What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-08-16 compared with 2023-08-17 · 426 added, 543 removed, 1278 unchanged (43% of the section changed)

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We have audited the accompanying consolidated balance sheets of Viavi Solutions Inc.

and its subsidiaries (the “Company”) as of July 1, 2023 and July 2, 2022, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity and of cash flows, for each of the three years in the period ended July 1, 2023, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of July 1, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of July 1, 2023 and July 2, 2022, and the results of its operations and its cash flows for each of the three years in the period ended July 1, 2023 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 1, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Changes in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for convertible debt instruments as of July 3, 2021.

and its subsidiaries (the “Company”) as of June 29, 2024 and July 1, 2023, and the related consolidated statements of operations, of comprehensive (loss) income, of stockholders’ equity, and of cash flows, for each of the three years in the period ended June 29, 2024, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of June 29, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 29, 2024 and July 1, 2023, and the results of its operations and its cash flows for each of the three years in the period ended June 29, 2024 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 29, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition – Identifying and Evaluating Performance Obligations in Certain Customer Contracts in the Network Enablement and Service Enablement Reportable Segments

As described in Notes 1 and 19 to the consolidated financial statements, the Company had $1,106.1 million of revenue for the year ended July 1, 2023 of which $697.5 million and $103.7 million related to the Network Enablement and Service Enablement segments, respectively.

The Company’s revenue recognition is determined by management through the following steps:

1) identification of the contract with a customer;

2) identification of the performance obligations in the contract;

3) determination of the transaction price;

4) allocation of the transaction price to the performance obligations in the contract;

and 5) recognition of revenue when (or as) the performance obligations are satisfied.

Certain of the Company’s contracts with customers include performance obligations consisting of a variety of products and services and may involve a significant level of integration and interdependency between performance obligations.

Identifying and evaluating whether products and services are considered distinct performance obligations may require significant management judgment, particularly in the Network Enablement and Service Enablement reportable segments due to the nature of the product and service offerings.

The principal considerations for our determination that performing procedures relating to revenue recognition – identifying and evaluating performance obligations in certain customer contracts in the Network Enablement and Service Enablement reportable segments is a critical audit matter are the significant judgment by management in identifying and evaluating performance obligations, which in turn led to a high degree of auditor judgment and effort in performing procedures and evaluating audit evidence obtained related to whether such performance obligations were appropriately identified and evaluated by management.

Revenue Recognition - Network Enablement and Service Enablement Reportable Segments

As described in Notes 1 and 19 to the consolidated financial statements, the Company had $1,000.4 million of total net revenue for the year ended June 29, 2024, of which $615.7 million and $86.3 million related to the Network Enablement and the Service Enablement reportable segments, respectively.

Revenue is recognized at the point in time control is transferred to the customer.

For hardware sales, transfer of control to the customer typically occurs at the point the product is shipped or delivered to the customer’s designated location.

For software license sales, transfer of control to the customer typically occurs upon shipment, electronic delivery, or when the software is available for download by the customer.

For sales of implementation service and solution contracts or in instances where software is sold along with essential installation services, transfer of control occurs and revenue is typically recognized upon customer acceptance.

The principal consideration for our determination that performing procedures relating to revenue recognition for the Network Enablement and the Service Enablement reportable segments is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company’s revenue recognition.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls related to the identification and evaluation of performance obligations in contracts with customers.

These procedures also included, among others, testing on a sample basis, the completeness and accuracy of management’s identification and evaluation of performance obligations in certain customer contracts in the Network Enablement and Service Enablement reportable segments.

These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the recognition of revenue for the Network Enablement and the Service Enablement reportable segments.

These procedures also included, among others, for the Network Enablement and the Service Enablement reportable segments (i) testing the revenue recognized, on a sample basis, by obtaining and inspecting source documents, such as contracts, invoices, evidence of transfer of control and cash receipts, and recalculating revenue recognized;

(ii) confirming outstanding customer invoice balances as of June 29, 2024, on a sample basis, and for confirmations not returned, obtaining and inspecting source documents, such as contracts, invoices, evidence of transfer of control, subsequent cash receipts, and other source documents to support collectability of outstanding customer invoice balances;

(iii) testing the issuance of credit memos, on a sample basis, by obtaining and inspecting source documents, such as credit memos, original invoices, and re-issued invoices;

and (iv) testing the timing of revenue recognition, on a sample basis, for revenue transactions that occurred near period end by obtaining and inspecting source documents, such as invoices, evidence of transfer of control, and cash receipts.

/s/ PricewaterhouseCoopers LLP

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(in millions, except per share data)

July 1, 2023 July 2, 2022 July 3, 2021

June 29, 2024 July 1, 2023 July 2, 2022

Product revenue $ 834.8 $ 936.1 $ 1,135.5

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Provision for income taxes 37.4 35.2 49.6

Net income $ 25.5 $ 15.5 $ 67.5

Net income per share:

Net (loss) income $ ( 25.8 ) $ 25.5 $ 15.5

Net (loss) income per share:

Basic $ ( 0.12 ) $ 0.11 $ 0.07

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VIAVI SOLUTIONS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in millions)

July 1, 2023 July 2, 2022 July 3, 2021

Net income $ 25.5 $ 15.5 $ 67.5

Other comprehensive income (loss):

June 29, 2024 July 1, 2023 July 2, 2022

Net (loss) income $ ( 25.8 ) $ 25.5 $ 15.5

Other comprehensive (loss) income:

Net change in cumulative translation adjustment, net of tax ( 6.0 ) 18.8 ( 76.1 )

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Net change in defined benefit obligation, net of tax:

Unrealized actuarial gains arising during period 2.0 13.9 4.1

Amortization of actuarial (gains) losses ( 0.1 ) 2.9 3.1

Net change in accumulated other comprehensive income (loss) 20.4 ( 59.2 ) 68.7

Comprehensive income (loss) $ 45.9 $ ( 43.7 ) $ 136.2

Unrealized actuarial (loss) gains arising during period ( 2.1 ) 2.0 13.9

Amortization of actuarial losses (gains) 0.1 ( 0.1 ) 2.9

Net change in accumulated other comprehensive (loss) income ( 8.0 ) 20.4 ( 59.2 )

Comprehensive (loss) income $ ( 33.8 ) $ 45.9 $ ( 43.7 )

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

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(in millions, except share and par value data)

July 1, 2023 July 2, 2022

June 29, 2024 July 1, 2023

Current assets:

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Preferred stock, $ 0.001 par value;

1 million shares authorized, no shares issued or outstanding at July 1, 2023 and July 2, 2022.

1 million shares authorized, no shares issued or outstanding at June 29, 2024 and July 1, 2023.

Common stock, $ 0.001 par value;

1 billion shares authorized;

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

222 million shares at June 29, 2024 and July 1, 2023, issued and outstanding

Additional paid-in capital 70,471.9 70,427.3

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(in millions)

July 1, 2023 July 2, 2022 July 3, 2021

June 29, 2024 July 1, 2023 July 2, 2022

OPERATING ACTIVITIES:

Net income $ 25.5 $ 15.5 $ 67.5

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

Net (loss) income $ ( 25.8 ) $ 25.5 $ 15.5

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

Depreciation expense 38.6 36.2 35.7

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Net change in fair value of contingent liabilities ( 9.5 ) ( 4.6 ) —

Loss on disposal of long-lived assets 0.9 2.3 0.1

Loss on convertible note debt modification and settlement — 2.2 101.8

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Purchases of short-term investments ( 225.1 ) ( 13.1 ) —

Acquisition of businesses, net of cash acquired ( 67.3 ) ( 8.3 ) ( 0.7 )

Maturities of short-term investments 219.6 — —

Acquisitions, net of cash acquired and other — ( 67.3 ) ( 8.3 )

Purchase price adjustment related to business acquisition — ( 0.7 ) —

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FINANCING ACTIVITIES:

Proceeds from issuance of senior notes 118.0 400.0 —

Proceeds from issuance of debt — 118.0 400.0

Payment of debt issuance costs — ( 4.2 ) ( 10.5 )

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Effect of exchange rates on cash, cash equivalents and restricted cash ( 2.9 ) 5.8 ( 32.3 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 57.2 ) ( 135.6 ) 161.0

Net decrease in cash, cash equivalents and restricted cash ( 33.8 ) ( 57.2 ) ( 135.6 )

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

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Cash paid for income taxes, net of refunds $ 30.9 $ 47.5 $ 77.1

(1) These amounts include both current and non-current balances of restricted cash totaling $ 12.9 million, $ 10.6 million and $ 8.4 million as of July 2, 2022, July 3, 2021, and June 27, 2020, respectively.

(1) These amounts include both current and non-current balances of restricted cash totaling $ 9.1 million, $ 12.9 million and $ 10.6 million as of July 1, 2023, July 2, 2022, and July 3, 2021, respectively.

(2) These amounts include both current and non-current balances of restricted cash totaling $ 10.5 million, $ 9.1 million and $ 12.9 million as of June 29, 2024, July 1, 2023 and July 2, 2022, respectively.

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

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Shares Amount

Balance at June 27, 2020 228.3 $ 0.2 $ 70,146.1 $ ( 69,347.2 ) $ ( 165.9 ) $ 633.2

Net income — — — 67.5 — 67.5

Other comprehensive income — — — — 68.7 68.7

Shares issued under employee stock plans, net of tax effects 3.0 — ( 11.5 ) — — ( 11.5 )

Stock-based compensation — — 48.6 — — 48.6

Repurchase of common stock ( 3.0 ) — — ( 42.6 ) — ( 42.6 )

Balance at July 3, 2021 228.3 $ 0.2 $ 70,183.2 $ ( 69,322.3 ) $ ( 97.2 ) $ 763.9

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

Net loss — — — ( 25.8 ) — ( 25.8 )

Other comprehensive loss — — — — ( 8.0 ) ( 8.0 )

Shares issued under employee stock plans, net of tax effects 2.7 — ( 4.8 ) — — ( 4.8 )

Stock-based compensation — — 49.4 — — 49.4

Repurchase of common stock ( 2.3 ) — — ( 20.0 ) — ( 20.0 )

Balance at June 29, 2024 221.9 $ 0.2 $ 70,471.9 $ ( 69,646.5 ) $ ( 144.0 ) $ 681.6

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

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Viavi Solutions, Inc.

(VIAVI, also referred to as the Company, we, our and us), is a global provider of network test, monitoring and assurance solutions to communications service providers (CSPs), enterprises, network equipment manufacturers (NEMs), original equipment manufacturers (OEMs), government and avionics.

VIAVI is also a leader in light management solutions for the anti-counterfeiting, consumer electronics, industrial, government and automotive markets.

(VIAVI, also referred to as the Company, we, our and us), is a global provider of network test, monitoring and assurance solutions for telecommunications, cloud, enterprises, first responders, military, aerospace and railway.

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.

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

The Company’s 2023 and 2022 fiscal years were 52-week years ending on July 1, 2023 and July 2, 2022, respectively.

The Company’s 2021 fiscal year was a 53-week fiscal year ending on July 3, 2021 as the first quarter of fiscal year 2021 was a 14-week quarter compared to the standard 13-week quarters.

The Company’s 2024, 2023 and 2022 fiscal years were 52-week years ending on June 29, 2024, July 1, 2023, and July 2, 2022, respectively.

Principles of Consolidation

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All inter-company accounts and transactions have been eliminated.

Reclassification of Prior Period Balances

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

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 in our NE and SE goodwill balances as of July 2, 2022 in “Note 9.

Goodwill” and operating segment tables for the years ended July 1, 2023 and July 2, 2022 in “Note 19.

Operating Segments and Geographic Information.”

Use of Estimates

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Restricted Cash

At July 1, 2023 and July 2, 2022, the Company’s short-term restricted cash balances were $ 4.5 million and $ 3.6 million, respectively.

