• Net Revenue: $238.2 million, down 5.5% sequentially and 3.9% year over year.
• Operating Margin: 10%, decreased 90 basis points sequentially and 240 basis points year over year.
• EPS: 6 cents, down 2 cents sequentially and 3 cents year over year.
• NSE Revenue: $159.4 million, down 6.5% year over year.
• OSP Revenue: $78.8 million, up 1.7% year over year.
• Cash and Short-term Investments: $497.9 million at the end of Q1.
• Cash Flow from Operating Activities: $13.5 million, compared to $50.3 million in the same period last year.
• CapEx: $7.3 million, compared to $6.7 million in the same period last year.

• Warning! GuruFocus has detected 4 Warning Signs with VIAV.

Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Viavi Solutions Inc (NASDAQ:VIAV) reported stronger-than-expected demand in the OSP segment, driven by anti-counterfeiting and 3D sensing products.
• The company is seeing signs of stabilization and recovery in the NSE segment, with expectations for stronger performance in the second half of fiscal 2025.
• Viavi Solutions Inc (NASDAQ:VIAV) launched the Valor Lab in Chandler, Arizona, enhancing its capabilities in testing for the OpenRAN ecosystem.
• The company introduced the industry's first 1.6 terabits per second high-speed Ethernet testing for AI workloads, positioning itself as a leader in the data center and high-performance computing markets.
• Viavi Solutions Inc (NASDAQ:VIAV) has maintained a strong cash position with total cash and short-term investments of $497.9 million at the end of Q1.

Negative Points

• Net revenue for the quarter was $238.2 million, slightly below the midpoint of the guidance range and down 3.9% year-over-year.
• Operating margin for the first fiscal quarter was at the low end of the guidance range, decreasing 90 basis points from the prior quarter.
• NSE revenue was at the low end of the guidance range, driven by slower order pace from service providers for field instruments.
• The SE segment experienced a 12.7% decline in revenue year-over-year, primarily due to conservative spending by enterprise customers.
• Cash flow from operating activities decreased significantly to $13.5 million from $50.3 million in the same period last year.

Q & A Highlights

Q: Can you discuss the linearity of bookings throughout the quarter and any notable trends? A: Oleg Khaykin, President and CEO, explained that bookings were largely as expected, with some major service providers preferring to start taking products in the second fiscal quarter. There was a noticeable increase in engagement and orders for Q2, Q3, and even Q4, indicating a pivot in operator behavior. This was driven by significant events such as AT&T's aggressive fiber deployment plans and Verizon's re-entry into the fiber market, which spurred cable providers to accelerate their network upgrades.

Q: Regarding the wireless side, is the recovery project-based or broader, and how should we think about seasonality in the second half of the fiscal year? A: Oleg Khaykin noted that the wireless recovery is broader than initially expected, with operators accelerating 5G densification and deployment. This could lead to a stronger-than-usual March quarter for NSE. Ilan Daskal, CFO, added that they continue to monitor macroeconomic factors, which could influence the momentum.

Q: Can you provide more detail on the European market and the 1.6T opportunity with data centers and AI builds? A: Oleg Khaykin stated that Europe is following North America's lead, with fiber deployments remaining strong. The 1.6T opportunity is driven by AI and data centers, with a faster transition period than previous telecom-driven deployments. The 800G is entering high-volume production, and 1.6T is expected to accelerate next year.

Q: How is the cable market performing, and are you seeing a pickup in orders? A: Oleg Khaykin mentioned that cable upgrades are progressing, with some delays due to architectural and system-level issues. However, more orders are expected in the coming quarters. Cable is increasingly becoming part of the fiber customer base, with investments in high-performance networking and optical monitoring systems.

Q: What is the outlook for the OSP business, and are there any changes in volume or reprint expectations? A: Oleg Khaykin explained that the OSP business is stable, with 3D sensing following the dynamics of their lead customer. Anti-counterfeiting demand may be conservative in the near term due to currency redesigns and sanctions, but new designs and products are expected to drive a rebound in the second half of the calendar year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.