What changed in this filing

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Item 1. Financial Statements

2021-11-08 compared with 2021-05-07 · 313 added, 431 removed, 502 unchanged (60% of the section changed)

3 unchanged sentences

(in millions, except per share data)

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Three Months Ended

October 2, 2021 October 3, 2020

Product revenue $ 289.1 $ 247.9

14 unchanged sentences

Income from operations 46.9 31.3

Interest income and other (loss) income, net ( 0.9 ) 5.3 0.8 9.3

Loss on convertible note settlement (Note 11) ( 85.9 ) —

Interest income and other income, net 1.4 0.6

Interest expense ( 3.6 ) ( 3.6 )

Income before taxes 26.0 6.0 83.3 59.0

(Loss) income before taxes ( 41.2 ) 28.3

Provision for income taxes 13.6 8.6

Net income (loss) $ 11.8 $ ( 32.8 ) $ 48.0 $ 2.0

Net income (loss) per share:

Net (loss) income $ ( 54.8 ) $ 19.7

Net (loss) income per share:

Basic $ ( 0.24 ) $ 0.09

7 unchanged sentences

(in millions)

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Net income (loss) $ 11.8 $ ( 32.8 ) $ 48.0 $ 2.0

Three Months Ended

October 2, 2021 October 3, 2020

Net (loss) income $ ( 54.8 ) $ 19.7

Other comprehensive income (loss):

Net change in cumulative translation adjustment, net of tax ( 9.6 ) 27.6

Unrealized holding loss arising during period — ( 0.1 ) — ( 0.1 )

Amortization of actuarial income (loss) 0.8 0.7 2.3 2.2

Unrealized holding gain arising during period 0.1 —

Amortization of actuarial income 0.8 0.8

Net change in accumulated other comprehensive income (loss) ( 8.7 ) 28.4

Comprehensive income (loss) $ 7.7 $ ( 65.9 ) $ 107.4 $ ( 29.0 )

Comprehensive (loss) income $ ( 63.5 ) $ 48.1

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

2 unchanged sentences

(in millions, except share and par value data)

April 3, 2021 June 27, 2020

October 2, 2021 July 3, 2021

Current assets:

18 unchanged sentences

Accrued expenses 33.3 24.8

Current portion of long-term debt — 2.8

Short-term debt ( Note11 )

Other current liabilities 57.4 57.1

2 unchanged sentences

Other non-current liabilities 217.7 226.0

Commitments and contingencies (Note 18)

Stockholders’ equity:

1 unchanged sentence

1 billion shares authorized;

229 million shares at April 3, 2021 and 228 million shares at June 27, 2020, issued and outstanding

240 million shares at October 2, 2021 and 228 million shares at July 3, 2021, issued and outstanding

Additional paid-in capital 70,349.9 70,183.2

7 unchanged sentences

(in millions)

Nine Months Ended

April 3, 2021 March 28, 2020

Three Months Ended

October 2, 2021 October 3, 2020

OPERATING ACTIVITIES:

Net income $ 48.0 $ 2.0

Adjustments to reconcile net income to net cash provided by operating activities:

Net (loss) income $ ( 54.8 ) $ 19.7

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation expense 8.9 8.8

1 unchanged sentence

Stock-based compensation 13.6 12.5

Amortization of debt issuance costs and accretion of debt discount 17.7 16.5

Net change in fair value of contingent liabilities ( 3.8 ) ( 4.3 )

Loss on convertible note settlement 85.9 —

Amortization of debt issuance costs 0.5 0.5

Other 1.3 0.6

13 unchanged sentences

Proceeds from the sale of assets 2.1 0.5

Acquisitions, net of cash acquired ( 0.7 ) ( 0.5 )

Acquisitions, net of cash hold back ( 1.2 ) —

Net cash used in investing activities $ ( 14.8 ) $ ( 7.5 )

FINANCING ACTIVITIES:

Proceeds from issuance of 3.75 % senior notes

Payment of debt issuance costs ( 4.9 ) ( 0.1 )

1 unchanged sentence

Withholding tax payment on vesting of restricted stock awards ( 7.2 ) ( 9.3 )

Cash paid to note holders in convertible note settlement ( 196.5 ) —

Cash paid to third parties in convertible note settlement ( 3.5 ) —

Payment of financing obligations — ( 0.4 )

Proceeds from employee stock purchase plan 3.7 3.5

Proceeds from revolving credit facility 150.0 —

Repayment of revolving credit facility ( 150.0 ) —

Payment of debt — ( 2.8 )

Net cash used in financing activities $ ( 43.2 ) $ ( 58.8 )

Net cash provided by (used in) financing activities $ 182.8 $ ( 15.8 )

Effect of exchange rates on cash, cash equivalents and restricted cash $ ( 3.1 ) $ 11.2

3 unchanged sentences

$ 926.7 $ 599.2

(1) These amounts include both current and non-current balances of restricted cash totaling $ 8.4 million and $ 8.9 million as of June 27, 2020 and June 29, 2019, respectively.

(2) These amounts include both current and non-current balances of restricted cash totaling $ 9.8 million and $ 8.4 million as of April 3, 2021 and March 28, 2020, respectively.

(1) These amounts include both current and non-current balances of restricted cash totaling $ 10.6 million and $ 8.4 million as of July 3, 2021 and June 27, 2020, respectively.

(2) These amounts include both current and non-current balances of restricted cash totaling $ 11.1 million and $ 8.4 million as of October 2, 2021 and October 3, 2020, respectively.

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

2 unchanged sentences

(in millions)

Three Months Ended April 3, 2021

Additional Paid-In Capital

Accumulated Deficit

Accumulated Other Comprehensive Loss

Balance at January 2, 2021 228.5 $ 0.2 $ 70,288.0 $ ( 69,384.8 ) $ ( 102.4 ) $ 801.0

Net income — — — 11.8 — 11.8

Other comprehensive loss — — — — ( 4.1 ) ( 4.1 )

Shares issued under employee stock plans, net of tax 0.6 — — — — —

Stock-based compensation — — 11.0 — — 11.0

Repurchase of common stock ( 0.5 ) — — ( 7.9 ) — ( 7.9 )

Balance at April 3, 2021 228.6 $ 0.2 $ 70,299.0 $ ( 69,380.9 ) $ ( 106.5 ) $ 811.8

Three Months Ended March 28, 2020

Three Months Ended October 2, 2021

Additional Paid-In Capital

1 unchanged sentence

Accumulated Other Comprehensive Loss

Balance at December 28, 2019 230.2 $ 0.2 $ 70,254.0 $ ( 69,357.4 ) $ ( 132.5 ) $ 764.3

Balance at July 3, 2021 228.3 $ 0.2 $ 70,183.2 $ ( 69,322.3 ) $ ( 97.2 ) $ 763.9

Net loss — — — ( 54.8 ) — ( 54.8 )

3 unchanged sentences

Repurchase of common stock ( 0.5 ) — — ( 8.5 ) — ( 8.5 )

Other — — — 0.1 — 0.1

Balance at March 28, 2020 228.0 $ 0.2 $ 70,265.5 $ ( 69,423.2 ) $ ( 165.6 ) $ 676.9

Nine Months Ended April 3, 2021

Convertible note settlement (Note 11) 10.6 — 159.1 — 159.1

Balance at October 2, 2021 239.7 $ 0.2 $ 70,349.9 $ ( 69,385.6 ) $ ( 105.9 ) $ 858.6

Three Months Ended October 3, 2020

Additional Paid-In Capital

7 unchanged sentences

Repurchase of common stock ( 0.6 ) — — ( 6.7 ) — ( 6.7 )

Balance at April 3, 2021 228.6 $ 0.2 $ 70,299.0 $ ( 69,380.9 ) $ ( 106.5 ) $ 811.8

Nine Months Ended March 28, 2020

Additional Paid-In Capital

Accumulated Deficit

Accumulated Other Comprehensive Loss

Balance at June 29, 2019 228.8 $ 0.2 $ 70,244.7 $ ( 69,384.5 ) $ ( 134.6 ) $ 725.8

Cumulative adjustment for adoption of ASC 842

— — — 3.0 — 3.0

Net income — — — 2.0 — 2.0

Other comprehensive loss — — — — ( 31.0 ) ( 31.0 )

Shares issued under employee stock plans, net of tax 2.8 — ( 12.7 ) — — ( 12.7 )

Stock-based compensation — — 33.5 — — 33.5

Repurchase of common stock ( 3.6 ) — — ( 43.8 ) — ( 43.8 )

Other — — — 0.1 — 0.1

Balance at March 28, 2020 228.0 $ 0.2 $ 70,265.5 $ ( 69,423.2 ) $ ( 165.6 ) $ 676.9

Balance at October 3, 2020 229.3 $ 0.2 $ 70,152.5 $ ( 69,334.2 ) $ ( 137.5 ) $ 681.0

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

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The financial information for Viavi Solutions Inc.

(VIAVI also referred to as the Company) for the three and nine months ended April 3, 2021 and March 28, 2020 is unaudited, and includes all normal and recurring adjustments Company’s management considers necessary for a fair statement of the financial information set forth herein.

(VIAVI also referred to as the Company) for the three months ended October 2, 2021 and October 3, 2020 is unaudited, and includes all normal and recurring adjustments Company’s management considers necessary for a fair statement of the financial information set forth herein.

The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (U.S.

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GAAP for annual consolidated financial statements.

For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K, for the year ended June 27, 2020.

There have been no material changes to the Company’s accounting policies during the three and nine months ended April 3, 2021, as compared to the significant accounting policies presented in “Note 1.

Basis of Presentation” of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report for the year ended June 27, 2020 on Form 10-K, filed with the SEC on August 24, 2020.

The Consolidated Balance Sheet as of June 27, 2020 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S.

For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K, for the year ended July 3, 2021.

Other than the adoption of Accounting Standards Update (“ASU”) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (refer to “Note 2.

Recently Issued Accounting Pronouncements” for more detail), there have been no material changes to the Company’s accounting policies during the three months ended October 2, 2021 as compared to the significant accounting policies presented in “Note 1.

Basis of Presentation” of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report for the year ended July 3, 2021 on Form 10-K, filed with the SEC on August 23, 2021.

