Vecima Networks Inc
TSX:VCM
US |
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
|
US |
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Mastercard Inc
NYSE:MA
|
Technology
|
|
US |
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
|
US |
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
|
US |
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
|
US |
Visa Inc
NYSE:V
|
Technology
|
|
CN |
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
|
US |
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
|
US |
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
|
US |
Coca-Cola Co
NYSE:KO
|
Beverages
|
|
US |
Walmart Inc
NYSE:WMT
|
Retail
|
|
US |
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
14.79
22.67
|
Price Target |
|
We'll email you a reminder when the closing price reaches CAD.
Choose the stock you wish to monitor with a price alert.
Johnson & Johnson
NYSE:JNJ
|
US | |
Berkshire Hathaway Inc
NYSE:BRK.A
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Mastercard Inc
NYSE:MA
|
US | |
UnitedHealth Group Inc
NYSE:UNH
|
US | |
Exxon Mobil Corp
NYSE:XOM
|
US | |
Pfizer Inc
NYSE:PFE
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
Nike Inc
NYSE:NKE
|
US | |
Visa Inc
NYSE:V
|
US | |
Alibaba Group Holding Ltd
NYSE:BABA
|
CN | |
3M Co
NYSE:MMM
|
US | |
JPMorgan Chase & Co
NYSE:JPM
|
US | |
Coca-Cola Co
NYSE:KO
|
US | |
Walmart Inc
NYSE:WMT
|
US | |
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Hello. This is the Chorus Call conference operator. Welcome to Vecima Networks Third Quarter Fiscal 2024 Earnings Conference Call and Webcast. [Operator Instructions] Presenting today on behalf of Vecima Networks are Sumit Kumar, President and CEO; and Dale Booth, Chief Financial Officer.
Today's call will begin with executive commentary on Vecima's financial and operational performance for the third quarter fiscal 2024 results. Lastly, the call will finish with a question-and-answer period for analysts and institutional investors.
The press release announcing the company's third quarter fiscal 2024 results as well as detailed supplemental investor information are posted on Vecima's website at www.vecima.com under the Investor Relations heading.
The highlights provided in this call should be understood in conjunction with the company's unaudited interim condensed consolidated financial statements and accompanying notes for the 3 and 9 months ended March 31, 2024. Certain.
Statements in this conference call and webcast may constitute forward-looking statements within the meaning of applicable securities laws, from which Vecima's actual results could differ. Consequently, attendees should not place undue reliance on such forward-looking statements.
All statements other than statements of historical fact are forward-looking statements. These statements include, but are not limited to, statements regarding management's intentions, belief or current expectations with respect to market and general economic conditions, future sales and revenue expectations, future costs and operating performance.
These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict and/or are beyond our control. Vecima disclaims any intention or obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise, except as required by law.
Please review the cautionary language in the company's third quarter earnings report and press release as well as its 2023 annual report regarding the various factors, assumptions and risks that could cause actual results to differ. These documents are available on Vecima's website at www.vecima.com under the Investor Relations heading and on SEDAR at www.sedarplus.ca.
At this time, I would like to turn the conference over to Mr. Kumar to proceed with his remarks. Please go ahead, sir.
Thank you. Good morning, and welcome, everyone. Thank you for joining us. The third quarter brought the start of the major growth wave we've been anticipating and with it, record financial performance, including a new high watermark for quarterly revenue and adjusted EBITDA.
I'm going to begin today with an overview of our Q3 highlights and achievements. Dale will follow with more details on our financial performance, and then I'll return to talk about our outlook going forward.
Starting with consolidated results, I'm thrilled to report that we beat our all-time quarterly revenue record with sales of $80.1 million in the third quarter. That represents almost 29.5% sequential growth from Q2. We We've paired this with strong gross margin percentage of 46.9%, which, in turn, helped us achieve the record adjusted EBITDA of $17.2 million and adjusted EBITDA margin of 21.5%.
The earnings performance was also very robust, with adjusted earnings per share increasing to $0.31. That's up 72% from a year ago and more than double what we achieved last quarter in Q2.
