VIAV - Earnings call transcript Q1 2018

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Operator

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. you. Thank Instructions] [Operator of you Head conference. begin Investor Ong, may Relations, your Bill

Bill Ong

Head you, Solutions My earnings Ong, Viavi Welcome name Investor quarter Bill Thank to XXXX first Julian. fiscal year is of Relations. call.

plus to Amar limitations to about include call on call valid usefulness to today’s risks also non-GAAP are today. earnings call Khaykin, release. during CEO; Please these note on discuss as and state our our uncertainties me financial reconcile their provide Maletira, release encourage forward-looking supplementary differ to recent financials, performance. cause that note that this results we unless results are materially in guidance We Please the We review actual all statements Joining current are are available are CFO. today’s include subject forward-looking Company’s statements non-GAAP. GAAP these President particularly revenue update in and you our Oleg filings, including financial tables to results we preliminary and described except those most our The statements. and from no slides, only the obligation will otherwise, of SEC and statements this expectations. factors These could risk Viavi website. our The historical which undertakes filings.

would by Finally, Amar. we I are to call Pacific like p.m. X:XX available this make call Time on and recording recording over website. now today’s turn the evening our we’ll to the

Amar Maletira

$XXX Viavi by $XXX X.X% and also NSE from primarily declined to strength and end in million decline field NSE revenue weakness expectations, our revenue revenue. X.X% decline in upside production. in offset vXXX.X in we better-than-expected, Bill. Thank Compared OSP’s with year-on-year X.X% topped to lab anti-counterfeiting partially a instruments, saw some our our driven OSP. of the results million. of guidance range our Fiscal you, as was by test high QX exceeded revenue guidance of million

are declined million. Operating management. year at expenses million of with We $XXX.X pleased a $XX.X from levels X.X% our expense ago

lower of or XX.X%, which we As $X.XX prior an $.XX to operating $X.XX at our points guidance grew year-over-year result, of exceeded levels, EPS from overall and despite year’s achieved XX%. a XX.X% revenue margin is expansion $.XX. basis of range XXX an of operating margins

from our with Now, the moving by exceeded at XX.X% NSE guidance million, million year ago. while at margin to margins fell revenue margins segments, a last year range SE of assurance SE’s we gross SE unprofitable have a result the XXXX. was in this announced revenue and in improvement favorable a a solutions discontinued acceptances restructuring product January through margin our of gross quarter The higher of to X.X% NSE improved in $XXX points million. of mix as gross basis partially restructuring lines of points, NSE the XX.X%. operating results as where $XX.X savings million, at of QX quarter million executing result business starting the XXX from $XXX.X $XXX OPEX revenue XX.X% SE at XX.X% improved decline million. reduction reduction a gross basis from NSE. points declined a X,XXX NE SE and was target by NE a expense XXX revenue in $XX.X This XX.X% basis $XX of of is offset year-ago exceeding annualized

beyond savings. restructuring-related was initiatives ongoing reduce within expenses in NSE, this we SE below we realized In an our QX, fiscal book designed to have to stated and funnel call, As X. productivity of bill have earnings NSE’s prior ratio efficiency

XX.X% There a meaningful our revenue our down reached Sensing of $XX.X Revenue related basis was to to ramp in declined anti-counterfeiting to better-than-expected in margin million, due previous continues OSP. of no XD $XX the high million million, increased Gross to products. turning X.X% points XX.X% that guidance last to products of Now, by margin incremental fiscal our in from basis points end QX. to year-on-year, cost $XX of by start-up Sensing at product related XXX Operating driven demand fiscal XXX QX. XD favorable year mix.

the to sheet. balance turning Now

end cash approximately cost $X.XX $XXX.X cash of cash and XXX.X million million Of stock callable notional was share fiscal investments was the QX. $XXX fiscal have billion our quarter authorized shares $XXX.X the total that repurchased X.X by including for repurchased $XX regards repurchased we is convertible August $XX XXXX, a In of buyback, we million portable ending of of in the per at short-term With with end and balance total XXX have commissions. QX. of net as approximately in million. original we amounts worth Our QX, the of flow Operating total share Viavi XXXX million. a to million basis notes million of

