VIAV - Earnings call transcript Q2 2022

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Viavi Solutions' Second Quarter Fiscal 2022 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Bill Ong, Head of Investor Relations, you may begin your conference.

Bill Ong

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

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

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

Henk Derksen

Thank second profitability. and you, quarter non-GAAP Bill. for QX record a Fiscal was Viavi's quarterly revenue highest for

exceeded guidance profit record $XXX XX.X% $XXX.X segment. guidance points in the strength million. a Viavi's XXX anticipated and million range offsetting NSE a basis came XX and record and X.X% mix, year-over-year, and EPS $X.XX favorable OSP on range up and X revenue $X.XX was revenue impact revenue $X.XX includes of exceeding at XXX.X of record basis leverage temporary points shares. business XX% the of count convertible XX%, our approximately function of discipline margin The of sequentially our at to shares in at our dilutive segment, expectations operating higher with tied X% of year-over-year year-over-year OpEx to a and exceeded expanded share is the volume, weakness $XXX up notes product or in quarter operating range. high $X.XX million consistent Second quarterly driven control. remaining increased by million, The to the million guidance

results assurance exceeded higher XX.X%, than year a OpEx control. primarily profit doubled disciplined profit XX.X% operating XX.X% to and points up XXX favorable at a profit a million revenue revenue by Now, points NSE from in basis NE reflecting moving guide year-over-year. profit XXX a starting from primarily of XX.X%, mix. increased data increased volume. our both NSE and achieved XX.X% wireless last year, result driven margin points gross million. quarterly $XX.X business strength with Within gross and NSE, QX range ago. SE XX.X% new product by Within year-over-year revenue of and guidance year-over-year, strength leverage $XXX.X on NSE's at gross million, to year revenue revenue million, NSE, in $XXX.X million, at our increased more XXX of and a NE products. NSE. $XXX on $XXX increased products. a center at revenue reported segments, came at as at record increased leverage reflecting range of records basis margins exceeded margin to higher in margin margin points higher SE XX.X% result XX.X% Operating profit basis increased ago XX.X%, year-over-year, operating fiber dollars XXX to from basis

to turning OSP. Now

ahead slightly XX.X% sensing products down revenue Revenue XD decreased quarter. as range was quarter end our our at of for $XX.X $XX profit XX.X% improved of million was the million to high Second demand million at a $XX of during basis from XXX the ago. ago Operating as guidance margin volume. better Gross year high basis XX.X% lower at profit a XXX due of exceeding XX.X%, primarily year end expense control. decreased the from year-over-year guidance revenue points a aforementioned expected XX.X%, to the of to than range points of due the result to margin

million $XX.X million levels the of The executed year a during $XX.X Turning billion of balance demands. fiscal in ago, months. to Operating QX XXXX non-recurring period. a was of free quarter, as the and $XX.X of for related a flow cash a inventory our cash year future in mainly cash million, $XXX.X tax to is was balance the total sheet, compared investments result payments primarily decrease function well compared last over the flow ending of the a short-term project in million, as ago anticipation quarter XX $XX.X to generation reduction temporary the restructuring to a up increase increased during of

In Increased the prior quarter reflects addition, in new million expenditures the year. CapEx $XX.X the $XX.X production we Arizona in capital million to invested during compared facility.

principle in As balance million approximately $XXX at fiscal of September, to a we you a completed XX% transaction of the notes remaining XXXX the our outstanding $XXX million and redeem original end may early from to convertible of QX. in XXXX recall,

the issuing of in shares as amount in in stock. part well second reduces additional convertible of end an or the an quarter in will in settled of combined authorized the notes, of the principal by $XX.X early to the Also value quarter. up principle of September, common original million XX.X retirement million convertible the at our in convertible Subsequently, the the outstanding deemed notes the which repurchase XXX further at Viavi Board $XXX commenced as XX% million, of million shares, $XXX During of in second be notes value. fiscal we start value principal which cash to for $XXX.X QX combined the million of million

third shares of $XX.XX commissions XX.X million $XXX.X price of to We average financial continue of structure including objectives. at to our program share, the a report February of execute $XXX growth total improve per We are the as the yesterday, pleased to flexibility for the to we intend an before to that capital Xnd, and quarter. complete repurchased provide allow our and million us million end plan purchase to

Now on to our guidance.