In particular, the third quarter was another breakout and record quarter for our Video and Broadband Solutions segment, with sales of $68.2 million climbing 39% quarter-over-quarter from Q2. This growth was, of course, driven by our Entra DAA products as the planned ramp in the second half related to major DAA rollouts got underway just as we expected, following the brief transition period in the first half.
This included a sharp ramp in ERM3 Remote PHY deliveries to Charter as part of their hybrid fiber coax upgrade initiative. As we mentioned previously, Charter intends to use our solution for a substantial portion of their footprint-wide cable access network upgrade to DAA. And as such, it represents a major multiyear revenue opportunity for Vecima. And that's only just beginning.
Demand was also very strong for our Entra Optical 10G PON products in Q3 as customers continue to broaden fiber-to-the-home deployments as part of funded rural broadband programs.
So while significantly ramping product deliveries into customer rollout programs, we are also making major strides with new products during the quarter. Looking first at our EN9000 GAP node, I'm pleased to report that we achieved certification for this new Entra platform with a leading Tier 1 customer in Q3.
The EN9000 is a powerful and future-proof solution that enables customers to easily transition to 10G and DOCSIS 4.0 technologies while protecting current network investments that they're making.
We also completed lab trials and initiated field trials for Entra EXS1610 All-PON shelf. That's another innovative Entra solution that provides maximum flexibility for customers by enabling them to cost effectively deploy fiber-to-the-premises in any market or hub deployment configuration.
Additionally, we unveiled our new Entra Virtualized Cable Modem Termination System platform during the quarter. So this is a natural next step [ marketing investments ] to move into the fast-growing vCMTS market. And it further adds our already-expansive Entra DAA offering for customers.
As part of the Entra Cloud platform, our vCMTS solution leverages software that's underpinned by the common engine of our leading DAA intellectual property. Today, within our Remote MACPHY platform, that software already powers several multi-gig DAA deployments at our customers.
We've now initiated vCMTS lab trials with a leading Tier 1 operator, and we expect field trials to commence in the fourth quarter of calendar 2024.
Also on the Entra front, early in the third quarter, we entered a U.S. manufacturing agreement for some of our fiber access products to ensure they meet Buy America requirements related to the U.S. BEAD program for fiber. The BEAD program is this major $42.5 billion U.S. initiative to design to bring high-speed broadband to underserved or unserved areas of the United States.
We see vast opportunities for our fiber access products flowing from it. And this agreement helps ensure we can capitalize on them.
Combined, these new products and programs are adding fuel to the already-powerful Entra DAA growth engine that we have. We now have multiple pathways of growth converging just as the industry demand for DAA is starting to accelerate. At the same time, the customer base for our Entra DAA solutions is continuing to expand.
By the end of the third quarter, engagements for Entra cable and fiber access are now approaching 200 unique program opportunities across 113 operators globally, with [ 58 ] customers ordering product today. That's up from 106 customer engagements and 50 ordering product a year ago, adding to the wave of demand that's now building for our Entra technologies and solutions. So a phenomenal quarter for our VBS segment and Entra, with much more yet to come.
Turning now to our Content Delivery and Storage segment. Sales of $10.2 million were lower year-over-year and quarter-over-quarter. Lumpy quarters are normal for this segment, as we've indicated before, mostly reflecting the timing of customer project rollouts and stepwise capacity expansions.
CDS service revenues were very strong, growing 10% year-over-year and contributing to strong Q3 gross margin results for the segment. Our solid service revenue performance reflects a steadily growing deployed base of media scale IPTV networks in the market. And we continue to grow that base in Q3 as we undertook further IPTV expansions with multiple customers.
Turning to Telematics, that segment also turned in a record quarter with revenues of $1.7 million, up 3% year-over-year. We added another 10 new customers for our NERO asset-tracking platform during the quarter, which in turn increased the number of movable assets we now monitor over -- to over 64,000 units.
We also received an order for approximately 300 additional Telematics subscriptions from an existing municipal government customer. Telematics also continues to be a highly profitable part of the business, with the segment achieving strong gross margin of 67.8% in the quarter.
