Slides November 5, 2020 Cautionary Language Concerning - - PowerPoint PPT Presentation
Slides November 5, 2020 Cautionary Language Concerning - - PowerPoint PPT Presentation
Fiscal 1Q 2021 Earnings Call Supplementary Slides November 5, 2020 Cautionary Language Concerning Forward-Looking Statements This presentation contains forward-looking statements under Section 27A of the Securities Act of 1934.
Cautionary Language Concerning Forward-Looking Statements
This presentation contains forward-looking statements under Section 27A of the Securities Act of 1934. Forward-looking statements are all statements we make other than those dealing specifically with historical matters. These forward-looking statements include, among other things, financial guidance. Please refer to the Company’s filings with the Securities and Exchange Commission, including our annual report on Form 10-K filed August 24, 2020 and our quarterly reports on Form 10-Q filed November 5, 2019, February 6, 2020 and May 7, 2020 for additional factors that could cause actual results to materially differ from current expectations. The forward-looking statements included in this presentation are valid only as of today’s date except where otherwise noted. Viavi Solutions Inc. undertakes no obligation to update these statements. This presentation and the Q&A that follows include non-GAAP financial measures which complement the Company’s preliminary consolidated GAAP financial statements. These non-GAAP financial measures are not intended to supersede or replace the Company’s preliminary GAAP financials. We provide a detailed reconciliation of preliminary GAAP results to the non-GAAP results in the Appendix to this presentation and in the “Preliminary Reconciliation of GAAP Measures to Non-GAAP Measures” schedule in our earnings release issued today. This earnings release is located in the Investor Relations sectionof our web site at https://investor.viavisolutions.com. Note:Amounts presentedin all slides are on a continuingoperationsbasis unless otherwise noted.
Fiscal 1Q 2021 Financial Highlights
(Amounts reflect non-GAAP and in $millions, unless otherwise noted)
All non-GAAP amounts are reconciled to the corresponding GAAP amounts in the Appendix beginning on slide 13.
Result Y/Y Performance Revenue
(exceeded $270M +/- $12M guidance range)
$284.7 down (5.0)% Non-GAAP Gross Margin 62.8% up 150 basis points
NE 63.8% down 60 basis points SE 66.8% up 650 basis points OSP 60.3% up 620 basis points
Non-GAAP Operating Margin
(exceeded 17.3% +/- 1% guidance range)
21.3% up 370 basis points
NSE 7.2% down (290) basis points OSP 46.7% up 870 basis points
Earnings Per Share
(exceeded $0.15 +/- $0.01 guidance range)
$0.21 up 16.7% GAAP Operating Cash Flow $63.9 up 104.2%
F1Q 2021 F4Q 2020 F1Q 2020 QoQ YoY Revenue $284.7 $266.6 $299.8 6.8% (5.0)% Non-GAAP Gross Margin 62.8% 61.7% 61.3% 110 bps 150 bps Non-GAAP Operating Expenses $118.2 $112.1 $131.2 5.4% (9.9)% Non-GAAP Operating Profits $60.6 $52.3 $52.7 15.9% 15.0% Non-GAAP Operating Margin 21.3% 19.6% 17.6% 170 bps 370 bps Non-GAAP Net Income $48.3 $40.8 $42.9 18.4% 12.6% Non-GAAP EPS $0.21 $0.18 $0.18 $0.03 $0.03
Income Statement
(Amounts reflect non-GAAP and in $millions, except per share amounts)
Revenue by Business Segment and Geographic Region
(Amounts in $millions)
F1Q 2021 F4Q 2020 F1Q 2020 QoQ YoY Segment Mix
NE $162.1 56.9% $180.9 67.9% $198.9 66.3% (10.4%) (18.5%) SE $21.4 7.5% $27.5 10.3% $20.9 7.0% (22.2%) 2.4% OSP $101.2 35.6% $58.2 21.8% $80.0 26.7% 73.9% 26.5%
