What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-03 compared with 2023-05-03 · 290 added, 403 removed, 561 unchanged (55% of the section changed)

3 unchanged sentences

(in millions, except per share data)

Three Months Ended Nine Months Ended

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

Three Months Ended

September 30, 2023 October 1, 2022

Product revenue $ 205.6 $ 267.7

11 unchanged sentences

Amortization of other intangibles 2.1 2.2

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

Restructuring and related benefits ( 0.8 ) —

Total operating expenses 128.4 135.0

(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

Income from operations 16.0 49.8

Interest and other income, net 10.2 1.1

Interest expense ( 7.8 ) ( 6.1 )

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

Income before income taxes 18.4 44.8

Provision for income taxes 8.6 12.2

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

Net (loss) income per share:

Net income $ 9.8 $ 32.6

Net income per share:

Basic $ 0.04 $ 0.14

5 unchanged sentences

VIAVI SOLUTIONS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in millions)

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):

Three Months Ended

September 30, 2023 October 1, 2022

Net income $ 9.8 $ 32.6

Other comprehensive loss:

Net change in cumulative translation adjustment, net of tax ( 20.4 ) ( 42.6 )

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

Amortization of net actuarial losses and other pension adjustments

Amortization of net actuarial (gains) losses and other pension adjustments

( 0.1 ) ( 0.3 )

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

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

Net change in accumulated other comprehensive loss ( 20.5 ) ( 42.9 )

Comprehensive loss $ ( 10.7 ) $ ( 10.3 )

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)

April 1, 2023 July 2, 2022

September 30, 2023 July 1, 2023

Current assets:

26 unchanged sentences

1 million shares authorized,

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

no shares issued or outstanding at September 30, 2023 and July 1, 2023

Common stock, $ 0.001 par value;

1 billion shares authorized;

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

222 million shares at September 30, 2023 and July 1, 2023, issued and outstanding

Additional paid-in capital 70,432.4 70,427.3

7 unchanged sentences

(in millions)

Nine Months Ended

April 1, 2023 April 2, 2022

Three Months Ended

September 30, 2023 October 1, 2022

OPERATING ACTIVITIES:

Net income (loss) $ 25.6 $ ( 1.0 )

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

Net income $ 9.8 $ 32.6

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

Depreciation expense 9.8 8.5

1 unchanged sentence

Stock-based compensation 11.2 13.0

Loss on convertible note settlement — 98.7

Loss on convertible note modification 2.2 —

Amortization of debt issuance costs 1.9 0.6

Net change in fair value of contingent liabilities ( 1.4 ) 0.5

Deferred taxes, net 1.2 2.1

13 unchanged sentences

INVESTING ACTIVITIES:

Purchases of short-term investments $ ( 52.3 ) $ —

Maturities of short-term investments 45.8 —

Capital expenditures ( 6.7 ) ( 14.8 )

1 unchanged sentence

Acquisitions, net of cash hold back — ( 15.5 )

Purchase price adjustment related to business acquisition ( 0.7 ) —

Net cash used in investing activities $ ( 12.6 ) $ ( 29.7 )

FINANCING ACTIVITIES:

Proceeds from issuance of debt ( Note 11 )

$ 118.0 $ 400.0

Payment of debt issuance costs ( 3.9 ) ( 10.2 )

Repurchase and retirement of common stock $ ( 10.0 ) $ ( 18.7 )

Withholding tax payment on vesting of restricted stock and performance based-awards ( 9.1 ) ( 11.1 )

Cash paid to note holders in convertible note settlement — ( 320.2 )

Cash paid to third parties in convertible note settlement — ( 4.1 )

Payment of financing obligations ( 0.1 ) ( 0.1 )

Proceeds from employee stock purchase plan 3.0 3.7

Proceeds from revolving credit facility — 150.0

Repayment of revolving credit facility — ( 150.0 )

Payment of acquisition related obligations — ( 0.7 )

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

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

Net cash used in financing activities $ ( 16.1 ) $ ( 26.8 )

Effect of exchange rates on cash, cash equivalents and restricted cash $ ( 9.3 ) $ ( 17.9 )

4 unchanged sentences

(1) These amounts include both current and non-current balances of restricted cash totaling $ 9.1 million and $ 12.9 million as of July 1, 2023 and July 2, 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.

(2) These amounts include both current and non-current balances of restricted cash totaling $ 7.3 million and $ 12.4 million as of September 30, 2023 and October 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 April 1, 2023

Three Months Ended September 30, 2023

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

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

Shares issued under employee stock plans, net of tax 0.4 — 4.0 — — 4.0

Stock-based compensation — — 12.7 — — 12.7

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

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

Accumulated Deficit

Accumulated Other Comprehensive Loss

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

Balance at July 1, 2023 221.5 $ 0.2 $ 70,427.3 $ ( 69,600.7 ) $ ( 136.0 ) $ 690.8

Net income — — — 9.8 — 9.8

3 unchanged sentences

Repurchase of common stock ( 1.0 ) — — ( 10.0 ) — ( 10.0 )

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

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

Nine Months Ended April 1, 2023

Balance at September 30, 2023 222.4 $ 0.2 $ 70,432.4 $ ( 69,600.9 ) $ ( 156.5 ) $ 675.2

Three Months Ended October 1, 2022

Additional Paid-In Capital

3 unchanged sentences

Net income — — — 32.6 — 32.6

Other comprehensive income — — — — 13.5 13.5

Shares issued under employee stock plans, net of tax 2.3 — ( 3.5 ) — — ( 3.5 )

Stock-based compensation — — 38.8 — — 38.8

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

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

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 — — — ( 1.0 ) — ( 1.0 )

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

2 unchanged sentences

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

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

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

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

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 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.