Overall, it was a simply excellent quarter for Vecima. And all across our operations, we continue to execute very successfully on our growth strategy.
At this point, I'll turn the call over to Dale to provide more color on our Q3 results. Dale?
Thank you, Sumit, and thank you all for joining us today. For the purposes of this call, we assume that everyone has seen our third quarter fiscal 2024 news release, MD&A and financial statements posted on Vecima's website.
Starting with consolidated sales, we generated third quarter revenue of $80.1 million, which was up 2% year-over-year and 29% quarter-over-quarter. The Video and Broadband Solutions segment accounted for $68.2 million of these sales. That was an increase of 5% year-over-year and 39% quarter-over-quarter and reflects the Entra DAA sales momentum Sumit discussed.
DAA sales as a whole accounted for $60.9 million of VBS sales. While not quite a match for the all-time high results of a year ago, they were 39% higher on a sequential quarterly basis. VBS segment sales also benefited from a strong contribution from our Commercial Video products as our lead customer increased orders for legacy TC600E products. This helped boost Commercial Video sales to $7.2 million, up 244% from a year ago and 37% from Q2 of this year.
While we're pleased with our strong Q3 Commercial Video results, overall, we view them as temporary. This part of our business continues to transition to next-generation platforms. And increasingly, our newer DAA-driven Commercial video solutions are being accounted for as part of intra-family sales.
Our Content Delivery and Storage segment saw continued quarterly revenue fluctuations with sales of $10.2 million, decreasing [ 13% ] year-over-year and 9% quarter-over-quarter. This mostly reflects timing of orders. And as Sumit noted, quarterly sales variances are typical for this segment.
Turning to Telematics, this segment turned in another good quarter with sales of $1.7 million, increasing 3% year-over-year and 4% quarter-over-quarter.
Gross margin for Vecima as a whole increased to 46.9%, up 340 basis points from 43.5% in the same period last year. This reflects improved margin performance from all 3 of our business segments, much of it related to an improved supply chain environment and lower expediting costs. It also reflects a very strong gross margin performance of 59.8% from our CDS segment, reflecting the increase in higher-margin services revenues year-over-year.
Turning to third quarter operating expenses, the notable changes year-over-year were as follows: R&D expenses decreased by $0.8 million to $11.3 million. This primarily reflects a targeted decrease in salary and wage costs and higher capitalized development costs, partially offset by increased costs for software and licensing. Sales and marketing expenses for the third quarter were $0.2 million lower at $6.7 million, mostly due to reduced trade show and promotion costs.
Third quarter G&A expenses decreased by $0.5 million to $7.9 million. This reflects lower ERP program implementation costs year-over-year as well as lower staffing costs. Other expense increased by $1 million to $1.3 million, reflecting a onetime $1.3 million advisory fee related to M&A activity in the third quarter.
In total, our third quarter OpEx was $27.5 million, a decrease of $0.4 million year-over-year, but $2.6 million higher quarter-over-quarter. As we mentioned in our last call, operating expenses in the second half of this year were expected to be higher than in the first half as we support the ramp-up of our sales.
In the Video and Broadband Solutions segment, third quarter operating expenses were down $0.4 million year-over-year, reflecting a combination of lower G&A and sales and marketing expense, partially offset by the onetime advisory fees related to M&A activity in the third quarter.
Content Delivery and Storage operating expenses were generally flat year-over-year at $7.4 million. And in our Telematics segment, operating expenses of $0.9 million were in line with prior-year results.
I note that reported R&D expense in a period is typically different than the actual expenditure. That's because certain R&D expenditures are deferred until product commercialization. Adjusting for deferrals, amortization of deferred development costs and income tax credits, actual R&D investment decreased to $14.6 million or 18% of sales in the third quarter from $15.4 million or 20% of sales in Q3 last year.
Looking at our bottom line results. Third quarter operating income was up 64% year-over-year to $10.1 million. This primarily reflects the higher VBS sales and an overall stronger gross margin percentage year-over-year.
