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01/11 03:22
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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%.
Net Revenue $299.1 million, up 25.6% year-over-year. The increase was driven by strong demand in the data center ecosystem and the acquisition of Inertial Labs.
Operating Margin 15.7%, up 570 basis points year-over-year. The improvement was due to higher fall-through and favorable product mix.
Earnings Per Share (EPS) $0.15, up $0.09 year-over-year. The increase was attributed to higher revenue and improved operating margins.
NSE Revenue $216 million, up 35.5% year-over-year. Growth was driven by strong demand for lab and production as well as field products, mainly from the data center ecosystem and the acquisition of Inertial Labs.
NSE Gross Margin 63%, up 210 basis points year-over-year. The increase was due to higher volume and favorable product mix.
NSE Operating Margin 7.5%, compared to negative 4.6% in the same quarter last year. The improvement was driven by higher fall-through.
OSP Revenue $83.1 million, up 5.5% year-over-year. The increase was primarily due to strength in Anti-Counterfeiting and Other products.
OSP Gross Margin 52.3%, down 300 basis points year-over-year. The decline was due to unfavorable product mix.
OSP Operating Margin 37.1%, down 250 basis points year-over-year. The decrease was attributed to product mix and higher manufacturing costs.
Cash and Short-Term Investments $549.1 million, up from $429 million in the prior quarter. The increase was due to refinancing activities and cash flow from operations.
Cash Flow from Operating Activities $31 million, up from $13.5 million in the same period last year. The increase was due to improved operational performance.
Capital Expenditures (CapEx) $8.5 million, up from $7.3 million in the same period last year. The increase was due to higher investment in infrastructure.
NSE revenue growth: NSE revenue grew approximately 35% year-on-year, driven by strong demand from the data center ecosystem and aerospace and defense customers. This includes high-performance semis, optical modules, and NAMs for AI data center build-out.
Spirent acquisition: Acquired Spirent's High-Speed Ethernet, network security, and channel emulation business lines, adding about $200 million of annual revenue run rate.
Data center ecosystem: Strong demand for lab and production products, including 800-gig and 1.6 terabit Ethernet test, chip-to-chip interconnect, and protocol test, driven by AI data center build-out.
Aerospace and Defense: Continued high demand for positioning, navigation, and timing products.
Operating margin improvement: Operating margin for Q1 was 15.7%, up 130 basis points sequentially and 570 basis points year-over-year.
Cash flow: Cash flow from operating activities was $31 million, up from $13.5 million in the same period last year.
Spirent integration: Plan to leverage complementary product portfolio and capabilities, recording NSE as one business segment going forward.
Convertible notes refinancing: Refinanced $250 million convertible notes due in 2026 with $250 million notes due in 2031, reducing interest rate from 1.625% to 0.625%.
OSP Gross Margin Decline: OSP gross margin decreased by 300 basis points year-over-year due to unfavorable product mix, which could impact profitability.
OSP Operating Margin Decline: OSP operating margin fell below guidance due to product mix and higher manufacturing costs, decreasing by 250 basis points year-over-year.
Seasonal Demand Variability: OSP revenue is expected to decline quarter-over-quarter in Q2 due to seasonally lower demand for anti-counterfeiting and 3D sensing products.
Soft Wireless Product Demand: The service provider business experienced continued soft demand for wireless products, which is expected to persist in the medium term.
Debt Refinancing Impact: The company refinanced $250 million in convertible notes, increasing interest expenses due to the new Term Loan B, which could pressure financials.
Integration Risks from Acquisition: The acquisition of Spirent's business lines introduces potential risks related to integration and achieving expected synergies.
Revenue Expectations: For the second fiscal quarter of 2026, Viavi expects revenue in the range of $360 million to $370 million. NSE revenue is projected between $283 million and $293 million, including $45 million to $55 million from the recently acquired Spirent business lines. OSP revenue is expected to be approximately $77 million.
Operating Margin: Viavi's operating margin for the second fiscal quarter of 2026 is expected to be 17.9%, plus or minus 60 basis points. NSE operating margin is projected at 13.6%, plus or minus 70 basis points, with Spirent's contribution being slightly accretive. OSP operating margin is expected to be 34%, plus or minus 50 basis points.
Earnings Per Share (EPS): EPS for the second fiscal quarter of 2026 is expected to be between $0.18 and $0.20. Viavi stand-alone EPS is projected at $0.18, with Spirent's contribution estimated between $0.00 and $0.02.
Market Trends and Segment Performance: Strong demand is expected to continue from the data center ecosystem and aerospace and defense customers throughout fiscal 2026. The data center ecosystem is driving demand for lab, production, and field products, supported by AI data center build-outs. Aerospace and defense demand is driven by positioning, navigation, and timing products. Service provider business is expected to remain stable, with gradual recovery in fiber offset by soft wireless demand. OSP revenue is expected to decline quarter-on-quarter due to seasonally lower demand for anti-counterfeiting and 3D sensing products.
Strategic Plans and Acquisitions: The acquisition of Spirent's High-Speed Ethernet, network security, and channel emulation business lines is expected to add approximately $200 million in annual revenue run rate, above the prior estimate of $188 million. The integration of Spirent's product lines is expected to strengthen Viavi's position in the data center ecosystem and contribute to incremental revenue in fiscal 2026.
Share Repurchase Program: During the quarter, the company purchased approximately 2.7 million shares of its stock for about $30 million. There is almost $170 million remaining under the current authorized share repurchase program.
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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