Q4 2020 Viavi Solutions Inc Earnings Call
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I would now can the conference over to your Speaker today, Bill Ong head of Investor Relations. Thank you. Please go ahead.
Thank you Mike welcome to Viavi solutions fourth quarter fiscal yearend 2020 earnings call. My name is belong head of Investor Relations joining me on todays call. It <unk>, President and CEO and AMOLED Terrell CFO.
Please note. This call will include forward looking statements about the company financial performance. These statements are subject to risks and uncertainties I could cause actual results to differ materially from Oakland expectations estimation. We encourage you to view on most recent annual report and that's if he falling particularly the risk factors described those filings.
Forward looking statements, including guidance, we provide during this call abella only as of today.
Yeah, we undertake no obligation to update these statements.
Please also note that unless we state otherwise all results except revenue on non-GAAP.
Consolidated non-GAAP results, what Glenn that would get financials and discuss the usefulness and limitations in todays earnings release, the least plus a supplemental earnings like which include the stock financial tables are available on the obvious website.
Finally, we of course, they call I will make the recording available by 430 PM Pacific time. This evening on the website I would now like to kind of called <unk>.
Thank you Bill fiscal Q4 shows seasonal growth in revenue and operating profit. Despite the impact of business recorded 19 revenue grew 4.1% sequentially operating profits increased 37.6% driven by sequential growth you're not NFC business.
Well fiscal Q4 revenue at two six to 6.6 million declined 8% year on year operating profit at 52.3 million grew 2.8% and operating margin at 19.6% expanded 200 basis points.
It appears that 18 cents was up by a penny or 5.9% from a year ago.
Now moving toward reported Q4 results by business segment, starting with NFC.
And I see revenue at <unk> point 4 million grew sequentially, 11.4% what declined 5.9% year on year.
We didnt NSC any revenue at 108.9 million declined 8.3% from a year ago due to pandemic related declines in a freely instruments products and this was partially offset by Fiveg related growth you know for wireless like products.
Oh It was sequentially any revenue grew 10.4 person primarily driven by growth in both wireless lab as well as our field instrument products, but demand stabilizing at service providers.
I see revenue increased 19% sequentially to 27.5 million and grew 14.1% year on year led by strong performance in our enterprise and data center products combined with growth in other shows products.
And then see gross margin at 64.6% decreased 10 basis points year on year, we didn't see any gross margin at 63.7% decrease hundred 60 basis points year on year, primarily due to lower revenue volumes in a field instruments.
I see gross margin at 70.5% increased 200 basis points from a year ago, largely due to higher revenue volume and favorable mix from a data center products.
And he and his team operating margin at 16.9% expanded 350 basis points year on year due to a 14% production in our operating expenses driven by disciplined expense management.
Bring efficiency programs and lower variable expenses in commissions travel and fringe benefits.
Now turning to a speed.
In fiscal Q4, wispy revenue at 58.2 million decreased 15.9% sequentially and 14.8% year on year as a result of the expected lower anti counterfeiting revenue as some demand shifted into a fiscal Q3.
This was partially offset by growth in three D sensing revenue.
Gross margin at 51% increased 150 basis points, you aren't you go to improve efficiencies.
Operating margin at 29.4% decline hundred 60 basis points year on year, primarily due to lower revenue warning on relatively fixed voice be operating expenses.
[noise] now moving to a fiscal year Twentytwenty performance.
Despite the back of the current 19 pandemic on our fiscal second half performance.
This revenue at 1.14 billion increase modestly by 0.5% from a year ago, driven by a slight growth in Tennessee revenue, partially offset by small decrease in a way speed.
The obvious operating margin at 18.6% expanded 110 basis points year on year, primarily driven by gross margin expansion as a result of efficiency efficiency initiatives in our manufacturing combined with disciplined Opex management.
Operating profit at 210.9 million grew 6.7%, increasing 13.3 million year on year.
It appears at 73 cents grew 7.4% or five cents year on year and reach the high end or September 2019, and let's dig guidance range of 67 cents to 73 cents.
Please note that our September 2019 enlisted guidance for fiscal Twentytwenty had not contemplated the impact to our business from dependent.
Now turning to the balance sheet, our total cash and short term investments ending balance was 544 million.
Operating cash flow for the quarter was 27.2 million, which include 19.4 million of onetime what's holding cash tax payment due to Patrick cash to the U.S. from our foreign entity.
In fiscal Q4, we repurchased approximately 0.6 million up Viavi stock at an average cost pieces of $10 in 60 cents per share including commissions.
After 200 million authorized share buyback announced during the September 2019, enlist even we have repurchased to date 44.4 million of Viavi stock at an average cost basis of $11.99.
We continue to be opportunistic share repurchase.
