Erica Mannion - Sapphire Investor Relations Jeff Rittichier - President and CEO Jikun Kim - CFO.

Joe Maxa - Dougherty & Company Jaeson Schmidt - Lake Street Capital Tim Savageaux - Northland Capital Lee Krowl - B. Riley & Company.

Ladies and gentlemen, thank you for standing by, and welcome to the EMCORE Corporation’s Fiscal Third Quarter 2017 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. At this time, I'd like to turn the call over to Erica Mannion of Sapphire Investor Relations. Please go ahead..

Thank you, and good afternoon, everyone. Before we begin, we would like to remind you that the information provided herein may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934.

These forward-looking statements are largely based on our current expectations and projections about future events and trends affecting our business.

Such forward-looking statements include, in particular, projections about future results, statements about plans, strategies, business prospects, changes in trends in the business and the markets in which we operate.

Management cautions that these forward-looking statements related to future events and our future financial performance that are subject to business, economic and other risks and uncertainties, both known and unknown, that may cause actual results, level of activity, performance or achievements of the business or our industry to be materially different from those expressed or implied in any forward-looking statements.

We caution you not to rely on these statements and to also consider the risks and uncertainties associated with these statements and the business that are included in our company's filings with the U.S.

Securities and Exchange Commission that are available on the SEC's website located at www.sec.gov, including the sections entitled Risk Factors in the company's Annual Report on Form 10-K and quarterly reports on Form 10-Q.

The company assumes no obligation to update any forward-looking statement to conform such statements to actual results or to changes in our expectations, except as required by applicable law or regulation. With me today from EMCORE are Jeff Rittichier, President and CEO; and Jikun Kim, Chief Financial Officer.

Jikun will review the financial results and Jeff will discuss business highlights and fiscal fourth quarter guidance before we open up the call up to questions. I will now turn the call over to Jikun..

Thank you, Erica, and good afternoon, everyone. Today, I will provide the details of our Q3 FY17 financial performance. Please note that consistent with prior quarters, these results include the effects of classifying what remains of EMCORE's Telecom and Photovoltaic businesses as discontinued operations.

Consolidated revenue for the quarter totaled $30.9 million, coming in at the high end of our revenue guidance of $29 million to $31 million.

Revenues in the quarter were driven by strengthening of demand across most of our product lines, offset by a return-to-normalized RF-over-glass volumes, following the Q2 product transition to OBI-mitigated products that we experienced.

DOCSIS 3.1 product revenues increased nominally relative to Q2, while the demand for our merchant chip products continued to increase. In the quarter we also recognized higher than average revenue growth for our Satcom video product line, while the fiber optic gyro sales grew normally.

We did receive a small order for our MTS-B fiber optic gyros from Raytheon, but contract negotiations of the multi-year opportunity continues. The GAAP gross profits in Q3 was $10.8 million. Gross margin in the quarter was 35%, up from 33.9% in the prior quarter.

Sequentially, gross margin in the quarter benefited from a positive mix shift to higher-margin products, partially offset by spending related to our Beijing facility transition efforts. Beijing relocation and redundant expenses in the quarter were approximately $300,000, slightly lower than the prior quarter spend levels.

On the non-GAAP basis, which takes into consideration adding back stock compensation concentration expenses as well as asset retirement obligations, our non-GAAP gross margins came in at 35.4%. During Q3, total GAAP operating expenses for R&D and SG&A were $9.2 million, approximately $300,000 higher than the prior quarter.

SG&A increased by about $0.1 million, principally due to higher FAS 123R expenses and incremental severance charges for the US and China operations. In Q3 FY17, we adopted ASU 2016-09 and recognized a FY17 opening balance sheet adjustments cumu catch-up expenses related to our stock compensation expenses in the quarter.

R&D increased $5.2 million, driven by continued investments in our fiber optic gyro products. In addition, during the quarter, we recognized a gain on the sale of our fully depreciated PP&E of $0.3 million, which lowered our overall GAAP operating expenses.

For further details, please see the GAAP to non-GAAP reconciliation tables in the press release. On a GAAP basis, operating income for the third quarter was $2 million or an increase of $0.3 million over the prior quarter.

On a non-GAAP basis, operating income was $3.6 million or 11.5% of revenues, within the guidance range of 11% of 13% that we provided last quarter.

