Aviat Networks Inc (AVNW) 2013 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. And welcome to the Aviat Networks Conference Call. Following the presentation, the conference will be open for questions.

(Operator instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to hand over the conference to Jennifer Graybeal of Aviat Networks. Jennifer, you may begin.

Thank you, Bruno. Good afternoon, everyone. And welcome to our first quarter 2013 earnings call. I'm joined by Mike Pangia, President and Chief Executive Officer, and Ned Hayes, Senior Vice President and Chief Financial Officer.

During this conference call we may make forward-looking statements regarding our business, including statements relating to projections of earnings and revenues, business drivers, the timing and capabilities of new products, network expansion by mobile and private network operators, and variations of economic recovery in different regions.

These and other forward-looking statements involve assumptions, risks and uncertainties that could cause actual results to differ materially from those statements.

For more information, please view the press release and filings made by the Company with the SEC. These can be found on the Investor Relations section of our website, which is www.aviatnetworks.com.

Now, I would like to turn the call over to Mike Pangia, President and CEO of Aviat Networks. Mike.

Thanks, Jennifer. And thank you all for joining us today. I am very pleased to report another strong quarter and a great start to the new fiscal year. We had good top-line momentum and another quarter where the orders booked-to-bill ratio was at least one-to-one.

Overall, I am encouraged by the way our order book is developing. Our forward visibility is improving. And our backlog is in excellent shape going into the second fiscal quarter.

Revenue in the first quarter was at the top end of our guidance range at $115 million. Non-GAAP gross margin was at 29.6% of sales. Relative to our Q4 results, I am pleased with the Q1 margin performance as we are beginning to see some of the positive effects of the transition to new products.

With volumes continuing to improve, we are moving beyond initial startup costs, and we remain confident that the trending of our gross margin will improve further in the coming quarters. Our focus on optimizing operating expenses continues. Our non-GAAP OpEx in Q1 was below the bottom end of our expected range, somewhat attributable to the timing of some items.

As mentioned in the past, we are striving to be more efficient in our supply chain and back office processes, while we evaluate and make selective investments in products and go-to-market activities.

The combination of improving margins and careful management of expenses will continue to have a favorable affect on our EPS.

The one area where we fell short of our expectations for the quarter was in cash. The ending cash balance was at $85.1 million, which was $10.9 million below where we ended Q4 FY12. But this was purely related to timing of deliveries that resulted in customer payments moving into the early part of Q2.

Ned will discuss this further in his section. With that, I would like to provide an update on the microwave transmission market.

On a global basis, mobile backhaul continues to be our primary addressable market segment, and the demand for increase in backhaul capacities in our customers' networks continues to grow in line with our expectations.

In the quarter, we saw increased demand in North America as we support the LTE deployments of our key customers. Internationally, there continues to be a combination of increasing capacity to handle subscriber growth, ongoing ability of some large 3G deployments, and the emergency of early stage LTE deployments.

Our position continues to be to support our customers for LTE readiness and ensure that our technology roadmap is well-aligned with these evolving market requirements. The discussion around smaller cell architectures is ongoing, with clear interest in millimeter wave products as one of the possible backhaul solutions for this longer term market opportunity.

We have a number of good opportunities in the pipeline in some other market segments such as public safety and national security applications, both in North America and in other parts of the world.

We previously discussed the interest in creating alternative long-distance, low latency microwave routes between several large metropolitan centers. Initially, this activity was focused in North America, but throughout this year, interest has grown in other regions. In fact, we just finished deploying our first low latency route in Europe between two large metropolitan areas.

So, for us, the headline is this -- despite a difficult macroeconomic environment in some regions, our new products and product roadmap seem to be resonating broadly across all of our geographies and application areas. This is reflected in our short term results. But more importantly, in our improving outlook, which is consistent with our past statements.

