VIAVI SOLUTIONS INC. Q1 FY2025 earnings call

• NSE: Revenue declined YOY due to softer field instruments and wireless, but signs of order stabilization with recovery expected in Q2 and H2 '25. Field instruments showing stabilization, wireless expected to recover in H2 '25, fiber production demand slightly down but growth expected in H2 '25, Mil/Aero grew robustly, SCO down due to conservative enterprise spend. - OSP: Grew YOY driven by anticounterfeiting and 3D sensing, exceeded guidance. - Milestones: Launch of Valor Lab in Chandler, AZ for open rent ecosystem; release of industry's first 1.6 terabits per second high-speed Ethernet testing for AI workloads.

Net revenue for the quarter was $238.2 million. By business segment: NSE revenue was $159.4 million (low end of $160M-$168M guidance), down 6.5% YOY, driven by softer field instruments and wireless; NE revenue was $141.6 million, down 5.6% YOY due to conservative spend; SE revenue was $17.8 million, down 12.7% YOY from conservative enterprise spend; OSP revenue was $78.8 million (above high end of $75M-$77M guidance), up 1.7% YOY driven by anticounterfeiting and 3D sensing. NSE gross margin 60.9% (270bps lower YOY), NE gross margin 60.9% (220bps lower YOY), SE gross margin 60.7% (650bps lower YOY), OSP gross margin 55.3% (280bps higher YOY). NSE operating margin negative 4.6% (550bps lower YOY), OSP operating margin 39.6% (180bps higher YOY).

• Second fiscal quarter 2025 revenue range $255M-$265M, operating margin 12.4% ±100bps, EPS $0.09-$0.11. - NSE revenue ~$188M ±$4M, operating margin 4.8% ±100bps. - OSP revenue ~$72M ±$1M, operating margin 32.3% ±100bps. - Tax expenses ~$7M ±$500k, other income/expenses net ~$3.5M expense, share count ~224M.

• Macro environment uncertainties including post-election dynamics and interest rate changes. - Inventory and lead time issues for specialized products affecting order timelines.

Q: Linearity of bookings, NSE order momentum A: Linearity was as expected, but some service providers pushed revenue to Q2. NSE showing order stabilization, recovery expected in Q2 and H2 '25.

Q: Europe market movement, 1.6 terabit opportunity A: Europe seeing movement, similar to North America trends. 1.6 terabit in data centers driven by AI builds, initial R&D, transitioning to production late 2025.

Q: Cable orders, 3D sensing A: Cable orders picking up, cable vendors moving to fiber, aligning with fiber operators. 3D sensing early adoption in China Android models, potential for growth if moves to midrange.

Q: OSP run rate, SE green shoots A: OSP run rate with anticounterfeiting and 3D sensing. SE seeing strong momentum in private networks and AI ops, expected revenue in H2 '25 and beyond.

Q: Carriers finishing year strong, lead times A: Pent-up demand driving strong finish, lead times vary; bleeding-edge products like 1.6 terabit have longer lead times, while mainstream products have shorter lead times.