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Viavi Solutions Inc (NASDAQ:VIAV)
Q2 2021 Earnings Call
Feb 2, 2021, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Viavi Solutions Second Quarter 2021 Fiscal Year Earnings Call. [Operator Instructions]

I would like to hand the call over to your speaker today, Mr. Bill Ong, Head of Investor Relations. Please go ahead.

Bill Ong -- Head-Investor Relations

Thank you, Gray. Welcome to Viavi Solutions second quarter fiscal year 2021 earnings. My name is Bill Ong, Head of Investor Relations. Joining me on today's call are Oleg Khaykin, President and CEO; and Pam Avent, Interim 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 report and SEC filings, particularly the risk factors described in those filings. The forward-looking statements, including guidance 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 except revenue are non-GAAP. We reconcile these non-GAAP results with our preliminary GAAP financials and discuss their usefulness and limitation in today's earnings release. The release plus our supplemental earnings slides, which includes historic financial tables, are available on Viavi's website. 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.

I would now like to turn the call over to Pam.

Pam Avent -- Interim CFO

Thank you, Bill. Fiscal second quarter revenue came in at $299.9 million, at the high end of our guidance range of $280 million to $300 million. The Q2 results represent a 4.4% year-on-year decline and a 5.3% quarter-on-quarter growth. The sequential growth was driven by continued recovery in NSE and strong OSP performance. Viavi's of record operating margin at 22.3% expanded 70 basis points year-on-year and exceeded the guidance range of 19% to 20%. EPS at $0.23 tied the record EPS from a year ago and exceeded the guidance range of $0.18 to $0.20.

Now moving to our reported results by business segment, starting with NSE. NSE revenue at $206.7 million declined 11.7% year-on-year and grew 12.6% sequentially. Within NSE, NE revenue at $180.9 million declined 10.9% from a year ago, primarily due to pandemic-related declines in field instruments. SE revenue decreased 17.3% [Technical Issues] due in parts of last year's stronger than usual demand in data center products. NSE gross margin at 63.3% declined 310 basis points year-on-year. Within NSE, NE gross margin at 62.6% declined 380 basis points from last year, primarily due to lower volumes. SE gross margin at 68.2% increased 150 basis points year-on-year due to favorable product mix. NSE's operating margin at 10.7%, decreased 530 basis points year-on-year, primarily as a result of lower revenue partially offset by lower operating expenses.

Now turning to OSP. OSP had a strong quarter with revenue at $93.2 million, up 17.2% year-on-year, driven by strong demand in anti-counterfeiting and 3D sensing. Gross margin was a record 62.7% up 790 basis points year-on-year driven by higher volume, favorable product mix and high factory utilization. OSP also delivered a record operating margin of 47.9%, up 970 basis points from last year's levels as a result of higher gross margin and opex management.

Now turning to the balance sheet. The ending balance of our total cash and short-term investments was $648.8 million, an increase of $53.3 million sequentially. Our operating cash flow [Technical Issues] quarter was a record $68.7 million. In Q2, we repurchased approximately $17.1 million of Viavi stock at an average cost of $13.26 per share, including commissions. Overall, we have repurchased approximately $68.3 million out of the $200 million authorized into the share buyback plan announced in September 2019. At the end of Q2, cumulatively under this plan, the average overall cost was $12.28 per share. We will continue to be opportunistic in our share repurchase.

Now on to guidance. We expect the third quarter revenue to be approximately $290 million, plus or minus $10 million. Operating margin is expected to be between 17.5% to 18.5% and EPS to be in the range of $0.16 to $0.18. We expect NSE revenue to be approximately $197 million, plus or minus $8 million, with operating margin at 6.5%, plus or minus 50 basis points. The OSP revenue is expected to be approximately $93 million, plus or minus $2 million, with operating margin at 43% plus or minus 100 [Technical Issues] basis points.

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 $3.5 million. The estimated fully diluted share count used in our calculation is 240 million shares. This includes an increase of approximately 8 million shares from Q2 as an adjustment to reflect the estimated dilution impact from our 2023 and 2024 convertible notes.

With that, I will turn the call over to Oleg.

Oleg Khaykin -- President and Chief Executive Officer

Thank you, Pam. I'm pleased with Viavi's performance in the second fiscal quarter. Our OSP business segment recorded its second highest revenue quarter in their record profitability, and our NSE business segment show its revenue and profitability continue to recover. The NE segment revenue recovery was led by increased demand for field instruments. Our service providers resumed their network maintenance activities and gear up for new deployment projects. Uptick in lab and production and wireless continued to enjoy strong customer demand driven by 400-gig in fiber and 5G in wireless. We are also seeing growing customer interest in 800-gig in ORAN. We see 800-gig and ORAN technology as drivers behind the next growth wave for lab and production and wireless respectively.

