What changed in this filing

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Item 1. Financial Statements

2024-02-02 compared with 2023-11-03 · 284 added, 186 removed, 665 unchanged (41% of the section changed)

3 unchanged sentences

(in millions, except per share data)

Three Months Ended

September 30, 2023 October 1, 2022

Three Months Ended Six Months Ended

December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022

Product revenue $ 210.9 $ 241.5 $ 416.5 $ 509.2

27 unchanged sentences

VIAVI SOLUTIONS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

Three Months Ended

September 30, 2023 October 1, 2022

Three Months Ended Six Months Ended

December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022

Net income $ 10.7 $ 8.4 $ 20.5 $ 41.0

Other comprehensive loss:

Other comprehensive income (loss):

Net change in cumulative translation adjustment, net of tax 29.7 43.3 9.3 0.7

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

Amortization of net actuarial gains and other pension adjustments

— — ( 0.1 ) ( 0.3 )

Net change in accumulated other comprehensive loss 29.7 43.3 9.2 0.4

Comprehensive loss $ ( 10.7 ) $ ( 10.3 )

Comprehensive income $ 40.4 $ 51.7 $ 29.7 $ 41.4

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)

September 30, 2023 July 1, 2023

December 30, 2023 July 1, 2023

Current assets:

26 unchanged sentences

1 million shares authorized,

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

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

Common stock, $ 0.001 par value;

1 billion shares authorized;

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

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

Additional paid-in capital 70,444.8 70,427.3

7 unchanged sentences

(in millions)

Three Months Ended

September 30, 2023 October 1, 2022

Six Months Ended

December 30, 2023 December 31, 2022

OPERATING ACTIVITIES:

26 unchanged sentences

Acquisitions, net of cash hold back — ( 64.4 )

Purchase price adjustment related to business acquisition — ( 1.0 )

Net cash used in investing activities $ ( 20.3 ) $ ( 95.9 )

2 unchanged sentences

Withholding tax payment on vesting of restricted stock and performance based-awards ( 9.3 ) ( 11.2 )

Payment of financing obligations ( 0.1 ) ( 0.1 )

Proceeds from employee stock purchase plan 3.0 3.7

Payment of acquisition related obligations ( 1.0 ) ( 0.7 )

Payment of acquisition related contingent consideration ( 0.9 ) ( 0.5 )

Net cash used in financing activities $ ( 18.3 ) $ ( 52.7 )

5 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 $ 7.3 million and $ 12.4 million as of September 30, 2023 and October 1, 2022, respectively.

(2) These amounts include both current and non-current balances of restricted cash totaling $ 8.9 million and $ 12.8 million as of December 30, 2023 and December 31, 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 September 30, 2023

Three Months Ended December 30, 2023

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

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

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

Net income — — — 10.7 — 10.7

Other comprehensive loss — — — — ( 20.5 ) ( 20.5 )

Other comprehensive income — — — — 29.7 29.7

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

Stock-based compensation — — 12.6 — — 12.6

Balance at December 30, 2023 222.6 $ 0.2 $ 70,444.8 $ ( 69,590.2 ) $ ( 126.8 ) $ 728.0

Three Months Ended December 31, 2022

Additional Paid-In Capital

Accumulated Deficit

Accumulated Other Comprehensive Loss

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

Net income — — — 8.4 — 8.4

Other comprehensive income — — — — 43.3 43.3

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

Stock-based compensation — — 13.1 — — 13.1

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

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

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

Six Months Ended December 30, 2023

Additional Paid-In Capital

3 unchanged sentences

Net income — — — 20.5 — 20.5

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

Other comprehensive income — — — — 9.2 9.2

Shares issued under employee stock plans, net of tax 2.1 — ( 6.3 ) — — ( 6.3 )

1 unchanged sentence

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

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

Balance at December 30, 2023 222.6 $ 0.2 $ 70,444.8 $ ( 69,590.2 ) $ ( 126.8 ) $ 728.0

Six Months Ended December 31, 2022

Additional Paid-In Capital

Accumulated Deficit

Accumulated Other Comprehensive Loss

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

Net loss — — — 41.0 — 41.0

Other comprehensive income — — — — 0.4 0.4

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

Stock-based compensation — — 26.1 — — 26.1

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

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

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, 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.

(VIAVI, also referred to as the Company, we, our and us) for the three and six months ended December 30, 2023 and December 31, 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 months ended September 30, 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 and six months ended December 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 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 results for the three and six months ended December 30, 2023 and December 31, 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.

