Viavi Solutions (VIAV) 6 May 202020 Q3 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
Mehdi Hosseini	Susquehanna Financial Group
Alex Henderson	Needham & Company, LLC
John Marchetti	Stifel, Nicolaus & Company
Tim Savageaux	Northland Securities Inc.
Michael Genovese	MKM Partners
Samik Chatterjee	JP Morgan

Call transcript

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Viavi Solutions Third Quarter 2020 Earnings Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a Question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today Bill Ong, Head of Investor Relations. sir. ahead, go Please

Bill Ong

to My Third Head name Relations. Welcome XXXX of Fiscal Earnings Call. is Viavi you. Quarter Solutions Year Investor Thank Bill Ong,

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

the estimations. note differ the financial about current materially to risk and report from we encourage particularly you performance. forward-looking are and cause could and most subject The company's uncertainties are of filings. our this that annual call review provide We as today. call statements guidance described actual to SEC factors Please include forward-looking risks statements will our These recent results this valid expectations to including those only in filings, statements, during

also revenue state all and earnings our their earnings historical note financial release, that Viavi limitations tables non-GAAP. obligation website. are preliminary which discuss plus today's includes our undertakes non-GAAP no unless results available GAAP otherwise Viavi's Please to results on except usefulness reconcile are in statements. update these We and to slides The financials we release. supplemental these

recording are available website. Time make our the evening we X.XX PM Finally, call Pacific and by this on today's we'll recording

like to call I would Amar. X the now to over turn

Amar Maletira

Bill. you, Thank

$XXX was fiscal and pandemic below Our as declined the revenue QX a range around million. for the Fiscal year-on-year the quarter guidance impacted $XXX Viavi was QX challenging COVID-XX globe. businesses million to million all at X.X% of $XXX.X

$X.XX ago. XX.X%. $X.XX up the $X.XX was XX.X% a guidance and the from below the EPS guidance OSP were the at year-on-year to $X.XX by a midpoint increased of of reached was NSE points margins while at XX.X% year to guidance range Viavi's basis and exceeded range. range, XX operating within

million million results by $XXX Now moving with guidance $XXX $XXX NSE. and segments, business NSE million. X% our range year-on-year was of at the to revenue reported below declined starting to QX

guidance lock largely result COVID-XX a down. Our missed of was revenue

from was cable due declines a year revenue to access down ago, $XXX.X any X.X% in at the NSE, Within million and instruments. mature primarily field

was at X.X% and to wireless ago, While lab mature revenue primarily combined across million both declined optical our in flat. products. roughly SE assurance weakness instruments from a due year $XX.X

growth our roughly were NSE flat. products While with

basis any at margins XX due NSE, at to XX gross points increased revenue Within margin year-on-year gross basis XX.X% XX.X% points year-on-year. lower declined volumes. NSE primarily

ago SE product XX.X% mix center gross our XXX margins as at a by assurance points due favorable year a basis from growth to as expanded well within data lines.

volume NSE's basis the the was reflecting decreased at operating by year the impact good and from partially COVID-XX range ago, lower below due guided revenue X.X% margin control. from to a XXX points expense offset

products. range Now anti-counterfeiting $XX.X million $XX to the in guidance increased result OSP. $XX year-on-year. of This a revenue better-than-expected at million demand increase to in of exceeded and was revenue OSP million XX.X%

due a expense OSP's primarily exceeded gross to margins XX% range operating as good margin, basis XXX as year-on-year, at points gross to XX% points mix favorable XX.X% XX% the of Operating well to and anti-counterfeiting products. increased XXX management. basis in at expanded expansion due guidance margins

short-term and per million cost total $XXX.X at stock Viavi ending balance million. of investments we Operating quarter Turning to average flow QX, the of was $XX.X $XX.X including approximately cash cash the In sheet, basis repurchased an our $XX.XX commissions. million. for balance was share

to continue to approximately XXXX $XXX announced stock we Analyst date. million plan We repurchase. share to Day our September during repurchased share Viavi $XX.X million buyback opportunistic in be of the Of event, authorized have

target. with had strengthens cash million from $XXX facility balance revolving our it position. interest million. several Earlier our of this $XXX secured banks was of more this a further We line credit XX% oversubscribed we of closed This sheet week, for combined credit and a on credit original strong from secured our facility than liquidity by

for three due coming is years. that debt any have the not next do we Additionally,

in have with conversion note at XXXX and coupon $XXX We at our coupon prices due in note million of due X% $XXX million convertible with two and respectively. XXXX $XX.XX, notes our X.XX% $XX.XX

our NSE. business providing not guidance of be revenue than we COVID-XX by as flat seasonal result and the strength uncertainty Now QX. QX to QX global said pandemic, outlook. macroeconomic a to to fiscal to slightly for business That expect Due are fiscal driven our we better in

placed the Looking it further out, ahead, remains we shortfall was unclear March will revenue customers pushed when to quarter's local orders shutdown. be continue but impacted believe be fiscal most as of our these by NSE

of market anticipate impacted OSP, our revenue be for Viavi's product weaker we For smartphones. sensing to XD XX% high-end end less demand by annual than is which revenue,

