Good afternoon. Welcome to the Aviat Networks Second Quarter Fiscal 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Mr. Keith Fanneron , Vice President of Global Finance and Investor Relations. Thank you. You may begin.
Thank you, and welcome to Aviat Networks' Second Quarter Fiscal 2022 Results Conference Call and Webcast. You can find our Form 10-Q press release and updated investor presentation in the IR section of our website at www.aviatnetworks.com, along with a replay of today's call in approximately two hours. With me today are Pete Smith, Aviat's President and CEO, who will begin with opening remarks on the company's fiscal second quarter, followed by David Gray, our CFO, who will review the financial results for the quarter and first half of fiscal 2022. Pete will then provide closing remarks on Aviat's strategy and outlook, followed by Q&A. As a reminder, during today's call and webcast, management may make forward-looking statements regarding Aviat's business, including but not limited to statements relating to financial projections, business drivers, new products and expansions, the impact of COVID-19, and economic activity in different regions.
These and other forward-looking statements reflect the company's opinions only as of the date of this call and webcast and involve assumptions, risks, and uncertainties that could cause actual results to differ materially from those statements. Additional information on factors that could cause actual results to differ materially from the statements made on this call can be found in our annual report on Form 10-K, filed with the SEC on August 25th, 2021. The company undertakes no obligation to revise or make public any revision of these forward-looking statements in light of new information or future events. Additionally, during today's call and webcast, management will reference both GAAP and non-GAAP financial measures. Please refer to our press release, which is available in the IR section of our website at www.aviatnetworks.com and financial tables therein, which include a GAAP to non-GAAP reconciliation and other supplemental financial information.
At this time, I'd like to turn the call over to Aviat's President and CEO, Pete Smith. Pete?
Thanks, Keith, and good afternoon, everyone. Thanks for joining us to review a successful quarter. The company continued to execute on our key long-term focus areas of growth, margin expansion, and meaningful bottom-line improvements despite continued supply chain and inflationary challenges. The Aviat team commitment resulted in revenue of $77.9 million, the highest quarterly revenue since Q1 of fiscal year 2016, driven by international growth of 25% versus last year. EBITDA margins of 13% continued rock-solid balance sheet and liquidity position, increased pace of share buybacks. These results would not have been possible without the tireless dedication and execution of our operations team, engineering team, and supplier partners in an incredibly challenging environment. Because supply chain has dominated the conversation over the past 12+ months, let's address the environment from Aviat's perspective. We experienced fewer supply interruptions, but we still experienced interruptions.
Lead times did not improve, but fortunately, there were no time pushouts. This is a sign of stabilization. The semiconductor allocation environment remains. We have invested to design out the most problematic suppliers. We remain subject to the risk of a supplier pushout and decommits late in the quarter. The most significant question: When does the supply environment get better? This is difficult to predict, but we feel that the environment will moderate in the April - June timeframe, and most, hopefully all, of the supply chain problems are behind us at the end of December. Now, let's move to the key highlights of the second quarter, which include our Multi-Band XD launch, high availability routing software factory acceptance test success, strong demand environment linked to RDOF, the infrastructure bill, and spectrum auctions, EMEA growth, share buybacks.
In the quarter, Aviat released a new enhancement to our Multi-Band product line. Multi-Band XD, or extended distance, increases the reach of 10 Gbps links over distances up to 20 km to support 5G and rural broadband applications. To achieve comparable performance, competitive Multi-Band solutions require up to four times the hardware, making them costly and impractical for tower deployments, leaving high-cost fiber as the only option. Now, with Multi-Band XD, operators can significantly lower their total cost of ownership by up to 90% when compared to fiber alternatives. Simply, this innovation makes Aviat more competitive versus fiber. In the previous quarter, Aviat announced release of our new high availability routing software to improve the reliability of critical networks of all kinds. This quarter, we passed a significant milestone with the successful completion of Factory Acceptance Test, or FAT, with a large U.S. state customer.
