Aviat Networks Inc (AVNW) 2022 Q1 法說會逐字稿

Good afternoon. Welcome to Aviat Networks' First Quarter Fiscal 2022 Earnings Call. (Operator Instructions) Please note, this conference is being recorded.

I will now turn the conference over to your host, Mr. Keith Fanneron, Vice President of Global Finance and Investor Relations. Thank you. You may begin.

Thank you, and welcome to Aviat Networks' first quarter fiscal 2022 results conference call and webcast. You can find our Form 10-Q, press release and updated investor presentation in the IR section of our website at www.aviatnetworks.com, along with a replay of today's call in approximately 2 hours. With me today are Pete Smith, Aviat's President and CEO, who will begin with opening remarks on the company's first fiscal quarter; followed by David Gray, our CFO, who will review the financial results for the first fiscal quarter. Steve will then provide closer remarks on Aviat's strategy and outlook followed by Q&A.

As a reminder, today's -- during today's call and webcast, management may make forward-looking statements regarding Aviat's business, including, but not limited to, statements relating to financial projections, business drivers, new products and expansions, the impact of COVID-19 and economic activity in different regions. These 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 annual report on Form 10-K filed with the SEC on August 25, 2021. The company undertakes no obligation to revise or make public any reversion 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 in the IR section of our website at www.aviatnetworks.com and financial tables therein, which include a GAAP to non-GAAP reconciliation and other supplemental financial information. At this time, I'd like to turn the call over to Aviat's President and CEO, Pete Smith. Pete?

Thanks, Keith, and good afternoon, everyone. Thanks for joining us to review a successful quarter. The company continued to execute on our key long-term focus areas of growth, margin expansion and meaningful bottom line improvements. The Aviat team commitment resulted in first quarter revenue of $73.2 million, growth of 10.4% from the first quarter of fiscal year 2021. First quarter adjusted EBITDA margins of 13.0% compared to 12.7% for the first quarter of fiscal year 2021. And a solid balance sheet and liquidity position with net cash at $47.3 million.

North American first quarter revenue increased 12.0% or $5.4 million year-over-year. International first quarter revenue increased 6.9% and or $1.4 million year-over-year. Adjusted EBITDA was $9.6 million for the first quarter, representing an improvement of $1.2 million versus the same period last year. The improvement in revenue and adjusted EBITDA for the first quarter was primarily due to higher volume of private network business, increased sales through our Aviat store, which serves primarily rural broadband space, improved international business driven by multi-band wins and an increase in software and license sales. To achieve these results, we must recognize our suppliers and the Aviat supply chain team. The current supply environment is incredibly challenging, and we thank our suppliers and our team for continued performance.

On our last call, I outlined the differentiation in our radio products, specifically the WTM 4000 platform, which has played a significant role in our recent growth in 5G and rural broadband. In today's call, I will reiterate some of the key points and subsequently highlight some of the wins that this platform has delivered this quarter. The Aviat WTM 4000 leads the industry in system gain, enabling radio links to go further in distance, have greater ability to overcome weather effects like rain and use smaller antennas, which is an important element in Aviat's total cost of ownership value proposition. And our WTM 4000 portfolio includes the industry's only single box multi-band radio for 10 gigabits per second capacity. Along with our software and e-commerce differentiation, this product has led to some positive developments in the market this quarter.

We have seen strong growth in our North American rural broadband segment. We now supply to 15 of the top 30 rural digital opportunity fund or RDOF winners and are in advanced discussions with 5 others of the top 30. This business is based on our WTM 4000 platform and is going strong for us. Internationally, Aviat has had one of the best quarters in our history with regards to winning new accounts. Many are share gains impacting revenue in future quarters, including a large Ministry of Defense Network in Northern Africa, 2 new Tier 2 operator wins in Africa, one in Chad and another in Angola, which included a hosted frequency assurance software recurring revenue win, our first fast win in Africa, 2 new operator wins in Southeastern Europe. And in APAC this quarter, we penetrated one of the largest mobile operators, a Tier 1 operator, achieving first ever sales for Aviat based on our multi-band solution.

