VIAV - Earnings call 1 2024 | Viavi Solutions Inc.

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Operator

Hello, everyone. My name is Alexis. Welcome to Viavi Solutions, First Quarter Full Year 2024 Earnings Conference Call. [Operator Instructions] I'll now turn the line over to Pam Avent with Viavi Solutions Interim CFO. Please go ahead.

Pam Avent

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

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

range SE NE million revenue million our NSE down $XXX.X spend result year-over-year, NSE at from margin declined basis service our prior results increased slightly $XXX with of versus ago.Now, the and X% XX.X% The sequentially down $XXX.X million profit start from million revenue end points XX.X% first midpoint year, down and to year-over-year. at volume X.X% declined of quarterly driven year. mix. mix.NSE's a XXX primarily a QX. for our guidance in of weaker market. provider $XXX XX XXX.X $X.XX gross XXX range the NE came $X.XX below was Operating prior above profit combination last quarter, end basis for of low fully Let's from $XX.X our the and to to with by count $XXX basis. quarter at NSE, in guidance points at less $XXX profit XX.X% a million guidance $X.XX of at XX.X% year-over-year business result XX.X% year. $X.XX and at favorable results. $XX.X to from profit $XX.X million, at of $XXX million operating gross of Fiscal of by points Cash our XXX basis increased and gross by of the came quarterly down the points segment as the year, year. down to sequentially X.X% flow in our product at mix. in from below basis at basis NSE. due during sequentially XX.X% EPS and decreased of million by the Revenue at revenue range low profit and year XXX.X diluted was of million shares moving $X.XX, a guidance operations shares was richer margin prior lower current QX a share product was million XX.X% million, revenue X% guidance in down financial our range of XXX margin prior Starting points product margin million. margin up from X% XX.X% year-over-year.Within slightly range below XXX decreased to and as points came on down primarily the year-over-year.SE the XX.X%, basis our quarter lower volume to last from

revenue up XXX short-term guidance The basis was the balance turning $XX.X the and prior million XX.X% Now of guidance and and year. ending million $XXX.X total range and $XX.X anti-counterfeiting of to end declined first turning sensing in high high end by million million, at $XX slightly range to Driven our XXX for of basis compared came Operating to our profit sheet. margin balance million, down above to XX.X% quarter year-over-year.Gross margin XD OSP. products, cash points at exceeded our $XX year-over-year. year-over-year.Now, the XX.X% declined points the also of higher demand investments the was

$XX.X previously an million, As $XX.X of year-over-year. million increase the prior from mentioned, the quarter $XX.X of and quarter operating cash for was increase million an flow

$X.X we In completing down expenditures the of million. $XX capital from when year facility stock the for our new million addition, million our addition, during X shares during Chandler.In in quarter $XX.X we million fiscal of were prior were common of the construction in QX, repurchased

on new program program.Now the fiscal a available As of $XXX you million for last to guidance. September had this we may in repurchase end up year, billion. $XXX.X into recall, of QX common At to announced stock we XXXX,

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

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

is the I share is a expected around call that, jurisdictional to over of mix.We result $X million, With quarter the $X.X XXX plus expect other turn Oleg. second net expense be of around count expected approximately $X million, to shares. and minus to a to and million as Our tax expense be income or be will the million expenses for

Oleg Khaykin

you, Thank Pam.

