Viavi Solutions (VIAV) 2 May 232023 Q3 Earnings call transcript

Hello. My name is John Louis. Welcome to the Viavi Solutions 3Q 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. Instructions]. [Operator

like Investor conference go Relations, now Hebbar, to ahead. turn of Head Viavi to would over the Sagar I Solutions. Please

fiscal of Investor Thank Solutions’ with Viavi My Welcome Louis. Relations is year quarter name Head you, call. XXXX Hebbar, to Sagar Solutions. earnings John third Viavi

risks and are company's this current uncertainties me include call materially and Joining President forward-looking today's subject financial Derksen, actual Henk statements differ are call and on the performance. expectations will statements These CFO. to Khaykin, about cause to could Oleg CEO, Please estimations. that and note, results our from

provide encourage filings, this only valid of our particularly unless We those Please call, most today. SEC factors as no otherwise, obligation that are note Viavi risk statements. report we we non-GAAP. described results these in and state statements, review to all during to the revenue also forward-looking update filings. are recent you The undertakes annual guidance except including

to supplemental We our their on at earnings plus reconcile release are these non-GAAP financial include release. The tables, in www.investor.viavisolutions.com. our preliminary and historical website limitations usefulness available financials slides, today's which discuss earnings Viavi's and GAAP results

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

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we providers OSP, earlier enablement segment. the for year. network in Thank you, more lab now Sagar. pullback revenue products Fiscal QX spending XXXX for patterns was demand our the and And a challenging experiencing quarter. service within Also, muted weaker with are

XX.X% it million. million the range year-over-year. QX recently of $XXX revenue came $XXX be high As updated at at our in million, fiscal a down guidance $XXX.X result, end to of I'll

range X.X% the XX.X%, end and of range $X.XX, came guidance profit down of decreased for was prior at prior to below the the updated $X.XX at from operating quarter Viavi's of high year and came $X.XX. guidance in and year of from initial in from $X.XX the to the margin from the XX.X% prior quarter EPS XX.X% by the prior XX.X%. $X.XX quarter

was down expense current consistent at the year. quarter quarter the million $X.X flow count well other at quarter from million income The billion was Cash XXX.X $XX.X share shares The the arrived third XXX.X for with $XX.X our million during prior tax as rate of XX% the in for the in million as period. versus prior from expectations. operations year levels

year. million, lower revenue from to As cash levels. $XX.X was $XXX.X operations of a the in result compared flow prior Year-to-date, million

connection and XXXX, approximately improve be workforce February substantial reduction strategic $XX restructuring the this The completion needs million company's in XXXX. into will and of opportunities. workforce business million to June company’s and to incur operational On the $XX million global X, of between workforce this plan X% estimates in resulting of and approximately the of plan savings. growth its expects growth annual efficiencies $XX plan, effective, charges better and with it with We anticipate company align by current

spending. year. NSE weakness NSE. reported impacted $XXX.X Now equipment last revenues by headwinds quarterly to continue business year-over-year, from the at network XX.X% by revenue X.X% service SE increased client’s provider in Any both million and the of driven $XX.X manufacturing million by revenue declining year-over-year. with million with on $XXX.X segments. to our macroeconomic results Starting current XX.X% moving QX be of

an volume. profit improved SE at year-over-year. by NSE, at Within gross gross mix. margin gross due margin to the increased year, XXX-basis lower primarily product prior XX.X% profit points decreased XXX-basis at XXX-basis points NSE margin year due points NE profit primarily XX.X% decreased from XX% on last to

lower high XX.X% of profit XX.X% our end year-over-year, quarter of initial million According revenue near initial at X.X% speak, at to margin X.X% profit at $XX.X down range gross was the million of first with prior combination a margin to $XX $XX result of operating compensation million, below from our Jennifer, a incentive guidance decreased margin was NSE from XX.X% exceeded of year points and range range revenue result guidance of operating X.X%. startup XX.X% volume was year-to-date initial a costs XXX-basis benefited the reversal profit in dynamic of new and to variable XX.X%. related facility as our to

sheet, up cash total balance of was $XX.X the million, million to our turning balance sequentially. $XXX.X short-term investments Now the and ending

XX% debt exchanging into of convertible During the value new third in a notes million proceeds $XXX.X with successful we million convertible note were dueling face issuance quarter, $XXX of XXXX, costs. XXXX generating net in our in

million in tiling we in the the in common repurchase $XX balance remaining million the to million $XX of in stock, in sheet, our convertible of value maturity anticipation of upcoming the notes XXXX of $XX The cash latter added fourth our net face quarter. the

revenues. was for mentioned million, million lot lower quarter the As cash earlier, operating year-over-year, of a $XX.X flow of a but there's decrease $XX.X

quarter, we in to $XX.X in the expenditures capital quarter. million compared prior In $XX.X addition, during invested the million

fiscal our of September, plan QX, all in share leaving ties XXX.X million approximately we for X.X During million of announced stock, under the XX is but shares the repurchase balance million the repurchased thing purchase. common main

plan million plan in up million XXX.X and QX up may fiscal repurchases. bonds recall share of that You for a of a with to authorized the new announced to we common purchase end board for September, stock $XXX

