Viavi Solutions Inc.

Ladies and gentlemen, thank you for standing by and welcome to the VIAVE Solutions first quarter fiscal year 2021 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. May I ask that you please limit yourself to one question and one follow-up. Please be advised that today's conference is being recorded. If you require further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Bill Ong, Head of Investor Relations. Thank you. Please go ahead, sir. Thank you, Tiffany.

Welcome to BRB Solutions' first quarter fiscal year 2021 earnings call. My name is Bill Ong, Head of Investor Relations. Joining me on today's call are Ola Hagen, President and CEO, and Amal Malhotra, CFO. Please note, this call will include forward-looking statements about the company's financial performance. These statements are subject to risk and uncertainty that could cause actual results to differ materially from current expectations estimations. We encourage you to review our most recent annual report and SEC filings, particularly the risk factors described in those filings. The forelooking statements, including guidance we provide during this call, are valid only as of today. The FBI undertakes no obligation to update these statements. Please also note that unless we state otherwise, all results are set revenue or non-GAAP. We reconcile these non-GAAP results to our preliminary GAAP financials and discuss the usefulness and limitation in today's earnings release. The release plus our supplemental earnings slide, which includes historic financial tables, are available on BRB's website. Finally, we are recording today's call and will make the recording available by 4.30 p.m. Pacific time this evening on the website. I would now like to turn the call over to Amar.

Thank you, Bill. Fiscal first quarter revenue at $284.7 million declined 5% on a year-on-year basis, but grew 6.8% sequentially, reflecting both seasonal OSP strength and stabilization in NSE revenue. We are operating margin at 21.3% is a record for a September quarter and presents a 370 basis points increase from a year-ago levels driven by margin expansion in OSP. EPS at $0.21 was up $0.03 both year-on-year and sequentially. Q1 revenue at $284.7 million was above our positive preannounced results of $282 to $284 million, as well as our initial guidance of $258 to $282 million. EPS at $0.21 was also above our positive preannounced results of $0.18 to $0.19, and our initial guidance range of $0.14 to $0.16. Now moving to our reported Q&A results by business segment, starting with NSE. NSE revenue at 183.5 million declined 16.5% year-on-year. Within NSE, NE revenue at 162.1 million declined 18.5% from a year ago, primarily due to the pandemic-related declines in field instruments. SE revenue increased modestly, up 2.4% from last year's levels. NSE gross margins at 64.2% improved 20 basis points year-on-year. Within NSE, NE gross margins at 63.8% declined 60 basis points from a year ago, primarily due to lower volume. SE gross margin at 66.8% increased 650 basis points year-on-year due to favorable product mix. NSE's operating margins at 7.2% decreased 290 basis points year-on-year due to lower revenue offset by a reduction in operating expenses reflecting disciplined expense management, ongoing efficiency programs, and lower variable expenses such as travel and entertainment, events, commission, et cetera, due to the pandemic. Now turning to OSP. OSP had a record quarter with revenue at $101.2 million, up 26.5% from last year, reflecting strong anti-counterfeiting and pre-desensing revenues, as well as solid aerospace and defense product demand. Gross margins at 60.3% was up 620 basis points year-on-year because of higher volume and better manufacturing absorption. OSP delivered record operating margins at 46.7%, up 870 basis points compared to last year as a result of higher gross margins and tight expense control. Now turning to the balance sheet. Our total cash and short-term investments ending balance was $595.5 million, which was an increase of $51.5 million sequentially. Our operating cash flow for the quarter was a record $63.9 million. In fiscal 2021 year to date, we repurchased approximately $13 million of VRV stock at an average cost basis of $12.24 per share. Overall, we have repurchased approximately $57.5 million of the total of $200 million authorized share buyback announced in September 2019 at an average cost basis of $12.05 per share. We continue to be opportunistic in our share repurchase. Now turning to our guidance. We expect fiscal second quarter 2021 revenue for VRV to be approximately $290 million, plus or minus $10 million, operating margin at between 19% to 20%, and EPS to be in the range of $0.18 to $0.20. We expect NSE revenue to be approximately $205 million, plus or minus $8 million, with operating margins at 11% plus or minus 50 basis points. We expect OSP revenue to be approximately $85 million, plus or minus $2 million, with operating margins at 40% plus or minus 100 basis points. Our tax expense is expected to be approximately 18% to 20%. We expect other income and expense to reflect a net expense of approximately $3 million. We estimate our share count to be approximately 233 million shares. On October 21st, the company announced my resignation as VIAVI's CFO, effective on November 20th. It was a difficult decision. It is a privilege to serve at VIAVI for more than five years. It's been a real pleasure supporting and partnering with OLLIC and the leadership team. We are a stronger company today. I'm committed to an orderly transition of my CFO duties following my departure and until a successor is identified, Our current global controller, Pam Event, will serve as the interim CFO. Additionally, I've entered into a consulting agreement with VIAVI for an anticipated period of six months after my departure. With that, I will turn the call over to Oleg.