VIAV - Earnings call transcript Q1 2019

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Operator

Good afternoon. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the VIAVI Solutions First Quarter 2019 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator Director Relations, Senior the may conference. of Ong, you Investor begin Bill

Bill Ong

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

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

Investor posted VIAVI’s meaningful equivalent We Please have on recast our website see slide financials XXXX financial in financial details. comparisons. and deck supplemental for to have for fiscal order year our more earnings Relations

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

Amar Maletira

operating guidance range. acquisition $XXX our and revenue end XX.X% million Production strong by revenue VIAVI’s well XX.X% strong demand at NSE, expected million both a OSP’s in and the Sensing midpoint range to exceeded performance A products. Sensing a $XXX.X VIAVI North with of coming demand from OSP by million, million expected $X.XX both XX% expanded growth due XD was delivered anti-counterfeiting of points demand in to year-on-year basis to AvComm Thank exceeding revenue year at and range weaker million the XX% a higher guidance $XX.X overall in good the XXX products. offset was Field and helped management. The as with XD million EPS strength million, margin products. a $XXX $XXX.X $X.XX. of and $XX from and the range at the the was at than high partially $XX at operating guidance. Wireless The to lower guidance you, anti-counterfeiting favorable grew $X.XX and and in year-on-year Instruments grew exceeded than Lab revenue and of for expense to level in end $X.XX, of driven $X.XX mix by ago guidance revenue Bill. at was of NSE our America our as Wireless,

of was in about was our decline at in products while Field revenue assurance center our for ago instruments, products. grew XX.X% wireless results XX% revenue acquisition spend. year-on-year. saw SE American and year XXX-gig service to Instruments flat also The Now to a segment, and data primary came result NSE X.X% the of $XXX.X AvComm double-digit expected business SE weaker percentage in mature a provider but however broad-based was this North year-on-year. XX.X% growth is NE both reflecting and Lab XXX-gig Ethernet the year-on-year, strong and particularly grew quarter. Production strengths fiber acquisition, particularly grew in The by XG at NSE. our with roughly the as from moving Wireless business assurance as continue products revenue revenue. a due business quarter demand year-on-year levels, to growth million, QX the from starting reported where disappointing

in indicated ASC XX.X% an for unfavorable resulted accounting XXX estimated this revenue NSE to impact margin resulting that of in note mix to XX $XX million NSE. acquisitions XXXX. gross fiscal year-on-year changes call, in earnings at year declined basis last at As million change $X points please from to our the our SE revenue, due

our However, Wireless ago addition business. the AvComm core margins a by above book-to-bill businesses, ratio was NSE’s at management basis points slightly year and acquired X. driven leverage NSE’s operating continued X.X% the and from from XXX increased of cost levels, operating in NSE

levels anti-counterfeiting OSP. due Sensing XD margins Now OSP of XXX strength XD redesign on XX.X% a $XX.X filters turning at to to higher demand. at of revenue year-ago Sensing ago products. from product gross declined, and basis from banknote optical the year mix a XX% points increased million OSP

XD VIAVI gross overall the Our said, margins than core That operating products. business margin lower our operating is have anti-counterfeiting Sensing Sensing XD profit. the accretive to products and

Now, the sheet. turning to balance

of $XXX.X full amount million. a this our this, the operating $XXX.X $XX.X million In flow X.XXX% million, while received was $XXX.X Our the for common convertible cash September, October, stock the senior the to notes note. cash. investments principal redeem connection convert, of In for short-term was balance to of QX, notes. the we this in an in approximately with we redeemed elected completed aggregate who approximately XXX,XXX in and In were total cash aggregate redemption, of quarter fully cash XXXX million and fiscal holders balance issued notice shares ending redemption approximately

X.XX% VIAVI today, outstanding the As X% balance million. XXXX and debt for the XXXX notes of $XXX total a notes, has of

registration SEC. registration for three afternoon, statement years. this the The S-X valid automatic Lastly, VIAVI filed typically shelf shelf statement is an with

filing administrative this historical of and the now S-X ASC future XXX file using standard. provide periods in first flexibility the additional to newly to reflect the of revenue window quarter an to our effective to to opportunity prior XX-Q also reduce are having We recast to burden

our to Now, guidance.

