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Viavi's (VIAV) Q3 Earnings Miss Estimates, Revenues Fall Y/Y
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Viavi Solutions Inc. (VIAV - Free Report) reported mixed third-quarter fiscal 2023 results, with the top line beating the consensus estimate and the bottom line missing the same. Soft demand trends, lower service provider and network equipment manufacturing spending and macroeconomic headwinds led to the top-line contraction year over year.
Net Income
On a GAAP basis, Viavi incurred a net loss of $15.4 million or a loss 7 cents per share against a net income of $19.2 million or 8 cents per share in the year-ago quarter. The decline was primarily driven by year-over-year lower net sales.
Non-GAAP net income was $18 million or 8 cents per share compared with $52 million or 22 cents per share in the prior-year quarter. The bottom line fell short of the Zacks Consensus Estimate by a penny.
Viavi Solutions Inc. Price, Consensus and EPS Surprise
Net sales in the quarter were $247.8 million, down 21.5% year over year owing to sluggish demand trends and macroeconomic challenges in the Network and Service Enablement (NSE) business. Declining sales in Optical Security and Performance Products (OSP) also hurt the top line. The top line beat the Zacks Consensus Estimate of $247 million.
The Network and Service Enablement (NSE) segment generated $177.3 million during the quarter. The figure lagged management’s guidance levels, reflecting low demand for lab products. Revenues from Network Enablement (NE) were down 26.8% from the year-ago quarter’s levels to $149.6 million, due to weak demand stemming from constrained spending environment. Net sales from Service Enablement (SE) stood at $27.7 million, up 4.5% year over year owing to healthy demand for Assurance products.
Optical Security and Performance Products (OSP) registered revenues of $70.5 million, down 16.8% year over year owing to declining sales of Anti-Counterfeiting and 3D sensing products. However, the figure surpassed the midpoint of the company’s initial guidance.
Revenues from America (40.5% of total revenues during third-quarter fiscal 2023) stood at $100.5 million, down from $108.8 million. Revenues from Asia-Pacific (30.5%) were $75.5 million, down 34.1% year over year. Revenues from EMEA (29%) stood at $71.8 million, down from $92.2 million in the year-ago quarter.
Other Details
In the third quarter, non-GAAP gross margin stood at 59.7%, down from 62% from the year-ago quarters’ levels. Non-GAAP operating margin declined to 11.4% from 21.5% reported in the prior-year quarter.
Operating margin in the NSE business was 1.4%, lower than the company’s initial guidance. Non-GAAP gross margin from the NE segment declined to 62% from 63.8% in the year-ago quarter owing to decline in volumes. Owing to a favorable product mix and increased volume, non-GAAP gross margin in the SE segment rose to 70.4% from 69.1% reported in the year-ago quarter. OSP business witnessed 490 bps (basis points) contraction on a year-over-over basis in non-GAAP gross margin to 50.6% due to startup costs in the company’s new Arizona facility.
Cash Flow & Liquidity
During the March quarter, Viavi generated $17.8 million of cash from operating activities compared with $28.9 million in the prior-year period. As of March 31, 2023, the company had $580.6 million in cash and cash equivalents with $627.9 million of long-term debt.
Outlook
For fourth quarter fiscal 2023, management expects revenues in the range of $242-$262 million. Non-GAAP operating margin is projected within the range of 10-12.4% with non-GAAP EPS in the range of 7 to 9 cents.
For the Network and Service Enablement segment, revenues are estimated at $187 million (+/- 8 million) with a non-GAAP operating margin of 3-6%. Revenues for the Optical Security and Performance Products (OSP) segment is approximated at $65 (+/- $2 million). Non-GAAP tax expenses are estimated at 25% and non-GAAP other income/expenses is expected at $4.5 million. Share count is estimated at nearly 222 million shares.
Management expects marginal decline in the OSP segment sequentially owing to low demand of anti-counterfeiting products and post-COVID fiscal tightening. The 3D sensing business will likely witness somewhat weaker sales owing to lower demand for smartphones and supply chain transition. In the NSE segment, management expects a gradual recovery in the second half of 2023.
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Viavi's (VIAV) Q3 Earnings Miss Estimates, Revenues Fall Y/Y
Viavi Solutions Inc. (VIAV - Free Report) reported mixed third-quarter fiscal 2023 results, with the top line beating the consensus estimate and the bottom line missing the same. Soft demand trends, lower service provider and network equipment manufacturing spending and macroeconomic headwinds led to the top-line contraction year over year.
Net Income
On a GAAP basis, Viavi incurred a net loss of $15.4 million or a loss 7 cents per share against a net income of $19.2 million or 8 cents per share in the year-ago quarter. The decline was primarily driven by year-over-year lower net sales.
