VIAVI Announces Fiscal Third Quarter 2017 Results

  • GAAP and Non-GAAP net revenue of $196.0 million, down $24.4 million or (11.1)% year-over-year
  • GAAP operating margin of (7.8)%, down 1,110 bps year-over-year
  • Non-GAAP operating margin of 11.9%, remained relatively flat year-over-year
  • GAAP EPS from continuing operations of $0.11, down (0.01) or (8.3)% year-over-year
  • Non-GAAP EPS from continuing operations of $0.09, remained relatively flat year-over-year

Milpitas, California, May 2, 2017 — VIAVI (NASDAQ: VIAV) today reported results for its third fiscal quarter ended April 1, 2017. Amounts presented below are on a continuing operations basis unless otherwise noted.

GAAP net revenue was $196.0 million, with net income of $26.0 million, or $0.11 per share. Prior quarter GAAP net revenue was $206.5 million, with net income of $49.2 million or $0.21 per share. GAAP net revenue for the third quarter of fiscal 2016 was $220.4 million, with net income of $28.8 million, or $0.12 per share.

Non-GAAP net revenue was $196.0 million, with net income of $21.9 million, or $0.09 per share. Prior quarter non-GAAP net revenue was $206.5 million, with net income of $23.6 million, or $0.10 per share. Non-GAAP net revenue for the third quarter of fiscal 2016 was $220.4 million, with net income of $21.6 million, or $0.09 per share.

“We exceeded our EPS guidance range with a non-GAAP EPS of $0.09,” said Oleg Khaykin, VIAVI’s President and Chief Executive Officer. “OSP revenue came in above expectations due to stronger than expected anti-counterfeiting demand, and in part offset weaker than expected NSE revenue that was impacted by weaker service provider and enterprise spend.”

Khaykin added, “We continue to make progress in reducing NSE’s operating expenses and expect to complete most of the restructuring of the SE business segment in this fiscal quarter. In addition, we are seeing the expected recovery in OSP’s core revenue in second half of fiscal 2017.”

Financial Overview:

The tables below (in millions, except percentage data) provide comparisons of quarterly result to prior periods, including sequential quarterly and year-over-year changes. A reconciliation between GAAP and non-GAAP measures is contained in this release under the section titled “Use of Non-GAAP (Adjusted) Financial Measures.”

Third Quarter Ended April 1, 2017

GAAP Results

  Q3 Q2 Q3 Change
  FY 2017

FY 2017

FY 2016 Q/Q Y/Y
Net revenue $196.0 $206.5 $220.4 (5.1)% (11.1)%
Gross margin 59.7%


59.6% (70) bps 10 bps
Operating margin (7.8)%


3.3% (1,100) bps (1,110) bps

Non-GAAP Results





  FY 2017

FY 2017

FY 2016 Q/Q Y/Y
Net revenue $196.0 $206.5 $220.4


Adj. Gross margin 62.2%



(70) bps

30 bps
Adj. Operating margin 11.9%



(110) bps

0 bps

GAAP and Non-GAAP Net Revenue by Segment

  Q3 % of Net




  FY 2017 revenue

FY 2017

FY 2016 Q/Q Y/Y
Network Enablement $103.4 52.8% $117.0 $123.1 (11.6)% (16.0)%
Service Enablement 28.7 14.6%