We are extremely excited about this development as well as all the other new accounts mentioned here. On top of all these market successes, in the quarter, Aviat announced a significant new product for operators, high availability routing software running on our CTR 8740 router platform. This new high availability routing software is a compelling choice for operators seeking an affordable routing solution that is reliable, scalable and secure. Aviat is now one of only a few router vendors on the market to support high availability software. While the software was designed for North American mission-critical private networks, we are starting to see demand in 5G networks worldwide as they evolve to meet the needs of critical use cases, such as connected cars, industrial IOT, machine-to-machine communications and public safety applications. As 5G transport networks work to become more reliable, this offering, along with our proven portfolio of highly reliable, high system gain radios gives Aviat a strong value proposition.

With that, let me introduce David Gray, CFO, and then turn the call over to him to review our financials before coming back for some final comments. David came to Aviat from Superior Essex, where he was CFO of the approximately $2.6 billion multinational company with a significant telecom equipment presence. Prior to his 7-plus years with Superior Essex, David held financial leadership positions of increasing responsibility at a number of prominent companies, including Couperin, Newell Brands and Philips Electronics. We're thrilled to have him on board as we continue to focus on corporate growth and margin expansion.

Thank you, Pete, and good afternoon, everyone. During my remarks today, I will review some of the key first quarter financial highlights. Please note that our detailed financials can be found in our Form 10-Q and earnings release, both of which were filed this afternoon. For the first quarter, we reported total revenues of $73.2 million as compared to $71.7 million for the prior fiscal quarter, a sequential increase of $1.5 million or 2.1% and as compared to $66.3 million for the first quarter of fiscal 2021, a year-on-year increase of $6.9 million or 10.4%. The North American team continued to focus on expanding sales and seizing upon Aviat's unique product and service differentiation. North American revenue, which comprised approximately 70% of total revenue for the first quarter was $15.9 million, an increase of $5.4 million or 12% from the first quarter of fiscal 2021. The increase was driven primarily by our Private Networks business, Rural Broadband and software.

International revenue for the first quarter came in at $22.2 million compared to $20.8 million for the first quarter of fiscal 2021, an increase of $1.4 million or 6.9%. Our book-to-bill ratio for the last 12 months was above 1, and our backlog remains above $200 million. First quarter gross margin was 35.7% on both a GAAP and non-GAAP basis as compared to 36.1% GAAP and 36.2% non-GAAP for fourth quarter of 2021 and 36.6% GAAP and 36.7% non-GAAP for the first quarter of fiscal 2021.

Our margins in the current quarter were negatively impacted by inflationary pressures and significant expedite fees incurred to overcome supply chain and logistical bottlenecks. These were partially offset by price increases, surcharges and favorable mix. The net impact of these factors was approximately 100 basis points. First quarter GAAP operating expenses, which include restructuring charges and share-based compensation, were $19.3 million compared to $22.1 million for the fourth quarter of fiscal 2021 and $17.7 million for the first quarter of fiscal 2021. First quarter non-GAAP operating expenses, which exclude the impact of restructuring charges and share-based compensation, were $17.9 million compared to $20.4 million for the prior fiscal quarter and $17.2 million for the first quarter of fiscal 2021.

We continue to make R&D investments with savings from previously announced G&A restructuring. First quarter GAAP net income, which includes restructuring charges and share-based compensation, was $4.7 million compared to $2.8 million for the prior fiscal quarter and $5.9 million for the first fiscal quarter of 2021. The year-over-year decline was due to $0.7 million of restructuring charges in the current quarter and $1.5 million higher tax expense resulting from the release of the U.S. deferred tax asset valuation allowance, as reported in our fiscal Q3 2021 results. As a reminder, the company has over $500 million of NOLs that will continue to generate shareholder value for the foreseeable future.

First quarter non-GAAP net income was $8.0 million compared to $5.3 million for the prior fiscal quarter and $6.9 million for the first quarter of fiscal 2021. First quarter non-GAAP EPS came in at $0.67 per share compared to $0.45 per share for the prior quarter and $0.62 per share for the first fiscal quarter of 2021. Adjusted EBITDA for the first quarter was $9.6 million compared to $7.0 million for the prior fiscal quarter, an increase of $2.5 million or 38% compared to Q1 of fiscal 2021, adjusted EBITDA increased by $1.2 million or 14%. Our adjusted EBITDA margins came in at 13% for the quarter compared to 9.7% for the prior fiscal quarter and 12.7% for the first fiscal quarter of 2021. In terms of profitability, this was the second highest adjusted EBITDA percentage in the history of the company, impressive accomplishments, given the inflationary environment we are all operating in.

