Good afternoon. My name is Julian and I will be your conference operator today. At this time, I would like to welcome everyone to the Viavi Solutions Fiscal First Quarter 2018 Financial Results Conference Call. All lines have been place on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Bill Ong, Head of Investor Relations, you may begin your conference.

Thank you, Julian. Welcome to Viavi Solutions first quarter fiscal year 2018 earnings call. My name is Bill Ong, Head of Investor Relations. Joining me on today’s call are Oleg Khaykin, President and CEO; and Amar Maletira, CFO. Please note this call will include forward-looking statements about the Company’s financial performance. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations. We encourage you to review our most recent SEC filings, particularly the risk factors described in those filings. The forward-looking statements including guidance we provide during this call are valid only as of today. Viavi undertakes no obligation to update these statements. Please also note that unless we state otherwise, all results except revenue are non-GAAP. We reconcile these non-GAAP results to our preliminary GAAP financials, and discuss their usefulness and limitations in today’s earnings release. The release plus our supplementary slides, which include historical financial tables are available on our website. Finally, we are recording today’s call and we’ll make the recording available by 4:30 p.m. Pacific Time this evening on our website. I would now like to turn the call over to Amar.

Thank you, Bill. Fiscal Q1 results exceeded the high end of guidance as revenue of v195.2 million topped our guidance range of $173 million to $193 million. NSE revenue was better-than-expected, primarily driven by strength in our field test instruments, partially offset by weakness in our lab and production. Compared to our expectations, we also saw some upside in OSP’s anti-counterfeiting revenue. Viavi revenue declined 7.4% year-on-year with a 9.2% decline from NSE and 2.5% decline in OSP. We are pleased with our expense management. Operating expenses at $93.1 million declined 9.4% from a year ago levels of $102.8 million. As a result, despite lower revenue levels, we achieved an overall operating margins of 15.1%, which is an expansion of 210 basis points from prior year’s operating margin of 13%. EPS at $0.11 grew $0.02 or 22.2% year-over-year and exceeded our guidance range of $.06 to $.09. Now, moving to our Q1 results by business segments, starting with NSE. NSE revenue at $140.8 million, exceeded the guidance range of $122 million to $138 million where NE revenue declined 5.7% while SE revenue fell 20.3% from a year ago. NSE gross margins at 64.7% improved 100 basis points from last year as SE gross margin of 70.7% improved 1,220 basis points, partially offset by a decline of 220 basis points in NE gross margins at 63.1%. The improvement in SE’s gross margin was a result of a higher acceptances of our assurance solutions this quarter and a favorable revenue mix as we have discontinued unprofitable product lines through the SE restructuring announced in January 2017. NSE operating expense in the quarter was $83.9 million, a reduction of 11.3% from year-ago at $94.6 million. This OPEX reduction is a result of executing SE restructuring and exceeding the annualized savings target of $35…

Thank you, Amar. We exceeded our EPS guidance range as both NSE and OSP came in above expectations, resulting in better-than-expected operating margin performance at 15.1%. For NSE, field instruments saw revenue strength, both year-on-year and sequentially. Our cable products was the major revenue driver. Cable strength is driven by DOCSIS 3.1 deployment that we expect to continue in the near future. G.fast DSL deployment however is lagging DOCSIS 3.1. We expect a pick-up in deployment G.fast in calendar 2018. Fiber saw a revenue pick-up sequentially but was down from a year-ago levels. Lab and production was noticeably weak, down significantly from a year ago levels as continued China slowdown negatively impacted our optical components customers. The SE business was off about 20% from a year ago levels, as a result of the discontinuation of unprofitable product lines and the declining mature products. The remaining SE business is a higher quality of revenues and gross margin from a year ago. Moving on to OSP. Revenue for anti-counterfeiting products was higher than expected in Q1, driven by improved customer demand. We expect our anti-counterfeiting products to follow seasonal cadence with a weaker second half in the calendar year, as our customer build rebalance and optimize their inventory followed by an expected recovery in demand in the first half of calendar 2018. We started production of 3D Sensing filters in fiscal Q1 and continued to ramp into Q2. That said, the projected revenues from 3D Sensing in fiscal Q2 is expected to be offset by declines in the anti-counterfeiting products. The October wildfires in Sonoma County has disrupted our Santa Rosa operations for about one week. I would like to express my appreciation and gratitude to our Santa Rosa operations team for their remarkable resilience in dealing with the wildfires and the professionalism they demonstrated in quickly resuming the operations. In conclusion, I would like to thank the Viavi team for delivering a strong quarter and express my appreciation to our customers and shareholders for their support. I will now turn the call over to Bill.

