Thank you, Rob. Welcome to the Viavi Solutions first quarter fiscal year 2020 earnings call. My name is Bill Ong, Head of Investor Relations. Joining me on today's call are Oleg Khaykin, President and CEO; and Amar Maletira, 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 to differ materially from current expectations and estimations. We encourage you to review our most recent Annual Reports and SEC filings, particularly the risk factors described in those filings. The forward-looking statements, including guidance we provided 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 except revenue are on a non-GAAP basis; we reconcile these non-GAAP results to our preliminary GAAP financials and discuss the usefulness and limitations in today's earnings release, the release, plus our supplemental earnings slide which includes historical financial tables, are available on Viavi's website. Finally, we are recording today's call and we'll make a recording available by 4:30 PM Pacific Time this evening on our website. I would now like to turn the call over to Amar.

Thank you, Bill. Viavi posted a record fiscal first quarter revenue of 299.8 million, which grew 11.7% year-on-year and exceeded our upwardly revised revenue guidance range of 282 million to 294 million set at our September 12 Analyst Day event. Both NSE and OSP revenue exceeded the guidance range, driven by better performance in wireless and fiber and 3D sensing products respectively. We recorded Viavi's operating margin at 17.6%, expanded 130 basis points year-on-year. EPS at $0.18 increased $0.03 from a year ago levels, both metrics exceeded the revised guidance midpoint of 17% and $0.16 respectively. Now moving to our reported Q1 results by business segment, starting with NSE. NSE revenue at 219.8 million grew 15.3% year-on-year. Within NSE, revenue at 198.9 million increased 20.9% from a year ago levels, driven by strong performance in wireless lab, cable and access, and fiber products across both field and lab. SE revenue at 20.9 million declined 20.2% from a year ago levels due to the expected runoff in our mature insurance product as well as weak demand from both growth assurance and datacenter products. NSE gross margins at 64% increased 40 basis points year-on-year within NSE gross margins at 64.4% expanded 180 basis points year-on-year due to higher revenue volume and a favorable product mix. SE gross margins at 60.3% was down 950 basis points from a year ago. This was primarily driven by lower revenue in both assurance and datacenter products. We expect SE revenue and gross margins to improve sequentially in our fiscal second quarter. NSE's operating margins at 10.1% increased 150 basis points from a year ago levels, reflecting the gross margin improvement and favorable operating leverage in our OpEx structure. Now turning to OSP. OSP revenue at 80 million grew 2.8% year-on-year, driven by demand for our 3D sensing product. OSP gross margins at 54.1% increased 350 basis points due to higher absorption of manufacturing overhead from increased 3D sensing product volumes and operational efficiency. Operating margins at 38% expanded 280 basis points reflecting the improvement in gross margins. Turning to the balance sheet. Our total cash and short-term investments ending balance was 530.3 million; operating cash flow for the quarter was 31.3 million. We announced during the September 12 Analyst Day event, a 200 million common stock repurchase plan effective until September 30, 2021, which replaces the prior stock repurchase plan. Under the prior plan, we repurchased 148.6 million in stock. Under the new plan, to date, we repurchased approximately 10.1 million of VIAVI stock at an average cost basis of $30.99 per share, including commissions. We'll continue to repurchase Viavi stock opportunistically to offset earnings dilution from stock-based compensation. Now onto our guidance. We expect fiscal second quarter 2020 revenue for Viavi to be approximately 302 million plus or minus 10 million, operating margins at 19% plus or minus 1%, and EPS to be in the range of $0.18 to $0.20. We expect NSE revenue to be approximately 224 million plus or minus 8 million; with operating margins at 13% plus or minus 1%. We expect OSP revenue to be approximately 78 million plus or minus 2 million, with operating margins at 36.5% plus or minus 1%. Our tax expense rate is expected to be approximately 18% to 20%. We expect other income and expenses to reflect a net expense of approximately 2.5 million. Share count is approximately 238 million shares. With that, I will turn the call over to Oleg.