Here are some specific activities by geographic sector. Our Africa sector increased its order bookings over the previous quarter making for another quarter of very strong performance. Part of this increase relates to our professional services business as large operators ordered turnkey solutions involving network planning and design and installation and commissioning services.

I was in Africa a few weeks ago and met with several of our customers. The messages I took away confirmed that we are doing the right things. They are pleased with the actions we took to stabilize the business and refocus on our core competency of wireless transmission. They see and have experienced the total cost of ownership benefits inherent in our products. And they are very happy with our ability to provide reliable and comprehensive services.

In line with those positive perceptions, these customers awarded Aviat orders in other segments of their business and in other territories that are new to us, allowing us to expand our overall footprint in the region.

In some cases, this is happening through deals where we are teaming up with the full line suppliers, usually at the direction of the end customer who is demanding Aviat's microwave product solutions.

Market demand for data services in these countries is driving operator investment and higher capacities and backbone infrastructures to deliver those services across Africa. Further contributing to the service demand is the recent implementation of undersea fiber optic cables to many countries.

I remain optimistic about our business prospects in this sector, and we will continue our efforts to partner with these customers and expand our business here in Africa.

In the Middle East, opportunities within the non-mobile space remains strong as security concerns across the region raise further demand for government networks.

As in other areas, the moves towards IP is driving further demand for backhaul and access networks that has been adversely affected by operator and investor concerns about the civil unrest in many of these markets.

Our medium to longer term outlook for the Middle East remains positive as we continue working with our key customers while they sort through this period of uncertainty.

As the Euro zone struggles with unfavorable market sentiment and economic challenges, we experienced lower than expected business there this quarter. We continue to receive orders from our new mobile operator customer that we previously announced. And we expect the value volume of orders to increase.

We remain optimistic about ongoing and future opportunities in this region, driving by migration to IP, and future demand for small site backhaul for LTE networks.

In Asia-Pacific, our existing tier one customers continue to upgrade and migrate networks to be 3G and LTE ready.

Also, in Q1, we received orders in the public safety vertical in several Australian regional networks, as well as winning new regional networks from our public safety project in Malaysia. Overall, orders are steady in this region, and we see a number of new opportunities developing.

In North America, we continue to find and win new business on the strength of our solutions, total cost of ownership, our proven ability to provide superior delivery and implementation services, and a reliable supply chain that is able to fulfill orders in a very short timeframe.

We see business growth in the mobile operator, local and state government, utility and high frequency trading verticals.

Another highlight is the growing contribution from systems integrators, wholesale network providers and value-added resellers that we did not see this time last year. The LTE build out with our T-Mobile operator customers continues, with no signs of slowing in the near term.

North America orders from the low latency vertical segment continue to be a bright spot for the Company. We believe our strong TCL proposition continues to spark significant interest across all verticals, while our largest competitors in North America remain challenged to keep talent and compete at the same level.

Now, an update on our products and services. The introduction and transition to our new ODU 600 high performance outdoor unit continues on schedule with two more frequency bands completed in the quarter. There are now 15 frequency bands in the full Eclipse portfolio. But the market (inaudible) in terms of volume is covered by the top six, which were released in prior quarters.

The full rollout will be completed within this fiscal year, fiscal year 2013. And over the course of the year, we expect that to positively impact gross margins as previously indicated.

The product refresh of the Eclipse and its North American IRU 600 variant that we targeted in our turnaround plan is essentially complete, significantly enhancing our competitive position from both microwave radio performance and from a Carrier Ethernet networking perspective.

With regard to our product roadmap, our future solutions for microwave networking capabilities continue to progress well and our next generation Aviat packet note platform, which we are branding as the Aviat CTR 8000 family of products, will start undergoing customer evaluation in the early part of calendar year 2013.

The CTR 8000 represents the future of highly integrated microwave networking and offers our customers an elegant migration path by reusing much of the network investments that they have already made.