(VIAVI, also referred to as the Company, we, our and us) for the three months ended September 30, 2023 and October 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 1, 2023.

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.

There have been no material changes to the Company’s accounting policies during the three months ended September 30, 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 1, 2023 on Form 10-K, filed with the SEC on August 17, 2023.

1 unchanged sentence

GAAP for complete financial statements.

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 results for the three months ended September 30, 2023 and October 1, 2022 may not be indicative of results for the fiscal year ending June 29, 2024 or any future periods.

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

The Company’s fiscal 2023 is a 52-week year ending on July 1, 2023.

The Company’s fiscal 2024 is a 52-week year ending on June 29, 2024.

The Company’s fiscal 2023 was a 52-week year ending on July 1, 2023.

2 unchanged sentences

All inter-company accounts and transactions have been eliminated.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Reclassification of Prior Period Balances

Certain reclassifications of prior period balances have been made to conform to current presentation.

Refer to “Note 19.

Operating Segments and Geographic Information” for further information.

Use of Estimates

The preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements, the reported amount of net revenues and expenses and the disclosure of commitments and contingencies during the reporting periods.

The Company bases estimates on historical experience and assumptions about future periods that are believed to be reasonable based on available information.

The Company’s reported financial positions or results of operations may be materially different under changed conditions or when using different estimates and assumptions, particularly with respect to significant accounting policies.

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

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 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;

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

increased risk of cybersecurity attacks;

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

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

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.

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.

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

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

Recently Issued Accounting Pronouncements

Recent Accounting Pronouncements Adopted

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

Disclosures by Business Entities about Government Assistance .

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

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

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Recent Accounting Pronouncements Not Yet Adopted

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

The amendments in this update expand the current last-of-layer method of hedge accounting that permits only one hedged layer to allow multiple hedged layers of a single closed portfolio.

To reflect that expansion, the last-of-layer method is renamed the portfolio layer method.

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

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

In March 2022, the FASB issued ASU 2022-02 Financial Instruments - Credit Losses (Topic 326), which eliminates the accounting guidance on troubled debt restructurings for creditors in ASC 310 and amends the guidance on vintage disclosures to require disclosure of current-period gross write-offs by year of origination.

The ASU also updates the requirements related to the accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The preparation of the Company’s Consolidated Financial Statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that effect the reported amount of assets and liabilities at the date of the financial statements, the reported amount of net revenues and expenses and the disclosure of commitments and contingencies during the reporting periods.

Estimates are based on historical factors, current circumstances and the experience and judgment of management.

Under changed conditions the Company’s reported financial positions or results of operations may be materially impacted when using different estimates and assumptions, particularly with respect to significant accounting policies.

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Recently Issued Accounting Pronouncements

Accounting Standards Issued But Not Yet Adopted

In October 2023, the FASB issued ASU 2023-06 to modify the disclosure or presentation requirements of a variety of topics, which will allow users to more easily compare entities subject to the SEC's existing disclosures with those entities that were not previously subject to the SEC's requirements, and to align the requirements in the FASB accounting standard codification with the SEC's regulations.

The effective date for each amendment will be the date on which the SEC removes that related disclosure from Regulation S-X or Regulation S-K.

The Company is currently evaluating the provisions of the amendments and the impact on its future consolidated financial statements.

We reviewed all other accounting pronouncements issued during the three months ended September 30, 2023 and concluded that they were not applicable to the Company.

Earnings Per Share

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

Three Months Ended Nine Months Ended

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

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

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

Three Months Ended

September 30, 2023 October 1, 2022

Net income $ 9.8 $ 32.6

Weighted-average shares outstanding:

3 unchanged sentences

Diluted 224.2 230.4

Net (loss) income per share:

Net income per share:

Basic $ 0.04 $ 0.14

1 unchanged sentence

(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.

As of September 30, 2023, the if-converted value is less than the outstanding principal of the 2024 and 2026 Notes, respectively, and are therefore anti-dilutive.

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 Nine Months Ended

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

Three Months Ended

September 30, 2023 October 1, 2022

Restricted stock units 0.5 1.4

4.3 0.3 3.6 0.6

Shares issuable from Senior Convertible Notes (2)

Total potentially dilutive securities 4.3 0.3 3.6 6.5

(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 nine months ended April 1, 2023, the changes in accumulated other comprehensive loss, net of tax, by component were as follows ( in millions ):

For the three months ended September 30, 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 1, 2023 $ ( 5.3 ) $ ( 125.4 ) $ ( 5.3 ) $ ( 136.0 )

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

Other comprehensive loss before reclassification — ( 20.4 ) — ( 20.4 )

Amounts reclassified out of accumulated other comprehensive loss — — ( 0.1 ) ( 0.1 )

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 )

(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 nine months ended April 1, 2023.

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

Net current-period other comprehensive loss — ( 20.4 ) ( 0.1 ) ( 20.5 )

Ending balance as of September 30, 2023 $ ( 5.3 ) $ ( 145.8 ) $ ( 5.4 ) $ ( 156.5 )

(1) The amount reclassified out of accumulated other comprehensive loss represents the amortization of actuarial gains included as a component of Cost of revenues, Research and development (R&D) and Selling, general and administrative (SG&A) in the Consolidated Statements of Operations, net of reclassification adjustments, for the three months ended September 30, 2023.

