Viavi Solutions (VIAV) 15 Aug 192019 Q4 Earnings call transcript

Company Profile

Participants

Bill Ong	Head of IR
Oleg Khaykin	President & CEO
Amar Maletira	CFO
John Marchetti	Stifel
Alex Henderson	Needham
Michael Genovese	MKM Partners
Joe Cardoso	JPMorgan
Tim Savageaux	Northland Capital Markets
Richard Shannon	Craig-Hallum
Meta Marshall	Morgan Stanley
Jun Zhang	Rosenblatt Securities
Dave Kang	B. Riley FBR

Call transcript

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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 Fourth Quarter 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]

you. Thank of may Head your Relations, Investor Ong, begin you conference. Bill

Bill Ong

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

Amar today's call Khaykin, CEO; Joining me Maletira, are on CFO. President Oleg and and

These that from Please performance. could results differ will materially cause expectations Company's call to and subject this forward-looking statements actual are note the risks current estimations. about include financial statements and uncertainties to

annual you report of those call SEC The we to the review to factors encourage forward-looking only guidance today. recent risk most We no obligation particularly and update our including as are undertakes valid this filings, statements. described these filings. Viavi provide in during statements

except to We these and Please also note preliminary that our limitations release. unless discuss results are non-GAAP in reconcile revenue we their results financials all state and GAAP earnings usefulness today’s non-GAAP. otherwise,

slide, available historical our plus include financial which release are tables, supplemental The website. VIAVI’s earnings on

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

Amar Maletira

to Thank you, XX.X% products. our on at XX.X exceeded in as our upside grew products. guidance from revenue XXX.X Bill. sensing wireless at core OSP upside exceeded due of revenue XD our above the and at XXX.X million, driven Viavi’s range. NSE was the by revenue million, revenue million OSP guidance year as midpoint year guidance revenue revenue fiber well range and

the XXX basis year EPS on margin XX.X% increased guidance of exceeded was Viavi’s at guidance up our ago. $X.XX and year. at a or high end year range from XX.X% operating $X.XX, exceeded the points and

products on NSE. both a strong QX grew Within market lab business test reported from year. across XX.X% million, and segments. grew our NSE NSE, year-ago year X.X% results fiber with by performance levels by to at in revenue field NE XXX.X XXX.X and moving at million, revenue wireless starting segment, Now driven

from XX.X to runoff a a our declined customers. assurance at primarily our mature weaker the expected XX.X% due levels, driven datacenter from from demand revenue from center of data products and SE million decline in year ago products

basis higher NSE cost year, gross on absorption gross XXX from increased overhead at due increased volumes SE. as as operating to XXX volumes. favorable the structure revenue year higher a XX.X% basis primarily points ago from within margin OpEx products higher our our NSE’s leverage year margins in operating XX.X% levels, margin revenue margins points well at growth at improvements and in gross reflecting the improvements

to provide we In primarily our NSE’s quarterly ratio XXXX. was which ratio that X. the business. book bill QX above any specific reporting Since ship Hence, is report will currently we is book redundant. to NSE, for metric we stop we metric believe guidance quarter, fiscal NSE quarterly this book revenue in given bill a business starting

of manufacturing turning XX.X% to at XX.X revenue revenue. to basis core OSP higher increased margin both and overhead increased product Now XD in driven as and XXX points year sensing absorption gross OSP’s anticounterfeiting on product the million, by XX.X% year lines. OSP. at sensing due revenue XD grew OSP

Operating higher and guidance margins the levels was increased reflecting XXX within margin points, at gross range XX%, our basis

NSE acquisition growth driven growth from OSP. driven XXXX growth increased field the and year year, to performance. XX.X% revenue was growth by of our lab organic products and in in of revenue a segment Now on AvComm year both test wireless measurement inorganic the a XX.X% and at across fiber assets. by and mix moving business our fiscal billion NSE in revenue X.XX XX.X% and Viavi’s growth

primarily center by volume major redesign business the weaker mature organic, growth banknotes. for of product in revenue our with reprint the declines offset data was strength our XD by from for demand led sensing This and products and anticounterfeiting OSP’s runoff SE was and partially in expected both revenue products.

expanded XX.X% year NSE result with driven management basis a at points revenue across of margins favorable margins growth functions. as operating operating continued XXX operating XXX in on significant basis Viavi’s cost points year, our improvements by of leverage all the and discipline

Our grew million at by XX OSP. XX.X of growth million, in on growth of XXX.X the the million million and year increase an XX.X% operating XX.X year profit or contributed of with NSE

grew $X.XX, at on year. or XX.X% $X.XX EPS year

Now the sheet. balance turning to

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

will Viavi continue to compensation. opportunistic We by to from stock earnings dilution be repurchasing offset stock-based

Now on to guidance. our

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

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

We plus minus expect XX% operating OSP at X%. or plus or revenue million, to with margin be approximately X minus XX million,