The Consolidated Balance Sheet as of July 3, 2021 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S.

GAAP for complete financial statements.

The results for the three and nine months ended April 3, 2021 and March 28, 2020 may not be indicative of results for the fiscal year ending July 3, 2021 or any future periods.

The results for the three months ended October 2, 2021 and October 3, 2020 may not be indicative of results for the fiscal year ending July 2, 2022 or any future periods.

The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to June 30th.

The Company’s fiscal 2022 is a 52-week year ending on July 2, 2022.

The Company’s fiscal 2020 was a 52-week year ending on June 27, 2020.

The Company’s fiscal 2021 was a 53-week year ending on July 3, 2021.

The Company’s first quarter of fiscal year 2021 was a 14 week quarter compared to the standard 13 week quarters.

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If estimates or assumptions differ from actual results, subsequent periods are adjusted to reflect readily available current information.

A novel strain of coronavirus (COVID-19) has been reported as first identified in Wuhan, China by the Chinese government in December 2019, and subsequently declared an international pandemic by the World Health Organization (WHO) in March 2020.

The worldwide spread of the COVID-19 virus has resulted in a global slowdown of economic activity which is likely to continue to impact demand for a broad variety of goods and services, including from our customers, while also continuing to disrupt sales channels and marketing activities for an unknown period of time until the disease is contained.

In late 2020, new and potentially more contagious variants of the virus emerged, along with a surge in cases in several regions across the globe, resulting in renewed shutdown and shelter in place orders.

While rollout of several vaccines commenced in December 2020, the pace of the rollout has been slow and the demand for vaccine far outpaces available supply.

While, the Company expects this could have a negative impact to our sales and our results of operations, the Company is not aware of any specific event or circumstances that would require an update to the estimates or judgments or a revision of the carrying value of assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q.

These estimates may change,

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

as new events occur and additional information becomes available.

A novel strain of coronavirus (COVID-19) first identified in Wuhan, China by the Chinese government in December 2019, and subsequently declared an international pandemic by the World Health Organization (WHO) in March 2020 continues to have a global impact.

The worldwide spread of the COVID-19 virus resulted in a global slowdown of economic activity which could continue to impact demand for a broad variety of goods and services, including from the Company’s customers, while also continuing to disrupt sales channels and marketing activities for an unknown period of time until the disease is contained.

While rollout of several vaccines commenced in December 2020, the pace of the rollout has been slow and the demand for vaccine far outpaces available supply.

As economies recover, there are continued supply chain constraints, shortages and delays, along with inflationary pricing pressures.

Governmental vaccine mandates could lead to attrition and operational challenges.

While, the Company expects that all of this could have a negative impact to its sales and its results of operations, the Company is not aware of any specific event or circumstances that would require an update to the estimates or judgments or a revision of the carrying value of assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q.

These estimates may change, as new events occur and additional information becomes available.

Actual results may differ materially from these estimates, assumptions or conditions .

1 unchanged sentence

Recent Accounting Pronouncements Adopted

In June 2016, the FASB issued guidance that changes the accounting for recognizing impairments of financial assets.

Under the new guidance, credit losses for certain types of financial assets will be estimated based on expected losses.

In the first quarter of fiscal 2021 the Company adopted the accounting standard using the modified retrospective approach.

The adoption of the new standard did not have a material impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In August 2018, the FASB issued guidance to amend the disclosure requirements related to defined benefit pension and other post-retirement plans.

Some of the changes include adding a disclosure requirement for significant gains and losses related to changes in the benefit obligation for the period and removing the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year.

This guidance is effective for the Company in the first quarter of fiscal 2022 and early adoption is permitted.

The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14 Defined Benefit Plans (Topic 715-20) - Changes to the Disclosure Requirements for Defined Benefit Plans, to amend the disclosure requirements related to defined benefit pension and other post-retirement plans.

The adoption of this guidance did not have an impact on the Company’s Consolidated Financial Statements.

In December 2019, the FASB issued guidance which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes , and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

The guidance is effective for the Company in the first quarter of fiscal year 2022 and early adoption is permitted.

The Company is evaluating the effects that the adoption of this guidance will have on its consolidated financial statements.

In August 2020, the FASB issued guidance which simplifies the accounting for financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

The guidance allows for either full retrospective adoption or modified retrospective adoption.

The guidance is effective for the Company in the first quarter of fiscal year 2023 and early adoption is permitted.

The Company is evaluating the effects that the adoption of this guidance will have on its consolidated financial statements.

The Company adopted this guidance in the first quarter of fiscal 2022.

The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments with characteristics of liability and equity.

This new guidance removes separation models for certain convertible debt instruments which will now be accounted for as a single liability measured at amortized cost.

In addition, the interest expense recognized for these instruments will typically be closer to the coupon interest rate due to the removal of the separation model’s non-cash discount amortization.

ASU 2020-06 is effective for the Company in the first quarter of fiscal 2023, with early adoption permitted for the first quarter of fiscal 2022.

Adoption of the new guidance can either be on a modified retrospective or full retrospective method.

The Company adopted ASU 2020-06 effective the first quarter of fiscal 2022, on the full retrospective basis.

The elimination of the separation model for the convertible debt instruments reclassified the equity components of the Company’s convertible notes previously in Additional paid-in capital to Long-term debt.

Consequently, the temporary equity balance for the Senior Convertible Notes as of July 3, 2021 was eliminated.

In addition, interest expense was reduced and net income was increased by $ 20.3 million and $ 21.4 million for fiscal years ending June 27, 2020 and July 3, 2021, respectively.

The adoption had no impact on total cash provided by (used in) operating, investing or financing activities in the Consolidated Statements of Cash Flows.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the impact of the standard adoption to select line items of the Company’s Consolidated Balance Sheet as of June 27, 2020 and July 3, 2021 ( in millions ):

June 27, 2020

As Reported Adjustment As Adjusted

LIABILITIES AND STOCKHOLDERS’ EQUITY

Long-term debt $ 600.9 $ 78.2 $ 679.1

Additional paid-in capital 70,274.3 ( 128.2 ) 70,146.1

Accumulated deficit $ ( 69,397.2 ) $ 50.0 $ ( 69,347.2 )

As Reported Adjustment As Adjusted

LIABILITIES AND STOCKHOLDERS’ EQUITY

Short-term debt $ 414.2 $ 42.4 $ 456.6

Long-term debt 209.8 14.3 224.1

Mezzanine equity - convertible notes 45.8 ( 45.8 ) —

Additional paid-in capital 70,265.5 ( 82.3 ) 70,183.2

Accumulated deficit $ ( 69,393.7 ) $ 71.4 $ ( 69,322.3 )

The following table presents the impact of the standard adoption to select line items of the Company’s Consolidated Statement of Operations for the three months ended October 3, 2020 ( in millions, except per-share data ):

Three Months Ended October 3, 2020

As Reported Adjustment As Adjusted

Interest Expense $ ( 9.0 ) $ 5.4 $ ( 3.6 )

Net income $ 14.3 $ 5.4 $ 19.7

Net income per share:

Basic $ 0.06 $ 0.03 $ 0.09

Diluted $ 0.06 $ 0.02 $ 0.08

Shares used in per-share calculation:

Basic 228.8 0.00 228.8

Diluted 231.8 0.00 231.8

Recent Accounting Pronouncements Not Yet Adopted

In October 2021, the FASB issued guidance which improves accounting for acquired revenue contracts with customers in a business combination.

The guidance is effective for the Company in first quarter of fiscal year 2024 and early adoption is permitted.

The Company is evaluating the effects that the adoption of this guidance will have on its financial statements.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Earnings Per Share

The following table sets forth the computation of basic and diluted net income per share ( in millions, except per share data ):

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Net income (loss) $ 11.8 $ ( 32.8 ) $ 48.0 $ 2.0

Three Months Ended

October 2, 2021 October 3, 2020

Net (loss) income $ ( 54.8 ) $ 19.7

Weighted-average shares outstanding:

Basic 231.1 228.8

Shares issuable assuming conversion of convertible notes (1)

8.5 — 2.3 3.0

Effect of dilutive securities from stock-based compensation plans — 3.0

Diluted 231.1 231.8

Net income (loss) per share:

Net (loss) income per share:

Basic $ ( 0.24 ) $ 0.09

Diluted $ ( 0.24 ) $ 0.08

(1) Represents the number of shares that would be issued if the Company’s 1.00 % Senior Convertible Notes (2024 Notes) and 1.75 % Senior Convertible Notes (2023 Notes) had been converted.

The par amount of the Company’s convertible notes is payable in cash equal to the principal amount of the notes plus any accrued and unpaid interest.

The “in-the money” conversion benefit feature above the conversion price of the 2023 Notes and 2024 Notes of, $ 13.94 and $ 13.22 per share, respectively is payable in cash, shares of the Company’s common stock or a combination of both, at the Company’s election.

Refer to “Note 11.

Debt” for more details.

The following table sets forth the weighted-average potentially dilutive securities excluded from the computation of the diluted net income per share because their effect would have been anti-dilutive ( in millions ):

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Three Months Ended

October 2, 2021 October 3, 2020

Restricted stock units 6.1 1.0

Stock options and ESPP 1.5 —

Shares issuable from Convertible Notes — 1.3 — —

Shares issuable from Senior Convertible Notes 8.3 —

Total potentially dilutive securities 15.9 1.0

(1) As the Company incurred a loss from continuing operations in the period, potential securities from employee stock options, ESPP, restricted stock units (RSUs) and performance stock units (PSUs) have been excluded from the dilutive net loss per share computations as their effects were deemed anti-dilutive.

(1) As the Company incurred a loss from continuing operations in the period, potential securities from employee stock options, Employee Stock Purchase Plan (ESPP), restricted stock units (RSUs), performance stock units (PSUs) and Senior Convertible Notes have been excluded from the dilutive net loss per share computations as their effects were deemed anti-dilutive.

(2) The Company’s 1.00 % Senior Convertible Notes due 2024 are not included in the table above.

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The Company’s average stock price for the period presented did not exceed the conversion price of $ 13.22 .