Thank you, Amar. Fiscal year 2020 is off to a good start, and I'm pleased with our strong performance in Q1. In NSE, demand was strong in both lab and field instruments. 5G wireless lab demand continues to be robust, up significantly year-on-year. Fiber demand has also remained strong in both lab and field driven by the 400 gigabit upgrade cycle. Cable demand was up year-on-year, helped by a spend recovery in North American cable providers for DOCSIS 3.1 along with some modest demand from Europe. We expect this higher cable demand to continue into Q2. Demand from North American telecom service providers continues to be sporadic with limited visibility. SE revenue came in at $20.9 million and was weaker than we expected in both our growth assurance and enterprise and datacenter products. The datacenter enterprise market has been challenging in calendar year 2019 with many deals being pushed out as customers reevaluate IT spending. The demand weakness in North American telecom service providers has also impacted the assurance business, resulting in lower revenue. In OSP, 3D sensing revenue increased significantly year-on-year driven by a broadening of the customer base for optical filters and continued adoption of our engineered products by Android-based smartphone customers. We expect 3D sensing revenue to continue to grow year-on-year in Q2. Demand for anti-counterfeiting products, as expected, was down year-on-year, relying mostly on the banknote reprint volume, and we expect this trend to continue into Q2. This reflects a change from a year ago when OSP benefited from banknote redesign demand in the fiscal first half of 2019. The banknote redesign pipeline remains robust. However, there is limited visibility from the majority of currency redesign demand in the next several quarters. In mid-September, we held our Analyst Day where we updated our strategy and provided the outlook for the next two fiscal years. The next phase of Viavi's evolution puts greater focus on growth, both organic and inorganic. We have updated our financial profitability targets based on our growth strategies in 5G, wireless, fiber, and 3D sensing. In conclusion, I would like to thank my Viavi team for another outstanding quarter of solid performance and express my appreciation to our customers and shareholders for their support. I will now turn the call over to Bill.

Thank you, Oleg. Let's begin the question-and-answer session. We ask everyone to limit their questions to one question and one follow-up.

Great, thank you very much. So clearly there is some tension in service provider spending in North America but broadly, are you seeing macro conditions starting to creep in conditions in the US and Europe, or is it more priority of spending type issue? How would you characterize the broader macro environment versus the focus of the company spends?

Hi Alex. Let me correct it. The North American service provider spend environment is no better or worse than it has been for the last 12 months. We still get very good revenue from it. Obviously, it's not as big as it used to be several years back, but we are getting our fair share of whatever is being spent. It's just no longer as good as it used to be, and it's nowhere near as good as what we see in Europe and other parts of the world. The difference, I would say, when I say sporadic, it's just that it's sporadic. Some days we could get a big order without warning and there is really nothing leading up to it; it seems to me it's more reactionary to demand rather than planning for demand. In terms of the macro, I don't think there is really a presence yet, but we see healthy demand in some of the growth segments. Clearly, everybody is now gearing up for 5G even though they may not be spending a lot of it now, but they are all thinking about where they will get the money. If the current environment continues, my guess is that a lot of the money will come at the expense of investing in the 2G and 3G and 4G infrastructure to keep it up to date. So some of the paired spending that we've seen - I don't have much statistical data to make a firm conclusion, but I think we are seeing some hesitancy to spend money ahead of the big 5G wave.

Great quarter. Thanks.

So, one question for me. Relative to your top line performance in the quarter, it came in above the high end of your guidance; how should we think about this momentum continuing as we progressed through the year? And relative to your full-year guidance you provided at the Analyst Day, what are some of the factors holding you back from raising your full-year guidance again?

This is Amar here. Thanks for the question. When you look at the beat relative to the analyst guidance that we provided just on September 12, it was largely driven by those three growth drivers that we have been pointing out as secular growth trends. We saw a beat in wireless lab or fiber both in lab and field and also the 3D sensing, particularly in the Android segment, came in stronger than what we were expecting. That doesn't mean that 3D sensing was on the iOS side; we also saw some strength in cable, specifically in North America as well as some in Europe and Latin America. Then as Oleg mentioned, the North American spend is sporadic. So when you think about looking forward for fiscal '20, we want to maintain the guidance we provided. The range is still valid, assuming those three growth trends - wireless, fiber, and 3D sensing - will continue. We expect our base business to be flat to grow, and our SE business, which we were hoping would be flat to show slight growth given the enterprise spend being weak, is starting off on a weaker note, at least in our fiscal Q1; we now assume that particular enterprise spend weakness will continue so SE should be sort of flat to slightly decline. Overall, the strength in our NSE business will offset some of the weakness that we are seeing in the SE business, so we will maintain our guidance.

I would also add, remember in the second half of the fiscal year, especially the March quarter, service providers traditionally pull back on their demand, and it takes them till the end of February to figure out what their budgets are going to be for next year. As a result, the March quarter is traditionally weaker with a lot more uncertainty. For us to be more bullish on the fiscal year, we need to see how strong the momentum is exiting Q2 before we have a better picture to revise the guidance for the rest of the fiscal year.

