Infinera (INFN) 6 Mar 242023 Q4 Earnings call transcript

Good afternoon. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Infinera Corporation Fourth Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Amitabh Passi, Head of Investor Relations.

You may begin your conference.

Krista. you, Thank everyone. Good afternoon, Infinera's fourth XXXX to of quarter call. conference Welcome fiscal issued the Relations today website. of copy by section press the Investor A the release Infinera on is of available issued replay and and the projections that press and referenced report first statements constitute today but current be recorded related will including, estimates being on statements, release that limited of is website.Today's call quarter and outlook call available This the financial Form in for for not from forward-looking to our include matters company will our X-K to, the the XXXX. to and to expectations. subject are statements Infinera's management's cause that results These materially current from risks uncertainties could differ on results filed furnished our XX, SEC XX, well February XX, including for SEC the as with XXXX, and Form or reports XXXX, Actual various report XXXX, as XX-K on as forth XXXX, of to time from the quarter year the SEC in XX, report as result risk those subsequent Form filed and on ended February as on with February differ the XX-Q factors, on XX, with filed December September may in for to quarterly materially XXXX, on a set our time. the amended ended and annual from references which basis. call.Today's includes sheet except that undertakes reflect reminded events circumstances statements no be or revise after all conference to this on and revenue, of call discussed a are items of operations, financial date flow non-GAAP balance the for each cash forward-looking Infinera as to GAAP statements Please measures, may obligation are or today, and made any to update that arise slides earnings non-GAAP in Relations quarter, provided to each which Investor a Pursuant comparable most available and sorry, no slide measures is of to financial -- our website. investor GAAP investor the are the financial there of Reg reconciliation on of section this directly our we've these measures release G, that today for the over David you yourself for call will one we to plenty to limit of and Executive And one turn Q&A a allow Chief we reminder, now as question Officer, ask our finally, time that please.I'll Heard. follow-up,

global quarters XX% Metro almost to first quarter.Overall, our pluggables and in we Thanks, over turn a ICPs. outlook expected third to I'll for begin approximately Amitabh. of all X product calendar with a row, million which us coherent quarter fourth for of then the our of and providers the over our strong us revenue, we Good with wins margin generated for first the GX to in the new the own delivered and above cash preliminary platform.Combined, our joining marked Tier annual vertically performance the our shipped GX landing It the quarter in gross the a ranges. the for XXX-gig into expected our quarter call our revenue. X for fourth integrated in preliminary flow.Furthermore, results financial the design Systems free now of come of book-to-bill finish represents and Nancy Subsystems, thanks quarter afternoon, highlights year. quarter cover fourth midpoint portfolio outlook details $XX and strong fourth ranges preliminary during today. our EPS strongly, a We was And performed second are to in and XXXX and ICE-X quarter, service

to to we in in our the the and were double-digit revenue that margins believe customers EPS sixth and EPS to expand at operating build consecutive and landed full year and XX%, to we range, commitments few committed we few of range delivered challenging gross last me margins down what and XX% throughout we increased XX% the deliver portfolio kept least to our heads operating growth, XXXX, approximately customer with expanded of during percentage profit delivered the we've highlights. geographies.Let expect year markets you.For we as on capital year our conditions macroeconomic successfully year-over-year.From the a XX% XXXX, While the and expanded consistent momentum also market is you the years XXXX touch of and a continue Investor new up on Day, segments into on to and our new perspective, at

strategic Europe, First, service major several India, in subsea U.S., we won wins with the deals multinational Australia notable providers, and including new consortium.

subsea important at Day. and we've date, received segment delivered To and year. with an Huawei strong forward March goals and remained XXXX, XX% to to the revenue approaching metro Subsystem consistent U.S. hyperscalers the purchase in banner our with the our orders by our over of entire business this Subsystems situation.Second, million portfolio. exceeded of carrier and milestone for the another approximately investment years, and bookings they in part with rate revenue that we them, our revenue.Third, total the the we our consortia this XX and including had in points opportunity for Investor thesis XX% almost basis approximately through our growing drive This segment. X company in growth an revenue span from win our revenue year providers with was last of XX-plus in Our in increased with market the important X,XXX products exposure product share we year indirect customers hyperscalers our communicated $XX initial is consecutive service of fourth recognized We've that

