Delaware | 000-22874 | 94-2579683 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification Number) |
430 North McCarthy Boulevard, Milpitas, CA | 95035 | |
(Address of Principal Executive Offices) | (Zip Code) |
Exhibit No. | Description | |
99.1 | Press release entitled “Viavi Announces Third Quarter 2017 Results” dated May 2, 2017. |
VIAVI SOLUTIONS INC. | ||
By: | /s/ Amar Maletira | |
Name: | Amar Maletira | |
Title: | Chief Financial Officer | |
(Duly Authorized Officer and Principal Financial and Accounting Officer) | ||
May 2, 2017 |
• | 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 |
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 | % | 60.4 | % | 59.6 | % | (70) bps | 10 bps | |||||||||
Operating margin | (7.8 | )% | 3.2 | % | 3.3 | % | (1,100) bps | (1,110) bps |
Non-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)% | |||||||||
Adj. Gross margin | 62.2 | % | 62.9 | % | 61.9 | % | (70) bps | 30 bps | |||||||||
Adj. Operating margin | 11.9 | % | 13.0 | % | 11.9 | % | (110) bps | 0 bps |
GAAP and Non-GAAP Net Revenue by Segment | ||||||||||||||||||||
Q3 | % of Net | Q2 | Q3 | Change | ||||||||||||||||
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 | % | 40.6 | 35.2 | (29.3 | )% | (18.5 | )% | |||||||||||
Optical Security and Performance Products | 63.9 | 32.6 | % | 48.9 | 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. |
Three Months Ended | Nine Months Ended | ||||||||||||||
April 1, 2017 | April 2, 2016 | April 1, 2017 | April 2, 2016 | ||||||||||||
Net revenue | $ | 196.0 | $ | 220.4 | $ | 613.3 | $ | 682.2 | |||||||
Cost of revenues | 75.4 | 85.0 | 235.4 | 255.6 | |||||||||||
Amortization of acquired technologies | 3.6 | 4.1 | 11.1 | 13.0 | |||||||||||
Gross profit | 117.0 | 131.3 | 366.8 | 413.6 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 34.1 | 40.0 | 106.1 | 126.0 | |||||||||||
Selling, general and administrative | 76.2 | 80.6 | 228.5 | 261.3 | |||||||||||
Amortization of other intangibles | 3.5 | 3.6 | 10.4 | 11.1 | |||||||||||
Restructuring and related charges | 18.4 | (0.1 | ) | 20.2 | 1.7 | ||||||||||
Total operating expenses | 132.2 | 124.1 | 365.2 | 400.1 | |||||||||||
(Loss) income from operations | (15.2 | ) | 7.2 | 1.6 | 13.5 | ||||||||||
Interest and other income (expense), net | 5.0 | 0.8 | 10.1 | 1.4 | |||||||||||
Gain on sale of investments | 51.2 | 39.8 | 186.6 | 39.8 | |||||||||||
Interest expense | (10.7 | ) | (9.1 | ) | (29.3 | ) | (26.7 | ) | |||||||
Income from continuing operations before taxes | 30.3 | 38.7 | 169.0 | 28.0 | |||||||||||
Provision for income taxes | 4.3 | 9.9 | 15.8 | 13.9 | |||||||||||
Income from continuing operations, net of taxes | 26.0 | 28.8 | 153.2 | 14.1 | |||||||||||
Income (loss) from discontinued operations, net of taxes | — | 5.0 | — | (45.4 | ) | ||||||||||
Net income (loss) | $ | 26.0 | $ | 33.8 | $ | 153.2 | $ | (31.3 | ) | ||||||
Net income (loss) per share from - basic: | |||||||||||||||
Continuing operations | $ | 0.11 | $ | 0.13 | $ | 0.66 | $ | 0.06 | |||||||
Discontinued operations | — | 0.02 | — | (0.19 | ) | ||||||||||
Net income (loss) | $ | 0.11 | $ | 0.15 | $ | 0.66 | $ | (0.13 | ) | ||||||
Net income (loss) per share from - diluted: | |||||||||||||||
Continuing operations | $ | 0.11 | $ | 0.12 | $ | 0.65 | $ | 0.06 | |||||||
Discontinued operations | — | 0.02 | — | (0.19 | ) | ||||||||||
