DZS (DZSI) 3 Aug 222022 Q2 Earnings call transcript

Good day, and thank you for standing by. Welcome to the DZS Second Quarter 2022 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. hand Vice over President to today, your like Moreau, Ted of now the to conference speaker I'd Investor Relations. ahead. go Please

Thank welcome and XXXX Good DZS Shannon. quarter call. earnings to second conference you, the morning

a are indicated, earlier. report on financial reconciliation to being determined provided the metrics from with the those on that contained Relations including statements Documents shareholder corresponding basis. analysts as current of today prospective our contained that company Misty Yesterday market as on as call the shareholder Investor company in updates financial the CFO, The will available the with regarding actual Investor GAAP files reports report our us in may results section expectations, of the Vogt, published factors performance of other in shareholder the a together of Please XX-Q information. future results shareholders, the company's part well with section quarter close, projections Kawecki. recent the are statements only CEO, company. being the and are cautions for after differ projections the and Joining identify business, actual Charlie its materially forward-looking XXXX filed X-K, President product, and events note unless to as we to or you or important the shareholders, On forward-looking this and These to and forward-looking documents materially. future Relations we forward-looking that and on market the to Form provide well GAAP to of could statements. differ referenced provide otherwise DZS SEC, that numbers insights, Please this website. DZS items you second risk call, website, events such refer non-GAAP that the section or was are XX-K most cause and statements financial

quarter, Three also third Conference will and the pleasure investor to hosted in panel by Charlie the will now week. participating next During the session Cowen be have conferences a Rosenblatt, Charlie. over Advisors, and call we to turn Part in participating I be Jefferies, at

welcome and Ted, guests. investors, analysts, and you, Thank

yesterday which market quarter an our second business, update shared posted results, Ted and closed, we after shareholder As XXXX the provides our financial market trends, report, outlook. on

remained and are networks has fixed robust the customer reduce and and to cost, increase and modernizing uncertainty. operating revenue. churn, in their of providers We increasing face that demand are mobile laser-focused effectively lower encouraged resilient Service economic on environment upgrading compete

service smarter, Wi-Fi hybrid the work-from-home to and as in design markets are With increasingly they respective and environment in faster, must place, intelligent homes smart networks. build and new compete and the Internet broadband deliver services. consumers They cost-effective providers win leaning into more understand home that the

As than before. more such, and providers are service advanced ever offering technologies intelligent software solutions

solutions access providers hyper service Our broadband enable services. fast and multi-gigabit to deliver

connectivity the the Our (ph) and multi-gigabit connected Subscriber to the to home Solutions and office network. broadband throughout specific Wi-Fi X the extends devices

expansion Canada, Optical transport last revenue, Subscriber data billion and foreseeable growth the Solutions numerous and confident service $XXX cloud as performance new analytics their Edge the and and solutions for loyalty. remain Pan-Asia, and empower United the States, software and remain service with strong that cloud replacement prospects of mile for customer initiatives. Access Chinese orchestrate, Europe, broadband network opportunity our solutions as and optimize advanced Edge satisfaction, automate, the our aggregate future. cycle investment we infrastructure revenue will well provide to build over providers global spanning to to traffic. Optical enables vendor improve DZS margin mobile Our and cost-effectively With increased customer leverage Solutions TCS's providers and government

consecutive sixth an backlog combined with our now bookings to of $XX quarter increase of $XXX deferred million, with of our XX% The increased in backlog total and revenue, of million. second is total million. $XXX revenue million excess orders $XXX represented QX service software and our year-over-year, million $XXX quarter deferred

and $XXX Solutions. Our wins of and first new million demand half inclusive momentum our performance and of bookings and XX Subscriber Optical customers acquired our and software for Edge cloud new strong highlights numerous project Infrastructure Access

extended supply The port second and quarter closures of subcomponents as in challenges in and May. manufacturing China for began shipping XXXX March chain reflected well continued into that semiconductors

of customer and million, due $XX end to rate Euro, Second been deployment fluctuations million have were would as exchange to as quarter range. the fluctuations to would quarter, margin which XX% exchange and for closer represented cost satisfy sequentially Yen. year-over-year and million impacted have gross fluctuations guidance revenue the an of and expedited quarter foreign airfreight during increase the earnings unfavorably Won, Likewise, of Without Japanese been these our unforeseen logistics incremental the by unfavorably $XX $X spanning schedules. revenue was well approximately XX% QX impacted by Korean exchange also foreign the top foreign

since have customers, on DZS, of new million $XXX pleased XXX eight with we numerous orders, delivered, acquisitions. software are I and As product cloud the new quarters reflect past I two next-generation the joined innovations, results we

only built which just people, systems and Access, in Edge that QX has completed expect our One our cloud project, portfolio transformation Optical addition, DZS initiative XXXX. still that short In we brand an we our two is infrastructure enviable be complements to and Subscriber Solutions. is The software years, completed Infrastructure outstanding product ongoing of ERP DZS have initiatives. In

