Viavi Solutions (VIAV) 5 Feb 192019 Q2 Earnings call transcript

Company Profile

Participants

Bill Ong	Head of Investor Relations
Oleg Khaykin	President and Chief Executive Officer
Amar Maletira	Executive Vice President and Chief Financial Officer
Vijay Bhagavath	Deutsche Bank
Alex Henderson	Needham & Company
Michael Genovese	MKM Partners
Samik Chatterjee	J.P. Morgan Securities
Jun Zhang	Rosenblatt Securities
Meta Marshall	Morgan Stanley & Co
Dave Kang	B Riley

Call transcript

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Operator

Good afternoon, my name is Christine and I will be your conference operator today. At this time, I would like to welcome everyone to the VIAVI Solutions Second Quarter Fiscal 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. [Operator Instructions] Thank you. Investor may of your Head Ong, Relations, begin you conference. Bill

Bill Ong

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

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

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

Amar Maletira

posted structure. well note a the driven and year-on-year XXX in business. with NE bank VIAVI's high-end NSE basis of at a lab a reflected strength you, $XX.X OSP $X.XX. of guidance segment our year-on-year the and as is guidance in from revenue year of grew production business. Both and record levels our revenues. guidance XX.X% operating result VIAVI's at notable which wireless revenue million exceeded revenue $XXX.X OSP revenue exceeded leverage at was range. record doubled a business by and as at million combined million demand solid anti-counterfeiting quarterly Thank more our as our operating NSE than $XXX.X the and ago Bill. exceeded with of our revenue our $X.XX, expanded significant at EPS cost margin a high-end new the higher points XX.X% in record

solid to by business grew moving segment, with QX Now NSE, year-on-year. million a ago $XXX.X and XX.X% from above addition OpEx result a the from and of production year-on-year. NE assurance points and million and from quarter inorganic The NSE's revenue. was integration at growth favorable our ago our the at reported gross year-on-year businesses, in results expanded to revenue margin expected XXX $XX.X driven higher leverage was record of by a business, was million points XX.X% XX.X% primarily driven basis and acquired year the year in about in growth assurance operating operating at from at business test mature basis the AvComm acquired our our our XX% the NSE X. This fiber SE revenue NSE. cost SE grew levels volume products. starting by declined $XXX.X of NSE's revenue businesses core revenue expanded lab declines the our XXX at to Within product NSE margin XX.X% in optical and mature business. due XX.X% mix. business, from continued NE synergies Wireless ratio levels of bill book the growth acquired management. a

due points anti-counterfeiting the OSP's bank strength optical and products. to gross lower at basis gross declined grew of sensing XX.X% of million higher $XX.X demand XD a on at mix filters. XX.X% revenue margins ago year margin XD XXX OSP OSP. to products turning the note Now year-on-year sensing from

operating XX.X% as operating expense of revenue XXX result a controls. and at higher However, points margins year-on-year basis expanded OSP's

Now to turning the balance sheet.

cash stock Of the million for QX, In a million have $XXX.X including was fiscal worth of million. basis Our total authorized our $XXX.X quarter $XXX investments and as X.X QX. balance cash short-term buyback, repurchased we end was at $X.XX fiscal share, of repurchased $XX.X million. of flow ending of per million the Operating VIAVI shares cost we the approximately commissions. share

dilution VIAVI stock We continue stock in opportunistic be will earnings from compensation. based to to of repurchasing offset

to guidance. Now our

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

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

from capacity expect filter OSP $X to XD lower of plus lower of or demand operating million revenue be margin XX% with our $XX for margins We guidance or at sensing planned OSP operating and minus idling costs minus million plus anti-counterfeiting The X%. the under-absorption reflects expected manufacturing product. expected at for

XXXX. business, fiscal maintaining XD seasonal our majority are Due million the of forecast revenue We nature of XD XXXX. sensing was of revenue of year first the year in to XD $XX the fiscal delivered sensing for half sensing consumer

in shipped expect We revenue year remaining second the fiscal to half the XXXX. our be of

to expected $X be million. approximately is million expense tax Our to $X

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

Oleg Khaykin

strong three XX%. over continued demand leverage the a many QX Fiscal and XXX% the created the from year-on-year test spending, in with the the revenue increase has leverage in profits and recovery recently for operating VIAVI. North have Wireless The across which drivers in strong principal equipment both to NSE delivered XXX NSE, gigabit have performance. and than for were demand restructuring grew The was behind quarter Amar. revenue. and lab test AvComm of American NSE you, operating Thank strong past core strong OpEx business resulted along of nearly production acquired VIAVI NE XXX million XG a metrics. and reflecting business operating In segment A years for key record carrier $XX.X equipment Ethernet more a the optimization