EPS We minus $X.XX. approximately the expect or the third or fiscal be quarter revenue range basis $XXX profit $X plus to XX% of points, to operating million $X.XX be is XXXX in million, be expected plus minus and to to XX margin

We XXX minus XX XX.X% million be with margin plus with profit at operating OSP operating is expect be million profit or expected points. $X to margin $XX $XXX plus or million, points. minus revenue NSE or or $X minus basis plus approximately revenue to XX.X% minus basis approximately million, at plus

tax Our is to approximately expected be rate XX%.

the income and other stock expenses complete as for current XXX we in reflect program, price fully calculation the quarter. share the expect We used the a to net third our and At count shares estimated diluted levels million of repurchase million. expense $X aforementioned is approximately share

call by expect also fourth to that, diluted With reduce We end turn million fully will the I quarter. share to the Oleg. over the to approximately the of count XXX

Oleg Khaykin

and of I'm Henk. Viavi's fiscal XXXX, with non-GAAP revenue performance Thank profitability. achieved half record pleased during first the which we you, in

wireless, $XXX.X percentage new was segment Viavi driven from half double-digit and demand last revenue EPS record. Our period a the non-GAAP at strength and is came fiscal The fiber by a was same year. in which NE first growth million $X.XX,

to we Customers Our revenue their started a Europe deployment as networks fiber momentum providers field new XXXX. in and fiber. expand service this achieved in and expect field with continue and XG to late instruments products adopt throughout XXXX upgrade record continue Americas both calendar to our

industry X.X Our in product equipment demand customers calendar to the expected cycle field initial cable prioritized upgrade be moderated robust The demand deployment to the leading technology. to launch new and said, expect a XXX-gig cable we Longer coax optical demand starting of XG move continues strong networks we to with ORAN generation upgrades. as with XXXX. next transport our lab technology year. fiber over customers DOCSIS The be continues to That make technology. fiber term, traditional this initial in deployment expect investments wireless most cable coax XXX-gigi many to sometime with the

shortages are our we As in been advanced securing many successful critical have demand. in aware, of experiencing semiconductor of said, components That industry devices. component been has meeting you our customers'

market early to favorable see SE a and us Our gains mid-calendar our has enabled time, in resulted this and situation result share assurance last by expect just calendar revenue supply in the seen business center common segments are drive in restructuring reaching The nitro came upsides and of supply we revenue, a to ability of and data million revenue segments. for under starting to more SE we in quarterly the turnaround to launch to catch up segments much execute XXXX. to the business guidance. At chain see starting subsequent a in market platform level calendar of XXXX. our XXXX The $XX is

in for a demand expect XG strong SE assurance. and the We year, calendar this strong growth anticipated market driven by performance base business in

year quarterly the range. rate to be $XX expect during We in revenue run to high million calendar low this million the $XX

expected to profitability. business delivered The better than Turning and revenue segment OSP. OSP

the core decreased elevated during revenue XXXX That levels at pre-pandemic reflect following we to million to more expect the anti-counterfeiting pandemic-driven $XX million their to run a remain as strength. year $XX QX print revenue demand demand OSP quarterly rate globally calendar Our quarterly above reduce rate. of sequentially banks -- central than the volumes, products high said moderated run the

stronger constraints We June Further, sensing in execution I another calendar seasonality quarter and of than QX will to healthy. record to stronger strong the past supply call the I and XD express would XD our employees, demand to my all turn years, and delivering reflecting expect components customers, over for supply to conclusion, stakeholders seasonally demand to to late our the Bill. partners, in and team expect second XXXX. appreciation for expect continued by wish demand half seasonally remain I be normalize modules fiscal not up in strong first make half. to the XXXX. supply in for chain the and sensing safe quarter like we In its Viavi in the customer record

Bill Ong

Thank you Oleg.

ask the Technology March We one March Conference discussion everyone Xth, We in will question-and-answer Morgan Stanley be Conference question session. participating begin Investor to let's to TMT Francisco follow-up. at virtually and the the limit Josh, Susquehanna Investor and XXth XXXX. San on one on

Operator

first comes Henderson with [Operator Instructions] Your Alex Needham. from question

Your line is open.

Alex Henderson

much. very you Thank

are a that a run OSP in at I talk security terms lower a we or this off, the could of degree which tough XG you're there? thinking where structure if talk quarter about, was in the hoping demand to XG there's cores? you good in stay in the versus little adoption the of First then XG environment. rate talking change products could little of terms about you what And bit cores any congratulations of piece, whether bit you're Thanks. a on the [indiscernible] some indications second about business,

Oleg Khaykin

you, Alex. Thank Sure.

