Q4 2023 Aviat Networks Inc Earnings Call
Okay.
Good afternoon, and welcome to the Avia networks fourth quarter fiscal 'twenty to 'twenty three 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. The conference is being recorded I will now turn the conference over to your host Mr. Andrew Frederickson Director of Investor Relations you may begin.
Thank you and welcome.
<unk> fourth quarter fiscal 2023 results conference call and webcast you.
You can find our press release and updated Investor presentation in the IR section of our website at Www Dot Avi on networks.
Along with a replay of today's call in approximately two hours.
Through today are Pete Smith.
President and CEO , who will begin with opening remarks on the company's fiscal fourth quarter, followed by David Gray our CFO .
For you the financial results for the quarter and fiscal 2023.
Pete will then provide closing remarks on strategy and outlook followed by Q&A.
As a reminder, during today's call and webcast management may make forward looking statements regarding the avionics business.
<unk>, but not limited to statements relating to financial projections business drivers, new products and expansion and economic activity in different regions.
And other forward looking statements reflect the company's opinions only as of the date of this call and webcast and involve assumptions risks and uncertainties that could cause actual results to differ materially from those statements.
Additional information on factors that could cause actual results to differ materially from the statements made on this call can be found in our most recent annual report on Form 10-K filed with the SEC.
The company undertakes no obligation to reveal.
Neither make public any revisions of these forward looking statements in light of new information or future events.
Additionally, during today's call and webcast management will reference both GAAP and non-GAAP financial measures. Please refer to our press release, which is available on the IR section of our website at Www Dot Avi networks Dot com and financial tables therein, which include a GAAP to non-GAAP reconciliation and.
Other supplemental financial information at this time I would like to turn the call over to <unk>, President and CEO Pete Smith Pete.
Thanks, Andrew and good afternoon, everyone.
Thank you for joining us to review Avi networks results for the fiscal fourth quarter of 2023 and full year fiscal 2023. The company continued to focus and execute on our key long term goals of topline growth margin expansion and bottom line improvement.
Highlights from the fourth quarter include revenue of $91 2 million, which represents growth of 17, 8% versus Q4 of last year, adjusted EBITDA of $12 6 million or 38% increase versus the same period prior year non.
non-GAAP EPS increase of 30%.
Drawn debt free balance sheet with $22 2 million of cash and marketable securities for.
For the full year fiscal 2023 Avianca achieved.
Revenue growth of 14, 4% to $346 6 million.
This represents our third consecutive fiscal year of double digit topline growth adjusted EBITDA of 47.0 million, a 23% increase over last year non-GAAP EPS growth of 20%.
Year end backlog of $289 million up 18% year over year 336, new customers in fiscal year 2023. These.
These financial and operational results reflect the continued demand we see for our products and services in the market as well as the dedicated effort from Avi our team members around the globe.
Let's discuss key highlights of the fourth quarter and fiscal year.
Starting with the global <unk> opportunity our business continues to see healthy demand from service providers. Thanks to our differentiated offerings in the U S. We see rising demand for our microwave backhaul products, despite flat to down five capex spend from tier one telecoms.
Operators build their <unk> networks by initial investment in fiber and as the coverage progresses microwave received a larger portion of the funding to expand backhaul in suburban and rural environments. This makes obvious demand occur somewhat different from the overall five capex cycle.
We believe there will be growth.
Product continued domestic investment in <unk> as network build outs continue until less densely populated regions.
Internationally, we are still in the early stages of the <unk> rollout and see strong interest for <unk> products at the beginning of the fiscal year, we announced our Bharti Airtel, which marks a new tier one customer and geographic market for IV <unk>.
Additionally, we see building momentum in Africa, Latin America, and Asia Pac.
Minder <unk> currently makes up less than 15% of global mobile data traffic. We have many years ahead of operators investing in their <unk> infrastructure, we see more opportunities to win selective tier one and tier two business, we will continue to target new accounts and <unk>.
Thats away from our competitors when we see a distinct economic advantage that Avi I can offer to the customer this will bring additional global scale and capabilities to our business to drive long term shareholder value.
Our funnel of opportunities against our largest global competitor continues to strengthen and we are focused on executing to gain market share and customers are current identified opportunity funnel for avianca to replace this competitor has over $80 million our fiscal 2023 revenue taken from this.