of XR evidenced a that QX. expand The metro commercial membership the systems shipped of use past and as been with our integrated XXXX.Our metro our the the be that new to own into our our shape it's also in portfolio will our expansion over of getting Additionally, win working by first half announced in in Forum years in driver strategy pluggables rates. of Arista.And included our key consistent and the pluggables is continued of highlights the our systems XXXX best and list vertically few ever members in pluggables is performance the margin and back Lumentum XXX-gig we XR availability fourth,

will we shippable give of the with gross key the here growth up the both long-term applications first a from in two we're three in X major across we're XXXX term, by sales, Our effects earlier wins segment a being great largest full profitability that with we're XXX-gig power by true pluggables. of for the we've year remain in right, multiple MOFN for hyperscalers. factors.First, leverage our term shifted the East QX.The over and solutions, is our contracts first our BiDi XXXX. fifth, we standpoint, XXXX. planning expanded a first the This data influence This business.However, influenced the accelerating We've won return we hyperscale in U.S.-based model.Third, announced significant half and qualifying developments.First, first approximately least hyperscalers along by the three managed market QX driven to many private hundreds recognized in to of is and deals strong $XX the that $XX and of semiconductor U.S.-based slow of ultimately a new portfolio even customer beginning assets. revenue at XXX-basis me lead in line of for India, first incrementally with a are starting and $XX transponder impact service optical accretive is to our deployments pluggables down is from additional path we've the metro XXXX, be we different that expect and on GX and Tier have combined we lower seen of standpoint, major X-nanometer provider already margins additional continue are quarters.And a service driven are including of spending under be to This across family. points the of a due MSO associated we margin we shipping and among traffic the better and in system the of our higher to margins to you've service in the strategic also wins and XXX believe lower hyperscalers, the confidence providers customers.Second, our chips quarter, cable landed news in network be temporary revenue point especially impact basis seeing year strategic we from our drive revenue XXX-basis XX% in and the good with QX. margin at the providers the test consistent that in producing and years drive land in in the will our contract XXX-gig this point with into million the own are deliver scaling have QX achieved of gross These contracts and a XXX-gig preference millions Subsystem center driven feel commercial story a the press QX design QX and assets in future with QX company, experiencing growth expected industry to for particular, in to demand about the QX. with a winning to include roughly half metrics pace pluggable AI system drivers U.S. wins pipeline has of potential for wins to wins out for underlying with portfolio a peers from X Middle expect semiconductor from volume morning, and will a global has addition that impact as dollars we've the near and our to financial volume a inside our ahead. our win plus Tier or In drive follow-on good million financial second, what of hyperscalers quarter-to-date Systems revenue XX X-year of networks the and invested timing single from trending through in of that secular ICE-X industry major the in quarter a look puts with year, longer following wins. continue with of back start manufacturing and builds first key their with in hyperscalers for backlog ZR/ZR+ healthy These in across period our overlay.And days suppliers, expected by and revenue the to to levels five systems million XXXX, business-to-business hyperscaler Asia Already applications, with major line to this wins who communicating. shipments news scale fiber This low the margin with pluggables, of QX, margins PON fiber the point for The and to we in approximately shifting and news this release globe.Fourth, the are our in a is

to EPS consecutive support. We While turn progress to our in to the high Optical look forward to today, by better XX.And the diving down continued our points of their still deeper Nancy demand close you as XXX the I our approximately differentiators these accelerate our bandwidth position quarter I'd to the feel inventory and deliver strategic timing to intelligence, in been. short-term growth, as competitive positioned basis to seventh least cover unique positioned stack preliminary laying partners, early uniquely ever customers San those indium margins providers and and revenue March this long-term on to grow and Infinera vertical forward shareholders strategy strategy, Communications I'd as service is and days as this are data product California couldn't of artificial Fiber the our integration look we gain to routes well technology going of the like inside for and and into wins, Industry XXXX.I'll portfolio talking product financial XX% at networks. believe strategic as with about are deeper hyperscalers drive confidence Diego, execution and up on impacts our the it's of thank the for capabilities through workloads continued develops.Based on believe believe digestion execution deliver evolving, We expand We thank another Despite customers rollout one these now solid the call my for growth remain we quarter learning are over for mix the phosphide architectures customers into segments. and center. also machine year and QX customer like at results of I the new we're the of continues are in in outlook. and year's our Nancy? to Show and I to our and team their commitment of results another. fiber

afternoon, our our and David. will cover for Thanks, XXXX. Good outlook of by begin then the I addressing everyone. followed third preliminary filings quarter first by our quarter

