Viavi Solutions(US:VIAV)2024-02-02 00:17Financial Data and Key Metrics Changes - Net revenue for Q2 2024 was $254.5 million, exceeding the guidance range of $240 million to $260 million, but down 10.5% year-over-year [4] - Operating margin was 13.2%, above the guidance range of 9.6% to 12.8%, but down 300 basis points year-over-year [4] - EPS was $0.11, exceeding the guidance range of $0.06 to $0.10, up $0.02 sequentially, but down $0.03 year-over-year [4] Business Segment Data and Key Metrics Changes - NSC revenue was $179.6 million, down 13.3% year-over-year, primarily due to lower CapEx from NEMs and service providers [5] - NE revenue was $155.5 million, reflecting a 15.2% year-over-year decline [5] - SE revenue grew 1.3% year-over-year to $24.1 million [5] - OSP revenue was $74.9 million, down 3.2% year-over-year, but at the high end of guidance [6] Market Data and Key Metrics Changes - The service provider market is expected to remain weak throughout 2024, with some recovery anticipated in cable spending in the latter half of the year [9][10] - Demand for 3D sensing products is expected to decline in the upcoming quarter, with estimates around $10 million [21][22] Company Strategy and Development Direction - The company is diversifying its focus beyond service providers into areas like 11 production and aerospace and defense, which are expected to drive growth [10] - Viavi was awarded a $21.7 million grant to create an advanced test lab for Open RAN technologies, reflecting its leadership in 5G and upcoming 6G [10] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the service provider market, noting that while conditions are improving, significant spending is not yet evident [12][13] - The company anticipates stronger demand in fiber production and aerospace and defense, which may offset weaknesses in service provider spending [9][10] Other Important Information - Total cash and short-term investments at the end of Q2 were $571.8 million, up from $489.7 million year-over-year [7] - The company plans to retire $96.4 million of convertible notes, impacting share buyback plans in the near term [7][42] Q&A Session Summary Question: Service provider market outlook - Management indicated that the service provider market is expected to remain weak throughout 2024, with some recovery anticipated in cable spending [11][12] Question: 800G fiber lab production - The 11 production business is recovering, driven by demand for 400 and 800 gig products, with significant contributions expected from AI data center modules [14][15] Question: EPS guidance explanation - EPS guidance is lower due to seasonality and increased costs associated with the beginning of the calendar year [15][16] Question: Lead times in service provider fiber test - Lead times for service provider fiber test orders are generally around two months [18] Question: 3D sensing revenue expectations - 3D sensing revenue is expected to be around $16 million in the upcoming quarter [25] Question: Cable spending triggers - Cable spending is anticipated to increase due to delays in technology readiness, with expectations for orders to ramp up in the second half of the year [32][33] Question: Wireless market recovery signs - Wireless infrastructure spending remains muted, with ongoing R&D CapEx for 5G and emerging 6G technologies [35][36] Question: Inventory levels - The company has no inventory in the channel, indicating a need for replacement in the telecom sector [30][39]