We replicated the entire state network in our facility in Austin, Texas, and subjected the system to real-world stress and performance testing. The software performed flawlessly. Aviat is one of only a few vendors offering high availability routing, and we have a rapidly growing pipeline of deals for this new software. This opens an additional $300 million of market opportunity for Aviat. The environment for Aviat's offerings continue to improve. Let's touch on the Rural Digital Opportunity Fund, the infrastructure bill, and the recent spectrum auction. We remain well-positioned for the rollout of the Rural Digital Opportunity Fund, or RDOF. As we track the RDOF winners, Aviat customers are earmarked for more than $3 billion of funding. In the quarter, we announced a new customer, Wisper Internet, in the space. In November 2021, the U.S. passed the Bipartisan Infrastructure Legislation, which appropriates $65 billion for broadband infrastructure deployment.
As a U.S. company, Aviat is well-positioned to participate in serving the 42 million Americans with broadband coverage or who lack contemporary bandwidth. The FCC recently completed a $22 billion auction, known as Auction 110, for the 3.45 GHz-3.55 GHz spectrum. The second biggest winner was DISH, our previously announced customer. As this spectrum is utilized, Aviat's backhaul business will be positively impacted. Our international growth of 25% was driven by our Europe and Africa regions. In previous earnings calls, we discussed improvements in the team and leadership. We have our first proof point internationally where selling on value and Aviat's differentiation works. Some highlights include a win with an important Southeastern European mobile operator and momentum with a U.K. private network customer.
We see the preparations for several 5G deployments in Africa, and we believe our portfolio has the best value proposition on the market for 5G in Africa. This preparation work suggests the future development of a favorable 5G demand environment. We accelerated the pace of share buybacks during Q2, repurchasing almost 2 million of Aviat stock and exhausting the previous board authorization. As announced, the board authorized a further $10 million share repurchase plan, and we anticipate executing on the new plan opportunistically in the subsequent quarters. Before turning the call over to David, let me provide a couple of additional observations and insights. First, this was a very good quarter and first half of our fiscal year. We remain focused and continue to execute, and those collective efforts are reflected in our financial and operational results.
We've continued to demonstrate our ability to grow and to take share of demand. Looking forward, we see three significant drivers, 5G, private networks, and rural broadband, and believe we are well-positioned to capture significant opportunities with our differentiated products, software, and services offerings. With that, let me turn the call over to David to review our financials before coming back for some final comments. David?
Thank you, Pete, and good afternoon, everyone. During my remarks today, I will review some of the key second quarter and first half fiscal 2022 financial highlights, noting our detailed financials can be found in our 10-Q and press release, both of which were filed this afternoon. As a reminder, all comparisons discussed today are between the second quarter of fiscal 2022 and the second quarter of fiscal 2021, unless noted otherwise. For the second quarter, we reported total revenues of $77.9 million, as compared to $70.5 million for the same period last year, an increase of $7.4 million or 10.4%, driven by international sales growth and continued strength in U.S. private networks. Sequentially, revenue increased by $4.7 million or 6.4%.
As Pete mentioned, our total revenue for the second quarter was the highest since our first quarter of fiscal 2016. North America, which comprised 66% of total revenue for the second quarter, was $51.0 million, an increase of $1.9 million or 3.8% from the same period last year, driven primarily by our private networks business. International revenue was $26.8 million for the quarter, an increase of $5.4 million or 25.5% from the same period last year. We are again pleased that our backlog continues to remain above $200 million, even after recognizing our highest quarterly revenues in over six years, because of our innovative and differentiated product portfolio.