The SE business segment had a robust Q2. Looking ahead, we expect Q3 to be weaker, driven by a confluence of two trends, the reduced spending by service providers on existing networks as they gear up for 5G and the delays in new projects by the enterprise customers until more staff is able to return to work. That's said, we expect SE revenue to start rebounding in fiscal Q4.

Overall, we expect NSE demand continue to improve in calendar 2021 with above seasonal demand outlook in the current fiscal Q3. Additionally, we expect 5G field instrument demand to start picking up in the second half of calendar 2021, as 5G service providers started ramping up their network build-outs.

Now turning to OSP. The OSP business segment finished the first half of fiscal year 2021 with the record revenue and profitability driven by strong demand for anti-counterfeiting and 3D sensing products. Anti-counterfeiting demand is being driven by a combination of global central bank's fiscal stimulus, inventory replenishment and new bank note redesigns. We expect the secular strength to be sustainable in the foreseeable future.

3D sensing demand for mobile devices came in stronger than expected, driven by increased adoption and penetration, with facial recognition applications in the marketplace for more than three years. Now we now have a large and growing demand from the lead customer with more customers and devices pointing to launch later in calendar 2021. As a result, we now expect 3D sensing revenue for fiscal year 2021 to increase to 20% year-on-year, up from the initial guidance of 10% to 20% year-on-year.

Looking back at the calendar 2020, I'm pleased with our performance and execution. Despite the unprecedented pandemic driven setback to our business in early 2020, we managed to recover our revenue and profits throughout the year, finishing it by tying our record quarterly EPS. Our fiscal Q3 is off to a good start, and we look forward to drive in continued recovery in growth in calendar 2021. A quick update on the CFO search, we have interviewed many impressive candidates and have narrowed it down to a final few. We expect to announce our new CFO sometime in March.

In conclusion, I'd like to express my appreciation to the Viavi's team for its strong execution during these challenging times. I wish all our employees, supply chain partners, customers and our shareholders to stay safe and healthy. I will now turn the call over to Bill.

Bill Ong -- Head-Investor Relations

Thank you, Oleg. This quarter, we will be participating at the Morgan Stanley TMT Investor Conference on March 1. Great, let's begin the question-and-answer session. [Operator Instructions]

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Samik Chatterjee from JPMorgan. Your line is open.

Samik Chatterjee -- J.P. Morgan Securities LLC -- Analyst

Thanks for taking my question and congrats on the cost strong guide here. Oleg, I just wanted to start up on the OSP segment and I think what I heard, you say that you expect the anti-counterfeiting strength to continue for a duration of time, maybe if you can kind of talk about how long do you think this momentum in on anti-counterfeiting will sustain? And am I reading it right, that you were kind of them seeing this low $90 million kind of quarterly run rate of revenue should be the new level for OSP segment? And I have a follow-up. Thank you.

Oleg Khaykin -- President and Chief Executive Officer

Thank you, Samik. So I think, listen, I mean, clearly U.S. is not the only country doing a significant stimulus spend, it's pretty much the norm around the world. And as a result, we constantly see additional orders coming in above and beyond or sooner than we expected. So there is clearly the stimulus. So there is driving some of the upside in the demand. And that's usually coming on top of -- we would have expected to be already a stronger demand because of many redesigns and additional adoption of our security features was driving additional growth. So that's coming up on top of it. In addition to that, in the first kind of six month of shut down, a lot of printer lines have been shut down and they've exhausted all of their inventory and they badly in the need of replacing in existing currency much less providing stimulus cash. So that's obviously driving an extra layer of demand.

And on top of all of it, there is also a very low inventories across the entire supply chain. So people trying to replenish their inventory as they need that. So I expect we're going to see an increased dual level of demand of -- for anti-counterfeiting products. I mean, I think -- it's really, we don't -- unfortunately, we don't get much visibility. But given all the elements, I think in the foreseeable future, in the next 12 months, I expect us to be running stronger than we traditionally have been. And traditionally, we've said our base business running around $50 million a quarter plus other business. I think now it's safe to assume that that's $55 million, maybe a little more at any given quarter. I mean, there is going to be some things will come in more in one quarter, may be less in the other quarter. But overall, I expect us to be running pretty tight on the anti-counterfeiting products in the foreseeable future.

And then 3D sensing is really going to be a function of customer shipments and I mean, even though we expected pretty good adoption and penetration, our lead customer I think had a much stronger demand that it was initially anticipated and we are seeing, obviously, some of that volume coming through driving much stronger results than we anticipated.