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

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

plus to with operating quarter at second or XX.X% fiscal $XX or million million, for revenue plus minus be $X OSP expect margin at minus X%. We

For the now Android-based year, increase XD expect customers. revenue an in we from full smartphone incremental Sensing fiscal

result, raising for is half in As year majority first The revenue year XD revenue $XX ship our for XXXX. forecast we from XD to Sensing $XX are Sensing a fiscal the to million XXXX. of fiscal million still expected of

expected is be rate XX%. expense approximately tax Our to

expect and We turn will With net to to expense a million. approximately that, million call over approximately Oleg. XXX.X I $X.X reflect shares. income of is Share count expenses other the

Oleg Khaykin

spend business North America, our NSE by the continuing the by and in its pleased performance driven fiscal with with trial outlook. a results business Despite Amar. QX environment NSE. you, initial challenging XG strong wireless continued our faced The Starting I’m Thank QX demand.

materialize. calendar to operators equipment NEMs As products decline see products XXX North from America, is for demand That Also, Ethernet. continues continued we North Production by American America our as XXX-gig service saw as largely the gigabit although continued a year-on-year, to demand was cycle. XG Lab and order now North a our our by expect said, starting Production driven procurement in to challenging. remain spending to Robust proceed in their in Instruments. strong our providers. dampened with customers completed later by XXXX, field test Field market cable increase and deployment decline than the Europe, expected, also XG cable carrier and in and Lab growth smaller

post segment, expectations. business to SE perform Our to restructuring, continues our

on to Moving OSP.

OSP of redesign the second expected guidance redesign half to the fiscal As we half for for the into orders we end recover We currency results in from QX XXXX. do QX fiscal business our not yet stated anti-counterfeiting of have from banknote back calendar and incremental reflect the in The demand strong visibility major spring, XXXX. customers customers. fiscal second

per base we to such, revenue anti-counterfeiting half conservatively be XX second of XXXX As the plan about million our scenario for case quarter. fiscal

business, expect Sensing by strong devices. a into first multiple we half XXXX, a XD mobile deploying recognition driven of customer fiscal technology facial lead For

increased of activity but fiscal to the lead from our the expected We’re from at the XXXX, revenue in and not ecosystem offset customers second the also from decline in them customer. half anticipate seeing seasonal increased the Android level

the acquisition significantly this XD RPC Lastly, the related Sensing diffusers VIAVI’s RPC off is module. increases the to acquisition Sensing other With applications. projector used RPC XD for this and VIAVI’s of of engineered strong presence part Sensing. in technology into in module, in leader camera go In afternoon, we a start. the optical products XD XXXX opportunity announced Photonics. a of portion is good fiscal the summary,

look ahead, continue QX we we As business QX. into to fiscal trends expect fiscal

business. expected of four outlined before, be drivers we primary As major to the continue our to trends

everywhere, demand The is is and fiber cable networks. The network fiber one of continued first densification including wireless everywhere. driving

our business deployment and continues business. positive The XG momentum. acquired recently is second we the gain testing for And about are XG. wireless one to industry wireless outlook

see that avionics radio to the is The reality Sensing. eventually third now for into The increased we infrastructure. positive And Android test augmented as budgets our to one and reality public application an new automotive applications. ecosystem starting and military opportunity And upgrade proliferate driver products. and into the is the and XD long-term apps a it lastly, virtual communication safety with

turn acquisition appreciation their my will and conclusion, In shareholders over Photonics like for XD to Our team my to I’d customers strengthens in recent call and our the further I thank Bill. position market. express sensing our RPC now to VIAVI our the support.

Bill Ong

session. question-and-answer everyone the We question to to and limit ask begin one let’s Chris, Oleg. you, one Thank discussion follow-up.

