Viavi Solutions Inc.

After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I would like to turn the conference over to Vibhuti Nair, Head of Investor Relations. Please go ahead.

Thank you, Audra. Good afternoon, everyone, and welcome to Viabi Solutions, fiscal third quarter, 2025 Earnings Call. My name is Raghu Dinaier, Head of Investor Relations for VIAVI Solutions, and with me on the call today is Oleg Hykin, our President and CEO, and Ilan Daskal, our CFO. 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 do differ materially from our current expectations and estimation. We encourage you to review our most recent annual report and SEC filings, particularly the risk factors described in those filings. The forward-looking statements, including tariff impact and guidance that we provide during this call, are valid only as of today. VIAVI undertakes no obligation to update these statements. Please also note that unless we state otherwise, all results discussed on this call, except revenue, are non-GAAP. We reconcile these non-GAAP results to our preliminary GAAP financials and discuss their usefulness and limitation in today's earnings release. The release, as well as our supplemental earnings slides, which include historical financial tables, are available on VIAVI's website at www.investor.viavisolutions.com. Finally, we are recording today's call, and we'll make the recording available on our website by 4.30 p.m. Pacific time this evening. Now, I would like to turn the call over to Ilan. Ilan?

Thank you, Vibhuti. Good afternoon, everyone. Now I would like to review the results of the third quarter of fiscal year 2025. Net revenue for the quarter was $284.8 million, which is above the midpoint of our guidance range of $276 to $288 million. Revenue was up 5.2% sequentially, and on a year-over-year basis was up 15.8%. Operating margin for the third fiscal quarter was 16.7%, above the high end of our guidance range of 13 to 15%. Operating margin increased 1.8% from the prior quarter, and on a year-over-year basis was up 7.4%. EPS at 15 cents was also above the high end of our guidance range of 10 to 13 cents, and was up 2 cents sequentially. On a year-over-year basis, EPS was up 9 cents. Moving on to our Q3 results by business segment. NSE revenue for the third fiscal quarter came in at $208.2 million, which is slightly above the midpoint of our guidance range of $202 to $212 million. On a year-over-year basis, NSE revenue was up 22.6 percent. NE revenue for the quarter was $188 million, which is an increase of 23.9 percent year-over-year as a result of strong demand by NEMS for our fiber lead and production products. The year-over-year NE revenue increase included the inertial leads revenue, which was in line with our expectations. SE revenue was $20.2 million, which is an increase of 11.6% from the same period last year, and is in line with our expectations. NSE gross margin for the quarter was 63.1%, which is 1.7% higher on a year-over-year basis. NE gross margin was 63.4%, which is an increase of 190 basis points from the same period last year, mainly driven by higher volume and favorable product mix. SE gross margin was 59.9%, which is a decrease of 90 basis points from the same period last year product mix. NSE's operating margin for the quarter was 10.4% versus a 1.8% loss in the same quarter last year. NSE operating margin is significantly above our guidance range of 6% to 8%, driven by higher gross margin falls through, as well as $4 million government R&D grant in Europe. OSP revenue for the third fiscal quarter came in at $76.6 million, which is just above the high end of our guidance range of $74 to $76 million. On a year-over-year basis, OSP revenue was up 0.5%. OSP gross margin was 51.6%, up 150 basis points from the same period last year, and was primarily driven by higher volume and favorable product mix. OSP's operating margin was 33.9%, which is at the high end of our guidance range of 32% to 34%, and it's 40 basis points lower on a year-over-year basis. Moving on to the balance sheet and cash flow. Total cash and short-term investments at the end of Q3 were $400.2 million compared to $512.8 million in the second quarter of fiscal 2025. The lower cash and investments balance at the end of this quarter is mainly attributed to the payment of the inertial LEFS acquisition. Cash flow from operating activities for the quarter was $7.8 million versus $19.5 million in the same period last year. The lower operating cash flow this quarter was mainly related to the acquisition of inertial LEFS. During the quarter, we did not purchase any shares of our stock as we prioritized our capital allocation towards M&A with the agreement to acquire Spirant's high-speed Ethernet and network security business lines. Although we plan to finance this transaction with additional debt, we will continue our financial discipline and intend to target less than four times gross leverage and well below three times net leverage over the long term. The fully diluted share count for the quarter was 226.9 million shares, up from 224.6 million shares in the prior year, and versus 226.1 million shares in our guidance for the third fiscal quarter. CapEx for the quarter was $6.8 million versus $3.2 million in the same period last year. Moving on to our fourth quarter guidance. We continue to assess the potential impact of global tariffs on the overall demand and timing of orders. Overall, we expect fiscal fourth quarter revenue to remain about flat relative to the strong third quarter revenue. For NSE, we are taking a more prudent outlook in view of tariff-related timing of customer orders. For OSP, we expect strength in anti-counterfeiting business, offsetting some seasonal weakness in 3D sensing demand. For the fourth fiscal quarter of 2025, we expect revenue in the range of $278 and $290 million. Operating margin is expected to be 13.5% plus or minus 1%, and EPS to be between 10 cents and 13 cents. We expect NSP revenue to be approximately $208 million plus or minus $5 million with an operating margin of 5% plus or minus 1%. OSP revenue is expected to be approximately $76 million plus or minus $1 million with an operating margin of 37% plus or minus 1%. Our tax expenses for the fourth quarter are expected to be about $8 million, plus or minus $500,000, as a result of jurisdictional mix. We expect other income and expenses to reflect a net expense of approximately $5 million, and the share count is expected to be around 227.4 million shares. Our guidance includes a tariff impact of about $3 million on orders that are already booked. This is expected to be dilutive to our gross margin and negatively impact our EPS by approximately one cent. With that, I will turn the call over to Oleg.