VIAVI Announces Fiscal Fourth Quarter and Year End 2016 Results
Fourth Quarter
- GAAP and Non-GAAP net revenue of $224.1 million, up $4.3 million or 2.0% year-over-year
- GAAP operating margin of (43.6)%, down 3,500 bps year-over-year
- Non-GAAP operating margin of 13.5%, up 580 bps year-over-year
- GAAP EPS from continuing operations of $(0.29), down $0.15 or 107.1% year-over-year
- Non-GAAP EPS from continuing operations of $0.10, up $0.06 or 150.0% year-over-year
Fiscal 2016
- GAAP and Non-GAAP net revenue of 906.3 million, up 32.4 million or 3.7% year-over-year
- GAAP operating margin of (9.3)%, down 60 bps year-over-year
- Non-GAAP operating margin of 12.8%, up 500 bps year-over-year
- GAAP EPS from continuing operations of $(0.22), up $0.35 or 61.4% year-over-year
- Non-GAAP EPS from continuing operations of $0.38, up 0.19 or 100.0% year-over-year
- Completed the repurchase of 7.3 million shares of common stock
Milpitas, California, August 11, 2016 — VIAVI (NASDAQ: VIAV) today reported results for its fourth fiscal quarter and fiscal year ended July 2, 2016. Amounts presented below are on a continuing operations basis unless otherwise noted.
GAAP net revenue was $224.1 million, with net loss of $(67.5) million, or $(0.29) per share which included a non-cash goodwill impairment charge of $91.4 million related to our Service Enablement segment. Prior quarter GAAP net revenue was $220.4 million, with net income of $27.4 million, or $0.12 per share. GAAP net revenue for fiscal 2015 fourth quarter was $219.8 million, with net loss of $(32.1) million, or $(0.14) per share.
Non-GAAP net revenue was $224.1 million, with net income of $23.8 million, or $0.10 per share. Prior quarter non-GAAP net revenue was $220.4 million, with net income of $21.6 million, or $0.09 per share. Non-GAAP net revenue for fiscal 2015 fourth quarter was $219.8 million, with net income of $10.4 million, or $0.04 per share.
“Fiscal Q4 came in above the midpoint of our revenue, operating margin and EPS guidance range driven by strength in our OSP segment,” said Oleg Khaykin, VIAVI’s President and Chief Executive Officer. “Fiscal year 2016 was a pivotal year in VIAVI’s evolution, beginning with the Lumentum spin off, hiring of a new senior management team and the launch of multiple operational transformation initiatives.”
Khaykin added, “Looking ahead to fiscal year 2017, we plan to continue to reduce our business complexity, improve our operational efficiencies and selectively invest in our core and growth businesses to drive a profitable and sustainable business model in longer term.”
GAAP net revenue for fiscal 2016 was $906.3 million, with net loss of $(50.4) million, or $(0.22) per share which again included a non-cash goodwill impairment charge of $91.4 million related to our Service Enablement segment. GAAP net revenue for fiscal 2015 was $873.9 million, with net loss of $(131.4) million, or $(0.57) per share.
Non-GAAP net revenue for fiscal 2016 was $906.3 million, with net income of $90.0 million, or $0.38 per share. Non-GAAP net revenue for fiscal 2015 was $873.9 million, with net income of $44.0 million, or $0.19 per share.
Financial Overview:
The tables below (in millions, except percentage data) provide comparisons of quarterly and annual results 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.”
