Viavi Solutions (VIAV) Q1 2025 earnings summary

Executive summary

• Q1 FY25 revenue was $238.2M, down 3.9% year-over-year and 5.5% sequentially, slightly below guidance midpoint, with GAAP net loss of $1.8M and non-GAAP net income of $12.4M.

• Operating margin was 10% (non-GAAP), at the low end of guidance, down 240 bps year-over-year; GAAP operating margin was 4.8%.

• Non-GAAP EPS was $0.06, at the midpoint of guidance, down $0.03 year-over-year; GAAP diluted EPS was $(0.01).

• OSP segment outperformed, offsetting weaker NSE demand; early signs of recovery in NSE order momentum, especially in advanced fiber products.

• Repurchased 2M shares for $16.4M during the quarter.

Financial highlights

• NSE revenue: $159.4M, down 6.5% year-over-year; NE revenue: $141.6M, down 5.6%; SE revenue: $17.8M, down 12.7%.

• OSP revenue: $78.8M, up 1.7% year-over-year, exceeding guidance.

• Non-GAAP gross margin was 59.1%, down 100 bps year-over-year; GAAP gross margin was 57.1%.

• Cash and short-term investments: $497.9M at quarter end; operating cash flow was $13.5M.

• CapEx was $7.3M; free cash flow was $6.2M.

Outlook and guidance

• Q2 FY25 revenue expected at $255M–$265M; non-GAAP EPS guidance: $0.09–$0.11; operating margin 12.4% ± 100 bps.

• NSE revenue guidance: ~$188M ± $4M, operating margin 4.8% ± 100 bps; OSP revenue guidance: ~$72M ± $1M, operating margin 32.3% ± 100 bps.

• Management anticipates stabilization and gradual recovery in end markets in the second half of FY25.

• Tax expense expected at ~$7M; other income/expense net expense ~$3.5M; share count ~224M.

• OSP expected to be seasonally weaker in Q2 due to anti-counterfeiting demand.