7 unchanged sentences

Refer to “Note 9.

Goodwill” and “Note 19.

Operating Segments and Geographic Information” for further information.

Use of Estimates

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

The preparation of the 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.

6 unchanged sentences

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.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.

The amendments clarify or improve disclosure and presentation requirements on various disclosure areas, including the statement of cash flows, earnings per share, debt, equity, and derivatives.

The amendments will align the requirements in the FASB Accounting Standards Codification (ASC) with the SEC’s regulations.

The amendments in this ASU will be effective on the date the related disclosures are removed from Regulation S-X or Regulation S-K by the SEC, and will not be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027.

Early adoption is prohibited.

As we are currently subject to these SEC requirements, this ASU is not expected to have a material impact on our Consolidated Financial Statements or related disclosures.

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures (Topic 280), to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses.

The amendments in this update will require public entities to disclose significant segment expenses that are regularly provided to the Company’s Chief Executive Officer, as the Company’s Chief Operating Decision Maker (CODM) and included within segment profit and loss.

This guidance is effective for fiscal years beginning after December 15, 2023 (fiscal 2025 for the Company), and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted and will be applied retrospectively to all prior periods presented in the financial statements.

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

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740), to enhance the transparency and decision usefulness of income tax disclosures through changes to the rate reconciliation and income taxes paid information.

This guidance is effective for fiscal years beginning after December 15, 2024 (fiscal 2026 for the Company), with early and retrospective adoption permitted.

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

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Earnings Per Share

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

Three Months Ended

September 30, 2023 October 1, 2022

Three Months Ended Six Months Ended

December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022

Net income $ 10.7 $ 8.4 $ 20.5 $ 41.0

8 unchanged sentences

(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 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.

As of December 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

September 30, 2023 October 1, 2022

Three Months Ended Six Months Ended

December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022

Restricted stock units 5.6 5.0 3.1 3.2

3 unchanged sentences

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

For the three months ended September 30, 2023, the changes in accumulated other comprehensive loss, net of tax, by component were as follows ( in millions ):

For the six months ended December 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 before reclassification — ( 20.4 ) — ( 20.4 )

Other comprehensive income before reclassification — 9.3 — 9.3

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

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.

Net current-period other comprehensive income (loss) — 9.3 ( 0.1 ) 9.2

Ending balance as of December 30, 2023 $ ( 5.3 ) $ ( 116.1 ) $ ( 5.4 ) $ ( 126.8 )

There was no tax impact for the six months ended December 30, 2023.

Refer to “Note 17.

6 unchanged sentences

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;

The acquisition 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.

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 allocation of the purchase price ( in millions ):

Cash and cash equivalents $ 1.1

Accounts receivable, net 2.3

Inventory, net 3.2

Identified intangible assets acquired 30.6

Other non-current assets 0.1

Accounts payable ( 0.6 )

Accrued expenses ( 3.4 )

Deferred revenue ( 2.1 )

Other current liabilities ( 0.5 )

Total purchase consideration $ 79.0

(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 ):

Estimated Useful Life Amount

Developed technology 6 years $ 25.0

Customer relationship 3 years 2.7

Tradename 2 years 0.5

Backlog 1 year 2.4

Total identifiable assets acquired $ 30.6

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In connection with this acquisition, the Company recorded approximately $ 48.3 million of goodwill and $ 30.6 million of developed technology and other intangibles.

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

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

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

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

The goodwill was deductible for U.S.

income tax purposes.

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.

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 March 29, 2023, April 21, 2023 and June 8, 2023, the Company completed acquisitions accounted for as asset purchases consisting of an aggregate 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 are being 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 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 .

