Q3 2025 Viavi Solutions Inc Earnings Call
Good afternoon. My name is odd right and I'll be your conference operator today at this time I would like to welcome everyone to the the Avi solutions fiscal third quarter 2025 earnings call. Today's conference is being recorded all lines have been placed on mute to prevent any background noise. After the speakers' remarks.
There will be a question and answer session. If you would like to ask a question. During this time simply press the star keep all over the number one on your telephone keypad. If you would like to withdraw your question Press Star one again.
Speaker Change: At this time I would like to turn the conference over to go to be their head of Investor Relations. Please go ahead.
Speaker Change: Thank you Roger.
Speaker Change: Good afternoon, everyone and welcome to the IV solutions fiscal third quarter 2025 earnings call.
Speaker Change: My name is the routine air head of Investor Relations for the IV solutions and with me on the call today is only taking our president and CEO and Ilan desktop our CFO.
Speaker Change: Please note. This call will include forward looking statements about the company's financial performance.
Speaker Change: These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations and estimations.
Speaker Change: We encourage you to review our most recent annual report and SEC filings.
Speaker Change: Particularly the risk factors described in those filings.
Speaker Change: The forward looking statements, including tariff impact and guidance that we provide during this call.
Speaker Change: Valid only as of today.
Speaker Change: The Abbvie undertakes no obligation to update these statements.
Speaker Change: Please also note that unless we state otherwise all results discussed on this call except revenue are non-GAAP.
Speaker Change: Reconcile these non-GAAP results to our preliminary GAAP financials and discuss their usefulness and limitation in today's earnings release.
Speaker Change: The release as well as our supplemental earnings slides, which include historical financial tables are.
Speaker Change: Billable on <unk> website at Www Dot Investor Doc the IV solutions dotcom.
Speaker Change: Finally, we are recording today's call and will make the recording available on our website by 430 P. M Pacific time this evening.
Ilan: Now I would like to turn the call over to Ilan.
Yes.
Ilan: Thank you everybody. Good afternoon, everyone now I would like to review the results of the third quarter of fiscal year 2025.
Ilan: Net revenue for the quarter was $284 $8 million, which is above the midpoint of our guidance range of $276 million to $288 million.
Ilan: Revenue was up five 2% sequentially and on a year over year basis was up 15, 8%.
Ilan: Operating margin for the third fiscal quarter was $16, 7% above the high end of our guidance range of 13% to 15%.
Ilan: Operating margin increased one 8% from the prior quarter and on a year over year basis was up seven 4%.
Ilan: EPS at <unk> 15 cents was also above the high end of our guidance range of 10 to 13 cents and was up <unk> <unk> sequentially.
On a year over year basis, EPS was up nine cents.
Ilan: Moving on to our Q3 results by business segment.
Ilan: NSE revenue for the third fiscal quarter came in at $208 $2 million, which is slightly above the midpoint of our guidance range of $200 million to $212 million.
Ilan: On a year over year basis, NSE revenue was up 22, 6%.
Ilan: <unk> revenue for the quarter was $188 million, which is an increase of 23, 9% year over year as a result of strong demand by nims for our fiber lab and production products.
Ilan: The year over year revenue increase included the inertial less revenue, which was in line with our expectations.
Ilan: SCE revenue was $22 million, which is an increase of 11, 6% from the same period last year and is in line with our expectations.
Ilan: NSE gross margin for the quarter was 63, 1%, which is one 7% higher on a year over year basis.
Ilan: In <unk> gross margin was 63, 4%, which is an increase of 190 basis points from the same period last year, mainly driven by higher volume and favorable product mix.
Ilan: <unk> gross margin was 59, 9%, which is a decrease of 90 basis points from the same period last year is there a lot of product mix.
Ilan: Nse's operating margin for the quarter was 10, 4% versus a one 8% loss in the same quarter last year.
Ilan: NSE operating margin is significantly above our guidance range of 6% to 8% driven by higher gross margin fall through as well as $4 million government R&D ground in Europe.
Ilan: OSP revenue for the third fiscal quarter came in at $76 6 million.
Ilan: Which is just above the high end of our guidance range of $74 million to $76 million.
Ilan: On a year over year basis, OSP revenue was up 0.5%.
Ilan: <unk> gross margin was 51, 6% up 160 basis points from the same period last year and was primarily driven by higher volume and favorable product mix.