We generated record third quarter adjusted EBITDA of $17.2 million, a year-over-year increase of $5.5 million or 47%. This primarily reflects our higher gross margins as well as lower operating expenses. On a quarter-over-quarter basis, adjusted EBITDA increased by $4.7 million or 38%.
We recorded a foreign exchange loss of $1.2 million in the third quarter, which compares to a foreign exchange gain of $0.2 million in the same period last year. This reflects a weakening Canadian dollar negatively impacting the translation of our monetary liabilities. Net income from continuing operations for the quarter increased to $5.8 million or $0.24 per share as compared to $4.5 million or $0.18 per share for the same period of fiscal 2023.
Turning to the balance sheet. We ended the third quarter with $3.3 million in cash, up from $2.3 million in the same period last year. Working capital of $82.1 million decreased slightly from $83.7 million in Q4 fiscal 2023 and up slightly from $80.4 million at the end of Q2 fiscal 2024. We note that working capital balances can be subject to significant swings from quarter-to-quarter.
Our product shipments are lumpy, reflecting the requirement of our major customers. Other timing issues like contracts with greater than 30-day payment terms also affect working capital, particularly if shipments are back-end weighted for a quarter.
Lastly, cash flow used in operations for the third quarter was $28.6 million as compared to cash provided by operations of $3.8 million during the same period last year. The $32.4 million increase in cash flow used in operations reflects a $35.6 million decrease in cash flow from noncash working capital, partially offset by a $3.1 million increase in operating cash flow.
On a final note, the Board of Directors approved a quarterly dividend of $0.055 per common share payable on June 17, 2024 to shareholders of record as of May 24, 2024. It is important to note that this dividend will be designated as an eligible dividend for Canadian income tax purposes.
So just to summarize, an excellent quarter, with robust sales growth and tight control of operating expenses translating to a very strong profitability.
Now back to Sumit.
Thank you, Dale. While our Q3 results were deeply satisfying, we believe they represent just the beginning of the momentum we see ahead for Vecima. As I mentioned earlier, a number of growth drivers are converging just as operators worldwide are launching major multiyear upgrades to their networks.
In our VBS segment, we expect to see a further ramp-up of our quarterly run rate in Q4 as we continue to support our customers' rollout plans with our growing portfolio of Entra DAA cable and fiber access products. We anticipate another record quarter for Entra sales in Q4 with momentum expected to build still further through fiscal 2025 and beyond.
In the CDS segment, overall demand for our IPTV and open caching solutions remained strong. However, shifts in project timing continue to affect our expectations for the full year in fiscal '24. We now expect the CDS segment to achieve fiscal 2024 sales results similar to or slightly lower than the strong performance we achieved in fiscal '23.
Longer term, we continue to see the robust future growth potential as the IPTV and OTT streaming services markets continue to expand and the open caching and dynamic advertising growth engines mature.
Finally, in our Telematics business, we expect consistent incremental growth from the fleet tracking market and continued increases in demand for our new removable asset tracking services. The latter has become an important driver of segment differentiation and gains in recent quarters.
Overall, we're expecting a strong finish to the year as we build on Q3's record results and establish another compelling run rate in the fourth quarter. All told for fiscal '24, after factoring in the first half transition, along with the timing shift in our CDS expectations, we expect full-year consolidated revenues to be modestly lower than the all-time record results we achieved in fiscal '23.
But after producing nearly 30% growth in Q3, with more to come in Q4, our run rate is expected to put us on a path for substantial annual growth, going forward. We expect significant year-over-year top line gains building again for fiscal '25. We also continue to target a gross margin percentage in the 45% to 49% range which, combined with our OpEx model, is expected to support excellent full-year adjusted EBITDA performance, both this year and next.
In summary, this is a tremendously exciting time for Vecima, with compelling prospects, both in the near and the longer term. Our market position is incredibly strong. We continue to expand our product portfolio with innovative new solutions. And our relationship with customers is growing and strengthening as we support their increasingly wide-scale rollouts.