Operator

Instructions] Deutsche Bhagavath Bank. from question with first [Operator Your Vijay comes

is line open. Your

Vijay Bhagavath

business, what I My Instruments. product XG into And next up NSE the with and Field need Field fiber-deep question coming are and in year there are monitor heading on for particular for some we big is Instruments? to cycles know the milestones

So, to us of and terms monitor? the guide key help milestones in us

Oleg Khaykin

with Asia-Pacific as one happy lot first in offset point, I everywhere traction North environment of spend. in in the service biggest The well is doing largely of mean, by the Latin been base that which has providers great in monitoring the performance think, well gaining spend we’ve is, I’m I’d America, much as this those North we I recovery. with markets North is we American our world, I America. EMEA, say, At concern case America. been as and very major signs of showing Well, that in clearly, a the kind have in are decreased as as are customer that also the the spend

going to in continue see monitor extent to reinvesting to going we’re their network. they’re to continue to what to So, start

fiber mean, we’re though into the meaningful that. The share largely pretty the the network fiber a field one around and And for absent RF fiber our of the I out future just I’m time the make networks, Field seeing some traction And the where we now strong continued right to world. trials in the gig we it where space other is course even is Once lab and the revenue network time. later like in very things gig, early one us, is deployment in development, on seeing is off, we XXX our bullish demand just the carve money ROADM XXX think XG. very deployments cable equipment. production, are wireless make testing, of And continuing had for we’re big That’s fact, it network initial in I actual grow. for clearly, the of execution into today. in matter goes with precursor the are to our deployment. third looking for which deeper in we area stages It’s Instruments networks, at the the now fiber. we’ve good obviously and space the on the

Vijay Bhagavath

quick next Amar. into and and for we margins product year? rest Thanks. into think of How the of mix should follow-on the Perfect. year A heading

Amar Maletira

Yes.

well as our higher side, which Field NSE, business. the and lab I instruments our product guided those more I think, mix, as in the the when compared look the at fiber guidance. and so, the the get The go for to margins, X.X% -- the the drive margins optical Lab also midpoint lab about Production we two goes just before we as the in to come of you Instrument to transport with at product wireless mix into on businesses

impact there So, to to be our from margins our reduce a Number to expenses. favorable we have operating perspective. two, has continued that

also and As guidance. you down a can operating see, prior sequentially expenses has gone versus

X% very North operating so, is start back as lot a the the in leverage providers should case there it in model. come a we service the create and NSE Having margins the that to least In And of model. I full-year, within that, operating from said operating spending, American good for at leverage be believe of we now. what should are X% for seeing

Operator

Partners. Your comes Genovese with next MKM Michael from question

Michael open. is Genovese is line open. with MKM Your Partners, line Your

Michael Genovese

Hi.

million Sensing. estimate just between $XX on on million that about XD spread wondering you million. it And or guess, my more the So, had OSP side did core by I the for beat $X Sensing XD guys for I OSP or more the I’m two? $X come was upside, the

Amar Maletira

Yes. Good It was Thanks, spread question. Michael. the two. between

expectation products anti-counterfeiting XD So, on expectations as -- areas. than higher came in the as Sensing, demand both, our saw we those an both well in our

would say, those two product I evenly lines. roughly, So between it’s split

Michael Genovese

And that some of from… was upside

Amar Maletira

that, And let me Michael. just add to

So, the Android as upside in too, remarks, ecosystem. is as the prepared mainly as Oleg it’s I my coming well from, mentioned coming mentioned from

the of ratio We XX% revenue half. we guidance the in expect And increased same $XX in that’s to that something that the in having with Android in that our up from seeing traction up was million, half QX; have show some about we And of first started million ecosystem. and QX. $XX hence, showed second

Michael Genovese

my Thanks. the or I into the question, your that other it improve is acquisition. play and say electronics, there you follow-up perfect. as sell auto is grow markets the which Does actually other for and acquisition does well? consumer into another a filter can smartphones, Okay, addressable can just the technology market

Oleg Khaykin

It of question. safety right to onto receiving module. camera side of RPC defuses the avoid increases eye sits the pixel. on which filter side, And object. our -- laser sits excellent addressable provide laser to market. light is end an the a the it and distribution projector the the plays module, what the the That’s that’s [Ph] our actually So, light above on of

So, traction by reason where through of are same our to have well best module. we we the need by And transmit is as the doing Android the today both the playing got as received diffuser. attracted It’s to world in customers, to in a we RPC, the the have the now going have you company side. like absolutely win and of in [indiscernible] significant technology, they for that be on part the unique this, And where ecosystem. were engineered filter ranked design the is

Operator

Your with Company. next Henderson question is Alex & Needham from

line Your is open.