Samik Chatterjee -- J.P. Morgan Securities LLC -- Analyst

Got it. If I can just follow-up on the recovery in the NE business, you talked about the two drivers in the prepared remarks. 5G wireless and fiber, curious kind of which one do you see as having more visibility into particularly I think when you mentioned 5G wireless, there is broader concern that most of the service -- telco service providers have overspent on spectrum auction. So does that have ramification in terms of pushing some of the spend-out in wireless infrastructure? Just wanted to get your thoughts on that.

Oleg Khaykin -- President and Chief Executive Officer

Sure. So I mean, when we say by recovery in any, that's the old bread and butter of the business, the cable access, fiber -- field fiber instruments, that's what's really been driving the recovery. The wireless in lab and production test was very strong in Q1, it continue to be strong in Q2. So that business continued to be strong and as far as we can see it's not going to decrease, it's going to continue to be very healthy and strong. So the only thing, I know the area that you are bringing up is the field wireless instruments, right. And that's really going to be linked to the deployment. So I do agree. They have all spend a lot of money on buying spectrum, but at certain point, they have to start monetizing.

So from our perspective, but just to strengthen our traditional broadband field instrumentation like fiber, DSL, cable and strength in our lab and production equipment for fiber and the wireless lab we see those trends continue to be pretty robust. And to the extent the second half, we start seeing more deployments happening. We expect also field wireless instruments to contribute. Whether they are going to really start in the second half, I tend to believe that they will start, whether it's going to be as aggressive as some people think, it is another matter. But they need to start monetizing this factor and generating revenue. Because it's no longer a duopoly in U.S., where you could kind of take your time and do it. I think there is in some ways, we are seeing emerging a race to claim the 5G crown between T-Mobile, Verizon and AT&T. So I do believe that we will see a more aggressive deployment rather than less aggressive deployment when it starts.

Samik Chatterjee -- J.P. Morgan Securities LLC -- Analyst

Okay, thank you for the insight. Thank you.

Operator

Thank you. And your next question comes from the line of Alex Henderson from Needham. Your line is open.

Alex Henderson -- Needham & Company, LLC -- Analyst

It's actually a great time to ask it, because it was kind of a follow-on what we're just talking about. You've historically been seen by The Street as tied to capex, but in fact it seems pretty clear to me that the predominant driver is actually more opex relevant to your test and measurement business in particular, the field instrument business. As you look at the pressures' that was mentioned, i.e., the license -- spectrum license fees going out, that's more of a capex or even independent of capex phenomenon. I would think that that would not have much impact at all on the opex driven side of your business. You seem to have pulled forward the timeline for 5G, a little bit, I think you were talking about at the end of calendar '21 being -- the point where it starts to pull forward that demand. Have you changed your thinking in terms of the timing pulling it forward some and what gives you that visibility?

Oleg Khaykin -- President and Chief Executive Officer

Thanks, Alex. A good question. So, no, I still say second half of calendar 2021. So I mean, whether you're going to take December quarter, September quarter, I mean I'm not that -- my inside is not that great. But I do believe they're going to start deploying. And remember, you're right, our field instrumentation demand for traditional fiber, cable and DSL is driven by opex. But remember, for us, the sales of instruments are -- there's two drivers, when the networks are being built, they need equipment to test and turn them on. And then when the equipment is being maintained. So maintenance is driven by our opex, the build-out demand is driven by capex. So when they start building these towers and certifying and releasing them into operation, they should have the first wave of equipment and it will be followed by subsequent waves as they've been certification and maintenance starts taking hold.

Alex Henderson -- Needham & Company, LLC -- Analyst

If I could follow-up, there is -- an argument that was made that being much further earlier in the test and measurement cycle being able to get into the pre-deploy lab helping to write the manuals that you've built in a competitive advantage that, now it's -- and it's can meet and to that extent you've got an inside track on the field test and measure, because you have helped designed to manuals. Is that playing out? Is that something that you've got any visibility on that share benefit from?

Oleg Khaykin -- President and Chief Executive Officer

Well, listen, I think the incumbents always have an advantage because they are already there. So they're also obviously, influencing installation. Now being a complete new comer in the absence of being in the lab, in the early deployments, we wouldn't get our time of day however being seen as the 5G expert coming in with the all NAMs than everybody else has given us an equal seat at the table. And we do believe, we're going to have an advantage, having been intimately involved in specifying installation protocols, certification criteria and things like that. And through that we also a fine tuned our product definition. And at this point, we have released pretty much the full suite of products. So in a way, our assumption on timing worked very well. We had the 5G start deploying a year ago, we would have very thin instrument portfolio today. I'd say, we have pretty much surrounded of all the corners and I think we have products that are better than the incumbents' products in that space. So we do believe that that should result in us picking up some share and covering our chunk of the market for ourselves.