The next major growth -- wave of growth is upon us, and Vecima is executing very effectively all across the business as we capture the multiple -- multiyear opportunities in our markets.
That concludes our formal comments for today. We'd now be happy to take questions. Operator?
[Operator Instructions] The first question comes from Jim Byrne of Acumen Capital.
Sumit, maybe you could just expand on the recent distribution deals that you announced, I think, in Denmark and Germany. And just give us an idea of how meaningful those types of deals could be.
Yes. Thanks, Jim. I think, as we've seen, and we've had several of those successes, distributor agreement announcements and -- for the reseller channel, we've always felt that there's a strong relationship that can flow when you have a world-leading technology vendor like us in the key CapEx spend areas of operators globally.
And that ties to an opportunity for strong best-of-breed channel partners in the regions to be an army on the ground for us and to really leverage the technology we bring to bear to generate results for operators locally in those regions.
We've been signing on these partners. It's part of our broader strategy to really reach every single broadband service provider in the world with this portfolio in Entra we've built. And internationally, these Tier 2 and 3 customers do typically work through these resellers, distributors or system integrators that help them locally on the ground there.
So again, we're working with some of the best partners in every region, and you're seeing that reflected in these announcements with respect to new agreements that we're bringing up with channel partners.
Just maybe order of magnitude, what does that channel partner revenue stream look like today? And how big of a contribution could that make in the next few years?
I think it's meaningful today. We're seeing as consistent with operators being in the very early innings of DAA rollouts generally, we're just getting started in some respects with a number of those channel partners. But they're early wins that they're bringing to the table, has been meaningful to us already.
So not going to really dial in on where we're at today in terms of contribution from the reseller channel, but we have great opportunity and overall addressable market that's coming to bear through those types of partners globally. And we expect it to be meaningful to our Entra results in fiscal '25.
Okay. Perfect. And then maybe just last one for me. Just give us a reminder of where the DAA rollout is in Europe kind of relative to North America.
Yes. As before, in EMEA, they have a different competitive environment, whether it's with the telcos with fiber or [ overbuilders ] or whatnot. And there's different dynamics than the U.S. market as typically [ they're ] moving earlier in the cycle to a network infrastructure evolution or transformation that we're creating with DAA. So we have seen that cadence in EMEA. But now, turn by turn, we are getting further deployment activity going in that region.
So like anywhere else in the world, the need for 10 achieving multi-gigabit speeds over all types of access networks is common around the world, but they have different competitive factors there, and then that changes the timing, perhaps potentially a little bit from behind the U.S. and [ CALA ] and other regions.
So I think, as I said before, with respect to the question on the channel partners, we do start to see that moving towards meaningful contributions to our overall Entra.
The next question comes from Jesse Pytlak of Cormark.
Just on the bid for [ Casa ] assets, can you maybe just update us to where the process currently stands? And just any of your expectations around interest from other companies in these assets?
Yes, Jesse, I think I'm not really willing or able to provide more information on the open call today.
I'll just add that of course, we have a strong investment thesis. We firmly believe in Vecima in a completely unique position in the marketplace between our software and our IP and our strength and the portfolio and our customer set with the virtualized cable access, we invented that. So lots essential kind of party like Vecima, I think, is essential to delivering a solid outcome to the industry from these assets.
So we have, of course, a very well-proven track record of doing that with our acquisitions and making them very strong for the industry, particularly when they're very complementary to what we're doing in DAA and 10G.
So as always, whether we accelerate with M&A or we leverage on the organic talent we have to bring these leading solutions to the market, we do expect to be a major player in the overall market, including the vCMTS. So we'll be happy to provide updates as that discussion matures.
I understand. Maybe just thinking a bit more broadly then, given what's happened with Casa and maybe just kind of considering the financial position of some of the competitors both in and outside of the cable plant, can you maybe just speak to what you're seeing on the competitive landscape and maybe how it could be influencing some of your conversations with your customers?
Yes. I'd rather not go into too much detail again, Jesse. I think that -- I think everyone is well aware of the participants in the market and how the market share works, particularly in the vCMTS.