Competitor was $24 million and our backlog is $34 million, we believe that the pressure on this competitor will remain for the foreseeable future that operators will continue to seek replacements and their networks shifting to a rural broadband business the demand environment for this market remains strong Gulf.
<unk> funding programs such as the.
Rural Digital opportunity fund art off and the broadband equity access deployment speed continue to develop and we remain well positioned with the <unk> store.
Art off related orders continued in the quarter, albeit relatively small and we anticipate increasing revenue from our top projects in calendar year 2024.
Although the dollar impact of art off to Avianca continues to be difficult to quantify at this early stage. We are booked blanket purchase orders from risks for the coming year in excess of $10 million. We view this as an encouraging sign of demand in this space.
The recent announcement of the broadband equity access and deployment or B program allocations to state government represents a positive step to unlocking of $42 5 billion dollar program. As a reminder, this program was part of the bipartisan infrastructure law passed in 2020.
The program is aimed at increasing the availability and affordability of high speed Internet service across the United States, especially in rural and underserved areas.
The announced allocations permit to states to begin planning their grant programs from a timing perspective, we anticipate that.
Approximately 20% of the announced allocations will begin flowing in late calendar year 2024, if other government broadband programs are an indication that peak will be in three to five years. Following the initial release of funds, but a long tail of spending.
While the initial bid notice of funding strongly encouraged fiber deployment, we believe that the most economical and effective deployments will include wireless networks in the appropriate areas. Further in recent meetings of the subcommittee of energy and Commerce.
NTIA no less than seven congressional representatives advocated for technology neutrality and cost effective deployments. We believe this testimony strongly favors microwave there are still many details would be but we believe that <unk> has the right set of products and state level relationships to benefit.
We will continue to update the investor community as appropriate.
Moving on to private networks in the fourth quarter, our North America revenue of $55 million was driven by strong private network demand and a record private network dialogue.
We believe we have the strongest portfolio for private networks, including highly reliable high power microwave radios for lowest overall total cost of ownership.
Portable high availability IP Mpls routers LTE base stations at evolved packet core solutions point to point and point to Multipoint access products and management software with expert systems and automation innovations for lowest opex and a full portfolio of turnkey.
Services, we remain the leading microwave vendor and private networks in North America, and growing share of demand around the world. We believe that the private network opportunity in North America will remain strong as networks upgrade to LTE to support video and other data driven applications. The funding environment remained strong.
<unk> for the for state and local governments positively impacted by ARPA funds. The private networks business will also continue to grow through new international opportunities, our private networks business.
Drove the significant increase in year over year backlog, which we will get to shortly.
In the fourth quarter, Avianca announced our new Ultra high power Indoor radio.
The IRR you 600, new HP new HP.
New 11 gigahertz radio with the highest transmit power ever supported in the industry and this path, which will allow us greater reliability more capacity and longer lengths.
Most importantly uhm.
Altra high RF performance enables the replacement of 80% of the 90.
Six gigahertz links in the USA, creating a significant upgrade opportunity with customers concerned about interference in the six gigahertz band. This is another example of Avianca innovating to meet customer needs and deliver value add solutions. We have already secured our first order and expect shipments to begin in the.
First half of fiscal year 2024, and.
In addition to the HP radio RBI released a number of innovative products and offerings in fiscal year 2023, including IP Mpls support for our WTS, all outdoor microwave platform to lower total cost of ownership and simplify customer networks vendor agnostic multi band solutions.
Which make it make it easier and cheaper for operators to upgrade their networks by adding Avianca E band or multi van alongside legacy microwave systems. This will also lowers the barrier for entry for Avia into our new network. This helped secure our win with Bharti Airtel frequency assurance software.
Fas on third party radios, which allows network operators to leverage our powerful software platforms to help them better manage their networks support for RTL 3000, Rvs access products acquired via the Redline Communications acquisition to provision plus which allows network.
Operators to improve the simplicity and reliability of managing their networks and to add we are proud of these innovations we have brought to the market and are excited to continue offering new solutions and products to our customers in the year ahead. Since artificial intelligence is prominently featured in the news we will share our pre.
Spectrum.
Avi I believe said that AI.
<unk> will use bandwidth and create more demand for capacity in line with the telecom peer group the amount of additional demand and timing is difficult to estimate at this point more specifically the generative AI branch of artificial intelligence requires low latency and consumes a lot of data, which bodes well for <unk>.