Total $284.7 100.0% $266.6 100.0% $299.8 100.0% 6.8% (5.0%) Region Mix
Americas $95.4 33.5% $103.5 38.8% $105.7 35.3% (7.8%) (9.7%) Asia-Pacific $108.2 38.0% $73.7 27.7% $107.2 35.7% 46.8% 0.9% EMEA $81.1 28.5% $89.4 33.5% $86.9 29.0% (9.3%) (6.7%)
Total $284.7 100.0% $266.6 100.0% $299.8 100.0% 6.8% (5.0%)
Business Segment Results
(Amounts in $millions)
F1Q 2021 F4Q 2020 F1Q 2020 QoQ YoY Revenue
NE $162.1 $180.9 $198.9 (10.4%) (18.5%) SE $21.4 $27.5 $20.9 (22.2%) 2.4% OSP $101.2 $58.2 $80.0 73.9% 26.5%
Total $284.7 $266.6 $299.8 6.8% (5.0%) Non-GAAP Gross Margin
NE 63.8% 63.7% 64.4% 10 bps (60 bps) SE 66.8% 70.5% 60.3% (370 bps) 650 bps OSP 60.3% 51.0% 54.1% 930 bps 620 bps
Total 62.8% 61.7% 61.3% 110 bps 150 bps Non-GAAP Operating Margin
NSE 7.2% 16.9% 10.1% (970 bps) (290 bps) OSP 46.7% 29.4% 38.0% 1,730 bps 870 bps
Total 21.3% 19.6% 17.6% 170 bps 370 bps
All non-GAAP amounts are reconciled to the corresponding GAAP amounts in the Appendix beginning on slide 13.
Fiscal 1Q 2021 NSE Business Highlights
(Amounts reflect non-GAAP and in $millions)
NE Segment Highlights
▪ Revenue at $162.1 million down 18.5% Y/Y primarily due pandemic related declines in Field Instruments ▪ Non-GAAP Gross margin at 63.8% down 60 basis points Y/Y due to lower volumes
SE Segment Highlights
▪ Revenue at $21.4 million increased 2.4% Y/Y due to increase in Assurance revenue ▪ Non-GAAP Gross margin at 66.8% increased 650 basis points Y/Y due to favorable product mix ▪ NSE revenue at $183.5 million was above the midpoint of the guidance range ($170-$190 million); Operating margin at 7.2% was above the midpoint of guidance range (5.5%-7.5%) ▪ Non-GAAP Operating margin decreased 290 basis points Y/Y due to lower revenue All non-GAAP amounts are reconciled to the corresponding GAAP amounts in the Appendix beginning on slide 13.
Fiscal 1Q 2021 OSP Business Highlights
(Amounts reflect non-GAAP and in $millions)
▪ Revenue at $101.2 million exceeded the guidance range ($88-$92 million); operating margin at 46.7% exceeded the guidance range (38.0%-40.0%) ▪ Revenue increased 26.5% Y/Y driven by increase in 3D Sensing, Anti-Counterfeiting and Aerospace & Defense products ▪ Non-GAAP Gross margin at 60.3% increased 620 basis points due to higher volume and favorable manufacturing cost absorption ▪ Non-GAAP Operating margin increased 870 basis points Y/Y due to aforementioned higher gross margin and good cost control All non-GAAP amounts are reconciled to the corresponding GAAP amounts in the Appendix beginning on slide 13.
(1) Includes cash and cash-equivalents, short-term investments and restricted cash. (2) Carrying value equals outstanding principal amount less the unamortized debt discount and debt issuance cost. Face amount is $685.0 million.
F1Q 2021 Total Cash Balance (1) $595.5 Long-term Debt (Carrying Value) (2) $606.6 GAAP Cash from Operations $63.9
Balance Sheet Highlights
(Amounts in $millions)
Balance Sheet Highlights
(Amounts in $millions)
Current Convertible Notes Terms 2024 Notes 2023 Notes Issue Size $460.0M $225.0M Current Outstanding * $460.0M $225.0M Coupon 1.00% 1.75% Final Maturity 3/1/2024 6/1/2023 Put Date N/A N/A Call Date N/A 6/1/2021 Call / Put Price (%) 100% 100% Conversion Price $13.22 $13.94 Shares Underlying * 34.8M 16.1M Settlement Par in Cash; Balance in stock & cash Par in Cash; Balance in stock & cash
* As of October 3, 2020
We expect second quarter revenue to be approximately $280 million to $300 million, non-GAAP
- perating margin to be 19.0% to 20.0% and non-GAAP EPS to be $0.18 to $0.20.