Moving on to the balance sheet. Our cash and cash equivalents at the end of the fourth quarter were $47.3 million compared to $47.9 million at the end of the fourth quarter of fiscal 2021 and $36.2 million at the end of the first quarter of 2021. We have no debt. During Q1, we repurchased $0.7 million of our common stock. Our balance sheet remains very solid, leaving us well positioned to execute our long-term plans.

With that, I turn it back to Pete for some final comments.

Thanks, David. Just a few additional comments before opening up for Q&A. I'm extremely proud of the entire Aviat team for their significant contributions to our results for the first quarter of fiscal year 2022. We are executing well given the constrained supply situation in the inflationary environment. Despite the environmental challenges, we affirm our previously announced annual guidance of $283 million to $293 million in revenue and $35 million to $38 million in adjusted EBITDA. We anticipate achieving the high end of the range, providing our customers with the most advanced, reliable and best total cost of ownership systems for mission-critical work, and our shareholders with profitable growth remains our goal.

With that, operator, let's open it up for questions.

(Operator Instructions) Your first question comes from the line of Theodore O'Neill with Litchfield Hills.

Thanks very much. Congratulations on a good quarter, and welcome aboard, David. So some questions. First question is about margin. My second question is about SG&A. So in the Q and in your prepared remarks, you mentioned margins this quarter compared to previous year were impacted by inflationary pressure, supply chain, logistic bottlenecks. You just mentioned that was expedite fees was an issue to get around the supply chain and logistic bottlenecks. And I know that last quarter, you talked about having -- trying to keep a higher level of inventory on hand to avoid running into some of these issues. So can you talk a little more specifically about where you're seeing both the inflationary issues and the logistic bottlenecks?

Yes. thanks, Theo. So the inflationary aspects and the logistic bottlenecks are in the same -- coming from the same place, principally the semiconductor suppliers, right? So sometimes our suppliers decide to increase price, and other times, they to get chips, you need to pay an expedite fee. And what I want to do is talk a little bit about that. So in the quarter, we had what we call cost inflation of 440 bps. And David Kang asked last quarter about whether or not we were going after price or surcharges or recovery, and we are doing that. We were able to execute on 110 bps of price recovery, and then we have favorable mix of $240 million, and that left us net 100 bps. What we would say about the environment is that inflation is moderating, hopefully, that persists. And our recovery as we look forward, will improve, right? And I'll talk a little bit about the recovery in a second and how it lines up with our business, right? Some of these expedite charges or are these cost increases, they're nearly instantaneous. So the recovery takes a little bit of time.

So we think with the environment given no change in inflation, that will be net positive by our Q4 fiscal year '22. And a little more color on the recovery. Our business cycle, we kind of have 3 different business cycles, our short-cycle business, which is really tied to our e-commerce, and all of our price/surcharge actions are in, our mid-cycle business, which is our international mobile network operators. That takes about a quarter or so to get in progress or in place or for that backlog to work its way out. And we have that in place, and we'll start to get some lift from that going forward. And then our Private Network business is a long-cycle business, and that's -- that will take a little bit longer to play out. So the kind of highlights are, we did have significant cost inflation in the quarter. We have started to execute on our price/surcharge recoveries. We thank our customers for their incredible cooperation in a difficult environment. And we think over the next couple of quarters, we'll be able to fully offset the inflationary pressures as long as the inflationary environment does not deteriorate.

Okay.

Is that helpful, Theo.

Yes, that's helpful. That's good. So the next question I have is about SG&A, which was below a year ago and down sequentially. I know you're not -- you don't give out guidance for SG&A, but can you -- since you talked about it coming down as a result of some restructuring, can you give us an idea at least qualitatively about whether this should rise through the rest of the year or stay the same or continue to go down?

We expect there to be a little bit of seasonality as there has been historically in our overall OpEx. So Q1 should be the low point for the year. Having said that, we continue to invest the savings from much of the restructuring into R&D projects that get Greenlit. So there should be a reasonable lift from what we currently have, but it shouldn't be anything out of the ordinary that you have seen there.

Your next question is from Scott Searle with ROTH Capital.

Nice quarter. And David, welcome board, congratulations. Just to dive in quickly and follow-up to the prior questions. Looking at the favorable mix in the quarter. I was wondering if you could provide a little bit more color? I'm assuming that's more Private Networks, but wondering if there was something else that was going on, on that front? Also, given the supply constraints, I'm wondering if there were any sales that were left on the table in the September quarter? And kind of how you're feeling sequentially as we go into the December quarter, given the backlog and the book-to-bill over 1, but also those supply constraints, do you have pretty good visibility in terms of your ability to deliver in the near-term? And kind of what are the concerns there? And also, directionally, how you're thinking about gross margin? It sounds like there are a lot of moving parts here that get you higher by the June quarter, but kind of wondering what you're seeing in the near-term?