SE segment some did expectations data center Our in experience came the although with and we business. in weakness push business line outs order our

to expect remain current steady SE at We for of levels revenue the remainder XXXX. fiscal

Moving anti-counterfeiting on a to fiscal The strong bank robust half business by had OSP. note demand. driven redesign first

XXXX As about quarterly we prior weaker moderating stated we half $XX the expect with calls, in year have core be OSP fiscal of to revenues second to million. earnings

deployment strong models. Smartphone expansion multiple by XXXX Our fiscal first of XD of also sensing had driven half a recognition business technology facial into

several saw from We initial new Smartphone ramp customers. the also

expect sensing half guidance, XXXX content we remain finish we XXXX. in and earlier both a technology - penetration growth of our to Our in calendar XD said, down. strong to That the opportunities continue increase. had the as about second performed fiscal be We seasonally optimistic

over year, will our the start express their VIAVI spend now to expect call I secular we trends customers namely our In performance. would increasing XD calendar shareholders and new Bill. and fiber, public As to like we to turn same safety wireless, and for my I team our XG to an my the support. conclusion, appreciation drive the military sensing, thank

Bill Ong

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

Operator

Your from Bhagavath line Deutsche Bank. Instructions] [Operator question first Vijay comes from of the

line Your open. is

Vijay Bhagavath

hey Amar, Vijay Oleg, Thank afternoon. good you. Bhagavath. Yes, it's Yes,

Oleg Khaykin

Hey, good Vijay. afternoon,

Amar Maletira

Vijay. Hey

Vijay Bhagavath

hi. Yes,

part. is I around think two my question

you so early First of that an if start for of question would us trends? globally is be of what are inflection monetize people kind just XG. XG when could paid Oleg, if state are portfolio. would and when the you demand then you that Get could around from your on I lot in getting clients and you state your a give telling sales a the terms What customers

Oleg Khaykin

are of first sort tell what? did was What Vijay, about our in coming sales kind you muffled. us of What people part? your

Vijay Bhagavath

you around, I your talk first Speakers]. think when sales customers demand trends you the key to Yes, [Multiple know, just part people and is

Oleg Khaykin

sure, Okay, sure.

America and think all I the we service NSE the for and take customers let's in of as the of some purchase quarter saw pushed out September with let's the in In our weakness general September we America was quarter, placed take and remained same strong of the December in us many just of quarter came - back steady So America North in outside North Clearly, kind of providers. spend December remedied aside, in North the momentum start the who products. the decisions if that quarter orders.

by we a was customers. surprised in So and pleasantly were fairly spend American across North broad it rebound multiple the

do see we sector. now the out momentum I the both I in patterns material field service aside a are services players. service not any wireless in providers service only from XG the So extent, service that provider in interest seasonality are deployment and in changes to trials, point would the thing and looking respect, from lab are or sector at The provider providers in and heightened our they instrumentation and those also seeing spending

So to instruments us fiber as in among think our a position incremental products. RF will VIAVI and opportunity calendar for service XG we to provider do XXXX nice the the in a spend it's drive and good the field providers addition copper

on is that the side, So right. NSE

Vijay Bhagavath

please know, I ahead. Yes, go

Oleg Khaykin

that we within the beginning the are clearly, was the upside we grow the a to be. phone seeing slowdown, just small have there beyond. we very the largely XD half on our had started to guys forecast our and OSP our kind revenue. it now aware where did to anti-counterfeiting among the expectations weaker, all in rather factored as in also demand, we to calendar modification feel in Instead and second a had and year, strong manufacturers but a Smartphone significant to bit have are the side, ramp not half we We of the would was any have of OSP you came make it business which result, - We forecast pretty in but been expect a a the expected we the calendar and fairly XXXX on of mobile although and XXXX. So in much forecasted. second need we the Clearly, had our throughout sensing clearly, other slowdown of it's not

