Q1 2024 Viavi Solutions Inc Earnings Call
Speaker 1: Hello, everyone. My name is Alexis. Welcome to the Avi Solutions first quarter full year 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. I'll now turn the line over to Pam Evans with the Avi Solutions interim CFO .
Hello, everyone. My name is Alexis welcome to be Avi solutions first quarter full year 2024 earnings conference call.
These have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
Now I'll turn the line over to Pam, even with the Avi solutions interim CFO.
Please go ahead.
Speaker 2: Thank you, Alexis. Welcome to the obvious solutions. 1st quarter fiscal year 2024 earnings call. My name is Pam event. The obvious solutions interim CFO . Also, joining me on today's call is our president and CEO .
Thank you Alexis welcome to <unk> solutions first quarter fiscal year 2024 earnings call. My name is Pam event Yobbish solutions interim CFO also joining me on today's call is <unk> taken our president and CEO. Please note. This call will include four.
Speaker 2: Please note this call will include forward-looking statements about the company's financial performance. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations and estimations.
Are we looking statements about the Companys financial performance. Please.
Statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations and estimations we.
Speaker 2: We encourage you to review our most recent annual report and FCC filings, particularly the risk factors described in this file.
We encourage you to review our most recent annual report and SEC filings, particularly the risk factors described described in those filings the forward looking statements, including guidance. We provide during this call are valid only as of today <unk> undertakes no obligation to update these statements.
Speaker 2: The forward looking statements, including guidance we provide during this call are valid only as of today. The IVY undertakes no obligation to update these statements.
Speaker 2: Please also note that unless we state otherwise, all results except revenue are non-GAAP . We reconcile these non-GAAP results to our preliminary financials, GAAP financials, and discuss their usefulness and limitations in today's earnings release.
Also note that unless we state otherwise all results except revenue are non-GAAP.
Reconcile these non-GAAP results to our preliminary financial.
GAAP financials and discuss their usefulness and limitations in today's earnings release.
Speaker 2: The release, plus our supplemental earnings slides, which include historical financial tables, are available on the Avi Solutions website at www.investor.viabisolutions.com. Finally, we are recording today's call and we'll make the recording available by 4.30 p.m. Pacific time this evening on our website. Let's start with our quarterly financial results.
Plus our supplemental earnings slides, which include historical financial tables are available on the IV solutions website at Www Investor Dot CRV solutions Dot com.
Finally, we are recording today's call and will make the recording available by 430 P. M Pacific time this evening on our website.
Let's start with our quarterly financial results.
Fiscal Q1 revenue came in at $247 9 million.
Speaker 2: Fiscal Q1 revenue came in at 247.9 million dollars, slightly below the midpoint of our guidance range of 240 million dollars to 260 million dollars. Revenue was down sequentially 6%. And down 20.1% on a year over year basis.
Slightly below the midpoint of our guidance range of $240 million to $260 million revenue was down sequentially, 6% and down 21% on a year over year basis.
Speaker 2: Arbiding profit margins of 12.4% with slightly below our guidance range of 12.7% to 14.2% up by 70 basis points from the prior quarter and down 930 basis points from the prior year. EPS at 9 cents, and at the low end of our guidance range of 9 to 11 cents, down 1 cents sequentially and down 14 cents year over year.
Operating profit margin of 12, 4% was slightly below our guidance range of 12, 7% to 14 point.
2% up by 70 basis points from the prior quarter and down 930 basis points from the prior year.
At nine and at the low end of our guidance range of nine to 11.
Yes, one sequentially and down 14 cents year over year.
Speaker 2: The current fully diluted share count was 224.2 million shares during the quarter, down from 230.4 million shares in the prior year. Cash flow from operations for our first quarter was $50.3 million versus $26.6 million a year ago. Now moving to our quarterly results by business segment for T1.
The current fully diluted share count was $224 2 million shares during the quarter down from 234 million shares in the prior year cash.
Cash flow from operations for our first quarter was $53 million versus $26 $6 million a year ago.
Now moving to our quarterly results by business segment for Q1.
Speaker 2: Starting with NSC, NSC revenue came in at $170.4 million above the low end of our guidance range of $167 million to $183 million. And down 22.2% year-over-year, primarily as a result of weaker spend in the service provider mark.
Starting with NSE NSE revenue came in at $174 million.
The low end of our guidance range of $167 million to $183 million and down 22, 2% year over year, primarily as a result of weaker spend in the service provider market.
Speaker 2: NE revenue at $150 million declined 23.7% year over year. SE revenue at $20.4 million declined 8.9% from last year.
<unk> revenue at $150 million declined 23, 7% year over year SCE revenue at $24 million declined eight 9% from last year.
Speaker 2: NSE gross profit margin at 63.
NSE gross profit margin at 63.
Speaker 2: are 63.6%. Increased 150 basis points sequentially, and decreased by 110 basis points zero over year.
Our 63, 6% increased 150 basis points sequentially and decreased by 110 basis points year over year.
Speaker 2: Within NSC, any gross profit margin at 63.1% decreased 140 basis points from the prior year, primarily due to a combination of lower volume and product missed.
Within NSE any gross profit margin at 63, 1% decreased 140 basis points from the prior year, primarily due to a combination of lower volume and product mix.
Speaker 2: As Siegro's profit margin, at 67.2% increased 110 basis points from last year, driven by richer products.
<unk> gross profit margin at 67, 2% increased 110 basis points from last year, driven by richer product mix.
Speaker 2: NSE's operating profit margin at 0.9% came in below our guidance range of 3% to 5% as a result of lower volume and less favorable product mix.