I'll start off with the mix, and then you can take the next point. But the mix is driven primarily, you're right, by Private Networks, as evidenced by the larger increase in North American volume has an anywhere else where Private Networks dominate. So that was certainly the big driver as well as some software and licensing revenue as well.

Yes. So in terms of revenue that we didn't get out to, I would say, it would be $2 million to $3 million that if we had a better performing supply chain we would have been able to achieve. So Scott, what did we not answer.

And looking forward to the December quarter, how are you feeling directionally then, given the supply chain, your inventory levels seem like they're okay. I think they're flattish with the June quarter or so, are there any concerns? How do you think things progress directionally from there? And are there anything in particular that you're worried about from a supply standpoint?

Yes. So we think that we're managing the supply chain better than a lot of folks in the de minimis. With that said, thousands of components go into a microwave radio and if one of them doesn't come, then we'll get hurt. But we're starting to feel that we -- right, so let's -- if you give me the exception that I might get impacted by a single supplier at the end of the quarter, we're feeling neutral to positive on our ability to navigate the supply chain, but I also need be out because of the uncertainty overall. But if we don't have a one-off event, we feel that the supply chain will be the same, if not slightly be better in the next quarter.

That's great. I'll take neutral positive all day long. Digging in a little bit on some of the geographic mix., it sounds like you started to get some wins in Europe. Historically, there just hasn't been a big revenue base for you guys. So I'm wondering if you could elaborate on that a little bit in terms of what's going on in the pipeline? Is that a bigger opportunity for you? And maybe we've wobble into the conversation there. What are you seeing? Where are they showing up? Or are they not showing up?

So that European win, that's in our shareholder letter. That was airwave in the U.K. Our leadership, we changed leadership about a little over a year ago in the EMEA region, building the funnel, and we think that Europe is on the upswing. So we feel very good about Europe with respect to Private Networks and our Tier 2 operator. So Steve is doing a good job there. And then with respect to Huawei share gains, we see that those opportunities in Eastern Europe, Africa and Asia-Pac and a little bit in Latin America. And we think that well, we know that our funnel, and we don't know what the conversion rate is going to be and how the cycle is going to be. But we have $60 million of opportunity in our funnel. This opportunity is new to us and a bunch of other folks. So we don't know how the competitive dynamics are going to play out and what the timing is going to be, but there are $60 million of Huawei, formally, Huawei had a lot pulled on and we're stranglehold and now we're getting up to back. So we're encouraged about that. And we hope over the next couple of quarters, we can talk about some share gains there.

Great. Very helpful. And lastly, if I could, just to dig in on your commentary related to ARPA funding. You've got 15 of the top 30. I believe a lot of that funding has not really been released yet. So I'm wondering if you're actually seeing the benefit of that or we should expect all the benefit of that to start to come in calendar '22 time frame?

Yes, I think you've got that right, that would be a positive catalyst in calendar year '22 as the yard up funding hits.

Great. Nice quarter.

Your next question comes from Dave Kang with B. Riley.

Good afternoon. I guess my first question is regarding chips. So last quarter, you thought that the pressure -- inflationary pressure was stabilizing because you mentioned that lead times were stabilizing or hasn't been stretched out in the last couple of months. Is that still the case? Or has things changed since then?

Yes, I think neutral to positive is same as last quarter, right? And some folks have asked me when do I think this gets better, right? I listen to all the CEOs of semiconductor companies and read all the literature. And my guess, and this is a guess and you can take it for whatever it's worth is, I think the environment starts to improve after in April. After we get through the Christmas season and Chinese New Year, but that's my guess. I would say, though, just the environment that Aviat's exposed is neutral and where the positive comes from as we we're not getting worse. Lead times are stable. And we've had a couple of months of stability. So we think that there should be -- it should start to get better. But with that said, if one of our suppliers has an exceptional event, we will get hurt. So I'd like to be more precise, so that we could run our business better, but that's the best information I can give you. Does that help at all?