Non-GAAP net income was $18 million or 8 cents per share compared with $52 million or 22 cents per share in the prior-year quarter. The bottom line fell short of the Zacks Consensus Estimate by a penny.
Viavi Solutions Inc. Price, Consensus and EPS Surprise
Viavi Solutions Inc. price-consensus-eps-surprise-chart | Viavi Solutions Inc. Quote
Revenues
Net sales in the quarter were $247.8 million, down 21.5% year over year owing to sluggish demand trends and macroeconomic challenges in the Network and Service Enablement (NSE) business. Declining sales in Optical Security and Performance Products (OSP) also hurt the top line. The top line beat the Zacks Consensus Estimate of $247 million.
The Network and Service Enablement (NSE) segment generated $177.3 million during the quarter. The figure lagged management’s guidance levels, reflecting low demand for lab products. Revenues from Network Enablement (NE) were down 26.8% from the year-ago quarter’s levels to $149.6 million, due to weak demand stemming from constrained spending environment. Net sales from Service Enablement (SE) stood at $27.7 million, up 4.5% year over year owing to healthy demand for Assurance products.
Optical Security and Performance Products (OSP) registered revenues of $70.5 million, down 16.8% year over year owing to declining sales of Anti-Counterfeiting and 3D sensing products. However, the figure surpassed the midpoint of the company’s initial guidance.
Revenues from America (40.5% of total revenues during third-quarter fiscal 2023) stood at $100.5 million, down from $108.8 million. Revenues from Asia-Pacific (30.5%) were $75.5 million, down 34.1% year over year. Revenues from EMEA (29%) stood at $71.8 million, down from $92.2 million in the year-ago quarter.
Other Details
In the third quarter, non-GAAP gross margin stood at 59.7%, down from 62% from the year-ago quarters’ levels. Non-GAAP operating margin declined to 11.4% from 21.5% reported in the prior-year quarter.
Operating margin in the NSE business was 1.4%, lower than the company’s initial guidance. Non-GAAP gross margin from the NE segment declined to 62% from 63.8% in the year-ago quarter owing to decline in volumes. Owing to a favorable product mix and increased volume, non-GAAP gross margin in the SE segment rose to 70.4% from 69.1% reported in the year-ago quarter. OSP business witnessed 490 bps (basis points) contraction on a year-over-over basis in non-GAAP gross margin to 50.6% due to startup costs in the company’s new Arizona facility.
Cash Flow & Liquidity
During the March quarter, Viavi generated $17.8 million of cash from operating activities compared with $28.9 million in the prior-year period. As of March 31, 2023, the company had $580.6 million in cash and cash equivalents with $627.9 million of long-term debt.
Outlook
For fourth quarter fiscal 2023, management expects revenues in the range of $242-$262 million. Non-GAAP operating margin is projected within the range of 10-12.4% with non-GAAP EPS in the range of 7 to 9 cents.
For the Network and Service Enablement segment, revenues are estimated at $187 million (+/- 8 million) with a non-GAAP operating margin of 3-6%. Revenues for the Optical Security and Performance Products (OSP) segment is approximated at $65 (+/- $2 million). Non-GAAP tax expenses are estimated at 25% and non-GAAP other income/expenses is expected at $4.5 million. Share count is estimated at nearly 222 million shares.
Management expects marginal decline in the OSP segment sequentially owing to low demand of anti-counterfeiting products and post-COVID fiscal tightening. The 3D sensing business will likely witness somewhat weaker sales owing to lower demand for smartphones and supply chain transition. In the NSE segment, management expects a gradual recovery in the second half of 2023.
Zacks Rank & Stocks to Consider
Viavi currently has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bandwidth Inc. (BAND - Free Report) , carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 341.97%, on average, in the trailing four quarters. It operates as a Communications Platform-as-a-Service (CPaaS) provider, offering avant-garde software application programming interfaces for voice and messaging services. It is the only application programming interface (API) platform provider that owns a Tier 1 network with enhanced network capacity, primarily catering to business enterprises.
With 8,800 on-net rate centers, it delivers unparalleled network quality and proactively monitors network operations 24/7 to resolve quality issues, capitalizing on an efficient cost structure for seamless connectivity and speed-to-market.
Meta Platforms Inc. (META - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 15.46%, on average, in the trailing four quarters. Meta Platforms is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like photo and video sharing app Instagram and WhatsApp messaging app owing to acquisitions.
Meta is considered to have pioneered the concept of social networking, which is why it enjoys a first mover’s advantage in this market. As developed regions mature, Meta undertakes measures to drive penetration in emerging markets of South East Asia, Latin America and Africa.
Workday Inc (WDAY - Free Report) , carrying a Zacks Rank #2, delivered an earnings surprise of 7.67%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 11.24%.
Workday is a provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system that makes it easier for organizations to provide analytical insights and decision support.