Alex Henderson: Thanks for letting me in. So, I was hoping we could go back to this contract that you’ve got with this hyperscaler, three years out, $100 million annual run rate. I would think that the initial shipments are, the first year that would be fairly low. And then, it would ramp probably double to say, $50 million and then hit that $100 million. Is that kind of the cadence of that ramp, $25 million, $50 million, $100 million?
David Heard: No – what we said in the prepared remarks was the three-year contract is worth hundreds of millions of dollars. So, we believe it will start shipping in 2025 with this particular customer and, yes, get more intense in 2026, 2027, and the beginning of 2028. And then we’ll be on the new – with that particular customer, you go from the 800 gig pluggable to potentially a 1.6 T pluggable from there. So, no, it’s – the number is much larger.
Alex Henderson: So it’s larger than $25 million, $50 million to $100 million?
David Heard: Yes, it’s hundreds of millions. Yes, it’s hundreds of millions over a three-year period, not like one or two or – you know, I don’t want to get too specific, but we’re – it’s the largest that we’ve seen.
Alex Henderson: And just to be clear, that’s all pluggables. Is there additional equipment sales associated with that, or is it more, narrow than that?
David Heard: So, with a lot of these deals, what I think you will see with a lot of deals in the future is you will see us get a pluggable win for the pluggable, and then we will have to compete independently for the platform that that goes in, the GX platform, and line system that that goes in. So in many cases, we have the opportunity to not only win the pluggable, but also win the platform that that goes in. So there has – that doesn’t even count that dollar impact. Ron, anything to add there?
Ron Johnson: I don’t think I would add, is that it’s extremely compelling, right for them to ramp this quickly, because it’s a significant, improvement in cost for per given power for their network.
Alex Henderson: So the other question I had for you is you mentioned the managed optical, lines that you’re going – you’re winning in some service providers, particularly India. Can you talk a little bit about the mechanics and the economics, of that type of transaction, where you’re actually, in line with that business?
David Heard: Ron, do you want to take that?
Ron Johnson: Yes. So you’re referring to managed optical fiber networks, and these are effectively opportunities, where we work with the end customer who’s a hyperscaler and a service provider, who’s providing the actual service. And then we agree on a bespoke network for them, right, to consume and to use all on their own, for their own specific application in that particular country. And from an economic perspective it’s very much like any other service provider win where there’s a line system component, there’s services, there’s transponders, or pluggables to print on the application, and it looks very similar to any big Tier 1 service provider win.
Alex Henderson: So it’s not a high management, you know, maintenance contract piece. It’s just classic systems.
David Heard: Classic systems with the maintenance contract, and the good news is, we see the end demand, because we’re working with the webscaler. So they typically tend to build them bigger, because they’re looking to interconnect to data centers and terrestrial networks.
Alex Henderson: Great. Got it. Thanks.
David Heard: Thanks, Alex.
Operator: And that concludes our question-and-answer period. I will now turn it back to Chief Executive Officer, David Heard for closing remarks.
David Heard: Hi, thank you. 2023 was another great year for us. We delivered on our commitments that we made during our Analyst Day, and I would say, it was a pretty rough landscape. Through Q4 of 2023, we have met or exceeded our outlook in 15 out of the last 16 quarters. Our portfolio is in the best shape it’s been. We’re winning new customers globally with less than 25% of our products from legacy systems. I mean, it’s a dramatic shift from where we were three, four years ago. Well, the front half of the year, is starting off a bit sluggish, which we called out, last year as this inventory burns out. We are winning some major design wins in both systems, and subsystems that build our – competence and confidence in the back half recovery.
And our ability to grow revenue, expand share, and increase margins in EPS. So, we appreciate the support of our customers, employees, and shareholders. We’re now going to get back to work, and continue executing a very sound investment strategy and focus on continued EPS expansion. Thank you all, and have a nice afternoon or evening.
Operator: This concludes today’s conference call. Thank you for your participation, and you may now disconnect.
