Viavi fiscal Q1 delivers 'all-time record' in OSP segment

Network test and measurement specialist Viavi Solutions posted better-than-expected net revenue and adjusted profits for fiscal Q1 2021 (ended October 3).

Revenue, although down 5% year-on-year, to $284.7 million, beats analyst consensus by $8.3 million. Non-GAAP EPS, at $0.21, beats by $0.04.

Figure 1: In the crosshairs: Viavi's Q1 has tested will – with little need for antenna adjustment.
(Source: Viavi)

Surging sales for Viavi's higher-margin optical security and performance products (OSP), up 73.9% quarter-on-quarter, to $101.2 million – and up 26.5% year-on-year – was the eye-catcher.

Viavi's CEO Oleg Khaykin, speaking on the Q1 earnings conference call (as transcribed by Seeking Alpha) said OSP delivered "all-time record quarterly revenue and profitability."

The OSP upturn, explained outgoing CFO Amar Maletira, "reflected strong anti-counterfeiting and 3D sensing revenues, as well as solid aerospace and defense product demand."

Maletira added that Viavi's overall operating margin, at 21.3%, was "a record for a September quarter and presents a 370 basis points increase from a year ago levels driven by margin expansion in OSP."

Problems in the field

Q1 was not entirely unblemished, however. Network enablement (NSE) revenue, which made up 56.9% of sales, was down 18.5% year-on-year, to $162.1 million, largely because of a drop-off in demand for field instruments.

Khaykin was nonetheless bullish about NSE's prospects going forward. "We expect Q2 revenue for NSE to be up significantly, reflecting continued demand recovery in field Instruments and seasonal strength in lab and production equipment," he said.

The CEO anticipated that, despite macroeconomic uncertainty, 5G field revenue will become "more meaningful" in the second half of calendar 2021 as the buildout of the next-gen tech accelerates.

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The service enablement segment was stable, up 2.4% year-on-year, to $21.4 million.

For the second quarter of fiscal 2021 (ended January 2) Viavi expects net revenue to be between $280 million to $300 million (versus consensus for $288 million) and non-GAAP EPS to be between $0.18 and $0.20 (above expectations of $0.17).

"OSP strength is expected to continue with modest pullback in 3D sensing and anti-counterfeiting products, in line with fiscal Q2 seasonality," said Khaykin.

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— Ken Wieland, contributing editor, special to Light Reading