Acquisition-related Contingent Consideration

The following table provides a reconciliation of changes in the fair value of the Company’s earn-out liabilities associated with the Company’s acquisitions for the three months ended September 30, 2023 and October 1, 2022 ( in millions ):

Three Months Ended

September 30, 2023 October 1, 2022

The following table provides a reconciliation of changes in the fair value of the Company’s earn-out liabilities associated with the Company’s acquisitions for the three and six months ended December 30, 2023 and December 31, 2022 ( in millions ):

Three Months Ended Six Months Ended

December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022

Beginning period balance $ 18.3 $ 2.9 $ 19.7 $ 2.5

Additions to Contingent Consideration — 29.4 — 29.4

Payments of Contingent Consideration ( 0.7 ) ( 0.5 ) ( 0.7 ) ( 0.5 )

Fair value adjustment of earn-out liabilities ( 7.0 ) 1.3 ( 8.4 ) 1.8

6 unchanged sentences

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

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

As of December 30, 2023, and July 1, 2023, the Company had total unbilled receivables of $ 13.6 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 ):

September 30, 2023

Three Months Ended

December 30, 2023

Three Months Ended Six Months Ended

Deferred revenue:

2 unchanged sentences

Revenue recognized during the period (2)

( 30.5 ) ( 62.2 )

Balance at end of period $ 84.7 $ 84.7

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 September 30, 2023, was $ 226.6 million.

The value of the transaction price allocated to remaining performance obligations as of December 30, 2023, was $ 248.4 million.

The Company expects to recognize approximately 89 % of remaining performance obligations as revenue within the next 12 months, and the remainder thereafter.

2 unchanged sentences

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

September 30, 2023

December 30, 2023

Allowance for credit losses $ 1.0 $ 0.8 $ ( 0.2 ) $ 1.6

2 unchanged sentences

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

September 30, 2023 July 1, 2023

December 30, 2023 July 1, 2023

Finished goods $ 53.4 $ 49.0

6 unchanged sentences

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

September 30, 2023 July 1, 2023

December 30, 2023 July 1, 2023

Refundable income taxes $ 28.3 $ 27.6

1 unchanged sentence

Advances to contract manufacturers 8.2 9.8

Fair value of forward contracts 5.4 3.5

Transaction tax receivables 3.7 5.1

Asset held for sale 2.5 2.5

Fair value of forward contracts 1.6 3.5

Other current assets 7.4 7.1

2 unchanged sentences

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

September 30, 2023 July 1, 2023

December 30, 2023 July 1, 2023

Operating ROU assets (Note 12) $ 37.5 $ 40.4

Long-term restricted cash 5.8 4.6

Deposits 2.6 2.3

Deferred contract cost 2.5 2.9

Debt issuance cost - Revolving Credit Facility 2.3 2.8

Deposits 2.1 2.3

Other non-current assets 9.9 8.7

2 unchanged sentences

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

September 30, 2023 July 1, 2023

December 30, 2023 July 1, 2023

Operating lease liabilities (Note 12) $ 10.0 $ 10.1

Fair value of forward contracts 5.2 2.4

Interest payable 5.4 5.5

Income tax payable 4.5 4.4

Acquisition related holdback and related accruals 4.4 4.1

Warranty accrual 4.0 4.2

Acquisition related holdback and related accruals 3.0 4.1

Transaction tax payable 2.6 4.3

Fair value of forward contracts 2.0 2.4

Restructuring accrual (Note 13) 1.2 5.8

Fair value of contingent consideration (Note 5) — 1.1

Interest payable 0.4 5.5

Other 10.0 7.9

4 unchanged sentences

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

September 30, 2023 July 1, 2023

December 30, 2023 July 1, 2023

Pension and post-employment benefits $ 54.9 $ 53.2

1 unchanged sentence

Long-term deferred revenue 23.9 23.4

Fair value of contingent consideration (Note 5) 17.4 18.6

Deferred tax liability 19.1 13.9

Financing obligation 15.7 15.8

Uncertain tax position 15.9 15.8

Financing obligation 15.8 15.8

Fair value of contingent consideration (Note 5) 10.6 18.6

Warranty accrual 4.5 4.8

4 unchanged sentences

Short-Term Investments

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 December 30, 2023, the Company’s short-term investments of $ 25.0 million were comprised of a 30 -day term deposit of $ 23.3 million and trading securities related to the deferred compensation plan of $ 1.7 million, of which $ 1.5 million was invested in equity securities, $ 0.1 million was invested in debt securities and $ 0.1 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.

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

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.

As of December 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 $ 5.4 million and $ 2.0 million is reflected as Prepayments and other current assets and Other current liabilities on the Consolidated Balance Sheets, respectively.

2 unchanged sentences

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

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.

As of December 30, 2023 and July 1, 2023, the notional amounts of the forward contracts that the Company held to purchase foreign currencies were $ 96.4 million and $ 87.5 million, respectively, and the notional amounts of forward contracts that the Company held to sell foreign currencies were $ 82.4 million and $ 19.3 million, respectively.

