What changed in this filing

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Item 1. Financial Statements

2022-11-04 compared with 2022-05-05 · 260 added, 404 removed, 541 unchanged (55% of the section changed)

Financial Statements (Unaudited)

Financial Statements

VIAVI SOLUTIONS INC.

1 unchanged sentence

(in millions, except per share data)

Three Months Ended Nine Months Ended

April 2, 2022 April 3, 2021 April 2, 2022 April 3, 2021

Three Months Ended

October 1, 2022 October 2, 2021

Product revenue $ 267.7 $ 289.1

11 unchanged sentences

Amortization of other intangibles 2.2 2.7

Restructuring and related benefits — ( 0.4 ) ( 0.1 ) ( 0.8 )

Total operating expenses 135.0 148.1

1 unchanged sentence

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

Interest income and other income (loss), net 0.6 ( 0.9 ) 3.1 0.8

Interest income and other income, net 1.1 1.4

Interest expense ( 6.1 ) ( 3.6 )

Income before income taxes 28.6 31.4 24.3 99.5

Income (loss) before income taxes 44.8 ( 41.2 )

Provision for income taxes 12.2 13.6

10 unchanged sentences

(in millions)

Three Months Ended Nine Months Ended

April 2, 2022 April 3, 2021 April 2, 2022 April 3, 2021

Three Months Ended

October 1, 2022 October 2, 2021

Net income (loss) $ 32.6 $ ( 54.8 )

2 unchanged sentences

Unrealized holding gain arising during period — 0.1

Amortization of actuarial income 0.8 0.8 2.3 2.3

Net change in accumulated other comprehensive income (loss) ( 12.0 ) ( 4.1 ) ( 24.1 ) 59.4

Comprehensive income (loss) $ 7.2 $ 13.1 $ ( 25.1 ) $ 123.6

Amortization of net actuarial losses and other pension adjustments

Net change in accumulated other comprehensive loss ( 42.9 ) ( 8.7 )

Comprehensive loss $ ( 10.3 ) $ ( 63.5 )

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

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(in millions, except share and par value data)

April 2, 2022 July 3, 2021

October 1, 2022 July 2, 2022

Current assets:

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Stockholders’ equity:

Preferred stock, $ 0.001 par value;

1 million shares authorized,

no shares issued or outstanding at October 1, 2022 and July 2, 2022

Common stock, $ 0.001 par value;

1 billion shares authorized;

228 million shares issued and outstanding at April 2, 2022 and July 3, 2021,

227 million shares at October 1, 2022 and 226 million shares at July 2, 2022, issued and outstanding

Additional paid-in capital 70,375.9 70,370.2

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(in millions)

Nine Months Ended

April 2, 2022 April 3, 2021

Three Months Ended

October 1, 2022 October 2, 2021

OPERATING ACTIVITIES:

Net (loss) income $ ( 1.0 ) $ 64.2

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

Net income (loss) $ 32.6 $ ( 54.8 )

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

Depreciation expense 8.5 8.9

3 unchanged sentences

Amortization of debt issuance costs 0.6 0.5

Deferred taxes, net 2.1 0.2

Gain on legal settlement ( 6.7 ) —

Other 0.8 1.3

6 unchanged sentences

Deferred revenue, current and non-current ( 6.6 ) ( 3.8 )

Deferred taxes, net ( 10.8 ) ( 3.9 )

Accrued payroll and related expenses ( 25.7 ) ( 9.6 )

10 unchanged sentences

Repurchase and retirement of common stock ( 18.7 ) ( 8.8 )

Withholding tax payment on vesting of restricted stock awards ( 12.5 ) ( 14.8 )

Withholding tax payment on vesting of restricted stock and performance based-awards ( 11.1 ) ( 7.2 )

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 ( 0.1 ) ( 1.0 )

Proceeds from employee stock purchase plan 3.7 3.7

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Payment of acquisition related holdback ( 0.3 ) —

Payment of acquisition related contingent consideration ( 4.1 ) —

Payment of debt — ( 2.8 )

Net cash used in financing activities $ ( 151.3 ) $ ( 43.2 )

Payment of acquired debt ( 0.4 ) —

Net cash (used in) provided by financing activities $ ( 26.8 ) $ 182.8

Effect of exchange rates on cash, cash equivalents and restricted cash $ ( 17.9 ) $ ( 3.1 )

3 unchanged sentences

$ 525.0 $ 926.7

(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 $ 11.7 million and $ 9.8 million as of April 2, 2022 and April 3, 2021, respectively.

(1) These amounts include both current and non-current balances of restricted cash totaling $ 12.9 million and $ 10.6 million as of July 2, 2022 and July 3, 2021, respectively.

(2) These amounts include both current and non-current balances of restricted cash totaling $ 12.4 million and $ 11.1 million as of October 1, 2022 and October 2, 2021, respectively.

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

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(in millions)

Three Months Ended April 2, 2022

Three Months Ended October 1, 2022

Shares Amount Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total

Balance at January 1, 2022 232.5 $ 0.2 $ 70,354.3 $ ( 69,470.4 ) $ ( 109.3 ) $ 774.8

Net income — — — 19.2 — 19.2

Other comprehensive loss — — — — ( 12.0 ) ( 12.0 )

Shares issued under employee stock plans, net of tax 0.4 — 2.7 — — 2.7

Stock-based compensation — — 12.8 — — 12.8

Repurchase of common stock ( 4.7 ) — — ( 78.7 ) — ( 78.7 )

Convertible note settlement (Note 11) — — ( 8.9 ) — ( 8.9 )

Balance at April 2, 2022 228.2 $ 0.2 $ 70,360.9 $ ( 69,529.9 ) $ ( 121.3 ) $ 709.9

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 $ 70,159.8 $ ( 69,324.0 ) $ ( 102.4 ) $ 733.6

Balance at July 2, 2022 226.4 $ 0.2 $ 70,370.2 $ ( 69,542.3 ) $ ( 156.4 ) $ 671.7

Net income — — — 32.6 — 32.6

3 unchanged sentences

Repurchase of common stock ( 1.3 ) — — ( 18.7 ) — ( 18.7 )

Balance at April 3, 2021 228.6 $ 0.2 $ 70,170.8 $ ( 69,314.7 ) $ ( 106.5 ) $ 749.8

Nine Months Ended April 2, 2022

Balance at October 1, 2022 226.8 $ 0.2 $ 70,375.9 $ ( 69,528.4 ) $ ( 199.3 ) $ 648.4

Three Months Ended October 2, 2021

Additional Paid-In Capital

8 unchanged sentences

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

Balance at April 2, 2022 228.2 $ 0.2 $ 70,360.9 $ ( 69,529.9 ) $ ( 121.3 ) $ 709.9

Nine Months Ended April 3, 2021

Additional Paid-In Capital

Accumulated Deficit

Accumulated Other Comprehensive Loss

Balance at June 27, 2020 228.3 $ 0.2 $ 70,146.1 $ ( 69,347.2 ) $ ( 165.9 ) $ 633.2

Net income — — — 64.2 — 64.2

Other comprehensive income — — — — 59.4 59.4

Shares issued under employee stock plans, net of tax 2.6 — ( 8.7 ) — — ( 8.7 )

Stock-based compensation — — 33.4 — — 33.4

Repurchase of common stock ( 2.3 ) — — ( 31.7 ) — ( 31.7 )

Balance at April 3, 2021 228.6 $ 0.2 $ 70,170.8 $ ( 69,314.7 ) $ ( 106.5 ) $ 749.8

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

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 2, 2022 and April 3, 2021 is unaudited, and includes all normal and recurring adjustments the 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 1, 2022 and October 2, 2021 is unaudited, and includes all normal and recurring adjustments the 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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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 2, 2022.