Net income (loss) | $ | 0.11 | $ | 0.14 | $ | 0.65 | $ | (0.13 | ) | ||||||
Shares used in per share calculation - basic | 229.4 | 232.0 | 230.8 | 234.4 | |||||||||||
Shares used in per-share calculation - diluted | 234.6 | 234.6 | 235.9 | 237.4 |
April 1, 2017 | July 2, 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 964.2 | $ | 482.9 | |||
Short-term investments | 478.6 | 484.7 | |||||
Restricted cash | 11.8 | 12.2 | |||||
Accounts receivable, net | 142.6 | 148.4 | |||||
Inventories, net | 46.8 | 51.4 | |||||
Prepayments and other current assets | 53.5 | 32.1 | |||||
Total current assets | 1,697.5 | 1,211.7 | |||||
Property, plant and equipment, net | 134.6 | 133.0 | |||||
Goodwill | 150.7 | 152.1 | |||||
Intangibles, net | 37.6 | 59.9 | |||||
Deferred income taxes | 108.0 | 108.8 | |||||
Other non-current assets | 12.3 | 12.6 | |||||
Total assets | $ | 2,140.7 | $ | 1,678.1 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 34.7 | $ | 47.0 | |||
Accrued payroll and related expenses | 47.5 | 44.9 | |||||
Deferred revenue | 67.3 | 78.6 | |||||
Accrued expenses | 27.7 | 24.9 | |||||
Other current liabilities | 69.8 | 31.0 | |||||
Total current liabilities | 247.0 | 226.4 | |||||
Long-term debt | 958.1 | 583.3 | |||||
Other non-current liabilities | 164.4 | 179.1 | |||||
Total stockholders’ equity | 771.2 | 689.3 | |||||
Total liabilities and stockholders’ equity | $ | 2,140.7 | $ | 1,678.1 |
Three Months Ended April 1, 2017 | |||||||||||||||||||||||||||
Network and Service Enablement | |||||||||||||||||||||||||||
Network Enablement | Service Enablement | Network and Service Enablement | Optical Security and Performance Products | Total Segment Measures | Reconciling Items | Consolidated GAAP Measures | |||||||||||||||||||||
Net revenue | $ | 103.4 | $ | 28.7 | $ | 132.1 | $ | 63.9 | $ | 196.0 | $ | — | $ | 196.0 | |||||||||||||
Gross profit | 67.5 | 17.7 | 85.2 | 36.7 | 121.9 | (4.9 | ) | 117.0 | |||||||||||||||||||
Gross margin | 65.3 | % | 61.7 | % | 64.5 | % | 57.4 | % | 62.2 | % | 59.7 | % | |||||||||||||||
Operating (loss)income | (4.4 | ) | 27.8 | 23.4 | (38.6 | ) | (15.2 | ) | |||||||||||||||||||
Operating margin | (3.3 | )% | 43.5 | % | 11.9 | % | (7.8 | )% |
Three Months Ended April 2, 2016 | |||||||||||||||||||||||||||
Network and Service Enablement | |||||||||||||||||||||||||||
Network Enablement | Service Enablement | Network and Service Enablement | Optical Security and Performance Products | Total Segment Measures | Reconciling Items | Consolidated GAAP Measures | |||||||||||||||||||||
Net revenue | $ | 123.1 | $ | 35.2 | $ | 158.3 | $ | 62.1 | $ | 220.4 | $ | — | $ | 220.4 | |||||||||||||
Gross profit | 80.7 | 19.8 | 100.5 | 35.9 | 136.4 | (5.1 | ) | 131.3 | |||||||||||||||||||
Gross margin | 65.6 | % | 56.3 | % | 63.5 | % | 57.8 | % | 61.9 | % | 59.6 | % | |||||||||||||||
Operating (loss)income | (0.1 | ) | 26.3 | 26.2 | (19.0 | ) | 7.2 | ||||||||||||||||||||
Operating margin | (0.1 | )% | 42.4 | % | 11.9 | % | 3.3 | % |
Three Months Ended | |||||||
April 1, 2017 | April 2, 2016 | ||||||
Corporate reconciling items impacting gross profit: | |||||||
Total segment gross profit | $ | 121.9 | $ | 136.4 | |||
Stock-based compensation | (0.7 | ) | (1.1 | ) | |||
Amortization of intangibles | (3.6 | ) | (4.1 | ) | |||
Other charges unrelated to core operating performance (1) | (0.6 | ) | 0.1 | ||||