Ilan: Osp's operating margin was 33, 9%, which is at the high end of our guidance range of 32% to 34% and is 40 basis points slower on a year over year basis.
Ilan: Moving on to the balance sheet and cash flow.
Ilan: Total cash and short term investments at the end of Q3 were $402 million.
Ilan: Compared to $512 8 million in the second quarter of fiscal 2025.
Ilan: The lower cash and investments balance at the end of this quarter is mainly attributed to the payment of the National Labs acquisition.
Ilan: Cash flow from operating activities for the quarter was $7 8 million.
Ilan: Versus $19 5 million in the same period last year.
Ilan: The lower operating cash flow this quarter was mainly related to the acquisition of <unk>.
Ilan: During the quarter, we did not purchase any shares of our stock as we prioritize our capital allocation towards M&A with the agreement to acquire <unk> high speed Ethernet and network security business lines.
Ilan: Although we plan to finance this transaction with additional debt, we will continue our financial discipline and intend to target less than four times gross leverage and well below three times net leverage over the long term.
The fully diluted share count for the quarter was $226 9 million shares up from $224 6 million shares in the prior year.
Ilan: And versus $226 1 million shares in our guidance for the third fiscal quarter.
Ilan: Capex for the quarter was $6 8 million.
Ilan: Versus $3 2 million in the same period last year.
Ilan: Moving on to our fourth quarter guidance.
Ilan: We continue to assess the potential impact of global tariffs on the overall demand and timing of orders.
Ilan: Overall, we expect fiscal fourth quarter revenue to remain about flat relative to the strong third quarter revenue.
Ilan: For NSE, we are taking a more prudent outlook in view of tariff related timing of customer orders.
Ilan: For OSP, we expect strength in anti counterfeiting business offsetting some seasonal weakness in three D sensing demand.
Ilan: For the fourth fiscal quarter of 2025, we expect revenue in the range of 278 and $290 million.
Ilan: Operating margin is expected to be 13, 5% plus or minus 1%.
Ilan: And EPS to be between 10.
Ilan: <unk> 13 cents.
Ilan: We expect NSE revenue to be approximately $208 million plus.
Ilan: Plus or minus $5 million.
Ilan: With an operating margin of 5% plus or minus 1%.
Ilan: OSP revenue is expected to be approximately $76 million, plus or minus $1 million with an operating margin of 37% plus or minus 1%.
Ilan: Our tax expenses for the fourth quarter are expected to be about $8 million.
Ilan: Plus or minus $500000 as a result of jurisdictional mix.
Ilan: We expect other income and expenses to reflect a net expense of approximately $5 million.
Ilan: And the share count is expected to be around 227 4 million shares.
Ilan: Our guidance includes a tariff impact of about $3 million on orders that are already booked.
Ilan: This is expected to be dilutive to our gross margin and negatively impacts our EPS by approximately <unk> <unk>.
Ilan: With this I will turn the call over to all call it.
Speaker Change: Thank you Elon the March quarter was unseasonably strong continuing a strong recovery and growth momentum that we saw in fiscal Q2.
Speaker Change: The quarterly revenue came in above the midpoint of the guidance with EPS above the high end of the guidance higher volume and richer revenue mix were the primary drivers are stronger EPS.
Speaker Change: Looking in more details in each of our business is starting with NSE NSE.
Speaker Change: NSE revenue in fiscal Q3 grew 23% year over year, driven by recovery in growth across many of our product segments.
Speaker Change: Instruments business segment continued to see a gradual recovery driven by the demand for fiber field instruments and fiber monitoring systems.
Speaker Change: Service providers and Hyperscale data center operators drove the demand as they build out and upgrade their networks.
We are particularly encouraged to see the embrace and adoption of fiber monitoring by Hyperscale.
Speaker Change: We expect this trend to continue through calendar 'twenty five.
Speaker Change: Fiber 11 production so another strong quarter, driven by 800 gig and one six Terabits data center ecosystem, which includes sami's optical modules systems and Hyperscale we.
Speaker Change: We expect 800 gig and one six terabyte optical infrastructure and emerging technologies, such as co packaged optics to continue driving strong demand for the rest of calendar 'twenty five.
Speaker Change: Our aerospace and defense business segment continued its strong growth momentum we expect the.
Speaker Change: At the position navigation and timing business strengthened by the acquisition of inertial labs to be a strong multiyear growth driver for our aerospace and defense business segment.