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

our a primarily approximately share reflect We estimated sequential to impact of trading share is count price and XXXX the is average other the above to-date Share XXXX notes million average reflects convertible Viavi’s shares expect expense from income The weighted this million. notes. XXX expenses these in of net count conversion existing accounting X.X quarter and price shares. in increase to approximately as

to With Oleg. that, turn will call I the

Oleg Khaykin

higher pulling our with products XG remained as market upgrade the industry’s fiscal upgrade also driven Thank XXX symbiotically for wireless you, by The Amar. capacity. providers along gig. both and of NSE, this their to XG being network bandwidth service and in independent infrastructure strong pleased field fiber fourth In performance is fiber, during strength quarter. I'm lab

DOCSIS upgrade. other geographies. The demand North American driven X.X X.X by spending as for DOCSIS on providers business year Cable segment by cyclically offset in customers. year SE partially quarter this their American mostly decline products cable enterprise declined remained weaker The datacenter weak was strong demand by North completed

by anti-counterfeiting our exceeded higher reprint expectations driven revenue the volumes. OSP, In banknote

business While robust, we calendar in to remains XXXX. sometime don't revenue expect and year until uptick pipeline visibility limited remains the see

The both and strength expectations the optical XD revenue by with our sensing largely from smartphone filters also driven diffusers, exceeded Android-based devices.

out We strategy expect year. transformation sensing our growing To have continue year we XXXX, during September during and targets. year non-GAAP to fiscal the have exceeded on our XD on revenue we profitability XXXX executed the analysts Viavi successfully day that laid recap,

the year NSE more and non-GAAP to The fiscal double-digit, XD segment from major business for XXXX, of product margins customers expanding OSP product sensing than doubling lines, achieving and operating year. with include multiple XX.X% multiple the prior the highlights fiscal the revenue

Viavi minimum both overall products growth, XG, OSP from markets. secular expected Lastly, fiber, revenue in today, XXXX, comes end namely with where and XD growth sensing there about year secular fiscal XX% strong NSE to was as of compared and

In we're with the launching on transformation a inorganic. of focus both fiscal year and XXXX, organic phase greater the growth, next Viavi’s

our of next month's outline regarding will a XXXX, we you provide also Santa We Analysts September revenue and presentation will We secular achieve in and webcast and more growth XX, expect and in leverage events. be our our California, the event forward major to of will fiber continue to invite on profitability. drivers goals. going XD live levels to where XG to higher Clara, Day sensing strategy we There wireless, information

would for thank performance express I appreciation XXXX conclusion, and shareholders strong to the my in support. In to and customers like Viavi their our my fiscal our team for

over turn the them. call will to I now

Bill Ong

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

Operator

first comes Stifel, from Your from Marchetti Instructions] your line is question open. John [Operator

John Marchetti

very lab Oleg, much. test about Cobham -- business a was the Thanks could more business the or in XG. if little wondering I the talk you bit

driver You certainly fiscal know, a this year. through of obviously, last that's been growth,

if how Just curious that sort their about, into you know, see going fiscal we're out customers can existing at you new as of and playing all contribution versus coming on. And comment you maybe customers ‘XX.

Oleg Khaykin

you. thank Yes,

this expectations we well all own deal. performed our above doing when this much and business exceeded pretty our were business obviously, projections has So,

know, acquired never a the case, they better much was. And upside than exception. done PowerPoint as our deck. performs even the than usually you been first In know, better perform nice case, look their scenario So, ever the day, it's you this you best is it's the company -- at

expect of major development sales bit from the of gears be we more part shifting although That to the a but be going as between configuration a and the said, we a development development a growing expect forward. production test at also be year, lower to to probably substitution a going customers rate. more testing, that capacity But we're this business so strong this to to focus of our seeing continue production, focus, start start protocol less a to of of still testing will

in out our of and field. ago products year. a those the and a very of what a to for half the labs are of set we're half as doing, portfolio we're position have in lot a this Furthermore, rough year And were leveraging develop we about the we acquisition, roadmap launch contemplating and this [ph] strong the comprehensive second products calendar coming

So basically, year. our first fiscal of half

today. not that this where continued instrumentation out and we're meaningful it's placing business field wireless but business, position in for growth, emphasis build instrumentation to positioning So, strong the have to but Cobham wireless little very use year way, outlook significant just this that we also a us --

respect, and to in to wireline that Viavi wireline are being being from field instrumentation we looking instrumentation of wireless So, primarily profile the change field a business.