Making further adjustments for the Beijing facility transition expenses, non-GAAP operating income in the quarter would have been closer to $3.9 million or 12.5% of revenues, hitting the Q4 FY ‘17 non-GAAP operating profit margin objectives of 12.5% that we identified during our prior earnings calls.

Our non-GAAP pretax income from continuing operations was $2.5 million in Q3 or an increase of 33% relative to the prior quarter.

Our non-GAAP pretax income, taking into consideration certain adjustments, all of which are set forth in the GAAP to non-GAAP reconciliation tables included in today’s press release, was $3.6 million or $0.13 per diluted share. This compares to $3.7 million or $0.14 per diluted share in the prior quarter.

Please note that we have included additional information regarding unique transactions, severance, stock compensation, amortization, litigation-related expenditures, impairments and other items in today’s press release to provide further clarity on our results. Moving on to the balance sheet and cash flow statements.

At the end of Q3 FY ‘17, the company’s cash and cash equivalents were approximately $66.1 million, a decrease of $2.5 million over the prior quarter. Regarding our working capital metrics, DSOs were at 68 days, an increase from the prior quarter DSO of 57 days. This increase reflects the timing of product shipments during the quarter.

Net inventory turns, including non-current inventory, was at 2.6 times, consistent with the prior quarter. Absolute value of net inventory declined by $0.2 million quarter-over-quarter. In Q3 FY ’17, we invested $2.7 million in capital expenditures, offset by the $0.3 million cash collected from the sale of fully depreciated assets.

We also recognized approximately $0.9 million in depreciation. Overall, the company’s free cash flow was negative $2.4 million in the quarter. In summary, we continue to make solid operational and financial progress during the quarter towards our Q4 FY ’17 operational and financial objectives. With that, I will turn the call over to Jeff.

Jeff?.

Thanks, Jikun, and good morning, everyone. As Jikun highlighted, we continued our strong financial performance in the third quarter, delivering revenue at the high end of our guidance range, a year-over-year growth of 38%.

On a pro forma basis and adjusting for the $3 million of revenue shift in Q2 of low-margin RFoG products that we discussed last quarter, our revenue in the third quarter grew 5% sequentially.

Furthermore, we continued to demonstrate the sustainable operating efficiencies that we’ve created in our business, delivering non-GAAP operating margins of 11.5%, despite higher-than-planned expenses caused by heavy R&D investments and to a lesser degree the relocation of our China-based manufacturing operations.

With that said, I’d like to provide you with some additional color on the trends we are seeing in each of our served markets as well as the operations of our business.

Within the cable television market, in the third quarter, we continued to see strong demand for our DOCSIS 3.1 products with sequential growth of 2%, excluding the low-margin RFoG shipments that I mentioned earlier, and year-over-year growth of 38%.

Looking into Q4 and the recent comments made by MSOs regarding their capital spending plan, we expect to see strong demand on the infrastructure side of cable television in general and DOCSIS 3.1 in particular.

In their most recent earnings call, Comcast stated that they expect capital intensity to remain flat year-over-year; however, they also stated that their first calendar quarter was $150 million lighter than planned and that CPE spending would decrease.

This implies that the remainder of the 2017 infrastructure spend should be slightly stronger than planned. In June, Charter restated for its commitment with all digital project to upgrade the 40% of Time Warner’s cable network and 50% of Bright House’s network that is not yet all digital. That was going to be a big drive for CapEx.

Charter said that it’s early in that project and that most of the all digital initiatives will take place in 2018. Although Liberty Global does not publicly announce CapEx numbers, we have seen solid activity from them as well.

Consequently, we believe we are still in the early innings of the network builds and are poised to benefit from our new products such as our linear EML or LEML-based solutions, which have been integrated across our product lines. We have received major LEML design wins within the quarter and expect to see this trend continue going forward.

The market for linear optic products in cable television remained strong. Moving on to the chip market. Revenues grew 21% sequentially. Growth in the quarter was a combination of GPON customer orders, which we received in Q2 and began shipping in Q3, as well as a small but increasing number of 10G parts.

Our development work on new chip products such as our 6.5 gigahertz wireless product and datacenter products continue with the goal of broadening our chip portfolio and the number of markets we serve. We expect that this growth will drive revenue as well as higher blended margin both for our chip business and for the company overall.

I am also pleased to announce that Iain Black joined us during Q3 as our Vice President of Wafer Fabrication. Iain joined us from Philips Lumileds, where he was the VP of Worldwide Manufacturing Engineering, Technology & Innovation.