Alex Henderson -- Needham & Company, LLC -- Analyst

Great, thank you very much for your answers.

Oleg Khaykin -- President and Chief Executive Officer

Sure. Thanks, Alex.

Operator

Thank you. Your next up is John Marchetti from Stifel. Your line is open.

John Marchetti -- Analyst -- Stifel, Nicolaus & Company

Thanks very much. Oleg, I just wanted to talk a little bit on the OSP business looking forward. You went through on the anti-counterfeiting side, how you expect that to kind of play out over the next 12 months or so? In looking at the 3D sensing, filter and end user business, I'm just curious to get your updated timing as you think maybe Android starts to get a little bit more involved here as we go through the calendar year. And if there is any concerns around some of the knocks changes that are rumored to happen with some of the new phones and things like that? Just to get your sense maybe of that 3D sensing business will be helpful within that OSP business as well?

Oleg Khaykin -- President and Chief Executive Officer

Okay. I know, it's a good question. So, I mean, first I'd say, notch, no notch, really no matter. We really don't care whether there is a notch or no notch. I mean we know which modules we're in and it's all within our guidance. So it's just a different way of designing things and I'm not going to further pine on that. There is a lot of what I've seen in the news, not entirely accurate understanding of what different things mean. The way, I would kind of make it easier, there is a world-facing and rear-facing. Rear-facing is a high resolution kind of facial recognition security. World-facing is more camera-related. And I do expect that the market in the technology innovator in that space, we'll see more world-facing cameras or more phones, as well as having ubiquitous facial recognition as well. So that business will continue to grow with their market share and the continuous adoption of 3D sensing technologies.

What I think, it could be an exciting upsides to the whole forecast is the Android, because we are seeing a much more animation around 3D sensing for the world-facing camera from various Android OEMs and depending which modules and which model is going to production, we're going to see a combination of diffusers and filters playing into that space. I mean we do believe that the -- having a world-facing camera on higher-end phones is now must have to kind of tie the camera performance and we do -- I do think the Android after several false starts is about to start adapting 3D sensing.

John Marchetti -- Analyst -- Stifel, Nicolaus & Company

Got it. And then if I can just also go back to your comment on ORAN, looking out as maybe a next leg of investment within that wireless lab. I guess where are we in that cycle from a tax perspective, is it still early days, are you seeing widespread interest. Is it maybe more geographically concentrated in one area and other? Any color you can just sort of share on that ORAN, Oleg, I would be appreciated as well. Thanks.

Oleg Khaykin -- President and Chief Executive Officer

Sure. I mean it's a very early stage. So operators, I mean you can talk all you want. Right now they need 5G working. So they are tailing for the initial deployment to the respective NAMs. Just put whatever you want, I don't care if it's proprietary solution. I'm just getting me something that works. In parallel, in their labs, they are all looking deeper, the ORAN as a kind of the next thing for themselves. And on top of it or even leading NAMs aggressively ensuring that they are ORAN compliant down the road, and what also ORAN brings, it brings a lot of new players into the market. So it's no longer just step 3-4 NAMs. Now you have about a dozen smaller companies, who are all looking to play it various horizontal or vertical layers of the network and they're all buying lab equipment. So at this point, I would say, ORAN is heavily a lab and experimentation and kind of what is kind of thing focused activity and in terms of the actual deployment. It just get me something to the works, and I don't care how you make it work. So I hope that gives you a bit more color how we see ORAN happening.

John Marchetti -- Analyst -- Stifel, Nicolaus & Company

It does. Thanks so much, Oleg.

Operator

Thank you. And your next question comes from the line of Mehdi Hosseini from Susquehanna. Your line is open.

Mehdi Hosseini -- Susquehanna Financial Group, LLLP -- Analyst

Thank you. Two follow-ups, Oleg, can you please help me understand how much of this strength in your 3D sensing is driven by the new models, especially the U.S. OEM that introduced and appears to be successful? And how much of your success is driven by increased content, so a smartphone units versus increased content for you? And I have a follow-up.