Now, I'd like to discuss our fiscal year 2013 key objectives and progress. As mentioned last quarter, our focus will remain on continued acquisition of new customers, improving costs and operational efficiencies, accelerating innovation in wireless transmission, and investing in our service capabilities by leveraging our network operating center, which we call our NOC, and turnkey services.

I'm pleased with the progress we are making. We continue to broaden our customer base in all markets. In Africa, as mentioned, out footprint is expanding. We are doing well in the low latency, high frequency trading market on a global basis. And in the first days of this quarter, we signed a new agreement for a private network in a major US metropolitan area.

Several internal projects are underway to improve our operational cost efficiencies. And they are surely results that will support our plan of optimizing expenses each quarter. That said, we are also investing in our go-to-market resources, particularly in those regions where we can regain market share and expand our coverage.

We are also making a major investment in updating our ERP system over the next year that will lead to process and cost efficiency, better controls and improved supply chain performance.

Our technology roadmap is on track. The introduction of new, more cost-efficient and higher performing products is moving forward on a steady pace. We will see further introductions in the coming months.

As mentioned in our business comments, and consistent with recent quarters, demand for our entire services portfolio is increasing. We continue to see our project management skills and dependability as areas of distinct competitive advantage over others in the industry.

Now, I'd like to turn the call over to Ned for an overview of our financial results. Ned.

Thanks, Mike. Our GAAP financial statements, along with a reconciliation of non-GAAP financial measures, are included in our press release issued today following the market's close. I would like to take a few minutes to summarize our non-GAAP financial performance at a high level.

As Mike previously mentioned, we had a strong quarter. The key highlights were revenue for FQ1 came in $115 million, which was toward the top end of our guidance range. Sales were particularly strong in our reported Middle East and Africa region at $49 million. And we saw continued solid performance in North America at $38.7 million.

In terms of products and services revenue mix, we saw continued strength in our services business, with the split coming to 73% product, and 27% service. Our services capabilities continue to be a key differentiator in winning and supporting deals worldwide.

Our significant tier one mobile operator in Africa, MTN, was once again a 10% customer in the first fiscal quarter. As Mike mentioned earlier, our total cost of ownership value proposition is truly resonating with this key customer, and we are expanding backlog and project scale across this carrier's operations and areas.

Non-GAAP gross margins for the quarter were 29.6% of revenue, which is in the middle of our guidance range. The strong services topline performance led to improved margins, as it enabled a better spreading of our relatively fixed services costs. We were also more effective in managing variable costs within projects from the bottom line perspective. And we are beginning to deliver the expected product margin benefits as we transition customers to our new outdoor radio systems.

All of these combine to deliver a full percentage point improvement over the previous sequential quarter.

Non-GAAP operating expenses for the quarter totaled $30.6 million, and were slightly below our guided range. Some expenses and investments planned for early in the fiscal year were moved to later quarters. But it is notable that we were adroit in managing expenses while sustaining strong bookings and revenue in the quarter. We will continue to focus on optimizing operating spend across all areas of the Company.

Adjusted EBITDA for the quarter was $4.7 million, which compares favorably with our sequential fourth quarter result of $2.9 million, and to our year ago quarters EBITDA of $1.3 million. Non-GAAP income earned in the quarter was $2.8 million, or $0.05 per fully diluted share. We continue to maintain a very strong balance sheet with $85.1 million in cash and equivalents and debt of only $11.8 million.

As Mike mentioned earlier, we didn't collect as much cash within the quarter as we had expected, leading to a net reduction of $10.9 million in our closing cash balances. This was a timing issue only. Customer-dictated schedules affected the finalization of orders, consequently delaying the associated invoicing and collections in the quarter.

I am very happy to report that we collected on those invoices in the first weeks of October. We are off to a great start on FQ2 collections we have recovered. And are well ahead of collections, compared to where we would normally be in the first month of an average quarter.

Further, we saw very good linearity in October shipments, and good visibility into November shipments. So, both should support strong FQ2 collections as well.