TAM of to our and add helps, the extensions to lines that and customers. continue we hopefully, our each to other within obviously, Cobham business So, expand product

Amar Maletira

the give this the John, take know, guys a synergies give on -- I'll revenue We question were till waiting update update around you the an an side, quickly on update. of give the business. this I'll just but the was the I fiscal to ‘XX on opportunity synergies of end quick cost to

estimated a million XX QX, synergies as of our of million the the about asset $XX already ‘XX if to between deal, assets asset, $XX results. $XX million two fiscal which that the had million is actioned reflected three-year $XX end cost in And, of wireless have our synergies and XX period. synergies, So, the we XX roughly those months for the recall actually to two-thirds we we to of between into into actually cost over acquired, months AvComm are anywhere you

cost to and some two going years. for this growth, driving next, in initiative accelerated well the drive three the synergies to the back lab reinvested feel then you know, wireless to into addition the in further of as the the we We cost topline -- also business in synergies. to So, growth lab also as business

business. back some So, is reinvested it into of the

John Marchetti

do How maybe every above the longer as given just How of of you look looks that a higher of that? converts. the sort or of model way think based the the now longer just to that on a or of we this money there the guidance beyond something little quarter measures next that and about like the count term bit over then on in strike you know, to think price we that some share a about is be mentioned in even to do maybe sort it result as that's of can And a two anti-dilutive moving like, followup, dollar we Amar, a the term that the going basis, forward?

Amar Maletira

Yeah.

actually. a So, question, good it's very

give more on how color in this. about prepared to bit here think me what of remark I let you my additional So, a mentioned little than

to a sequentially you as of is QX if quarter, fiscal XXX September typically, grant. Now, annual in from One X.X sequentially, with thing QX, to million count is fiscal to which to equity it's see you’ve shares, keep grown QX, got September I our a from will guidance vesting as that fiscal our well QX and start of is, which mind shares. share fiscal quarter -- awards by fiscal due million the increases our

So year, right. every that happens

go So already factored element that do and offset there's dilution. buy we is, some our of What that XXX. and inti we back shares

share the have $XX.XX, it's to price that, for this about the those higher your price, and we date, have. the quarter $XX.XX the what are to questions, seen till the since converts is $XX.XX, prices at look share average you it at than coming and addition two we the if two is, specific In conversion

price much So, our money. in stock is very the

the got accounting in of million there's of about converts shares impact X.X because being that added so these the money. And

buck So, increase the average and you to you for should about say X count. a just $XX.XX of above the million every there, increase shares share about adding take dollar if from think

of half EPS less Now, cent. a a cent than three to is context, what really is is put about things it tenths means that in the dilution

So, it's to profit XXXK operating to how if much you then convert about it that, of need XXXK. into additional offset we

you the always don't profit models, our price but know stock will that dollars go know, in in factor we where So, model. be, operating and our we because we operating the this, actually know know, you drive we

Operator

question next from comes Your line Henderson your is Needham, from Alex open.

Alex Henderson

Great, thank much. you very

of announcements time you the in that deal came two announced that lot a that that Could you the kind ask unable talk than to we us China you Mobile and deal bit announced some out were breadbox, little bit calculus? pretty a Samsung bigger give interesting and have a You [indiscernible]. about later questions of a little slice kind of a than you smaller

Oleg Khaykin

other on equipment you lot into guess when to I where know, but sell a turned occasional is, we've probably with splicing some we system emulation fiber lot been the originally, a them Mobile didn't cheer mean, know, gear mean, of you the moment everybody start it's a to have also the system it good think know, things deal. you think I testing of obviously we partner such the said, but I number XG. that kind a are don't our as just equipment. it to a And standards, on. presence clearly. know, working manufacturers, your was, you test Well, out service the of you customers is the vendors next are and thought all one first in providers products own those come that network talk big goes that I evaluate with I show about out, China on I where came the shipping, to been be so bigger thing with of knew but you was a and We of of it want usually mean, level labs deal, their much we they the testing kind one

nevertheless to Although provider element from us as -- many volumes test the as equipment. subsequently, into important sales That of into don't field service labs are into need allows significantly OEM their lower it stands. and, get providers service because they an is the to labs

with respect, felt a were were with such, actually just happy that we’re beyond in than and a collaboration when performance one-off carrier in the just sale. do a our we that purely of There significantly was more So, they welcome we more evaluating standards. us. various doing equipment lot release as various And to press

position every Samsung, of we have we of customer mean where I base -- Huawei exception, -- it the aside ours. an the across I I they all station significant from the wireless of And case strongest would today with were is this a say, majority internal mean, In solution. much labs at we strongest our the point, major pretty much share Huawei, manufacturer, Huawei. have in infrastructure. have testing are is very

and press we Samsung there was OEM to So I as capture that think I the think was the did. us release. for last And

Alex Henderson

than smaller slice, box a any bread than or bigger a So sizing?

Oleg Khaykin

big put the that the let's it bread box on Well, how way. slice. It’s it or significant, depends is

Alex Henderson

if sensing a you quarter-to-quarter us question last XD basis? grew tell could, could on the One whether I

Amar Maletira

fiscal did ‘XX fiscal sensing XD Yes, from did quarter-to-quarter ‘XX. on So, QX QX grow grow a basis sequentially. it to

Oleg Khaykin

for as the I quarter depending And mean, not other. transition are one a a and was remarks, quarter my so in it predominantly, the it's prepared standard supporting, said much on for June you I is,

Android So, by it Asia. the was primarily devices driven in

Operator

from Michael from next Your question Genovese comes MKM Partners.