Vijay Bhagavath

printed XX% new quick are on Street XX% norm for your high-teens for thoughts The What this was Amar. XX%. there guys Thanks. the in operating new you norm? A to into close margins? follow-on the and as getting of Is kind the

Amar Maletira

but about drive is the a to quarters, forward, few operating it is that structure a for huge we have we have this let's, There new in leverage we created. been consistently going the one cost like thing norm as that know, the would restructuring the you model. We so drove, last that talking

as the in, you have what and is our we is drops the levels, to higher QX, NSE that quarters OSP operating revenue the NSE basically line margins. and of both structure the that we the XX.X% seen at landed also lot We as at well posting it had high businesses, which margins coming So OpEx - where December revenue quarter. in record we XX% had volumes created have very bottom with landed fiscal operating

sticking create overall but improvements good mix headwind a to dollar if comes and XX% revenue, two significant of going say example it our XX% probably the little should we range Now goes think a and margin, should we forward. profit operating the the we operating clearly, does operating quarters very there forward, know, for - of accretive. depends portion just of sensing operating XD revenue all now where very the exceed but are on and leverage volume to will in I to saw, the expect it model, the as becomes in, it going bit high we be from of because range margin is you years you still as up, will a Again, too

Oleg Khaykin

checking the and drives about of - said, all I operating terms is well were here. is we There secret add And margins. no scale back, as in this Amar will what

IT G&A operating where is to with opportunities of things we we new much out continue We additional our need have pretty be. like roll a that systems year. model optimization Our to this long-term as obviously later and some some still it implement

in to north but the I driving toward be line leverage said, operating our we point really the XX%. because new improve foreseeable with is and the for to this us what Amar drives in future, focusing, the continue at G&A said, normal, stick really that shifting it's and our organically VIAVI really as to get to XX% to leverage XX% of as will We inorganically both for top

Amar Maletira

So, more add if one just I can point.

to the cost reducing communicate we way here. restructuring In key addition efficiently our we to we scale that want message cost such that the also is structure that shifted our and a business now quite can in

Operator

Your & Needham of next Alex question comes from the Henderson line from Company.

Your line open. is

Alex Henderson

of you and hoping little the start was process in XG about interior that Obviously, development developing are the lifecycle the I off the companies talk to development. developing boards. chips bit a could the you

a to design that provider over you at are - are multiple move time, to and how in testing each You in mature. architecture talk field about Can of from steps. where through testing where making lab terms steps test to board to of their customers deployment decision the the the original service but you in field type moving to those

Oleg Khaykin

design, Sure, at companies area, and are that really play in so much more the chip the National we design the Schwarz that it's like Instruments not board doing well. of as Rohde point maybe Keysight or &

cycle that product may region. is XG, the talk we we about of system sales the when level. you at enter with see leading XG kind Where in them So the

big build provide the level. and is come in product a base the station around XG we test releasing be able start network them, system the who emulate test that systems be to So because their we for radios at to once product product, their and where OEMs to designing large to

to with products are the put are comes test will position then network deploying is and the segment multiple out where OEM products XG is and simulated of enter. which The is develop is we a in will level in do labs validate Then as next family for our the RF deployment. down come the much stream lifecycle in CellAdvisor we that skinny of we step, what in that that customers provide with the a also field where we a trials, providers service the it. as that to leadership longer a into they system more the next provide revenue build in environment to in testing QX go where the So field instrument in products the as products to step field of hoping their and such us the us and do who and these the XG many just products term announced XG in they provider

system there into for comes OEMs you additional station time In need will mass also scale point, when more manufacturing. production. production addition to high testing will the test a test, base the that demand, At volume

field the deployment in play much the that at and provider operations. system service very between we OEM So both point and the

Alex Henderson

that So in chain of terms the XG are we customers [Technical implementing along where products? the Difficulty]

Oleg Khaykin

are we imagine, they lot So can of are a systems systems. test releasing getting you now so lot of a their clearly of as making a demand from lot OEMs changes, they're who and need

say the see strong we is demand labs now would but service of from - seeing from very and I to trials are do are So to OEMs, we products. demand field also starting the providers various evaluation there

at right time. So we are that point in

Alex Henderson

scale what part of So if one this the is curve those get versus were demand it, curve? demand the of around versus the each do we second size the various into own When their the of steepest third? the scale has to I - first

