Viavi Solutions(US:VIAV)2023-11-03 00:19Financial Data and Key Metrics Changes - Fiscal Q1 revenue was $247.9 million, slightly below the midpoint of guidance range of $240 million to $260 million, down 6% sequentially and down 20.1% year-over-year [6] - Operating profit margin was 12.4%, slightly below guidance range of 12.7% to 14.2%, up 70 basis points from the prior quarter, and down 930 basis points from the prior year [6] - EPS was $0.09, meeting the low end of guidance range of $0.09 to $0.11, down $0.01 sequentially and down $0.14 year-over-year [6] - Cash flow from operations was $50.3 million, an increase from $26.6 million a year ago [6][10] Business Segment Data and Key Metrics Changes - NSE revenue was $170.4 million, above the low end of guidance range of $167 million to $183 million, down 22.2% year-over-year [7] - NE revenue was $150 million, declining 23.7% year-over-year [7] - SE revenue was $20.4 million, down 8.9% from last year [7] - NSE gross profit margin was 63.6%, increasing 150 basis points sequentially, but decreasing 110 basis points year-over-year [7] - OSP revenue was $77.5 million, slightly above the high end of guidance range of $73 million to $77 million, down 15.1% year-over-year [9] Market Data and Key Metrics Changes - The service provider market experienced weaker spending, impacting NSE revenue [14] - Demand for anti-counterfeiting and 3D sensing products drove OSP revenue, which exceeded expectations [16] - North America faced challenges, while Europe and Asia showed better performance in telecom spending [56] Company Strategy and Development Direction - The long-term growth strategy focuses on 5G and 6G wireless, new service enablement products, and emerging resilient P&T technology [20] - The company aims to manage inventory levels and optimize operations in response to current market conditions [24] Management's Comments on Operating Environment and Future Outlook - The end-market spend environment remains challenging, particularly for service providers in North America [14] - A mixed performance was noted in NSC, with some product areas showing robust demand while others lagged [15] - Expectations for the December quarter include seasonal declines in anti-counterfeiting demand and softer 3D sensing demand [17] - Anticipated recovery in wireless lab products and fiber lab demand is expected in early calendar 2024 [19] Other Important Information - The company repurchased 1 million shares for $10 million during fiscal Q1, with $224.8 million remaining in the stock repurchase program [11] - Guidance for fiscal Q2 2024 includes revenue expectations of $240 million to $260 million and EPS of $0.06 to $0.10 [12] Q&A Session Summary Question: Plans for additional cost reductions in OpEx - Management has already implemented significant cost reductions, totaling about $30 million, and does not plan further reductions at this time [23][25] Question: Service provider order linearity and outlook - Order conversion is taking longer due to lower demand, but no cancellations have been reported, indicating a stabilization in the market [27][28] Question: Recovery in lab business - The lab business is seeing demand from wireless NEMs and high-speed optical transport, with expectations for recovery in storage and wireless sectors [31][33] Question: Outlook for the second half of the year - Management is cautiously optimistic about the second half, expecting some recovery in telecom spending and network upgrades [36][38] Question: Regional trends in telecom spending - North America is struggling, while Europe and Asia are performing better, with Latin America showing resilience [56]