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01/11 03:24
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The company reported strong financial performance with revenue and EPS growth, and higher operating margins. Despite tariff concerns, management is optimistic about passing costs to customers and expects strong demand in key segments like aerospace and defense. The acquisition of Inertial Labs and growth in fiber monitoring systems and wireless business further enhance prospects. However, the lack of share repurchases and vague responses on tariffs and fiber lab impact are slight concerns. Given the market cap and overall positive indicators, a stock price increase of 2% to 8% is anticipated.
Net Revenue $284.8 million, up 15.8% year-over-year due to strong demand across various segments.
Operating Margin 16.7%, up 7.4% year-over-year, driven by higher gross margin fall through and a $4 million government R&D grant.
EPS $0.15, up $0.09 year-over-year, attributed to higher volume and richer revenue mix.
NSE Revenue $208.2 million, up 22.6% year-over-year, driven by recovery and growth across product segments.
NE Revenue $188 million, up 23.9% year-over-year, due to strong demand for fiber lab and production products.
SE Revenue $20.2 million, up 11.6% year-over-year, in line with expectations.
NSE Gross Margin 63.1%, up 1.7% year-over-year.
NE Gross Margin 63.4%, up 190 basis points year-over-year, driven by higher volume and favorable product mix.
SE Gross Margin 59.9%, down 90 basis points year-over-year due to product mix.
NSE Operating Margin 10.4%, significantly above guidance, compared to a 1.8% loss in the same quarter last year.
OSP Revenue $76.6 million, up 0.5% year-over-year, driven by higher volume and favorable product mix.
OSP Gross Margin 51.6%, up 150 basis points year-over-year, primarily driven by higher volume and favorable product mix.
OSP Operating Margin 33.9%, 40 basis points lower year-over-year.
Total Cash and Short-term Investments $400.2 million, down from $512.8 million in the previous quarter, mainly due to the payment for the Inertial Labs acquisition.
Cash Flow from Operating Activities $7.8 million, down from $19.5 million year-over-year, mainly related to the acquisition of Inertial Labs.
CapEx $6.8 million, up from $3.2 million year-over-year.
Fully Diluted Share Count 226.9 million shares, up from 224.6 million shares year-over-year.
Inertial Labs Acquisition: The acquisition of Inertial Labs is expected to strengthen the position navigation and timing business, serving as a multiyear growth driver for the aerospace and defense segment.
NSE Revenue Growth: NSE revenue grew 23% year-over-year, driven by demand from service providers and hyperscale data center operators for fiber field instruments and monitoring systems.
OSP Revenue Stability: OSP revenue was marginally increased year-over-year due to strength in anti-counterfeiting products, with expectations for fiscal Q4 to be flat quarter-on-quarter and up year-on-year.
Operating Margin: Operating margin for Q3 was 16.7%, above guidance, with NSE operating margin at 10.4%, significantly above guidance due to higher gross margin and a $4 million government R&D grant.
Cash Flow Impact: Cash flow from operating activities decreased to $7.8 million, primarily due to the acquisition of Inertial Labs.
M&A Focus: The company prioritized capital allocation towards M&A, specifically acquiring Spirent’s high-speed ethernet and network security business lines, planning to finance with additional debt.
Tariff Impact: The company expects a $3 million tariff impact on orders, which is anticipated to dilute gross margin and negatively affect EPS by approximately $0.01.
Tariff Impact: The company is assessing the potential impact of global tariffs on overall demand and timing of orders, with an expected tariff impact of about $3 million on orders already booked, which is anticipated to be dilutive to gross margin and negatively impact EPS by approximately $0.01.
Customer Order Delays: There is a risk that previously approved purchase orders (POs) and upcoming orders may be delayed or reduced in volume as customers reapprove POs to include tariffs or decide to take a wait-and-see approach.
Supply Chain Realignment: The company is in a position to realign its supply chain to further reduce the tariffs impact within 6 months, indicating potential challenges in managing supply chain dynamics.
Economic Factors: The company is taking a more conservative outlook for Q4 due to recently imposed U.S. tariffs, which may affect revenue expectations.
Operating Margin: The tariffs are expected to have a low-single-digit impact on the company's operating margin, indicating potential pressure on profitability.
Acquisition of Spirent’s Business Lines: Viavi Solutions plans to finance the acquisition of Spirent’s high-speed ethernet and network security business lines with additional debt, while maintaining financial discipline.
Growth in Aerospace and Defense: The acquisition of Inertial Labs is expected to be a strong multiyear growth driver for the aerospace and defense business segment.
Fiber Monitoring Adoption: There is an expected continued trend in the adoption of fiber monitoring by hyperscalers through calendar 2025.
5G Demand: The demand for wireless field instruments is seen as a leading indicator for the resumption of 5G network buildout.
Q4 Revenue Guidance: For Q4 2025, revenue is expected to be in the range of $278 million to $290 million.
Operating Margin Guidance: Operating margin for Q4 is expected to be 13.5%, plus or minus 1%.
EPS Guidance: EPS for Q4 is projected to be between $0.10 and $0.13.
NSE Revenue Guidance: NSE revenue is expected to be approximately $208 million, plus or minus $5 million.
OSP Revenue Guidance: OSP revenue is expected to be approximately $76 million, plus or minus $1 million.
Tariff Impact: The guidance includes a tariff impact of about $3 million on orders already booked, expected to negatively impact EPS by approximately $0.01.
Share Repurchase Program: During the quarter, we did not purchase any shares of our stock as we prioritized our capital allocation towards M&A with the agreement to acquire Spirent’s high-speed ethernet and network security business lines.
The earnings call indicates strong financial performance and growth prospects, especially in the data center and aerospace sectors. The Spirent acquisition is expected to be accretive sooner than expected, and there's optimism around wireless recovery and Tier 1 service provider spending. While there are some concerns about the smartphone segment and unclear responses, overall sentiment is positive. Considering the company's market cap, the predicted stock price movement is likely to be positive, between 2% to 8%.
The earnings call summary reflects a positive sentiment with strong financial performance, including record-high revenue and improved margins. The Q&A section reveals optimistic guidance, particularly in the data center and aerospace sectors. Despite some uncertainties in specific segments, the overall outlook is favorable, with growth in key areas and strategic acquisitions. The market cap of $1.5 billion suggests a moderate reaction, leading to a positive stock price movement prediction of 2% to 8%.
The company reported strong financial performance with revenue and EPS growth, and higher operating margins. Despite tariff concerns, management is optimistic about passing costs to customers and expects strong demand in key segments like aerospace and defense. The acquisition of Inertial Labs and growth in fiber monitoring systems and wireless business further enhance prospects. However, the lack of share repurchases and vague responses on tariffs and fiber lab impact are slight concerns. Given the market cap and overall positive indicators, a stock price increase of 2% to 8% is anticipated.
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