Oleg Khaykin

don't Well, I you have have instead think multiple of waves. demand a steepest think, I part you current,

continue So to creates sell if add as stream it migrate. together, smoothed because of Later kind you you software. because, the lab, more today, the all - initial with you additional on it are standards them in selling initially releases boxes out

roll of cycle the that So than software I releases the but you XX-year you implementation. outs. rather hardware of instrumentation, It's for go field keep will becomes selling a various more additional standard say into as sale

a core, we to that a the are have be field for we in instrumentation. to player major So the business what shooting really is position

additional the you will of a test are follow seeing in several ship a you to years, lot base see terms software going be would demand the lot that system for the installed OEMs, where say testing standard of the in will with of sales I more in in releases. and quarters probably boxes you lot just existing do on a go lab So next the systems to

Alex Henderson

I see. Thanks.

Oleg Khaykin

say really curves It's bell just a together So I revenue. years. one multiple fairly smooth multiple at would trough adding and then no like many there peak is for upgrades

Amar Maletira

field But lab than in general, the market. is larger much the market

Oleg Khaykin

Yes.

Amar Maletira

It is roughly XX/XX.

Oleg Khaykin

right. is That

Alex Henderson

go in of we probably field we year? back Right, should acceleration once year next so market, demand this be to is and into seeing half an which the

Oleg Khaykin

it's it's like I it's in market many don't know spend but field years. happens bigger, sustaining demand, if more acceleration because demand remember is also much the over more

then in very points a and of Okay? by the much market lab follow-on driven lot the technology sales. transition is in Whereas software the

big well is the the revenue. XG So driving software revenue our to as and shipping. XG existing LTE all still for our are for the system of we example, upgrades still that a new - not XG It's today chunk as is system

Alex Henderson

you. thank Okay,

Operator

next question the Your from of from Michael MKM Partners. Genovese comes line

open. Your line is

Michael Genovese

I I guys. different in guess I it been asked, maybe some way. has Hey but of think this ask a slightly

the how the the of the as how flush, budget of how happening flush more in was terms you sustainable more much just side? In in opposed of seasonal in of upside being much upside to NE type much organic you being know budget describe upside on a side the and acquisition something, the as would quarter, and more more was the indicative

Amar Maletira

first, me let the with last right. So start question

business, came side entities the XG. of and driven our balance the of Wireless by and so of business in the business, the the on it more than of business million the look acquired momentum we about a when and the mainly million, side roughly $XX $XXX most on the NE our at core guidance from So $XXX in gave XX% at organic any upside from we actually came of you came upside roughly of million, NSE instrument core

to what quarter, a when other Tier about in think our was September North I'm quarter, is spend in just color think - were is you in spend here, pause about came when will and in Tier Oleg But is there all is go in the I is you recall, the the both a give if X some service and the What QX, in which that saw sure when fiscal on there saw we you American sort actually back X North regions spending. of quarter going to we we spend. our going and that we what was jump So December pause and whereas America back. providers, said just December

Oleg Khaykin

would there a was it a of something say, that out like funnel because released not than money was was funds delayed were I It got budget rather the the in finally the spend nowhere. flush, a later. Yes, things that popped effectively quarter and

were not bluebird and out a some of to money like was there what actually came the just it of lot expecting there. was maybe we So something buy, was that we the in a that the flush were spend, we that but September quarter, materialized some do have in budget nowhere, funds the programs funnel for money it here

Michael Genovese

high-end market going next to be and related Android, on make is is any I then of that wondering kind just ask year, very, the maintaining mass want is a XD operating sense there into sort the of your any sensing level are a I that Android the guidance question or a on to - phones that is mean low-volume I'm helpful. of Okay, for is sooner don't that though, side, this this more if that I guidance, One, to it you is get questions. there opportunity? to of changing of mix you know is moving granularity that, if couple of And guess very it could on update, up systems then I market