The Company’s long-term restricted cash balances, included in Other non-current assets on the Consolidated Balance Sheets, were $ 4.6 million and $ 9.3 million as of July 1, 2023 and July 2, 2022, respectively.

At June 29, 2024 and July 1, 2023, the Company’s short-term restricted cash balances were $ 5.0 million and $ 4.5 million, respectively.

The Company’s long-term restricted cash balances, included in Other non-current assets on the Consolidated Balance Sheets, were $ 5.5 million and $ 4.6 million as of June 29, 2024 and July 1, 2023, respectively.

These balances primarily include interest-bearing investments in bank deposit and money market funds which act as collateral supporting the issuance of standby letters of credit and performance bonds for the benefit of third parties.

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and, (ii) the portion of the loss that is not related to credit factors, or the non-credit loss portion.

The credit loss portion is recorded as an allowance to credit loss through Interest and other income, net, in the Consolidated Statement of Operations and the non-credit loss portion is recorded as a component of Accumulated other comprehensive loss on the Consolidated Balance Sheets.

The Company’s investments also include fixed term deposits with interest earned recorded as a component of Interest and other income, net, in the Consolidated Statement of Operations.

The credit loss portion is recorded as an allowance to credit loss through Interest and other income, net, in the Consolidated Statements of Operations and the non-credit loss portion is recorded as a component of Accumulated other comprehensive loss on the Consolidated Balance Sheets.

The Company’s investments also include fixed term deposits with interest earned recorded as a component of Interest and other income, net, in the Consolidated Statements of Operations.

Fair Value of Financial Instruments

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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 July 1, 2023 and July 2, 2022, the Company did not hold any Level 3 investment securities.

The Company’s Level 3 liabilities as of July 1, 2023 and July 2, 2022 consist of contingent purchase consideration liabilities related to business acquisitions.

As of June 29, 2024 and July 1, 2023, the Company did not hold any Level 3 investment securities.

The Company’s Level 3 liabilities as of June 29, 2024 and July 1, 2023 consist of contingent purchase consideration liabilities related to business acquisitions.

The fair value of such earn-out liabilities are generally determined using a Monte Carlo Simulation that includes significant unobservable inputs such as the risk-adjusted discount rate, gross profit volatility, and projected financial forecast of acquired business over the earn-out period.

The fair value of certain earn-out liabilities is derived using the estimated probability of success of achieving the earn-out milestones discounted to present value.

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

VIAVI SOLUTIONS INC.

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Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful lives of the asset or the remaining lease term.

Demonstration units are amortized using the straight-line method and are Company products used for demonstration purposes for existing and prospective customers.

Demonstration units are Company products used for demonstration purposes for existing and prospective customers and are amortized using the straight-line method.

These assets are generally not intended to be sold and have an estimated useful life of 3 to 5 years.

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Those gains or losses and prior service cost or credit are subsequently recognized as a component of net periodic pension cost pursuant to the recognition and amortization provisions of the authoritative guidance.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The measurement of the benefit obligation and net periodic pension cost is based on the Company’s estimates and actuarial valuations provided by third-party actuaries and are approved by management.

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In estimating the expected return on plan assets, the Company considers historical returns on plan assets, diversification of plan investments, adjusted for forward-looking considerations, inflation assumptions and the impact of the active management of the plan’s invested assets.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company measures its benefit obligation and plan assets using the month-end date of June 30, which is closest to the Company’s fiscal year-end.

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While the Company’s allowance for doubtful accounts balance is based on historical loss experience along with anticipated economic trends, unanticipated financial instability in the telecommunications industry could lead to higher than anticipated losses.

As of July 1, 2023, there were no customer balances that represented 10% or more of the Company’s total accounts receivable, net.

As of July 2, 2022, one customer represented 10 % or more of the Company’s total accounts receivable, net.

As of June 29, 2024 and July 1, 2023, there were no customer balances that represented 10% or more of the Company’s total accounts receivable, net.

During fiscal 2024, 2023 and 2022, one customer generated 10% or more of total net revenues.

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The Company relies on a limited number of suppliers and contract manufacturers for a number of key components and sub-assemblies contained in the Company’s products.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company generally uses a rolling twelve-month forecast based on anticipated product orders, customer forecasts, product order history and backlog to determine its materials requirements for any one period.

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The Company could experience reduced or delayed product shipments or incur additional inventory write-downs and cancellation charges or penalties, which may result in increased costs and have a material adverse impact on the Company’s results of operations.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Foreign Currency Forward Contracts

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Implementation services provided in conjunction with hardware or software solution projects include sale of the products along with project management, set-up and installation.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Steps of revenue recognition

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The Company utilizes judgment to determine the customer’s ability and intent to pay, which is based upon various factors including the customer’s historical payment experience or credit and financial information and credit risk management measures implemented by the Company.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Identify the performance obligations in the contract:

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proprietary pigment, optical filters, proprietary software licenses;

support and maintenance which includes hardware support that extends beyond the Company's standard warranties, software maintenance, installation, professional and implementation services, and training.

support and maintenance which includes software and hardware support that extends beyond the Company's standard warranties;

installation, professional and implementation services, and training.

Identifying and evaluating whether products and services are considered distinct performance obligations may require significant judgment particularly in NSE due to the nature of the product and service offerings.

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If a directly observable price is not available, the SSP must be estimated based on multiple factors including, but not limited to, historical pricing practices, internal costs, and profit objectives as well as overall market conditions.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Recognize revenue when (or as) performance obligations are satisfied:

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For other professional services or time-based labor contracts, revenue is recognized as the Company performs the services and the customers receive and/or consume the benefits.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenue policy and practical expedients

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The Company's revenue is presented on a disaggregated basis in the Consolidated Statements of Operations and in “Note 19.

Operating Segments and Geographic Information”.

This information includes revenue from reportable segments and a break-out of products and services for which the nature and timing of the revenue as characterized above is generally at a point in time and over time, respectively.

Operating Segments and Geographic Information.” This information includes a break-out of product and service revenue, revenue from reportable segments and revenue from each of the three geographic regions in which we operate.

The Company provides reserves for the estimated costs of product warranties at the time revenue is recognized.

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In addition, from time to time, specific warranty accruals may be made if unforeseen technical problems arise.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Shipping and Handling Costs

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As such, software development costs have been expensed as incurred.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Government Assistance

From time to time the Company will receive government assistance in the form of grants and tax credits in certain jurisdictions, generally recorded as a reduction of R&D expense in the Consolidated Statements of Operations.

The Company recorded approximately $ 4.0 million in the form of R&D credits during fiscal 2023.

As of July 1, 2023, the Company had pending receipts of approximately $ 14.5 million related to government assistance primarily in the U.K.

included in Prepayments and other current assets on the Consolidated Balance Sheets.

From time to time, the Company will receive government assistance in the form of grants and tax credits from government agencies in certain jurisdictions in which it operates.

GAAP does not have specific accounting guidance covering agreements between government and business entities.

The Company applies International Accounting Standards 20 (IAS 20), Accounting for Government Grants and Disclosure of Government Assistance , by analogy when accounting for government assistance.

Under IAS 20, grants are recognized when there is reasonable assurance the conditions of the grant will be met and the grant will be received.

After initial recognition, government assistance is recognized in a manner consistent with the manner in which the Company recognizes the underlying costs in the Consolidated Statement of Operations for which the grant is intended to compensate.

Government assistance related to assets will generally be deducted from the asset’s carrying value.

Stock-Based Compensation

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Time-based restricted stock awards will generally vest in annual installments over a period of three to four years subject to the employees’ continuing service to the Company.

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

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

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.

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The total fair value of the equity awards is recorded on a straight-line basis, over the requisite service period of the awards for each separate vesting period of the award, except for certain performance-based awards which are amortized based upon the graded vesting method.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In accordance with the authoritative guidance on accounting for income taxes, the Company recognizes income taxes using an asset and liability approach.

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Likewise, if the Company determines that it is not more likely than not that its deferred tax assets will be realized, then a valuation allowance may be established for such deferred tax assets and the Company’s tax provision may increase in the period in which the Company makes the determination.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The authoritative guidance on accounting for uncertainty in income taxes prescribes the recognition threshold and measurement attributes for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

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Although the Company believes that these estimates accurately reflect the costs of its restructuring plans, actual results may differ, thereby requiring the Company to record additional liabilities or reverse a portion of existing liabilities.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contingencies

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The Company regularly evaluates current information available to determine whether such accruals should be adjusted and whether new accruals are required.

Contingent liabilities include contingent consideration in connection with the Company’s acquisitions, which represent earn-out payments and is recognized at fair value on the acquisition date and is remeasured each reporting period with subsequent adjustments recognized in the SG&A expense of the Consolidated Statements of Operations.

Contingent liabilities include contingent consideration in connection with the Company’s acquisitions, which represent earn-out payments and is recognized at fair value on the acquisition date and is remeasured each reporting period with subsequent adjustments recognized in SG&A expense in the Consolidated Statements of Operations.

While the Company believes the estimates and assumptions are reasonable, there is significant judgment and uncertainty involved.

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Subsequent to initial recognition, the Company records period-to-period changes in the ARO liability resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows.

The Company derecognizes ARO liabilities when the related obligations are settled.

As of July 1, 2023, and July 2, 2022, the Consolidated Balance Sheets included ARO balance of $ 0.5 million in Other current liabilities and $ 3.8 million and $ 3.7 million, respectively, in Other non-current liabilities.

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

Balance at Beginning of Period Liabilities Incurred Liabilities Settled Accretion Expense Revisions to Estimates Balance at End of Period

Year ended July 1, 2023 $ 4.2 $ 0.3 $ ( 0.3 ) $ 0.1 $ — $ 4.3

Year ended July 2, 2022 $ 3.7 $ 0.8 $ ( 0.4 ) $ 0.1 $ — $ 4.2

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Recently Issued Accounting Pronouncements

Recent Accounting Pronouncements Adopted

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , which simplifies the accounting for convertible instruments with characteristics of liability and equity.

This new guidance removes separation models for certain convertible debt instruments which will now be accounted for as a single liability measured at amortized cost.

In addition, the interest expense recognized for these instruments will typically be closer to the coupon interest rate due to the removal of the separation model's non-cash discount amortization.

The Company adopted ASU 2020-06 effective the first quarter of fiscal 2022, on a full retrospective basis.

The elimination of the separation model for the convertible debt instruments reclassified the equity components of the Company’s Senior Convertible Notes previously in Additional paid-in capital to Long-term debt.

Consequently, the temporary equity balance for the Senior Convertible Notes as of July 3, 2021 was eliminated.

In addition, interest expense was reduced and net income was increased by $ 21.4 million for fiscal 2021.

The adoption had no impact on total cash provided by (used in) operating, investing or financing activities in the Consolidated Statements of Cash Flows.

The following table presents the impact of the standard adoption to select line items of the Consolidated Balance Sheet as of July 3, 2021 ( in millions ):

As Reported Adjustment As Adjusted

LIABILITIES AND STOCKHOLDERS’ EQUITY

Short-term debt $ 414.2 $ 42.4 $ 456.6

Long-term debt 209.8 14.3 224.1

Mezzanine equity - Senior Convertible Notes 45.8 ( 45.8 ) —

Additional paid-in capital 70,265.5 ( 82.3 ) 70,183.2

Accumulated deficit $ ( 69,393.7 ) $ 71.4 $ ( 69,322.3 )

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the impact of the standard adoption to select line items of the Consolidated Statement of Operations for the year ended July 3, 2021 ( in millions, except per-share data ):

Year Ended July 3, 2021

As Reported Adjustment As Adjusted

Interest Expense $ ( 36.1 ) $ 21.4 $ ( 14.7 )

Net income $ 46.1 $ 21.4 $ 67.5

Net income per share:

Basic $ 0.20 $ 0.10 $ 0.30

Diluted $ 0.20 $ 0.09 $ 0.29

Shares used in per-share calculation:

Basic 228.7 — 228.7

Diluted 235.9 0.4 236.3

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

Disclosures by Business Entities about Government Assistance .