GAAP gross profit | $ | 117.0 | 131.3 | ||||
Corporate reconciling items impacting operating income: | |||||||
Total segment operating income | $ | 23.4 | $ | 26.2 | |||
Stock-based compensation | (8.1 | ) | (9.1 | ) | |||
Amortization of intangibles | (7.1 | ) | (7.7 | ) | |||
Other charges unrelated to core operating performance (1) | (5.0 | ) | (2.3 | ) | |||
Restructuring and related charges | (18.4 | ) | 0.1 | ||||
GAAP operating (loss)income from continuing operations | $ | (15.2 | ) | $ | 7.2 |
(1) | During the three months ended April 1, 2017 and April 2, 2016, other charges unrelated to core operating performance primarily consisted of write-down of fixed assets, site consolidations, reorganizations, transformational initiatives such as the implementation of simplified automated processes and the insourcing or outsourcing of activities. |
Nine Months Ended April 1, 2017 | |||||||||||||||||||||||||||
Network and Service Enablement | |||||||||||||||||||||||||||
Network Enablement | Service Enablement | Network and Service Enablement | Optical Security and Performance Products | Total Segment Measures | Reconciling Items | Consolidated GAAP Measures | |||||||||||||||||||||
Net revenue | $ | 339.0 | $ | 105.7 | $ | 444.7 | $ | 168.6 | $ | 613.3 | $ | — | $ | 613.3 | |||||||||||||
Gross profit | 219.5 | 66.1 | 285.6 | 96.5 | 382.1 | (15.3 | ) | 366.8 | |||||||||||||||||||
Gross margin | 64.7 | % | 62.5 | % | 64.2 | % | 57.2 | % | 62.3 | % | 59.8 | % | |||||||||||||||
Operating income | 5.7 | 72.1 | 77.8 | (76.2 | ) | 1.6 | |||||||||||||||||||||
Operating margin | 1.3 | % | 42.8 | % | 12.7 | % | 0.3 | % |
Nine Months Ended April 2, 2016 | |||||||||||||||||||||||||||
Network and Service Enablement | |||||||||||||||||||||||||||
Network Enablement | Service Enablement | Network and Service Enablement | Optical Security and Performance Products | Total Segment Measures | Reconciling Items | Consolidated GAAP Measures | |||||||||||||||||||||
Net revenue | $ | 377.1 | $ | 120.0 | $ | 497.1 | $ | 185.1 | $ | 682.2 | $ | — | $ | 682.2 | |||||||||||||
Gross profit | 247.0 | 77.7 | 324.7 | 105.7 | 430.4 | (16.8 | ) | 413.6 | |||||||||||||||||||
Gross margin | 65.5 | % | 64.8 | % | 65.3 | % | 57.1 | % | 63.1 | % | 60.6 | % | |||||||||||||||
Operating income | 10.3 | 75.1 | 85.4 | (71.9 | ) | 13.5 | |||||||||||||||||||||
Operating margin | 2.1 | % | 40.6 | % | 12.5 | % | 2.0 | % |
Nine Months Ended | |||||||
April 1, 2017 | April 2, 2016 | ||||||
Corporate reconciling items impacting gross profit: | |||||||
Total segment gross profit | $ | 382.1 | $ | 430.4 | |||
Stock-based compensation | (2.7 | ) | (3.7 | ) | |||
Amortization of intangibles | (11.1 | ) | (13.0 | ) | |||
Other charges unrelated to core operating performance (1) | (1.5 | ) | (0.1 | ) | |||
GAAP gross profit | $ | 366.8 | $ | 413.6 | |||
Corporate reconciling items impacting operating income: | |||||||
Total segment operating income | $ | 77.8 | $ | 85.4 | |||
Stock-based compensation | (25.9 | ) | (34.0 | ) | |||
Amortization of intangibles | (21.5 | ) | (24.1 | ) | |||
Other charges unrelated to core operating performance (1) | (8.6 | ) | (12.1 | ) | |||
Restructuring and related charges | (20.2 | ) | (1.7 | ) | |||
GAAP operating income from continuing operations | $ | 1.6 | $ | 13.5 |