Thanks very much. I was hoping you could just spend a minute on the fairly impressive sequential growth in the APAC business in the quarter; it looks like that grew almost 20% sequentially. Curious if that's primarily on the 3D sensing side just given your comments, Amar, about some of the Android strengths, but just if you could spend a minute there in terms of that bounce back and maybe where you're seeing growth in that region in this most recent quarter.

Yes. When you look at the sequential growth, John, you're absolutely right. That is mainly driven by 3D sensing. We saw sequential growth in the 3D sensing business from our June quarter to the September quarter. Much of it is reported out of Asia. Generally speaking, all regions actually saw year-on-year growth this year, resulting in a very broad-based revenue growth story at Viavi for our fiscal Q1 and hence, it was a record revenue quarter for Viavi as a whole.

And clearly, 5G wireless and fiber is a big element on the networking side.

In the APAC region as well, Oleg.

Exactly. I mean…

Go ahead. I apologize.

No, I think those secular trends remain the same across all the regions.

And then maybe just a quick follow-up on that 3D sensing side. Oleg, last quarter, and also at the Analyst Day, you made some comments about the potential of looking at a licensing model or some different ways to both protect the IP and grow that 3D sensing business, particularly in the Asia-Pac region. Just curious if there's been any movement there or how we should think about the Android ecosystem in particular and its reliance on some of the China mobile handset operators as we look out over the remainder of the calendar year. Thank you.

At this point, it is too premature to give any update from the last four or five weeks ago. As I mentioned, we have a number of legal actions percolating across multiple jurisdictions and as they develop, our strategy between licensing versus enforcement will shift depending on the outcomes of various challenges.

Hi, good afternoon. Congrats on the results. First question is on the 5G or wireless side; I would imagine that was the primary driver for a pretty impressive 21% growth rate. My question is, given what we've seen with Nokia of late, which arguably needing to refresh the whole product line, it seems like that could be a positive thing for you. I wonder if you started to see some of that already contributing to the growth in 5G base station test, and then I'll follow up.

Sure. We are engaged with all the major players in 5G, and it’s still very early in the deployment cycle. There is a lot of revamping and engineering and adding new features to the products that the various vendors are bringing out; this obviously drives their need for more features and more test systems, both in scope and quantity. Our view is we are always ready to sell them more when they need it. I don't think we have any constraints on our ability to deliver new features, enhancements, or what specific customers may demand. We don’t have limitations on the volume of production that we can ship. We are riding the 5G wave as it happens.

Okay, great. And to follow up, we had a little back and forth on this at the Analyst Day, where I think if I recall properly, you said we might see another upgrade cycle in cable recover in two to three years. Maybe I misheard, and you meant two to three weeks. But cable seems to have recovered pretty quickly and unexpectedly, and according to your commentary about Q2 sustainably; I wonder if you could dig into that deeper in terms of what you saw on cable and if you were as surprised as I am? Thanks.

I wouldn't say surprised; it’s like I think people may misunderstand when we say DOCSIS 3.1 upgrade. It’s not a spike that goes flat; there’s an initial wave, then everybody does a big upgrade in North America and has to digest it. There's a drop but then as they digested, they need a bit more, which leads to smaller subsequent bumps. So, reality is when you deploy DOCSIS 3.1, there is initial spend, and then you re-figure out what else you need. We also have a lot of other products going into cable like fiber monitoring, and now we see some cable operators starting to look at the wireless space too. So I wouldn’t say we are in for another big uptick, but cable continues to have its fluctuations. Perhaps we are a couple of years away from fully symmetric DOCSIS 3.1 where you can send and receive data at equal rates, but there is whole RemotePhy architecture conversions coming up which drives more test requirements. This looks very similar in many ways to 5G infrastructure.

Thanks. It seems like we've seen upside in 5G ever since you've done the acquisitions. For at least five quarters here, we've seen lab-driven 5G upside. Can you talk more about why that's doing so well? Is there something about 5G that makes it a better opportunity in 4G, or is it roughly equal to where we were in the 4G cycle?

As much as I'd like to take credit for our brilliant acquisition strategy, there has been an upside surprise to us and the management team running it. There is fundamentally something different about 4G and 5G. When we look at 2G to 3G, 3G to 4G, it was evolutionary; 5G is revolutionary. It’s a new technology, new architecture, different deployment methodologies; that comes with a steep learning curve and uncertainty that requires fundamentally more testing and monitoring to figure out what’s going on with the network. As a result, we do feel that 5G will align more with the 1G and 2G test and measurement and skills required than what we saw with 3G and 4G. Many early deployers of 5G networks have been announced because nobody wants to take the risk of a network not working as advertised when deploying something so different. Service providers are relying more on us to ensure that they have the control needed if something goes wrong.