With FQ1's collections performance, our DSOs grew to 87 days, up from historic lows last quarter of 71 days. As expected, we saw a reduction in our overall inventories coming from more efficient management of materials. And we hope to continue to improve in that area. This resulted in inventory turns improving slightly from 4.4 to 4.5 turns. And efficient supply chain management allowed our days payable to improve to 66 days versus 57 days in our last sequential quarter.

GAAP cash flow from operations was a use of $9.2 million. With CapEx in the quarter of $1.3 million, our free cash flow stood at a negative $10.5 million.

Now, let me conclude the financial section of the call with our guidance for our second quarter of fiscal year 2013.

Based on current trends, our revenue outlook range is $115 million to $120 million. Our strong bookings performance over the past several quarters provides us confidence to continue to raise the floor on our revenue expectations.

We expect FQ2 non-GAAP gross margins to be in the 29.5% to 30.5% range. We continue to caution that, as we experienced in our last couple of quarters, this can have a significant impact on gross margin rates in one direction or another.

Given variability in product mix, geographic mix, services volumes, carrier choppiness, timing of customer deliveries, especially in large projects, and pricing this gradual improvement in margin may very well not be linear. Having said that, we continue to be confident that gross margins will be north of 30% in the second half of the fiscal year and beyond.

We will sustain our focus on modulating operating expenses to deliver on the bottom line. We expect that on non-GAAP operating expense spend will be a little more than the quarter just ended, and will be in the range between $31 million and $32 million.

On a go forward basis, opportunities remain to further optimize and better align our spending, especially G&A, and ensure that we are investing in those key areas supporting our long term objectives and profitability.

We are expecting strong cash collection in the second fiscal quarter, as previously mentioned. Our expectation is that we will increase our cash balances in the quarter and will restore our cash and equivalents balances in the coming quarters to levels observed at the end of the previous fiscal year.

As mentioned in our last call, we are included estimated cash tax expense in our non-GAAP results this fiscal year. During FQ1, we estimated $650,000 in cash tax expenses. And business models should include a similar amount for FQ2 and for the rest of the fiscal year.

So, with that update, I'll turn the call back over to Mike for his executive summary. Mike.

Thanks, Ned. As mentioned earlier, we are very pleased with the first quarter results. My confidence in our business and the approach we are taking is growing. This is because of improved business results, the positive remarks I get from our customers, and our renewed stability, a sharp contrast to the current challenges that most of our competitors are facing in various aspects of their businesses.

In closing, our order backlog is strong. And our visibility is improving. We are deploying new products and solutions to the market. And we have more new products in the pipeline. Our competitive position, as measured by total cost of ownership, is as strong as it's ever been. And we are focused on continuing to improve it.

We are making the right moves in trimming the expenses while investing in areas that will enhance the top and bottom lines. Our period of restructuring is behind us, unlike some of our competitors. We have more opportunities to improve our share of the business. Our sales force is confident that they have what they need to win.

And last, but not least, we are well-positioned for enhanced profitable growth, which should result in increased shareholder value.

Now, I would like to turn the call over for questions. Operator, you may proceed with the Q&A.

Thank you, sir. We will now begin the question and answer session. (Operator instructions). And our first question comes from Blaine Carroll with Avian Securities. Please go ahead.

That's some quarter, guys.

Hi, Blaine. How you doing?

Hi, Blaine.

I'm doing good, thanks.

Hey, Mike, can you talk a little bit more about Africa? You gave a fair amount of detail there. But your commentary is almost 180 degrees from one of your competitors that reported earlier in the week. And I'm just wondering if you can sort of talk about share gains or customer concentration? Or -- you know -- size of customers and how you're winning in the Africa market?

Sure, Blaine. Rather than discuss what, perhaps, the competitors say, I think we've been pretty consistent in our views about Africa.

It's an excellent market. We see opportunities for growth. There's a tremendous amount of activity going on in terms of migrating those networks. And we're very well positioned there.