There was no tax impact for the three months ended September 30, 2023.

Refer to “Note 17.

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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;

The total purchase consideration included 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 included escrow payments of $ 5.0 million for indemnity holdback and $ 2.0 million subject to final cash and net working capital adjustments.

The acquisition met 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 Company has included the financial results of Jackson Labs in its Consolidated Financial Statements from the date of acquisition.

Pro forma results of operations have not been presented because the effect of the acquisition was not material to the Consolidated Statements of Operations.

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 ):

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

Cash and cash equivalents $ 1.1

8 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.

(1) Goodwill at acquisition date of $ 48.8 million reduced by measurement period adjustment of $ 0.5 million in the third quarter of fiscal 2023.

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 ):

5 unchanged sentences

Total identifiable assets acquired $ 30.6

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

2 unchanged sentences

income tax purposes.

Other Acquisitions:

On March 29, 2023, April 21, 2023 and June 8, 2023, the Company completed acquisitions accounted for as asset purchases consisting of cash paid at closing of $ 2.9 million and $ 0.2 million of indemnity holdback.

In connection with these acquisitions, the Company recorded developed technology intangibles of $ 2.5 million which will be amortized over their estimated useful life of five years .

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.

1 unchanged sentence

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

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

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

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

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

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.

The acquisition was accounted for as an asset purchase.

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

Acquisition-related Contingent Consideration

The following table provides a reconciliation of changes in the fair value of the Company’s earn-out liabilities associated with the Company’s acquisitions for the three and nine months ended April 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

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 September 30, 2023 and October 1, 2022 ( in millions ):

Three Months Ended

September 30, 2023 October 1, 2022

Beginning period balance $ 19.7 $ 2.5

Additions to Contingent Consideration — — 29.4 —

Payments of Contingent Consideration ( 6.6 ) ( 3.2 ) ( 7.1 ) ( 4.4 )

Fair value adjustment of earn-out liabilities ( 1.4 ) 0.5

1 unchanged sentence

Ending period balance $ 18.3 $ 2.9

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Balance Sheet and Other Details

1 unchanged sentence

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

As of April 1, 2023, and July 2, 2022, the Company had total unbilled receivables of $ 11.9 million and $ 7.3 million, respectively.

As of September 30, 2023, and July 1, 2023, the Company had total unbilled receivables of $ 12.8 million and $ 13.7 million, respectively.

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

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

April 1, 2023

Three Months Ended Nine Months Ended

September 30, 2023

Three Months Ended

Deferred revenue:

2 unchanged sentences

Revenue recognized during the period (2)

( 29.6 ) ( 98.5 )

Balance at end of period $ 90.5

2 unchanged sentences

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

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

The value of the transaction price allocated to remaining performance obligations as of September 30, 2023, was $ 226.6 million.

The Company expects to recognize approximately 88 % 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

Accounts receivable allowances - Credit losses

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

July 1, 2023 Charged to Costs and Expenses Deductions (1)

April 1, 2023

September 30, 2023

Allowance for credit losses $ 1.0 $ 0.4 $ ( 0.1 ) $ 1.3

2 unchanged sentences

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

April 1, 2023 July 2, 2022

September 30, 2023 July 1, 2023

Finished goods $ 51.7 $ 49.0

2 unchanged sentences

Inventories, net $ 113.5 $ 116.1

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 ):

April 1, 2023 July 2, 2022

September 30, 2023 July 1, 2023

Refundable income taxes $ 27.7 $ 27.6

3 unchanged sentences

Asset held for sale 2.5 2.5

Fair value of forward contracts 1.6 3.5

Other current assets 6.1 7.1

Prepayments and other current assets $ 67.2 $ 72.1

Other non-current assets

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

September 30, 2023 July 1, 2023

Operating ROU assets (Note 12) $ 38.1 $ 40.4

Long-term restricted cash 4.0 4.6

Deferred contract cost 2.5 2.9

Debt issuance cost - Revolving Credit Facility 2.5 2.8

Deposits 2.1 2.3

Other non-current assets 9.3 8.7

Other non-current assets $ 58.5 $ 61.7

Other current liabilities

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

April 1, 2023 July 2, 2022

Income tax payable $ 10.2 $ 9.6

September 30, 2023 July 1, 2023

Operating lease liabilities (Note 12) $ 10.0 $ 10.1

Interest payable 8.4 4.6

Restructuring accrual (Note 13) 7.4 —

Fair value of forward contracts 5.2 2.4

Income tax payable 4.3 4.4

Acquisition related holdback and related accruals 4.4 4.1

Transaction tax payable 4.5 11.5

Warranty accrual 4.1 4.2

Fair value of forward contracts 1.5 8.4

Fair value of contingent consideration 1.1 1.8

Transaction tax payable 2.9 4.3

Restructuring accrual (Note 13) 1.5 5.8

Fair value of contingent consideration (Note 5) 0.9 1.1

Interest payable 0.4 5.5

Other 7.5 7.9

4 unchanged sentences

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

April 1, 2023 July 2, 2022

September 30, 2023 July 1, 2023

Pension and post-employment benefits $ 52.0 $ 53.2

Operating lease liabilities (Note 12) 27.6 29.4

Fair value of contingent consideration 23.5 0.7

Long-term deferred revenue 23.5 23.4

Financing obligation 15.8 16.0

Fair value of contingent consideration (Note 5) 17.4 18.6

Deferred tax liability 16.8 13.9

Financing obligation 15.7 15.8

Uncertain tax position 15.5 15.8

Warranty accrual 4.7 4.8

Asset retirement obligations 3.8 3.8

Other 7.9 8.0

2 unchanged sentences

Short-Term Investments

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.

