Cable and fiber instruments, coupled with the vendor's acquisitions of AvComm and Cobham's Wireless Test and Measurement business, helped drive VIAVI Solutions to net revenue of $219.4 million in the latest quarter, up almost 12% from 12 months ago.
VIAVI Solutions closed the acquisitions of AvComm and Wireless on March 15, allowing it to include those results in its most recent quarterly earnings report (the vendor's third quarter ended March 31). Including the purchases, the company's operating profit on the $219.4 million revenue was $33.2 million, with operating margin at 15.1% and non-GAAP EPS at $0.13, said Amar Maletira, chief financial officer, during an
earnings call on May 3.
Excluding the outlay on the two businesses, VIAVI earned third-quarter revenue of $207.1 million, an increase of 5.7%, with operating margin of 14.1%.
VIAVI breaks out its offerings into three segments: network enablement (NE), service enablement (SE) and optical security and performance (OSP) products.
"[Network and service enablement] revenue at $157.1 million (including $12.3 million from the acquired AvComm and Wireless businesses) grew 18.9% year-on-year. Excluding the acquisition, NSE revenue at $144.8 million grew 9.6% year-on-year," said Maletira, according to the Seeking Alpha transcript. "This was driven by 10.9% growth in NE revenue and 4.9% growth in our SE revenue. NE revenue growth excluding the acquisition was a result of strong performance in cable and fiber instruments, partially offset by weak lab in production product demand."
Demand recovered, compared with the prior quarter, for VIAVI's anti-counterfeiting products and the vendor saw sequential demand for its 3D Sensing solutions, he said. A major bank note's redesign did cause some decline in VIAVI's anti-counterfeiting business but it was offset by 3D Sensing sales, said Maletira.
Looking ahead, service providers will continue to roll out fiber -- especially FTTH, although cable operators' DOCSIS 3.1 deployments will slow down the strong demand in North America, said CEO and President Oleg Khaykin during the earnings call. In North America, telcos' deployment of high-speed Gfast appears to be slowing until later in 2018 or early 2019, he said, although European providers are more aggressive.
At least one analyst responded positively to VIAVI's financial reports, recommending a "buy" of the vendor's stock.
"Organic NE sales were up 11% [year-over-year], versus up 4% in the prior quarter and down y/y for the four preceding quarters, due to the company's diversification into cable, other U.S. carriers, Europe and Latin America," wrote Michael Genovese, managing partner at MKM Partners. "The 4QFY18 outlook calls for organic NE sales to increase 7%-9% y/y, and still does not count on a large US Tier 1 contribution. We believe US Tier 1 NE demand may positively inflect in [early 2019/late 2018] driven by fixed access and 5G."
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