However, stable remain we note countercyclical bank recessionary that are expect, anti-counterfeiting in periods. to given product reprint typically demand

call the note ERP Oleg, that quarter. Before transitioned new to Viavi our to fiscal pleased successfully to over third turn I during system I'm a

to for We have drive while would and the needs. business this transition in successful further G&A been year. working This than responding other functions on initiative more changing a our effectively efficiency

to call With over Oleg. the that, I turn

Oleg Khaykin

Amar. a our experienced US you, to progressed quarter and the our for as was Thank R&D quarter expectations. globally. impacting centers and Fiscal China COVID-XX from as challenging and increasing migrated below then Europe pandemic QX Viavi operations the headwinds to came demand in NSE

in order came and a OSP as on due expectations. hand late saw result quarter customer expedites and other a above recovery upsides to and

we share. in EPS our non-GAAP came our disciplined OpEx While midpoint of range guidance management, through guidance the of $X.XX the delivered combined below range, revenue a

NSE We to this business said, would our our from order went million. revenue The operations. QX midpoint pandemic that home are either of revenue impact headwinds around near of as $XX to hold. been Absent pushed segment mode $XXX point, NSE out impacted customers purchase into guidance on million decisions overall placed $XXX the in COVID-XX we NSE seeing by impact Many work of were the or the the most million. increasingly lockdown That and at any be have range cancellations. not estimate of meaningful was on

acceptance no one the shortfall revenue attributed at that in available be to can getting customer shipments shutdown since NSE logistics customer products. side of half delayed and was to receive Nearly or resulted

and The other with field half This the into impacted demand out lines. beyond. QX mainly pushed of product our was result slowdown instruments orders

on-site orders to recover their flat provide with pushing roughly verification recognition impact under into year revenue the of these products and customers were a acceptance thereby enterprise SE normal more to This for COVID-XX from mode which year product ago out to quarter. revenues, assurance impacted as data next modest unable center revenue also expect lockdown were a was when ago. to and return down customers We operations.

well into continue QX wireless and QX gig R&D rollouts. technology in to the XG strong as expected. delivered Our fiber and and gig lab spends continued invest include products customers production as XXX XG held which up generally XXX during

or any challenges pandemic experience impacted and NSE Lastly, our exceeded operations to admirably of has expectations. would have lockdown our and supply segment we that did deliveries. issues chain performed the guidance our well The range the OSP team not logistical responded business

Chinese saw the in the difference. we order And demand When able expected. our got in came end the at the place lockdown, than security operations. beginning increased better When Chinese made enacted revenues in pigment leverage by our operations the operations of mid-March, shelter impacted California our quarter. We counterfeiting California up were the to

$XX would we this While next positive for the million a OSP quarter several visibility or trends quarters. minimum, limited the expected rate whether not as per continue, remains maintain core business the to run its to

various announced anti-counterfeiting bank stimulus and outlook the a the have products. with broad [from for Additionally, of view medium on a given financial pipeline, the measures some together based region] by governments, we positive term healthy

reduced expectations during below our XD revenue driven sensing market end pandemic to reacted the disruptions in and came chain Our as customers demand. quarter supply

We to trends expect continue QX. into these

However, seasonally stronger of second we expect half calendar XXXX. a year

future. Viavi persist well to is end volatility expect demand said persevere. macroeconomic We near the That headwinds market the to positioned and in

balance us the and We cost strong sheet liquidity, have which our combined manage market a up with sets well disciplined management, impact. and leadership to

construction, some do major place products, benefits improving some NSE drivers core Our focus new a counter which a our maintaining Historically, more existing on remain networks their times. as provide service in during market, down of which lines. versus providers of efficiency cyclical intact benefit a recessionary and growth product of our

we our the demand which for OSP, demand downturns, the steady was economic products. in for during stable In banknote expect anti-counterfeiting reprint result

like would performance during Viavi our and challenging also shareholders our for these times. wish stay extraordinary partners, healthy. I my thanks to to their a all I and team safe express conclusion, In special customers employees to supply chain

I will the call turn now over to Bill.