$XX we approximately expect to profit margin to be on expected million and XX.X% the XXX-basis be or minus plus or guidance, is $XXX fiscal our points $X.XX fourth $X.XX. be quarter XXXX million. to EPS Operating to minus plus Now revenue to

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

$X.X expected around expense million The expected to as we be a around approximately million. shares. and FX count result reflect a jurisdictional of rates, is income expect is XX% to XXX of rate be our share expenses net to

the I'll over With ball turn Oleg. to that

the to spent quarter has Fiscal Henk. the at you, challenging we rabid quarter Thank service in for was end our The a customers. the non-GAAP Viavi. our driven first third quarter systems revenue end fiscal our segment. providers in below lower guidance margins and the by slowdown spread of weakness Viavi semiconductor range NSE The of in that came initial saw and XXXX operating

weakness our driven double-digit in operating come end year-on-year to profit pullback was at guidance. a was and lab sequentially much declined R&D as non-GAAP NSE equipment NSE in initial manufacturers our year business field revenue spend products. segment. than margins well in and the percentage lower The as of sequential primarily basis NE on our by reflecting leading network anticipated higher and down below NE urine

development demand was This of by products offset stronger GigE. high-speed partially our optical XXX driven including infrastructure, by optical the lab for

Our X.X% SE grew line business in with year-on-year our segment expectations.

and see Looking in some recovery. of early starting ahead, we to bottomed business signs believe QX, we're out our NSE

Specifically, of for seeing initial and some quarter, during and lab instruments gradual this we production field recovery recovery are for fee. signs and stabilization

this see arrow to of spot is continue debilitation second calendar to half PNC from momentum customers. and which demand recovery We into our continue male XXXX. businesses, resilient healthy the expect avionics One bright

year-on-year and sequentially consistent Now guidance. turning decreased with OSP, to OSP our

lower. ahead slightly slightly of OSP came was core sensing in our The While demands XD expectations.

also post-COVID due form driven to somewhat be sensing transition lower for seasonal fourth fiscal and business We The is to smartphones designs. demand demand expect weaker lower expected XD quarter-on-quarter to slightly due year tightening. anti-counterfeiting than for supply down fiscal new be quarter to chain to by model products

strains team and support. my by said seasonal this and employees, XXXX Viavi year challenging That and my XD would second to I managing thank their conclusion, for customers, during half stronger anti-counterfeiting environment recovery like expect express we for appreciation demand of and sensing. In shareholders calendar our and to

to not the over call Sagar. turn I will

Oleg. Thank you,

question, This one We'll June on to the everyone that Rosenblatt Summit to session. ask at Louis, limit be participating quarter. one question-and-answer and question John We Xth. follow-up. has Tech begun virtual this

Your question comes Please of line first Rosenblatt. Genovese Michael go Instructions] from the [Operator ahead. of

And Thank to it OEMs? Oleg, Basically, from out of, the test kind mean much. saw manufacturers? us side we they you just as about draw trying a should semiconductor is in of tells solid when does their big trying understand, semiconductor implication to the it you it on forward. own what the Or that kind slowdown spending Because, think down field do more and said, fairly what slow tests? what that it? NAMs for going this, sudden businesses, is seems for you, lab you both very figure I'm

kind of slammed of quarters Well, this it to brakes to if clearly in they providers more took And big maybe at on then by a, still they it, Initially, I the one because, had so backlog, backlog December March, in players, the NAMs. September to look September, service the right? quarter, way, delivered to decline. had two orders think percolate they because some semi in them of there's the saw it

reaction the back because, knee think And to what and be, the I jerk lab And as spending. to pulled a companies. often NAMs slammed semi there happens, lagging brakes to does on expected would somewhat get equipment we the effect on is

is cases I of I that XX%, expected I XX%. in would XX% saw mean, the think size to I was maybe I kind some surprised pullback. slowdown. we of

quite company’s broad It's NIMs. been NIMs, It's storage It's some semiconductor networking communication. not pretty significant. broad processing So, somewhat It's wireless base, the anyone. it's it's range, broad-based

well. the building. the that high-performance business to that it area and spot doing they're only really of that a due business The continue of of backlog sanctioning extent think, And I a the significant to And think Huawei. I bright probably, is to be some was of lot is a optical piece gear, still

all are broad-based well and so may demand. data the European European some names and a be storage, I see communication, networking see and U.S. processor, driving But picking pullback, see companies, carriers share, of as telecom, I -- I and up comm, manufacturers. U.S. gear as meaningful that some that wireless these on

that my test, assume area and follow-up. clarification ever an a I is really that's issue. where an Just not inventory lab in

correction, we're there? seeing So, inventory we're it's demand not, seeing of an sort not a

there by much no inventory. very driven No, is programs. It's

was reaction the on way I knee it, So, hit at a I look to think brakes the jerk it span.