<unk> operating profit margin at 0.9% came in below our guidance range of 3% to 5% as a result of lower volume and less favorable product mix.
Now turning to OSP.
Speaker 2: Driven by higher demand for the anti-tounter-fitting and 3-dcenting products, first quarter revenue came in at $77.5 million, slightly above the high end of our guidance range of $73 million to $77 million, and was down 15.1% zero over year.
Driven by higher demand for the anti counterfeiting and <unk> sensing products first quarter revenue came in at $77 $5 million slightly above the high end of our guidance range of $73 million to $77 million and was down 15, 1% year over year.
Speaker 2: Gross profit margin at 52.5% to climb 420 basis points zero over year. Operating margin at 37.8% also exceeded the high end of our guidance range and to climb 450 basis points zero over year. Now-
Gross profit margin at 52, 5% declined 420 basis points year over year.
Operating margin at 37, 8% also exceeded the high end of our guidance range and declined 450 basis points year over year.
Now turning to the balance sheet.
Speaker 2: The ending balance of our total cash and short term investments with $544.5 million.
Ending balance of our total cash and short term investments was $544 $5 million.
Speaker 2: up 27.4 million dollars compared to the prior year.
Up $27 4 million compared to the prior year.
Speaker 2: As previously mentioned, operating cash flows for the quarter was $50.3 million in increase of $26.8 million from the prior quarter and an increase of $23.7 million year-over-year. In addition, capital expenditures during the quarter of $6.7 million were down from the $14.8 million in the prior year when we were completing construction of our new facility in Chandler.
As previously mentioned operating cash flow for the quarter was $53 million, an increase of $26 $8 million from the prior quarter and an increase of $23 $7 million year over year.
In addition capital expenditures during the quarter of $6 $7 million were down from the $14 $8 million in the prior year. When we were completing construction of our new facility in Chandler.
Speaker 2: In addition, during fiscal Q1, we repurchased 1 million shares of our common stock for $10 million. As you may recall in September of last year, we announced a new common stock repurchase program for up to $300 billion. At the end of fiscal Q1 2024, we had $224.8 million available into this program. Now on to guidance.
In addition, during fiscal Q1, we repurchased 1 million shares of our common stock for $10 million as.
As you May recall in September of last year, we announced a new common stock repurchase program for up to $300 billion.
At the end of fiscal Q1, 2024, we had $224 $8 million available under this program.
Now onto guidance.
We expect our first.
Speaker 2: are fiscal second quarter, 2024 revenue, to be in the range of $240 million to $260 million.
Our fiscal second quarter 2020 for revenue to be in the range of $240 million to $260 million.
Speaker 2: Operating profit margin is expected to be 11.2%, plus or minus 160 basis points, and EPS to be 6 to 10 cents.
Operating profit margin is expected to be 11, 2% plus or minus 160 basis points.
And EPS to be six to 10.
Speaker 2: We expect NSC revenue to be approximately $177 million plus and minus $8 million, with an operating profit margin of 2% plus or minus 200 basis.
We expect NSE revenue to be approximately $177 million plus or minus $8 million.
With an operating profit margin of 2% plus or minus 200 basis points.
Speaker 2: OSP revenue is expected to be approximately $73 million plus or minus $2 million with an operating profit margin of 33.5% plus or minus 100 basis.
OSP revenue is expected to be approximately $73 million plus or.
It's $2 million with an operating profit margin of 33, 5%.
Thus, our minus 100 basis points or.
Speaker 2: Our tax expense is expected to be around $8 million, plus or minus half a million dollars for the second quarter as a result of jurisdictional mis.
Our tax expense is expected to be around $8 million plus.
Plus or minus half a million dollars for the second quarter as a result of jurisdictional mix.
Speaker 2: We expect other income and expenses to be a net expense of approximately $3 million.
We expect other income and expenses to be a net expense of approximately $3 million.
Speaker 2: And the share count is expected to be around 222 million shares. With that, I will turn the call.
And the share count is expected to be around 222 million shares.
With that I will turn the call over to <unk>.
Speaker 3: Thank you, Pam. During the September quarter, our end-market spend environment continue to be challenging, particularly with the service providers.
Thank you Pam.
The September quarter, our market spend environment continued to be challenging, particularly with the service providers in North America.
Speaker 3: In view of this continued headwind, our revenue came in slightly below the midpoint of our guidance, with stronger OSP demand helping to offset the weaker telecom service provider revenue.
In view of this continued headwinds our revenue came in slightly below the midpoint of our guidance with stronger OSB demand, helping to offset the weaker telecom service provider revenues.
Speaker 3: Our EPS came in at the low end of our guidance range driven by lower volume and higher taxes due to less favorable geographic revenue.
Sure.
EPS came in at the low end of our guidance range, driven by lower volume and higher taxes due to less favorable geographic revenue mix.
Speaker 3: Within a sea, we saw a mixed performance. The demand for our field fiber, cable, service enablement, and wireless lab products came in weaker than expected due to tight-spanned and capex environment at Tier 1 service providers.
With NSE, we saw a mixed performance the demand for our field fiber cable service enablement and wireless lab products came in weaker than expected due to tight spend in capex environment.
Tier one service providers the demand for lab fiber avionics and Ofcom products was robust and continued to see good momentum.
Speaker 3: The demand for lab fiber, avionics, and off-com products was robust and continued to seize good momentum.
Speaker 3: The net result was NSU revenue coming in slightly below the midpoint of our guide. New,,
The net result was NSE revenue coming in slightly below the midpoint of our guidance.
Now turning to OSP.
Speaker 3: Most of the business segments results came in slightly better than expected, but both revenue and profitability exceeding our expectations. The results were driven by stronger than expected demand for both anti-controfitting and 3-d sensing products.
