VIAV - Earnings call transcript Q3 2022

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Operator

Good afternoon, and thank you for standing by. Welcome to the Viavi Fiscal Third Quarter 2022 Earnings Call. [Operator Instructions] I will now turn the conference over to Head of Investor Relations, Mr. Sagar Hebbar. Please go ahead.

Sagar Hebbar

Sarah. you, Thank Solutions Viavi fiscal XXXX year Welcome third call. earnings to quarter of Sagar and is name Investor Hebbar, My Head Relations Corporate FP&A.

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

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

Henk Derksen

having more great a Viavi years, pursue we than Relations. role been as his with of Thank assumes for him formerly additional and Ong Financial recently of and left Analysis you, the to than Investor in Planning endeavors. wish now new for and more six future eight years Sagar. has JDSU, Corporate Bill success opportunity as Head Viavi Sagar been with the firm Head and after

results. March revenue non-GAAP Viavi’s Viavi quarter Fiscal a is to and on profitability. for both QX Now QX record for

additional million, solid guidance by our OSP NSE of XX.X%, notes. $XXX.X segment EPS the is down range to year-over-year. reduced from at points of in albeit at a operating margin came up driven guidance performance, range a lower X% million in and year-over-year, in our million. of of an performance convertible end XXX Third continued at at strong came year, our $X.XX $XXX of share performance because XX.X% basis high profit operating million in segment, combination primarily quarter to lower increased of revenue $XXX improving the XX.X% was count shares sequential exceeding improving Viavi’s $X.XX business prior than redemption tax XXX.X year-over-year. of count. in The share rate XX.X% expected Growth

convertible includes However, it of of approximately X.X the notes shares. the million dilutive impact still remaining

strength NSE starting X% NSE. revenue by a XXX revenue guided of margin moving disciplined revenue the in operating at business points a management. Now $XXX.X SE million, and QX at in production increased XX.X%, in basis products. year-over-year, margin basis points by primarily profit supply low higher year, COVID-related ago components increased profit our gross year basis China $XXX.X operating year-over-year, SE late result decreased up profit chain $XXX year-over-year. results XX points points our assurance XX last from segment, $XXX with a margin and result expedite X.X% to of reported at in mitigate higher Shenzhen as both reflecting of as we of shutdowns a came at increased our range million, result million the million, at quarter. to at XXX strength continued product Within our in wireless year-over-year, XX.X% driven in mix. NSE’s constraints. year-over-year and to basis increased reflecting million revenue leverage favorable OpEx NE [ph] gross NSE, to datacenter products. lab at NSE XX.X% XX.X% proactively fiber, increased and gross Within NSE, of $XX.X XX.X%, from revenue costs and on margin secure profit NE end

to turning OSP. Now

was revenue to year near profit our points by ago a a products million, the at due result $XX.X of range improved disciplined exceeded to offset for higher basis OpEx down XX.X%, albeit was demand aforementioned X.X% guide raw XX.X%, end Operating of of million at Revenue margin material at decreased volume quarter. revenue quarter and to year-over-year, XX%. guidance $XX the Third of XXX better-than-expected from sequentially points to $XX the million lower range the due XX.X% costs. profit by management. year-over-year, XXX during and high Gross down basis anti-counterfeiting margin XX.X%,

initiatives, Now us additional The compared demand investments levels, challenges. balance including ending in customer our ago, as a of in well short-term turning sheet. exceed Operating of supply related is in total to balance and decrease million million, payables. meet cash cash organic as to of notes was chain allowing million $XX.X of result due of to inventory retirements timing year-ago requirements the million quarter inventory reduction the to of million, The for down $XX.X $XXX flow a was $XX.X to increased investments a environment payroll $XX.X and the primarily and convertible compared year period.