Michael Genovese

in prepared sensing XD than you your doubled Oleg, mentioned more remarks, year-over-year.

driven Android. like think to give the help by for was mentioned you Can like it nearly maybe next about just you think year? me And about us some tripled, looks it that primarily I on think I it how up to XXX%. this

So seasonality this could generally other talk of in half the just the ecosystem calendar year? back about you

Oleg Khaykin

I it’s Well, I we -- it’s bit think double. I what the a -- is than more -- little Because more than actually, think it do say right. doubled, last think

Amar Maletira

So, yes. exactly. More than doubled,

take color -- so bit and more then it we Oleg little there. So from give a you I'll

said $XX sensing. full be actually roughly XD we would close about the million about minus, plus year and landed So million in or we to $XX

So to it's than point. double Oleg's more

Oleg Khaykin

XX. it's think I because Close,

Amar Maletira

XX.

Oleg Khaykin

being we XX. modest. Yeah, are so

much doubled. it's right, than You're more

Michael Genovese

Right.

So posts to how think give year? Do for the you do year, you two model can but strength guide kind of out us quarters? about expect of the for also for both the it what Like it next we ecosystems?

Oleg Khaykin

here so the mean, thing. I is Well,

clearly going think to it's I grow.

In comes in purely and being [indiscernible] provider supply clearly price impact terms to terms best China the also the to of clearly, wins, chain support I extremely here the, do and then all and cautious the American I mean it's the the my amount I'm Asian have of bit chain because on the ultimately. our of be, competitive to best to us more hedging have growth, know of supply be companies. I customers. I'm cautious best demonstrated reduce don't bets If a in we de-Americanization ability and technology, much best some to bit deliver metrics should we a reliance performance, But to the being, have the going down we supply well. of of how

don't why expect this the the think cannot strong cautious. is we wins, have issue are case, supply. But in thing with growth year. I being an any -- But predict we So, I one that's we and political it's

where to some to is Just of how wins are really to function be it's going much grow those going a of blow. going trade

Michael Genovese

in strength the quarter? if the pulled June some also I'm Android, little this in topic, want but to actually strength the, just like seems building iOS seems early follow-up the quarter, one because on listening out name, maybe it calling into I'm the from it big say the And saw of trying players, to the forward had you like you're in not bit customer, same non-Android to they year. I a Okay. VCSEL the wondering

Oleg Khaykin

you account really times. I have think So take to your remember, into lead

providing assembly the you're is three into VCSEL, to to time through months a zone. get your If product closer lead probably fab the

a lead weeks. the is of time couple us, For

So with the and the are much our actual demand. let's orders OEM, you vendor place are would later sooner ultimately our say the a much to your that you I orders because you place closer orders would, with optical prefer situation more, if semiconductor much you vendor. actually orders the

overbuilding and and So quickly have ups risk the overbuilding in without much can inventory. lower we to very demand avoid inventory respond of and downs a the we --

Michael Genovese

then if it more. great. And pretty you strength ask wireless for Okay, that. see, test. good like wireline have looks could balanced Thanks to and I It's one just between and

on you've think questions about type you on seeing drivers talk wireline of which customers, good regions, got some I of wireless. you're sort Could out of? demand what just right the now,

Oleg Khaykin

So And the requirements. extremely say, the gig mean R&D production. lot strength I right. year, we've conversion biggest a of been I a [indiscernible] XXX is driving as of wireline, gig on this and mentioned, the strong, is I in has our seen to This lab fiber in XXX whole lot and would production

I from in And at to test development is modules equipment. think that's on semiconductors obviously advanced developing for So, OEM there gig. testing to everybody here a demand modules and production, driven XXX gig and OTDR production XXX the demand driving very strong just the lab for by, is

XX where would fiber fiber say where So has that is I'd say, I strongest. in months the been the in probably, past

optic but a pushing Then just of gig probably networks. with all the the XG stages, these preparation, it's early it further, are the XXX once in although also things fiber happening upgrade

networks, on healthy seeing advanced set laid out, fiber also big And in so our whole the software in for network the, which monitors are we Europe solutions, – new of and Trans is put network. demand national being healthy that a fiber field are it optic a fiber up, and Asia. hardware whole testing, We also as and combination monitoring fiber of Trans-Atlantic, for seeing Pacific, is demand especially

I the one would So field and one monitoring equipment. say next optical the is and is would the solutions. is lab in biggest fiber I driver installation The production. say And network next

see, they the fiber As end down a and of deployed, lot kind more the the gets as start expect construction of doing demand tools for that to infrastructure line, connections. customer installer we

Amar Maletira

perspective, Mike, growth which APJ, Europe was regional and about, NSE the and grew including X.X% NE growth grew and grew China. actually talked a XX.X%, regions, XXX% you Americas, from And all actually in organic NE

Oleg Khaykin

a so demand. Yeah, North of lot relatively demand even are by a pulling other customers, we seeing American with are customers modest

Operator

Your Chatterjee comes next question from Samik JPMorgan. from

open. is line Your

Oleg Khaykin

Samik?