QX transforming a disruptive developed a the our marquee software this we been foundation DZS around alignment subscription world solutions. Cloud. that we Tier-X acquired software RIFT, automation orchestration neutral which have During of form of cloud software high focused time, on with strategically XXXX, In margin innovator focused and platform, vendor the and differentiated our portfolio with customers

portfolio. provided management customers The of service express assurance the transaction provider property, Wi-Fi cloud XX software solutions software valuable and software engineers. intellectual with service intelligence our management team marquee for an acquisition which elite vision award-winning artificial and cloud of check accelerated and second of Cloud included DZS and experience the quarter Assurance ASSIA's During Service XXXX, Wi-Fi DZS ASSIA's we with

We gross The to was revenue purchase XX%. to all-cash to be times million approximately expect equivalent pro in margins revenue. $XX annualized one be forma approximately

North progress and Subscriber acquired spanning marquee cross-selling a Edge opportunity EMEA represent Access Solutions. newly and customer Optical America primarily our and our significant Our market RAN. Shifting expansion to with Open for

marquee During XG aligned market began in Open quarter, the platform reference front-haul defining Europe, our we new second with operator Rakuten a to RAN Symphony's gateway mobile architecture. shipping

to category in middle the XXX-gigabit flexibility, deployment the Saber Connect Fiber We Saber for in transported mile improving demonstrated Conference as optionality broader billion transport audience economics allowing (ph). scalable and platform, broadband multi-terabit traditional leverage Optical $X XG Additionally, router Saber in equity, coherent mile as of edge up the XXXX cost mile aggregation of the we addressable billion to platform redefines delivers application applications sites an transport. Edge Nashville compact next-generation network grant service a program XXXX market. suited mobile aligned highly hardened access, for design digital bandwidth deployments The is unveiled of the fraction of providers environmentally capital the of $XX an with in within poised modular billion middle Saber cell and optical hardened a $XX funds in Saber Optical XXX a deployment well our $XX aligned last Edge the at perfectly mobile solutions. June to virtually projects divide spanning fiber elite platform environmentally bridging anywhere significantly with and The for the program. the kilometers. at aggregating is distances of deployments billion

and tone Our culture at DZS. innovation set the

We are the the continues thrilled company. that new to with talent join

quarter to strategy designed fluctuations closing, during chain to better we new and our foreign orders remainder delivered position million capture As look supply with XXXX existing with In new and XX in accelerate second go-to-market our wide new of customers and customers. playbook headwinds the XXXX, DZS we added our including to customers. DZS $XXX newly into plan and despite acquired customers exchange, ASSIA and the

especially foreign revenue have for ability expansion in America in and million gain disciplined our exchange $XX topped within in Europe, if not to turn execution dynamics remain and million. QX walk our in through would I'd market revenue foreign financial as share $XX like XXXX. our though fluctuations in confident while XXXX to our North exchange range, our stabilize With Our to today's guidance delivering QX supply and chain that, and plans, highlights the We Misty the our unforeseen to margin was call Misty? outlook. over

our in I'd is foreign operating you, as it Korean help quarter, to order better creating the foreign foreign throughout our and the margin currencies, revenue and our everyone. Yen, against by understand than impacts on gross Won, quarter. currency the in exposure results. income morning, the our impact Japanese the discussing are headwinds U.S. good Euro and hedged on second The our like currency to on Thank QX jurisdictions. weakened Dollar Charlie, our naturally foreign unexpected in partially to you Many greater particularly we is business start

from XX% of we During our our Europe. total revenue X% Japan, Korea, from QX, generated of XX% revenue total and from

detail fewer Dollar provide dollars. U.S. converted results. revenues walk additional through the strengthened QX, will as As financial these I our to throughout I

for consecutive million, indicated, strong orders exceeding orders quarter underlying sixth remains $XXX demand with Charlie of our million. total As with QX $XXX

