What changed in this filing

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Item 1. Business

2024-08-16 compared with 2023-08-17 · 44 added, 62 removed, 230 unchanged (32% of the section changed)

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We help customers harness the power of instruments, automation, intelligence and virtualization.

VIAVI is also a leader in light management technologies for 3D sensing, for the anti-counterfeiting, consumer electronics, industrial, automotive, government and aerospace applications.

VIAVI is also a leader in light management technologies which are used in anti-counterfeiting, 3D sensing, consumer electronics, industrial, automotive, government and aerospace applications.

To serve our markets, we operate the following business segments:

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We operate in two broad business categories:

Network and Service Enablement (NSE) and Optical Security and Performance Products (OSP).

Network and Service Enablement (NSE) and OSP.

NSE operates in two reportable segments, NE and SE, whereas OSP operates as a single segment.

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Our solutions address lab and production environments, field deployment and service assurance for wireless and wireline networks, including computing and storage networks.

Our test instrument portfolio is one of the largest in the industry, with hundreds of thousands of units in active use by major network equipment manufacturers (NEMs), operators and service providers worldwide.

Our test instrument portfolio is one of the largest in the industry, with hundreds of thousands of units in active use by NEMs, operators and service providers worldwide.

Within the NE product portfolio, our wireless products consist of flexible application software and multi-function hardware that our customers can easily use as standalone test and measurement solutions or combine with industry-standard computers, networks and third-party devices to create measurement, automation and embedded systems.

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AvComm products are positioned in all of the customers’ product life cycle phases from research & development (R&D), manufacturing, installation, deployment and field, to depot repair and maintenance of devices.

NE customers include CSPs, NEMs, government organizations and large corporate customers, such as major telecom, mobility and cable operators, chip and infrastructure vendors, storage-device manufacturers, storage-network and switch vendors, radio and avionics commercial companies, original equipment manufacturers (OEMs), state and federal agencies, utilities, law enforcement, military contractors and the armed forces and deployed private enterprise customers.

NE customers include CSPs, NEMs, government organizations and large corporate customers, such as major telecom, mobility and cable operators, chip and infrastructure vendors, storage-device manufacturers, storage-network and switch vendors, radio and avionics commercial companies, OEMs, state and federal agencies, utilities, law enforcement, military contractors and the armed forces and deployed private enterprise customers.

Our customers include América Móvil, AT&T Inc., Lumen Technologies, Inc.

(formerly CenturyLink, Inc.), Cisco Systems, Inc., Nokia Corporation, British Telecom Openreach, Deutsche Telekom AG and Verizon Communications Inc.

For further information related to our customers, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 7 of this Annual Report on Form 10-K.

NE competitors include Anritsu Corporation, EXFO Inc., Keysight Technologies Inc., Rohde & Schwarz, VeEX Inc.

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They help service provider technicians assess the performance of network elements and segments and verify the integrity of the information being transmitted across the network.

These instruments are highly intelligent and have user interfaces that are designed to simplify operations and minimize the training required to operate them.

These instruments are enhanced with artificial intelligence and machine learning and built-in automation and analytics with user interfaces that are designed to simplify operations and minimize the training required to operate them.

Our NE solutions are also used by NEMs in the design and production of next-generation network equipment.

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Primarily consisting of our network performance monitoring and diagnostic tools (Apex, GigaStor, Observer).

Primarily consisting of our growth products (location intelligence and NITRO mobile products) and mature products.

Primarily consisting of our growth products (Nitro Geo, NITRO Mobile and AI Ops products) and mature products.

Industry Trends for NSE

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The 5G transition is being deployed globally and is expected to be disruptive to businesses, consumers and potentially create new applications and vertical industries.

The increase in demand for 5G services will be increasingly supported by automation and associated artificial intelligence and machine learning, which will further enable enterprise requirements for private 5G as well as numerous use cases such as remote working and energy efficiency.

We believe the increase in demand for 5G services will be increasingly supported by automation and associated artificial intelligence and machine learning, which will further enable enterprise requirements for private 5G as well as numerous use cases such as remote working and energy efficiency.