Operator

Chatterjee? Samik

Oleg Khaykin

be there think I a problem... may

Joe Cardoso

Joe is for Samik. on This Cardoso

that. about Sorry

can first dig And that, quarter and seeing within you us stable to you you level? there to you're just us question. when we perspective? hitting service stable So to into you tell that then do if expect in last a telecom not, demand And from Can specifically Are what what touch about customers, on yet? terms spoke provider a my of cable from cable reach level?

Oleg Khaykin

right. to I So got it think, you've let's, at look geographically,

a Europe the would and healthy. but the as is service is the healthy, would say I it below still is, I ago, North levels Latin provider America than of So, Asia, year past. better qualify demand was America far

there that see it on and it's improving. The said, as no is urgent us the it's, longer North dire was ago here on for good turn qualify as year about the and reliant nice they and a as would clearly us we growth and the spigot, products I anytime comes requirements I'd major sporadic, we revenue it longer as our say, heavily acute. Although, for no gradually news need players upside. becomes for it's American are for as That

for completed operators would of X.X their continue to American. Latin In And last DOCSIS to purchases so level, cable, buy Europe North as X.X I I say but see maintenance terms for equipment the and obviously the of have replacement deployments happening now and DOCSIS said by large in starting American we on are to in upgrade kind earlier, year. they

as saw America strong X.X. said, demand as cable. North we for those big for not are there That DOCSIS fairly So regions

demand coming which years, the Duplex to to don't gun. next the be to down standard, would of be to kind the North want about jump but of I think enough decline steady I next the maybe the upgrade three in two offset the for in couple three years. network of we of not more see it's a until So cable America, years,

driving Now increasingly they that providers in network nevertheless and present which field the some I monitoring said, They as big be cable good to our fiber. opportunities, today. are very of demand we are installation, that may but something was that seeing not call a a comes providers, the different down little in opportunities really case the the a to any cable very not networks they're becoming mean, fiber look if end. mean, Today, past. at at I with you the is mean them. fundamentally cable I of misnomer bit of coax as

result, a providers. at more longer service and some of As good monitoring fiber providers. are selling to opportunity a spectrum them, a term looking to wireless actually we And have to good they do see with lot and opportunities XG become fiber also cable

couple think outlook the the cable companies that's my of years. I next So, on over

I space. think of on going metamorphosis a there is lot in the cable

Joe Cardoso

quarter season networking China. And lot going this highlighted then of of then into the between quarter. equipment tension in the and the earning my recent suppliers relates US second question A and kind weakness to next

your guys then wanted in region into So take baking guidance. from get just I conservatism customers seeing on the quarter your guys are your you first and what any are if to you

Oleg Khaykin

as and some originated of predominantly built, have geographically equipment we American where sell side, -- designed our China. we gear because outside on our it's sell given into North China, the America. we're not to fairly import sanctions North of is Well, and developed lab exposed as limited We peers, the as and not to exposure NSE in mainly it's the case,

chain gives where chain North to importation have we is on is where equipment North American the some it the our products Now a risk tariffs, diverse last from exposure America, of fairly years. for of the geography we China products been and we one these that do supply And -- is in provided buy obviously us there can and some said, potential exposure. we couple shift That -- easily we've mitigating of supply another. to have

it's noise. in a way So in for really us, the

our is XD have I area The sensing. -- concern only do where the

supply though right is and thing and even are restrictions healthy are now. China a the the in only more take dose we the of developed import against pragmatism. we really chain of it So with products there, Clearly, thinking that specifically manufacturing our backlash American a it's versus I'm have to of

Amar Maletira

already some we it And have in factored QX our of guidance.

Oleg Khaykin

exactly. It reflects in our guidance,

Joe Cardoso

and Okay, thanks great results. guys

Amar Maletira

you. Thank

Operator

Capital Your Tim Northland comes next question from Markets. Savageaux from

Tim Savageaux

Look, medium-term network well know commentary maybe on on side. equipment enablement, But I well? if America Asia. us if various I you among the imagine any similar kind regions accelerating you you kind of last on progress across wonder to with as activity you Europe OEMs. the did focused comment just you deployment in cable of end is lot North kind that applies market the strength broad give quarter, on I pretty wonder across deployment And I as as in mentioned dynamics XG regions, and whether your could what Do mostly XG network some see you A to geographic can same that decelerating? on of carriers have the comments of

Oleg Khaykin

Sure.