Now onto our guidance.
We expect fiscal first quarter 2021 revenue for Viavi to be approximately 270 million plus or minus 12 million operating margin between 16%, 16.3% to 18.3% and it appears to be the range of 14 cents to 16 cents.
We expect NSC revenue to be approximately an 80 million plus or minus 10 million, but operating margin at 6.5% plus or minus 1%.
We expect wispy revenue to be approximately 90 million plus or minus 2 million, but operating margin at 39% plus or minus 1%.
Our tax expense rate is expected to be approximately 19% to 20%. We expect if we expect other income and expenses to reflect a net expense of approximately 3.5 million.
We estimate our share count to be approximately 232 million shares with that I'll turn the call or too early.
Thank you Omar.
Fiscal Q4 results grew sequentially helped by the stability nation of demand in NFC that was partially offset by the expected decline in or speak.
The business improvement within any was driven by record the wireless revenue growing by double digit percentage, both sequentially and year on year benefiting from continued strong demand for Fiveg wireless lab equipment.
We'll instruments segment, although down from a year ago, so seasonal strains and some signs of stability nation as service providers resumed their field operations.
I see your revenue improvement both sequentially and year on year, driven by strength in both assurance and enterprise and data center products helped by deals that are were pushed out from Q3 and closed in Q4.
You know speed and the anti counterfeiting revenue was down sequentially inline with our expectations three D. Sensing revenue improved sequentially driven by seasonal increase in customer demand and initial orders for the next generation of products.
Looking back at fiscal year 2020. It is a tale of two house, where the first half was characterized by a record six month revenue and non-GAAP operating profits driven by our three major growth product areas.
The second half however was heavily impacted by corporate 19 pandemic despite that through solid execution, we managed to grow and no revenue and profitability in fiscal 2020 from a year ago levels.
Condemning disruption up with holding.
Notwithstanding our combined wireless and fiber portfolio in NSC grew in fiscal 2020 led by our Fiveg wireless lab equipment.
Which finished strong with record revenues in Q4, and you can always be three D. Sensing grew by more than 20% year on year.
In fiscal Q1, we expect or speed to achieve a record revenue level driven by increased three D. Sensing revenue and increased demands for anti counterfeiting products helped by banks not redesign and an increase in reprint volumes as currency printing operations resume.
In NFC, we expect Q1 revenue to be seasonally down from the June quarter.
Looking ahead, we expect Tennessee to recover in calendar 2021, four or speed, we expect anti counterfeiting to strengthen throughout the year German by a multitude of fiscal stimulus across the world along with strong growth in three D. Sensing overall, our long term secular growth drivers in Fiveg wireless fiber.
And three D sensing remain intact, and we expect to continue to achieve higher levels of revenue and profitability.
In conclusion, I would like to express my appreciation to our Viavi team.
For their continued extraordinary performance during this challenging times I also wish all our employees supply chain partners customers in our shareholder say safe and healthy.
I'll now turn the call over to Bill.
Thank you all like Mike, Let's begin the question answer session. We ask everyone to limit discussion to one question the one follow up.
At this time I would like to remind everyone to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key please standby will be compiled the Q many roster.
Your first question comes from John Marchetti from Stifel.
Thanks, very much like I was wondering if you could take a minute and just discuss sort of what you're seeing a in the different markets globally. All of the it looks like all of the growth this quarter Oh I'd be sequentially came from the North American market I'm. Just curious you know what is your looking out over the next quarter and into next calendar year either.
How do you expect some of these different geographies too.
Start to contribute 40 here.
Sure. So I would say I mean, maybe for a good job by geography, I'll I'll talk first about the different businesses. So I would say anything to do with 11 production continued to be pretty strong and healthy as the most manufacturing operations and enjoy.
Nearing the labs can continue to operate through out the pandemic and by the way also includes the our internal labs all our engineers are back at work I mean, obviously, we implemented.
Various safety protocols, but well if I look at our own internal Oh, less engineering labs, and our manufacturing facilities. They continue to operate a with no interruption and we're seeing it same thing a pretty much with all our major customer. So those two segments, where a quite good and we expect them to continue.
You to do fine I'm in the only thing I would say is the conversion cycle from a design win to appeal always a little longer because you have to ship the equipment.
To the customer you cannot to enter their facilities, because they're quarantined, but you have to do everything are mostly so it takes a bit more time, but that flow of business continues to to be pretty strong.
The area, where we saw weakness towards the end of Q3 and through most of the Q4 is the field operations and it's largely because of the disruption to a lot of the operators, but throughout the summer weve see been seeing stabilization us more and more of them.