Thank you, Oleg. This quarter, we’ll be participating at the William Blair investor event at our San Jose office on December 12. Please note, in September, we relocated our corporate headquarters from Milpitas to San Jose, California. Julian, let’s begin the question-and-answer session. We ask everyone to limit discussion to one question and one follow-up.

Certainly. [Operator Instructions] Our first question comes from the line of Michael Genovese from MKM Partners. your line is open.

Thanks very much. Oleg, could you just provide some additional color on any NE coming in better than you expected? And when in the quarter did it become clear that it was trending better, and how do you expect it to play out over the next couple of quarters in the NE demand side?

Sure. I think, you’ve got to deconstruct the NE. Within it, we had some better-than-expected, and really I would say, the strength was driven predominantly by the cable operators and more aggressive deployment of DOCSIS 3.1. That truly is what kind of moved the needle. But also, we saw much stronger strength in mature and fiber products -- the field instruments fiber products. Now, one particular though however -- and that was mainly in North America, as I said, cable operators kind of led the charge on the -- service provider was a mixed bag, kind of normalized expected performance from one of the major customers, much weaker than expected demand from another. Europe, Asia, Latin America performed as expected. So, there was no big surprises for us there. Now, one area which was notably weak was the lab and production, and it is really driven by the slowdown in fiber optic module production in Asia. So, I mean that obviously took away some of the upside that we saw in the cable space. The other area of relative weakness was G.fast products. I think, there is a lot of expectations around getting the deployment going and it seems to be taking a much slower ramp-up than expected, which likely going to manifest itself in the -- sometime in the 2018. So, it just gives you an idea how strong the cable and some of the metro fiber products performed last quarter that more than offset relative weakness in other categories. In terms of the outlook, I think we expect our NE business to continue to be fairly solid going into this quarter. We are -- I would not go as far as saying we are seeing a lot of budget flush but I think it’s going to -- honestly…

Sounds pretty good, and I appreciate all that really good color on the market. Just secondly, on 3D Sensing, has anything changed since your last report, is there anything worth calling out different from three months ago? And when we think about modeling the December quarter, would it be single-digit millions or would it be double-digit millions...

So, I’m not going to comment on quantities or the dynamics, the only thing I’ll say, our ramp and forecast has not changed in the last 13 months. Just as we predicted last September, it’s rolling out and ramping exactly as we expected. I know there has been a lot of fluctuations and ups and downs from a number of people, but we are seeing as exactly as we expected and it’s coming in as we expected.

Our next question comes from Dmitry Netis from William Blair. Your line is open.

I’m going to stay on the 3D question, 3D Sensing question, if I may. There is a lot of confusion as far as the rev rec goes for you versus some of the other players that supply the pixels [ph] into the large customer, let’s just call it iPhone 10 that’s shipping. We all know that you are part of that design. So, can you refresh our memory or can you give us a sense of what is that rev rec, what does it look like? And are you bound by specific contractual obligations that requires you to kind of recognize the revenue maybe 30 days after the phone ships or do you recognize the revenue when you ship into the module manufacturer? I mean, how does this all work? I know you gave us some perspective last quarter, but there is plenty of confusion out there to try to sort of separate [indiscernible] here?

Sure. So, I’ll let Amar explain exactly the accounting behind it, but before I do that, first of all, let me comment, you mentioned iPhone 10, I don’t want to -- everything we talk about, I’m not going to acknowledge or comment on which product it is in. Clearly, we are ramping and I just want to make sure we abide by the NDA with our customers. And I’ll turn over to Amar to give you the accounting explanation, how this thing works.