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

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

The Company adopted ASU 2021-10 on July 3, 2022 on a prospective basis.

We often receive government assistance in the form of research grants and tax credits in certain jurisdictions, recorded as a reduction of R&D expense in the Consolidated Statements of Operations.

The Company recorded approximately $ 4.0 million in R&D credits during fiscal 2023.

As of July 1, 2023, the Company had pending receipts of approximately $ 14.5 million related to government assistance primarily in the U.K.

included in Prepayments and other current assets on the Consolidated Balance Sheets.

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

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

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

The Company adopted this guidance in the fourth quarter of fiscal 2023, which did not have an impact on the Company’s Consolidated Financial Statements.

We will assess future impact, if any, in subsequent periods.

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

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

The Company adopted this guidance in the fourth quarter of fiscal 2023, which did not have an impact on the Company’s Consolidated Financial Statements.

We will assess future impact, if any, in subsequent periods.

SEC Climate Rules

In March 2024, the SEC issued its final climate disclosure rules, which require the disclosure of climate-related information in annual reports and registration statements.

The rules require disclosure in the audited financial statements of certain effects of severe weather events and other natural conditions above certain financial thresholds, as well as amounts related to carbon offsets and renewable energy credits or certificates, if material.

On April 4, 2024, the SEC voluntarily stayed the implementation of the final rules pending the completion of judicial review of the consolidated challenges to the final rules by the Court of Appeals for the Eighth Circuit.

The final rules, as originally issued, would be effective for the Company in various fiscal years, starting with its Annual Report on Form 10-K for fiscal year 2026.

Disclosures pursuant to the final rules, as originally issued, would be required prospectively, with information for prior periods required only to the extent it was previously disclosed in an SEC filing.

The Company is currently evaluating the impact of the final rules on its Consolidated Financial Statements and disclosures and continue to monitor the status of the related legal challenges.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

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

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

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

The Company adopted this guidance in the fourth quarter of fiscal 2023, which had no impact on the Company’s Consolidated Financial Statements.

We will assess future impact, if any, in subsequent periods.

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

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

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

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

The Company adopted this guidance in the fourth quarter of fiscal 2023, which did not have an impact on the Company’s disclosures in the Annual Report on Form 10-K for the year ended July 1, 2023.

We will assess future impact, if any, in subsequent periods.

Accounting Standards Issued But Not Yet Adopted

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.

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 included within segment profit and loss that are regularly provided to the Company’s Chief Executive Officer as the Company’s Chief Operating Decision Maker (CODM).

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 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.

This ASU is not expected to have a material impact on our Consolidated Financial Statements or related disclosures.

We reviewed all other accounting pronouncements issued during fiscal 2024 and concluded that they were not applicable to the Company.

VIAVI SOLUTIONS INC.

1 unchanged sentence

Earnings Per Share

Basic net income per share is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period.

Diluted net income per share is computed by dividing net income for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period.

If dilutive, the effect of outstanding Employee Stock Purchase Program (ESPP) purchase rights, restricted stock units (RSUs), performance-based stock units (PSUs), market-based stock units (MSUs), stock options and Senior Convertible Notes is reflected in diluted net income per share by application of the treasury stock method and/or the if-converted method, as applicable.

The calculation of diluted net income per share excludes all anti-dilutive common shares.

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

July 1, 2023 July 2, 2022 July 3, 2021

Net income $ 25.5 $ 15.5 $ 67.5

Basic net (loss) income per share is computed by dividing net (loss) income for the period by the weighted average number of common shares outstanding during the period.

Diluted net (loss) income per share is computed by dividing net (loss) income for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period.

If dilutive, the effect of outstanding Employee Stock Purchase Program (ESPP) purchase rights, restricted stock units (RSUs), performance-based stock units (PSUs), market-based stock units (MSUs), stock options and Senior Convertible Notes is reflected in diluted net (loss) income per share by application of the treasury stock method and/or the if-converted method, as applicable.

The calculation of diluted net (loss) income per share excludes all anti-dilutive common shares.

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

June 29, 2024 July 1, 2023 July 2, 2022

Net (loss) income $ ( 25.8 ) $ 25.5 $ 15.5

Weighted-average shares outstanding:

3 unchanged sentences

Diluted 222.6 226.6 238.2

Net income per share:

Net (loss) income per share:

Basic $ ( 0.12 ) $ 0.11 $ 0.07

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Debt” for more information.

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 ):

July 1, 2023 July 2, 2022 July 3, 2021

The following table sets forth the weighted-average potentially dilutive securities excluded from the computation of the diluted net (loss) income per share because their effect would have been anti-dilutive ( in millions ):

June 29, 2024 July 1, 2023 July 2, 2022

Full Value Awards (1)

4 unchanged sentences

Accumulated Other Comprehensive Loss

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

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.

Changes in accumulated other comprehensive loss by component, net of tax, were as follows ( in millions ):

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Beginning balance as of July 1, 2023 $ ( 5.3 ) $ ( 125.4 ) $ ( 5.3 ) $ ( 136.0 )

Other comprehensive (loss) income before reclassification ( 0.3 ) 18.8 2.0 20.5

Amounts reclassified from accumulated other comprehensive (loss) income — — ( 0.1 ) ( 0.1 )

Net current period other comprehensive (loss) income ( 0.3 ) 18.8 1.9 20.4

Ending balance as of July 1, 2023 $ ( 5.3 ) $ ( 125.4 ) $ ( 5.3 ) $ ( 136.0 )

(1) Activity before reclassifications to the Consolidated Statements of Operations during the fiscal year ended July 1, 2023 relates to the unrealized actuarial gain of $ 2.8 million, net of income tax effect of $ 0.8 million.

The amount reclassified out of accumulated other comprehensive (loss) income represents the amortization of actuarial losses included as a component of SG&A expense in the Consolidated Statement of Operations for the year ended July 1, 2023.

Other comprehensive loss before reclassification — ( 6.0 ) ( 2.1 ) ( 8.1 )

Amounts reclassified from accumulated other comprehensive loss — — 0.1 0.1

Net current period other comprehensive loss — ( 6.0 ) ( 2.0 ) ( 8.0 )

Ending balance as of June 29, 2024 $ ( 5.3 ) $ ( 131.4 ) $ ( 7.3 ) $ ( 144.0 )

(1) Activity before reclassifications to the Consolidated Statements of Operations during the fiscal year ended June 29, 2024 relates to the unrealized actuarial loss of $ 2.8 million, net of income tax effect of $ 0.7 million.

The amount reclassified out of accumulated other comprehensive loss represents the amortization of actuarial loss included as a component of Cost of revenues, R&D and SG&A in the Consolidated Statements of Operations for the year ended June 29, 2024.

Refer to “Note 17.

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Jackson Labs Technologies, LLC

On October 5, 2022, the Company acquired all of the equity of Jackson Labs Technologies, LLC (Jackson Labs), a privately held company which specializes in Position, Navigation and Timing (PNT) solutions for critical infrastructure serving both military and civilian applications.

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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.

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 .

Acquisition-related costs incurred were approximately $ 0.8 million and have been recorded within SG&A expense 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.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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

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.

income tax purposes.

The goodwill was deductible for U.S.

income tax purposes in the year of acquisition.

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:

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On May 13, 2022 and May 20, 2022, the Company completed acquisitions accounted for as business combinations for cash paid at close of $ 9.5 million, additional earn-outs of up to $ 3.3 million 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.

On May 13, 2022 and May 20, 2022, the Company completed business acquisitions for total consideration of approximately $ 9.5 million in cash paid at close and an earn-out liability of up to $ 3.3 million cash to be paid based on the occurrence or achievement of certain agreed upon targets.

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

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

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

The acquisition was accounted for as an asset purchase.

On September 17, 2021, the Company acquired all of the equity of one business for approximately $ 1.6 million cash consideration, of which $ 1.2 million was paid with cash on hand and $ 0.4 million remains in current liabilities.

The acquisition was accounted for as an asset purchase under the authoritative guidance.

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Acquisition-related Contingent Consideration

The following table provides a reconciliation of changes in fair value of the Company’s earn-out liabilities for the years ended July 1, 2023 and July 2, 2022, as follows ( in millions ):

The following table provides a reconciliation of changes in fair value of the Company’s earn-out liabilities for the years ended June 29, 2024 and July 1, 2023, as follows ( in millions ):

Balance July 2, 2022 $ 2.5

1 unchanged sentence

Change in Fair Value measurement ( 4.6 )

Currency translation adjustment 0.1

Payments of Contingent Consideration ( 7.6 )

Balance July 1, 2023 (1)

Additions to Contingent Consideration 29.4

Change in Fair Value measurement ( 9.5 )

Payments of Contingent Consideration ( 0.7 )

Balance July 1, 2023 (2)

(1) Includes $ 1.8 million in Other current liabilities and $ 0.7 million in Other non-current liabilities on the Consolidated Balance Sheets.

Balance June 29, 2024 (2)

(1) Includes $ 1.1 million in Other current liabilities and $ 18.6 million in Other non-current liabilities on the Consolidated Balance Sheets.

(2) Included in Other non-current liabilities on the Consolidated Balance Sheets.

Balance Sheet and Other Details

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Contract Asset balances will fluctuate based upon the timing of transfer of services, billings and customers’ acceptance of contractual milestones.

Gross receivables include both billed and Unbilled Receivables/Contract Assets.

As of July 1, 2023 and July 2, 2022, the Company had total Unbilled Receivables/Contract Assets of $ 13.7 million and $ 7.3 million, respectively.

Gross Receivables:

Includes both billed and Unbilled Receivables/Contract Assets.

As of June 29, 2024 and July 1, 2023, the Company had total Unbilled Receivables/Contract Assets of $ 16.3 million and $ 13.7 million, respectively.

Deferred Revenue:

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Revenue is recognized on these items when the revenue recognition criteria are met, generally resulting in ratable recognition over the contract term.

Contract liabilities are included in Other current liabilities on the Consolidated Balance Sheets.

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the activity related to deferred revenue, for the year ended July 1, 2023 ( in millions ):

The following table summarizes the activity related to deferred revenue, for the year ended June 29, 2024 ( in millions ):

June 29, 2024

Deferred revenue:

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Remaining Performance Obligations:

Remaining performance obligations represent the aggregate amount of the transaction price allocated to performance obligations not delivered or are incomplete, as of July 1, 2023.

Remaining performance obligations represent the aggregate amount of the transaction price allocated to performance obligations not delivered or are incomplete, as of June 29, 2024.

Remaining performance obligations include deferred revenue plus unbilled amounts not yet recorded.

1 unchanged sentence

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

The value of the transaction price allocated to remaining performance obligations as of July 1, 2023, was $ 256.3 million.

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

Accounts Receivable Allowances

The table below presents the activities and balances for allowance for doubtful accounts, as follows ( in millions ):

The value of the transaction price allocated to remaining performance obligations as of June 29, 2024, was $ 237.8 million.

The Company expects to recognize 88 % of the remaining performance obligations as revenue within the next 12 months, and the residual thereafter.