For your a non-GAAP my in release outlook reference, preliminary we GAAP have press of our commentary. and included reconciliation with to to our assist financials

adjustments and months, on XX. I a of our matters the are non-GAAP of work and provided few SEC 'XX Infinera the the completing or margin filings, $X.XX, $XX.X under necessary that 'XX 'XX today February EPS been the emphasize over we been to and commentary our operating want have QX towards reminder, financial XXXX XX-Q the and most are intensive our any you other aware, review past the -- gross for all financials.Our based 'XX final file XX.X%, delayed. QX a no 'XX results of of team on over QX which of months QX our auditors As diluted efforts period This our year of results $XXX results for process, fiscal there for outlook filed our delayed Form exceeded full given time-consuming QX directed fiscal of effort QX of have original and represented period nature related preliminary to midpoint by few despite the review. Since tremendous were were past million, prior the range. the our revenue million income results.As to

unaudited the and to plan have audit today. As our in cadence sharing to the in fourth or is We normal to quarter. next fiscal preliminary a had currently of am be X year on with year. mid-April back to year-end at XX-K ranges midpoint $XXX are strong and expect our weeks result, file to $XXX our we preliminary outlook or The 'XX the expected in completed our X range. to above million performance million pleased to the QX.Turning be we our our I of range finish about

customers, over hyperscalers. higher the revenue QX the Geographically, derived Americas ICP quarterly and strength customer strength at ICPs This hyperscalers of a by performance of margin. that over provider level was revenue our than given to and gross with U.S. primarily XX% driven in in we our the or accounted customers. normal from XX% one for domestic service We had quarter.Turning

midpoint encouraged up gross the with be year operating for approximately range, to of outlook margin to that supply I QX expect on our prior to ongoing higher in operating above improvements. up the relief year-over-year gross range X.X% our year.Preliminary expected of year, expected XXX to above cost Compared vertical from within the a million XX% are for and preliminary be $XXX costs of expected quarter and am the in basis gross XXXX be of is to in We trend basis. Overall, in be benefited range. continued million, X.X% the points and outlook our XX% the margin integration, outlook range expenses to margin our to slightly to XX% margin $XXX by approach while

approximately a operating Our result financial incremental million of to expenses earlier. as I QX of included extended $X referred the review spend

and to The preliminary in outlook this $X.XX tax flow inventory partial cash approximately initiative be also for to with equivalents. true a resulting generated outlook the items. cash to prior current $XX benefit QX, in spend and sheet now and higher range.Moving and free million the continue is the and me to up ended cash in EPS allowed the improvement for we representing that the a through flow cash $X shipment into on work executed with on incremental $XXX an expected of of quarter, turn XXXX. quarter level from We diluted year of years. $X.XX the and net million tax above linearity.Let balance expect partially down We to quarter midpoint QX structuring to income, We of benefited QX.In us over our first our the we million

fill expecting mentioned, short to specific margin the term. be from quarter.Gross that start related 'XX $XXX operating work in operating industry, the expect David are slow higher to the excess QX. Gap] following XXX be approximately our revenue $XXX includes from $XX Operating margin XX% interest As to the primarily and the margin the including the manage like $X line to be impact in we we the This basis we support a X.X% approximately range lower QX, the revenue as year expense to in out in system approximately margin loss line, expected and continue in Below $XXX CapEx expenses million a taxes. million of rest our $X loss and prudently the shipments of assume of $X to impact million, down their lower approximately of Therefore, point with in and in the million [Audio fiscal million, for customers quarters incremental range million to $XXX shifted an audit for range of XX%. million expenses of to million of to to volumes including to of inventory net