In addition, the Company’s 1.75 % Senior Convertible Notes due 2023 are not included in the table above.

The par amount of convertible notes is payable in cash equal to the principal amount of the notes plus any accrued and unpaid interest and then the “in-the money” conversion benefit feature at the conversion price above $ 13.94 per share is payable in cash, shares of the Company’s common stock or a combination of both, at the Company’s election.

The Company’s average stock price for the period presented did not exceed the conversion price of $ 13.94 .

Refer to “Note 11.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the nine months ended April 3, 2021, the changes in accumulated other comprehensive loss, net of tax, by component were as follows ( in millions ):

For the three months ended October 2, 2021, the changes in accumulated other comprehensive loss, net of tax, by component were as follows ( in millions ):

Unrealized losses on available-for sale investments Foreign

currency translation adjustments, net of tax Change in unrealized components of defined benefit obligations (1)

Beginning balance as of June 27, 2020 $ ( 5.1 ) $ ( 129.6 ) $ ( 31.2 ) $ ( 165.9 )

Other comprehensive income before reclassification — 57.1 — 57.1

Amounts reclassified to accumulated other comprehensive loss — — 2.3 2.3

Net current-period other comprehensive income — 57.1 2.3 59.4

Ending balance as of April 3, 2021 $ ( 5.1 ) $ ( 72.5 ) $ ( 28.9 ) $ ( 106.5 )

(1) The amount reclassified out of accumulated other comprehensive loss represents the amortization of actuarial losses included as a component of cost of revenues, research and development (R&D) and selling, general and administrative (SG&A) in the Consolidated Statement of Operations for the nine months ended April 3, 2021.

There was no tax impact for the nine months ended April 3, 2021.

Beginning balance as of July 3, 2021 $ ( 5.1 ) $ ( 68.1 ) $ ( 24.0 ) $ ( 97.2 )

Other comprehensive loss before reclassification 0.1 ( 9.6 ) — ( 9.5 )

Amounts reclassified out of accumulated other comprehensive loss — — 0.8 0.8

Net current-period other comprehensive loss 0.1 ( 9.6 ) 0.8 ( 8.7 )

Ending balance as of October 2, 2021 $ ( 5.0 ) $ ( 77.7 ) $ ( 23.2 ) $ ( 105.9 )

There was no tax impact for the three months ended October 2, 2021.

Refer to “Note 17.

Employee Pension and Other Benefit Plans” for more details on the computation of net periodic cost for pension plans.

During the three months ended October 2, 2021, the Company acquired all of the equity of one business for approximately $ 1.6 million cash consideration, of which $ 1.2 million was paid with cash on hand and $ 0.4 M remains in current liabilities.

The acquisition was accounted for as an asset purchase under the authoritative guidance.

The developed technology will be amortized over its estimated useful life of 5 years.

Prior Year Acquisitions

3Z Telecom, Inc.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides a reconciliation of changes in the fair value of the Company’s earn-out liabilities associated with Company’s acquisitions for the three and nine months ended April 3, 2021 and March 28, 2020 ( in millions ):

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

The following table provides a reconciliation of changes in the fair value of the Company’s earn-out liabilities associated with Company’s acquisitions for the three months ended October 2, 2021 and October 3, 2020 ( in millions ):

Three Months Ended

October 2, 2021 October 3, 2020

Beginning period balance $ 4.0 $ 9.9

Fair value adjustment of earn-out liabilities 0.3 —

Currency translation adjustment 0.1 — 0.6 —

Ending period balance $ 4.3 $ 9.9

No payments were made in connection with the Company’s earn-out liabilities during the three and nine months ended April 3, 2021 and March 28, 2020.

No payments were made in connection with the Company’s earn-out liabilities during the three months ended October 2, 2021 and October 3, 2020.

Balance Sheet and Other Details

Contract Balances

Unbilled Receivables:

The Company records a receivable when an unconditional right to consideration exists and transfer of control has occurred, such that only the passage of time is required before payment of consideration is due.

Timing of revenue recognition may differ from the timing of customer invoicing.

Payment terms vary based on product or service offerings and payment is generally required within 30 to 90 days from date of invoicing.

Certain performance obligations may require payment before delivery of the service to the customer .

Contract Assets:

A Contract Asset is recognized when a conditional right to consideration exists and transfer of control has occurred.

Contract Assets include fixed fee professional services, where the transfer of services has occurred in advance of the Company's right to invoice.

Contract Assets, included in accounts receivable, net, on the Consolidated Balance Sheets, are not material to the Consolidated Financial Statements.

Contract asset balances will fluctuate based upon the timing of transfer of services, billings and customers’ acceptance of contractual milestones.

Gross receivables include both billed and unbilled receivables (Unbilled Receivables and Contract Assets).

As of April 3, 2021, and June 27, 2020, the Company had total unbilled receivables of $ 5.9 million and $ 3.8 million, respectively.

Deferred Revenue:

Deferred revenue consists of contract liabilities primarily related to support, solution deployment services, software maintenance, product, professional services, and training when the Company has a right to invoice or payments have been received and transfer of control has not occurred.

Revenue is recognized on these items when the revenue recognition criteria are met, generally resulting in ratable recognition over the contract term.

Contract liabilities are included in deferred revenue and non-current liabilities on the Consolidated Balance Sheets.

As of October 2, 2021, and July 3, 2021, the Company had total unbilled receivables of $ 6.5 million and $ 6.2 million, respectively.

The Company also has short-term and long-term deferred revenues related to undelivered hardware and professional services, consisting of installations and consulting engagements, which are recognized as the Company's performance obligations under the contract are completed and accepted by the customer.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables summarize the activity related to deferred revenue ( in millions ):

April 3, 2021

Three months ended Nine Months Ended

October 2, 2021

Three months ended

Deferred revenue:

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Revenue recognized during the period (2)

( 28.1 ) ( 82.1 )

Balance at end of period (3)

$ 86.0 $ 86.0

Short-term deferred revenue $ 66.6

Long-term deferred revenue $ 18.5

(1) Included in these amounts is the impact from foreign currency exchange rate fluctuations.

(2) Revenue recognized during the period represents releases from the balance at the beginning of the period as well as releases from the following period quarter-end deferrals.

(3) The long-term portion of deferred revenue is included as a component of Other non-current liabilities.

Remaining Performance Obligations:

Remaining performance obligations represent the aggregate amount of the transaction price allocated to performance obligations that are not delivered or incomplete.

Remaining performance obligations include deferred revenue plus unbilled amounts not yet recorded.

The aggregate amount of the transaction price allocated to remaining performance obligations does not include amounts owed under cancellable contracts where there is no substantive termination penalty.

(2) Revenue recognized during the period represents releases from the balance at the beginning of the period as well as releases from the current period deferrals.

(3) The long-term portion of deferred revenue is included as a component of other non-current liabilities, on the Consolidated Balance Sheets.

Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, adjustments for revenue that have not materialized, and adjustments for currency.

The value of the transaction price allocated to remaining performance obligations as of April 3, 2021, was $ 239.7 million.

The value of the transaction price allocated to remaining performance obligations as of October 2, 2021, was $ 250.3 million.

The Company expects to recognize approximately 92 % of remaining performance obligations as revenue within the next 12 months, and the remainder thereafter.

Disaggregation of revenue

The Company's revenue is presented on a disaggregated basis on the Consolidated Statements of Operations and in “Note 19.

Operating Segments and Geographic Information”.

This information includes revenue from reportable segments and a break-out of products and services for which the timing of the revenue is generally at a point in time and over time, respectively.

Accounts receivable allowance

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accounts receivable allowance - Credit losses

The following table presents the activities and balances for allowance for credit losses ( in millions ):

June 27, 2020 Charged to Costs and Expenses Deductions (1)

April 3, 2021

July 3, 2021 Charged to Costs and Expenses Deductions (1)

October 2, 2021

Allowance for credit losses $ 2.0 $ 0.2 $ ( 0.2 ) $ 2.0

2 unchanged sentences

The following table presents the components of inventories, net ( in millions ):

April 3, 2021 June 27, 2020

October 2, 2021 July 3, 2021

Finished goods $ 40.9 $ 41.0

2 unchanged sentences

Inventories, net $ 102.8 $ 94.9

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Prepayments and other current assets

The following table presents the components of prepayments and other current assets ( in millions ):

April 3, 2021 June 27, 2020

October 2, 2021 July 3, 2021

Prepayments $ 13.1 $ 13.4

7 unchanged sentences

The following table presents the components of other current liabilities ( in millions ):

April 3, 2021 June 27, 2020

October 2, 2021 July 3, 2021

Customer prepayments $ 0.8 $ 0.4

1 unchanged sentence

Income tax payable 22.5 22.6

Warranty accrual 4.4 4.6

Warranty accrual, current 4.5 4.3

Transaction tax payable 4.8 4.9

2 unchanged sentences

Other current liabilities $ 57.4 $ 57.1

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other non-current liabilities

The following table presents components of other non-current liabilities ( in millions ):

April 3, 2021 June 27, 2020

October 2, 2021 July 3, 2021

Pension and post-employment benefits $ 94.5 $ 97.0

2 unchanged sentences

Long-term deferred revenue 18.5 19.8

Fair value of contingent consideration (Note 8) 1.8 9.4

Warranty accrual, non-current 5.8 5.4

Operating lease liabilities (Note 12) 28.4 30.8

2 unchanged sentences

Other non-current liabilities $ 217.7 $ 226.0

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Investments and Forward Contracts

Available-For-Sale Investments

The following table presents the Company’s available-for-sale securities as of April 3, 2021 ( in millions ):

Amortized Cost/

Carrying Cost

Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

Available-for-sale debt securities:

Asset-backed securities $ 0.9 $ — $ ( 0.4 ) $ 0.5

Total available-for-sale debt securities $ 0.9 $ — $ ( 0.4 ) $ 0.5

The Company generally classifies debt securities as available-for-sale and as cash equivalents, short-term investments, or other non-current assets based on the stated maturities of the securities.

In addition, certain securities with stated maturities of longer than twelve months , which are highly liquid and available to support current operations are also classified as short-term investments.

As of April 3, 2021, the total estimated fair value of $ 0.5 million was classified as other non-current assets.