VIAVI SOLUTIONS INC.

2 unchanged sentences

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

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

The foreign exchange forward contracts incurred a gain of $ 3.4 million and loss of $ 0.1 million for the three and six months ended December 30, 2023, respectively, and a gain of $ 6.0 million and loss of $ 0.7 million for the three and six months ended December 31, 2022, respectively.

Fair Value Measurements

12 unchanged sentences

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

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

As of December 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.

6 unchanged sentences

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

September 30, 2023 July 1, 2023

December 30, 2023 July 1, 2023

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

16 unchanged sentences

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

(2) Includes, as of December 30, 2023, $ 370.6 million in Cash and cash equivalents, $ 3.0 million in Restricted cash and $ 4.1 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.

2 unchanged sentences

(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.

(6) As of December 30, 2023, included in Other non-current liabilities on the Consolidated Balance Sheets.

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

Other Fair Value Measures

2 unchanged sentences

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

September 30, 2023 July 1, 2023

December 30, 2023 July 1, 2023

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

11 unchanged sentences

The following table presents changes in goodwill allocated to the Company’s reportable segments (in millions) :

Network Enablement Service Enablement Optical Security

Network Enablement (1)

Service Enablement (1)

Optical Security

and Performance

Balance as of July 1, 2023 $ 399.2 $ 13.8 $ 42.2 $ 455.2

Currency translation and other adjustments (1)

Currency translation 1.0 — — 1.0

Other adjustment (2)

— ( 1.0 ) — ( 1.0 )

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.

Balance as of December 30, 2023 $ 400.2 $ 12.8 $ 42.2 $ 455.2

(1) Balance as of July 1, 2023 adjusted to reflect a reclass of $ 1.2 million from Service Enablement to Network Enablement due to a product line movement (see Note 19.

“Operating Segments and Geographic Information” for further details).

(2) Adjustment related to Goodwill acquired as part of a prior acquisition.

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 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.

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

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

Acquired developed technology $ 438.9 $ ( 397.5 ) $ 41.4

11 unchanged sentences

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

Three Months Ended

September 30, 2023 October 1, 2022

Three Months Ended Six Months Ended

December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022

Cost of revenues $ 3.4 $ 5.7 $ 6.9 $ 12.8

1 unchanged sentence

Total amortization of intangible assets $ 4.8 $ 7.9 $ 10.4 $ 17.2

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 ):

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

Remainder of 2024 $ 9.6

2 unchanged sentences

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

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.

As of December 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 ):

September 30, 2023 July 1, 2023

December 30, 2023 July 1, 2023

Principal amount of 1.00 % Senior Convertible Notes

13 unchanged sentences

Long-term debt $ 632.8 $ 629.5

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

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

VIAVI SOLUTIONS INC.

9 unchanged sentences

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 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 and will be amortized to interest expense using the straight-line method 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 September 30, 2023, the expected remaining term of the 2026 Notes is 2.5 years.

As of December 30, 2023, the expected remaining term of the 2026 Notes is 2.2 years.

3.75 % Senior Notes (2029 Notes)

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

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

Proceeds of the 2029 Notes amounted to $ 393.0 million after issuance costs of $ 7.0 million.

The debt issuance costs were capitalized and will be amortized to interest expense using the straight-line method until maturity.

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

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

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 30, 2023, the expected remaining term of the 2029 Notes is 5.8 years.

1.75 % Senior Convertible Notes (2023 Notes)

2 unchanged sentences

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.

The debt issuance costs were capitalized and amortized to interest expense using the straight-line 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.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.00 % Senior Convertible Notes (2024 Notes)

1 unchanged sentence

On March 22, 2017, the Company issued an additional $ 60.0 million upon exercise of the over-allotment option of the initial purchasers.

The total proceeds from the 2024 Notes amounted to $ 451.1 million after issuance costs.

The total proceeds from the 2024 Notes amounted to $ 451.1 million after issuance costs of $ 8.9 million.

The debt issuance costs were capitalized and will be amortized to interest expense using the straight-line method until maturity.

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

As of December 30, 2023, the expected remaining term of the 2024 Notes is 0.2 years.

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

See Senior Convertible Notes Settlement below.

See Senior Convertible Notes Settlement section below.

During the periods from, and including December 1, 2023 until the close of business on the business day immediately preceding March 1, 2024, holders may convert the 2024 Notes at any time regardless of the foregoing circumstances.

