What changed in this filing

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Item 1. Business

2021-08-23 compared with 2020-08-24 · 146 added, 130 removed, 167 unchanged (62% of the section changed)

Viavi Solutions Inc.

(VIAVI, also referred to as the Company, we, our, and us) is a global provider of network test, monitoring and assurance solutions for communications service providers, enterprises, network equipment manufacturers, government and avionics.

(VIAVI, also referred to as the Company, we, our, and us) is a global provider of network test, monitoring and assurance solutions for communications service providers (CSPs), enterprises, network equipment manufacturers (NEMs), original equipment manufacturers (OEMs), government and avionics.

We help these customers harness the power of instruments, automation, intelligence and virtualization to Command the network .

VIAVI is also a leader in light management solutions for 3D sensing, anti-counterfeiting, consumer electronics, industrial, government, automotive and defense applications.

To serve our markets, we operated in the following business segments:

VIAVI is also a leader in management solutions for 3D sensing, anti-counterfeiting, consumer electronics, industrial, aerospace, automotive and medical applications.

To serve our markets, we operate in the following business segments:

• Network Enablement (NE);

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• Optical Security and Performance Products (OSP).

Corporate Information

The Company was incorporated in California in 1979 as Uniphase Corporation and reincorporated in Delaware in 1993.

Our heritage includes several significant mergers and acquisitions including, among others, the combination of Uniphase Corporation and JDS FITEL in 1999 (JDSU).

In August 2015, JDSU completed the separation of our Lumentum business (the Separation) to gain greater strategic flexibility to address rapidly changing market dynamics.

At the same time, we changed our name to Viavi Solutions Inc.

In January 2021, VIAVI relocated headquarters from San Jose, California to Arizona, located at 7047 E.

Greenway Parkway, Suite 250, Scottsdale, Arizona 85254, and our telephone number is (408) 404-3600.

Our website address is www.viavisolutions.com, which the Company recognizes as a channel of distribution for disclosing materials and non-public information for financial disclosure purposes.

We are subject to the requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act), under which we file annual, quarterly and periodic reports, proxy statements and other information with the SEC.

The SEC maintains a website, www.sec.gov , which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

We also make available free of charge, all of our SEC filings on our website at www.viavisolutions.com/investors as soon as reasonably practicable after they are electronically filed with or furnished to the SEC.

The information contained on any of the websites referenced in this Annual Report on Form 10-K are not part of or incorporated by reference into this or any other report we file with, or furnish to, the SEC.

Industry Trends

NE and SE are collectively referred to as Network and Service Enablement ( NSE ).

NE and SE (collectively referred to as Network and Service Enablement (NSE)).

The telecommunications (Telecom) and cable industries are experiencing a major evolution in technology that is likely to last for the next decade as wireless communications expand and evolve from 4G to 5G technology with its promise of greater bandwidth capacity, faster transmission speeds and lower latency response time.

5G is a disruptive technology that is being gradually deployed by service providers using millimeter wave and sub-6 GHz technologies.

5G has broader applications beyond smart mobile devices.

5G’s increased bandwidth capacity and speed, as well as lower latency, should enable numerous devices, referred to as the “Internet of Things” (IOT), to have greater device-to-device connectivity to enable smart homes, smart cities, smart grid, smart and autonomous cars, factory automation and other applications that are yet to be conceptualized.

Wireless communications connectivity at the edge, or the “last mile” or “last hundred yards”, will bring gigahertz speeds and capacity to the home as well as to “all devices” and to “all connected things” (e.g.

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Many operators, however, have decided to run existing legacy networks until no longer operable and then replace them with new optical fiber.

The COVID-19 pandemic resulted in global work-office shutdown and Work-From-Home policies among network service providers, network equipment manufacturers and its related supply chain.

The COVID-19 pandemic resulted in global work-office shutdown and Work-From-Home policies among network service providers, NEMs and their related suppliers.

This in turn disrupted and delayed new network construction build out, general network maintenance and new technology development.

5G Wireless has broader applications beyond smart mobile devices.

As consumer communication, service provider network operations, and enterprise networks increasingly migrate to the cloud, hyperscale services have become significant drivers of technology innovation, including optical fiber up to 800GbE.

The scale and complexity of these technology shifts are also challenging service providers to rearchitect their networks, becoming more automated, virtualized and optimized based on real-time intelligence.

The convergence of network technologies requires significant investments from both the traditional carriers (telecom and cable) and cloud service providers.

To achieve scale and a profitable return on investment, these communications service providers ( CSPs ) in recent years have consolidated and are expected to continue to consolidate.

While traditional service provider capital spending in physical networks has been declining, and this impacts the served available market opportunity for our NSE segment.

To achieve scale and a profitable return on investment, these CSPs in recent years have consolidated and are expected to continue to consolidate.

Traditional service provider capital spending in physical networks has been declining, and this impacts the served available market opportunity for our NSE segment.

However, the new cloud service providers and virtualized networks create new NSE opportunities.

Our NE and SE products and solutions are well positioned to meet these rapidly changing industry trends, given our technology and products, as well as customer installed base.