Gross margins for the quarter were 36.2% and 36.3% on a GAAP and non-GAAP basis as compared to 38.2% and 38.3% in the prior- year. Gross margins remained under pressure from inflationary headwinds and expedite costs related to supply chain disruptions, but improved sequentially from Q1 by 60 basis points. This is consistent with our prior earnings commentary, where we noted that price actions to offset inflation would gain momentum as the year progressed. Second quarter GAAP operating expenses were $19.9 million, and second quarter non-GAAP operating expenses, which exclude the impact of restructuring charges and share-based compensation, were $19.2 million. GAAP and non-GAAP OpEx were $0.8 million and $0.9 million higher than the prior- year, respectively.
The increase was driven by higher R&D costs incurred to complete the design out of problematic vendors as well as higher commissions in line with strong orders and sales. Second quarter GAAP net income was $5.7 million compared to $6.6 million last year. The decline was wholly attributable to a $1.8 million higher GAAP tax provision in the current quarter, which was from the release of the U.S. deferred tax asset valuation allowance as reported in our fiscal Q3 2021 results. As a reminder, the increase in tax provision year-over-year will not increase our cash taxes paid. The company has over $500 million of NOLs that will continue to generate shareholder value via minimal cash tax payments for the foreseeable future.
Second quarter non-GAAP net income, which excludes restructuring charges, share-based comp, and non-cash tax provision, was $8.5 million compared to $8.4 million for the same period last year. Second quarter non-GAAP EPS came in at $0.71 per share compared to $0.74 per share for the same period last year. Adjusted EBITDA for the second quarter was $10.1 million, which was flat to the prior- year. Adjusted EBITDA margins were 13.1% for the quarter. Moving on to the balance sheet. Our cash and cash equivalents at the end of the second quarter were $42.3 million. We continue to have no debt. During Q2, we continued to increase investment in working capital to facilitate higher sales growth and protect ourselves from supply chain disruptions.
Our strong balance sheet permits us to amass component supply and invest in international growth projects. As a result, accounts receivable and unbilled receivables grew by $12.9 million in the quarter. Additionally, higher international growth typically has longer payment terms than North American customers. Also grew by $2.5 million in the quarter as we added more supply chain buffer stock. AR and inventory growth was only partially offset by current liabilities, which grew by $4.0 million in the quarter. As a result of these working capital increases and $2 million of stock buybacks in the quarter, net cash decreased sequentially from the first quarter by $5.0 million and by $0.7 million from Q2 of the prior- year. We expect this working capital dynamic to moderate in subsequent quarters, returning us to strong positive cash generation.
Regardless, our balance sheet remains very solid, leaving us well positioned to execute our long-term plans. With that, I will turn it back to Pete for some final comments. Pete?
Thanks, David. Just a few additional comments before opening up for Q&A. I'm extremely proud of the entire Aviat team for their significant contributions to our results for the second quarter of fiscal year 2022. We continue to execute well given the constrained supply situation and inflationary environment. Despite these challenges based on our first half performance, we are raising our full- year guidance as follows. Revenue for fiscal year 2022 to be in the range of $290 million-$298 million, and adjusted EBITDA to be in the range of $37 million-$39 million. Providing our customers with the most advanced, reliable, and best total cost of ownership systems for mission-critical work and our shareholders with profitable growth remains our goal. With that, operator, open it up for questions.
Thank you. If you would like to signal with questions, please press star one on your touchtone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star one if you would like to signal, and we'll pause for just a moment. Our first question will come from Scott Searle with Roth Capital.
Hey, good afternoon, and thanks for taking my questions. Nice job on the quarter. Very difficult operating environment. Hey, maybe, Pete, just to dive in quickly on the guidance for the fiscal year, it looks like it would probably imply that you're down a little bit sequentially into the March quarter, typical seasonality. Is that how we should be thinking of it, above consensus expectations, but down a little bit sequentially from the December results?
Yeah. You know, we've talked in the past about seasonality. Some years there are seasonality and some not, being a project-based business. You know, what drives the seasonality when we have it is year-end buying principally from our government customers, and we certainly had that this year.