Probably isn't a better example around total cost of ownership, as we see it, with our largest customer being MTN. And that's what has led us to be in a position to actually expand our footprint with them.

We are not the only provider of backhaul solutions in that account. So, there's more opportunities for us. But it's key that we work very closely with our customer and are able to help them improve their business. And that has gone very well with MTN and others in Africa.

So, hopefully, that answers your question. We continue to see opportunities moving forward as well in that fantastic region.

Is there anything that's changing in that market -- you know -- with the embassy fiber cable coming in? Or -- you know -- from a currency or -- you know -- a cash generation of the carriers over there that is responsible for that market being so strong for you?

Well, I think if you look at examples, at countries like Nigeria where there's been quite a bit of new competitors coming in, it's important that those that are leading in terms of subscribers continue to have the best network possible in terms of reliability.

That drives investment and the need to increase capacity from a backhaul perspective. And I think that continues.

Back to the point that I made. I was just there a few weeks ago. It's very clear to me that one of the big positive effects for us, as perhaps as different than a year ago, is that our renewed stability is -- I mean -- the customers see that clearly. We were probably not in the same place a year ago, having still come off the heels of some restructuring. But we're in a much better position. We're much more stable.

Our services capability that we offer in the region are really fantastic. And we have a number of resources in that region that have the capability to provide services.

And, as we've talked before, it's not just about the services in terms of limitations, but the whole logistics aspect of getting product into the country in a reliable manner are also important.

Okay. And then, Ned, on the receivables. It does sound as if it was business that came in towards the end of the quarter. But is there anything different going on within receivables? Are receivables lengthening as maybe some of your customers are getting larger and getting more favorable terms? And -- you know -- what is the quality of the receivables?

I thought I saw a bad debt expense -- you know -- on the financial somewhere. Is there any concern within the receivables?

No. I don't think there's any meaningful change whatsoever, Blaine, quarter to quarter. It was absolutely as you described. We had some very strong orders. Some dictated customer shipments that ended up being toward the end of the quarter versus what our expectations were. We collected on the vast majority of those in the first weeks of October.

In fact, to add additional color, our collections in the calendar month of October were $50 million, more than twice than what we normally expect to see in the first month of an average quarter.

The quality of our receivables stand absolutely as they have in the past. We're not seeing as yet any significant pressure to extend our payment terms to our customers. We're still very much enjoying quality customers out there, quality regions out there in terms of payment terms.

And -- you know -- the bad debt expenses that we took were just prudent with $300,000 here, $100,000 there. Nothing meaningful in terms of any tilting toward a worsening of the credit quality within our receivables portfolio.

Beautiful. Thanks. I'll pass it on. And congratulations.

Thanks, Blaine.

Thanks, Blaine.

Our next question comes from Barry McCarver with Stephens, Incorporated. Please go ahead.

Hey. Good afternoon, guys. And great quarter.

Thanks, Barry.

Thanks.

Back on that -- back on Africa for just a minute. Without targeting any specific customer, can you just talk broadly about the gross margins out of that market? Are those margins a little better than some of your other territories or kind of the average? I'm wondering how much -- you know -- success in that region -- what that does to your overall margin profile.

I'll ask Ned to comment on whether or not there's any significant effect from a margin perspective in terms of either -- compared to other markets or changes we've seen relative to our own margin performance.

Yes. I think, Barry, quite honestly, when you take a look at the composition in terms of ratio of revenues coming out of Africa, they've got to be pretty strong. We're not going to comment, given competitive intelligence out there, in terms of what we're getting from this.

But what we are seeing is the value add that we are providing in terms of product performance, product reliability, services capability, reuse of assets, that the margins are holding up. And despite the competitors coming in there with -- you know -- equipment for free, people understand that there's no such thing as a free lunch.

And, again, the overall total cost of ownership value proposition that we're delivering, especially to our key customers in Africa, are resonating and we're enjoying the benefits of that. Not only with customer retention, but good margins.