So, Dmitry, let me give a very high-level overview of how revenue recognition works in the typical book-ship business, and it all depends on the product -- where the product is in its lifecycle. So, for any product that the customer generally -- for any product that any company books and ships and recognize revenue, the customer generally has a right to inspect the product, test it and reject it within a specified period of time. Now, if the product has been in the market for some time, companies ship the product, recognize revenues, if the payment is certain. However, every company at a total product line level will book some reserve for a certain amount of revenues for warranty support, for replacements, for rejections, so on and so forth. Now, in the case of any brand new products, in this case with the 3D Sensing filters we are talking about, there is no history of rejections et cetera. That does not imply that we are having any issues. In fact, we tracking to plan from a product quality perspective, but this is a brand new product that we are trying to ship into the customers. So, initially, till such time, we develop our track record and a history of the replacements or rejections as a result of inspections, we will basically defer the revenue till the end of the specified inspection period. Once we determine the history, maybe in a quarter or so, then, we will go back to a normal book-ship revenue recognition for any product. So, that’s what it is. It is as simple as that. There is nothing special about how we recognize versus other companies do. It is just that we are in -- we have introduced a brand new product for which we do not have a history.

Okay. And that contract covers you for how long, like for the lifetime of this specific customer deployment or…

No, there is a specified period and I will not get into the specifics of the contract. It is for a specified number of days. And it is not for the life time or for the entire year. This is for specified number of days to allow the customers to inspect, to test and to reject. And this is with any products we ship.

And at this point, we have a kind of earlier ramp in the Q1 and now production in Q2. I mean by next quarter, we should have a decent history looking back in the beginning of the ramp in Q1 and kind of steady state production in Q2. And at that point time, we will be able to adjust our policy, how we book and what percentage of revenue we book as the reserve, probably around Q3, I mean depending how the history plays out.

I see. It’s very helpful. So, once the evidence…

And also keep in mind, unlike others in the supply chain, we almost -- we don’t have the kind of lead time the others have. So, we are almost 3 to 4, 5, 6 weeks –

We’re just in time.

Just in time. So, the history is developing right now. For some other companies, the history might have already developed.

So, for example, if we have a lead time of 3 to 6 months, you start building products way in advance. And by the time, the kind of production starts, customer already has had plenty of time to inspect and reject the product. So, you have a history at the time of the -- within a particular quarter. With us, we have a very short lead time, and we started production relatively late in the cycle.

Got it, okay. That’s very helpful. I think there is a kind of a thought that if the evidence and history is there, then the lead times might come down quite significantly and you’ll be able to rev rec that part much sooner, I’m sure.

Yes. As soon as we ship, exactly right.

Got it. All right. My second question and I’ll step off the line, is on the NSE side of the equation. It sounds like you’re guiding second quarter to be roughly flat, which is likely a good news in this CapEx-constraint environment. However, you did mention book-to-bill below 1. So, just as you kind of -- how you interpret that vis-à-vis maybe NE and SE? Is that specific to a certain segment? Do you expect SE to continue to decline in the December quarter and then NE showing strength or maybe flat here quarter-over-quarter, if you give some color there? And then, maybe if I could flip the DOCSIS 3.1 comment. There seems to be an indication from some of the component vendors, semiconductor vendors that are shipping into the DOCSIS 3.1 deployment that it’s seeing a bit of an air pocket heading into the end of the year, just according to our surveys. You did not see it. Could it be that there is just simply a timing of how you deploy instrumentation and test instruments versus the actual network equipment in the network? Are you seeing any slowdown of DOCSIS 3.1?

Okay. Why don’t you take the first part and I’ll take the DOCSIS part?

