Avanex Corporation F1Q09 (Qtr End 09/30/08) Earnings Call Transcript

Nov.18.08 | About: Avanex Corp. (AVNX)

Avanex Corporation (AVNX) F1Q09 (Qtr End 09/30/08) Earnings Call Transcript November 6, 2008 4:30 PM ET

Executives

Pete Currillo [ph] – IR

Giovanni Barbarossa – Interim CEO

Mark Weinswig – VP, Finance & Interim CFO

Analysts

John Harmon – Needham & Company

Paul Bonenfant – Morgan Keegan

Ajit Pai – Thomas Weisel Partners

Todd Kaufman – Raymond James

Operator

Good day, and welcome to the Avanex Corporation First Quarter Fiscal Year 2009 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Pete Currillo [ph]. Please go ahead.

Pete Currillo

Thank you, everyone, for joining us today. I'd like to remind you all of -- I'd like to remind all of you today's call contains forward-looking statements about our expectations, future events, strategies and the performance of the Company. Forward-looking statements are subject to risks and uncertainties and actual results could differ materially from those projected or contemplated by the forward-looking statements.

We encourage you to look at the Company's most recent SEC filings, particularly, today's earnings release, our 8-K and our most recent 10-K. Avanex does not intend to update any forward-looking statement, including guidance, as a result of new developments or otherwise.

Additionally, in order to comply with SEC regulations, because non-GAAP information is presented on today's call, please note that Avanex has provided a reconciliation table and other information attached in today's earnings release and 8-K, which can be found in our Web site at www.avanex.com that will provide reconciliation on today's call.

I'd now like to turn the call over to Giovanni.

Giovanni Barbarossa

Thank you, Pete. Good afternoon and welcome to our 2009 fiscal first quarter earnings call. During today's call we'll be discussing the key events of the first quarter, the impact of macroeconomic trends on our business, and the Company's strategic direction.

Let's talk about the five key objectives that we accomplished in the first quarter. First, the awarding of design wins Tier 1 OEM and the improvement of our new product introduction process; second, the increase of market share with new customers; third, the implementation of Companywide cost saving initiatives; and fourth, the streamlining of our organizational structure.

The first important objective was design wins and new product introduction. We had a number of engagements with customers during the first fiscal quarter, which we will be discussing in more detail later in the call.

The second area of focus in the quarter was expanding our existing customer relationships. It is evident that customers believe Avanex is a strategic supplier for their optical components and module needs. For example, during the quarter, we saw strengthening from two of our largest customers, Alcatel-Lucent and Nortel, which each represented over 10% of total revenues. Nortel returned as a greater than 10% customer for the first time in over one year.

At the same time, we experienced a significant decline from one of our largest customers. We remain engaged with this customer on a number of new differentiated projects for future growth and we look forward to this customer returning to the 10% of total revenue in future quarters as business improves.

Sales in Asia were also relatively strong in the quarter, accounting for more than 21% of our revenue. We continue to see significant engagements there as we increase the level of design activities with the major OEMs in this region. I would like to point out that we're seeing strong opportunities for future growth in a number of markets within Asia.

Third, let's discuss the cost-saving program we implemented during the quarter. With the telecommunication industry seeing some clear sign of weakness, we believe it was critical to move fast to reduce our cost structure. The cost cutting initiatives included the reduction of roughly 11% of our headcount by consolidating the transmission module design activities into our existing facilities in France and China, the closing of our Florida facility and the streamlining of the organization.

In addition, we have implemented a number of other initiatives to reduce costs, including a 10% pay cut for all executives and the reduction of discretionary spending, such as travel, advertising and consulting. Total expense for the restructuring was $2.3 million, primarily for headcount related costs and future lease payments. The action taken in the first quarter will save the Company between $8 million and $10 million per year beginning in the second fiscal quarter.

A competitive advantage of Avanex business model is its low fixed cost structure. Through the action taken in the first fiscal quarter, our strong balance sheet and our flexible business model, we believe that we can weather the present downturn and outperform our peers.

And finally, the simplification of our company into a functional organization. A leaner, flatter structure is better suited to respond faster to customer requests, which we believe will assist in expediting time to market for new product. In addition, realizing synergies and better combination has we have placed the global R&D function under a single leader.

