Viavi Solutions(US:VIAV)2022-02-04 02:07Financial Data and Key Metrics Changes - Viavi Solutions reported Q2 revenue of $314.8 million, a 5% increase year-over-year, exceeding guidance of $296 million to $310 million [7] - The operating profit margin reached a record 23.3%, expanding 100 basis points year-over-year and exceeding the guidance range of 20% to 21% [8] - EPS was $0.24, a quarterly record high, up 4.3% year-over-year, surpassing the guidance range of $0.18 to $0.20 [8] Business Segment Data and Key Metrics Changes - The NSE segment achieved record revenue of $244.2 million, up 18.1% year-over-year, exceeding guidance of $230 million to $240 million [9] - Within NSE, NE revenue increased 18.5% to $214.4 million, driven by fiber and wireless products, while SE revenue was $29.8 million, up 15.5% year-over-year [10] - OSP segment revenue was $70.6 million, down 24.2% year-over-year, but slightly above the high end of guidance [13] Market Data and Key Metrics Changes - The demand for fiber and wireless products in the NE segment showed double-digit growth, with fiber field products achieving a new revenue record [25] - The company noted a strong demand for 5G field instruments and expects continued momentum throughout 2022 [26][44] - The OSP business segment's anti-counterfeiting products revenue decreased due to moderated demand from central banks [31] Company Strategy and Development Direction - The company plans to continue improving its capital structure and financial flexibility to execute growth objectives, including a share repurchase program of up to $190 million [19] - Viavi expects to maintain a strong performance in the SE segment, targeting growth at double the rate of the NSE business [60] - The company anticipates a shift towards fiber and wireless technology in the long term, with strong demand for 400-gig optical transport [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving record revenue and non-GAAP profitability for the first half of fiscal 2022 [24] - The company expects a favorable supply chain situation by mid-calendar 2022, which could enhance revenue potential [29] - Management acknowledged challenges in labor and supply chain as potential constraints but sees opportunities in automation and software solutions [85] Other Important Information - The company reported total cash and short-term investments of $738.5 million, up $89.7 million year-over-year [15] - Operating cash flow for the quarter was $22.2 million, a decrease due to non-recurring tax payments and increased inventory levels [16] - The company redeemed approximately 40% of its convertible notes, reducing the outstanding balance significantly [17] Q&A Session Summary Question: Insights on OSP business and 5G adoption - Management indicated that the anti-counterfeiting business is expected to stabilize at a higher run rate than pre-pandemic levels, with a new normal in the high 50s [39] - Regarding 5G, there is increasing demand for both wireless and fiber products, with expectations for continued growth [44] Question: Impact of supply chain disruptions - Management noted that without supply chain challenges, gross margins could improve by 1-2 percentage points, and revenue could increase by $5 million to $10 million [49] Question: Future revenue targets and growth rates - Management anticipates that NSE growth could move into the higher single digits, with a focus on fiber and wireless segments [68] Question: 5G field instruments and market share - Management sees a potential market of $300 million for 5G field instruments, targeting a market share of 25% to 33% [74] Question: Maintaining share gains amid supply chain normalization - Management believes that once share is gained, it becomes a new normal due to training and integration of their equipment into customer operations [83]