Ladies and gentlemen, thank you for standing by, and welcome to the Viavi Solutions First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session.

[Operator Instructions] Please be advised that today's conference is being recorded.[Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Bill Ong, Head of Investor Relations. Thank you. Please go ahead, sir..

Thank you, Rob. Welcome to be Viavi Solutions first quarter fiscal year 2020 earnings call. My name is Bill Ong, Head of Investor Relations. Joining me on today's call are Oleg Khaykin, President and CEO; and Amar Maletira, CFO. Please note this call will include forward-looking statements about the company's financial performance.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from current expectations and estimations. We encourage you to review our most recent Annual Reports and SEC filings, particularly the risk factors described in those filings.

The forward-looking statements, including guidance we provided during this call are valid only as of today. Viavi undertakes no obligation to update these statements.

Please also note that unless we state otherwise all results except revenue on non-GAAP, we reconcile these non-GAAP results to our preliminary GAAP financials and discuss the usefulness and limitations in today's earnings release, the release, plus our supplemental earnings slide which include historical financial tables are available on Viavi's website.

Finally, we are recording today's call and we'll make a recording available by 4:30 PM Pacific Time this evening on our website. I would now like to turn the call over to Amar. .

Thank you, Bill. Viavi posted a record fiscal first quarter revenue of 299.8 million which grew 11.7% year-on-year and exceeded our upwardly revised revenue guidance range of 282 million to 294 million set at our September 12 Analyst Day event.

Both NSE and OSP revenue exceeded the guidance range driven by better performance in wireless and fiber and 3D sensing products respectively. We always Viavi's operating margin at 17.6% expanded 130 basis points year-on-year.

EPS at $0.18 increased $0.03 from a year ago levels, both metrics exceeded the revised guidance midpoint of 17% and $0.16 respectively. Now moving to our reported Q1 results by business segment, starting with NSE.NSE revenue at 219.8 million grew 15.3% year-on-year.

Within NSC any revenue at 198.9 million increased 20.9% from a year ago levels, driven by strong performance in Wireless lab, cable and access and fiber products across both field and lab.

SE revenue at 20.9 million declined 20.2% from a year ago levels due to the expected run off in our mature insurance product as well as weak demand from both growth assurance and datacenter products.

NSE gross margins at 64% increased 40 basis points year-on-year within NSC any gross margins at 64.4% expanded 180 basis points year-on-year due to higher revenue volume and a favorable product mix. SE gross margins at 60.3% was down 950 basis points from a year ago. This was primarily driven by lower revenue in both assurance and datacenter products.

We expect SE revenue and gross margins to improve sequentially in our fiscal second quarter. NSE's operating margins at 10.1% increased 150 basis points from a year ago levels, reflecting the gross margin improvement and the favorable operating leverage in our OpEx structure. Now turning to OSP.

OSP revenue at 80 million grew 2.8% year-on-year, driven by demand for our 3D sensing product. OSP gross margins at 54.1% increased 350 basis points due to higher absorption of manufacturing overhead from increased 3D sensing product volumes and operational efficiency.

Operating margins at 38% expanded 280 basis points reflecting the improvement in gross margins. Turning to the balance sheet. Our total cash and short-term investments ending balance was 530.3million, operating cash flow for the quarter was 31.3 million.

We announced during the September 12 Analyst Day event, a 200 million common stock repurchase plan effective until September 30, 2021 which replaces the prior stock repurchase plan.

Under the prior plan we repurchased 148.6 million in stock under the new plan to date, we repurchased approximately 10.1 million of VIAVI stock at an average cost basis of $30.99 per share including commissions. We'll continue to repurchase Viavi have stock opportunistically to offset earnings dilution from stock based compensation.

Now onto our guidance. We expect fiscal second quarter 2020 revenue for Viavi to be approximately 302 million plus or minus 10 million, operating margins at 19% plus or minus 1% and EPS to be in the range of $0.18 to $0.20. We expect NSE revenue to be approximately 224 million plus or minus 8 million; with operating margins at 13% plus or minus 1%.

We expect OSP revenue to be approximately 78 million plus or minus 2 million, with operating margins at 36.5% plus or minus 1%. Our tax expense rate is expected to be approximately 18% to 20%. We expect other income and expenses to reflect a net expense of approximately 2.5 million. Share count is approximately 238 million shares.

With that I will turn the call over to Oleg..