Send their to conditions back in the field and they kind of got their act together and kind of found the new normal and gradually they're all the reassessing what they need to do and I actually do think given the placer off challenges a lot of operators are facing with different work from home environment.
It will be a very positive for our field instrumentation business in quarters two comp.
In case of or speed one of the things. We so in Q3 in Q4, a lot of the a governmental prince printer operations have been shut down. So the currencies were not printed so a lot of the inventories are finished lots have been depleted and a lot of the inventories or whatever you know raw materials in the channel where do you played itself.
I such a starting this quarter and I think for the next several quarters I expect demand for anti counterfeiting products to be running above our average, which combined with a fairly strong three D sensing demand that we see.
Coming in the coming quarters would be a very I will lead to kind of a record performance for our OSP business unit. So in that respect I think I will just be business unit is almost counter cyclical to a that some of the challenges we faced in NFC business unit. So that's a welcome outlook there.
In terms of geography, I would say Asia Pacific kind of so the initial brunt of the Corona virus. So that was the can leave Canary in the mine shaft. We saw the initial decline and also a shut down or facility. There I'm, mostly end of January through February since then.
Pretty much most of the Asia Pacific operations have recovered. Although there is still obviously a continued some challenges to covert related but in terms of manufacturing and lab in engineering and production demand in that region. It's all continues to be pretty pretty well.
Europe surprisingly kept its resiliency even in the during the worst of the crisis and I mean, the only obviously challenge is.
Converting did you know a design wins to peos takes a bit longer given the.
Remote work environment, but Europe was pretty good North America had some stumbles.
In March April may, but things starting to.
To stabilize and recover throughout the summer one region. That's really been impacted heavily is Latin America, Latin and South America and that is driven obviously Corbett is a big influence there but also.
A significant devaluation of currency presented challenges for a number of customers no Luckily for us. It's a very small part of our business, but nevertheless, if I would say geographically I'd say central and South America have really been the regions. There been most impacted by combination of quoted and it could.
Our mix challenges. So hopefully that gives you some color on a regional as well as the different business product lines.
Thanks, very much and Ammar, if I could just a follow up.
I Wonder if you could just discuss some of the fixed versus variable costs in the margins for particularly for NFC. This quarter, obviously, a very strong performance on that that operating margin line you know in the guidance there even if we take the higher in a fairly significant.
Quench will decline. So if you could just maybe talk for a little bit about you know that variable versus fixed cost and maybe what we need from a revenue perspective to sort of consistently achieved more than a 10% operating margin in that NFC business. Thanks, Yeah. So a good question. Thanks for asking the question here so.
You know as I mentioned, a lost a in the last earnings call.
We have the mix of variable to fixed isn't a sort of 40% reliable 60% fixed costs. So we have a very good mix of have been able to fixed cost. So sequentially. We did see the opex go down and I'll expand the sequential decline here I did expand the year on year.
In my prepared remarks, so sequentially, we went down about six and half million dollars from a fiscal Q4, two fiscal Q3 fiscal Q3, two fiscal Q4.
And those are those three things one is a disciplined opex management number two is ongoing operational efficiency programs and number three is reduction in variable expenses related to travel very less to know travel happened, but in April may and June and we did benefit from that we also.
Benefited from some beautiful and fringe benefits savings.
Okay, So see a healthcare costs coming down.
We are in some geographies we are self insured people are working from home, they're not visiting doctors hospitals as frequently frequently so healthcare costs came down a we also saw some small onetime benefits as we took advantage of some payroll and benefit in couple of.
Countries. So.
If I have to characterize the six and half million dollars saw sequential reduction I would see really one third of that production is ongoing efficiency suite as something that will stick and two thirds of that is lower variable expenses, we should come back as C. Travel restrictions of work from home are lifted.
Now all in all we expect operating expenses to be in the range of 43% to 44% of revenue I think that should what do you should be modeling.
For fiscal Q1, which is the current quarter. We are in we also have.
No one additional week. So it's a 14 week fiscal quarters. So we'll have one additional week off payroll expenses and so the our opex should be between 40% to 44%, but more towards the high end of that range at least for fiscal Q1, but I think long term you should model us flow in our port 40% to 44%.
Oh revenue thanks, very much thank you.
Your next question comes from Samik Chatterjee from JP Morgan.
Hey.
Thanks.
Question.
Yes.
<unk>.
Oscar.
Oh.
Just help me think.
From.
It could be.
No.
Technicians.
But when we look at kind of previous.
Any revenue.
3 million than you do that though.
Can you.
Do you see anything in the long but on that.
After that Leverages, even with these.
You mean.
<unk>.
Well I think the the field instrumentation businesses generally fairly kind of.
Stabilize it is some incentive there depending on the cycle in the technology pipeline could be a little bit higher little bit lower I think a lot of companies service providers and when they went into a lock down a lot of their programs are put on hold and it was really all about tree agile only.
