What changed in this filing

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Item 1. Financial Statements

2023-02-03 compared with 2022-11-04 · 275 added, 149 removed, 652 unchanged (39% of the section changed)

3 unchanged sentences

(in millions, except per share data)

Three Months Ended

October 1, 2022 October 2, 2021

Three Months Ended Six Months Ended

December 31, 2022 January 1, 2022 December 31, 2022 January 1, 2022

Product revenue $ 241.5 $ 277.4 $ 509.2 $ 566.5

11 unchanged sentences

Amortization of other intangibles 2.2 2.6 4.4 5.3

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

Total operating expenses 144.1 141.2 279.1 289.3

16 unchanged sentences

(in millions)

Three Months Ended

October 1, 2022 October 2, 2021

Three Months Ended Six Months Ended

December 31, 2022 January 1, 2022 December 31, 2022 January 1, 2022

Net income (loss) $ 8.4 $ 34.6 $ 41.0 $ ( 20.2 )

3 unchanged sentences

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 )

— 0.7 ( 0.3 ) 1.5

Net change in accumulated other comprehensive income (loss) 43.3 ( 3.4 ) 0.4 ( 12.1 )

Comprehensive income (loss) $ 51.7 $ 31.2 $ 41.4 $ ( 32.3 )

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

2 unchanged sentences

(in millions, except share and par value data)

October 1, 2022 July 2, 2022

December 31, 2022 July 2, 2022

Current assets:

26 unchanged sentences

1 million shares authorized,

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

no shares issued or outstanding at December 31, 2022 and July 2, 2022

Common stock, $ 0.001 par value;

1 billion shares authorized;

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

225 million shares at December 31, 2022 and 226 million shares at July 2, 2022, issued and outstanding

Additional paid-in capital 70,388.8 70,370.2

7 unchanged sentences

(in millions)

Three Months Ended

October 1, 2022 October 2, 2021

Six Months Ended

December 31, 2022 January 1, 2022

OPERATING ACTIVITIES:

23 unchanged sentences

Acquisitions, net of cash hold back ( 64.4 ) ( 1.2 )

Purchase price adjustment related to business acquisition ( 1.0 ) $ —

Net cash used in investing activities $ ( 95.9 ) $ ( 32.5 )

6 unchanged sentences

Cash paid to third parties in convertible note settlement — ( 3.8 )

Payment of financing obligations ( 0.1 ) —

Proceeds from employee stock purchase plan 3.7 3.7

3 unchanged sentences

Payment of acquired debt ( 0.4 ) —

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

Payment of acquisition related contingent consideration ( 0.5 ) ( 1.2 )

Net cash used in financing activities $ ( 52.7 ) $ ( 2.9 )

Effect of exchange rates on cash, cash equivalents and restricted cash $ ( 0.1 ) $ ( 4.9 )

4 unchanged sentences

(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.

(2) These amounts include both current and non-current balances of restricted cash totaling $ 12.8 million and $ 11.6 million as of December 31, 2022 and January 1, 2022, respectively.

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

2 unchanged sentences

(in millions)

Three Months Ended October 1, 2022

Three Months Ended December 31, 2022

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

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

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

Net income — — — 8.4 — 8.4

Other comprehensive loss — — — — ( 42.9 ) ( 42.9 )

Other comprehensive income — — — — 43.3 43.3

Shares issued under employee stock plans, net of tax 0.2 — ( 0.2 ) — — ( 0.2 )

1 unchanged sentence

Repurchase of common stock ( 2.2 ) — — ( 25.2 ) — ( 25.2 )

Balance at December 31, 2022 224.8 $ 0.2 $ 70,388.8 $ ( 69,545.2 ) $ ( 156.0 ) $ 687.8

Three Months Ended January 1, 2022

Additional Paid-In Capital

Accumulated Deficit

Accumulated Other Comprehensive Loss

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

Three Months Ended October 2, 2021

Net income — — — 34.6 — 34.6

Other comprehensive loss — — — — ( 3.4 ) ( 3.4 )

Shares issued under employee stock plans, net of tax 0.3 — ( 1.4 ) — — ( 1.4 )

Stock-based compensation — — 13.2 — — 13.2

Repurchase of common stock ( 7.5 ) — — ( 119.4 ) — ( 119.4 )