▪Business segment revenue guidance:
- For NSE, we expect revenue to be $197 million to $213 million
- For OSP, we expect revenue to be $83 million to $87 million
▪Business segment Non-GAAP operating margin guidance:
- For NSE, we expect non-GAAP operating margin to be 10.0% to 12.0%
- For OSP, we expect non-GAAP operating margin to be 39.5% to 40.5%
▪ Expect non-GAAP tax expenses to be approximately 18% to 20% ▪ Expect non-GAAP Other Income/Expense to be net expense of approximately $3.0 million ▪ Expect share count for EPS calculation to be approximately 233.0 million shares
Fiscal 2Q 2021 Guidance
(Amounts reflect non-GAAP)
Upcoming Investor Events
Date Event Forum
- Nov. 11, 2020
Viavi Solutions Inc. 2020 Annual Shareholders Meeting Virtual
- Nov. 12, 2020
Stifel 2020 Midwest One-on-One Growth Investor Conference Virtual
- Dec. 15, 2020
MKM Partners Investor Conference Virtual
Appendix
GAAP Income Statement
(Amounts in $millions, except per share amounts)
Unaudited Q120 Q220 Q320 Q420 Q121 GAAP Income Statement Sep 2019 Dec 2019 Mar 2020 Jun 2020 Sep 2020 ($ in millions, except per share amounts) Net revenue $ 299.8 $ 313.7 $ 256.2 $ 266.6 $ 284.7 Cost of revenues 117.0 115.8 101.4 104.1 107.1 Amortization of acquired technologies 8.4 8.4 8.0 7.9 8.2 Total cost of revenues 125.4 124.2 109.4 112.0 115.3 Gross profit 174.4 189.5 146.8 154.6 169.4 Operating expenses: Research and development 51.5 50.3 46.8 45.0 48.8 Selling, general and administrative (1) 93.2 86.3 83.6 51.9 81.4 Amortization of other intangibles 8.7 8.8 8.9 8.7 8.5 Restructuring and related charges 0.3 (0.9) (1.6) 5.7 (0.6) Total operating expenses 153.7 144.5 137.7 111.3 138.1 Income (loss) from operations 20.7 45.0 9.1 43.3 31.3 Interest income and other income 2.7 1.3 5.3 0.3 0.6 Interest expense (8.3) (8.4) (8.4) (8.6) (9.0) Income before income taxes 15.1 37.9 6.0 35.0 22.9 Provision for Income Tax 8.3 9.9 38.8 8.3 8.6 Net income (Net loss) $ 6.8 $ 28.0 $ (32.8) $ 26.7 $ 14.3 Net income (Net loss) per share, basic $ 0.03 $ 0.12 $ (0.14) $ 0.12 $ 0.06 Net income (Net loss) per share, diluted $ 0.03 $ 0.12 $ (0.14) $ 0.12 $ 0.06 Shares used in per-share calculation (basic) 229.4 230.0 230.0 228.1 228.8 Shares used in per-share calculation (diluted) 236.4 238.3 230.0 230.3 231.8 Unaudited Q120 Q220 Q320 Q420 Q121 % Total GAAP Revenue Sep 2019 Dec 2019 Mar 2020 Jun 2020 Sep 2020 Gross margin 58.2% 60.4% 57.3% 58.0% 59.5% Research and development 17.2% 16.0% 18.3% 16.9% 17.1% Selling, general and administrative (1) 31.1% 27.5% 32.6% 19.5% 28.6% Total operating expenses 51.3% 46.1% 53.7% 41.8% 48.5% Operating margin 6.9% 14.3% 3.6% 16.2% 11.0%
(1) Includes Loss (gain) on disposal of long-lived assets
Non-GAAP Income Statement