Okay. So, let me go ahead and give you some color on our guidance. So, when you look at overall NSE guidance, it’s roughly flat on a sequential basis. Now, you have to really dissect NSE into NE NSE to understand what we -- how we are guiding. So, if you look at -- and again, we are not splitting guidance and I’m not going to give a specific guidance on NE NSE but I’ll give you enough of color. So, at the midpoint of NE guidance, implies a sort of a low-single digit sequential growth. Now typically NE grows mid-to-high single digit in Q2. However, we are being prudent in our guidance here by A, assuming minimum budget flush in December quarter and that’s what Oleg mentioned earlier; and B, also recognizing the fact that NE had one of the strong sequential performance in the September quarter. It grew 6.5% sequentially compared to a typical seasonality where it actually declines double digit. And that goes to the fact saying that we are seeing a momentum in our cable DOCSIS 3.1 products, we are seeing momentum sequentially in fiber, in metro. So, there is a broad range of products that we are starting to see a momentum in the field instrument site. So, if there is a budget flush and if the momentum in the field instrument demand continues, with some stabilization in our lab and production test instrument, we should see some upside to the midpoint of our revenue guidance for NSE. So, that is point number one. On the SE side, again, you’ve got to dissect between assurance and the data center business. So overall SE, we are assuming will decline about mid to high single digit sequentially, because we have a matured product within the assurance piece that continues to decline. On the data center piece which is more network visibility or packet capture products, we expect that to sequentially grow. So, when you start dissecting our guidance, you will NE is prudent, conservative given the momentum we have seen but we need to see that couple of more quarters to making sure that becomes a trend. And on the SE side, it’s just the fact that the mature products are declining sequentially and that’s something which is already out there. So that’s how we look at the NSE guidance. Does that help, Dmitry?

Very helpful. Thank you.

So, let me talk about DOCSIS. So, when you are doing the deployment, first, you buy the head in equipment, right, that’s already happened. Then, you buy a lot of the set-top boxes. So, a lot of these things happens well before you buy instrumentations. Once you have the head and equipment installed, all the infrastructure installed and you have an ample inventory of modems to shut, that’s when you start buying the equipment. So, in the way really the -- and just keep in mind, when we talk about test gear, you are talking about tens of thousands of units, when you are talking about the deployment and modems and other things, you are talking about millions of units. So, in that respect, the amount of chipsets that we buy is a tiny fraction of the total. So, you really cannot -- it’s a rounding area for a lot of the semi companies that supply the DOCSIS modems.

So, it’s actually reverse from original thinking. I got you. And then, the chips that you buy is a much smaller number obviously than the chips that go into modems. But the question is that chips that go into the modems, are you seeing any indication of any slowdown from the build out standpoint of the DOCSIS 3.1 and some of the major customers say, Comcast and Charter?

We have actually seen the equipment procurement accelerating between Q4 to Q1 and it’s looking pretty good. But, I imagine, they have already bought all the modems or placed orders from modems a while back. What they are doing now is they’re actively rolling out the service, but they must already have a whole inventory of products sitting on the shelf to do it.

Our next question comes from Patrick Newton from Stifel. Your line is open.

I wanted to jump in on OSP and specifically the anti-counterfeiting side. So, you did reiterate that second half trends should improve, post this fiscal 2Q guide. Previously, you’ve been a little bit more specific. And I think excluding 3D Sensing, you had talked to high 50s million quarterly run rate in the second half of fiscal year 2018. So, I’m curious if there is any changes to that forecast. And then, drilling down on the 2Q outlook. Can you help us understand why it’s so soft? I think assuming that there is some 3D Sensing revenue built into that midpoint of 45 million, this looks like the lowest revenue level for OSP since probably the 2007 timeframe. So, what’s going on in this business?

So, let me first take the guidance for the second half first, Patrick. So, we do expect, as we have spoke -- talked in the past. We do expect a rebound in the second half in both revenue and operating margins for OSP. And given the volumes in the 3D S filters in second half and the rebound in demand in anti-counterfeiting, and I’m not going to dissect 3D S and anti-counterfeiting, but we have given enough of color to let you guys know that out of the $35 million to $45 million in 3D S, significant portion of that is going to be in second half. So, what we are expecting in second half from an OSP perspective is the revenue to be roughly around 30% higher compared to first half. So, if you do the math, you’ll see that it’s sort of, at a very high level around mid-$60 million range on a quarterly average in Q3 and Q4. So, it’s somewhat consistent. Now, the mix within that since we have limited visibility into the anti-counterfeiting business at this point in time, the mix within that, we will come and give you more color on that towards the end of when we announce our earnings in Q2.

