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Viavi (VIAV) Q4 Earnings Beat Estimates, Revenues Fall Y/Y

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Viavi Solutions Inc. (VIAV - Free Report) reported decent fourth-quarter fiscal 2020 (ended Jun 27, 2020) results, with the bottom and the top line surpassing the Zacks Consensus Estimate. The San Jose, CA-based company delivered lower revenues owing to pandemic-related adversities.

Bottom Line

On a GAAP basis, net income from continuing operations came in at $26.7 million or 12 cents per share compared with $12.5 million or 5 cents per share in the year-ago quarter. The more than two-fold rise despite top-line contraction was primarily driven by lower operating expenses. For fiscal 2020, earnings from continuing operations were $28.7 million or 12 cents per share compared with $5.4 million or 2 cents per share in fiscal 2019.

In the June quarter, non-GAAP net income came in at $40.8 million or 18 cents per share compared with $40.1 million or 17 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 4 cents. For fiscal 2020, non-GAAP net income was $171.3 million or 73 cents per share compared with $156.2 million or 68 cents per share in fiscal 2019.

Viavi Solutions Inc. Price, Consensus and EPS Surprise

Viavi Solutions Inc. Price, Consensus and EPS Surprise

Revenues

Impacted by the pandemic, quarterly total net revenues declined 8% year over year to $266.6 million compared with $289.7 million in the prior-year quarter. However, the top line surpassed the consensus estimate of $260 million. Fiscal 2020 revenues rose 0.5% to $1,136.3 million from $1,130.3 million on the back of marginal growth in NSE (Network and Service Enablement) revenues.

Segment wise, revenues from NE (Network Enablement) fell 8.3% from the year-ago quarter’s figure to $180.9 million due to reduced demand of field instruments stemming from the virus outbreak. This was partially offset by record 5G-related growth in wireless lab products. Meanwhile, SE (Service Enablement) revenues improved 14.1% to $27.5 million, mainly driven by robust demand for datacenter, enterprise and assurance products.

NSE’s gross margin was 64.6%, down 110 basis points (bps) year over year. Its operating margin of 16.9% increased 350 bps driven by lower variable expenses and efficiency programs on the back of prudent expense control measures.

OSP (Optical Security and Performance Products) revenues declined 14.8% year over year to $58.2 million compared with $68.3 million in the year-ago quarter. The year-over-year deterioration was mainly caused due to softer demand of anti-counterfeiting products, partially offset by solid growth in 3D sensing revenues.

OSP’s gross margin of 51% expanded 150 bps year over year owing to improved efficiencies. Meanwhile, operating margin of 29.4% contracted 160 bps year over year. The downside was primarily due to lower revenues on the back of relatively fixed OSP operating expenses.

Region wise, Viavi generated 38.8% of total net revenues from the Americas, 27.7% from the Asia-Pacific and 33.5% from EMEA (Europe, Middle East and Africa).

Other Details

Overall non-GAAP gross profit declined to $164.4 million with a margin of 61.7% from $179.2 million with 61.9% in the year-ago quarter. Non-GAAP operating income was $52.3 million compared with $50.9 million in the prior-year quarter with respective margins of 19.6% and 17.6%. Non-GAAP operating margin rose 200 bps year over year driven by judicious expense management.

Cash Flow & Liquidity

In fiscal 2020, Viavi generated $135.6 million of net cash from operating activities compared with $138.8 million in the prior fiscal. As of Jun 27, 2020, the company had $539 million in cash and equivalents with $600.9 million of long-term debt compared with the respective tallies of $521.5 million and $578.8 million in the year-ago quarter.

The company repurchased nearly $0.6 million worth of shares at an average cost of $10.60 per share in the quarter. Of the $200 million authorized share buyback program announced in September 2019, Viavi repurchased $44.4 million worth of shares to date.

Q1 2021 Guidance

Despite uncertainties pertaining to the ongoing pandemic, Viavi provided a definitive outlook for the first quarter of fiscal 2021. Revenues are expected in the range of $258-$282 million with adjusted earnings in the band of 14-16 cents per share. For NSE, revenues are anticipated in the range of $170-$190 million and that of OSP is expected in the vicinity of $88-$92 million.

Moving Ahead

Viavi’s long-term growth strategy depends on three pillars — Fiber, 5G Wireless and 3D Sensing. The company is confident about generating higher revenues and profitability in the upcoming quarter supported by solid demand. Backed by a robust liquidity position, the company is committed to overcome the near-term catastrophic impact of COVID-19 with its much-acclaimed counter-cyclical business portfolio.

Zacks Rank & Stocks to Consider

Viavi currently has a Zacks Rank #3 (Hold).  

A few better-ranked stocks in the industry are Harmonic Inc. (HLIT - Free Report) , Plantronics, Inc. (PLT - Free Report) and Turtle Beach Corporation (HEAR - Free Report) . While Harmonic sports a Zacks Rank #1 (Strong Buy), Plantronics and Turtle Beach carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Harmonic’s bottom line surpassed the Zacks Consensus Estimate thrice in the last four quarters. The company has a trailing four-quarter earnings surprise of 4.4%, on average.

Plantronics’ bottom line surpassed the Zacks Consensus Estimate thrice in the last four quarters. The company has a trailing four-quarter earnings surprise of 540%, on average.

Turtle Beach’s bottom line surpassed the Zacks Consensus Estimate in the last four quarters. The company has a trailing four-quarter earnings surprise of 41%, on average.

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