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Viavi Solutions Inc. (VIAV - Free Report) reported relatively strong second-quarter fiscal 2023 results, with the bottom and the top line beating the respective Zacks Consensus Estimate. However, it reported year-over-year lower revenues owing to demand softness driven by weak end-market conditions and a challenging macroeconomic environment.
Net Income
On a GAAP basis, net income in the quarter was $8.4 million or 4 cents per share compared to $34.6 million or 14 cents per share in the year-ago quarter. Top-line contraction on a year-over-year basis and higher income taxes induced the decline in earnings.
Non-GAAP net income was $31.5 million or 14 cents per share compared with $59.3 million or 24 cents per share in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate by 3 cents.
Viavi Solutions Inc. Price, Consensus and EPS Surprise
Quarterly total revenues declined 9.6% year over year to $284.5 million from $314.8 million in the prior year. The decline is primarily due to the persistence of demand softness and headwinds in service provider spending in the Network Service Enablement segment. However, the top line surpassed management’s guidance and outperformed the consensus estimate of $270 million. However,
Reduced spending by service providers in CapEx and OpEx hampered the revenue growth for Network and Service Enablement (NSE) segment. Revenues from Network Enablement (NE) were down 16.2% from the year-ago quarter to $179.7 million, driven by weaker demand for fiber and wireless lab products, partially offset by strong demand for wireless field instruments. The company also witnessed a positive momentum for the recently acquired Jackson Labs resilient PNT product. Service Enablement (SE) revenues declined by 8.1% to $27.4 million, led by inferior product mix. Company’s data center products experienced low demand driven by weakness in enterprise market.
Optical Security and Performance Products (OSP) revenues witnessed a growth of 9.6% year over year to $77.4 million due to higher demand for both anti-counterfeiting and 3D sensing products in the December quarter.
The revenues from America (37.4% of total revenues during second-quarter fiscal 2023) stood at $106.3 million, down from $125.7 million. The revenues from Asia-Pacific (36.9%) stood at $105.1 million, up from $91 million. The revenues from EMEA (25.7%) stood at $73.1, down from $98.1 million.
Other Details
During the quarter, the non-GAAP gross margin stood at 61.1%, down 210 bps from the year-ago quarter’s levels. Non-GAAP operating margin was 16.2%, down 710 bps from the year-ago quarter.
The operating margin for the NSE segment stands at 8.9%. In Network Enablement non-GAAP gross margin was 64.1%, down by 30bps due to demand rigidity induced by low spending from service providers. Non-GAAP gross margin for Service Enablement (SE) was 66.8% and it witnessed a contraction of 500bps year over year, driven by soft product mix and a decline in volume.
Cash Flow & Liquidity
During the December quarter, Viavi generated $46.2 million of cash from operating activities, a significant increase from $22.2 million in the year-ago period. As of Dec 31, 2022, the company had $484.1 million in cash and cash equivalents with $617.2 million of long-term debt.
Outlook
In the fiscal third quarter, management expects customers to continue lowering their CapEx and OpEx due to weak end-market conditions. Despite the demand rigidity, the company expects a near-term recovery with the stabilization of service provider spending. Management anticipates a demand recovery for cable field instruments once major cable operators begin upgrading networks during 2023. Viavi expects SE revenues to be stable for the remainder of fiscal 2023. In the OSP segment, the company is sensing weaker performance primarily due to weaker demand for anti-counterfeiting product demand in the next quarter. It also expects that the market for the company’s 3D sensing products is likely to decline in the second half of fiscal 2023. Viavi is working on a restructuring plan to adjust to changing market conditions.
For the third quarter, the company approximates revenues of $266 million (+/- $10 million). Viavi expects non-GAAP operating profit margins of around 13.6% and non-GAAP earnings are estimated in the band of 10-12 cents per share. For the Network and Service Enablement segment, revenues are estimated at $197 million (+/- 8 million) with a non-GAAP operating margin of 7.2-8.2%. Revenue for Optical Security and Performance Products (OSP) segment is approximated at $69(+/- $2 million). It anticipates the non-GAAP tax expenses between 23% and 25%. Based on current stock price levels, the estimated share count is roughly 226 million shares.
Arista Networks, Inc. (ANET - Free Report) , carrying a Zacks Rank #2, delivered an earnings surprise of 12.7%, on average, in the trailing four quarters. Earnings estimates for ANET stand at $4.38 per share.
Arista provides cloud networking solutions for data centers and cloud computing environments. The company offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next-generation data center networks.
Jabil Inc. (JBL - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 8.7%, on average, in the trailing four quarters. Earnings estimates for JBL for the current year have remained unchanged in the past 30 days at $8.37 per share.
Jabil is one of the largest global suppliers of electronic manufacturing services. The company offers electronics design, production, product management and after-market services to customers catering to aerospace, automotive, computing, consumer, defense, industrial, instrumentation, medical, networking, peripherals, storage and telecommunications industries.
Motorola Solutions, Inc. (MSI - Free Report) , carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 6.6%, on average, in the trailing four quarters. Earnings estimates for MSI for the current year have remained unchanged in the past 60 days at $10.20 per share.
Motorola is a leading communications equipment manufacturer with strong market positions in barcode scanning, wireless infrastructure gear, and government communications.