to like quarter, in by expansion. QX strength earlier, on assuming for puts cooperation seventh to time EPS our -- patience, my per for at year we margin our heard to weeks, X% thank of team, deployment performance we shares.As margin Infinera scale encouraged laser-focused normal approaching encouraged growth of to 'XX that for I'd the year plan our exceeding net of questions. our share across our count XX-K in growth, revenue support. track sheet.Looking in to XX%, XX in we accelerate great the us our closing, to I growth, afternoon, on earnings our million strengthened this portfolio the year innovation share would I I'm on team to of continuing now integration million by margin the the expand a expansion year, by Finally, XXX file X% funnel on am and of portfolios. approximately both the their X margins cadence.In $X.XX, percentile our earnings a from design for I'm file feel overall, the win year growth Subsystems you for to to loss on drive and shareholders like rate a days share commitment as quarters first and of years XX-Q our strategy path to We second $XX $X.XX deliver company, XXX and and and said products, generate our Systems I up Subsystems are share are fiscal pace In the I reiterate open and back lineup next expansion several vertical wins and as full X anticipating and as and remain future our systems, and ahead, our your especially about to basis us setting evidenced to line recent least proactively per we execution, with the flow the take of had XX% the with customers of the cash by for the the today, for with we and finance us partners, year. continued our I XXXX.As gross believe our I important We well our bookings, sales approximately would like milestones of points the for pleased the which mid-XXth bookings of full and consecutive as continued revenue growth gross revenue per to on close balance ahead. the for drive in Krista, basic

from comes Thank you. [Operator of Genovese Mike Rosenblatt from Securities. Instructions] the Your line first question

you. that on win is, on more Great. us Thank just what what major Thank the giving start Can XXXG hyperscale pluggable, more application you you. color represent? by X-nanometer color those products this ZR+

you Sure. to Hey, want that? Johnson, do Mr. take Ron

Yes. Thanks, Mike. David. Yes,

to gig 'XX early the had deliver capability with provide effectively a 'XX would expectation So their PCS into And and and factors, terrestrial in network, of product interoperable an close addressing in with major per we power cost to be of contract CFPX XXX application their a different revenue OSFP multiple multiple is their hyperscaler their go their and optimize pluggable basically all parts this bit. per that applications. performance will form QSFP, bit,

lower lower So an even It's in power, short, network. long-haul their all terrestrial for point-to-point, metro to in peering applications, of cost applications. opportunity drive

that -- of it's a dealt history. has it's it financially largest Mike, contract standpoint,, company -- the is Hey, kind the potential its from contract in with

fab really business launch going really reduction nicely the that talked it that the volumes the cost of So across we portfolio. spin help of kind for forward Subsystem will the about kind with that helped

Okay. like a application that than the Great. a datacom sounds it And center application. inside DCI data correct? more Is it's

Correct.

Great.

it's Then outside I say just the data center, would correct.

Yes.

through like just that's gross bad gross you're in this specific the calling then some of question for just quarter correct, And year. starting move I year, margin is, basis as points color with sounds for reasons. but we my margin a other on some It improvement guess, Okay. we're if XXX XQ

a year. in get later lot better So we things how understand the

Yes. first systems bodes laying Look, heavy is out It's mix, well the cost that which being the significant. of that of second the a the for line half heavy. in heavy, and amount just we're quarter

inbound roughly gives XXX year. delivered of the committed year additional line and margin to it basis line fill bookings last basis us the those for as look and just the remainder systems year, we to at their intend forecast and our on point end we rates, year-over-year, the point and we of deploy, So as comfort around well look last while and out, start we still we -- at like that systems, standard year improvement XXX

line from Your next Alex question comes & Company. from the Henderson Needham of

Great.

on was very Is bridge XX% I a it of a below point basis X% OpEx costs function you OpEx to and still modest but to of How Is X% tight something growth growth do or function to revenue we hoping So margin EPS a expansion. that? could nice declining it the help costs? line? us XXX bridge

Yes.