Thank you, Amar. Fiscal year 2020 is off to a good start, and I'm pleased with our strong performance in Q1. In NSE demand was strong in both lab and field instruments. 5G wireless lab demand continues to be robust up significantly year-on-year. Fiber demand has also remained strong in both lab and field-driven by 400 gigabit upgrade cycle.

Cable demand was up year-on-year, helped by a spend recovery in North American cable providers for DOCSIS 3.1 along with some modest demand from Europe. We expect this higher cable demand to continue into Q2.

Demand from North American telecom service providers, continues to be sporadic with limited visibility.SE revenue came in at $20.9 million and was weaker than we expected in both our growth assurance and enterprise and datacenter products.

The datacenter enterprise market has been challenging in calendar year 2019 with many deals being pushed out as customers reevaluate IT spending. The demand weakness in North American telecom service provider also has impacted the assurance business resulting in lower revenue.

In OSP 3D sensing, revenue increased significantly year-on-year driven by a broadening of customer base for optical filters and continued adoption of our engineered to fusers by Android-based smartphone customers. We expect 3D sensing revenue to continue to grow year-on-year in Q2.

And they counterfeiting demand was as expected, was down year-on-year relying mostly on the banknote to reprint volume and we expect this trend to continue into Q2. This reflects a change from a year ago were OSP benefited from banknote redesign demand in the fiscal first half of 2019. The banknote redesigned pipeline remains robust.

However, there is limited visibility from majority currency redesigns demand in the next several quarters. In mid-September, we held our Analyst Day where we updated our strategy and provided the outlook for the next two fiscal years.

The next phase of in Viavi's evolution puts greater focus on growth, both organic and inorganic, we have updated our financial profitability targets based on our growth strategies in 5G wireless fiber in 3D sensing.

In conclusion, I would like to thank my Viavi team for another outstanding quarter of solid performance and express my appreciation to our customers in our shareholders for their support. I will now turn the call over to Bill..

Thank you, Oleg. Bob, let's begin the question-and-answer session. We have everyone to limit discuss the one question, one follow-up..

[Operator Instructions] And your first question comes from the line of Alex Henderson from Needham. Your line is open..

Great, thank you very much. So clearly there is some tension in service provider spending in North America but broadly, are you seeing macro conditions starting to creep in conditions in the US and Europe. Or is it more priority of spending type issue.

How would you characterize the broader macro environment versus the focus of the company spends?.

Hi Alex, well. So actually, let me correct it. The North American service provider spend environment is no better or worse than it was all for the last 12 months. What I -- we still get very good revenue from it. Obviously, it's not as big as it used to be several years back, but we are getting our fair share of whatever is being spent.

Is just no longer as good as it used to be and its nowhere near as good as what we see in Europe and other parts of the world,. The difference, I would say, when I say sporadic, it's just that sporadic. I mean one day you could get a big [indiscernible] of an order and be enough.

And there'll be no for warning and there is really nothing leading up to it, it's just, it seems to me it's more reactionary to demand the rather than planning for demand. So that's really I'd say will be my commentary. In terms of the macro, I don't think there is really that's a presence yet, but we see healthy demand in some of the growth segments.

Clearly, everybody is now gearing up for 5G even though they may not be spending a lot of it now, but they all thinking where they're going to get the money. And as you can imagine if in the current environment, my bet would be that a lot of the money will come at the expense of investing in the 2Gs and 3G and 4G infrastructure to keep it up to date.

So I think some of the pairing of spending that we've seen. I mean I don't have much statistical data to make firm conclusion. But I think we are seeing some hesitancy to spend money ahead of the big 5G wave..

Great quarter. Thanks..

And your next question comes from the line of Samik Chatterjee from JP Morgan. Your line is open..

So, one question for me. Relative to your top line performance in the quarter, it came in above the high end of your guidance, how should we think about to be in the context of that momentum continuing as we progressed through the year.

And relative to your full-year guidance you provided at the Analyst Day, what's holding you -- what I'd like some of the factors that are holding you back from raising your full year guidance again?.

So this is Amar here. Thanks for the question. So when you look at the beat, beat to the analyst guidance that we provided just on September 12 it was again driven by -- mainly by those three growth drivers that we have been pointing out as a secular growth trends.

We saw beat in wireless lab or fiber, both in lab as well as in our field came in strong and also the 3D sensing primarily on the Android showed also came in stronger than what we would expecting. That doesn't mean that 3DS was came in line at least on the iOS side.