Other than the adoption of Accounting Standards Update (ASU) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity and ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (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 and nine months ended April 2, 2022 as compared to the significant accounting policies presented in “Note 1.

There have been no material changes to the Company’s accounting policies during the three months ended October 1, 2022 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 2, 2022 on Form 10-K, filed with the SEC on August 19, 2022.

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GAAP for complete financial statements.

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

The results for the three months ended October 1, 2022 and October 2, 2021 may not be indicative of results for the fiscal year ending July 1, 2023 or any future periods.

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

1 unchanged sentence

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

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

Principles of Consolidation

1 unchanged sentence

All inter-company accounts and transactions have been eliminated.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Use of Estimates

3 unchanged sentences

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A novel strain of coronavirus (COVID-19) declared an international pandemic by the World Health Organization (WHO) in March 2020 continues to have a global impact more than two years since it was first identified in Wuhan, China.

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.

We operate globally and sell our products in countries throughout the world.

Recent escalation in regional conflicts, including the Russian invasion of Ukraine, resulting in ongoing economic sanctions, and the risk of increased tensions between China and Taiwan, could curtail or prohibit our ability to transfer certain technologies, to sell our products and solutions, or to continue to operate in certain locations.

Moreover, international conflict has resulted in increased pressure on the supply chain and could further result in increased energy costs, which could increase the cost of manufacturing, selling and delivering products and solutions;

inflation, which could result in increases in the cost of manufacturing products, reduced customer purchasing power, increased price pressure, and reduced or cancelled orders;

increased risk of cybersecurity attacks;

and general market instability, all of which could adversely impact our financial results.

As a result of the restrictions on exports to Russia, we suspended transactions in the region effective February 2022, which has negatively impacted our business.

While sales in this jurisdiction are not material to our total consolidated revenues or net income, we are 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.

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

Actual results may differ materially from these estimates, assumptions or conditions due to risks and uncertainties, including the ongoing geopolitical instability as well as the potential for additional trade actions or retaliatory cyber-attacks aimed at infrastructure or supply chains, the impact on our future operations and results remains uncertain.

The worldwide spread of the COVID-19 virus and global slowdown of economic activity 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.

New and potentially more contagious variants of the virus have emerged over the course of the pandemic, along with a surge in cases in several regions across the globe, including Europe and Asia, resulting in renewed shutdown, mandatory quarantines and shelter in place orders in certain regions.

These events have led, at times, to slowdowns in shipping and commercial activities.

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

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

Governmental vaccine mandates and mandated quarantines could lead to attrition and operational challenges.

Through continued economic challenges, there continue to be periodic shipping and logistics challenges and continued supply chain constraints, shortages and delays, along with inflationary pricing pressures.

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.

1 unchanged sentence

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

Recently Issued Accounting Pronouncements

Recent Accounting Pronouncements Adopted

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 a material impact on the Company’s Consolidated Financial Statements.

In December 2019, the FASB issued ASU 2019-12 Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, by removing specific exceptions to the general principles in Topic 740, Income Taxes and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

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 $ 21.4 million for the fiscal year ended July 3, 2021.

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 July 3, 2021 ( in millions ):

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 and nine months ended April 3, 2021 ( in millions, except per-share data ):

Three Months Ended April 3, 2021

As Reported Adjustment As Adjusted

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

Net income $ 11.8 $ 5.4 $ 17.2

Net income per share:

Basic $ 0.05 $ 0.03 $ 0.08

Diluted $ 0.05 $ 0.02 $ 0.07

Shares used in per-share calculation:

Basic 228.7 — 228.7

Diluted 240.2 — 240.2

Nine Months Ended April 3, 2021

As Reported Adjustment As Adjusted

Interest Expense $ ( 27.0 ) $ 16.2 $ ( 10.8 )

Net income $ 48.0 $ 16.2 $ 64.2

Net income per share:

Basic $ 0.21 $ 0.07 $ 0.28

Diluted $ 0.21 $ 0.06 $ 0.27

Shares used in per-share calculation:

Basic 228.8 — 228.8

Diluted 233.8 0.6 234.4

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers which requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606.

At the acquisition date, an acquirer should account for the related revenue contracts in accordance with ASC 606 as if it had originated the contracts.

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

The Company elected to early adopt this guidance in the second quarter of fiscal 2022 on a retrospective basis to the beginning of the fiscal year.

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

Recent Accounting Pronouncements Not Yet Adopted

Recently Issued Accounting Pronouncements

Recent Accounting Pronouncements Adopted

In November 2021, the FASB issued ASU 2021-10 Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance to increase the transparency of government assistance including the disclosure of the types of assistance, an entity's accounting for the assistance, and the effect of the assistance on an entity's financial statements.

This guidance is effective for the Company in the first quarter of fiscal 2023 with early adoption permitted.

The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.

Disclosures by Business Entities about Government Assistance .

ASU 2021-10 requires annual disclosures about transactions with a government entity that are accounted for by applying a grant or contribution accounting model including the disclosure of the types of assistance, an entity's accounting for the assistance, and the effect of the assistance on an entity's financial statements.

ASU 2021-10 is effective for annual periods beginning after December 15, 2021.

The Company adopted the ASU on July 3, 2022 with no material impact expected to disclosures in the Annual Report on Form 10-K for the year ended July 1, 2023.

Recent Accounting Pronouncements Not Yet Adopted

In March 2022, the FASB issued ASU 2022-01 Derivatives and Hedging (Topic 815), which clarifies guidance on fair value hedge accounting of interest rate risk for portfolios of financial assets.

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The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.

In June 2022, the FASB issued ASU 2022-03 Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions , which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.

The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction.

This guidance also requires certain disclosures for equity securities subject to contractual sale restrictions.

The new guidance is required to be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption.

This guidance is effective for the Company in the first quarter of fiscal 2025 with early adoption permitted.

The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.

In September 2022, the FASB issued ASU 2022-04 Liabilities—Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations , which makes a number of changes meant to add certain disclosure requirements for a buyer in a supplier finance program.

The amendments require a buyer that uses supplier finance programs to make annual disclosures about the program’s key terms, the balance sheet presentation of related amounts, the confirmed amount outstanding at the end of the period, and associated rollforward information.

Only the amount outstanding at the end of the period must be disclosed in interim periods.

This guidance is effective for the Company in the first quarter of fiscal 2024 with early adoption permitted.

The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.

VIAVI SOLUTIONS INC.

