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Viavi (VIAV) Q4 Earnings Beat on Healthy Top-Line Growth

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Viavi Solutions Inc. VIAV reported strong fourth-quarter fiscal 2021 (ended Jul 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.

Bottom Line

On a GAAP basis, net loss in the quarter was $1.9 million or loss of 1 cent per share against net income of $26.7 million or 12 cents per share in the year-ago quarter. The year-over-year decline was primarily attributable to higher operating expenses and income tax provision.

Non-GAAP net income came in at $52.8 million or 22 cents per share compared with $40.8 million or 18 cents per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 3 cents.

In fiscal 2021, GAAP net income was $46.1 million or 20 cents per share compared with $28.7 million or 12 cents per share in fiscal 2020. Non-GAAP net income aggregated $195.5 million or 83 cents per share compared with $171.3 million or 73 cents per share in fiscal 2020.

Viavi Solutions Inc. Price, Consensus and EPS Surprise

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

Total net revenues in the reported quarter increased 16.6% year over year to $310.9 million and exceeded the company’s guidance of $290-$310 million. The upsurge was primarily driven by continued strength in wireless and fiber, along with robust demand for anti-counterfeiting products. The top line surpassed the consensus estimate of $302 million. In fiscal 2021, total revenues improved to $1,198.9 million from $1,136.3 million a year ago.

Segment wise, revenues from NE (Network Enablement) were up 17.6% from the year-ago quarter to $212.7 million due to solid demand for fiber, cable and wireless products. SE (Service Enablement) revenues fell 13.5% to $23.8 million, mainly due to softness in demand for assurance and data center products. Overall, NSE (Network and Service Enablement) segment revenues of $236.5 million were above the guidance of $219-$235 million.

OSP (Optical Security and Performance Products) revenues increased 27.8% year over year to $74.4 million and came within the projected range of $71-$75 million. The improvement was mainly driven by robust demand for anti-counterfeiting products. OSP’s non-GAAP gross margin of 57.5% expanded 650 basis points (bps) year over year owing to higher volume and favorable product mix, while non-GAAP operating margin of 38.8% improved 940 bps on higher gross margin.

Region wise, Viavi generated 35.4% of total net revenues from the Americas, 33.3% from the Asia-Pacific and 31.3% from EMEA (Europe, Middle East and Africa).

Cash Flow & Liquidity

During the fiscal fourth quarter, Viavi generated $63 million of cash from operations, up 131.6% year over year. In fiscal 2021, the company generated record operating cash flow of $243.7 million, up 79.7% from $135.6 million in fiscal 2020. As of Jul 3, 2021, the company had $697.8 million in cash and cash equivalents with $209.8 million of long-term debt compared with respective tallies of $539 million and $600.9 million a year ago.

During the quarter, Viavi repurchased $10.9 million worth of shares at an average price of $16.77 per share. Subsequent to the end of the quarter, the company purchased $87.1 million worth of shares at an average price of $12.98 per share, under its $200 million share buyback plan announced in September 2019.

Q1 Fiscal 2022 Guidance

For the first quarter of fiscal 2021 (ending Oct 2, 2021), Viavi expects revenues in the range of $303-$317 million. These include NSE revenue expectations of about $215 million and OSP revenues of approximately $95 million. Non-GAAP earnings are estimated in the band of 20-22 cents per share.

Zacks Rank & Stocks to Consider

Viavi currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are Knowles Corporation KN, Qualcomm Incorporated QCOM and SeaChange International, Inc. SEAC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Knowles has a long-term earnings growth expectation of 10%. It delivered an earnings surprise of 10.8%, on average, in the trailing four quarters.

Qualcomm has a long-term earnings growth expectation of 21%. It delivered an earnings surprise of 13.5%, on average, in the trailing four quarters.

SeaChange International has a long-term earnings growth expectation of 10%. It delivered an earnings surprise of 12.2%, on average, in the trailing four quarters.


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