The ordering and buying whatever was absolutely necessary and.
And a lot of the you know.
Fundamental like appeals that are flowing through the system got interrupted because of there's a lot approvals in the chain that need to happen and it's one thing it's very easy to get them down when you have a person one of our account managers in the building. They can hit everybody in one day in the PEO is done.
Once you have to go remotely and through email and catch all the right people. It takes just fundamentally took a lot longer and I think.
In quite a lot of the service providers surprisingly for companies that are.
Fundamentally provide networks they still work very much in the headquarter centric environment and we found a number of them when they have to work from home a lot of the processes broke down and system. We're just not as optimized to more promoted Leo work across multiple offices. So I.
I think that's really been this thing and I mean, I you know from what I see at least all the talk and all the a sense, we get ages, everybody see acute need for network improvement than in network investment.
Because of the sort of his degradation and challenges they're all facing so that is all positive and I think thats all going to manifest itself in a higher spend down the road, but I mean in fact, a lot of customers now our.
All analyzing the lessons learned in the last three months.
Based on their network performance or all the issues that they faced and it's actually putting a lot of.
What I would call less a low used to be lower priority projects.
On the front burner, and I think that's actually going to benefit us and I think when you see.
Significant uptake in demand for services from companies like Commscope or the fiber from.
Good morning, that's basically a leading indicator because within next several quarters a once a that's fiber is delayed and that improvements to network has had done the services need to be turned down and our demand usually trex them by several quarters legging.
Oh, maybe just moving to be.
Sounds like there is a positive.
Depending business.
So you're ramping on three D sensing for the next products.
So let me think about the magnitude.
Thank you for three D sensing in physical to anyone versus fiscal <unk>.
If I mean, not looking for a specific guidance, but more in terms of.
Oh, you're thinking about the.
<unk> unit look improvement as well.
Opportunity with.
Yes.
Yes.
<unk>.
Well I think the if I look at our oldest speed you know as I mentioned in our.
Last call.
For anti counterfeiting for example, we saw with all the stimulus programs around the world going in fact, it was just a matter of time or until there was a heightened demand for our reprint volumes right and.
It took about a quarter longer than we thought a one of the followed you find out is actually a lot of printer print works were shut down and all the currency that was distributed was distributed from inventory. So now you have a very low finished goods inventory a fairly low raw materials inventory in the channel and that's.
Actually I think going to add resolved in multi quarter heightened demand for our anti counterfeiting product. If you overlay on top of its some of the redesign nodes going in production, we should see some.
Pretty strong demand for anti counterfeiting over the next year or so so that's the anti counterfeiting study, which is great because it just drives a lot of loading on our factories and drives better absorption, it's all goodness to the bottom line.
On three D sensing.
Clearly the big a driver a now and I'd say the first half of this fiscal year is the world facing camera, that's being introduced and that's clearly I'm, giving us a good boost and more than offsetting the customary ASP erosion and.
Things like that but in terms of really how I think about growth, it's really going to be a function of underweight adoption.
I mean to date.
On a Android has been lagging in fact, it started out pretty good with the wild way in Chinese vendors, leading the pack.
But then the economic slowdown caused them to put a lot of higher end models on the back burner and or try to reduce cost and their handsets I think there will be watching how successfully.
Apple launches their world facing camera and how well it performs and I do think.
They all have designs already done they just don't really I think they suffer from a lack of imagination, what to do with it and they usually look to innovation leader a the Chinese case would be apple to see what applications and technologies. They introduce and then they tried to follow so clearly if Android.
Follows up with the world facing cameras and those things.
Get designed into the phones for later in the.
In the year that could mean a meaningful uptick.
For the three D sensing if Android does not happen I think the overall growth will be.
Flat to slightly up.
Okay.
Thank you.
Your next question comes from Alex Henderson from Needham.
Thank you very much.
First question I wanted to ask really is your view of the financial conditions a of your primary customers and what that might.
Impact the outlook as we go into the back half.
Yes.
Yeah.
Large number of unemployed.
The risk of skinny bundles the risk.
Cord cutting.
Have you had any conversations with your.
Key tier ones that might give us an indication of the direction of their spending a intention.
As an offset potentially too.
Obviously acute need to choose cited moments ago.
Well, it's a very good question obviously that's.
The thing I look at however, if I look at what we've seen so far.
If people are willing to go for go a lot of other things, but not their high speed data. So I cannot a pine on the TV bundles or entertainment bottom bundles, but what we've seen is just the opposite we've seen a number of customers upgrading their packages in terms of the speed.
The high data speed that they get from there to their home. So they could be enables to work from home. So I.