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

Three Months Ended Nine Months Ended

April 2, 2022 April 3, 2021 April 2, 2022 April 3, 2021

Three Months Ended

October 1, 2022 October 2, 2021

Net income (loss) $ 32.6 $ ( 54.8 )

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Shares issuable assuming conversion of convertible notes (1)

4.9 8.5 — 2.9

Effect of dilutive securities from stock-based compensation plans 2.7 —

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Diluted $ 0.14 $ ( 0.24 )

(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.

(1) Represents the dilutive impact for the Company’s 1.75 % Senior Convertible Notes due 2023 (2023 Notes) and the 1.00 % Senior Convertible Notes due 2024 (2024 Notes).

As of October 1, 2022, the if-converted value in excess of outstanding principal of the 2023 and 2024 Notes was $ 1.6 million and $ 17.7 million, respectively.

Refer to “Note 11.

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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 2, 2022 April 3, 2021 April 2, 2022 April 3, 2021

Three Months Ended

October 1, 2022 October 2, 2021

Restricted stock units (2)

0.3 0.3 0.6 0.4

Stock options and Employee Stock Purchase Plan — 1.5

Shares issuable from Senior Convertible Notes — 8.3

Total potentially dilutive securities 1.4 15.9

(1) Represents the number of restricted stock units (RSUs) that are excluded from the computation of diluted earnings per share as their inclusion would have been anti-dilutive.

(2) As the Company incurred a loss from continuing operations in the period, potential securities from employee stock options, Employee Stock Purchase Plan (ESPP), 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.

Accumulated Other Comprehensive Loss

The Company’s accumulated other comprehensive loss consists of the accumulated net unrealized gains or losses on available-for-sale investments, foreign currency translation adjustments and change in unrealized components of defined benefit obligations.

(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) Represents the number of RSUs that are excluded from the computation of diluted earnings per share as their inclusion would have been anti-dilutive.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the nine months ended April 2, 2022, the changes in accumulated other comprehensive loss, net of tax, by component were as follows ( in millions ):

Accumulated Other Comprehensive Loss

For the three months ended October 1, 2022, 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

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Beginning balance as of July 2, 2022 $ ( 5.0 ) $ ( 144.2 ) $ ( 7.2 ) $ ( 156.4 )

Other comprehensive income (loss) before reclassification 0.1 ( 26.5 ) — ( 26.4 )

Other comprehensive loss before reclassification — ( 42.6 ) — ( 42.6 )

Amounts reclassified out of accumulated other comprehensive loss — — ( 0.3 ) ( 0.3 )

Net current-period other comprehensive income (loss) 0.1 ( 26.5 ) 2.3 ( 24.1 )

Ending balance as of April 2, 2022 $ ( 5.0 ) $ ( 94.6 ) $ ( 21.7 ) $ ( 121.3 )

(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 2, 2022.

There was no tax impact for the nine months ended April 2, 2022.

Net current-period other comprehensive loss — ( 42.6 ) ( 0.3 ) ( 42.9 )

Ending balance as of October 1, 2022 $ ( 5.0 ) $ ( 186.8 ) $ ( 7.5 ) $ ( 199.3 )

There was no tax impact for the three months ended October 1, 2022.

Refer to “Note 16.

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

Prior Year Acquisitions

RPC Photonics, Inc.

During the second quarter of fiscal year 2019, the Company acquired all of the equity interest of RPC Photonics, Inc.

The consideration paid for RPC was approximately $ 33.4 million in cash and an additional earn-out of up to $ 53.0 million in cash to be paid based on the achievement of certain gross profit targets over approximately a four year period.

On July 18, 2022, the Company completed an acquisition accounted for as a business combination consisting of cash paid at closing of $ 17.5 million and $ 2.0 million of indemnity holdback.

In connection with this acquisition, the Company recorded approximately $ 11.2 million of goodwill, $ 5.1 million of developed technology and $ 1.8 million of deferred tax liability.

The acquired developed technology asset is being amortized over its estimated useful life of four years .

On May 13, 2022 and May 20, 2022, the Company completed acquisitions accounted for as business combinations for cash paid at close of $ 9.5 million, additional earn-outs of up to $ 3.3 million in cash to be paid based on the occurrence or achievement of certain agreed upon targets and $ 2.0 million of indemnity holdback.

In connection with these acquisitions, the Company recorded $ 10.0 million of goodwill, $ 7.3 million of developed technology and other intangibles and $ 1.6 million of deferred tax liability.

The acquired developed technology and other intangible assets are being amortized over their estimated useful lives ranging from one to six years .

On September 17, 2021, the Company acquired all of the equity of one business for approximately $ 1.6 million.

The acquisition was accounted for as an asset purchase.

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

On October 30, 2018, the Company acquired all of the equity interest of RPC Photonics, Inc.

(RPC) for approximately $ 33.4 million in cash as part of a business combination.

An additional earn-out of up to $ 53.0 million, subject to achievement of certain gross profit targets over an approximate four year period through December 31, 2022, is currently not expected to be paid.

The acquisition of RPC expands the Company’s 3D Sensing offerings.

Other Acquisitions

During the first quarter of fiscal year 2022, 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 million 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.

During the fourth quarter of fiscal year 2020, the Company completed a business acquisition for total consideration of approximately $ 5.2 million in cash paid at close and an earn-out liability of up to $ 5.5 million in cash to be paid based on the occurrence or achievement of certain agreed upon targets.

In connection with this acquisition, the Company recorded approximately $ 6.2 million of developed technology and customer relationships and $ 1.4 million of deferred tax liability resulting from the acquisitions.

The acquired developed technology and customer relationship assets are being amortized over their estimated useful lives of six years .

VIAVI SOLUTIONS INC.

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Acquisition-related Contingent Consideration

The following table provides a reconciliation of changes in the fair value of the Company’s earn-out liabilities associated with the Company’s acquisitions for the three and nine months ended April 2, 2022 and April 3, 2021 ( in millions ):

Three Months Ended Nine Months Ended

April 2, 2022 April 3, 2021 April 2, 2022 April 3, 2021

The following table provides a reconciliation of changes in the fair value of the Company’s earn-out liabilities associated with the Company’s acquisitions for the three months ended October 1, 2022 and October 2, 2021 ( in millions ):

Three Months Ended

October 1, 2022 October 2, 2021

Beginning period balance $ 2.5 $ 4.0

Payments of Contingent Consideration ( 3.2 ) — ( 4.4 ) —

Fair value adjustment of earn-out liabilities 0.5 0.3

4 unchanged sentences

Gross receivables include both billed and unbilled receivables (including Contract assets).

As of April 2, 2022, and July 3, 2021, the Company had total unbilled receivables of $ 7.7 million and $ 6.2 million, respectively.

As of October 1, 2022, and July 2, 2022, the Company had total unbilled receivables of $ 8.3 million and $ 7.3 million, respectively.

The Company also has short-term and long-term deferred revenues related to undelivered product 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.

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

April 2, 2022

Three Months Ended Nine Months Ended

October 1, 2022

Three Months Ended

Deferred revenue:

2 unchanged sentences

Revenue recognized during the period (2)

( 24.6 ) ( 89.6 )

Balance at end of period (3)

$ 97.9 $ 97.9

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

2 unchanged sentences

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 2, 2022, was $ 282.7 million.