Before moving onto our discussion of revenue and design wins by product application, I would like to discuss a recent design engagement that we are really excited about. We've been selected by Tier 1 OEM to develop a new subsystem that leverages our amplifier, optical performance monitoring and Wavelength Selective Switch technology into a single WDM card. This opportunity is with a customer that has not been a 10% customer in recent times. We began to ship units in our third fiscal quarter ending March 31. In addition, we see this architecture being ubiquitous in next generation ROADM deployment and expect to see similar design wins available to us in the future.

Looking now to our three products groups. First, revenue for our transmission products, which includes transceivers, transponders and modulators was approximately one-third of the Company's revenue and one-third of our design wins came from transmission in the first fiscal quarter. The key drivers in this market include the move to tunable solutions at a higher transmission rate, such as 40G, new modulation format and longer transmission distances.

In our transmission product group we released a new modulator supporting ISP communication links at both 40G and 100G. We're also accelerating our product cost reduction strategies that include material costs and cycle time improvement. Within our transponder products, we are focusing our efforts on new lower cost solution on expanding our tunable product portfolio.

The transmission product group saw a number of design wins and engagements in the quarter. We are currently engaged with over ten customers for the 40G need and engaged with more than five customers on then 100G projects. While 40G and 100G are still small markets, we see them growing significantly in the future due to their invent cost advantages for service providers. Our 40G and 100G modular products are key enablers for these ISP networks.

Second, revenue from our regeneration products, which includes sophisticated control amplifiers, gain blocks, fixed and tunable dispersion compensation modules and the industry leading optical performance monitoring products were in approximately 50% of the Company's revenue and 60% of our design wins in the first fiscal quarter.

Avanex continues to be the technology and market leader in new generation products. With the market moving to lower cost of ownership networks, our intelligent generation products are best positioned to meet our customers needs.

We see a significant opportunity from the move to ISPs, such as 40G. The regeneration product group saw a number of design wins in the first fiscal quarter. Within amplification we are happy to announce the major design win of our Oasis control amplifier platform at a top European customer. This design win is significant because the products was previously supplied internally. After reviewing our technological differentiation and market leadership, the customer decided to start procuring their amplifier solutions from us.

We're currently seeing additional opportunities with respect to the make versus buy decisions of OEMs in the (inaudible) product application and we believe that we are the best positioned supplier to win captive business due to our technology, scale and market leadership. As a result, we expect to win more captive OEM amplified business in the near future. For example, we are already in the qualification stage with a tier one Asian customer to outsource a portion of their amplifier requirements in the future.

In dispersion compensation, we believe that we have the largest portfolio of dispersion compensating products in the world, including fiber, etalon and FBG's products, with etalon-based products being available in both fixed and tunable configuration.

We're focusing on expanding our footprint through the release of new products that address the rest of and summary networks at higher speed, such as 40G and compatible solution.

This quarter we had a tunable dispersion compensation design win for a 40G network from the tier one Asian customer. This OEM is providing the product for a major Asian network deployment with one of the largest carriers n the world in one of the fastest growing markets.

In the fixed dispersion market we are seeing some increased interest in our solutions due to their higher level of performance and cost competitiveness. As we announced at the ECO Trade Show we recently produced a low PMD solution to better serve market requirement.

In addition, we've been selected by a major North American OEM to develop a 2R optical regenerator that combines our amplifier and tunable dispersion compensation technology in a single platform. This subsystem product lowers costs, improves network performance and provides our customers with differentiated, integrated line card solution.

During the quarter we announced a partnership with StrataLight to work on a 100G testbed. While 100G is seen the flow of development, we believe that there are opportunities for our regeneration and transmission products as the market moves to higher and higher speeds.

Finally, revenue from wavelength management products, which includes both fixed and reconfigurable wavelength routing products was approximately 15% of the Company's revenue and contributed less than 10% of our design wins in the first fiscal quarter.

In our wavelength management product group we saw continued traction with the development of our wavelength selective switch product portfolio. Our wavelength selective switch product platform has significant opportunities with different configurations for a host of metro needs and applications.

We believe that our platform lends itself to reliable and cost effective differentiated solutions for our customers. We are currently engaged with the five tier one customers on their WSF [ph] needs.

In the September quarter, we started shipping beta units to a tier one Asian OEM customer. This customer will be using our products to deploy in Asia, one of the fastest growing markets for optical networking spending. We will be discussing further design wins in the future quarters.

