Bruce McClelland: Yes. So, I think my comment was — I had bookings in my head when I made the comment, Tim. So part of the strong bookings in Q1 clearly is out of that region with the new wins we’ve already announced and the new products we’re ramping there. From a 10% customer perspective, we may end up a little short of that on the full year, but we’ll have to see how the second half plays out. And certainly, we’d love to see that happen.
Timothy Savageaux: And just quickly on that, did you — how many 10% customers did you have in the quarter? Just kind of the usual or…
Bruce McClelland: Yes, exactly same as we had on Verizon was our 10%-plus customer in the quarter.
Timothy Savageaux: And congrats on the quarter and the outlook.
Operator: Our next question is from Dave Kang with B. Riley Securities.
Ku Kang: My first question is your book bill for IP Optical 1.6. Just wondering if it was due to any kind of order pull-ins if you can provide additional color on that?
Bruce McClelland: Well, I guess I’d describe it as building backlog for — not just for this quarter but for future quarters, Dave. So, I mentioned the one large federal defense industry booking that was certainly part of the backlog that we’re building, which will ship over the next 12 months — and then there’s another portion of that, that books as we go forward. So certainly, that’s building good backlog for the remainder of the year. Similarly, bookings out of the India region help us build backlog for future quarters. So, I certainly don’t think of them as pull-ins. They’re simply giving us good visibility into demand in future quarters. And it certainly makes the supply chain-related activities more predictable that way as well.
Ku Kang: Got it. Now I know that you don’t quantify backlog, but just wondering if you can provide additional color as far as the mix between IP optical and SBC or CNA.
Bruce McClelland: Yes. So, the bookings or the backlog obviously created in the first quarter were stronger around the IP and optical portion of the portfolio. We have a very strong bookings position obviously around the maintenance portion of our Cloud & Edge business. As I mentioned, more than 90% of the projected revenue this quarter is already covered under backlog or secure contracts. So, we’ve got a pretty healthy backlog for the next couple of quarters, yes.
Ku Kang: Got it. And then you talked about selling more chassis in first quarter, and that’s why your margins were below 50%, but then you’re kind of guiding to mid-50s second half as you’re going to sell more line cards. Is that one of the drivers for margin expansion?
Bruce McClelland: Yes. I think there’s 2 or 3 drivers. So certainly, that’s one of them that some of the equipment that we’re shipping last quarter and this quarter, as you know, is building out the optical underlay, the optical line for the deployments, and those are always at lower margin. So, as we fill that in with transponders, obviously, that reverses and improves dramatically on the margins. That’s a piece of it. The second piece is just regional mix. As we start off the year, obviously, there’s always a mix of how much is in Europe, how much North America, how much India, et cetera, with India being stronger, that’s pulled margins down somewhat in the first half and the visibility we have to growth in the other regions help improve the gross margin.
And then the third factor is always around the volume of the business. As you saw in the fourth quarter, I think we did $97 million of IP optical as we get into the higher revenue level, that clearly helps with fixed cost absorption adds another 300 or 400 basis points just from a pure volume perspective.
Ku Kang: Got it. And my last question is on India. I guess most of the revenues are coming from Airtel. What about the other 2 guys and Vodafone, any opportunities, especially I’m assuming Huawei is in their either geo or ?
Bruce McClelland: Yes. So, we do business with all the operators there, Geo, Vodafone, Idea I mentioned TATA teleservices on the commercial or the enterprise side. they’re not at the level of business we’re doing with Bharti. And we do a mix of business in the region. Some of it’s on our IP optical portfolio, but we also have a very good presence with our Cloud and Edge business as well. It’s at a lower level of revenue, but it’s a higher margin, higher profitable business. So that blend helps us. And clearly, we have ambitions to grow our share in the region.
Operator: Our next question is from Greg Mesniaeff with WestPark Capital.
Gregory Mesniaeff: Yes. Question on the margin guidance you gave for IP Optical and what you just reported. Can you talk a little bit about component pricing and how you’re managing those inputs? Is there just an improving component pricing environment that you’re dealing with? Or are you attempting to redesign some of your products and design out some of the components that you may not need as much anymore?
Bruce McClelland: Yes. Good question, Greg. So, the last 18 months, we’ve seen almost no component or cost improvements. Normally, you’ll see a 2%, 3%, 4% improvement on an annual basis just through negotiation just through cost improvements, et cetera. We haven’t seen that for 18 months. We do anticipate seeing a little bit of that start to happen in the second half of the year. And obviously, you’ve seen the supply situation shift around pretty dramatically on not only key components, but memory components, connectors, et cetera. So, we do anticipate seeing some improvement in the second half. And again, as volumes just get higher, it gets better as well. So, we’ll see how the year progresses. But I think — the other part of your question around designing out problematic components, that’s definitely a part of the agenda that we’ve been working on half a dozen or so designs that have been re-spinning to remove either short supply components or higher cost components, and we see some of those designs start to kick in early in the third quarter that helps as well.