$XX $XXX QX, and reflect ended set $XXX million have would XX% foreign currency for million, at As at continuously $XXX When $X plus to year-over-year. services the equaled a by quarter deferred our of was with have software with we U.S. backlog million. is combined Because rates. $XXX exchange or million record in million revenue, deferred a Backlog impacted Dollar unfavorably combined result, during otherwise quarterly revenue. revenue deferred new backlog revalued when million strengthened and combined the up backlog current our

year-over-year revenue foreign impact, Our $XX $X to Despite remains and revenue due million ongoing constraint availability. conversion still increased of backlog million. this we of to subcomponent to XX% the challenged currency

customers beyond the region. second and have subcomponent our stronghold towards quarter, Asia, skewed our the we diversified Japan where business across Asia, our year-over-year Within revenue to Korea During XX% in million. increased $XX availability into Pan-Asia and

$X our XX% from exchange $XX of million, emphasis impact year-over-year $XX approximately Asia. increased of converting from the of total exchange. the region shipments footprint Revenue foreign reflecting the America X% timing impact, on declined strategic our reflecting the overall to EMEA revenue foreign this million, in to Revenue year-over-year and DZS revenue XX% expanding in As occurred of region. million from

of sold margin of QX are half foreign of unforeseen however, Korean based cost impacted our cost won, by for partial is our of our About in allowing currency overall a of remainder Our changes. Dollars. was the goods adjusted U.S. based gross goods business sold for XX% in natural hedge, Asia

were expenses our as would customers impact our elevated That as natural approximately timely operating we higher. and increased $XXX,XXX expenses as the Assets. fees of million cost FX, operating The prioritize including a with incurred margins estimate of products with chain acquisition reflects QX towards to expenses XXX we XX% costs of goods partial our have in The expedite gross was our shipping that operating to Without second the weighing our increase denominated the in currency mix $XX was been logistics headwinds, factor addition to on adjusted possible. we subcomponent In and decreased million year-over-year exchange our final basis Korean business gross foreign compared XXXX. margin as Won. QX foreign we In the foreign hedge performance points delivering revenue during have and availability. quarter, weighted Asia of supply currency approximately by $XX due investments in ASSIA

of loss Our $XX slight XXXX, influencing XXXX, in and of to our was EBITDA were EBITDA headwinds. foreign QX million loss our compared was We of a million non-GAAP XXXX. credit have $XX availability (ph) adjusted cash loss on supply QX with loss the $X $X.XX million facility. QX QX the a quarter and EPS factors and metrics profitability $XX revolving of we currency during in $X.XX changes in a unforeseen our million ended a to to compared primary chain The

$XX five-year reminder to acquisition, ASSIA a entered a for As term we loan. million the pay into

availability which several component increased to our inventory and in and as in levels necessitated possible, Continued with buildup past to forecasts. We our customers impacted align has material of delivering our products over backlog has back-end Inventory a reopening as the customer a or year prioritize year-over-year returns X.X the resulted quarters working capital. compared has limited sales loaded XX raw inventory increase strong were Annualized outstanding in million were ago QX the times with quarter XXXX times during ports compared days second the in Days China to with $XX in days XXX period X.X XX%. as inventory QX May. shipments due ago. our year were timely

$XX receivable experienced in result, $XXX increase a accounts million we million. to sequential As a

includes of updated financial guidance ASSIA our acquisition. guidance, the Asset contribution seven now our from Turning XXXX to months

to the remain of relative Additionally, Yen we half Dollar expect second and to strong the the U.S. Euro, in XXXX. Won,

our result, reflects supply continued our FX prioritize for year expectation a customers. as As full guidance we updated anticipated delivery to impacts our revenue chain our and headwinds

margin Our million XX.X%; expenses updated $XXX and operating from XXXX of is XX.X% from and million, $XXX full gross follows: $XXX to range range guidance million; million. in is as million $XX to $XXX $X between guidance in year million revenue to a a EBITDA our

million, and Looking guiding revenue third to operating quarter, our to XX% to of of million million margins to are range expenses $XX $XXX $XXX XX%, we to million. a gross $XX of

we convert of be $X sequentially end technology approximately balance third to XX cash. working intend of quarter of business, XXXX improve when greater We to results relatively we to out and to million categories $X QX and our between revenue balance look our EBITDA transparency cash the capital expect provide we QX days. report as result, order by cash the million. new evolution product flat anticipate two the at we a In to by in our break As into

software first and this our X% The new portion mix of ever-increasing revenue importance services, will will second XXXX, grows revenue. which business. represented quarter total an as category the of be In category to our software approximately of in be

which product the the hand We connectivity historic going a business remarks, session. of to I'd over forward. feel our will more the useful breakout be will areas. Q&A our facilitate broadband this transport category to our second in call mobile provide Networking, and of reflection completes to the will directional The Access operator strategy consist now prepared like That

