Aviat Networks - Q3 2024

Transcript

Operator (participant)

Good afternoon. Welcome to Aviat Networks' Third Quarter Fiscal 2024 Earnings Call. At this time, all participants are in a listen-only mode. A Q&A session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Mr. Andrew Fredrickson, Director of Investor Relations. You may begin.

Andrew Fredrickson (Director of Investor Relations)

Thank you, and welcome to Aviat Networks' Third Quarter Fiscal 2024 Results Conference Call and Webcast. You can find our 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. With me today are Pete Smith, Aviat's President and CEO, who will begin with opening remarks on the company's fiscal third quarter, followed by David Gray, our CFO, who will review the financial results for the quarter. Pete will then provide closing remarks on Aviat's strategy and outlook, followed by Q&A. As a reminder, 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, 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 most recent annual report on Form 10-K filed with the SEC. The company undertakes no obligation to revise or make public any revision 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 would like to turn the call over to Aviat's President and CEO, Pete Smith. Pete?

Pete Smith (President and CEO)

Thanks, Andrew, and good afternoon, everyone. Let's review Aviat Networks' results for the third quarter of fiscal year 2024. We are pleased to report that Aviat continued execution of its organic growth strategy and made further progress on its Pasolink acquisition. Highlights from the third quarter include total revenue of $111.6 million, which represents growth of 34% versus Q3 of last year. Core Aviat revenue growth of 7% versus the same period last year. Non-GAAP gross margin of 35%, with core Aviat margins above 38%. Adjusted EBITDA of $12 million, 11% higher than the year-ago period. Non-GAAP EPS of $0.73. Strong cash generation in the quarter, with $59.2 million of cash and marketable securities on the balance sheet and a net cash balance of $10 million.

These financial and operational results are driven by the continued implementation of Aviat's operating model and made possible thanks to the effort and execution of the Aviat team and our partners throughout the quarter. Let's review key highlights of the third quarter. We continued to progress the integration of the Pasolink business. In our first full quarter of ownership, we accelerated the execution of cost structure optimization and approached our near-term profitability goals. These efforts will continue to accelerate over the next two quarters as Aviat moves away from transition services provided by NEC. The Pasolink business was nearly breakeven on an EBITDA basis in the quarter and was accretive to our free cash flow generation. As we have onboarded Pasolink customers, we have undertaken a customer profitability review to ensure margins are at sustainable levels.

While our work is still ongoing, we expect that this will result in a slower ramp to the target $140 million annual run rate contribution. However, this should translate to more attractive business for Aviat's shareholders. Beyond the existing Pasolink base, the sales teams continue to build cross-selling opportunities where we are introducing Pasolink products to historical Aviat customers and vice versa. We have already converted some of these into bookings and expect this will continue to grow in the quarters ahead. From a cost perspective, we are tracking to our internal plan to reduce cost of goods sold and excess inventory from the Pasolink business. We had some wins in the quarter and anticipate beginning to realize some more significant savings in the current fiscal fourth quarter, primarily from inventory rationalization. Further, inventory optimization and cost savings will materialize in fiscal year 2025.

Overall, the transaction is tracking to an IRR in excess of 2.5 times Aviat's weighted average cost of capital. Moving on to the core Aviat business. In private networks, investments and upgrades to networks both in the U.S. and internationally continued to support growth in this segment. The recent U.S. nationwide Tier 1 outage underscores the importance of private public safety and critical infrastructure networks. Our customers turn to Aviat for design and operation of networks that are engineered with a high degree of redundancy and reliability. Aviat's equipment enables first responders, utilities, and governments to continue communicating even when public networks are compromised. Driving further investment in private networks is the recent authorization by the FCC at the end of February for companies to begin offering automated frequency coordination systems, or AFC, for spectrum in the 6 GHz band.

This is an exciting development that will likely lead to more fixed wireless access usage. However, concern persists among many of our private network customers as their microwave backhaul largely utilizes the 6 GHz band, creating the possibility for interference. We've been preparing and have developed a comprehensive suite of solutions to protect these networks by detecting and correcting interference issues. Our Frequency Assurance Software, or FAS, is patent software that analyzes customers' networks to detect interference and suggest remediation actions. Working on Aviat radios and the radios of a leading competitor, FAS allows the network operator to have confidence in their network's reliability and performance, even in the face of potential interference, without having to move communication to a new band. Once interference is detected, or for proactive customers who wish to avoid the possibility entirely, Aviat offers two solutions.