Fourth Quarter Ended June 27, 2015
| GAAP Results | |||||
| Q4 | Q3 | Q4 | Change | ||
| FY 2016 | FY 2016 | FY 2015 | Q/Q | Y/Y | |
| Net revenue | $224.1 | $220.4 | $219.8 | 1.7% | 2.0% |
| Gross margin | 60.7% | 59.6% | 59.6% | 110 bps | 110 bps |
| Operating margin | (43.6)% | 3.3% | (8.6)% | (4,690) bps | (3,500) bps |
| Non-GAAP Results | |||||
| Q4 | Q3 | Q4 | Change | ||
| FY 2016 | FY 2016 | FY 2015 | Q/Q | Y/Y | |
| Net revenue | $224.1 | $220.4 | $219.8 | 1.7% | 2.0% |
| Adj. Gross margin | 63.3% | 61.9% | 62.6% | 140 bps | 70 bps |
| Adj. Operating margin | 13.5% | 11.9% | 7.7% | 160 bps | 580 bps |
| Non-GAAP Net Revenue by Segment | ||||||
| Q4 | % of Net | Q3 | Q4 | Change | ||
| FY 2016 | revenue | FY 2016 | FY 2015 | Q/Q | Y/Y | |
| Network Enablement | $127.5 | 56.9% | $123.1 | $132.2 | 3.6% | (3.6)% |
| Service Enablement | 33.6 | 15.0% | 35.2 | 37.1 | (4.5)% | (9.4)% |
| Optical Security and Performance Products | 63.0 | 28.1% | 62.1 | 50.5 | 1.4% | 24.8% |
| Total | $224.1 | 100.0% | $220.4 | $219.8 | 1.7% | 2.0% |
Fiscal Year Ended June 27, 2015
| GAAP Results | |||
| FY 2016 | FY 2015 | Change Y/Y | |
| Net revenue | $906.3 | $873.9 | 3.7 % |
| Gross margin | 60.7% | 59.5% | 120 bps |
| Operating margin | (9.3)% | (8.7)% | (60) bps |
| Non-GAAP Results | |||
| FY 2016 | FY 2015 | Change Y/Y | |
| Net revenue | $906.3 | $873.9 | 3.7% |
| Adj. Gross margin | 63.1% | 63.8% | (70)bps |
| Adj. Operating margin | 12.8% | 7.8% | 500 bps |
| Non- GAAP Net Revenue by Segment | ||||
| FY 2016 | % of Net Revenue | FY 2015 | Change Y/Y | |
| Network Enablement | $504.6 | 55.7% | $506.8 | (0.4)% |
| Service Enablement | 153.6 | 16.9% | 174.3 | (11.9)% |
| Optical Security and Performance Products | 248.1 | 27.4% | 192.8 | 28.7% |
| Total | $906.3 | 100.0% | $873.9 | 3.7% |
- Americas, Asia-Pacific and EMEA customers represented 49.1%, 16.6% and 34.3%, respectively, of total net revenue for the quarter. Americas, Asia-Pacific and EMEA customers represented 51.1%, 18.3% and 30.6%, respectively, of total net revenue for the year ended July 2, 2016.
- As of July 2, 2016, the Company held $979.8 million in total cash and investments, which also includes marketable equity investments. During the fiscal quarter and year ended July 2, 2016, the Company sold 2.0 million shares and 4.5 million shares, respectively, 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 $48.5 million and $109.7 million, respectively.
- During the fiscal quarter and year ended July 2, 2016, the Company generated $17.9 million and $52.9 million of cash from operations, respectively.
- The Company adjusted its current and 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, Condensed Consolidated Balance Sheet and reportable segment information.
Business Outlook for the First Quarter of Fiscal 2017
For the first quarter of fiscal 2017 ending October 1, 2016, the Company expects non-GAAP net revenue to be $201 million to $217 million and non-GAAP earnings per share to be $0.06 to $0.08. 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.
Recently Announced Restatement
The Company reported today on SEC Form 8-K that it will restate its previously issued financial statements for each of the quarters ended October 3, 2015, January 2, 2016 and April 2, 2016 (the “Restatement”). During the preparation of the Company’s fiscal 2016 Annual Report on Form 10-K, management determined that an error had occurred in the Company’s calculation of income taxes which resulted in: (a) an understatement of GAAP income tax expense of $2.1 million for the three months ended October 3, 2015, (b) an understatement of GAAP income tax expense of $2.3 million for the three months ended January 2, 2016, (c) an understatement of GAAP income tax expense of $4.4 million for the six months ended January 2, 2016, (d) an overstatement of GAAP income tax expense of $1.4 million for the three months ended April 2, 2016, and (e) an understatement of GAAP income tax expense of $3.0 million for the nine months ended April 2, 2016. The correction of these errors will result in a reduction of GAAP income tax expense as reported in this press release for the three months ended July 2, 2016 of $3.0 million and does not impact the full year fiscal 2016 results.
The error did not impact previously reported cash from operating activities or non-GAAP results. The Audit Committee concluded that the cumulative effect of the error in the six month period ended January 2, 2016 exceeded the threshold of materiality and warranted the Restatement.
The Company will amend its Quarterly Reports on Form 10-Q for the quarters ended October 3, 2015, January 2, 2016 and April 2, 2016 as soon as reasonably practicable. The amounts of the error described above are preliminary and subject to change prior to filing the amended Quarterly Reports on Form 10-Q. Any references to the prior periods reflect the Company’s financials as previously filed and have not been adjusted to correct the error described above.
Conference Call
The Company will discuss these results and other related matters at 1:30 p.m. Pacific Time on August 11, 2016 in a live webcast, which will also be archived for replay on the Company’s website at www.viavisolutions.com/investors. The Company will post supplementary slides outlining the Company’s latest financial results on www.viavisolutions.com/investors 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 www.sec.gov.
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 www.viavisolutions.com. 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, cash flow and other financial metrics, as well as the impact and duration of certain trends and market 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 and product discontinuances 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 June 27, 2015 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.