NE ’s AvComm (or Avionics Communications) products from our acquisition of that business from Cobham plc in March 2018, further expand NSE ’s Test & Measurement (T&M) opportunity into the government, civil, aerospace and military markets for communications and public safety testing.

Military radio test and avionics products are a growth opportunity as defense and public safety department budgets increase significantly due to the ongoing upgrade from analog to digital communications.

The threat of counterfeiting of banknotes and documents of value is rising as counterfeiters have increasing access to a broad range of advanced but relatively low-cost imaging technologies and printing tools.

With this access, counterfeiters have the ability to potentially create simulations of actual documents and products for illicit purposes, creating the need for robust, technically sophisticated and easy to validate anti-counterfeiting features.

NE’s Avionics Communications (AvComm) products, further expand NSE’s Test & Measurement (T&M) opportunity into the government, civil, aerospace and military markets for communications and public safety testing.

We also believe military radio test and avionics products are a growth opportunity as defense and public safety department budgets increase significantly due to the ongoing upgrade from analog to digital communications.

The threat of counterfeiting of banknotes and documents of value is enabled by a broad range of advanced but relatively low-cost imaging technologies and printing tools.

With this access, counterfeiters – who range from hobbyists to nation states - have the ability to potentially create simulations of actual documents and products for illicit purposes, creating the need for robust, technically sophisticated and easy to validate anti-counterfeiting features.

We have decades of anti-counterfeiting expertise leveraging our Optically Variable Pigment (OVP®), and our Optically Variable Magnetic Pigment (OVMP®) technologies to protect the integrity of banknotes and other high-value documents by delivering optical effects that, on one hand, consumers can easily recognize but on the other hand, counterfeiters find very difficult to reproduce.

In addition to Anti-Counterfeiting solutions, we also provide optical technologies for the 3D sensing, consumer electronics, government, automotive, and industrial markets.

For example, we manufacture and sell optical filters for 3D sensing applications that enable consumers to interact with their devices more naturally by allowing electronic devices to accurately measure depth and motion.

In addition to Anti-Counterfeiting technologies, we also provide optical technologies for the 3D sensing, consumer electronics, government, automotive, and industrial markets.

For example, we manufacture and sell optical filters for 3D sensing applications that allow consumers to interact with their devices more naturally by enabling electronic devices to accurately measure depth and motion.

Our filters play an important role in those applications, separating out ambient light from the incoming data used by sensors to make precise measurements.

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Through the development of multiple generations of products for 3D sensing and by delivering improved performance and competitive value with each iteration, we believe we have established ourselves as the industry’s leading supplier of high-performance filters enabling depth-sensing systems in consumer electronics.

In October 2018, we broadened our portfolio of 3D sensing technologies when we acquired RPC Photonics ( RPC ), a technology leader in engineered optical diffusers, marketed under the trademark “Engineered Diffusers TM .” Engineered Diffusers TM diffuse the infrared laser light transmitted by a smartphone in 3D sensing applications, enabling reliable system performance while guarding eye safety.

In October 2018, we broadened our portfolio of 3D sensing technologies when we acquired RPC Photonics (RPC), a technology leader in engineered optical diffusers, marketed under the trademark “Engineered Diffusers TM .” Engineered Diffusers TM diffuse the infrared laser light transmitted by a smartphone in 3D sensing applications, enabling reliable system performance while also guarding eye safety.

In user facing applications of 3D sensing including facial recognition, our Engineered Diffusers TM enable infrared light to safely impinge on the target, i.e.

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CSPs make up the majority of NE and SE revenues.

We also market and sell products to network equipment manufacturers ( NEMs ), original equipment manufacturers ( OEMs ), enterprises, governmental organizations, distributors and strategic partners worldwide.

We also market and sell products to NEMs, OEMs, enterprises, governmental organizations, distributors and strategic partners worldwide.

We have a dedicated sales force organized around each of the markets that we serve that works directly with customers’ executive, technical, manufacturing and purchasing personnel to determine design, performance and cost requirements.

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Our direct sales force is complemented by a highly trained team of field applications engineers who assist customers in designing, testing and qualifying our products.

We market our products and capabilities through attendance at trade shows, the production of promotional webinars, participation in technical forums, select advertising and by developing customer partnerships.

We market our products and capabilities through attendance at trade shows, the production of promotional webinars, the development of samples and product demonstrations, participation in technical forums, select advertising and by developing customer partnerships.

A high level of support is a critical part of our strategy to develop and maintain long-term collaborative relationships with our customers.

We develop innovative products by engaging our customers at the initial design phase and continues to build that relationship as our customers’ needs change and develop.

We develop innovative products by engaging our customers at the initial design phase and continue to build that relationship as our customers’ needs change and develop.

Service and support are provided through our offices and those of our partners worldwide.

Corporate Information

The Company was incorporated in California in 1979 as Uniphase Corporation and reincorporated in Delaware in 1993.

Our heritage includes several significant mergers and acquisitions including, among others, the combination of Uniphase Corporation and JDS FITEL in 1999.