Okay. Maybe to dive in on the software component. I think you indicated about a $300 billion TAM on that front. I wonder if you could expand on that a little bit in terms of software contribution maybe near term and how you start to penetrate that opportunity.
Right. That's around our routing, right? Where we have High Availability routing software for a state network, and that project went well. We cited that that's a $300 million TAM. You know, what we'll be selling when we have those wins, we will have you know, microwave radio router and the embedded software. Now that we've proven ourselves, our funnel is starting to grow. That's when we sell that embedded routing software, that'll be as embedded software. With respect to our overall software, we're reluctant to break out the embedded software as a standalone because we can only sell it in conjunction with hardware.
Just to keep going on this, we do have our FAS, which is a standalone software, but it's not. It's helped our margins and over the past couple years, but it's not material enough to break out.
Great.
Is that helpful?
Perfect. Maybe if I could jump in on the RDOF front. It sounds like some of these RDOF deployments are starting to get underway. I think to- date, you've seen very little, if any, contribution. I think you articulated a $3 billion opportunity with existing customers. How do you expect that to flow in? If you could as well, the infrastructure bill seems like it's coming behind it. I'm sure there's some politics probably in terms of the allocations and timelines there, but there's been a big push in terms of American made, and you guys certainly fit that bill. I guess, how does RDOF kinda flow into the current calendar year, and where do we start to see the benefits from the infrastructure bill starting to kick in?
Yeah. We think that we're not aware of any RDOF spending with Aviat yet, so it's all yet to come. That's upside for the business. Our best estimate of when we can expect to see an RDOF impact is in the back half of this calendar year. It's in front of us, all of it. Then the broadband infrastructure fund or, for the policy wonks, H.R. 3684, there's four steps for implementation. First, the FCC needs to update their maps, and we think that's in the summertime of this calendar year. The Commerce Department is creating a process for states to apply, and that application, from what's been published, is May 2022.
The states will develop their plan for permission, I mean, for submission, and then they'll be reviewed and approved by the Commerce Department. We think that that's, you know, the end of 2022 to the beginning of 2023 for that funding to make an impact.
Great. Perfect. Lastly, if I could, international had a great quarter. You're up 25% year-over-year. It seems like looking at it, geographically, Latin America and Middle East and Africa did well. Is that you benefiting from Huawei tear- outs or Huawei being less visible? Then on the European front, big opportunities there, I think, in terms of what you're starting to win hasn't shown up in the numbers yet. When do we expect Europe to start to kick in? Thanks.
You know, when we report our segments, Europe is up, driven principally by the private network in the U.K. Secondly, we did have some good growth in the Europe region driven by a Huawei share gain, that was the Southeastern Europe network operator. Then thirdly, on Africa, we are seeing some share gain from Huawei. What we're finding is that a lot of our business in Africa this quarter was around 5G deployment, so getting the sites prepped and getting demos done. We think that that's gonna bode well for the Africa region going forward.
Great. Thank you.
Great. Great question. Thanks, Scott.
Our next question will.
All right.
Oh, thank you. Our next question will come from Dave Kang with B. Riley.
Thank you. Good afternoon. I guess my first question is, I believe you said regarding the supply chain situation that it should start to ease post-June. How should we think about gross margin in calendar second half? Does it go back to like, you know, 38% or so? Can you just provide some more color on what to expect?
Hey, Dave. I would comment on that by saying yes, you know, we're still on track with what we said previously as far as our pricing actions being able to fully offset the cost increases that we've been seeing by Q4 of this year. Looking out at that quarter and beyond, you know, we still expect the overall inflationary impact to be somewhat dilutionary because even though our price actions will offset dollar- for- dollar, you're also, you know, increasing the denominator while holding the numerator steady. That will have, you know, some impact. We do expect a s the momentum continues to unfold here, we'll be able to hold on to those pricing gains and start seeing some better accretion on the gross margin line.