Yes. And I would say, remember, when you talk about anti-counterfeiting business, there is really two layers that you look in that business. There is kind of steady state replacement, reprints that you are doing and then there is a periodic ways of new, redesigns and major economies doing their major printing. In the last couple of years, we had a several major macro campaigns by major economies printing a lot of a new notes with new designs. Some of these waves are coming to an end and the new waves -- I mean, central bankers that don’t share their exact dates with us when they are going to start on the new currencies. But, I mean, at this point in time, we have no visibility of when the next generation of redesigns or the new printing waves are going to start sometime next year. But generally, there is a seasonality in inventory management and rebalancing that kind of coincides with the calendar year, and between us and the our major customer, and they do a very active inventory management and rebalancing in the fourth calendar quarter every year.

So, on Q2, just to build on Oleg said and to your question, so you have to consider three or four factors here, Patrick. So, yes, we had said, we were expecting low-50s in terms of our total revenue for Q2, and it is -- we are guiding 45 here. Our assumption on 3D S has not changed from our previous sort of color on guidance we provided for Q2. The lower volumes is coming from the other parts of the business because of higher inventory rebalancing that our customer doing. And when you look at the margin rate, we have some under absorption in Q2 because of lower volumes but more importantly also the Santa Rosa fire for which we had to stop production for a certain period of time. And as the entire community is trying to get up back on the feet, there will be loss of some productivity et cetera. So, we have factored all those in for our guidance to be at 30% operating margins. That’s not the steady state. It will bounce back. And we expect as we exit Q2 and look at full-year, we should be in the mid -- and depending again on the mix between the 3D Sensing revenue and the anti-counterfeiting revenue, we should be in the mid-30%-plus operating margins for the full year for the OSP business.

Thank you. Those details were great. I guess, just shifting to the SE business. I’m trying to get a understanding of where we are in the restructuring process relative to what you gave at your Analyst Data. You talked about how there is some pruned portions of the portfolio, mature portions. And then, I believe there is some growth products that are embedded in there. So, if we think about the $29 million revenue level in September. Are we in the process of bottoming here, or how much I guess if we think more intermediate term and out in 2019 timeframe, how should we think about the revenue level of this service enablement business?

So, the way we are forecasting and modeling is, this business -- and if you look at SE as a mix in NSE, by the time we exit fiscal year 2018, we should be roughly in the 19% and 20% SE as a mix of NSE. Now, starting 2019, we are assuming that the mature products will basically bottom out, which means then what we have remaining in the portfolio, whether it’s on the assurance side or on the data center side will be only the growth products. So, we should expect growth starting in SE but that’s the expectation. But also keep in mind that we are trying to also delay the run-off of the mature products, because mature products are at a very high margin. So, when the business team on the assurance side come back with the renewal win on mature products, we are not saying no to that, because that’s a very, very high margin and high profit job. But, the expectation is, end of fiscal 2018, it goes to about -- SE becomes 20% of the NSE mix. And then from there on in 2019, I think we should start seeing some growth.

Great. I appreciate the details. Good luck in the quarter.

Thank you.

Our next question comes from Meta Marshall from Morgan Stanley. Your line is open.

Great, thanks. I just wanted to ask about the Trilithic acquisition and just whether it kind of helped with some of the cable strength that you saw in the last quarter, and just how it is performing to-date and just some commentary there. And then, noted the repurchase of some of the convertible -- outstanding convertible notes this quarter. And just wanted an update of whether there was any kind of change in strategy there just so opportunistically buying back that the outstanding convert? Thanks.

Yes. No, Trilithic did not have much effect on the quarter. We closed it most of the way through the quarter. And really most of the cable growth really came out from the all traditional Viavi product.

So, on the -- and again, we don’t give -- we don’t split the revenues for Trilithic but I had given of enough color last quarter on what the revenue profile is of the Trilithic. So, it was not much of an impact on the year-over-year growth in the cable business, it was solid anyways. Now, what was your next question, was around the buybacks?

