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Executives

Erica Mannion - Investor Relations

Tim Jenks - Chairman, President and CEO

Cal Hoagland - Interim CFO

Analysts

Alex Henderson - Needham & Company

Jorge Rivas - Craig Hallum

NeoPhotonics Corp (NPTN) Q3 2013 Business Update Call November 14, 2013 8:00 AM ET

Operator

Welcome to the NeoPhotonics’ Third Quarter 2013 Business Update Call. This call is being webcast live on the NeoPhotonics’ Event Calendar webpage at www.neophotonics.com. This call is the property of NeoPhotonics and any recording, reproduction or transmission of this call without the expressed written consent of NeoPhotonics is prohibited. You may listen to a webcast replay of this call by going to the NeoPhotonics webpage.

I would now like to turn the call over to Erica Mannion at Sapphire Investor Relations, Investor Relations for NeoPhotonics.

Erica Mannion

Good morning. Thank you for joining us today for NeoPhotonics’ third quarter business update. With me today are Tim Jenks, Chairman and CEO, and Cal Hoagland, Interim CFO. Tim will begin with a general summary of the progress made during NeoPhotonics’ third quarter, followed by Cal who will discuss certain financial matters, our new auditor appointment, and reasons for the delay in filing.

Tim will continue with a discussion of the industry and technology trends and future growth opportunities for the -- before the Company opens the call up for questions.

The call today may contain forward-looking statements that involve risks and uncertainties. These include statements related to NeoPhotonics’ future quarterly filings, business outlook for the quarter ending December 31, 2013, future periods and industry trends, and forward-looking statements that management may make in response to questions.

Actual results may differ materially from forward-looking statements. Factors that could cause results to differ materially from these statements include those described in yesterday’s press release, as well as those detailed in the section entitled Risk Factors of the Company’s Annual and Quarterly Reports on Forms10-K and 10-Q most recently filed with the SEC.

NeoPhotonics cautions you not to place undue reliance on forward-looking statements, and that these statements speak only as of the date they are made.

Non-GAAP financial measures will be discussed today. Please visit NeoPhotonics’ Investor Relations webpage for the Company’s press release, which contains an explanation of these non-GAAP financial measures.

Before I turn the call over to Tim, I would like to mention that management will be presenting at the upcoming conferences taking place in the first quarter of 2014. Needham & Company’s Technology Conference, the week of January 13th in New York City, Stifel Nicolaus’ Technology, Media & Internet Conference, the week of February 10th in San Francisco, and Raymond James’ Institutional Investors Conference, the week of March 3rd in Orlando, Florida.

Now, I will turn the call over to CEO, Tim Jenks.

Tim Jenks

Thank you for joining us today. NeoPhotonics made solid progress during the last year and we continued that trajectory in our third quarter of 2013. We are proud to report the highest revenue in the Company’s history at $76.8 million, which was toward the higher end of our projected range of $72 million to $78 million. We continued to accelerate our 100 gigabit per second product suite.

In conjunction, we saw good results from the strategic acquisition of LAPIS Semiconductor Optical Components Unit that we closed in the first quarter, and which enhanced our 100G product portfolio. I will refer to this business henceforth as NeoPhotonics Semiconductor. And we continue to see strong traction with our 100G and Coherent products and momentum with new products in the pipeline.

We are pleased that we continue to achieve sequential growth, both organically and in the acquired NeoPhotonics Semiconductor business.

Before I continue with the usual business overview, I would like to bring your attention to the press release we sent out after the market closed yesterday, in which we stated that we will be delayed in filing our Form 10-Q. While we are working diligently to resolve the underlying issue, I believe it’s important to note that our filing delay has no impact on our ongoing business activities and progress.

I will now turn the call over to Cal Hoagland, our Interim Chief Financial Officer, to provide more details and then I’ll come back on the line to provide a more in depth update on our business progress. Cal?

Cal Hoagland

Thank you, Tim, and good morning. For those of you who may be new to NeoPhotonics, I succeeded JD Fay as Interim CFO in early September. Since that time I’ve had the pleasure of working with a dedicated team that is driving to further enhance its position as a leader in the 100G network communications space.

In our press release today we announced that Deloitte LLP has been appointed as our new audit partner, effective November 15, 2013. In addition we announced that we are delayed in filing our Form 10-Q for September 30, 2013 period due to a purchase price accounting issue, and as well, its relation to our previously announced change in auditor.