Yes, very helpful. Just on the gross margin, regarding your outlook for the year, I know you didn't talk about next quarter, but assuming sort of neutral as far as the supply chain situation is concerned, so should we expect gross margin, it was down a little bit sequentially in the first quarter. What about second quarter, should we be thinking kind of flattish or maybe even further step down? How should we think about December quarter gross margin in terms of a trend or trajectory?

Yes. So we think it should be incrementally up, provided we don't have any additional inflation excursions, right? So we're not ready for inflation starting last January to start to put our processes in to figure out and how we were going to pass on price and surcharges. But the problem with that is we didn't know how much was going to come and how it was going to be delivered. So we're working through that. So we think we should get more price recovery in the next quarter. And if mix was flattish, then our margins should tick up. And I don't want to be specific on that because I can't tell you what mix is going to be. Yes, I can't tell you the full uptake of our price actions. But what I'd like our investors to know is we recognize inflation. We think we have enough differentiation in our products, and our customers are cooperating as we work to offset this difficulty.

Got it. My last question is, you said you raised prices on your products. When was that done? And when was that communicated to your customers? And did that cause sort of a surge in orders as they try to take advantage of prices before they go up?

Yes. So this environment is -- everybody likes to throw around the word unprecedented. It is unprecedented. And so for our short-cycle or e-commerce, that was done instantaneously. And then for our bigger customers, it was a negotiation and effective. But we -- I'm pretty familiar with bringing in demand ahead of a price increase. And I would have to say that, that was de minimis and it's certainly not material. To be honest, in my past role I've seen that I can't point to a single example where we saw demand pull in ahead of a price increase.

Your next question comes from Tim Savageaux with Northland.

Good afternoon, and congrats on the quarter. Let's talk a little bit about rural broadband. Pete, I don't think you're going to guess my first question, whether -- what sort of proximity we are to that magic 10% revenue number with regard to rural broadband or any update as to when we might get there, and I guess I'll couch it with the following promise, which is when you were at our rural broadband forum, I think you'd mentioned an additional 4 out of wins to get you to 13, apparently, you've been busy in the last month and picked up 2 more. So as you look at that and considering the addressable market out there, I guess, in addition to that, achieving that milestone, you talked about kind of a 40% or so market share in rural broadband. Do you think you're in a position to run above that now? And I'll follow-up in a second here.

So yes, we put in our investor presentation that our estimate is pretty close to 40% share. Look, with these new wins, it's possible that we could trend up as the ARPA funding takes hold. And I think a couple more quarters of performance and the flow of the ARPA funding should balance us over that 10% hurdle. So we're -- right. Look, I think I said that we'd be -- we'd get there by the end of this fiscal year and more confident in that. And if it's not by the end of this fiscal year, it might be sooner. Tim? Is that helpful?

Got it. It sure is. And just to follow-up on the ARPA front, and I'll have one more after that. But -- so you talked about 15 of the top 30 overall award recipients, I guess, and then I'd ask 2 questions on that, which is, can you estimate the total funding received by those 15 that you've won from ARPA? Question number one. And question number 2, are those only wireless guys? I mean, to the extent you've got 15 and you're working on 5 more, it seems like there could be some fiber guys in there, too? Or is this all fixed wireless in terms of access to the opportunities?

No. While we can't get the -- so we should tell you, let me go back and figure out how many of you guys that we can never get because they're fiber, but there are some of other in the top 30. And your question about estimate the funding received. We haven't done that, but we'll take that as an action. So those are both fair questions.

Yes. I think that's worth doing. And shifting over internationally. You mentioned a pretty strong order quarter. I don't know if you want to throw out any kind of international book-to-bill metrics, but if you did, that would be great. But the interesting thing is that based on some of the locations that you've called out, these are not locations that are legendary for booting out Huawei. And so when you talk about -- not all of them talked about a very large Tier 1, maybe that's it. So I want to dig into that dynamic a bit more. When you talk about share gain, can you be more granular about that, given that, again, it's not like we're talking about U.K. or the Western Europe or Japan or areas that have been explicitly kind of moving Huawei out with some of the locals are, there probably the areas that they're hanging on the best. So are those competitive wins and not political wins? I guess, I'd say on the one hand and on the other, if there's another share gain dynamic outside of Huawei? I would love to hear more about that.