First, is an ultra-high power radio at 11 GHz to enable customers to move to a new band. We estimate upwards of 80% or more of the 90,000 6 GHz microwave links in the U.S. can move to 11 GHz with this product. Second, is a new innovative multi-band solution operating at 6 and 11 GHz and utilizing the 11 GHz UHP radio, specifically designed to protect longer link distances. These new offerings represent a large opportunity for Aviat to solve a growing problem for our customers, and we believe we are several quarters ahead of our closest competitor with these products. In the third quarter, we made several updates to our products to better address our private network customers. We released 1+1 hardware protection on our WTM radio platform.

This is important to open the all-outdoor radio market in mission-critical segments, such as with public safety, federal, and utility customers. We also released a new hardware variant of our CTR router to improve the interface and address the growing capacity needs of our router customers. These upgrades will help to sustain our leadership in the private network segment. Additionally, we won our first major LTE radio access network deal in an international military application, which is an exciting adjacency market based on our Redline acquisition. In mobile networks, we continue to execute to serve our global Tier 1 and Tier 2 operators, who in many cases are still in the middle of or just beginning to build out their microwave 5G networks.

To enable Pasolink customers to better manage their networks and to further expand the addressable market for our software, we will roll out support for our Pasolink portfolio in our ProVision management platform in Q4 fiscal year 2024. In India, we received our first orders for microwave backhaul radios. Previously, we had been selling only our E-band and multiband solutions. The microwave backhaul order is exciting as it represents Aviat's first sale into a $200 million Indian microwave segment that had previously been unaddressed by Aviat. With that, I will turn it over to David to review our financials before coming back for some final comments. David?

David Gray (CFO)

Thank you, Pete, and good afternoon, everyone. During my remarks today, I'll review some of the key fiscal 2024 third quarter financial highlights, noting our detailed financials can be found in our press release and 10-Q filed this afternoon. As a reminder, all comparisons discussed today are between the third quarter of fiscal 2024 and the third quarter of fiscal 2023, unless noted otherwise. For the third quarter, we reported total revenues of $111.6 million, as compared to $83.5 million for the same period last year, an increase of $28.1 million, or 33.7%. On a constant currency basis, our revenue would have been $114.5 million.

North America, which comprised 40% of our total revenue for the quarter, was $44.4 million, a decrease of $3.6 million from the same period last year, due to the near completion of a large Tier 1 project. For the first nine months of fiscal 2024, North America is up 3% versus the prior year, and bookings and backlog remain strong. International revenue was $67.2 million for the quarter, an increase of $29.8 million, or 79.7% from the same period last year. The addition of the Pasolink business contributed $22.5 million of that growth, while the core Aviat business grew by $7.3 million, or 19.6%. The strong organic growth was driven by Latin America and Asia Pacific regions, offsetting weakness on the African continent.

Our trailing twelve-month book-to-bill ratio remained above 1, as it has since fiscal 2018. Gross margins for the quarter were 32.7% on a GAAP basis and 35.2% on a non-GAAP basis, as compared to 35.7% GAAP and 35.9% non-GAAP in the prior year. GAAP margins were impacted by $2 million write-down of Aviat inventory that will be replaced in the market by Pasolink products, as well as $0.6 million in amortization of the inventory step-up purchase accounting adjustment. Non-GAAP margins were diluted as expected by the impact of the Pasolink business. Core Aviat non-GAAP margins for the quarter were very strong at 38.4%, driven by product mix and operational productivity.

Third quarter GAAP operating expenses were $31.5 million, an increase of $9.2 million from the prior year, driven by the addition of approximately $5.5 million in Pasolink-related OpEx, M&A expenses, and increased core R&D expenses. Non-GAAP operating expenses, which exclude the impact of restructuring charges, share-based compensation, and deal costs, were $28.5 million, an increase of $7.9 million, driven by Pasolink and increased R&D. Third quarter operating income was $5.0 million on a GAAP basis and $10.8 million on a non-GAAP basis, compared to prior year GAAP of $7.5 million and non-GAAP of $9.3 million, or a decrease of 32.9% and an increase of 16.2%, respectively. Third quarter tax provision was $0.6 million, compared to $2.2 million last year.