Accounts Receivable - Allowance for Credit Losses

The table below presents the activities and balances for allowance for credit losses, as follows ( in millions ):

Balance at Beginning of Period Charged to Costs and Expenses Deduction (1)

End of Period

Year Ended July 1, 2023 $ 1.4 $ 0.4 $ ( 0.8 ) $ 1.0

Year Ended June 29, 2024 $ 1.0 $ 1.3 $ ( 0.7 ) $ 1.6

Year Ended July 1, 2023 $ 1.4 $ 0.4 $ ( 0.8 ) $ 1.0

1 unchanged sentence

(1) Represents the effect of currency translation adjustments and write-offs of uncollectible accounts, net of recoveries.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Inventories, net

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

July 1, 2023 July 2, 2022

June 29, 2024 July 1, 2023

Finished goods $ 44.6 $ 49.0

2 unchanged sentences

Inventories, net $ 96.5 $ 116.1

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Prepayments and Other Current Assets

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

July 1, 2023 July 2, 2022

June 29, 2024 July 1, 2023

Refundable income taxes $ 28.5 $ 27.6

2 unchanged sentences

Transaction tax receivables 3.3 5.1

Fair value of forward contracts 3.5 3.8

Assets held for sale 2.5 2.5

Fair value of forward contracts 1.7 3.5

Other current assets 10.5 7.1

2 unchanged sentences

The following table presents the components of property, plant and equipment, net, as follows ( in millions ):

July 1, 2023 July 2, 2022

June 29, 2024 July 1, 2023

Land $ 19.5 $ 19.6

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Property, plant and equipment, net $ 228.2 $ 243.0

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other Non-Current Assets

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

July 1, 2023 July 2, 2022

Operating ROU assets (Note 12) $ 40.4 $ 45.2

June 29, 2024 July 1, 2023

Operating ROU assets $ 35.8 $ 40.4

Long-term restricted cash 5.5 4.6

Deferred contract cost 2.5 2.9

Debt issuance cost - Revolving Credit Facility 2.8 3.5

Deposits 2.4 2.3

Debt issuance cost - Revolving Credit Facility 1.9 2.8

Other non-current assets 9.9 8.7

Other non-current assets $ 58.0 $ 61.7

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other Current Liabilities

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

July 1, 2023 July 2, 2022

Operating lease liabilities (Note 12)

$ 10.1 $ 10.1

Income tax payable 4.4 9.6

June 29, 2024 July 1, 2023

Restructuring accrual (Note 13)

Operating lease liabilities

Income tax payable 5.3 4.4

Interest payable 5.1 5.5

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Warranty accrual 3.4 4.2

Acquisition related holdback and related accruals 4.1 0.1

Fair value of forward contracts 1.5 2.4

Acquisition related holdback and related accruals — 4.1

Fair value of contingent consideration (Note 5)

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The following table presents the components of other non-current liabilities, as follo ws ( in millions ):

July 1, 2023 July 2, 2022

June 29, 2024 July 1, 2023

Pension and post-employment benefits $ 51.2 $ 53.2

Operating lease liabilities (Note 12)

Operating lease liabilities 25.7 29.4

Long-term deferred revenue 25.7 23.4

Fair value of contingent consideration (Note 5)

Financing obligation 15.8 16.0

Uncertain tax position 17.0 15.8

Financing obligation 15.7 15.8

Deferred tax liability 11.7 13.9

Fair value of contingent consideration (Note 5)

Warranty accrual 4.0 4.8

Asset retirement obligations 3.0 3.8

Restructuring accrual (Note 13)

Other 7.3 8.0

Other non-current liabilities $ 171.6 $ 186.7

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Interest and Other Income, net

The following table presents the components of interest and other income, net, as follows ( in millions ):

July 1, 2023 July 2, 2022 July 3, 2021

June 29, 2024 July 1, 2023 July 2, 2022

Interest income $ 18.9 $ 10.2 $ 3.4

Foreign exchange gain, net ( 2.2 ) 1.4 —

Other income, net ( 0.4 ) 0.4 0.4

Foreign exchange (loss) gain, net ( 3.1 ) ( 2.2 ) 1.4

Gain on litigation settlement 7.3 — —

Other (loss) income, net ( 1.4 ) ( 0.4 ) 0.4

Interest and other income, net $ 21.7 $ 7.6 $ 5.2

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Investments and Forward Contracts

Short-Term Investments

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 $ 0.1 million was invested in debt securities, $ 1.2 million was invested in equity securities and $ 0.2 million was invested in money market instruments.

Trading securities are reported at fair value, with the unrealized gains or losses resulting from changes in fair value recognized in the Consolidated Statements of Operations as a component of Interest and other income, net.

As of July 2, 2022, the Company’s short-term investments of $ 1.4 million were comprised of trading securities related to the deferred compensation plan, of which $ 0.3 million was invested in debt securities, $ 1.0 million was invested in equity securities and $ 0.1 million was invested in money market instruments.

As of June 29, 2024, the Company’s short-term investments of $ 19.9 million were comprised of 30 -day term deposits of $ 18.4 million and trading securities related to the deferred compensation plan of $ 1.5 million, of which $ 1.4 million was invested in equity securities and $ 0.1 million was invested in debt securities.

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, $ 0.2 million was invested in money market instruments and $ 0.1 million was invested in debt securities.

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

As of July 1, 2023, the Company had forward contracts that were effectively closed but not settled with the counterparties by year end.

As of June 29, 2024, the Company had forward contracts that were effectively closed but not settled with the counterparties by fiscal year end.

Therefore, the fair value of these contracts of $ 1.7 million and $ 1.5 million is reflected as Prepayments and other current assets and Other current liabilities on the Consolidated Balance Sheets, respectively.

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

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

therefore, the fair value of the contracts is minimal as of July 1, 2023 and a value of $ 0.1 million is reflected in Other current liabilities on the Consolidated Balance Sheets as of July 2, 2022.

As of July 1, 2023 and July 2, 2022, the notional amounts of the forward contracts that the Company held to purchase foreign currencies were $ 87.5 million and $ 119.1 million, respectively, and the notional amounts of forward contracts that Company held to sell foreign currencies were $ 19.3 million and $ 80.5 million, respectively.

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

therefore, the fair value of the contracts was minimal as of June 29, 2024 and July 1, 2023.

As of June 29, 2024 and July 1, 2023, the notional amounts of the forward contracts that the Company held to purchase foreign currencies were $ 81.9 million and $ 87.5 million, respectively, and the notional amounts of forward contracts that Company held to sell foreign currencies were $ 26.8 million and $ 19.3 million, respectively.

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

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

The foreign exchange forward contracts incurred a gain of $ 1.2 million and a loss of $ 8.3 million for the years ended July 1, 2023 and July 2, 2022, respectively.

The foreign exchange forward contracts incurred a loss of $ 0.7 million and a gain of $ 1.2 million for the years ended June 29, 2024 and July 1, 2023, respectively.

VIAVI SOLUTIONS INC.

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

July 1, 2023 July 2, 2022

June 29, 2024 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 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) Includes, as of June 29, 2024, $ 286.7 million in Cash and cash equivalents, $ 4.9 million in Restricted cash and $ 3.7 million in Other non-current assets on the Consolidated Balance Sheets.

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

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

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

(4) Included in Prepayments and other current assets on the Consolidated Balance Sheets.

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

(6) As of July 1, 2023 and July 2,2022, includes certain amounts in Other current liabilities and Other non-current liabilities on the Consolidated Balance Sheets.

(6) As of June 29, 2024, 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

Fair Value of Debt:

If measured at fair value on the Consolidated Balance Sheets, the Company’s 3.75 % Senior Notes (2029 Notes), 1.625 % Senior Convertible Notes (2026 Notes), 1.00 % Senior Convertible Notes (2024 Notes) and 1.75 % Senior Convertible Notes (2023 Notes) would be classified in Level 2 of the fair value hierarchy as they are not actively traded in the markets.

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

July 1, 2023 July 2, 2022

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

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

June 29, 2024 July 1, 2023

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

5 unchanged sentences

— — — — 95.6 — 95.6 —

1.75 % Senior Convertible Notes

— — — — 73.4 — 73.4 —

Total liabilities $ 577.0 $ — $ 577.0 $ — $ 700.1 $ — $ 700.1 $ —

(1) The 2024 Notes were retired upon maturity on March 1, 2024.

See “Note 11.

3 unchanged sentences

Changes in the carry value of goodwill allocated segment are as follows (in millions) :

Enablement Service

Enablement Optical Security

Enablement (1)

Optical Security

and Performance

3 unchanged sentences

Acquisitions 60.0 — — 60.0

— 10.0 — 10.0

Currency translation and other adjustments ( 18.1 ) ( 0.8 ) — ( 18.9 )

Measurement period adjustment ( 0.5 ) — — ( 0.5 )

Currency translation 6.9 1.2 — 8.1

Balance as of July 1, 2023 (3)

$ 399.2 $ 13.8 $ 42.2 $ 455.2

Acquisitions (2)

60.0 — — 60.0

Measurement period adjustment (2)

Currency translation ( 1.1 ) ( 0.2 ) — ( 1.3 )

Other adjustment (4)

— ( 1.0 ) — ( 1.0 )

Currency translation adjustments 6.9 1.2 — 8.1

Balance as of July 1, 2023 (4)

Balance as of June 29, 2024 (5)

$ 398.1 $ 12.6 $ 42.2 $ 452.9

(1) Gross goodwill balances for NE, SE and OSP were $ 651.6 million, $ 277.2 million and $ 126.7 million, respectively as of July 3, 2021.

Accumulated impairment for NE, SE and OSP was $ 301.9 million, $ 272.6 million and $ 84.5 million, respectively as of July 3, 2021.

(2) See “Note 5.

Acquisitions” of the Notes to Consolidated Financial Statement for additional information related to the Company’s acquisitions.

(1) Balance as of July 2, 2022 adjusted to reflect a reclass of $ 1.2 million from Service Enablement to Network Enablement due to a product line movement.

(2) Gross goodwill balances for NE, SE and OSP were $ 634.7 million, $ 285.2 million and $ 126.7 million, respectively, as of July 2, 2022.

2 unchanged sentences

Accumulated impairment for NE, SE and OSP was $ 301.9 million, $ 272.6 million and $ 84.5 million, respectively, as of July 1, 2023.

(4) Adjustment related to goodwill acquired as part of a prior acquisition.

(5) Gross goodwill balances for NE, SE and OSP were $ 700.0 million, $ 285.2 million and $ 126.7 million, respectively, as of June 29, 2024.

Accumulated impairment for NE, SE and OSP was $ 301.9 million, $ 272.6 million and $ 84.5 million, respectively, as of June 29, 2024.

Impairment of Goodwill

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

The Company determined that, based on its organizational structure and the financial information that is provided to and reviewed by the Company’s Chief Operating Decision Maker (CODM) during fiscal 2023, 2022 and 2021 that its reporting units were NE, SE and OSP.

As part of the annual impairment test, the Company performed a quantitative assessment of goodwill impairment for all reporting units.

For the quantitative analysis, the Company compares the fair value of a reporting unit to its carrying value.

If the estimated fair value exceeds book value, goodwill is considered not to be impaired.

However, if the fair value of the reporting unit is less than book value, then goodwill will be impaired by the amount that the carrying amount exceeds the fair value, not to exceed the carrying amount of the goodwill.

To estimate the fair value of each reporting unit, we applied a combination of the income approach and the market approach.

The income approach used discounted future cash flows in which sales, operating income and cash flow projections were based on assumptions driven by current economic conditions.

The market approach utilized the Guideline Public Company Method and Guideline Transaction Method to derive fair value.

The Guideline Public Company Method determines the fair value of an entity based upon trading multiples calculated using market value of minority interests in publicly-traded companies that are similar to the subject company.

The Guideline Transaction Method calculates the fair value of an entity by analyzing recent sales of comparable entities.

The Company determined that, based on its organizational structure and the financial information that is provided to and reviewed by the Company’s CODM during fiscal 2024, 2023 and 2022 that its reporting units were NE, SE and OSP.