In addition to the amounts presented above, the Company’s short-term investments classified as trading securities related to the deferred compensation plan as of April 3, 2021, were $ 1.5 million, of which $ 0.4 million was invested in debt securities, $ 0.2 million was invested in money market instruments and funds and $ 0.9 million was invested in equity securities.

Trading securities are reported at fair value, with the unrealized gains or losses resulting from changes in fair value recognized in the Company’s Consolidated Statements of Operations as a component of interest income and other (loss) income, net.

During the three and nine months ended April 3, 2021 and March 28, 2020, the Company recorded no other-than-temporary impairment charges in each respective period.

The following table presents contractual maturities of the Company’s debt securities classified as available-for-sale as of April 3, 2021, ( in millions ):

Amortized Cost/

Carrying Cost

Amounts maturing in more than 5 years $ 0.9 $ 0.5

Total debt available-for-sale securities $ 0.9 $ 0.5

The following table presents the Company’s available-for-sale securities as of June 27, 2020, (in millions):

Amortized Cost/

Carrying Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

Available-for-sale securities:

Asset-backed securities $ 0.9 $ — $ ( 0.4 ) $ 0.5

Total available-for-sale securities $ 0.9 $ — $ ( 0.4 ) $ 0.5

As of June 27, 2020, the estimated fair value of $ 0.5 million was classified as other non-current assets.

In addition to the amounts presented above, as of June 27, 2020, the Company’s short-term investments classified as trading securities, related to the deferred compensation plan, were $ 1.4 million, of which $ 0.3 million was invested in debt securities, $ 0.2 million was invested in money market instruments and funds and $ 0.9 million was invested in equity securities.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Short-Term Investments

As of October 2, 2021 the Company’s short-term investments of $ 1.6 million were comprised primarily of trading securities related to the deferred compensation plan, of which $ 0.3 million was invested in debt securities, $ 0.3 million was invested in money market instruments and $ 1.0 million was invested in equity securities.

As of July 3, 2021, the Company’s short-term investments of $ 1.6 million were comprised primarily of trading securities related to the deferred compensation plan, of which $ 0.3 million was invested in debt securities, $ 0.3 million was invested in money market instruments and $ 1.0 million was invested in equity securities.

Non-Designated Foreign Currency Forward Contracts

3 unchanged sentences

The Company does not use these foreign currency forward contracts for trading purposes.

As of April 3, 2021, the Company had forward contracts that were effectively closed but not settled with the counterparties by quarter end.

As of October 2, 2021, the Company had forward contracts that were effectively closed but not settled with the counterparties by quarter end.

Therefore, the fair value of these contracts of $ 1.1 million and $ 2.9 million is reflected as prepayments and other current assets and other current liabilities, respectively.

As of June 27, 2020, the fair value of these contracts of $ 2.2 million and $ 1.5 million is reflected as prepayments and other current assets and other current liabilities, respectively.

As of July 3, 2021, the fair value of these contracts of $ 2.6 million and $ 1.4 million is reflected as prepayments and other current assets and other current liabilities, respectively.

The forward contracts outstanding and not effectively closed, with a term of less than 120 days, were transacted near quarter end;

therefore, the fair value of the contracts is not significant.

As of April 3, 2021 and June 27, 2020, the notional amounts of the forward contracts the Company held to purchase foreign currencies were $ 120.2 million and $ 146.4 million, respectively, and the notional amounts of forward contracts the Company held to sell foreign currencies were $ 20.6 million and $ 22.0 million, respectively.

The change in the fair value of foreign currency forward contracts is recorded as gain or loss in the Company’s Consolidated Statements of Operations as a component of Interest income and other (loss) income, net.

As of October 2, 2021 and July 3, 2021, the notional amounts of the forward contracts the Company held to purchase foreign currencies were $ 158.5 million and $ 114.0 million, respectively, and the notional amounts of forward contracts the Company held to sell foreign currencies were $ 20.8 million and $ 27.8 million, respectively.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The change in the fair value of these foreign currency forward contracts is recorded as gain or loss in the Company’s Consolidated Statements of Operations as a component of Interest income and other income, net.

The cash flows related to the settlement of foreign currency forward contracts are classified as operating activities.

The foreign exchange forward contracts incurred a loss of $ 0.1 million and a gain of $ 13.3 million for the three and nine months ended April 3, 2021, respectively and losses of $ 4.0 million and $ 1.8 million for the three and nine months ended March 28, 2020, respectively.

The foreign exchange forward contracts incurred a loss of $ 1.8 million for the three months ended October 2, 2021 and a gain of $ 6.5 million for the three months ended October 3, 2020.

Fair Value Measurements

13 unchanged sentences

includes financial instruments for which fair value is derived from valuation-based inputs, that are unobservable and significant to the overall fair value measurement.

As of April 3, 2021 and June 27, 2020, the Company did not hold any Level 3 investment securities.

The Company’s Level 3 liabilities as of April 3, 2021, consist of contingent purchase consideration.

The company has aggregate contingent liabilities related to its

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

business and asset acquisitions completed during fiscal 2020 and 2019.

As of October 2, 2021 and July 3, 2021, the Company did not hold any Level 3 investment securities.

The Company’s Level 3 liabilities as of October 2, 2021 and July 3, 2021, consist of contingent purchase consideration.

The Company has aggregate contingent liabilities related to its business and asset acquisitions completed during fiscal 2020 and 2019.

The fair value of earn-out liabilities was determined using a Monte Carlo Simulation that includes significant unobservable inputs such as the risk-adjusted discount rate, gross profit volatility, and projected financial forecast of acquired business over the earn-out period.

The fair value of contingent consideration liabilities is remeasured at each reporting period at the estimated fair value based on the inputs on the date of remeasurement, with the change in fair value recognized in the Selling, General and Administrative expense of the Consolidated Statements of Operations.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value Measurements

The Company’s assets and liabilities measured at fair value (categorized by input measure) for the periods presented are as follows ( in millions ):

April 3, 2021 June 27, 2020

The Company’s assets and liabilities measured at fair value for the periods presented are as follows ( in millions ):

October 2, 2021 July 3, 2021

Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3

13 unchanged sentences

Total liabilities $ 7.2 $ — $ 2.9 $ 4.3 $ 5.4 $ — $ 1.4 $ 4.0

(1) $ 2.1 million and $ 2.2 million in prepayments and other current assets on the Company’s Consolidated Balance Sheets as of April 3, 2021 and June 27, 2020, respectively.

(2) Includes as of April 3, 2021, $ 372.8 million in cash and cash equivalents, $ 1.5 million in short-term investments, $ 2.7 million in restricted cash, $ 2.1 million in prepayments and other current assets and $ 5.1 million in other non-current assets on the Company’s Consolidated Balance Sheets.

Includes as of June 27, 2020, $ 327.2 million in cash and cash equivalents, $ 1.4 million in short-term investments, $ 3.4 million in restricted cash, $ 2.2 million in prepayments and other current assets, and $ 4.5 million in other non-current assets on the Company’s Consolidated Balance Sheets.

(3) $ 2.2 million and $ 1.5 million in other current liabilities on the Company’s Consolidated Balance Sheets as of April 3, 2021 and June 27, 2020, respectively.

(4) Includes $ 1.8 million and $ 9.4 million in other non-current liabilities and $ 4.9 million and $ 0.5 million in other current liabilities as of April 3, 2021 and June 27, 2020, respectively.

(1) $ 1.1 million and $ 2.6 million in prepayments and other current assets on the Company’s Consolidated Balance Sheets as of October 2, 2021 and July 3, 2021, respectively.

(2) Includes as of October 2, 2021, $ 626.7 million in cash and cash equivalents, $ 1.6 million in short-term investments, $ 3.0 million in restricted cash, $ 1.1 million in prepayments and other current assets and $ 6.0 million in other non-current assets on the Company’s Consolidated Balance Sheets.

Includes as of July 3, 2021, $ 401.0 million in cash and cash equivalents, $ 1.6 million in short-term investments, $ 2.7 million in restricted cash, $ 2.6 million in prepayments and other current assets, and $ 5.6 million in other non-current assets on the Company’s Consolidated Balance Sheets.

(3) $ 2.9 million and $ 1.4 million in other current liabilities on the Company’s Consolidated Balance Sheets as of October 2, 2021 and July 3, 2021, respectively.

(4) Includes $ 4.3 million and $ 4.0 million in other current liabilities as of October 2, 2021 and July 3, 2021, respectively.

Other Fair Value Measures

1 unchanged sentence

If measured at fair value in the Consolidated Balance Sheets, the Company’s 1.75 % Senior Convertible Notes (2023 Notes) and 1.00 % Senior Convertible Notes (2024 Notes) would be classified in Level 2 of the fair value hierarchy as they are not actively traded in the markets.

As of April 3, 2021 and June 27, 2020, the fair value of the 2023 Notes was approximately $ 286.8 million and $ 251.4 million, respectively and the fair value of the 2024 Notes was approximately $ 614.1 million and $ 523.3 million, respectively.

As of October 2, 2021 and July 3, 2021, the fair value of the 2023 Notes was approximately $ 165.3 million and $ 300.7 million, respectively and the fair value of the 2024 Notes was approximately $ 368.4 million and $ 646.9 million, respectively.

See “Note 11.

5 unchanged sentences

and Performance

Balance as of June 27, 2020 $ 334.9 $ 4.3 $ 42.2 $ 381.4

Balance as of July 3, 2021 $ 349.7 $ 4.6 $ 42.2 $ 396.5

Currency translation adjustments ( 2.5 ) ( 0.1 ) — ( 2.6 )

Balance as of April 3, 2021 $ 349.9 $ 4.3 $ 42.2 $ 396.4

Balance as of October 2, 2021 $ 347.2 $ 4.5 $ 42.2 $ 393.9

The Company tests goodwill for impairment at the reporting unit level annually during the fourth quarter of each fiscal year, or more frequently if events or circumstances indicate that the asset may be impaired.

In the fourth quarter of fiscal 2021, the Company reviewed goodwill under the qualitative assessment of the authoritative guidance and concluded that it was more likely than not that the fair value of each reporting unit exceeded its carrying amount and that no indication of impairment existed.