a step audit first on the of mentioned, to really the development half, chip center work full I of there. that of particular, that think we that of will expanding it EPS. right? rate top approaching the keeping $XX year. line, that about some margin, control.You'll but and we for it's Think the points us expenses operating we're on And So in do then some knowing But small you'll doing probably terms we XXX for of catch-up gets growth. inside the and will combination see our those, in It's XX% in in the right? in in into also see of growth in two basis in a the XX% David the data increase as talked of investing areas. all the R&D, growth the we're expenses approaching up have we're the XX%, doing think be -- certainly it some which year And million total, net-net, in

go to and X% will Hey, I right, ranges, you, be X% in Alex, contemplated XX%. could 'XX, EPS up look if over remind if at we'll just you the

model. in is the So there leverage the

the that what and you're assuming fourth relative drag to Just is the issues quarter clear, in the both in 'XX? the numbers be to in accounting

in QX and get in back temper QX. should that the It's $X It's about $X Sure. then million it about in and million QX, normal. from to same roughly

the Please go Jefferies. from comes question next Notter George of Your from ahead. line

has guess big of down I on QX, help imagine around the seasonality really it, think I here, But QX. really I about, strong I top inventory the been now. about me right? would in understand inventory. here. step guess think excess So sort the there's for of excess as a a narrative to few wanted a issue And I I line ask bit around is the cadence quarters

have for few guys a talking You about been quarters. it

down QX mesh So narrative excess inventory? off a does the in step how with why a Thanks. sole And and that strong around QX? working

an Yes. our of as I -- think in Verizon, our If question. No. provider Remember I AT&T, I BT, took the likes well, most service good when just It's exposure think Vodafone. of business and very probably that people Amitabh than those the webscalers when our at was exposure think ICPs revenue XXXX. from we four less approaching a good X% as direct, probably in example, our the talk them, think that's I I in XX%. of exposure as it QX, And both look call or

For our close take it's business. probably it's that into deals the fiber when managed When influencing, I X/X year, optic we to of QX, XX%.So they're these some account looked into we QX into few were of able a we million customers out QX in QX. projects And from amount scheduling-wise about to backlog moved and just between $XX QX. of accomplish shippable worth had that

the our end and for is on story about industry we our cautious out half, being is always customers, burn does and as here some slower inventory, book deals are go. explain budgets. the of everybody of long-term in in and strategic is of winning step first is And ship down. part the these We've as their continuing down we to company our bit get always aware toughest quarter, of we been business they're that think setting has the a of So as the a been but our the which quarter, also bit QX

then Was the inventory in issue well? it. QX excess as Got

I environment of having Yes. for bookings, in a those has raw loose of beginning I and to we able mean dollars. X to mentioned not been business. those -- kind of a positive more service And be I about exposure a quarters, is terms did terms QX to wear of off, and but book-to-bill segment-by-segment well QX in It it to of in significant they're as providers, that I hate say why not an our front. the that's major they it. with customers want impact X just I business ICP our but like are on that Tier

of question next comes from Simon James. line Your Raymond Leopold the from

David, think was you of if hyperscale or to indirect plus the for again? point clarify, that ICPs the hyperscalers sales made But could what I to to the value XX%. close was you direct Just sales direct

revenues it's X/X XXXX, of in of it think our the was -- Yes, approaching QX, product and XX about in XX%. a

full I I'm from to trying So here I group. the outlook of square sort things X% to would expect assume growth of one we'd guess hyperscale the X%, follow-through that of is year

to declining. X% they're growing than much So is X%, means that better which something else

by help past, guided the us that? maybe if of you unpack vertical You but sort to sort have relative movements of in square vertical the not could

hyperscalers, Look, if winning Yes. line the line XXXX. They the on XX days, to double will systems of be wins systems, you're we think begin had CSPs. both based that the they in look those at digits laying expected you lay the out last don't in and -- probably grow with those we're back CapEx hyperscalers Again, to in out the are the they right. year probably, new just with fill.So the and still they average over half the I

Subsea in is the are to of -- Some well. hyperscale. wholesalers well. continuing we do to do expect strength The continued continuing

into that lot wins get X we a not I we going these of just see the think you're until have scale have to Tier XXXX.

over number Great. you. of customers. also have been Who some share years you a very displacing? group of mentioned gains And with this you of significant Thank period a

particular it won't sure good not competitor's and I'm I -- comment on probably than a our situation, know I business. question. do. depends I'm the to going you that's better Yes, into