Our remaining convertible is million. balance XXXX $XXX.X notes

stock $XXX.X the $XXX continue Our repurchasing Viavi includes note. total outstanding recent to and note. XXXX million our in retiring of debt convertible our million be opportunistic XXXX We’ll

guidance. our Now, to

We for to expect quarter second to at million EPS plus minus $X.XX. million, margin range or $XXX and X%, be the fiscal to of revenue be to XX.X% Viavi in operating XXXX $XXX $X.XX

be We minus million plus plus or to NSE X%, at at $X minus or operating margin X%. $XXX expect million revenue with

is QX For products. macro at for OSP to the quarter level, be expected anti-counterfeiting tough fiscal the

quarter, first demand last in followed by an half stated recovery lower expected we half. second the in we fiscal demand expect As XXXX

$XX Sensing the XXXX. early devastating the October fiscal XD our including maintaining of to portion revenue of with County guidance million, are second Sonoma for revenue recognized Rosa significant California in fiscal In experienced year We million wildfires. $XX half in North XXXX Santa between

anti-counterfeiting the experienced near margin Hence, wildfires fiscal QX million Sensing revenue This operating plus $XX OSP’s and XX% minus X%. margin but or in coupled plus to expect Santa million expected at potential minus ramp will undamaged our operating on facility revenue pressure XD an OSP’s for be we QX. Sonoma and the evacuation OSP with or at volumes business lower at fiscal $X our in impact stoppage. County production zone was while Rosa Fortunately,

fiscal operating in recover and expect QX. to We revenue OSP’s margin

Our tax expected for second quarter fiscal is approximately $X.X to million. be expense

expected We to over half million Oleg. EPS QX, to I to first be the be XXXX is count fiscal of and expense of the the expect with QX of to fiscal second margin be XXX our EPS along half at shares. half and revenue expect OSP EPS midpoint XXXX. our reflect and expenses With recovery QX using With fiscal solid $X.XX, than EPS to the share call will fiscal and an higher of expected in other fiscal expected Viavi’s turn In a that $X.XX. a in we EPS midpoint first closing, approximately our fiscal QX approximately income million net XXXX performance guidance $X.X

Oleg Khaykin

you, at and exceeded in better-than-expected range above OSP Thank expectations, as margin performance our Amar. guidance We in operating XX.X%. EPS both resulting NSE came

field NSE, strength, saw both For and year-on-year instruments sequentially. revenue

G.fast products in cable the expect future. the revenue near deployment is we X.X. Our deployment driver. that lagging DOCSIS X.X to major Cable DOCSIS continue was however is strength driven DSL by

We a pick-up a continued down expect a off year saw of optical as ago. production but revenues result customers. higher a Lab from and products. from year-ago levels, in remaining year mature business our a was Fiber revenue gross XX% a ago about SE China negatively The The down and business a from and margin the pick-up in calendar deployment lines was quality ago was levels. sequentially G.fast as product from significantly components impacted levels of of declining slowdown weak, XXXX. noticeably unprofitable is SE the discontinuation year a

anti-counterfeiting to on products expected Moving than Revenue demand. for improved customer QX, higher in OSP. was driven by

to anti-counterfeiting their second a to operations to for anti-counterfeiting customer their our the in team demand would one seasonal our ramp my demonstrated the disrupted products QX. weaker resuming calendar followed with and from inventory XD expected and appreciation for expect with Viavi That XD will would QX follow in in and to customers said, shareholders now half express in the continued appreciation my they resilience Sonoma the our and County an fiscal cadence of professionalism be like in for year, strong The turn week. wildfires a products. optimize offset for recovery October to is our first by Sensing I Rosa as expected delivering quickly started support. rebalance half into and operations. In Sensing Bill. by quarter revenues the remarkable their about We production and conclusion, thank in in We of Santa team our operations the to calendar declines to the to I Rosa fiscal has the wildfires Santa gratitude like in I dealing over QX express filters XXXX. projected in call build the

Bill Ong

you, Oleg. Thank

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

Operator

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

Michael Genovese

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

Oleg Khaykin

Sure.