In 2000, we acquired Optical Coatings Laboratory, Inc., which is currently part of our OSP business segment, and in 2005 we acquired Acterna, Inc.

which is currently part of our NSE business segments.

Following these acquisitions, we operated as a company comprised of a portfolio of businesses with a focus on optical innovation, communications network

and service enablement, commercial lasers and anti-counterfeiting solutions.

In August 2015, JDSU completed the separation of our Lumentum business (the Separation) to gain greater strategic flexibility to address rapidly changing market dynamics.

At the same time, we changed our name to Viavi Solutions Inc.

Additionally, for the last several years, we have implemented multiple manufacturing, facility, organizational and product line transitions.

We expect some of these activities to continue for the foreseeable future.

Our headquarters are located at 6001 America Center Drive, San Jose, California 95002 , and our telephone number is (408) 404-3600.

Our website address is www.viavisolutions.com .

The SEC maintains a website, www.sec.gov , which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC .

Corporate Strategy

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• Increase the benefit from the use of our net operating loss carryforwards (NOL) by improving our profitability organically and inorganically;

Greater flexibility in capital structure enabling greater capital return to shareholders.

Our near-term strategy, and next transformation phase, will be a greater focus on growth, both organic and inorganic.

We expect to leverage major secular growth trends in 5G Wireless, Fiber and 3D Sensing to achieve higher levels of revenue and profitability.

• Greater flexibility in capital structure in support of our strategic plans.

Our near-term strategy, and next transformation phase, will be more focused on growth, both organic and inorganic.

We plan to leverage major secular growth trends in 5G Wireless, Fiber and 3D Sensing to achieve higher levels of revenue and profitability.

Our long-term capital allocation strategy, which supports our corporate strategy, is as follows:

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• Organic investments in initiatives to support revenue growth and productivity;

Return capital to shareholders through share buybacks;

• Return capital to shareholders through share buybacks and execute on capital allocation and debt management strategy;

• Mergers and acquisitions that are synergistic to company strategy and business segments.

Although we expect to successfully implement our strategy, internal and/or external factors could impact our ability to meet any, or all, of our objectives.

These factors are discussed under Item 1A - Risk Factors .

Although we are working to successfully implement our strategy, internal and/or external factors could impact our ability to meet any, or all, of our objectives.

These factors are discussed under Item 1A “Risk Factors” of this Annual Report on Form 10-K.

Business Segments

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In addition, our segments share common corporate services that provide capital, infrastructure, resources and functional support, allowing them to focus on core technological strengths to compete and innovate in their markets.

The table below discloses the percentage of our total net revenue attributable to each of our three reportable segments.

June 27, 2020

June 29, 2019

June 30, 2018

Network Enablement

Service Enablement

Optical Security and Performance Products

Network Enablement

Our NE segment provides an integrated portfolio of testing solutions that access the network to perform build-out and maintenance tasks.

These solutions include instruments, software and services to design, build, turn-up, certify, troubleshoot, and optimize networks.

They also support more profitable, higher-performing networks and help speed time-to-revenue.

Our solutions address lab and production environments, field deployment and service assurance for wireless and wireline networks, including storage networks.

Our test instrument portfolio is one of the largest in the industry, with hundreds of thousands of units in active use by major NEMs, operators and services providers worldwide.

Designed to be mobile, these products include instruments and software that access the network to perform installation and maintenance tasks that help service provider technicians assess the performance of network elements and segments and verify the integrity of the information being transmitted across the network.

These solutions also support more profitable, higher-performing networks and help speed time-to-revenue.

Our solutions address lab and production environments, field deployment and service assurance for wireless and wireline networks, including computing and storage networks.

Our test instrument portfolio is one of the largest in the industry, with hundreds of thousands of units in active use by major NEMs, operators and service providers worldwide.

Designed to be mobile, these products include instruments and software that access the network to perform installation and maintenance tasks, which help service provider technicians assess the performance of network elements and segments and verify the integrity of the information being transmitted across the network.

These instruments are highly intelligent and have user interfaces that are designed to simplify operations and minimize the training required to operate them.

Within the NE product portfolio, our wireless products consist of flexible application software and multi-function hardware that our customers can easily use as standalone test and measurement solutions or combine with industry-standard computers, networks and third-party devices to created measurement, automation and embedded systems.

Our Radio Access Network (RAN to Core) test and validation product addresses the various communications infrastructure market segments.

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Our professional services, provided in conjunction with system integration projects, include project management, installation and implementation.

Our Avionics products group is a global leader in T&M instrumentation for communication and safety in the government, civil, aerospace and military markets.

Avionic product solutions encompass a full spectrum of instrumentation from turnkey systems, stand-alone instruments or modular components that provide customers with highly reliable, customized, innovative and cost-effective testing tools.

Our NE segment provides solutions for CSP s, as well as NEM s and data center providers that deliver and/or operate broadband/IP networks (fixed and mobile) supporting voice, video and data services as well as a wide range of applications.

Our AvComm products are a global leader in T&M instrumentation for communication and safety in the government, civil, aerospace and military markets.