Convertible note settlement (Note 11) — — ( 7.4 ) — — ( 7.4 )

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

Six Months Ended December 31, 2022

Additional Paid-In Capital

2 unchanged sentences

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

Net income — — — 41.0 — 41.0

Other comprehensive income — — — — 0.4 0.4

Shares issued under employee stock plans, net of tax 1.9 — ( 7.5 ) — — ( 7.5 )

Stock-based compensation — — 26.1 — — 26.1

Repurchase of common stock ( 3.5 ) — — ( 43.9 ) — ( 43.9 )

Balance at December 31, 2022 224.8 $ 0.2 $ 70,388.8 $ ( 69,545.2 ) $ ( 156.0 ) $ 687.8

Six Months Ended January 1, 2022

Additional Paid-In Capital

Accumulated Deficit

Accumulated Other Comprehensive Loss

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

Net loss — — — ( 20.2 ) — ( 20.2 )

4 unchanged sentences

Convertible note settlement (Note 11) 10.6 — 151.7 — — 151.7

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

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

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

3 unchanged sentences

The financial information for Viavi Solutions Inc.

(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.

(VIAVI also referred to as the Company) for the three and six months ended December 31, 2022 and January 1, 2022 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.

3 unchanged sentences

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.

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.

There have been no material changes to the Company’s accounting policies during the three and six months ended December 31, 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.

1 unchanged sentence

GAAP for complete financial statements.

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 results for the three and six months ended December 31, 2022 and January 1, 2022 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.

23 unchanged sentences

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.

The reopening of China and ending of its “zero-Covid” policy could have unforeseen impacts on our operations and facilities.

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

39 unchanged sentences

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

October 1, 2022 October 2, 2021

Three Months Ended Six Months Ended

December 31, 2022 January 1, 2022 December 31, 2022 January 1, 2022

Net income (loss) $ 8.4 $ 34.6 $ 41.0 $ ( 20.2 )

8 unchanged sentences

(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.

As of December 31, 2022, the if-converted value is less than the outstanding principal of the 2023 and 2024 Notes, respectively.

Refer to “Note 11.

1 unchanged sentence

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

October 1, 2022 October 2, 2021

Three Months Ended Six Months Ended

December 31, 2022 January 1, 2022 December 31, 2022 January 1, 2022

Restricted stock units (1)

Stock options and Employee Stock Purchase Plan — 1.5

5.0 0.5 3.2 0.8

Shares issuable from Senior Convertible Notes (2)

Total potentially dilutive securities 5.0 0.5 3.2 7.1

(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.

(1) Represents the number of 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 Senior Convertible Notes have been excluded from the dilutive net loss per share computations as their effects were deemed anti-dilutive.

VIAVI SOLUTIONS INC.

2 unchanged sentences

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.

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 ):

For the six months ended December 31, 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

1 unchanged sentence

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

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

Other comprehensive income before reclassification — 0.7 — 0.7

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

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 )

(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, net of reclassification adjustments, for the three months ended October 1, 2022.

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

Net current-period other comprehensive income (loss) — 0.7 ( 0.3 ) 0.4

Ending balance as of December 31, 2022 $ ( 5.0 ) $ ( 143.5 ) $ ( 7.5 ) $ ( 156.0 )

There was no tax impact for the six months ended December 31, 2022.

Refer to “Note 16.

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

On October 5, 2022, the Company acquired all of the equity of Jackson Labs Technologies, LLC (Jackson Labs), a privately held company which specializes in Position, Navigation and Timing (PNT) solutions for critical infrastructure serving both military and civilian applications.

The acquisition enables the Company to broaden its solutions offering into the rapidly developing PNT landscape.

The total purchase consideration includes approximately $ 49.9 million paid in cash at closing and additional contingent consideration of up to $ 117.0 million for which future cash payments are dependent on the achievement of certain operational and revenue targets over the course of a three-year period beginning in January 2023.

The cash consideration paid at closing includes escrow payments of $ 5.0 million for indemnity holdback and $ 2.0 million subject to final cash and net working capital adjustments.

The acquisition meets the definition of a business and has been accounted for in accordance with the authoritative guidance on business combinations;

therefore, the tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the acquisition date.