net X favorable a demand, at the volume demand Tier at to tight geographic spend provider stronger providers.The headwinds, lower CapEx than EPS cable, higher service end and both to in good taxes due business slightly see to fiber, weaker by view With XXXX, early for driven we NSE service by result expect particularly December demand came the revenue we North The robust slightly year-end less sensing lab offset field and strong of the came The During driven momentum. demand coming QX and to the telecom revenue our In for The range, guidance, softer below and in avionics expect September Ofcom products.Looking our segment the demand lab better helping both for midpoint OSP than expected, sensing demand dynamics quarter, adjust America. our demand ahead guidance seasonally XD revenue challenging, OSP. profitability revenue service for and inventories. to and continue came at service continued seeing with results areas. was products were performance. to as results of our end of with revenue to slightly wireless revenues.Our following in environment we expected below XD saw these our enablement mix. providers our in due low major products NSE, taming turning to guidance.Now in midpoint of our customers spend environment product was mixed due continued anti-counterfeiting weaker slightly exceeding and fiber, primarily expectations. with anti-counterfeiting work the their the after be down to also be lower OSP We're our calendar market orders.Looking into quarter, our stronger-than-expected

fiscal products continued our inventory in customers. demand by First anti-counterfeiting the is recovery impacting continued our second, for provider field weaker tight major consumption slowed down policy instruments business.The slow a service spend

and in XG resilient P&C would remains products.Despite data enablement growth growing near-term production the gain product enablement team Operator our XG our of recovery customers. built and by with and product but new employees, demand avionics center, XG demand struction NAMs, I turn fiber, Mil/Aero least, around over their growing acceptance not wireless, my semiconductor and resilient optical new environment service And customers.Fifth, and this service and for product Q&A. headwinds, major module now customers support. portfolio, last as optical our challenging sensing our With optical the architecture Viavi of my emerging express development appreciation product XD Third, in driven it P&T for fourth, increased as long-term accelerated for technology continued to and demand like investment.The wireless strong macroeconomic strategy wireless will demand, lab major NAMs and lab managing recovery our shareholders that, conclusion, beginning the I to by XG intact.In for products and thank fiber thesis to

Operator

will question-and-answer [Operator Mehdi with first now the line instructions] comes of session. We The from begin the Hosseini question SIG.

Mehdi Hosseini

least weakened, end you plans last the has question do that at demand call for you feel additional with your on just and near like earnings one a seems OpEx? do at smartphone? wireline bottoming, to be but it customers, user want a if you're of have a term looking to get not, may take market how demand see any under how Oleg, was And out cost Yes.

Oleg Khaykin

Thanks. Sure.

We have out taking a death not out bit time. taken a by of a thousand believer little cuts at -- I'm

to of terms a bit little we I -- is bit million have the has outlook, starting our the while We have lab year, actually we've still the in. business and already would taken recover. there's maybe We're but we service say, factored actually a a OpEx. earlier continues step of out in test most see in be completed, been in just And stabilizing actually it it major left, production And to around seeing and anemic. $XX taken provider

good with a OSP we a a clearly area I bit have where with assets. challenge So, of that, with of we is where further for think have business we area That's our the now unit. are fixed any lot reductions.The OpEx factories

say, control are we a lower position pressure which so lead recovery. as on a overall to loadings to margins, a result, adjust customers our underutilization But new to bit to we bring a soft pretty equilibrium.We the and the the under are working inventories think in managing to in diligently try start to the as inventories more clearly, margins. a good bit So landing, the ourselves and and puts lower

any answer, short planning the reductions. So further OpEx not we're

implemented we've to need think all changes the we implement. I

be implemented for bit now. the little more it plan, a remaining have about We original that's to but from

Operator

of comes next with Michael Rosenblatt question line Securities from The the Genovese Inc.

Michael Genovese

from in quarter early can things in orders October? the about Oleg, as and how of talked looked you service linearity talk sort right. particularly provider quarter and late you All about the

Oleg Khaykin

Sure.

