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Viavi (VIAV) Q1 Earnings Beat Estimates, Revenues Grow Y/Y

Zacks Equity Research

Viavi Solutions Inc. VIAV reported solid first-quarter fiscal 2020 results, wherein both the bottom line and the top line surpassed the respective Zacks Consensus Estimate, and increased year over year. The strong quarterly performance reflected the underlying strength of the company’s resilient business growth model and diligent execution of operational plans.

Net Income

On a GAAP basis, net income improved to $6.8 million or 3 cents per share from net loss of $15.3 million or loss of 7 cents per share in the year-ago quarter, primarily driven by top-line growth.

Quarterly non-GAAP net income came in at $42.9 million or 18 cents per share compared with $35.2 million or 15 cents per share in the year-ago quarter. The bottom line beat the consensus estimate by 2 cents.

Viavi Solutions Inc. Price, Consensus and EPS Surprise

Viavi Solutions Inc. Price, Consensus and EPS Surprise

Viavi Solutions Inc. price-consensus-eps-surprise-chart | Viavi Solutions Inc. Quote

Revenues

Quarterly total revenues increased 11.7% year over year to $299.8 million and exceeded the company’s guidance of $288 million, driven by strong performance of fiber, wireless and 3D sensing products. The top line surpassed the Zacks Consensus Estimate of $288 million.

By segments, Network Enablement revenues were up 20.9% from year-ago quarter to $198.9 million, driven by strong performance of Wireless lab, cable and access and fiber products across both field and lab market. Service Enablement revenues declined 20.2% to $20.9 million owing to the expected run-off of mature insurance products coupled with weaker demand from assurance and data center products. Optical Security and Performance revenues increased 2.8% to $80 million, driven by solid demand of 3D sensing, partially offset by decrease in anti-counterfeiting products.

Region wise, Viavi generated 35.3% of total revenues from the Americas, 35.7% from the Asia-Pacific region and 29% from EMEA (Europe, Middle East and Africa).

Other Quarterly Details

Non-GAAP gross profit improved to $183.9 million from $160.6 million for respective margins of 61.3% and 59.8%. Non-GAAP operating income was $52.7 million compared with $43.8 million in the prior-year quarter for respective margins of 17.6% and 16.3%. Non-GAAP operating margin was above the high end of management’s guidance of 17%, reflecting healthy order trends, operational efficiency and growth dynamics.

Cash Flow and Liquidity

Viavi generated $31.3 million of cash from operating activities in the quarter. During the fiscal first quarter, the company repurchased 10.1 million shares at an average cost of $30.99 per share. By the end of fiscal 2019, Viavi had repurchased $148.6 million worth of shares out of $200 million authorization for share buybacks.

As of Sep 28, 2019, the company had $525.3 million of cash and cash equivalents with $584.3 million of long-term debt.

Outlook

For second-quarter fiscal 2020, Viavi projects revenues in the range of $292-$312 million. It anticipates non-GAAP operating margin to be 18-20% with non-GAAP earnings of 18-20 cents per share. Revenues for Network service enablement and Optical Security and Performance segments are expected to be in the range of $216-$232 million and $76-$80 million, respectively.

Zacks Rank & Other Stocks to Consider

Viavi currently carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the industry include Altice USA, Inc. ATUS, Harmonic Inc. HLIT and UTStarcom Holdings Corp UTSI, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Altice surpassed earnings estimates in each of the trailing four quarters, the average positive surprise being 158.5%.

Harmonic surpassed earnings estimates in each of the trailing four quarters, the average positive surprise being 48.3%.

UTStarcom Holdings delivered average positive earnings surprise of 56.4% in the trailing four quarters, beating estimates twice.

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