Dave, to just add on that, you know, we're, you know, it'll be a little while before we give guidance for fiscal year 2023. The other what we'll need to balance is how much traction we have on our software, you know, on our innovative new products versus the international growth. You know, David just said one important thing is that we still maintain that we're going to get back to parity from cost price in our April to June timeframe. Then we're back to where we were before this environment took hold. It'll be our margin improvements will be predicated on mix and capturing more software and more innovation.
Got it. My second question is on you talked about having various trials, number of trials last year that you expect, you know, those will go into production this year. Can you just provide us or give us an update or some data points, exact, you know, how many trials you had and how many you expected to go into production this year?
Well, I'm struggling with a little bit what I meant by the trials, but let me give you the one that I'm ready to prepare. We talked a lot about Multi-Band, our XD, our new product we have, that's opened up another $50 million of TAM versus fiber. We're in two trials with lead customers. On the High Availability software, you know, we've passed the FAT with a state network customer, and we've sold that to maybe a half a dozen other customers. The pipeline on the high availability routing software, we have another five or 10 customers behind there. When we think about our pipeline, we kind of parse it out by the innovative products.
I think, you know, to be as responsive as possible to your question, on the Multi-Band XD, we have two. We have more customers on the high availability routing software, and we have about half a dozen that are queued up for trials.
Got it. My last question is on OpEx. It was up approximately, what, $1 million sequentially to $30 million or SG&A. How should we think about OpEx going forward?
Well, I think it's safe to say that we believe that our Q2 is probably the high watermark for OpEx in this fiscal year. Some of those extra expenses that were noted in the earlier comments should not recur, so they should moderate somewhat in the back half. You know, that'll also be balanced against some modest seasonality that typically exists in our OpEx. It should fall back a little bit and be more in line with what we've seen in previous years.
Got it. Thank you.
Thank you. Our next question will come from Tim Savageaux with Northland Capital Markets.
Good afternoon.
Hi, Tim.
Hey, how's it going? I'm trying to think about how to frame this question, and I guess I'll start kind of with the gross margin approach. You know, mix U.S. versus international is typically an important factor. I wanna think about that both short term and long term. In the quarter you just reported, I think you were able to increase gross margins by what you said 60 basis points, despite a much higher international mix. I guess start, you know, question one, how did you do that? David, I wonder if you can specifically frame the supply impact on that, whether that's a couple hundred basis points or what have you. Longer term, you know, a lot of what you're talking about opportunity-wise, you know, appears pretty U.S.-focused, right? RDOF, DISH, other state level.
Should we think about that U.S. mix increasing and bringing gross margins up with it, or are there other dynamics at play here as we go through the rest of the year?
Okay. I'll speak to the gross margin first, and then Pete can talk to the international versus domestic mix. For the quarter, you know, the cost increases you know impacted our margins by roughly 340 basis points negatively. That was offset partially by our price recovery actions that added about 230 basis points. That's about 2 x what we reported in our first quarter. You're right, the international strength did have a bit of a dilutive effect by about 80-90 basis points in the quarter. That kind of is a walk year-over-year from a margin perspective.
You know, we again continue to expect the pricing actions to gain traction in future quarters to help offset those inflationary pressures that we've seen. Right?
Tim, on the mix, right? We've said that our long-term target gross margin is 40%, and the way we were you know planning on getting there was through you know hardware innovation and software. You know, as we've gotten traction with the international team, we think you know we think that there's a good growth opportunity there that we're digging into, but we have our first proof point. I think your question is when RDOF kicks in and the infrastructure fund kicks in, will that drive more growth in the U.S. side? Yes, that is more margin accretive.
You know, one of the, you know, I gave my best estimates on when that funding will hit, and we wanna keep our you know, regional mix model the same, 2/3 North America, 1/3 the rest of the world. We will revisit that as that funding starts to flow, but there's no denying that when it does, it'll be margin accretive for us. Oh, I think
Sorry, I'm on mute.