with you. first from Essi Paul Instructions] question [Operator K. Our Woodruff. comes Thank William

now is line open. Your

Charlie, you taking bit also guys for question. supply little this in numbers you another like And fourth quarters assessment the is currency, forward? and your have how about affect your call. and then exclude you hit talk I my the China, can you expediting Thank going maybe, and It chain the looks overall if charges to going the a third maybe

team X%, our it's so hard the million quarter I us at with that certainly the XX%, into so for to we be the of that dealing best just it's mean, as we look with mean, going out, that see if revenue we're we Asia see. was what some I $XX Yeah. exchange would happened guidance was Europe, the certainly the certainly didn't you within and to QX, executed have the us. pointed we Yen and were Euro revenue X%, up much top to that disappointed when exposure foreign the been second obviously Won things provided didn't as this with end hit ever, you frustrating have was QX up and up

global second looking at banking As likely the with our it anticipated the foreign are working the been had year, have JPMorgan Morgan the and outlook what partner banking what Misty half closely and to us provided, the with. very partners fluctuations JP of comment half exchange relates we've incorporates can second and she on in be provided it, other and that to key

that. return any normal beneficial don't we So, in the year. XXXX, we from company. our the partners exit foreign change that you if we assumes to second enter and want will is, we outlook as the of year What will I certainly that to much of on banking believe foreign the half exchange that exchange that hearing comment are have Misty, for be doesn't this know which levels,

Yeah.

we second quarter so relates project into half. view a we variances we took that and expect to forecast a foreign the in views some have those significant of perform of given will to and bit the what the XXXX half that certainly better had in occurred it of of second of second the currency, As to some incorporated we how

appreciate as and you to more Europe, important to and that's America expect the North is than at and thing our is, margin Europe, be a other into unlock backlog perspective XX% we so we million the deferred, better. of and margin total more North backlog America of $XXX much of the and think that I look from if profiles more

a you balance I a Okay. which can renewed these shifting a the year, contracts have maybe give your expect next each bit My is and ASSIA your question, where that and are have that from a XX your now sheet maybe at current, done imply it will you Thank acquisition. what can how a And and revenues. plan do the into been a little phases three where Two contract you secondly, maybe aggressive questions, that would get quarters first, gears, the year, ASSIA months cloud second fully of good on and opportunity all you provides us three good nice offering color value, to to to increase portion, take have little in I in pricing, or assume integrate more you. bit on once? so? game on quarters noticed or liabilities this about them are be you the This

portfolios into the really CloudJack mean, already filled the fully gap it Express void. in integrated DZS a Clouds, there I integration is software because Yeah. no really and so are

to able nobody to platform which orchestration from the the attributes house, for And If the you a in is the software the about think we network part software the to fiber really assurance really gave about all that space. then was mobile to this us fixed is provide management think software orchestration, about prior management tilted all home where something experience and year, that we've ASSIA OLT ASSIA be software doing Wi-Fi inside is service was over transaction, somewhat -- DSL the which at ONT is in the Wi-Fi the and really network. last of access what and we were RIFT network where aware terminated to game-changing the

So, the DZS been systems have that's fully have all of employees been integrated and net integrated. managing that all business. into been even The is fully that is integrated, way fully new the

renew said something assessing to just and we of and through really us some transaction contracts was the diligence. It's due that it pretty timing the these was when something obviously were opportunity translate better an as value, that's have You renew contracts overall important of important provide and for we for certainly these of ARPU that into an customers better some we as expect will XXXX which more profile in revenue margin to and us.

thank I'll it pass you. Well, on.

Thank you.

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

is now open. line Your

Yes. Good morning.

right next wondering and Just years? next couple the is can now how some get I'm coming it upgrades hearing how over India big big major year, of

from significant as all that with was Tier ONT did profile. different with Phase X ago Optical to think, us is X the and is to to for Wi-Fi profile expanding Transport ONTs, X two that think parts there Phase in-home OLT that the you aware, the opportunity and the higher India. see of a we that of comes OLTs, least of announce, We Well, are that a participate margin I awarded in and in, which side the we network pretty were of I at second much the quarters obviously Phase the we

be in participate that opened has former I in for like being able is India. their the in China DZS capital region. vendors to the country thoughtful So, about of a clearly certainly aggressive opportunity China replacement particular it -- up we mean, that really to are companies

shareholders different it, thoughtful and not into with low-margin chase deals, go appreciate also bookends that about I there think investors but important come are we rushing to it's being we're able what are India with to ONTs in are lower to much different that and the profile Phase attributed margin is the obviously, is OLTs software X. margin the to profiles, complement to in the be OLTs for