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Viavi (VIAV) Revenues Decline Y/Y, Q2 Earnings Beat Estimates
Viavi Solutions Inc. (VIAV - Free Report) reported relatively strong second-quarter fiscal 2023 results, with the bottom and the top line beating the respective Zacks Consensus Estimate. However, it reported year-over-year lower revenues owing to demand softness driven by weak end-market conditions and a challenging macroeconomic environment.
Net Income
On a GAAP basis, net income in the quarter was $8.4 million or 4 cents per share compared to $34.6 million or 14 cents per share in the year-ago quarter. Top-line contraction on a year-over-year basis and higher income taxes induced the decline in earnings.
Non-GAAP net income was $31.5 million or 14 cents per share compared with $59.3 million or 24 cents per share in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate by 3 cents.
Viavi Solutions Inc. Price, Consensus and EPS Surprise
Viavi Solutions Inc. price-consensus-eps-surprise-chart | Viavi Solutions Inc. Quote
Revenues
Quarterly total revenues declined 9.6% year over year to $284.5 million from $314.8 million in the prior year. The decline is primarily due to the persistence of demand softness and headwinds in service provider spending in the Network Service Enablement segment. However, the top line surpassed management’s guidance and outperformed the consensus estimate of $270 million. However,
Reduced spending by service providers in CapEx and OpEx hampered the revenue growth for Network and Service Enablement (NSE) segment. Revenues from Network Enablement (NE) were down 16.2% from the year-ago quarter to $179.7 million, driven by weaker demand for fiber and wireless lab products, partially offset by strong demand for wireless field instruments. The company also witnessed a positive momentum for the recently acquired Jackson Labs resilient PNT product. Service Enablement (SE) revenues declined by 8.1% to $27.4 million, led by inferior product mix. Company’s data center products experienced low demand driven by weakness in enterprise market.
Optical Security and Performance Products (OSP) revenues witnessed a growth of 9.6% year over year to $77.4 million due to higher demand for both anti-counterfeiting and 3D sensing products in the December quarter.
The revenues from America (37.4% of total revenues during second-quarter fiscal 2023) stood at $106.3 million, down from $125.7 million. The revenues from Asia-Pacific (36.9%) stood at $105.1 million, up from $91 million. The revenues from EMEA (25.7%) stood at $73.1, down from $98.1 million.
Other Details
During the quarter, the non-GAAP gross margin stood at 61.1%, down 210 bps from the year-ago quarter’s levels. Non-GAAP operating margin was 16.2%, down 710 bps from the year-ago quarter.
The operating margin for the NSE segment stands at 8.9%. In Network Enablement non-GAAP gross margin was 64.1%, down by 30bps due to demand rigidity induced by low spending from service providers. Non-GAAP gross margin for Service Enablement (SE) was 66.8% and it witnessed a contraction of 500bps year over year, driven by soft product mix and a decline in volume.
Cash Flow & Liquidity
During the December quarter, Viavi generated $46.2 million of cash from operating activities, a significant increase from $22.2 million in the year-ago period. As of Dec 31, 2022, the company had $484.1 million in cash and cash equivalents with $617.2 million of long-term debt.
Outlook
In the fiscal third quarter, management expects customers to continue lowering their CapEx and OpEx due to weak end-market conditions. Despite the demand rigidity, the company expects a near-term recovery with the stabilization of service provider spending. Management anticipates a demand recovery for cable field instruments once major cable operators begin upgrading networks during 2023. Viavi expects SE revenues to be stable for the remainder of fiscal 2023. In the OSP segment, the company is sensing weaker performance primarily due to weaker demand for anti-counterfeiting product demand in the next quarter. It also expects that the market for the company’s 3D sensing products is likely to decline in the second half of fiscal 2023. Viavi is working on a restructuring plan to adjust to changing market conditions.
For the third quarter, the company approximates revenues of $266 million (+/- $10 million). Viavi expects non-GAAP operating profit margins of around 13.6% and non-GAAP earnings are estimated in the band of 10-12 cents per share. For the Network and Service Enablement segment, revenues are estimated at $197 million (+/- 8 million) with a non-GAAP operating margin of 7.2-8.2%. Revenue for Optical Security and Performance Products (OSP) segment is approximated at $69(+/- $2 million). It anticipates the non-GAAP tax expenses between 23% and 25%. Based on current stock price levels, the estimated share count is roughly 226 million shares.
Zacks Rank & Other Stocks to Consider
Viavi currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Arista Networks, Inc. (ANET - Free Report) , carrying a Zacks Rank #2, delivered an earnings surprise of 12.7%, on average, in the trailing four quarters. Earnings estimates for ANET stand at $4.38 per share.
Arista provides cloud networking solutions for data centers and cloud computing environments. The company offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next-generation data center networks.
Jabil Inc. (JBL - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 8.7%, on average, in the trailing four quarters. Earnings estimates for JBL for the current year have remained unchanged in the past 30 days at $8.37 per share.
Jabil is one of the largest global suppliers of electronic manufacturing services. The company offers electronics design, production, product management and after-market services to customers catering to aerospace, automotive, computing, consumer, defense, industrial, instrumentation, medical, networking, peripherals, storage and telecommunications industries.
Motorola Solutions, Inc. (MSI - Free Report) , carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 6.6%, on average, in the trailing four quarters. Earnings estimates for MSI for the current year have remained unchanged in the past 60 days at $10.20 per share.
Motorola is a leading communications equipment manufacturer with strong market positions in barcode scanning, wireless infrastructure gear, and government communications.