Oh, I'm sorry, go ahead.
It was a really interesting question too. Too bad. No, gonna stick with RDOF. You mentioned you'd won awards, I think backed by with carriers or backed by $3 billion in awards. Historically, I wanna ask about you at one time estimated kind of a TAM range for Aviat in the 2%-4% range based on that network build cost or maybe even based on those awards. You know, as you have more experience with these deals and are winning a lot of them, is that still a reasonable range? Any bias toward the high and low- end or, you know, kind of any update in general on how you see your market opportunity out of those award funds or award builds?
Yeah, I would say we're the same, right? The reason we put the $3 billion number in last time was, you know, you asked a question that we didn't have last time, was of your winners, how much does it represent an opportunity? $3 billion. We would stick with the 2%-4% of the funding goes to microwave. You know, in our investor presentation, we think that we have 38% share and, you know, I wouldn't say that any of that's materially changed. As you kind of model our potential upside when the RDOF funding, I would say that the numbers are the same.
Great. That, you know, that $3 billion number is pretty much the total amount of awards to fixed wireless carriers. Is that coincidental or is there anything outstanding there or have you kinda won 'em all?
Let me check if that's a coincidence or fact. I didn't do that totaling, but what we, you know, we'll get back to you on that. But it's
I agree.
We've gotta be pretty close to winning them all.
Yeah. Well, I'm just saying your share sounds anecdotally higher than 38%, but it really hasn't started to roll yet.
Yeah.
I figured there was limited impact looking at the flat sequential U.S. numbers from RDOF. You know, as you look at the state level, I don't know if you're seeing any funding or opportunities, you know, not for state networks, but coming out of state-level funding. I'd ask you the same question on DISH in terms of, you know, it doesn't seem like that's started to be material yet. What's your expected timing on that?
Yeah. I think you know the state funding environment is pretty stable and the positive catalyst is the infrastructure fund. There's one bit of legislation that I don't know that we fully understand with the conversion of the leftover CARES money. That could be a positive catalyst, but we don't know specifically about that. On DISH, it hasn't been material, but we're seeing signs that it will have some positive impact, let's say, in Q4 of our fiscal year.
Great. Thanks very much.
You, you're back on mute. Yeah.
Thank you. Our next question will come from Theodore O'Neill with Litchfield Hills Research.
Yeah. Congratulations on the quarter.
Thanks.
Couple of questions for you. Could sales have been higher if you hadn't had the supply chain issues in the quarter? If they could have been, do those sort of come later or do these get taken up and consumed by competitors?
Well, Theo, I'm pleased to report that we didn't miss any demand due to supply chain issues in the quarter. If you go back the past couple quarters, we said we'd missed $1 million or $2 million, but our supply chain team performed well, and we didn't miss any demand. I think that's the first time that's been the case in three or four or maybe more quarters. That's another sign that the environment is stabilizing, and I'll keep my fingers crossed that maybe the supply environment is moderating.
That's terrific. Pete, on the last quarter, you said that you're now supplying 15 of the top 30 Rural Digital Opportunity Fund winners and are in advanced discussions with five of the other of the top 30. How is that going?
Yeah, I would say we've gotten one out of the five, so let's go for 16 of the top 30.
Great. It was noted earlier, but your sales in the Africa and Middle East segment were up 30%, sequentially, and they've been, I think they've been flat for many quarters. As we sort of model out these, our own projections, should we consider that to sort of be stable at this new level, or how should we think about that?
You know, we think that, look, it was an exceptional quarter, Q2.
Okay.
We, you know, if we wanna kinda do that, our North America business was not growing as much and international was growing more. We would say that, you know, the way to look at our revised revenue guidance and just use the 2/3 North America, 1/3 split. I think that's about the color we can give. But I would say on the Africa side, as the 5G prep work is completed, then you could imagine later this calendar year of this having a positive impact. But to hedge back on that a little bit, we still see the 2/3 North America, 1/3, and we want them both to grow. That's where we're at. It's a good question.