Oleg Khaykin

high-end very there it's models. phones, lot of say a wouldn't is actually I

be I but still features, it's just question bringing adoption it's systems, a to quite models, I biggest the these Android - and are the released. consumer with the of good features. a acceptance these I see the acceptance more say, features which be be we year, models phones rather these there being that a going than not will be the shortage market. - because driven be don't will to it's really by It's other that out of not certainly going actually, hope volume one. because to of it's features think We - really first would by sense the My these a of rather level consumer the think is, are of few operating it's it's there just driver models going out

Michael Genovese

guidance you to if Did that all year on there comment a is your want at for mix this within shift? mix shift

Amar Maletira

Android-based I'm So million of but revenue be specific sensing the $XX guidance, half recognized on to and half million reasons, was maintaining obvious recognized very we there. the balance XD the we the bit $XX of there's are a second of going XX% in for is seeing uptick in Mike. clearly, second full-year. within first for little this the XX% filters, that half, and to are not the

seeing are traction customer, some guidance. We maintaining same there the the and we lead for are

conservative we with we we to we year on customer the were but as and whole momentum hopefully the are when to begin and continue. rolls we number, Android-based some traction this through, put $XX see should So that the do see holding million

Oleg Khaykin

I And ecosystem, add we a twofer. get also Android in that would

a We well in as position engineered both as strong have filters. diffusers very

the that content able that phone the could to in Android be have phones, product all with as content well. we diffusers terms the may phone of other be well greater actually our but than penetrate in we future, per in said, a So it our in ecosystems

we and thing win decides. the - what ask everywhere - sit then the are market team is is just line bottom we will and think I from can see So go I my back only they

for shortage model. design phone be or will well, if it particular market wins losing will great, the of any things it very So accepts and are we but do not

Michael Genovese

Thanks so much.

Operator

JP of from question from comes the Morgan. next line Your Samik Chatterjee

Your line is open.

Samik Chatterjee

quarter. providers is that This strength of is you strong coming wanted here. what and saw of understand, the similar you of you something Can trend will are this the expect there there you discussed on back that? of just the in help Samik America service about of Can is or what a this Oleg, have markets, you question. kind seeing some come my taking you you that kind you to talk I for materialize spending North expected of from in quarters? just where Thanks us kind you help international saw kind the

Oleg Khaykin

so want let the us in ago ourselves you American compare growth be point I weak as spending, emphasize. mean, strong, dead any mean to so years market. on I clear upside with quarter three at the point North spend a two, by North way in recovery and looks just it is just the When a strong significant strong the measure, not say many you provide postponements North it strong. - were way, me put have that, Well, let's were call any there any I they if actually it bounce. it to it's American would I that so cat market prior this was It's from or as to American time, but that we that relative to and run quarterly this is will rate diversified our It's

play the a or they the market in seen need some to need terms to and and catch-up. North services, year year they do bring new very to on to improve extent have of being will the service last American pragmatic spending We continue half,

us. to or on going a spend extent good So materializes sustained for to they basis, very although the sporadically be it's

and on were where respect although more instances there catch to quarter they December September I say few a the of had would quarter capital was - a spend. that in CapEx So up materialized

from was quarter as December. So but we just more really of then I coming in of think September overall, it a benefited well, postponement

Samik Chatterjee

customers international was with of consistent North different kind markets largely sorry, trend of America? your in And with the the some or

Oleg Khaykin

again, Repeat. Say please.

Samik Chatterjee

the of trend saw as customers in Was was with international international North or that - consistent kind with consistent well? America the what you

Oleg Khaykin

last steady it's growth spend years. the in nice of customers I say would international couple pretty the Well, much over and

international much with I So, seen in America, on spend we many network American the we have amount steady as of like past the just quarter couple they and in of that where mean way I just the Europe, simply have Latin it's same kicking behavior business been in North do to part every operators the say What the in to Pacific have not have point now to America Asia maintenance really getting they - things as network market and they seen markets. their idiosyncratic would is their and seen possible certain I mean model and North the delaying a a has we it's consistent years the decline. by readiness something continues just can that. to - forward spend otherwise fairly

two certainly North I downward So last operating and leverage some in hope our to that a will in model. we extent years to tremendous the happens, of reversal see seen the be the that have America the we curve to spending that it will

Samik Chatterjee

you. Okay. Thank

Operator

line the Securities. Zhang from of from comes question Rosenblatt next Jun Your

open. is line Your

Jun Zhang

Thanks.