Telecom equipment and backhaul needs on the product and services front <unk> has invested in fast frequency assurance software and has health assurance software products. These are both examples of expert systems that replicate a specialized knowledge set to provide powerful solutions to help customers manage their <unk>.
Outwards and monitor for interference.
Network Health. This branch of artificial intelligence offers customers an impactful solution today going forward <unk> intends to invest in additional software that eases the customer's burden of network operations moving on to the supply chain environment, We continue to see improvements nearly all of our.
Fly has returned to pre crisis performance, we have 13 components. There remain an allocation. This is an improvement from 27 component allocations last quarter and over 100, a year ago. Additionally component lead times continue to improve and are now normalized we remain diligent and derisking the supply chain and building redundant.
<unk> where possible.
Our results for our customers and shareholders would not be possible without the dedication of all of the of the <unk> employees. This was a great quarter and an excellent fiscal year, we remain focused and will continue to execute to grow and take share of demand. This has and will continue to be reflected in our financial and.
Additional results obviously core values include customer focus as part of our focus on the customer we advanced our voice of the customer process. The authored by our sales and marketing teams resulted in fiscal year backlog of $289 million. This represents an increase of 18% versus prior.
Your year note that we report on this metric annually annually to avoid the inherent quarterly fluctuations with a project based business. Additionally, I'll highlight again that we added 336, new customers. This was driven by state and local governments service providers redline customers and the expansion of the store.
Platform internationally, given the high cost of switch we believe that these new customers along with our backlog sets us up well for growth in fiscal year 2024, and beyond with that let me turn the call over to David to review, our financials before coming back for some final comments David.
Thank you Pete and good afternoon, everyone. During my remarks today I'll review some of the key fiscal 2023 fourth quarter and full year financial highlights, noting our detailed financials can be found in our press release filed this afternoon.
As a reminder, all comparisons discussed today are between fourth quarter of fiscal 2023 in the fourth quarter of fiscal 2022 unless noted otherwise.
For the fourth quarter, we reported total revenues of $91 2 million as compared to $77 4 million for the same period last year, an increase of $13 8 million or 17, 8% driven by strong growth in all regions.
North America, which comprised 60% of our total revenue for the quarter was $55 1 million, an increase of $6 4 million or 13% from the same period last year, driven by our private networks and tier one business.
International revenue was $36 zero 1 million for the quarter, an increase of $7 4 million or 25, 8% from the same period last year with particular strength in the middle East and Latin America.
As Pete mentioned, our backlog grew 18% to 289 million continuing our trend of trailing four quarter book to Bill ratio above one started back in fiscal 2018.
Gross margins for the quarter were 35, 8% and 36, 2% on a GAAP and non-GAAP basis, as compared to 35, 5% and 37.
35, 7% in the prior year.
The improvement in gross margin was driven by better price cost dynamics, partially offset by regional mix.
Fourth quarter GAAP operating expenses were $26 3 million, an increase of $4 1 million from the prior year.
Fourth quarter, non-GAAP operating expense, which exclude the impact of restructuring charges share based compensation and deal costs were $22.0 million, an increase of $2 5 million.
The increases in both GAAP and non-GAAP operating expenses were primarily due to the addition of Red lines. While GAAP was further impacted by M&A expenses related to our acquisition of <unk> microwave transport business.
Fourth quarter, GAAP and non-GAAP operating income was $6 3 million and 11.0 million compared to prior year gap of $5 2 million and non-GAAP of $8 1 million or increases of 26% and 34, 9% respectively.
Fourth quarter tax provision was $2 4 million compared to $2 8 million last year.
As a reminder, the company has $500 million of Nols that will continue to generate shareholder value via minimal cash tax payments for the foreseeable future.
Fourth quarter GAAP net income was $3 3 million as compared to $4 5 million last year, which included a onetime gain of $2 6 million on marketable securities.
It did not repeat.
Fourth quarter, non-GAAP , net income, which excludes restructuring charges share based compensation M&A related costs and non cash tax provision was $10 3 million.
Impaired to $7 8 million for the same period last year, an increase of $2 5 million or 32, 1% driven by growth and margin expansion.
Fourth quarter non-GAAP EPS came in at <unk> 87 per share on a fully diluted basis compared to 767 per share for the same period last year, an increase of 29, 9%.
Adjusted EBITDA for the quarter was $12 6 million, an increase of $3 4 million or 37, 5% from the prior year.
Adjusted EBITDA margins were 13, 8% for the quarter.
