Viavi Solutions Inc. Q4 FY2025 earnings call

• Fiscal '25 ended strongly with Viavi revenue and EPS at the high end of guidance. - NSE revenue in fiscal Q4 grew ~15% YOY, driven by data center ecosystem and aerospace and defense. - OSP revenue in Q4 was above guidance, driven by anticounterfeiting and other products. - Full year 2025 saw revenue growth from data center ecosystem, aerospace and defense, and OSP's anticounterfeiting. - Prioritized capital allocation towards M&A, including acquisition of Inertial Labs and pending acquisition of Spirent's business lines. - Successfully priced and allocated a $600 million Term Loan B for the Spirent deal and general corporate purposes.

For the fourth quarter of fiscal 2025, Net revenue was $290.5 million. The Network and Service Enablement (NSE) segment had revenue of $209.1 million in Q4, up 14.8% YOY, with a gross margin of 62.2% and an operating margin of 4.7%. The OSP segment had revenue of $81.4 million in Q4, up 16.6% YOY, with a gross margin of 54.7% and an operating margin of 39.4%. For the full fiscal year 2025, revenue was $1.84 billion, up 8.4% YOY. Operating margin was 14.2%, up 270 basis points from fiscal 2024, and full year EPS was $0.47, up $0.14 from the prior year.

• First fiscal quarter of 2026 revenue expected in range of $290 million to $298 million. - Operating margin expected to be 15% ± 40 basis points, EPS between $0.13 and $0.14. - NSE revenue expected ~$211 million ± $3 million with operating margin of 5.8% ± 40 basis points. - OSP revenue expected ~$83 million ± $1 million with operating margin of 38.3% ± 20 basis points. - Guidance does not include financials from Spirent acquisition, expected to close by end of September. - Target 4x gross leverage and below 3x net leverage long term.

• Tariff impacts on sales, though mitigated. - Volatility in service provider spend for wireless and cable products. - Seasonality in revenue, with historically softer Q1 relative to Q4. - Potential impact of macroeconomic environment on business performance.

Q: How did tariff impacts progress and account for in guidance?

A: Tariff impact ~$1.5 million, fully mitigated, built into pricing and supply chain realigned. Guidance for Q1 doesn't include Spirent acquisition.

Q: Competitive dynamics and visibility for 1.6T test in data center ecosystem?

A: 1.6T test gets in the door and locks follow-on activity. Demand is strong from data center ecosystem across value chain. Data centers are increasingly buying field instrumentation for network performance.

Q: Breakdown of contribution to Q1 upside between data center and aerospace and defense?

A: Both data center and aerospace and defense were strong, but segmentation details not disclosed.

Q: Margin outlook for NSE?

A: NSE had ~20% operating margin prior to telecom meltdown. Goal is to move into mid-to-high teens and then 20s longer term.

Q: ASP and volume impact on OSP?

A: ASP stabilized, OSP is ~$300 million run rate. Margin affected by mix in anti-counterfeiting products and volume. Stabilization and gradual growth expected with new segments materializing.