What changed in this filing

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Item 1. Financial Statements

2023-05-03 compared with 2023-02-03 · 234 added, 197 removed, 730 unchanged (37% of the section changed)

3 unchanged sentences

(in millions, except per share data)

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

Product revenue $ 205.2 $ 275.8 $ 714.4 $ 842.3

11 unchanged sentences

Amortization of other intangibles 2.1 2.2 6.5 7.5

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

Restructuring and related charges (benefits) 10.2 — 10.2 ( 0.1 )

Total operating expenses 143.1 146.1 422.2 435.4

Income from operations 22.9 49.3 72.7 96.2

(Loss) income from operations ( 2.1 ) 40.8 70.6 137.0

Loss on convertible note settlement (Note 11) — ( 6.4 ) — ( 98.7 )

Loss on convertible note modification (Note 11) ( 2.2 ) — ( 2.2 ) —

Interest income and other income, net 1.6 0.6 4.9 3.1

Interest expense ( 6.7 ) ( 6.4 ) ( 19.0 ) ( 17.1 )

Income (loss) before income taxes 18.9 36.9 63.7 ( 4.3 )

(Loss) income before income taxes ( 9.4 ) 28.6 54.3 24.3

Provision for income taxes 6.0 9.4 28.7 25.3

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

Net income (loss) per share:

Net (loss) income $ ( 15.4 ) $ 19.2 $ 25.6 $ ( 1.0 )

Net (loss) income per share:

Basic $ ( 0.07 ) $ 0.08 $ 0.11 $ —

7 unchanged sentences

(in millions)

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 )

Three Months Ended Nine Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

Net (loss) income $ ( 15.4 ) $ 19.2 $ 25.6 $ ( 1.0 )

Other comprehensive income (loss):

Net change in cumulative translation adjustment, net of tax 13.4 ( 12.8 ) 14.1 ( 26.5 )

Unrealized holding gain arising during period — — — 0.1

Unrealized holding (loss) gain arising during period ( 0.3 ) — ( 0.3 ) 0.1

Amortization of net actuarial losses and other pension adjustments

1 unchanged sentence

Net change in accumulated other comprehensive income (loss) 13.1 ( 12.0 ) 13.5 ( 24.1 )

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

Comprehensive (loss) income $ ( 2.3 ) $ 7.2 $ 39.1 $ ( 25.1 )

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

2 unchanged sentences

(in millions, except share and par value data)

December 31, 2022 July 2, 2022

April 1, 2023 July 2, 2022

Current assets:

18 unchanged sentences

Accrued expenses 27.8 29.3

Short-term debt ( Note11 )

Short-term debt 164.2 68.4

Other current liabilities 60.2 56.3

5 unchanged sentences

1 million shares authorized,

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

no shares issued or outstanding at April 1, 2023 and July 2, 2022

Common stock, $ 0.001 par value;

1 billion shares authorized;

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

222 million shares at April 1, 2023 and 226 million shares at July 2, 2022, issued and outstanding

Additional paid-in capital 70,415.6 70,370.2

7 unchanged sentences

(in millions)

Six Months Ended

December 31, 2022 January 1, 2022

Nine Months Ended

April 1, 2023 April 2, 2022

OPERATING ACTIVITIES:

5 unchanged sentences

Loss on convertible note settlement — 98.7

Loss on convertible note modification 2.2 —

Amortization of debt issuance costs 2.3 2.2

Deferred taxes, net 4.1 ( 10.8 )

Restructuring 10.2 —

Gain on legal settlement ( 6.7 ) —

17 unchanged sentences

FINANCING ACTIVITIES:

Proceeds from issuance of 3.75 % senior notes

Proceeds from issuance of debt ( Note 11 )

$ 118.0 $ 400.0

Payment of debt issuance costs ( 3.9 ) ( 10.2 )

7 unchanged sentences

Repayment of revolving credit facility — ( 150.0 )

Payment of acquisition related holdback ( 0.3 ) —

Payment of acquired debt ( 0.4 ) —

Payment of acquisition related obligations ( 0.7 ) ( 0.9 )