We also saw some strength in cable and specifically in North America as well as some in Europe as well as Latin America. And then as Oleg mentioned the North American's spend is sporadic. So when you think about looking forward for fiscal ' 20 we want to maintain the guidance we provided. The range is still valid.

And again, we are assuming those three growth trends, wireless, fiber and 3D sensing will continue. We do expect our base business to be flattish to grow.

And our SE business, which we were hoping would be say flattish to slight growth given the enterprise spend being weak and starting off on a weaker note at least in our fiscal Q1, what we are assuming now that particular enterprise spend a weakness will continue and so SE should be sort of flattish to slightly decline.

So we will continue to see strength in our any business and that's trend will offset some of the weakness that we are seeing in SC. So overall, we will maintain the guidance that we provided..

And I would also add in remember in the second half of fiscal year especially the March quarter. I mean it's seasonally you see mobile phone providers are pulling back on their demand and traditionally the service providers. Probably take till the end of February to figure out with their budgets are going to be for next year.

As a result, March quarter is traditionally weaker with a lot more uncertainty. So for us to really get more bullish on the fiscal year, we need to see how strong is the momentum exiting Q2 before we have a better picture to revise the guidance for the rest of the fiscal year..

Your next question comes from the line of John Marchetti from Stifel. Your line is open..

Thanks very much. I was hoping you could just spend a minute on the fairly impressive sequential growth in the APAC business in the quarter, it looks like that grew almost 20% sequentially.

Curious if that's primarily on the 3D sensing side just given your comments there Amar about some of the Android strengths, but just if you could spend a minute there in terms of that bounce back and maybe where you're seeing growth in that region in this most recent quarter..

Yes. So when you look at the sequential growth. John, you're absolutely right. That is mainly driven by 3D sensing. As you see we sequentially grow in 3D sensing business from our in June quarter to the September quarter. So that's a lot of it is reported out of Asia and so that's the growth you're seeing.

But generally speaking, if you look at on a year-on-year basis I think all regions, actually grew this year on a year-on-year basis. And so it was a very broad-based revenue growth story at Viavi for our fiscal Q1 and hence, it was a record revenue quarter for Viavi as a whole..

And clearly 5G wireless and fiber is a big element on net working side..

Absolutely..

In the APAC region as well, Oleg..

Exactly. I mean….

Go ahead. I apologize..

No, I think those secular trends remain same across all the regions..

And then maybe just a quick follow-up on that 3D sensing side. Oleg in to last quarter, and also at the Analyst Day, you made some comments about the potential. Maybe I'm looking at a licensing model or some different ways to both protect the IP and grow that 3D sensing business, particularly in the Asia-Pac region.

Just curious if there's been any movement there or how maybe we should think about the Android ecosystem in particular and its reliance on some of the China mobile handset operators as we're looking out over the remainder of the calendar year. Thank you..

So I think at this point is preliminary too premature to give any update from last four or five weeks ago. As I mentioned, we have a number of legal actions percolating across multiple jurisdictions and as they develop our Strategy between licensing versus enforcement will modulate the depending on the outcomes of various challenges..

Thank you..

Your next question comes from the line of Tim Savageaux from Northland Capital Markets. Your line is open. .

Hi, good afternoon. Congrats on the results. First question is on the 5G or wireless kind of side I would imagine that was the primary driver were pretty impressive 21% growth rate. My question is given what we've seen with Nokia of late which arguably needing to refresh the whole product line.

It seems like that could be a positive things for you guys -- I think for you guys. I wonder if you started to see some of that already in terms of contributing to the growth in 5G base station test and then I'll follow up..

Sure. I mean clearly, I mean we are engaged with all the major players and 5G and it's still very early innings of the 5G deployment.

There is a lot of revamping our engineering and adding of new features to the products that all the various vendors are bringing out, and that's obviously drives their need for more features more test systems, both in, I would say scope of a test and the quantity of test.

And as I said, our view is where they are always ready to sell them more when they need it. So it's not -- I don't think we have any constraints on our ability to deliver new features, the enhancements and what specific customers may demand. And we don't have any limitations on volume of production that we can ship.

So I think I would say pretty much we are writing the 5G wave as it happens..