quarter out year compared invested prior during the the capital million Arizona continue we new to addition, the facility. we as production in to $X.X $XX.X In expenditures million in build

of XXXX XXX XXXX from convertible improve at are principal of recall, quarter, the reduction XXXX, may notes a to redeemed combined or the an our end As value, additional total half in capital of outstanding third XXX $XXX.X XX% XXX these end of million the the costs Bring value value. value. re-acquisition of to principal million. value of to notes the convertible XXXX continue quarter the first of million principal XX to leading outstanding completed million at of the or of structure. our you original convertible XX% remaining notes to half and at original transactions extinguish we million we notes this balance In principal first original our the approximately $XX.X outstanding of million targeted principal In we a the

QX, we million XX.X common under the resulting plan million total a amount repurchase X.X This at X.X shares million $XX.X This financial million. shares million total our to the during us and to continue fiscal $XXX stock improve XX remaining objectives. XX.X repurchase our amount includes structure for of XXXX of purchased of of were capital XXXX quarter in of million end shares repurchase for flexibility the million. XXXX plan repurchase During to the million plan repurchased repurchased the X.X a growth our completes plan. The in the balance provide is The on We execute the this plan. under share shares allow authorization of quarter. to

Now on to our guidance.

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

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

between and Our XX%. XX% expected be tax rate is to

the expense million turn Share is notes. to expect expenses income levels of reflect that, of XXX.X net I price call approximately other approximately Oleg. to stock upon the based With approximately $X million. will count and the dilutive a We X.X convertible million shares includes of impact and current remaining over

Oleg Khaykin

Thank you, Henk.

start. of a second The fiscal half XXXX off good is to

of have we COVID-related the performance shutdowns challenges their in QX, service by strong I'm with in achieved NEMs year . historical mid-single-digit both pleased the fiscal providers despite delivering supply driven a period results be growing During levels wireless. driven and percentage initial QX segment XXX Fiber GigE. China. OSP mix also segment and expand Wireless customer ago with and percentages grew production a from cyclically non-GAAP GigE highs profitability. in customer The demand center fiber to year saw growth data by revenue strong cable from North Demand new double-digit fiber. XX had NE chain growth lower. The O-RAN NSE upgrade revenues and We robust as strong moderated products. year-on-year. for saw products demand, and last to solutions was same and of deployment. up Optic with business shifts and XX% networks assurance from strong, continues deployment as American SE in XXX business

anticipated expect growth to the for in network from and XG benefit strong market We SC traffic. demand

successfully execute shortages. to supply despite continue chain We

revenue has and Our customer components, been inventory ability build secure to to enabled a meet us and share. market grow demands great differentiator and critical

with profitability The revenue our OSP. business OSP to better-than-expected turning delivered guidance segment and revenue range. exceeding Now

quarter-on-quarter banks demand QX stimulus it recovered our December anticounterfeiting XD as quarter. from COVID decreased from Although up demand revenue their year-on-year product central XX% sensing the moderated as high and anti-counterfeiting spending, globally was

Looking ahead.

We and up anti-counterfeiting the be the XXXX provided September expected Fiscal guidance record another year three from profitability Fiscal revenue sensing at expect stronger XXXX. revenue to is Day Analyst year-on-year, for to XD be last Viavi. year in during benefiting QX XXXX our is demand. also year and of

despite are the in our to pandemic chain. proud We the three-year global targets have exceeded challenges supply and

three our there. on our an plan be goals we Boston you see As in of next the to XXXX, save to next we and will and date, year cycle. strategy the we Please outline hosting for growth, Day phase the Analyst XX, September hope

Sagar. team information for in the my the our would shareholders over like and to appreciation support. Viavi my In to of will and conclusion, partners, our will for supply to performance chain the express turn regarding more provide strong I thank another quarter We customers now I event call months. continue their coming to

Sagar Hebbar

you, go us ahead. Instructions] [Operator Thank Please the let begin Oleg. question-and-answer Sarah, session.