Speaker Change: The wireless business segment, so the same dynamics as in.
Speaker Change: Fiscal Q2, a stronger demand for <unk> instruments offset by continued weakness in the infrastructure test products.
Speaker Change: I believe that the demand for wireless field instruments is a leading indicator for the resumption of <unk> network build out leading to gradual recovery for the overall wireless segment.
Speaker Change: And lastly, the SCE business segment results were in line with our expectations.
Speaker Change: Looking ahead, we expect Q4 to be roughly flat to fiscal Q3 normally we would expect a seasonally stronger Q4, but feel it's prudent to take a more conservative outlook due to recently imposed tariffs specifically on the revenue side. There is a risk that some of the previously approved Pos and upcoming <unk>.
Speaker Change: Orders may get delayed a reduced volume as customers re approved.
Speaker Change: To include tariffs for decided to take a wait and see approach and.
Speaker Change: And on the gross margin side, we expect to absorb approximately $3 million in tariffs from the previously committed orders and reciprocal tariffs on imported U S materials.
Speaker Change: Overall, we currently expect the tariffs to have a low single digit impact on our operating margins.
Speaker Change: Given our global footprint, we are in a position to realign our supply chain to further reduce the tariffs impact as they stand today within six months.
Speaker Change: Now turning to OSP during.
Speaker Change: During the fiscal third quarter OSB increased marginally on a year over year basis, as a result of strength in anti counterfeiting and other products.
Speaker Change: We expect fiscal Q4 to be roughly flat quarter on quarter and up year on year characterized by seasonally weaker three D sensing offset by strength in anti counterfeiting and other businesses.
Speaker Change: As communicated previously we are starting to see a demand supply equilibrium emerge.
Speaker Change: Anti counterfeiting business.
Speaker Change: In conclusion, I would like to thank the RV team for their continued dedication and strong performance in our customers and shareholders for their continued support.
Speaker Change: With that I will now turn it back to the operator for Q&A.
Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in we would like to excuse me ask a question. Please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question simply press Star one again.
Speaker Change: We will take your first question from Ruben Roy of Stifel.
Speaker Change: Thank you.
Speaker Change: It will start to tariffs discussion.
Speaker Change: Yes.
Speaker Change: If you could maybe drill down a little bit into.
Speaker Change: On the revenue side of the equation so.
Speaker Change: You mentioned that you have some concerns that some approved codes may get delayed or are you actually seeing delays today any push outs et cetera or is this just more of a conservative take.
Speaker Change: Take near term.
Speaker Change: Well.
Speaker Change: I would tell you on our first draft of our notes I have cancelled.
Speaker Change: Remove canceled because actually nobody has canceled the order so thats one thing. Furthermore.
Speaker Change: We're seeing actually people accepting the increases and just adding it to their order. So that's a positive so but I feel you know.
Speaker Change: Clearly, we know what third four weeks into the quarter since the the big changes and.
Speaker Change: Starting to feel a bit better, but clearly there is a number of <unk> that had to go back to be reapproved with the adders to compensate for the.
Speaker Change: Tariffs and at this time, we are seeing some of them coming back.
Speaker Change: And so far nobody has canceled nobody has reduced the size of the order and the accepting the.
Speaker Change: Tariff increases and but I think it's probably prudent to be conservative because.
Speaker Change: The people who are responding the earliest I, usually the ones, who really need the product.
Speaker Change: And there is always a group of customers, who said you know what if I can always wait another month, maybe things will change again and as we've seen in the first week of the tariffs fluctuated over the place and I mean, some I mean, we basically stopped all shipments into your ask Henry.
Speaker Change: Took the.
Speaker Change: And we held onto them to see until things stabilize so I think there's still it's no longer as volatile as it was in the first two weeks.
Speaker Change: But I think it's probably prudent to be a bit more conservative and I do think there's going to be some set of customers, who will delay placing orders and thats. Just the result in the revenue slipping into the fiscal first quarter of next year. So that's why we're being a bit cautious.
Speaker Change: On the.
Speaker Change: Our revenue guidance for this quarter.
Speaker Change: Okay. Thank you.
Speaker Change: A follow up in terms of some of the.
Speaker Change: Some of your equipment that shift into the U S is there a way to think about how much of that revenue is sourced from China or other areas that we might have to worry about high tariffs.
Speaker Change: Mentioned, you could potentially move in six months I'm, just trying to figure out.
Speaker Change: What the impact.
