Viavi Solutions(VIAV) - 2025 Q3 - Quarterly Results

Q3 FY2025 Financial Highlights Third Quarter Fiscal 2025 Performance Summary VIAVI reported strong Q3 FY2025 results, with significant year-over-year growth across key metrics, including net revenue increasing by 15.8% to $284.8 million and non-GAAP EPS growing 150.0% to $0.15 - CEO Oleg Khaykin attributed the strong results to strength in both Network and Service Enablement (NSE) and Optical Security and Performance (OSP) segments, expressing optimism about continued recovery and growth in end markets[3] Q3 FY2025 Key Financial Results (GAAP vs. Non-GAAP) | Metric | Q3 FY2025 (GAAP) (in millions) | Q3 FY2024 (GAAP) (in millions) | Y/Y Change (GAAP) | Q3 FY2025 (Non-GAAP) (in millions) | Q3 FY2024 (Non-GAAP) (in millions) | Y/Y Change (Non-GAAP) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $284.8 | $246.0 | +15.8% | $284.8 | $246.0 | +15.8% | | Operating Margin | 3.0% | (4.8)% | +780 bps | 16.7% | 9.3% | +740 bps | | Income from Operations | $8.5 | ($11.9) | +171.4% | $47.7 | $23.0 | +107.4% | | Diluted EPS | $0.09 | ($0.11) | +181.8% | $0.15 | $0.06 | +150.0% | Segment Performance The Network Enablement segment was the primary growth driver, with revenue increasing 23.9% year-over-year to $188.0 million, while OSP and Service Enablement segments also saw growth Net Revenue by Segment (in millions) | Segment | Q3 FY2025 (in millions) | Q3 FY2024 (in millions) | Y/Y Change | | :--- | :--- | :--- | :--- | | Network Enablement | $188.0 | $151.7 | +23.9% | | Service Enablement | $20.2 | $18.1 | +11.6% | | Optical Security and Performance Products | $76.6 | $76.2 | +0.5% | | Total | $284.8 | $246.0 | +15.8% | Other Financial and Operational Details As of March 29, 2025, VIAVI held $400.2 million in cash and investments, with $640.9 million in net debt, and generated $7.8 million in operating cash flow - Revenue by geography for Q3 FY2025: - Americas: 38.0% - Asia-Pacific: 35.4% - EMEA: 26.6%[11] - As of March 29, 2025, the company held $400.2 million in total cash, short-term investments, and short-term restricted cash[11] - Total net carrying value of debt, including 1.625% and 3.75% Senior Notes, was $640.9 million[11] - The company generated $7.8 million in cash flows from operations during the third fiscal quarter[11] Business Outlook Fourth Quarter Fiscal 2025 Guidance For Q4 FY2025, VIAVI anticipates net revenue between $278 million and $290 million, with non-GAAP earnings per share projected to be between $0.10 and $0.13 Q4 FY2025 Guidance | Metric | Expected Range | | :--- | :--- | | Net Revenue | $278 million - $290 million | | Non-GAAP EPS | $0.10 - $0.13 | - The company has not provided a reconciliation to GAAP EPS guidance due to the difficulty in forecasting certain reconciling items, such as restructuring and acquisition-related charges[7] Financial Statements (Preliminary) Condensed Consolidated Statements of Operations For Q3 FY2025, VIAVI reported a GAAP net income of $19.5 million, or $0.09 per diluted share, a significant improvement from the prior-year quarter's net loss of $24.6 million, driven by higher revenue and a $16.3 million tax benefit Statement of Operations Highlights (in millions, except per share data) | Metric | Three Months Ended Mar 29, 2025 (in millions) | Three Months Ended Mar 30, 2024 (in millions) | | :--- | :--- | :--- | | Net revenue | $284.8 | $246.0 | | Gross profit | $160.7 | $137.9 | | Income (loss) from operations | $8.5 | ($11.9) | | Net income (loss) | $19.5 | ($24.6) | | Diluted net income (loss) per share | $0.09 | ($0.11) | Condensed Consolidated Balance