As of September 30, 2023, the Company’s short-term investments of $ 20.5 million were comprised of a 30 -day term deposit of $ 19.0 million and trading securities related to the deferred compensation plan of $ 1.5 million, of which $ 1.2 million was invested in equity securities, $ 0.1 million was invested in debt securities and $ 0.2 million was invested in money market instruments.

As of July 1, 2023, the Company’s short-term investments of $ 14.6 million were comprised of a 30 -day term deposit of $ 13.1 million and trading securities related to the deferred compensation plan of $ 1.5 million, of which $ 1.2 million was invested in equity securities, $ 0.1 million was invested in debt securities and $ 0.2 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 Consolidated Statements of Operations as a component of Interest and other income, net.

Non-Designated Foreign Currency Forward Contracts

3 unchanged sentences

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

As of April 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.

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

As of September 30, 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 $ 1.6 million and $ 5.2 million is reflected as Prepayments and other current assets and Other current liabilities on the Consolidated Balance Sheets, respectively.

As of July 1, 2023, the fair value of these contracts of $ 3.5 million and $ 2.4 million is reflected as Prepayments and other current assets and Other current liabilities on the Consolidated Balance Sheets, respectively.

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

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

As of April 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.

As of September 30, 2023 and July 1, 2023, the notional amounts of the forward contracts that the Company held to purchase foreign currencies were $ 101.2 million and $ 87.5 million, respectively, and the notional amounts of forward contracts that the Company held to sell foreign currencies were $ 15.2 million and $ 19.3 million, respectively.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

The change in the fair value of these foreign currency forward contracts is recorded as gain or loss in the Consolidated Statements of Operations as a component of Interest 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 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.

The foreign exchange forward contracts incurred losses of $ 3.6 million and $ 6.7 million for the three months ended September 30, 2023 and October 1, 2022, respectively.

Fair Value Measurements

8 unchanged sentences

includes financial instruments for which the valuations are based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

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

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

Level 2 instruments of the Company include asset-backed securities, foreign currency forward contracts and debt.

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

1 unchanged sentence

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

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

As of September 30, 2023 and July 1, 2023, the Company did not hold any Level 3 investment securities.

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

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.

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

The fair value of contingent consideration liabilities is remeasured at each reporting period at the estimated fair value based on the inputs on the date of remeasurement, with the change in fair value recognized in the Selling, general and administrative (SG&A) expense of the Consolidated Statements of Operations.

VIAVI SOLUTIONS INC.

2 unchanged sentences

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

April 1, 2023 July 2, 2022

September 30, 2023 July 1, 2023

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

Cash and cash equivalents:

Debt available-for-sale securities:

Asset-backed securities (1)

$ 0.3 $ — $ 0.3 $ — $ 0.3 $ — $ 0.3 $ —

Total debt available-for-sale securities 0.3 — 0.3 — 0.3 — 0.3 —

Money market funds (2)

379.3 379.3 — — 344.8 344.8 — —

Short-term investments:

Trading securities (3)

1.5 1.5 — — 1.5 1.5 — —

Other current assets:

Foreign currency forward contracts (4)

Other non-current assets:

debt available-for-sale securities asset-backed securities 0.3 — 0.3 — 0.6 — 0.6 —

1.6 — 1.6 — 3.5 — 3.5 —

Total assets $ 382.7 $ 380.8 $ 1.9 $ — $ 350.1 $ 346.3 $ 3.8 $ —

Current liabilities:

Foreign currency forward contracts (5)

$ 5.2 $ — $ 5.2 $ — $ 2.4 $ — $ 2.4 $ —

Contingent consideration (6)

1 unchanged sentence

Total liabilities $ 23.5 $ — $ 5.2 $ 18.3 $ 22.1 $ — $ 2.4 $ 19.7

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

(1) Included in Other non-current assets on the Consolidated Balance Sheets.

(2) Includes, as of September 30, 2023, $ 372.4 million in Cash and cash equivalents, $ 3.3 million in Restricted cash and $ 3.6 million in Other non-current assets on the Consolidated Balance Sheets.

Includes, as of July 1, 2023, $ 336.5 million in Cash and cash equivalents, $ 4.3 million in Restricted cash and $ 4.0 million in Other non-current assets on the Consolidated Balance Sheets.

(3) Included in Short-term investments on the Consolidated Balance Sheets.

(4) Included in Other current assets on the Consolidated Balance Sheets.

(5) Included in Other current liabilities on the Consolidated Balance Sheets.

(6) As of September 30, 2023 and July 1, 2023, includes certain amounts in Other current liabilities and Other non-current liabilities on the Consolidated Balance Sheets.

Other Fair Value Measures

Fair Value of Debt:

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:

April 1, 2023 July 2, 2022

If measured at fair value on the Consolidated Balance Sheets, the Company’s 3.75 % Senior Notes (2029 Notes), 1.625 % Senior Convertible Notes (2026 Notes) and 1.00 % Senior Convertible Notes (2024 Notes) would be classified in Level 2 of the fair value hierarchy as they are not actively traded in the markets.