I So, firstly, the continues year, the as say they as seen we've anti-counterfeiting five for late well, to significantly then -- in in digest about think bought. And I've higher decrease last volumes. -- we're what quarters, I'd -- everybody mentioned demand

We start to business gradually and expect to most kind be that taken for We think XXs bit get last kind quarter, rate during that little of maybe place quarter going pandemic. this volumes, new level don't we to the think to of a is have creeping but this it's we up better core digestion and going business, run the the kind saw of good normal. of high

kind few higher got XX future. range mid-XXs, the If foreseeable a you to then the then think And got it is for we we was of remember, the back, kind low XXs, it to years assumption of good low-XXs.

year. usually doesn't mean last redesign a don't there major but quarters as we'll Now, would when redesign new a for a long pop XX over it's that be that as going a happen it won't quarter, currency. economy where starts think maybe launches any I -- to And

I'll as run for intermediate the a rate So, business. XX I assume norm good say term, an as like long-term, high think core it's way think to

XD about to sensing. of terms sensing moderate. is the going -- XD you ask In did

As challenge I customer said, getting our supplies. elite had

to step out. half the the XD a first second of probably seasonally very going half quarter. And the lower of confluence expected of of took this sensing and year kind level sensing of are both rebounds. hard see things to of second expect half, a result a kind continuing new stronger we coming events, I as if back drop. But meaningfully think, XD two just models we quarter we'll really be we to as bouncing a of kind And out. Last majority strong saw anti-counterfeiting fourth start they and So, it quarter,

seeing interesting the we're interest Regarding XG, see our we in developing, products. increased very demand

also demand -- quarter. we it's think it's wireless products also not clearly the for points, it's of first the instrumentation. fiber -- the actually instruments data only I fiber fourth I these mean products, is saw well our deployment we RF but products, XG -- increase have the as And because the in a -- pooling field So, for XG also product lot

of becoming which a is -- double for in positive a a bit So, us, it's whammy way.

to do we So, obviously pick and and the the concerns XG see of XG radio There FAA starting up. safety around was frequency. altimeters

of going on. testing I think there's a lot

We no technology there danger the impact sides or to and offering make providing advice that is are good aviation. both obviously to on commercial sure

Alex Henderson

much. you Thank Great. very

Alex Henderson

you. Thank

Operator

with Mehdi comes question from next Hosseini Susquehanna International. Your

Your open. line is

Mehdi Hosseini

Yes.

if December you challenges components? quarter be Oleg, disruption. your Just to didn't wanted have procuring and just understand go help March back chain us would supply what you upside any with the impact can

Oleg Khaykin

let's say two mean, there's upside. just I Well,

The COGS. we have is one first lower significantly will

we'd to we quarter, get you build that on fees the you it, we $XX one, we would the get product. not able revenue, in million very one difficult points margin it's if So, to things ship have components be say probably third of the that topline for make components. And to reason like and but $X and after the probably did ship is say chance second the to and to the surcharges two month, the that let's million. the up the gross percentage nodes expedite I'd pick And pay in sure through if to get

components so So, that's month. second the see the month, the end and by of where finalize we getting all ship the challenge can the into generally we third product

we kind And just quarter. how generally keeps see. it over just that's next of then into rolling So, the

Mehdi Hosseini

we topline And the we about since your beyond give operating been And Is that year? looking half, calendar the revenue quarter, second begin some next how fiscal a the as target, and it on while insight you just Okay, the second year? can for this of last should especially the us of looking March opportunities thinking an into updated think has you are pushed where margin. great. especially about be half into occasion how should

Oleg Khaykin

so and will start turn Henk. Sure, I to over I'll it

remember, model. will So, what already clearly, have running our going provide projection that’s Analyst in where current we our are three-year a longer Day term is of we our to September, But and model was. ahead

first quarter accrue of the We has generally lot calendar expect costs statutory so -- a that for we year.

and looking $X.XX So, But are generally, there's some even we headwinds on our that, be in margins. plus gross to OpEx EPS. with

be operating In of quarters. consider even XX at probably quarter -- terms with to looking of could about already, the normally low margin, I'd one weaker March we our say

OSP up see And recovers, continues make business it respect, much if mentioned moving that -- to to the that think to and And start mid-XX. already towards Henk anything? we will as in So, we're momentum do gain there. as maybe we NSE I had obviously, easier. could gross sustains, closer margin our it