That more predominantly truly I had operators NE. the would it, by in products aggressive I think, we the and really strength driven say, mature fiber you’ve -- needle. we the products. was deconstruct is what of and cable kind the DOCSIS moved But stronger better-than-expected, deployment much some saw got instruments and X.X. field also, to Within strength fiber of the

I from mixed one the the Latin North provider than kind demand the was performance expected from of Now, service that kind another. customers, one Asia, normalized of bag, Europe, in mainly America, America as said, however expected. as charge and a particular of though performed expected -- major cable -- on was weaker led much operators

there. big us no So, was surprises for there

module is Now, weak slowdown production, one lab really the production and area driven which in was and optic by Asia. it was fiber the in notably

in So, space. away I we the took of mean that some upside cable saw the obviously that

relative G.fast other The weakness of products. was area

seems than going taking lot manifest be which expected, is in there -- likely itself slower think, the and around getting going the XXXX. to much I a ramp-up in a of to the expectations deployment sometime it

strong of metro the in quarter other fiber gives So, and how weakness an some relative categories. cable offset performed products idea than that more it the you last just

our business fairly be expect we think I going NE outlook, the to of quarter. solid to continue into terms this In

I standards. out finally are lot would seeing it’s news, think upgrade [ph] as but operators far some taking pent we demand as -- up good honestly flush to of and roll and I going say not budget these We to networks saying their are steps a would -- go I

fiber -- is we next we the area type. and probably much have network that progress, were the wins upgrade there but say expecting. a to moving I would the not committed fast we This the think clearly home guess, even -- G.fast in is I mainly still fiber are the I to couple though big year, don’t still as as customers see the optic

So of and some signs of rest of world the positive the that major lab we getting the and in recovered gives out And optic players number after in of terms And extent to of reasonable. see coming looking improvements to downturn, a our economic in the the fiber Brazil you the feel [indiscernible] color. the from we having seems are nuclear is be pretty will we of start issues. And production. pick-up world, the America; of some winter rest seeing kind Latin the

feel going see reasonably but And for think we A about into us, how early quarter, this to will calendar, I call. goes. next we seasonally point, it too the it’s So, weak good is second QX NE.

Michael Genovese

that I and appreciate all good, pretty market. really on good the Sounds color

has single-digit would And or December last different XD there on it your it double-digit Sensing, months be changed would report, when since we about anything calling quarter, three modeling millions... be secondly, worth ago? Just think anything out is from the millions

Oleg Khaykin

not comment months. and quantities or our going the say, the I’m XX thing So, the forecast in only to ramp last on has I’ll dynamics, changed not

fluctuations and but are we and as ups people, it’s in exactly seeing there been we predicted from ramping as and we a expected. downs lot rolling I of and expected. number out last of coming a September, as has we Just expected as it’s as exactly know we

Operator

Dmitry from Blair. comes question William next from Our Netis

is line open. Your

Dmitry Netis

pixels for just There question, I’m let’s stay design. far confusion the [ph] on of some lot rev may. going the call large players We Sensing of goes that a question, rec as that the the that it I the to XD if other know XX you part versus as is you into are shipping. that’s iPhone supply of all XD customer,

what ship of requires recognize like? memory how manufacturer? ships or phone us of a of days know gave our do you separate I you refresh when does confusion us does are you [indiscernible] recognize or that of you can by the you maybe out give look contractual here? XX to the that module obligations last all try bound is you perspective to plenty rev to this you is revenue it there specific there sense what So, the the some into kind revenue work? I can quarter, mean, sort rec, after And but

Oleg Khaykin

Sure.