Okay, great. And to follow up, we had a little back and forth on this at the Analyst Day, where I think if I recall properly. You said we might see another upgrade cycle cable might recover and say two to three years. Maybe I misheard and you meant two to three weeks.

But the cable seems to have recovered pretty quickly and unexpectedly and according to your commentary about Q2 sustainably, I wonder if you could kind of dig into that deeper in terms of what you saw on cable and is -- if you were as surprised as I am? Thanks..

Well, I mean look I wouldn't say surprised, I mean I think people may take it to literally when we say DOCSIS 3.1 upgrade. It's not a -- like a spike signal and it goes flat, right. It's like initial wave everybody buys in North America and does a big upgrade.

Then they have to digested, so you have a drop then as they digested is there all we need a bit more here. Then you have a kind of secondary, but lower kind of bump up. And then of course the rest of the world started deploying it as well.

So you have like a bunch of small little bumps, right? So net-net, reality is when you are deploying DOCSIS 3.1 or any other technology there is obviously initial spend and then you do a more fine-tuning resizing, re-figuring out what else more you need.

And remember, we also have a lot of other products that going to cable like fiber monitoring and things like that, it's not only meters. It's a lot of other test equipment that we sell into cable operators. And then now we obviously see some cable operators are starting to look at wireless space.

Well, it opens up opportunity for us to sell them some wireless products. So I would say -- I wouldn't say that we are in for another big uptick, but I just think was are cautioning everybody not to think that cable goes to zero. It continues to come and go. And the next thing is not that far off.

Maybe couple of years for the fully symmetric DOCSIS 3.1 where you can send and receive data at equal rates. And then, of course, there is whole -- the RemotePhy architecture conversion that's going to be happening in the coming years which obviously drives a lot of other test requirements.

Actually not that far off from the 5G infrastructure, because in a way, if you look at RemotePhy architecture and you look at the 5G architecture, they look very similar in many ways. So a lot of the similar type products would play into that space..

Okay, thanks..

And your next question comes from the line of Michael Genovese from MKM Partners. Your line is open..

Thanks. Hey, like -- it seems like we've seen upside in 5G ever since you've done the acquisitions. So for at least five quarters here we've seen lab driven 5G upside. Can you just talk a little bit more about why that's doing so well. And is it somehow.

Is there something about 5G that makes it a better opportunity in 4G or is it roughly equal to where we were in the 4G cycle?.

Well, I think as much as I'd like to take credit for this brilliant inside when we bought that business, it's truly is there has been an upside surprise to us as well as the management team that's running it. But as we dig into it, I tell you, there is a fundamentally something different about 4G and 5G and 3G for that matter.

Remember when I was saying it earlier in the earlier calls when we look at 2G to 3G, 3G to 4G.

It was really just marginal improvements, it was kind of the evolutionary as 5G is much more revolutionary, it's completely new technology, a new architecture and the different apology of deployment as such it's becomes with a very steep learning curve and a lot of uncertainty and that requires fundamentally a lot more testing and a lot more monitoring to figure out what's going on with the network.

So as a result, I think we do feel the 5G will be more in line with the 1G and 2G in terms of the test and measurement and skills required to deploy these networks than what we've seen with 3G and 4G.

And I mean part of ATC is the some of the primary early deployers of 5G networks are announced, because nobody wants to take the risk of network working as advertised deploying something so different. As a result, I see service providers relying more on NIMs to ensure that they have one that to strangle if something goes wrong.

So I think in that respect I do believe we will see more need across the board and not just we are -- we've got pretty much anybody who is selling into 5G ecosystem..

We did mentioned during the Analyst Day Michael, we basically given the more test requirement more use cases and 5G being different than 4G. We also made very targeted investments in R&D to go capture those -- the other use cases they're out there, plus strengthen our market position, which is as is very strong..

Yeah, it's actually Amar bring up very good point. I mean all that revenue is not coming in for free. I mean we actually some of these opportunities and selectively up to funding about three, four quarters ago and that's obviously what's driving it. So it's a very good.

I mean, I wish you all the R&D projects or like this very tight, very close correlation between this incremental spend and the incremental revenue bump up..

And it's [indiscernible] variable was the fixed costs, so that we guys know that --.

That's right. It's something that we can scale down..

So when do you expect to see field test and let's see the service providers step up is more of the spending.

When do you think we'll start to see upside in the business or see that driving the business, what's your current view?.

