- Earnings call transcript Q1 2023

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Operator

Good afternoon and welcome to the Viavi Solutions First Fiscal Quarter of 2023 Earnings Conference 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. I will now turn the call over to Sagar Hebbar, Head of Investor Relations. ahead. go Please

Sagar Hebbar

Welcome XXXX Julie. Head Solutions quarter first Investor Thank call. to My year earnings Hebbar, name fiscal Relations. you, Viavi is of Sagar

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

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

Henk Derksen

operating within down last we and in in margin range QX profit for in points at our service Viavi's Fiscal at among the a to quarter million and $XXX.X prior-year from year After at our range of came down Viavi. X.X% million X.X record but demand three impact basis quarter shares saw XXXX guidance to $X.XX XX.X%. guidance although providers. $XXX shares. quarter, improved prior XX.X% of convertible basis of approximately from last came X.X% unanticipated of million. revenue XXXX, XX The was year-over-year of dilutive concentrated XXX.X million XXX count of an of of both in results XX.X% $XXX and below range current the points Fiscal Sagar. you, notes last down weeks deceleration quarter, a EPS was million share QX to in within remaining $X.XX the Thank guidance results includes $X.XX. challenging

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

As margin discussed $XXX.X lower flat. year, earlier, profit combined roughly NE from XX expense our XX.X% operating missed decreased SE a basis guide and at points flat NSE to was due a a XX% favorable SE in because Within and by of mix. XX% year-ago. declines XX.X% to NE revenue volume. across decreased at quarter. NSE, margin decreased reflecting year-over-year. the year-ago, at below X.X% NSE range control. XX.X% was of service X.X% result of both of margin the from million segment partially the margin volumes NSE, wireless offset instruments profit late X% in million XX profit XXX at from year-over-year in optical last Within gross was guidance points gross points increased basis basis primarily product Field increased down instruments was weakness revenue XX.X% providers year-over-year. year-over-year. was profit $XX gross Lab at revenue

to the range exceeded Arizona from profit basis a quarter down levels, of the facility. first year-over-year to million million. points XXX at Coming year-over-year. costs XX% turning $XX.X points $XX Gross This at decrease of our Now startup high end is X.X% OSP, basis $XX million XX.X%. range to XXX and exceeded revenue XX%. year guide of new off a it our record in prior But margin of profit revenue our guidance was was impact of ago. includes XX.X% Operating of margin year

result sheet, million, was the quarter of ending Now to to and of income and share cash acquisitions, balance our balance $XX.X employee payroll the down year-ago offset of cash due the The Operating million, in plan. was the of million million million term equity short $XXX.X of decrease translations, primarily to flow related compared non-occurring reduction total tax a for was payments. to repurchases the $XX.X turning our a sequentially, and period. $XX.X $XX.X timing investments dilution

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

QX, quarter. fiscal for we our that of transactions repurchased common During XXXX shares repurchase the million the the completing $XX.X plan at under X.X million, thereby end expired stock of

in $XXX million recall, September, program plan common This our new our may announced of authorized up to strategy. deployment opportunistic we for to be you allows of worth as As board think stock repurchase us a capital that we shares. the new

of of continuing guidance, into we are October, the in QX unexpected demand reducing our fiscal to reduction sudden at and in view and on outlook. Now our the end

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

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

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

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

Oleg Khaykin

Viavi. guidance, we below in The quarter XXXX Unexpectedly exited a Henk. with coming Thank fiscal visibility. demand and order you, momentum September quarter disappointing strong for was

demand For the track most all part, and be backlog across healthy segments. strong to QX appear on with

Viavi weeks providers in of a last North noticed book third major North the slowdown the dynamics in book many of quarter. reflection Europe a characterized in in of pullback as ship of percentage and provider is rapid providers instruments the coming impacted of by segments a in of our conversion conversion significant are However, deceleration in Providers a ship The we month revenue. Europe. across ship business delivered field three and significantly we in other America in The order major expected. the observed market service during heavy September, The aside service book orders segment America month general quarter end Service that and dynamics service September. spend by our Thus

down the and expect environment reduce slowing CapEx to by providers deployment. to slower and persist work as service their We over OpEx spending wireless next the several fiber quarters,