Bill Ong

you, Thank Oleg.

Conference participating the on X. the This May Investor will on Investor session. and following quarter XX. Conference at the question-and-answer Technology Conference Investor conference June May Global XX Sector we let's Craig-Hallum on The Ian, begin Insight JPMorgan Cross Stifel be The virtually.

Operator

[Operator Instructions]

from comes Your Susquehanna. of the first Mehdi line Hosseini question of

is open. line Your

MehdiHosseini

how on the quarters? see do have wanted I evolving to for a of Thanks Yes. the the XXX I and get the next update rollout taking gig that over an Then few follow-up. question. you

OlegKhaykin

gig out lot I mean Well, Sure. XXX modules. rolling of customers a our are

So when as that we the as to test manufacturers, module as XXX selling some equipment, lab our well of customers, as gig production well basically system means the these that about both we talk rollout equipment the manufacturers. are

are to continuing QX rollout for big Also year. and strong into clearly XXX probably one the demand seeing rest the very demand are I gig of on router we And modules. see we And destinations. think the the is of for China this be continue

segments. very across a demand strong all So,

MehdiHosseini

the the the have March going Perhaps out? that revenue another incremental half? some as make if can step-up was to of we strong the productions in I XXX enough of they're are may rework indefinitely up revenues words out revenue happen enough, pushed would the gig quarter In pushed and the that to be some question, got to if production supposed a a second into for be

OlegKhaykin

I out and I said all, will -- assume think customer start out, well, I mean, definitely kind we revenues they any make it's pushed a coming of near-term work back the to I and decision. of first pushed Well, think the the definitely to as don't

definitely too strong probably is it award. So

product remarks, out shipped the during very expected, any my demand there production not see I XXX even the As demand I healthy all push in wireless XG think we the in gig in and and with did both prepared customers customers come is fact, XX the to the gig downturn. fact for products as our a because XXX seeing is our market all strong said this

going think would beyond don't any any additional we shortfall. up what we're I planning see are that So make demand to

don't for that the in we shortfall instruments, XXX made saw up be going by think higher So gigs. difference will I the it's be the field think I to demand

I think trajectory. its continuing own XXX on are gigs

Operator

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

open. is line Your

AlexHenderson

Thanks. Hey, guys.

its counterfeiting So that's economic important this I about environment to independent product activity, in OSP Obviously, business. is line dynamic talk seems of little was and hoping pretty this a nice. the which you have bit could demand a more very a is

quarters several see potentially this I think to really this in thought commentary, pickup about is before arena. prior you had out would But you this a

do trying products pigments potential to so to that's what understand I think of is to think pulling back and And don't orders and I'm the what people security extent it you normally half caused pull for opportunity? expediting you're reprint from in?

OlegKhaykin

a particular you Well, thing. on first of pull so bit mean, in, give more all, color this just I this

So heavily the by the -- of were plants just impacted as printing most shutdowns.

in fact of half. a have the down the been facilities So for printing shut and most month last

What some they supply concerns source. also hand really security of number hold closer with flights. level bit driven a of and months. Two about in becoming the and of chain Okay. having concerned the to to getting was inventories product People more significant are they have the it are wish reduction on

happens, That said inventory. we're plenty there seeing initially is also what of

which notes their of So the initially of finished distributed inventory, they depletes when being come out notes. inventory are

extent ink hand you starts when on demand that's to to when need printing it have want for pigment to volume. the additional generates to as replenished the that's notes Then this these progresses, thing and the make be enough the

would our lag I of there holds. quarters still is that thus thesis So a several say

in-house mean the of guilty build lot I we pulled are our somewhat up a components to any That's with demand. chain ourselves. inventory supply well have We and for we be products fearing XG experienced of as disruptions. just our some meet chain because have are in why, all and But the not products, prepared to disruption, some critical gig of to critical able XXX the supply components internally other we

AlexHenderson

if that. So I follow-up could just on

do the and COVID churn that's increased that or of acceleration we result that that is is a builds them demand anything occurring? sort of destroy to I of that to an seen the just we how base facilitating an have not Or installed currency demand? reconcile causing mean So, acceleration?