Overall, we had an impressive quarter on the design win and new product engagement front and are excited about our opportunities to improve our competitive position. While the market is still uncertain because of the current macroeconomic environment, we're cautiously optimistic about our opportunities based on our leading technology and product portfolio.

Now let me take a few moments to discuss the market -- the current market environment. I witnessed first hand the downturn of 2001 and 2003 and understand that the key to winning during this challenging time is to move quickly to cut expenses while at the same time investing in new products and design win opportunities for the future.

At this point we do not know when the market environment would improve nor if it is -- stabilized. Unlike most of other competitors, we outsource the vast majority of our manufacturing, which allows us to quickly ramp production up or down when the business environment changes.

I would like now to outline the six aspects of the strategic direction that were implemented. First, we're improving our execution on new product introduction and time to market to better address customer needs. Second, we're working to further diversify our customer base to increase the number greater than 10% customers. Third, we're expanding our business opportunities by working with OEMs to address the current captive amplifier needs. As I mentioned above, this past quarter we had one design win and expect another win by next quarter. Fourth, we're expanding our technology leadership in subsystems by integrating our differentiated product platforms.

As we mentioned previously, one of these opportunities, which we are very excited about is the wavelength selective switch plus amplifier plus optical performance monitoring the line card that is expected to ship to a customer by the end of March. In addition, we're working with other customers on similar opportunities. Fifth, we are streamlining the business from an organizational and business process standpoint. We are organized into a leaner, flatter structure to realize product development synergies and foster better coordination. And finally, we are utilizing our strong IP precision to increase the competitiveness of our products.

We have one of the boldest IP portfolio in the world with more than 800 patents. We believe that there is a great opportunity to leverage this asset and I look forward to further discussing our positives on this activities in future periods.

I would like to turn the call over to Mark Weinswig, who will discuss our financials. Mark?

Mark Weinswig

Thanks, Giovanni. Net revenue for the fiscal first quarter was $45.3 million, down 13% from $51.8 million last quarter and down 17% from $54.7 million in the same period last year. The sequential decline was primarily driven by a significant reduction in the demand from one of our largest customers for our regeneration product and lower end customer demand. On a geographic basis, North America was 36% of revenue, Europe 43% of revenue, and Asia 21%. Greater than 10% customers in the quarter were Alcatel-Lucent and Nortel.

Gross margin was 17% for the first fiscal quarter. This includes the impact of roughly $1.6 million from the write-off of inventory associated with excess and obsolete and inventory related to the shutdown of our Florida facility, and $300,000 of stock comp expense relating to manufacturing. Excluding these items, our gross margin would have been roughly 21%.

Total operating expenses for the first fiscal quarter were $18 million or 40% of revenue. This compares to $15.5 million or 30% of revenue in the fourth fiscal quarter and $15.4 million or 28% of revenue in the same period last year. Operating expenses included severance costs of $0.7 million associated with executives who departed during the quarter and $2.3 million relating to our restructuring initiatives.

In the second fiscal quarter, as a result of our cost cutting initiatives and other items, we expect expenses to fall by more than $2 million. In addition, we are implementing plans to reduce our exposure to E&O in future periods. However, it is important to note that there is an increased risk of greater E&O charges during this period of market uncertainty.

Our operating loss in the first quarter was $10.2 million compared to $0.7 million operating profit last quarter and a loss of $0.2 million in the same period last year. Net loss was $9.6 million or $0.63 per diluted share for the first quarter. This compares to net income of $1.3 million or $0.08 per diluted share last quarter and net income of $45,000 or breakeven for the same period last year.

Please note that our fiscal fourth quarter 2008 GAAP income benefited by $3.1 million due to certain one-time items, as mentioned last quarter. Based on our current operating model, our current operating cash flow breakeven revenue level is roughly $46 million to $48 million in quarterly revenue.

Moving on to the balance sheet, our cash, restricted cash and investments ended the quarter of $50 million, down $9 million from the prior quarter. The Company spent $1.6 million for CapEx in the quarter to increase manufacturing capacity on certain new products, including TDC and WSS. We expect our cash burn to decrease in future quarters.

As a result of our cost-cutting activities, total headcount at the end of our first fiscal quarter were 515, down from 576 in the prior quarter, for a reduction of more than 10% quarter to quarter. As Giovanni noted, the majority of the reduction was in our manufacturing operation, our general and administrative function and the transmission modules group, whose activities were consolidated into our France and China sites.

