VIAVI Announces First Quarter Fiscal 2021 Results
SAN JOSE, Calif., Nov. 5, 2020 /PRNewswire/ -- VIAVI (NASDAQ: VIAV) today reported results for its first fiscal quarter ended October 3, 2020.
First quarter of fiscal 2021 net revenue was $284.7 million. GAAP net income was $14.3 million, or $0.06 per share. Non-GAAP net income was $48.3 million, or $0.21 per share.
Fourth quarter of fiscal 2020 net revenue was $266.6 million. GAAP net income was $26.7 million or $0.12 per share. Non-GAAP net income was $40.8 million, or $0.18 per share.
First quarter of fiscal 2020 net revenue was $299.8 million. GAAP net income was $6.8 million, or $0.03 per share. Non-GAAP net income was $42.9 million, or $0.18 per share.
"Our OSP business segment delivered an all-time record quarterly revenue driven by strong demand in 3D Sensing and Anti-Counterfeiting products. Together with a stabilizing demand environment in NSE and operating expense control, we achieved a non-GAAP EPS at $0.21 which exceeded both the guidance range and a year ago levels," said Oleg Khaykin, VIAVI's President and Chief Executive Officer. "We expect NSE revenue to continue recovering and strengthen sequentially driven by Field Instruments. OSP strength is expected to continue with modest pullback in 3D Sensing and Anti-Counterfeiting products, inline with fiscal Q2 seasonality."
Khaykin added, "The near-term macroeconomic uncertainty notwithstanding, we expect calendar 2021 to be a growth year driven by the secular demand for 5G Wireless, Fiber and 3D Sensing."
Financial Overview:
The tables below (in millions, except percentage, and per share data) provide comparisons of quarterly results to prior periods, including sequential quarterly and year-over-year changes. A full reconciliation between the GAAP and non-GAAP measures included in the tables is contained in this release under the section titled "Use of Non-GAAP (Adjusted) Financial Measures."
First Quarter Ended October 3, 2020
GAAP Results
Q1 Q4 Q1
Change
FY 2021 FY 2020 FY 2020 Q/Q Y/Y
Net revenue $
284.7 $
266.6 $
299.8 6.8 (5.0)
% %
Gross margin 59.5
% 58.0
% 58.2
%
150 bps
130 bps
Operating
margin 11.0
% 16.2
% 6.9
%
(520) bps
410 bps
Income from 31.3 43.3 20.7 (27.7) 51.2
operations % %
Net income 0.06 0.12 0.03 (50.0) 100.0
per share % %
Non-GAAP Results
Q1 Q4 Q1 Change
FY 2021 FY 2020 FY 2020 Q/Q Y/Y
Non-GAAP 62.8 61.7 61.3
gross
margin % % %
110 bps
150 bps
Non-GAAP 21.3 19.6 17.6
operating
margin % % %
170 bps
370 bps
Non-GAAP
income from % %
operations 60.6 52.3 52.7 15.9 15.0
Non-GAAP
net % %
earnings
per share 0.21 0.18 0.18 16.7 16.7
Net Revenue by Segment
Q1 % of Net Q4 Q1 Change
FY 2021 revenue FY 2020 FY 2020 Q/Q Y/Y
Network $
162.1 56.9 $
180.9 $
198.9 (10.4) (18.5)
Enablement % % %
Service 21.4 7.5 27.5 20.9 (22.2) 2.4
Enablement % % %
Optical Security
and Performance % % %
Products 101.2 35.6 58.2 80.0 73.9 26.5
Total $
284.7 100.0 $
266.6 $
299.8 6.8 (5.0)
%
% %
-- Americas, Asia-Pacific and EMEA customers represented 33.5%, 38.0% and
28.5%, respectively, of total net revenue for the quarter ended October
3, 2020.
-- As of October 3, 2020, the Company held $595.5 million in total cash,
short-term restricted cash and investments.
-- As of October 3, 2020, the Company had $460.0 million aggregate
principal amount of 1.00% Senior Convertible Notes and $225.0 million
aggregate principal amount of 1.75% Senior Convertible Notes with a
total net carrying value of $606.6 million classified as long-term debt.
-- During the fiscal quarter ended October 3, 2020, the Company generated
$63.9 million of cash from operations.
Business Outlook for the Second Quarter of Fiscal 2021
For the second quarter of fiscal 2021 ending January 2, 2021, the Company expects net revenue to be between $280 million to $300 million and non-GAAP earnings per share to be between $0.18 and $0.20.
With respect to our expectations above, the Company has not reconciled non-GAAP net income per share to GAAP net income (loss) per share in this press release because it is unable to provide a meaningful or accurate estimate of certain reconciling items described in the "Use of Non-GAAP (Adjusted) Financial Measures" section below and the information is not available without unreasonable effort as a result of the inherent difficulty of forecasting the timing and/or amounts of certain items, including certain charges related to restructuring, acquisition, integration and related charges. In addition, the Company believes such reconciliations would imply a degree of precision that may be confusing or misleading to investors.
Conference Call
The Company will discuss these results and other related matters at 1:30 p.m. Pacific Time on November 5, 2020 in a live webcast, which will also be archived for replay on the Company's website at https://investor.viavisolutions.com. The Company will post supplementary slides outlining the Company's latest financial results on https://investor.viavisolutions.com under the "Quarterly Results" section concurrently with this earnings press release. This press release is being furnished as a Current Report on Form 8-K with the Securities and Exchange Commission, and will be available at www.sec.gov.
About VIAVI Solutions
VIAVI (NASDAQ: VIAV) is a global provider of network test, monitoring and assurance solutions for communications service providers, enterprises, network equipment manufacturers, government and avionics. We help these customers harness the power of instruments, automation, intelligence and virtualization to Command the network. VIAVI is also a leader in light management solutions for 3D sensing, anti-counterfeiting, consumer electronics, industrial, automotive and defense applications. Learn more about VIAVI at www.viavisolutions.com. Follow us on VIAVI Perspectives, LinkedIn, Twitter, YouTube and Facebook.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include any expectation, anticipation or guidance as to future financial performance, including future revenue, gross margin, operating expense, operating margin, profitability targets, cash flow and other financial metrics, as well as the impact and duration of certain trends and market position and conditions. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. In particular, the Company's ability to predict future financial performance continues to be difficult due to, among other things: (a) continuing general limited visibility across many of our product lines; (b) quarter-over-quarter product mix fluctuations, which can materially impact profitability measures due to the broad gross margin ranges across our portfolio; (c) consolidations in our customer base; (d) unforeseen changes in the demand for current and new products, technologies, services, delays or unforeseen events in the roll-out of new industry platforms such as 5G or evolving technology such as 3D sensing and customer purchasing delays as they assess or transition to such new technologies and/or architectures, all of which limit near-term demand visibility, and could negatively impact potential revenue; (e) continued decline of average selling prices across our businesses; (f) notable seasonality and a significant level of in-quarter book-and-ship business; (g) various product and manufacturing transfers, site consolidations, product discontinuances and the restructuring and workforce reduction plans, including the plan announced during the first quarter of fiscal 2019 that may cause short-term disruptions; (h) challenges integrating the businesses the Company has acquired and realizing all of the expected benefits and savings; (i) the ability of our suppliers and contract manufacturers to meet production and delivery requirements to our forecasted demand; (j) potential disruptions or delays to our manufacturing and operations due to natural disasters such as the recent wildfires in Northern California; (k) the uncertain and ongoing impact to our supply chain of tariffs, sanctions and other trade measures imposed by domestic and foreign governments and the possibility of escalation of "trade wars" and retaliatory measures between nations; (l) the impact of infectious disease outbreaks, epidemics, and pandemics including the effects of the COVID-19 global pandemic on our financial results, revenues, customer demand, business operations and manufacturing and on the business operations of our customers, contract manufacturers and suppliers; and (m) inherent uncertainty related to global markets, including recessions and tightening liquidity and the effect of such markets on demand for our products. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. For more information on these risks, please refer to the "Risk Factors" section included in the Company's Annual Report on Form 10-K for the fiscal year ended June 27, 2020 filed with the Securities and Exchange Commission. The forward-looking statements contained in this press release are made as of the date thereof and the Company assumes no obligation to update such statements.
Contact Information
Investors:
Bill Ong
408-404-4512
bill.ong@viavisolutions.com
Press:
Amit Malhotra
202-341-8624
amit.malhotra@viavisolutions.com
The following financial tables are presented in accordance with GAAP, unless otherwise specified.
- SELECTED PRELIMINARY FINANCIAL DATA -
VIAVI SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
PRELIMINARY
Three Months Ended
October 3, 2020 September 28, 2019
---
Net revenue $
284.7 $
299.8
Cost of revenues 107.1 117.0
Amortization of acquired technologies 8.2 8.4
Gross profit 169.4 174.4
Operating expenses:
Research and development 48.8 51.5
Selling, general and administrative 81.4 93.2
Amortization of other intangibles 8.5 8.7
Restructuring and related (benefits) charges (0.6) 0.3
Total operating expenses 138.1 153.7
Income from operations 31.3 20.7
Interest income and other income, net 0.6 2.7
Interest expense (9.0) (8.3)
Income before taxes 22.9 15.1
Provision for income taxes 8.6 8.3
Net income $
14.3 $
6.8
Net income per share:
Basic $
0.06 $
0.03
Diluted $
0.06 $
0.03
Shares used in per share calculations:
Basic 228.8 229.4
Diluted 231.8 236.4
The preliminary financial statements are estimated based on our current information.
VIAVI SOLUTIONS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, unaudited)
PRELIMINARY
October 3, 2020 June 27, 2020
---
ASSETS
Current assets:
Cash and cash equivalents $
590.8 $
539.0
Short-term investments 1.5 1.5
Restricted cash 3.2 3.5
Accounts receivable, net 220.1 235.5
Inventories, net 87.3 83.3
Prepayments and other current
assets 58.7 50.8
Total current assets 961.6 913.6
Property, plant and equipment,
net 175.4 172.5
Goodwill, net 387.9 381.4
Intangibles, net 134.4 148.1
Deferred income taxes 110.2 105.4
Other non-current assets 54.9 55.3
Total assets $
1,824.4 $
1,776.3
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $
45.2 $
53.0
Accrued payroll and related
expenses 51.2 51.4
Deferred revenue 60.1 54.6
Accrued expenses 21.4 22.6
Current portion of long-term
debt - 2.8
Other current liabilities 49.6 48.4
Total current liabilities 227.5 232.8
Long-term debt 606.6 600.9
Other non-current liabilities 236.5 231.2
Total stockholders' equity 753.8 711.4
Total liabilities and
stockholders' equity $
1,824.4 $
1,776.3
The preliminary financial statements are estimated based on our current information.
VIAVI SOLUTIONS INC.
REPORTABLE SEGMENT INFORMATION
(in millions, unaudited)
PRELIMINARY
Three Months Ended October 3, 2020
Network and Service Enablement
Network Service Network and Optical Security Other Items (1) Consolidated
Enablement Enablement Service and Performance GAAP Measures
Enablement Products
---
Net revenue $
162.1 $
21.4 $
183.5 $
101.2
$ $
284.7
Gross
profit 103.5 14.3 117.8 61.0 (9.4) 169.4
Gross 63.8 66.8 64.2 60.3 59.5
margin % % % % %
Operating income 13.3 47.3 (29.3) 31.3
Operating margin 7.2 46.7 11.0
% % %
Three Months Ended September 28, 2019
Network and Service Enablement
Network Service Network and Optical Security Other Items (1) Consolidated
Enablement Enablement Service and Performance GAAP Measures
Enablement Products
---
Net revenue $
198.9 $
20.9 $
219.8 $
80.0
$ $
299.8
Gross
profit 128.0 12.6 140.6 43.3 (9.5) 174.4
Gross 64.4 60.3 64.0 54.1 58.2
margin % % % % %
Operating income 22.3 30.4 (32.0) 20.7
Operating margin 10.1 38.0 6.9
% % %
(1) Other items include charges
unrelated to core operating
performance primarily consisting of
stock-based compensation,
amortization of acquisition-
related intangibles, restructuring
and related charges, changes in
fair value of contingent
consideration liabilities and other
charges unrelated to core operating
performance.
The preliminary financial schedules
are estimated based on our current
information.
Use of Non-GAAP (Adjusted) Financial Measures
The Company provides non-GAAP gross margin, non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per share, EBITDA and adjusted EBITDA financial measures as supplemental information regarding the Company's operational performance. The Company uses the measures disclosed in this release to evaluate the Company's historical and prospective financial performance, as well as its performance relative to its competitors. Specifically, management uses these items to further its own understanding of the Company's core operating performance, which the Company believes represent its performance in the ordinary, ongoing and customary course of its operations. Accordingly, management excludes from core operating performance items such as those relating to certain purchase price accounting adjustments, amortization of acquisition-related intangibles and inventory step-up, stock-based compensation, restructuring, separation costs, changes in fair value of contingent consideration liabilities and certain investing expenses and non-cash activities that management believes are not reflective of such ordinary, ongoing and customary course activities. Additionally, the Company excludes the results of discontinued operations in calculating non-GAAP net income (loss), non-GAAP net income (loss) per share, EBITDA and adjusted EBITDA for all periods reported. The Company believes excluding these items enables investors to evaluate more clearly and consistently the Company's core operational performance.
The Company believes providing this additional information allows investors to see Company results through the eyes of management. The Company further believes that providing this information allows investors to better understand the Company's financial performance and, importantly, to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance.
The non-GAAP adjustments described in this release are excluded by the Company from its non-GAAP financial measures. The non-GAAP adjustments, and the basis for excluding them, are outlined below.
Cost of revenues, costs of research and development and costs of selling, general and administrative: The Company's GAAP presentation of gross margin and operating expenses may include (i) additional depreciation and amortization from changes in estimated useful life and the write-down of certain property, equipment and intangibles that have been identified for disposal but remained in use until the date of disposal, (ii) workforce related charges such as severance, retention bonuses and employee relocation costs related to formal restructuring plans, (iii) costs for facilities not required for ongoing operations, and costs related to the relocation of certain equipment from these facilities and/or contract manufacturer facilities, (iv) stock-based compensation, (v) changes in fair value of contingent consideration liabilities and (vi) other charges unrelated to our core operating performance comprising mainly of acquisition related transaction costs, amortization of acquisition related inventory step-up, integration costs related to acquired entities, litigation and other costs and contingencies unrelated to current and future operations, including transformational initiatives such as the implementation of simplified automated processes, site consolidations, and reorganizations. The Company excludes these items in calculating non-GAAP gross margin, non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per share, EBITDA and adjusted EBITDA. The Company believes excluding these items enables investors to evaluate more clearly and consistently the Company's core operational performance.
Amortization of intangibles: The Company includes amortization expense related to intangibles in its GAAP presentation of cost of revenues and operating expense. The Company excludes these significant non-cash items in calculating non-GAAP gross margin, non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per share, EBITDA and adjusted EBITDA, because it believes doing so provides investors a clearer and more consistent view of the Company's core operating performance in terms of cost of revenues and operating expenses.
Non-cash interest expense and other expense: The Company incurred non-cash interest expense accretion of the debt discount on its convertible debt instruments. The Company eliminates this in calculating non-GAAP net income (loss), and non-GAAP net income (loss) per share, EBITDA and adjusted EBITDA, because it believes that in so doing, it can provide investors a clearer and more consistent view of the Company's core operating performance.
Income tax expense or benefit: The Company excludes certain non-cash tax expense or benefit items, such as the utilization of net operating losses where valuation allowances were released, intra-period tax allocation benefit, the impact of US tax reform enacted in December 2017 and the tax effect for amortization of non-tax deductible intangible assets, in calculating non-GAAP net income (loss) and non-GAAP net income (loss) per share. As the Company excludes amortization of certain intangibles assets in calculating non-GAAP gross margin, non-GAAP operating profit or (loss) and non-GAAP income or (loss), the tax benefit resulting from non-tax deductible amortization expense of such intangible assets is also excluded from non-GAAP metrics. The Company believes excluding these items enables investors to evaluate more clearly and consistently the Company's core operational performance.
Interest, taxes, depreciation, amortization and other adjustments: The Company's EBITDA calculation primarily excludes interest income and other income (expense), interest expense, taxes, depreciation and amortization, and other items that are not part of its core operating performance described above. The Company's adjusted EBITDA excludes items in addition to the items excluded from the EBITDA calculation such as stock-based compensation, restructuring and related charges (benefits), gain or loss on sale of available for-sale investments, changes in fair value of contingent consideration liabilities arising from prior acquisitions and other charges related to activities that are not part of its core operating performance described above. Management believes adjusted EBITDA is a helpful indicator of the Company's core operational cash flow.
Non-GAAP financial measures are not in accordance with, preferable to, or an alternative for, generally accepted accounting principles in the United States. The GAAP measure most directly comparable to non-GAAP net income (loss) is net income (loss). The GAAP measure most directly comparable to non-GAAP net income (loss) per share is net income (loss) per share. The Company believes these GAAP measures alone are not fully indicative of its core operating expenses and performance and that providing non-GAAP financial measures in conjunction with GAAP measures provides valuable supplemental information regarding the Company's overall performance.
VIAVI SOLUTIONS INC.
RECONCILIATION OF GAAP MEASURES FROM CONTINUING OPERATIONS
TO NON-GAAP MEASURES
(in millions, except per share data)
(unaudited)
PRELIMINARY
The following tables reconcile GAAP measures to non-GAAP measures:
Three Months Ended
October 3, 2020 September 28, 2019
Gross Profit Gross Margin Gross Profit Gross Margin
---
GAAP measures $
169.4 59.5 $
174.4 58.2
% %
Stock-based compensation 1.2 0.4 1.0 0.3
% %
Other charges unrelated
to core operating
performance - % 0.1 %
Amortization of 8.2 2.9 8.4 2.8
intangibles % %
---
Total related to Cost of 9.4 3.3 9.5 3.1
Revenue % %
Non-GAAP measures $
178.8 62.8 $
183.9 61.3
% %
===
Three Months Ended
October 3, 2020 September 28, 2019
Operating Operating Operating Operating
Income Margin Income Margin
---
GAAP measures $
31.3 11.0 $
20.7 6.9
% %
Stock-based compensation 12.5 4.4 10.3 3.4
% %
Change in fair value of - % 1.7 0.6
contingent liability %
Other charges unrelated
to core operating % %
performance (1) 0.7 0.2 2.6 0.9
Amortization of 16.7 5.9 17.1 5.7
intangibles % %
Restructuring and related (0.6) (0.2) 0.3 0.1
(benefits) charges % %
Total related to Cost of
Revenue and Operating % %
Expenses 29.3 10.3 32.0 10.7
---
Non-GAAP measures $
60.6 21.3 $
52.7 17.6
% %
===
Three Months Ended
October 3, 2020 September 28, 2019
Net Income Diluted EPS Net Income Diluted EPS
---
GAAP measures $
14.3 $
0.06 $
6.8 $
0.03
Items reconciling GAAP net income and
EPS to non-GAAP net income and EPS:
Stock-based compensation 12.5 0.05 10.3 0.04
Other charges unrelated
to core operating
performance (1) 0.7 4.3 0.02
Amortization of
intangibles 16.7 0.07 17.1 0.07
Restructuring and related
(benefits) charges (0.6) 0.3
Non-cash interest
expense and other
expense 5.4 0.02 5.1 0.02
Benefit from income taxes (0.7) (1.0)
Total related to net
income and EPS 34.0 0.15 36.1 0.15
Non-GAAP measures $
48.3 $
0.21 $
42.9 $
0.18
Shares used in per share calculation for
Non-GAAP EPS 231.8 236.4
Note: Certain totals may not add due to
rounding
(1) Other items include charges
unrelated to core operating
performance primarily consisted of
certain acquisition and integration
related changes, transformational
initiatives such as, site
consolidations, and reorganization,
loss on sale of investments and loss
on disposal of long-lived assets.
The preliminary financial schedules are
estimated based on our current
information.
VIAVI SOLUTIONS INC.
RECONCILIATION OF GAAP MEASURES FROM CONTINUING OPERATIONS
TO ADJUSTED EBITDA
(in millions, unaudited)
PRELIMINARY
Three Months Ended
October 3, 2020 September 28, 2019
GAAP net income $
14.3 $
6.8
Interest income and
other income, net (0.6) (2.7)
Interest expense 9.0 8.3
Provision for income
taxes 8.6 8.3
Depreciation 8.8 9.8
Amortization 16.7 17.1
EBITDA 56.8 47.6
Costs related to
restructuring and
related (benefits)
charges (0.6) 0.3
Costs related to
stock-based
compensation 12.5 10.3
Change in fair value
of contingent
liability - 1.7
Other charges
unrelated to core
operating
performance (1) 0.7 2.6
Adjusted EBITDA $
69.4 $
62.5
Note: Certain totals may not add due to
rounding
(1) Other items include charges
unrelated to core operating
performance primarily consisted of
acquisition and integration related
charges, transformational initiatives
such as site consolidations, and
reorganization, loss on sale of
investments and loss on disposal of
long-lived assets.
The preliminary financial schedules are
estimated based on our current
information.
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SOURCE VIAVI Financials