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

September 30, 2023 July 1, 2023

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

5 unchanged sentences

94.7 — 94.7 — 95.6 — 95.6 —

1.75 % Senior Convertible Notes

67.9 — 67.9 — 73.4 — 73.4 —

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

Total $ 659.5 $ — $ 659.5 $ — $ 700.1 $ — $ 700.1 $ —

See “Note 11.

6 unchanged sentences

Balance as of July 1, 2023 $ 398.0 $ 15.0 $ 42.2 $ 455.2

Acquisition 60.0 — — 60.0

Measurement period adjustment ( 0.5 ) — — ( 0.5 )

Currency translation adjustments 3.6 1.2 — 4.8

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

Currency translation and other adjustments (1)

( 4.0 ) ( 1.6 ) — ( 5.6 )

Balance as of September 30, 2023 $ 394.0 $ 13.4 $ 42.2 $ 449.6

(1) Other adjustments include a reclass of $ 1.3 million from Service Enablement to Network Enablement due to a product line movement.

“Operating Segments and Geographic Information” for further details.

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

In the fourth quarter of fiscal 2022, the Company reviewed goodwill under the qualitative assessment of the authoritative guidance and concluded that it was more likely than not that the fair value of each reporting unit exceeded its carrying amount and that no indication of impairment existed.

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

In the fourth quarter of fiscal 2023, the Company performed a quantitative assessment of goodwill impairment and concluded the fair value of each of the Company’s reporting units was at least two times the carrying value, and therefore no impairment was identified.

There were no events or changes in circumstances which triggered an impairment review during the three months ended September 30, 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 April 1, 2023 Gross Carrying Amount Accumulated Amortization Net

As of September 30, 2023 Gross Carrying Amount Accumulated Amortization Net

Acquired developed technology $ 437.0 $ ( 392.3 ) $ 44.7

$ 445.8 $ ( 394.2 ) $ 51.6

Customer relationships 193.0 ( 185.2 ) 7.8

6 unchanged sentences

Total intangibles $ 673.5 $ ( 614.9 ) $ 58.6

(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.

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

VIAVI SOLUTIONS INC.

1 unchanged sentence

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

Three Months Ended Nine Months Ended

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

Three Months Ended

September 30, 2023 October 1, 2022

Cost of revenues $ 3.5 $ 7.1

1 unchanged sentence

Total amortization of intangible assets $ 5.6 $ 9.3

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 ):

Based on the carrying amount of acquired developed technology, customer relationships and other intangibles as of September 30, 2023, and assuming no future impairment of the underlying assets, the estimated future amortization is as follows ( in millions ):

Remainder of 2024 $ 14.6

2 unchanged sentences

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

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.

As of September 30, 2023 and July 1, 2023, 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 ):

April 1, 2023 July 2, 2022

Principal amount of 1.00 % Senior Convertible Notes

Unamortized 1.00 % Senior Convertible Notes debt issuance cost

September 30, 2023 July 1, 2023

Principal amount of 1.00 % Senior Convertible Notes

$ 96.4 $ 96.4

Unamortized 1.00 % Senior Convertible Notes debt issuance cost

Other short-term debt — 0.4

( 0.2 ) ( 0.2 )

Short-term debt $ 96.2 $ 96.2

4 unchanged sentences

Principal amount of 1.625 % Senior Convertible Notes

Unamortized 1.00 % Senior Convertible Notes debt issuance cost

Principal amount of 1.625 % Senior Convertible Notes

Unamortized 1.625 % Senior Convertible Notes debt discount

( 11.7 ) ( 12.9 )

Unamortized 1.625 % Senior Convertible Notes debt issuance cost

( 1.9 ) ( 2.1 )

Long-term debt $ 631.1 $ 629.5

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

The Company was in compliance with all debt covenants as of September 30, 2023 and July 1, 2023.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 Company issued $ 132.0 million aggregate principal amount of the 2026 Notes to certain holders of the 1.00 % Senior Convertible Notes due 2024 (2024 Notes) in exchange for $ 127.5 million principal amount of the 2024 Notes (the Exchange Transaction) 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).

The Exchange Transaction was accounted for as a modification.

The $ 127.5 million principal of the 2024 Notes was reduced by $ 10.1 million, with offsetting increase to additional paid-in capital, to account for the increase in the fair value of the embedded conversion option in the modification.

The increase in principal and coupon interest, along with the increased option value, totaled $ 14.6 million and is a direct reduction from the carrying amount of the debt on the Consolidated Balance Sheets.

This amount will be accreted as an adjustment to interest expense on a straight-line basis and will accrete up to the full face value of the 2026 Notes at maturity.

The proceeds of the 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 in the Consolidated Statements of Operations.

The remaining issuance costs of $ 2.0 million as well as $ 0.3 million of unamortized costs carried over from the 2024 Notes at the exchange date were 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.

As of September 30, 2023, the expected remaining term of the 2026 Notes is 2.5 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

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

As of September 30, 2023, the expected remaining term of the 2029 Notes is 6.0 years.

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)

1 unchanged sentence

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

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

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

As of April 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.

See Senior Convertible Notes Settlement below.

In connection with the issuance of the 2023 Notes, the Company incurred $ 2.2 million of issuance costs.

The debt issuance costs were capitalized and amortized to interest expense using the effective interest rate method from issuance date through maturity on June 1, 2023.

See Senior Convertible Notes Settlement section below for details of the 2023 Notes exchange transactions during fiscal 2022.

On June 1, 2023, the remaining 2023 Notes were retired upon maturity.