Payment of acquisition related contingent consideration ( 6.6 ) ( 4.1 )

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

Net cash provided by (used in) financing activities $ 29.3 $ ( 151.3 )

Effect of exchange rates on cash, cash equivalents and restricted cash $ 5.8 $ ( 8.9 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 75.9 ) 35.3

Net increase (decrease) in cash, cash equivalents and restricted cash 20.4 ( 106.9 )

Cash, cash equivalents and restricted cash at the beginning of the period (1)

2 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 $ 12.8 million and $ 11.6 million as of December 31, 2022 and January 1, 2022, respectively.

(2) These amounts include both current and non-current balances of restricted cash totaling $ 12.6 million and $ 11.7 million as of April 1, 2023 and April 2, 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 December 31, 2022

Three Months Ended April 1, 2023

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

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

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

Net loss — — — ( 15.4 ) — ( 15.4 )

Other comprehensive income — — — — 13.1 13.1

2 unchanged sentences

Repurchase of common stock ( 2.8 ) — — ( 30.0 ) — ( 30.0 )

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

Convertible note modification (Note 11) — — 10.1 — 10.1

Balance at April 1, 2023 222.4 $ 0.2 $ 70,415.6 $ ( 69,590.6 ) $ ( 142.9 ) $ 682.3

Three Months Ended April 2, 2022

Additional Paid-In Capital

1 unchanged sentence

Accumulated Other Comprehensive Loss

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

Net income — — — 19.2 — 19.2

4 unchanged sentences

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

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

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

Nine Months Ended April 1, 2023

Additional Paid-In Capital

7 unchanged sentences

Repurchase of common stock ( 6.3 ) — — ( 73.9 ) — ( 73.9 )

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

Convertible note modification (Note 11) — — 10.1 — 10.1

Balance at April 1, 2023 222.4 $ 0.2 $ 70,415.6 $ ( 69,590.6 ) $ ( 142.9 ) $ 682.3

Nine Months Ended April 2, 2022

Additional Paid-In Capital

8 unchanged sentences

Convertible note settlement (Note 11) 10.6 — 142.8 — — 142.8

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

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

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 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.

(VIAVI also referred to as the Company) for the three and nine months ended April 1, 2023 and April 2, 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 and six months ended December 31, 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 nine months ended April 1, 2023 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 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 results for the three and nine months ended April 1, 2023 and April 2, 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.

12 unchanged sentences

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.

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 the US, 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;

3 unchanged sentences

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.

Foreign companies in China are facing increasing operational challenges and enhanced scrutiny from governmental entities in region.

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.

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.

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.

The impact on our future operations and results remains uncertain.

While the Covid pandemic has abated and normal business operations have largely resumed, events have led, at times, to slowdowns in shipping and commercial activities.

Through lingering economic turbulence, 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.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Recently Issued Accounting Pronouncements

5 unchanged sentences

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.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Recent Accounting Pronouncements Not Yet Adopted

25 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 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 )

Three Months Ended Nine Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

Net (loss) income $ ( 15.4 ) $ 19.2 $ 25.6 $ ( 1.0 )

Weighted-average shares outstanding:

3 unchanged sentences

Diluted 224.1 236.8 227.6 232.1

Net income (loss) per share:

Net (loss) income per share:

Basic $ ( 0.07 ) $ 0.08 $ 0.11 $ —

Diluted $ ( 0.07 ) $ 0.08 $ 0.11 $ —

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

(1) Represents the dilutive impact for the Company’s 1.75 % Senior Convertible Notes due 2023 (2023 Notes), the 1.00 % Senior Convertible Notes due 2024 (2024 Notes) and the 1.625 % Senior Convertible Notes due 2026 (2026 Notes).