OlegKhaykin

are of past, know in I out physical think, any did see the it, fiscal or the been I notes. one the There from so don't currency miler lower be much actually stimulus money that paper notes, to in notes. past plastic that more whenever it on the currency we which and information some the there has mean of apparently notes of the But generally terms has is extra how paper And you'll of risk to got than things Central released. proving part than Banks. Well, and comes forth. be is had properties to proving so antibacterial destroyed you been, type I get in type of migration kind of and have some risky

or economy notes. some some notes I for because the in inks as to and pigments it's go notes are on to a us, the the fresh issue, mainly see past, of of being we play released, miler either retiring So the on believe we're supply they notes stimulate paper we replace into not going do plastic an really into don't the a ink

Operator

of next Stifel. of the Marchetti Your question from line John comes

line open. Your is

JohnMarchetti

much. hoping business people very take that little well. because would a was have didn't I from it have things people home in Oleg, have working some this of the sort could might just I work. up the and in you held a like been doing weaker, you bit sounds fairly Thanks environment with labs like thought moment, that lab

I'm little have field with just where things of that the making that you curious right we a out are can if bit how that. networks still environment bit contrast two just about would sure running, in have on you in at or look I the thought again are that be technicians as there curious side might those sort now? little test I'm seen this current like talk actually a stronger fiber

OlegKhaykin

Sure.

color on you Let that. me more give

there mean big mean, we we of built optical continue is to releases, at the not the two things in and the a are when the from in is shipped networking. now, rollouts. lab being midst may of technology of are and be the are One many first I companies still see, and in but these what I So yes, right, are look staffing essential lab all, new being all which we running engineers do the development.

a be that the technologies activity are engineers have does So within home, out, or pursuit. aggressively do of lot by the is even we the from level have of we goes -- what can And rolled we seen lab new in while work maintain by way, to somebody even being even Viavi labs continue a test though some engineering other work remotely.

happen respect, share out products, that thing and the XXXX, during seen we've use new to So launches, in the what pick not continue so seen up can opportunity stronger product to of accelerate key same companies they come the that some XXXX, in downturn. better and

Really be production are gig lab the and we ever. and continue thing. exactly So seeing to advanced XG same strong for as products XXX as

There do home operations. at the working right to go are vendors the customer have and one operations, network. field. told to the and send technician The your the in of maintenance the the the networks Most staying basically home. of types in area those of most stay core their most are are because to operators at are of ones into of the the and house the is of field where those see now turn terms you these two of In is, technicians there things they continue

drop-off and a continue in operations a it's with those the at which smaller customer dealing very pretty be where So is is really the strong, force big shipments premises. of of of we the saw component to field we directly parts orders instruments to see edge to

you're increase doing being, a of additional operators the going it. bandwidth more probably get time and to not get plant if network their customers. get a of existing and to the lot want trying core out to provide new what are to is But for capacity existing their service, you So, within efficiency effective to

field The core in there demand, off whereas instruments field the about saw maintenance. of network there then we where good. core network to when is maintenance instruments, client continues kind be that pretty of and business maintenance customer is of of the in that's drop talk we the why, are the So kind the clients

AmarMaletira

John, most So on which I've access we guidance the in market access reported. the my year-on-year, decline actually where DSO just where to said is the add of to well our as side is cable prepared is within that, and saw and what as GAAP we

OlegKhaykin

pretty but know technicians to Bay the by local And to Area, told I I your your you're send much it don't live, you not service that is in know house. providers any where they're how going here

It's See your great. So you connected. of own. if you're on kind

great. you so are not If not, it's

AmarMaletira

as So of to area where construction addition sell given site edge some is the at the pause, also maintenance on the the construction lock and network. there down the even is to we an in

those areas pause. see we So both a

Operator

of question Your Tim next comes from line the Northland. Savageaux of

open. Your is line

TimSavageaux

disruption, record follow-on of me. across wonder the quarter and the Good wanted like you among the for of as edge increases I would that cable subscriber Oleg, similar a and look off supplier, And network of more sort Pardon what dynamics, do guess a in expect and you impact increased regard Hey. sound service you in dynamics has as test of the afternoon. fourth broadly, business? Viavi first to well, for providers. kind to see question, I at at general operators your on for the first then, networks example, reporting quarter, that trends beyond at way March traffic. there's a with you some little to chain to much like impact but quantify, attribute bit that to in supply doesn't lockdowns, Maybe, can

increased I long it subscriber the whether among these guys? and traffic, as considering And at, seeing increased look traffic? real-time infrastructure, some of guess, how service dynamics as have do positive exposure But last any are you you at of wouldn't to And expect be to you that feel you positive providers network kind what to-date? you would like increased