(1) | During the nine months ended April 1, 2017 and April 2, 2016, other charges unrelated to core operating performance primarily consisted of write-down of fixed assets, site consolidations, reorganizations, transformational initiatives such as the implementation of simplified automated processes, the insourcing or outsourcing of activities and Viavi-specific incremental charges for professional fees and additional personnel costs to complete the separation. |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||
April 1, 2017 | April 2, 2016 | April 1, 2017 | April 2, 2016 | ||||||||||||||||||||||||||||
Net income (loss) | Diluted EPS | Net income (loss) | Diluted EPS | Net income (loss) | Diluted EPS | Net income (loss) | Diluted EPS | ||||||||||||||||||||||||
GAAP measures from continuing operations | $ | 26.0 | $ | 0.11 | $ | 28.8 | $ | 0.12 | $ | 153.2 | $ | 0.65 | $ | 14.1 | $ | 0.06 | |||||||||||||||
Items reconciling GAAP net loss and EPS from continuing operations to non-GAAP net income and EPS: | |||||||||||||||||||||||||||||||
Related to cost of revenues: | |||||||||||||||||||||||||||||||
Stock-based compensation | 0.7 | — | 1.1 | — | 2.7 | 0.01 | 3.7 | 0.02 | |||||||||||||||||||||||
Other charges unrelated to core operating performance (1) | 0.6 | — | (0.1 | ) | — | 1.5 | 0.01 | 0.1 | — | ||||||||||||||||||||||
Amortization of acquired technologies | 3.6 | 0.02 | 4.1 | 0.02 | 11.1 | 0.05 | 13.0 | 0.05 | |||||||||||||||||||||||
Total related to gross profit | 4.9 | 0.02 | 5.1 | 0.02 | 15.3 | 0.06 | 16.8 | 0.07 | |||||||||||||||||||||||
Related to operating expenses: | |||||||||||||||||||||||||||||||
Research and development: | |||||||||||||||||||||||||||||||
Stock-based compensation | 1.3 | 0.01 | 2.0 | 0.01 | 4.6 | 0.02 | 6.7 | 0.03 | |||||||||||||||||||||||
Other charges unrelated to core operating performance (1) | 2.3 | 0.01 | 0.8 | — | 3.1 | 0.01 | 2.9 | 0.01 | |||||||||||||||||||||||
Selling, general and administrative: | |||||||||||||||||||||||||||||||
Stock-based compensation | 6.1 | 0.03 | 6.0 | 0.03 | 18.6 | 0.08 | 23.6 | 0.10 | |||||||||||||||||||||||
Other charges unrelated to core operating performance (1) | 2.1 | 0.01 | 1.6 | 0.01 | 4.0 | 0.02 | 9.1 | 0.04 | |||||||||||||||||||||||
Amortization of other intangibles | 3.5 | 0.01 | 3.6 | 0.02 | 10.4 | 0.04 | 11.1 | 0.05 | |||||||||||||||||||||||
Restructuring and related charges | 18.4 | 0.08 | (0.1 | ) | — | 20.2 | 0.09 | 1.7 | 0.01 | ||||||||||||||||||||||
Total related to operating expenses | 33.7 | 0.14 | 13.9 | 0.06 | 60.9 | 0.26 | 55.1 | 0.23 | |||||||||||||||||||||||
Gain on sale of investments (2) | (51.2 | ) | (0.22 | ) | (39.8 | ) | (0.17 | ) | (186.6 | ) | (0.79 | ) | (39.8 | ) | (0.17 | ) | |||||||||||||||
Non-cash interest expense and other income | 7.9 | 0.03 | 6.8 | 0.03 | 21.9 | 0.09 | 19.9 | 0.08 | |||||||||||||||||||||||
Income taxes | 0.6 | — | 6.8 | 0.03 | 2.5 | 0.01 | 0.1 | — | |||||||||||||||||||||||
Total related to net income and EPS | (4.1 | ) | (0.02 | ) | (7.2 | ) | (0.03 | ) | (86.0 | ) | (0.36 | ) | 52.1 | 0.22 | |||||||||||||||||
Non-GAAP measures from continuing operations | $ | 21.9 | $ | 0.09 | $ | 21.6 | $ | 0.09 | $ | 67.2 | $ | 0.28 | $ | 66.2 | $ | 0.28 | |||||||||||||||
Shares used in per share calculation for Non-GAAP EPS | 234.6 | 234.6 | 235.9 | 237.4 | |||||||||||||||||||||||||||
Note: Certain totals may not add due to rounding |