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

Amar Maletira

let high-level overview and in a give the is the Dmitry, in it business, works So, of where product all lifecycle. product me depends revenue the -- book-ship its on very how typical recognition

that and time. product any generally test generally for reject revenue, any a inspect company that it product, for within So, recognize -- a product it and books to and the of the any specified has customer the period right ships customer

the been certain. the time, market the is if some revenues, recognize product, companies for Now, ship has product the in if payment

for level a and However, on every for of amount so will reserve some total so a product for for line replacements, certain revenues company book support, warranty rejections, at forth.

there the we any Sensing products, et of case does that no brand new any having about, is the not rejections in are filters Now, with history of cetera. case in imply this are That XD we issues. talking

from product to plan but we quality new is to a into that tracking this are we fact, product the In perspective, brand trying ship a customers.

develop history the replacements of end till book-ship time, then, we maybe history, result So, period. our the track so, as a or a revenue or initially, record go defer basically and we the a back we for recognition normal will revenue we any product. till such rejections in of of Once the to inspections, will quarter inspection specified determine the a

about companies for So, how have are which It not nothing in is as we brand it is It that’s just what as simple a history. recognize versus is other we we we is. introduced that. There product have do do. special that new -- a

Dmitry Netis

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

Amar Maletira

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

Oleg Khaykin

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

Dmitry Netis

It’s very see. helpful. I

the once evidence… So,

Amar Maletira

the chain, have the And of also keep mind, have. in -- time unlike we supply in others kind lead the don’t others almost we

almost we X, weeks to are – X So, X X,

Oleg Khaykin

time. in just We’re

Amar Maletira

Just in time.

right developing So, the history is now.

history some might already developed. the other have For companies,

Oleg Khaykin

to time, products kind advance. the you And to plenty time have start customer building of of inspect starts, a reject had So, way already has time the of for months, we lead by the production X and in X example, if product.

quarter. So, time have relatively history of particular and started us, short a at -- have a the cycle. lead the you a in late we time, the within With very we production

Dmitry Netis

very That’s okay. helpful. it, Got

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

Amar Maletira

Yes.

we as soon exactly As ship, right.

Dmitry Netis

is it. this NSE right. the the flat, question likely sounds environment. which My like Got the be line, you’re step of good and roughly I’ll on side It CapEx-constraint guiding quarter a second news is All second equation. to off in

mention below However, you did book-to-bill X.

be December SE then, And give you So, just you and as DOCSIS NE maybe -- flat quarter-over-quarter, that the from surveys. to decline deployment the pocket here you in the how our maybe kind of if if component vis-à-vis of and just a comment. that Do vendors, shipping you are NE interpret end that X.X to a SE? into could maybe heading seeing some X.X the strength expect to air showing color flip DOCSIS of Is I bit that to an semiconductor there? segment? then certain according indication the some quarter specific vendors continue of seems or the There an it’s into year, to

did is it and just you seeing versus network? you any not Could instrumentation Are actual timing simply instruments deploy slowdown DOCSIS see test that the how equipment network You in it. X.X? be there of of a the

Oleg Khaykin

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

Amar Maletira

Okay.

go guidance. color on you So, our and give let me some ahead

look a overall roughly guidance, you sequential basis. NSE it’s flat at when So, on

NSE are guiding. into to how Now, NE what we -- you have dissect to really NSE understand we

and not you NSE again, give if you color. are a splitting look give guidance I’ll So, to but specific I’m on going and NE guidance -- we at not of enough

a guidance, of implies sort of low-single a digit growth. at sequential So, midpoint the NE

NE Now in QX. digit grows mid-to-high single typically

flush X.X% B, the NE sequentially budget in where fact It DOCSIS goes products, However, typical sequential actually to we compared X.X double A, we also seeing quarter. prudent in that that the one momentum September the here that’s digit. our guidance a and in declines And of fact sequentially momentum in strong earlier; Oleg quarter the that being performance grew what in we December mentioned saying cable recognizing had minimum seasonality metro. are in it and fiber, seeing by to a assuming our are are

products So, site. field see there to a the is a momentum broad instrument are we that range of in starting

to our a and if with demand lab our the budget the momentum NSE. instrument, if there midpoint upside field see in of is should continues, So, instrument and some for in some stabilization we test the production revenue guidance flush

point that one. So, number is

to the data again, between business. On you’ve center got assurance the and SE dissect side,

will SE, to single digit overall So we within piece a sequentially, are assuming matured product mid assurance about decline continues decline. we high because to the have that

