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Viavi Announces Fiscal Second Quarter 2016 Results

MILPITAS, CA — (Marketwired) — 02/02/16 — Viavi (NASDAQ: VIAV)

GAAP and Non-GAAP net revenue of $232.1 million, up $5.7 million or 2.5% year-over-year

GAAP operating margin of 4.0%, up 1,340 bps year-over-year

Non-GAAP operating margin of 13.1%, up 470 bps year-over-year

GAAP EPS from continuing operations of $0.02, up $0.18 or 112.5% year-over-year

Non-GAAP EPS from continuing operations of $0.11, up $0.06 or 120.0% year-over-year

Amounts presented below are on a continuing operations basis unless otherwise noted

$100 million common stock repurchase program

Viavi (NASDAQ: VIAV) today reported results for its fiscal second quarter ended January 2, 2016.

GAAP net revenue was $232.1 million, with net income of $3.3 million, or $0.02 per share. Prior quarter GAAP net revenue was $229.7 million, with net loss of $(13.6) million, or $(0.06) per share. GAAP net revenue for fiscal 2015 second quarter was $226.4 million, with net loss of $(37.7) million, or $(0.16) per share.

Non-GAAP net revenue was $232.1 million, with net income of $25.0 million, or $0.11 per share. Prior quarter non-GAAP net revenue was $229.7 million, with net income of $19.6 million, or $0.08 per share. Non-GAAP net revenue for fiscal 2015 second quarter was $226.4 million, with net income of $11.3 million, or $0.05 per share.

“Viavi delivered another solid quarter as our performance met or exceeded the high end of our guidance range,” said Rick Belluzzo, Viavi–s Interim President and Chief Executive Officer. “Our strategy to deliver improved profitability and revenue growth is executing to plan. Although uncertainty in the current macroeconomic environment could challenge the business, we remain focused on improving our operational infrastructure and solidifying our go-to market strategy for a transformational 2016 fiscal year.”

Belluzzo added, “I–m also pleased to announce that the Board of Directors has authorized a program to repurchase up to $100 million of the Company–s common stock through open market or private transactions between now and February 1, 2017. The timing of repurchases and the number of shares repurchased will depend upon business and financial market conditions.”

The tables below (in millions, except percentage data) provide comparisons of quarterly results to prior periods, including sequential quarterly and year-over-year changes. A reconciliation between GAAP and non-GAAP measures is contained in this release under the section titled “Use of Non-GAAP (Adjusted) Financial Measures.”

Americas, Asia-Pacific and EMEA customers represented 52.2%, 18.2% and 29.6%, respectively, of total net revenue for the quarter.

The Company held $926.0 million in total cash and investments, which also includes marketable equity investments, and used $(1.0) million of cash for operations during the quarter.

The Company adjusted its current and 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, Condensed Consolidated Balance Sheet and reportable segment information.

For the fiscal third quarter of 2016 ending April 2, 2016, the Company expects non-GAAP net revenue to be $210 million to $226 million and non-GAAP earnings per share to be $0.07 to $0.09.

The Company will discuss these results and other related matters at 1:30 p.m. Pacific Time on February 2, 2016 in a live webcast, which will also be archived for replay on the Company–s website at . The Company will post supplementary slides outlining the Company–s latest financial results on under the “Quarterly Results” section concurrently with this earnings press release. This press release and the supplementary slides are being furnished as a Current Report on Form 8-K with the Securities and Exchange Commission, and will be available at .

Viavi (NASDAQ: VIAV) software and hardware platforms and instruments deliver end-to-end visibility across physical, virtual and hybrid networks. Precise intelligence and actionable insight from across the network ecosystem optimizes the service experience for increased customer loyalty, greater profitability and quicker transitions to next-generation technologies. Viavi is also a leader in anti-counterfeiting solutions for currency authentication and high-value optical components and instruments for diverse government and commercial applications. Learn more at and follow us on Viavi Perspectives, LinkedIn, Twitter, YouTube and Facebook.

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include any anticipation or guidance as to future financial performance, including future revenue, gross margin, operating expense, operating margin, profitability, cash flow and other financial metrics, as well as the impact and duration of certain trends and market conditions. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. In particular, the Company–s ability to predict future financial performance continues to be difficult due to, among other things: (a) continuing general limited visibility across many of our product lines; (b) quarter-over-quarter product mix fluctuations, which can materially impact profitability measures due to the broad gross margin ranges across our portfolio; (c) consolidations in our customer base; (d) customer purchasing delays as they assess or transition to new technologies and/or new architectures, which limit near-term demand visibility, and could negatively impact potential revenue; (e) continued decline of average selling prices across our businesses; (f) notable seasonality and a significant level of in-quarter book-and-ship business; (g) various product and manufacturing transfers, site consolidations and product discontinuances that have caused and may cause short-term disruptions; (h) the ability of our suppliers and contract manufacturers to meet production and delivery requirements to our forecasted demand; and (i) inherent uncertainty related to global markets and the effect of such markets on demand for our products. Additionally, risks related to the recent separation include the ability to retain key employees, the ability to recognize anticipated cost savings, Viavi–s ability to function successfully as a stand-alone entity, potential business disruption caused by the separation, and customer retention and financing risks. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. For more information on these risks, please refer to the “Risk Factors” section included in the Company–s Annual Report on Form 10-K for the fiscal year ended June 27, 2015 filed with the Securities and Exchange Commission. The forward-looking statements contained in this press release are made as of the date thereof and the Company assumes no obligation to update such statements.