Such increases in demand for pervasive on-premise/off-premise services will further drive the need for cybersecurity.

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Existing network infrastructure that is not otherwise being upgraded is also expected to be modernized with new cable and access technologies.

Cable providers are investing in DOCSIS 3.1 to enhance existing cable networks while DSL copper lines are being upgraded to GFast.

Many operators have decided to run existing legacy networks by deploying superior technologies or continuing to run such networks until they are no longer operable and then replacing them with new optical fiber.

Cable operators are investing in Distributed Access Architecture (DAA) and extending frequencies and network capacity.

For our avionics products, many governments across the globe are increasing their military and public safety budgets to upgrade communication infrastructure.

The convergence of network technologies requires significant investments from both traditional carriers and cloud service providers.

While traditional services providers, in recent years, have continued to consolidate to gain scale, and capital spending in physical networks has been declining, it also creates additional opportunities as service providers deploy NE products and solutions to improve average revenue per user (ARPU) metrics by reducing the need for physical customer service visits through faster installation and repair completion.

In recent years, there has been consolidation of some traditional service providers.

This has created scale and capital spending in physical networks has been declining.

However, it has also created additional opportunities as service providers deploy NE products and solutions to reduce cost of repair and maintenance of their networks.

These products and solutions also improve efficiency of new service installation, activation and services by reducing the need for physical customer service visits and faster installation and repair completion.

In addition, the new cloud service providers and virtualized networks create new NSE opportunities.

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OSP also produces precise, high-performance, optical thin-film coatings and light shaping optics capabilities for a variety of applications including, for example, optical filters and Engineered Diffusers, marketed under the trademark “Engineered Diffusers®”, for 3D sensing applications.

OSP customers include SICPA Holding SA Company (SICPA), STMicroelectronics Holding N.V., Lockheed Martin Corporation and Seiko Epson Corporation.

OSP customers include SICPA Holding SA Company (SICPA), Lockheed Martin Corporation and Seiko Epson Corporation.

We have a strategic alliance with SICPA to market and sell our OVP and OVMP product lines for banknote anti-counterfeiting applications worldwide.

Sales of these products to SICPA generated approximately 10% of our net revenue from continuing operations during fiscal 2021, 2022 and 2023.

A material reduction in sales, or loss of the relationship with SICPA, may harm our business and operating results as we may be unable to find a substitute marketing and sales partner or develop these capabilities ourselves in a timely manner.

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Operating Segments and Geographic Information” of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

For further information related to our customers, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 7 of this Annual Report on Form 10-K.

OSP competitors include providers of anti-counterfeiting technologies such as Giesecke & Devrient, De La Rue plc;

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We leverage our capabilities to deliver technologies that enable anti-counterfeiting solutions designed to protect the integrity of banknotes and other documents of value.

The wide availability of advanced and relatively low-cost imaging technologies and printing tools threatens the integrity of critical printed documents, necessitating robust, technically sophisticated and easy to validate anti-counterfeiting features.

Our OVP, and OVMP technologies enable intuitive overt optical effects that consumers can easily recognize but counterfeiters find very difficult to reproduce.

We also design, manufacture and sell optical filters for 3D sensing applications that allow consumers to interact with their devices more naturally by enabling electronic devices to accurately measure depth and motion.

The wide availability of advanced and relatively low-cost imaging technologies and printing tools presents a consistent threat to the integrity of secure documents, necessitating robust, technically sophisticated and easy to validate anti-counterfeiting features.

Our security pigment technologies enable intuitive overt optical effects that consumers can easily and quickly recognize and that counterfeiters find very difficult to reproduce.

Major trends in banknote design include an interest in incorporating more security features even on lower value denominations, a greater variety of colors, development of eye-catching abstract images, and implementing vertical orientation more frequently.

Our technologies enable solutions for designers to address these trends.

We also design, manufacture and sell optical filters to improve the performance of optical sensors for a range of applications including 3D sensing.