Well, for the last three, four quarters I've been telling you that everybody is getting a bit ahead of themselves when they think about the deployment.

Deployment is still proceeding at a much more cautious pace and I actually, as I've been saying all along, I think we're probably going to see field test truly picking up more towards the end of the calendar 2020 and today it's mostly trials and it's a very much done by NIMs using a lot of very expensive lab equipment as they fine tune their deploying their models.

And we work with all of them in that scenario. And right now it's all about putting your products as part of the deployment protocols for the network. So when they does go mass rollout that's when you would see the demand. So I would say second half of next calendar year at the earliest..

Great. I appreciate that really well thought our responses and keep up the great work..

Your next question comes from the line of Richard Shannon from Craig-Hallum. Your line is open..

Well, thanks guys for taking my questions as well.

I want to focus on OSP in the margin structure that you had in the quarter, the gross margin, operating margins were excellent to say at least here, so I guess I wanted to ask you a couple of very quick questions here is to make sure I'm understanding things here, is the non-3D sensing part of that business is that -- was that revenue kind of flat.

And was there any change in margin structure there or is it all due to 3D sensing?.

So it's all due to 3D sensing and as we had indicated Richard, as the 3D sensing volume were up it leads to higher absorption of our manufacturing costs and also the team of the up the learning curve here and we've been doing this for the last 1.5 years. The team is also driving a lot of operational efficiency in manufacturing.

So it's a combination of higher absorption of manufacturing audits with higher volumes as well as the increased operational efficiency. And as we also obviously been working on and take counterfeiting side we took out some of the older redundant costs capacity out, and we continue to improve productivity of those assets.

So, but I think as Amar said the biggest impact here's our 3D sensing volume production of filters and the fusers is now running at a much bigger industrial scale. So there is elements of economies of scales kicking in and this quarter of -- in particularly, very highly loaded factory with very good absorption.

Now, obviously when it comes to things like June quarter. Yes -- you have the opposite effect. I mean you have a lot of under-absorption unless you're building inventory and we prefer to build just in time and take the Dips and lumps when they come still avoid building up inventories.

But what we've developed is a very flexible, variable cost that we can ratchet up and ratchet down as volume comes in..

Okay.

So I think historically, you've talked about 3D sensing being a poor -- adding to a poor mix within OSP it sounds like it was actually maybe in line or maybe even better in the quarter, is that fair to guess or not?.

I will not comment on that piece because for obvious reasons, but obviously it is better than what it was last year. As the volumes were lower and we were scaling up the manufacturing. .

Well, I mean, a poorer mix is the -- I guess I prefer, I like money.

Let’s say this way, I mean, yes, I would love to have 40%, 50% operating profits on some products, but remember, even the 3D sensing, although it's lower margins than the traditional military Mil/Aero products, or anti-counterfeiting products from the business units, it's still significantly better operating margin than a lot of our other product lines.

So, overall, it's a very positively accretive to Viavi overall..

I think you bring up a good point, Richard, if I can just expand it a little bit. As Oleg mentioned, we have seasonality in our margin structure in OSP. So the first two quarters of the fiscal year, the September quarter and December quarter, you typically see higher margins and then we purposefully avoid pre-building inventory, etcetera.

And those margins typically go down in the March and the June quarter. So overall, we should be still where we guided, about mid-30% for the fiscal year, but again we don't want to go. This is a consumer business, with very fast cycle times and we have a very -- in a three to four week lead time.

So, there is no reason for us to go pre-build a lot of inventory and get stuck with that inventory in the consumer business. So we are very, very -- we have worked this in the last two years and it's worked very well for us and that's how we will also operate going forward..

Well, and as 3D sensing penetrates more and more products and vertical markets, you're going to see more of a smoothing out between the first and second half of the calendar year.

And it's very similar, I mean, I remember back from my early days in this industry, if you look at the gallium arsenide power amplifier in CDMA phones, when it all started it was a two-quarter-a-year business with strong demand in the first half and an almost nothing in the second half.

As the CDMA, WCDMA and 3G penetrated, it became more and more linear rise then today. Nobody talks about a strong second half and weak first half in the power amplifier space. So, I expect the 3D sensing to be marching in that general direction..

Okay, great, thanks for all the detail and keep up the good work. That's all from me..

Thanks, Richard..

Your next question comes from the line of Meta Marshall from Morgan Stanley, your line is open..

Great, thanks.