AvComm solutions encompass a full spectrum of instrumentation from turnkey systems, stand-alone instruments or modular components that provide customers with highly reliable, customized, innovative and cost-effective testing tools.

Our NE segment provides solutions for CSPs, as well as NEMs and data center providers that deliver and/or operate broadband/IP networks (fixed and mobile) supporting voice, video and data services as well as a wide range of applications.

These solutions support the development and production of network equipment, the deployment of next generation network technologies and services, and ensure a higher-quality customer experience.

AvComm products are positioned in all of the customers’ product life cycle phases from R&D, manufacturing, installation, deployment and field, to depot repair and maintenance of devices.

NE customers include CSP s, NEM s, government organizations and large corporate customers, such as major telecom, mobility and cable operators, chip and infrastructure vendors, storage-device manufacturers, storage-network and switch vendors, radio and avionics commercial companies, OEMs, civil, state and federal agencies, utilities, law enforcement, military contractors and the armed forces and deployed private enterprise customers.

Our customers include América Móvil, AT&T Inc., Inc., CenturyLink, Inc., Cisco Systems, Inc., Nokia Solutions and Networks and Verizon Communications Inc.

No single NE customer accounted for more than 10% of our net revenue during fiscal 2020 , 2019 or 2018 .

Several network technology trends are taking place to support the growing bandwidth demand and are impacting the way NEM s and CSP s design, build and deploy new network systems.

These trends are driving shifts in capital spending with the transition to advanced LTE and 5G, cable upgrades to DOCSIS 3.1, DSL copper line upgrades to Gfast, deployment of 100G Metro optical fiber, 400G in optical transport, and adoption of advanced network management technologies such as virtualization, assurance and automation.

AvComm products are positioned in all of the customers’ product life cycle phases from research & development (R&D), manufacturing, installation, deployment and field, to depot repair and maintenance of devices.

NE customers include CSPs, NEMs, government organizations and large corporate customers, such as major telecom, mobility and cable operators, chip and infrastructure vendors, storage-device manufacturers, storage-network and switch vendors, radio and avionics commercial companies, OEMs, civil, state and federal agencies, utilities, law enforcement, military contractors and the armed forces and deployed private enterprise customers.

Our customers include América Móvil, AT&T Inc., Lumen Technologies, Inc.

(formerly CenturyLink, Inc.), Cisco Systems, Inc., Nokia Corporation and Verizon Communications Inc.

Several network technology trends are taking place to support the growing bandwidth demand and are impacting the way NEMs and CSPs design, build and deploy new network systems.

These trends are driving shifts in capital spending with the transition to advanced LTE and 5G, cable upgrades to DOCSIS 3.1, DSL copper line upgrades to Gfast, deployment of 100GbE Metro optical fiber, 400GbE in optical transport, and adoption of advanced network management technologies such as virtualization, assurance and automation.

As service providers face pricing pressure on their average revenue per user (ARPU) metrics, they are turning to our NE products solutions to both reduce the need for physical customer service visits through faster installation and repair completion and improve user satisfaction.

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and Artiza Networks, Inc.

While we face multiple competitors

for each of our product families, we continue to have one of the broadest portfolios of wireline and wireless products available in the network enablement industry.

In Aerospace and Tactical Communications, AvComm competes against Anritsu, Astronics DME Corp., General Dynamics and Tel Instruments.

While we face multiple competitors for each of our product families, we continue to have one of the broadest portfolios of wireline and wireless products available in the network enablement industry.

In Aerospace and Tactical Communications, AvComm competes against Anritsu Corporation, Astronics DME Corp., General Dynamics and Tel Instruments.

Our NE solutions include instruments and software that support the development and production of network systems in the lab.

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These instruments are highly intelligent and have user interfaces that are designed to simplify operations and minimize the training required to operate them.

Our NE solutions are also used by NEM s in the design and production of next-generation network equipment.

Thorough testing by NEM s plays a critical role in producing the components and equipment that are the building blocks of network infrastructure.

Our NE solutions are also used by NEMs in the design and production of next-generation network equipment.

Thorough testing by NEMs plays a critical role in producing the components and equipment that are the building blocks of network infrastructure.

We leverage our installed base and knowledge of network management methods and procedures to develop these advanced customer experience solutions.

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Our professional services, provided in conjunction with system integration projects, include project management, installation and implementation.

Our NE products and associated services including the acquired Trilithic and AW businesses are, as follows:

Our NE products and associated services are, as follows:

Field Instruments :

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(b) Optical Transport products;

and (d) Wireless products.

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This functionality has become more critical as organizations have been forced to adopt remote working procedures, increasing network challenges and security risks.

Our SE segment provides solutions and services primarily for communication service providers and enterprises that deliver and/or operate broadband/IP networks (fixed and mobile) supporting voice, video and data services as well as a wide range of applications.

Our SE segment provides solutions and services primarily for CSPs and enterprises that deliver and/or operate broadband/IP networks (fixed and mobile) supporting voice, video and data services as well as a wide range of applications.

These solutions provide network and application visibility to enable more cost-effective ways to provide a higher-quality customer experience.