With that, I will turn it back to Giovanni, who will discuss the outlook for the second fiscal quarter of 2009.

Giovanni Barbarossa

Thanks, Mark. In summary, in spite of these challenging times we believe that Avanex is in a good position. We have a low fixed-cost structure, a number of new and upcoming design activities with a host of major OEM customers, a differentiated technology and IP portfolio and a strong balance sheet with $50 million in cash, restricted cash and investments and no debt.

Now, let me turn to guidance for the second quarter of fiscal year 2009. We expect revenue to be in the range of $37 million to $42 million. We expect gross margins to be between 17% and 21%. I would like to note that there are still market uncertainties and low visibility. At this point, while we will be competent in our guidance we continue to monitor the market environment. Thank you for your continued interest in Avanex. We look forward to updating you on our progress on these objectives over the next quarter.

Pete Currillo

Operator, we are now ready for the question and answer part of our call.

Question-and-Answer Session

Operator

Thank you. (Operator instructions). We'll go first to John Harmon, Needham & Company.

John Harmon - Needham & Company

Hi. Good afternoon.

Giovanni Barbarossa

Hi, John.

John Harmon - Needham & Company

A couple of questions, please. First of all, did you complete all the restructuring in the fiscal first quarter that you intended to do or is there more restructuring to be done in the second quarter and more charges?

Giovanni Barbarossa

John, thanks for your question. We did complete the shutdown of our site in Florida. We also executed in a number of other actions in terms of our cost reduction efforts. As the quarter evolves we will keep monitoring the situation. As you know, the market environment is pretty uncertain and we'll have to address this question at a later time, so for the time being, we have executed all of the action that ended up with the saving of the between $8 million and $10 million per year, so that's all completed.

John Harmon - Needham & Company

Thank you. As you said, you have little visibility. I realize visibility is challenged, but I was wondering if you have any indication of how the March '09 quarter could turn out?

Giovanni Barbarossa

March '09. Well, we don't really have visibility, so I'm sure you understand. The first quarter, some customers, such as Nortel and Alcatel-Lucent actually increased their revenue with us. So we increased market share with those customers, with other customers we didn't. So it's really -- the visibility is very poor now. So over the past couple of weeks I've been on the phone with virtually all of our customers really talking to them directly and they really don't see what's going to happen in the future quarters. So that's why the revenue guidance we gave is something we feel comfortable with, but beyond one quarter would be very difficult for us at this point to understand what's going to happen in the first quarter -- the first calendar quarter of next year.

John Harmon - Needham & Company

Thank you. Could you say what types of products or what product categories you think you gained market share during the quarter?

Giovanni Barbarossa

Well, so couple of areas. For sure, in the amplifier application group, we believe we increased the market share. Also, we had in the -- what we call the subsystem groups in general between both Nortel and Alcatel I think we did a pretty good job there. And also we saw an increase in terms of interest and also really ramping up revenue from that perspective, it's really our tunable dispersion compensation products. We talked about the design win with a tier one OEM customer in Asia, which is seeing slight traffic as we speak in a major network in Asia. We're really excited about it. It's really the key differentiation for our product lines and it's something we are, investing to ramp up production because it's going to be one of those products that we're really counting on in the future.

John Harmon - Needham & Company

Thank you. And just finally one for Mark. Of the $9 million in cash burn you had, can you tell me how much was from operations, how much went into working capital versus how much was from operations of the business?

Mark Weinswig

Yes, thank you very much for the question. John, first of all, on the CapEx side, we actually had CapEx about $1.6 million in the quarter. That's higher than our typical run rate. The main reason for that is similar to what Giovanni was mentioning, which is that we are invest -- we did invest in two main new product categories, the WSS and the TDC product lines, so we increased our manufacturing capabilities for those products as we hope to ramp those over the next couple quarters. In terms of our cash flow statement, our operating activities and cash flow from operations was about an $8 million loss basically in the quarter and then, of course, as I mentioned, we did have about $1.6 million of CapEx, so that gets us basically to the roughly $10 million we burned in the quarter.

John Harmon - Needham & Company

Great. Thank you very much.

Mark Weinswig

Thank you.

Operator

We'll go next to Paul Bonenfant, Morgan Keegan.

Paul Bonenfant - Morgan Keegan

Hi, thank you. I'd like to start with a couple questions of clarification. I'm wondering if you could review for me what you had in your transcript regarding the contribution for percent of sales for each of transmission, regeneration and wavelength, because my numbers don't seem to add up?