He is already having a powerful impact on our fab operations and his hiring demonstrates our commitment to growing our optical semiconductor business. Within the satcom market, during the quarter, we experienced higher than typical sequential growth as a large project shipped during the quarter.

As a reminder, quarterly revenue can some times be lumpy within this market due to timing and relatively large size of individual projects. However, the market for new satellite launches is growing along with our opportunities.

Although this market has been fragmented on the supply side, EMCORE is the only company serving the ground station market that has its own fab, a key advantage.

Although this product line has not traditionally contributed large revenue, there are strong technology and operational linkages to our DAS, or distributor antenna system products, a new product development can be leveraged between the two markets.

Operationally, in the third quarter, we successfully completed the transition of our satcom manufacturing operations to our US EMS partner and discontinue our non-core video products. Keeping our EMS operations in the US allows us to meet the TAA and ITAR requirements from our military customers.

This transition paced away towards incremental operating leverage, as we continue to grow the volume of our satcom product lines through the introduction of new low-cost L-Band links and technologies for 5G radio-over-fiber DAS, and of course, focused on larger systems.

Within the fiber optic gyro market, our strong performance on the MTS-B program has opened us new larger programs for EMCORE with higher-margin, higher-complexity navigation products, such as our new Orion family. Our most recent announcement of the EMCORE-Orion MINAV is a great example of the size we empower advances that we offer.

Compared to its competition, the Orion MINAV is about a third of the size and weight of its competitors, while consuming less than half the power. ASPs for these inertial navigation system are typically in the $50,000 range.

In our previous calls, I indicated that we have important shipment milestones to meet this summer for other products and programs yet to be announced.

Ss of today, we do expect to meet those delivery commitments, paving the way for production in FY ’18, as these new products are compatible with industry form factors and will be sampled to other military prime contractors in the fall.

These are the largest navigation market opportunities that we pursued to-date, and we are very excited about our position in this business. As Jikun indicated, we resumed production shipments of our MTS-B units in Q3 as negotiations continued on our multi-year supply agreement.

Given the complexity around government contract regulations, we expect these negotiations to continue into the fourth quarter with a subsequent uptick in volumes, once finalized. As a reminder, we do not expect movements in shipments related to this process to represent a loss of business, only a delay.

This is typically the way things work in the defense business. Shifting gears to the operations side of the business. With our new automated facility inside the 5th Ring of Beijing now in production we are working hard to complete the qualification of the remaining automation equipment.

At this point, we’ve reduced our direct headcount from a peak of 370 in December of 16 to about 160 people today, and we’ll conclude this stage with 100 directs by the end of August for a total headcount, including all functions such as manufacturing and engineering, supply chain, et cetera, of 150 people in EMCORE Asia, down from 430 people.

We stopped production at the [indiscernible] facility in Langfang two months ago, and we have moved out nearly all of the equipment and inventory. We’ll return the buildings to landlord this month. While this work has been finalized in Q4, we expect to incur a decline in transition costs.

As we have discussed on prior calls, when complete, we expect these actions in China, combined with the transformation of our U.S. manufacturing operation, to result in a breakeven point of $1 million to $1.5 million less per quarter. While we expect to realize some of the benefit in Q4, we should fully realize the benefit at the start of fiscal 2018.

It’s important to understand that this manufacturing transformation is not the endpoint for EMCORE. For example, we expect to add fully automated material management systems to our newly automated transmitter line in Q1 and Q2 of FY ’18. This will complete the move of the entire transmitter build process, improving our working capital and costs.

Over the next year, we expect to devote the majority of our Six Sigma Green and Black belt projects to wafer fab operations, where we will not only improve the standard process controls but build process nodes that will launch new generations of chip products for captive and merchant markets.

We see the fab as a key area for investment both in terms of capital and world-class technologies as we work to improve our ability to execute and invent. Before moving on to guidance, I would like to comment on the heavy R&D expenses that we incurred during Q3.

The bulk of these expenses were in our navigation product line, where we’re working on multiple products with larger ASPs and correspondingly larger builds of material.

As I pointed out earlier, our new Orion family flagship INS has an ASP of nearly $50,000, and several new products not yet announced have ASPs that are also larger than typical, in the 30k range. Consequently, expenses to support this level of sophistication are also higher.

With that said, we believe these investments will have a strong return on investment that’s well in excess of our cost of capital. Turning to the outlook for our business.