OlegKhaykin

I mean traffic. increased traffic increased It's clearly symmetry sure, just the of also is traffic. us; news for not So, network it's good at

challenges biggest increase that upstream we significant with the of of is traffic. seeing One the some in the are customers our

downloading see people now to uploading. used have So to, we clearly, most I but mean if just people data trying significant in increase are are the

upward. big the more the of of challenges the dealing noise that, opening with one and more to up providers of create usually how capacities some things So require service with lot for that less desirable bands that a are which bandwidth means with is like troubleshooting. And

So I'd demand is going of mix requirements. the bandwidth to say as and the It's amount technical the create increasing bandwidth more is of changing.

just people when of the are things the kind at and to I their lockdown everybody to think returning chaotic is who even the is expect terms as some I as the been of what quite a the were some home, things and okay. out, are back is things what starting still and suddenly there is been, work starting are wagon. of of a of and of the are mean term, to themselves to it it's in seeing end least It's a dynamic stage don't are -- the how beginning situation operations and figure states has lot various environment. stabilizes, we're the of some a priorities work when short normal. get February, bit bearing were stabilizing, I March, when out has that reopen have, What or remember, which a What going uncertainty very at the come of to now seeing though to mid-March. go pretty a getting back figuring been kind we told a and off must-have going as normalcy to fell at in is to come there nice

the demand is clearly the Now, drives of technicians lot things one -- edge big recalling to back of the all for and work the a us. that

kind on midstream over of demand network. healthy seeing the are We

the management. for resolution there of again number allocation is seeing Edge demand and one, opportunities products are a that's pending of are and workforce core area the healthy the The the to of back the remains the kind the that there, are that We comes outstanding manage still work. bandwidth, rest TBD

AmarMaletira

coming service as did So back mid piece strength is for believe on are color do giving is the end from it with revenue the expecting side, And fiber be and day, by continue. what some we're access both pay driven higher strength as expect Oleg this to any for on of the we well have business The to the but to up mentioned revenue at Viavi out, demanding than demand guidance, the on to that the it's continue some QX, not network. for haul mainly access side because although, the roughly the of lab the of because a NSE. well the we flattish side pushed subscriber of the in We cable also maintenance we in QX, seasonal slightly the we to the and seasonal perspective, the overall give bandwidth will from getting are as, the is the of construction as as and providers better haul willing bandwidth. expecting

they the in is more going backhaul QX same to the as as as So the higher assume this us that of lab service mid-haul to the saw think strength well I But in it going and into providers. be with prudent what the was expect from for in level service QX, we will network.

OlegKhaykin

have edge quarter the the biggest we open network uncertainty up. for reservations of the Yes, things is where until around this

AmarMaletira

the is And quantify for edge right. revenue of NSE, the the just one-third network to about of roughly

So perspective. just in things to put

OlegKhaykin

chunk. The sizable

AmarMaletira

revenue. have field that is another X% which of that's avionic also business, test, less on and do the is than but the We

Viavi overall an from perspective. just So

TimSavageaux

pushing like out plan? to XG in optical XXX real but reference seeing development or could from was I in and NEM on overall kind a question. of the pace mentioned deployment I maybe regard you and this the pulling anything to the with gig that XG follow your perspective, Over in If side, carrier continuing quickly XG Okay. changing with are up work even think you

OlegKhaykin

I Well, testing. really demand, trial product driven to mean our demand, for right demand still ramping the up already it's do end their of XG launches and related lot have NEM preparing we of very who now production. some by but Bulk more a today carrier installation aggressively and

we So also and see where I'd placing mid interest we're the providers demand the of to that's stream starting of are more the more monitoring orders but network seeing of, of and for XG. today, from the bulk say, kind coming service kind in core the for

also is Open The a ORAN, which other thing the is there lot of interest is Network. in Access the Radio

As the all interoperability across of there insisting different the well operators ensure as provide are on different parts interoperability party to between -- service the testing are level emerging seeing all from providers and the we demand vendors. third compliance independent to vendors NIMs is in as and the of different network strong both

Operator

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

Your line is open.

MichaelGenovese

Thanks very much.

on XD Was on question on of sort pull-ins. or quarter, as that of upside the the OSP core the was the at all OSP the sensing that the of end First any well?