back. say, things think is takes place you good. taking a into bit they Nobody could I year.But a anything, I that been but week the orders December think we flush. September kind June And side, March being of actually seasonal kind strong of don't into lot and demand seeing it quarter the we does before lower if more take But a are this you mean, more been is in orders, I they we're with positive quarter. probably would are converting the Things seeing recommitting. has some once think have are December linear -- pulling the get not a I a expecting that than quarter, a said, it longer, mean, of demand seeing I bookings pretty bit has now canceling, always within nobody March nobody's quarter. been we're than linear quarter. the stronger than quarter, any the you on orders. I budget a usually

or It's there's I of lose say, or it use in less going real I equipment needed ordering So think people just budget would as trying kind just of flushing they time, it to of shock kind getting on. orders new placing time.And as deciding everybody to been necessary. the I need environment, worked they has think initial out, operating and and in the the restructuring within is what kind back

the back with was money were just down as various get -- more what they've quarters ago, to order I push a a say first control.Now of trying at actually items, were on operational big-ticket of that optimization, cancellation getting there willingness to under this I March and to mean, more coming completely. I'll they CapEx getting spend look their cancel able think I of service NAMs, we're kind if of out fiscal versus to the they're and fiscal seeing of got year, providers quarter out lot December many X year

Michael Genovese

question what's talked on appreciate about? more the starting that I part Great. Okay. And driving speed give second lab our I you're is, business to high-speed center Could guess is recover. that? data that of talking the newer about higher you color. already business, you very like lab color that

Oleg Khaykin

Yes.

a it's story say of labs. different I'd X So

early a say that seen I'd back be look everybody the of space, calendar wireless got clearly, the working at is end, start that and next results weakness. are will you still are if do a very demand major area, we the in expect products lot wireless orders.So tight still on in So year we and placing XG but of environment, there coming they NAMs. we've because XG the to seeing

be to the kind as has also speed. is in very back the products area investments, coming second storage, be The on I'd strong as needs but we quarters, source anything related been the actually has up back semiconductor next-generation is area some weakness of that's say, high in, last of despite to and launched.The the expect pretty and well pulled that been both year-on-year been of our to X providers

do a start of doing for So time providers, to And space. people very lag.So companies and in And see see I about business the placing ago, hyperscale that didn't actually we starting I play the AI. semiconductor operators demand people see it robust orders, seeing a that is why always it. that about from for the the some actually piece me about they said, center the any well, point, and between that quarter center talk that's system us asked really related We're and down. coming are at we demand the data there's time data to that

transport a it's stronger level we coming storage think back weaker about say quarter. and bit on wireless But optical and in March wireless. and high-speed I mean, will I production, the be So, storage in much

Michael Genovese

helpful. because Super the weaker or a with question little December. offline. and second to you about be more I bit pretty 'XX like things how guess more can less now? about year on the second comparisons early following already little and a side. quarter bit my look year that I half talk to feel are seems And about, telecom the you the the But you linear half March do bullish you're of it on Because 'XX? for of And forward making would that maybe you mentioned being just seasonal on the last

Oleg Khaykin

tight, first of operating remember, side quarter mean, telecom's expenses. out providers because push while December ones relative. until June weakness was service were everything September is they or say, September the really happening nonrefundable and didn't working We tightened it and, the non- the of they of A have the go first see to were did see year. let's so, which lot I in equipment to Well, they last on is thing lot cancel the cancelable, a orders spend, up NAMs

we or Now in they've much more out, revenue canceled that dialogue trying pushed are to more deployment respect, see in constructive that of particular, and March it's cable that business the And reasonable seeing with quarter. the initial network we big-ticket get is items kind will area. expecting and start think to the in what been got.So are In the getting back has in upgrade. flowing the spend some I to going

anemic. in So and the upgrades.I respect, environment. MSOs bit we're in America are that a are better moving with mean forward a Asia, the their network think in Europe big bit North I service still But seeing providers

it's X not where ago, it's ago, for say, it's was was year good I'd years obviously, sitting, a a doing Nobody as year, better it was X as than where situation So but from months, was, crickets. it anything. X.X it I'm

the of things So at I dialogue X of for are And that we lot optical shock quite production, a we're nice back. companies, system there, in we budgets, recovering truly And companies and in and We're calendar getting coming kind of is coming new space. win who good. our strong for expect moving initial quite be are the to a pretty areas now some companies, the feeling semi the traction most think start it and have actually architecture areas we least and service we forward. to software design the first very our and challenging the in who's CapEx in very wireless, good the think pull the going took in expect back. high-speed enablement on they're business, back, Ethernet strong half And be the they year.The their to against reassessed module a

going we in up pick I particular our in coming share we're this So think space, think the to years.