The value of the transaction price allocated to remaining performance obligations as of October 1, 2022, was $ 246.0 million.

The Company expects to recognize approximately 91 % of remaining performance obligations as revenue within the next 12 months, and the remainder thereafter.

4 unchanged sentences

July 2, 2022 Charged to Costs and Expenses Deductions (1)

April 2, 2022

October 1, 2022

Allowance for credit losses $ 1.4 $ 0.3 $ ( 0.2 ) $ 1.5

2 unchanged sentences

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

April 2, 2022 July 3, 2021

October 1, 2022 July 2, 2022

Finished goods $ 40.5 $ 41.6

4 unchanged sentences

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

April 2, 2022 July 3, 2021

October 1, 2022 July 2, 2022

Refundable income taxes $ 25.1 $ 14.5

Prepayments 13.8 16.0

Asset held for sale 6.3 6.5

Advances to contract manufacturers 12.7 11.8

Refundable income taxes 10.6 5.9

Transaction tax receivables 8.3 10.4

Asset held for sale 2.5 2.5

Other current assets 14.4 14.0

2 unchanged sentences

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

April 2, 2022 July 3, 2021

Customer prepayments $ 0.6 $ 0.4

Restructuring accrual — 0.5

October 1, 2022 July 2, 2022

Fair value of forward contracts $ 11.2 $ 8.4

Income tax payable 10.2 9.6

Warranty accrual, current 4.5 4.3

Transaction tax payable 6.6 4.9

Operating lease liabilities (Note 12) 9.8 10.1

Interest payable 8.3 4.6

Transaction tax payable 4.6 11.5

Warranty accrual 4.0 4.4

Fair value of contingent consideration 2.5 1.8

Other 5.9 5.9

4 unchanged sentences

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

April 2, 2022 July 3, 2021

October 1, 2022 July 2, 2022

Pension and post-employment benefits $ 50.2 $ 59.6

Operating lease liabilities (Note 12) 30.5 33.5

Long-term deferred revenue 20.1 19.4

Financing obligation 15.9 16.0

Deferred tax liability 15.3 9.5

Long-term deferred revenue 19.8 19.8

Warranty accrual, non-current 6.2 5.4

Operating lease liabilities (Note 12) 33.3 30.8

Uncertain tax position 13.3 12.9

Warranty accrual 5.5 6.2

Other 15.8 13.3

2 unchanged sentences

Short-Term Investments

As of April 2, 2022 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, $ 0.2 million was invested in money market instruments and $ 1.1 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.

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 income (loss), net.

As of October 1, 2022 the Company’s short-term investments of $ 1.3 million were comprised primarily of trading securities related to the deferred compensation plan, of which $ 0.9 million was invested in equity securities, $ 0.3 million was invested in debt securities and $ 0.1 million was invested in money market instruments.

As of July 2, 2022, the Company’s short-term investments of $ 1.4 million were comprised primarily of trading securities related to the deferred compensation plan, of which $ 1.0 million was invested in equity securities, $ 0.3 million was invested in debt securities and $ 0.1 million was invested in money market instruments.

Non-Designated Foreign Currency Forward Contracts

3 unchanged sentences

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

The Company had forward contracts that were effectively closed but not settled with the counterparties as of the balance sheet date.

As of April 2, 2022, the fair value of these contracts of $ 2.6 million and $ 4.2 million is reflected as prepayments and other current assets and other current liabilities, respectively.

As of October 1, 2022, the Company had forward contracts that were effectively closed but not settled with the counterparties as of the balance sheet date.

Therefore, the fair value of these contracts of $ 4.5 million and $ 11.2 million is reflected as prepayments and other current assets and other current liabilities, respectively.

As of July 2, 2022, the fair value of these contracts of $ 3.8 million and $ 8.3 million is reflected as prepayments and other current assets and other current liabilities, respectively.

1 unchanged sentence

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

As of April 2, 2022 and July 3, 2021, the notional amounts of the forward contracts the Company held to purchase foreign currencies were $ 106.4 million and $ 114.0 million, respectively, and the notional amounts of forward contracts the Company held to sell foreign currencies were $ 33.9 million and $ 27.8 million, respectively.

As of October 1, 2022 and July 2, 2022, the notional amounts of the forward contracts the Company held to purchase foreign currencies were $ 90.6 million and $ 119.1 million, respectively, and the notional amounts of forward contracts the Company held to sell foreign currencies were $ 19.2 million and $ 80.5 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 (loss), 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 $ 1.6 million and $ 4.1 million for the three and nine months ended April 2, 2022 and a loss of $ 0.1 million and a gain of $ 13.3 million for the three and nine months ended April 3, 2021, respectively.

The foreign exchange forward contracts incurred losses of $ 6.7 million and $ 1.8 million for the three months ended October 1, 2022 and October 2, 2021, respectively.

Fair Value Measurements

9 unchanged sentences

Level 2 instruments of the Company generally include certain U.S.

and foreign government and agency securities, commercial paper, corporate and municipal bonds and notes, asset-backed securities, certificates of deposit, foreign currency forward contracts and long-term debt.

and foreign government and agency securities, commercial paper, corporate and municipal bonds and notes, asset-backed securities, certificates of deposit, foreign currency forward contracts and debt.

To estimate their fair value, the Company utilizes pricing models based on market data.

1 unchanged sentence

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 2, 2022 and July 3, 2021, the Company did not hold any Level 3 investment securities.

The Company’s Level 3 liabilities as of April 2, 2022 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.

As of October 1, 2022 and July 2, 2022, the Company did not hold any Level 3 investment securities.

The Company’s Level 3 liabilities as of October 1, 2022 and July 2, 2022 consist of contingent purchase consideration.

The Company has aggregate contingent liabilities related to its business acquisitions.

The fair value of certain earn-out liabilities is 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 certain earn-out liabilities is derived using the estimated probability of success of achieving the earn-out milestones discounted to present value.

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.

3 unchanged sentences

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

April 2, 2022 July 3, 2021

October 1, 2022 July 2, 2022

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

16 unchanged sentences

(1) Included in other non-current assets on the Company’s Consolidated Balance Sheets.

(2) Includes, as of April 2, 2022, $ 292.7 million in cash and cash equivalents, $ 3.1 million in restricted cash, and $ 6.3 million in other non-current assets on the Company’s Consolidated Balance Sheets.

(2) Includes, as of October 1, 2022, $ 276.0 million in cash and cash equivalents, $ 3.1 million in restricted cash, and $ 8.5 million in other non-current assets on the Company’s Consolidated Balance Sheets.

Includes, as of July 2, 2022, $ 301.5 million in cash and cash equivalents, $ 3.1 million in restricted cash, and $ 8.6 million in other non-current assets on the Company’s Consolidated Balance Sheets.

2 unchanged sentences

(5) Included in other current liabilities on the Company’s Consolidated Balance Sheets.

(6) Includes certain amounts in other current liabilities and other non-current liabilities on the Company’s Consolidated Balance Sheets.