On which is we products, packet capture the piece grow. expect or data network sequentially that to more center visibility

the So, start and couple NE when the more need the a And our but already becomes dissecting is on there. mature that’s is given side, quarters you of conservative which see making will it’s trend. to have something declining guidance, out we the that fact that products we SE prudent, are that seen just you momentum sure to sequentially

look help, how the we that’s Dmitry? Does guidance. So at NSE that

Dmitry Netis

Very helpful. you. Thank

Oleg Khaykin

talk DOCSIS. So, me about let

are buy set-top you you that’s the head the happened. you deployment, first, boxes. doing lot when the of So, Then, in already equipment, a buy right,

all buying and the the that’s So, have equipment you things shut, happens of head you ample buy instrumentations. installed to a well when equipment. start these installed, Once modems you before lot you have of an the inventory infrastructure and

talking -- you and of talk talking just modems of things, when mind, gear, other thousands the of you when units. about really we millions about deployment way So, test in talking units, and you in are are are tens the and about keep the about

buy total. that So, the respect, a of tiny the amount chipsets of in that we fraction is

DOCSIS a So, lot really that companies it’s supply the cannot of rounding the modems. a -- semi for you area

Dmitry Netis

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

Oleg Khaykin

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

Operator

Newton from Patrick from comes Stifel. question next Our

line is open. Your

Patrick Newton

and side. I the to on OSP specifically in wanted jump anti-counterfeiting

improve, And did that run you half rate XD XXs second half reiterate second excluding little you’ve year this should had I post guide. Previously, trends in fiscal fiscal think a Sensing, the high quarterly XXXX. of you been talked specific. So, to XQ more million bit

on for curious some since down it’s assuming the Can there And XD outlook. forecast. understand us why So, this if that XQ lowest built million, soft? into is of any there to I’m timeframe. OSP I looks that the drilling revenue revenue changes you help probably midpoint XX that is XXXX Sensing like level then, so think the

So, on this what’s going in business?

Amar Maletira

guidance me the second first the Patrick. first, let half for So, take

color a So, past. and do margins rebound in the half second revenue both volumes we we the expect XD half talked second the do given in demand and OSP. We for And filters rebound spoke operating expect, in the as S in in in -- out have portion in to the XD we to to of in be let know anti-counterfeiting, that I’m going going half. million second that to you of not significant and $XX have given S of enough XD is anti-counterfeiting, S, $XX but million guys and dissect in the

OSP perspective the XX% revenue is expecting are to roughly an be we half compared from half. in to first what around second So, higher

you’ll around if see a sort and million math, mid-$XX on So, level range you it’s that high average quarterly a QX. do in of, very QX at the

consistent. somewhat it’s So,

QX. into color announce this the on the within towards earnings the in of time, business come will we mix that, visibility Now, that give more point in and have we when the since anti-counterfeiting mix that we within limited our end at you

Oleg Khaykin

business. printing. really the there printing state several are periodic and by is you is Yes. of new major look campaigns There of major And doing business, then economies replacement, I about would a new reprints of a years, is redesigns we of that steady macro new, ways that say, designs. when a lot two couple their remember, doing you there that with last major a kind had and layers in notes you anti-counterfeiting In major talk economies

the Some the and fourth mean, bankers waves to don’t us on these new and dates kind coming point at management currencies. I between have the printing I are redesigns no the the next -- that mean, generally, year. end central waves new their is sometime that of start or very in when of and with But major seasonality rebalancing waves year, the going generation time, year. calendar us in are coincides quarter management every new our share to going visibility a inventory of in active start to there a are an rebalancing customer, and exact inventory we they and But, with calendar they this when the next do of and

Amar Maletira

consider Oleg or and So, to build on factors on said here, your question, just you to to QX, four so three have Patrick.

yes, were had in -- are here. and we revenue So, total our QX, it is we for expecting low-XXs terms guiding said, XX of we

have Our because inventory fire QX And And provided back for for had QX. from S rate, is some you on Santa the production et loss of cetera. the at not from guidance absorption previous parts because which coming a importantly but our our of of trying community changed productivity entire volumes of stop to the lower we some Rosa higher also color we of lower XD sort in assumption business get margin when feet, the time. on there for doing. the the volumes we certain under customer be on will rebalancing of that is other The has as up to more period look

and expect have Sensing not to the and we we between depending It in our operating the OSP operating factored at on at bounce XX% year mix revenue be guidance the all XD steady should the That’s the be we and -- in be we as margins. will look the QX again those back. business. we margins mid state. So, full revenue, anti-counterfeiting for full-year, for exit the the should mid-XX%-plus for in And