No indications of impairment were identified under the qualitative assessment of goodwill impairment for fiscal years ending on June 29, 2024 and July 2, 2022.

In fiscal 2023, the Company performed a quantitative assessment of goodwill impairment for all reporting units.

Based on our testing during the fourth quarter of fiscal 2023, 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.

In addition, no indications of impairment were identified under the qualitative tests performed for fiscal years ending on July 2, 2022 and July 3, 2021.

VIAVI SOLUTIONS INC.

1 unchanged sentence

Acquired Developed Technology and Other Intangibles

The following tables present details of the Company’s acquired developed technology, customer relationships and other intangibles as of July 1, 2023, and July 2, 2022, ( in millions ):

As of July 1, 2023 Weighted-Average Remaining Useful Life Gross Carrying Amount Accumulated Amortization Net

Acquired developed technology (1)

3.9 years $ 438.5 $ ( 390.2 ) $ 48.3

The following tables present details of the Company’s acquired developed technology, customer relationships and other intangibles as of June 29, 2024, and July 1, 2023 ( in millions ):

As of June 29, 2024 Weighted-Average Remaining Useful Life Gross Carrying Amount Accumulated Amortization Net

Acquired developed technology 2.9 years $ 436.2 $ ( 401.9 ) $ 34.3

Customer relationships 1.5 years 194.8 ( 191.0 ) 3.8

2 unchanged sentences

As of July 1, 2023 Weighted-Average Remaining Useful Life Gross Carrying Amount Accumulated Amortization Net

Acquired developed technology 3.3 years $ 416.6 $ ( 375.8 ) $ 40.8

Acquired developed technology (2)

3.9 years $ 438.5 $ ( 390.2 ) $ 48.3

Customer relationships 2.0 years 195.2 ( 185.9 ) 9.3

1 unchanged sentence

Total intangibles $ 673.5 $ ( 614.9 ) $ 58.6

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

(2) During fiscal 2023, we recorded a $ 0.6 million non-cash charge due to the discontinued use of certain intellectual property.

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

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

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

Thereafter 0.6

Based on the carrying amount of acquired developed technology, customer relationships and other intangibles as of June 29, 2024, and assuming no future impairment of the underlying assets, the estimated future amortization is as follows ( in millions ):

Total amortization $ 38.2

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of July 1, 2023 and July 2, 2022, the Company’s debt on the Consolidated Balance Sheets was as follows, including the carrying amounts of the Senior Convertible and Senior Notes, net of unamortized issuance costs ( in millions ):

July 1, 2023 July 2, 2022

Principal amount of 1.00 % Senior Convertible Notes

Unamortized 1.00 % Senior Convertible Notes debt issuance cost

As of June 29, 2024 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 follows ( in millions ):

June 29, 2024 July 1, 2023

Principal amount of 1.00 % Senior Convertible Notes

Unamortized 1.00 % Senior Convertible Notes debt issuance cost

Other short-term debt — 0.4

Short-term debt $ — $ 96.2

5 unchanged sentences

Unamortized 1.625 % Senior Convertible Notes debt discount

Unamortized 1.625 % Senior Convertible Notes debt issuance cost

Principal amount of 1.00 % Senior Convertible Notes

( 8.1 ) ( 12.9 )

Unamortized 1.625 % Senior Convertible Notes debt issuance cost

( 1.3 ) ( 2.1 )

Long-term debt $ 636.0 $ 629.5

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

The Company was in compliance with all debt covenants as of June 29, 2024 and July 1, 2023.

1.625 % Senior Convertible Notes (2026 Notes)

7 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 issuance 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 within Long-term debt (as a contra-balance) on the Consolidated Balance Sheets and will be amortized as an adjustment to interest expense on a straight-line basis until maturity.

The 2026 Notes are an unsecured obligation of the Company and bear interest at an annual rate of 1.625 %, payable in cash 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.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The 2026 Notes may be converted under certain circumstances, based on an initial conversion rate of 75.7963 shares (equivalent to an initial conversion price of approximately $ 13.19 per share) at the option of the holders into cash up to the principal amount, with the remaining amount converted into cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock at the Company’s election.

The initial conversion price represents a 22.5 % premium to the closing price of the Company’s common stock on the pricing date, March 1, 2023, which will be subject to customary anti-dilution adjustments.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The 2026 Notes may be converted at any time on or prior to the close of business on the business day immediately preceding December 15, 2025, in multiples of $ 1,000 principal amount, at the option of the holder under the following circumstances:

10 unchanged sentences

If the Company redeems less than all the outstanding 2026 Notes, at least $ 75.0 million aggregate principal amount of 2026 Notes must be outstanding and not subject to redemption as of the relevant redemption notice date.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Indenture provides for customary events of default, including payment defaults, breaches of covenants, failure to pay certain judgments and certain events of bankruptcy, insolvency and reorganization.

1 unchanged sentence

These amounts automatically become due and payable if an event of default relating to certain events of bankruptcy, insolvency or reorganization occurs.

As of July 1, 2023, the expected remaining term of the 2026 Notes is 2.7 years.

As of June 29, 2024, the expected remaining term of the 2026 Notes is 1.7 years.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.75 % Senior Notes (2029 Notes)

4 unchanged sentences

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

As of July 1, 2023, the expected remaining term of the 2029 Notes is 6.2 years.

As of June 29, 2024, the expected remaining term of the 2029 Notes is 5.3 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, remaining 2023 Notes were retired upon maturity.

On June 1, 2023, remaining 2023 Notes principal of $ 68.1 million was retired upon maturity.

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 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.

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

In connection with the issuance of the 2024 Notes, the Company incurred $ 8.9 million of issuance costs.

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

The 2024 Notes may be converted under certain circumstances, based on an initial conversion rate of 75.6229 shares (equivalent to an initial conversion price of approximately $ 13.22 per share), at the option of the holders into cash up to the principal amount, with the remaining amount converted into cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock at the Company’s election.

The conversion rate, and thus the conversion price, may be adjusted under certain circumstances.

The initial conversion price represents a 32.5 % premium to the closing sale price of the Company’s common stock on the pricing date, February 27, 2017, which will be subject to customary anti-dilution adjustments.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The 2024 Notes may be converted at any time on or prior to the close of business on the business day immediately preceding December 1, 2023, in multiples of $1,000 principal amount, at the option of the holder only under the following circumstances:

• On any date during any calendar quarter beginning after June 30, 2017 (and only during such calendar quarter) if the closing price of the Company’s common stock was more than 130 % of the then current conversion price for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading-day period ending on the last trading day of the previous calendar quarter;

• If the Company distributes to all or substantially all holders of its common stock rights or warrants (other than pursuant to a stockholder rights plan) entitling them to purchase, for a period of 45 calendar days or less, shares of VIAVI’s common stock at a price less than the average closing sale price of VIAVI’s common stock for the ten trading days preceding the declaration date for such distribution;

• If the Company distributes to all or substantially all holders of its common stock, cash or other assets, debt securities or rights to purchase our securities (other than pursuant to a stockholder rights plan), at a per share value exceeding 10 % of the closing sale price of the Company’s common stock on the trading day preceding the declaration date for such distribution;

• If the Company is party to a specified transaction, a fundamental change or a make-whole fundamental change (each as defined in the Indenture of the 2024 Notes);

• During the five consecutive business-day period immediately following any ten consecutive trading-day period in which the trading price per $1,000 principal amount of the 2024 Notes for each day of such ten consecutive trading-day period was less than 98 % of the product of the closing sale price of VIAVI’s common stock and the applicable conversion rate on such date.

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.

Holders of the 2024 Notes may require the Company to purchase all or a portion of the 2024 Notes upon the occurrence of a fundamental change at a purchase price equal to 100 % of the principal amount of the 2024 Notes to be purchased, plus accrued and unpaid interest to, but excluding, the fundamental repurchase date.

If an event of default occurs and is continuing, the principal amount of the 2024 Notes, plus accrued and unpaid interest, if any, may be declared immediately due and payable, subject to certain conditions set forth in the Indenture.

These amounts automatically become due and payable if an event of default relating to certain events of bankruptcy, insolvency or reorganization occurs.

As of July 1, 2023, the expected remaining term of the 2024 Notes is 0.7 years.

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 amortized to interest expense using the straight-line method from the issuance date through maturity on March 1, 2024.

See Senior Convertible Notes Settlement section below for details of the 2024 Notes exchange transactions during fiscal 2022.

On March 1, 2024, the Company converted two notes at the request of the respective note-holders and retired the remaining 2024 Notes principal of $ 96.4 million upon maturity.

Senior Convertible Notes Settlement

2 unchanged sentences

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.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

1 unchanged sentence

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.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

11 unchanged sentences

Amounts outstanding under the Credit Agreement accrue interest as follows:

(i) if the amounts outstanding are denominated in US Dollars, at a per annum rate equal to either, at the Company’s election, Term Secured Overnight Financing Rate (SOFR) plus a margin of 1.35 % to 1.85 % per annum, or a specified base rate plus a margin of 0.25 % to 0.75 %, in each case, depending on the average excess availability under the facility, (ii) if the amounts outstanding are denominated in Sterling, at a per annum rate equal to the Sterling Overnight Interbank Average Rate (SONIA) plus a margin of 1.2825 % to 1.7825 %, depending on the average excess availability under the facility, (iii) if the amounts outstanding are denominated in Euros, at a per annum rate equal to the Euro Interbank Offered Rate plus a margin of 1.25 % to 1.75 %, depending on the average excess availability under the facility, or (iv) if the amounts outstanding are denominated in Canadian Dollars, at a per annum rate equal to either, at the Company’s election, the Canadian Dollar Offered Rate plus a margin of 1.25 % to 1.75 %, or a specified base rate plus a margin of 0.25 % to 0.75 %, in each case, depending on the average excess availability under the facility.

(i) if the amounts outstanding are denominated in US Dollars, at a per annum rate equal to either, at the Company’s election, Term Secured Overnight Financing Rate (SOFR) plus a margin of 1.35 % to 1.85 % per annum, or a specified base rate plus a margin of 0.25 % to 0.75 %, in each case, depending on the average excess availability under the facility, (ii) if the amounts outstanding are denominated in Sterling, at a per annum rate equal to the Sterling Overnight Interbank Average Rate (SONIA) plus a margin of 1.2825 % to 1.7825 %, depending on the average excess availability under the facility, (iii) if the amounts outstanding are denominated in Euros, at a per annum rate equal to the Euro Interbank Offered Rate plus a margin of 1.25 % to 1.75 %, depending on the average excess availability under the facility, or (iv) if the amounts outstanding are denominated in Canadian Dollars, at a per annum rate equal to either, at the Company’s election, the adjusted Term Canadian Overnight Repo Rate Average (CORRA) plus a margin of 1.25 % to 1.75 %, or a specified base rate plus a margin of 0.25 % to 0.75 %, in each case, depending on the average excess availability under the facility.

The covenants of the Credit Agreement include customary restrictive covenants that, among other things, restrict the Company’s ability to incur additional indebtedness, grant liens and make certain acquisitions, investments, asset dispositions and restricted payments.

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 July 1, 2023, we had no borrowings under this facility and our available borrowing capacity was approximately $ 172.5 million, net of outstanding standby letters of credit of $ 4.1 million.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of June 29, 2024, we had no borrowings under this facility and our available borrowing capacity was approximately $ 153.3 million, net of outstanding standby letters of credit of $ 4.1 million.

Revolving Credit Facility

1 unchanged sentence

The Company borrowed $ 150 million and repaid $ 150 million under this Credit Agreement during the first quarter of fiscal 2022.

In connection with the entry into the Senior Secured Asset-Based Revolving Credit Facility noted above, the Company terminated this facility.