1.00 % Senior Convertible Notes (2024 Notes)

3 unchanged sentences

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

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

As of September 30, 2023, the expected remaining term of the 2024 Notes is 0.4 years.

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

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

As of September 30, 2023, we had no borrowings under this facility and our available borrowing capacity was approximately $ 152.1 million, net of outstanding standby letters of credit of $ 4.1 million.

Revolving Credit Facility

4 unchanged sentences

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

Three Months Ended

September 30, 2023 October 1, 2022

Interest expense-contractual interest $ 5.0 $ 4.6

8 unchanged sentences

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

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 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 ):

April 1, 2023

Other non-current assets $ 40.5

Total operating ROU assets $ 40.5

Lease expense, cash flow and balance sheet information related to our operating leases are as follows ( in millions ):

September 30, 2023 October 1, 2022

Operating lease costs (1)

Cash paid for amounts included in the measurement of operating lease liabilities 4.6 4.6

Operating ROU assets obtained in exchange for operating lease obligations 0.9 0.7

Operating ROU assets (Other non-current assets) 38.1 41.6

Other current liabilities 10.0 9.8

1 unchanged sentence

Total operating lease liabilities $ 37.6 $ 40.3

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

Fiscal Years Operating Leases

Weighted-average remaining lease term 6.7 years 7.0 years

Weighted-average discount rate 4.8 % 4.6 %

(1) Total variable lease costs were immaterial during the three months ended September 30, 2023 and October 1, 2022.

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

Future minimum operating lease payments as of September 30, 2023 are as follows ( in millions ):

Operating Leases

Remainder of 2024 $ 7.7

Fiscal 2025 9.6

Fiscal 2026 7.2

Fiscal 2027 5.6

Fiscal 2028 3.9

Thereafter 9.8

5 unchanged sentences

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

Restructuring charges primarily include severance, benefits and outplacement costs to eliminate a specified number of positions.

The timing of associated cash payments is dependent upon the jurisdiction of the affected employees and can extend over multiple periods.

Fiscal 2023 Plan

During the second quarter of fiscal 2023, Management approved a restructuring and workforce reduction plan (the Fiscal 2023 Plan) to 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.

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)

The first phase of the Fiscal 2023 Plan impacted our Network and Service Enablement (NSE) and Optical Security and Performance Products (OSP) segments and Corporate (Corp) functions and was substantially complete as of September 30, 2023.

The second phase of the Fiscal 2023 Plan is primarily focused on reducing costs in our Service Enablement (SE) segment and the Company anticipates this phase to be substantially complete by the end of the second quarter of fiscal 2024.

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

Balance as of

July 1, 2023 Restructuring and related benefits Cash Settlements Balance as of September 30, 2023

Fiscal 2023 Plan

NSE/Corp $ 3.5 $ ( 0.6 ) $ ( 2.4 ) $ 0.5

OSP 0.6 — ( 0.6 ) —

Fiscal 2023 Plan Phase I 4.1 ( 0.6 ) ( 3.0 ) 0.5

NSE/Corp 1.7 ( 0.2 ) ( 0.5 ) 1.0

Fiscal 2023 Plan Phase II 1.7 ( 0.2 ) ( 0.5 ) 1.0

$ 5.8 $ ( 0.8 ) $ ( 3.5 ) $ 1.5

(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.

(1) Included in Other current liabilities on the Consolidated Balance Sheets as of September 30, 2023 and July 1, 2023.

The Company recorded an income tax provision of $ 8.6 million for the three months ended September 30, 2023.

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

The income tax provision for the three months ended September 30, 2023 and October 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 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.

As of September 30, 2023 and July 1, 2023, the Company’s unrecognized tax benefits totaled $ 50.7 million and $ 51.1 million, respectively, and are included in deferred taxes and other non-current tax liabilities, net.

The Company had $ 3 M accrued for the payment of interest and penalties as of September 30, 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.

4 unchanged sentences

Repurchase of Common Stock

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

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

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

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

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.

During the three months ended September 30, 2023, the Company repurchased 1.0 million shares of its common stock for $ 10.0 million under the 2022 Repurchase Plan.

As of September 30, 2023, the Company had remaining authorization of $ 224.8 million for future share repurchases under the 2022 Repurchase Plan.

The 2022 Repurchase Plan replaced 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.

3 unchanged sentences

When converted into shares upon vesting, shares equivalent in value to the minimum withholding taxes liability on the vested shares are withheld by the Company for the payment of such taxes.

The Company generally estimates the fair value of stock-based awards based on the closing market price of the Company’s common stock.

The Company generally estimates the fair value of stock-based awards based on the closing market price of the Company’s common stock on the grant date.

In the case of performance-based awards that include a market condition, the Company will estimate the fair value of the award using a combination of the closing market price of the Company’s common stock on the grant date and the Monte Carlo simulation model.

1 unchanged sentence

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

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

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

During the nine months ended April 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.

During the three months ended September 30, 2023 and October 1, 2022, the Company granted 2.9 million and 2.3 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 September 30, 2023 and October 1, 2022 were estimated to be $ 30.0 million and $ 33.8 million, respectively.

During the three months ended September 30, 2023 and October 1, 2022, the Company granted 0.8 million and 0.7 million performance-based awards, respectively.

There were no performance-based shares attained over target during the three months ended September 30, 2023.

There were 0.1 million performance-based shares attained over target during the three months ended October 1, 2022.