Operator

comes with Instructions] ahead. you. go line from of [Operator question Needham. Alex Your Thank first Please the Henderson

Alex Henderson

Thanks. Great.

all, quarter. off congratulations. first Good So

the fairly comment a made You late quarter. in

conditions And April. the you have impacts two or do seems have clear as the impact You out gotten can in exposure Thanks. chains any of in a on for Ukraine? while we're in war to XQ? Russia magnitude the Is Russia of change EMEA? the additional result has on quarters? did you the there that of operational saw supply on And China some in And worse China. demand Europe evident quantify It subject, pretty the in pressures in pressures any

Oleg Khaykin

Thank Alex. Sure. you,

it's of kind what say incoming that would your because your days I is they was permanently a outgoing increase the be. impact and China, to onetime they've of supply done of kind products shifted have and in some quarantine products So amount

in, factored in probably So the new quarter which strong. is – once I'd now it's quarter. once the is of all $X extremely say, it's in about of kind June June and adjustment, that And coming reason million us, and it be lead think built going roughly That's that's you've in. cost I time the revenue that done lag shipment, part to

product So for just now in and additional quarantine was the is incoming And quarantine. days to few to the – some it components requirements flowing in really go outgoing sit have components then put accordingly. just

our So that's now June quarter. fully all the in guidance factored, for

Europe. have salespeople to I overall, in As to been that think have or and some of in factored million to that working move to go. And Viavi the all we region let revenue being $X either $XX now maybe have million in that's the we situation about in. we region,

where that's are. we So

Alex Henderson

to So or... clear, million $XX quarterly million just or to $X be annually

Oleg Khaykin

annually. Annually,

Alex Henderson

right. Annually,

backed been exposure? exposure and at And forecasted the And this receivables so that's point. zero out of

Oleg Khaykin

been zeroed much out. Pretty

Henk Derksen

receivables. No

Oleg Khaykin

exposure. receivables No

Alex Henderson

there, either change close a cancellations, conditions? bit was Perfect. in salvo, a demand notice as last time? change been than was the your in expected. EMEA had Any opening demand there weaker a war did of that And I European the longer business causing has little question we in result was in that

Oleg Khaykin

in think it way I I it’s other. in $XXX,XXX no Europe, No, the didn't is general, really Western the there impact. few or needle no But the in so quarter, move mean, impact. a one

Alex Henderson

Okay, thank you.

Henk Derksen

Alex. Thanks,

Operator

Thank you.

question next Tim Savageaux ahead. comes the go Your Markets. of Northland from line Capital Please with

Tim Savageaux

of and double-digit fiber such kind a and the you congrats large is fiber suppliers, Hi, want some growth which good the is at some have you in as Oleg, scale growth fiber projects. expectations, made, in particular sustainable growth on over up even by that infrastructure mean period Corning, that I of follow from very for do maybe quarter? about their is I for Or lever pretty of enhanced stimulus good time? anything follow-up. about comment And of commentary in double-digit off a double-digit on many quarter, in to afternoon years, this talking strong results. there driving be to think type I a these

Oleg Khaykin

growth. XX% don't sustainable at Well, I mean, I anything is think

quarter March were year look a I got lot starting That's – to think at things a recover. the – to you the ago. where just

have compare. easier obviously So an we

well. good was March last for us already quite quarter year Although as

is players say their been fiber They've are driving So aggressively already deploying it. for several deployed it been what's – many up I would years. ramping major they fiber

business. Now all the are new have on they turning equipment. and that outfitting won checks instrumentation all we on customers. requires pretty they're the much and spend And on significant turning that it product our chain amazing And our components. we're thanks significant field to with also, of where deliver some able of supply ways, the none our chunk organization, source of competitors even can the And in to job

from have I also my our let's XX%. only not source instrumental XX%, in second XXX%. share of management cannot source would would the prowess supply that give a in the what in because if but capturing increased and XX%, you And entire has a the business fiber, second So take really major players comments, lot said deliver, XX%, they that's benefiting you, for for chain been of remaining this say, spend then

has So cake. clearly an additional that icing been on the

Tim Savageaux

Got wouldn't it. And hold you XX%. to I

Just to there. But you enough. trying get that's XX% fair to

Oleg Khaykin

I foreseeable is the definitely future, for Well, growth strive is can obviously, we for. single-digit higher think something