AmarMaletira

No. It in the below we in on XD core sensing, XD came a little what sensing was OSP, And had Mike. forecasted. the all

recall, some sensing, XD as mainly of our the you the impacting adjusted side have in for February supply If guidance impact COVID-XX in to forecast China. on chain was our we

saw anti-counterfeiting, in some came and a the was well But but offset as have as orders. strength factored that it we XD for below -- we by that in forecast expedited So little more the sensing. of we than

MichaelGenovese

Okay.

for or you there's 'XX can customer, to I be about sensing just think in at us XXXX? going high at there guess XD obviously market is And there concerns. are of fiscal in any think general how I think but concerns increase kind just the should some the level help we but content know macro a share I don't So terms? not, about if

OlegKhaykin

comfortable we So our I share. are think market with pretty

the sensing fundamentally cameras. I facing world think there be the some biggest in of volumes to of is content increase. are XD going expected is I mean higher-end phones. lower just talk headwinds There

and mix facing with to XD subject module rear is going one towards having sensing modules. obviously relative be Now, a world phones facing it's versus between the both only the

seeing we sides the I thing we model clearly ultimate the the mix whatever that of both it. total be worry ourselves. mean to market I that is we the biggest going So are And for That's the happy or model playing because risk we with are us, think in aside, for allocation about mix is are demand.

Operator

Samik comes next line JPMorgan. of the Your of Chatterjee question from

Your line is open.

SamikChatterjee

I know the more kind year their and and the of the which the Thanks in afternoon. customers, be Oleg, we if read, the revenue increased core you're more kind benefiting the groups you of question. the do or you. some telcos kind mentioned demand. CapEx kind your here aligned to of you which that partly but that just I spend a you talking these shows guidance good plans Thank likely taking of bit for of But of Hi, in more? for -- my backdrop are the of year, see clearly partly can of expanding for lower but what's customer to you as you as a ask kind that for value weaker logistics macro expenses, shortfall to what's read terms side particularly we've more, seen wireless network

OlegKhaykin

Well, I seeing think -- so reevaluating not are think spending. the I we anybody their

I think the for the, of it's really Asian timing and European, operators. North issue American say, most rate I'd of some of

going here to those quickly back they're be issue they know really the they the going what have the we how to the and are technicians, think brought rate brought on more I is home back. been be don't sent and Edge, because

So the that's we saw slowdown where in spend.

Latin our big been it's What, currency. Central concerned of about part a not part however, a sales there but of has is and one our America. where I'm There devaluation significant and America of South their local still America, it's more sales, is area the

burden a has So become denominated everything significant spend -- been for in the has them. dollar

see going in to a reduction they think I spend those regions the So, as do with in we're deal currency devaluation. significant

SamikChatterjee

the will got look if level the what's business kind OpEx the can of to demand And decline think of up come when think the just to shed which before you with Amar, fixed to it. gross of follow you can best versus about how quarter-on-quarter. cost look Okay, kind on at I -- kind light I profit the through. about And see variable because of some you recovery run in here

margin was there the lower on XX% think revenue. I a

to cost So actions limiting what can of about do that? just think in the trying terms

AmarMaletira

Yes, sure.

think our guidance OpEx $XX think we all guidance we our -- below about OpEx, what I for was what in roughly were when came implied QX. million the we, you in So versus about our

a that entertainment Now, when you we media very canceled. of think expenses and most were marketing online. one-third the more symposiums I events of expenses mainly we becoming because and lower have think happening as online as in shifted that's very very, effectively was events getting and travel effective about to But it of and

that to one-third in able that. freeze of So was take of because One-third we mainly quickly was hiring. a action because were proactive

targeted we hiring Although we where But I would we we'll is areas areas. are say said we still we -- growth in are let's generally hiring hiring. very, so and those long-term freeze secular continue there in believe a

the had will in a from. And one-third So we result then efficiency of other that and was some continue one-third in place of that the savings programs company. came that mainly as

how look So should down right. that's our we OpEx, at how actually brought you

that proactively. as the I come is will So we was travel actions variable half past, et entertainment, a the the was it expense half as comes was think revenue well in cetera, back back. which it of took that other as And

period, I anything at fixed, XX% about roughly think in total over Everything Viavi even overall when business we of and about XX XX% level, about fixed, our XX% expenses six-month the Now, fixed of when rate. months. and have variable variable fixed plus the nine talk but months, XX% on is it's sort roughly you our

be. said I've and window taken what a So just six-month that would

We have run efficiency to we the continue programs that discuss during Day. that we Analyst

So we'll continue to those. run

And believe OpEx as that comes so down we very will revenue our the effectively we manage down.