Dan Park

my This Alex. for Dan afternoon. Thanks for on Park is question. Good taking

full So, Verizon their want if year so, wanted see -- seeing I just with CapEx from are to to guiding just you any impact this? FYXX I guys down,

Oleg Khaykin

they wireless spend really are probably for So, trials. yes. I mean, to In down we are XG areas, and on guiding. also clearly comes saw the mainly some in QX, money, they where field to some it going

kind So, network area in quarters. base what our in the coming going to about obviously area, that spend upside bread concerned of as some the are we’ll probably where to the major butter, see that’s one opportunities. to But, is be maintenance, we for the more and

Operator

Shannon Your Craig-Hallum. next question with is Richard from

is line open. Your

Richard Shannon

I may comments. have first missed few of

apologize. if So, repeating I’m I things,

any can to so acquisition, of give RPC we us apples-to-apples comparison? or revenue, how that’s can the With adding sense much Amar, you of December get quantification quarter characterization a your

Amar Maletira

the perspective, it’s than from this quarter, Company it’s much. a December is VIAVI of a less total X% -- revenue. Actually, for So, not revenue

material. a puts strategically technology that mainly us This XD is the into sensing it’s not ecosystem. acquisition So,

you December space. more we December just when is two So, will integrate it it’s announce which months the not revenue, Having quarter give worth opportunity material color earnings deal, the quarter, said that, we enough. and immaterial, in of we the back for for come as closed because close this on it, we deal, the is and

Richard Shannon

question. Thanks Okay, perfect. follow-on for that. My

Can useful we safety it’d timing perspective, last regarding give us please? should your scale as of public You about a think that, opportunity communications about military sense the guys in of remarks well talked be and how I and this prepared for believe a you upgrades. and quarter

Oleg Khaykin

a monitor Well, can we as the about pace. What move imagine, government, things the you at are talk snail approval. when we is budgets

got most that it. for budget The projects the So, they RFQs got is come next important the to awards project. step from has thing and approved these is and particular assigned that

about see half while second calendar the the I’d wireless for more a we of me, more are side say next outcome as think on type of of the talk opportunities government, military opportunity, into year. kind near-term So, I we of XG that

So, That’s for next visibility that calendar are the the really business us, on. of is starting more year. earliest that the we targeting second spend increased see we from in that half

Operator

Jun Rosenblatt question Your from Securities. next is Zhang with

line Your open. is

Unidentified Analyst

on is seeing demand competition in and XG kind Jun. is Good Gargan the Hey. testing are And Kevin how in then, afternoon, Thanks any [ph] of you guys. the I markets? for X any G This if XXX years. taking these increasing my think you question. sustainable for could just you on wondering X to provide next for was color

Oleg Khaykin

on to segment XG we need basically testing, So, market. the I the think just

play we the on where is system So, side.

we So, them That’s for where protocol field, we also build testing, as base when provide on testing, vendors, And kind forth. field providing similar then, various evaluate testing, goes of NEMs, stations, type play. instruments network to when the point the tester with monitor of of they that’s so from so the and it capacity to operators field they security some view. well to as test into them

that’s ourselves playing. So, we see where

and are becomes integral this major significant invested particular by requires integral investment and their also planning. they an case, only our of part And share infrastructure We’re are their network not to well. where actual we In the lab, space the designs demand leader that’s or players for the the play, of are, the some my equipment; we not in in breeds but NEMs where playing chips the solutions, in operators. knowledge, the worldwide. it as it protocols testing in success best boards of seeing success, of software other once And majority because the market part

about we’re of the stages prospects in So, technology early pretty in deployment. long-term our given good that the that respect, I feel