Tim Savageaux

I is material Okay. follow-up extent side. mentioned least? haven't a same the wireless more the that's half, you to the that. rate growth growth. to side you seen for while yet, a maybe as or at where greater, And take and can fiber the second take even instrumentation that really on on the if field wireless wireless And you've mid-single-digit contribution I'll wonder

Oleg Khaykin

it’s There, I the ever you if just I market. a because as I think be mean, at And big we fiber, fiber think now goal for entering bigger – fundamentally Well, don’t will wireless seeing good a much as will is X/X. – second much And starting look to of in ultimately, need the several number about stronger more in fiber it’s compact. of checks, in I feel And already the market And we field. maybe our terms market about tens wireless in we very much we’re And and country, more right? the thousand, obviously the this think half have whereas of wireless this position orders instead be is what coming do like believe industry of of in be about thousands, X/X upgraded ramp. deployment. our we’ve to

far, of A, the being ORAN provider, XG increasing could And to driven pick feel It’s test the be we’re increasingly actually ORAN. traditional particularly applications, need seeing well players, increases position they’re business, coming if taking about now orders where the about of I ORAN in strong NAM’s think other up traditionally, both. from to more unbundling deploying more of ORAN, NAMs new and choice but It entries networks. tested. number with for about the pace, in customers when wireless equipment, And So makes talk in that the and it’s up increasing in service a, industry. kind feel for we’re NAM you the it’s become only it it the private we wireless, in in equipment more or as really its but between opening not the of – number our also as also us. really their by deliveries, a also growth kind driver good as as as for for of service we having and was architecture demand. us best field position a in to things And by And points the number a way, the deployment major ORAN providers

actually with the expanding course, is infrastructure Open test network our flywheel for think So field I more the that wireless actually addressable in on infrastructure the emergence of RAN market of expansion on that it the side. significantly even our gets the as for market the instruments. respect, And instruments effect creates bigger,

Tim Savageaux

it. very much. Got Thanks

Operator

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

Samik Chatterjee

on And plan the expected that after for as CAGR the guided the initially I the Oleg, didn’t year higher you’ve you or revenue three your to end look taking target at I we back, high to. you be tough of – one, your when at a – growth been range CAGR. year, a my that with of you Day. if the end targets year track to track hit about high first because X% Analyst probably the through guess the – But can last take back this had for that two Day. – you or I Hi, I had issued Obviously, years years, started be above issued you’re cadence Analyst and point, X% XXXX fiscal to last my thanks comments think questions.

curious above issued higher beyond X% see being about think And deliver three years two so Or that’s of current the how being And of to you you sustainable you I of of about sustainability a the past. pent-up the growth are helping account have this thinking thinking on sort the you’ve growth that growth years? more you’re as end in follow-up, like about I’m sort Would next how of X%, to the you drivers primarily do rates please. to you of that demand? range – the the think – – high then the some high

Oleg Khaykin

We So we’ll our be foresee through we not may clearly, blow I the a there think well, away and about recession if pandemic. global figured it, so growth. did thought we or handily

actually bottom of leverage, market what and the a – exceeded So be plenty improved in heck still the it significantly is of seeing has line through operating terms the dynamics. the to top on in we’re exceeded of line tougher. we buffers obviously, So, right? we a But have And and on proved the built lot in.

driven much the up today, we is a diverse And DSL very dynamic, more becoming have major say, a growth and new where higher environment fundamentally cable and it’s tools, field the by opening instrumentation wireless was markets. it our wireless field fiber on with more much new and in Before, instruments. I’d play

than like business new growth modern ORAN segments from to our the JDS a – the we of to while and restructuring some XG think be And were were going actually the the with segment of business, in higher we’re kind the and SC we revamped days Viavi. Uniphase we

want don’t three the patient Because actually the last for anybody we really market. are years. And next feel about – optimistic Analyst do thunder the going was more years my we the much years about stabilized were years years first Day, three next three the in we we to last into and that next think patient. steal than three start I So ahead. three the three it’s all fighting shape but the The I the full speed butt get kicking forward, was the – about

we to are in what that and end the markets dynamics markets dynamic the So than last we a be applications end that three going the the feel our more playing our of are are seen in coming environment new years actually of diversity in years. we three