In connection with the entry into the Senior Secured Asset-Based Revolving Credit Facility in December 2021, the Company terminated this facility.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Interest Expense

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

July 1, 2023 July 2, 2022 July 3, 2021

June 29, 2024 July 1, 2023 July 2, 2022

Interest expense-contractual interest $ 19.7 $ 19.2 $ 16.5

3 unchanged sentences

Total Interest Expense $ 30.9 $ 27.1 $ 23.3

The effective interest rate on the Company’s contractual debt was 2.65 %, 2.25 % and 1.25 % for fiscal 2023, 2022 and 2021, respectively.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The effective interest rate on the Company’s contractual debt was 2.77 %, 2.65 % and 2.25 % for fiscal years 2024, 2023 and 2022, respectively.

The Company is a lessee in several operating leases, primarily real estate facilities for office space.

1 unchanged sentence

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

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

July 1, 2023 July 2, 2022

Lease expense and cash flow information related to our operating leases is as follows ( in millions ):

June 29, 2024 July 1, 2023

Operating lease costs (1)

2 unchanged sentences

Operating ROU assets obtained in exchange for operating lease obligations $ 7.2 $ 7.0

Operating ROU assets (Other non-current assets) 40.4 45.2

Other current liabilities 10.1 10.1

Other non-current liabilities 29.4 33.5

Total operating lease liabilities $ 39.5 $ 43.6

Weighted-average remaining lease term 6.3 years 6.8 years

Weighted-average discount rate 5.6 % 4.8 %

(1) Total variable lease costs were immaterial during the fiscal years ended July 1, 2023 and July 2, 2022.

(1) Total variable lease costs were immaterial during the fiscal years ended June 29, 2024 and July 1, 2023.

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 July 1, 2023 are as follows ( in millions ):

Operating Leases

Fiscal 2024 $ 10.3

Fiscal 2025 9.4

Fiscal 2026 7.2

Fiscal 2027 5.6

Fiscal 2028 4.0

Future minimum operating lease payments as of June 29, 2024 are as follows ( in millions ):

Thereafter 8.5

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Future minimum operating lease payments as of July 2, 2022, were as follows ( in millions ):

Operating Leases

Fiscal 2023 $ 10.2

Fiscal 2024 9.8

Fiscal 2025 7.8

Fiscal 2026 6.0

Fiscal 2027 4.6

Thereafter 12.8

Total lease payments 51.2

Interest ( 7.6 )

Present value of lease liabilities $ 43.6

Restructuring and Related Charges

The Company’s ARO liability is primarily associated with leasehold improvements which the Company is contractually obligated to remove at the end of a lease to comply with the lease agreement.

The Company derecognizes ARO liabilities when the related obligations are settled.

As of June 29, 2024 and July 1, 2023, the Consolidated Balance Sheets included ARO balances of $ 1.2 million and $ 0.5 million, respectively, in Other current liabilities and $ 3.0 million and $ 3.8 million, respectively, in Other non-current liabilities.

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

Balance at Beginning of Period Liabilities Incurred Liabilities Settled Accretion Expense Balance at End of Period

Year ended June 29, 2024 $ 4.3 $ — $ ( 0.2 ) $ 0.1 $ 4.2

Year ended July 1, 2023 $ 4.2 $ 0.3 $ ( 0.3 ) $ 0.1 $ 4.3

Restructuring

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

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

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

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

Fiscal 2024 Plan

During the second quarter of fiscal 2023, Management approved a restructuring and workforce reduction plan (the Fiscal 2023 Plan) to better align the Company’s workforce with current business needs and strategic growth opportunities.

During the fourth quarter of fiscal 2024, management approved a restructuring and workforce reduction plan (the Fiscal 2024 Plan) across various functions intended to improve operational efficiencies and better align the Company’s workforce with current business needs.

The Company expects approximately 6 % of its global workforce to be affected.

As a result, the Company recorded charges of $ 12.1 million during the year to Restructuring and related charges (benefits) line within our Consolidated Statements of Operations, of which $ 10.4 million is related to Phase I of the Fiscal 2023 Plan and $ 1.7 million is related to Phase II of the Fiscal 2023 Plan.

The first phase of the Fiscal 2023 Plan impacted all segments and corporate functions and the Company anticipates this phase of the Fiscal 2023 Plan to be substantially complete by the end of the first quarter of fiscal 2024.

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

The Company anticipates the Fiscal 2024 Plan to be substantially complete by the end of fiscal 2025.

Fiscal 2023 Plan

During the second quarter of fiscal 2023, management approved a restructuring and workforce reduction plan (the Fiscal 2023 Plan) to better align the Company’s workforce with current business needs and strategic growth opportunities.

The Fiscal 2023 Plan impacted approximately 5 % of the Company’s global workforce.

The first phase of the Fiscal 2023 Plan impacted our NSE and OSP segments and Corporate (Corp) functions and was substantially complete as of March 30, 2024.

The second phase of the Fiscal 2023 Plan is primarily focused on reducing costs in our SE segment and was substantially complete as of June 29, 2024.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Balance as of July 2, 2022 Restructuring and related charges Cash Settlements Balance as of July 1, 2023

A summary of the activity in the restructuring accrual for the fiscal year ended June 29, 2024 is outlined below ( in millions ):

Balance as of July 1, 2023 Restructuring and related charges (benefits) Cash Settlements Balance as of June 29, 2024

Fiscal 2024 Plan

1 unchanged sentence

OSP — 1.2 — 1.2

Fiscal 2024 Plan — 14.8 ( 0.2 ) 14.6

Fiscal 2023 Plan

NSE/Corp 3.5 ( 0.9 ) ( 2.6 ) —

OSP 0.6 — ( 0.6 ) —

Fiscal 2023 Plan Phase I 4.1 ( 0.9 ) ( 3.2 ) —

2 unchanged sentences

$ 5.8 $ 13.6 $ ( 4.5 ) $ 14.9

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

During fiscal 2022 and 2021, the Company recorded a benefit related to restructuring actions of $ 0.1 million and $ 1.6 million, respectively.

(1) Includes certain amounts in Other current liabilities and Other non-current liabilities on the Consolidated Balance Sheets.

During fiscal 2023, the Company recorded restructuring charges of $ 12.1 million related to the Fiscal 2023 Plan.

During fiscal 2022, the Company recorded a benefit of $ 0.1 million related to a restructuring plan initiated in fiscal 2019.

The Company’s income (loss) before income taxes consisted of the following ( in millions ):

July 1, 2023 July 2, 2022 July 3, 2021

June 29, 2024 July 1, 2023 July 2, 2022

Domestic $ ( 95.8 ) $ ( 37.6 ) $ ( 82.6 )

1 unchanged sentence

Income before income taxes $ 11.6 $ 60.7 $ 65.1

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s income tax expense (benefit) consisted of the following ( in millions ):

July 1, 2023 July 2, 2022 July 3, 2021

June 29, 2024 July 1, 2023 July 2, 2022

Current $ 0.3 $ — $ —

9 unchanged sentences

The state current expense primarily relates to the impact of additional capitalization of R&D costs.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The foreign current expense primarily relates to the Company’s profitable operations in certain foreign jurisdictions.

1 unchanged sentence

A reconciliation of the Company’s income tax expense at the federal statutory rate to the income tax expense at the effective tax rate is as follows ( in millions ):

July 1, 2023 July 2, 2022 July 3, 2021

June 29, 2024 July 1, 2023 July 2, 2022

Income tax expense computed at federal statutory rate $ 2.4 $ 12.8 $ 13.7

1 unchanged sentence

inclusion of foreign earnings 3.8 1.3 19.8

Internal Intellectual Property Restructuring 1.2 10.1 19.1

Internal restructuring 1.2 1.2 10.1

Valuation allowance 17.5 0.5 3.3

14 unchanged sentences

Balance as of

July 1, 2023 July 2, 2022 July 3, 2021

June 29, 2024 July 1, 2023 July 2, 2022

Gross deferred tax assets:

17 unchanged sentences

Total net deferred tax assets $ 70.8 $ 73.0 $ 76.8

As of July 1, 2023, the Company had federal, state and foreign tax net operating loss carryforwards of $ 1,695.5 million, $ 364.6 million and $ 461.0 million, respectively, and federal and state research tax credit carryforwards of $ 81.9 million and $ 54.2 million respectively.

As of June 29, 2024, the Company had federal, state and foreign tax net operating loss carryforwards of $ 1,450.7 million, $ 358.0 million and $ 429.6 million, respectively, and federal and state research tax credit carryforwards of $ 83.3 million and $ 54.7 million, respectivel y.

The federal tax net operating loss carryforwards start to expire in fiscal 2025 and at various dates through 2038 if not utilized.

1 unchanged sentence

The state tax net operating loss carryforwards start to expire in fiscal 2025 and at various dates through 2044 if not utilized.

The state research credit start to expire in fiscal 2024 but a majority of the state credits have an indefinite carryforward period.

Th e state research credit start to expire in fiscal 2025 but a majority of the state credits have an indefinite carryforward period.

In addition, a portion of the foreign tax net operating loss and capital loss carryforwards have an indefinite carryforward period.

1 unchanged sentence

Loss carryforward limitations may result in the expiration or reduced utilization of a portion of the Company’s net operating losses.

During fiscal 2024, the Company completed a series of planned internal transactions between subsidiaries within the group to optimize our ability to repatriate earnings back to the U.S.

As a result of these transactions, the Company is able to reduce the amount of withholding tax that will be accrued on current and future earnings.

The tax expense of these transactions was approximately $ 1.2 million.

During fiscal 2022, the Company completed a planned internal transaction moving certain of VIAVI’s intellectual properties out of a foreign jurisdiction where tax rates are scheduled to increase to the U.S.

1 unchanged sentence

The Company recorded foreign tax expense of $ 13.2 million related to this transaction.

Foreign withholding taxes associated with the repatriation of earnings of foreign subsidiaries have not been provided on $ 7.9 million of undistributed earnings for certain foreign subsidiaries.

Foreign withholdi ng taxes associated with the repatriation of earnings of foreign subsidiaries have not been provided on $ 15.3 million of undistributed earnings for certain foreign subsidiaries.

The Company intends to reinvest these earnings indefinitely outside of the United States.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During fiscal 2021, the Company completed a planned series of internal transactions restructuring certain of VIAVI’s intellectual properties.

The result of which aligned the properties in a single entity which owns, manages, directs, and protects the properties, including but not limited to patents, product designs, processes, manufacturing technologies, know-how, and trade secrets.

In conjunction with the internal restructuring $ 2.3 billion ($ 482 million tax effected) of U.S.

federal net operating loss carryforwards were utilized, and the Company recognized a new deferred tax asset relating to the book and tax basis difference of certain intangible assets of $ 589 million.

Given the full valuation allowance that is carried on the Company’s U.S.

deferred tax assets, the change in the deferred taxes as a result of the transaction does not have a material impact on the financial statements.

The Company recorded state tax expense including reserves for uncertain tax positions of $ 19.1 million related to this transaction .

The valuation allowance increased by $ 30.7 million in fiscal 2023, increased by $ 11.9 million in fiscal 2022, and decreased by $ 114.2 million in fiscal 2021.

The valuation allowance decreased by $ 15.5 million in fiscal 2024, increased by $ 30.7 million in fiscal 2023, and increased by $ 11.9 million in fiscal 2022.

The decrease during fiscal 2024 was primarily due to the amortization of intangibles assets, utilization of federal net operating losses (NOLs) offset by an increase in the capitalization of federal research expenditures in the U.S.

The increase during fiscal 2023 was primarily due to the increase in capitalization of federal research expenditures in the U.S.

This includes the effects of the mandatory capitalization and amortization of research and development expenses incurred in fiscal 2023, as required by the 2017 Tax Cuts and Jobs Act (Tax Act) .