SE customers include similar CSPs, NEMs, government organizations, large corporate customers and storage-segment customers that are served by our NE segment.

Our Service Enablement solutions portfolio grew as a result of several acquisitions made during the past several years to address the network industry shift to a more agile, flexible, programmable, and cost-effective virtualized software-centric network.

Our SE solutions portfolio has grown as a result of several acquisitions made during the past several years to address the network industry shift to a more agile, flexible, programmable, and cost-effective virtualized software-centric network.

Our Data Center product and solutions offerings address customers’ needs to support data center network traffic through application and performance monitoring.

Competitors of SE include NetScout Systems, Inc., Riverbed Technology and Spirent Communications plc.

Our SE segment competitors include NetScout Systems, Inc., Riverbed Technology, Inc.

and Spirent Communications plc.

While we face multiple competitors for each of our product families, we continue to have one of the broadest portfolios of wireline and wireless monitoring solutions available in the service enablement industry.

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Our customers are able to access and analyze the growing amount of network data from a single console, simplifying the process of deploying, provisioning and managing network equipment and services.

These capabilities allow network operators to initiate service to new customers faster, decrease the need for technicians to make on-site service calls, help to make necessary repairs faster and, as a result, lower costs while providing higher quality and more reliable services.

These capabilities allow network operators to initiate service to new customers faster, decrease the need for technicians to make on-site service calls, and help to make necessary repairs faster, which lowers costs while providing higher quality and more reliable services.

Our SE products and associated services are, as follows:

Data Center :

Consisting of our Network Performance Monitoring and Security tools (Apex, GigaStor, Observer).

Consisting of our Network Performance Monitoring and Diagnostic tools (Apex, GigaStor, Observer).

Primarily consisting of our (a) Growth Products (Location Intelligence and NITRO Mobile products) and (b) Mature Products (Legacy Assurance and Legacy Wireline).

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Our technologies are deployed on the banknotes of more than 100 countries today.

Leveraging our expertise in spectral management and our unique high-precision coating capabilities, OSP provides a range of products and technologies for the consumer and industrial market, including, for example, 3D sensing optical filters.

OSP value-added solutions meet the stringent requirements of commercial and government customers.

Our products are used in a variety of aerospace and defense applications, including optics for guidance systems, laser eye protection and night vision systems.

These products, including coatings, optical filters and Engineered Diffusers TM , are optimized for each specific application.

Our OSP segment delivers overt and covert features to protect banknotes and documents of value against counterfeiting, with a primary foc us on the currency market.

OSP also produces precise, high-performance, optical thin-film coatings for a variety of applications i n consumer electronics, government, automotive, industrial, and other markets.

For example, we design and produce optical filters which are used in 3D sensing products and other applications.

In addition, we offer custom color solutions that include innovative special effects pigments that provide product enhancement for brands in the automotive and other industries.

Leveraging our unique high-precision coating and light shaping optics capabilities, OSP provides a range of products and technologies for the consumer electronics, government, automotive, and industrial markets, including, for example, optical filters and Engineered Diffusers™ for 3D sensing applications.

Other OSP product lines include custom color solutions and spectral sensing.

Custom color solutions include innovative special effects pigments that provide product enhancement for brands in the automotive and other industries.

Spectral sensing solutions include handheld and process miniature near infrared spectrometers for pharmaceutical, agriculture, food, feed, and industrial applications.

Our OSP segment delivers overt and covert features to protect banknotes and documents of value against counterfeiting, with a primary focus on the currency market.

OSP also produces precise, high-performance, optical thin-film coatings for a variety of applications in consumer electronics, government, automotive, industrial, and other markets.

For example, we design and produce optical filters and Engineered Diffusers™, which are used in 3D sensing products and other applications.

OSP serves customers such as SICPA Holding SA Company (SICPA), STMicroelectronics Holding N.V., Lockheed Martin Corporation and Seiko Epson Corporation.

During fiscal 2020 , 2019 and 2018 , net revenue from SICPA represen ted 12.3%, 14 .3%, 14.8%, respectively, of our net revenue.

Counterfeiting of banknotes and other documents of value is rising as counterfeiters have access to a broad range of advanced but relatively low-cost imaging technologies and printing tools, giving them the potential ability to create simulations of banknotes and other documents of value for illicit purposes.

For further information related to our customers, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations under Item 7 of this Annual Report on Form 10-K.

Counterfeiting of banknotes and other documents of value is enabled by a broad range of advanced but relatively low-cost imaging technologies and printing tools, giving counterfeiters - who range from hobbyists to nation states - the potential ability to create simulations of banknotes and other documents of value for illicit purposes.

As a result, demand is increasing for sophisticated overt anti-counterfeiting features, such as our OVP® and OVMP® technologies.

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At the same time, the effects created by these technologies are difficult to create or simulate using conventional printing technology.

The consumer electronics, government, automotive and instrumentation markets require customized, high-precision coated products and optical components that selectively absorb, transmit or reflect light to meet the performance requirements of sophisticated systems.