Patrick Newton

Thank great. Analyst of to you. in trying business. details were what to understanding where Those Data. gave at restructuring a we shifting are the you get to guess, I’m your the process I relative SE just

is the in there portfolio, portions that You mature then, embedded some growth is believe And portions. there. how talked I of about are there some products pruned

So, we if September. timeframe, million more in how think of process about we or XXXX and the Are think enablement about revenue guess $XX here, in revenue intermediate I out in bottoming service we the much term the business? this level think how level if we should of

Amar Maletira

should XX% we -- as a mix and forecasting a the NSE. modeling as the way in if of XXXX, SE be XX% So, NSE, look are SE you this business by mix we at we in and roughly is, and the time exit fiscal year

that the assurance side basically we mature whether be the the Now, on which have only on we the means data center side are bottom remaining will XXXX, will it’s starting growth in the out, products. what portfolio, products then assuming or

starting mature growth we margin. SE expectation. should the run-off of but also we in keep trying are But very also in products mind high mature the that the a delay that’s expect are So, products, to at because

of becomes from growth. think in mix. NSE XXXX, we goes when back XXXX, with on So, team to job. mature products, because But, seeing -- not renewal then we fiscal it is, to are expectation And XX% a I the SE some very, no win end assurance saying about profit very that��s the margin side there on on high and the business that, the high come the of should start

Patrick Newton

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

Amar Maletira

you. Thank

Operator

from comes question from Meta next Our Morgan Stanley. Marshall

is open. Your line

Meta Marshall

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

Oleg Khaykin

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

Amar Maletira

So, but quarter is again, had we what color Trilithic. enough -- give revenues -- the on don’t don’t revenue on split the last Trilithic the of the and for profile of given we I

on was business, anyways. impact So, it of not solid was cable the growth it an much year-over-year in the

question, your was around the what next was Now, buybacks?

Meta Marshall

strategy the X.XX% repurchasing around the convert? just Yes,

Amar Maletira

Yes.

I to not opportunistic my last So, back, going layout quarter, going plan as back. not in said think going to are we’ll or I’m buy buying be I -- we very overall how to I’m

you our capital priorities capital deploy structure our the If and at how changed we how has not think the capital about we and that look structure.

So, gross high very the were a the because have new two converts sheet, buying we we if balance the leverage sitting one, opportunistically you recall, and we one. ratio, and our on old have one old

from the years. can Because next continue the our it XXXX, be how can a do behaves, we extend to we can that’s option remind What terms depending put an ratio net have because net we try or to market will either the but is we it old august and XX, the on is position. we just is we have it opportunistic, buying believe it’s negative also five Although, very right we how leverage when be time back or that for I so, are. converts will call should cash do XXXX, which

have here. So, various options I think we

we We buy will back. how very be opportunistic on

this We also quarter. bought shares some back

price. a bond will well as as we So, share on both, the do price based

Meta Marshall

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

Amar Maletira

Yes.

think I continues would I overall SE, profitability say to improve.

mentioned, more I As than QX. quarter trend it last in breakeven and continued was that

Operator

Company. question next from Henderson Needham from Our comes Alex &

Your line is open.

from comes question next Riley. from Kang Our B. Dave

is line Your open.

Lee Krowl

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

Oleg Khaykin

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

Lee Krowl

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

Amar Maletira

of we that just XXXX year-on-year is the question? bps, that QX improvement for XXX announced, the OSP

Lee Krowl

just as Sensing… speaking XD generally No,

Oleg Khaykin

Okay.

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

Amar Maletira

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

Lee Krowl

And then, just XD one more question on Sensing.