Yes. So you asked a hard question. So the dynamics, it's difficult for us to decipher and in our voice of the customer process we ask whether the engagements are due to politics or supply chain, and the answers are both or mixed? Sometimes it's supply chain, sometimes it's politics. And we want to know so that we understand the dynamics that we can try and replicate it, but we were getting both answers. And at the end of the day, we're kind of indifferent as long as we get up to that. And then a little more color on where they're coming from. Our value proposition internationally is strongest with our multi-band and with our in regions that have high spectrum cost because our total cost of ownership is strongest. So we're seeing operators that are having difficulty with either Huawei supply chain or the geopolitical environment is changing and the high spectrum cost, that's where we are seeing the biggest opportunities. So have I been fully responsive to your question? Or...

(Operator Instructions) Your next question comes from Aaron Martin with AIG Investment Partners.

It's Aaron Martin with AIGH. A lot of the questions have been asked already, particularly by Scott, but congratulations on a nice quarter. I appreciate you breaking out your revenue buckets in those 3 pieces of e-commerce and the mid-market and retains to passing through the price increases. If I were to look at those 3 buckets and sort of how much of your revenue, can you cut -- how much of your revenue is in each one of those buckets?

So it comes and goes, the smallest is the shortest cycle, and the biggest is the longest cycle, Aaron. So look, for passing on price, our longer cycle business is our biggest. So that's why if mix is flat and there's no additional upticks in inflation, we feel good about expanding our gross margins going forward.

Got it. But it's going to be more gradual as we get in over the next 9 to 12 months because of the long lead on the vast majority of the business.

That's fair.

Yes. Got it. And just a clarification on the book-to-bill, was the book-to-bill above 1 for the past 12 months or for the quarter itself?

Yes. We typically only talk about 12 months trailing due to the project nature. The project nature and the fluctuation. So we're comfortable disclosing here, but let me give a little more color. When we were writing the script, I was going to talk more about supply chain and the difficulties and how comfortable we are with the demand environment. So we're pretty comfortable with demand, and a lot of our management team's focus is going towards deliveries. So we feel good about the demand environment.

Okay. Congratulations on a nice quarter, and we're in continued progress. One more thing. I want to congratulate you on actually buying back stock this quarter.

Well, thank you. I think that's all I'll say. I wish you trading at higher than our triggers.

Well, is it depressed to get to keep buying back more?

Very good.

Your next question comes from Orin Hirschman with AIGH Investment Partners.

You have to increase the trigger in. As long as it's accretive, that's my personal opinion. But just in terms of the overall business, if there would not have been constraints on supply, do you have any clue how much more you could have shipped in the quarter?

I think we've said $2 million to $3 million.

Okay. And in terms of the overall momentum on the Private Network side, keeping in mind, keeping aside the competition aspect of it, how would you characterize that momentum compared to 6 months ago or a year ago?

I'd say it's the same. Yes. I think the momentum is the same. The Private Network teams are doing a great job. The opportunities are the same. And there's potential positive catalysts around RDOF funding and we'll build that better. So I'd say it's the same with some possibility for improving.

Is the drivers for the customers the same being led by security? Or is there anything changed there in terms of the drivers?

No. So our Private Network customers are principally 911 first responder networks. Secondly, would be utilities. I think long-term, the utility market is improving with further focus on security, more centers and utility arts, water, wastewater would be third, fourth would be oil and gas. And I would say that -- which is a really small part of our business. But I think the demand drivers are about the same as they were 6 to 12 months ago. With the one caveat that utilities, the macro trend would be favorable for Private Network demand.

Okay. And last but not least, on the software side. I know it's just a tiny piece of liver the sales today. But can you just kind of update how that's going, particularly on the SaaS side? And I know you're developing additional applications, how is that going? And that's it for me for now.

Yes. So the additional applications we expect in the next 12 months to launch a follow-on offering to fast that would -- we're not ready to talk about or detail but would be additive to fasten would solve more network operator problems. And we would say our software business is still small, it's going well, and it was a positive contributor to the mix that we cited as the mix, which was -- we had favorable mix, and part of that was due to software. And the last thing I would say, while this is not standalone software, but our high availability routing software was released in the quarter. And what we are -- we think that's going to help with Private Networks, but we're also starting to find internationally that there could be attraction, and that's a positive surprise for us.

(Operator Instructions) There are no additional questions in queue. I would like to turn it back over to management for closing remarks.

Thanks. Thanks, everyone, for your support and your participation in the call. During the quarter, we executed well. We're building a foundation for our future. We're really excited about the business, and we can't wait to talk to you again in 90 days. Thanks, everyone.

This concludes today's conference call. You may now disconnect.