Fair enough. Thanks very much.
Thank you.
Once again, if you would like to signal with questions, please press star one on your touch tone telephone. Again, that is star one if you would like to ask questions. Our next question will come from Aaron Martin with AIGH Investment Partners.
Hi, guys. Congratulations on the nice quarter. I appreciate the continued execution on the buyback. Quickly going back to the AR, was that increase there related to the shift in revenue, international, anything related to there, or what else do you, 'cause it's been a nice little creep up.
Yeah. This quarter it was almost entirely due to international growth, you know, if I look at the regional breakout of our AR. That was definitely a driving factor, you know, which we typically have longer payment terms with international customers in addition to the strong growth. Those are the two biggest contributing factors that again we expect that to start to come back, you know, in subsequent quarters.
You know, I think you talked about the backlog flipping over $200 million. Was it up sequentially?
We don't break out backlog on a quarterly basis because of the project nature. The other thing we would add to give you a little more insight is our book-to-bill ratio remains above one.
Okay. As I look at that on the higher backlog, is any of that a function of longer lead times and your customers having to order ahead for a little longer, or is that really emblematic of true demand?
We, you know, our private network business is long cycle, so we don't see very much acceleration of demand in that segment. We certainly haven't seen the mobile network operator space. If that's going on, we're not aware of it. I wouldn't say we have any acceleration of demand. It's really true demand.
Got it. As I think about, you know, growth over the next six, 12, you know, 24 months, what's a more important driving factor? Is it, you know, rural broadband? Is it, you know, 5G rollouts really happening? What are the bigger factors in terms of whether the growth will show up and how strong it will be for you guys over that time frame?
We have three drivers that we talk about: private networks, which is about 2/3 of our business, so that's really important. I think that's gonna be a steady grower for us. When the BIF, the infrastructure fund, kicks in, that should be a growth accelerant. The rural broadband would be a growth accelerant. 5G, we think we're in the early innings. We're really happy to see the developments, particularly in Africa, and that'll be a growth accelerant.
If you look at the in terms of the core company, the private networks is most important, but in terms of accelerating growth, the 5G and the rural broadband should be, you know, pleasant developments for us, say 1-2 years out.
Got it. You talked about a Multi-Band, how you know the customers are very excited the release. You I think you said that you know it enables a $300 million TAM expansion for you. Can you talk a little bit about your initial I guess test? Well, I don't know if you've taken any orders yet with particularly for Multi-Band and you know any quantification around the initial rollout of that product.
Yeah. The $300 million TAM expansion was with our High Availability routing software. The Multi-Band XD makes our microwave radios more competitive versus fiber. We think at that distance we've opened up to $50 million more of TAM, so that would be share gain versus fiber. We are in trials with two lead customers. Where these lead customers are is when you know where they're using fiber and the total cost of ownership of the fiber increases dramatically with link distances. Think about you know mountainous terrains or you know kind of island-based nations where there's a lot of water. Do we think that this improves the value proposition for microwave?
We're really excited that we have two significant customers that are in trials.
Okay. Then on the new 10 Gbps very long distance radio, where are you with that? Do they care about the additional capabilities, and or you know competition catching up or, what can you tell me there in terms of acceptance?
All right. The 10 Gbps radio and the Multi-Band XD are the same. That commentary is related to the Multi-Band XD radio.
Okay. Thank you very much.
Thank you.
Thanks.
Thank you. That does conclude the question-answer session. I'll now turn the conference back over to Mr. Pete Smith for any additional or closing remarks.
I'd like to thank everyone for your support and attention and interest in Aviat. Everybody, stay safe and healthy. We're looking forward to giving you an update on our progress in 90 days. Thanks, everyone.
Thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day.