The consumer electronics, government, automotive and instrumentation markets require customized, high-precision coated products and optical components that selectively absorb, transmit, reflect or shape light to meet the performance requirements of sophisticated systems.

Our unique and proprietary deposition platforms and decades of know-how enable us to offer an array of advanced technologies and precision optics-from the UV to the far IR portion of the light spectrum to meet the specific requirements of our customers.

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The diffuser redirects the laser light to avoid direct eye contact, a critical safety feature for 3D sensing applications.

OSP’s competitors include providers of anti-counterfeiting features such as Giesecke & Devrient, De La Rue plc;

OSP’s competitors include the following:

providers of anti-counterfeiting features such as Giesecke & Devrient, De La Rue plc;

special-effect pigments like Merck KGA;

coating companies such as Nidek, Toppan, and Toray and optics companies such as Materion;

coating companies such as Nidek, Toppan and Toray;

optics companies such as Materion;

and, optical filter companies such as II-VI Inc.

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Anti-Counterfeiting :

Our OVP® technology has become a standard used by many governments worldwide for currency protection.

This technology provides a color-shifting effect that enables intuitive visual verification of banknotes.

We also provide OVMP®, a technology that delivers depth and motion effects for authenticating banknotes.

Our OVP® and OVMP® technologies are incorporated into inks used by many government and state-owned security printers worldwide for banknote protection.

These technologies deliver a range of intuitive overt effects that enable the rapid verification of banknotes without requiring a specialized device or reader.

For product differentiation and brand enhancement, we provide custom color solutions for a variety of applications using our ChromaFlair® and SpectraFlair® pigments to create color effects that emphasize body contours, create dynamic environments, or enhance products in motion.

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Our OSP business manufactures and sells optical filters for 3D sensing products that separate out ambient light from incoming data to allow devices to be controlled by a person’s movements or gestures.

Our Engineered Diffusers TM optimize the 3D sensing module for laser use eye safety.

Our Engineered Diffusers TM shape light emitted for 3D sensing applications and also enhance eye safety.

Our products are used in a variety of aerospace and defense applications, including optics for guidance systems, laser eye protection and night vision systems.

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Industrial and Other Markets:

We provide multicavity and linear variable optical filters on a variety of substrates for applications including, thermal imaging, and spectroscopy and pollution monitoring.

We also develop and manufacture miniature near infrared spectrometers that leverage our linear variable optical filters for use in applications for agriculture, pharmaceuticals and other markets.

We provide multicavity and linear variable optical filters on a variety of substrates for applications, including thermal imaging, spectroscopy and pollution monitoring.

We also develop and manufacture miniature handheld and process near infrared spectrometers that leverage our linear variable optical filters for use in applications for agriculture, pharmaceutical and other markets.

As part of our strategy, we are committed to the ongoing evaluation of strategic opportunities and, where appropriate, the acquisition of additional products, technologies or businesses that are complementary to, or strengthen, our existing products.

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The acquisition of RPC expands our 3D Sensing offerings.

On March 15, 2018, we completed the acquisition of AW, which further strengthens our competitive position in 5G deployment and diversifies our product offerings into military, public safety and avionics test markets.

On August 9, 2017, we completed the acquisition of Trilithic, a provider of electronic test and measurement equipment for telecommunications service providers.

The acquisitions of 3Z, AW and Trilithic have been integrated into our NE business segment.

On March 15, 2018, we completed the acquisition of AvComm and Wireless (AW), which further strengthens our competitive position in 5G deployment and diversifies our product offerings into military, public safety and avionics test markets.

The acquisitions of 3Z and AW have been integrated into our NE business segment.

The acquisition of RPC has been integrated into our OSP business segment.

Refer to “Note 5.

Acquisitions ” for additional information related to our acquisitions.

Acquisitions” under Item 8 of this Annual Report on Form 10-K for additional information related to our acquisitions.

Restructuring Programs

We continue to engage in targeted restructuring events intended to consolidate our operations and align our businesses in response to market conditions and our current investment strategy.

In fiscal 2019, we implemented a plan within our Network Service and Enablement business, including actions related to the recently acquired AW business.

These actions further drive our strategy for organizational alignment and consolidation as part of its continued commitment to a more cost effective and agile organization and to improve overall profitability in our NSE business.

Included in these restructuring plans are specific actions to consolidate and integrate the newly acquired AW business within the NSE business segment.

We may continue to engage in targeted restructuring events, to consolidate our operations and align our businesses in response to market conditions and our current investment strategy.

Such actions are intended to further drive our strategy for organizational alignment and consolidation as part of its continued commitment to a more cost effective and agile organization and to improve overall profitability in our business segments.

Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 7 and “Note 13.

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Research and Development

During fiscal 2020 and 2019 , we incurred R&D expenses of $193.6 million and $187.0 million , respectively.

As of June 27, 2020 , we had approximately 1,000 employees engaged in R&D.

We devote substantial resources to R&D to develop new and enhanced products to serve our markets.

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Manufacturing

As of June 27, 2020 , we have significant manufacturing facilities for our NE, SE and OSP segments located in China, France, Germany, United Kingdom and the United States.