So my is question revenue contribution. XG the first that

you for and could data you think us testing color clients we mentioned revenue that And us quarter in some give last the order XG you some to that Thanks. recover? I So more when outs business. guidance market that? gave center Could the for guidance update push and also the from is about expect there you that do second

Amar Maletira

will take first push Yes, the and I one on one take center client will the data the Oleg second out.

will of What wireless not and million. business. at combined businesses give the combined, on high-end did any said that did Wireless be is or about We on guidance it. the range we AvComm revenue that we say the we the business about acquired specific $XXX we the XG we guidance good our So feel

our the high-end the in are on even execution the momentum we so exceeding range I - we are the seeing given of guidance is good. business fact, In that wireless think and specifically XG, the in

synergies we about I that revenue had cost the business. the to we that tracking to will committed that in So here we positive feel about Street, trend are just add the million. Also, $XX to $XX

back In to started which the we into as plan and of the for we share the ahead capture market fiscal year the that of one, are market it in XXXX, fact for also reinvest and we go fact gain so share can have is continues. business momentum and of some XG

Oleg client push will the to et I the turn So cetera. out data call on center

Oleg Khaykin

mean execute, in budgets data Usually, being we really longer quarter is that cautious taking more I more is being - that fourth some prior in in so usual. the Yes, lot data seen around enterprise and cautious it fourth a sizable was fairly we seen center and That seen spend seen of in up we change. but for Company-level, have of spend environment the a a more that than sentiment used It said, segment one general was more the that unit, deals a we before. of our years. center revenue-wise to a have in it we than just was quarter we have that the cloud business have not saw not material, impact more material the material that time haven't or is this very the

Jun Zhang

thanks Great, a lot.

Operator

Your of Marshall Morgan next from Stanley. from line question comes Meta the

open. line Your is

Meta Marshall

of for contribution of just leveraging expect me And to any need in like have and Maybe implementation the kind I on second and that the all just about kind there Oleg, the from the would that you that then expertise color lab kind share kind of you products calendar those acquisition, the guys kind into bigger RPC leveraging a Photonics guys. today that question guys of revenue opportunity in them just that commentary Alex's products gave of Thanks you to are on or is kind question would make on sure field do you there. you are the maybe implementation building XXXX? developing wanted relationships you of have take or for field

Oleg Khaykin

so is a any from question, when terms the increase zero, virtually Okay, high the of field, kind you first wireless in of start very percentage.

So percentage because talk not be going it I'm going to in terms big. is clearly to

service have Now what the strong at the at we XG, have are very that part well - in on about already What very position is capitalize the that and we a some for beams and in we analysis the instruments what deployment lab, the we - we is going - of the announced, really is right field OEM, of area. talks have we inside lab - being the that tool able the have instrumentation north have deployment. that network terms powerful provider XX% namely which a to of on well as of as it's in is both the CellAdvisor

family are We network bundled together optimized we our software load of are with also tools XG have a to that obviously fiber specifically them the the also and come meter optimize XG for deploying also that that the tools infrastructure deployment. for

supports Software and developing one deployment, deployment. at that existing software our it them it's XG So the we Assurance that it also instruments new then, but and already XG a already for them - have all modifying into our taking been of XG into looking products, adding has released, putting

are of months. probably say having with would the to released rest the out about of I of and we So XX% kind toolkit the next solutions XX% our six full them XG way in in fields coming

to new RF to in position we that annuity the VIAVI succeed good case, and our whole making are is And that we will on we to XX big for provider next clearly able for if positioning in a are Company be we clearly, wireless deploy to this outside bet customers the years. include the in and very that copper create to fiber of and assistance offer feel spend significant XG. I service So,

do to Regarding RPC, want you comment?