Unidentified Analyst

you heading segment you trends kind Sensing on some I slowdown mentioned of XXXX. industrial XD business Sensing? the XD your And then, the into impact know a a automotive just in seen any of quick follow-up. for and Have from

Oleg Khaykin

we the zero mean, -- virtually industrial industrial have automotive. I Well, revenue in

even that’s not issue So, for an us. really

So, today, conventional whatever it’s not automotive a because in fact, away, a it’s in Sensing couple I is more probably using years think sensing sensing. they’re a XD, XD of

automotive, not opportunity. So, really view longer our that what space. I’m But, mean slowdown a you on term a by sure really in it’s

presence XD the on We about X subsystem our Tier or involved automotive major probably X being all Sensing with more to OEM away. Tier are the car And the X providers years to is currently X manufacturers. and view in

going in some But, it’s already high-end see that’s comparison. to relatively in-cabin are cars We volume the happening some today. by of small monitoring a

Operator

Your next Kisner question Capital from James is with Markets. Loop

Your line is open.

James Kisner

any I mention this I’m filings your So, China. product or tariffs for all current [ph] in any on noticed didn’t just just point? about this that guess you tariffs at your talk some all. list they’re in you products guys not, wondering having at in impact from if maybe new the at the first, I production be of

Amar Maletira

the in do yes, James. minimal in So, I time, products at is think, some this we have China, point impact but

And mitigation X on monitoring know And are plan. out also it. working continuously we are are We now. lists I there there

at this we So, point will of tariffs. monitor the impact to don’t because material to in And time, a situation. P&L, we see continue our

James Kisner

the the a past. bit then North just more slowdown And talk little about in American

being and in being about now. You pretty about North of you’re America, guys it have talking slowdown kind able to talked weather of kind diversified a this

North to might sharp me I pretty or like you how motivation pretty the in the assume comment it’s -- spend of lasting sort just start, is? of that America. on I’m sounds slowdown was and how kind think merger -- in related that slowdown be And so, what maybe it And sharp

Oleg Khaykin

M&A, operators. the in They slowdown and network with the between I expansion to sharp, their maintenance, the especially very network is Well, tradeoff indeed policies. try dividend triage biggest mean,

purchases under the equipment So, not fall our in unfortunately, the their of CapEx. OpEx, P&L the

to if normally begun such, profit spending, to we up impacted. tighten as you extend where that’s get So, have quarterly improve your [ph] the P&L, you really on operating

Eventually, at watching all upgrade the expense they But acquisitions largely for clearly to your you of of the everybody’s how but maintenance network to for of just like the happening monitoring and other, making for kind all longer delay, it’s can fixing more that’s pay time, the on. delayed and each So, you through comes money and delaying management. I delaying think, do in, or have you looking a and spending long they’re bold bill eventually later them. roof the

point it’s for zero, zero. lot to the go like But drop kind I’d a this in we’ve the XX it you is to us, seen, that -- have of say at hard time, is then, further I’d down truly But months it’s always given gets of obviously, floor. say it mitigate downside mitigated to largely this last that some zero only of it’s there So it. risk. the when to down. again, But, imagine in thing we Until ultimate

James Kisner

Understood.

follow-up. quick one Just

guys test year the You outlook end in year. changed of kind You the your think guide prior talked about that the the the for still high for assets higher the have end wireless being unchanged, range of wireless…. I still of for for that in Is range?

Oleg Khaykin

testing a the to service I driving of now. on networks early getting it’s testing be further today equipment are money the instruments. the our with instrumentation government the we’re volume are as spend what in the into to expect upside testing. And is really deployments And real doing initially where leadership down providers the big XG field various the contribute. XG in lab a field we military the as And is well Because evaluate once what road to using lab working deployed, starting is big we’re parlay our mean, the winning and the in are vendors. term and longer will we lot

Operator

Dave B. is Riley Kang question next FBR. from Your with

open. is line Your

Lee Krowl

on parse to just acquisition. on Hey, quick I deck. of Thanks questions. kind B. for Krowl Riley. Lee actually slide is my wanted just guys. the taking for the This Real

low some very very diverse. the is lever mentioned volumes. And guys You OEMs, many volumes, ecosystem there very many, the Android obviously high to some Android ecosystem. is The

wins or when you’re wins, just have is these So, wins do opportunities. of to and design volume are design more that kind design for it high sampling refer you future you