As of July 3, 2021, we have significant manufacturing facilities for our NE, SE and OSP segments located in China, France, Germany, United Kingdom and the United States.

Our most significant contract manufacturing partners are located in China and Mexico.

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Although we intend to establish at least two sources of supply for materials whenever possible, for certain components we have sole or limited source supply arrangements.

We may not be able to procure these components from alternative sources at acceptable prices within a reasonable time, or at all;

therefore, the loss or interruption of such arrangements could impact our ability to deliver certain products on a timely basis.

Patents and Proprietary Rights

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We do not intend to broadly license our intellectual property rights unless we can obtain adequate consideration or enter into acceptable patent cross-license agreements.

As of June 27, 2020 , we owned approximately 793 U.S.

patents and 1,478 foreign patents and have 913 patent

applications pending throughout the world.

The average age of the patents we hold is 11.6 years , which is slightly older than the midpoint of the average 20-year life of a patent.

We consider our backlog balance to be an estimate of future revenue to be earned from contractually committed product and service arrangements.

As of June 27, 2020 and June 29, 2019 , our backlog was approximately $204.6 million and $244.1 million , respectively.

As of July 3, 2021, we owned approximately 831 U.S.

patents and 1,528 foreign patents and have 1,004 patent applications pending throughout the world.

The average age of the patents we hold is 9.1 years, which is slightly younger than the midpoint of the average 20-year life of a patent.

Due to possible changes in product delivery schedules and cancellation of product orders, and because our sales often reflect orders shipped in the same quarter in which they are received, our backlog at any particular date is not necessarily indicative of actual revenue or the level of orders for any succeeding period.

We employed approximately 3,600 employees as of June 27, 2020 , which included approximately 1,200 employees in manufacturing, 1,000 employees in research and development, 900 employees in sales and marketing, and 500 employees in general and administration.

This compared to a workforce of approximately 3,600 as of June 29, 2019 , and 3,500 as of June 30, 2018 .

None of our employees in the U.S.

is represented by a labor union;

however, in certain foreign subsidiaries, labor unions or workers’ councils represent some of our employees.

At VIAVI, the health, safety and wellbeing of our employees, customers, partners, suppliers, communities are of the utmost importance.

We have suspended international business travel and are conducting meetings with customers and partners remotely.

We have established an internal COVID-19 task force with management representation from human resources, legal, facilities and business units and are closely monitoring developments.

We have updated our business continuity plans and our IT team continues to enhance remote work capabilities and cybersecurity tools.

Our employees have access to a centralized resource portal for COVID-19 where they can find health and safety information and support tools.

While we, along with the rest of the world continue to navigate the risks and uncertainties associated with the COVID-19 pandemic, we are committed to continuing to provide a safe and supportive work environment for our employees and are following all recommended protocols from state and local regulators and health authorities.

Environmental, Social and Governance

All of our stakeholders are essential to our business-stockholders, customers, suppliers, employees, communities as well as the environment and society.

We are working to making our workforce more inclusive, our business more sustainable, and our communities more engaged by maintaining strong environmental, social and governance (ESG) practices.

We detail our overall ESG strategy and our ESG progress on our ESG web page and in our annual Corporate Social Responsibility Report, which can both be found at www.viavisolutions.com/csr .

Our business is seasonal, as is typical for our competitors and many large companies.

For NSE, revenue is typically higher in the second and fourth fiscal quarter, all else being equal.

There is typically a modest end of calendar year customer spending budget flush that benefits the December quarter.

Telecom and cable spending budgets are typically set at the start of a new calendar year, the March quarter and thus NSE’s weakest revenue quarter, all else being equal, with spending release and benefiting the June quarter.

There is typically a modest end of calendar year customer spending budget flush that benefits our second fiscal quarter.

Telecom and cable spending budgets are typically set at the start of a new calendar year, thus with all else being equal, our third fiscal quarter is NSE’s weakest revenue quarter with spending release benefiting our fourth fiscal quarter.

For our OSP business, given our recent exposure to the consumer market, namely our 3D Sensing products into the smart phone market, OSP revenue is expected to be seasonally higher in the first and second fiscal quarter followed by seasonal demand declines in the third and fourth fiscal quarters.

Human Capital Management

As of July 3, 2021, we had approximately 3,600 employees worldwide representing more than 30 self-identified nationalities working across approximately 30 countries.

VIAVI is committed to promoting and maintaining a diverse and inclusive work environment and offering equal opportunities to everyone.

We seek to empower our employees to learn and develop their skills to accelerate their career and to attract best in class talent.

The CEO and the SVP Human Resources are responsible for the development of the People Strategy and execute this with the support of the Executive Management Team.

We regularly update the Compensation Committee on human capital matters.

Business Values & Standards

The VIAVI business values articulate the internal cultural identity for VIAVI employees and provide a shared understanding of expectations across the Company.

They represent the principles that will help guide us to achieve our objectives globally and the desired operating environment of the employees and management.

VIAVI is committed to respecting human rights and acknowledges the fundamental principles contained in the Universal Declaration of Human Rights, the tenets of the United Nations Guiding Principles on Business and Human Rights, core International Labor Organization Conventions and the laws of countries in which we operate.