Henk Derksen

post plan revenue be we'll solid little granular like very give by in our the yes, years we Day, so a performance think to a the performance said, of you margins, We're first We on and September there's you pleased we cost. we'll upcoming back growth, presenting consolidated and plan. Oleg with statutory half We half. of outlook ago, as far. segment. will So, three And Investor did basis, XX% bit averaged our for for very ahead

Operator

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

open. is line Your

Samik Chatterjee

had a March like moderation revenue, moderation sequential mix the does terms slight start guess, surprised up taking if this expecting the similar that almost look going a for my for moderation despite or bit like can surprised bit for March, you're Henk operating quarter, guidance and material in well. a OSP is of Thanks after quarter, margin margin a with first. sequential but in just with just in you or the one I record I'm as Henk the I Great. question. maybe

the if margins? that operating can So, -- the I'm I'm sequential terms bit, of because moderation unpack in just magnitude surprised a you of with

Henk Derksen

on as outlook, increase posted. margin a have million million. costs, statutory in about our what as you to revenues we But do just to with $X is typical so which high end, we in are consistent the Yes, said, the $X factor

then little X$ a a maybe about that's So, bit or X.X%. mix. anticipated we And normalized

Our guidance is prudent. typically

So, the that's rationale here.

tax On our the XX.X% a rate March the quarter. tech second side, posted rate we that's and the tax XX% for and --- guidance quarter for

Samik Chatterjee

are, But revenue the follow-up, quarterly what on higher terms add my to been you've of ceiling SE in just how to sort of And do the capabilities can on the allow for you portfolio Oleg in sort before This more more acquire you recently revenue? terms looks business. be quarterly and SE. for of of What SE, the Okay. rate what's then, that for opportunity what based have set to today, investing growing does obviously is portfolio capabilities? focused on the

Oleg Khaykin

I -- a probably the out at of very make obviously, that for meaningfully, Well, product new goes least, other. we the Viavi it's coming overall. new grow everything double as double at -- think the organically, rate rate think a grow probably in platform, But we NSE if we myself, should could at can the margin as the we we it's business But obviously, impact. planned, of than higher ahead least I And higher think it function a want much well, rest meaningful really with shouldn't listen, we gross get think to business of scale, at to we target. than rate and at the of overall

Samik Chatterjee

questions. my taking for Thanks you. Thank

Henk Derksen

welcome. You're

Operator

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

open. line Your is

Tim Savageaux

is and is SE if of good that Congrats the on rate, overall you NSE on growth easy Oleg, that's sort you've quarter, really to the question, And XX% be going forward. got about comps some year, timing because And, that's going any in question. begs talked good here, in my growth guiding in grow fiber focus a what afternoon. And going something to double the that? the Well, to you around quarter. growth appear to double-digit wireless but

And enabled here, look the double-digit you pretty the is which we as the question in looked year? trends in given sustainable market network next so is growth see business, into more achievable positive, my

Oleg Khaykin

more increasingly learned -- thing growth difficult. more XX% I One becomes is year-over-year and

easy moving is XX% -- comparables is think, thing, type I $XXX different I We maybe for of remember increased $XXX so expect time, that the were over segments -- long. talked one the do the I million fiber and right? listen, on growth. the million So, cable a DSL think last reasonable decline higher business originally, have time. a NSE on like comparables talking XX% single-digits some number. is I don't that and things we into overall And we mean, number, over wireless like, we more X% or when And like some

growth the decline. of segments some also clearly will to assume you will grow But overall, the segments got meaningfully double-digits. So, in legacy

net-net, to is goal get higher maybe from single-digits segment. our to mid-single-digits So, thinking kind we're of that for

Tim Savageaux

Great. much. Thanks very

Oleg Khaykin

Sure. Thanks.

Operator

next from question with comes Shannon Your Craig-Hallum. Richard of line the

open. is line Your

Richard Shannon

the way be that you the way you think That'd We'd First in these field kind kind of of the gains or that. a have can in relative you share some today. showing themselves? of base is you're sounds could help manifest any -- see signs how opportunity progress characterize sense please. one like far XG of out If of see And to any there. great that the instruments, getting to us on XG to -- you get love you early can started dollar

Oleg Khaykin

Sure. little tricky, what I is XG mean, a right.

equipment who for infrastructure we is business coming network new today others have in but labs, a which primarily system players cast, a these and service already of us a for that like significant provider it's ORAN, some the XG the manufacturers, So right. also targeting and Rakuten, are

be infrastructure, year to market we're then where targeting And kind run when type big and the business iron, of So, may new million viewing field software XX%. to products. there converted we instrumentation that's market $XXX when it's comer big about XG. there more a a fully we're per are rate And XX% is they share.

