Dave Kang: Got it. And my last question is, can you just talk about pricing environment, any changes up or down?
Peter Smith: Stable.
David Gray: Stable.
Dave Kang: Stable. Got it. All right. Thank you.
Operator: Thank you. One moment please for our next question. And our next question comes from the line of Tim Savageaux with Northland Capital Markets.
Tim Savageaux: Good afternoon.
Peter Smith: Hi, Tim.
Tim Savageaux: Congrats on closing the deal. Let’s see, where to begin here. The backlog commentary, and while I appreciate the growth metric. Got a few more questions on that, which is I think you gave us at last fiscal year-end, associated with that 18% gross for the backlog of $289 million given your book-to-bill commentary in the interim, or I assume that’s higher. Well, I would love to get as much specifics as I can. I assume we’re reasonably at the $300 million but do you have any color or commentary on that?
Peter Smith: I think your math there, back of the envelope is reasonable as far as north of $300 million.
David Gray: Actually, Tim, we don’t have the math broken out in front of us, but it’s pretty simple math.
Tim Savageaux: Yes. And my simple math points to a pretty darn good book-to-bill coming out of all that as well, I’d say comfortably over 1. But in that context, you seem to be and you typically see seasonal declines in revenues in Q1, given your kind of implicit Pasolink guide, you seem to be guiding to that again. So just sort of typical carrier spending behavior in certain quarters or what are you seeing in terms of typical seasonality, March down, June up, sounds like India could help that, but…
Peter Smith: Yes, just to clarify, you’re talking about calendar Q1 or Q3, right?
Tim Savageaux: That is correct. Sorry, yes.
Peter Smith: Yes, I think we would agree with your statement, Tim, with that. So we hope to do better, but we need to own the Pasolink business a little bit longer to understand the seasonality. And we’re hopeful that shortening the cycle time, working the inventory down will lead to faster delivery of product, faster revenue ramps. So I think with where we’re at right now, we would agree with your statement and we hope to improve the business where we could say, well that pattern will no longer hold. And I think that, that would be we’d have a vantage point for the fiscal year ’25 to make that statement for — make a different statement, but your statement for where we are now is most likely correct.
Tim Savageaux: I’ll take that, given today. Okay. Well, I think we might be mixing up Aviat standalone seasonality in March and in Pasolink in June. But assuming maybe some degree of uptick in Pasolink revenues, as you move into June, I mean you look to be guiding the standalone business. It’s a pretty solid growth this year, right, 7%, 8% something like that. And you look to be guiding it flat next year, which is a little – wait a minute please Pete, which is a little bit dissonant with some of the bookings and backlog and commentary that we’ve seen, that assumes that Pasolink gets to a full 140 and maybe that’s not a good assumption, but there still seems to be a lot and not flat, up 1% to 2%, I guess. And I’m not reading that kind of change in your business. So maybe we can delve into that a little bit deeper.
Peter Smith: Yes, so look for we typically guide the next fiscal year in August. And for where we’re at now, we want to be conservative and I wouldn’t read you’re right. We came out with the backlog statements, we think the core is healthy. What the analysts have said to me, if we don’t give a number, you’ll put the number together on our behalf. So you’re right to give us a bit of a hard time on the FY ’25 number. This is where we’re comfortable, but as time goes on, I would expect us to do better, but that’s the number we’re comfortable with right now.
Tim Savageaux: Yes. Don’t know if that was a hard time, just doing a little math here. But I hear you. A couple more quick ones. So obviously, the gross margins were surprisingly strong, especially given the international mix. You cited a couple of factors and you’re also very strong. You appeared to be in APAC, it might have been LATAM as well. Can you talk a little bit more about kind of what happened there in that region and how you’re able to have high end of the range gross margins with that degree of international mix?
David Gray: Yes, like I said, I think if you look at the regions where the region, where the software was most beneficial, it was in APAC. And then also in the Americas, Pete mentioned the record store revenues in the first half that also is margin accretive as well as we had some favorable easing material input costs. So that provides a bit of a tailwind to us as well. So all those factors combined really kind of a confluence of events, but again it could be a little bit lumpy, but so I think our full-year guidance is solid.
Tim Savageaux: Okay. And last one for me. You noted R&D up pretty sharply here in the quarter. I assume that’s still standalone or does that include anything from NEC given when you closed it on the one hand? And on the other, when you talk about incremental spend in R&D, is it from that elevated baseline or some other baseline?
David Gray: So the R&D does include a month worth of NEC additional costs that are contractually spelled out with them. And then we were up on just an organic basis as well. That’s a planned increase as we work to develop the product roadmap. So it was a little bit lower than we had anticipated in Q1, if you will. But I think we’re on track for kind of our full-year guidance there and not overspending in any way. It’s rationally thought out and this is what we had planned.
Tim Savageaux: Okay, fair enough. But it sounds like maybe something a little over the Q1 ’24 expense baseline? Would it be relevant for your incremental guide than Q2 per se since it’s a stub. Is that [indiscernible]?
Peter Smith: Very fair.
Tim Savageaux: All right. Great. Thanks very much.
Peter Smith: Thank you.
Operator: Thank you. I would now like to hand the call back over to CEO, Pete Smith for any closing remarks.
Peter Smith: Thanks everyone for joining. We look forward to updating you on our continued progress in about 90 days. Be safe. Talk soon.
Operator: Thank you for participating. This does conclude today’s program, and you may now disconnect.