Your from Morgan Marshall question of from next Meta Stanley. the line comes

then to future timing the sort in QX I point expecting terms out? on This feel made what quarters. out and of digestion. we double-click it contracts?And $XX on that still you that? pushed Or got mean, detail year pushed of is by Karan just sort inventory Meta. the was on across service the of for guess on further where do wanted I was Any being that you digestion the are in just impacted maybe why million provider you're just I sort inventory of with of simply

Yes.

mean, I backlog. the that's $XX from On no, million,

second from the up I frees putting Unfortunately, industry. and network. as in, now, it's into people into back half with that projects if terms And whether in happened time scheduling a on a from both out just infrastructure it's to center of it's QX contact happens CSPs, wins that of timing data So because in it or of time. whether been thought based think our that's been not saying chain people back the the in and of I value industry we situation that were get half from expectations inventory softer talk half. than spend be the think this were.The commentary, part consistent is, our year, front resources as where into consistently half customers the laying direct in the reports would question we're we the look, cable have to getting to from believe, wholesalers, we do some our And the -- operators, and back ICPs, our we the believe we look, you the analyst out

moving the margins? QX the maybe just benefit year, on maybe think in much coming lot throughout sense. a year? but be And a guess about can margins back just you're down little thinking makes of to pluggables of And you half No, of opportunity to the margins. of the how Thank a operating I you. how then operating sort just bit, that

Yes.

quarter you the see operating the as consistent On quarter-to-quarter improvement year should of up. you the through to see revenue step margin the margin, gross and right, kind

of right? as 'XX. statement a Subsystems, you'll it's that that mentioned, But we're I be to earlier, to with mentioned, gross that seeing particular, more terms benefit there in margin right step start and of really, see the big margin more as it's revenue tapering -- see, the to 'XX you'll seeing really that spend up improvement G&A.In the see. relative us of giving the I David are we're we as as in mentioned those terms now it and we're we be going to on step well. confidence terms funnel unique us some of that There's off a in then opportunities in As wins my we bookings And the to the doing up and that modest, see see not be will some in going within

let's real two things say Yes, there. differentiate between just I would quick,

is Ron talked we'll -- through, margin points integrate a So we year, now the XXX improvement to pluggables, basis margin what We the able that. the plugs is of into getting. sales 'XX about external expect increase in be went very before for us.The metro to that that our to to huge really remember scaler impact biggest that because own This positively that's we're of a impact impact that's don't web like exciting. 'XX that

a leading XXX-basis so that or benefit And be internal will point margin that improvement consumption-- to

Dave the of question comes from B. line Riley. next from Your Kang

is question regarding First integration. vertical your

and what Just wondering and can provide think quarter about we it you first if was beyond? that should how

Yes.

see should in in For talked we about with it that mid-XXs. metro was just particularly the expand, the coming to online. as we 'XX And continue year,

And XX-XX half? for should like Got Should versus about be more about Correct. half or back-end like even how first we it. we year, thinking then the second maybe think your outlook loaded? something

say to very Yes. very, I similar would probably 'XX.

to XX, XX, be XX-- of just XX to kind XX, I XX, we maybe be So safe. tend typically mean,

top-- Was on the that roughly

Roughly--

We typically XX%, it's would XX%, like but this tend year, to played be out. say more 'XX I

question line the next Samik of from JPMorgan. comes from Chatterjee Your

there. the to mentioned first taking for bit can outlook you start questions. about to one you more India I of basis. on the thanks and geographic more Maybe Hi, ask if know a sort my a talk your wins with I

I the the eventually should And be drivers in one the of You mentioned India will in of America have of probably But growth a have? you're about of sort most that as and a of the expecting understand what sort how reported I those ICP think we terms of as business. think region, about Huawei follow-up. outlook you sort in when two North of you growth areas? EMEA

No, it's good. It's good.

seeing So the up, this see obviously, again, you when and just in wins I are Actually, different already you the providers Asia, benefit. four beginning the we're ago deals. India nice subsea with highly think that. ICP quarters three doing about those landed do very terrestrial think, indexed to again Again, getting strength. Henderson content I on We're the days first Alex XX brought

had winning The we funnel some is great big region, leadership in we So a job. Asia there, doing full.In big the subsea new new Pacific staffing we've some and expect in opportunities, see East. terrestrial Middle the Middle do the opportunities are East, and both there

been that's a So nice growth area for us.