we said starts adopting should be as we So, as maybe XX hit other things when all regions the in private out, comparably, done, networks. and renting next XXs continue think Europe and And this start and maybe then we year, start growing rolling be XG -- out the XG should into probably into year,

Richard Shannon

on and great. And I slightly have gross but say great instruments, be go you higher perspective. may here. grow with I higher that Okay, lower as XG a to product. misheard margins. heard margins guess Oleg, my into I gross was you a That's margins My guess was generally balling thought question are is there I I remarks you prepared field understanding of gross going kind follow-on

to want that together? just So, sure sets level make

Oleg Khaykin

little Well, so give me let a perspective. you

kind If wireline you wireless The higher fiber of instrumentation take, you carries and like generally margins. instrumentation. what market wireless cable, DSL, will take

wireless, at but So, same wireless a part say handheld don't significantly the -- gross the instruments, the higher as than come there reason you sell wireless generally instruments margin let's as need the a they for cable. many don't margin. even a on thing, have you is just And -- cable, handheld is higher of a for many have it you you

need investment, guess have I you right. So, recoup order your to that to in

more actually units now, of in be wireless expect and XX,XXX well. thousands to for be average to up XX,XXX as average space. you selling the we the tens and in content as in up cable So, to we may space, margins our example, get you'd instrumentation, Also ASP selling go of the wireless go

Richard Shannon

helpful. very that's that. Thanks for Okay, all

Operator

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

is line open. Your

Meta Marshall

you of share that chain mentioned Oleg not know, market me. right issues, of gains fiber wondering for supply now chain of clearly -- seeing grow upon supply being labor growth seen? you've be near-term? ability you a just that that Tim's just to how were Great. supply do kind the periods how And some of you you chain building you kind or just to some Do or time? as know, is gains on then having the not from as business hold for many But Maybe those reverts, any Thanks. digestion over on having to going do gating you share you question loosens, first Thanks. in just, could item a see business maybe fast question years. see second, to,

Oleg Khaykin

Sure.

So, on was the well, share. first I much think the question mundane

And So, operations, software, want XX/XX. they like and a it, cloud that, you really more in a you when get pound you all upload it's for to honest, much is data momentum, deployments, cannot like software where right, a same natural Viavi and to costs, the visibility. that more trained, a generates second using of kind doing a to do to going once Also, of pennywise we're practiced. they they somebody use barrier taking as Viavi they're do point, kind things price lot many things these and reporting and equipment, monitor you're cloud things. At the time, that into your the of applications, Well, deployments, rabbit price, doing execute, And everybody's to the generally, instruments lot cannot your can they Ideally, when law, that network lower these are and and because case instrument share. create -- and get normal, kind -- is yes, XX% XXX%, and it's offer the they Well, you of doing bring your network, rabbits what we is and but other foolish, be content, software we're of have a instruments, back but for tried all it and everybody are type introducing certain right price, to XXX% like a more is do XX%. they want squeeze your new of whole she to -- own as people to these of continue to the certain when optimize often in now. that. switching called as lot you we possession and have just becomes the price equipment use keep at for used

share, be guess. So, do gain make best these we obviously, the keep new our share just But permanent, okay. a barriers going some normal, go them it may to generally, becomes to like for of once there's I obviously us to back, honest, you

regarding and the in constraints. big fiber is huge labor rolling Now, challenge. America, and is constraint they a a are Listen, North it out

need the people same got your You've to people your building who right. wireless fiber, are they build network, those

a you the you fiber. mean constrained lot automation of together your, reduce lot I know, truck So, productivity lot that seeing your improve extent, gives assets instruments, the opportunities. we rolls and when build we reduce, whole monitoring opportunities and run field the know, the fiber XG can and and two we of software that network and us wireless fuse tremendous And in networks actively a the you out the us a actually networks we're background to sell the your introduced in monitoring a the a passively and products of and in a where and with triggers and alarms lot of network, resides of that view solutions fiber operations for it's just this there's significant and of actually big lot of whole present that and will not network problem.

we you -- the resonates the on with our more are resources, you. actually like So, more value proposition constrained

Meta Marshall

much Perfect. Oleg. so Thanks

Oleg Khaykin

Sure.

Operator

the back closing Ong to I'll further time. There are for Bill turn this questions remarks. no at call

Bill Ong

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

Operator

the concludes This call.

disconnect. may now You

Viavi Solutions (VIAV) 4 Feb 222022 Q2 Earnings call transcript