3D sensing applications allow consumers to interact with their devices more naturally by enabling electronic devices to accurately measure depth and motion.

Our filters play an important role in those applications, separating out ambient light from the incoming data used by sensors to make precise measurements.

Notably, our patented low angle shift technology enables our customers to significantly improve the signal-to-noise ratio of their systems and deliver reliable system performance.

Through the development of multiple generations of products for 3D sensing and by delivering improved performance and competitive value with each iteration, we believe we have established ourselves as one of the industry’s leading supplier of high-performance filters enabling depth-sensing systems in consumer electronics.

Similarly Engineered Diffusers, diffuse the infrared laser light transmitted by a smartphone in 3D sensing applications, enabling reliable system performance while also guarding eye safety.

In addition to anti-counterfeiting and 3D sensing applications, OSP technologies enable optical solutions in industries we believe the applications of which will mature or there will be development of new applications for OSP technologies that will grow demand for our OSP products and solutions.

Through the development of multiple generations of products for 3D sensing and by delivering improved performance and competitive value with each iteration, we believe we have established ourselves as one of the industry’s leading suppliers of high-performance filters enabling depth-sensing systems in consumer electronics.

Similarly Engineered DiffusersTM, shape the infrared laser light transmitted by a smartphone in 3D sensing applications, enabling reliable system performance while also guarding eye safety.

Major trends in 3D sensing and other applications we target including an ongoing drive toward enabling increased efficiency in size, weight, and power (SWaP).

As an example, customers in the mobile handset market are increasingly interested in delivering products that have increasingly thin physical profiles, necessitating innovation in the design and manufacturing of optical filters to meet those expectations.

In addition to anti-counterfeiting and 3D sensing applications, OSP technologies enable optical solutions for a range of other applications for customers in the aerospace, defense, biomedical, and industrial markets.

Research and Development

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We have centers of excellence for product marketing and development in Asia, Europe and North America.

In fiscal 2024, the Company was approved for a grant expected to provide approximately $21.7 million in funding over a three-year performance period from the Public Wireless Supply Chain Innovation Fund.

The grant is intended to facilitate a fully automated, cooperative, open and unbiased testing environment dedicated to ORAN interoperability, performance and security.

This service is designed to manage and support 5G and ORAN deployments that would benefit new entrants, startups and educational institutions to access tools with a minimal ramp-up time.

In our OSP segment, our R&D efforts concentrate on developing more innovative technologies and products for customers in the anti-counterfeiting, consumer electronics, industrial, government and automotive markets.

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Manufacturing

As of July 1, 2023, we have significant manufacturing facilities for our NE, SE and OSP segments located in China, France, Germany, Mexico, the United Kingdom and the United States.

As of June 29, 2024, we have significant manufacturing facilities for our NE, SE and OSP segments located in China, France, Germany, Mexico, the United Kingdom and the United States.

Our most significant contract manufacturing partners are located in China and Mexico.

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We do not intend to broadly license our intellectual property rights unless we can obtain adequate consideration or enter into acceptable intellectual property cross-licensing agreements.

As of July 1, 2023, we own 956 U.S.

As of June 29, 2024, we own 994 U.S.

patents and 1,969 foreign patents and have 1,195 patent applications pending throughout the world.

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Human Capital Management

The VIAVI culture is made up of the diverse contributions of our approximately 3,600 employees worldwide (as of July 1, 2023) representing more than 30 self-identified nationalities working across 30 countries.

The VIAVI culture is made up of the diverse contributions of our approximately 3,600 employees worldwide (as of June 29, 2024) representing more than 30 self-identified nationalities working across 30 countries.

VIAVI is committed to promoting and maintaining a diverse and inclusive work environment and offering equal opportunities to everyone.

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We regularly update and partner with the Compensation Committee of the Board of Directors on human capital matters.

Employee experience continues to be an important focus of our People Strategy, including implementing automation to increase efficiency in our business processes, manager and employee self-service for transactions and advanced reporting for organizational insight.