Oleg Khaykin -- President and Chief Executive Officer

So, I think clearly the market leader is driving home full of our 3D sensing business. And I mean, there is really been no change to the -- what we've seen there is couple of things, first of all, I think you guys can make your own assessment on their market share. We believe that they picked up some market share. So as a result, we are now talking about higher volume of phones. Then within those phones, I think almost universally now everything has rear-facing camera for facial recognition. And it's proliferating into other products like tablets and PCs. And then of course, the world-facing camera on the higher-end models really got a lot of interest. So I think they probably came in stronger than we would have expected. So I think we take all of these things together. I would say, the bigger driver in terms of the increased volume is just surely more volume. And the second biggest one is the introduction of the world-facing cameras. And between the two of that, of those, it's more than enough to offset any ASP erosion.

Mehdi Hosseini -- Susquehanna Financial Group, LLLP -- Analyst

Okay. But would you agree that you have higher content? Now to me, it seems like you may have two different filters of products versus one in the past?

Oleg Khaykin -- President and Chief Executive Officer

Yes. So in the phone that has both world-facing and rear-facing camera, our content is greater. It's a little different. So I mean, people -- let me just give you a little clarification. When people think about the lasers, the world-facing laser is actually higher power than the rear-facing laser and in some cases, may be more expensive. For us that's not how we look at it, we look at it by the sensor area and the world-facing camera sensor is much smaller. It's a lower resolution than the rear-facing which is a facial recognition sensor. So in terms of the ASP, the ASP for the world-facing cameras are much smaller and ASP for the rear-facing cameras are bigger, because the area is bigger. But the mere fact that before we had zero world-facing filters, and now we have some and it's growing. That's obviously driving upside. I'd say, good [Indecipherable] two to one in terms of content. So if you think about the total area, it's 1.5.

Mehdi Hosseini -- Susquehanna Financial Group, LLLP -- Analyst

Sure. Now the NSE part of your business seems to be more clear today than three, six months ago. At some point, it's going to turn and you have new products that hopefully will scale. And so I want to stay focus on the OSP, it's interesting that the recently one of the key suppliers in 3D sensing they made the bold acquisition of getting into lasers, which was very surprising to me. To me, LiDAR suddenly has become a huge growth driver. In that context, would you actually shift your focus if six months ago, you were looking into M&A for NSE application, now you're looking more in strengthening your portfolio with the eyed on LiDAR as end market application. Am I thinking about this the right way?

Oleg Khaykin -- President and Chief Executive Officer

We look at acquisitions for both OSP and NSE. We're not really -- we have a clear roadmap and strategy for each. I think you're talking about Lumentum. I think to my view on it, it's more of a diversification play for them to add industrial and kind of the industrial laser processing and things I guess. So I mean they have their own strategy for that. I don't know, I know even from the days of JDS they were always looking at fiber lasers for industrial application. So I think it's a good deal for them. Longer term, it will make them a more diversified, more resilient company not depending on any one particular model of the phone. So I think that that was a good opportunity for them, and I think it worked out quite well. For us, as we're looking combination of both. I think going deeper still makes more time for us, it gives us a much bigger leveraging in any kind of acquisition. Going wider is probably a bit too premature for us as it we need to continue to drive scale in our existing markets.

Mehdi Hosseini -- Susquehanna Financial Group, LLLP -- Analyst

Just a quick follow-up, given the changes in the market, would you say the priority in optical sensing now seems to be higher than NSE in the context of M&A opportunities?

Oleg Khaykin -- President and Chief Executive Officer

I would say, higher or lower. I mean the both are priorities. We have our kind of target list in each business and it's really matter of which one becomes more actionable sooner or later. And in both cases, we get tremendous operating leverage. So I mean, we are equal -- we don't need to choose either or we can do. And here, it's really comes down to more worthy actionability. Now the only difference is in optical space, there is very handful of companies, and most of them are fairly smaller in that respect they don't really move the needle. And in case of NSE, there are some bigger players as well. So I mean, we do look at the area around LiDAR, I mean that's a very interesting part for us.

Mehdi Hosseini -- Susquehanna Financial Group, LLLP -- Analyst

Okay, thank you.

Operator

Thank you. And your next question comes from the line of Richard Shannon from Craig-Hallum. Your line is open.

Richard Shannon -- Craig-Hallum Capital Group LLC -- Analyst

Well, thanks for taking my questions. I think, a follow-up on the NE business piece in 5G field test, Oleg, you talked about some confidence in seeing second half of your calendar year being robust, how would you describe the kind of inputs to that what geographically? And then how long you kind of see the cycle for 5G field test lasting?