The following financial tables are presented in accordance with GAAP, unless otherwise specified.

The preliminary financial statements are estimated based on our current information.

The preliminary financial statements are estimated based on our current information.

The preliminary financial schedules are estimated based on our current information.

The preliminary financial schedules are estimated based on our current information.

The Company provides non-GAAP net revenue, non-GAAP gross margin, non-GAAP operating income, non-GAAP net income (loss), non-GAAP net income (loss) per share, EBITDA and adjusted EBITDA financial measures as supplemental information regarding the Company–s operational performance. The Company uses the measures disclosed in this release to evaluate the Company–s historical and prospective financial performance, as well as its performance relative to its competitors. Specifically, management uses these items to further its own understanding of the Company–s core operating performance, which the Company believes represent its performance in the ordinary, ongoing and customary course of its operations. Accordingly, management excludes from core operating performance items such as those relating to amortization of acquisition-related intangibles, stock-based compensation, restructuring, separation costs, and certain investing expenses and non-cash activities that management believes are not reflective of such ordinary, ongoing and customary course activities. Additionally, the Company excludes the results of discontinued operations in calculating non-GAAP net income (loss), non-GAAP net income (loss) per share, EBITDA and adjusted EBITDA for all periods reported. The Company believes excluding these items enables investors to evaluate more clearly and consistently the Company–s core operational performance as the Company is no longer active in its discontinued operations.

The Company believes providing this additional information allows investors to see Company results through the eyes of management. The Company further believes that providing this information allows investors to better understand the Company–s financial performance and, importantly, to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance.

The non-GAAP adjustments described in this release have historically been excluded by the Company from its non-GAAP financial measures. The non-GAAP adjustments, and the basis for excluding them, are outlined below.

Cost of revenues, costs of research and development and costs of selling, general and administrative: The Company–s GAAP presentation of gross margin and operating expenses may include (i) additional depreciation and amortization from changes in estimated useful life and the write-down of certain property, equipment and intangibles that have been identified for disposal but remained in use until the date of disposal, (ii) workforce related charges such as severance, retention bonuses and employee relocation costs related to formal restructuring plans (iii) costs for facilities not required for ongoing operations, and costs related to the relocation of certain equipment from these facilities and/or contract manufacturer facilities, (iv) stock-based compensation, (v) other non-recurring charges comprising mainly of one-time acquisition, integration, litigation and other costs and contingencies unrelated to current and future operations, including Viavi-specific costs incurred to effect the separation of the Lumentum business and post-separation activities such as small site consolidations, reorganizations, insourcing or outsourcing of activities and severance related costs related to the exit of key executives, and (vi) impairment charges resulting from a write-down or write-off of the carrying value of intangible assets assessed in accordance with authoritative guidance. The Company excludes these items in calculating non-GAAP gross margin, non-GAAP operating income, non-GAAP net income (loss), non-GAAP net income (loss) per share, EBITDA and adjusted EBITDA. The Company believes excluding these items enables investors to evaluate more clearly and consistently the Company–s core operational performance.

Amortization of intangibles: The Company includes amortization expense related to intangibles in its GAAP presentation of cost of revenues and operating expense. The Company excludes these significant non-cash items in calculating non-GAAP gross margin, non-GAAP operating income, non-GAAP net income (loss), non-GAAP net income (loss) per share, EBITDA and adjusted EBITDA, because it believes doing so provides investors a clearer and more consistent view of the Company–s core operating performance in terms of cost of revenues and operating expenses.

Other income (loss), net and non-cash interest expense: The Company incurred non-cash interest expense accretion of the debt discount on its convertible debt instruments. The Company has sold investments or adjusted the value of investments from time to time based on market conditions, and includes the impact of these activities in its GAAP presentation of other income (expense), net. The Company eliminates these items in calculating non-GAAP net income (loss), non-GAAP net income (loss) per share, EBITDA and adjusted EBITDA, because it believes that in so doing, it can provide investors a clearer and more consistent view of the Company–s core operating performance.

Income tax expense or benefit: The Company excludes non-cash tax expense related to the utilization of net operating losses where valuation allowances were released, non-cash income tax, intra-period tax allocation benefit and other significant one-time events, such as the spin-off of Lumentum. The Company believes excluding these items enables investors to evaluate more clearly and consistently the Company–s core operational performance.

Interest, taxes, depreciation, amortization and other adjustments: The Company–s EBITDA calculation primarily excludes interest, taxes, depreciation and amortization, and other items that are not part of its core operating performance described above. The Company–s adjusted EBITDA excludes items in addition to the items excluded from the EBITDA calculation such as stock-based compensation and restructuring and related charges (benefits), and other charges related to non-recurring activities that are not part of its core operating performance described above. Management believes adjusted EBITDA is a good indicator of the Company–s core operational cash flow.

Non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. The GAAP measure most directly comparable to non-GAAP net income (loss) is net income (loss). The GAAP measure most directly comparable to non-GAAP net income (loss) per share is net income (loss) per share. The Company believes these GAAP measures alone are not indicative of its core operating expenses and performance.

The following tables reconcile GAAP measures from continuing operations to non-GAAP measures:

The preliminary financial schedules are estimated based on our current information.

The preliminary financial schedules are estimated based on our current information.

Bill Ong
408-404-4512

Amit Malhotra
202-341-8624