Okay. Great. That's helpful. And then, Michael, you just mentioned in your prepared remarks that how much better visibility was -- you know -- today, than it has been in the past.

If you were to look at that a couple different ways, how much of that has to do with just the advancement and rollout of your new product lines versus -- are you seeing any freeing up of budgets for backhaul solutions?

There's a number of drivers around improved visibility for us. In our largest markets, we have had very strong orders momentum. Our backlog is improved. Linearity of our orders has been better. And that all leads to improve visibility and confidence going forward.

We have our new products coming out. Or products have come out in terms of our radios. Those have been -- those have gone extremely well in terms of the acceptance for those products into our customer base.

We've got some exciting new verticals. The low latency market is an exciting vertical for us. And we're now creating, actually -- rather than pursuing, we're creating that market in many ways working with some of our customers. And that's growing from just North America internationally.

Our services portfolio has always been one of our strengths. But we continue to add to the breadth of that portfolio. And that's improving our visibility because of the demand for our services is allowing us to do a much better job of taking a look at what our outlooks might be in the coming quarters.

Great. And then last question. Just looking at the North American market over the last -- you know -- four quarters -- you know -- we continue to hear about demand kind of building in this market. And yet, revenue's, almost like clockwork, off about $2 million a quarter. Is there anything really to read into that? Anything change in the pricing environment? Or just kind of be more circumstantial is how the numbers look?

Well, I think our business there has been pretty steady. You say dropping by $2 million or so quarter-to-quarter. I'm not quite sure about that. I actually think we're up year-over-year, Q1 to Q1, in North America.

But, notwithstanding that, you got to understand that in North America our business is composed of -- you know -- two-thirds of our business is non-mobile. And as we've explained before, the non-mobile segment has a characteristic associated with it -- is you do a large project, you deploy it and then that next large project and that customer could not fall within the same calendar year or even the next calendar year.

So, we have to continuously have new customers. And that's what we're seeing. We're seeing new large opportunities to emerge that allow us to continue to keep the pace in North America.

And we do expect, as I think we've stated, that we continue to see promise for improvement and growth going forward in North America.

The only other thing I would add is, given our venture into low latency vertical, we are literally building networks for our customers with our customers. And we're not seeing that revenue as yet.

When we turn those turnkey projects over, then you'll see a nice fleshing out of revenue based upon these low latency projects. So, that's got a somewhat deferring mechanism on both revenue and cash. And we're managing through that very nicely, I think.

That's very helpful. Okay. Thanks, guys.

Okay.

Our next question comes from Rich Valera with Needham. Please go ahead.

Thank you. Just a follow-up on the receivables question. When can you talk about the linearity of the just completed quarter? It sounds like the one you're in is very nice and linear. And that should certainly help the collection side of things. How was the quarter you just completed? Was that a little bit more backend loaded quarter?

With a couple of our key customers the shipments was a little back ended. And, therefore, that's why the invoicing was able to be completed within the quarter, but the collection slipped, literally days and weeks outside the quarter, Rich.

Sure. And I just wanted to make sure I understood exactly what your thoughts were on the cash performance in the quarter that we're currently in. I'm assuming you expect your receivables to be a source of cash in the current quarter. But do you think that'll drive overall positive cash flow from operations in the current quarter?

Yes, we do.

Okay. Very good. And then with respect to the CTR 8000 -- I hope I have that name right. The next gen platform.

Yes.

Sounds like you'll start -- you'll have it in customers' hands early this next calendar year. I wonder if you could give us any more color on how you expect that will roll out from initial production and then through to volume production standpoint?

Yes. So, I think we've been pretty consistent relative to -- you know -- it is going to be in customer trials. We do expect to, as we get towards the back end of our fiscal year, we expect to start receiving some orders. We will go through a sales cycle stage. In fact, we've already started beginning to position that. And you'll have variants of the product as well.