I guess, there's a.
Bifurcation, there is a work from home crowd, who either have subsidies from their work or they have to have a better performance of internet for them to do work from home. So that actually resulted in not say a higher demands and more complaints one of the things don't work consumers who are just you consume.
Entertainment don't complain a much one service goes out for a few minutes or an hour. However, if you cannot do your business and you cannot communicated with your workers enjoy Internet service goes down the number of complaints and you know a very.
Irritated customers has increased dramatically and that's obviously being heard and then of course, you and now theres, a heightened and visibility about the lack of access to high speed data for a lot of the rural and other communities in the country. So there is.
Again increased.
Interest in finding more broadband access the political level. So I'd say actually we look at our cable customers I look at our telecom customers if anything they actually seen increase in demand for their business I don't know a highly was manifest if people.
Lose those subsidies federal subsidies $600 a weakened so one but so far what we've seen it seems people are willing to go up forgo a lot of all the things before they give up their mobile phone or their high speed data access.
Second question Theres Directionally.
We obviously have a system that was designed around the download speeds and did not take into account.
The video conferencing and work from home type of environment that we're now faced with a here significant commentary about cable companies and other companies needing to become more symmetrical.
Not drive significant need for your product as they do high splits.
Hi, you're absolutely right. So as that is actually are they not over the problem in fact, what we're seeing.
Quick and Dirty they just basically give you more capacity, but there by turning on some noisy channels. The generally they are avoid using because of a lot interference and that obviously causes a lot of problems and networking periodically network needs to be shut down and reset and that this is awful lot of consumers, so but I mean.
While it was a lot of conversation we've been having is how do you increase.
The bandwidth altogether. So you can give more have better specs spectral efficiency, how far more symmetricom, a data flowing in and out and that obviously and needs to half has significant architectural ramifications and.
The capital investment so a number of our customers already thinking about it and actually that would drive even a greater demand for our products because no splitting you now have to see visibility of fiber much deeper into our network. So I'd say, it's actually really good news for both our fiber cable.
And ultimately even some of our fiveg.
Products on the edge.
To give an additional bandwidth for the last mile. It's totally new testing procedures and new testing to that's right.
Thanks, guys.
Sure.
Your next question comes from Mehdi Hosseini from Susquehanna.
Hey, guys that Nick on somebody thanks.
Calls.
Yes, first slawson talking about piece for second.
When thinking about the guidance for next quarter.
Should we think about how that plays into the push out from one of the major USA.
Smartphone Oems and versus maybe some outage.
So is this just to clarify here at Nic is this is a question on three D sensing specifically.
Yes, if we go through these.
Yes so.
As already mentioned earlier I think let me give full year kind of view and then.
Basically boil it down to Q1 in Q2.
No for full year, we believe that three D sensing as we look out as of today to TD syncing revenue to should be sort of flattish to slight growth.
And thats, mainly driven by.
Our flagship customer.
The flagship customer demand remains robust.
In fact now we are on not just one.
One socket in one SKU, but you're on multiple skew and there are more than one socket. So we are in front facing as well as we're facing so from that perspective, the volumes have gone up so from a form that from that.
No.
If you factor that in a wee from at least from a flagship customer perspective, we should see growth in all revenue in fiscal 2001 versus fiscal 20.
On the on aside the adoption on the Android side has actually been quite anaemic, and we think that the Android customers kicking the can down the road. So if Android customers adoption happens in the next couple of quarters that should basically result in a little upside to what I talked about flattish to slight increase so.
For.
Fiscal Q1, I think our what I would say is the revenue from Threed sensing should be you know up sequentially significantly and should be on a year on year basis, roughly flattish to slight decline.
Hey, Bill Thank you and just shifting a little bit.
I just wanted to touch on foreign Digi networking.
First off the thing and updated sense of the timeline here and then how we should think about the order of what types of customers are going to golf pointing cheaper.
On Sunday tone that would be great. Thanks.
So we didnt catch the first part is the first thing you asked.
Oh, just an updated timeline on fiveg.
On the rollout.
Gee, Okay. So I mean, the 400 GE to US right now is really.
I would say more of a field opportunity I mean, it's no longer in the lab I mean, the lap has moved down to 608 hundred. So 11 production four hundredg today is a very much already in production and increasingly we are seeing more and more demand for our field instruments.
They have four hundredg in them. So I would say in metro four Hundredg is happening now, but also I think it's probably one of the bigger opportunities. We see there isn't a datacenter our four hundredg is already kind of domain backbone of data center.
So I I would say 400 GE today is a mainstream.
And that by not you're saying, it's some of the carriers Telecom network and then.
We'll move to data center.
Yeah. It started out with the core of the networking or the telecom and then it kind of moved into the.