Oleg Khaykin -- President and Chief Executive Officer

Well, I think really the 5G field test I think it's going to be a super cycle kind of seven, eight year run. Initially, going to have initial deployment, followed by densification and then more and more geographies have been a rollout. It's similar to what we saw with our 3G and things like that. So how aggressively things start, I think it's already happening in countries like Japan and we are seeing some pretty good traction and even though, we are in the home turf, one of our major competitors. We are doing pretty well in that market, which gives me confidence that our products are quite good. In terms of the U.S., I think U.S. will be the next thing, I mean clearly, there is China, and that's already been going on for quite a while. In terms of the next big deployment, markets will be U.S., and in U.S., we have an interesting situation of three players now vying for the 5G crown. That's why I think we will probably see things happening sooner rather than later, because there is now a competition. It's no longer a duopoly with two major players kind of moving at a kind of link-link node-node type pace, where they take the time. Right now there's three players, it's very difficult to sustain a collusion or anything like that.

So I think things are going to happen much quicker in U.S., maybe starting sometime next year, later this year. I think that the next one would be Europe and I think Europe is really about a year behind U.S. into some deployments and we probably should start seeing some things happens in Europe sometime next year.

Richard Shannon -- Craig-Hallum Capital Group LLC -- Analyst

Okay, great. Thanks for that color. Oleg, my follow-on question is in your fiber business, you've talked, I think, for at least couple of quarters about a fairly robust cycle 400-gig, maybe if you can give us a sense of when that turns into a robust cycle in terms of fiber. And then how do you see the 400-gig generation versus the last two generations of at least as positive or even better. How do you view that?

Oleg Khaykin -- President and Chief Executive Officer

Well, I think, if anything, I see like -- when we went from one-gig to 10-gig, 10-gig to 100-gig, what I've seen with each one is deterioration. The amount of time between the start of deployment of one and started deployment of another technology node that time has been getting shorter and shorter. I mean, we only went to 100-gig in earnest, a couple of years ago. And now we are already seeing 400-gig and we already, our customers want to see 800-gig. So I think the fiber is really, from my perspective, I think the time of each node deployment is shortening and we may see multiple technology core exist. I mean we may see data centers moving to higher bit-rate sooner and metro areas kind of transitioning from 10-gig to 100-gig slower, but we will be seeing all these nodes co-existing in parallel rather than with one ramping up the other one ramping down. And just completely new customer segments, it's no longer the traditional telecom transport. I mean we see the back lane overall the data center boxes is becoming optical and that's really driving a lot of the fiber demand.

Richard Shannon -- Craig-Hallum Capital Group LLC -- Analyst

Okay, great. That's a great perspective, Oleg. Thanks for that.

Operator

Next up, we have Tim Savageaux from Northland Capital. Your line is open.

Tim Savageaux -- Northland Securities Inc. -- Analyst

Good afternoon and congrats on the results. A couple of questions here. First, over on the OSP side or 3D sensing, in particular, you had mentioned and we've heard a little bit of this before today, about an increasing level of activity around world-facing in the Android universe and you'd also mentioned that there is a potential source of upside, and I think your Android contribution to 3D sensing to date has been pretty low, if not minimal. And so my question is basically an upside to what baseline, when you say that which is to share with a robust Android rollout in second half of calendar '21, your fiscal '22 drive the same sort of double-digit growth you're seeing in 3D sensing next year even with, say your top customer sort of flattish.

Oleg Khaykin -- President and Chief Executive Officer

Yes. So I would make a little correction, actually our contribution to Android universe in 3D sensing has been huge, it's just the universe has been fiddly. And it's kind of started and then just physical the way so. In that respect, the Android market has been happened, but we've been engaged with all the major players. And I think this time around I think later this year, we are going to see Android and it's mainly world-facing cameras. And for us, it's double opportunity. It's not only filters. It's also diffusers. So depending which model is going to production and which modules get designed in, we will get either one or two of our product designed in. And given that Android is so big with enough players, if they introduce into more than one high-end models, we can see that volume to be quite meaningful.

Tim Savageaux -- Northland Securities Inc. -- Analyst

Got it. And I was mentioning your revenue contribution not your technology contribution.

Oleg Khaykin -- President and Chief Executive Officer

Our contribution is big. It comes from a very small base. But yes, I mean -- I think Android is going to happen this year. And I mean, otherwise they will really lose out big on customer acceptance. So I think, I mean we don't -- we haven't put any of it in our forecast. I mean, we still treating it as an upside, so we clearly as it -- we will probably start seeing over the next three to four months, as customers are placing orders, how many models and how many modules will go into production.

Tim Savageaux -- Northland Securities Inc. -- Analyst

Got it. And just a quick one on OSP, just want to make sure I heard the number right. The kind of baseline currency run rate you're looking at $65 million a quarter?