half transport we that we OLTs that's shipping middle in So, Phase expect second and ONTs, something and that year of the X X begin is Phase in will for us early XXXX. was book mile the this the in

be was strong, of weak, APAC get so next transport that My that transport I can significant second your will going go of fairly you over beyond? was in is, your mobile get the but thought question mobile it. continues Got and and portion kind half to what mobile,

in that Well, in did mobile share a did did large in comments, you QX. -- with my win we I operator Europe we

of call five, project begin high-margin of pause project, in We it drove do their think that with working sort of in a seeing with a Architecture you're has first of QX SoftBank Mobile the transport of did QX. that some I revenue their -- this six, shipping DZS, the year, is next-generation that multi-year on and revenue of begin Phase something transport will XG seven see mobile SoftBank where to a of our this that the we over Transport we year is on PON-based to which and ship with and the anticipate going ‘XX. contract they're We in phase on them is second let's lot starting the that platform which in in will of phase reevaluation so in years, mobile we're and next last, half half through a their X the

is such released Got been regarding question And my it. have U.S., yet? as RDOF various government last funds they

are peers think fair we've mean, with in what we've think a customers I North of lot I three our participating, that it's been Yeah, got America. mean, sure. to I I assess and articulating

who ILECs. co-ops, think we through excitement weren't those an equipment been historically frankly market fiber entering we've Most lot where of to DZS is the that outside what for to that been frankly have of refer supplier of part, using. the the entrants gives I service and opportunity to seeing of of providers to a would regional a the the lot of into most participate and they flowing funds are into overbuilders partners some incumbent. new as utility traditional new historically Where are we sort the

policies, your your solid months? over lot, much backlog, you many is so go can one because -- get this one how question, Got how is cancellable maybe contract after question like it, that a more be actually can I

but Well, speaks ironically, haven't including volumes at the technology, relationship the $XXX fortunate any for look have so, the extended we a that had have not talking and over and they dependency seen customers the contracts. this we've can would last ever haven't long-dated very were think very exchange patient out customers, for we I million that the the think been years I on of and right independent from I've lead in do any D been just and thing it been I two they've the and I before I want, been call we about We're it. customers here, mean in technology our I've don't Book, and that have. when the million, whatever we've the they Dave, historical mean, the supportive years and and with $XXX with if very been customer of the XX of years any fought which we to know, backlog I orders so trying pulled been do and mean, committed I the some here, two times D mean, a customers derail look, seen impacts, of I've on contract not foreign books,

years, deferred add referred most but Dave, projects are solid so which it and in the and can that, revenues Paul commonly that have build, one from right, those that haven't I vary we as three build already mentioned a deferred if to -- we've maintenance on to I terms to backlog are contract revenue, the you have think recognized to and example, think liabilities, want. contract, month earlier, for revenue, but we

Thank you.

you. Thank

Our next comes Stifel. question from Svanberg Tore with

open. is line Your

a continuous that It and light and that in but the on is see shortages transformation record ease trending, like on like and right that certainly you're the things component is backlog. starting really how backlog conversion the was ForEx now, and the backlog the that, moving starting to of on direction? sounds now especially in to Charlie, you I just have the Yes. Thank wondering here you, congratulations handle conversion,

incurred we one we're to I deployment possibly with are we trying trying Yeah, mean meet to certainly customer mean, we best the to of I a industry I everything sometimes mindset. to XXXX and And adhere the significant increases are so half of price August equipment year. from last backlog things, second of in sort were of to can and starting can this forget suppliers perspective. do this in we the first-in-first-out mean, sort we're trying of schedules in to the we of that that align first-in-first-out there all this

some of the that to that end of QX out. it in we along we're out I aggressively all flush price to trying see by price whole backlog backlog customers by was flushed but think our sort QX, that increases impacted the expected of favorably that attributed price So, to not have yet by increases seeing price what so of customers was been passed not as we've of this in most increases, impacted lot we of in the will and but the to articulating year, attributed sort higher a we that you're you'll pass had to along of and delivered some QX, the

the the look in were left months is, you we the foreign ago, QX six The were agreed some expedite margin hope to going is QX, cost on that in you peers. ships. ago was, and way out that to months being of and in implemented and is, expedite, with for today, fluctuations, less, work, six expedite and that I for wasn't seeing thing a it's we're that for impact DZS are the that's it now important appreciate that if follows I and stabilizes quarter, then structure six books the projects with little and pulling the way to it something was in a frankly that mean based only like you and this and have ago bit we charges there flush six the on will months for a the exchange paying mean, an have, expedite and that at you you lot fees other you get my variable we that books from to the it to least paying I on were which mean expedite a it, less at most current real paying happens and So, you're but it it everything as an when it let's expense I new agree low-margin pricing in and speak that so months cash ship perspective to reserve,