Today we are limiting our discussion to just the Revenue and Cash Balances as we are working to finish a complete review of the Purchase Price Accounting related to NeoPhotonics Semiconductor and to allow our new auditors time to review our completed Financials. As a result, we cannot make any comments on any additional line items.

As to when we will file our Q1, Q2, and Q3 financials we are not able to make an estimate at this time, but we are committed to completing them as urgently as we possibly can.

The Company’s quarterly report on Form 10-Q/A for the first quarter of 2013 previously filed with the SEC included a real estate registration tax on property acquired in Japan in the acquisition of approximately $0.5 million, as part of the purchase price of NeoPhotonics Semiconductor.

Upon a further examination as to the nature and party legally responsible for the payment of the real estate registration tax, we have determined the tax should have been expensed as an acquisition cost. As such, the Company is determined that we will need to restate our financial statements for the first and the second quarters of 2013 to reflect an increase in loss before tax of approximately $0.5 million, a decrease in cash flows from operating activities of approximately $0.5 million, and an increase in cash from investing activities of approximately $0.5 million.

We intend to complete the review of the purchase transaction and the work related to the close of our accounting records as of September 30, 2013 and for the three and nine months then ended, to make the appropriate changes in our prior financial statements, and to amend and file our quarterly reports on Forms 10-Q/A and 10-Q after completion of the appropriate work and quarterly reviews by our new auditors.

Next, I will discuss a few financial details for the third quarter of 2013.

As Tim noted our record quarterly revenue of $76.8 million represents a growth of 16.1% for the third quarter of this year over the same quarter last year. It was primarily due to; a) continued strength in our 100G products including those used in Coherent networks; b) increased revenue from NeoPhotonics Semiconductor; and c) an increase in the quarter in revenue for Access products.

NeoPhotonics Semiconductor revenue was approximately $14 million for the quarter, which was toward the high-end of our projected range for this business and contributed significantly to the quarter.

We had three customers that comprised 10% or greater revenue in the third quarter of 2013, Alcatel-Lucent was approximately 18%, Ciena was approximately 13%, and Huawei Technologies was approximately 23% of our total revenue.

On the balance sheet, we ended the third quarter with $70.9 million of cash, cash equivalents, and short-term investments. Total bank debt at September 30, 2013 was $34.2 million.

Now, I’ll provide our outlook for the fourth quarter of 2013. We anticipate revenue for the fourth quarter ending December 31, 2013 to be in the range of $70 million to $76 million. Non-GAAP gross margin is anticipated to be in the range of 24% to 28%. As a reminder, and as is customary in the industry, we negotiate pricing during the fourth quarter, which has a downward impact on margins.

This has been a summary update, as much as is possible in our current situation. However, before I conclude I would like to add that over the last two months at NeoPhotonics, I have spent considerable time working with the U.S., Japan and China teams and am very pleased to work with NeoPhotonics during this period. It has been my pleasure to be a part of such a dedicated team committed to the success of NeoPhotonics and its leadership in this space.

Also, we have strengthened our internal team and we are addressing our internal controls. I am pleased to note that Bandy Wu has joined NeoPhotonics as Vice President and Corporate Controller, reporting to me. Bandy, who was previously Controller at Micrel, has taken a very important role in the Company and I am confident that her professional experience and depth of knowledge in public company controls and reporting procedures will be an important and valuable addition.

With that, I will turn the call back over to Tim.

Tim Jenks

Thank you Cal. Notwithstanding the recent determination regarding the purchase price accounting for NeoPhotonics Semiconductor, we are pleased with our continued progress.

NeoPhotonics is a leading designer and manufacturer of photonic integrated circuit, or PIC, based optoelectronic modules and subsystems for bandwidth-intensive, high-speed communications networks. Our products enable cost-effective, high-speed data transmission and efficient allocation of bandwidth over communications networks. As network speeds have moved from 10G to 40G to 100G, we have been enjoying rapid growth with our leadership in 100G applications, as we provide a suite of solutions to customers for Coherent and other high speed networks.

Our business continues to be driven by our 100G products including those used in telecom Coherent networks, plus contributions from NeoPhotonics Semiconductor, notably also for 100G products. Revenue from our high-speed products was $28.4 million or 37% of total revenue in the third quarter. This is an increase of 31% from the third quarter of 2012. Our 100G product group was the largest contributor to our highest revenue quarter in the Company’s history. Today we have a strong suite of solutions for 100G transmission. That our customers are utilizing for next generation designs due to superior performance as well as cost competitiveness.