still operating that we to And the profit requirement. so will deliver

not fiscal are as out, assuming looking for a Overall we 'XX we recovery. are V-shape

prudent would do that be I think to not it.

same the we the next a of U assuming for thinking more ship recoveries two that So quarters. are

'XX fiscal to half calendar XXXX. for of a starting half first 'XX then fiscal So and first in recovery sort of of happen

some Oleg that business, demand so about And first think probably our you back And from the half the of of in overall edge I we will calendar network. XXXX. mentioned, see come on as that perspective, think pressure the will if

to it single-digit think that speak. decline overall has NSE, so so low And we

On the pressure, we end the side, low. it be although XD And demand see given on sockets. But be market that we skews. believe will sensing will OSP will will be multiple multiple

will So more pressure sensing, be that we be offset there by assuming are XD under-counterfeiting. but our on than that will

to compared year-on-year should So roughly fiscal be fiscal 'XX on OSP in 'XX. flattish a basis

to you the revenue that think OpEx the that we when plus back, and the scale side. an will as operating back should you OpEx be revenue that at about I level think I come be saw the on So that will dynamics, we extent -- QX, in think comes variable

costs cost. Right. variable when have we manufacturing, have Now, than side, roughly side our XX% in COGS It's think have fixed let's more than COGS in the XX% is NSE variable, almost sort OpEx and where in opposite our the where XX% It's say business, XX% you OSP about we fixed of we think business is fixed. a on about roughly say I let's our variable. in -- a have roughly in we

the fixed on XX% fixed variable at we roughly have the a overall, good XX% side variable. about and level on Roughly Viavi So COGS mix our mix. is versus

deliver gross a even color. to business. So enough gives good -- our I down operating of volumes that's Hopefully, the of leverage there lot we as and margins you side NSE the that in actually terms on in when reason able we came have the good think COGS we're

Operator

Your of Hosseini next the Mehdi line comes Susquehanna. question of from

open. is line Your

MehdiHosseini

Yes.

for the are up. for year? CapEx planning June a your to quarter and you up. and I the and of CapEx reported what And the your March how follow was follow within calendar Just June half have wanted second quarter And for

AmarMaletira

we fiscal should for our Yes, revenue spend reported so our we making about in and to our how percentage We well growth as maintaining will CapEx. in was of as $XX.X as talk for about expect which build continue XDS that in sure in in areas And secular out very focus focused CapEx are investment spent maybe are we are we but you all X% -- our a X% of program, strong targeted we business as a fiber. what very -- CapEx QX. million about to prudent are XG, is on we

strategic will what all based so our guided three the years. be investments our we be on to discipline that And in four exercise continue and to financial and operational sort are of last

to X% X% quarters. So high-end do low continue the that will versus will towards next the the four in and of and to mid to we to forward going the three CapEx we more manage range

is in growth. there we what, areas to there where that Our we want whole we think is is potential remain one. philosophy invested know And

this of are. emerge stronger want we much to than So be period. as We we recessionary much, out

saw, and as very subscribed million who we And multiple we not actually it in have only put strong was banks to also all cash credit in by a a place us. balance. you But interested $XXX are lending also money facility

is back this a just again So us. stock for

MehdiHosseini

forecasting. better then, the want and -- booking to Okay. NSE either require in any just customers the With mix different the segment sense? of OS? book or And that will would your between your Is to I backlog understand

AmarMaletira

SE think we I business have business ship have business NSE we is business the good within NSE where software is book but position. and a business assurance is mainly an backlog our there which No,

about them. backlog business. a have, OSP, Performance the So to comes compared in And business Security when in Optical of then you that's field larger also think it's some business. with of..-- one the instrument of the and sort we Lab resilient

OlegKhaykin

or a really XD quarter. looking a forecast. time of a during we NSE the we up can think have kind market, lead of All a short But I sensing, of the real within get base it four And orders. is get we forecast, getting. we in to longer-term very be forecast in but I quarter. down than a the on get because go weeks the go the six-month mean two A like kind more lot no

it the forecast, quarter. mean a but I general to get So can throughout go up and down

I would chunk So quarter business, is the ship. I book big say of say, would a our within

MehdiHosseini

Okay.

for that it forecasting to to So you And would take right say phase go business? is two would way your three when how Is people are home just a your to to time work? that NSE It's from quarters. in for a the that slow back work assumption some edge, you rather you to be third, out? which this expect about think

OlegKhaykin

Correct.