The aggregate grant-date fair value of performance-based awards granted during the three months ended September 30, 2023 and October 1, 2022 were estimated to be $ 9.7 million and $ 11.1 million, respectively.

As of September 30, 2023, $ 84.2 million of unrecognized stock-based compensation costs remain to be amortized.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

The impact on the Company’s results of operations of recording stock-based compensation by function for the three months ended September 30, 2023 and October 1, 2022, is as follows (in millions) :

Three Months Ended

September 30, 2023 October 1, 2022

Cost of revenues $ 1.2 $ 1.2

2 unchanged sentences

Total stock-based compensation expense $ 11.2 $ 13.0

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

Approximately $ 1.2 million of stock-based compensation was capitalized to inventory as of September 30, 2023 and October 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 April 1, 2023, the U.K.

As of September 30, 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 nine months ended April 1, 2023, the Company contributed $ 0.9 million to the U.K.

During the three months ended September 30, 2023, the Company contributed $ 0.5 million to the U.K.

plan and $ 0.9 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 Nine Months Ended

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

Service cost $ — $ — $ — $ 0.1

Three Months Ended

September 30, 2023 October 1, 2022

Interest cost $ 0.9 $ 0.6

Expected return on plan assets ( 0.5 ) ( 0.4 )

Amortization of net actuarial losses — 0.8 — 2.3

Amortization of net actuarial (gains) losses ( 0.1 ) 0.1

Net periodic benefit cost $ 0.3 $ 0.3

3 unchanged sentences

Based on actuarial assumptions, the Company expects to incur cash outlays of approximately $ 9.4 million related to its defined benefit pension plans during fiscal 2024 to make current benefit payments and fund future obligations.

As of April 1, 2023, approximately $ 4.8 million had been incurred.

As of September 30, 2023, approximately $ 1.4 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 1, 2023.

3 unchanged sentences

Legal Proceedings

Tel-Instruments Electronics Corp.

In July 2023, the Court of Appeals in the State of Kansas affirmed a lower court decision in a case filed by Aeroflex Wichita, (“Aeroflex”, a VIAVI subsidiary), against Tel-Instrument Electronics Corp.

(TIC) and two of its employees with total damages of $ 7.3 million owed to VIAVI.

The lower court case, filed by Aeroflex prior to the acquisition by VIAVI and affirmed by the Kansas Court of Appeals, awarded damages caused by tortious interference and improper use and disclosure of Aeroflex’s confidential and proprietary business information used by the defendants to win a competitive U.S.

Army contract.

TIC did not file a petition to appeal the decision and acknowledged its obligation to pay damages in full.

VIAVI subsequently then received total payments of $ 7.3 million from TIC and the two former employees and recorded a gain to Interest and other income, net in the Consolidated Statements of Operations for the three months ended September 30, 2023.

Pension Settlement

In June 2016, the Company received a court decision regarding the validity of an amendment to a pension deed of trust related to one of its foreign subsidiaries which the Company contends contained an error requiring the Company to increase the pension plan’s benefit.

7 unchanged sentences

law firm responsible for the error.

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.

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 on the Consolidated Balance Sheets.

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

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

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

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

2 unchanged sentences

Outstanding Letters of Credit, Performance Bonds and Other Claims

As of April 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.

As of September 30, 2023, the Company had standby letters of credit of $ 6.9 million and performance bonds and other claims of $ 0.4 million collateralized by restricted cash.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Product Warranties

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

The following table presents the changes in the Company’s warranty reserve during the three months ended September 30, 2023 and October 1, 2022 ( in millions ):

Three Months Ended

September 30, 2023 October 1, 2022

Balance as of beginning of period $ 9.0 $ 10.6

3 unchanged sentences

Balance as of end of period $ 8.8 $ 9.5

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Operating Segments and Geographic Information

14 unchanged sentences

The CODM manages the Company in two broad business categories:

The CODM evaluates segment performance of the NSE business based on the combined segment gross and operating margins.

The CODM evaluates segment performance of the NSE business based on the combined segments (NE and SE) gross and operating margins.

Operating expenses associated with the NSE business are not allocated to the individual segments within NSE, as they are managed centrally at the business unit level.

1 unchanged sentence

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

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

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

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

The following tables present information on the Company’s reportable segments for the three months ended April 1, 2023 and April 2, 2022 ( in millions ):

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended April 1, 2023

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

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

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

The following tables present information on the Company’s reportable segments for the three months ended September 30, 2023 and October 1, 2022 ( in millions ):

Three Months Ended September 30, 2023

Network and Service Enablement

5 unchanged sentences

Gross margin 63.1 % 67.2 % 63.6 % 52.5 % 58.2 %

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

Operating income $ 1.5 $ 29.3 $ ( 14.8 ) $ 16.0

Operating margin 0.9 % 37.8 % 6.5 %

Three Months Ended April 2, 2022

Three Months Ended October 1, 2022

Network and Service Enablement

1 unchanged sentence

Product revenue (2)

Service revenue 27.6 12.0 39.6 0.1 — 39.7

Net revenue $ 204.3 $ 26.5 $ 230.8 $ 84.7 $ — $ 315.5

Gross profit $ 130.3 $ 18.3 $ 148.6 $ 47.0 $ ( 8.7 ) $ 186.9

Gross margin 63.8 % 69.1 % 64.4 % 55.5 % 59.2 %

Operating income $ 34.4 $ 33.3 $ ( 26.9 ) $ 40.8

Operating margin 14.9 % 39.3 % 12.9 %

Three Months Ended

April 1, 2023 April 2, 2022

Corporate reconciling items impacting gross profit:

Total segment gross profit $ 148.0 $ 195.6

Stock-based compensation ( 1.2 ) ( 1.2 )

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 (loss) income:

Total segment operating income $ 28.3 $ 67.7

Stock-based compensation ( 12.8 ) ( 12.8 )

Amortization of intangibles ( 8.0 ) ( 9.6 )

Change in fair value of contingent liability 1.9 —

Other charges unrelated to core operating performance (1)

$ 166.3 $ 10.2 $ 176.5 $ 91.2 $ — $ 267.7

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)

Nine Months Ended April 1, 2023

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 $ 438.4 $ 36.9 $ 475.3 $ 239.1 $ — $ 714.4

Service revenue (2)

Net revenue $ 524.2 $ 79.1 $ 603.3 $ 239.2 $ — $ 842.5

Gross profit $ 333.5 $ 53.8 $ 387.3 $ 128.0 $ ( 22.5 ) $ 492.8

Gross margin 63.6 % 68.0 % 64.2 % 53.5 % 58.5 %

Operating income $ 49.8 $ 91.9 $ ( 71.1 ) $ 70.6

Operating margin 8.3 % 38.4 % 8.4 %

Nine Months Ended April 2, 2022

Network and Service Enablement

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

Consolidated GAAP Measures

Product revenue $ 545.9 $ 42.6 $ 588.5 $ 253.8 $ — $ 842.3

Service revenue 77.7 36.7 114.4 0.4 — 114.8

30.2 12.2 42.4 0.1 — 42.5

Net revenue $ 196.5 $ 22.4 $ 218.9 $ 91.3 $ — $ 310.2

3 unchanged sentences

Operating margin 13.2 % 42.3 % 16.1 %

(1) Other items include charges (benefits) unrelated to core operating performance primarily consisting of stock-based compensation, amortization of acquisition-related intangibles, restructuring, changes in fair value of contingent consideration liabilities and other charges unrelated to core operating performance.

(2) Effective for the first quarter of fiscal 2024, management of certain products moved from the SE segment to the NE segment to better align with operational and go-to-market strategies.

As a result, prior period balances have been recast to reflect the impact to product and service revenue, gross profit and gross margin.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Nine Months Ended

April 1, 2023 April 2, 2022

Three Months Ended

September 30, 2023 October 1, 2022

Corporate reconciling items impacting gross profit:

2 unchanged sentences

Amortization of intangibles ( 3.5 ) ( 7.1 )

Other charges unrelated to core operating performance (1)

( 0.2 ) ( 0.1 )

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

GAAP gross profit $ 144.4 $ 184.8

4 unchanged sentences

Change in fair value of contingent liability 1.4 ( 0.5 )

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

Restructuring and related (charges) benefits ( 10.2 ) 0.1

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

Restructuring and related benefits 0.8 —

GAAP operating income from continuing operations $ 16.0 $ 49.8

(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.

(1) During the three months ended September 30, 2023 and October 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, 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 nine months ended April 1, 2023 and April 2, 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 months ended September 30, 2023 and October 1, 2022 (in millions):

Three Months Ended

April 1, 2023 April 2, 2022

September 30, 2023 October 1, 2022

Product Revenue Service Revenue Total Product Revenue Service Revenue Total

6 unchanged sentences

Total Asia-Pacific $ 77.7 $ 8.2 $ 85.9 $ 103.5 $ 8.1 $ 111.6

Switzerland $ 13.4 $ 0.1 $ 13.5 $ 18.7 $ 0.1 $ 18.8

Other EMEA 41.7 16.6 58.3 59.5 13.9 73.4

Total EMEA $ 55.1 $ 16.7 $ 71.8 $ 78.2 $ 14.0 $ 92.2

$ 46.6 $ 14.9 $ 61.5 $ 60.1 $ 15.5 $ 75.6

Total net revenue $ 205.6 $ 42.3 $ 247.9 $ 267.7 $ 42.5 $ 310.2

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Nine Months Ended

April 1, 2023 April 2, 2022

Product Revenue Service Revenue Total Product Revenue Service Revenue Total

United States $ 227.0 $ 44.6 $ 271.6 $ 239.8 $ 41.1 $ 280.9

Other Americas 47.4 10.8 58.2 64.3 10.8 75.1

Total Americas $ 274.4 $ 55.4 $ 329.8 $ 304.1 $ 51.9 $ 356.0

Asia-Pacific:

Greater China $ 165.9 $ 5.7 $ 171.6 $ 188.1 $ 6.8 $ 194.9

Other Asia 100.8 19.8 120.6 122.4 14.5 136.9

Total Asia-Pacific $ 266.7 $ 25.5 $ 292.2 $ 310.5 $ 21.3 $ 331.8

Switzerland $ 42.2 $ 0.3 $ 42.5 $ 43.4 $ 0.3 $ 43.7

Other EMEA 131.1 46.9 178.0 184.3 41.3 225.6

Total EMEA $ 173.3 $ 47.2 $ 220.5 $ 227.7 $ 41.6 $ 269.3

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

Subsequent Events

On October 18, 2023, the Company announced that, effective November 7, 2023, Ilan Daskal would join the Company as Executive Vice President and Chief Financial Officer (CFO).

Daskal will report to President and Chief Executive Officer, Oleg Khaykin, and oversee the global finance organization, including finance, accounting and reporting, tax, treasury, internal audit, investor relations and information technology.

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