The Company has received trivial requests for conversion.

Senior Convertible Notes Settlement

1 unchanged sentence

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

The Company recorded a loss of $ 85.9 million in connection with the settlement transactions which is presented as Loss on convertible note settlement in the Company’s Consolidated Statements of Operations.

The Company recorded a loss of $ 85.9 million in connection with the settlement transactions which is presented as Loss on convertible note settlement in the Consolidated Statements of Operations.

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

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

The Company recorded a loss of $ 6.4 million in connection with the settlement transactions which is presented as Loss on convertible note settlement in the Company’s Consolidated Statements of Operations.

The Company recorded a loss of $ 6.4 million in connection with the settlement transactions which is presented as Loss on convertible note settlement in the Consolidated Statements of Operations.

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

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

The Company recorded a loss of $ 6.4 million in connection with the settlement transactions which is presented as Loss on convertible note settlement in the Consolidated Statements of Operations.

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

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

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

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

VIAVI SOLUTIONS INC.

10 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 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.

As of December 30, 2023, we had no borrowings under this facility and our available borrowing capacity was approximately $ 159.0 million, net of outstanding standby letters of credit of $ 4.1 million.

Revolving Credit Facility

3 unchanged sentences

Interest Expense

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

Three Months Ended

September 30, 2023 October 1, 2022

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

Three Months Ended Six Months Ended

December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022

Interest expense-contractual interest $ 5.0 $ 4.6 $ 10.0 $ 9.2

8 unchanged sentences

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

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

September 30, 2023 October 1, 2022

Lease expense and cash flow information are as follows ( in millions ):

Three Months Ended Six Months Ended

December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022

Operating lease costs (1)

$ 3.3 $ 3.2 $ 6.6 $ 6.5

Cash paid for amounts included in the measurement of operating lease liabilities 3.2 3.6 7.8 8.2

Operating ROU assets obtained in exchange for operating lease obligations 1.5 2.3 2.6 3.0

(1) Total variable lease costs were immaterial during the six months ended December 30, 2023 and December 31, 2022.

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

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

December 30, 2023 July 1, 2023

Operating ROU assets (Other non-current assets) $ 37.5 $ 40.4

4 unchanged sentences

Weighted-average discount rate 4.8 % 4.8 %

(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 ):

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

Operating Leases

17 unchanged sentences

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

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

July 1, 2023 Restructuring and related (benefits) charges Cash Settlements Balance as of December 30, 2023

Fiscal 2023 Plan

5 unchanged sentences

$ 5.8 $ ( 0.9 ) $ ( 3.7 ) $ 1.2

(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.

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

The Company recorded an income tax provision of $ 7.6 million and $ 16.2 million for the three and six months ended December 30, 2023, respectively.

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

The income tax provision for the three and six months ended December 30, 2023 and December 31, 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 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.

As of December 30, 2023 and July 1, 2023, the Company’s unrecognized tax benefits totaled $ 50.8 million and $ 51.1 million, respectively, and are included in deferred taxes and other non-current tax liabilities, net.

The Company had $ 3.3 million accrued for the payment of interest and penalties as of December 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.

7 unchanged sentences

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

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.

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

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

Stock-Based Compensation

8 unchanged sentences

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

During the three months ended 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.

During the six months ended December 30, 2023 and December 31, 2022, the Company granted 3.5 million and 2.6 million time-based restricted stock awards, respectively.

The aggregate grant-date fair value of time-based restricted stock awards granted during the six months ended December 30, 2023 and December 31, 2022 were estimated to be $ 34.8 million and $ 36.7 million, respectively.

During the six months ended December 30, 2023 and December 31, 2022, the Company granted 1.2 million and 0.7 million performance-based awards, respectively.

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

There were 0.1 million performance-based shares attained over target during the six months ended December 31, 2022.

The aggregate grant-date fair value of performance-based awards granted during the six months ended December 30, 2023 and December 31, 2022 were estimated to be $ 13.4 million and $ 11.5 million, respectively.

As of December 30, 2023, $ 80.0 million of unrecognized stock-based compensation costs remain to be amortized.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Three Months Ended

September 30, 2023 October 1, 2022

The impact on the Company’s results of operations of recording stock-based compensation by function for the three and six months ended December 30, 2023 and December 31, 2022, is as follows (in millions) :

Three Months Ended Six Months Ended

December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022

Cost of revenues $ 1.2 $ 1.2 $ 2.4 $ 2.4

2 unchanged sentences

Total stock-based compensation expense $ 12.5 $ 13.0 $ 23.7 $ 26.0

Approximately $ 1.2 million of stock-based compensation was capitalized to inventory as of September 30, 2023 and October 1, 2022.