Other Fair Value Measures

Fair Value of Long-term Debt:

Fair Value of Debt:

If measured at fair value in the Consolidated Balance Sheets, the Company’s 3.75 % Senior Notes (2029 Notes), 1.00 % Senior Convertible Notes (2024 Notes) and 1.75 % Senior Convertible Notes (2023 Notes) would be classified in Level 2 of the fair value hierarchy as they are not actively traded in the markets.

The Company’s long-term debt measured at fair value for the periods presented are as follows:

April 2, 2022 July 3, 2021

The Company’s debt measured at fair value for the periods presented are as follows:

October 1, 2022 July 2, 2022

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

Long-term Debt:

3.75 % Senior Notes

6 unchanged sentences

See “Note 11.

Debt”, for further discussion of the Company’s long-term debt.

Debt”, for further discussion of the Company’s debt.

VIAVI SOLUTIONS INC.

4 unchanged sentences

Balance as of July 2, 2022 $ 331.6 $ 13.8 $ 42.2 $ 387.6

Acquisition 11.2 — — 11.2

Currency translation adjustments ( 10.3 ) ( 0.7 ) — ( 11.0 )

Balance as of April 2, 2022 $ 342.4 $ 4.3 $ 42.2 $ 388.9

Balance as of October 1, 2022 $ 332.5 $ 13.1 $ 42.2 $ 387.8

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 2022, 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 2, 2022.

There were no events or changes in circumstances which triggered an impairment review during the three months ended October 1, 2022.

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 2, 2022 Gross Carrying Amount Accumulated Amortization Net

As of October 1, 2022 Gross Carrying Amount Accumulated Amortization Net

Acquired developed technology $ 418.0 $ ( 380.2 ) $ 37.8

11 unchanged sentences

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 2, 2022 April 3, 2021 April 2, 2022 April 3, 2021

Three Months Ended

October 1, 2022 October 2, 2021

Cost of revenues $ 7.1 $ 7.9

1 unchanged sentence

Total amortization of intangible assets $ 9.3 $ 10.6

Based on the carrying amount of acquired developed technology, customer relationships and other intangibles as of April 2, 2022, 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 1, 2022, and assuming no future impairment of the underlying assets, the estimated future amortization is as follows ( in millions ):

Remainder of 2023 $ 17.5

1 unchanged sentence

Total amortization $ 48.7

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

As of April 2, 2022 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 acquired developed technology, customer relationships and other intangible balances are adjusted quarterly to record the effect of currency translation adjustments.

As of October 1, 2022 and July 2, 2022, 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 ):

April 2, 2022 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 )

October 1, 2022 July 2, 2022

Principal amount of 1.75 % Senior Convertible Notes

$ 68.1 $ 68.1

Unamortized Senior Convertible Notes debt issuance cost ( 0.1 ) ( 0.1 )

Other short-term debt — 0.4

Short-term debt $ 68.0 $ 68.4

Principal amount of 3.75 % Senior Notes, long-term

Principal amount of 3.75 % Senior Notes

$ 400.0 $ 400.0

Unamortized 3.75 % Senior Notes debt issuance cost

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

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

( 6.1 ) ( 6.4 )

Principal amount of 1.00 % Senior Convertible Notes

Unamortized Senior Convertible Notes debt issuance cost ( 0.9 ) ( 1.0 )

Long-term debt $ 616.9 $ 616.5

The Company was in compliance with all debt covenants as of April 2, 2022 and July 3, 2021.

The Company was in compliance with all debt covenants as of October 1, 2022 and July 2, 2022.

VIAVI SOLUTIONS INC.

5 unchanged sentences

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

As of April 2, 2022, the expected remaining term of the 2029 Notes is 7.5 years.

Senior Secured Asset-Based Revolving Credit Facility

On December 30, 2021, 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.

The Credit Agreement provides for a senior secured asset-based revolving credit facility in a maximum aggregate amount of $ 300 million, which matures on December 30, 2026.

The Credit Agreement also provides that, under certain circumstances, the Company may increase the aggregate amount of revolving commitments thereunder by an aggregate amount of up to $ 100 million so long as certain conditions are met.

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 the assets of the Company and those of its subsidiaries that are borrowers and guarantors under the Credit Agreement.

Amounts outstanding under the Credit Agreement accrue interest as follows:

(i) if the amounts outstanding are denominated in US Dollars, at a per annum rate equal to either, at the Company’s election, Term Secured Overnight Financing Rate (SOFR) plus a margin of 1.35 % to 1.85 % per annum, or a specified base rate plus a margin of 0.25 % to 0.75 %, in each case, depending on the average excess availability under the facility, (ii) if the amounts outstanding are denominated in Sterling, at a per annum rate equal to the Sterling Overnight Interbank Average Rate (SONIA) plus a margin of 1.2825 % to 1.7825 %, depending on the average excess availability under the facility, (iii) if the amounts outstanding are denominated in Euros, at a per annum rate equal to the Euro Interbank Offered Rate plus a margin of 1.25 % to 1.75 %, depending on the average excess availability under the facility, or (iv) if the amounts outstanding are denominated in Canadian Dollars, at a per annum rate equal to either, at the Company’s election, the Canadian Dollar Offered Rate plus a margin of 1.25 % to 1.75 %, or a specified base rate plus a margin of 0.25 % to 0.75 %, in each case, depending on the average excess availability under the facility.

The covenants of the Credit Agreement include customary restrictive covenants that, among other things, restrict the Company’s ability to incur additional indebtedness, grant liens and make certain acquisitions, investments, asset dispositions and restricted payments.

In addition, the Credit Agreement contains certain financial covenants that require the Company to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 if excess availability under the facility is less than the greater of 10 % of the lesser of maximum revolver amount and borrowing base and $ 20 million.

As of April 2, 2022, we had no borrowings under this facility and our available borrowing capacity was approximately $ 176.9 million.

Revolving Credit Facility

On May 5, 2020, the Company entered into a credit agreement with Wells Fargo as administrative agent, and other lender related parties.

The Company borrowed $ 150 million and repaid $ 150 million under this Credit Agreement during the first quarter of fiscal 2022.

In connection with the entry into the Senior Secured Asset-Based Revolving Credit Facility noted above, the Company terminated this facility.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of October 1, 2022, the expected remaining term of the 2029 Notes is 7.0 years.

1.75 % Senior Convertible Notes (2023 Notes)

On May 29, 2018, the Company issued $ 225.0 million aggregate principal amount of 1.75 % Senior Convertible Notes due 2023 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

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

The 2023 Notes are an unsecured obligation of the Company and bear interest at an annual rate of 1.75 % payable in cash semi-annually in arrears on June 1st and December 1st of each year, beginning December 1, 2018.

As of April 2, 2022, the expected remaining term of the 2023 Notes is 1.2 years.

As of October 1, 2022, the expected remaining term of the 2023 Notes is 0.7 years.

The 2023 Notes mature on June 1, 2023 unless earlier converted, redeemed or repurchased.

See Senior Note Settlement below.

See Senior Convertible Notes Settlement below.

1.00 % Senior Convertible Notes (2024 Notes)

3 unchanged sentences

The 2024 Notes are an unsecured obligation of the Company and bear interest at an annual rate of 1.00 % payable in cash semi-annually in arrears on March 1 and September 1 of each year.