As of April 1, 2023, the if-converted value is less than the outstanding principal of the 2023, 2024 and 2026 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 Six Months Ended

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

Three Months Ended Nine Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

Restricted stock units (1)

8 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 six months ended December 31, 2022, the changes in accumulated other comprehensive loss, net of tax, by component were as follows ( in millions ):

For the nine months ended April 1, 2023, 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 income before reclassification — 0.7 — 0.7

Other comprehensive (loss) income before reclassification ( 0.3 ) 14.1 — 13.8

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

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 )

(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 six months ended December 31, 2022.

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

Net current-period other comprehensive (loss) income ( 0.3 ) 14.1 ( 0.3 ) 13.5

Ending balance as of April 1, 2023 $ ( 5.3 ) $ ( 130.1 ) $ ( 7.5 ) $ ( 142.9 )

There was no tax impact for the nine months ended April 1, 2023.

Refer to “Note 17.

14 unchanged sentences

Inventory, net 3.2

Goodwill 48.8

Identified intangible assets acquired 30.6

5 unchanged sentences

Total purchase consideration $ 79.0

(1) Goodwill at acquisition date of $ 48.8 million reduced by measurement period adjustment of $ 0.5 million.

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 ):

9 unchanged sentences

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.

4 unchanged sentences

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

1 unchanged sentence

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.

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

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

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 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

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 1, 2023 and April 2, 2022 ( in millions ):

Three Months Ended Nine Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

Beginning period balance $ 33.2 $ 3.1 $ 2.5 $ 4.0

7 unchanged sentences

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

As of December 31, 2022, and July 2, 2022, the Company had total unbilled receivables of $ 8.0 million and $ 7.3 million, respectively.

As of April 1, 2023, and July 2, 2022, the Company had total unbilled receivables of $ 11.9 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 ):

December 31, 2022

Three Months Ended Six Months Ended

April 1, 2023

Three Months Ended Nine Months Ended

Deferred revenue:

7 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 December 31, 2022, was $ 254.2 million.

The value of the transaction price allocated to remaining performance obligations as of April 1, 2023, was $ 244.2 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)

December 31, 2022

April 1, 2023

Allowance for credit losses $ 1.4 $ 0.4 $ ( 0.8 ) $ 1.0

2 unchanged sentences

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

December 31, 2022 July 2, 2022

April 1, 2023 July 2, 2022

Finished goods $ 49.6 $ 41.6

2 unchanged sentences

Inventories, net $ 125.9 $ 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 ):

December 31, 2022 July 2, 2022

April 1, 2023 July 2, 2022

Refundable income taxes $ 30.7 $ 14.5

7 unchanged sentences

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

December 31, 2022 July 2, 2022

April 1, 2023 July 2, 2022

Income tax payable $ 10.2 $ 9.6

Operating lease liabilities (Note 12) 10.1 10.1

Fair value of contingent consideration 7.7 1.8

Interest payable 8.4 4.6

Warranty accrual 4.1 4.4

Restructuring accrual (Note 13) 7.4 —

Acquisition related holdback and related accruals 4.5 0.1

Transaction tax payable 4.5 11.5

Warranty accrual 4.2 4.4

Fair value of forward contracts 1.5 8.4

Fair value of contingent consideration 1.1 1.8

Other 8.3 5.8

Other current liabilities $ 60.2 $ 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 ):

December 31, 2022 July 2, 2022

April 1, 2023 July 2, 2022

Pension and post-employment benefits $ 55.0 $ 59.6

8 unchanged sentences

Other non-current liabilities $ 194.6 $ 170.4

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Investments and Forward Contracts

Short-Term Investments

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.

As of April 1, 2023, the Company’s short-term investments of $ 1.5 million were comprised primarily of trading securities related to the deferred compensation plan, of which $ 1.0 million was invested in equity securities, $ 0.2 million was invested in debt securities and $ 0.3 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.

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 December 31, 2022, the Company had forward contracts that were effectively closed but not settled with the counterparties as of the balance sheet date.

As of April 1, 2023, 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 $ 2.3 million and $ 1.5 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 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 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.