Oleg Khaykin

design the the of Android with combination Android the the they saying ecosystem. X, we’ve point they are this both. the X They not biggest design have of Well, got all which But, -- early the in wins in volume it’s top OEMs, much And is in at wins, all time. basically have kind -- players the application.

that’s purely is and merits pretty their -- much So, on everyone of the technology.

their that Android not driven primarily said, it’s Now, And Apple does know, it’s as own. ecosystem, you because it’s iOS by time-of-flight applications.

So, various that and adopted presents said we proliferates good a feel go as time-of-flight to gets with into us it other applications, opportunity further.

Lee Krowl

make switching then, weakness, That to American that as it. over Got North And on sense. my well. ask space question the I’ll market

the of would If cycles. kind horizon. you dig traction the hinted their demand to of just reaching with adoption I certain cycles X.X. on a But getting say it ramping G.fast and in had good of DOCSIS DOCSIS at conclusion You and the -- described kind in I because procurement guess, for kind you curious, as guys maybe the seems like past of

So G.fast indeed opportunity as just past kind you that of guys if kind of well? it get did concluded curious or if

Oleg Khaykin

big the the all cable, smaller big say, lion would will I wave, procurement of now, And procurement while or or next in lower That opportunities. XX the the said, Europe. of of all past their North I took place are kind the the at North customers the believe taken place over end be approaching end, the cycle. we’ve our in First America wave, of deployment DOCSIS -- on share months. And took least X.X, the America, in

would Europe. been guys with the It’s than as far cable Now, few said, have anybody a can not really a it’s with -- of G.fast smaller operators. North delayed I for market not has the down don’t think The I G.fast a the biggest kicking would kind be. perennially thus the happening telcos as we and in spend. is that expectations Europe the still North materialized got postponed both seeing past to are that road. as side smaller spend America is Where cable, picking up the largely DSL any America. a players in has the the and us well And it that on are exceptions But match with much G.fast home, by, gigabit of

are a think, but companies of I think probably anticipating. of it may couple of XG it yards of the were do customers kind using I initially the to final happen, now versus at smaller home our thinking perhaps much some than So, into the will copper. still many volumes hundred And telco the

it shaken out yet. hasn’t still So, fully

So, dormant It’s that’s the status pretty of much and delayed. G.fast.

Amar Maletira

Just add that just world the performance have America some last the on of rest versus North of just appreciate if couple I NSE, driven can color in so in diversification you’ll the that we years.

you grew of North double give color. fact, digits, some In outside to just to America guys actually

as But, the And point, good so, America America. North to Oleg’s is in America. North the across execution outside good see earlier well of of we as North continue outside to board, both spend, good particularly demand demand and

Oleg Khaykin

strong our we’ve have And fact, a calendar in in next going and think, Asia our into I from efforts significant And with pleased Europe, taken momentum years. year. very last the a Latin competition team’s the America two where we in I’m very share

Operator

from Your Stifel. John question Marchetti comes with next

Your line is open.

John Marchetti

G.fast fiber-to-the-home pillars Maybe just that a little mentioned on comment. going as the being forward. Oleg, and of up four of following you before, one bit sort those deployments obviously, fiber key

real as a to of of growth. leg reconcile that trying sort Just

of maybe, enough think comments deployments for fiber just of Is trends of at deployment the rest with you made make that? the up trying America, you some you will, this key things of North like that. type on some the I’m the see to deployments world for to XG and If with just some least fiber-to-the-home might reconcile G.fast? of as you one bypassed, if in

Oleg Khaykin

Sure.