Most of the <unk> business segment. The results came in slightly better than expected with both revenue and profitability exceeding our expectations. The results were driven by stronger than expected demand for both.
Counterfeiting and <unk> sensing products.
Speaker 3: Looking ahead at the December quarter, we expect the revenue to be seasonally down, primarily due to lower anti-controfitting demand, as our customers work to adjust their ear and inventory.
Looking ahead of the December quarter, we expect revenue to be seasonally down primarily due to lower anti counterfeiting demand as our customers work to adjust their year end inventories were also seeing slightly softer three D sensing demand after a strong Q1 orders.
Speaker 3: We also see slightly softer 3D sensing demand after strong Q1 or W
Speaker 3: Looking into early calendar 2024, we expect the following demand dynamics for our major product areas. First, it's continued slow recovery and service provider spend impacting our field instruments.
Looking into early calendar 2024, we expect the following demand dynamics for our major product areas. First is continued slow recovery in service provider spend impacting our field instruments business. The second continued weaker demand for oriented contributing products.
Speaker 3: The second, continued weaker demand for our anti-contributing products, a tight fiscal policy slowed down the inventory consumption by major costs.
Fiscal policy slowed down the inventory consumption by major customers third beginning of recovery of wireless lab products as major wireless Nims continue five new product development and increased <unk> investment.
Speaker 3: Third, beginning of recovery of wireless lab products, as major wireless nams continue 5G product development, and increase 6G investments.
Speaker 3: The fourth accelerated recovery in our fiber lab and production product demand during by strong optical demand by data center, optical NAMS, optical module, and semiconductor cost.
Fourth.
Celebrated the recovery in our fiber lab and production product demand driven by strong optical demands by data center optical <unk> optical module and semiconductor customers.
Speaker 3: Fifth, growing service enablement product demand as there are new architecture gain instruction and acceptance with major costs.
Fifth.
Growing service enablement product demand as our newer conjecture gains traction and acceptance with major customers.
Speaker 3: And last but not the least, growing demand for our avionics, Milero and resilient TNT products.
Last but not the least growing demand for our avionics milagro and resilient P&C products.
Speaker 3: Despite the near-term macroeconomic headwinds, our long-term growth strategy thesis built around 5G and 6G wireless, fiber, new service enablement, product portfolio, 3G sensing, and emerging resilient P&T technology remains intact. In conclusion, I would like to thank my viavit team for managing in this challenging environment and express my appreciation to our employees, customers, and shareholders for their support. With that, I will not turn it over to operator for Q&A.
Despite the near term macroeconomic headwinds our long term growth strategy is built around <unk> and <unk> wireless fiber new service enablement product portfolio three D sensing and emerging resilient P&C technology remains intact in conclusion I would like to thank my view averaging for managing in this challenge.
<unk> environment and express my appreciation to our employees customers and shareholders for their support with that I will now turn it over to operator for Q&A.
Okay.
We will now begin the question answer session. If you would like to ask a question. Please press star followed by one on your telephone keypad.
Speaker 1: If you would like to ask a question, please press star followed by one on your telephone keypad. If you are new to any of your like room with that question, please press star followed by two. Again, to ask a question, press star one.
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Speaker 1: As a reminder, if you are using a speaker phone, please remember to pick up your handset before asking a question. We will pause here briefly as questions are registered.
As a reminder, if you are using a speakerphone. Please remember to pick up your handset before asking your question.
We will pause briefly ask questions are registered.
Speaker 1: The first question comes from the line of Mary Huffinney with SIT. You may proceed.
The first question comes from the line of medical Hussaini with Citi.
You May proceed.
Speaker 4: Yes, sir. Thanks for taking my question.
Yes, thanks for taking my question.
Yes.
Speaker 4: Oleg, do you have any plans to take additional costs out of the RPX?
OLED.
Do you have any plans to take additional cost.
Speaker 4: And if not, how do you see near term with
And if not how do you see.
Near term.
Speaker 4: last one, last earning call, was on the question that your customer's at least on a wireline may be bothering, but the silver demand has weakened and just want to get a feel for how you're looking at the end market demand outside of the smartphone.
Last time last earnings call.
We've done this.
On your question Doug.
Your customers at least on a wireline Matt.
The bottoming, but it seems like.
Demand has weekend and.
Just wanted to get a feel for are you looking at the end market demand.
Sort of a smartphone.
Sure.
Speaker 3: Sure, thanks. We have taken out, you know, I'm not a believer of death by 1000 cuts.
Sure. Thanks.
<unk> taken out.
Not a believer of death by a thousand cuts taking out a little bit at a time, we have taken a.
Speaker 3: taking out a little bit at a time. We have taken a
Speaker 3: major step earlier in the year with taking out about $20 million in OPEX and we have just completed, I would say, there's maybe a little bit left.
Major staff earlier in the year.
We've taken out about $30 million in Opex and we have just completed I would say there is maybe a little bit left.
Speaker 3: but most of it has already been factored in. And, you know, in terms of the outlook, we actually see.
But most of it has already been factored in and we.
In terms of the outlook, we actually see.
Speaker 3: While the service provider is still continues to be a bit anemic, we actually seeing it stabilizing. And our lab and production test business is actually starting to recover. So I think with that, I think we are good for now with any further op-ex reduction.
While the service provider is still continues to be a bit anemic, we actually seeing it stabilizing.
And there are a lab and production test business is actually starting to recover so.
I think the.
With that I think we are good for now with the any further opex reductions.
Speaker 3: The area where we have a bit of a challenge is clearly
The area, where we have a bit of a challenge is clearly.