Yes, just the strategy around repurchasing the 6.25% convert?

Yes. So, I think I’m not going to -- as I said last quarter, I’m not going to layout my overall plan or how we are going to buy back, we’ll be very opportunistic in buying back. If you look at our capital structure and the priorities that has not changed how we deploy the capital and how we think about our capital structure. So, if you recall, we have a very high gross leverage ratio, because we have two converts sitting on our balance sheet, the new one and the old one, and we were opportunistically buying the old one. Although, I should remind that the net leverage ratio is negative because we have net cash position. What we will try and do is we will be very opportunistic, buying back our old converts when we believe it’s a right time to do so, depending on how the market behaves, but we also have an option from 2018, which is august 15, 2018, we can either call it or it can be put or we can just continue to extend it for the next five years. Because that’s how the terms are. So, I think we have various options here. We will be very opportunistic on how we buy back. We also bought back some shares this quarter. So, we will do both, based on a share price as well as the bond price.

If I could sneak in one more question, you mentioned last quarter hitting a milestone of SE being breakeven. I just wanted to get a sense if that continued this quarter?

Yes. I think SE, I would say overall profitability continues to improve. As I mentioned, last quarter it was more than breakeven and that trend continued in Q1.

Our next question comes from Alex Henderson from Needham & Company. Your line is open. Our next question comes from Dave Kang from B. Riley. Your line is open.

This is actually Lee Krowl filling in for Dave. Couple of quick questions. I know, you kind of ran through OSP. But, to the extent you can talk about it, can you remind us if 3D Sensing is margin accretive or in line with kind of that overall margin improvement? Just trying to get a sense of is the improvement driven by just anti-counterfeiting or is there some contribution from 3D Sensing as it ramps?

I think if I understand you correctly, you are trying to understand is the 3D Sensing, what kind of impact it has on overall company margins, is that the question?

That can be part of it but I was just more specifically, the OSP.

OSP for Q1 of 2018 that we just announced, the year-on-year improvement 110 bps, is that the question?

No, just generally speaking as 3D Sensing…

Okay. I think generally, as we said earlier on the call, the 3D Sensing business, which is a consumer business, it’s gross margins and operating margins are lower than the traditional anti-counterfeiting margins, but they are above the overall company margins.

So, it will be slightly dilutive to the overall OSP margins. But, as you all know, it will be profit dollar accretive.

And then, just one more question on 3D Sensing. Your 3D Sensing counterpart this morning spoke about a second up incoming customer out of Asia. Just curious, do you guys have any update on -- I know you guys have one major customer but is there any other that are in the pipeline or any sort of improved visibility on incremental customers on that front?

I’m not going to comment on which customers specifically we have or don’t have but we are engaged with the lot of companies in that space and they are all at various stages of development. I would not qualify the orders we get there, really more of samples orders rather than production. So, I’m not sure which opportunity in particular they were referring to but remember, [Indiscernible] can go into a lot of implications not only into 3D.

And then, last one for me. I know you talked about G.fast kind of still in the pending phase of kind of starting to grow. Is that M&A driven as a customer pauses or is that more of just the technology development and adoption is just not there yet and you are just kind of waiting? Just trying to figure out, as we see some of these larger deals close, whether that’s a catalyst for spending on G.fast or if it’s just a matter of adoption?

Well, I think it’s a really more of a function when service providers want to spend some OpEx dollars because most of our instrumentation falls under the OpEx category. And one of the things some of them are doing, they are delaying some of these adoption to managing expense controls. But ultimately, they do have to follow through on their plans and at the right time spend the money. So, I mean we’ve seen similar type of delays in DOCSIS. Even though everybody was talking DOCSIS 3.1, we actually were expecting ramp happen in the summer of 2016. It really just took about a year longer. And I would imagine G.fast is following the same pattern.

We have a follow-up question from Dmitry Netis from William Blair. Your line is open.