about the probably the quarter. demand a field happens you the if within think instruments. It's very say business quarter. XX% book So I'd of within our ship much

know product is three customer planning but and the between to -- the place they orders, program when we that clear, an they they Now within is order the placed receive the time the place time time months. the

term. So that's we have, long say don't I would really why

quarter. We others, products orders some it from the the a the of capital longer-term it's in network by most have Unlike service and an less there falls have in with almost the spend order real-time than receive is in because we we advance. part their usually the providers, Cisco the likes instrumentation a well capital of they demand. ship -- timing spend And the that time of under OpEx of as such orders between and time

Operator

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

open. line is Your

AlexHenderson

Thanks.

check a said. I wanted So things couple of that you to just

in million is I So the what is around correct? you that that OSP are heard excluding imply. going sensing $XX be Is to you XD saying range

AmarMaletira

Alex. No,

Because be demand see $XX anti-counterfeiting If you're cyclical do business million will OSP our OSP. counter fiscal an and we we 'XX, increased referring core higher core than in to the to business we believe is average. that expect the

AlexHenderson

you thought that in said not upcoming I to But quarter was be that million right? that going or is the Right. around had $XX

AmarMaletira

in --. the well And

OlegKhaykin

least. We said the at

AmarMaletira

At least, yes. the

AlexHenderson

Okay.

So that's was. mean from down excluding it sequentially I XD. where That's

sequentially. it's down So

AmarMaletira

sensing. XD excludes It

not fiscal directionally. was particular because any we of are 'XX I Alex, So, we fiscal giving on color guidance talking just about giving QX. are QX fiscal

AlexHenderson

okay. see, I

would So, that flat, in And but the up mix end it. NE. the shift if then revenues you you to got And point, are within the be but quarter would I OSP that bit It a if imply product at --. like the that in lower that think not you XD. case, it is that's does assume persisting I should spike said margin probably of little that sound had down second a your excluding and

OlegKhaykin

No.

make to margin can you lower think product. us jump I a

AlexHenderson

the lower it Well, than levels NE operating isn't OSP. margin on definitely

AmarMaletira

are the on see you're yes, higher will if from on, But sequentially that but cost goes of up, leverage NE, you absorption and fixed mix NSE NSE. on operating perspective, right, also you higher yes, the

AlexHenderson

is of the piece XD it be is sequentially. is other I a the down would of guide not you talking June sharply like the guys. sequential just then sensing this And system the indicator about clearly that good right. down All sounds declines. quarter, they're more light -- the mean out yes. yesterday quite Momentum and Exactly for to on flatter in you're much Everybody of talk kind guiding

OlegKhaykin

actually you a mean, remember, First We, builds the of different than time, dynamic are they lead like order a do, matched have longer buying semiconductor our much what much to demand I customer laser you're all, we closer a right. have product and if because ships.

AlexHenderson

All right.

down, table, would may it other fall people about. So off it's it think going that the to about just be did that thinking would sure be is be correctly, everybody but make -- to the not way

OlegKhaykin

Exactly, exactly.

time. almost So in we are shipping just

seen for ago, because going products, have example, we, accept you're dime they six have might in from So so the respond we you on QX, place coming orders I the semiconductor right. if us months drop you are out, it can whereas you to to bigger because those mean and a order

us, the shipments. when down the actual market way. much go when get turnaround, to things end downdraft It's you other really for matched Whereas way more you a as -- don't uptick things much it's get really more also don't as

AlexHenderson

route? of could. conditions would pricing I this the last you you that in is or of depressed not that's you higher been to if in your depressed take about. go guys. advantage Acquisitions Clearly, reasonable acquisitions prices take that appetite for companies it of Lot you it, the choosing of that you tremendous I is an been that that reluctant in acquisition see. similarly in policy environment for have think to and I successful. One talked therefore this to cash guys you the, environment wildly conserving you've are giving question, advantage that have the been assume done terms

OlegKhaykin

say right. is the our the I'd always is deal it's just to and same; got Well, that appetite the price sure stays make right

I don't shying away think from I environment. So we a are in deal think, this doing

we fundamental generation. new Now powder. sheet our feel pretty we decent have balance have Also, the with more business and have dry comfortable about cash we we facility, credit

a So at opportunity right look comes it. the if absolutely, we will take definitely along,

AlexHenderson

any the talked to there willingness? about people in Is change you've

OlegKhaykin

is think I still denial. some there

few for a down. takes usually to settled quarters things it think I percolate and

Operator

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

Bill Ong

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

Operator

today's conference call. includes This

disconnect. now may You

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