Acquisition related costs incurred were approximately $ 0.8 million and have been recorded within SG&A in the Consolidated Statements of Operations.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The total purchase consideration was allocated to tangible and intangible assets acquired and liabilities assumed based on the preliminary fair value on the acquisition date.

The following table presents the preliminary allocation of the purchase price ( in millions ):

Cash and cash equivalents $ 1.1

Accounts receivable, net 2.3

Inventory, net 3.0

Goodwill 48.8

Identified intangible assets acquired 30.6

Other non-current assets 0.1

Accounts payable ( 0.6 )

Accrued expenses ( 3.4 )

Deferred revenue ( 2.1 )

Other current liabilities ( 0.5 )

Total purchase consideration $ 79.3

The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition ( in millions, except useful life ):

Estimated Useful Life Amount

Developed technology 6 years $ 25.0

Customer relationship 3 years 2.7

Tradename 2 years 0.5

Backlog 1 year 2.4

Total identifiable assets acquired $ 30.6

Goodwill represents the excess of the preliminary estimated purchase consideration over the preliminary estimates of the fair value of the net tangible and intangible assets acquired and has been allocated to the Network Enablement segment.

Goodwill is primarily attributable to expected synergies in the acquired technologies that may be leveraged by the Company in future PNT offerings.

The goodwill is expected to be deductible for U.S.

income tax purposes.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

9 unchanged sentences

(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.

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.

The earn-out targets were not met so no payment is required.

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Three Months Ended

October 1, 2022 October 2, 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 and six months ended December 31, 2022 and January 1, 2022 ( in millions ):

Three Months Ended Six Months Ended

December 31, 2022 January 1, 2022 December 31, 2022 January 1, 2022

Beginning period balance $ 2.9 $ 4.3 $ 2.5 $ 4.0

Additions to Contingent Consideration 29.4 — 29.4 —

Payments of Contingent Consideration ( 0.5 ) ( 1.2 ) ( 0.5 ) ( 1.2 )

Fair value adjustment of earn-out liabilities 1.3 — 1.8 0.3

4 unchanged sentences

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

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

As of December 31, 2022, and July 2, 2022, the Company had total unbilled receivables of $ 8.0 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.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

October 1, 2022

Three Months Ended

December 31, 2022

Three Months Ended Six Months Ended

Deferred revenue:

2 unchanged sentences

Revenue recognized during the period (2)

( 33.4 ) ( 68.9 )

Balance at end of period $ 94.6 $ 94.6

1 unchanged sentence

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

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

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 October 1, 2022, was $ 246.0 million.

The value of the transaction price allocated to remaining performance obligations as of December 31, 2022, was $ 254.2 million.

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accounts receivable allowance - Credit losses

1 unchanged sentence

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

October 1, 2022

December 31, 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 ):

October 1, 2022 July 2, 2022

December 31, 2022 July 2, 2022

Finished goods $ 48.6 $ 41.6

2 unchanged sentences

Inventories, net $ 120.3 $ 110.1

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Prepayments and other current assets

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

October 1, 2022 July 2, 2022

December 31, 2022 July 2, 2022

Refundable income taxes $ 25.6 $ 14.5

7 unchanged sentences

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

October 1, 2022 July 2, 2022

Fair value of forward contracts $ 11.2 $ 8.4

December 31, 2022 July 2, 2022

Income tax payable $ 10.4 $ 9.6

Operating lease liabilities (Note 12) 9.8 10.1

Fair value of contingent consideration 7.7 1.8

Interest payable 4.8 4.6

Transaction tax payable 4.6 11.5

Warranty accrual 4.1 4.4

Fair value of contingent consideration 2.5 1.8

Transaction tax payable 3.3 11.5

Fair value of forward contracts 2.4 8.4

Other 9.6 5.9

Other current liabilities $ 52.1 $ 56.3

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other non-current liabilities

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

October 1, 2022 July 2, 2022

December 31, 2022 July 2, 2022

Pension and post-employment benefits $ 55.1 $ 59.6

Operating lease liabilities (Note 12) 29.1 33.5

Fair value of contingent consideration 25.5 0.7

Long-term deferred revenue 20.0 19.4

5 unchanged sentences

Other non-current liabilities $ 194.3 $ 170.4

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Investments and Forward Contracts

Short-Term Investments

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.