35.2 (29.3)% (18.5)%
Optical Security and Performance Products 63.9 232.6%


62.1 30.7% 2.9%
Total $196.0 100.0% $206.5 $220.4 (5.1)% (11.1)%
  • Americas, Asia-Pacific and EMEA customers represented 43.8%, 20.6% and 35.6%, respectively, of total net revenue for the quarter ended April 1, 2017.
  • As of April 1, 2017, the Company held $1,454.6 million in total cash and investments, which also includes marketable equity investments. As of April 1, 2017, the Company also had $1,110 million aggregate principal amount of Senior Convertible Notes with a net carrying value of $958.1 million classified as Long-term debt.
  • During the third quarter ended April 1, 2017 the Company sold 1.3 million shares of the 11.7 million shares of Lumentum common stock retained as part of the spin-off of Lumentum. The Company generated net proceeds from these sales of $62.1 million and had 0.4 million shares remaining valued at $20.8 million at April 1, 2017.
  • During the fiscal quarter ended April 1, 2017, the Company generated $17.3 million of cash from operations.
  • The Company adjusted its historical Condensed Consolidated Statements of Operations, Condensed Consolidated Balance Sheets and reportable segment information to reflect the spin-off of the Lumentum business (formerly the Company’s communications and commercial optical products business segment and WaveReady product line) on August 1, 2015. The Lumentum business’ adjusted results are reflected as discontinued operations for the periods reported in the Company’s GAAP Condensed Consolidated Statement of Operations and reportable segment information.

Business Outlook for the Fiscal Forth Quarter of Fiscal 2017
For the fourth quarter of fiscal 2017 ending July 1, 2017, the Company expects non-GAAP net revenue to be between $188 million to $204 million and non-GAAP earnings per share to be $0.07 to $0.09. With respect to our expectations above, the Company has not reconciled non-GAAP net income per share to GAAP net income (loss) per share in this press release because it is unable to provide a meaningful or accurate estimate of certain reconciling items described in the “Use of Non-GAAP (Adjusted) Financial Measures”section below and the information is not available without unreasonable effort as a result of the inherent difficulty of forecasting the timing and/or amounts of certain items, including restructuring and related charges and gain on sale of investments. In addition, the Company believes such reconciliations would imply a degree of precision that would be confusing or misleading to investors.

Conference Call
The Company will discuss these results and other related matters at 1:30 p.m. Pacific Time on May 2, 2017 in a live webcast, which will also be archived for replay on the Company’s website at  The Company will post supplementary slides outlining the Company’s latest financial results on under the “Quarterly Results” section concurrently with this earnings press release. This press release is being furnished as a Current Report on Form 8-K with the Securities and Exchange Commission, and will be available at

About VIAVI Solutions
VIAVI (NASDAQ: VIAV) is a global provider of network test, monitoring and assurance solutions to communications service providers, enterprises and their ecosystems, supported by a worldwide channel community including VIAVI Velocity Solution Partners. We deliver end-to-end visibility across physical, virtual and hybrid networks, enabling customers to optimize connectivity, quality of experience and profitability. VIAVI is also a leader in high performance thin film optical coatings, providing light management solutions to anti-counterfeiting, consumer electronics, automotive, defense and instrumentation markets. Learn more about VIAVI at Follow us on VIAVI Perspectives, LinkedIn, Twitter, YouTube and Facebook.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include any anticipation or guidance as to future financial performance, including future revenue, gross margin, operating expense, operating margin, profitability targets, cash flow and other financial metrics, as well as the impact and duration of certain trends and market position and conditions. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. In particular, the Company’s ability to predict future financial performance continues to be difficult due to, among other things: (a) continuing general limited visibility across many of our product lines; (b) quarter-over-quarter product mix fluctuations, which can materially impact profitability measures due to the broad gross margin ranges across our portfolio; (c) consolidations in our customer base; (d) customer purchasing delays as they assess or transition to new technologies and/or new architectures, which limit near-term demand visibility, and could negatively impact potential revenue; (e) continued decline of average selling prices across our businesses; (f) notable seasonality and a significant level of in-quarter book-and-ship business; (g) various product and manufacturing transfers, site consolidations, product discontinuances and the restructuring and workforce reduction plan announced in January 2017 that have caused and may cause short-term disruptions; (h) the ability of our suppliers and contract manufacturers to meet production and delivery requirements to our forecasted demand; and (i) inherent uncertainty related to global markets and the effect of such markets on demand for our products. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. For more information on these risks, please refer to the “Risk Factors” section included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 2, 2016 filed with the Securities and Exchange Commission. The forward-looking statements contained in this press release are made as of the date thereof and the Company assumes no obligation to update such statements.