Asia. spoke incoming second XD this morning a up customer about counterpart Your out Sensing of

incremental of Just but update curious, other front? do or you guys customer the are major there customers on know that improved on any -- one any any visibility guys I is sort have you on have pipeline that in

Oleg Khaykin

on of which all at there, and various in more lot orders comment to going than or with we rather of have of get companies that they engaged not customers have I space really development. are stages production. we but don’t samples the are we orders would not the specifically qualify I’m

but into only sure a referring not into particular [Indiscernible] So, of implications opportunity XD. which lot I’m they in can not were to remember, go

Lee Krowl

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

Oleg Khaykin

do some time are plans have to controls. And these ultimately, a the them it’s OpEx one of falls they I because OpEx to category. adoption they things the think instrumentation on But their when providers at service through of doing, function more our some to managing and the under a follow delaying really want of Well, spend money. dollars spend the are of some of expense most right

actually type year in about the seen really DOCSIS. ramp in the expecting we’ve a is X.X, Even of was mean were delays would talking though following just pattern. DOCSIS XXXX. longer. everybody we took And It imagine of I So, happen I similar same G.fast summer

Operator

Dmitry William question follow-up from a have Netis from We Blair.

Your line is open.

Dmitry Netis

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

Amar Maletira

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

Dmitry Netis

you are Okay, what that’s expecting.

And question enablement the for business. service same Okay. maybe then, network

in How half side? calibrated typical like be or -- then calibrated the flush seasonality the feel should March you December here and NSE expecting some on or rather quarter. shape maybe properly, You we year second street the the of the vis-à-vis in the out there

Amar Maletira

some on the Dmitry, I So, the field listen, NE want NSE. on are second give the But instruments. to on business half, attraction don’t guidance seeing with any we of side

sequential time, a first growth in are we the QX. seeing For

have in first than scenario. quarter, many quarter seasonally March March budget quarter assuming normal quarter. or is how before least will quarter lower can We growth year-end see lower come out if all March of that calendar see, at are quarter at typically -- not. to because never our also think I that will will our June don’t typically it’s seen think be in sequential the again, a pans than December The than we have for people higher least the But have December quarter, typically seasonality so if two or we quarter the years. But, holds And just the change. we a we NE I this out, and

high should And think so, I guys a level, that’s you at think basically, very us. about

Oleg Khaykin

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

Amar Maletira

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

Dmitry Netis

terms restructuring Got the it. to It Very comment helpful. you’ve moment base going business. And the like to restructuring, the the now. properly of calibrated cost Oleg incremental is in the or in SE And the of on at your maybe the of efforts you NE right business. date been any most restructuring sound there part has side inside of potentially doesn’t feel this on

tell you and to You feel something else maybe the comfortable us? Is because revenue fair is that levels. the there with the your cost want uptick or possibly base of in assessment

Oleg Khaykin

restructuring point So, view. the it’s a of announced step fair SE. assessment major in the function from We

not the legal on. that functions systems of we redesign are stages but and that other actually have as levels, of of implementation played the we we funnel step sales the our marketing, at G&A, we upgrade entities But world a kind as functions, that’s and at of step are and around various remember, whole and a our lot and and so So, itself small major has optimizing out. IT

of So, measures the costs. the have to and we at sales equilibrium we’ll other other But, achieved on goes. implement. we’re going to we this G&A our NSE, the to point continue and obviously and continue see that we’ve with here from optimize But NE the kind of and respect G&A to business how a number

Dmitry Netis

Got if one Last like. it. helpful. anyway, I last may since I’m Very sounds

X you the CTL-Level bit or transaction, could a has impact positive of this to there negative? isn’t read is that expect that anything little closed, now a On deal or to much of we pick-up guys,

Oleg Khaykin

CTL-Level X?

Dmitry Netis

CenturyLink, Level X…

Oleg Khaykin

Sorry, CenturyLink.

Amar Maletira

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

Oleg Khaykin

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

Amar Maletira

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

Dmitry Netis

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

Amar Maletira

us. as doing it’s think I expected, It’s Dmitry. helping

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

Operator

Loving-DeCoster Our last Charles from question comes Craig-Hallum. from

line open. Your is

Bill Ong

close Julian, maybe, out. we’ll it

Operator

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

Bill Ong

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

Operator

This conference call. concludes today’s

now may disconnect. You

Viavi Solutions (VIAV) 1 Nov 172018 Q1 Earnings call transcript