plan side. XXXX existing tariffs some that we the semiconductors making in we China. consolidation We're anyone some still are we're those of of covering some some sort half seeing expect are the on that less we've there's will subcomponent and of I that and that and year the -- CM in and the on the to QX, ecosystem aggressive which tell hoping it saw more space, their chips for cooperative expedite is finding of a lot U.S., bit that some exit lot probably than second our and QX, it incurring we away to so shift So, a much the it into also we're a that of on based it of QX, remember, from, the but lingering of some need a of lot seeing wafers you of as we of way backlog we'll we seeing I'm go saw will space. technologies and with lot decisions know call, this electronics that of consumer of brakes you into ease consumers got years of are an a pumps better see just fees, the some

a the a attribute we as is much of seeing margin multifaceted in FX ‘XX. there enhancement a will we're some and we that move of and hopefully business ‘XX we charges as China to flush old incurring different stabilized some out out backlog of and the elements not profile that certainly more expedite So, less are in incur tariffs lot of

revenues I by you. reporting next to And thank that by software gross quarters basically you're margin track, my to just related XX% all sort towards the really way move the just and been perspective, that of a the -- great That's of of appreciate it's and sort start issue? -- going that, couple assume is is, I by versus product ForEx and delayed software of trajection that mix the because still of of on question

right. exactly That's exactly right. That's

the normalized, to you at this close year-to-date our ASSIA points, our you we are basis XXX XX%. points, right, around of quarter again around XXX getting really added XX% to you add so right, when to XXX that get the basis Tore, to back if basis And if look on a you contribution XX%, we're

assume we QX one Very be then XXXX, to on the of last good. range inventory the that And question by normalized inventory, back should will the of sort that just is target?

get as to normal our company. define will ranges normalized new bigger for a and business, we Well, back we're stronger growing we a built

Thank answers. Great perfect. Okay, you.

you. Thank

from Christian question next Craig-Hallum. Schwab comes Our with

now Your open. line is

has basis, guys, Charlie, Hey, short growth currency on swings on but, company for facing, aggregate it? just, unfortunately that changed, such a is topline a hasn't that just your go-forward unprecedented timeframe everyone either rate the

consideration was we It has, really into provided the hair-cutted foreign fact, the anticipate and the taking for rest and guidance we year QX impacts that exchange the of by in year. that for just the

incorporate struggle majority So, higher our if to as then the foreign exchange possible. because be range dates $XXX you request the we second end for still ability foreign in half, soon favorable fluctuations, QX, the was range of we on deliver the to obviously, got our of believe of we've changes of I we as is with still in there, ship backlog and it continue becomes a out customer to is that did of million guidance mean, we all and back exchange the if impacts the year, our the change what didn't

to expedites, a number doing which can make one doing that customer keep we we continue that's to where and all want think backlog the we're So, for if first have customer requirements everything is of unlock that some frustrating situation and schedules, so we're satisfy money opportunity sure do to subcomponents, to we and we're customers to that, hope priority and access deployment just certainly because to appreciate our being I and foremost and can to we need we I you that, us an been happy. exceed of and spending guys thoughtful

us on of and sheet putting tell your on be then And instead you? working for capital, why you just commentary you inventory partners can Great. own materials your materials increased balance contract on securing raw raw would the manufacturing and that on

Yeah.

me two -- we Remember, has Hanover, we things here have the one facilities, one it. Germany, that of asked got one have So, we Florida. I had didn't still this ago, -- in is we so one, but you that way you when manufacturing nobody Tampa, did, is quite two the this question I'm in had years asked and glad

had today manufacturing Korea, that a -- philosophy and Tampa. lot building company a build chips with of CMs semiconductors the manage we're where vertically could the integrated here got product. then was cost do provide business, so to the downstream portion of we and our the still those accessibility those we're and manage and the buy the to So, I to chips everything before we're the manage to we in In of

today. details share execute the execution believe final reasons, believe more in I'm there aggressive that Now outlook we that XXXX we're we and opportunity obvious has consolidate more and with to free so will very CMs, we ton upside is today that, but be CM cost on on our plan and as prepared details you cash, our into not exit as I providing for to to consolidation strategy we a the I not our this you a them, have we that our up to of that's lower a to baked we closer will obviously, significant great give which and the us into get year upside one XXXX as meaningful tell for