We are a member of the Responsible Business Alliance, which further strengthens our efforts and commitment.

We realize that being a responsible global citizen is about more than just complying with local regulations.

It’s about how we do business, and how our organization’s activities affect the people and communities where we live and work.

The VIAVI Code of Business Conduct captures the broad principles of legal and ethical business conduct embraced by the Company as part of its commitment to integrity.

VIAVI expects that all employees will act in a manner that complies both with the letter and spirit of this code of conduct.

Diversity, Equity, and Inclusion (DEI)

VIAVI is committed to fostering, cultivating, and preserving a culture of diversity, equity and inclusion.

Our human capital is one of our most valuable assets.

We believe the collective sum of our individual differences, life experiences, knowledge, innovation, business acumen, self-expression, and unique capabilities contribute to a culture that enhances our reputation and achievement.

VIAVI has long been committed to ensuring that all individuals have an equal opportunity to enjoy a fair, safe and productive work environment – regardless of age, ancestry, race, color, mental or physical disability or medical condition, gender, gender identity, gender expression, genetic information, family or marital status, registered domestic partner status, medical condition, military and veteran status, race, religious creed, language, national origin, citizenship status, sex (including pregnancy, childbirth, breastfeeding and any related medical conditions), sexual orientation, socio-economic status, or any other protected category under applicable law.

We embrace, encourage, and celebrate our employees’ differences and what makes them unique.

Talent Development

Our talent development programs promote the VIAVI Business Values through a passion for learning and performance.

We are developing relevant and useful learning resources for our employees, managers, and leaders that invite a growth mindset and create an appetite for lifelong learning.

We drive talent conversations at all levels, which is complemented by Everyday Development, our performance management check-in process.

Check-ins ensure that teams are being coached and supported throughout the year with relevant and timely discussions on expectations, feedback and development.

Both managers and employees have a role to play to ensure that they are connected on the activities that drive our business forward.

Our employees can expect to engage regularly with their manager, and to have their support to accelerate their performance and development.

Enabling critical leadership practices was a top priority in 2021, as we instituted our global Leadership Development Program with over 230 of our managers joining the Manager Development and Strategic Leadership Series.

Many of our employees are participating in mandatory training courses covering data privacy, cyber-security, health and safety as well as the prevention of sexual harassment in the workplace.

Talent Rewards

Our compensation and benefit programs are designed to recognize our employees' individual performance and contributions to our business results, including competitive base salaries and variable pay for all employees, share-based equity award grants, health and welfare benefits, time-off, development programs and training, and opportunities to give back to our communities.

We provide talent rewards that are competitive in the marketplace.

We support equal pay for equal work, pay transparency as well as all federal anti-discrimination laws applicable to employment, including those within Title VII of the Civil Rights Act.

Health and Safety

VIAVI is committed to maintaining an inclusive, supportive, safe and healthy work environment where our employees can thrive.

We strictly comply with all applicable health and safety regulations, offer robust training to our employees on health and safety matters, maintain controls and proper disposal of hazardous materials and track workplace incidents and injuries.

We maintain and regularly update emergency and disaster recovery plans.

While faced with the ongoing COVID-19 pandemic, we have come together to institute a set of global policies, a global COVID-19 Committee at the executive level, regional and local Pandemic Response Teams, Return to Work guidelines and flexible workplace practices to help our employees and their families stay healthy and safely navigate the challenging and changing environment.

Environmental, Social and Governance

All stakeholders are essential to our business, including stockholders, customers, suppliers, employees, communities as well as the environment and society.

We are working on making our workforce more inclusive, our business more sustainable, and our communities more engaged by maintaining strong environmental, social and governance (ESG) practices.

We detail our overall ESG strategy and progress on our ESG web page and in our annual Corporate Social Responsibility Report, which can both be found at www.viavisolutions.com/csr .

Information Security

Information security is the responsibility of our Information Security team, overseen by the Chief Information Security Officer.

We leverage a combination of the National Institute of Standards and Technology (NIST) Cybersecurity Framework, International Organization for Standardization and Center for Internet Security best practice standards to measure security posture, deliver risk management and provide effective security controls.

Our information security practices include development, implementation, and improvement of policies and procedures to safeguard information and ensure availability of critical data and systems.

Our Information Security team conducts annual information security awareness training for employees involved in our systems and processes that handle customer data and audits of our systems and enhanced training for specialized personnel.

Our program further includes review and assessment by external, independent third-parties, who assess and report on our internal incident response preparedness and help identify areas for continued focus and improvement.

As set forth in its charter, our Audit Committee, comprised fully of independent directors, is responsible for oversight of risk, including cybersecurity and information security risk.

Our Chief Information Security Officer delivers quarterly reports and updates to the Audit Committee.

The Audit Committee regularly briefs the full Board on these matters, and the Board receives regular updates on the status of the Information Security Program, including but not limited to relevant cyber threats, roadmap and key initiative updates, and the management of information security risk.

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What changed 10-K

Item 1. Business