Viavi's service infrastructure strategy the critical NSE acquisition insufficient Viavi guidance XX driven timing is detail solely came budgets, production to lower X% should wireless business by spend $X SE resilient the revenue dependence our was technology. Looking of growth with guidance unit line, Gig in expected, assurance XG in rapidly year-on-year high came part value guidance EPS stands revenue was requirement revenue and mix million, data about helps NSE. line applications above Jackson $X.XX. entirely offset acquired leading which comm our networks. our Despite Viavi's and for million at in in growth range. instruments dynamics. in PNT in demand about and $XXX our was below energy OSP The by early revenue greater and The telecom a at and the quarter driven continue which moderate transportation and to lower underlying the on growing a which as a at understand our field October, product volatile telecom our applications. to growth revenue, provider by by Resilient and In driven investing in our the units. of The high end navigation including is products in PNT revenue Labs, providers business is but lower positioning improvement in delivered accelerate the continued includes The of [indiscernible] XXX for shortfall This came NSE fiber of products. reducing our

be we to look environment As at ahead demand challenging. the December continues we expect quarter, NSE

continue as in XX in to customers CapEx expected increased any Specifically, spend field their business production is expected demand to line is be weaker segment to and some also budgets budget is see spending. year-end expected SE The time of realign semiconductor also segment The continue this instrument perform slightly expectations. conservatism showing it traditional as to that NIM our see is with to and are down will our reduce and we Furthermore, service highly unlikely around. priorities. providers

Now and profitability were OSP, expectations. demand stronger revenue segment business better exceeding anti-counterfeiting expected by expected the both the and were our for turning XD than The driven to OSP both products. sensing revenue results with than

our sensing down their ahead Looking expected seasonally inventories. than to to the demand be demand. year-end we lower expect primarily slightly revenue work due seeing quarter, to softer customers anti-counterfeiting at We're December XD as adjust also

resilient our to XD the positions operational their managing end the my financial like growth I macroeconomic investment our We the recent market the to remain turn challenging entry position environment express That out near-term to XG as and I us uncertainty the intact. this strong come growth remain appreciation PNT. Viavi drivers Strong manage to said, thesis now near We and my and with call persist acquisition to Viavi liquidity future. for will macro-economic positive markets with the and Sagar. the the such shareholders customers through stronger demand in and conclusion, team In headwinds on expect well recover. volatility for sensing, and over would drivers support. into long-term long-term discipline in combined thank fiber, and as Wireless, execution

Sagar Hebbar

Oleg. you, Thank

Communications This everyone We question limit be the Annual one and Julie, participating quarter, Needham session. will at question-and-answer the Security Conference discussion let Networking on virtually November follow-up. one begin to ask XX. to and us Viavi

Operator

Hosseini Instructions] comes Mehdi from [Operator go Thank you. question Please Your ahead. SIG. from first

Unidentified Analyst

Logan downforce significant Seems on What's of the little expected is operating years. margin points, quarter I NSE bit X% I to of this your is guess, for a can for Mehdi on? segment my operating Hi, that plus give be guess in like that margin there? touch question minus for first behalf I color basis [indiscernible] guide more several XX to driving lowest or you your on Hosseini. second wanted

you color there, if be great. So just that'd provide some

Oleg Khaykin

profit unanticipated guide million in margins revenues in are Absolutely, for per the $XXX demand. gross in million a the hit allows NSE deleverage degradation significant line. the us story It's the below we the at NSE, intact. quarter, on midpoint. at It $XXX that performance deceleration just typically moment, revenue And us drops it's to margin, business operating the see bottom

Unidentified Analyst

So driven? it volume is

Oleg Khaykin

All left. volume

Unidentified Analyst

that little Can that Got Do then sticking to providers, see slower what into worse? slowing a get lead quarter, especially it, next you could slowing you and some the future, expecting NSE. macro production in you I about you're the more bit especially you mentioned from guess the in field service any instrument if headwinds the demand risk know, demand? at talk point if lap saw

Oleg Khaykin

we the September, it works, the at and was sudden several discussion cancelled out is, about all of not thought ship our spreading the deceleration of it when quarters. So the conversion customers of pushing the saw have was end the thing book initial

the was thought thing the the providers quarter initial spreading of how or over up. and end while of many slowing showed October the plans So their like, revenue are October that cash was well, more it whatever, shapes major multiple let's see service down really quarters. management our If clearly

if prudent So the back. we felt expectations. with bounces weaker the demand, the Clearly, market it's to lower

to including and them it's seeing demand of the instruments, position our do, be When think only particular will well of be conservative slowing planning internal field prudent decided upside, as some an companies But service to their many but as continues talk decide the to and strong. with And reset leveling we in it thing a we on accelerate, I expectations providers. take down. production, about to semiconductor the a demand are end market because names the service

as to bit that Looking on happens, a there's rate going at pullback as service as be more But bit spend volatile conservative much environment. burn CapEx, the as a not the prudent not conservatism and probably that it's the when providers. past, seeing also some and to say history you're R&D more in slower

mid-single-digits down in why, the taking level prudent that's not outlook. So I we're down it think But really our to take that production it's much.