We mentioned during the Analyst Day that given the more test requirements and more use cases, and 5G being different from 4G, we also made targeted investments in R&D to capture those other use cases and strengthen our market position.

We have made investments in R&D, which is driving the revenue growth we are seeing.

When do you expect to see field tests and for service providers to step up spending? When do you think we will see that driving the business? What’s your current view?

I've been saying for the last three or four quarters that everyone is getting a bit ahead of themselves when they think about deployment; it is proceeding at a much more cautious pace. I believe that we'll start to see field tests picking up more towards the end of calendar year 2020. Today, it’s mostly trials conducted by NIMs using a lot of expensive lab equipment as they fine-tune their deployment models. Right now, it’s all about getting our products part of the deployment protocols for when they go mass rollout, and that's when we expect to see demand. So, I would say the second half of next calendar year at the earliest.

Thanks, guys, for taking my questions. I want to focus on OSP and the margin structure you had in the quarter; the gross margin and operating margins were excellent to say the least. I guess I wanted to ask you a couple of quick questions to make sure I'm understanding things correctly: Is the non-3D sensing part of that business revenue kind of flat, and was there any change in margin structure there, or is it all due to 3D sensing?

So it's all due to 3D sensing, Richard. As we indicated, with the increased 3D sensing volume, there was higher absorption of our manufacturing costs and operational efficiency. We have been driving a lot of operational efficiency in manufacturing while working on the anti-counterfeiting side, removing some of the older redundant costs. But the biggest impact here was positively influenced by our 3D sensing volume production; it's now running at a much bigger industrial scale. There are elements of economies of scale kicking in resulting in a highly loaded factory with very good absorption.

So I think historically, you've talked about 3D sensing being a poor addition to your product mix within OSP; it sounds like it was actually maybe in line or maybe even better this quarter, is that a fair guess?

I will not comment on that because of obvious reasons, but it is better than what it was last year when the volumes were lower.

I would say we like money. Even though the margins from 3D sensing are lower than the traditional military or anti-counterfeiting product lines, it still is significantly better than a lot of our other product lines. Overall, it is very positively accretive to Viavi.

You bring up a good point, Richard. As Oleg mentioned, we typically see higher margins in the first two quarters of the fiscal year, but we avoid pre-building inventory in this consumer business space. Consequently, we see margins drop in March and June quarters. Overall, we should still meet our guidance for the fiscal year in the mid-30s, but we strategically choose to avoid pre-building inventory to mitigate risks.

As 3D sensing penetrates more products and vertical markets, we're likely to see smoothing out between the first and second halves of the calendar year. It's similar to the experiences from my early days in this industry with gallium arsenide power amplifiers in CDMA phones. As 3D sensing matures, we expect a more linear revenue rise.

Great, thanks. First question for me: wireless coming in stronger than expected may not be as seasonal as you previously talked about. How do we think about the seasonality of the wireless business now? And then, I know the 3D sensing business can be short-lead time driven. But do they experience the same kind of lead times on the Android ecosystem or how do we think about timing the volumes?

In wireless, there is a difference between selling into the field versus selling in the lab. Lab sales are driven by engineering budgets and are more linear. In a hot new area like 5G, it is the most strategic spending a company can do. Seasonality in wireless is more driven by individual NIM rollout and product launch cycles rather than a general trend. Regarding 3D sensing, we prefer to run on a short product lead-time basis, allowing flexibility and avoiding inventory buildup. Thus, we build only based on customer visibility toward demand.

Hi guys. This is Nick filling in for Mehdi. I just wanted to shift a little bit to talking about 400G. Do you still see the second half of 2020 as a catalyst for that? Where do we stand with 400G and what should we think about in terms of its impact on each business unit?

I would say the 400G rollout is now in full swing. It has a long deployment cycle, so I expect that business to be good for us and our customers. We see growth primarily in production testing as the volume of shipments increases, and R&D is now following with 600 and 800 gig products. In summary, we see a three-cycle path: R&D, production, and deployment. We hope the same model will repeat in the wireless sector.

Do you have a sense of when that shift from data centers to broad usage will happen? Is that in the second half of the year, next quarter, or 2021? What should we think?

It varies. It depends on operators and how much capacity they have in their metro networks. We're seeing hyperscale data center operators building out their own interconnect networks. It's premature to make sweeping statements on when operators will go to 400G upgrade. It will likely focus on individual operators who have capacity constraints, delaying deployment of 400G in areas with abundant dark fiber.

Thank you all. 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.