There were no events or changes in circumstances which triggered an impairment review during the three and nine months ended April 3, 2021.

There were no events or changes in circumstances which triggered an impairment review during the three months ended October 2, 2021.

Acquired Developed Technology and Other Intangibles

The following tables present details of the Company’s acquired developed technology, customer relationships and other intangibles ( in millions ):

As of April 3, 2021 Gross Carrying Amount Accumulated Amortization Net

As of October 2, 2021 Gross Carrying Amount Accumulated Amortization Net

Acquired developed technology $ 423.4 $ ( 363.5 ) $ 59.9

2 unchanged sentences

Total intangibles $ 655.4 $ ( 577.2 ) $ 78.2

As of June 27, 2020 Gross Carrying Amount Accumulated Amortization Net

As of July 3, 2021 Gross Carrying Amount Accumulated Amortization Net

Acquired developed technology $ 423.8 $ ( 356.9 ) $ 66.9

2 unchanged sentences

Total intangibles $ 657.1 $ ( 569.1 ) $ 88.0

(1) Other intangibles consist of customer backlog, non-competition agreements, patents, proprietary know-how and trade secrets, trademarks and trade names and other assets.

(1) Other intangibles consist of customer backlog, non-competition agreements, patents, proprietary know-how and trade secrets, trademarks and trade names.

VIAVI SOLUTIONS INC.

1 unchanged sentence

The following table presents the amortization recorded relating to acquired developed technology, customer relationships and other intangibles ( in millions ):

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Three Months Ended

October 2, 2021 October 3, 2020

Cost of revenues $ 7.9 $ 8.2

1 unchanged sentence

Total amortization of intangible assets $ 10.6 $ 16.7

Based on the carrying amount of acquired developed technology, customer relationships and other intangibles as of April 3, 2021, and assuming no future impairment of the underlying assets, the estimated future amortization is as follows ( in millions ):

Based on the carrying amount of acquired developed technology, customer relationships and other intangibles as of October 2, 2021, and assuming no future impairment of the underlying assets, the estimated future amortization is as follows ( in millions ):

Remainder of 2022 $ 29.0

2 unchanged sentences

The acquired developed technology, customer relationships and other intangibles balance are adjusted quarterly to record the effect of currency translation adjustments.

As of April 3, 2021 and June 27, 2020, the Company’s long-term debt on the Consolidated Balance Sheets represented the carrying amount of the liability component of the Senior Convertible Notes, net of unamortized debt discounts and issuance costs.

The following table presents the carrying amounts of the liability and equity components of our debt ( in millions ):

April 3, 2021 June 27, 2020

Principal amount of 1.00 % Senior Convertible Notes

$ 460.0 $ 460.0

Principal amount of 1.75 % Senior Convertible Notes

Unamortized discount of liability component ( 62.9 ) ( 79.1 )

Unamortized debt issuance cost ( 4.0 ) ( 5.0 )

Carrying amount of liability component $ 618.1 $ 600.9

Carrying amount of equity component (1)

$ 136.8 $ 136.8

(1) Included in additional paid-in-capital on the Consolidated Balance Sheets.

The Company was in compliance with all debt covenants as of April 3, 2021 and June 27, 2020.

In the first quarter of fiscal 2022 the Company adopted ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, on a full retrospective basis.

The impact of the newly adopted guidance eliminates the equity component of the Company’s Senior Convertible Notes.

Refer to “Note 2.

Recently Issued Accounting Pronouncements” for more details.

As of October 2, 2021 and July 3, 2021, the Company’s debt on the Consolidated Balance Sheets represented the carrying amount of the Senior Convertible and Senior Notes, net of unamortized issuance costs.

The following table presents the carrying amounts of the Company’s debt ( in millions ):

October 2, 2021 July 3, 2021

Principal amount of 1.00 % Senior Convertible Notes due 2024, short-term

Unamortized Senior Convertible Notes debt issuance cost, short-term — ( 3.4 )

Short-term debt $ — $ 456.6

Principal amount of 3.75 % Senior Notes, long-term

Unamortized 3.75 % Senior Notes debt issuance cost, long-term

Principal amount of 1.75 % Senior Convertible Notes, long-term

Principal amount of 1.00 % Senior Convertible Notes, long-term

Unamortized Senior Convertible Notes debt issuance cost, long-term ( 2.3 ) ( 0.9 )

Long-term debt $ 800.7 $ 224.1

The Company was in compliance with all debt covenants as of October 2, 2021 and July 3, 2021.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.75 % Senior Notes (2029 Notes)

On September 29, 2021, the Company issued $ 400.0 million aggregate principal amount of 3.75 % Senior Notes due 2029 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

Proceeds of the 2029 Notes amounted to $ 393.0 million after issuance costs.

The 2029 Notes are an unsecured obligation of the Company and bear annual interest of 3.75 %, payable semi-annually in arrears on April 1 and October 1 of each year, beginning April 1, 2022.

The 2029 Notes mature on October 1, 2029 unless earlier redeemed or repurchased.

Revolving Credit Facility

On May 5, 2020, we entered into a credit agreement (the Credit Agreement) with Wells Fargo Bank, National Association (Wells Fargo) as administrative agent, and other lender related parties.

On May 5, 2020, the Company entered into a credit agreement (the Credit Agreement) with Wells Fargo Bank, National Association (Wells Fargo) as administrative agent, and other lender related parties.

The Credit Agreement provides for a $ 300 million senior secured revolving credit facility, which matures on March 1, 2023.

The Credit Agreement also provides that, under certain circumstances, we may incur term loans or increase the aggregate principal amount of revolving commitments by an aggregate amount of up to $ 200 million plus additional amounts so long as our secured net leverage ratio, determined on a pro forma basis does not exceed 1.50 :1.00.

The proceeds from the credit facility established under the Credit Agreement will be used for working capital and other general corporate purposes.

The obligations under the Credit Agreement are secured by substantially all of our assets.

Amounts outstanding under the Credit Agreement accrue interest at a rate equal to either, at our election, LIBOR plus a margin of 1.75 % to 2.50 % per annum, or a specified base rate plus a margin of 0.75 % to 1.50 %, in each case, depending on our consolidated secured leverage ratio.

We are required to pay a commitment fee on the unutilized portion of the facility which ranges between 0.30 % and 0.40 % per annum depending on our consolidated secured leverage ratio.

As of April 3, 2021 and June 27, 2020, we had no amounts outstanding under the Credit Agreement.

The Credit Agreement also provides that, under certain circumstances, the Company may incur term loans or increase the aggregate principal amount of revolving commitments by an aggregate amount of up to $ 200 million plus additional amounts so long as the Company’s secured net leverage ratio, determined on a pro forma basis does not exceed 1.50 :1.00.

The proceeds from the credit facility established under the Credit Agreement have been used for working capital and other general corporate purposes.

The obligations under the Credit Agreement are secured by substantially all of the Company’s assets.

Amounts outstanding under the Credit Agreement accrue interest at a rate equal to either, at the Company’s election, LIBOR plus a margin of 1.75 % to 2.50 % per annum, or a specified base rate plus a margin of 0.75 % to 1.50 %, in each case, depending on the Company’s consolidated secured leverage ratio.

The Company is required to pay a commitment fee on the unutilized portion of the facility which ranges between 0.30 % and 0.40 % per annum depending on the Company’s consolidated secured leverage ratio.

The Company borrowed $ 150 million and repaid $ 150 million under the Credit Agreement during the three months ended October 2, 2021.

As of October 2, 2021 and July 3, 2021, the Company had no amounts outstanding under the Credit Agreement.

1.75 % Senior Convertible Notes (2023 Notes)

1 unchanged sentence

The Company issued $ 155.5 million aggregate principal of the 2023 Notes to certain holders of the 2033 Notes in exchange for $ 151.5 million principal of the 2033 Notes (the Exchange Transaction) and issued and sold $ 69.5 million aggregate principal amount of the 2023 Notes in a private placement to accredited institutional buyers (the Private Placement).

The carrying value of the liability component at issuance was calculated as the present value of its cash flows using a discount rate of 5.3 % based on the 5 -year swap rate plus credit spread as of the issuance date.

As of April 3, 2021, the expected remaining term of the 2023 Notes is 2.2 years.

As of October 2, 2021, the expected remaining term of the 2023 Notes is 1.7 years.

The proceeds from the 2023 Notes Private Placement amounted to $ 67.3 million after issuance costs.

7 unchanged sentences

The 2024 Notes mature on March 1, 2024 unless earlier converted or repurchased.

The carrying value of the liability component at issuance was calculated as the present value of its cash flows using a discount rate of 4.8 % based on the 7 -year swap rate plus credit spread as of the issuance date.

As of April 3, 2021, the expected remaining term of the 2024 Notes is 2.9 years.

As of October 2, 2021, the expected remaining term of the 2024 Notes is 2.4 years.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the fourth quarter of fiscal 2021, the closing price of the Company’s common stock exceeded 130 % of the applicable conversion price of the 2024 Notes on at least 20 of the last 30 consecutive trading days of the calendar quarter, causing the 2024 Notes to be convertible by the holders for the period of July 1, 2021 to September 30, 2021.

As a result, $ 456.6 million carrying value of the notes was reclassified to short-term debt as of July 3, 2021.

In the first quarter of fiscal 2022 the closing price of the Company’s stock did not exceed 130 % of the applicable conversion price of the 2024 Notes for at least 20 of the last 30 consecutive trading days of the calendar quarter.

As such, the conversion window was closed as of October 1, 2021.

The carrying value of the 2024 Notes was reclassified to long-term debt as of October 2, 2021.

The Company received four requests for conversion when the conversion was opened during the first quarter of fiscal 2022.

The amount requested for conversion is trivial and is not presented as short-term debt in our Consolidated Balance Sheet as of October 2, 2021.

Senior Convertible Notes Settlement

On September 2, 2021, the Company entered into separate privately-negotiated agreements with certain holders of its 1.75 % Senior Convertible Notes due 2023 and 1.00 % Senior Convertible Notes due 2024.