Speaker Change: Impact is how much are we talking about here.
Speaker Change: So I think I said.
Speaker Change: If I look at it.
Speaker Change: Clearly just looking trailing 12 months, it's roughly 15% of our revenue is.
Speaker Change: Subject to tariffs overall right coming into the U S.
Speaker Change: Clearly China, given the magnitude of the tariffs is the most pronounced.
Speaker Change: And we said that today roughly 3%.
Speaker Change: The revenue is.
Speaker Change: Is the tariff impact and we can reduce it significantly within the next I would say.
Speaker Change: Six months or more like three to six months, because we can just reroute and move.
Speaker Change: Our production to really even within the same contract manufacturers by different <unk>.
Speaker Change: <unk> origin, so but it takes some were already working on it we're already moving things around so I think within six months.
Speaker Change: The tariff impact will be fairly de minimis.
Speaker Change: Okay, just one final one that doesn't.
Speaker Change: We aren't changed.
Speaker Change: Farming right.
Speaker Change: That's a big yes, yes, I had a quick follow up for Ilan I guess on the cost side of the equation. So the $3 million on the higher costs a lot of folks have been talking about passing through costs just under state law to understand you know how youre thinking about that is this should we think about the increased costs I guess as a longer term headwind.
Speaker Change: On margins. So let me let me take it.
Speaker Change: Yes, I'll take it so.
Speaker Change: We made a conscious effort to all the peers that we accepted and committed to.
Jeff: We're going to eat for Jeff and I would say about $3 million as we mentioned everything else that <unk>.
Jeff: POS came in but haven't been confirmed and everything its incoming.
Jeff: He is getting our universal tariff matter and it is a non negotiable and so far we have not seen any issue.
Jeff: With people not accepting it so I think there were some people who would try to play the game and say, hey, I'm not going to pay chair, if I said, well, it's kind of like if you buy a product on Amazon and you refuse to pay the tax you don't get the product I think.
Jeff: What we see in the industry is universally all our peers in everybody's passing it on and I think.
Jeff: I would call even the biggest customers are saying it is what it is is the new normal and.
Jeff: Today, we are identifying tariffs, obviously as things stabilize and go on just become part of the price.
Reuben: Yes, so reuben Okay got it.
Reuben: The $3 million are embedded in our guidance right in this the ones kind of headwind.
Reuben: But as already mentioned prospectively.
Reuben: The goal is to pass it through to the customers and to offset the posture and here. We just did not want to argue uncommitted.
Reuben: At Pos.
Reuben: We did not want to go back and uncommitted sorry, that's just.
Reuben: We decided to.
Reuben: A high ROI on that one.
Reuben: Yes, it makes sense. Thank you guys.
Reuben: Thank you.
Ryan Koontz: We'll move next to Ryan Koontz at Needham <unk> company.
Ryan Koontz: Great. Thanks for the question.
Ryan Koontz: Any particular technology domains you'd call out as you look forward, obviously, you talked about the third quarter strength across.
Ryan Koontz: Fiber and wireless and optical as you look forward over the next couple of quarters any any changes in behavior, you're hearing from the different customer segments and then secondarily.
Ryan Koontz: A follow up how does your exposure looking across datasets.
Ryan Koontz: Data center, and AI and can you comment on that opportunity.
Ryan Koontz: I would say is a great question. So are increasingly when I say fiber lab and production that's pretty much think of it today is a code word for data center because the days one.
Ryan Koontz: Fiber core and telecom drove that business are.
Ryan Koontz: Rover today disproportional.
Ryan Koontz: Today, I would say majority of it goes to farm that the data center and the new nodes are being pushed by the data center at your leading Sami's. It's you are leading.
Ryan Koontz: Fiber optic module manufacturers, leading nims and the top data centers.
Ryan Koontz: That's pretty much the whole ecosystem, that's driving it.
Ryan Koontz: March quarter was a very strong growth quarter on quarter for that business, we've shipped into a number of projects this quarter.
Ryan Koontz: We expect some a bit of a pullback, but it's still going to be stronger than December quarter, and we expect another very strong quarter in September. So there we have some visibility on the customers are coming in and placing now longer term orders. So we expect the I would say.
Ryan Koontz: The data center ecosystem, which is basically means for us fiber 11 production is going to be very strong throughout the rest of this year.
Ryan Koontz: On the other segment is the aerospace and defense.