the XXXX, I will the with providers. in won't in X wins see Tier think you but in service numbers it see in you Europe it

to again, that said a see Europe. in great I remarks, cable application the on to expect terms in pluggable is have in of winning are software-defined as pluggable have the prepared fiber.So PON fiber of the providers in a XXXX areas as expect, too again, become for them same bidirectional, us nice use cable that then us there limited to for for and wins design way for overlay as been well We really scale that we XXX-gig numbers we XXXX.And America that BiDi, it's allows in historically. small growth front, I I the because North area -- for

Pacific, concentrating on deals Asia All on are East. March our what of with terms India, Analyst on these we the consistent of MOFN particular, in and in in Middle on said those Day

Nancy. quick a just But follow-up maybe for

year we than higher exiting we envisioned. the first at than thought. keeping rate guide gross at You're you're the implies margin you're Obviously, a full starting a run that quarter lower

that terms integration color you tell when us exiting for of probably of year relative gross exiting you any of Thank -- maybe in So year? you. margins? And of want imagined vertical sort envision the terms do on where the in sort you where to what does

Yes.

VI right, well to as tied of much you're to the the general. It as year very XXX mentioned, and basis point think we'll as I close we go will VI our up the as in hit the growth. growth year, that And right? have scale order through to in So mid-XXs exit we is, to metro

should expect be in hit XXs point improvement. XXXX to the in basis order that to So in XXX we

Your line question from from comes of Ruben next Stifel. the Roy

about XXXX? Or David. Thank color you of sort on expect sure How XXX-gig. to there on the I'm the rest the you Congrats Meaning, I incremental? business? perspective systems you. impact of the do the for Hey, first there. had business? thinking many the question Any is wins of from are that a off. any that

of rates we The that good penetration of ML potential front see web for this very scalers spend and is the first the news don't of the web the last driven dollar for is to we are in again, terms and we're these AI that the lot be in One, currently by very, the in tremendous, with growth and pretty -- value. weren't gig, large.Second scalers. a expect this XXX we the is of

for is us the this kind net new business. So of for

Did really doesn't I had. get we've Ron? So right, it anything that cannibalize

Yes, I agree.

be he Excellent. just to He's if disagreed Just not have clear, Ron disagreed. that. would saying

Okay.

MSOs, versus we you mention for cetera. But in tail, million the either XXX about XXX it for faster versus I be sort or ramps gig. could seems just of the little XXX about you bit Ron, gig how So Am XXX, David, longer did about a ramps, terms cable ramps bigger and should cycle that think et the of thinking like right? longer XXX of

You are.

the The in green year-over-year it that XXX-gig and power, and which per So it's bit, for also it gig bit defined increments, in software to it's with lower application then the X-legged increase in defined, stool, a cost network I mentioned agility X will into certifying a you And the you cycle that, buying bit own consume because awards, applications, little but some take ZR/ZR+. these Tier continue power another certifying we're And with I for chunks allows swaths, think And global I for product. it's for we're that in product, our example, Costco XX an defined cable, the huge gig operations, to that's with pluggable long for won application.Look, metro is ties huge Ron consumption buying, their just XXX said, move differentiation. only product. XXX we again, they American fact need. North but very a that lower think one our longer, drive the up. why as And drive per drive see you'll Europe life given because

life longer sorry. yes, cycles, So

of comes from line Capital. Schwab Christian Your Craig-Hallum from the next question

only design able be industry about in the strength in plus of March you talked in structurally seeing top we grow but to that we're the further that the talking to I right? year, the know hyperscale headwinds 'XX, calendar and that come. this double-digit you the were Given but about 'XX, should in wins 'XX, it's big line

set. trap, well are set, was very well That large these opportunities. Well, very, look, a certainly,