Data center as well and now it's moving into Metro. So early days. It's early days. So I'd say, it's probably the next three four years as it's going to get penetrated deeper and deeper into the Metro network, but and the datacenter I mean, what we're seeing in data center as the copper backplane being replaced with optical backplane and its opening.
From your markets for us there as well.
Great. Thanks, guys.
Sure. Thank you.
Your next question comes from Michael Genovese from MKM partners.
Yes, hi, thanks.
I guess.
So the and E guidance, which on.
It seems.
Fairly historically normal, but maybe on the high end of historically normal decline. So just in terms that outlook.
The book to Bill.
What are you seeing in the different segments of NFC and as it is the is there have been declining and against a tougher FC compared this quarter I just wanted to ask questions.
Yes so.
Thanks, Mike for the question slippage, you a little bit of color on and then see guidance for Q1 fiscal Q1 and done all the can jump in hearing it brought additional color here. So if you look at historically of fiscal quarter.
Q1.
In in a C to revenue typically goes down about mid to high single digit sequentially looking from fiscal Q4, two fiscal Q1, as we started a new fiscal year and also you know Europe typically goes on vacation. So those are two factors that typically a you know.
Fixed revenue down sequentially.
So having said that we are guiding to a little bit is cheaper than that typical sequential decline in Q1 as Alex mentioned in his earlier common in our sales funnel in NSC. It remains healthy we have seen demand stabilizing in NSC, but due to the you know travel restrictions and lot of virtual meetings, you know a remote meta.
Thanks, we are seeing that the conclusion of the funnel into orders is taking a little longer than than usual. So let's see if you are being a bit conservative here in terms of for guidance in Tennessee revenue outlook for Q1, and now if you do better than the outlook, obviously $180 million that we guided given the operating leverage we have in the NSC busy.
Yes, I think you should have a very good positive impact on our operating profit and EPS, but that's how we look at the NSC guidance. So yes. It does stabilize funnel remains hilli conversion is taking a little bit longer and hence is that's the reason why we are guiding a little bit cheaper than the typical sequential decline you see in fiscal Q.
One.
Well, so I'd just say this very good point then.
If you compare to the last couple of years, it's a bit over skewed compare the September quarter.
In a last year in two years ago were characterized by some new technology adoption. So far so cable rolling out DOCSIS three had won two years ago and some major customers upgrading their on DSL networks last year. So some of the knits seasonal dip that we would have seen in Q1.
Was.
Not as a parent in the last two years I mean this year, there's really nothing new happening in terms of new technology adoption. So it's very much a seasonal trend.
Which is further somewhat pressured by the.
The the covered.
Environment.
Great I don't say in the absence of pandemic, we probably should see about maybe up to $15 million to $20 million more this quarter.
Thanks for that thanks for that color and then just my other question is.
I understand it.
Threed sensing.
You know into the Io S. ecosystem is saying that.
That you're seeing.
Filters and not Diffusers and is there any update or ability is still is another question that you would start selling them to caesars in 2021 or is that still a possibility.
Well I mean, when we acquired RPC I mean, there where the.
Early on there where are the there kind of preferred source, but they decided to pass on them because there were a start up.
Needless to say, we do see a great opportunity Ferrara diffuser technology, it would be a perfect fit down in the next couple generations of whether it's going to be 20, I don't think is 21, but I think via we may have opportunities.
Into model say 20 to 23 type.
On a calendar year. It just it's just it's the final design final two for you to really be in let's say a 2022, we should have been designed in in 18 or 19, So I think I do believe.
In the in the especially as World also goes more and more towards some of flight our diffusion technology has a good opportunity for us to increase share in both the iOS and Android ecosystems.
Thanks, guys and congrats on the solid execution.
Thank you. Thank you.
Your next question comes from Tim Savageaux from Northland Capital.
Hi, good afternoon, maybe keep the focus on [noise].
NFC or really any in particular.
Like you mentioned that maybe you're having a.
I would impact.
From a pandemic or 15 to 20 million in the quarter. When is that something you think you can pick up through the remainder of the fiscal year.
Especially given the increased traffic demand from the leading indicators.
That you noted previously and in addition to that I Wonder if I could get an update on.
Where are your standing on the wireless field instrument side in terms of that.
Potentially beginning to ramp you mentioned some.
Continued strength from a lab side.
To what extent to we.
We see that translate into the field in fiscal 21.
Sure. So in terms of I think your first question kind of make up the difference is there going to be a catch up I.
I don't believe there is going to be a catch up because the reality is.
I think our quarterly demand will recover to the Prequaled EBITDA levels and the reason for that is has nothing to do it even if there is a pent up demand service providers can absorb new product set on the assortment rate. It's fundamentally you know they can only do so much with number of people they have and the training and deployment and things.