As of April 1, 2023 and July 2, 2022, the notional amounts of the forward contracts the Company held to purchase foreign currencies were $ 97.8 million and $ 119.1 million, respectively, and the notional amounts of forward contracts the Company held to sell foreign currencies were $ 20.2 million and $ 80.5 million, respectively.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

The foreign exchange forward contracts incurred gains of $ 0.8 million and no gains or losses for three and nine months ended April 1, 2023, respectively, and losses of $ 1.6 million and $ 4.1 million for the three and nine months ended April 2, 2022, respectively.

Fair Value Measurements

14 unchanged sentences

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 such earn-out liabilities are 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 ):

December 31, 2022 July 2, 2022

April 1, 2023 July 2, 2022

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

15 unchanged sentences

Total liabilities $ 26.1 $ — $ 1.5 $ 24.6 $ 10.9 $ — $ 8.4 $ 2.5

(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.

(1) Includes, as of April 1, 2023, $ 317.0 million in cash and cash equivalents, $ 4.4 million in restricted cash, and $ 7.4 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

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.

If measured at fair value in the Consolidated Balance Sheets, the Company’s 3.75 % Senior Notes (2029 Notes), 1.625 % Senior Convertible Notes (2026 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 debt measured at fair value for the periods presented are as follows:

December 31, 2022 July 2, 2022

April 1, 2023 July 2, 2022

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

5 unchanged sentences

97.4 — 97.4 — 250.7 — 250.7 —

1.75 % Senior Convertible Notes

67.9 — 67.9 — 73.4 — 73.4 —

Total liabilities $ 766.8 $ — $ 766.8 $ — $ 661.6 $ — $ 661.6 $ —

8 unchanged sentences

Acquisition 60.0 — — 60.0

Measurement period adjustment ( 0.5 ) — — ( 0.5 )

Currency translation adjustments 3.6 1.2 — 4.8

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

Balance as of April 1, 2023 $ 394.7 $ 15.0 $ 42.2 $ 451.9

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

In the fourth quarter of fiscal 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 six months ended December 31, 2022.

There were no events or changes in circumstances which triggered an impairment review during the three and nine months ended April 1, 2023.

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 December 31, 2022 Gross Carrying Amount Accumulated Amortization Net

As of April 1, 2023 Gross Carrying Amount Accumulated Amortization Net

Acquired developed technology (1)

$ 445.8 $ ( 394.2 ) $ 51.6

Customer relationships 193.7 ( 183.0 ) 10.7

6 unchanged sentences

Total intangibles $ 642.3 $ ( 588.1 ) $ 54.2

(1) During the third quarter of fiscal 2023, we identified impairment indicators for a developed technology monitoring intangible, resulting in a $ 0.6 million non-cash impairment charge.

This charge has been recorded within SG&A in the Consolidated Statements of Operations.

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

2 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

Cost of revenues $ 5.9 $ 7.4 $ 18.7 $ 22.7

1 unchanged sentence

Total amortization of intangible assets $ 8.0 $ 9.6 $ 25.2 $ 30.2

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 ):

Based on the carrying amount of acquired developed technology, customer relationships and other intangibles as of April 1, 2023, and assuming no future impairment of the underlying assets, the estimated future amortization is as follows ( in millions ):

Remainder of 2023 $ 8.0

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 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.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of April 1, 2023 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 debt discount and issuance costs.

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

December 31, 2022 July 2, 2022

April 1, 2023 July 2, 2022

Principal amount of 1.00 % Senior Convertible Notes

$ 68.1 $ 68.1

Unamortized 1.00 % Senior Convertible Notes debt issuance cost

( 0.1 ) ( 0.1 )

Principal amount of 1.75 % Senior Convertible Notes

Unamortized 1.75 % Senior Convertible Notes debt issuance cost

Other short-term debt — 0.4

6 unchanged sentences

Unamortized 1.00 % Senior Convertible Notes debt issuance cost

( 0.8 ) ( 1.0 )

Principal amount of 1.625 % Senior Convertible Notes

Unamortized 1.625 % Senior Convertible Notes debt discount

Unamortized 1.625 % Senior Convertible Notes debt issuance cost

Long-term debt $ 627.9 $ 616.5

The Company was in compliance with all debt covenants as of December 31, 2022 and July 2, 2022.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company was in compliance with all debt covenants as of April 1, 2023 and July 2, 2022.