Moving onto the balance sheet.
Our cash and marketable securities at the end of the fourth quarter totaled $22 2 million with no debt up from a net cash position of $16 2 million in the prior quarter.
Fourth quarter cash flows from operations were $7 4 million driven by significant improvement in our inventory levels from $40 9 million in Q3 to $33 1 million in Q4, as we consume some of our buffer stock and helped us navigate the supply chain issues of the past two years.
We made good progress in terms of DSO.
Our net DSO declined by five days versus Q3.
Note that net DSO includes trade and Unbilled balances net of advanced payments payments in unearned revenue and is a key indicator of our working capital efficiency.
Our balance sheet remains very solid, leaving us well positioned to execute our long term plans with that I'll turn it back to Pete for some final comments.
Thanks, David before opening up for Q&A I'd like to put some context around the demand environment summarize our fiscal year and provide a few updates over the past several months. We have received many calls focused on channel dynamics of microwave compared to fiber.
See vast differences in the channels.
Detailed three distinguishing characteristics first throughout the supply chain crisis, the largest constraint impact in the quarter was less than $2 million and <unk> revenue.
With this ability to meet demand, we never experienced the order pattern witnessed in the fiber space the fiber space experienced many instances of double order or lead times prior to the supply chain crisis and today are similar note that prior to the supply chain crisis during the.
<unk> and <unk>.
Today, we can book and ship certain orders within a given quarter as a result, our customers did not place duplicative orders in an attempt to see which order what's filters second Rbis business is approximately 60% private networks. The majority of these customers are government entities.
<unk> and utilities due to the critical nature of these customer networks, the customers expect to be prioritized at the outset of Covid before the supply chain crisis, we ramped our inventory purchases to support mission critical networks. As a result, we did not disappoint our customers and double.
Ordering did not in soup third many of <unk> customers operate small and medium sized networks. These networks are often sourced to a single supplier as a result, the probability of substitution is alone. This strongly discourages double ordering that prevailed in the fiber space further.
We have excellent insight into our largest mobile network operator, since we performed the installations.
Lastly, the obvious store hold inventory for Isps as a result of our customers do not have an incentive for double ordering and we have reasonable knowledge of the inventory held at our customers.
We will close this discussion with the comment related to fiber versus microwave comparison as it relates to Capex spending as noted previously in the call. We observed the headlines that U S. Tier one capex spending is declining year over year.
<unk> is undeterred since network builds typically proceed with fiber one followed by microwave. Therefore this mixture of capex spend is shifting to favor <unk> microwave.
Fiscal year 2023 represented a significant year for <unk> networks. The company continues to grow we have successfully integrated our first acquisition and greater than 10 years with Red line Communications and achieve results ahead of our financial model for this acquisition, we announced <unk> microwave trans.
Sport acquisition, which builds on the 2019 North America channel partnership.
Our strategy is expanded historically have focused on growth and private networks tier two and Isps.
As we have developed the portfolio and our value proposition, we have the wherewithal to pursue and win select tier ones. We now include select tier ones and our overall strategy.
As an update on NFC transaction. We currently expect the transaction to close in the October to December quarter subject to regulatory approval and customary closing conditions.
<unk> remains focused on our growth drivers are <unk> rural broadband and private networks. The <unk> upgrade cycle is still early and rural broadband there is significant government funding in the us and other select countries that aim to expand the availability of high speed Internet access.
<unk> is well positioned to address this market and we see these government efforts as a positive catalyst for our business Lastly, we see increasing demand for private network builds for critical communications and data needs based on the company's outlook, we're establishing our fiscal year 2020 forward guidance.
Exclusive of the <unk> business, we will update our guidance upon closure of the <unk> transaction.
Revenue for fiscal year 2024 to be in the range of $367 million to $374 million and adjusted EBITDA to be in the range of $51 million to $56 million based on the current weather pattern order pattern and record backlog, we expect revenue to build through the fiscal year.
<unk>, our business comps on an annual project basis, rather than a sequential quarterly basis, we expect our first quarter to show modest growth compared to fiscal year 2023 second quarter with strong growth third quarter again modest in the fourth quarter will be our strongest we will revisit guidance as the year develops.
And we work with our customers on the timing of our backlog with that operator, let's open it up for questions.
To ask a question you will need to print star one on your telephone.
In terms of yourself from the queue. Please press star one again please.