Operator

go Please ahead. Henderson Your next from from question Alex comes Needham.

Alex Henderson

Thanks.

So I given going pretty of couple you've the implied I you're a and to persist beyond quarters obviously, that. guess some question think guidance quarter. December for it's And the for here is,

we a assuming year, thinking as half at to fourth XQ as be look the back good XQ looking we the So, that and how metric be to year, a out guide fiscal into should about we'll quarter is as well? be

Oleg Khaykin

Sure.

I clearly know nobody ball. a as one you So mean, Alex, thing crystal well Henk. me and But has

we little more do knife decrease a want don't the and so forth. falling and view is Our on then be to and decrease, so and catching

find three time mean, about how my think the we in they like they -- COVID new freeze then more deployment. mean, indicator. thing. spending. I quarter. actually in to new long quarter experience for next was move was these is what reach like the March probably another it's good I an the down a it's after and of start end to find really equilibrium, We providers footing history, new quarter this all need the it carrier, the the they first instruments the saw reality -- then long provider literally never decide, But they been it still two players XXXX. past a takes the all at still takes aircraft the and need it's pivot has service at I then of driven because takes looking taking like to and is and their service then and the looking span after XXth it's quarters And

Unfortunately, The OPEX. of thing our the was OPEX hit from as maintenance POs end any there. what is all they -- we've an at seen, froze travel, revenue on the and of the they a they first OPEX really September, treated whatever hanging lot and out

they when second releasing are quarter, where they bigger realignment the looser. usually reassess and what opposite we're usually got and beneficiary, on the layoffs comes funds. spend. announced they OPEX becomes their start third In spend the CapEx So hit. to the now the bit then In of are quarter, we we -- the have beneficiary a it's early And you. and side of And the the

a being three quarter quarter. conservative quarter in recovery think of and is kind the a the So stable we slightly taking in effectively view, maybe of kind June March the quarter, stabilizing this looking first to

expected slower. is be way first be similar to guided Day second But of So try a And we at that's the with scenario we Unfortunately, think of a talked going slower which because they sooner. we prior. came their we expected to half be be weeks that to about our to exposure. the kind net layoffs When our in weaker. and we lot at Analyst the in continue flattish, strong, be XX will a the half year under thing slowdown to service operating. are as it next the cost next year we year providers to lower And

Analyst I slowdown in profile thought. a XX we quick we weeks came very demand Day, and think, sooner literally, saw than the right degeneration after of about the

Alex Henderson

the happen, quarter, will beyond thought calendar But quarters So the that half And 'XX. strongest, looked the as based you're Is sounds something out it back 'XX not talking the like $X.XX on for normally the $X.XX being ballpark. if sounds 'XX one you to of strongest about December $X.XX calendar kind process? year. is in but the recovery think of of the the range in that $X.XX, the that guidance to seasonally you your 'XX, like of probably right in

Oleg Khaykin

mean, -- back it opportunity be the the we clearly, further be, a it's be of a really be the think more to or next we and to that the as Viavi. year, you structural dead If brings, it's next But deep lower bounce if year then actually going as is positioning you depends to quicker. the to of the view going improve then think year really an will end. going us kind be much quicker towards for so malaise calendar what clearly think recession how recovery, I Well, just will

does recover deeper the So when the that stronger. much will recovery operating be much will and leverage come in,

Operator

Tim Markets. ahead. Please question from next go Your Savageaux comes Northland Capital from

Tim Savageaux

have out A are on cable seeing I follow-on. slowdown with would operators? seeing the you're you're afternoon. similar trends of carriers. first kind good couple a Hi, the wireless? hand? you of I guess nature comment can the of and fiber one questions be the across what seeing And then On on the you