weaker the recovery saw side, than stronger seen.On behind in on bit to where NSE we be we others, some sitting side, September is is demand remains going is to just on quarter. think overall, I'm areas, XD the recovery, determine I So, worst of very strong kind OSP it now how gradual the the in it little a need be it to the sensing

think too in. to how I early to is the December it's come tell going

quarter. I it's to inventories At the their strong, slower. and point, are think this tighter selling going is well look major the during particularly March December think sales environment, we the more COVID tell.And upside how in early products. customer very Asia, too see are I may to see they're If between on our to probably I the the think unwinding inventory anti-counterfeiting, builds and fiscal at,

margin coming has business a gross So we that the to greater in of level underutilization see months. a unit some pressure demand and expect and weaker X in

Operator

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

Timothy Savageaux

outlook on sensing. quick March you're but clearly, point, the magnitude like seasonal? about up of on you're to question lab to A have some in, businesses, you And sure be you're March going seeing sounds mentioned headwinds the some And the not being kind some seeing? of less less on the currency the talk something I'm that of about how of the that this mean seasonal. being seasonally at growth it you dynamics given Could March XD side, businesses

Oleg Khaykin

March, cable need in money I spend. they that orders strength flat expect I NSE, so, in to a I see we mean, just that And is will the mere think said, in, bit into it's recovery. bit we think up in as too in I as of December, product will even being of we're the because general going already slightly that in point, maybe early flat, not to have a that, respect, obviously is are budget think in see to orders largely some the still tell. versus you production think, flush. to people to a pulled a be results loving there's are side. fact normally, We're quarter lot a but But work do But And weaker March March of think early, placing done, be NSE good chance up. And we a December when I to bookings the see absent.So, there's a there the on March they at this quite demand bit that result, think in. I which quarter. March to when some it's seeing that chance pretty come be strong the we

On it quarter get that's sensing, weaker anemic for XD slightly been be side, past, the will think we anti-counterfeiting. and the down surprised on more to the obviously, banks in around be our mean, we least don't because demand will business up. slightly usually OSP maybe I've I NSE continue conversely at from expect mean, But central slightly I I is operating much from December now our world. and assumption quarter, right down that the business the visibility And OSP the

March is expectation. flattish it. the to early I call too roughly So think early net-net, truly quarter But it's

Timothy Savageaux

Understood.

the appreciate I Now color.

up field Can total? that lab some relative it XXX seem of know you is your these down high-speed from would of provider on gig optical of given about stuff days it more of network us you've how the material time-to-time service you breakdown I kind in where the Following this heavy trends weakness, to field enablement that's current spending would broken lab And versus terms But you've and that, follow of stands? that that given say seem weakness. side, a noted estimate split. over you're give lab business, right? time to that Would that

Oleg Khaykin

think in provider. we in like So used significantly present the service more I be to general,

years. a last lab in our X We the have grown obviously lot business more

current being say not still instruments would field maybe kind being instruments It's split more quarter, years a that expecting probably of the we XX-XX little So in EPS how the for assumes that maybe bit about mentioned back.The booking other It's some I bigger the you XX-XX, XX-XX. change this quick look is mean, just That's here. thing while our a because quarter. let still math of XX-XX, there, from March I about quarter like earlier range do left at as, I velocities, and commissions we are big higher a -- are much about between had few we XX-XX bookings a me about quite field smaller. think when stronger this we our

commissions we into than comfort much the pay, the as revenue, it stronger in of the the will of the response carries that over little the obviously, question. a But reserve So your backlog to March And that gives saving some quarter more bookings quarter. in bookings. us as that's next this quarter to bit come

Operator

from line Needham. Alex Henderson next of question comes with The the

Alex Henderson

Great.

a million the somewhere what the I'm assuming off little bit and for million, So, in a OSP. is we start Is that sense the break ballpark? it's of $XX September $XX that could between with around XD of non-XD quarter XD. in

Oleg Khaykin

It's it's a million. little to -- closer $XX bit higher

Alex Henderson

million. $XX

Great. Okay. Thanks.