For the fourth fiscal quarter, given the continued strength we’re seeing in cable television, we expect revenue to be in the range of $29 million to $31 million with non-GAAP operating margins targeted at 12.5%. Now I will turn the call over to the operator to open things up for questions.

Operator?.

Thank you. [Operator Instructions] Our first question is from Joe Maxa of Dougherty & Company. Your line is open..

I am just wondering -- you gave a lot of color on your various product lines, I wonder if you could give the typical what percent of revenues that you’ve given in the past to help us out a little more..

You want me to take that?.

Please. Yes, please..

Hi, Joe. This is Jikun. Cable TV was 75% to 80% of revenues. Chips were 7.5% to 12.5% of revenues. Satcom video was 7.5% to 12.5% of revenues, and the fiber optic gyro was about 2.5%..

Okay, thank you. That’s helpful. On the cable TV side, one of your largest competitors said there were a little accelerated deployments in the second half of the year.

How does that tie in with what your expectations are for Q3 and then perhaps the next quarter?.

Without understanding exactly what they are saying, it’s little hard to comment as far as what technologies we might be talking about. What I would say is that, for us, our share is excellence, remains excellence, and the market for linear optics is strong.

It’s an interesting set of dynamics out there in discussions with Remote 5 because the people that are talking about this the most have the least share today. So from my perspective, I can understand the comments, but I don’t know that that particularly winds up well with what’s actually going on in the market..

Okay, that’s fine.

The chip business strength you’ve seen, are you expecting that to continue?.

Yes, I think we will see continued strength in chips. We had a couple of improvements over in the manufacturing side, I think, which will enable us to be competitive in some of the price-sensitive areas, where it’s been a little more difficult for us in the past. There is a lot of new things in development.

So the real objective here, Joe, is to build two businesses into very significant pieces of EMCORE’s overall business, and I think we are making great progress doing that. .

Right, that sounds good. On the gyroscope business, you talk about obviously negotiations ongoing. In the past, you’ve thrown out numbers about what percent of revenue that perhaps could be.

Do you have any type of color you’d be willing to share on what your thoughts are on the growth opportunities with the gyroscope? Any updates?.

Well, it’s a little bit -- we have to be a little bit careful with that one because the fact we are in the middle of negotiations, I think the point to make is that if would be, for that individual product line, there is two things that you got to consider immediately.

First one is that this will probably push us up to the high end of what we have ever shipped before to them within a year, except we’ll extent that over multiple years and multiples relatively long time for this contract.

As far as the other piece, we are setting the stage for negotiations on other products that we’ve really yet to discuss with the Street. And so we need to make sure that we have our act together from a standpoint of capturing the costs in a consistent way that military prime contractors expect.

Jikun, do you have any other comments on that?.

No, I think you are right, Jeff. I mean we are on our FY ’18 plan. We are still working on that. We should be able to announce something in the September or actually December earnings call, but yes, we are currently looking at all scenarios here. .

One just last one for me.

On the R&D expense line, should we expect that to continue to be around current levels, given your focus on the gyroscope and that type of stuff? Or is that going to come back in a little bit?.

I think for Q4 it’s likely be on the high side. Again, you got big chunks of material that are being bought to support these programs. With engineering process, sometimes you go through multiple reiterations, and so, yes, could be a little expensive.

Whether or not that represents the new consistent mark for us is R&D as a percentage of revenue, I think it’s a little bit heavy and we will come down a bit, but through Q4, our plan is that it’s going to remain heavy as a percentage of the top line. .

Got it. Okay, thank you. I’ll jump back in the queue. .

Our next question is from Jaeson Schmidt of Lake Street Capital. Your line is open. .

Hey, guys. Thank you for taking my questions. Jeff, just want to start. It sounds like, given your prepared remarks, you guys continue to feel confident on the CATV tailwinds, just curious if you have seen any improvement in your overall visibility within the spending environment over the last three months..

Hi, Jaeson. I would say that it’s been pretty consistent overall. There has certainly been no degradation that we have seen. We have a very close relationship with our major customers. We just won a big supplier work from ARRIS. We’ve been one of their top 5 suppliers. With that said, there are actually some places where our visibility has improved a bit.

And let’s just say one of them is – well, I can’t comment. I wish I could. But it’s certainly not degraded at all and I would say equivalent to slightly up as far as our visibility..

Okay, that’s helpful.

And then just shifting to the LEML, can you just talk a little bit about how that impacts any ASP or margin profile with the CATV business?.

