Viavi Solutions Inc. ( VIAV Quick Quote 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 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.
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 Quick Quote HLIT - Free Report) , Plantronics, Inc. ( PLT Quick Quote PLT - Free Report) and Turtle Beach Corporation ( HEAR Quick Quote 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. Zacks Top 10 Stocks for 2020
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