We continue to work on increasing our content per port in 100G systems, and we believe that our percent of revenue in the 100G business is one of the highest of companies in the market for optical modules and subsystems, and we continue to see expectations for ramping in this early part of a multi-year investment cycle for 100G systems.

In the industry going forward, we expect to see modest increases in carrier CapEx, such as was recently announced by Verizon, and new program awards for 100G transport and metro deployments, which we would expect to result in increasing demand conditions over time.

The China market in the first three quarter of the year was slower than previously expected, and we anticipate this to continue into the fourth quarter as large tenders announced by two of China’s largest carriers have taken longer to be awarded than originally estimated by our analysts and our customers. Recently we have seen some large tenders being awarded for LTE deployments, and we anticipate that wireline deployments will start to pick up as well within 2014.

We have been delivering strong growth for many quarters, and would expect an increase in the economic growth in China could be accompanied by stronger demand from China carriers and their network equipment suppliers. In turn this would be beneficial to our top-line and create more leverage in our operating model. We believe that tender awards in China for 100G network deployments will strengthen our product mix and our market position as we participate in those network upgrades.

We have been investing in these products for several years and we believe we have a competitive advantage to continue to support the expected growth in the market for 100G deployments over the longer term. In our last two quarterly calls, I noted that we added considerable manufacturing capacity which is just now beginning to be utilized as intended. With this action, we have necessary capacity for increasing volumes and at competitive cost.

Specific to 100G, we now have customer design spanning all of our defined Tier-1 customers including 6 different product families, all of which are in production. For our speed and agility product group, now 100G products constitute 54% of the total group and, as I mentioned, includes all of our top tier customers.

In addition, we believe we are currently the number one supplier of coherent receivers to transport systems in the industry, and the number one volume supplier of narrow line width lasers for coherent applications over the last two years. For single mode 100G Ethernet client side transceivers, we believe we are the number one supplier of lasers and laser driver ICs for these modules and the number two volume supplier of optical transceiver modules themselves, resulting in our participating in the rapidly growing 100G client side market in two significant ways.

We believe that Coherent is a sea change to network architectures, allowing for higher and higher data rates over longer distances, as customers continue to demand more bandwidth. Demand for speed is driven in part by massive data traffic demands as well as new LTE wireless installations, which generally leads to the need for upgrades in telco backbone networks. We expect the world’s largest network equipment manufacturers will capture the largest share of the demand for new installations and we are fortunate to count these Tier-1 customers as long standing customers and as customers for our 100G Coherent product suite.

Analysts predict that while the overall telecom market will be relatively flat over the near-term, volume deployments of 100G coherent optical interfaces in the core telecom network will continue to grow in 2014 and beyond as service providers continue to upgrade their core networks to 100G coherent and begin targeted rollouts of coherent interfaces in metro and regional networks. Then as our system equipment customers continue to release their cost and performance optimized 2nd and 3rd generation 100G platforms, this will also boost demand.

I will now talk about our Product Groups.

In the third quarter of 2013, revenue from Speed and Agility products was approximately 69% of our total revenue which is consistent with the prior quarter. Of this, revenue from our 40G and 100G products was approximately 37% of total revenue, up $7 million or 31% from the third quarter of 2012. Revenue from this product group was slightly lower by $0.9 million in the third quarter than in the second quarter, when it had increased 33% compared with the first quarter.

This resulted in the slight amount of excess inventory at key customers, which we believe has now been consumed. This product group has been on an accelerated growth path over the last two years, and with Metro deployments beginning in 2014, we expect this trend to continue. We believe that essentially all of our 100G product families are early in their life cycles and we expect to leverage these product families for years to come. We are building on our proprietary PIC technology platform to introduce new and enhanced products and gain new customer design wins.

In the third quarter, revenue attributable to our Access product group was approximately 23% of our total revenue, which is up $2.7 million sequentially in dollar terms. Within this group are point-to-point networks, certain wireless backhauling applications, and passive optical networks, or PON.

Our PON products have been declining slowly over the last two years. Due to plateaued growth in PON and continued pricing pressure in the market, we do not expect to see a growth trend in PON over the foreseeable future. As a result we have trimmed our spending in this area in order to enhance our 100G focus. PON products are relatively low margin, such that a slow decline in these products as they mature will not be adverse to overall margin or profitability. We anticipate that this segment will decline as a percent of our total revenue overtime.