Approximately $ 1.3 million and $ 1.2 million of stock-based compensation was capitalized to inventory as of December 30, 2023 and December 31, 2022, respectively.

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 September 30, 2023, the U.K.

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

During the six months ended December 30, 2023, the Company contributed $ 0.6 million to the U.K.

plan and $ 1.9 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

September 30, 2023 October 1, 2022

Three Months Ended Six Months Ended

December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022

Interest cost $ 0.8 $ 0.7 $ 1.7 $ 1.4

Expected return on plan assets ( 0.5 ) ( 0.4 ) ( 1.0 ) ( 0.8 )

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

Amortization of net actuarial gains — — ( 0.1 ) —

Net periodic benefit cost $ 0.3 $ 0.3 $ 0.6 $ 0.6

3 unchanged sentences

Based on actuarial assumptions, the Company expects to incur cash outlays of approximately $ 8.7 million related to its defined benefit pension plans during fiscal 2024 to make current benefit payments and fund future obligations.

As of September 30, 2023, approximately $ 1.4 million had been incurred.

As of December 30, 2023, approximately $ 2.5 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.

18 unchanged sentences

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

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

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

law firm responsible for the error.

6 unchanged sentences

Outstanding Letters of Credit, Performance Bonds and Other Claims

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.

As of December 30, 2023, the Company had standby letters of credit of $ 7.1 million and performance bonds and other claims of $ 1.8 million collateralized by restricted cash.

VIAVI SOLUTIONS INC.

1 unchanged sentence

Product Warranties

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

The following table presents the changes in the Company’s warranty reserve during the three and six months ended December 30, 2023 and December 31, 2022 ( in millions ):

Three Months Ended Six Months Ended

December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022

Balance as of beginning of period $ 8.8 $ 9.5 $ 9.0 $ 10.6

5 unchanged sentences

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

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

The Company’s CODM uses operating segment financial information to evaluate segment performance and to allocate resources.

The Company’s reportable segments are:

17 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

The Company does not allocate stock-based compensation, acquisition-related charges, amortization of intangibles, restructuring, 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

The following tables present information on the Company’s reportable segments for the three months ended December 30, 2023 and December 31, 2022 ( in millions ):

Three Months Ended December 30, 2023

Network and Service Enablement

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

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

Consolidated GAAP Measures

Product revenue $ 125.2 $ 10.8 $ 136.0 $ 74.9 $ — $ 210.9

5 unchanged sentences

Operating margin 3.6 % 36.4 % 8.8 %

Three Months Ended October 1, 2022

Three Months Ended December 31, 2022

Network and Service Enablement

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

Network Enablement (2)

Service Enablement (2)

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

Consolidated GAAP Measures

Product revenue (2)

9 unchanged sentences

(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.

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

VIAVI SOLUTIONS INC.

1 unchanged sentence

Three Months Ended

September 30, 2023 October 1, 2022

December 30, 2023 December 31, 2022

Corporate reconciling items impacting gross profit:

2 unchanged sentences

Amortization of intangibles ( 3.4 ) ( 5.7 )

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

Other charges unrelated to core operating performance (1)

GAAP gross profit $ 148.0 $ 167.0

4 unchanged sentences

Change in fair value of contingent liability 7.0 ( 1.3 )

Other charges unrelated to core operating performance (1)

( 1.1 ) ( 0.9 )

Restructuring and related benefits 0.1 —

GAAP operating income from continuing operations $ 22.4 $ 22.9

(1) During the three months ended December 30, 2023 and December 31, 2022, other charges unrelated to core operating performance primarily consisting of certain acquisition and integration related charges, accretion of debt discount and loss on disposal of long-lived assets.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Six Months Ended December 30, 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 $ 245.6 $ 18.5 $ 264.1 $ 152.4 $ — $ 416.5