The Company settled $ 93.8 million principal amount of the 2023 Notes and $ 181.2 million principal amount of the 2024 Notes in exchange for an aggregate of 10.6 million shares of its common stock, par value $ 0.001 per share, and $ 196.5 million in cash.

The Company recorded a loss of $ 85.9 million in connection with the settlement transaction, which included a loss on induced conversion of $ 9.5 million, a loss on debt extinguishment of $ 72.7 million and third-party fees of $ 3.7 million.

The $ 85.9 million loss is presented as Loss on convertible note settlement in the Company’s Consolidated Statements of Operations.

After the transaction, the outstanding aggregate principal amount of the 2023 Notes and 2024 Notes was $ 131.2 million and $ 278.8 million, respectively, in each case, with terms unchanged.

Interest Expense

The following table presents the interest expense for contractual interest, amortization of debt issuance costs and accretion of debt discount ( in millions ):

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

The following table presents the interest expense for contractual interest and amortization of debt issuance costs ( in millions ):

Three Months Ended

October 2, 2021 October 3, 2020

Interest expense-contractual interest $ 2.3 $ 2.1

Amortization of debt issuance cost 0.5 0.5

Accretion of debt discount 5.4 5.2 16.2 15.5

As discussed in “Note 2.

Recent Accounting Pronouncements”, upon adoption of ASU 2020-06 the non-cash discount amortization for the 2023 and 2024 Notes is eliminated.

As a result, the interest expense recognized for these instruments will typically be closer to the coupon interest rate.

The Company is a lessee in several operating leases, primarily real estate facilities for office space.

The Company determines if an arrangement is a lease or contains a lease at inception.

Operating lease liabilities are recognized based on the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date.

As the rate implicit in the lease is not readily determinable for our operating leases, the Company uses an incremental borrowing rate based on information available at the commencement date to determine the present value of future lease payments.

The lease term is the non-cancelable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that an option will be exercised.

Operating right-of-use (ROU) assets are recognized at commencement based on the amount of the initial measurement of the lease liability.

Operating ROU assets also include any lease payments made prior to lease commencement and exclude lease incentives.

Lease expense is recognized on a straight-line basis over the lease term.

Operating ROU assets are included in other non-current assets and lease liabilities are included in other current liabilities and other non-current liabilities in the Company’s Consolidated Balance Sheets.

Lease and non-lease components for all leases are accounted for separately.

The Company does not recognize ROU assets and lease liabilities for leases with a lease term of twelve months or less.

The Company's lease arrangements are composed of operating leases with various expiration dates through March 31, 2042.

The Company's leases do not contain any material residual value guarantees.

For the three months ended April 3, 2021 and March 28, 2020, the total operating lease costs were $ 3.6 million and $ 3.6 million, respectively.

For the nine months ended April 3, 2021 and March 28, 2020, the total operating lease costs were $ 10.4 million and $ 10.2 million, respectively.

Total variable lease costs were immaterial during the three and nine months ended April 3, 2021 and March 28, 2020.

For the three months ended October 2, 2021 and October 3, 2020, the total operating lease costs were $ 3.5 million and $ 3.4 million, respectively.

Total variable lease costs were immaterial during the three months ended October 2, 2021 and October 3, 2020.

The total operating costs were included in cost of revenues, research and development, and selling, general and administrative in the Company’s Consolidated Statements of Operations.

As of April 3, 2021, the weighted-average remaining lease term was 4.8 years, and the weighted-average discount rate was 4.6 %.

For the three months ended April 3, 2021 and March 28, 2020, cash paid for amounts included in the measurement of operating lease liabilities were $ 3.3 million and $ 3.7 million, respectively;

and operating ROU assets obtained in exchange of new operating lease liabilities were $ 2.8 million and $ 0.6 million, respectively.

For the nine months ended April 3, 2021 and March 28, 2020, cash paid for amounts included in the measurement of operating lease liabilities were $ 11.4 million and $ 12.9 million, respectively;

and operating ROU assets obtained in exchange of new operating lease liabilities were $ 6.3 million and $ 15.1 million, respectively.

As of October 2, 2021, the weighted-average remaining lease term was 7.7 years, and the weighted-average discount rate was 4.7 %.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The balance sheet information related to our operating leases is as follows ( in millions ):

April 3, 2021

Other Non-Current Assets Other Current Liabilities Other Non-Current Liabilities Total

ROU Assets $ 39.1 $ — $ — $ 39.1

Operating Lease Liabilities $ — $ 12.0 $ 24.8 $ 36.8

Future minimum operating lease payments as of April 3, 2021 are as follows ( in millions ):

For the three months ended October 2, 2021 and October 3, 2020, cash paid for amounts included in the measurement of operating lease liabilities were $ 5.2 million and $ 4.4 million, respectively;

and operating ROU assets obtained in exchange of new operating lease liabilities were $ 0.1 million and $ 1.6 million, respectively.

The balance sheet information related to the Company’s operating leases is as follows ( in millions ):

October 2, 2021

Other non-current assets $ 41.9

Total operating ROU assets $ 41.9

Other current liabilities $ 10.4

Other non-current liabilities 28.4

Total operating lease liabilities $ 38.8

Future minimum operating lease payments as of October 2, 2021 are as follows ( in millions ):

Fiscal Years Operating Leases

4 unchanged sentences

Present value of lease liabilities $ 38.8

Future minimum operating lease payments as of June 27, 2020, were as follows ( in millions ):

Future minimum operating lease payments as of July 3, 2021, were as follows ( in millions ):

Fiscal Years Operating Leases

3 unchanged sentences

Present value of lease liabilities $ 42.4

Restructuring and Related Charges

The Company has initiated restructuring events primarily intended to reduce its costs, consolidate its operations, integrate various acquisitions, streamline product manufacturing and align its business to address market conditions.

The Company’s restructuring charges primarily include severance and benefit costs to eliminate a specific number of positions, facilities and equipment costs to vacate facilities, consolidate operations, and lease termination costs.

The timing of associated cash payments is dependent upon the type of restructuring charge and can extend over multiple periods.

Fiscal 2019 Plans - NSE, including AvComm and Wireless (AW) Restructuring Plan

During the first quarter of fiscal 2019, the Company’s management approved restructuring and workforce reduction plans within its Network Service and Enablement (NSE) business, including actions related to the acquired AW business.

The plan was re-approved in the third quarter of fiscal 2019 and the fourth quarter of fiscal 2020 to include additional headcount and to further drive operational improvement.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Summary of Restructuring Plans

The following table presents the adjustments to the accrued restructuring expenses for the Company’s restructuring plans for the nine months ended April 3, 2021 (in millions) :

Restructuring and Related Charges

The Company restructuring events are primarily intended to reduce costs, consolidate operations, integrate various acquisitions, streamline product manufacturing and address market conditions.

During the three months ended October 2, 2021, the Company recorded no restructuring related charges or benefits.

During the three months ended October 3, 2020, the Company recorded restructuring related benefits of $ 0.6 million.

A summary of the activity in the remaining restructuring plan is outlined below (in millions):

Fiscal 2019 NSE,

Including AW Plan

Beginning of period balance, June 27, 2020 (2)

Beginning of period balance, July 3, 2021 (1)

Cash settlements ( 0.3 )

Restructuring and related benefits ( 0.8 )

Non-cash Settlements and Other Adjustments (1)

End of period balance, April 3, 2021 (2)

(1) Other adjustments represents the effect of currency translation adjustments.

(2) Included in other current liabilities on the Consolidated Balance Sheets as of April 3, 2021 and June 27, 2020, respectively.

During the three and nine months ended April 3, 2021 and March 28, 2020 the Company recorded restructuring and related benefits, as follows:

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

FY2019 NSE, Including AW Plan ( 0.4 ) ( 1.6 ) ( 0.8 ) ( 2.2 )

The Company recorded an income tax expense of $ 14.2 million and $ 35.3 million for the three and nine months ended April 3, 2021, respectively.

The Company recorded an income tax expense of $ 38.8 million and $ 57.0 million for the three and nine months ended March 28, 2020, respectively.

The income tax provision for the three and nine months ended April 3, 2021 primarily relates to income tax in certain foreign and state jurisdictions based on the Company’s forecasted pre-tax income or loss for the respective fiscal year.

The income tax provision for the three and nine months ended March 28, 2020 primarily related to a $ 31.6 million charge for withholding taxes expected to be paid on the repatriation of $ 316.4 million of foreign earnings that the Company no longer considered to be permanently reinvested.

In light of the economic uncertainty caused by COVID-19, the Company reevaluated its historic assertion on foreign earnings and no longer considered these earnings to be permanently reinvested.

The repatriation of these earnings increased available cash in the U.S.

and provided greater U.S.

financial flexibility to assist the Company in navigating the expected downturn in the economy.

The foreign earnings were repatriated to the U.S.

without incurring any significant additional U.S current or deferred tax expense.

In addition, the income tax provision for the period includes the income tax in certain foreign and state jurisdictions based on the Company’s forecasted pre-tax income or loss for the respective fiscal year.

The income tax provision recorded differs from the expected tax provision that would be calculated by applying the federal statutory rate to the Company’s income from continuing operations before taxes primarily due to the withholding taxes accrued on foreign earnings and the changes in valuation allowance for deferred tax assets attributable to the Company’s domestic and foreign income from continuing operations.

As of April 3, 2021, and June 27, 2020, the Company’s unrecognized tax benefits totaled $ 48.4 million and $ 48.4 million, respectively, and are included in deferred taxes and other non-current tax liabilities, net.

The Company had $ 3.7 million accrued for the payment of interest and penalties as of April 3, 2021.

End of period balance, October 2, 2021 (1)

(1) Included in other current liabilities on the Consolidated Balance Sheets as of October 2, 2021 and July 3, 2021, respectively.

The Company recorded an income tax expense of $ 13.6 million and $ 8.6 million for the three months ended October 2, 2021 and October 3, 2020, respectively.

The income tax provision for the three months ended October 2, 2021 and October 3, 2020 primarily relates to income tax in certain foreign and state jurisdictions based on the Company’s forecasted pre-tax income or loss for the respective fiscal year.

The income tax provision recorded differs from the expected tax provision that would be calculated by applying the federal statutory rate to the Company’s income from continuing operations before taxes primarily due to the changes in valuation allowance for deferred tax assets attributable to the Company’s domestic and foreign income from continuing operations.