As of April 2, 2022, the expected remaining term of the 2024 Notes is 1.9 years.

As of October 1, 2022, the expected remaining term of the 2024 Notes is 1.4 years.

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

See Senior Note Settlement below.

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.

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

The requests were for trivial amounts.

In the first three quarters 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.

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

See Senior Convertible Notes Settlement below.

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.

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

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 transactions which is presented as Loss on convertible note settlement in the Company’s Consolidated Statements of Operations.

On November 17, 2021 and November 22, 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.

On November 17, 2021 and November 22, 2021, the Company entered into separate privately-negotiated agreements with certain holders of its 2023 and 2024 Notes.

The Company settled $ 20.6 million principal amount of the 2023 Notes and $ 25.0 million principal amount of the 2024 Notes in exchange for $ 59.0 million in cash.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On March 2, 2022, 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.

On March 2, 2022, the Company entered into separate privately-negotiated agreements with certain holders of its 2023 and 2024 Notes.

The Company settled $ 23.2 million principal amount of the 2023 Notes and $ 26.8 million principal amount of the 2024 Notes in exchange for $ 64.7 million in cash.

The Company recorded a loss of $ 6.4 million in connection with the settlement transactions which 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 $ 87.4 million and $ 227.0 million, respectively, in each case, with terms unchanged.

On June 3, 2022, the Company entered into separate privately-negotiated agreements with certain holders of its 2023 and 2024 Notes.

The Company settled $ 19.3 million principal amount of the 2023 Notes and $ 3.1 million principal amount of the 2024 Notes in exchange for $ 27.1 million in cash.

The Company recorded a loss of $ 3.1 million in connection with the settlement transactions which is presented as Loss on convertible note settlement in the Company’s Consolidated Statements of Operations.

As of October 1, 2022, the outstanding principal amount of the 2023 and 2024 Notes was $ 68.1 million and $ 223.9 million, respectively, in each case, with terms unchanged.

Senior Secured Asset-Based Revolving Credit Facility

On December 30, 2021, 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.

The Credit Agreement provides for a senior secured asset-based revolving credit facility in a maximum aggregate amount of $ 300 million, which matures on December 30, 2026.

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 the assets of the Company and those of its subsidiaries that are borrowers and guarantors under the Credit Agreement.

Amounts outstanding under the Credit Agreement accrue interest as follows:

As of October 1, 2022, we had no borrowings under this facility and our available borrowing capacity was approximately $ 177.7 million.

Revolving Credit Facility

On May 5, 2020, the Company entered into a credit agreement with Wells Fargo as administrative agent, and other lender related parties.

The Company borrowed $ 150 million and repaid $ 150 million under this Credit Agreement during the first quarter of fiscal 2022.

In connection with the entry into the Senior Secured Asset-Based Revolving Credit Facility noted above, the Company terminated this facility.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Interest Expense

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

Three Months Ended Nine Months Ended

April 2, 2022 April 3, 2021 April 2, 2022 April 3, 2021

Three Months Ended

October 1, 2022 October 2, 2021

Interest expense-contractual interest $ 4.6 $ 1.9

2 unchanged sentences

Total interest expense $ 6.1 $ 3.6

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.

1 unchanged sentence

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

For the three months ended April 2, 2022 and April 3, 2021, the total operating lease costs were $ 3.5 million and $ 3.6 million, respectively.

For the nine months ended April 2, 2022 and April 3, 2021, the total operating lease costs were $ 10.7 million and $ 10.4 million, respectively.

Total variable lease costs were immaterial during the three and nine months ended April 2, 2022 and April 3, 2021.

For the three months ended October 1, 2022 and October 2, 2021, the total operating lease costs were $ 3.3 million and $ 3.5 million, respectively.

Total variable lease costs were immaterial during the three months ended October 1, 2022 and October 2, 2021.

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 2, 2022, the weighted-average remaining lease term was 7.3 years, and the weighted-average discount rate was 4.4 %.

For the three months ended April 2, 2022 and April 3, 2021, cash paid for amounts included in the measurement of operating lease liabilities were $ 3.8 million and $ 3.3 million, respectively;

As of October 1, 2022, the weighted-average remaining lease term was 7.0 years, and the weighted-average discount rate was 4.6 %.

For the three months ended October 1, 2022 and October 2, 2021, cash paid for amounts included in the measurement of operating lease liabilities were $ 4.6 million and $ 5.2 million, respectively;

and operating right-of-use (ROU) assets obtained in exchange of new operating lease liabilities were $ 0.7 million and $ 0.1 million, respectively.

For the nine months ended April 2, 2022 and April 3, 2021, cash paid for amounts included in the measurement of operating lease liabilities were $ 12.5 million and $ 11.4 million, respectively;

and operating ROU assets obtained in exchange of new operating lease liabilities were $ 10.3 million and $ 6.3 million, respectively.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

April 2, 2022

October 1, 2022

Other non-current assets $ 41.6

3 unchanged sentences

Total operating lease liabilities $ 40.3

Future minimum operating lease payments as of April 2, 2022 are as follows ( in millions ):

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Future minimum operating lease payments as of October 1, 2022 are as follows ( in millions ):

Fiscal Years Operating Leases

4 unchanged sentences

Present value of lease liabilities $ 40.3

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.

There were no restructuring charges or benefits recorded during the three months ended April 2, 2022.

During the nine months ended April 2, 2022, the Company recorded restructuring related benefits of $ 0.1 million.

During the three and nine months ended April 3, 2021, the Company recorded restructuring related benefits of $ 0.4 million and of $ 0.8 million, respectively.

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

Fiscal 2019 NSE,

Including AW Plan

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

Cash settlements ( 0.4 )

Restructuring and related benefits ( 0.1 )

End of period balance, April 2, 2022

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company recorded an income tax provision of $ 9.4 million and $ 25.3 million for the three and nine months ended April 2, 2022, respectively.

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

The income tax provision for the three and nine months ended April 2, 2022 and 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.

The income tax provision for the nine months ended April 2, 2022 includes a $ 8.1 million tax benefit recognized upon the statute of limitations on a transfer pricing reserve in a non-US jurisdiction.

The Company recorded an income tax provision of $ 12.2 million and $ 13.6 million for the three months ended October 1, 2022 and October 2, 2021, respectively.

The income tax provision for the three months ended October 1, 2022 and October 2, 2021 primarily relates to income tax in certain foreign and state jurisdictions based on the Company’s forecasted pre-tax income or loss.

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 April 2, 2022, and July 3, 2021, the Company’s unrecognized tax benefits totaled $ 50.2 million and $ 55.5 million, respectively, and are included in deferred taxes and other non-current tax liabilities, net.

The Company had $ 1.6 million accrued for the payment of interest and penalties as of April 2, 2022.

As of October 1, 2022 and July 2, 2022, the Company’s unrecognized tax benefits totaled $ 50.0 million and $ 49.7 million, respectively, and are included in deferred taxes and other non-current tax liabilities, net.

The Company had $ 2.4 million accrued for the payment of interest and penalties as of October 1, 2022.