1.625 % Senior Convertible Notes (2026 Notes)

On March 6, 2023, the Company issued $ 250.0 million aggregate principal amount of 1.625 % Senior Convertible Notes due 2026 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

The Company issued $ 132.0 million aggregate principal amount of the 2026 Notes to certain holders of the 1.00 % Senior Convertible Notes due 2024 in exchange for $ 127.5 million principal amount of the 2024 Notes and issued and sold $ 118.0 million aggregate principal amount of the 2026 Notes in a private placement to accredited institutional buyers (the Subscription Transactions).

Proceeds of the 2026 Notes Subscription Transactions amounted to $ 113.8 million after issuance costs of $ 4.2 million.

The exchange resulted in $ 2.2 million of the issuance costs to be recorded as loss on convertible note modification on the Consolidated Statements of Operations.

The remaining issuance costs of $ 2.0 million was capitalized within long-term debt (as a contra-balance) on the Consolidated Balance Sheets and will be amortized as an adjustment to interest expense on a straight-line basis until maturity.

The 2026 Notes are an unsecured obligation of the Company and bear annual interest of 1.625 %, payable semi-annually in arrears on March 15 and September 15 of each year, beginning September 15, 2023.

The 2026 Notes mature on March 15, 2026 unless earlier converted, redeemed or repurchased.

As of April 1, 2023, the expected remaining term of the 2026 Notes is 3.0 years.

3.75 % Senior Notes (2029 Notes)

2 unchanged sentences

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

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

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

The 2029 Notes mature on October 1, 2029

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

unless earlier redeemed or repurchased.

As of April 1, 2023, the expected remaining term of the 2029 Notes is 6.5 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 December 31, 2022, the expected remaining term of the 2023 Notes is 0.4 years.

As of April 1, 2023, the expected remaining term of the 2023 Notes is 0.2 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 December 31, 2022, the expected remaining term of the 2024 Notes is 1.2 years.

As of April 1, 2023, the expected remaining term of the 2024 Notes is 0.9 years.

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

7 unchanged sentences

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.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

4 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 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.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

As of April 1, 2023, we had no borrowings under this facility and our available borrowing capacity was approximately $ 169.4 million.

Revolving Credit Facility

2 unchanged sentences

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 Six Months Ended

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

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

Three Months Ended Nine Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

Interest expense-contractual interest $ 4.8 $ 4.8 $ 14.0 $ 12.0

Amortization of debt issuance cost 0.6 0.6 1.8 2.2

Accretion of debt discount 0.4 — 0.4 —

Other 0.9 1.0 2.8 2.9

Total interest expense $ 6.7 $ 6.4 $ 19.0 $ 17.1

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 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 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;

For the three months ended April 1, 2023 and April 2, 2022, the total operating lease costs were $ 3.2 million and $ 3.5 million, respectively.

For the nine months ended April 1, 2023 and April 2, 2022, the total operating lease costs were $ 9.7 million and $ 10.7 million, respectively.

Total variable lease costs were immaterial during the three and nine months ended April 1, 2023 and April 2, 2022.

The total operating costs were included in cost of revenues, R&D and SG&A in the Company’s Consolidated Statements of Operations.

As of April 1, 2023, the weighted-average remaining lease term was 6.9 years, and the weighted-average discount rate was 4.7 %.

For the three months ended April 1, 2023 and April 2, 2022, cash paid for amounts included in the measurement of operating lease liabilities were $ 2.9 million and $ 3.8 million, respectively;

and operating right-of-use (ROU) assets obtained in exchange of new operating lease liabilities were $ 0.9 million and $ 3.9 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;

For the nine months ended April 1, 2023 and April 2, 2022, cash paid for amounts included in the measurement of operating lease liabilities were $ 11.1 million and $ 12.5 million, respectively;

and operating ROU assets obtained in exchange of new operating lease liabilities were $ 3.9 million and $ 10.3 million, respectively.