As of October 2, 2021, and July 3, 2021, the Company’s unrecognized tax benefits totaled $ 59.2 million and $ 59.1 million, respectively, and are included in deferred taxes and other non-current tax liabilities, net.

The Company had $ 4.1 million accrued for the payment of interest and penalties as of October 2, 2021.

The timing and resolution of income tax examinations is uncertain, and the amounts ultimately paid, if any, upon resolution of issues raised by the taxing authorities may differ from the amounts accrued for each year.

Although the Company does not expect that our balance of gross unrecognized tax benefits will change materially in the next 12 months, given the uncertainty in the development of ongoing income tax examinations, the Company is unable to estimate the full range of possible adjustments to this balance.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stockholders' Equity

Repurchase of Common Stock

In September 2019, the Board of Directors authorized a stock repurchase program of up to $ 200 million of the Company’s common stock through open market or private transactions before September 30, 2021.

The new stock repurchase program replaces the previous $ 200 million stock repurchase program that was set to expire on September 30, 2019.

Under the new repurchase program, the Company may repurchase its common stock from time to time at the discretion of the Company’s management.

During the three and nine months ended April 3, 2021, the Company repurchased 0.5 million and 2.3 million shares of its common stock for $ 7.9 million and $ 31.7 million, respectively, of which $ 0.6 million was included as an unsettled liability at the end of April 3, 2021.

As of April 3, 2021, the Company had remaining authorization of $ 123.9 million for future share repurchases.

In September 2019, the Board of Directors authorized a stock repurchase program (“2019 Repurchase Plan”) of up to $ 200 million of the Company’s common stock through open market or private transactions before September 30, 2021.

On August 18, 2021, the Board of Directors approved to extend the 2019 Repurchase Plan until September 30, 2022.Under the 2019 Repurchase Plan, the Company may repurchase its common stock from time to time at the discretion of the Company’s management.

During the three months ended October 2, 2021, the Company repurchased 0.5 million shares of its common stock for $ 8.5 million.

As of October 2, 2021, the Company had remaining authorization of $ 104.5 million for future share repurchases under the 2019 Repurchase Plan.

The number of shares to be repurchased and the timing of such repurchases will be based on several factors, including business and financial market conditions.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In September 2021 the Board of Directors authorized a new stock repurchase plan (“2021 Repurchase Plan”) of up to $ 190 million.

The 2021 Repurchase plan is separate from the 2019 Repurchase Plan and is anticipated to result in the repurchase of the Company’s common stock issued in connection with the exchange transaction with certain holders of its Senior Convertible Notes (Refer to “Note 11.

Debt” for more details).

The Company did not repurchase any shares of its common stock under the 2021 Repurchase Plan during the three months ended October 2, 2021.

Stock-Based Compensation

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For performance-based awards, shares attained over target upon vesting are reflected as awards granted during the period.

Time-based restricted stock awards will generally vest in annual or quarterly installments over a period of four years subject to the employees’ continuing service to the Company.

The Company's performance-based awards may include performance conditions, market conditions, time-based service conditions or a combination there of and are generally expected to vest over a one to four years.

Time-based restricted stock awards will generally vest in annual or quarterly installments over a period of three to four years subject to the employees’ continuing service to the Company.

The Company's performance-based awards may include performance conditions, market conditions, time-based service conditions or a combination thereof and are generally expected to vest over one to four years .

In addition, the actual number of shares awarded upon vesting of performance-based grants may vary from the target shares depending upon the achievement of the relevant performance or market based conditions.

During the nine months ended April 3, 2021 and March 28, 2020, the Company granted $ 3.2 million and $ 3.2 million time-based restricted stock awards, respectively.

The aggregate grant-date fair value of time-based restricted stock awards granted during the nine months ended April 3, 2021 and March 28, 2020 were estimated to be $ 44.8 million and $ 43.9 million, respectively.

During the three months ended October 2, 2021 and October 3, 2020, the Company granted $ 2.0 million and $ 2.5 million time-based restricted stock awards, respectively.

The aggregate grant-date fair value of time-based restricted stock awards granted during the three months ended October 2, 2021 and October 3, 2020 were estimated to be $ 33.1 million and $ 33.5 million, respectively.

Time-based restricted stock awards granted to eligible employees generally vest in annual or quarterly installments over a period of four years , are subject to the employees’ continuing service to the Company and do not have an expiration date.

During the nine months ended April 3, 2021 and March 28, 2020, the Company granted $ 1.1 million and $ 0.5 million, performance-based awards, respectively.

In addition, during the nine months ended April 3, 2021 and March 28, 2020, the Company granted an additional 0.1 million and 0.2 million shares, respectively, due to performance-based shares attained over target.

The aggregate grant-date fair value of performance-based awards granted during the nine months ended April 3, 2021 and March 28, 2020 were estimated to be $ 15.7 million and $ 7.7 million, respectively.

During the three months ended October 2, 2021 and October 3, 2020, the Company granted $ 0.4 million and $ 0.6 million, performance-based awards, respectively.

In addition, during the three months ended October 3, 2020, the Company granted an additional 0.1 million shares due to performance-based shares attained over target.

There were no performance-based shares attained over target during the three months ended October 2, 2021.

The aggregate grant-date fair value of performance-based awards granted during the three months ended October 2, 2021 and October 3, 2020 were estimated to be $ 7.9 million and $ 8.9 million, respectively.

The majority of performance-based awards vest in equal annual installments over four years based on the attainment of certain performance measures and the employee’s continued service through the vest date.

Performance-based awards with market conditions were valued using a Monte Carlo simulation.

As of April 3, 2021, $ 68.5 million of unrecognized stock-based compensation costs, remain to be amortized.

As of October 2, 2021, $ 90.9 million of unrecognized stock-based compensation costs, remain to be amortized.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The impact on the Company’s results of operations of recording stock-based compensation by function for the three and nine months ended April 3, 2021 and March 28, 2020, as follows (in millions):

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

The impact on the Company’s results of operations of recording stock-based compensation by function for the three months ended October 2, 2021 and October 3, 2020, as follows (in millions):

Three Months Ended

October 2, 2021 October 3, 2020

Cost of revenues $ 1.6 $ 1.2

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Total stock-based compensation expense $ 13.6 $ 12.5

Approximately $ 1.2 million and $ 1.1 million of stock-based compensation was capitalized to inventory as of April 3, 2021 and March 28, 2020, respectively.

Approximately $ 1.3 million and $ 1.2 million of stock-based compensation was capitalized to inventory as of October 2, 2021 and October 3, 2020, respectively.

Employee Pension and Other Benefit Plans

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Benefits are generally based upon years of service and compensation or stated amounts for each year of service.

As of April 3, 2021, the U.K.

As of October 2, 2021, the U.K.

plan was partially funded while the other plans were unfunded.

1 unchanged sentence

For unfunded plans, the Company pays the post-retirement benefits when due.

During the nine months ended April 3, 2021, the Company contributed $ 1.6 million to the U.K.

During the three months ended October 2, 2021, the Company contributed $ 0.3 million to the U.K.

plan and $ 1.0 million to the other plans.

1 unchanged sentence

The following table presents the components of net periodic cost for the pension and benefits plans ( in millions ):

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Three Months Ended

October 2, 2021 October 3, 2020

Service cost $ 0.1 $ 0.1

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The Company expects to incur cash outlays of approximately $ 8.8 million related to its defined benefit pension plans during fiscal 2022 to make current benefit payments and fund future obligations.

As of April 3, 2021, approximately $ 5.9 million had been incurred.

These payments have been estimated based on the same assumptions used to measure the Company’s projected benefit obligation at June 27, 2020.

As of October 2, 2021, approximately $ 1.3 million had been incurred.

These payments have been estimated based on the same assumptions used to measure the Company’s projected benefit obligation at July 3, 2021.

VIAVI SOLUTIONS INC.

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law firm responsible for the error.

As of April 3, 2021, the related accrued pension liability was £ 6.5 million or $ 9.0 million.

The Company is subject to a variety of claims and suits that arise from time to time in the ordinary course of our business.

As of October 2, 2021, the related accrued pension liability was £ 7.0 million or $ 9.5 million.

The Company is subject to a variety of claims and suits that arise from time to time in the ordinary course of its business.

While management currently believes that resolving claims against the Company, individually or in aggregate, will not have a material adverse impact on its financial position, results of operations or statement of cash flows, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.

Were an unfavorable final outcome to occur, there exists the possibility of a material adverse impact on the Company’s financial position, results of operations or cash flows for the period in which the effect becomes reasonably estimable.

The Company follows authoritative guidance which requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee.

In addition, disclosures about the guarantees that an entity has issued, including a tabular reconciliation of the changes of the entity’s product warranty liabilities, are required.

The Company from time to time enters into certain types of contracts that contingently require the Company to indemnify parties against third-party claims.

These contracts primarily relate to:

(i) divestiture agreements, under which the Company may provide customary indemnifications to purchasers of the Company’s businesses or assets;

(ii) certain real estate leases, under which the Company may be required to indemnify property owners for environmental and other liabilities, and other claims arising from the Company’s use of the applicable premises;

and (iii) certain agreements with the Company’s officers, directors and employees, under which the Company may be required to indemnify such persons for liabilities arising out of their employment relationship.

The terms of such obligations vary.

Generally, a maximum obligation is not explicitly stated.

Because the obligated amounts of these types of agreements often are not explicitly stated, the overall maximum amount of the obligations cannot be reasonably estimated.

Historically, the Company has not been obligated to make significant payments for these obligations, and no liabilities have been recorded for these obligations on the Consolidated Balance Sheets as of April 3, 2021 and June 27, 2020.

Outstanding Letters of Credit, Performance Bonds and Other Claims

As of April 3, 2021, the Company had standby letters of credit of $ 7.3 million, performance bonds of $ 0.9 million and other claims of $ 1.6 million, collateralized by restricted cash.

As of October 2, 2021, the Company had standby letters of credit of $ 8.5 million, performance bonds and other claims of $ 2.6 million collateralized by restricted cash.