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.

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Repurchase of Common Stock

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 noted below 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).

During the three months ended April 2, 2022, the Company repurchased 4.2 million shares of its common stock for $ 70.6 million under the 2021 Repurchase Plan.

During the nine months ended April 2, 2022, the Company repurchased 11.7 million shares of its common stock for $ 190.0 million under the 2021 Repurchase Plan.

As of April 2, 2022, there is no remaining authorization under this plan.

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 April 2, 2022 the Company repurchased 0.5 million shares of its common stock for $ 8.1 million under the 2019 Repurchase Plan.

During the nine months ended April 2, 2022, the Company repurchased 1.0 million shares of its common stock for $ 16.6 million under the 2019 Repurchase Plan.

As of April 2, 2022, the Company had remaining authorization of $ 96.4 million for future share repurchases under the 2019 Repurchase Plan.

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.

In September 2022 the Board of Directors authorized a new stock repurchase plan (“2022 Repurchase Plan”) of up to $ 300 million effective October 1, 2022 which will remain in effect until the amount authorized has been fully repurchased or until suspension or termination of the program.

Under the 2022 Repurchase Plan, the Company is authorized to repurchase shares through a variety of methods, including open market purchases, privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans.

The timing of repurchases under the plan will depend upon business and financial market conditions.

The 2022 Repurchase Plan replaces the $ 200 million stock repurchase plan that the Board previously authorized in September 2019 (“2019 Repurchase Plan”).

The 2019 Repurchase Plan expired on September 30, 2022.

During the three months ended October 1, 2022, the Company repurchased 1.3 million shares of its common stock for $ 18.7 million under the 2019 Repurchase Plan.

VIAVI SOLUTIONS INC.

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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 three to four years subject to the employees’ continuing service to the Company.

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

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 2, 2022 and April 3, 2021, the Company granted $ 2.4 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 2, 2022 and April 3, 2021 were estimated to be $ 39.8 million and $ 44.8 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 2, 2022 and April 3, 2021, the Company granted $ 0.4 million and $ 1.1 million, performance-based awards, respectively.

In addition, during the nine months ended April 3, 2021, 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 nine months ended April 2, 2022.

The aggregate grant-date fair value of performance-based awards granted during the nine months ended April 2, 2022 and April 3, 2021 were estimated to be $ 7.9 million and $ 15.7 million, respectively.

During the three months ended October 1, 2022 and October 2, 2021, the Company granted 2.3 million and 2.0 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 1, 2022 and October 2, 2021 were estimated to be $ 33.8 million and $ 33.1 million, respectively.

During the three months ended October 1, 2022 and October 2, 2021, the Company granted 0.7 million and 0.4 million, performance-based awards, respectively.

In addition, during the three months ended October 1, 2022, 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 1, 2022 and October 2, 2021 were estimated to be $ 11.1 million and $ 7.9 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 2, 2022, $ 71.4 million of unrecognized stock-based compensation costs remain to be amortized.

The impact on the Company’s results of operations of recording stock-based compensation by function for the three and nine months ended April 2, 2022 and April 3, 2021, is as follows (in millions):

Three Months Ended Nine Months Ended

April 2, 2022 April 3, 2021 April 2, 2022 April 3, 2021

As of October 1, 2022, $ 91.2 million of unrecognized stock-based compensation costs remain to be amortized.

The impact on the Company’s results of operations of recording stock-based compensation by function for the three months ended October 1, 2022 and October 2, 2021, is as follows (in millions):

Three Months Ended

October 1, 2022 October 2, 2021

Cost of revenues $ 1.2 $ 1.6

2 unchanged sentences

Total stock-based compensation expense $ 13.0 $ 13.6

Approximately $ 1.2 million of stock-based compensation was capitalized to inventory as of April 2, 2022 and April 3, 2021.

Approximately $ 1.2 million and $ 1.3 million of stock-based compensation was capitalized to inventory as of October 1, 2022 and October 2, 2021, respectively.

VIAVI SOLUTIONS INC.

5 unchanged sentences

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

As of April 2, 2022, the U.K.

plan was partially funded while the other plans were unfunded.

As of October 1, 2022, the U.K.

plan was fully funded while the other plans were unfunded.

The Company’s policy for funded plans is to make contributions equal to or greater than the requirements prescribed by law or regulation.

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

During the nine months ended April 2, 2022, the Company contributed $ 0.9 million to the U.K.

During the three months ended October 1, 2022, the Company contributed $ 0.3 million to the U.K.

plan and $ 0.8 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 2, 2022 April 3, 2021 April 2, 2022 April 3, 2021

Three Months Ended

October 1, 2022 October 2, 2021

Service cost $ — $ 0.1

7 unchanged sentences

The Company expects to incur cash outlays of approximately $ 7.9 million related to its defined benefit pension plans during fiscal 2023 to make current benefit payments and fund future obligations.

As of April 2, 2022, approximately $ 5.8 million had been incurred.

As of October 1, 2022, approximately $ 1.1 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 2, 2022.

6 unchanged sentences

The Company determined the likelihood of loss to be probable and accrued £ 5.7 million as of July 2, 2016 in accordance with authoritative guidance on contingencies.

The accrual is included in pension and post-employment benefits, which is a component of other non-current liabilities in the Company’s Consolidated Balance Sheets.

The Company pursued an appeal of the court decision.

In March 2018, the appellate court affirmed the decision of the lower court.

The Company is pursuing a motion for summary judgement on the deed of rectification claim and continues to pursue a claim against the U.K.

The Company pursued a motion for summary judgement on the deed of rectification claim and continues to pursue a claim against the U.K.

law firm responsible for the error.

As of April 2, 2022, the related accrued pension liability was £ 7.0 million or $ 9.2 million.

As of July 2, 2022, the related accrued pension liability of £ 5.4 million or $ 6.5 million was included in pension and post-employment benefits within other non-current liabilities in the Company’s Consolidated Balance Sheets.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In September 2022, the Company received a favorable court decision which removed completely and definitively the obligation to fund the increased pension benefit with retrospective effect to 1999.

As a result of the judgment, and in accordance with authoritative guidance on contingencies, the Company reversed the liability and recorded a gain (reduction to Selling, general and administrative expense in the Company’s Consolidated Statements of Operations) of £ 5.7 million or $ 6.7 million during the three months ended October 1, 2022.

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

2 unchanged sentences

Outstanding Letters of Credit, Performance Bonds and Other Claims

As of April 2, 2022, the Company had standby letters of credit of $ 9.4 million, performance bonds and other claims of $ 2.3 million collateralized by restricted cash.

As of October 1, 2022, the Company had standby letters of credit of $ 11.6 million, performance bonds and other claims of $ 0.8 million collateralized by restricted cash.

Product Warranties

The following table presents the changes in the Company’s warranty reserve during the three and nine months ended April 2, 2022 and April 3, 2021, ( in millions ):

Three Months Ended Nine Months Ended

April 2, 2022 April 3, 2021 April 2, 2022 April 3, 2021

The following table presents the changes in the Company’s warranty reserve during the three months ended October 1, 2022 and October 2, 2021, ( in millions ):

Three Months Ended

October 1, 2022 October 2, 2021

Balance as of beginning of period $ 10.6 $ 9.7

5 unchanged sentences

The Company evaluates its reportable segments in accordance with the authoritative guidance on segment reporting.