Ryan Koontz: With the acquisition of inertia labs, and some of our earlier acquisition of Jackson Labs, and our whole play in PMT.
Ryan Koontz: We continue to win big programs and as those things start going into production. It's a very different business from the rest of the Abbvie, where we do a book ship. This one is all about design wins and tell you I am just blown away youre looking some of the programs we are winning.
Ryan Koontz: The size of the program is bigger than the Tam for our test and measurement business and Thats why I think as these things start materializing in going into production is going to be a very strong grower, but even this year its already quarter on quarter and through the rest of the year. We expect it to have to be posting pretty strong growth. So I would say too.
Ryan Koontz: Businesses that are going to be really stand out in kind of driving the growth of our weighted average growth is the data center business, which is 511 production and aerospace and defense we expect.
Ryan Koontz: The fiber field, which is the instruments and fiber monitoring to be the kind of steady Eddie recovery and.
Ryan Koontz: Gradual recovery trajectory and the wireless I think we expect.
Ryan Koontz: Clearly we are already seeing activity in the.
Ryan Koontz: Field for field instrumentation, and we've seen obviously that confirmed with that some of the leading wireless nims confirming that five year.
Ryan Koontz: Construction is resuming and we expect that to leading in the second half to recovery in our fiber.
Ryan Koontz: Wireless infrastructure and an FC business I think it continues to perform well and.
Ryan Koontz: And.
Ryan Koontz: I think theres a lot of great opportunities for us later in the year.
Ryan Koontz: Great.
Ryan Koontz: Helpful.
Ryan Koontz: Or any commentary you can make about the process and where you are with regards to the.
Ryan Koontz: The divestiture.
Ryan Koontz: From the <unk> acquisition.
Ryan Koontz: So I would always kind of just given the key side is the driving seat on this one it's all depends.
Ryan Koontz: It depends on their they provided.
Ryan Koontz: Update that they believe it's going to be doing their job.
Ryan Koontz: July quarter, so basically anytime between now and end of July is what.
Ryan Koontz: Is the stated.
Ryan Koontz: Dates are.
Ryan Koontz: We just leave it at that.
Speaker Change: Great I appreciate the thoughts thanks, so thanks, so much sure.
Marshall: We'll move next to meet a Marshall at Morgan Stanley.
Mary: Hi, This is Mary on for meta.
Speaker Change: I just wanted to go back to your comments on the OSP business.
Speaker Change: Is there anything else that you would add in terms of some of the headwinds or tailwind on the OSP business as we think about the second half of the calendar year. Thank you.
Speaker Change: Well I think it's that.
Speaker Change: Kind of premature to talk about second half of the calendar year, but generally it's a stronger.
Speaker Change: <unk> for the three D sensing.
Speaker Change: And it's kind of.
Speaker Change: Fairly steady for anti counterfeiting, but what we've seen now with the anti counterfeiting has.
Speaker Change: <unk> stabilized and we actually see upside in the.
Speaker Change: In the first half of the calendar year and it just leads us to believe that a lot of the inventory has been burned off in the channel and we were expecting actually during.
Speaker Change: During the March quarter to burn off some inventory and Ron.
Speaker Change: Lower.
Speaker Change: The action you didn't happen because of the demand came in stronger so we actually did both.
Speaker Change: <unk> managed to get the best of both worlds, we burn down the inventory and.
Speaker Change: Iran higher utilization that is giving us that our gross margin for that segment. So we expect anti counterfeiting to be yes.
Speaker Change: A much healthier.
Speaker Change: Shape as weather going forward than it was in the last 12 months and the three D. Sensing I mean, you guys all see the news and actually it's been pretty strong I mean the.
Speaker Change: I would even say the Q3 was stronger than we thought and generally.
Speaker Change: Our June quarter is a seasonally weaker quarter and then the stronger demand comes in.
The second half of the calendar year.
Speaker Change: Great. Thank you.
We will go next to Andrew Spinola at UBS.
Speaker Change: Hi, Thank you.
Speaker Change: I wanted to ask some follow up.
Speaker Change: Last quarter, we saw some strength return to the NSE business as the service provider starting to spend again.
Speaker Change: This quarter it looks pretty strong and then the guide is for a little bit of a slowdown next quarter. I think we were hoping that there was a real return to spending by the service providers that maybe it wasn't indicative of our head.
Speaker Change: <unk>.
Speaker Change: And it was a return to growth that would hopefully be followed in Europe and beyond.