This includes the effects of the mandatory capitalization and amortization of R&D expenses incurred in fiscal 2023, as required by the 2017 Tax Cuts and Jobs Act (Tax Act) .

The increase during fiscal 2022 was primarily due to the increase in capitalization of federal research expenditures in the U.S.

The decrease during fiscal 2021 was primarily due to the expiration of federal net operating losses, federal capital losses, and federal research credits.

The following table provides information about the activity of our deferred tax valuation allowance (in millions) :

4 unchanged sentences

Deductions Credited to Expenses or Other Accounts (2)

Year Ended July 1, 2023 $ 1,320.8 $ 114.4 $ ( 83.7 ) $ 1,351.5

Year Ended June 29, 2024 $ 1,351.5 $ 132.7 $ ( 148.2 ) $ 1,336.0

Year Ended July 1, 2023 $ 1,320.8 $ 114.4 $ ( 83.7 ) $ 1,351.5

2 unchanged sentences

(2) Deductions include current year releases credited to expenses and current year reductions due to decreases in net deferred tax assets, return to provision true-ups, other adjustments and increases in deferred tax liabilities.

A reconciliation of unrecognized tax benefits between June 27, 2020 and July 1, 2023 is as follows ( in millions ):

Balance at June 27, 2020 $ 52.0

A reconciliation of unrecognized tax benefits between July 3, 2021 and June 29, 2024 is as follows ( in millions ):

Balance at July 3, 2021 $ 59.1

Additions based on tax positions related to current year 0.4

Additions based on tax positions related to prior year 2.6

Reduction based on tax positions related to prior year ( 2.6 )

Reduction related to settlement ( 0.5 )

Reductions for lapse of statute of limitations ( 6.1 )

1 unchanged sentence

Additions based on tax positions related to current year 2.7

Additions based on tax positions related to prior year 2.6

Addition based on tax positions related to prior year 0.1

Reduction based on tax positions related to prior year ( 1.1 )

5 unchanged sentences

Reductions for lapse of statute of limitations ( 0.2 )

Balance at July1, 2023 $ 54.9

Balance at June 29, 2024 $ 54.5

The unrecognized tax benefits relate primarily to the allocations of revenue and costs among the Company’s global operations and the validity of some U.S.

Included in the balance of unrecognized tax benefits at June 29, 2024 are $ 13.2 million of tax benefits that, if recognized, would impact the effective tax rate.

Also included in the balance of unrecognized tax benefits at June 29, 2024 are $ 37.6 million of tax benefits that, if recognized, would result in adjustments to the valuation allowance.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The unrecognized tax benefits relate primarily to the allocations of revenue and costs among the Company’s global operations and the validity of some U.S.

Included in the balance of unrecognized tax benefits at July 1, 2023 are $ 12.9 million of tax benefits that, if recognized, would impact the effective tax rate.

Also included in the balance of unrecognized tax benefits at July 1, 2023 are $ 38.2 million of tax benefits that, if recognized, would result in adjustments to the valuation allowance.

The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits within th e income tax provision.

The amount of interest and penalties accrued as of July 1, 2023, July 2, 2022 and July 3, 2021 was approximately $ 2.9 million, $ 2.1 million, and $ 4.0 million, respectively.

During fiscal 2023, the Company’s accrued interest and penalties increased by $ 0.8 million.

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.

The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits within th e income tax provisio n.

The amount of interest and penalties accrued as of June 29, 2024, July 1, 2023 and July 2, 2022 was approximately $ 3.8 million, $ 2.9 million, and $ 2.1 million, respectively.

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

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

1 unchanged sentence

The Company believes that adequate amounts have been provided for any adjustments that may result from these examinations.

The following table summarizes the Company’s major tax jurisdictions and the tax years that remain subject to examination by such jurisdictions as of July 1, 2023:

The following table summarizes the Company’s major tax jurisdictions and the tax years that remain subject to examination by such jurisdictions as of June 29, 2024:

Tax Jurisdictions Tax Years

10 unchanged sentences

Repurchase of Common Stock

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

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

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

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

The 2022 Repurchase Plan replaces the $ 200 million stock repurchase plan that the Board previously authorized in September 2019 (“2019 Repurchase Plan”) and expired on September 30, 2022, as well as the stock repurchase plan that the Board of Directors authorized in September 2021 (“2021 Repurchase Plan”) used during fiscal 2022 for the purpose of repurchasing the Company’s common stock issued in connection with the exchange transactions with certain holders of its Senior Convertible Notes (refer to Senior Convertible Notes Settlement section of “Note 11.

Debt” for more details).

During fiscal 2024, the Company repurchased 2.3 million shares of its common stock for $ 20.0 million under the 2022 Repurchase Plan.

During fiscal 2023, the Company repurchased 6.0 million shares of its common stock for $ 65.2 million under the 2022 Repurchase Plan.

As of July 1, 2023, the Company had remaining authorization of $ 234.8 million for future share repurchases under the 2022 Repurchase Plan.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of June 29, 2024, the Company had remaining authorization of $ 214.8 million for future share repurchases under the 2022 Repurchase Plan.

The following table summarizes share repurchase activity related to the Company’s stock repurchase program (in millions, except average price per share amounts) :

July 1, 2023 July 2, 2022 July 3, 2021

June 29, 2024 July 1, 2023 July 2, 2022

Total number of shares repurchased 2.3 7.3 14.8

2 unchanged sentences

Remaining authorization at end of period $ 214.8 $ 234.8 $ 67.3

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The total purchase price of these repurchases was reflected as a decrease to common stock based on the stated par value per share with the remainder charged to accumulated deficit.

2 unchanged sentences

The Company evaluated the provisions of the new legislation, which included an excise tax on share repurchases.

The IRA was effective as of January 1, 2023 and repurchase activity after that date resulted in an accrual of $ 0.3 million recorded in Other current liabilities on the Consolidated Balance Sheets.

The IRA was effective as of January 1, 2023 and repurchase activity after that date resulted in an accrual of $ 0.3 million for excise tax recorded in Accrued expenses on the Consolidated Balance Sheets.

Preferred Stock

4 unchanged sentences

Stock-Based Benefit Plans

Stock Option Plans

Stock Award Plans

The Company’s Amended and Restated 2003 Plan provides for the granting of stock options, stock appreciation rights (SARs), dividend equivalent rights, restricted stocks, restricted stock units, performance units and performance shares, the vesting of which may be time-based or upon satisfaction of performance criteria or other conditions.

As of July 1, 2023, the Company had 8.7 million shares subject to (i) Full Value Awards (defined below) issued and outstanding under the Amended and Restated 2003 Plan and (ii) stock options grant made in connection with the new CEO appointment in fiscal 2016.

The exercise price for stock options is equal to the fair value of the underlying stock at the date of grant.

The Company issues new shares of common stock upon exercise of stock options.

As of July 1, 2023, 7.5 million shares of common stock, primarily under Amended and Restated 2003 Plan, were available for grant.

As of June 29, 2024, the Company had 9.1 million shares subject to Full Value Awards (defined below) issued and outstanding and 13.1 million shares of common stock available for grant under the Amended and Restated 2003 Plan.

Employee Stock Purchase Plans

In June 1998, the Company adopted the ESPP, which became effective August 1, 1998 and provides eligible employees with the opportunity to acquire an ownership interest in the Company through periodic payroll deductions and provides a discounted purchase price as well as a look-back period.

The Company’s ESPP provides eligible employees with the opportunity to acquire an ownership interest in the Company through periodic payroll deductions and provides a discounted purchase price as well as a look-back period.

The ESPP is structured as a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986.

As of July 1, 2023, 1.5 million shares remained available for issuance.

As of June 29, 2024, 6.8 million shares remained available for issuance.

The ESPP as amended provides for a 15 % discount with a look-back period of six months .

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Full Value Awards

6 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.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock-Based Compensation

The impact on the Company’s results of operations of recording stock-based compensation expense by function for fiscal 2024, 2023 and 2022 was as follows ( in millions ):

July 1, 2023 July 2, 2022 July 3, 2021

June 29, 2024 July 1, 2023 July 2, 2022

Cost of revenue $ 4.9 $ 4.8 $ 5.2

2 unchanged sentences

Total stock-based compensation expense $ 49.4 $ 51.2 $ 52.3

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

Approximately $ 1.2 million of stock-based compensation expense was capitalized to inventory at June 29, 2024 and July 1, 2023.

Stock Option Activity

There has been no activity for stock-based compensation expense related to stock options during the fiscal years ended July 1, 2023, July 2, 2022, and July 3, 2021.

The following table summarizes outstanding and exercisable options as of July 1, 2023 all of which have been fully amortized and recognized since before June 29, 2019.

Options Outstanding Options Exercisable

Exercise Price Number of Shares Weighted Average Remaining Contractual Term

(years) Weighted Average Exercise Price Aggregate Intrinsic Value

(millions) Number of Shares Weighted Average Remaining Contractual Term

(years) Weighted Average Exercise Price Aggregate Intrinsic Value

$ 5.95 1,180,257 0.62 $ 5.95 $ 6.3 1,180,257 0.62 $ 5.95 $ 6.3

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $ 11.33 as of July 1, 2023, which would have been received had the options been exercised as of that date.

The total number of in-the-money options exercisable as of July 1, 2023 was 1.2 million.

During fiscal 2024, 1.2 million of stock options were exercised all of which have been fully amortized and recognized since before June 29, 2019.

There were no stock options outstanding as of June 29, 2024.

Employee Stock Purchase Plan Activity

1 unchanged sentence

During fiscal 2024, the Company issued shares of 400,381 and 324,219 on January 31, 2024 and July 31, 2023, respectively, as part of the ESPP.

As of July 1, 2023, there was $ 0.2 million of unrecognized stock-based compensation cost related to the ESPP that remains to be amortized.

As of June 29, 2024, there was $ 0.2 million of unrecognized stock-based compensation cost related to the ESPP that remains to be amortized.

The cost will be recognized in the first quarter of fiscal 2025.

2 unchanged sentences

Full Value Awards Activity

A summary of the status of the Company’s non-vested Full Value Awards as of July 1, 2023 and changes during the same period is presented below ( amount in millions, except per share amounts ):

A summary of the status of the Company’s non-vested Full Value Awards as of June 29, 2024 and changes during fiscal years 2022, 2023 and 2024 are presented below ( in millions, except Weighted-Average Grant Date Fair Value per share amounts ):

Full Value Awards

Performance Shares (1)

Non-Performance Shares Total Number of Shares Weighted-average Grant-dated Fair Value

Non-vested June 27, 2020 1.0 5.1 6.1 $ 12.97

Non-Performance Shares Total Number of Shares Weighted-Average Grant Date Fair Value Per Share

Non-vested July 3, 2021 1.5 4.8 6.3 $ 13.98

Awards granted 0.4 2.4 2.8 $ 16.95

9 unchanged sentences

Awards forfeited ( 0.2 ) ( 0.3 ) ( 0.5 ) $ 15.55

Non-vested July 1, 2023 1.7 5.8 7.5 $ 15.06

Non-vested June 29, 2024 2.2 6.9 9.1 $ 12.51

(1) Performance Shares refer to the Company’s MSU and PSU awards, where the actual number of shares awarded upon vesting may be higher or lower than the target amount depending on the achievement of the relevant market conditions and performance goal achievement.

1 unchanged sentence

The aggregate grant-date fair value of MSUs granted during fiscal 2024, 2023 and 2022 was estimated to be $ 13.4 million, $ 11.4 million and $ 7.9 million, respectively, and was calculated using a Monte Carlo simulation.

The fair value of PSU awards granted in fiscal 2021 was $ 2.0 million.

The Company did no t grant any PSU awards in fiscal 2023 and 2022.

The Company did not grant any PSU awards in fiscal 2024, 2023 and 2022.