Speaker 3: Our OSP business unit, that's the area where we have factories with a lot of fixed assets. So clearly, lower loadings lead to a bit more underutilization and as a result, a bit lower margins, which puts the pressure on the overall margins. But as the, you know, we are working diligently to bring the inventories under control as our customers and ourselves.
Our OSP business unit.
That's.
The area, where we have factories with a lot of fixed assets. So clearly lower loadings will lead to a bit more underutilization and.
As a result, with lower margins, which puts the pressure of the overall margins but.
We are working diligently to bring the inventories under control as our customers and ourselves try to.
Speaker 3: try to adjust inventories to the new equilibrium. We think we are in pretty good position.
Adjust inventories to the new equilibrium.
We think we're in pretty good position.
Speaker 3: in managing soft lending, so to say, and to start the recovery. So the short answer, we're not planning any further up-ex reductions. I think we've implemented all the changes we need to implement. We have a little bit more remaining to be implemented from the original plan, but that's about it for now.
In managing a soft landing so to say and just started the recovery. So the short answer we're not planning any further opex reductions.
We have implemented all the changes we need to implement we are a little bit more remaining to be implemented from the original plan, but that's about it for now.
Okay.
Thank you.
Thank you for your question.
Speaker 1: The next question comes from the line of Michael Genovese with Rose and Black Securities. You may proceed.
The next question comes from the line of Michael Genovese with Rosenblatt Securities You May proceed.
Speaker 5: All right, thank you. Hey, Ola, can you talk about linearity sort of from service provider orders in the quarter and particularly how things look late in the quarter and anything you talk about early October ?
Alright, thank you.
Can you talk about linearity sort of from service provider orders in the quarter.
Particularly how things looks late in the quarter and anything you can talk about early October.
Sure I think.
Speaker 3: Sure, I think the, if anything, linearity is in pretty good the nobody has been decommitting. I mean, I would say.
If anything the linearity is in pretty good.
Nobody has been <unk> I mean, I would say.
Speaker 3: Converting orders into bookings is taking a bit longer, but that's the, that's the result of Lord that does the Lord event event. If before you could get things within a quarter and I take you a bit more than a quarter. But with that said, I think the nobody's been canceling. Nobody been pulling back. I mean, they're still once they place the orders, they take the orders.
Converting.
Orders into bookings is taking a bit longer but that's the that's the result of lower that does the lower demand demand is before you could get things within a quarter and it takes you a bit more than a quarter, but.
With that said I think.
Nobody has been cancelled and already been pulling back I mean, theyre still once they place the orders they take the orders and.
Speaker 3: And we're seeing actually, you know, we're not expecting, usually in December quarter, you always have some budget flash. I don't think we're seeing any of it this year, but on the positive side, we are seeing a probably stronger than seasonal demand into the March quarter. Things are being a lot more linear than kind of...
We're seeing actually.
We're not expecting usually in the December quarter, you always have some budget flush I don't think were seeing any of it this year, but on the positive side, we are seeing a probably stronger than seasonal.
Demand into the March quarter things are being a lot more linear than kind of.
Speaker 3: a strong June , kind of December , quarter, week, September .
A strong June June kind of December quarter weak September.
Speaker 3: uh... march quarter so i think uh... there's less
March quarter, So I think there is less.
Speaker 3: I would say kind of budget flushing or trying to use it or lose it going on. It's people ordering equipment just as they need it, kind of real time, just in time. And I think the initial shock and the restructuring has been kind of worked out and everybody's getting back to within the new operating environment, deciding what they need and placing orders as necessary. I think the I'll say the first.
I would say kind of budget flushing or trying to use it or lose it going on its people ordering equipment.
Just as they need it kind of real time, just in time and.
I think the initial shock and restructuring has been kind of worked out and everybody is getting back to within the new.
Operating environment, deciding what they need and placing orders as necessary.
<unk>.
I will say the first.
Speaker 3: two quarters of fiscal, I mean, if I look at the December , kind of March quarter of this fiscal year.
Two quarters of fiscal <unk>.
If I look at the.
December March quarter of this fiscal year.
Speaker 3: You know, a year ago, there was a lot of order cancellation as many service providers were trying to get their CapEx under control. Now that they were able to cancel and push out big ticket items.
A year ago.
There was a lot of order cancellation <expletive>.
Many service providers, we're trying to get their capex under control now that the.
They were able to cancel and push out big ticket items.
Speaker 3: with various NAMs, they're getting back to operational, you know, optimization and...
With various nims they're.
They are getting back to operational optimization.
Optimization and.
Speaker 3: We're actually seeing more willingness to spend money on getting more out of what they've got versus You know just coming down
We're actually seeing more willingness to spend money on getting more out of what they've got versus.
Just coming down completely.
Speaker 5: Great. I appreciate that color. I guess our second question is, you talked about the lab business already starting to recover. Could you give more color on what's driving that? And is the newer higher speed, like very high speed data center business part of that lab that you're talking about?
Okay, great I appreciate that color.
The second question is you talked about the lab business.
Are you starting to recover could you give more color on what's driving that and is the newer higher speed with very high speed data Hello business part of that lab that youre talking about.
Speaker 3: Yeah, so I'd say it's a story of two different labs. So if you look at the wireless space, clearly we've seen the results of major wireless nams. I'd say there is still a very tight environment, but we do expect the demands to start coming back early next calendar year, because in the end, everybody still got a lot of 5G and 6G products that they are working on and they are, will be placing orders.
Yes, so I'd say it's.
It is.
Story of two different labs. So if you look at the wireless space clearly, we're seeing the results of major wireless Nims.