right. a in the bit look three highway would I of at it's So it direction, for each -- lanes three-lane, highway akin deployments, to

there speed of is. your lane put I very Korea well, full speed I they would they there mean, are China. got Then they fast fast. the you've much lane I deploying would network I as mean XG are, -- say, is with lane that's growing ahead they're the experimenting high-speed and and and So in that's are every it's pretty medium flavor actually

lots there Japan of put In would some of case the America, Japan, is trials. ahead looking to where and I North lane second do of Olympics. deployments they're actually The in areas high-density

consumer, it's different Japan private in North flavors, mean well as America, network. whereas and deployments heavily these focused consumer. but is there, I wireless, So combination fixed trials, as on XG a of

varies a And be doing of to America. experimenting they kind deploy. will of kind of Korea, first the to I have the happening there that rationale imagine economic would in So of put would will North lot space, doing Europe think Europe best everybody I just seeing lane, in going rationale of between which with China, different call, one and where flavors the the to months. I I is then -- see economic Japan XG we're the or And it slow trials start XX starting more are and lane, planning next isolated is,

place. say where view things our are of I'd that's taking So kind on

Tim Savageaux

Great. And on gross -- any the could on margin also I side. focused if follow-up

I mentioned imagine organic in the the at in significant line. more you mix, Could year-on-year, I pretty or think place operating on that, know are synergies least as completely you takes much that terms leverage detail those you guess talk margin. and in there, saw also of I operating expense gross but drivers some -- increases

you gross the If this? increases any the margin address specifically in and drivers the the of quarter maybe sustainability for in could

Oleg Khaykin

Sure.

I'll provide So I more to will to turn start color. and then you Amar over

So think things mix. a the of I first there foremost, margin, if mean, it. couple drive about and you gross is

about fundamentally products we those production, a higher when So come talk in stronger growth gross at lab margin. and

get the the are In terms of consumer, into lab, higher, The the closer the margins to you margins, the are you profile, the but the margin lower. the the higher. much are more much lower volumes volumes but get

it's much thus requirements grew demand we the mix. have strong uplift if at the that that in fiscal equipment. obviously gave more Since businesses you where strongest had some look margin we demand high. And lot strong customized So implement 'XX, we production. in and of are our gross a we've very a margins of in lab and those the a environment customer-specific It's in a is, lot had

is one next volume. The

remains up flat. revenue our fairly operation again manufacturing significantly, Our

management, procurement, fairly cost engineering, of overheads, the fixed. manufacturing all So manufacturing things supply these other the is chain

as revenue million on $XXX the smaller scales almost percentage whether standard and such of $X ship million, $XXX and the drag it revenue, So $XXX the very, we perfectly million billion, the the with margin of million, becomes or us $XXX smaller.

that's the say would I So biggest second kind kicker. of

of at the rationalization undertook last And is, the better one or course both the did functions our the of in we where out manufacturing of and but organization. of cost in material manufacturing it done come of terms locations synergies absorbed functions some of some centralized also previously

variance of this to in think is define qualitatively, -- margins. I the So kind way describe the is

Amar?

Amar Maletira

you think No, all. I covered it

Oleg Khaykin

is. there color the all provided I think I Yeah,

Operator

from from Craig-Hallum. comes question Shannon next Richard Your

Richard Shannon

still discussion if to the can year, And answers segments or and the expected, questions Wondering you in I in the not Cobham. think any, extend on businesses strong specifically just acquired maybe fiscal actually any to asked, but one as high. in that year, that growth like saw other this regarding versus year last? than Cobham, and that I within referring the you follow-up to this including better your of about a first growth current XG collectively

Amar Maletira

you more key on so Analyst XX the So, full guide Day will, with three I Richard, drivers as we'll next have this think as can as I -- well on color give we we the for as year years. September and just well the

expect to we So high But fiber NE continue by level, do to wireless. and year-on-year, both that's at plan. the a grow driven

of business SE expect to mature this actually, We to go assurance to continuing multiple also decline, SE after years we flattish be actually year, the expect down. with

we expect SE In about for mix. roughly So fiscal roughly example, go of 'XX, business to was that to mature XX% XX%. the assurance the

first So in products there mature in the will But the even by our continuous growth decline be be time 'XX. fiscal offset in for that growth the will businesses. assurance

actually NE flat. SE grow to So continuing and SE -- remaining

NSE grow is overall year-on-year. expected So to

redesigns. Again core two will the in business will grow OSP double-digits. know, limited, half or On next half, sensing side, business least also first three visibility for more key the we weeks. you the not And that again the on first expect do as XD give is so OSP color we the any at

assuming first core are XXXX kick XX in baseline OSP in. the expecting revenue to we roughly reprint are half, minus the calendar in we or the the be will some the of and So plus volumes that business

the or of but that's half, second half are in the be we how ‘XX calendar to We whether don't first know that's going modeling.