Like that so if they keep a quarter just basically the whole thing just shifts it does not really bunches op and comes in a sooner because I mean, they just can't I don't think they can process a higher volume than what they normally consume in any given quarter because it involves not only receiving it it will send it revolves distribution today.
Our field force training the field force qualifying them certifying and it's just fundamentally a fairly.
Fixed pipeline, how they do it in terms of the.
The second part wireless trend the wireless.
Instrumentation.
Thank you guys, all Noam and we've been saying all along the five you deployment will roll out to be slower than.
Most people initially expected and it's very much playing out.
As we predicted so we feel pretty good that next calendar year is the area, where fiveg networks are getting deployed what we do Meanwhile, it's actually worked extremely well for us. It gave us time to fully developed the pool a wireless field toolkit. So we no longer have a one trick pony, we actually ever.
Comprehensive from wireless deployment.
A work flow the at the tool kit and everything and we are now are aggressively working with service providers and leading nams.
To get them familiarized with our instruments with our automated workflow management and training and everything else kind of bringing a lot of the things that cable and telecom company has been doing wireline company has been doing forever in terms of really industrializing.
Service deployment, bringing it to wireless which has traditionally be more of a cottage type garage dived.
Industry and.
He'll that.
At least on all the commentary and reaction, we get from and Nams.
Deployment resources as well as the service providers.
We should be able to carve out meaningful share for ourselves. So if I just can add Tim what you're seeing now and I'm sure you'll hear and get the news that Fiveg is rolling out he said all pre commercial rollout.
And the the real commercial rollout, which is at scale totaled six point was mainly a calendar 2021 phenomenon thats with.
Most of a field instruments.
We'll be actually deployed and wants to deployment happens the more into the maintenance fees and again, we have an opportunity to again go sell into the maintenance groups to.
Yeah.
Hey, Paul.
Your next question comes from meta Marshall from Morgan Stanley.
Great. Thanks, a couple of questions maybe first on.
Europe, you noted kind of they've been more resilient just a question as to whether that's been more apparent on the wireless or wired side and then second.
You just mentioned in the answer to Tim's question about.
Building your wireless tool kit and having kind of time for that to be deployed I guess I was just wondering progress without face to face meetings and whether you think ultimately kind of having more that tool kit sale will take kind of a resumption of travel to.
Close those sales thanks.
Yes, so I'll take the first one on Europe and I'm sure all it will give more color here the resiliency in Europe is across both wireless as well as wired and when I talk about why it. It is mainly on the fiber side. So I think a wireless lab has been strong in Europe.
And and also on the fiber side. So I think Europe has been generally very strong for us actually in fiscal two in fiscal 21.
Fiscal 20 through the pandemic too.
On the wireless tool kit I will stop and so on the wireless tool kit.
This is a long process you've got to have do you have to get designed in and that's fair. Our teams are working on for the last couple of quarters.
As Alex mentioned Navio, a fully build a product we have launched the product we are adding more features and functionality to it as an old it's important to get to design and before the commercial rollout happened so you're talking to the service providers, we're talking to the network equipment manufacturers. We are talking to exercise will also participated in this rollout and so it's a video.
Abroad.
About kind of approach and yes travel restrictions do impact, but our teams have been working very effectively we're actually doing demos virtually et cetera. So I think that funnel will start building I heard offers but this is at this point in time I think we wouldn't be sort of in the mid stages. So so to speak and getting.
Designed.
So I would just say you know a lack of ability to travel and face to face meetings significantly benefits in combined and we see that in all of our core markets, where we are the incumbent we have a name recognition we have established contact networks and it's all the working very well for us.
In wireless it is a challenge right I mean, because anywhere and you get on the block, but we have some very exciting products and we started talking to a lot of these players well before the call. It hits, So I mean as Mark said.
I mean, there is no we don't want to.
Pull rollover anybody size and we are recognized it is John more challenging than we thought because clearly when you and you can block you want to.
Be their face to face because a lot of the training happens a hands on you got to be a working directly with the.
Technicians and their engineers, but I think.
We just have to be that much more creative with our online webinars and training and leveraging our.
Strains in wireless lab, where we are the incumbent to really help us get introduction into the field organizations and.
Developing a good inroads into field organizations.
So, let's say not to answer it would be a hell of lot easier. If we if you could trial, but we got to do best to where we've got.
Alright, thank you.
Your next question comes from Richardson Shen from Craig Hallum Capital.
Thanks, guys for taking my question I want to pull up on Oh look on your comments regarding the sales fall conversion wants to see if that's a specific.
To any particular medium cable fiber CSL wireless et cetera, and whether there's any differences across geographies as well.