I would say there is a still a very tight environment, but we do expect the demand to start coming back early next calendar year.
Indiana, everybody has still got a lot of <unk> and <unk> products that they are working on in there.
We will be placing orders.
Speaker 3: So, in that area, we've seen weakness. The second area of weakness has been in, I'd say, in the last two quarters is anything related to storage also a storage both semiconductor and this drive.
So in that area, we've seen weakness the second area of weakness has been.
I'll say it in the last two quarters is anything related to storage.
Also our storage.
Both semiconductor and disk drive providers.
Speaker 3: Providers kind of pulled back on some of the investment, but we expect that to be coming back as well as the next generation products needs to be launched.
Providers kind of pulled back on some of the investment, but we expect that to be coming back as well as in next generation products <unk> launched the area, that's been pretty strong and actually has been up year on year.
Speaker 3: The area that's been pretty strong and actually has been up year on year is the very high.
Very high speed, so about a quarter ago people asked me about do I see any demand with <unk>.
Speaker 3: So, you know, about a quarter ago, people asked me about, do I see any demand with related to the hyper scale data center for AI?
Related to the Hyperscale datacenter for AI and at that point, we Didnt really seed, we actually starting to see that coming now that's why I said between the time people talk about it and the time they start placing orders there is always some lag so that piece of business for us is actually doing very well and we are seeing a robust demand from.
Speaker 3: And at that point, we didn't really see it. We're actually starting to see that coming now. That's why I said between the time people talk about it and the time they start placing orders, there's always some lag. So that piece of business for us is actually doing very well.
Speaker 3: And we are seeing robust demand from the system providers, the data center operators, and the semiconductor companies that play in that space.
The system providers.
The data center operators and the semiconductor companies that play in that space. So I mean, sorry can you say about <unk> production.
Speaker 3: So, I mean, so I say about level of production, it's much stronger on high-speed optical transport and a bit weaker in storage and...
It's much stronger on high speed optical transport and a bit weaker in storage and wireless.
Speaker 3: But if we think storage and wireless will be coming back in the March.
But if we think storage and wireless will be coming back in the March quarter.
Okay Super helpful and I look forward to following up on more of that offline I guess my last question for <unk> would be about you already mentioned the March quarter, maybe being a little bit more linearly less seasonal.
Speaker 5: super helpful and I look forward to following up more in that offline. I guess my last question for here though would be about, you already mentioned the March quarter, maybe being a little bit more linear and less seasonal with December , but can you talk about the second half of the year because you're pretty bullish on the second half of the year and makes it to comparisons to early 23 sort of, as in 24. And how do you feel about that now? Because it seems like things are a little bit weaker on the telecom side.
December but.
Can you talk about the second half of the year, because we're pretty bullish on the second half of year or niche comparisons too.
Early 'twenty three sort of exiting 'twenty four.
How you feel about that now because it sounds like things are a little bit weaker on the telecom side.
Yeah.
Speaker 3: Well, I mean, remember, telecom's side weakness is relative.
Well I mean remember telecoms side weakness is relative and we were the first ones to see.
Speaker 3: We were the first ones to see everything go tight, which was in them.
Everything go tight which is was in.
Speaker 3: September and December of last year, a lot of the names didn't see it happening until June . And that's a September quarter because they have non cancelable non refundable orders. So, while the service providers were working to cancel or push out a lot of the equipment spend, the first thing they did is they really tightened up on operating operating expenses. Now that the big ticket items being canceled.
September and December of last year.
A lot of the <unk> didn't see it happening until June and lets say September quarter, because they have noncancelable nonrefundable orders.
While the service providers, we're working to cancel or push out a lot of the equipment spend the first thing. They did is they really tightened up on operating expense operating expenses.
Now that the big ticket items been cancelled or pushed out.
Speaker 3: It's kind of going getting back to business and trying to get more with what they've got. So in that respect the dialogue we are seeing is
Kind of going getting back to business and trying to get more with what they've got so in that respect. The dialog we are seeing is.
Speaker 3: much more constructive in that area. In particular, we are expecting to see some reasonable spend in cable deployment and a network upgrade. And I think the initial revenue needs will start flowing in the March quarter.
Much more constructive in that area in particular, we are going we are expecting to see some real.
Reasonable spend in the cable.
<unk> deployment.
And.
Our network upgrade and I think the initial revenue on it will start flowing in the March quarter. So in that respect the msos are doing.
Speaker 3: So in that respect, you know, the MSOs are doing, moving forward with their network upgrades. I think...
And moving forward through their network upgrades.
Thank you.
Speaker 3: The big service prize in North America are steel, a bit of an enemy.
The Big service price in North America are still a bit anemic.
Speaker 3: But in Europe and Asia, I mean, we're seeing a bit better environment. So, obviously, it's not as good as it was, I'd say, a year, year and a half ago, but it's...
But in Europe, and Asia, and we're seeing a bit better environment. So obviously, it's not as good as it was I'd say, a year year and a half ago, but it's.
Speaker 3: from where I'm sitting, it's a better situation than it was a year ago. For six months, it was crickets. Nobody was doing anything.
From where I'm sitting it's a better situation than it was a year ago, where for six months. It was crickets nobody was doing anything so at least we have the dialog and things are moving forward and I think the initial shock for a lot of <unk>.
Speaker 3: We have the dialogue and things are moving forward. And I think the initial shock for a lot of
Speaker 3: level production, the semi-company, module companies, system companies, they kind of took a pullback, reassess.
11 production the semi companies module companies system companies that kind of took.
Pulled back reassessed their budgets their capex and now they are coming back in.
