Viavi (VIAV 10.29, -0.34 -3.2%), a provider of network test, monitoring and assurance solutions last night reported Q4 earnings and issued soft guidance for Q1, driving the stock to near six-month lows dating back to February.
Driving the losses today is the weak guidance so let’s look at that point first. VIAV guided both earnings per share (EPS) and revenues lower than expected for Q1; non-GAAP EPS is expected to be in the range of $0.06-0.09 with revenues between $173-193 million. Management highlighted the soft guidance, stating it’s working through cyclical business challenges to the core businesses.
As such, the company will focus on stabilizing and reversing the NSE revenue trend, aided by the expected recovery in North American service providers spend and its revamped product strategy. The company also expects to realize initial 3D sensing revenue in the first half of fiscal 2018 with a greater ramp in the second half.
To that end, VIAV sees Optical Security and Performance Products (OSP) revenues at $51-55 million with operating margins of 38-40%. The company expects lower demand in the first half for these products with an expected recovery in the second half. Additionally, although the company has begun shipping 3D sensing products, they do not expect to realize any meaningful 3D sensing revenues in Q1 due to revenue recognition timing.
Switching gears back to the Q4 print now, VIAV beat market expectations with Q4 EPS of $0.12 yet revenues were essentially in-line, falling 11.6% compared to a year ago to $198.1 million.
Weakness in net revenues was felt across the board at VIAV. Particularly, Network Enablement net revenues were down 17.6% compared to last year to about $105.0 million. This segment makes up roughly 53% of total net revenues, a considerable chunk when you consider the next largest segment only constitutes about 32% of the total. OSP garners that title, the second largest segment in VIAV that is, and posted a comparatively solid quarter with net revenues up 1% to $63.6 million. Service Enablement, VIAV’s smallest segment, reported net sales for Q4 of $29.5 million, down 12.2% versus a year ago.
Given the soft OSP forecast and commentary regarding 3D revenue recognition timing, it’s no surprise that the stock is taking a breather today. Into the print shares were boasting YTD gains of about 29%, about 10% lower than mid-May highs of $11.89. Optical peers CIEN +0.04%, FNSR +0.26%, IIVI -0.55%, ACIA +1.35%, OCLR +0.12%, INFN -0.70%, AAOI -4.87% have been doing equally as well this year as the industry has seen strong results and solid guidance up to this point.