Service revenue 59.9 26.0 85.9 — — 85.9

Net revenue $ 305.5 $ 44.5 $ 350.0 $ 152.4 $ — $ 502.4

Gross profit $ 191.8 $ 30.3 $ 222.1 $ 79.7 $ ( 9.4 ) $ 292.4

Gross margin 62.8 % 68.1 % 63.5 % 52.3 % 58.2 %

Operating income $ 7.9 $ 56.6 $ ( 26.1 ) $ 38.4

Operating margin 2.3 % 37.1 % 7.6 %

Six Months Ended December 31, 2022

Network and Service Enablement

Network Enablement (2)

Service Enablement (2)

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

Consolidated GAAP Measures

Product revenue (2)

$ 318.9 $ 21.7 $ 340.6 $ 168.6 $ — $ 509.2

Service revenue (2)

60.9 24.5 85.4 0.1 — 85.5

Net revenue $ 379.8 $ 46.2 $ 426.0 $ 168.7 $ — $ 594.7

Gross profit $ 244.9 $ 30.1 $ 275.0 $ 92.3 $ ( 15.5 ) $ 351.8

Gross margin 64.5 % 65.2 % 64.6 % 54.7 % 59.2 %

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

Operating margin 11.1 % 39.2 % 12.2 %

(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 net revenue, gross profit and gross margin.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Six Months Ended

December 30, 2023 December 31, 2022

Corporate reconciling items impacting gross profit:

Total segment gross profit $ 301.8 $ 367.3

Stock-based compensation ( 2.4 ) ( 2.4 )

Amortization of intangibles ( 6.9 ) ( 12.8 )

Other charges unrelated to core operating performance (1)

( 0.1 ) ( 0.3 )

GAAP gross profit $ 292.4 $ 351.8

Corporate reconciling items impacting operating income:

Total segment operating income $ 64.5 $ 113.4

Stock-based compensation ( 23.7 ) ( 26.0 )

Amortization of intangibles ( 10.4 ) ( 17.2 )

Change in fair value of contingent liability 8.4 ( 1.8 )

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

1 unchanged sentence

GAAP operating income from continuing operations $ 38.4 $ 72.7

(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.

(1) During the six months ended December 30, 2023 and December 31, 2022, other (charges) benefits unrelated to core operating performance primarily consisting of certain acquisition and integration related charges, legal settlement, accretion of debt discount and losses on disposal of long-lived assets.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company operates primarily in three geographic regions:

2 unchanged sentences

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

The following table presents net revenue by the three geographic regions in which the Company operates and net revenue from countries that exceeded 10% of the Company’s total net revenue for the three months ended September 30, 2023 and October 1, 2022 (in millions):

The following table presents net revenue by the three geographic regions in which the Company operates and net revenue from countries that exceeded 10% of the Company’s total net revenue for the three and six months ended December 30, 2023 and December 31, 2022 (in millions):

Three Months Ended

September 30, 2023 October 1, 2022

December 30, 2023 December 31, 2022

Product Revenue Service Revenue Total Product Revenue Service Revenue Total

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Total net revenue $ 210.9 $ 43.6 $ 254.5 $ 241.5 $ 43.0 $ 284.5

Six Months Ended

December 30, 2023 December 31, 2022

Product Revenue Service Revenue Total Product Revenue Service Revenue Total

United States $ 136.2 $ 31.3 $ 167.5 $ 158.5 $ 30.6 $ 189.1

Other Americas 28.3 7.8 36.1 33.4 6.8 40.2

Total Americas $ 164.5 $ 39.1 $ 203.6 $ 191.9 $ 37.4 $ 229.3

Asia-Pacific:

Greater China $ 95.3 $ 3.2 $ 98.5 $ 122.4 $ 3.9 $ 126.3

Other Asia 53.2 13.7 66.9 76.7 13.7 90.4

Total Asia-Pacific $ 148.5 $ 16.9 $ 165.4 $ 199.1 $ 17.6 $ 216.7

$ 103.5 $ 29.9 $ 133.4 $ 118.2 $ 30.5 $ 148.7

Total net revenue $ 416.5 $ 85.9 $ 502.4 $ 509.2 $ 85.5 $ 594.7

VIAVI SOLUTIONS INC.

1 unchanged sentence

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.

On January 11, 2024, VIAVI announced that the U.S.

National Telecommunications and Information Administration has awarded the Company a grant from the Public Wireless Supply Chain Innovation Fund.

The grant is expected to provide approximately $ 21.7 million in funding over a three-year period to be used by the Company to create an advanced test lab to enable and accelerate the development of Open Radio Access Network technology and components.

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