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

December 31, 2022

April 1, 2023

Other non-current assets $ 40.5

3 unchanged sentences

Total operating lease liabilities $ 39.5

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Future minimum operating lease payments as of April 1, 2023 are as follows ( in millions ):

Fiscal Years Operating Leases

4 unchanged sentences

Present value of lease liabilities $ 39.5

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.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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

The Company’s restructuring charges include severance, benefit and outplacement costs to eliminate a specified number of positions.

The Company expects approximately 5 % of its global workforce to be affected.

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

A summary of the activity in the FY 2023 Plan is outlined below (in millions):

Network and Service Enablement Optical Security

and Performance

Products Total

Beginning of period balance, July 2, 2022 $ — $ — $ —

Restructuring and related charges 9.0 1.2 10.2

Cash settlements ( 2.7 ) — ( 2.7 )

Non-cash settlements and other adjustments

( 0.1 ) — ( 0.1 )

End of period balance, April 1, 2023 (1)

$ 6.2 $ 1.2 $ 7.4

(1) Included in other current liabilities on the Consolidated Balance Sheets as of April 1, 2023.

The Company recorded an income tax provision of $ 6.0 million and $ 28.7 million for the three and nine months ended April 1, 2023, respectively.

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 income tax provision for the three and nine months ended April 1, 2023 and April 2, 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 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 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 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.

As of April 1, 2023 and July 2, 2022, the Company’s unrecognized tax benefits totaled $ 51.1 million and $ 49.7 million, respectively, and are included in deferred taxes and other non-current tax liabilities, net.

The Company had $ 2.8 million accrued for the payment of interest and penalties as of April 1, 2023.

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

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stockholders' Equity

3 unchanged sentences

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

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)

During the three months ended April 1, 2023, the Company repurchased 2.8 million shares of its common stock for $ 30.0 million under the 2022 Repurchase Plan.

During the nine months ended April 1, 2023, the Company repurchased 5.0 million shares of its common stock for $ 55.2 million under the 2022 Repurchase Plan.

As of April 1, 2023, the Company had remaining authorization of $ 244.8 million for future share repurchases under the 2022 Repurchase Plan.

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.

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

During the nine months ended April 1, 2023 and April 2, 2022, the Company granted 3.1 million and 2.4 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 1, 2023 and April 2, 2022 were estimated to be $ 42.1 million and $ 39.8 million, respectively.

During the nine months ended April 1, 2023 and April 2, 2022, the Company granted 0.7 million and 0.4 million, performance-based awards, respectively.

In addition, during the nine months ended April 1, 2023, 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 1, 2023 and April 2, 2022 were estimated to be $ 11.5 million and $ 7.9 million, respectively.

Performance-based awards will generally vest over three to four years based on the attainment of certain performance measures and the employee’s continued service through the vest date.

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

As of April 1, 2023, $ 73.4 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 1, 2023 and April 2, 2022, is as follows (in millions):

Three Months Ended Nine Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

Cost of revenues $ 1.2 $ 1.3 $ 3.6 $ 4.1

2 unchanged sentences

Total stock-based compensation expense $ 12.7 $ 12.8 $ 38.8 $ 39.7

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

Approximately $ 1.2 million of stock-based compensation was capitalized to inventory as of April 1, 2023 and April 2, 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 December 31, 2022, the U.K.

As of April 1, 2023, 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 six months ended December 31, 2022, the Company contributed $ 0.6 million to the U.K.

During the nine months ended April 1, 2023, the Company contributed $ 0.9 million to the U.K.

plan and $ 3.9 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 Six Months Ended

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

Three Months Ended Nine Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

Service cost $ — $ — $ — $ 0.1

6 unchanged sentences

At a minimum, the Company evaluates these assumptions annually and makes changes as necessary.

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

Based on actuarial assumptions, 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 1, 2023, approximately $ 4.8 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.

19 unchanged sentences

Outstanding Letters of Credit, Performance Bonds and Other Claims

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.