would people wise, Yeah. have working be I if that would hundreds contract not think of that chain. thousands leading manufacturers very supply on

they'll very, obviously, We're and not to the going emphasis Infrastructure of to the in -- being so a a more -- up as well. ship there, our -- buying, as frees that more differently to be more there's infrastructure, is Access me networks that help company, of on term long in and the orchestrated, a technology built, way reside don't business inventorying, capital company will manufacturing we opportunity intelligence and needs of towards and and we be in software we're not working certainly should managing the on to that, we're large be lot multi-billion we great manufacturing margins for a software, these us that be there companies want our able but in are and very are long business we believe as for and a point, the side we and it time, to XXXX participate the means to we're cash dollar doing managed, as but that your

again those in some an on and on that to one pass you certainly just point price chain chip opportunity and The start into sent do outlook, know quick to about you've on XXXX? will all your I follow-up supply happen we'll fees. is then be of I take expedited with if increases kind companies the And and don't going Perfect. fall networking majority are have one, effect costs to that believe January incorporated, X, letters of at received this assume to talking increases price begin question there out,

Yeah.

communicated for are is, dialog I increases, yes. tell certainly profile effective hold an They're under there half. be would downstream assuming the but price answer I telegraphing have yes, would is the the but the speaking that that mean second and we certainly margin the our January taken is X, baked There else we price like that answer semiconductor prices increases have nothing in accepted taking they're communicating, you, key second everyone companies take I price haven't half, is coming. we're the is right with they that of been sort that who we the consideration. we increase hold, a So those in now. anticipated to in are mean,

‘XX. delicate we've partnering a not it's good necessary it user in with our the I prepared think a really I'm in potential January of end there talk something done did are at acknowledge but increases customers price detail, but to that will I is very increased about desired that price communication that job increases, and receive becomes granular least of be we on to that process

thanks other No Great, guys. questions.

Thank you.

comes Tim Capital next Savageaux Our question with from Markets. Northland

open. line now Your is

you of America? North in being needle get fiber more standpoint. ramp that, you we're a good in seeing Hi. I about you and I America Good questions that backlog on any an even consolidated guys Europe a biased drivers that reasonably going there business something looks and America, to going is kind visibility out, pretty have that demand and like think move half, pretty could the you're of at particular mentioned backlog lot stand second headwinds I and been the or -- side, and half basis, from FX you in of significantly in the on guess while look but morning. Europe, second one assume that North in organic communications customers, either aggressive are there's X the revenue your the of good towards I based for these on ramp at sector, as least so, like your with can Tier as Couple contemplate for North you're looking you being as if you on terms wonder you think a or

Yeah.

XX% world. very providers So, we Tim, don't service enough, XX our talk fair, business around about with but XX of the it top are is the your points of telecommunication

but They've we the for customers significant our just very from we been us. represent entire half they comments to unlock very, I of one a the backlog second X, tiering and Tier perspective. portfolio spot our excuse of on. they sort a Xs, have that to amount today two So, million they we at I consolidated Tier continue is X best to a mean, and significant tied meaningful. customers that backlog loyal drive subscribers, your think of Tier on intend very what are as certainly are refer They're to our new is of also of are business Tier I technology year, would of partnership in we they X, so a of me, lot large, much lot to the that think, and are

shifting guys? letter that Tier and the think reference made a count European review could that area are mobile wonder you X and with if maybe or fixed focus, pipeline win pipeline and think I win operator, to those large mobile we for and mentioned but you're that mentioned of is the seeing looks can whether they I you of you that whether while your I go-forward replacement this like back to you Then back you Okay. in opportunities a step that what a develop one of

and of on we've trial those of trials, you're close that and as engineers and Yeah, that eventually been region. on phase. which there, the to closing I Vietnam in has It's that order very to is activity, future very a that rate pipeline that I future been in out got expanding Pan-Asia to Taiwan in Singapore our from got if giving we've We've we've then and particular but in loyal we've Korea Dave, even have in America got proof a Vietnam by Korea lot India, of the, a and moving are think would and run aggressively Phase value the you sort and would North and It's close opportunity the I you market I there and us an of Europe. a moved capping investing us proposal deployment and most market, from trials Japan and most to away the there and new us. the tell about exciting base for into and countries sort opportunity contract XXX gaps strong where out suppliers pillars moving Pan-Asia, the mean, mean I that business Australia, a physical and large so Hanoi, some certainly is that Japan. but Chinese two and of participate for it's far say in we we that exciting region think, mentioned