Speaker 3: They are budgets, they are capex, and now they're coming back. And the within the areas in a high speed optical and Ethernet is going to be quite strong.
The areas in our high speed.
Optical and Ethernet is going to be quite strong.
Speaker 3: We've expected to be quite strong in the first half calendar year. The wireless we expected to start recovering and coming back.
We expect to be quite strong in the first half.
Calendar year.
The wireless we expect it to start recovering in coming back and.
Speaker 3: And on the service enable our software business, we're actually feeling pretty good. We're getting a very good traction for our new architecture and a very nice design win in some of the most challenging areas against truly who is who in the space. So I think in that particular space, we think we're gonna pick up share in the coming year. So, you know, overall where I'm sitting, it's on the NSC side.
On the service enabled by our software business, we're actually feeling pretty good.
We're getting very good traction for our new architecture, and a very nice design win in some of the most challenging areas against a truly a who's who in the space.
I think in that particular space, we think we're going to pick up share in the coming year. So.
Overall, what I'm sitting it's on the NSE side I think the worst is behind it is now we just need to determine how is it going to be kind of gradual recovery, although the stronger recovery in some areas are weaker than the others.
Speaker 3: I think the worst is behind it is now we just need to determine.
Speaker 3: How is it going to be a kind of gradual recovery, a little stronger recovery in some areas weaker in the others?
Speaker 3: It remains to be seen on the OSB side
It remains to be seen on the OSP side.
Speaker 3: We saw very strong demand on 3D sensing in the September quarter. I think it's too early to tell how the December is going to come in. I think our major customer is probably going to look at see how well they're selling their products.
We saw very strong demand on <unk> sensing in the September quarter, I think it's too early to tell how the December is going to come in I think.
Our major customer is probably going to look at it see how well they are selling their product. If the sales are very strong, particularly in Asia, we may see more upside to the December and March quarter.
Speaker 3: If the sales are very strong, particularly in Asia, we may see more upside to the December and March quarter.
Speaker 3: This point is too early to tell and on the anti-counterfeiting I think between the inventory bills during COVID and tighter fiscal environment, I think the inventories are on winding slower so we expect to see a weaker demand and that's a greater level of underutilization and some gross margin pressure in that business unit in the coming six months.
At this point, it's too early to tell.
Anti counterfeiting I think.
Between the inventory builds during COVID-19 and tighter fiscal environment I think the inventories are unwinding slower. So we expect to see a weaker demand and thus greater level of underutilization in some gross margin pressure.
That business unit in the coming six months.
Okay great.
Great commentary thank you.
Sure. Thanks.
Thank you for your question.
Speaker 1: The next question comes from the line of Tim Savago with Northland Capital Market. You may proceed.
The next question comes from the line of Tim <unk> with Northland Capital markets. You May proceed.
Okay.
Hi, good afternoon, sorry about that.
Speaker 6: Quick question on the kind of outlook you mentioned, something about March being less seasonal.
Quick question on the <unk>.
It kind of outlook you mentioned something about March.
Being less seasonal.
Speaker 6: And I'm not sure how, you know, the magnitude of some of the businesses, the lab businesses that you're seeing growth and, you know, clearly you're going to have some headwinds seasonally on 3D sensing and it sounds like
And I'm not sure how they work.
Magnitude of some of the businesses the lab businesses that youre seeing growth.
Clearly youre going to have some headwinds seasonally on <unk> sensing in it sounds like.
Speaker 6: on the currency side, but at this point, you know, or you mean to talk about more to being less seasonal, could march be up given some of the dynamics that you're seeing.
On the currency side, but at this point.
Or you mean to talk about March being less seasonal occurred March be up given some of the dynamics that you're seeing.
Speaker 3: I think it's a bit early, so I think in the NFC, there's a chance that March will be flat to up.
I think it's a bit early I think in the NFC Theres a chance that March will be.
Flat to up.
Speaker 3: I mean, as I said, we expect some pretty strong cable demand to come in in March quarter. And we do think we're going to see some leaven production recovery. But I think at this point, it's too early to tell. But the mere fact that some of the normally you see quite a bit of orders being pulled in into December quarter because of budget flash.
I mean as I said, we expect some pretty strong.
Cable demand.
To come in in March.
March quarter, and we do think we're going to see some 11 production.
Our recovery, but I think it's at this point, it's too early to tell but the mere fact that some of the.
Normally you see quite a bit of orders being pulled in into the December quarter because of budget flush.
Speaker 3: We're not seeing that. There are other results. People just placing orders to when they need the product versus when they have the money to spend them in that respect.
Not seeing that as a result people just placing orders to when they need the product versus when they have the money to spend and in that respect.
Speaker 3: We think the general strength that we see in December , which results in a bit weaker March, I think is largely
We think.
The general strength that we see in December which results in a bit weaker.
March I think is largely absent so the March bookings are already in.
Speaker 3: So the March bookings are already in and, you know, there's still obviously a lot of work to be done, but there's a good chance that March will be flat, maybe even slightly up on NSE site. On the O-SP side, I think it will be slightly down because that's usually...
There's obviously a lot of work to be done, but there's a good chance that March will be flat, maybe even slightly up on NFC side on the OSB side I think it will be.
Slightly down because thats usually.
Speaker 3: the weaker quarter for 3D sensing and we continue to expect
The weaker quarter for <unk> sensing and.
We continue to expect more anemic demand on anti counterfeiting, but obviously.
Speaker 3: more anemic demand on anti-controfitting. But obviously, I've been surprised in the past. I mean, we don't get much visibility from central banks around the world. And I mean, at least our operating assumption right now is that OSP business will be slightly down from the...
<unk> been surprised in the past, we don't get much visibility from central banks around the world and.