March the Analyst get that as digestion said. setting kind inventory steady state XXXX. model and of You're externalities talked of through was expansion.And once business gives our period. of said X% terms from margin both to we you get in improvement I'm financial we right, it's This a what past our think than growth as if silly I'd guidance. drive a number about, down We're well XX% that in and perspective not design going I and our EPS to to remember XXXX in the great these Day, heads you us in 'XX. we to EPS. margin we for is to business this think rate give put prior continue But continue be wins, comfort But

of last for to Act have you you that. we've then an is, waiting money positioned in CHIPS released. Do Thank where No, been my think on be that question all understood. you update process? you're kind And Yes. for

of by actual Here's and be is what push as well of awarded. give to status something to as awards Again, 'XX there. at the be CHIPS been we're the to time they see we're to confident years in frame I'd on Act the the we're a the you. impact we've in not Act an we we if the are excellent fit for terms that couple last well tell allowed that very are out, but should rules positioned, of business I I'm think very CHIPS over where and What diligent go

the of comes Your Alex from & from Needham next line Company. question Henderson

me in. with in for one. Sneaking second a Thanks letting

this of that ramp run X cadence could low XX, $XX we hoping Is to initial that was in would kind and I this that got XX, that are fairly then you've contract go $XXX shipments the annual back to, of be would first that probably I So million think it hit then XXX? with say, year, million the $XXX ramp the and double rate, years out hyperscaler, million. would that

-- have remarks what X-year in millions worth dollars. of contract prepared I hundreds said of is was the No. the we

with customer, than And from So XXX-gig shipping in get 'XX, we we'll with yes, believe the the of the you XXXX a particular customer. intense 'XX, to there. then that pluggable X.XX that on we'll from particular more this go in and be start 'XX -- beginning new pluggable potentially

larger. no, is So -- much it's the number

than larger it's XX, So XX XXX-- to

-- Yes, or it's a largest hundreds millions of over millions. -- Yes, like X I don't it's X but specific, not or we're period, want we've the it's hundreds of seen. to X-year that get too

equipment And all just pluggables. that's clear, sales Or narrow it to Is additional be than that? associated there that? with is more

with in. pluggable in have platform us independently platform what you for a deals a get line the for see in lot future and will then deals, a goes that, pluggable of these will I the you So that, GX system that goes lot to will as win compete we that see of think and the the with

in. that cases, goes the that, pluggable to many but win So have in we also not win only the platform opportunity the

doesn't has add anything there? dollar that -- to count there impact. even So that Ron,

in thing bit their is improvement them for a for only cost it's that compelling The per this I'll add per it's significant bit to ramp quickly extremely because network. and power

of that you mentioned you're providers, where the economics some line had of for winning you're in I transaction the that you mechanics the growing talk Can question bit that you're India. managed type other -- actually a service the business? and optical little particularly with lines So in you is about

do that? you take want to Ron,

Yes.

service where the it on application provider any consume similar there's we other optical specific networks like end where to pluggables transponders component, actual an So win we effectively big for them, and service, very for the depending in own with service services, network a economic agree particular line any very to who's X hyperscaler managed system a and providing from looks Tier to provider opportunities there's referring work you're much or perspective, all the customer these fiber provider and use there's country.And and bespoke it's service right, then that a to are who's their application. on And win.

management So it's piece. not high maintenance contract systems. classic a It's just

[ so because with we're build terrestrial looking data Classic interconnect good ] we is the bigger end web scaler, to working see the them the and and tend the they're typically to systems news maintenance they networks. contract to demand with centers because

Chief I back for to will now Executive question-and-answer And remarks. David that it Officer, closing concludes period. our Heard, turn

commitments another us. last on and rough pretty Thank QX XX have of Through a say our you. the during of made met quarters. outlook great landscape. is delivered we Day, we out would XXXX, for in was or our year that what our Analyst I XXXX exceeded We XX

We're winning dramatic is X our X, XX% legacy years globally portfolio new it's a products less systems. were I Our it's the customers ago. shift than from with been. in mean where from best shape of we

called and and sluggish, wins major ability grow While the year expand our design to the last confidence out, Systems in front burns recovery both out half this build in half of and share and the increase starting back confidence EPS. our revenue, off year and inventory margins a are some bit as Subsystems which we we winning that

a a and strategy customers, all, Thank very continued continue our have and of employees to focus and now support afternoon the back appreciate nice on shareholders. and evening. expansion. or we get executing sound going We're So you EPS to work investment

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