What changed in this filing

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Item 1A. Risk Factors

2024-05-03 compared with 2024-02-02 · 44 added, 12 removed, 330 unchanged (15% of the section changed)

1 unchanged sentence

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, the escalating armed conflict between Israel and Hamas, resulting in instability in the Middle East, and the risk of increased tensions between the U.S.

Recent escalation in regional conflicts, including the Russian invasion of Ukraine, resulting in ongoing economic sanctions, the armed conflict between Israel and Hamas, resulting in instability in the Middle East, and the risk of increased tensions between the U.S.

and China, could curtail or prohibit our ability to transfer certain technologies, to sell our products and solutions, or to continue to operate in certain locations.

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

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

Further, it is possible that the U.S.-Chinese geopolitical tensions could result in government measures that could adversely impact our business.

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• Cyclical demand for our currency products;

• Changing market and economic conditions, including the impacts due to tariffs, the ongoing conflict between Russia and Ukraine, the escalating armed conflict between Israel and Hamas;

• Changing market and economic conditions, including the impacts due to tariffs, the ongoing conflict between Russia and Ukraine, the armed conflict between Israel and Hamas;

tensions and trade sanctions between the U.S.

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In addition, unfavorable developments with evolving laws and regulations worldwide related to such technologies may limit or slow the rate of global adoption, impede our strategy, and negatively impact our long-term expectations in these markets.

Our growth and ability to serve a significant portion of these markets is subject to many factors including our success in implementing our business strategy as well as market adoption and expansion of 5G infrastructure, 3D sensing and other applications for consumer electronics.

Our growth and ability to serve a significant portion of these markets are subject to many factors including our success in implementing our business strategy as well as market adoption and expansion of 5G infrastructure, 3D sensing and other applications for consumer electronics.

We cannot assure you that we will be able to serve a significant portion of these markets and the growth forecasts should not be taken as indicative of our future growth.

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• Acquire, assume, or become subject to litigation related to the acquired businesses or assets.

We may fail to consummate the Proposed Acquisition, may not consummate the Proposed Acquisition on the expected terms, or may not achieve the anticipated benefits.

Completion of the Proposed Acquisition is subject to, among other things, the receipt of approval of the Proposed Acquisition by the requisite majorities of Spirent’s shareholders, regulatory approvals and other customary closing conditions for the acquisition of a U.K.

public company, including the sanction of the U.K.’s High Court.

On March 28, 2024, Spirent announced that it had received the Competing Offer at a higher nominal price per share of Spirent than that reflected in the Proposed Acquisition and that the board of directors of Spirent had withdrawn its recommendation in favor of the Proposed Acquisition and instead had recommended Spirent shareholders vote in favor of the Competing Offer.

The Competing Offer is conditioned on, among other things, the receipt of applicable antitrust and other regulatory clearances.

On April 17, 2024, Spirent announced the indefinite adjournment of the meetings of the shareholders of Spirent relating to the VIAVI Offer Scheme, which were scheduled to be held on May 1, 2024.

If those meetings are not held by May 23, 2024, the VIAVI Offer Scheme will lapse, unless VIAVI elects to waive the relevant condition to the Proposed Acquisition or such deadline is extended with the consent of the U.K.

Panel on Takeovers and Mergers.

As a result, the possible timing and likelihood of completion of the Proposed Acquisition are unclear and uncertain, and, accordingly, there can be no assurance that the Proposed Acquisition will be completed on the expected terms, on the anticipated schedule or at all.

In addition, the competing bidder is a larger company with a leading position in many product segments.

If the competing bidder is successful in executing its proposed bid for Spirent, we believe it could further entrench the competitor’s leading position in many product segments, which would limit customer choice and could adversely impact us.

Even if completed, the success of the Proposed Acquisition will depend, in significant part, on our ability to successfully integrate Spirent and its subsidiaries, grow the revenue of the combined company and realize the anticipated strategic benefits and synergies from the combination .

We may not generate positive returns on our research and development strategy.

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dollar and among the currencies of the countries in which we do business may adversely affect our operating results by negatively impacting our revenues or increasing our expenses;

• Our ability to comply with a wide variety of laws and regulations of the countries in which we do business, including, among other things, customs, import/export, anti-bribery, anti-competition, tax and data privacy laws, which may be subject to sudden and unexpected changes;

• Our ability to comply with a wide variety of laws and regulations of the countries in which we do business, including, among other things, customs, import/export, anti-bribery, anti-competition, climate/sustainability regulations, tax and data privacy laws, which may be subject to sudden and unexpected changes;

• Difficulties in establishing and enforcing our intellectual property rights;

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As a result, these actions, including potential retaliatory measures by China and further escalation into a potential “trade war”, may adversely impact our business.

While recent US export controls on China’s semiconductor and artificial intelligence industries may have an indirect impact on VIAVI, the implications of such controls are still being evaluated and are not expected to have a material impact on our consolidated annual revenues.

While recent U.S.

export controls on China’s semiconductor and artificial intelligence industries may have an indirect impact on VIAVI, the implications of such controls are still being evaluated and are not expected to have a material impact on our consolidated annual revenues.

Furthermore, the geopolitical and economic uncertainty and/or instability that may result from changes in the relationship among the United States, Taiwan and China, may, directly or indirectly, materially harm our business, financial condition and results of operations.