else fiber-to-the-home big America, York, mean, call I the like world, fiber-to-the-home more of a consciously is dense we function fiber North it say, Boston deal everywhere. a in talk let’s change the New everywhere growth. In urban fiber fiber to Because America North areas, indeed really the So, everywhere. And right. of about and I G.fast of it’s What is the production. in you within fiber run run building, building. into sometimes node hundred way run the couple last you where all the kind yards fiber you maybe fiber really the then the is of home most optical to new to the of of or

it But, maintenance I regardless So, other mean else of fiber plant. the In being They’re fiber are in closer or is the in the home, and the over is G.fast. running Asia, copper reduces excited not home. what Europe, to their pushing ever about seeing deploying in deploying we to are customers we fiber is because things. pushed whether indeed in everywhere more are Europe also this

that’s now the is opportunities, lot providers. we’re the pushing seeing And selling all to way of station. pretty mean, And it seeing they making are And home. we’re of longer fiber fiber antenna, don’t in cable mean now. mean antenna all to guys. I talking pushed are base I the is really providers, call becoming where service than people really fiber of who they’re way service operators all they cable They’re a into run guys at they’re more the fiber are we network fiber clicks, neighborhood. yards hundred and when no near-term, couple tower, down anymore; wireless, the network cable as them cable now look I there the the I you if now fun the about about the really way also more talk We being cable. to are fiber the operators much to into the cable now last

both this that’s see mean really fiber of telcos a -- lot where as a now I companies. is well cable interest from So,

John Marchetti

Right.

sort as deeper network, more fiber-to-the-home to of in the pushing not comment so you it? So, fiber about much used

Oleg Khaykin

the it’s most it’s say, economically a it is areas. more But, to Europe the In them still not in feasible in building. America, all to push in way suburbs building big just would urban fiber yes, the I to fiber-to-the-home. Well, truly of for the

John Marchetti

then, I just a And on OSP if for can ask minute.

had side more in anti-counterfeiting you You bit a side. the than and little in the obviously banknote expected strength

larger coming potentially a we did that you expected? to a move in the as half here. off than relative fiscal you programs you think sure get expectations, of that think dropping -- were bit year? ones got trying about that Just the of those then how were you the And forward weren’t couple in to second your little about we do Were

Oleg Khaykin

cards from and never as a predict. to usually to demand. us customers. enough the good your number Clearly, our about a it. don’t [ph] planning customer lot we We But that having know with We and be as always forecast. in take your judgment operandi And bag always you run it. from modus these got they that is it capacity linearizing of more get It’s always conservative gives -- smart to the take customer our forecast

plan over the upside So, in we when some forecast. a said, I’d for meet we But, costs, forecast upside. with we’ve and want, plan materializes able be look will customers it case, prudent, our time and conservative say plan we we our to if at capacity, some the taken hey, with to judge our

got to big And in some some mean, an the that this line. nevertheless -- of our probably budget. bigger than current more So, it’s we it operating bottom easily provide leverage And upsize It’s upsize. within operating materialized absorb materialize. we what customer a a I to obviously And forecast happened all failed upside. could but case, rather not more a

plan customer peak. value kind We never always forecast. So, the the plan the we of for of RMS for

Amar Maletira

Plan execute aggressive. conservatively,

Oleg Khaykin

That’s then thing do exactly peak the end right. plan can the bag. holding up The and you worst is you for

Operator

Meta comes Morgan question Stanley. next with Your from Marshall

Your line open. is

Meta Marshall

I operating NSE just on wanted to ask margins. the

And second you as of is would that which of about Just than to you realized. have there synergies widespread? then, you’re point, the versus kind geography any know particular just of maybe or some extent expected surprising talked early in a interest kind operations more kind that Thanks. Is of strength. better seeing being is [ph] which XG I

Amar Maletira

here, Meta. take the question I’ll So, for Thanks first the question.

business So, terms operating that of and the we two the AvComm in leverage have is the adding by things are the just model. margins, definitely in here. there One Wireless

a added here. not corporate have overhead We lot of

We additional are revenue. corporate the leveraging deliver OpEx to the

have expenses to continue manage a core knew So, manage we have continue day business at a it. is our to We there. there’s that’s the in to and expenses we what leverage two a end tight, NSE we the of natural and Number do very cyclical we that business.

profit very operating operating provider spending, North leverage example, be the should American for a for should service amount through. starts good it of So, model, good and if drop

did cost the synergies In we this terms see model. and still early as We to that of that’s we’re ahead baked for also integration, the some synergies stages. fact AvComm Wireless, us. continue into execute in and in was on But again of