Amar Maletira

you think quickly this that just guys but will can comment, you enough so we will I on I through guidance any are not giving one. of so RPC, Yes, Mika, give specific color

So completed acquisition. in was first RPC the We our December of already all, quarter.

about December it we market it and for not it bought and one the and features if calendar in still you an one filter you XXXX the really strong think unit, a XD is wins Android-based Smartphone really front-facing. we basically three the will material within Android specific of initial engineered customers from in had sensing. number one three revenues design for technology filters ecosystem for is in sensing is our which beyond believe two the the are increases again addressable ramp and in in stages. We say and that so earlier December XD sensing quarter perspective recall, Number overall diffuser our RPC the numbers were and area XD to was reasons: most RPC our Android-based quarter, their in leadership For the

the Now so we the have now more, in And will front-facing. will just if have which facing have the multiplies. well two you added, it's as diffuser will as units filter the two feature world engineered gets

up, So it's is early can I right it now, but guidance any this since you but it's early stages, meaningful. said as too early to give be really Android starts as the in ramping ecosystem

the it not the our but same, really increase ASPs meaningful is revenue. are Now to

Oleg Khaykin

sensing exiting it market year and the revenue So it meaningful up year. - of yes, XD chunk strongly if XXXX, a it really our Android be calendar scales will throughout the adopts

Amar Maletira

separate And versus XD our we want sensing. RPC

us be sensing so it's will guide one will interconnected that cetera revenue you for XD because here. We et also easier give it

Meta Marshall

Understood. it. Thanks Got guys.

Amar Maletira

Thank you.

Operator

question next of FBR. line the from Riley B comes from Kang Your Dave

Your line is open.

Dave Kang

Thank Good afternoon. you.

congratulations were results taxes than First especially nice on of considering higher all expected.

question as regarding to fiscal expected per quarter, were million why well? million than and $X they use higher first that is So my regarding 'XX we for taxes, $X should

Amar Maletira

for you Higher in taxes, depending where lands, we asking and taxes. lands profit have on profit on thanks the So higher the pay we tax where question know. jurisdictions NOLs, it if don't the

higher operating just profit, EBIT, had of quarterly profit we So this history and the of higher record operating it's so a in Company a taxes. record result

in range. and Now you it around roughly typically be going that and of will use is you know, should roughly tax XX% to our XX% something is PBT that that forward

Dave Kang

to Got it. And then moving wireless...

Amar Maletira

Dave, Dave?

Dave Kang

ahead. Go

Amar Maletira

let that land. all the it for landing, just where on depends and this in are range the right. than so quarter, profits of is particular is where this lower It again profits - is So me because what

Dave Kang

And it. that who North got China/Asia? America/Europe? really assume then in are on it understanding my wireless your Got XG it, main regarding side, activities, that - are is fair the or And it - leading they is it's to China/Asia competitors more is

Amar Maletira

so America for field or North lab Korea perspective the labs, probably a is Europe and see as trials and ahead, regions we up. little XG in specific we catching we the all a from testing like we in market competitive - regions, significant too we but outs happening go have Japan, example is is South and across system So in basically bit do won't the where it that share, a roll do but an see the

Oleg Khaykin

portfolio Cobham you the VIAVI tell our was before assets significant XG competitor and we will acquired we the I most to Well, exited business. that

felt a customer are we maybe small some and end, really sub-scale here there they the We and could not investment and customers player when just companies we biggest there, in but we partner of up would north and with a are by can second the the keep mean be test, sliver offer demand think the level were system and most we the who with want otherwise performance all the have XX% in keep I all you that solution market share and compelling particular I never with in standards up requirements, of segment. far the

Dave Kang

Got ASP XX%, it. as regarding as concerned, And what about - about to how to know want maybe XX% filters so I XX%, should ASP is then I we and margins. moving far maybe it’s XD, margins? assume specifically, we and can diffusers, like don't you of think of talk XX% mean,

Oleg Khaykin

are and only about sure on market leader, So is because pricing I'm not listening I thing it. the listen, last if want our the you call you to to margins ones are talk

leave it for that. to sidelines. our for at the It's to guess guided and it's So from competitors let's we know, us

So was wouldn't in be we it attractive. this not business if

add, leave is against to the and the on One OEMs biggest solutions internally single thing developed offering. have prior test system you who on is actually usually will so question the all would I just think developed it that. actually, your competition, solutions, to level internal competitors the I the clarify at So the in own that I their major compete

Dave Kang

you. Thank it. Got

Operator

Company. from comes Needham question next Your from Henderson & the line Alex

open. Your line is

Alex Henderson

was hoping about lines. OpEx the little a talk could Thanks. you bit I

going of a your have you puzzle Do on an going to had how internationally? fairly would Any these you the them of R&D to need continue bit to looks push SG&A R&D be other at about there, moving a are acquisition you investments? going pieces up are Thanks. helpful. like Can it's things you you expenditures little out in stable about up some bit. to picked little around, forward, got talk You you thinking keep build the are levels,

Amar Maletira

we'd perspective, same keep the OpEx an at from like to so Yes, it level.