Starting in Q3, we have increased our non-GAAP cash tax estimate from $0.3 million to $0.5 million per quarter as a result of the Pasolink acquisition. As a reminder, the company has nearly 500 million of NOLs that will continue to generate shareholder value via minimal cash tax payments for the foreseeable future. Third quarter GAAP net income was $3.4 million, down from $4.9 million last year due to the previously mentioned M&A-related expenses.

Third quarter non-GAAP net income, which excludes restructuring charges, share-based compensation, M&A-related costs, and non-cash tax provisions, was $9.4 million, compared to $8.9 million for the same period last year, an increase of $0.55 million, or 5.6%, driven by core revenue growth and margin expansion, partially offset by the additional R&D investment and modest dilution from the Pasolink business. Third quarter non-GAAP EPS came in at $0.73 per share on a fully diluted basis, compared to $0.75 per share for the same period last year, a decrease of 2.7% as a result of the shares issued in connection with this Pasolink acquisition.

Adjusted EBITDA for the quarter was $12.0 million, or 10.8% of revenue, an increase of $1.2 million, or 11.1% from the prior year. Moving on to the balance sheet. Our cash and marketable securities increased by $13.3 million to $59.2 million, driven by strong cash from operating activities of $15.3 million in the quarter. As a result, we moved from a net debt position of $3.6 million last quarter to a net cash position of $10.2 million at the end of the third quarter. This strong cash generation was driven by core operating results and a positive contribution from the Pasolink business.

From a working capital standpoint, our DSOs and inventory turns continue to be impacted by the addition of the Pasolink assets, which added roughly 20 days to DSO for Q3 and reduced inventory turns from 7.8, excluding Pasolink, to 4.9, as reported. We expect these impacts to moderate over the coming quarters as the Pasolink business ramps and working capital levels normalize. Moving on to our fiscal 2024 guidance. We are updating our full year 2024 revenue guidance to be in the range of $408 million-$418 million, and our EBITDA guidance to remain within the previously announced range. This softened guidance is primarily attributable to the slower ramp in Pasolink revenue, cautious CapEx spends by Tier 1 customers, and African mobile network business. We expect our EBITDA for the fiscal year 2024 to approximate the current consensus estimate.

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

Pete Smith (President and CEO)

Thanks, David. Before Q&A, I would like to briefly discuss our outlook. The Pasolink acquisition is ahead of plan from an EBITDA and free cash flow perspective, and we continue to expect it to be EPS accretive by September 2024 quarter. Additionally, the acquisition is tracking well ahead of plan from an IRR perspective. We still believe the business will get to a $140 million run rate level previously discussed, and our EBITDA margin goals for Pasolink are in sight. The core Aviat business executed in line with our expectations, and we're achieving sustained growth ahead of the overall market growth rate. With that, operator, let's open up for questions.

Operator (participant)

Thank you. As a reminder, to ask a question, please press star one one on your telephone. Please stand by while we compile the Q&A roster. Our first question comes from Jaeson Schmidt of Lake Street. Your line is open.

Jaeson Schmidt (Senior Research Analyst)

Hey, guys. Thanks for taking my questions. I just want to start on the updated fiscal 2024 guidance. Dave, I know you kind of laid out kind of three drivers from that, but if we think about, let's call it the $15 million delta at the midpoint between the two ranges, can you sort of rank order those three issues in terms of impact?

Pete Smith (President and CEO)

Let me rank order them, Jaeson. One is the Pasolink ramp, and then, I would say two would be Africa, and three would be the Tier 1 environment.

Jaeson Schmidt (Senior Research Analyst)

Okay, that's really helpful. And I know you mentioned you guys are looking over sort of the Pasolink business from a margin perspective. Curious if this changes your thoughts, Pete, on how you're looking at fiscal 2025. I think last quarter you thought sort of $515 million-$520 million. Is that still achievable?