As of December 31, 2022 and 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.

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, net.

4 unchanged sentences

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

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.

As of December 31, 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 $ 8.4 million and $ 2.4 million is reflected as prepayments and other current assets and other current liabilities, respectively.

2 unchanged sentences

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

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)

As of December 31, 2022 and July 2, 2022, the notional amounts of the forward contracts the Company held to purchase foreign currencies were $ 95.6 million and $ 119.1 million, respectively, and the notional amounts of forward contracts the Company held to sell foreign currencies were $ 26.2 million and $ 80.5 million, respectively.

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

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

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

The foreign exchange forward contracts incurred a gain of $ 6.0 million and a loss of $ 0.7 million for the three and six months ended December 31, 2022, respectively, and losses of $ 0.7 million and $ 2.5 million for the three and six months ended January 1, 2022, respectively.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value Measurements

13 unchanged sentences

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

As of 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 Company’s Level 3 instruments consist of contingent purchase consideration liabilities related to business acquisitions.

The fair value of such earn-out liabilities generally 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.

4 unchanged sentences

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

October 1, 2022 July 2, 2022

December 31, 2022 July 2, 2022

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

Debt available-for-sale securities:

Asset-backed securities (1)

$ 0.6 $ — $ 0.6 $ — $ 0.6 $ — $ 0.6 $ —

Total debt available-for-sale securities 0.6 — 0.6 — 0.6 — 0.6 —

Cash and cash equivalents:

Money market funds (1)

$ 240.5 $ 240.5 $ — $ — $ 313.2 $ 313.2 $ — $ —

Short-term investments:

Trading securities

1.4 1.4 — — 1.4 1.4 — —

Other current assets:

Foreign currency forward contracts 8.4 — 8.4 — 3.8 — 3.8 —

4.5 — 4.5 — 3.8 — 3.8 —

Other non-current assets:

debt available-for-sale securities asset-backed securities 0.6 — 0.6 — 0.6 — 0.6 —

Total assets $ 250.9 $ 241.9 $ 9.0 $ — $ 319.0 $ 314.6 $ 4.4 $ —

Current liabilities:

Foreign currency forward contracts $ 2.4 $ — $ 2.4 $ — $ 8.4 $ — $ 8.4 $ —

$ 11.2 $ — $ 11.2 $ — $ 8.4 $ — $ 8.4 $ —

Contingent consideration (2)

1 unchanged sentence

Total liabilities $ 35.6 $ — $ 2.4 $ 33.2 $ 10.9 $ — $ 8.4 $ 2.5

(1) Included 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.

(1) Includes, as of December 31, 2022, $ 228.6 million in cash and cash equivalents, $ 4.1 million in restricted cash, and $ 7.8 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.

(3) Included in short-term investments on the Company’s Consolidated Balance Sheets.

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

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

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

3 unchanged sentences

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

October 1, 2022 July 2, 2022

December 31, 2022 July 2, 2022

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

16 unchanged sentences

Currency translation adjustments 0.6 1.0 — 1.6

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

Balance as of December 31, 2022 $ 392.2 $ 14.8 $ 42.2 $ 449.2

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 months ended October 1, 2022.

There were no events or changes in circumstances which triggered an impairment review during the three and six months ended December 31, 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 October 1, 2022 Gross Carrying Amount Accumulated Amortization Net

As of December 31, 2022 Gross Carrying Amount Accumulated Amortization Net

Acquired developed technology $ 446.4 $ ( 388.6 ) $ 57.8

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

October 1, 2022 October 2, 2021

Three Months Ended Six Months Ended

December 31, 2022 January 1, 2022 December 31, 2022 January 1, 2022

Cost of revenues $ 5.7 $ 7.4 $ 12.8 $ 15.3

1 unchanged sentence

Total amortization of intangible assets $ 7.9 $ 10.0 $ 17.2 $ 20.6

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 ):

Based on the carrying amount of acquired developed technology, customer relationships and other intangibles as of December 31, 2022, and assuming no future impairment of the underlying assets, the estimated future amortization is as follows ( in millions ):

Remainder of 2023 $ 16.1

2 unchanged sentences

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.