So XD growth in OSP NSE in growing, core business. the of sensing business flattish sort and OSP to slight growth overall business decline and business

three We'll So you that's give when meet two, we the more details overall color. weeks. in

Richard Shannon

fiber whether could markets? if Okay, telecom, It be are trends discussion maybe separate side me between gig, different was to datacom, that And good. sounds or those gig there? wasn't clear details. maybe there any two more I and here. more XXX addressing on with more other XXX about then the questions you And forward follow-up other specific just the in your look to to

Oleg Khaykin

Yes.

also talk [indiscernible] interconnect we things of and telecom So, the a I think between about is bit centers, like the it's gig, I datacom XXX mean quite but when there PEM predominantly data thing, X that.

same testing, into semiconductor that's and So devices go a products. products as well the as modules or production in developing these

a talking the XXX, So lot is mean drive for our term, I’d going set as I same upgrading also of on thinking obviously to say seeing XXX products. networks gig, going near demand gig XXX R&D. edge a I there really much But the much products When mean, well. already to very about we leading pretty it's it's in of metro that's lab, some are

Operator

from Stanley. Your Meta comes from Morgan next Marshall question

Meta Marshall

just or connecting of whether kind wanted like, noted or feed it switching additionally, be the G.fast we feeds do any from with I widespread? on you've or just maybe fiber past should some it of? in that the is And commentary, carrier something strength or And that quarters, changes one is deciding there be from fiber of trend mindful be would more that the dynamic should to it but any kind to, of over there is of you've couple kind seen couple fiber? last whether the of were last lame fast telcos

Oleg Khaykin

Yeah.

fiber, fiber, geography. So the when which by about we talk the varies operators it field is doing

out of whether new things a or lot networks, nature. fiber building national really network, If fiber is you it that look of Trans-Pacific Asia, it's at

monitoring Latin -- more of connecting the lot in seeing So, of it's kind customers miles. or probably and talking a say, connecting higher-end more Europe, of big you're of think systems and there North I'd nature, installation buildings kind it's in last And equipment. bit like with If things like a about we're several America America, of Europe that probably mainly, is that I respect. more networks. metro

Meta Marshall

Is And Europe had than mile? G.fast know, it Or on of that then adoption any last legs that? more just kind in to any of it. and primarily changes change I for kind there? Got North Any America.

Oleg Khaykin

Sure.

Europe. So I in in demand have that see do biggest one pretty demand US, On already. I clearly covered the cable we nice G.fast, -- so, the mean, is and

G.fast fiber So I -- clearly after is one more probably I is or going be to there. don't and of mean, one there know, generations at network. don't deeper maybe still in getting deeper I that, it's it's but most more think generation

healthy I fiber So or fiber. is would between on say in curb. still G.fast probably term, we Europe towards But is And G.fast and the a for us. more to seeing the Europe going are I primarily more think longer market pretty depending countries

Operator

question next Jun comes from Rosenblatt Your Zhang Securities. from

Jun Zhang

-- also, Huawei, And just side have color impacts in strong I So, to sensing from far? filter very the that from Android see any about, diffuser want market. some growth And you the coming you or get you the growth more the so from is product? mentioned, the do ban XD of

Oleg Khaykin

think clearly ramping when they extensive, performance. and acquired already very by the technology, a had and it's they best I the So, diffusers, was And best and we in pipeline do designed that nicely. RPC, large, provide

probably, but more the are supply chain. side, We concern the also -- Americanization of filter have I demand that's where on we seeing are about

to and various singulation back-end That manufacturers. them other licenses supplying a doing people being we the some then manufacturing means them, -- for outright, said, some the let and do providing of of either exploring module to various I mean, are

is would So I'm where filters where think -- being more area probably, that's I I the conservative about.

XD with also period, players when things, there a decided traction of is, those had these thing other players. look at and we is the we Now a to sensing number delay strong

we'll the how down is we're given things in the think plays that in see the the is of and more going mature. think Vivo Huawei I can today. And China, are the all basically chain it negotiations supply kicking I out, OPPO clearly mean, end, on. are it's until I kind road So the of one this watching. But,

ways other have We monetizing filter technology. our of

Jun Zhang

But of some you XXXX? of any calendar-year the from camera role you see redesign the play client? play a are major cool. I sensing in for Okay, XD -- Do -- you calendar-year can mentioned modules role your in back the you XXXX. there the mean, potentially

Oleg Khaykin

you Are the, about a world-facing talking camera? like

Jun Zhang

right. that's Yeah,

Oleg Khaykin

much we mean pretty I all in the designs. are Well, major

diffuser production, diffuser if we products are our products are the we mean, coming things out, I in more one that by and time favor. into also allow to to do is, leader. potentially in know our into we some modules of absent a fairly really -- today talk timing. very point But they go we I the well for the are very hoping these It us time, of that structured will of and also, there the more flight, would for has over, well. will And So, It's light been actually product. play other we supply are at think technology we matter

Jun Zhang

theaters? Okay. difference, What's ASP the if between compare the diffuser I and

Oleg Khaykin

information. Are about I'm provide you sources. Well, can difference it talking in you get from don't ASP? sure we that your

Operator

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

Dave Kang

afternoon. you. Thank Good

couple outlook. a fiscal Just of questions 'XX on your

used or Anymore over on also growth. expect XD north, And growth there? XX% digits. You as north, on of double-digit double expect not maybe color you NE you

if and concerned you're is main internalizing, come customer? will if, from North the one, So the Huawei American the about then primarily growth