(1) | During the three and nine months ended April 1, 2017 and April 2, 2016, other charges unrelated to core operating performance primarily consisted of write-down of fixed assets, site consolidations, reorganizations, transformational initiatives such as the implementation of simplified automated processes and the insourcing or outsourcing of activities as well as Viavi-specific incremental charges for professional fees and additional personnel costs to complete the separation. |
(2) | During the three and nine months ended April 1, 2017, the Company sold 1.3 million shares and 6.9 million shares, respectively of the 11.7 million shares of Lumentum common stock which was retained as part of the separation of Lumentum. The Company recognized a realized gain of $51.2 million and $186.5 million on the sale. During the three and nine months ended April 2, 2016, the Company sold 2.5 million shares and 2.5 million shares, respectively of the 11.7 million shares of Lumentum common stock which was retained as part of the separation of Lumentum. The Company recognized a realized gain of $39.7 million and $39.7 million on the sale. |
Three Months Ended | Nine Months Ended | ||||||||||||||
April 1, 2017 | April 2, 2016 | April 1, 2017 | April 2, 2016 | ||||||||||||
GAAP net income from continuing operations | $ | 26.0 | $ | 28.8 | $ | 153.2 | $ | 14.1 | |||||||
Interest and other income (expense), net | (5.0 | ) | (0.8 | ) | (10.1 | ) | (1.4 | ) | |||||||
Gain on sale of investments (1) | (51.2 | ) | (39.8 | ) | (186.6 | ) | (39.8 | ) | |||||||
Interest expense | 10.7 | 9.1 | 29.3 | 26.7 | |||||||||||
Income taxes | 4.3 | 9.9 | 15.8 | 13.9 | |||||||||||
Depreciation | 6.7 | 8.1 | 22.2 | 26.1 | |||||||||||
Amortization | 7.1 | 7.7 | 21.5 | 24.1 | |||||||||||
EBITDA from continuing operations | (1.4 | ) | 23.0 | 45.3 | 63.7 | ||||||||||
Costs related to restructuring and related charges | 18.4 | (0.1 | ) | 20.2 | 1.7 | ||||||||||
Costs related to stock-based compensation | 8.1 | 9.1 | 25.9 | 34.0 | |||||||||||
Other charges unrelated to core operating performance (2) | 5.0 | 2.3 | 8.6 | 12.1 | |||||||||||
Adjusted EBITDA from continuing operations | $ | 30.1 | $ | 34.3 | $ | 100.0 | $ | 111.5 |
(1) | During the three and nine months ended April 1, 2017, the Company sold 1.3 million shares and 6.9 million shares, respectively of the 11.7 million shares of Lumentum common stock which was retained as part of the separation of Lumentum. The Company recognized a realized gain of $51.2M and $186.5M on this sale. During the three and nine months ended April 2, 2016, the Company sold 2.5 million shares and 2.5 million shares, respectively of the 11.7 million shares of Lumentum common stock which was retained as part of the separation of Lumentum. The Company recognized a realized gain of $39.7 million and $39.7 million on the sale. |
(2) | During the three and nine months ended April 1, 2017 and April 2, 2016, other charges unrelated to core operating performance primarily consisted of write-down of fixed assets, site consolidations, reorganizations, transformational initiatives such as the implementation of simplified automated processes and the insourcing or outsourcing of activities as well as Viavi-specific incremental charges for professional fees and additional personnel costs to complete the separation. |