I mean.
At least our operating assumption right now is that our OSP business will be slightly down from the.
Speaker 3: December quarter and the NSC business maybe conversely slightly out. So NetNet, roughly flat-ish March quarter in the early expectation. But I think
December quarter, and the NSE business, maybe Conversely, slightly up so net net roughly flattish.
March quarter is the early expectation.
But I think it's too early to truly call it.
Speaker 6: I understand. Now, but I appreciate the color. Following up on the network enablement side and given.
Understood I appreciate the color.
Following up on the network enablement side given.
Some of the.
Speaker 6: turns you've noted in terms of service providers spending weakness. I'm gonna, it would seem to follow that, and I know you've broken us down from time over time about lab versus field split, but.
Trends, you've noted in terms of service provider spending weakness.
It would seem to follow.
And I know you've broken this down from time to time over time about lab versus field split but.
Speaker 6: It would seem that you're more, you know, lab heavy these days, given that field weakness.
It would seem that youre more.
Lab heavy these days given that field weakness.
Speaker 6: You know, A, would you say that's right? Can you give us, you know, kind of a current estimate of where that breakdown stands? And of that, you know, lab business.
Hey, I would just say that's right can you give us kind of a current estimate of where that breakdown stands in.
The lab business.
Speaker 6: You know, how material is your 800 gig high speed optical stuff relative to that total?
Material as your 800 gig high speed optical stuff relative to that.
Total.
Speaker 3: So, you know, I think in general, we've been, you know, we used to be like significantly more present in the service provider. We have obviously grown our lab business a lot more in the last six years. So, I mean, while we're still not quite there, I would say the, the field instruments as.
So I think in general we've been.
We used to be like significantly more present in the.
Our service provider.
We have.
Obviously grown our lab business a lot more in the last six years. So I mean, while we're still not quite there I would say.
The field instruments.
Speaker 3: Let me just kind of do a quick math here. It's probably more like 60, 40, maybe 55, 40, it's still about maybe 60, 40, 55, 45 split between the field instruments being a little bit better, bigger and left being smaller. It's a big change from about 70, 30 that we had a few years back.
Let me just kind of do a quick math here.
It's probably more like 60 40, maybe.
$55 40.
So about maybe 60 40, 50 545 split between the field instruments being a little bit better bigger and love being.
Smaller as a big change from about 70, 30 that we had a few years back.
Speaker 3: The other thing is, you know, I mentioned earlier, but what we think about March quarter, some of the, you know, when you look at our EPS range for this quarter, that
The other thing as I mentioned earlier about.
How do we think about March quarter some of the.
When you look at our EPS range for this quarter.
Speaker 3: assumes higher commissions because our current booking velocity is, we are expecting much stronger booking.
That assumes a.
Higher commissions, because our current booking velocities, we're expecting much stronger bookings.
Speaker 3: in this quarter. So we pay, at least we reserve commissions in the quarter of bookings. And that obviously, as the bookings come in much stronger than the revenue, some of it carries over as the starting it, starving backlog into the next quarter that gives us a little bit more comfort with the Mars quarter. But that's...
In this quarter, so we pay it.
We'll reserve.
Commissions in the quarter of bookings.
And that obviously as the bookings come in much stronger than the revenue some of it carries over as the starting at starving.
Backlog into the next quarter that gives us a little bit more comfort with the March quarter.
But that's.
Response to your questions.
Okay. Thanks.
Thank you for your question.
Speaker 1: question comes from the line of Alex Anderson with Meet-Em, who may proceed.
The next question comes from the line of Alex Henderson with Needham You May proceed.
Great. Thanks.
Speaker 7: So I was hoping we could start off with a little bit of a sense of what the break is between 3D and...
So I was hoping we could start off with a little bit of a sense of what the break is between <unk> and <unk>.
And non three D OSP.
Speaker 7: and non-3D OSP. I'm assuming that it's somewhere around $20, $21 million in the September quarter for 3D, is that?
I'm, assuming that it's somewhere around 2000 $21 million.
September quarter.
For three D is that in the ballpark.
Speaker 3: It's a little bit higher, closer to $20, $4 million. 24. Okay, great, thanks.
It's a little bit higher closer to $24 million.
Okay, great. Thanks.
And a little over 20 clients.
Speaker 7: Normally that declines sequentially. If it's a little stronger, what gives you the confidence that it's not going to decline more sequential?
Normally that declined sequentially, it's a little stronger.
As you the confidence that it's not going to decline more sequentially.
So we are expecting.
Speaker 3: So we are expecting some decline into this quarter. But in the near term, we, I mean, we're looking at our current forecast. We are seeing a revenue to be around.
Some declining to this quarter.
But.
In the near term.
I mean.
Looking at our current forecast we are seeing.
Our revenue to be around.
Speaker 3: maybe 3, 4 million down for the total OSP. And that's largely coming out of the, some of it coming from the anti-counterfeiting and some of the other is coming out of the 3D sensing. But there's other elements of 3D sensing market that are playing into it.
Maybe three 4 million down for the total OSP.
And that's largely coming out of the <unk>.
Some of it coming from the anti counterfeiting and some of the other is coming out of the three D. Sensing, but there is other elements of three D sensing market that are playing into it.
Speaker 3: Well, so just, and we're ready one month into the, yeah,
Well.
And we're already one month into the.
Yes, we're really one month into December quarter. So, yes, we already won.
Speaker 7: Yeah, we already want to monitor things at the same place. So, yeah. Is there another piece of the business that's kicking in other than the standard cuts?
Of course these.
Another piece of the business.
Kicking in other than the standard customer.