the to if So, look I'm those be lot lot cautiously for projects them us deep already network of a the and in some how I to the convert about X to they've opportunity. XXXX. complementary involved in. they're been CloudCheck us focus. given able Xs OLT virtually I product we into we inside sits that over. been Tier with And some that I very a mean, It in products network you ONT optimistic OLTs operators and cross-sell of that activity if invoke opportunity better in to this half customers and able between has I year manage part all their home, certainly might you a think for our really of the customers, marquee Express and -- as a that the discussions be talk to and of it's at that the Tier help and maybe we came mean and about those the XX sits mean, ASSIA to that of broadband our participate all most close will our opportunity are our second of mean, revenue the that operators historically all in the hadn't we're great ONTs, Wi-Fi

question last for me. And Great.

be would home Asia, that side, the of mobile the fixed and appreciated. you gap was, what are the to fixed business mobile pause back more so the color what's Going in guessing the kind color and wanted of more in there? fiber, that more filling for I drivers might understand any I'm but I broadband Korea strong be obviously, elsewhere, Thanks. on and certainly versus kind on

customer, that's their XX% filling our mobile as gateway pretty Yeah. operators and these Europe, for the SoftBank market their deploying gap I Symphony Rakuten, in a very has being Rakuten with historically into utilizing been they success, today, and I front-haul With third-party mentioned, which Software. a XX% Software exclusive which broadband Symphony the front-haul we provider right network the Japan and of historically successful networks their XG Mobile, now. in are IP core had Rakuten we're is their service will of a next-generation reference one It's obviously, customer. has Japan new mean, fixed platform gateway lot been seeing be significant, rollout out success, in and all have

there. out in a Show, that's the the We're sort about we Day, did very that in pretty and that details soft void. interest shared to we of rolled lot Saber, demonstrated a are Connect the our XXXX with mature SoftBank, Fiber optical we're as think So, some a deployed, At some network launch actually eventually that We're we the a Investor think at with product we of seeing for And had in out, company. the We opportunity that I evolution participate and XG Optical ‘XX. huge rolls decent Transport well. platform, margins we with as with a a and now that transport new we're of huge provide it. in filling excited mile position pipeline XG that of see middle The the being into that as and upside funds something could Nashville good

networks, the we're hold to becomes So, looking going it's we're take time There it's much but -- is RAN a I who new, to of trials take to we lot right seeing side, and mobile need participate are that partners world, Open lot a everyone for are shareholders, of for and appreciate around gain where historically is to has some just as and allows still around we the that. differently open, it we mobile for very on optimistic it's lot got and lot timeline for are the than closed aggressive our of activity. very to Open a us just RAN a us on at mobile you've DZS, RAN seeing unlock continue what just more think doing going Open it just network on analyst and are of now, momentum to

very much. Thanks Okay.

Tim. Thanks,

you. Thank

Company. comes next Needham Koontz Ryan Our with from and question

Your line open. is

of this Thanks. freight inventory in or Right. and it that impacts to, gross days the Is for year or different the guided last mine you new the hundred but I Thanks chain several been sounds of shift about could ask XX the outlook way. of wanted like toward margin seeing as see it have already is maybe there. mix changed you're there quarter? answered, more supply Most of you the in points cost basis What's was a increases in for most of hit the question. I a if rest revenue APAC since the in there, kind saw

So, Ryan, great question.

we've new seeing the through So increases on the what as cost through, of year, more certainly chain cost supply new increases right, seen recently. side, the moved are we've we're some come

that you And piece the was... FX got

Right.

weakened, XX%, as piece, QX significant earlier, I -- revenue and coming was was more I we our of associated in with those than into Yen, the Won I didn't the obviously, so most just The mean, the X%, currencies Ryan. sort was it you was surprise, of saying and weakened a that QX. regional mean, that that alone, weakened XX% have Euro mix QX, was was it in the see

Right. Okay.

headwind much be in you to necessarily and in of strength fixed in that on to into the XQ half a we the APAC expect that second margins? So that APAC don't saw continue

what in in have what and QX, ship we fluctuate we we can factored best hedge Well, to what expect and had the they we we've outlook and to the and to JPMorgan foreign for their we the by educated on we based other QX anticipate incorporate what been to best in backlog to done that QX currency can. QX and banks, within so

Misty. Thanks, Charlie. Thanks, Okay.

Ryan. Thanks,

Thank does I'm time. at call. no questions today's conclude conference this further Thank you showing This currently you. participating. for And

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