So, I mean -- given the nature of the product rollout, I would see that taking some period of time. It's difficult to predict exactly when you're going to see an accelerated ramp driven by that.

But notwithstanding that, we're in excellent position right now in terms of our current portfolio. And we do see the opportunity to grow our business with the current portfolio we have. In fact, I see the next generation platform allowing us to perhaps extend and accelerate the growth.

That's helpful. Just one final, kind of big picture on. Hard not to notice that pretty much everyone else in the telecomm infrastructure seems to be struggling and sort of noting -- you know -- fairly meaningful slowdowns in their pace of rollouts with service providers. And you guys are obviously kind of outperforming pretty nicely.

And just trying to -- I want to understand. Have you guys seen any change in the landscape and have just been sort of able to outperform because of various things like your service total cost of ownership? Or in the specific areas you compete, have you just not really seen that much slowdown barring, I think, Europe, where you mentioned you did see some slowdowns?

So, just trying to understand -- you know -- how you guys seem to be, frankly, performing quite well in an environment that most of your competitors and other providers see as quite challenging?

First of all, I appreciate that you've observed that, because I feel the same way. Notwithstanding that, to answer your question, we're seeing a combination of things.

I mean, in our current customer base, or our current addressable market, we continue to see opportunities that all the drivers for those customers are there in terms of devices and increased requirement to drive for increased capacity. Migration by migrating their networks more to IP.

As I mentioned, using one of our large customers as an example, our ability to expand our footprint in some of these large operators is there -- has been there for us. So, I guess from that perspective, our share is increasing.

I would say that -- you know -- we did lose market share. We went through a period of uncertainty there. And we've been able to regain some of the share that we've lost with some of those existing customers.

On top of that, we have seen increased demand for our services from customers that either used other companies or were doing things themselves. Or increased breadth of our services, including our NOK has positioned us for some additional business. And the low latency market, albeit the revenue to date has not been significant. We're seeing that as a further growth engine moving forward.

I would say a couple things. The overall market, I would say that there's no indication that we've seen that that is growing, probably relatively flat. And there might be many areas that we've already mentioned where it's significantly down than what's expected -- Europe, Middle East being examples. And we do expect that that will come back because those underlying drivers are still there in that market.

And then, just the last point in terms of general macro and what may happen. You know, we've been running this business cautiously optimistically -- if I can use those words together -- since for a long time. And we do that every day. We will continue to look at the drivers, look at the economic indicators. And be in a position where we can manage ourselves to be able to be profitable under pretty much any circumstance. But we very much manage the business cautiously optimistic on a day-to-day basis.

The only thing I'd add would be the stability of the business. We have been through the ringer here over the last two to three years. And it's quite nice now to be able to get back to our core competency where we have been successful over the last 50 years of being technology leader in microwave transmission, microwave networking product.

The restructuring we've gone through is completely behind us. And a number of our competitors are out there announcing that they now need to embark down that slippery slope. Our balance sheet is extraordinarily strong. Again, versus some of our competitors out there, especially when you take a look at the PSOs and PPOs.

Our revenue is growing as opposed to being tempered across the entire board of the space that we're playing in. So, we find ourselves to be at a very, I think, strong and stable position that some of our competitors can't talk about right now.

Fair enough. I appreciate the commentary. Thanks, gentlemen.

Thank you.

Thank you.

Sir, there are no further questions in the queue at this time. Please continue.

Okay.

I'd like to thank everyone for your participation today. I do have a quick update of our upcoming events for you.

Our annual meeting of shareholders will be held on Tuesday, November 13, at 2.00 p.m. local time, at our headquarters that's located at 5200 Great America Parkway in Santa Clara, California.

In addition, we'll be attending the Needham and Next Gen Conference on November 7, in New York, followed by the Stevens Fall Investment Conference on November 14, also in New York City. This concludes our call today.

Ladies and gentlemen, this does conclude the conference call. Thank you for your participation. And you may now disconnect.