Sheets As of March 29, 2025, VIAVI's total assets increased to $1.93 billion from $1.74 billion, primarily due to goodwill and intangible assets, while total liabilities rose to $1.20 billion from $1.05 billion Balance Sheet Highlights (in millions) | Metric | March 29, 2025 (in millions) | June 29, 2024 (in millions) | | :--- | :--- | :--- | | Total current assets | $835.4 | $876.5 | | Total assets | $1,933.2 | $1,736.3 | | Total current liabilities | $544.7 | $247.1 | | Total liabilities | $1,204.4 | $1,054.7 | | Total stockholders' equity | $728.8 | $681.6 | Reportable Segment Information In Q3 FY2025, the Network and Service Enablement segment reported a GAAP operating income of $21.7 million, a significant turnaround, while the Optical Security and Performance Products segment maintained profitability at $26.0 million Segment GAAP Operating Income (in millions) | Segment | Q3 FY2025 (in millions) | Q3 FY2024 (in millions) | | :--- | :--- | :--- | | Network and Service Enablement | $21.7 | ($3.1) | | Optical Security and Performance Products | $26.0 | $26.1 | Segment GAAP Gross Margin | Segment | Q3 FY2025 | Q3 FY2024 | | :--- | :--- | :--- | | Network and Service Enablement | 63.1% | 61.4% | | Optical Security and Performance Products | 51.6% | 50.1% | Non-GAAP Financial Measures Use of Non-GAAP (Adjusted) Financial Measures VIAVI uses non-GAAP financial measures to provide a clearer view of core operational performance by excluding non-recurring or non-core items - Management uses non-GAAP measures to evaluate historical and prospective financial performance and to understand the company's core operating activities, which are considered ordinary, ongoing, and customary operations[24] - Key adjustments to derive non-GAAP figures include excluding stock-based compensation, amortization of intangibles, restructuring costs, acquisition-related costs, and certain legal settlements[25] Reconciliation of GAAP to Non-GAAP Measures For Q3 FY2025, non-GAAP operating income was $47.7 million versus GAAP operating income of $8.5 million, primarily adjusted for acquisition charges, stock-based compensation, and amortization of intangibles Reconciliation of Q3 FY2025 GAAP to Non-GAAP Operating Income (in millions) | Description | Amount (in millions) | | :--- | :--- | | GAAP operating income | $8.5 | | Stock-based compensation | $14.1 | | Acquisition and integration related charges | $13.3 | | Amortization of intangibles | $7.3 | | Change in fair value of contingent liability | $2.5 | | Amortization of inventory step-up | $1.7 | | Other charges | $0.6 | | Restructuring and related (benefits) | ($0.3) | | Non-GAAP operating income | $47.7 | Reconciliation of Q3 FY2025 GAAP to Non-GAAP Net Income (in millions) | Description | Amount (in millions) | | :--- | :--- | | GAAP net income | $19.5 | | Total reconciling items (net) | $14.4 | | Non-GAAP net income | $33.9 | Reconciliation of GAAP Net Income to Adjusted EBITDA Adjusted EBITDA for Q3 FY2025 significantly increased to $57.0 million from $32.6 million in the prior year, derived by adjusting GAAP Net Income for interest, taxes, depreciation, amortization, and other non-core items Reconciliation to Adjusted EBITDA (in millions) | Description | Q3 FY2025 (in millions) | Q3 FY2024 (in millions) | | :--- | :--- | :--- | | GAAP Net Income (Loss) | $19.5 | ($24.6) | | Interest, Taxes, Depreciation & Amortization | $8.3 | $22.3 | | EBITDA | $25.1 | $2.7 | | Stock-based compensation | $14.1 | $12.8 | | Acquisition and integration related charges | $13.3 | $0.6 | | Other adjustments | $4.5 | $16.5 | | Adjusted EBITDA | $57.0 | $32.6 |