Oleg Khaykin

to So cable interesting cable they the we side pretty in among the positive taking to and terms less operators neurotic it. think wise we But I do see the they dynamic cable half. did second be plan their in execute just have plan much their behavior more not operators a actually of quarter-to-quarter And operators they cable They on much and take. expect we everything to find spend. bit

their it to And increase it we payment we anymore. could do facilities back like provider, or and really also they're And the think physically deployments is we can today of fast actually programs. we comes in moving installing We my service come down you and not if They infrastructure when field want but it's but multiple quarters they slowing still hey, I going slow the all to fiber. racks are equipment. and need over the it's some the spread pace. down Because the pace. doing they're into terms. DSL the are equipment, you largely wireless And it's -- cases, much forward, don't canceling -- just how telecom they're when

it what but cash you're burn. reducing So not it more your doing you way is is I the think if you're quarterly thereby spreading plans, quarters, you're it's over changing clearly, your --

seen been any seeing. what out, and it's I So we terms. haven't spreading around, pushing it all cancellations, quarters the we order really that's over multiple mean it are payment discussing remarkably,

really But that's the on their far, it's we So hand, nobody's see. programs other is that cable, why, been this time more can it's stable. so much canceling at amazingly,

Tim Savageaux

Okay, that and instruments recent you relatively focused the next context, can more which based on that's AT&T QX, fiber comment the a I like side, seeing for of weakness, pretty more in on I broad you for been side. it entry of you're And and that's that, sounds guess but CBN well established you? pretty assume question, equation how great. maybe given this kind field broad like whole I than in this on since mean, think the the decline you're based it's seeing in bill. terms -- I you're about whole their it And of what stuff, finishing this wireless is is on lot in and is I AT&T important driving how sounds

Oleg Khaykin

don't -- services. pretty that broader, are to the it's just not we're down any the others. North in to reality want when it's some and out, say I that's And what turn And our American time the of equipment assume particular of as things. about, seeing up well. can and finish this who a is much when comes it's But -- European, AT&T, including as comes building Well, slowing well right. as bring they they're in. clearly, them the And is But it's usually lot you major I we talking actually when

who generally, accelerate a But realign, equipment back the reduce they and might they once says purchases. come whenever OPEX. think I So knows, CFO

any do unfortunately, their instruments not providers service is to shut and budget. the the travel company in And purposes budget, are field things in of are down in OPEX easiest for the that any OPEX. expenses CapEx and your of entertainment, in their One

their the reduce related go instruments than thing purchases, spend. rather they is the adjust whack goes because then news their you CapEx, do any you've kind what new So buying But first capital usually actually, OPEX their spends good when and equipment. up, got with OPEX they more they is and on of

cycles. counter that saw cyclical the respect. in COVID same thing So we it's And prior and in bit happened a during

Operator

question comes from Angela JPMorgan. Samik Jin ahead. Chatterjee Your next for on go from Please

Angela Jin

This afternoon. Angela. is good Hi,

here. had pricing sort Are tier seeing taken from any And into some input of up follow-up. all dig I mentioned are slowdown. a just that pressure pricing large probably then had that of demand your of coming seeing one providers? ago, of you wanted costs and down, to on sort you few you're you And know, I have costs. pricing, ahead of So these especially quarters these a now

Oleg Khaykin

news is good the is It's ultimately demand. really So no there pricing. on pressure

starting expedite the much side, becoming as positive And I improve we pretty available. think the to situation the I components we the think any not speak. On readily no are And we're we're anything, I quarter, longer think, really we're pricing the seeing continues doing seeing down. If of really chasing any not components device is semiconductor in this -- any come some case. to

Because if notice respect, is on the are operations, costs, margin that And overhead well. the our more actually than is gross revenue, is in in lower whole holding is that positive operating the really what's So there built you gross in there. that. much margin

up pretty So lower gross is holding volume, the your in margin well. if

On you you it the back -- margins going the your actually lower higher are when the expand. to to volume, volume, get tells

they really to in a that It's holding say our I very down I velocity So equipment well. not customers it's really, up are for. pricing want competitive don't think take really environment. comes which price at And looking would think the I to is respect,

Angela Jin

it. Got

follow-up guess I So that. quickly to on just

apply, no components pressure? other that not even saying you're any FPGAs like you're First where there's special seeing of or components sort certain

Oleg Khaykin

you we're as are things lead in used I that some you an the are And time, cases, coming availability. like, to spot the what at FPGAs rapidly. -- now an down ago, now have three, even very many, market think equilibrium be, four it's XX-month in balance, was given think times with in months I to lead

there's going lead I and place. been with But improvement time, But FPGAs in mean, of I availability. reasonable lead it's easily. to standard a they're spot last So, thing -- components, fall the turnaround. kind been on element times as just it's in that's that's market a dramatic mean, rapid now wouldn't available still some in there's, I a the are very say

Operator

Your Securities. Mike from ahead. next question comes from Rosenblatt go Please Genovese

Michael Genovese

Great, thanks.