Speaker Change: Six months et cetera.
Speaker Change: Wondering first do you think there was any sort of pull forward of demand by the service providers either Q2 either.
Speaker Change: Both Q2, and Q3 or do you think that this trend of a return to spend is intact and we should hope to see it continue going forward.
Speaker Change: Well first of all I don't think there was any pull in because thats not how they operate.
Speaker Change: And.
Speaker Change: If you think about it seasonally with service provider March quarter is one of the weakest quarters and it was almost on par with the December quarter. So the demand was actually quite healthy right. But then there is another one with service providers is the wireless field instruments.
Speaker Change: That was it continued to be pretty strong from December quarter as well. So it leads us to believe that.
Speaker Change: We're starting to see a resumption of the <unk> build out so in that respect I would say the service provider field instrumentation and kind of demand is very much in line and I would say.
Speaker Change: It's.
Speaker Change: Getting back to normal I mean, it's not something that youre seeing big growth I think it's a low single digit kind of quarter on quarter by that.
Speaker Change: And generally I think the pattern, maybe one quarter it'll be stronger next quarter, maybe a little bit weaker, but it's trajectories in the right direction and I would say generally we would see significant drop from December quarter to the March quarter. So if you kind of think about in the March quarter was roughly flat to December quarter in that business that.
Speaker Change: Is actually significant growth.
Speaker Change: And we also assume for next quarter kind of a more prudent approach.
Speaker Change: <unk> et cetera, we expect that probably some of that will probably push out into the September quarter, because if you don't place your orders early on the new place at a later.
Speaker Change: It takes a long time for if you revise your apio it has to re circulate and collect all the signatures by the time. It gets in you might not have enough weeks in a week in the quarter to build the product. So it probably will push out into the next quarter. So overall last quarter. This quarter next quarter, it's about timing the dynamic of timing of orders we don't.
Speaker Change: See any change in our thinking in terms of the end markets that.
Speaker Change: We operate naphtha demand there.
Speaker Change: Got it.
Speaker Change: That's the way to think about the fourth quarter guide is sort of Youre just assuming across the board everyone is just going to be a little slower pull back a little bit. It's not that you are seeing weakness in one specific part of the business because of the tariffs and others are stronger its just a general expectation of some some pause and some slowdown in the next.
Speaker Change: Quarter related to just waiting to see what's happening.
Speaker Change: Well, so I mean, it's very so in that OSP business.
Speaker Change: There is no impact because you have a long term forecast and you execute and there is very de Minimis.
Speaker Change: Tariff impact in that business, because we have factories in different geographies that produce with us John.
Speaker Change: Geographic so we don't have an impact that it is really on the NFC sites and within that it's a service providers will take the longest to reapprove pose with adders I mean, when you look at the 11 production data centers.
Speaker Change: The turnaround has been pretty quick I mean, they said, yes. It is what it is that's a tariff here's the peel back so I would say.
Speaker Change: If any segment, that's going to push out and you may see some slippage of revenue that would be more for the service provider segment rather than the <unk>.
Speaker Change: <unk> production, which is semi companies.
Speaker Change: Equipment vendors data centers and the module integrators.
Speaker Change: Got it thank you.
Speaker Change: Thanks.
Speaker Change: Our next question comes from Michael Genovese at Rosenblatt Securities.
Speaker Change: Great. So just talk on the tariffs for a minute here.
Speaker Change: Do you have your manufacturing exposure to places where tariffs there is a risk I mean, I know people don't think tariffs are going to go up.
Speaker Change: Full rates in southeast Asia, and Taiwan would be implemented, but that's still on the table and a possibility so.
Speaker Change: I know you said they don't behave to pull things forward, but do you have any customers that are exposed more to those regions in China and would want to pull things forward and for that reason.
Speaker Change: I have not seen any customers that are pulling products forward because in the end they all have their quarterly budget.
Speaker Change: And you got I have not.
Speaker Change: They spend what they get in any given quarter and the only thing. We've seen is like okay. That's fair to put an adder and they just had to reapprove. It that's about it.
Speaker Change: I have not seen antibody, if we say hey, I'll take everything now because they don't want it.
Speaker Change: It's just.
Speaker Change: You would think you would see it because.
Speaker Change: But it's not the case.
Speaker Change: Okay. Okay.
Speaker Change: Then just on the on the total inventory for the company and I think it went up about 25% quarter over quarter was that new buying in front of a tariff or something else going on.