(Amounts in $millions, except per share amounts)
Unaudited Q120 Q220 Q320 Q420 Q121 Non-GAAP Income Statement Sep 2019 Dec 2019 Mar 2020 Jun 2020 Sep 2020 ($ in millions, except per share amounts) Net revenue $ 299.8 $ 313.7 $ 256.2 $ 266.6 $ 284.7 Cost of revenues 115.9 114.5 99.5 102.2 105.9 Gross profit 183.9 199.2 156.7 164.4 178.8 Operating expenses: Research and development 48.9 47.8 44.2 42.3 46.6 Selling, general and administrative 82.3 83.5 74.5 69.8 71.6 Total operating expenses 131.2 131.3 118.7 112.1 118.2 Income from operations 52.7 67.9 38.0 52.3 60.6 Interest income and other income (0.5) (1.9) 2.1 (3.1) (3.0) Income before income taxes 52.2 66.0 40.1 49.2 57.6 Provision for income tax 9.3 10.4 8.1 8.4 9.3 Net income $ 42.9 $ 55.6 $ 32.0 $ 40.8 $ 48.3 Net income per share, basic $ 0.19 $ 0.24 $ 0.14 $ 0.18 $ 0.21 Net income per share, diluted $ 0.18 $ 0.23 $ 0.14 $ 0.18 $ 0.21 Shares used in per-share calculation (basic) 229.4 230.0 230.0 228.1 228.8 Shares used in per-share calculation (diluted) 236.4 238.3 234.1 230.3 231.8 Unaudited Q120 Q220 Q320 Q420 Q121 % Total Non-GAAP Revenue Sep 2019 Dec 2019 Mar 2020 Jun 2020 Sep 2020 Gross margin 61.3% 63.5% 61.2% 61.7% 62.8% Research and development 16.3% 15.2% 17.3% 15.9% 16.4% Selling, general and administrative 27.5% 26.6% 29.1% 26.2% 25.1% Total operating expenses 43.8% 41.9% 46.3% 42.0% 41.5% Operating margin 17.6% 21.6% 14.8% 19.6% 21.3%
Reconciliation of GAAP Measures to Non-GAAP Measures
(Amounts in $millions)
Unaudited Q120 Q220 Q320 Q420 Q121 Gross Profit - GAAP to Non-GAAP Reconciliation Sep 2019 Dec 2019 Mar 2020 Jun 2020 Sep 2020 ($ in millions, except per share amounts) GAAP segment gross profit $ 174.4 $ 189.5 $ 146.8 $ 154.6 $ 169.4 Stock-based compensation 1.0 1.0 1.2 1.1 1.2 Amortization of intangibles 8.4 8.4 8.0 7.9 8.2 Other charges unrelated to core operating performance 0.1 0.3 0.7 0.8 — Non-GAAP gross profit $ 183.9 $ 199.2 $ 156.7 $ 164.4 $ 178.8 Unaudited Q120 Q220 Q320 Q420 Q121 Operating Income - GAAP to Non-GAAP Reconciliation Sep 2019 Dec 2019 Mar 2020 Jun 2020 Sep 2020 GAAP operating income $ 20.7 $ 45.0 $ 9.1 $ 43.3 $ 31.3 Stock-based compensation 10.3 11.3 11.7 11.3 12.5 Amortization of intangibles 17.1 17.2 16.9 16.6 16.7 Change in fair value of contingent liability 1.7 (6.0) — (27.2) — Other charges unrelated to core operating performance 2.6 1.3 1.9 2.6 0.7 Restructuring and related charges (benefits) 0.3 (0.9) (1.6) 5.7 (0.6) Non-GAAP operating income $ 52.7 $ 67.9 $ 38.0 $ 52.3 $ 60.6 Q120 Q220 Q320 Q420 Q121 Unaudited Sep 2019 Dec 2019 Mar 2020 Jun 2020 Sep 2020 GAAP net income (loss) $ 6.8 $ 28.0 $ (32.8) $ 26.7 $ 14.3 Stock-based compensation 10.3 11.3 11.7 11.3 12.5 