The Company’s Chief Executive Officer is the Company’s Chief Operating Decision Maker (CODM).

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

The Company’s Chief Executive Officer, as the Company’s Chief Operating Decision Maker (CODM), uses operating segment financial information to evaluate segment performance and to allocate resources.

The Company’s reportable segments are:

(i) Network Enablement (NE):

NE provides testing solutions that access the network to perform build-out and maintenance tasks.

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

(i) Network Enablement:

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

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

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):

SE solutions are embedded systems that yield network, service and application performance data.

These solutions—including instruments, microprobes and software—monitor, collect and analyze network data to reveal the actual customer experience and to identify opportunities for new revenue streams and network optimization.

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

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(ii) Service Enablement:

SE provides embedded systems and enterprise performance management solutions that give global communications service providers, enterprises and cloud operators visibility into network, service and application data.

(iii) Optical Security and Performance Products:

OSP leverages its core optical coating technologies and volume manufacturing capability to design, manufacture, and sell technologies for the anti-counterfeiting, consumer electronics, industrial, government and automotive markets.

Segment Reporting

4 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.

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.

The Company does not allocate stock-based compensation, acquisition-related charges, amortization of intangibles, restructuring and related charges, impairment of goodwill, non-operating income and expenses, 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 2, 2022 and April 3, 2021 ( in millions ):

Three Months Ended April 2, 2022

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables present information on the Company’s reportable segments for the three months ended October 1, 2022 and October 2, 2021 ( in millions ):

Three Months Ended October 1, 2022

Network and Service Enablement

7 unchanged sentences

Operating margin 13.2 % 42.3 % 16.1 %

Three Months Ended April 3, 2021

Three Months Ended October 2, 2021

Network and Service Enablement

7 unchanged sentences

Operating margin 13.5 % 44.1 % 14.4 %

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended

April 2, 2022 April 3, 2021

Corporate reconciling items impacting gross profit:

Total segment gross profit $ 195.6 $ 191.4

Stock-based compensation ( 1.2 ) ( 1.2 )

Amortization of intangibles ( 7.4 ) ( 8.3 )

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

GAAP gross profit $ 186.9 $ 182.0

Corporate reconciling items impacting operating income:

Total segment operating income $ 67.7 $ 61.4

Stock-based compensation ( 12.8 ) ( 11.0 )

Amortization of intangibles ( 9.6 ) ( 16.6 )

Change in fair value of contingent liability — 2.3

Other charges unrelated to core operating performance (1)

( 4.5 ) ( 0.6 )

Restructuring and related benefits — 0.4

GAAP operating income from continuing operations $ 40.8 $ 35.9

(1) During the three months ended April 2, 2022 and April 3, 2021, other (charges) benefits unrelated to core operating performance primarily consisted of certain acquisition and integration related charges, transformational initiatives such as site consolidations, reorganization, and loss on disposal of long-lived assets.

Nine Months Ended April 2, 2022

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 $ 545.9 $ 42.6 $ 588.5 $ 253.8 $ — $ 842.3

Service revenue 77.7 36.7 114.4 0.4 — 114.8

Net revenue $ 623.6 $ 79.3 $ 702.9 $ 254.2 $ — $ 957.1

Gross profit $ 401.0 $ 54.4 $ 455.4 $ 143.8 $ ( 26.8 ) $ 572.4

Gross margin 64.3 % 68.6 % 64.8 % 56.6 % 59.8 %

Operating income $ 110.7 $ 104.6 $ ( 78.3 ) $ 137.0

Operating margin 15.7 % 41.1 % 14.3 %

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 %

Nine Months Ended

April 2, 2022 April 3, 2021

October 1, 2022 October 2, 2021

Corporate reconciling items impacting gross profit:

9 unchanged sentences

Change in fair value of contingent liability ( 0.5 ) ( 0.3 )

Other charges unrelated to core operating performance (1)

( 8.2 ) ( 0.7 )

Restructuring and related benefits 0.1 0.8

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

GAAP operating income from continuing operations $ 49.8 $ 46.9

(1) During the nine months ended April 2, 2022 and April 3, 2021, other (charges) benefits unrelated to core operating performance primarily consisted of certain acquisition and integration related charges, transformational initiatives such as site consolidations, reorganization, and loss on disposal of long-lived assets.

(1) During the three months ended October 1, 2022 and October 2, 2021, other (charges) benefits unrelated to core operating performance primarily consisted of certain acquisition and integration related charges, transformational initiatives such as site consolidations, reorganization, and loss on disposal of long-lived assets.

VIAVI SOLUTIONS INC.

4 unchanged sentences

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 and nine months ended April 2, 2022 and April 3, 2021 (in millions):

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 1, 2022 and October 2, 2021 (in millions):

Three Months Ended

April 2, 2022 April 3, 2021

October 1, 2022 October 2, 2021

Product Revenue Service Revenue Total Product Revenue Service Revenue Total

10 unchanged sentences

Total net revenue $ 267.7 $ 42.5 $ 310.2 $ 289.1 $ 37.7 $ 326.8

Nine Months Ended

April 2, 2022 April 3, 2021

Product Revenue Service Revenue Total Product Revenue Service Revenue Total

United States $ 239.8 $ 41.1 $ 280.9 $ 202.5 $ 41.3 $ 243.8

Other Americas 64.3 10.8 75.1 51.5 10.3 61.8

Total Americas $ 304.1 $ 51.9 $ 356.0 $ 254.0 $ 51.6 $ 305.6

Asia-Pacific:

Greater China $ 188.1 $ 6.8 $ 194.9 $ 216.3 $ 7.8 $ 224.1

Other Asia 122.4 14.5 136.9 71.4 11.3 82.7

Total Asia-Pacific $ 310.5 $ 21.3 $ 331.8 $ 287.7 $ 19.1 $ 306.8

Switzerland $ 43.4 $ 0.3 $ 43.7 $ 55.7 $ 0.3 $ 56.0

Other EMEA 184.3 41.3 225.6 179.2 40.4 219.6

Total EMEA $ 227.7 $ 41.6 $ 269.3 $ 234.9 $ 40.7 $ 275.6

Total net revenue $ 842.3 $ 114.8 $ 957.1 $ 776.6 $ 111.4 $ 888.0

Subsequent Events

On October 4, 2022 the Company completed the acquisition of Jackson Labs Technologies, Inc., a designer of precision timing, frequency and test and measurement instruments for $ 53.0 million, net of cash acquired, subject to working capital adjustments.

Additional consideration included up to $ 117.0 million in earn out payments to be paid in cash predominantly based on the achievement of certain revenue targets over a three year period.

Due to the closing of this acquisition subsequent to the period end, the Company is currently determining the fair value of assets acquired and liabilities assumed necessary to develop the purchase price allocation.

Therefore, disclosure of the purchase price allocation to the tangible and intangible assets acquired and liabilities assumed is not practicable.

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