Speaker Change: There is the incremental inventory from the initial lifts acquisition that closed end of January if you back out their inventory actually our inventory was slightly down quarter over quarter.
Speaker Change: Okay Perfect and then last question for me is just an update.
Speaker Change: Color on.
Speaker Change: The aviation business.
Speaker Change: Which business sorry.
Speaker Change: Military aerospace and defense, yes, what about it.
Speaker Change: Just just just a color update on how that market is.
Speaker Change: Oh, yes.
Speaker Change: Listen that businesses is doing very well, it's got very healthy quarter on quarter growth.
Speaker Change: I mean, there is parts of that business that are more like a mature with a slower growth like the.
Speaker Change: The.
Speaker Change: I would say the mix.
Speaker Change: Mission critical.
Speaker Change: Communication like two way radios in ASEAN expedite go slower, but the area that's really driving.
Speaker Change: Significantly higher growth is the whole PMT positioning navigation and timing and that is all about drones. It's all about anti spoofing anti jamming of GPS.
Speaker Change: And things like that so that's the business that is a very strong quarter on quarter growth.
Speaker Change: Okay. Thanks very much.
Speaker Change: Thank you.
Speaker Change: And next we'll go to Tim <unk> at Northland capital markets.
Speaker Change: Okay.
Speaker Change: Hey, good afternoon.
Speaker Change: Two questions and really both trying to quantify a couple of things that we've been talking about here.
Speaker Change: First in terms of the overall size of the fiber lab and production business, which is a real growth area for you guys I think you're talking about growing into.
Speaker Change: Yes.
Speaker Change: The June quarter.
Speaker Change: If I were to put that around 2025% of any revenue would I be too far off there.
Speaker Change: Any color on that would be interesting.
Speaker Change: And then I want to take a shot at quantifying the degree of your Prudence, but why don't we follow up with that start with lab and production.
Speaker Change: Well I think this one is that the June quarter, we expect some pullback from the March quarter, because we are shipping to a lot of big projects. So there was a big significant increase.
Speaker Change: December and March quarter than June quarter, or is there some pullback and we expect September quarter to be another.
Speaker Change: Increase in the shipments so I'd say today.
Speaker Change: 25%, maybe on NFC is probably a little too much but 20% is probably more like it on any on the.
Speaker Change: NSE NSE NSE, yes.
Speaker Change: Okay. So that's on that and what was your second part.
Speaker Change: Youre talking about.
Speaker Change: How much I think it probably.
Speaker Change: Sure.
Speaker Change: Five to maybe.
Speaker Change: $10 million is a reasonable number to take a hedge.
Speaker Change: Slip out right now.
Speaker Change: That was that was going to be my follow up which is normally.
Speaker Change: You might even see high single digit sequential growth in any on a seasonal basis.
Speaker Change: Yeah.
Speaker Change: And so that gets me a little bit higher closer to me well.
Speaker Change: If I remember.
Speaker Change: What is seasonal I mean seasonally March quarter is down here, we actually had a march quarter right. So I mean.
Speaker Change: It's a different kind of compare so if you had a typically seasonally march quarter.
Speaker Change: The June quarter will be exactly what you would expect it to be up so I mean, it's.
Speaker Change: It was it a seasonal I don't know if that pattern will maintain but clearly.
Speaker Change: If it is that we may have to redefine what seasonal.
Speaker Change: Understood.
Speaker Change: We will settle on fire.
Speaker Change: And I think it's really the data center is where probably broke the traditional seasonality, but even then they look at the field instruments, there were roughly flat quarter on quarter, which is like in that particular space is that you could consider growth.
Speaker Change: Great I.
Speaker Change: I appreciate it thanks very much.
Speaker Change: Alright, thank you.
Speaker Change: And there are no further questions at this time I will turn the conference back over to Bill <unk> for closing remarks.
Speaker Change: Thank you Audrey.
Bill: And thank you everyone. This concludes our earnings call for today have a good evening goodbye.
Bill: And this does conclude today's conference call. Thank you for your participation you may now disconnect.
Bill: Please wait the conference will begin shortly.
Bill: Yes.
Bill: [music].
Bill: Okay.
Bill: Yes.
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Bill: Yes.
Bill: Yes.
Bill: Yes.
Bill:
Bill: Yes.
Bill: Yes.
Bill: Sure.
Bill: [music].