First question for me, wireless coming in stronger than expected and it maybe not be as seasonal as you maybe talked before, just how do we think about the seasonality of the wireless business, how you are thinking about it now? And then maybe just, more initially, I know short lead times on the 3D sensing business can be sure [indiscernible] ecosystem.

But, I was trying to understand, do they have the same kind of short lead times on the Android ecosystem or just timing the volumes and how we should think about?.

Okay. So, wireless, when there is a difference between when you sell into the field versus when you sell in the lab. Lab is driven by engineering budgets and they are fairly SaaS and they are more or less linearized and clearly when you're going into a hot new area like 5G, it is the most strategic spending thing that company can do.

Fundamentally, if the company wants to get more aggressive, you see more budgets come up and, in the end, you purely just have to a line up with the customers engineering roadmap and you write that spend cycle.

I think at this point in time, if there is a seasonality, it's not a seasonality, there is I would call calendar-based, it's really driven more by the individual NIM, a rollout and product launch cycle. And you just got to be agile and roll with the punches.

In case of the 3D sensing, it's very much a Viavi and philosophy [ph], that we do not get ahead of ourselves and you could always try to make your gross margins look a little better in the down quarters, by running more production.

But all you're doing is taking good cash from your bank and putting it into an inventory, and as often happens in especially consumer electronic space, that inventory often turns into nothing. If a customer doesn't have as much demand as they predicted, or they make a design change and all of a sudden the inventory is useless.

So, what we chose to do consciously from the very beginning is to run this business on a very short product lead-time basis. And we have a phenomenal manufacturing team that can execute internal [ph] within two to four weeks, at the worst case turned around the order.

And we plan and build our whole supply chain to be able to respond to that lead time, which gives us tremendous flexibility, not to pre-build inventory or respond to the very early forecast from our customers, but rather wait till the customer has a much better visibility of their true demand and would build just to that.

So, that's very much more of philosophy on how we prefer to run production for consumer electronics business..

Got it. Thank you so much..

Your next question comes from the line of Mehdi Hosseini from Susquehanna. Your line is open..

Hi guys. This is Nick filling in for Mehdi, just wanted to shift a little bit to talking about 400G.

Do you still see the second half of ‘20 to be the catalyst for that? Where do we stand with 400G and what should we think about it in terms of how it impacts each business unit?.

Well, I think I would say the 400 gig rollout is now in full swing. I mean, it's got quite a ways to go. So, I expect that business to be good for us and our customers. I mean, you've seen probably, there has been some reports like, IN-5 [ph] just had a very strong quarter.

It's going to be a long deployment cycle and everybody playing in that thing will benefit and where we benefit in it primarily today is in the production, because that's where the volume of shipments that drives the production test and, that said, R&D is now following with a 600 and 800 gig. So, you sell to them that equipment for the lab space.

But, I'd say for production testing, that's where we see a lot of 400 gig. But, it also means as it starts getting deployed in the next several quarters, we will see probably demand for that kind of thing happening in the field instruments. So, it's kind of like a three cycles, R&D cycle, followed by production cycle, followed by the deployment cycle.

And we hope the same model will repeat itself in the wireless space..

Yes..

And the field is quite early and we did launch of 400 gig product on the field..

Yes. Today, a lot of 400 gig goes mostly in the datacenters and, which is a whole new market for us, and of course, once the data centers are running it, then people start upgrading, or to interconnect them more for high speed..

And just a quick follow-up on that, do you have a sense of, in terms of when that shift from data centers to broad usage, like when should we expect that? Is that second half, is that next quarter, or is it 2021, what should we think?.

Well, it's varies. I mean it's depends on operators and how much capacity they have in their metro networks, but we're also seeing the hyperscale data center operators actually building out their own interconnect networks and spending a lot of money there.

I would say, it’s probably too premature to make sweeping statement as to when the operators are going to go to 400 gig upgrade.

Most likely is going to be more focused, specific to individual operators and they will do it probably, initially in the markets where they have the biggest constraint of capacity and probably delayed deployment of 400 gig in areas where they have a lot of dark fiber.

And if there is some correlation with 5G deployment too?.

5G is another one. Yes, exactly..

Okay, fair enough. Thank you..

There are no further questions at this time. Mr. Bill Ong, I turn the call back over to you..

Thank you, all, this concludes our earnings call for today. Thank you, everyone..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..