Amortization of intangibles 17.1 17.2 16.9 16.6 16.7 Restructuring and related charges (benefits) 0.3 (0.9) (1.6) 5.7 (0.6) Change in fair value of contingent liability 1.7 (6.0) — (27.2) — Other charges unrelated to core operating performance 2.6 1.3 1.9 2.6 0.7 Non-cash interest expense 5.1 5.2 5.2 5.2 5.4 Withholding income taxes — — 31.6 — — Benefit from Income Tax (1.0) (0.5) (0.9) (0.1) (0.7) Non-GAAP net income $ 42.9 $ 55.6 $ 32.0 $ 40.8 $ 48.3
Financial Information by Segment
(Amounts in $millions)
Unaudited Q120 Q220 Q320 Q420 Q121 Segment Results ($ in millions) Sep 2019 Dec 2019 Mar 2020 Jun 2020 Sep 2020 Net revenue: Netw ork Enablement $ 198.9 $ 203.0 $ 163.9 $ 180.9 $ 162.1 Service Enablement 20.9 31.2 23.1 27.5 21.4 Netw ork and Service Enablement 219.8 234.2 187.0 208.4 183.5 Optical Securities and Performance Products 80.0 79.5 69.2 58.2 101.2 Net revenue $ 299.8 $ 313.7 $ 256.2 $ 266.6 $ 284.7 Gross profit Netw ork Enablement $ 128.0 $ 134.8 $ 104.3 $ 115.3 $ 103.5 Service Enablement 12.6 20.8 16.0 19.4 14.3 Netw ork and Service Enablement 140.6 155.6 120.3 134.7 117.8 Optical Securities and Performance Products 43.3 43.6 36.4 29.7 61.0 Total segment gross profit $ 183.9 $ 199.2 $ 156.7 $ 164.4 $ 178.8 Operating income Netw ork and Service Enablement $ 22.3 $ 37.5 $ 13.8 $ 35.2 $ 13.3 Optical Securities and Performance Products 30.4 30.4 24.2 17.1 47.3 Total segment operating income $ 52.7 $ 67.9 $ 38.0 $ 52.3 $ 60.6 Unaudited Q120 Q220 Q320 Q420 Q121 Non-GAAP Revenue by Segment (%) Sep 2019 Dec 2019 Mar 2020 Jun 2020 Sep 2020 Netw ork Enablement 66.3% 64.7% 64.0% 67.9% 57.0% Service Enablement 7.0% 9.9% 9.0% 10.3% 7.5% Optical Securities and Performance Products 26.7% 25.3% 27.0% 21.8% 35.5%
Condensed Balance Sheet
(Amounts in $millions)
Unaudited Q420 Q121 Balance Sheet (in millions) Jun 2020 Sep 2020 ASSETS Current assets: Cash and cash equivalents $ 539.0 $ 590.8 Short-term investments 1.5 1.5 Restricted cash 3.5 3.2 Accounts receivable, net 235.5 220.1 Inventories, net 83.3 87.3 Prepayments and other current assets 50.8 58.7 Total current assets 913.6 961.6 Property, plant and equipment, net 172.5 175.4 Deferred income taxes 105.4 110.2 Goodw ill, net 381.4 387.9 Intangibles, net 148.1 134.4 Other non-current assets 55.3 54.9 Total assets $ 1,776.3 $ 1,824.4 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 53.0 $ 45.2 Accrued payroll and related expenses 51.4 51.2 Deferred revenue 54.6 60.1 Accrued expenses 22.6 21.4 Other current liabilities 48.4 49.6 Total current liabilities 232.8 227.5 Long-term debt 600.9 606.6 Other non-current liabilities 231.2 236.5 Total stockholders’ equity 711.4 753.8 Total liabilities and stockholders’ equity $ 1,776.3 $ 1,824.4