Viavi Solutions(VIAV) - 2024 Q4 - Annual Results

Financial Highlights VIAVI's fiscal 2024 results reflect a challenging market, with declines in both Q4 and full-year revenue and profitability Fourth Quarter Fiscal 2024 Highlights In the fourth quarter of fiscal 2024, VIAVI reported net revenue of $252.0 million, a 4.4% decrease year-over-year, with non-GAAP operating margin at 10.9% and non-GAAP diluted EPS at $0.08 Q4 FY2024 Key Financial Metrics | Metric | Value | Change (YoY) | | :--- | :--- | :--- | | Net Revenue | $252.0 million | -4.4% | | GAAP Operating Margin | (2.3)% | -680 bps | | Non-GAAP Operating Margin | 10.9% | -80 bps | | GAAP EPS | $(0.10) | -$0.10 | | Non-GAAP Diluted EPS | $0.08 | -20.0% | Fiscal Year 2024 Highlights For the full fiscal year 2024, VIAVI's net revenue was $1.0 billion, a 9.6% decrease year-over-year, resulting in a non-GAAP operating margin of 11.5% and non-GAAP diluted EPS of $0.33 FY2024 Key Financial Metrics | Metric | Value | Change (YoY) | | :--- | :--- | :--- | | Net Revenue | $1.0 billion | -9.6% | | GAAP Operating Margin | 2.1% | -530 bps | | Non-GAAP Operating Margin | 11.5% | -410 bps | | GAAP EPS | $(0.12) | -209.1% | | Non-GAAP Diluted EPS | $0.33 | -40.0% | Financial Performance Analysis This section analyzes VIAVI's quarterly and annual financial performance, detailing segment results, financial position, and cash flow Quarterly Performance (Q4 FY2024) Q4 FY2024 revenue was $252.0 million, meeting guidance midpoint, with a 4.4% year-over-year decrease but a 2.4% sequential increase, driven by stronger OSP revenues offsetting softer NSE demand - CEO Oleg Khaykin stated that fiscal 2024 was challenging due to an anemic end-market spend environment, expecting a gradual recovery in NSE demand in H2 FY2025[2] Q4 FY2024 Performance vs. Prior Periods (Non-GAAP) | Metric | Q4 FY2024 | Q3 FY2024 | Q4 FY2023 | Change Q/Q | Change Y/Y | | :--- | :--- | :--- | :--- | :--- | :--- | | Net Revenue (in millions) | $252.0 | $246.0 | $263.6 | 2.4% | (4.4)% | | Gross Margin (%) | 59.6% | 57.9% | 58.2% | 170 bps | 140 bps | | Operating Margin (%) | 10.9% | 9.3% | 11.7% | 160 bps | (80) bps | | Earnings Per Share | $0.08 | $0.06 | $0.10 | 33.3% | (20.0)% | Q4 FY2024 Revenue by Segment | Segment | Q4 FY2024 Revenue (in millions) | Change Q/Q (%) | Change Y/Y (%) | | :--- | :--- | :--- | :--- | | Network Enablement | $158.5 | 4.5% | (9.7)% | | Service Enablement | $23.7 | 30.9% | 5.8% | | Optical Security and Performance Products | $69.8 | (8.4)% | 6.2% | | Total | $252.0 | 2.4% | (4.4)% | Annual Performance (FY2024) For the full fiscal year 2024, net revenue declined 9.6% to $1.0 billion, with all segments experiencing a year-over-year decrease, and non-GAAP operating margin contracting by 410 basis points to 11.5% FY2024 Performance vs. FY2023 (Non-GAAP) | Metric | FY2024 | FY2023 | Change Y/Y | | :--- | :--- | :--- | :--- | | Net Revenue (in millions) | $1,000.4 | $1,106.1 | (9.6)% | | Gross Margin (%) | 59.4% | 60.5% | (110) bps | | Operating Margin (%) | 11.5% | 15.6% | (410) bps | | Earnings Per Share | $0.33 | $0.55 | (40.0)% | FY2024 Revenue by Segment | Segment | FY2024 Revenue (in millions) | FY2023 Revenue (in millions) | Change Y/Y (%) | | :--- | :--- | :--- | :--- | | Network Enablement | $615.7 | $707.2 | (12.9)% | | Service Enablement | $86.3 | $94.0 | (8.2)% | | Optical Security and Performance Products | $298.4 | $304.9 | (2.1)% | | Total | $1,000.4 | $1,106.1 | (9.6)% | Financial Position and Cash Flow As of June 29, 2024, VIAVI held $496.2 million in total cash and investments, generated $116.4 million in cash flow from operations for the full fiscal year, and had a net carrying value of $636.0 million in total debt - Geographic revenue for Q4 FY2024 was distributed as follows: Americas 39.2%, Asia-Pacific 36.3%, and EMEA 24.5%[6] Key Balance Sheet and Cash Flow Data (as of June 29, 2024) | Metric | Value (in millions) | | :--- | :--- | | Total cash, short-term investments & restricted cash | $496.2 | | Total net carrying value of debt | $636.0 | | Cash flow from operations (Q4 FY2024) | $26.2 | | Cash flow from operations (FY2024) | $116.4 | Segment Performance Details In Q4 FY2024, the combined Network and Service Enablement (NSE) segment saw a year-over-year decline in operating income, while the Optical Security and Performance Products (OSP) segment's operating income grew, with both segments experiencing a decrease in operating income for the full fiscal year Q4 Segment Performance (GAAP) | Segment | Net Revenue (Q4'24 vs Q4'23, in millions) | Operating Income (Q4'24 vs Q4'23, in millions) | Operating Margin (Q4'24 vs Q4'23, %) | | :--- | :--- | :--- | :--- | | Network & Service Enablement | $182.2 vs $197.9 | $3.2 vs $11.4 | 1.8% vs 5.8% | | Optical Security & Performance | $69.8 vs $65.7 | $24.3 vs $19.4 | 34.8% vs 29.5% | Full Year Segment Performance (GAAP) | Segment | Net Revenue (FY24 vs FY23, in millions) | Operating Income (FY24 vs FY23, in millions) | Operating Margin (FY24 vs FY23, %) | | :--- | :--- | :--- | :--- | | Network & Service Enablement | $702.0 vs $801.2 | $8.0 vs $61.2 | 1.1% vs 7.6% | | Optical Security & Performance | $298.4 vs $304.9 | $107.0 vs $111.3 | 35.9% vs 36.5% | Corporate Developments and Outlook This section details VIAVI's recent restructuring initiatives and provides financial guidance for the upcoming fiscal quarter Restructuring Plan On June 13, 2024, VIAVI approved a restructuring and workforce reduction plan to improve operational efficiencies, affecting approximately 6% of the global workforce and expected to be substantially complete by the end of fiscal 2025 - The company initiated the 'Fiscal 2024 Plan' to better align its workforce with current business needs[7] Restructuring Plan Details | Metric | Expected Value | | :--- | :--- | | Affected Workforce | ~6% of global workforce | | Estimated Charges | ~$15 million | | Annualized Cost Savings | ~$25 million | Business Outlook (Q1 FY2025) For the first quarter of fiscal 2025, ending September 28, 2024, VIAVI anticipates net revenue to be in the range of $235 million to $245 million, with non-GAAP EPS expected between $0.05 and $0.07 Q1 FY2025 Guidance | Metric | Guidance Range | | :--- | :--- | | Net Revenue (in millions) | $235 - $245 | | Non-GAAP EPS | $0.05 - $0.07 | Financial Statements (Preliminary) This section presents VIAVI's preliminary consolidated statements of operations and balance sheets for the recent fiscal periods Consolidated Statements of Operations The preliminary consolidated statements of operations show a net loss of $21.7 million for Q4 FY2024 and $25.8 million for the full fiscal year 2024, a significant decline from the prior year's results Key Income Statement Data (GAAP) | Metric | Q4 FY2024 (in millions) | Q4 FY2023 (in millions) | FY2024 (in millions) | FY2023 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $252.0 | $263.6 | $1,000.4 | $1,106.1 | | Gross Profit | $145.6 | $146.0 | $575.9 | $638.8 | | (Loss) Income from Operations | $(5.7) | $11.8 | $20.8 | $82.4 | | Net (Loss) Income | $(21.7) | $(0.1) | $(25.8) | $25.5 | | Diluted EPS | $(0.10) | $0.00 | $(0.12) | $0.11 | Consolidated Balance Sheets As of June 29, 2024, VIAVI's total assets were $1.74 billion, a decrease from $1.85 billion in the prior fiscal year, primarily due to lower cash, receivables, and inventories, while total liabilities also decreased Key Balance Sheet Data (as of year-end) | Metric | June 29, 2024 (in millions) | July 1, 2023 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $471.3 | $506.5 | | Total current assets | $876.5 | $945.0 | | Total assets | $1,736.3 | $1,850.5 | | Total current liabilities | $247.1 | $343.5 | | Long-term debt | $636.0 | $629.5 | | Total stockholders' equity | $681.6 | $690.8 | Non-GAAP Financial Measures This section explains VIAVI's use of non-GAAP financial measures and provides detailed reconciliations to their GAAP equivalents Use of Non-GAAP Measures VIAVI uses non-GAAP financial measures like gross margin, operating margin, net income, and EPS to evaluate core operating performance, providing investors with a clearer view by excluding non-ordinary items - Management excludes certain items to better understand the company's core operating performance, representing its performance in the ordinary, ongoing, and customary course of its operations[24] - Key adjustments include excluding stock-based compensation, amortization of acquired intangibles, restructuring charges, changes in fair value of contingent consideration, and other non-core charges[26][27][28] Reconciliation of GAAP to Non-GAAP Measures This section provides detailed reconciliations of GAAP results to their non-GAAP counterparts for key metrics including gross profit, operating income, net income, and EPS, along with a reconciliation of GAAP Net Income to Adjusted EBITDA Reconciliation of GAAP to Non-GAAP Operating Income (FY2024) | Metric | Amount (in millions) | | :--- | :--- | | GAAP Operating Income | $20.8 | | Stock-based compensation | $49.4 | | Change in fair value of contingent liability | $(9.5) | | Other charges (benefits) | $20.6 | | Amortization of intangibles | $20.1 | | Restructuring and related charges | $13.6 | | Non-GAAP Operating Income | $115.0 | Reconciliation of GAAP to Non-GAAP Net Income (FY2024) | Metric | Amount (in millions) | | :--- | :--- | | GAAP Net (Loss) Income | $(25.8) | | Total reconciling items | $99.3 | | Non-GAAP Net Income | $73.5 | Reconciliation to Adjusted EBITDA (FY2024) | Metric | Amount (in millions) | | :--- | :--- | | GAAP Net (Loss) Income | $(25.8) | | Interest, Taxes, Depreciation & Amortization | $105.3 | | EBITDA | $79.5 | | Other Adjustments (Restructuring, SBC, etc.) | $73.5 | | Adjusted EBITDA | $153.0 |