Please standby, which will hold the Q&A roster.
One moment for our first question.
Our first question comes from the line of Scott <unk>.
Ross.
You may begin hey, good afternoon.
Thanks for taking the questions nice job on the quarter and I appreciate the color.
Maybe to start on the gross margin front.
The product had a good quarter services, a little bit of a softer quarter I know that really tends to depend on mix. I was wondering if you could elaborate a little bit more on that if there's anything to read into the quarterly changes in how should we be thinking about gross margins looking out at the September quarter.
Hey, Scott, It's David I'll take this one so.
Yes, I think.
I wouldn't read too much into the mix between.
Service and product right.
We disclose it separately because those are the rules.
But in reality, it's a project based business, we tend to evaluate it at the project level irrespective of weather.
Services margins for one project or higher level.
First FERC for equipment.
From a kind of an overall outlook standpoint.
<unk>.
Yes, our outlook we.
We did have.
Some.
Severely large projects that were somewhat dilutive to our overall margins but.
We think the.
Yes.
Inflation cost.
And price dynamics are kind of moving in our favor now.
We did experience a.
Our bid margin improvement quarter over quarter sequentially, and we would expect that trend to continue as we look out in two.
FY 'twenty four.
I think.
We'd be looking at.
Kind of a somewhat.
Somewhat similar trend of growth overall that we saw from Q3 to Q4 I think is a reasonable.
Guideline, we'd expect hope, it's stronger, but I think thats good.
Great helpful.
Maybe if I could you spend some time talking about art off indeed, but or funding has really been starting to filter into the results I think there've been a number of wins, whether it's coming from a very.
Public safety utility or in some cases tribal lands.
Wondering how that pipeline is looking at how important that is as we look out to the fiscal 2004 timeline.
So I think.
We had.
Thanks to everyone for listening in our prepared remarks went a little long re cut the tribal lands.
Part of the script.
So we see strength.
There.
With respect to the ARPA.
Funds they need to be used by December 31, some other.
Researchers out there.
Less than 10% of that is has been.
So we think that that.
It's going to bode well for our growth going forward.
<unk>.
When we win projects.
Our backlog is up significantly.
Sometimes we know that its ARPA funds and sometimes we don't.
But our private network backlog is at a record demand and we would take that part of that is.
It could be tied to the Dr. Bal locations.
Great.
Helpful and lastly, if I could just to follow up on the <unk>.
Transaction it sounds like Thats still tracking your expectations for the October December timeframe I am Wonder if you could just elaborate or reiterate what the expectations were.
Had some some goals in terms of cost cutting some gross margin et cetera, I Wonder if you could just give us a quick update in terms of your latest thoughts on that front and how youre feeling about customer retention.
So we.
When we put the when we announced the transaction we thought.
We.
We thought about country customer retention and we said that we were going to do.
In the first 12 months after close $150 million in revenue, we said that we wanted to get to.
By the fifth quarter to make it accretive.
And exiting.
Second year, we wanted to get it in the 11% to 13% EBITDA range, So I would say that.
We feel good about all of those.
Commitments.
Well we.
We will definitely do.
As we close the transaction we will update.
Our overall model.
What I have to say as NACS been extraordinarily cooperative.
In the interim period.
Cooperation bodes well for <unk>.
Certainly exceeding <unk>.
Leading our profitability targets.
Great. Thanks, so much ill get back in queue.
Thank you one moment for our next question.
Yeah.
And our next question comes from the line of Eric to bigger.
JMP Securities Your line is open.
Yeah, Thanks, Jason questions.
That's on a good quarter.
First off.
Yes.
That backlog number.
Going to strategic.
We need to grow from these levels or is that a seasonably seasonally.
And then they come back yet.
In Q1.
And then I have a follow up question.
So on the backlog we have a project based business. So we always disclose the backlog.
Once every 12 months.
So I think.
We see our funnel, though Josh.
12 months from now the backlog should be.
Greater than 289, but.
We basically provide that insight.
Growing shares in case you know.
That's what we do know David do you have some that I think.
I would just add to that our our goal is to maintain a book to book to revenue ratio above one.
Trailing 12 month basis, which says that.
Our our essentially our orders are growing faster than revenue at all.
Okay.
And then secondly, just on the on the.
Environment.
You have a sense and I'm speaking for us.
Criminal fraud side, how much of your how much of it.
The projects that Youre working on at this point.