maybe on here I want touched in the and that, early you an another of future? sounds test that you're saying do just think which it ask, so way, NEMS, is, an some You've that a the economic to like indicator at this indicator? you're Because before, but will to of the early it? further Is kind then you're customers lab down right slow look way that early,

Oleg Khaykin

-- And first it Well, I'd instruments, say field usually OPEX. thing. the that's is it's an so because easily where the we see

to when to readily it field as Now, not sacrifice deliveries comes as R&D, R&D providers companies service their sacrifice technicians. their do

more spend do the you R&D don't -- generally, pullback they'll like by So something, X%, or or may stays quarter. it's, orders push the I out resilient. see a I But maybe think but think

a it thing volatile not it as also equipment as as the does instruments. think I -- instruments, lab field nice quickly field was bounce about but back So if not as

lab I recover. fast. you'll just quickly, reversal the couple hard comes it's you really get as instruments, but it And field longer to may really and fortunes. instruments, last, it quarters down it see think The probably a also whacked take of So resilient, more

Michael Genovese

Okay, that's fair.

you Analyst outlook, and three-year Day and and you so change. as the did Okay, things gave Henk, a guys started like, to then mentioned

beginning the obviously, is of outlook So this three-year different.

reevaluate to Or do outlook So the we same? three-year is have the that?

Henk Derksen

cash plays demand and But terms profitability, we in over the continue in cycle. there. early good committed give of of where end it's the three-year softness, quarters, two committed before we And see the quarters. to how about couple And to out flow especially are, next generation, work to the update to give understand to one here have the better outlook. you just we feel markets, or Well, we're We have plan. current it, that we so through we we our an us be

Oleg Khaykin

we And it's And got first roughly said as three the kind we the recession. a pulled weaker. profile because think will of the half hey, meeting first in good Boston, plan. be about was of of And year the I this figured, going half and fewer And to second be to we year good. about it really was got there's figured flat a first outlook it, And going in by figure a really be be a second looks we talked but we there'll quite quarter we said it XX we weeks. for

would So about a three then and year still same be the market the assume and years, they by still year. fiscal say recovery when you'll from will were. this prior have I as we you talk But the are a down fundamentals probably the bit trends

recovers. think I So as recovers economy or the demand

I think early about too we're downgrading. start out, when we three -- years it's to think

Operator

Instructions]. [Operator

Morgan go from comes question Stanley. next Meta Your Marshall Please from ahead.

Mary Lenox

your forward Hi, this a currency weakness Lenox pull the Was Mary in on down guidance. assumptions? seeing the of Marshall. is segment on your you're Meta question XD there in sensing where for I OSP had the and or our volumes coming

Oleg Khaykin

the ends we down. December a slows generally Well, what is see in counterfeiting -- quarter the I think

that more So September say deliver. XD then sensing, couldn't major kind I'd that's the year, our customer lot pulled quarter cyclical the a of and industry Last in realized downturn. rest the biggest was really on strong. of pretty they

time I was much line in December the think think roughly around market So quarter. forecast, we the it demand This December was with reduction demand forecast. the have a see demand. rolling September in we a I some had weaker slight we And did

given I sense, some was foreign year. kind and of conservative the of sales, of last number the makes nothing for others. it potentially like think it's but listening more Qualcomm It to outlook

I little is cyclical more quarter December by But bit we it's than pullback anti-counterfeiting thought. maybe So is a it's traditional good, pretty weaker driven primarily think still adjustments.

Sagar Hebbar

Julie, is that the last question?

Operator

Mike Securities, please go from we ahead. Genovese again coming have Rosenblatt more question And from one

Michael Genovese

Yes, just thanks.

to want numbers the core I model. couple on a and out get on more to between a Just of sensing. questions XD the I'm -- trying OSP split

core in? So sort come in I'll OSP the or ask that I guess high-XXs? Where of did was mid-XXs

Henk Derksen

the first quarter. Mid-XXs in

Michael Genovese

in Okay. taxes. Great. tax with or because fixed rates And tax And assume because the of earnings the this then are international higher rate -- the at increase I lower. we're now, taxes just looking sort finally, some that's there's

long how do you So is XX XX before? have say that And case? versus think at were looking this then that the we we'll

Henk Derksen

geographical I expect quarter how the think you in we during Its QX, rest year. We're normalize that generating to this paying exactly specific generate described the is it's in countries it. mix will where tax. to are of and income we think jurisdiction higher

Operator

And I at for to the will this remarks. Sagar questions there call over further closing are time. no back turn

Sagar Hebbar

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

Viavi Solutions (VIAV) 4 Nov 222023 Q1 Earnings call transcript