Oleg Khaykin

And XG. I’ll a on take question a

it kind buckets. as three would I So, characterize maybe of

European delivery the and or They base and are to products their one that’s the spending your equipment biggest, first providers. group production a the biggest time. XG the of service manufacturers, their by They providers. that’s this is The the ramp Asian station at testing prior major far equipment to that’s NEMs,

I second providers. the about second biggest The really and I’d point say, aggressive. really Asia it’s Japan. it’s And by is the is, the far most bucket Japan about say service would is

I it’s just the the and testing kind to foot playing would more they work In terms and are testing with closely And fact, all in potential and the customer and operators, I the XG. third very of of if North works kind European truly of early Japan, are what’s science what initial really their the not in values be going would XG, most in you kind it. of would putting want happen and doesn’t bucket and experiment because aggressive learnings. who and of kind XG just getting a of happen, to know adopter And say, of the watch American

are say So, followed first, far it’s followed I the world. service service providers, in the providers that the by by everywhere NEMs would by in order, else Japanese

Operator

Samik with last Chatterjee The JP comes from Morgan. question

open. is line Your

Unidentified Analyst

for Bharat Daryani actually on [ph] is Samik. This

is question on XD Sensing. my So,

world-facing in being the the Sensing for recently to of players application. win XD a highlighted Sensing close XD market design One

the that XD So, world-facing opportunity? calendar adoption timeline what How next realistic take is a side? on Is would your size look of timeline. on year at? in to you sensing the half Thanks. second of terms of also And

Oleg Khaykin

lot time-of-flight is players world-facing playing. means say that a different there of people when So, technology. usually And

of players doing it. doing there Android are is also there it; number is -- We rumors that iOS is

extremely but I technology the out business, them, with market. pretty So, on big the we bag in the one equation. opportunities diffuser. on don’t camera -- the much are is filter in chain only leader the all design I I I the lowest of RPC, and that’s the the on that in of us know key in chunk world-facing in diffuser are eye camera in elements also in cameras there. much the of world-facing with safety we And technology we the our the And we available of side now through for provides we’re is now equation, the acquisition highest mean lost the well-positioned now think of world-facing, have the involved the laser every a RPC of the technology. not side have probably But mean,

Unidentified Analyst

the that. have In Thanks the well XQ for And percentage. ‘XX and you as products center first fiscal quick data highlighted double-digit just by grew center product. data in follow-up on quarter

through So, how spending should moderation And comments by in around some think also about that been hyperscalers. XXXX? going we’ve hearing the

your impact any know possible like from that. Thanks. on I So, to thoughts would

Amar Maletira

it’s X year on directionally, business should market to on condition, at a things. is double-digit And going depending provide we off for growth lower last years. products. good a One just or we that a growth, Again, single-digit result is, two or But growth started not data I’m the that to base. X the in of had the a So grow. whether a continue guidance full center

secondly, all we that’s a and And and I together. strategy said market it to come to continue et on so, team and depending easier was should have such business starting ‘XX, going product -- cetera think the that, into in demand. Having fiscal grow work as year place unit the compare. And

Oleg Khaykin

centers. hyperscale They regarding their own they’re performance. part most the us, I technology for mean, pretty development. our And happy non-event. for with Frankly, we’re do your question data specifically

really not base addressing. data own the they’re our customer their So, the Most and customer center networks. enterprise we are in are customers base the managing of customers

we we monitor of Now, who them provide do solution operator. do provide for the hyperscale data data performance center data -- centers, the to use hyperscale also customers the

that kind their just their service of idea -- make on of are keeping them fulfilling or sure they agreements to agreements. level So, service obligations

Operator

now back like of call. portion I’d over Q&A the to to it turn the concludes Ong. Bill This

Bill Ong

today. Thank you, Chris. call earnings Thank This you, everyone. concludes for our

Operator

today’s concludes This call. conference

You disconnect. may now

Viavi Solutions (VIAV) 1 Nov 182019 Q1 Earnings call transcript