Sure. And I am going to try not to get technical on this. But the LEML, and the important thing to understand is it gets -- its development was right at the heart of why people have talked about Remote 5 so much, which is improving what’s the linked budget, the ability to transmit large amounts of information over distance, okay.

And the LEML is significantly better than anybody’s DFB, and we are the only one in the world that has one, okay.

So the implication of that is that margins should be better than the traditional DFB, and as cable operators look for ways to preserve the hundreds of billions of dollars of investment that they have in linear plants, the things that we are making over on the LEML side are very attractive, okay.

So certainly it helps us from a margin perspective, Jaeson. I think we know how to manufacture these things. And I was just in China actually earlier in the week and was encouraged by some of the things that saw in yields. So I don’t see anything but it being a sign of strength. .

Okay. And then along the gross margin lines, you’ve seen some nice expansion recently.

Would we expect, given the tailwinds from the Beijing facility transition, that gross margins should continue to trend higher?.

Yes, in general I think that’s right. Again, the thing we have to -- the only caveat to that is, if you get hit in a given quarter with and [RPOD] heavy on the ONU side mix, that’s the thing that tends to pull it back down. But yes, you are right.

You will see it show up as gross margin improvement and potentially a couple of places over on the operating expense side. I mean one of the things we don’t talk about is a lot of our back-office stuff over in finance happens in Beijing, where it’s just less expensive to do certain things..

Okay, and the last one from me and I will jump back into queue. Cash balance remains pretty strong.

How should we think about potential usage going forward? Do you need to have a fair number on the balance sheet whether in negotiations maybe larger military defense contracts?.

No. Jikun, please chime in if I am saying anything out of school, but I think all of our military contractors see the strength in our balance sheet and operations, and we are not having any, let’s call them covenants for sake of argument here, placed upon us for any reason at all..

Yes, Jeff. You are correct. No issues with large defense customers on our balance sheet. .

Okay, thanks a lot, guys. .

Our next question is from Tim Savageaux of Northland Capital. Your line is open..

A couple of questions, first on the chip side. It may be the case this quarter it’s a bit of a milestone that your -- or for the September quarter that your GPON revenue is going to be greater than your competitor MACOMs for the first time in quite some time. I wonder if we can talk about any potential impact there.

There obviously seem tremendous headwinds in the 2.5 to 10-gig transition. I think you are probably all just on the 10 gig side and maybe that’s a little more manageable.

But to what extent is China playing a role in the chip sales and how should we think about that going forward relative to what we heard from your competitor over there?.

Sure. I can understand MACOM’s position. I would think that we are certainly not immune from general market forces. There has been a lot of oversupply in that business. As the share leader which MACOM is, I would expect they feel that more than we would.

With that said, we have some very strong relationships inside of the GPON market, and we have talked in the past about supplying multi-generational customers. So people that are sampling 10g parts from us that want to have a long-term relationship with us were also supplying 2.5G, and I think we are picking up just a bit more business there.

The 10G market in China is starting to move mostly on the LLT side, although we are starting to see some early evidence that the ONUs are getting deployed as well. So it’s not completely uniform. Maybe we are doing a better job with fitting the niches in them, Tim, but MACOM has done extremely well in that business. .

Okay, well.

And I don’t know if your commentary on growth was meant to imply sequential growth next quarter, but as you do look at your September quarter guide and you are going to tick there, and frankly given the commentary we hear from ARRIS last time talking about record quarters in access and transports and continued growth there just given kind of basis seasonality, I understand you might lead a bit in terms of strength earlier in the year their deployments, but where are you seeing or anticipating the sequential declines in the business.

I know you mentioned that dotcom kind of bumped up. Perhaps that’s bumping back down.

But if there is any trends underneath a slight sequential decline you are guiding for mid range, like to hear that?.

I am not sure that we’re talking about same declines. It’s just a whole bunch of moving parts at this point, Tim. The RFoG shipments in Q4 I think are going to be -- I am trying to think.

Yes, RFoG shipments this quarter are going to be relatively strong, but we’ll expect to see more high-margin transmitter shipments in maybe right at the end of the quarter and then certainly in our Q1.

I would just describe it as sort of normal ebbs and flows in customer inventories as opposed to any kind of statement that’s worthy of reading between the lines on. I will say that there are other big things moving with Liberty Global through the MSOs that shifted us in a positive way outside of the current quarter.