I just want to make sure I heard you guys correctly, or Amar, actually. When you talked about the OSP, you said that the second half will be -- this is the revenue line I suppose you were referring to, would be up 30% from the first half?

Yes Second half or first half revenue, it’s roughly 30%.

Okay, that’s what you are expecting. Okay. And then, maybe same question for the network service enablement business. You feel like you calibrated or the street calibrated there properly, vis-à-vis maybe some of the flush in December and then typical seasonality in the March quarter. How should we be expecting the year -- or rather the second half shape out here on the NSE side?

So, I don’t want to give any guidance on the second half, Dmitry, on NSE. But listen, we are seeing some attraction on the NE side of the business with field instruments. For the first time, we are seeing a sequential growth in Q1. We have never seen in NE a sequential growth in many years. But again, we will have to see, how this all pans out, at least for -- at least a quarter or two before we can see if the normal seasonality holds or not. But, I think we are just assuming that if March quarter typically is lower than the December quarter, I don’t think so that will change. The March quarter will be lower than December quarter. And typically we have our June quarter seasonally higher than the March quarter, because it’s our year-end and also typically people come out of the first calendar quarter budget scenario. And so, that’s basically, at a very high level, I think you guys should think about us.

And we made a lot of restructuring in that business in the past 12 months. And I want to see at least several more quarters before we can call it a trend. But I do believe a lot of the new discipline that we’ve put in place on the products, marketing, the sales process and things like that are starting to bear fruits. And I’ll wait a few more quarters until I can comfortably see if it’s something that is purely market playing out or some of it purely driven by our new discipline in that business.

And just to add a little bit more color. In this quarter, one of our largest customer spend didn’t really bounce back. Yet, we had a very broad improvement in our overall revenue performance, just to give you some color on that. If that customer spend bounces back, hopefully, it can be better.

Got it. Very helpful. And maybe Oleg to your comment on the restructuring, you feel you’ve properly calibrated in terms of the cost base right now. And most of the restructuring to date has been in the SE side of the business. It doesn’t sound like there is any incremental restructuring efforts going on at this moment or inside the NE potentially part of the business. You feel comfortable with your cost base and possibly because of the uptick in the revenue levels. Is that the fair assessment or is there something else maybe you want to tell us?

So, it’s a fair assessment from the step function point of view. We announced the major restructuring in SE. So, that’s kind of has played itself out. But remember, we actually have a whole funnel of and not the major step functions, but a lot of small step functions that we are optimizing at the G&A, and sales and marketing, and other levels, that are at various stages of implementation as we upgrade our IT systems and as we redesign our legal entities around the world and so on. So, we’ll continue to optimize our G&A and other costs. But at this point with respect to the NE and NSE, we’ve achieved kind of the equilibrium and obviously we’re going to see from here how the business goes. But, we have a number of other measures on the sales and G&A that we continue to implement.

Got it. Very helpful. Last one if I may since I’m last anyway, sounds like. On the CTL-Level 3 transaction, is there anything to read that that deal has now closed, could we expect a little bit of pick-up or this isn’t much of a impact to you guys, positive or negative?

CTL-Level 3?

CenturyLink, Level 3…

Sorry, CenturyLink.

I don’t know whether we can offer any color…

Yes. Generally, we try not to comment on our customers. But generally, I think so far, the consolidation in cable industry while we were nervous initially on, I think we are coming out feeling pretty positive with our end position with the all the new consolidated companies.

And also, keep in mind, we all tried at Trilithic which basically broadens our product portfolio to point solutions in cable that now can find new markets, outside of North America.

Any comment on the channel guide, how channel is doing? I know that was a big initiative for you.

I think it’s doing as expected, Dmitry. It’s helping us. I think we have more work to do there. There is a huge -- I think there is a lot of opportunities ahead of us in channel. But based on our expectations, coming in line with our expectations, but I can tell you there is more opportunity there.

Our last question comes from Charles Loving-DeCoster from Craig-Hallum. Your line is open.

Julian, maybe, we’ll close it out.

Certainly, I’ll turn the call back over to Mr. Ong.

Okay. Thank you. This concludes our earnings call today. Thank you, everyone.