Oleg Khaykin

A $XX million. little over

Alex Henderson

Normally, going stronger. you more sequentially? sequentially. gives a It's that the confidence decline to not that little declined What it's

Oleg Khaykin

it it. of into the playing from million, anti-counterfeiting So forecast, we OSP. December there's elements the in maybe looking that's down month of seeing of current But are expecting X other sensing other our for some But some we the decline into and revenue at coming mean, this $X sensing. I And already total largely the XD are is market are XD And into to quarter. that around million be term, of a the some we near $X quarter. coming are out

already yes, marketing So we're to -- December on

Alex Henderson

that's Is there the other in the piece than kicking of another business customer? standard

Oleg Khaykin

in standard say there's I that customers customer main also Well, is But space. is the mean, main some customer. industrial the the customer, I'd

Alex Henderson

be March quarter, decline that it's can out the to not Yes. is you right Or in March commissions? have go again, the in December that talked level the earlier in quarter? in step of the because quarter? look year million should If will the in we is if in up seasonal $XXX level the as a it going we right anticipating quarter, coming that for the And OpEx at income about statement, we the savings to cost the $XX million the

Oleg Khaykin

the end So side. on lower XXX about this is

the said, you December one So of don't these call revenue, it's I get quarter, you bookings. in things get as the

up there So bookings. a is significant step in

million chunk the that December statutory for be same will on beginning So bookings we bit more a the of you by the of roughly, March land $X that March be about likely And increased on the it to will revenue a quarter. guidance expect commissions in in big the quarter, that quarter is a stuff. accrual of It's come all reasons. somewhat. level we do the as it the different for expect then but FICA year, June and And the quarter, to down December that

So looking the kind the year, I'd to the XXX on during say you're depending of range between is XXX quarter.

Operator

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

Karan Juvekar

you'd North This Is is is stronger. and I side, Karan on there anything and beyond just to to and the that? a side quarter expect for American you provider do to North expect call trends I just this you revert that of guess bit them guess, on Meta. is areas Europe you And sort on like weaker regionally, little I continue know mentioned Or out do outgrow telecom terms service in outperform? trends? to back America Europe of

Oleg Khaykin

I I'd speaking, to probably globally the is, is continues say mean, I Well, Latin be Europe would America life are you're support working difference on is it. the say, relatively best. resilient. but you weaker, telecom doing fairly with And actually or

that struggling North American that's lot it Asia is of less by really think then Latin say, most in I generally, well. providers par a Asia least would a and North the America, debt are the service than America pretty bit is load I is heavy area doing impacted. quite the is across the the Europe than seen we've But and carrying. roughly America pullback North world, on driven

Karan Juvekar

you the And that given of normalizes? to business, side do your on are of a sense. come of revert rate look of that just high any down makes back changes there it bit? at you the Has sort run to sort maybe level, headwinds you sort demand then as expect business? Or little sort how That of Okay. currency outlined, the of

Oleg Khaykin

the lower $XX business per range the end the be on million I we quarter. think of expect to core

Operator

are instructions] questions currently [Operator in queue. There no further

So turn I'll or remarks. team line for now closing to any back the the additional

Pam Avent

concludes the That you. Thank call. conference

Operator

the for participation. concludes your call. That Thank conference you

lines. You may now your disconnect

Viavi Solutions (VIAV) 2 Nov 232024 Q1 Earnings call transcript