As a have scale Alex, efficiently. I can where we mentioned built cost structure earlier, we

than are growing much So, OpEx the your growth if is lower at it. X how will say rate. revenue looking grow we is your percent, revenue That

will if R&D don't make we area expenses that an we that one reallocation grow. an area it area, to we is in spend So from we our an is of grow our down philosophy do dynamic making expenses, needed, want that reallocate to will we double believe sure sure that

so synergies example basically of that driving in cost we invest also some good a we drive to funneled So can the go businesses, the it is acquired back growth. it we are into business

good revenue the to is That sales cost relatively on revenue be line commission. flattish. we dramatically, higher OpEx up our about bookings flat. if will say and When roughly in OpEx there and I a variation flat, be come some - here will go think depending have be So should otherwise to pay to roughly have, how how or will the there but

Oleg Khaykin

also to think it's this is quarter. fair that calendar a I point first And a

quarter. a there's in of lot fall regulatory this So accruals

first quarter skews OpEx. So the some of

Amar Maletira

within math, benefits do So since in coming December the flattish mentioned, taxes you be as the the you are year. will sort just coming see, numbers if quarter can payroll you of cost OpEx as and the sequentially, those Oleg from have from although we March beginning to calendar quarter that higher

we driving. So at of also typically will the and taxes some benefits be calendar year, that efficiencies the beginning that are payroll the offsetting go up of but

Oleg Khaykin

commissions. lower the And

Amar Maletira

And the commissions lower cetera. et

Alex Henderson

in quarter. a declines, have in seasonal seasonal Is or in did $XX.X that going because or forward at business If line, downs just million you December the low of point that some look the of will the spend? and in there this that watermark at acquisition kind R&D up kicks or

Amar Maletira

downs reduce So of but typically line items, ups within and cases, OpEx R&D I the it sort we and will there forward on will won't is flattish. and any In intent depending and we happen, keep of expense G&A will to the the expense. going control into sort our Those be of overall, quarter. reinvest go things sort on that some might flattish but of in specific keep OpEx

Oleg Khaykin

in of Amar the If that level, then a R&D like parties a have it's mind then pulled more that back on spend of keep want development. not going may peak, some is kind said, do party to but roughly quarters, R&D in spend quarter gets problems the but, is there and have have future third a, our to as be fixed, in certain And we what the absorb we software accelerate in particular we budget third flattish. that we certain always all especially is we we the additional to

Alex Henderson

pretty you year One from accrue yet you? last to that you - almost the into cost or of through further are buildings savings as a on have synergy there acquisition. this OpEx much now you streamlining been a expenses or Are question have result benefits things line with integration or exiting the what are

Amar Maletira

a Yes, so it's good question.

of savings three-year a over So $XX we million million said $XX to period.

those the but achieve year, of roughly Alex plan. So about saw XX% we on we we that first to XX% are ahead in track of are that, to and

as end fiscal we well of by the which June is our our ahead So communicated - we plans of what quarter. internal be XXXX, plan year will as

those estate up even don't costs. drive ramping are are XXXX closing things you XXXX, still without especially integrate of some within savings closing down our real will when lot savings a we cases down - some in savings take savings those and our fiscal because in fiscal numbers. that to numbers, continuously see in are and time it in some entities, our 'XX also trying integrating be the COGS, and systems, systems, our see to we will adding So goes revenue in we XXXX We

So going of on. things lot there's

terms plan in question your in timing cost answer our we saving achieving to our summary, ahead the of of synergies. and So are

will plan we you our in provided guys ago. be a to quarter numbers You on our and December the and that synergy of it of saw continue hit numbers some numbers year continue savings second XXXX to already half already we to our in execute and cost about it's to numbers

Alex Henderson

Great, thanks.

Operator

over you. back this no the are questions call turn at There time. further to I Bill,

Bill Ong

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

Operator

conference today's concludes This call.

may You disconnect. now

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