Are you getting funding from.
Argos Sce's aggregate.
Some of the available funding out there how much of the market is that.
We'll see at this point.
So it's.
That's hard to such hard too.
So to say what I can point to is last quarter. We said that we had orders from four of the largest the hard off recipients they were small in nature.
<unk>.
Those projects are continuing I would also say in the script.
You mentioned.
$10 million or so of.
The blanket purchase orders.
We see we see the rural broadband.
The demand environment, improving in what I would say, we don't know is how long some of those aren't off recipients how long it's going to take to convert.
We see as design activity.
The volume purchases.
Very good okay. Thank you.
Thank you.
One woman sorry next question.
Yeah.
And our next question comes from the line of Jason Smith from Lake Street. Your line is open.
Hey, guys. Thanks for taking my questions. Just curious if you could provide an update on the Red line business. It sounds like you continue to see really good traction there it outperformed your expectations, but what's the funnel look like for fiscal 'twenty four.
Okay. So so here's what I can say.
We don't have the funnel broken down.
Right right in front of us.
But what I can say is the first year, what we did was we stabilized the business we took out.
Canadian public listing cost, so and that went better than expected.
Year or two of the ownership we are starting to recognize.
Ross selling opportunities right, so selling avia prouder to redline customers and vice versa, and then thirdly would be.
In the last 90 days, we announced or approximately 90 days, we announced putting our our network management software on the.
The Red line.
Products, which we think over the next six months, we will start to land some of those and will drive some.
Additional.
Margin expansion.
Okay. That's helpful and then just as a follow up.
How big of a contributor was the object store in fiscal 'twenty, three or just Q4.
In the fiscal year was about 8% to 9% pretty similar to.
Contributor as last year.
Okay perfect. Thanks, a lot guys.
So enrollment so next question.
Yeah.
Okay.
And our next question comes from the line of Theodore O'neill from Litchfield Hills Research. Your line is open.
Thank you very much and congratulations on the good quarter Pete.
Thanks, Dave.
First question on guidance, if I take the midpoint of the range of guidance for sales and EBITDA. It implies EBITDA grows twice as fast as revenue what's the driver for that.
Yes, so look we've had a emphasis on profitable growth since I arrived here.
That's what we're continuing to do we think.
Favorable mix driven by North America private networks.
Adding more software into the mix.
And we get leverage out of our increase in volume and not all of it.
Doubling on the mid point of profitability versus top line growth.
As also while we plan to invest in R&D, So I think that.
Our plan is to execute that and I really picked up.
And insightful question. Thanks, Okay.
On the on the beat.
<unk> state allocations.
Read that.
New Mexico in Minnesota, as saying that if they do it all allocation to fiber, they're not going to reach the goals of getting everyone on broadband does that create an opportunity for microwave and also if it does its theres some selling effort that needs to go on to make that happen.
Okay. So.
Let me talk about the selling effort.
First.
The reason, obviously excited but it's early days for its a little bit premature for feed is off.
<unk> best relationships out of all of our customers are with state governments and Thats due to our 901 first responder private network business. So that so we are really excited about what Minnesota and new Mexico.
And the southern congressional Representatives that we cited said said so we think that this is a great opportunity for us, albeit a little bit out in time and then the <unk>.
Comments on fiber being too expensive. It is it is there was.
There was a congressional Rob from Kentucky, basically said.
Are we going to really run fiber to seven homes. So.
<unk>, New Mexico said is the.
Fiber is too expensive and certainly do connect.
Lower density density.
Good points that it doesn't make sense. So we see this as an opportunity we see states starting to say they'll get more mileage.
For their money.
Using <unk>.
Wireless we are starting to see it.
In Congress. So we think that this is a true.
Fantastic development, and we just need to continue to use R. R.
Our sales channel that.
Carried through 911 private network business.
The same states the same procurement organization, we think we're well positioned.
Okay. My last question is that last week, the FCC granted special authority to AT&T. These microwave backhaul in Maui, because the cable network infrastructure was destroyed.
Are you seeing any increase in.
Weather disaster awareness among your clients as a parcel sales benefit for using microwave or.
This is something that always happens whenever there's a disaster.
So this happens typically in disaster right. So.
We.
So we have network.
On Maui, what we did for the customer when this happened was.
So it's not the AT&T deployment, but it's b utilities.
Utilities.
We help monitor their network we've recommended.
