Spirent Communications plc

First-half order intake was $239 million, below H1 2022, and book-to-bill was 107. Revenue was down in the period, though the company did not state the exact figure in the prepared remarks; operating profit was just over $11 million versus a strong prior-year comparison. Gross margin was 72%, operating costs were $149.4 million versus $152.6 million in the previous half, and the tax rate outlook was around 15%. The orderbook grew to over $300 million, up 7% versus June last year and 5% versus December. Management said 60% of that orderbook underpins second-half 2023 revenue. Guidance was unchanged: the company expects the softness to be short-term, sees a heavier-than-usual second-half weighting, and said full-year targets remain achievable.

Eric Updyke emphasized that Spirent is seeing a return in customer engagement and orders after a difficult first quarter, with pipeline improving and conversion rates moving in the right direction. He highlighted structural growth drivers including 5G standalone, O-RAN, hyperscalers, 800G Ethernet, and location-aware technologies, and said the company’s strategy has shifted it toward more software, services, and a broader customer base. He was notably upbeat about financial services as a new segment and said the company is confident in its full-year outlook and even more excited about 2024.

Paula Bell focused on the financial impact of the weak start to the year and the recovery in Q2. She said orderbook rose to over $300 million, book-to-bill was 107, gross margin was 72%, operating costs were $149.4 million versus $152.6 million in H1 2022, and operating profit was just over $11 million. She also said cash discipline remained strong, the company was halfway through its planned $70 million buyback at end-June, and it is proposing a 5% dividend increase. On costs, she said the company mitigated about half of 5% salary inflation and expects to finish the year in line with that plan.

Analysts focused on why revenue trailed peers, what products would benefit from a 5G standalone ramp, and how costs should trend in H2. Management said the revenue gap versus peers reflected Spirent’s heavier exposure to telco and the severity of Q1 weakness, while citing improved Q2 order activity, pipeline, and conversion rates. On 5G standalone, Eric said Landslide remains central, but managed services, Vantage, and the transition from lab to preproduction and active assurance should also benefit over time. Questions also addressed financial services and guidance confidence; management said the bank opportunity is early but promising, there is a growing pipeline, and confidence comes from the record orderbook, improving pipeline, better conversion, and cost actions already in place.