Pete Smith (President and CEO)

Look, I think we'll, you know, we got a little bit overly enthusiastic with respect to our our number for FY 25. We typically put that in the the August session, and I think we will we will update that guidance in in August. I would say that $515 number will be probably the the high end of the range, but we're not ready to do that. Look, we we you know we discovered some, quote unquote, empty revenue in Pasolink, so we're we're not gonna take that. And what we're really really excited about is we're ahead of our plan on cash generation, and you know we expect by September to be EPS accretive, if not sooner.

Jaeson Schmidt (Senior Research Analyst)

Okay, that makes sense. And then just the last one from me, and I'll jump back into queue. I know you previously said that you never expected BEAD to have a big impact on calendar 2024. But curious if you could just update your thoughts on how you're thinking about some of these government funding initiatives and what's our timetable to an impact to the PNL?

Pete Smith (President and CEO)

Yeah. So we've been consistent that BEAD is a calendar year 2025. We are seeing some incremental orders from the Rural Digital Opportunity Fund and ARPA, the American Rescue Act. We we we know that that needs to be spent by the end of December 2026, and we are not forecasting anything, but we, we are well positioned to have a positive surprise. And when we get that, then we'll, we'll update you all.

Jaeson Schmidt (Senior Research Analyst)

Got it. Thanks a lot, guys.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from Scott Searle of Roth Capital Partners. Your line is open.

Scott Searle (Managing Director and Senior Research Analyst)

Hey, good afternoon. Thanks for taking my questions. Hey, Pete, maybe to dive in on Pasolink, I think, you know, back of the napkin math, right, it's about $22 million or so in the quarter, and gross margins in the 28% range. I'm wondering if you could address, you know, where you think Pasolink can get to. I think that the target number was getting $30-$35 million on the top line and being able to bring up gross margins more in line with, core Aviat. You know, what are the current thoughts there? How big is the magnitude of, you know, call it, empty or hollow revenue that you were finding with Pasolink?

Pete Smith (President and CEO)

Yeah. So, Scott, you know, it's a matter of time on getting to the $140, and our view on getting to 33% gross margins remains intact. And, you know, one of the drags on the gross margin right now is the impact of the transition services, and that each quarter we progress, that will get less, less and less, and so that'll have a positive impact. And then we are working on, you know, reducing field service costs as well as cost of goods sold. So, we feel, we feel good about that.

Scott Searle (Managing Director and Senior Research Analyst)

Gotcha. And, you know, maybe to follow up, from an OpEx standpoint, it seems like you guys have done a lot of rationalization at this point in time. Is there more to go on that front?

Pete Smith (President and CEO)

Yes. So so look, we're disappointed with our enthusiasm on the top line. We are very, very enthusiastic about our ability to remove cost and squeeze both the operating expense and the gross margin line. And, you know, that's really why we gave the the hint about our IRR being 2.5x our WACC. And I, you know, I think we'll give some more color on that in six months because we're we're really, we're really, really pleased with the returns we're projecting. You know, look, the returns would be even better if the faster we can get some of the ramp issues out of the way.

But net, net, we would still do this deal, and we're, we're happy about the customer engagements, we're happy about the return, and we just need to be a little more circumspect with respect to the Pasolink ramp.

Scott Searle (Managing Director and Senior Research Analyst)

Gotcha. Well, last two items. I think core, Aviat gross margin said 38%. Historically, that's tended to be a bit of an anomaly. So is, is that the sustained range going forward, or does that come in a little bit in the June quarter? And lastly, new products and opportunities, India, and then specifically some of the areas of router and 11 GHz. I was wondering if you could just give us a timeline of when you expect that to contribute. Thanks.

David Gray (CFO)

Yeah. Hey, hey, Scott, I'll take the margin question first. So, yeah, our organic gross margins were very strong in the quarter at 38.4%. And year to date, we are right around 38%, which is, you know, a couple of hundred basis points better than our initial guidance for the full year of FY 2024. We do expect, you know, probably a modest pullback in Q4, but we'll still be well ahead of what we were projecting on a full year basis. So I think, you know, things are looking good from that standpoint, and I think it kind of resets what the expectation should be going forward.