instruments, well, on little kind quarter, field say hard, March that stabilization so quarter of like seeing we very of was the seeing kind are on maybe would in things gradually start out appear quarter. lab instruments to the in a We to December bottoming lab say be I was quarter. bit recover and instruments. uptake saw, the starting this think we quarter of dropped let's March And the in we the

surprising, matter I into just are the of shock it's we kind how supply to It's coming. because of in very off there things of general hard a starting a an kind was overreaction, was hey, chain. said because percolates think March October, a And it So, now come was which think everybody quickly told and I quarter.

line of ahead. the from comes Tim Savageaux. question Please next Your go

afternoon. good differentiation. a Hi, That was magnet

Speaking an if point. of expectations of is can what spots, year? out you field of at the back the when recently cable the I toward witness a you for update your quarter The the give bright wonder, us noted cable bright in March year. that the end what of and market the are on you've seen last balance spot

quarter, in their I this and of CapEx some March order, in already they decisions. players shipped And revenue kind we and so finalize kind mean, see So, we saw being to finalized fiscal this the quarter. March quarter cable orders have early QX. And communicating releasing of the orders expect started

September little They they going a quarter and to Generally, in they're whatever spend. the much cable pretty blow June maybe will spend December. through bit it in players,

So, mean, risk of counter trying fiber are with there and the of they lot gap consumer some a still also XG close for I access. the to is clearly,

and a North it's been positive that's American story. mostly So

the see I'd normally growth guess between as seasonality side. decline field the the on about But to on Okay. down, some I saw the weakness have And Thanks, some March million for quarter in over you to any side. to expected said, what $XX or, seen break than to that. extent sequential greater looks lab way Switching results. be you might imagine that sequential a you field you'd

drivers real look we of there, the couple parts moving So, them what lab? between those at were

on this say the stabilization. of we painful, at And field because I quarter higher level Predominantly, the is which June a gross was production, from than beginning the much is average. recovery. drop side revenue is would saw margins was the very

the mix. it the pressure puts also So, on

and say would of share production. in going the this start used drop, recovering. it's dropped be maybe less than a predominantly, to we've So quarter, stabilized, And largely even was quarter-on-quarter I lion's

So, to up, further for I'd say, to be and going instruments. beginning in this slightly up quarter, it's of production flat the recovery

Meta ahead. Your [Operator Instructions] Marshall. question next Please comes go from

help there's business any we we any versus of to we buckets of lab have one just instrumentation, seeing there? between get contextualize recovering if If of if when guidance other. mix kind just are directional rough like Maybe any Thanks. kind Great. a could element production the of us could business and there's the rough that the field

turn We've dependency I'll and on been or last to field very it so working years or start hard six the reduce I'll instruments. provider over our a Henk. service over to

One growth love and bright in of was very really our significant stars production.

it a meaningful the Henk general where So, point turn That's was the sharp share impact. it's our the got I'll pullback guidance. great to quarter actually during some to And of March to provide revenue.

was to typically labs, components. lab is XX% fields more closer the NE quarter the within what It XX%. production call mix wireless In to lab slightly includes products, XX% Yeah, we XX%, for than March different. XX% was and and

the that decline significance we as the speaks business discussed. So of saw that to lab we of in that sort

the guys is, of just, a it noted or model not just, should headwinds phone filters? QX much just is And inventory of some died, know kind there or they're content the sensing what just model Perfect. holding and as and Okay. a you mindful it's designs, of then any that don't fiscal on we be new change XD you I

new are to be the size some Well, is performance models being the filter. will advanced, in say going going higher to they're more even even as there as in redesigned, well older of launched same use the newer new obviously modules but by the models, old though and the model the

manufacturers contract to is inventory, also, trying new but the they which that are model down that in transitioning the work big, OEMs existing all the to So, not year.

course, of switchover. they phone to do wants have and And course, a as, everybody are So whatever consume on the hand down of sales then year-on-year.

have has is and So, on consumption should the a hand volume. whatever demand inventory muting of some of somebody more what's anybody

call this I at will There Investor are questions turn no of over Relations. time. Sagar further Head to the back Hebbar,

earnings our John Thank Louis. everyone. you, you, This Thank today. concludes calls for

This conference. concludes today's

You now disconnect. may