As of December 31, 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 ):

October 1, 2022 July 2, 2022

December 31, 2022 July 2, 2022

Principal amount of 1.75 % Senior Convertible Notes

1 unchanged sentence

Unamortized 1.75 % Senior Convertible Notes debt issuance cost

( 0.1 ) ( 0.1 )

Other short-term debt — 0.4

6 unchanged sentences

Unamortized 1.00 % Senior Convertible Notes debt issuance cost

( 0.8 ) ( 1.0 )

Long-term debt $ 617.2 $ 616.5

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

The Company was in compliance with all debt covenants as of December 31, 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 October 1, 2022, the expected remaining term of the 2029 Notes is 7.0 years.

As of December 31, 2022, the expected remaining term of the 2029 Notes is 6.8 years.

1.75 % Senior Convertible Notes (2023 Notes)

3 unchanged sentences

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

As of December 31, 2022, the expected remaining term of the 2023 Notes is 0.4 years.

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

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

As of December 31, 2022, the expected remaining term of the 2024 Notes is 1.2 years.

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

15 unchanged sentences

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.

As of December 31, 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

8 unchanged sentences

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

As of December 31, 2022, we had no borrowings under this facility and our available borrowing capacity was approximately $ 169.6 million.

Revolving Credit Facility

6 unchanged sentences

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

Three Months Ended

October 1, 2022 October 2, 2021

Three Months Ended Six Months Ended

December 31, 2022 January 1, 2022 December 31, 2022 January 1, 2022

Interest expense-contractual interest $ 4.6 $ 5.3 $ 9.2 $ 7.6

5 unchanged sentences

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

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.

For the three months ended December 31, 2022 and January 1, 2022, the total operating lease costs were $ 3.2 million and $ 3.7 million, respectively.

For the six months ended December 31, 2022 and January 1, 2022, the total operating lease costs were $ 6.5 million and $ 7.2 million, respectively.

Total variable lease costs were immaterial during the three and six months ended December 31, 2022 and January 1, 2022.

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 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;

As of December 31, 2022, the weighted-average remaining lease term was 7.1 years, and the weighted-average discount rate was 4.6 %.

For the three months ended December 31, 2022 and January 1, 2022, cash paid for amounts included in the measurement of operating lease liabilities were $ 3.6 million and $ 3.5 million, respectively;

and operating right-of-use (ROU) assets obtained in exchange of new operating lease liabilities were $ 2.3 million and $ 6.4 million, respectively.

For the six months ended December 31, 2022 and January 1, 2022, cash paid for amounts included in the measurement of operating lease liabilities were $ 8.2 million and $ 8.7 million, respectively;

and operating ROU assets obtained in exchange of new operating lease liabilities were $ 3.0 million and $ 6.5 million, respectively.

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

October 1, 2022

December 31, 2022

Other non-current assets $ 40.3

5 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Future minimum operating lease payments as of December 31, 2022 are as follows ( in millions ):

Fiscal Years Operating Leases

4 unchanged sentences

Present value of lease liabilities $ 38.9

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 Company recorded an income tax provision of $ 10.5 million and $ 22.7 million for the three and six months ended December 31, 2022, respectively.

The Company recorded an income tax provision of $ 2.3 million and $ 15.9 million for the three and six months ended January 1, 2022, respectively.

The income tax provision for the three and six months ended December 31, 2022 and January 1, 2022 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 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.

As of December 31, 2022 and July 2, 2022, the Company’s unrecognized tax benefits totaled $ 50.3 million and $ 49.7 million, respectively, and are included in deferred taxes and other non-current tax liabilities, net.

The Company had $ 2.6 million accrued for the payment of interest and penalties as of December 31, 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.

5 unchanged sentences

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.

During the three months ended December 31, 2022, the Company repurchased 2.2 million shares of its common stock for $ 25.2 million under the 2022 Repurchase Plan.

As of December 31, 2022, the Company had remaining authorization of $ 274.8 million for future share repurchases under the 2022 Repurchase Plan.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Stock-Based Compensation

8 unchanged sentences

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 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.

During the six months ended December 31, 2022 and January 1, 2022, the Company granted 2.6 million and 2.1 million time-based restricted stock awards, respectively.