In addition, we launched a new learning management system to allow for micro-learning in the flow of work.

Our next phase will include improving our approach to measuring employee sentiment and drivers for engagement.

The VIAVI People Strategy articulates our talent priorities and provides the road map for the execution of human capital management in support of our business strategy.

Employee experience continues to be an important focus of our People Strategy.

In fiscal 2025, we are evolving internal employee outreach to enhance business knowledge, drive organizational awareness and to foster cross-functional collaboration.

We measure employee sentiment and gather data that provides insight into our culture, the working environment, and our employee’s drivers for engagement.

Business Values & Standards

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VIAVI is committed to fostering, cultivating, and preserving a culture of diversity, equity and inclusion.

Our human capital is one of our most valuable assets.

We believe the collective sum of our individual differences, life experiences, knowledge, innovation, business acumen, self-expression, and unique capabilities contributes to a culture that enhances our reputation and achievement.

We believe the unique contributions and capabilities of our employees comprise one of our most valuable assets.

We believe the collective sum of our individual differences, life experiences, knowledge, innovation, business acumen, self-expression, and unique capabilities promotes a culture that enhances our reputation and achievement.

VIAVI has long been committed to ensuring that all individuals have an equal opportunity to enjoy a fair, safe and productive work environment – regardless of age, ancestry, race, color, mental or physical disability or medical condition, gender, gender identity, gender expression, genetic information, family or marital status, registered domestic partner status, military and veteran status, race, religious creed, language, national origin, citizenship status, sex (including pregnancy, childbirth, breastfeeding and any related medical conditions), sexual orientation, socio-economic status, or any other protected category under applicable law.

We seek to embrace, encourage, and celebrate our employees’ differences and what makes them unique.

We embrace, encourage, and celebrate our employees’ differences and what makes them unique.

Talent Development

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Both managers and employees have a role to play to ensure that they are connected to the activities that drive our business forward.

Our employees can expect to engage regularly with their manager, and to have their support to accelerate their performance and development.

Our global Leadership Development Program has now reached over 70% of our leaders in fiscal 2023.

We aim for a work environment in which our employees can expect to engage regularly with their manager, and to have their support to accelerate their performance and development.

Our global Leadership Development Program has now reached over 79% of our managers in fiscal 2024.

We introduced advanced leadership concepts this year, enabling our participants to connect globally and cross functionally while advancing their skills.

We continue to provide guidance and best practices in hybrid working for our employees and managers, which are supported by our Flexible Work policy.

The early-in-career rotation programs for engineers and sales talent continue.

We provide guidance and best practices in hybrid working for our employees and managers, which are supported by our Flexible Work policy.

We maintain early-in-career rotation programs for engineers and sales talent.

Our diverse and global program participants are supported by a mentor and their manager to coach them as they take on exciting new technical challenges.

We believe their program experiences will unleash innovation and creativity for our organization while enabling our long-term talent pipeline.

We believe their program experiences will help to unleash innovation and creativity for our organization while enabling our long-term talent pipeline.

Technical talent thought leadership is a continued focus at our annual Technology Council event for engineering talent.

We are encouraged that VIAVI employees exhibit commitment to their ongoing career development, with 70% of our individual contributors building the professional and technical skills they need to advance their careers.

Our employees regularly participate in mandatory training courses covering data privacy, cybersecurity, health and safety as well as the prevention of sexual harassment in the workplace, each achieving over 98% compliance by employees.

In addition, approximately 78% of individual contributors take advantage of additional training resources provided by the Company to support them in ongoing career and professional skills development.

Talent Rewards

Our compensation and benefits programs are designed to recognize our employees' individual performance and contributions to our business results, including competitive base salaries and variable pay for all employees, share-based equity award grants, health and welfare benefits, time-off, development programs and training, and opportunities to give back to our communities.

We provide talent rewards that are competitive in the marketplace.

We support equal pay for equal work, pay transparency as well as all federal anti-discrimination laws applicable to employment, including those within Title VII of the Civil Rights Act.

