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Viavi Solutions Inc. VIAV reported impressive third-quarter fiscal 2021 (ended Apr 3, 2021) results, with both the bottom and top lines surpassing their respective Zacks Consensus Estimate. The San Jose, CA-based company generated higher revenues on the back of solid demand for wireless, fiber and anti-counterfeiting products.
On a GAAP basis, net income in the quarter was $11.8 million or 5 cents per share against net loss of $32.8 million or loss of 14 cents per share in the year-ago quarter. The year-over-year improvement was primarily attributable to higher income from operations.
Non-GAAP net income came in at $42.3 million or 18 cents per share compared with $32 million or 14 cents per share in the prior-year quarter. The bottom line beat 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
Recovering from the pandemic adversities, quarterly total net revenues increased 18.4% year over year to $303.4 million and exceeded the company’s guidance of $280-$300 million. The upsurge was primarily driven by continued strength in wireless and fiber, along with robust demand for anti-counterfeiting products. Also, the top line surpassed the consensus estimate of $291 million.
Segment wise, revenues from NE (Network Enablement) were up 16.5% from the year-ago quarter’s figure to $190.9 million due to increased demand for fiber, cable and wireless products. SE (Service Enablement) revenues fell 12.1% to $20.3 million, mainly due to softness in demand for assurance and data center products. Overall, revenues in the NSE (Network and Service Enablement) segment were above the guidance of $189-$205 million.
NSE’s gross margin was 64.2%, down 10 basis points (bps) year over year. Operating margin of 9.9% increased 250 bps, primarily as a result of higher revenues.
OSP (Optical Security and Performance Products) revenues increased 33.2% year over year to $92.2 million and came within the projected range of $91-$95 million. The improvement was mainly driven by robust demand for anti-counterfeiting and 3D sensing products.
OSP’s gross margin of 60.6% expanded 800 bps year over year owing to higher volume, favorable product mix and high factory utilization. Operating margin of 43.9% improved 890 bps on higher gross margin.
Region wise, Viavi generated 33.6% of total net revenues from the Americas, 33.7% from the Asia-Pacific and 32.7% from EMEA (Europe, Middle East and Africa).
Overall, non-GAAP gross profit was $191.4 million with a margin of 63.1% compared with $156.7 million with a margin of 61.2% in the year-ago quarter. Non-GAAP operating income was $61.4 million compared with $38 million in the prior-year quarter with respective margins of 20.2% and 14.8%.
Cash Flow & Liquidity
During the fiscal third quarter, Viavi generated $48.1 million of cash from operations compared with $39.1 million in the year-earlier period. As of Apr 3, 2021, the company had $672.2 million in cash and cash equivalents with $618.1 million of long-term debt.
Q4 Fiscal 2021 Guidance
For the fourth quarter of fiscal 2021 (ending Jul 3, 2021), Viavi expects revenues in the range of $290-$310 million. These include NSE revenue expectations in the range of $219 million to $235 million and OSP revenues in the range of $71 million to $75 million. Non-GAAP earnings are estimated in the band of 18-20 cents per share.
Zacks Rank & Stocks to Consider
Viavi currently has a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader industry are Altice USA, Inc. ATUS, Cogent Communications Holdings, Inc. CCOI and Corning Incorporated GLW. While Altice USA and Cogent sport a Zacks Rank #1 (Strong Buy), Corning carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Altice USA pulled off a trailing four-quarter earnings surprise of 61.5%, on average.
Cogent pulled off a trailing four-quarter earnings surprise of 29%, on average.
Corning pulled off a trailing four-quarter earnings surprise of 39%, on average.
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