Viavi Solutions(US:VIAV)2020-02-05 02:07Financial Data and Key Metrics Changes - Viavi Solutions reported record revenue of $313.7 million for Q2 fiscal 2020, growing 2.2% year-over-year and exceeding guidance of $292 million to $312 million [7] - Operating margins reached 21.6%, expanding 80 basis points year-over-year, and also exceeded the guidance range of 18% to 20% [7] - Record EPS of $0.23, reflecting a 4.5% growth from the previous year, also surpassed the guidance range of $0.18 to $0.20 [7] Business Segment Data and Key Metrics Changes - NSE revenue was $234.2 million, growing 4.7% year-over-year and exceeding guidance of $216 million to $232 million [8] - NE revenue within NSE was $203 million, up 3.8% year-over-year, driven by strong performance in Fiber, Wireless, and Cable products [9] - SE revenue was $31.2 million, growing 10.6% year-over-year, driven by demand in Data Center products [9] - OSP revenue was $79.5 million, reaching the high end of guidance but declining 4.4% year-over-year due to expected declines in core OSP business [12] Market Data and Key Metrics Changes - NSE gross margin increased to 66.4%, up 110 basis points year-over-year, while SE gross margins decreased to 66.7%, down 530 basis points from the previous year [10] - OSP gross margins expanded to 54.8%, up 460 basis points due to efficiencies [12] - Operating cash flow for the quarter was $38 million, with total cash and short-term investments at $556.9 million [13] Company Strategy and Development Direction - The company focuses on three major growth drivers: 5G, Fiber, and 3D sensing, expecting robust demand for 5G lab test instruments throughout 2020 [17] - Viavi is enhancing operational effectiveness through a new ERP system, which went live in December [22] - The company anticipates continued growth in 3D sensing driven by technology adoption and customer diversification [20] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand for 5G field test instruments ramping up in late 2020 or early 2021 [17] - The company expects cable spending to moderate for the remainder of fiscal 2020 after a strong start [18] - Management acknowledged potential impacts from the coronavirus situation in China but indicated that current forecasts account for these factors [32][35] Other Important Information - The company repurchased approximately $9.2 million of its stock during the quarter [13] - Guidance for Q3 fiscal 2020 includes expected revenue of approximately $278 million, operating margins of 15.5%, and EPS in the range of $0.13 to $0.15 [14] Q&A Session Summary Question: Geographic trends and performance - Management noted strong performance in North America and Europe, while Asia experienced a decline due to timing of major orders [26][29] Question: Impact of coronavirus on guidance - Management confirmed that current guidance includes potential impacts from the coronavirus, with limited exposure to service provider instrumentation in China [31][34] Question: OSP business trajectory - Management indicated that the core OSP business is expected to average about $50 million per quarter for fiscal 2020, with some redesigns anticipated in the second half [39][41] Question: SE business performance - SE revenue growth was attributed to improved demand in Data Center and Growth Assurance products, with expectations for stabilization in fiscal 2020 [43][45] Question: 400G upgrade market outlook - Management expects robust demand for 400G production equipment to continue throughout the year [50] Question: 5G deployment confidence - Management remains conservative about the speed of 5G deployment, emphasizing the complexity and scale of the rollout [78] Question: 3D sensing settlements - Management discussed settlements related to optical filter patents and the potential for increased test measurement sales [82]