The aggregate grant-date fair value of time-based restricted stock awards granted during the six months ended December 31, 2022 and January 1, 2022 were estimated to be $ 36.7 million and $ 35.0 million, respectively.

During the six months ended December 31, 2022 and January 1, 2022, the Company granted 0.7 million and 0.4 million, performance-based awards, respectively.

In addition, during the six months ended December 31, 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 six months ended January 1, 2022.

The aggregate grant-date fair value of performance-based awards granted during the six months ended December 31, 2022 and January 1, 2022 were estimated to be $ 11.5 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.

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

As of December 31, 2022, $ 81.3 million of unrecognized stock-based compensation costs remain to be amortized.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The impact on the Company’s results of operations of recording stock-based compensation by function for the three and six months ended December 31, 2022 and January 1, 2022, is as follows (in millions):

Three Months Ended Six Months Ended

December 31, 2022 January 1, 2022 December 31, 2022 January 1, 2022

Cost of revenues $ 1.2 $ 1.2 $ 2.4 $ 2.8

2 unchanged sentences

Total stock-based compensation expense $ 13.0 $ 13.3 $ 26.0 $ 26.9

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Approximately $ 1.2 million of stock-based compensation was capitalized to inventory as of December 31, 2022 and January 1, 2022.

Employee Pension and Other Benefit Plans

3 unchanged sentences

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

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

As of December 31, 2022, the U.K.

plan was fully funded while the other plans were unfunded.

1 unchanged sentence

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

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

During the six months ended December 31, 2022, the Company contributed $ 0.6 million to the U.K.

plan and $ 1.7 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

October 1, 2022 October 2, 2021

Three Months Ended Six Months Ended

December 31, 2022 January 1, 2022 December 31, 2022 January 1, 2022

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 October 1, 2022, approximately $ 1.1 million had been incurred.

As of December 31, 2022, approximately $ 2.3 million had been incurred.

These payments have been estimated based on the same assumptions used to measure the Company’s projected benefit obligation at July 2, 2022.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Commitments and Contingencies

10 unchanged sentences

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.

4 unchanged sentences

Outstanding Letters of Credit, Performance Bonds and Other Claims

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.

As of December 31, 2022, the Company had standby letters of credit of $ 11.9 million, performance bonds and other claims of $ 0.9 million collateralized by restricted cash.

Product Warranties

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

The following table presents the changes in the Company’s warranty reserve during the three and six months ended December 31, 2022 and January 1, 2022, ( in millions ):

Three Months Ended Six Months Ended

December 31, 2022 January 1, 2022 December 31, 2022 January 1, 2022

Balance as of beginning of period $ 9.5 $ 10.3 $ 10.6 $ 9.7

3 unchanged sentences

Balance as of end of period $ 9.4 $ 10.8 $ 9.4 $ 10.8

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Operating Segments and Geographic Information

7 unchanged sentences

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(ii) Service Enablement:

14 unchanged sentences

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

The following tables present information on the Company’s reportable segments for the three months ended December 31, 2022 and January 1, 2022 ( in millions ):

Three Months Ended December 31, 2022

Network and Service Enablement

7 unchanged sentences

Operating margin 8.9 % 35.5 % 8.0 %

Three Months Ended October 2, 2021

Three Months Ended January 1, 2022

Network and Service Enablement

8 unchanged sentences

Three Months Ended

October 1, 2022 October 2, 2021

December 31, 2022 January 1, 2022

Corporate reconciling items impacting gross profit:

2 unchanged sentences

Amortization of intangibles ( 5.7 ) ( 7.4 )

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

GAAP gross profit $ 167.0 $ 190.5

4 unchanged sentences

Change in fair value of contingent liability ( 1.3 ) —

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

Other charges unrelated to core operating performance (1)

( 0.9 ) ( 0.8 )

Restructuring and related benefits — 0.1

GAAP operating income from continuing operations $ 22.9 $ 49.3

(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.