And I’d like to talk a bit about industry trends.

It is important to recognize that virtually all of 100G Coherent shipments to-date are for long haul transport systems; that is, for system platforms designed for long haul. Based on inputs from our customers, we expect we will begin to see systems designed specifically for Metro deployments in the second half of 2014.

This is important, as today’s design wins are tomorrow’s shipments, and in the 10G world we saw that Metro deployments could result in 3X volume increases versus long haul overtime. These Metro applications are also in the NeoPhotonics technology, sweet spot, where we offer distinct benefits in performance, density, reliability and customization. We think we are well positioned for this growth in terms of product offerings, design slots and manufacturing capacity.

The acceleration of mobile network deployments including 4G/LTE is increasing industry CapEx spending, as we see in announcements, notably from China, but in turn this drives demand for 100G upgrades supporting these new networks. As carriers increase their deployment of high speed networks, there is a direct benefit to NeoPhotonics.

Next, we see the broad expansion of cloud computing through massively scaled datacenters and related infrastructure updates as beneficial, as we supply elements of high-speed connections both within and between datacenters as well as multiple products that help users connect to the cloud. And we see this trend accelerating.

Datacenter deployments of high-speed optical links are supporting several key trends, including, the enterprise move from in-house IT to cloud computing and infrastructure-as-a-service, an explosion in big data processing and storage for both enterprise and consumer Internet applications, and increased efficiency and flexibility in networking equipment from advances in virtualization and software defined networks, or SDN.

These higher-level trends in turn are driving changes at the infrastructure level which overtime will be beneficial to NeoPhotonics, and are already positively impacting our business. The increased consolidation of enterprise computing and consumer Internet applications into large cloud-scale datacenters, along with more efficient use of processing resources, means higher-bandwidth interconnections both within and outside of datacenters to handle ever-increasing workloads and data traffic.

100G links are currently being deployed primarily as high-bandwidth connections between Internet routers within datacenters and central offices within telecom transport networks. 100G, which includes both our optical components and transceiver products, is still a relatively small portion of the data com market, but it is the fastest growing portion and will take share overtime, driven by the trends I just described.

In summary, the use of Coherent technologies in metro applications, increased spending in mobile, the transition to cloud computing architectures, and the expansion of storage, memory and big data, all drive increasing need for products of the type NeoPhotonics is providing.

We will continue our current efforts for further improvements in each of these areas and continue to pursue further product developments to capture new opportunities. For example, we have announced, a compact PIC-based Narrow Line width tunable laser, so-called micro-ITLA that we are sampling to major customers, a small form factor Integrated Coherent Receiver, or ICR, that enables higher port density on 100G and above coherent line cards and transponders, and our new High Dynamic Range receiver and Variable-power Integrated Coherent Receiver.

All of these products are important additions to our Coherent product suite, plus our new lower power and lower cost 100G client modules in the so-called CFP2 form factor, in both LR10 and LR4 versions, for both carrier telecom and data com applications.

We expect 100G transmission technology, which is a basis for future network design, will drive multi-year investment cycles for those companies associated with this emerging paradigm. Our product portfolio addresses these high-speed requirements in both carrier telecom and enterprise datacenter markets, and we expect to continue to be a strong player as the market expands overtime.

This concludes our formal comments and now I will ask the operator to open up the line for questions. We will try to answer your questions, but please be cognizant that the purpose of the call was to provide an update on the business. We are unable at this time to provide full third quarter financial results and we cannot provide additional financial metrics, operator?

Question-and-Answer Session

Absolutely. (Operator Instructions) We’ll take our first question from Alex Henderson from Needham.

Alex Henderson - Needham & Company

Two questions, first one sort of obvious which is I’m a little confused at why you can’t give us a little bit more detail on the full income statement given the magnitude of the accounting adjustment you’re talking about is only a $1.5 million which looks like it was in prior periods as opposed to something that would be impacting the current quarter? And can you give us at least some sense of what’s going on in your OpEx lines so that we have at least some sort of baseline to work off of?

And then second, on the demand side of the equation. Can you talk a little bit more about the timing and structure and magnitude of what you’re hearing out of China? Obviously the hockey stick of demand associated with big build has not occurred, but it does sound like China was a little stronger seasonally than it was in the prior quarter. And when would you expect that Chinese business hockey stick to start to kick in, what kind of magnitude would you think that that would look like?