As of April 1, 2023, the Company had standby letters of credit of $ 11.8 million and performance bonds and other claims of $ 0.7 million collateralized by restricted cash.

Product Warranties

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

The following table presents the changes in the Company’s warranty reserve during the three and nine months ended April 1, 2023 and April 2, 2022, ( in millions ):

Three Months Ended Nine Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

Balance as of beginning of period $ 9.4 $ 10.8 $ 10.6 $ 9.7

9 unchanged sentences

The Company’s reportable segments are:

(i) Network Enablement:

(i) Network Enablement (NE):

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

2 unchanged sentences

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

(ii) Service Enablement:

(ii) Service Enablement (SE):

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.

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:

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

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.

8 unchanged sentences

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 1, 2023 and April 2, 2022 ( in millions ):

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 December 31, 2022 and January 1, 2022 ( in millions ):

Three Months Ended December 31, 2022

Three Months Ended April 1, 2023

Network and Service Enablement

5 unchanged sentences

Gross margin 62.0 % 70.4 % 63.3 % 50.6 % 56.9 %

Operating income $ 18.5 $ 27.5 $ ( 23.1 ) $ 22.9

Operating income (loss) $ 2.5 $ 25.8 $ ( 30.4 ) $ ( 2.1 )

Operating margin 1.4 % 36.6 % ( 0.8 ) %

Three Months Ended January 1, 2022

Three Months Ended April 2, 2022

Network and Service Enablement

8 unchanged sentences

Three Months Ended

December 31, 2022 January 1, 2022

April 1, 2023 April 2, 2022

Corporate reconciling items impacting gross profit:

2 unchanged sentences

Amortization of intangibles ( 5.9 ) ( 7.4 )

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

GAAP gross profit $ 141.0 $ 186.9

Corporate reconciling items impacting operating income:

Corporate reconciling items impacting operating (loss) income:

Total segment operating income $ 28.3 $ 67.7

4 unchanged sentences

( 1.3 ) ( 4.5 )

Restructuring and related benefits — 0.1

GAAP operating income from continuing operations $ 22.9 $ 49.3

(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.

Restructuring and related charges ( 10.2 ) —

GAAP operating (loss) income from continuing operations $ ( 2.1 ) $ 40.8

(1) During the three months ended April 1, 2023 and April 2, 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, accretion of debt discount, intangible impairment and loss on disposal of long-lived assets.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Six Months Ended December 31, 2022

Nine Months Ended April 1, 2023

Network and Service Enablement

8 unchanged sentences

Operating margin 8.3 % 38.4 % 8.4 %

Six Months Ended January 1, 2022

Nine Months Ended April 2, 2022

Network and Service Enablement

10 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Six Months Ended

December 31, 2022 January 1, 2022

Nine Months Ended

April 1, 2023 April 2, 2022

Corporate reconciling items impacting gross profit:

3 unchanged sentences

Other charges unrelated to core operating performance (1)

( 0.2 ) ( 0.1 )

GAAP gross profit $ 492.8 $ 572.4

5 unchanged sentences

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

Restructuring and related benefits — 0.1

Restructuring and related (charges) benefits ( 10.2 ) 0.1

GAAP operating income from continuing operations $ 70.6 $ 137.0

(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.

(1) During the nine months ended April 1, 2023 and April 2, 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, accretion of debt discount, intangible impairment 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 and six months ended December 31, 2022 and January 1, 2022 (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 nine months ended April 1, 2023 and April 2, 2022 (in millions):

Three Months Ended

December 31, 2022 January 1, 2022

April 1, 2023 April 2, 2022

Product Revenue Service Revenue Total Product Revenue Service Revenue Total

12 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Six Months Ended

December 31, 2022 January 1, 2022

Nine Months Ended

April 1, 2023 April 2, 2022

Product Revenue Service Revenue Total Product Revenue Service Revenue Total

10 unchanged sentences

Total net revenue $ 714.4 $ 128.1 $ 842.5 $ 842.3 $ 114.8 $ 957.1

Subsequent Events

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