Speaker 3: Well, I mean, the standard customer, there's also some industrial customers in that.
Well I mean, the standard customer and Theres also some industrial customers in that space.
Speaker 3: But the main customer is the main customer.
Okay.
If we could go.
I'd say the main customer is the main cost.
Yes, if we could go to the income statement, you talked about $30 million in cost savings coming out earlier in the year is as we look at the $118 million in Opex in the quarter is that the right level that we should be anticipating in the December quarter or will it step up because of commissions.
Speaker 7: If we could go to the income statement, you talked about $30 million in cost savings coming out earlier in the year.
Speaker 7: as we look at the $118 million in the quarter, is that the right level that we should be anticipating in the December quarter will it step up because of commissions? And if it's not going to have a seasonal decline in the March quarter, is that again, the right level for the March quarter?
And if it's not going to have a seasonal decline in the March quarter or is that again, the right level for the March quarter.
Speaker 3: So this is 118 is about on the lower end site. So in the December quarter, as I said, we actually have a, it's one of these things, you don't get the revenue, you get bookings. So there's a significant step up in booking. So there's a big chunk of that $4 million increased guidance for December quarter is the commissions on bookings. On the revenue that will likely land in the...
So this is why 2018 as bad on the lower end side. So in the December quarter as I said, we actually have a it's one of these things you don't get the revenue you get bookings. So there is a significant step up in bookings there.
A big chunk of that $4 million increased guidance for December quarter is the <unk>.
Commissions on bookings.
On the revenue that will likely land in the.
Speaker 3: March quarter. And in the March quarter, it will be roughly, we expect to be about the same level as December , but for different reasons. It's more of a statutory crew, all that you do beginning of the year, the FICA and all that stuff. And then by the June quarter, we expect it to come down a bit somewhat. So I'd say during the year, you're kind of looking between 1.18 to 1.22 is the range depending on the quarter.
March quarter and.
In the March quarter.
Roughly we expect to be about the same level as December but for different reason, it's more of a.
Cacciatore accruals that you do beginning of the year, the FICA and all that stuff and then by the.
June quarter, we expect it to come down a bit somewhat so I'd say during the year, you're kind of looking between 118 to 122 is the the range depending on the quarter.
Great. Thanks.
Speaker 1: Sure, thanks. Thank you for your question.
Sure. Thanks.
Thank you for your question.
Speaker 8: The next question comes from the line of Meta Marshall with Morgan Stanley . He may proceed.
Your next question comes from the line of meta Marshall with Morgan Stanley You May proceed.
Speaker 9: Hi, thank you. This is Karan on Firmida. I guess just on the telecom side and service provider side. Just regionally, I know you mentioned that in North America it's weaker and areas like Europe is a little bit stronger. Is there anything you'd call out on this quarter in terms of trends beyond that? And I guess do you expect sort of Europe to revert back to North American trends? Or do you expect them to continue to outgrow in our performance?
Alright. Thank you. This is kieran on for meta I guess, just on the telecom side and service provider side.
Just regionally I know you mentioned that North America is weaker in areas like Europe is a little bit stronger is there anything you'd call out on this quarter in terms of trends beyond that and I guess do you expect sort of Europe to revert back to North American trends or do you expect them to continue to outgrow and outperform.
Speaker 3: Well, I mean, I'd say telecom globally is weaker, but the difference is that you're in life support or you're working with it. And I would say relatively speaking, Europe is doing probably the best.
Well I mean, I'll say telecom globally is weaker but.
The differences are you on life support or Youre working on that and I would say relatively speaking Europe is doing probably the best.
Speaker 3: Latin America is actually a continuously fairly resilient Asia is doing pretty well. It's North America is really the area that's struggling quite a bit. Nothing, a lot of it is driven by the heavy debt load that North American service providers are carrying.
Latin America is actually continues to be fairly resilient to Asia is doing pretty well.
<unk>.
North America is really the area that.
Struggling quite a bit and I think a lot of it is driven by the heavy debt load that north American service providers are carrying.
Speaker 3: But generally, we've seen pullback across the world. Lesson, the least in Europe , then I would say Asia, then Latin America, roughly on par, and then North America is the most impact.
But generally we've seen pull back across the world.
Lesser at least in Europe than I would say.
Asia.
And then Latin America, roughly on par and then North America is the most impacted.
Speaker 9: Okay, thank you. That makes sense. And then sort of on the currency side of your business, just given sort of the headwinds you outlined, are there any changes to maybe high level, how do you look at the run rate of that business, has that come down a little bit or do you sort of expect it to revert back as sort of demand normalizes?
Okay. Thank you that makes sense and then sort of on the currency side of your business.
Just given sort of the headwinds you outlined are there any changes to maybe high level. How do you look at the run rate of that business.
As I come to unlimited or do you sort of expect it to revert back as sort of demand normalizes.
Yes.
Speaker 10: I think we expect the core business to be on the lower end of the $50 million range. For a quarter. Okay.
I think we expect the core business to be.
On the lower end of the $50 million range.
For the quarter.
Okay perfect. That's helpful. Thank you. Thank you very much.
Sure.
Thank you for your question.
Speaker 8: Again, if you would like to ask a question, please press star following by one.
Again, if you would like to ask a question. Please press star followed by one.
Speaker 8: There are currently no further questions in queue. So I'll now turn the line back to the team for an closing or additional remarks.
There are currently no further questions in queue. So I'll now turn the line back to the team for any closing or additional remarks.
Thank you I think with that we can end the call.
That concludes the conference call. Thank you for your participation you may now disconnect your lines.
Speaker 8: That concludes the conference call. Thank you for your participation. You may now disconnect your line.