Yahoo Finance Viavi Solutions Inc (VIAV) Q3 2024 Earnings Call Transcript Highlights: A Detailed Review of ...
Net Revenue: $246 million, down 0.7% year-over-year.
Operating Margin: 9.3%, decreased 210 basis points year-over-year.
Earnings Per Share (EPS): $0.06, down $0.02 year-over-year.
NSE Revenue: $169.8 million, down 4.2% year-over-year.
NE Revenue: $151.7 million, 0.1% decline year-over-year.
SE Revenue: $18.1 million, down 28.7% year-over-year.
OSP Revenue: $76.2 million, up 8.1% year-over-year.
NSE Gross Margin: 61.4%, down 190 basis points year-over-year.
NE Gross Margin: 61.5%, down 70 basis points year-over-year.
SE Gross Margin: 60.8%, down 930 basis points year-over-year.
OSP Gross Margin: 50.1%, down 60 basis points year-over-year.
OSP Operating Margin: 34.3%, down 130 basis points year-over-year.
Cash and Short-term Investments: $486.1 million, down from $571.8 million in Q2 FY24.
Cash Flow from Operating Activities: $19.5 million, up from $17.8 million year-over-year.
Capital Expenditures (CapEx): $3.2 million, down $7.6 million year-over-year.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Net revenue for the quarter was $246 million, slightly above the low end of the guidance range.
Operating margin for the quarter was 9.3%, within the guidance range and slightly above the low end.
OSP revenue for the third fiscal quarter exceeded the high end of the guidance range, showing a year-over-year increase of 8.1%.
Cash flow from operating activities increased compared to the same period last year, indicating improved operational efficiency.
The company successfully repaid its outstanding balance of the 2024 convertible notes, strengthening its balance sheet.
Negative Points
Revenue was down sequentially by 3.3% and on a year-over-year basis by 0.7%.
Operating margin decreased both sequentially and on a year-over-year basis, indicating potential challenges in operational efficiency.
NSE revenue was below the guidance range and declined year-over-year by 4.2%, reflecting a conservative spend environment at enterprise customers.
SE revenue declined significantly by 28.7% from the same period last year, driven by a slowdown in enterprise customer spend.
Total cash and short-term investments decreased significantly from the previous quarter, from $571.8 million to $486.1 million.
Q & A Highlights
Q: Can you provide more detail on how the quarter progressed, particularly in the enterprise and service provider sectors? A: (Oleg Khaykin - President, Chief Executive Officer, Director) The quarter saw a decrease in spending from North American service providers, which was anemic and gradually decreasing. In the enterprise sector, while there were some large deals, there was also a significant deal that slipped to the next quarter, indicating a more conservative spending environment. This pattern of delayed spending and managing quarterly CapEx is becoming more common among customers.
Q: What are your expectations for seasonal trends and service provider spending as we move into the second half of the year? A: (Oleg Khaykin - President, Chief Executive Officer, Director) September is typically a lower quarter due to budget assessments by service providers. The second half of the year might not see significant improvements in service provider spending, which is expected to remain tactical. However, there could be a better outlook for lab business in North America and some recovery in the SE business.
Q: Could you provide some insights into the miss on the SEMS and the broader wireline telco business for fiber builds? A: (Oleg Khaykin - President, Chief Executive Officer, Director) The miss in the SEMS was largely due to a significant order that was delayed to the next quarter, impacting both revenue and margins. In the broader wireline telco business, North America remains the weakest link, with service providers opting to "sweat the assets" rather than expand, awaiting market turnaround or competitive moves.
Q: How do you see service provider telco spending changing in 2025 compared to 2024? A: (Oleg Khaykin - President, Chief Executive Officer, Director) In 2025, the aging of field instruments sold in strong years like 2022 might necessitate significant replacements. This could lead to a substantial spending cycle similar to what was seen in 2021-2022. However, any expansion or upgrade of networks by service providers could further amplify the demand for new tools and replacements.
Q: What could help improve the operating margins for the NS business aside from volume recovery? A: (Oleg Khaykin - President, Chief Executive Officer, Director; Ilan Daskal - CFO, EVP) Volume recovery is the primary driver for improving margins due to the high variable margins on lab and software products. Additionally, a recovery in the high-margin SC business would significantly contribute to the bottom line.
Q: Can you provide details on the strengths and expectations for the P&C business? A: (Oleg Khaykin - President, Chief Executive Officer, Director) The P&C business is seeing robust demand, particularly in aerospace and defense, driven by issues with GPS signals in Europe and the Middle East and strong demand for next-generation avionics products. This interest is expected to continue growing, supporting the business segment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