We do think that there is a need in the industry for vendor diversity in the virtual solution. We will address that with our organic platform. But these assets represent another opportunity to also do so, and we'll see that -- again, I believe that we are uniquely capable of making the assets perform for the industry and deliver a solid solution, but we'll again provide updates as that discussion culminates.
Okay. And then maybe just on the balance sheet. Leverage has been coming up. You've temporarily increased your credit line. You do have that bid out there for the Casa assets. Can you maybe just run through your thinking around how you're going to -- how you plan to manage the balance sheet and maybe what kind of debt levels you're comfortable with carrying?
Yes. I think you've seen we've hit the $17.2 million on the EBITDA on the run rate. So that gives you a sense on what type of leverage ratios should be available to the companies like Vecima. We are very confident in having multiple sources of available liquidity and funding, inclusive of any consummation of M&A.
Again, as you might expect for a company of our size, scale, performance, the EBITDA run rate we have, we do feel like we have numerous paths to capital available to us, and we'll bring those to bear as necessary.
The next question comes from Ryan Koontz of Needham & Company.
I wonder, Sumit, if you could maybe give us some color on the mix of DAA nodes versus fiber what you're seeing in terms of demand here in the first half of the calendar year relative to your recent results and your expectations for 2Q?
Yes. I think we are seeing, of course, with some of the new program wins that have been accelerating as we enter calendar '24. Of course, the cable access is becoming a growth driver most recently for Entra. But we do have ongoing broad deployment on the rural broadband programs with fiber. And we know that BEAD is still in the future overall for that set of products. We have world-leading market share in 10-gig Remote OLTs on the fiber access front.
So in recent quarters, the mix is probably slightly more cable access heavy in our Entra portfolio, of course, with these new major Tier 1 programs running, but [ is continuing ].
And in the field -- on the field front, the art of deployment of fiber is accelerating through calendar '24. So as we continue to see operators kind of work through their inventory and ramp up their field deployments of fiber to the home, we're expecting some really good tailwinds on the fiber access front through calendar '24 as well.
And then when BEAD comes into the picture, that creates a tremendous headwind for -- or tailwind for fiber access for us in parallel to these tailwinds we've got going in the cable access side.
Right. That's really helpful. And you mentioned your large [indiscernible] program ramping. How would you maybe qualify your visibility there on that big program? Do you feel like you've got a firmer kind of grasp with what kind of the rest of the calendar year looks like, at least for the company, in terms of expectations to ship?
We do have good visibility, as you could expect, with a major Tier 1 operator, major program that's underway. There's a lot of crisp focus on the planning cycle over the next 3 years that they have to conduct for this infrastructure upgrade they're going to do across their HFC network. So along with that, it's important to them and important to us that we have good visibility into the profile.
Of course, as always, with major Tier 1, major network upgrades quarter-to-quarter, fluctuation is totally normal. They've got to get the labor going and all that.
But in the bigger picture, as I said, I mean, look, calendar year to calendar year, the visibility is solid and strong and consistent with everything we've seen. And that allows us to execute like we planned.
Okay. That's great. One last, if I could. On -- congrats on the GAP node kind of moving to the next key milestone here. What's your updated view on when you see the GAP product lines really start to achieve kind of critical mass in terms of substituting for traditional nodes?
Yes. I think we've talked about before that what GAP allows operators to do is go modular and future proof, whereas they have these multi-dozens of legacy nodes from all the incremental upgrades over the years or M&A and consolidation of other operators has led them to a place where they've got too much fragmentation in legacy nodes. And then we need to go to 1.8-gigahertz capability.
We're adding incremental tower rails, the thermal capacity that's necessary to go to a symmetrical 10-gig and beyond that in the future, if you move those nodes to fiber.
So this vision of the long-term multi-decade living node is coming to fruition within GAP. And we expect that -- like we said, we have the Tier 1 go through certification of it very recently. So we're expecting us to look at contribution coming in this calendar year in a meaningful way.
[Operator Instructions] As there appears to be no further questions, this concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.