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Viavi (VIAV) Q3 Earnings & Revenues Lag Estimates, Down Y/Y
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Viavi Solutions Inc. (VIAV - Free Report) reported relatively soft third-quarter fiscal 2024 results, with both the top line and the bottom line missing the respective Zacks Consensus Estimate. The sluggish spending environment at the service provider and enterprise customer end, weak demand trends led to tepid results.
Net Income
On a GAAP basis, Viavi incurred a net loss of $24.6 million or a loss of 11 cents per share compared to a net loss of $15.4 million or a loss of 7 cents per share in the year-ago quarter. The decline was primarily due to year-over-year lower net sales.
Non-GAAP net income was $13.2 million or 6 cents per share compared with $18 million or 8 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 $246 million, down 0.7% year over year, owing to slackening demand trends amid weak spending environment in the Network and Service Enablement (NSE) business. This was partly offset by higher Optical Security and Performance Products (OSP) revenues in the quarter. The top line missed the Zacks Consensus Estimate of $249.2 million.
NSE segment generated $169.8 million during the quarter, down 4.2% year-over-year.The reported figure was way below management’s guidance level of $173-$179 million,reflecting cautious spending behavior by enterprise customers. Revenues from Network Enablement (NE) were down 0.1% from the year-ago quarter’s levels to $151.7 million. Net sales from Service Enablement (SE) were $18.1 million, down 28.7% year over year, owing to declining trends in enterprise customer spend.
Optical Security and Performance Products (OSP) registered revenues of $76.2 million, up 8.1% year over year. The figure surpassed the higher end of management’s guidance due to increasing sales of Anti-Counterfeiting and 3D sensing products.
Revenues from America (35.9% of total revenues during third-quarter fiscal 2024) were $88.3 million, down from $100.5 million. Revenues from Asia-Pacific (36.5%) were $89.7 million, up 18.8% year over year. Revenues from EMEA (27.6%) totaled $68 million, down from $71.8 million in the year-ago quarter.
Other Details
In the fiscal third quarter, non-GAAP gross margin was 57.9%, down 180 basis points (bps) from 59.7% from the year-ago quarter level. Non-GAAP operating margin declined to 9.3% (down 210 bps) from 11.4% reported in the prior-year quarter.
Operating margin in the NSE business was a negative 1.8% lower than the company’s initial guidance range of 0.0-3.0%. Non-GAAP gross margin from the NE segment was 61.5%, down 70 bps from the year-ago quarter, owing to a decline in volumes and product mix. Non-GAAP gross margin in the SE segment was 60.8%, down 930 bps from the prior-year level due to lower volumes.
OSP business' non-GAAP gross margin contracted 50 bps on a year-over-over basis to 50.1% due to a reversal of variable incentive compensation that aided the company in the prior-year quarter.
Cash Flow & Liquidity
During the March quarter, Viavi generated $19.5 million of cash from operating activities compared with $17.8 million in the prior-year period. As of Mar 31, 2024, the company had $454.2 million in cash and cash equivalents with $634.4 million of long-term debt.
Outlook
For the fourth quarter of fiscal 2024, management expects revenues in the range of $246-$258 million. Non-GAAP operating margin is projected within 9.5-11.8%, with non-GAAP EPS in the band of 6 cents to 8 cents.
For the NSE segment, revenues are estimated between $179 million and $189 million with a non-GAAP operating margin of 1.4-3.6%. Revenues for the OSP segment are anticipated between $67 million and $69 million, with a non-GAAP operating margin of 31-34%. Non-GAAP tax expenses are estimated at approximately $8 million (+/- $0.5 million), and non-GAAP other income/expenses to be net expense are expected at roughly $3 million. The share count is estimated at nearly 225.5 million shares.
Management expects a marginal decline in the OSP segment sequentially owing to seasonal weaker demand for 3D sensing products.
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Viavi (VIAV) Q3 Earnings & Revenues Lag Estimates, Down Y/Y
Viavi Solutions Inc. (VIAV - Free Report) reported relatively soft third-quarter fiscal 2024 results, with both the top line and the bottom line missing the respective Zacks Consensus Estimate. The sluggish spending environment at the service provider and enterprise customer end, weak demand trends led to tepid results.
Net Income
On a GAAP basis, Viavi incurred a net loss of $24.6 million or a loss of 11 cents per share compared to a net loss of $15.4 million or a loss of 7 cents per share in the year-ago quarter. The decline was primarily due to year-over-year lower net sales.