Oleg Khaykin -- President and Chief Executive Officer

Let me say in terms of the -- we always say our kind of base business, it were on $50 million. I'd say $55 million to maybe $60 million. So I'd say, it's actually higher $50s million type range.

Tim Savageaux -- Northland Securities Inc. -- Analyst

Got it, thanks. And then last one from me. To the extent that you saw strength in some of your traditional fiber cable field test here in the December quarters, in to what extent is it possible to characterize that versus pent-up demand releasing? Or would that be the same as a more traditional budget flush? And as you look for to the declines in March, do you see that as being principally seasonal in nature or any other drivers there?

Oleg Khaykin -- President and Chief Executive Officer

Yes, actually it's all driven, what I call it, the best kind of demand. I mean a lot of customers are seeing significant increase on bandwidth for consumer bandwidth and increased demand for quality of the network. I mean, for example, I'm doing my call from the office because I cannot rely on my local cable provider for not shut me off during the day, during my call. So I think that would, we are seeing is actually response by cable companies and telecom companies to the kind of consumers demanding more bandwidth and higher quality of service. And that's to me is the best kind of demand you can have because it manifest itself into our longer-term investment with a more sustainable demand over multiple quarters. So it took them several quarters to figure out what needs to be done. I mean, I think many of them are still redesigning their networks and they're starting to roll it out, and I think the next wave will be and I won't say a wave but kind of incremental spend in the U.S., this whole overall broadband. We are seeing already a lot of customers starting to plan and compete for the government money for these projects. And that would be also an additional spend down the road for us.

Tim Savageaux -- Northland Securities Inc. -- Analyst

Great, thanks very much.

Operator

Thank you. And our next question comes from the line of Meta Marshall from Morgan Stanley. Your line is open.

Meta Marshall -- Morgan Stanley & Co. LLC -- Analyst

Great, thanks. Maybe expanding on the 3D sensing opportunity, it's been a while since you kind of talked about how you are thinking about timing of the auto opportunity. And just with your supply chain partners seeming to think that [Indecipherable] may be 2022. Just wanted your latest thought. And then maybe as a second question, Europe was relatively strong despite maybe stricter accessibility issues, [Indecipherable] in North America, in Q4, just anything to read into that pickup that we saw in Q4 out of Europe. Thanks.

Oleg Khaykin -- President and Chief Executive Officer

So I'd say, in terms out of 3D, I think, listen, we always said the actual like LiDAR and the kind of autonomous driving or assisted driving that will take longer. And it's really not a function of the lasers or filters, it's really the area around the whole cost minimization and miniaturization that's needs to take place. I mean, today, we are pretty much working with every LiDAR company out there. And I think 90% of them will be out of business or will get acquired in the next few years. And we still view automotive as a '23, '24 opportunity at the earliest for that. However, there are segments for 3D sensing already in out of that are being active today mainly the high end, which is the gesture recognition in cabin monitoring and things like that and we are pretty good share in that market. It's not a big market, it's very much limited to high end market, but it's getting -- giving us engagement with the customers and positions us of the kind of go-to company for 3D sensing in automotive. So that's how I see automotive to us, it's really more, I'll say, longer-term play for us. And still I'd say consumer devices in industrial 3D vision, it is our call as the near-term drivers of the growth in business for us.

In terms of Europe, actually the whole EMEA region has been very robust for us even during the worst downturn during the pandemic and it continues to be very strong and it continues to grow. So we've seen very strong demand and growth in Europe and a lot of fiber initiatives going on in Europe with the mandates from governments to rollout fiber to practically every household in Europe. And Europe, as you know is very different from U.S. We have a cable pretty much connect almost every house in North America. In Europe, it's predominantly had been DSL and the DSL has run out of steam in terms of delivering broadband subs. We are seeing wholesale, I'll say, call it fabrication in Europe with fiber being pushed out reward in the network with a lot of national push behind it.

Meta Marshall -- Morgan Stanley & Co. LLC -- Analyst

Great, thanks.

Operator

Thank you. Our last question comes from the line of Fahad Najam from MKM Partners. Your line is open. Once again, your next question and your final question comes from the line of Fahad Najam from MKM Partners. Your line is open.

Fahad Najam -- MKM Partners LLC -- Analyst

Thank you. Thank you for taking my question. Most of my questions have been answered, but Oleg, if I could ask you to help us understand a little bit about more of your opportunity in 5G, but maybe if you can peel this on a little bit more, it's from what I understand, there are two aspects of your opportunity. One is on the RF side rather it's on the fiber optic, the optical side given all these different spectrum that are going to be coming online, carriers are going to be looking [Indecipherable] market. So densifying on so to speak to shortfall carry be the video traffic, can you speak to us where you are in terms of the opportunities you're seeing, is it more on the optical side or do you think the optical side follows the RF side, maybe a little bit of the dynamics there. If you can help us understand the opportunity and how you see this dynamic play out between the optical and the RF?