Product Warranties

The Company provides reserves for the estimated costs of product warranties at the time revenue is recognized.

In general, the Company offers its customers warranties up to three years and has accrued a reserve for the estimated costs of product warranties at the time revenue is recognized.

It estimates the costs of its warranty

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

obligations based on its historical experience of known product failure rates, use of materials to repair or replace defective products and service delivery costs incurred in correcting product failures.

From time to time, specific warranty accruals may be made if unforeseen technical problems arise.

The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

The following table presents the changes in the Company’s warranty reserve during the three and nine months ended April 3, 2021 and March 28, 2020, ( in millions ):

Three Months Ended Nine Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

The following table presents the changes in the Company’s warranty reserve during the three months ended October 2, 2021 and October 3, 2020, ( in millions ):

Three Months Ended

October 2, 2021 October 3, 2020

Balance as of beginning of period $ 9.7 $ 9.4

3 unchanged sentences

Balance as of end of period $ 10.3 $ 9.6

$ 9.6 $ 9.2 $ 9.6 $ 9.2

(1) The short-term portion of the warranty reserve is included as a component of other current liabilities (see “Note 6.

Balance Sheet and Other Details”) with the long-term balance included as a component of other non-current liabilities on the Company’s Consolidated Balance Sheets.

Operating Segments and Geographic Information

2 unchanged sentences

The Company's reportable segments reflect the way the Company's CODM reviews and assesses performance of the business.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s reportable segments are:

2 unchanged sentences

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

The Company also offers a range of product support and professional services such as repair, calibration, software support and technical assistance for our products.

The Company also offers a range of product support and professional services such as repair, calibration, software support and technical assistance for its products.

NE’s avionics products provide test and measuring solutions for aviation, aerospace, government, defense, communications and public safety.

(ii) Service Enablement (SE):

2 unchanged sentences

(iii) Optical Security and Performance Products (OSP):

OSP provides innovative, precision, high performance optical products for anti-counterfeiting, government, industrial, automotive and consumer electronic markets, including 3D Sensing applications.

OSP provides innovative, precision, high performance optical products for anti-counterfeiting, consumer and industrial, government, automotive, industrial and other electronic markets.

Segment Reporting

The CODM manages the Company in two broad business categories:

3 unchanged sentences

The Company allocates corporate-level operating expenses to its segment results, except for certain non-core operating and non-operating activities as discussed below.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

consideration liabilities, non-operating income and expenses, or other charges unrelated to core operating performance to its segments because management does not include this information in its measurement of the performance of the operating segments.

The Company does not allocate stock-based compensation, acquisition-related charges, amortization of intangibles, restructuring and related benefits, impairment of goodwill, changes in fair value of contingent consideration liabilities, or other charges unrelated to core operating performance to its segments because management does not include this information in its measurement of the performance of the operating segments.

These items are presented as “Other Items” in the table below.

Additionally, the Company does not specifically identify and allocate all assets by operating segment.

The following tables present information on the Company’s reportable segments for the three months ended April 3, 2021 and March 28, 2020 ( in millions ):

Three Months Ended April 3, 2021

The following tables present information on the Company’s reportable segments for the three months ended October 2, 2021 and October 3, 2020 ( in millions ):

Three Months Ended October 2, 2021

Network and Service Enablement

7 unchanged sentences

Operating margin 13.5 % 44.1 % 14.4 %

Three Months Ended March 28, 2020

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended October 3, 2020

Network and Service Enablement

7 unchanged sentences

Operating margin 7.2 % 46.7 % 11.0 %

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended

April 3, 2021 March 28, 2020

October 2, 2021 October 3, 2020

Corporate reconciling items impacting gross profit:

2 unchanged sentences

Amortization of intangibles ( 7.9 ) ( 8.2 )

Other charges (benefits) unrelated to core operating performance (1)

GAAP gross profit $ 195.0 $ 169.4

8 unchanged sentences

GAAP operating income from continuing operations $ 46.9 $ 31.3

(1) During the three months ended April 3, 2021 and March 28, 2020, other charges (benefits) unrelated to core operating performance primarily consisted of certain acquisition and integration related changes, transformational initiatives such as, site consolidations, and reorganization, and loss on disposal of long-lived assets.

The following tables present information on the Company’s reportable segments for the nine months ended April 3, 2021 and March 28, 2020 (in millions):

Nine Months Ended April 3, 2021

Network and Service Enablement

Network Enablement Service Enablement Network and Service Enablement Optical Security and Performance Products Other Items (1) Consolidated GAAP Measures

Product revenue $ 462.1 $ 28.5 $ 490.6 $ 286.0 $ — $ 776.6

Service revenue 71.8 39.0 110.8 0.6 — 111.4

Net revenue $ 533.9 $ 67.5 $ 601.4 $ 286.6 $ — $ 888.0

Gross profit $ 339.9 $ 44.3 $ 384.2 $ 175.3 $ ( 28.0 ) $ 531.5

Gross margin 63.7 % 65.6 % 63.9 % 61.2 % 59.9 %

Operating income $ 56.4 $ 132.4 $ ( 79.3 ) $ 109.5

Operating margin 9.4 % 46.2 % 12.3 %

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Nine Months Ended March 28, 2020

Network and Service Enablement

Network Enablement Service Enablement Network and Service Enablement Optical Security and Performance Products Other Items (1) Consolidated GAAP Measures

Product revenue $ 507.2 $ 34.9 $ 542.1 $ 228.4 $ — $ 770.5

Service revenue 58.6 40.3 98.9 0.3 — 99.2

Net revenue $ 565.8 $ 75.2 $ 641.0 $ 228.7 $ — $ 869.7

Gross profit $ 367.1 $ 49.4 $ 416.5 $ 123.3 $ ( 29.1 ) $ 510.7

Gross margin 64.9 % 65.7 % 65.0 % 53.9 % 58.7 %

Operating income $ 73.6 $ 85.0 $ ( 83.8 ) $ 74.8

Operating margin 11.5 % 37.2 % 8.6 %

Nine Months Ended

April 3, 2021 March 28, 2020

Corporate reconciling items impacting gross profit:

Total segment gross profit $ 559.5 $ 539.8

Stock-based compensation ( 3.6 ) ( 3.2 )

Amortization of intangibles ( 24.9 ) ( 24.8 )

Other charges (benefits) unrelated to core operating performance (1) 0.5 ( 1.1 )

GAAP gross profit $ 531.5 $ 510.7

Corporate reconciling items impacting operating income:

Total segment operating income $ 188.8 $ 158.6

Stock-based compensation ( 33.4 ) ( 33.3 )

Amortization of intangibles ( 49.8 ) ( 51.2 )

Change in fair value of contingent liability 3.8 4.3

Other charges unrelated to core operating performance (1) ( 0.7 ) ( 5.8 )

Restructuring and related charges 0.8 2.2

GAAP operating income from continuing operations $ 109.5 $ 74.8

(1) During the nine months ended April 3, 2021 and March 28, 2020, other charges unrelated to core operating performance primarily consisted of certain acquisition and integration related changes, transformational initiatives such as, site consolidations, and reorganization, and loss on disposal of long-lived assets.

(1) During the three months ended October 2, 2021 and October 3, 2020, other charges unrelated to core operating performance primarily consisted of certain acquisition and integration related changes, transformational initiatives such as, site consolidations, and reorganization, and loss on disposal of long-lived assets.

VIAVI SOLUTIONS INC.

2 unchanged sentences

Americas, Asia-Pacific, and Europe, Middle East and Africa (EMEA).

Net revenue is assigned to the geographic region and country where our product is initially shipped.

For example, certain customers may request shipment of our product to a contract manufacturer in one country, which may differ from the location of their end customers.

The following tables present net revenue by the three geographic regions we operate in and net revenue from countries that exceeded 10% of our total net revenue for the three and nine months ended April 3, 2021 and March 28, 2020 (in millions):

Net revenue is assigned to the geographic region and country where the Company’s product is initially shipped.

For example, certain customers may request shipment of the Company’s product to a contract manufacturer in one country, which may differ from the location of their end customers.

The following table presents net revenue by the three geographic regions in which the Company operates and net revenue from countries that exceeded 10% of the Company’s total net revenue for the three months ended October 2, 2021 and October 3, 2020 (in millions):

Three Months Ended

April 3, 2021 March 28, 2020

October 2, 2021 October 3, 2020

Product Revenue Service Revenue Total Product Revenue Service Revenue Total

10 unchanged sentences

Total net revenue $ 289.1 $ 37.7 $ 326.8 $ 247.9 $ 36.8 $ 284.7

Nine Months Ended

April 3, 2021 March 28, 2020

Product Revenue Service Revenue Total Product Revenue Service Revenue Total

United States $ 202.5 $ 41.3 $ 243.8 $ 213.0 $ 40.0 $ 253.0

Other Americas 51.5 10.3 61.8 45.8 12.5 58.3

Total Americas $ 254.0 $ 51.6 $ 305.6 $ 258.8 $ 52.5 $ 311.3

Asia-Pacific:

Greater China $ 216.3 $ 7.8 $ 224.1 $ 188.7 $ 5.0 $ 193.7

Other Asia 71.4 11.3 82.7 89.6 11.2 100.8

Total Asia-Pacific $ 287.7 $ 19.1 $ 306.8 $ 278.3 $ 16.2 $ 294.5

Switzerland $ 55.7 $ 0.3 $ 56.0 $ 53.4 $ 0.1 $ 53.5

Other EMEA 179.2 40.4 219.6 180.0 30.4 210.4

Total EMEA $ 234.9 $ 40.7 $ 275.6 $ 233.4 $ 30.5 $ 263.9

Total net revenue $ 776.6 $ 111.4 $ 888.0 $ 770.5 $ 99.2 $ 869.7

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Subsequent Events

The Company purchased land and building in Chandler, Arizona, on April 26, 2021, for $ 14.3 million.

The Company repurchased approximately 2.8 million shares of its common stock, under the 2021 Repurchase Plan approved by the Board in September 2021, for approximately $ 45 million.

The Company has approximately $ 145 million remaining available for future repurchase of the $ 190 million authorized under the 2021 Repurchase Plan.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements