Viavi Solutions Inc. VIAV reported modest first-quarter fiscal 2025 results, wherein adjusted earnings matched the Zacks Consensus Estimate but revenues missed the same. 

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Sluggish demand trends in all verticals, a constrained spending environment owing to macroeconomic challenges and inventory adjustments led to lower revenues year over year.

Net Income

On a GAAP basis, Viavi incurred a net loss of $1.8 million or a loss of a penny per share against net income of $9.8 million or 4 cents per share in the year-ago quarter. The significant decline in earnings was attributable to revenue contraction in the reported quarter.

Excluding non-recurring items, non-GAAP net income was $12.4 million or 6 cents per share, down from $19.5 million or 9 cents per share in the year-earlier quarter. The bottom line was in line with the Zacks Consensus Estimate.

Revenues

Total revenues were $238.2 million compared with $247.9 million in the year-ago quarter. Soft demand trends in the smartphone market and 3D sensing products affected revenue growth. However, robust demand from avionics customers supported the top line in the September quarter. Revenues missed the Zacks Consensus Estimate of $240 million.

Net sales from Network Enablement (NE) were $141.6 million, down from $150 million in the year-ago quarter. Weak demand trends, owing to a constrained spending environment, led to a 5.6% year-over-year decline in the quarter. However, gradual recovery in lab and production test equipment from wireless and fiber NEMs and semiconductor companies partially cushioned the top line in this segment. 

Revenues from the Service Enablement (SE) segment were $17.8 million, down 12.7% from the year-ago quarter’s $20.4 million, owing to the conservative spending behavior of enterprise customers.

Optical Security and Performance Products (OSP) revenues were $78.8 million from the year-earlier quarter’s tally of $77.5 million. The 1.7% increase was primarily due to strong demand for 3D sensing and anti-counterfeiting products.

Net sales from America contributed $88.7 million to revenues, down from $100.5 million reported in the year-ago quarter. Revenues from Asia-Pacific remained flat at $85.9 million. Revenues from EMEA increased to $63.6 million from $61.5 million reported in the prior-year quarter.

Other Details

In the first quarter of fiscal 2025, the non-GAAP gross margin was 59.1%, down from 60.1% from the prior-year quarter. Non-GAAP gross margin in the NE segment was 60.9%, down 220 basis points year over year due to lower volume and product mix. SE segment’s gross margin decreased to 60.7% from 67.2% in the prior-year quarter as a result of lower revenues. OSP segment’s gross margin increased to 55.3% from 52.5% in the year-ago quarter.

Non-GAAP operating margin was down 240 bps year over year to 10%. Operating margin in the Network and Service Enablement business was down 550 basis points year over year due to lower revenues. OSP segment’s operating margin increased to 39.6% from 37.8% in the prior-year quarter.

Cash Flow & Liquidity

During the September quarter, Viavi generated $13.5 million of cash from operating activities. As of Sept. 28, 2024, the company had $467.9 million in cash and cash equivalents with $637.6 million of long-term debt.

Outlook

For the second quarter of fiscal 2025, management expects revenues in the range of $255-$265 million. Non-GAAP operating margin is expected to be in the range of 11.4%-13.4%, with non-GAAP earnings per share between 9 and 11 cents.

For the Network and Service Enablement segment, revenues are projected to be between $184 and $192 million. Revenues for the OSP segment are anticipated to be in the band of $71-$73 million, with a non-GAAP operating margin of 31.3-33.3%.

VIAV’s Zacks Rank

Viavi currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Motorola Solutions, Inc. MSI is scheduled to release third-quarter 2024 earnings on Nov. 7. The Zacks Consensus Estimate for earnings is pegged at $3.36 per share, indicating growth of 5.33% from the year-ago figure.

Pinterest, Inc. PINS is scheduled to release third-quarter 2024 earnings on Nov. 7. The Zacks Consensus Estimate for earnings is pegged at 34 cents per share, indicating growth of 21.4% from the year-ago figure.

Light and Wonder LNW is scheduled to release third-quarter 2024 earnings on Nov. 12. The Zacks Consensus Estimate for earnings is pegged at $1.11 per share, indicating growth of 37% from the year-ago figure.

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