Oleg Khaykin -- President and Chief Executive Officer

Sure. You bring up very good point. And in fact we are seeing fiber and RF converging because you cannot talk about RF without talking about fiber in wireless network in by source, because everything in the wireless infrastructure is interconnected today with fiber. So you need to test your timing, transmission and all these things you have to test fiber as well as the RF. Right so where we feel is, we have the unique opportunity here as all our instruments come with two-in-one. We have been our RF instruments and fiber in a single box, so you only need to bring one instrument to do all everything that you need to do in the market, in the field, installation or qualification. But in terms of what we're seeing is, in terms of 5Gs are clearly the Phase 1 for us, it was really winning big with NAMs in the lab and engineering development and it is going to continue as the new 5G standards are rolled out and new instantiation.

The next big way for us will be really the field deployment, so which plays to our traditional strength in field instrumentation. We see that growth. And the next way after that is rolled out called ORAN and it's combination of traditional players like NAMs and service providers, but also a lot of the new entrants into the markets were coming in offering service or particular part of the network and they are buying our products to help them to be compliant in testing. And in the same, I'd say the other big element I think emerging in there for 5G is the private 5G networks, because I think in many cases 5G and the enterprise network is going to become synonymous as more and more companies view 5G as they're effectively their enterprise network. And that's a completely new markets for us and where we haven't really played -- we haven't played in enterprise networks in event large enterprises start deploying 5G for their private purposes. It plays very well to our toolkit across the entire Viavi. So it to be test equipment, stimulation equipment, monitoring equipment, as well as the assurance software that goes into the enterprise network. So I look at the 5G and it's not any one technology, there is a lot of opportunities. It's really of -- our refocus on is what do you want to put more money. First, second, third and how these things are going on rollout. But the number of opportunities in 5G is huge for us.

Fahad Najam -- MKM Partners LLC -- Analyst

Thank you. And then if I could ask you a question on the optical side, maybe if you can share with us some data points, that's where you're seeing even the shift to 800-gig in higher speeds. You've got beginning to become an increasing portion of your revenue mix and how should we be thinking about the implication for your margin from that.

Oleg Khaykin -- President and Chief Executive Officer

So the 800-gig today is very much a bleeding edge of development and it's very much an engineering lab demand. So it's a leading optical equipment NAMs and they are suppliers for various optical modules. That's what's playing in the semiconductor company, except that's who is really doing 800-gig. So to us 800-gig today is really the kind of advance development. And I think we will probably start seeing next year 800-gig being rolled out into the field with some early adopters.

Fahad Najam -- MKM Partners LLC -- Analyst

Thank you very much. And lastly if I could, one of the largest chip makers Broadcom talked about building their co-pack is optics chips in 2022. So does the shift to co-pack is optics create an incremental revenue opportunity for you with the customers?

Oleg Khaykin -- President and Chief Executive Officer

Sure, I mean that's actually as semiconductor companies, kind of trying to do more vertical integration with the co-packaging of optics and things like that. I mean, they start buying the same equipment that the module manufacturers and used to do OR and NAMs or ORs. So it's actually semiconductor business for us, I mean, a very active space in selling high end optical testing systems.

Fahad Najam -- MKM Partners LLC -- Analyst

Thank you very much. I appreciate your answers.

Operator

Thank you. There are no further questions at this time. I will turn the call over back to Bill for any closing remarks.

Bill Ong -- Head-Investor Relations

Thank you. Great. This concludes our earnings call today. Thank you, everyone.

Operator

[Operator Closing Remarks]

Duration: 53 minutes

Call participants:

Bill Ong -- Head-Investor Relations

Pam Avent -- Interim CFO

Oleg Khaykin -- President and Chief Executive Officer

Samik Chatterjee -- J.P. Morgan Securities LLC -- Analyst

Alex Henderson -- Needham & Company, LLC -- Analyst

John Marchetti -- Analyst -- Stifel, Nicolaus & Company

Mehdi Hosseini -- Susquehanna Financial Group, LLLP -- Analyst

Richard Shannon -- Craig-Hallum Capital Group LLC -- Analyst

Tim Savageaux -- Northland Securities Inc. -- Analyst

Meta Marshall -- Morgan Stanley & Co. LLC -- Analyst

Fahad Najam -- MKM Partners LLC -- Analyst

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