Tim Jenks

With respect to the accounting questions, maybe Cal can first address that.

Cal Hoagland

What we’re dealing there was a purchase price and its allocation and that has a ripple through effect from Q1, Q2 and Q3. So we want make sure that we have that bucket did correctly between the quarters. And as also there is some mechanics of making sure that we get all the other items in there too. And then lastly we have new auditors coming and taking look at this as you recall our pervious auditors resigned effective the 15th, they indicated they were not able to complete the review prior to our filing date so we have new auditors. And they may possibly take a slightly different look at things. So those are items that are in consideration and why we are at this point in time not coming out with further information.

In regards to the OpEx line, at this point in time we can't give any further guidance in this. The acquisition of NeoSemi does have an impact on our OpEx.

Tim Jenks

I am going to go to the demand side question and specifically related to China. In prior conference calls we have talked about what we were hearing notably with China Mobile, China Telecom expressions for tenders and their volumes, which were talked about in the range of 10,000 lines. We're still hearing numbers in the high single-digit thousands for lined deployments of 100G for the same carriers, but it's not more specific now actually than it was previously.

So I would expect that in November-December there is some more clarity because all of the network equipment suppliers are dealing with vendors on share awards and supply contracts for the next year. And therefore I would expect greater clarity, but Alex I don't really have more detail to share than this.

Operator

(Operator Instructions) And we'll take our next question from Jorge Rivas from Craig Hallum. Your line is open.

Jorge Rivas - Craig Hallum

I am sorry. Can you hear me now?

Tim Jenks

Yeah go ahead Jorge.

Jorge Rivas - Craig Hallum

First question on two of your top customers, I noticed that Ciena and Huawei were down sequentially when the quarter grew a little bit, just wondering if there is anything going on there? I noticed that Ciena guided for revenues to go up 5% for the October quarter. So just trying to reconcile those different trends I guess.

Tim Jenks

Very well the, let's see we did report also that Alcatel was sequentially up and quite a bit. And so Alcatel went to 18% of revenue and then as you noted Huawei and Ciena proportionally did decline. We did also note in the prior conference call that Ciena was up quite a bit. So sequentially in the prior quarter the second quarter of Ciena was played up as their WaveLogic 3 system had launched and there was quite a surge. And then I think we are into a more normalized view.

But proportionately your observation is correct, we did see a little bit more Access business this quarter on a percent basis, but there aren't megatrends going on with any of these guys, but there are differences as to what they take in each quarter. So Ciena was strong in the second quarter and Alcatel was strong in the third quarter.

Jorge Rivas - Craig Hallum

My other question it’s about for next quarter guidance, can you give us some color on the segments and how we should expect them to perform?

Tim Jenks

Well let's see, we have -- we're guiding $70 million to $76 million for the fourth quarter the -- recall as Cal noted that in the fourth quarter we do have negotiations that happened. So as those negotiations happen in November and December timeframe depending on the customer that does have a downward impact on revenue and margin.

On a product group basis, we would generally expect things to be relatively flat. The speed and agility segment will still be the largest piece of our business. We're continuing to see strength there as well as strength overall in our 100G products, the Access business relatively flat both on a percentage basis and a revenue basis. So I wouldn't lead you to any major changes in those.

Jorge Rivas - Craig Hallum

And then one last question if I may. Can you give us the growth -- sequential growth number for 100G in the third quarter?

Tim Jenks

Sure. Hang on just one moment. So in the -- on a sequential basis the total growth let's see in 2013 third quarter the whole business is actually down just very slightly like 2% or 3%, actually 3%. We had a fair amount of inventory at the end of the second quarter, so on a sequential basis that's down just a smidgeon. And on a volume basis proportionately, is that what you're looking at?

Jorge Rivas - Craig Hallum

Yes.

Tim Jenks

Okay.

Operator

(Operator Instructions) We'll take a follow-up question from Alex Henderson from Needham.

Alex Henderson - Needham & Company

So could you give us a little bit more sense of what your timeline is on the micro-ITLA in terms of your sampling now, when does it go to full production, when do you think that that becomes a material contributor to revenues?

Tim Jenks

We are sampling that product now and our expectation is that we would have what we would refer to as general availability in Q1. And so we would expect it to be material in the second half, but with the GA in Q1 it's really in the second quarter that it's material as opposed to the first quarter, because it will just start to grow in the first quarter.