Mark Weinswig

Yes. So, for transmission we announced that transmission was about one-third of the customers rev -- of our revenue in the quarter, regeneration was about 50% and then wavelength management was about 15%.

Paul Bonenfant - Morgan Keegan

Okay. Thank you. Did you give the percentage of revenue for each of your 10% customers, Alcatel-Lucent and Nortel? I know you mentioned they were 10% or greater.

Mark Weinswig

No, we didn't. I don't think we mentioned on the call. Nortel was a greater than 10%, it was actually 15% in the quarter and Alcatel was over 30%.

Paul Bonenfant - Morgan Keegan

Okay. Now given -- it sounds like you're projecting little bit of an uptick in gross margin like next quarter. Are you assuming roughly about the same mix across your three major segments?

Mark Weinswig

Actually, the reason for the increase in our gross margin range is for a few factors. First of all, lower manufacturing expenses relating to the cost-cutting efforts that we mentioned that happened at the end of September. Secondly, we are expecting little bit of positive mix shift. We are rolling out some new products, the TVC, the WSS. And in addition, we also -- as we mentioned on the call, we did do some cost reductions on some of our products that actually will start taking effect fully in the second fiscal quarter.

Paul Bonenfant - Morgan Keegan

Did you have any appreciable ROADM revenue in the quarter?

Giovanni Barbarossa

No, we didn't, but on the other hand, as we said, we're very excited about something that happened again last quarter. We've been selected, as we said, for (inaudible) system, ROADM application where we're actually selling the package. The package is our own amplifier, our own optical performance monitoring, our own wavelength selective switch solution, so the customer selected us because they believe that we are the best really that can provide that kind of solution to them. And so this happened just the past quarter. And again, as we emphasized, I think it's very important to emphasize the fact that this hasn't been a 10% customer of Avanex for quite some time, so that's really in line with our strategies to diversify our greater than 10% customer base.

Paul Bonenfant - Morgan Keegan

Okay. Thank you. And one more if I might. I know that in response to John's earlier question, you mentioned you're not prepared to give guidance for the March quarter, but I'm just wondering about this time of year is when you start to negotiate contracts for the new calendar year and you start seeing what the year-over-year price declines are going to look like, so maybe a two-part question. You mentioned last quarter that you were seeing pressure from legacy products into a top customer and I'm wondering if that's been exacerbated by the deteriorating demand, if you are seeing irrational behavior from your competitors? And the second part would be what do you see? Do you see typical price declines coming in calendar year '09 or anything out of the ordinary? Thank you.

Giovanni Barbarossa

Paul, thanks, that's an excellent question. So let me say a couple things. First, in terms of price pressure, honestly, we don't really see any pressure higher than any time in the past. So it's a typical price pressure that we face in the past. In terms of the March quarter, maybe I can give you some kind of a data point, which on the other hand I want to make sure that we take it as it is. And this is the fact that our October bookings were actually stronger than usual. So it's really uncertain out there and that's why we keep very close contact with our customers to monitor the situation very frequently, because (inaudible) it's very, very reduce and we need to monitor the situation as much as we can. Again, there is no doubt some kind of uncertainty out there, but as we said, we are very excited about our engagements. One data point, which I think is important, is also the fact that none of our customers has canceled any of design activities that have with us, so we're very positive about the fact that from a new partnership production standpoint, we're actually growing from that standpoint and we see this very positive.

Paul Bonenfant - Morgan Keegan

Okay. Thanks.

Giovanni Barbarossa

You're welcome.

Operator

Thank you. And we'll go to Ajit Pai, Thomas Weisel.

Ajit Pai - Thomas Weisel Partners

Yes, good afternoon.

Mark Weinswig

Hi, Ajit.

Ajit Pai - Thomas Weisel Partners

Couple of quick questions. The first one is you talked about the cash flow is actually improving on a go-forward basis, so, relative to the $9 million you had this quarter you're forecasting a drop in revenue next quarter. But can you still expect the cash flow or the cash burn to drop to$5 million or so and extrapolating that over the next few quarters if the revenue run rate remains around $40 million what would the cash burn be based on your model after all the streamlining and restructuring is over?