Oh, no which were trying to set a final conversion sales from opener, yes sales funnel syndrome conversion. So I would say out out say probably for the service providers. That's the longest conversion, it's a bit better for the lab.
A lab and it's pretty good for production cost reduction you just basically ship orders they already know what they werent tried.
In lab the challenge there is you cannot.
Coming in demo equipment. So you have to arrange equipment to be shifted in somebody's got to receive it. They got a set it up and then you got to remotely or provide the demo and consultancy and then you've got to chase down and close the PEO. So I'd say it probably adds maybe I'd say three to four weeks at most.
I think the S service provider because the nature of the business as you it's not monolithic entity. It where you have one person you sell to in headquarters and they placed an order you've got to sell it twice you got to sell it to the central engineering kind of network operations and then you've got a salad every single region.
No operating units that buys the instruments and deploy them into their daily life. So you have to just is there just fundamentally more points to connect and the mere fact, the connection takes longer.
To get them all on line is probably where we have so I would say the worst case you may see eight weeks.
Delay, but I think in average I'd say, it's probably three to four weeks is what you're running for some with them now that said, that's really more for the new projects or things like that four areas, where you already sold it and customer just pools the equipment as they needed a that's not an issue because they're already.
Signed off and then just place recurring order. So that's where I said, it's good to be an incumbent 'cause everywhere, where you are an incumbent.
In the existing programs, that's usually where you benefited a lot in the last several months because you just basically have orders coming in.
They pull your equipment from me as they needed.
Okay. That's helpful discussion to like the follow up from a one of your prepared remarks, and I apologize I may have missed I had my little Internet outage Fred in your prepared remarks that I think on complaint.
Well maybe of Comcast is listening to this can you tell me get my one gig service off that I just saw a best yet call them and they just go online and make a lot a nasty comments and say to link used viavi tools, yeah, and tell them use a real real tools.
I certainly do that.
I think you talked about some stabilization.
With.
Field operations or something along those lines, maybe if you can.
Described that a little bit more in specific I think last quarter, you talked about some deferring dynamics between your field core and field edge instrument you can.
Provides more color.
Yes, so I mean field core it's always easier because you sell to one central entity right.
Whereas field edgy, you've got to sell to multiple entities right now Cedar acquires training and a lot of all that kind of handholding, so I and they usually those since those are the people who come in contact that's usually also the people who companies sent home to avoid during the locked down so that's where I'd say I would.
To delineate train and.
When I say stabilization, which it means.
Customers are picking up the programs, where they dropped them off dropped them like sometime in March or April their reestablishing connections. They kind of got their act together and now the.
They are now internally discussing what plans, they're going to do they have reprioritize sense, but I tell you priorities that every year every service provider that they had their top five in January is no longer the same top five it's all changed and the mere fact, you're having outage and from very record of.
Well service providers is a testament to it because a networks that were working just fine in January are no longer working just fine.
In June I tell you I get outage and I'm going to set heart of Silicon Valley I get an outage.
For anywhere between 15 minutes jar and a have between like nine am and Threepl, which is prime working hours right. So it just tells you would be challenges everybody spacing and as a result, the priorities that all of them are struggling with our completely different the when they were in January so a they change their plans.
There are top five are different than they were in January but now those top five as identified.
The architectural decisions being made and orders are started being placed so that's what I mean by stabilization I mean, the the kind of via the fire drill that everybody who is running all around is over because nobody was making a decision when nobody knew what they needed to do right now they know what they need to do they got themselves.
Recalibrated and that's where I see the you know the discussions are flowing and use cases being proposed and the peos being issued I'd like them to be flying at a faster pace, but it's a heck of a lot better environment than it was in April of this.
This year just to add.
Equaled me in June the travel was almost almost nil very very less travel and we still been able to deliver $208 million of revenue that itself because people have.
Used to this new normal of working virtually but the demand is still there. The demand is still that the demand is not integrating its not getting destroyed is just taking more time to can would it because of certain to most need to happen there et cetera, and you just got to do better planning I mean, even things like shipping something there is no longer as many flights there used to be.
Yes, especially if you're going international you got a lot of their routes said were direct are no longer direct so you have to a budget a few extra day, so it's especially gets dicier on the and over the quarter. Because you know just because you are able to ship it out of the factory doesn't mean, it's going to get in time to the customer. So I think we've learned quite a bit how to manage.
Is that our customers are learning the same way so that's what I'm, saying by stabilizing our people found a way to adopt.
Okay, Great perspective, guys. Thanks, that's helpful.
Thanks engine sure.
I am seeing no more questions at this time I'll turn it back to bill on for closing remarks.
Thank you Mike This concludes our earnings call for today. Thank you everyone.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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