(1) During the three months ended December 31, 2022 and January 1, 2022, other charges 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Six Months Ended December 31, 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 $ 316.5 $ 24.1 $ 340.6 $ 168.6 $ — $ 509.2

Service revenue 58.1 27.3 85.4 0.1 — 85.5

Net revenue $ 374.6 $ 51.4 $ 426.0 $ 168.7 $ — $ 594.7

Gross profit $ 240.7 $ 34.3 $ 275.0 $ 92.3 $ ( 15.5 ) $ 351.8

Gross margin 64.3 % 66.7 % 64.6 % 54.7 % 59.2 %

Operating income $ 47.3 $ 66.1 $ ( 40.7 ) $ 72.7

Operating margin 11.1 % 39.2 % 12.2 %

Six Months Ended January 1, 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 $ 369.2 $ 28.1 $ 397.3 $ 169.2 $ — $ 566.5

Service revenue 50.1 24.7 74.8 0.3 — 75.1

Net revenue $ 419.3 $ 52.8 $ 472.1 $ 169.5 $ — $ 641.6

Gross profit $ 270.7 $ 36.1 $ 306.8 $ 96.8 $ ( 18.1 ) $ 385.5

Gross margin 64.6 % 68.4 % 65.0 % 57.1 % 60.1 %

Operating income $ 76.3 $ 71.3 $ ( 51.4 ) $ 96.2

Operating margin 16.2 % 42.1 % 15.0 %

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Six Months Ended

December 31, 2022 January 1, 2022

Corporate reconciling items impacting gross profit:

Total segment gross profit $ 367.3 $ 403.6

Stock-based compensation ( 2.4 ) ( 2.8 )

Amortization of intangibles ( 12.8 ) ( 15.3 )

Other charges unrelated to core operating performance (1)

GAAP gross profit $ 351.8 $ 385.5

Corporate reconciling items impacting operating income:

Total segment operating income $ 113.4 $ 147.6

Stock-based compensation ( 26.0 ) ( 26.9 )

Amortization of intangibles ( 17.2 ) ( 20.6 )

Change in fair value of contingent liability ( 1.8 ) ( 0.3 )

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

Restructuring and related benefits — 0.1

GAAP operating income from continuing operations $ 72.7 $ 96.2

(1) During the six months ended December 31, 2022 and January 1, 2022, other benefits (charges) 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.

The Company operates primarily in three geographic regions:

2 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 months ended October 1, 2022 and October 2, 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 and six months ended December 31, 2022 and January 1, 2022 (in millions):

Three Months Ended

October 1, 2022 October 2, 2021

December 31, 2022 January 1, 2022

Product Revenue Service Revenue Total Product Revenue Service Revenue Total

10 unchanged sentences

Total net revenue $ 241.5 $ 43.0 $ 284.5 $ 277.4 $ 37.4 $ 314.8

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Six Months Ended

December 31, 2022 January 1, 2022

Product Revenue Service Revenue Total Product Revenue Service Revenue Total

United States $ 158.5 $ 30.6 $ 189.1 $ 167.3 $ 26.2 $ 193.5

Other Americas 33.4 6.8 40.2 46.4 7.3 53.7

Total Americas $ 191.9 $ 37.4 $ 229.3 $ 213.7 $ 33.5 $ 247.2

Asia-Pacific:

Greater China $ 122.4 $ 3.9 $ 126.3 $ 124.2 $ 4.9 $ 129.1

Other Asia 76.7 13.7 90.4 79.1 9.1 88.2

Total Asia-Pacific $ 199.1 $ 17.6 $ 216.7 $ 203.3 $ 14.0 $ 217.3

Switzerland $ 28.8 $ 0.2 $ 29.0 $ 24.7 $ 0.2 $ 24.9

Other EMEA 89.4 30.3 119.7 124.8 27.4 152.2

Total EMEA $ 118.2 $ 30.5 $ 148.7 $ 149.5 $ 27.6 $ 177.1

Total net revenue $ 509.2 $ 85.5 $ 594.7 $ 566.5 $ 75.1 $ 641.6

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.

Restructuring plan

On February 1, 2023, the Company approved a restructuring and workforce reduction plan (the Plan) intended to improve operational efficiencies and better align the Company’s workforce with current business needs and strategic growth opportunities.

The Company expects approximately 5 % of its global workforce to be affected and estimates it will incur charges of approximately $ 15 million in connection with the Plan.

The Company anticipates the Plan to be substantially complete by the end of fiscal 2023.

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