Mark Weinswig

We appreciate the call, so couple of quick -- or the question, couple quick things. First of all, we enacted a cost reduction effort at the end of Q1 that actually is going to result in about $8 million to $10 million in savings on a yearly basis, so we see that being very beneficial. In addition, as we mentioned with our guidance and with the question previously, we are seeing an improvement in our mix shift with some of our new product rollouts, in addition with some of the cost reduction efforts that we had. So those are couple things that are actually benefiting the Company. On the other side we are seeing a reduction in our revenue stream as we mentioned. And just to reiterate, our cash on an operating cash flow basis, our breakeven point is about $46 million to $48 million a quarter in revenue. So if you work out the math, it can let you know where our cash burn is on a quarter-to-quarter basis.

Ajit Pai - Thomas Weisel Partners

Right, but at a $40 million revenue run rate, what kind of cash burn would you have with the new model after the mix shift and everything else?

Mark Weinswig

That's accounted for in our $46 million to $48 million cash flow break-even rate that we mentioned in the call.

Ajit Pai - Thomas Weisel Partners

Right, but how much is variable on the expense line, which is -- on the gross margin side we know what the impact would be, but when you're looking at the expense line there would be a certain drop off in expenses also if the revenue is lower, right?

Mark Weinswig

Yes. And like I said, with the cost reduction efforts that we made in the quarter, it's about $2 million per quarter and -- in benefits as a result of our work relating to our cost reduction efforts. It's also important to note that we do mainly -- we are mainly on a CM model, so, therefore, we don't really have the very large infrastructure in our manufacturing like many of our peers, so we do have much more flexibility in our operating model than almost any other company in this industry.

Ajit Pai - Thomas Weisel Partners

Got it. And now just as many of the players in the space are facing dropping revenue, and it is still a highly fragmented space, what's happening in terms of the competitive landscape? One, I think to the question that was asked just prior to mine, on the pricing front and then also on the consolidation front. Can you give us some color as to with activities heating up discussions are increasing or reducing?

Giovanni Barbarossa

Well, the attitude of all our customers towards Avanex hasn't really changed. I believe it's actually increased -- has improved over the past few months, so they do consider us a strategic supplier for those products where no doubt we have both market as well as technology leadership. So from that standpoint, the level of engagement, it's high and we'll keep increasing it as much as we can. That's one of my priorities, as I said, and one of the really strategic aspects that we're really focusing on. In terms of the price pressure and so forth, as I said, there isn't really nothing extraordinary from that standpoint. This is really affecting everybody equally, I believe, and I think from our side what we're trying to do is really as I said focus on new product introductions, on -- for example, really winning that kind of business which has been captive for several years and which is available out there. This is something which I really want to emphasize. If you look at all of the OEMs out there that still manufacture their own amplifiers, we could really take advantage of our scale, our technology leadership, our resources and our intellectual property to really do a good job there and take that business from our OEMs at the time when they don't buy amplifiers on the (inaudible) market.

Ajit Pai - Thomas Weisel Partners

Got it. Thank you.

Giovanni Barbarossa

You're welcome.

Operator

We'll go next to Todd Kaufman, Raymond James.

Todd Kaufman - Raymond James

Thanks very much. Specifically as it relates to your Tellabs business, which I think you were doing comfortably around $10 million a quarter, it looks like there has been a material change there. Were you displaced by a competitor or did end demand for that Tellabs system product just dry up?

Giovanni Barbarossa

Well, no, absolutely. We were not displaced by a competitor. I don't believe that's the case at all. Actually, if you look at the engagement level we have for the next generation product that's actually pretty high and we're -- we're actually trying to leverage the product on which we are working for the future to keep our market share high at Tellabs. So that's a customer that we expect to come back soon. Of course, as we said before the visibility is still pretty poor, but on the other hand we keep the engagement with Tellabs pretty high.

Todd Kaufman - Raymond James

So, in the recent quarter, that was just weaker demand for your product -- for that system product at Tellabs?

Giovanni Barbarossa

Absolutely.

Todd Kaufman - Raymond James

Okay. Thank you very much.

Mark Weinswig

Thank you, Todd.

Giovanni Barbarossa

Thank you.

Operator

And it does appear there are no further questions at this time. So I'll turn the conference back over to management for any additional or closing remarks.

Giovanni Barbarossa

So thank you very much for your continued interest in Avanex. We'll be looking forward to talk to you in the near future. Thank you.

Operator

Ladies and gentlemen, that does conclude today's conference. Thank you for your participation. You may disconnect at this time.

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