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Without such a license, we could be enjoined from future sales of the infringing product or products, which could adversely affect our revenues and operating results.

The use of open-source software in our products, as well as those of our suppliers, manufacturers and customers, may expose us to additional risks and harm our intellectual property position.

Certain of the software and/or firmware that we use and distribute (as well as that of our suppliers, manufacturers and customers) may be, be derived from, or contain, “open source” software, which is software that is generally made available to the public by its authors and/or other third parties.

The use of open-source software in our products, as well as those of our suppliers, manufacturers and customers, and the use of generative artificial intelligence in our work processes, may expose us to additional risks and harm our intellectual property position.

Certain of the software and/or firmware that we use and distribute (as well as that of our suppliers, manufacturers and customers) may be, be derived from, or contain, “open-source” software, which is software that is generally made available to the public by its authors and/or other third parties, as well as generative artificial intelligence (GenAI) technology (discussed further below).

Such open-source software is often made available under licenses which impose obligations in the event the software or derivative works thereof are distributed or re-distributed.

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In the event future iterations of open-source software are made available under a revised license, such license revisions may adversely affect our ability to use such future iterations.

Similarly, GenAI technology has proliferated including as a feature in existing commercially available products, some of which we use.

GenAI is a type of machine-learning model capable of generating various types of content, including data, text and images.

While GenAI may increase efficiency and enhance our work processes, use of GenAI tools could expose us to data and network security risks.

These risks include the exposure of our intellectual property, confidential and proprietary information (including customer information) to unknown recipients;

the introduction of malware into our network;

and the creation of content subject to copyright, trademark, or other intellectual property protection of an unknown third party.

Environmental, Social and Governance (ESG) Risks

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These developments have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting ESG-related requirements and expectations.

For example, developing and acting on ESG-related initiatives and collecting, measuring and reporting ESG-related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including the SEC’s climate-related reporting requirements, which are currently stayed pending legal challenges but which could come into effect in the coming years along with reporting requirements in California and other jurisdictions which we may be subject to.

We may also communicate certain initiatives and goals regarding ESG-related matters in our SEC filings or in other public disclosures.

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If a major earthquake, wildfire or other natural disaster were to damage or destroy our facilities or manufacturing equipment, we may experience potential impacts ranging from production and shipping delays to lost profits and revenues.

In October 2017 and again in October 2019, we temporarily closed our Santa Rosa, California facility resulting in production stoppage, due to wildfires in the region and the facility’s close proximity to the wildfire evacuation zone.

In October 2017 and again in October 2019, we temporarily closed our Santa Rosa, California facility due to wildfires in the region and the facility’s close proximity to the wildfire evacuation zone which resulted in production stoppage.

The location of our production facility could subject us to production delays and/or equipment and property damage.

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Our term notes increased our overall leverage and our convertible notes could dilute our existing stockholders and lower our reported earnings per share.

The issuance of our 1.00% Senior Convertible Notes due 2024, our 1.625% Senior Convertible Notes due 2026 and our 3.75% Senior Notes due 2029 (together the “Notes”) substantially increased our principal payment obligations.

The issuance of our 1.625% Senior Convertible Notes due 2026 and our 3.75% Senior Notes due 2029 (together the “Notes”) substantially increased our principal payment obligations.

The degree to which we are leveraged could materially and adversely affect our ability to successfully obtain financing for working capital, acquisitions or other purposes and could make us more vulnerable to industry downturns and competitive pressures.

In addition, the holders of the 2024 and 2026 Notes are entitled to convert the Notes into shares of our common stock or a combination of cash and shares of common stock under certain circumstances which would dilute our existing stockholders and lower our reported per share earnings.

In addition, the holders of the 2026 Notes are entitled to convert the Notes into shares of our common stock or a combination of cash and shares of common stock under certain circumstances which would dilute our existing stockholders and lower our reported per share earnings.

Our ability to make payments on our indebtedness when due, to make payments upon conversion with respect to our convertible senior notes or to refinance our indebtedness as we may need or desire, depends on our future performance and our ability to generate cash flow from operations, which is subject to economic, financial, competitive and other factors beyond our control.

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If any of these events occur, we may not derive some or all of the expected benefits from our NOLs and tax credit carryforwards.

Changes in tax legislation or policies could materially impact our financial position and results of operations.

VIAVI operates in many jurisdictions around the world.

Global tax policy is in a heightened state of evolution, with particular attention to Base Erosion and Profit Shifting (BEPS), transfer pricing, and general corporate tax reform.

Any substantial changes in domestic or international corporate tax policies, regulations, or guidance may materially adversely affect our business, the amount of taxes we are required to pay, and our financial condition and results of operations generally.

Enforcement activities or legislative initiatives may also have similar effects.

The Organization for Economic Co-operation & Development (OECD) has issued BEPS Pillar Two Model Rules.

Pillar Two establishes a minimum global effective tax rate of 15% on profits of large multinational companies.

While the U.S.

has not adopted the Pillar Two rules, many countries where we operate have adopted or are expected to adopt the OECD Pillar Two Model.

These changes could increase our tax burden, reduce net income and impact cash flow.

The Pillar Two rules, if enacted are generally effective for tax years beginning on or after January 1, 2024.

We expect this to be applicable for fiscal year 2025 and do not expect any material impacts to our current financial statements.

We will continue to monitor the tax legislation for any future implications.

General Risks

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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 1A. Risk Factors