Non-GAAP net income was $13.2 million or 6 cents per share compared with $18 million or 8 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 $246 million, down 0.7% year over year, owing to slackening demand trends amid weak spending environment in the Network and Service Enablement (NSE) business. This was partly offset by higher Optical Security and Performance Products (OSP) revenues in the quarter. The top line missed the Zacks Consensus Estimate of $249.2 million.
NSE segment generated $169.8 million during the quarter, down 4.2% year-over-year.The reported figure was way below management’s guidance level of $173-$179 million,reflecting cautious spending behavior by enterprise customers. Revenues from Network Enablement (NE) were down 0.1% from the year-ago quarter’s levels to $151.7 million. Net sales from Service Enablement (SE) were $18.1 million, down 28.7% year over year, owing to declining trends in enterprise customer spend.
Optical Security and Performance Products (OSP) registered revenues of $76.2 million, up 8.1% year over year. The figure surpassed the higher end of management’s guidance due to increasing sales of Anti-Counterfeiting and 3D sensing products.
Revenues from America (35.9% of total revenues during third-quarter fiscal 2024) were $88.3 million, down from $100.5 million. Revenues from Asia-Pacific (36.5%) were $89.7 million, up 18.8% year over year. Revenues from EMEA (27.6%) totaled $68 million, down from $71.8 million in the year-ago quarter.
Other Details
In the fiscal third quarter, non-GAAP gross margin was 57.9%, down 180 basis points (bps) from 59.7% from the year-ago quarter level. Non-GAAP operating margin declined to 9.3% (down 210 bps) from 11.4% reported in the prior-year quarter.
Operating margin in the NSE business was a negative 1.8% lower than the company’s initial guidance range of 0.0-3.0%. Non-GAAP gross margin from the NE segment was 61.5%, down 70 bps from the year-ago quarter, owing to a decline in volumes and product mix. Non-GAAP gross margin in the SE segment was 60.8%, down 930 bps from the prior-year level due to lower volumes.
OSP business' non-GAAP gross margin contracted 50 bps on a year-over-over basis to 50.1% due to a reversal of variable incentive compensation that aided the company in the prior-year quarter.
Cash Flow & Liquidity
During the March quarter, Viavi generated $19.5 million of cash from operating activities compared with $17.8 million in the prior-year period. As of Mar 31, 2024, the company had $454.2 million in cash and cash equivalents with $634.4 million of long-term debt.
Outlook
For the fourth quarter of fiscal 2024, management expects revenues in the range of $246-$258 million. Non-GAAP operating margin is projected within 9.5-11.8%, with non-GAAP EPS in the band of 6 cents to 8 cents.
For the NSE segment, revenues are estimated between $179 million and $189 million with a non-GAAP operating margin of 1.4-3.6%. Revenues for the OSP segment are anticipated between $67 million and $69 million, with a non-GAAP operating margin of 31-34%. Non-GAAP tax expenses are estimated at approximately $8 million (+/- $0.5 million), and non-GAAP other income/expenses to be net expense are expected at roughly $3 million. The share count is estimated at nearly 225.5 million shares.
Management expects a marginal decline in the OSP segment sequentially owing to seasonal weaker demand for 3D sensing products.
Zacks Rank
Viavi currently has a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Upcoming Releases
Arista Networks, Inc. (ANET - Free Report) is slated to announce first-quarter 2024 results on May 7, after the market close. The stock, sporting a Zacks Rank #1 at present, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 17.5% and delivered an earnings surprise of 13.3%, on average, in the trailing four quarters.
Airgain, Inc. (AIRG - Free Report) is slated to report first-quarter 2024 results on May 8, after the closing bell. It currently carries a Zacks Rank #2(Buy). It has a long-term earnings growth expectation of 35%.
Headquartered in San Diego, CA, Airgain offers integrated wireless solutions in the form of antenna products. These products are equipped to solve critical connectivity needs in both the design process and the operating environment across the enterprise, automotive and consumer markets. Ideal for original equipment and design manufacturers, vertical markets, chipset vendors, service providers, value-added resellers and software developers worldwide, the customizable antennas from Airgain serve both indoor and outdoor connectivity issues.
Turtle Beach Corporation (HEAR - Free Report) is slated to report first-quarter 2024 results on May 7, after the closing bell. It develops and markets gaming headset solutions for various platforms, including video game and entertainment consoles, handheld consoles, personal computers, tablets and mobile devices under the Turtle Beach brand. It has a Zacks Rank #2.