Pete Smith (President and CEO)

Okay. So, Scott, let me jump in with the product question. So the 1+1 hardware protection on the WTM, right, that gives us a high reliability, high capacity outdoor radio. We think that increases the addressable market by about $50 million. We also mentioned our frequency assurance on our leading private network competitor that create. That's available now, and we have received initial orders, and, you know, that's a high margin. We see the 11 GHz radio we have, you know, we have previously announced Tucson Electric, that is in the market. We think the opportunity size there is $120 million.

Then the long distance link protection with the multiband 6 + 11, that's a smaller market, say $30 million, and it's in our, it's in our toolbox right now. And the reason we bring all that stuff up is because of the 6 GHz unlicensed band opportunity, which we think will drive more backhaul and is good for the fixed wireless folks.

Scott Searle (Managing Director and Senior Research Analyst)

Great. Thank you.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from Theodore O'Neill of Litchfield Hills Research. Your line is open.

Theodore O'Neill (CEO and Senior Analyst)

Thank you very much. Pete, you mentioned in your prepared remarks that you are seeing cross-selling, and I was wondering, between the Pasolink and your products, are there any surprises there that you weren't expecting?

Pete Smith (President and CEO)

So, you know, that's actually making it difficult to kind of keep the business separated. And we see opportunity in services to take, to provide services where Aviat didn't have footprint and vice versa. So that's a pleasant surprise, you know, that's masked by our slower than expected ramp, but we're really excited about that. And I would say we're six months out from being able to bring some of the Aviat software and put it on top of the Pasolink radio. And what I would, you know, this doesn't show up in the financials, but we're enthused about the customer engagement and the desire for us to, you know, make things like FAS and HAS and our network management software work on the Pasolink radios.

Theodore O'Neill (CEO and Senior Analyst)

Okay. And on the first India microwave backhaul order, did something, something unique happen in India that opened up this opportunity for you?

Pete Smith (President and CEO)

I think we proved ourselves with the E-band and multiband and our vendor agnostic software, as well as our delivery. And what that was an opportunity to do was go after some of the incumbents. And the feedback that we've, we've received, right, we did well when we got the small opportunity, and the feedback we're getting now on the microwave piece is they like the technical performance of our product, the simplicity of the design, and some of our key features. So we're, you know, we executed on, you know, the toe hold, and it seems like it's going to pave the way for future growth.

Theodore O'Neill (CEO and Senior Analyst)

Okay. For David, on the selling and admin expense, I'm wondering how it should trend from here? You-- There's $1.7 million of M&A in the current quarter, and I'm wondering if that continues.

David Gray (CFO)

That should go down significantly from here on out. I wouldn't expect there'd be you know some straggling costs as we tackle certain things. But no, like Pete mentioned, that would help the margins, it'll also help our OpEx, is the reduction in some of the transition services costs quarter-over-quarter as we go forward. So, we expect to be getting more of those costs out you know going forward, so that should be working in our favor.

Theodore O'Neill (CEO and Senior Analyst)

Okay. And my last question, Pete, I think every company should be filing two S-3 shelf filings of however much the money they can get. But, I was wondering if you could share your thoughts on putting that in place for Aviat.

Pete Smith (President and CEO)

Yeah. So we, we have an existing shelf from three years ago that expires on May fourth. And, you know, I know that some investors get, get concerned about, I think we've been a prudent deployer of capital. And, so us just putting the shelf in place is good corporate housekeeping. If some opportunity were to present itself, we're in position to capitalize on it. But I want to be clear, we currently have no active deal in our M&A pipeline that would necessitate pulling down the shelf, but we just wanted the flexibility. And then, a couple investors put in some questions since that filing came out, you know, about our firepower.

And we, we're comfortable using debt up to three times our 12 months trailing EBITDA, or three times the pro forma combined EBITDA. So we think we have some significant firepower. And then an additional question was, if you use that debt, what would the rate be? And we think it would be in the SOFR plus 250-300 basis points.

Theodore O'Neill (CEO and Senior Analyst)

Okay, thanks very much.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from Tim Savageaux of Northland Capital Markets. Your line is open.