So I wouldn’t say that there is a lot to -- there’s no key leads to read on this other than -- as you just sort of take a look at all the different moving product lines inside of EMCORE, we said, “Mm, let’s call it roughly flat,” but if things actually line up, we’ll go pass the number on the top side..

Understood. And I guess my final question, you referenced distributed access before, and I think while that remains kind of in relatively early days, I would say that there has some been an increase in momentum towards distributed access deployment over the past couple of quarters in the industry.

I mean would you agree with that, broadly speaking? And has your kind of timeline as to whether we’ll – when we will start to see some material deployments there changed at all?.

Well, what you mean by momentum, call it people talking, been….

Yes, that’s what I mean..

Yes, certainly there is lots of discussions, but talk is what it is and expenditures are other things I care about a lot more. So I would say, yes, I agree with you. There has certainly been more buzz out there as far as actually turning into real dollars.

Again, I don’t see it and certainly not in a way that has any real bearing on what we are doing and what we are seeing as far as the business model. We started talking about distributed access architectures and their effect on the business in January 2015 when I first came back to the company. So we are well aware of what the state-of-the-art is.

We are well aware of implications. But EMCORE has been a cable TV company since the ‘80s, or at least with a deep exposure to it. And so I would say we know heck of a lot about the real issues involved with putting it into the field, getting it to work, and how long those things take.

I mean ask yourself this question, how long does it take to migrate from DOCSIS 3.0 to 3.1? Five years? So I do think there is more buzz.

There would certainly be some test deployments done, and that means that there will be more test deployments in ’18, but it’s outside of my crystal ball to tell you that it’s going to hit for the foreseeable future..

[Operator Instructions].

[Operator Instructions] Our next question is from Lee Krowl of B. Riley & Company. Your line is open. .

Hey, guys. Thanks for taking my questions. First off, just on defense opportunities. You guys kind of cited the incremental R&D ongoing and probably carries over for a quarter or two.

But as those designs turn into revenue, is there an incremental spend in CapEx?.

Hi, Lee. This is Jeff. Surprisingly, it’s not a big one. Let me give you an example. The transceivers that we use to make the really the heart of the gyro, we are starting to automate the production of those, but it uses the same technology that we’ve built for the cable TV automation projects because they fit inside of the same butterfly package.

So we will certainly get hit with things like rates tables, which could be very expensive. Rate table rotates the gyro or the inertial navigation system in multiple rotations at the same time with a big temperature change -- chamber in it, but it’s not like outfitting away from that. .

Okay.

And then on the margin targets, with Beijing kind of coming to a conclusion here and kind of a fiscal ’17 targets kind of tracking to your expectations, kind of what are the opportunities as you look out a little further in terms of potential margin expansion from there? And I guess is there a sizable opportunity or is kind of levels kind of sustainable just given the current cycle and revenue trends?.

Well, I would -- in fact, actually, if the chip business starts to move forward more aggressively on the revenue side, we will see some margin expansion opportunities. The same thing is true over on the gyro IMU/INS side, and that’s inertial measurement unit and inertial navigation system, their higher levels of integration.

Again, what we are targeting, our growth opportunities outside of cable with a more favorable margin profile -- I mean -- and candidly, there are larger markets significantly larger markets in some cases than cable.

And that’s sort of been the, as I jokingly said, “the fish; no, no, crow, the fish pool they’re in, we need a bigger fish pool and certainly the navigation business is a much larger fish pool and the chip business is and growing to be a much larger fish pool as well. .

Okay.

So then on to that point, as we look to 2018 in terms of the mix of growth drivers, the biggest opportunities are defense and the chip business?.

Not necessarily. I mean there is still some placements where we see the strength in distributed antenna systems actually. And we are not -- we will get out in front of all you guys about this when we set our yearly objectives in the December call, but don’t forget about to DAS at all, because we are doing some really interesting traction there.

But and that is an outgrowth of the linear technology that we candidly have a very strong position in in the cable TV business. So that will be a little near term in terms of growth, but yes, military and chips, we are expecting especially in the latter half of ‘18 to be quite strong..

Thank you. This is the Q&A portion of today’s conference. I would like to turn the call over to Jeffrey Rittichier for any closing remarks..

Thank you. In closing, I would just like to thank EMCORE’s customers for their continued support. We are especially proud of the major awards that we received from ARRIS and Raytheon and the team effort at Tokyo EMCORE to win those awards. Thank you for your time today, and have a good day..

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program. You may now disconnect. Have a wonderful day..