We provide talent rewards that are competitive in the marketplace and support equal pay for equal work and pay transparency.

Health and Safety

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The success of our Safety program is demonstrated by our best-in-class Total Recordable Injury Rate (TRIR) of only 0.15 injuries per 100 full-time workers per year.

Environmental, Social and Governance Matters

We believe that serving our stakeholders, including our stockholders, customers, suppliers, employees, communities and the environment, drives commercial success and that implementing environmental, social and governance (ESG) practices makes our business more sustainable.

We take immense pride in the progress we are making within our ESG initiatives.

VIAVI is committed to transparency in its environmental practices, and we publicly report our key environmental metrics.

VIAVI continues to focus on energy efficiency, both in our products and business practices – which has resulted in a significant reduction of our carbon footprint over the years.

Our annual ESG report can be found at www.viavisolutions.com/esg .

Information Security

Information security is the responsibility of our Information Security team, overseen by our Chief Information Security Officer.

Our enterprise risk management program considers cybersecurity risks alongside other company risks, and our enterprise risk professionals consult with company subject matter experts to gather information necessary to identify cybersecurity risks, and evaluate their nature and severity, as well as identify mitigations and assess the impact of those mitigations on residual risk.

We leverage a combination of the National Institute of Standards and Technology Cybersecurity Framework, International Organization for Standardization and Center for Internet Security best practice standards to measure our security posture and manage risk.

Our information security practices include development, implementation, and improvement of policies and procedures to safeguard information and ensure availability of critical data and systems.

Our Information Security team conducts annual information security awareness training for employees involved in our systems and processes that handle customer data and audits of our systems and enhanced training for specialized personnel.

We also conduct semi-annual cyber awareness training and run tabletop exercises to simulate a response to a cybersecurity incident, and use the findings to improve our practices, procedures, and technologies.

Our Incident Response Plan coordinates the activities we take to prepare for, detect, respond to and recover from cybersecurity incidents, which include processes to triage, assess severity for, escalate, contain, investigate, and remediate the incident, as well as to comply with potentially applicable legal obligations and mitigate brand and reputational damage.

Our program further includes review and assessment by external, independent third-parties, who assess and report on our internal incident response preparedness and help identify areas for continued focus and improvement.

We also carry insurance that provides protection against the potential losses arising from a cybersecurity incident.

In the last fiscal three years, we have not experienced any material information security breach incidences and the expenses we have incurred from information security breach incidences were immaterial.

This includes penalties and settlements, of which there were none.

As set forth in its charter, our Audit Committee, comprised fully of independent directors, is responsible for oversight of risk, including cybersecurity and information security risk.

Our Audit Committee has established a Cybersecurity Steering Committee consisting of three independent directors, Laura Black (who serves as Chair of the Cybersecurity Steering Committee), Douglas Gilstrap and Joanne Solomon, as well as our Chief Information Officer, our Chief Information Security Officer and other members of our management representing a variety of teams and functions including legal, finance, and internal audit.

Members of our Cybersecurity Steering Committee have work experience managing cybersecurity and information security risks, an understanding of the cybersecurity threat landscape and/or knowledge of emerging privacy risks.

The purpose of the Cybersecurity Steering Committee is to oversee our compliance with reasonable and appropriate organizational, physical, administrative and technical measures designed to protect the integrity, security and operations of our information technology systems, transactions, and data owned by us, by providing guidance and oversight of our information technology and cybersecurity program.

The Cybersecurity Steering Committee generally meets on a quarterly basis and generally delivers reports and updates to the Audit Committee at each scheduled Audit Committee meeting.

The Audit Committee or, at the Audit Committee’s instruction, the Cybersecurity Steering Committee regularly briefs the full Board on these matters, and the Board receives regular updates on the status of the information security program, including but not limited to relevant cyber threats, roadmap and key initiative updates, and the identification and management of information security risks.

Our full Board reviews cybersecurity related opportunities as they relate to our business strategy, and cybersecurity-related matters are also factored into business continuity planning.

Where You Can Find More Information

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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-K

Item 1. Business