Tim Savageaux (Managing Director and Senior Research Analyst)

Hey, good afternoon. You mentioned 7% organic growth for Aviat in fiscal Q3. I wonder if you can give us, you know, a similar estimate, not a similar number, but the same type of estimate for organic growth that you're implying here for Q4. And I think that brings you in, right, or, you know, likely bring you in somewhere around 5% for the year. Is that sort of rate, maybe a little bit below your historic growth rate, but would you expect, at least as you look at it now, would you expect that to persist into fiscal 2025, or maybe something more typical, kind of mid- to high-single digits in terms of organic growth rate for Aviat? Thanks.

David Gray (CFO)

Yeah, I think in that mid-single digits where we would end this year would carry forward into 2025. We're not gonna estimate in the high single digits at this point.

Pete Smith (President and CEO)

But look, yeah, for modeling purposes, put it at mid-single digits, and, you know, we, you know, of course, we're gonna try and do better than that. And you know, look, we talked about two other headwinds, Tier 1 and Africa. We think that Africa is really at a bottom, and, you know, that's largely interest rates. Another data point that I'd like to add is, on our constant currency basis, our revenue was down 4%. It would have been 4% higher if we didn't have the emerging market currency issue, and we would've had about $1.9 million more EBITDA. So, you know, we we beat the consensus on the bottom, bottom line despite that.

You know, our number one focus is to drive the Pasolink revenue up quicker. You know, we, you know, I would say the Africa currency issue, you know that's, that's beyond the control of Aviat, but we're well positioned when that dam breaks.

Tim Savageaux (Managing Director and Senior Research Analyst)

Okay, thanks. And maybe I was gonna follow up with that with hopefully a discussion on some of the puts and takes around that organic growth rate. You mentioned Africa, although that sounds like it's impacting this year, and if it's bottoming, maybe that could be a tailwind. You know, I imagine, you know, the rural broadband growth drivers could get stronger next year. Then again, you mentioned finishing up a Tier 1 project, and maybe that's a tough compare. So Pete, I wonder if you might just, you know, go through some of those puts and takes around that mid-single-digit growth rate and, you know, what could drive it either way?

Pete Smith (President and CEO)

Yeah. So the Tier 1 project is a tough compare. You know, we think we have about 35%, 35% share of rural broadband, and if the RDOF kicks in a meaningful way, that's gonna be very, very positive for us. A reversal in the currency with respect to Africa is going to be good. And then, you know, so, and let me come back to the US Tier 1. This is a question that we've gotten, and in the quiet period is about some some multi-dwelling unit trials that we can't disclose the customer, but we, we'd acknowledge those. And if that were to get across the goal line, that would be a significant uplift to offset the completion of the project.

So we, we're pretty happy with our funnel and, we, you know, we think that the future is rather bullish for us. And so the puts and takes, the put is the completion of the US Tier 1. We see new projects with our major US Tier 1 customer that could be a lift for us. We see Africa currency at the bottom, and we need, as interest rates moderate, that's going to reverse, and we need to get the Pasolink ramped up to where it should be.

Tim Savageaux (Managing Director and Senior Research Analyst)

And that's a good place to end for my last question, which is: Would you hope to have that up to the target run rate by the end of fiscal 2025? And that's it for me. Thanks.

Pete Smith (President and CEO)

Yes. Yes. Yeah, that's Tim, you usually give me a hard time for not being direct in my answers, and rightfully so from your perspective. My answer on that is a clear, crystal clear yes.

Tim Savageaux (Managing Director and Senior Research Analyst)

Well, then, received in crystal clear fashion. Thanks, Pete.

Operator (participant)

Thank you. And as a reminder to ask a question, please press star one one. One moment for our next question. I'm actually showing no further questions. At this time, I'd like to turn the conference back to Pete Smith for closing remarks.

Pete Smith (President and CEO)

All right. Thanks, everyone, for joining us. We're looking forward to updating you in about 90 days. We remain enthusiastic about the business. We think our, our products, customers, and our cost reduction program are on track, and we're certainly bullish about the future. Thanks, everyone.

Operator (participant)

This concludes today's conference call. Thank you for participating, and you may now disconnect.