Amar Maletira

will business is, what will will growth I correct more give NSE and you Typically, grow, you. just will overall double-digit. right. be. grow this low-single on a we digit me SE color the never said flat, said be NE let is So NSE grower, I NE long-term will

that in there but QX So, quarters, repeated be fiscal -- will just for reported, we some XX%. quarter we grew example, this we

also our fiscal NE. for expect to a We QX quarter be strong

be the So actually flattish. overall, will SE still NE for remaining with sort full low-single-digit of year grower

NSE. that's So the commentary on

and We 'XX. so we fiscal coming in and And when saw see upside, XD upside. said in estimates. give that to going you Now from that then the past our landed done XX% we done with we now the XX% increased upside went the When in regard XX%, will to XX%. we we in, as have we around to the have sensing, to we that's XX% then we what view are we come with

approach So as cart similar want 'XX, there of provide we the mentioned, we when uncertainties here. guidance. and Oleg the to Because a are don't take to fiscal even is going put lot the before horse we a in

But weeks. way or what color three will we not meet guide, more to two we when change I will And you. in is we give you wanted so, tell the we

Dave Kang

most Android? the Got mix mix Android, the between was the was sequential was versus of fourth quarter it. said What growth you in what the between, iOS

Amar Maletira

most growth information, of of that even Android, growth little was was but but iOS. there in We don't the also a give bit

growth on was iOS the a but mix we so of So between between don't that iOS Android, side. And it more mix. share and sequentially, Android

Dave Kang

it? And last this should it. then think Got my on And was fiscal we CapEx, year? what is question how about

Amar Maletira

Yes.

for the year. was the So full roughly million $XX CapEx

So about landed we X% roughly. revenue, of our

of You side to investments change should in -- our sensing. last The the X% a for used and of capacity XD going mix and the the the expect of us forward. on past to put the we in periods, revenue will X% between lot CapEx, CapEx be to OSP go build

you in I is, will areas CapEx NSE. think, see what growth the towards us shift now

are We in -- in feeling the side. wireless investing comfortable

will we our of productivity investment So make CapEx R&D in go wireless drive to teams.

CapEx also side. you OSP on overall, corporate so be will implementing But say, even And IT upgrading we X% NSE. to the so, on the the also and past systems CapEx And into X% been will see of and between between for revenue. years, are CapEx here. our shift half We've one will this -- and working some

Operator

a We question have from Henderson Alex from follow-up Needham.

Alex Henderson

XG. question XG, It So backbone towers. the is right what's wanted in but just of like being XG, to to seems the on deployment deployed now backhaul, relative ask architectural, XG a most the

Does XG the backhaul switching the the or that they’re in still terms and the that your -- build are spend optical are function the backbone? of that mostly of of around that So the where -- using towers. more a relative that in have still on the timing around an impact using routing the is guides piece, and impacting positioning

Oleg Khaykin

the being ways, deployment. to run that's the going the in to So it as the actually done be what's think kind future, the, mean, many of in main implementation, XG. And all I clearly, going today not is for fiber has, way what -- you're foreseeable on it's said, where to the overlay describing, antenna. That XG standalone I

some had at leveraging you're before. station fiber cases, services. add antenna, needs to base want XG the you least need backhaul. upgraded between to really in going bandwidth, than additional be And you the backhaul, to right, even largely higher and you're in So if But more to is that it

XG lab sales there the standalone, depending very be network. will are strong, being flavors fact, I to because said on a different implementation. this is is but XG I mean, be of to continue looking pure in enough all lot required it people at into So, it's going today the also longer predominantly why of And term,

will the a So standards XG for reality to here is, bullish are continue new to to need on we evolve, why many development are to take presence. our XG years come, place, going lab and that's

Alex Henderson

were And a then I you that digits, clarification. just you mean when and going but talking with to if get you I NSE SCPs could guys single grow NE about blended did ago? the the thought the low a higher flat, spoke growing digits moment low-single was than

Amar Maletira

we that Alex, we our QX same So is will be we grower state, double-digit QX, double-digit reported. growth so seeing here in do fiscal NE let the we in what business. And in are me recently just

NE the right, year, slight for being to SE For overall be to between growth. low-to-mid full we and for anywhere the full flattish year, single-digit grower have

So overall single-digit 'XX. NSE should be low-to-mid growth fiscal year for

Alex Henderson

Does that imply is that half fairly back the flat?

Amar Maletira

point might It have. in this yes. our be at based flat on time, Yes, that we visibility

strong, of fiscal XX-plus right. a very quite had is percent. growing assuming recently quarter are The 'XX, we it We remember flattish, because strong about was reported QX

back half, are back your the flattish. absolutely will half assuming to you're point, we assuming We're right. that be the So

the do see as and Oleg QX. fiber we'll little we into fiscal to that traction mentioned, time, we QX wireless. have point visibility know year, will visibility. a we into in in this fiscal both and get we at the, visibility As But that more move And

things how when will give you half, the shape So I'll more second color we on meet. in up

Operator

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

Bill Ong

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

Operator

This call. conference concludes today’s

disconnect. now may You

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