The damage that they had with how they should respond from a networking perspective, we do this.
When.
Hurricane Sandy we did this with the.
Then the Nashville bombing.
So here's one that one thing that I would like to emphasize the reason microwave has traction in <unk>.
Situations like this is because it's faster deploy and it's actually more reliable.
On fiber.
Okay. Thank you very much.
Enrollment for our next question.
Okay.
And our next question comes from the line of Tim just Avago.
Northland capital markets. Your line is already.
Great. Thanks.
Congratulations on that.
Your third year.
Double digit revenue growth.
And on the order growth.
In particular, which looks to be a.
Let me start with the two.
Given the strength in backlog backlog that you reported.
And so I'll kind of ask my annual fiscal year end question.
About.
Well a couple of things really.
That order growth and backlog growth relative to what you guided to.
From a revenue growth perspective.
Relate those two items.
And then.
As you look at the <unk>.
Fiscal 'twenty three kind of flattish in the U S Big International growth.
Based on the order book or any other visibility you might have how.
How do you expect that to change into 'twenty four I guess.
Given what youre seeing from a backlog perspective, I'll follow up down there.
So so.
Backlog.
<unk>.
The group the growth in backlog was.
The principal driver of that was growth in North American private networks right. So <unk>.
<unk> three was flattish.
North America, we see North America, the demand environment.
Picking up so we will get.
A bigger contribution from North America than we did in 2003, we also think that that favors.
Margin margin growth.
And then in terms of how to think about the backlog.
<unk> kind of our last couple of sentences around the guidance well we did.
The recently completed quarter, we did see some big projects come in.
Statement about wanted to look at how the customers.
Projects developed is really is really related to.
How fast we get to the design freeze and how fast we get that.
To revenue if that.
If the customers are want to move quickly then we will as.
As the year progresses update.
<unk> incentives.
Kind of go.
At a.
A slower pace than we will leave the guidance.
Yes.
But we are hopeful to.
Great.
At this point can you say that you expect on a percentage basis faster growth in North America than international.
Okay.
Sure.
Yes.
Hum.
I wouldn't go that far because you've got.
We will take numbers working against North America, a little bit but.
Yes.
Yes, it should be.
Closer.
Alright.
Got it.
And.
You mentioned that as you look forward with a greater North America contribution.
You would expect that to be accretive, especially in private networks, you expect that to be accretive gross margins, that's sort of what we saw Q3 to Q4, but pretty big volume increase and positive mix shift in North America, and yet we didn't see much.
In the way of gross margins you may have touched on it already but if we can just kind of dig down on that is why we didn't see more gross margin expansion given those two positives.
Kind of a mixture I will one volume one mix I guess two positive drivers.
Yes.
<unk> actually went against us in Q4, a little bit right. I mean, there was a regional mix component certainly with North America returning.
The growth that that did help us but there was.
Kind of a broader headwind within.
Our overall product mix.
And it can be.
For this business it can be a little volatile right because we do have a large software component if that fluctuates quarter to quarter that can swing it.
Yes, 2030 basis points.
So I think there wasn't anything.
The dynamics behind Q4, we're positive we expect that that kind of level of improvement to continue.
And yes.
We will take it from there.
Okay. So lower software revenue I guess, some services that might takeaway there okay. Yes.
Sounds good.
And maybe last question for me I don't know if your terminology has changed.
I think last quarter, you had with regard to the Huawei replacement pipeline you've talked.
About bookings revenues and backlog and eventually you've got that all of the foot.
Now youre talking about spinal.
Of the $80 million I think versus our commentary on bookings of 50 last quarter I don't know if those are two different things youre backlog, which would suggest bookings of $58 million.
Or whether the funnel has expanded and you are just giving us a broader sense of the opportunity.
The funnel has expanded so we're giving you a broader sense of the opportunity.
Yeah, so to be specific.
And last quarter.
What we wanted to communicate was.
At the end.
Q3 year to date revenue of $14 5 billion of bookings of $36, one and our funnel of 55.
And.
Now, we would say that.
Bookings are about the same revenue went to 24 and the overall funnel is 82, so we see fee.
The opportunity the opportunity building there.
<unk>, yes.
Sorry.
That's good for me for very well I guess, one other factor I might have expected too.
From a mixed standpoint, where you see higher North America not much impact.
<unk> gross margins I might have assumed that was maybe a lot of Verizon coming in.
At year end at lower margins, but it sounds like thats not the case.