Samik Chatterjee

Got it. Got it.

the the more does been suggest that be generally pattern weeks, three in customer For the point on you’ve unit unit you customer pretty for building changing primary might sort to sees. sort seen my is remember that demand customer up And is correctly, their It of piece the there. seasonality bit to to low a from front which have you sensing aligned in December, two time lead XD inventory. a pick demand of have of mentioned I the you if business, on closely which your terms buying the contrary follow-up, of the

of see, see does Just then on benefit you that and timing get curious the product the more any sort that impact the next you that into or that the cycle? to color ramp of front

Oleg Khaykin

get a length reality Sure. unusual The weren’t Well, that the our quarter and respect I very able remember it. actually all December chipsets. talked is at in to was they customer about

their since knew the actual us would I to us. number March builds kind of transition they they do And they linearization time, in they traditionally and June build artificially And demand. clear bills this the as March was it and first June bit get lot The the the within here. situation next quarter, more reduced in when in have short are a half placed calendar a because orders Well, in improved could level constrained. – built they needed, see all we with obviously year a demand back half not the a impacted their product and So higher the and quarter, second I some quarter. adversely of they lead of more lead a quarter product do little and think they the of units

the half and shortages the quarters the of and constraints first making supply the calendar September given in volume December up now think year. I of some they’re the in

it’s us in pattern stronger of of know respond reality but I a and in I that think, respect, if claim think of on least I a So their not, we the chain. worries or to their don’t giving And dime it supply are can terms demand. bit a changes we is

Samik Chatterjee

for No, Thanks here. see I’ll you. thank floor Thank color. Great. you. the the

Oleg Khaykin

Sure.

Operator

Thank you.

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

Karan Juvekar

this Hey, Thank Juvekar you the question. for Karan Meta. for on is

elsewhere for just sort of demand example, you in inability So any availability questions. to seeing of quick the demand? complications are seeing from One, labor supply or disruption chain, things chain two equipment? I in installation Are you have differing those find

Oleg Khaykin

think wouldn’t inability So, I to about well, – say I the labor. find

is two exposed of think especially One production probably supply I additional increases as you with if implemented zero – the outgoing controls there’s policy, they’ve number the aware that COVID China chain well of quarantine challenges. product. incoming you’re to the and components on types are

in getting longer manufactured shipped getting into out of China, product time and factor parts China. So have as lead you result, now a to of

semiconductor very improving really I’d of passive it and I and components. but issue really March of components, adjustment. and quarter, to in we our analog in or but mixed would and time the happened an have set signal late situation under challenge by third steel we So is – the still FPGA second summer. are tight say the anymore think a one we see large, that’s quarter. performance it’s the to The high But narrow the And components kind do by supply. with continue say devices going don’t set

Karan Juvekar

it. Got

this And in that seeing now, quick then challenges you. Thank I that particular was share right call just there Okay. a gains. chain the you Thank you’re better? And earlier mentioned seeing follow-up, little you markets you. one of mitigate sort and wondering, sort share them maybe of given you’re end supply these are just any gains being able to bit

Oleg Khaykin

in share are I’d say Well, NSE board, across the we the seeing gains.

got them of with supply build execute you have multiple to to whole a very in next sources, versus like their you product ability because competitors a product. of for deal parts tactical, give on you you which your can’t our it forth. your just deliver Basically XXX% lot XXX%, chain are parts need field product the competitor. a the customers They get example, cannot replacement Some out they and support business, cycle a where for the of a big instruments once so of so the with is and have

technological over leadership performance of and competitors. bleeding the by competition, And our are wireless so XXX So extending market product in business, a share our on our and and then I the edge that’s pick share latest tactically say space technology advanced standards the we you winning the on far would the outpacing basically up. having where like field. market our GigE with

Karan Juvekar

Helpful. you. Thank it. Got

Operator

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

Sagar Hebbar

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

Operator

you. Thank

You lines. may disconnect now your

Viavi Solutions (VIAV) 4 May 222022 Q3 Earnings call transcript