Alex Henderson - Needham & Company

And the pricing/margin associated with that product versus the existing 100G product there is, how should we be thinking about that?

Tim Jenks

Well, let's see, in general terms the 100G, the existing ITLA or integrated tunable laser assembly and the micro-ITLA aren't, they're not really direct replacements in the sense that people don’t remove and replace one and put the other one in necessarily but it is often used in new designs. There is for the smaller form factor and higher performance there is some level of price premium, but we would expect that they'll go to parity actually over the course of a year or so, but it does start off with a premium for the micro.

Alex Henderson - Needham & Company

And is there a gross margin impact on the startup cost of this product line, how should we be thinking of the feathering in the increased initial volumes, low margins, that kind of thing when you first start launching the project and how rapidly does that change from start up mode to volume production where your margins are normalized?

Tim Jenks

Well, let's see the, from a production point of view the two products have a lot of similarity in the production locations and production processing. The result of that is that there is an overlap or a crossover between the two productions, so overtime as volume increases in the micro than it becomes the dominant player in the production lines but they're to a large extent the production processes are done together and they do, they're produced in the same facility and they're produced largely sharing similar equipment.

The margin on a new product that we're just starting to produce is a little difficult to predict. If there are any teething issues than you can have, you can in some cases have a slightly lower margin although the expectation is that generally speaking it would be slightly higher overtime than the existing base product.

Alex Henderson - Needham & Company

So in the second quarter when it's going from initial launch to modest volumes, should we anticipate that the margins on the product will be lower than the corporate averages or will it be particularly new to that level?

Tim Jenks

They're highly -- you should expect it to be in line with the corporate average and I would expect that as it matures in the second half of the year it’ll be a positive contributor.

Alex Henderson - Needham & Company

And the same questions around the CFP2 form factor product and can you delineate between SR and LR?

Tim Jenks

Yes, sure, so first of all just to note, we, I know you know this Alex, but just to cover it though, we manufacture today a CFP so this 100G pluggable module. And then we go to a next generation which is approximately half the size and that's the CFP2. The CFP2 we have in variations that is both the LR4 and the LR10, you asked about SR, the short reach version, all of ours are long reach. And so we do have both the 100G provided with 10 lanes of 10G and we have the 100G provided with four lanes of 25G, so different variance both LR.

The two products have quite high internally produced content. With that high content they actually have margin profiles that are reasonably similar. And it would be different if for example lot of the content was purchased from outside but they’re actually very strong vertical integration products.

Alex Henderson - Needham & Company

And the timing of ramping these LR2 -- I mean the CFP2 form factors?

Tim Jenks

So for CFP2 that -- both versions of that product have GAs that are in the same timeframe as the last product we talked, the micro-ITLA. However, the design in there expectation is that volume will take a bit longer. So, we would be predicting that in the second half, so third quarter, fourth quarter as opposed to the micro-ITLA which I said in the second quarter.

Alex Henderson - Needham & Company

Obviously these are datacenter products, can you talk about what else you sell into the datacenter other than these two products. What portion of your -- in aggregate what portion of your business is datacenter you mention that as an area of future growth. How do you see that transitioning overtime relative to the broader mix?

Tim Jenks

Yes, so the products, first of all the datacenter products are covering both 10G and 100G. And so in 10G we’re talking about for example SFP+ 10G transceiver products and in 100G we’re talking CFP, CFP2 type transceiver products.

Today the, probably a majority of our shipments of these products go to telecos but they’re often connecting doing router connects for example between router in a datacenter and then connecting that to the telecom operator’s central office. And so there are some applications that maybe within the datacenter, but it’s often datacenter to teleco via the router interconnect on CFP. SFP+ can be more broadly used as it’s an MSA product.

Alex Henderson - Needham & Company

And the scale of the 10G piece of your business?

Tim Jenks

10G is relatively small. So, it’s single-digits for us, single-digit percent for us.

Operator

It appears there are no further questions at this time. Tim Jenks, at this time I’ll turn the conference back over to you for any additional or closing remarks.

Tim Jenks

Well, thank you to everyone for joining us today. In closing I would like to thank everyone for joining the call and given our record revenue in the quarter, it’s regrettable that we were not able to share more detail on the third quarter financial results at this time. However, as our guidance indicates, the business continues to perform well and we remain very excited about the opportunity which lies in front of us. Thank you very much.

Operator

This concludes today’s conference. Thank you for your participation.

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