That's actually a fair statement Tim.
Yes that was a contributing factor.
Yeah, and so I would say the data.
Your suspicion is true.
Yes.
I'd also like to say.
The Wall Street research a tier one capex.
Our biggest domestic.
Tier one customer was strong and continues to be strong.
Got it and I guess real last question from me strong enough to make it on the 10% list for the year or did you have any one else getting to 10 Bell.
We have not only of Nikola known no 10%.
For the quarter or for the year.
Great. Thanks very much.
Thank you one moment for our next question.
And our next question comes from the line of Dave Kang from B Riley. Your line is open.
Thank you and good afternoon first question is on the end and you see acquisition just wondering if they're trailing 12 month revenue changed materially since they have a greater exposure to service providers compared to you.
So no.
<unk>.
Are there or not.
Third third TTM data.
Has not materially changed from the time that we put together our investment thesis.
And also going forward.
Yeah.
Any material changes.
No we don't.
Recently I visited their largest.
Customer.
Yes, I've visited their largest customer.
Are there within 1% to 2% of what we modeled so.
And here I will go further.
The second biggest region and our leader there today.
Within percentage points of the way, we modeled it so I would say.
The data we used in our investment thesis remains intact.
Got it.
And then on Bharti.
Sure.
Yes.
I guess.
No.
Just try to find out what inning are we in.
Some are saying just getting start as some are actually saying things have plateaued out so what what do you see from your side.
We.
We expect.
Significant growth from Bharti.
Fiscal year 'twenty for both top topline contribution and when we took that business. We said that it was low margin and we've been able to.
We executed on our.
Value engineering projects. So we expect that we will get some.
Margin lift as that demand.
Materializes.
So we feel good about got it.
Got it and then my last question is for David.
What was capex for the quarter end.
What do you think.
What's your projection for the year.
Okay, so for the quarter.
It was.
Think about 400000.
Dollars.
Can you just verify that kind of full year cash flows.
And then for FY 'twenty four.
It's going to be a little bit higher this year.
Finished FY2023.
With Capex of $5 3 million.
<unk> got in our plan around <unk>.
Six five.
For this year.
We do have some.
Refreshment investments coming up.
How does the ordinary.
Got it thank you.
Thank you.
For next question.
Okay.
Okay.
Our next question will actually be a follow up from Scott Searle from Roth capital markets. Your line is open.
Maybe just to quickly follow up on a couple of geographic questions you talked about.
The cadence of network builds being led by fiber and then the evolution to wireless transmission of backhaul.
Looking at.
Yes.
So the 70% pop coverage Mark now it gets a little bit more difficult in terms of covering those incremental pumps I assume that's basically commentary around that and the expansion going forward. We will have more microwave links in it. So the one im wondering if youre seeing more on that front and kind of what's your broad based expectations are for the upcoming fiscal year.
Two looking at Europe .
Used to be a very small portion of the mix there behind from a <unk> build standpoint, and wireless transmission has always been.
A component of those network builds it always seems like you guys are kind of on the cusp of some business expanding there I'm just wondering what's your high level thoughts are in terms of growing that as an opportunity or should we not be planning on.
Future growth in contribution coming from European Arena.
Yes.
Okay. So first try.
Try to restate.
Dish met the federal deadline to cover 70% of the U S population.
By June 30th.
This.
Looks to be.
Taking a breather on Capex for the first six months of our fiscal year, and we expect the microwave rollout to really start.
January to March quarter, and we feel like we're well positioned so that's that's what I would say about.
Dish I would say in the.
Europe region, we we have a couple of big projects, we see some weakness from the.
The.
One of the specialist that's headquartered in.
In Europe , and we think that that will help drive double digit growth in Europe in fiscal year 'twenty four.
So theres a little color.
Great. Thanks, so much.
Thanks.
Thank you.
Conclude Q&A for today I will now turn the call back over to Pete Smith for any closing remarks.
Well thanks.
To our shareholders.
And the investment analysts for joining the call listening to our extended remarks on our fiscal year 'twenty. Three we think it was a great year.
Look forward to providing an update on the next quarter in the next 90 days.
Hopefully getting too close in a short amount of time and giving an update on the a b and C.
Less transport transaction.
Thanks, Thanks, everyone talk to you soon.
This concludes today's conference call. Thank you for participating you may now disconnect everyone have a good day.
Okay.
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Okay.
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