PSU awards vest based on the attainment of certain performance measures and the employee’s continued service through the vest date.

As of July 1, 2023, $ 60.1 million of unrecognized stock-based compensation cost related to Full Value Awards remains to be amortized.

As of June 29, 2024, $ 54.9 million of unrecognized stock-based compensation cost related to Full Value Awards remains to be amortized.

That cost is expected to be recognized over the remaining amortization period of 1.5 years.

4 unchanged sentences

The weighted-average assumptions used to measure fair value of performance-based awards with a market condition were as follows:

July 1, 2023 July 2, 2022 July 3, 2021

June 29, 2024 July 1, 2023 July 2, 2022

Volatility of common stock 34.8 % 31.2 % 33.8 %

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company did no t issue stock option grants during the fiscal years ended July 1, 2023, July 2, 2022 and July 3, 2021.

The Company did no t issue stock option grants during the fiscal years ended June 29, 2024, July 1, 2023 and July 2, 2022.

The Company estimates the fair value ESPP purchase rights using a BSM valuation model.

1 unchanged sentence

Employee Stock Purchase Plans

July 1, 2023 July 2, 2022 July 3, 2021

June 29, 2024 July 1, 2023 July 2, 2022

Expected term (in years) 0.5 0.5 0.5

2 unchanged sentences

Expected Term:

The Company's expected term for stock options was calculated utilizing the simplified method in accordance with the authoritative guidance.

The Company used the simplified method as the Company does not have sufficient historical share option exercise data due to the limited number of shares granted as well as changes in the Company's business following the separation from Lumentum, rendering existing historical experience less reliable in formulating expectations for current grants.

The Company’s purchase right period is six months under the ESPP.

Expected Volatility:

The expected volatility for stock options was based on the historical volatility of the Company's common stock and its peers.

The expected volatility for ESPP purchase rights was based on the historical volatility of its stock price with a similar expected term.

16 unchanged sentences

The Company is responsible for a non-pension post-retirement benefit obligation assumed from a past acquisition, which is closed to new participants.

As of July 1, 2023 and July 2, 2022, the liability balances related to the non-pension post-retirement benefit plan were $ 0.4 million.

As of June 29, 2024 and July 1, 2023, the liability balances related to the non-pension post-retirement benefit plan were $ 0.3 million and $ 0.4 million, respectively.

The liability balances were included in Other non-current liabilities on the Consolidated Balance Sheets.

3 unchanged sentences

Benefits are generally based upon years of service and compensation or stated amounts for each year of service.

As of July 1, 2023, the U.K.

As of June 29, 2024, the U.K.

plan was fully funded while the other plans were unfunded.

3 unchanged sentences

No other required contributions are expected in fiscal 2025, but the Company, at its discretion, can make contributions to one or more of the defined benefit plans.

In July 2024, the U.K.

Court of Appeal upheld a ruling in the matter of Virgin Media Limited v NTL Pension Trustees II Limited, a decision that VIAVI was not a party to or involved in, that certain historical amendments for contracted out defined benefit schemes were invalid if they were not accompanied by the correct actuarial confirmation.

The Company and its U.K.

pension scheme trustee are reviewing this development and considering whether this decision has any implications for its U.K.

The Company accounts for its obligations under these pension plans in accordance with the authoritative guidance which requires the Company to record its obligation to the participants, as well as the corresponding net periodic cost.

2 unchanged sentences

The following table presents the components of the net periodic benefit cost for the pension and benefits plans ( in millions ):

July 1, 2023 July 2, 2022 July 3, 2021

June 29, 2024 July 1, 2023 July 2, 2022

Service cost $ — $ — $ 0.2

1 unchanged sentence

Expected return on plan assets ( 1.9 ) ( 1.7 ) ( 1.7 )

Recognized net actuarial (gains) losses ( 0.1 ) 2.9 3.1

Recognized net actuarial losses (gains) 0.1 ( 0.1 ) 2.9

Net periodic benefit cost $ 1.5 $ 0.9 $ 3.0

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s accumulated other comprehensive (loss) income includes unrealized net actuarial (gains)/losses.

The amount of unrealized net actuarial (gain)/loss expected to be recognized in net periodic benefit cost during fiscal 2024 is $ 0.1 million.

The Company’s accumulated other comprehensive (loss) income includes unrealized net actuarial losses (gains).

The amount of unrealized net actuarial loss (gain) expected to be recognized in net periodic benefit cost during fiscal 2025 is $ 0.2 million.

The changes in the benefit obligations and plan assets of the pension and benefits plans were ( in millions ):

Pension Benefit Plans

July 1, 2023 July 2, 2022

June 29, 2024 July 1, 2023

Change in benefit obligation

Benefit obligation at beginning of year $ 86.1 $ 95.5

Service cost — 0.2

Interest cost 3.3 2.7

Actuarial gains ( 4.2 ) ( 25.7 )

Actuarial losses (gains) 1.5 ( 4.2 )

Benefits paid ( 6.1 ) ( 5.6 )

11 unchanged sentences

Pension Benefit Plans

July 1, 2023 July 2, 2022

June 29, 2024 July 1, 2023

Amount recognized on the Consolidated Balance Sheets at end of year:

3 unchanged sentences

Other changes in plan assets and benefit obligations recognized in other comprehensive (loss) income:

Net actuarial gain $ 2.0 $ 13.9

Amortization of accumulated net actuarial (gains) losses ( 0.1 ) 2.9

Total recognized in other comprehensive income (loss) $ 1.9 $ 16.8

During fiscal 2023, the Company (amounts represented as £ and $ denote GBP and USD, respectively) contributed £ 1.0 million or approximately $ 1.2 million, while in fiscal 2022, the Company contributed £ 1.0 million or approximately $ 1.3 million to its U.K.

Net actuarial (loss) gain $ ( 2.1 ) $ 2.0

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

Total recognized in other comprehensive (loss) income $ ( 2.0 ) $ 1.9

During fiscal 2024, the Company contributed £ 1.0 million or approximately $ 1.3 million, while in fiscal 2023, the Company contributed £ 1.0 million or approximately $ 1.2 million to its U.K.

pension plan.

These contributions allowed the Company to comply with regulatory funding requirements.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Underlying both the calculation of the PBO and net periodic cost are actuarial valuations.

1 unchanged sentence

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

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The discount rate reflects the estimated rate at which the pension benefits could be effectively settled.

4 unchanged sentences

Pension Benefit Plans

July 1, 2023 July 2, 2022 July 3, 2021

Used to determine net period cost at end of year:

June 29, 2024 July 1, 2023 July 2, 2022

Used to determine net periodic cost at end of year:

Discount rate 4.1 % 4.1 % 3.2 %

10 unchanged sentences

The funded plan assets are managed by professional third-party investment managers.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value Measurement of Plan Assets

The following table sets forth the plan assets at fair value and the percentage of assets allocations as of July 1, 2023 ( in millions, except percentage data ):

The following table sets forth the plan assets at fair value and the percentage of assets allocations as of June 29, 2024 ( in millions ):

Fair value as of

June 29, 2024

Target Allocation Total Percentage of Plan Assets Level 1 Level 2

Global equity 40 % $ 10.5 33.8 % $ — $ 10.5

Equity / Other 40 % $ 12.1 37.8 % $ — $ 12.1

Fixed income 60 % 17.0 53.1 % — 17.0

Other 20 % 7.9 25.4 % — 7.9

Cash — % 2.9 9.1 % 2.9 —

Total assets $ 32.0 100.0 % $ 2.9 $ 29.1

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table sets forth the plan’s assets at fair value and the percentage of assets allocations as of July 2, 2022 ( in millions, except percentage data ):

The following table sets forth the plan’s assets at fair value and the percentage of assets allocations as of July 1, 2023 ( in millions ):

Fair value as of

Target Allocation Total Percentage of Plan Assets Level 1 Level 2

Global equity 40 % $ 10.3 35.2 % $ — $ 10.3

Equity / Other 60 % $ 18.4 59.2 % $ — $ 18.4

Fixed income 40 % 10.0 32.1 % — 10.0

Other 20 % 6.4 21.8 % — 6.4

Cash — % 2.7 8.7 % 2.7 —

2 unchanged sentences

Pension funds are classified as Level 2 assets since such funds are not directly traded in active markets.

Global equity consists of several index funds that invest primarily in U.K.

equities and other overseas equities.

Equity / Other consists of several funds that invest primarily in U.K.

equities and other overseas equities as well as a small portion in liquid alternatives.

Fixed income consists of several funds that invest primarily in index-linked Gilts (over 5 year), sterling-denominated investment grade corporate bonds and overseas government bonds.

Other consists of several funds that primarily invest in global equities, bonds, private equity, global real estate and infrastructure funds.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Future Benefit Payments

1 unchanged sentence

These payments have been estimated based on the same assumptions used to measure the Company’s PBO at fiscal year end and include benefits attributable to estimated future compensation increases ( in millions ):

Pension Benefit Plans

2030-2034 23.1

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Commitments and Contingencies

Royalty Payments

The Company is obligated to make future minimum royalty payments of $ 1.5 million measured as of July 1, 2023 for the use of certain licensed technologies.

The Company is obligated to make future minimum royalty payments of $ 0.8 million measured as of June 29, 2024 for the use of certain licensed technologies.

Future minimum payments are expected to be paid through the third quarter of fiscal 2026, as follows ( in millions):

Royalty Payments

Purchase Obligations

Purchase obligations of $ 124.0 million as of July 1, 2023, represent legally-binding commitments to purchase inventory and other commitments made in the normal course of business to meet operational requirements.

Purchase obligations of $ 101.1 million as of June 29, 2024, represent legally-binding commitments to purchase inventory and other commitments made in the normal course of business to meet operational requirements.

Although open purchase orders are considered enforceable and legally binding, the terms generally allow the option to cancel, reschedule and adjust the requirements based on the Company’s business needs prior to the delivery of goods or performance of services.

3 unchanged sentences

While the Company seeks to maintain a sufficient safety stock of such products and maintains on-going communications with its suppliers to guard against interruptions or cessation of supply, the Company’s business and results of operations could be adversely affected by a stoppage or delay of supply, substitution of more expensive or less reliable products, receipt of defective parts or contaminated materials, increases in the price of such supplies, or the Company’s inability to obtain reduced pricing from its suppliers in response to competitive pressures.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Financing Obligations

6 unchanged sentences

As a result, they were continuously accounted for as financing transactions.

As of July 1, 2023, $ 0.2 million was included in Other current liabilities , and $ 15.8 million was included in Other non-current liabilities .

As of July 2, 2022, $ 0.1 million was included in Other current liabilities , and $ 16.0 million was included in Other non-current liabilities .

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of July 1, 2023, future minimum annual lease payments of Santa Rosa’s non-cancelable leaseback agreements were as follows (in millions) :

As of June 29, 2024, $ 0.1 million was included in Other current liabilities , and $ 15.7 million was included in Other non-current liabilities on the Consolidated Balance Sheets.

As of July 1, 2023, $ 0.2 million was included in Other current liabilities , and $ 15.8 million was included in Other non-current liabilities on the Consolidated Balance Sheets.

As of June 29, 2024, future minimum annual lease payments of Santa Rosa’s non-cancelable leaseback agreements were as follows (in millions) :

Thereafter 8.3

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Because the obligated amounts of these types of agreements often are not explicitly stated, the overall maximum amount of the obligations cannot be reasonably estimated.

Historically, the Company has not been obligated to make significant payments for these obligations, and no liabilities have been recorded for these obligations on the Consolidated Balance Sheets as of July 1, 2023 and July 2, 2022.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Outstanding Standby Letters of Credit and Performance Bonds

As of July 1, 2023, the Company had standby letters of credit of $ 8.4 million, and other claims of $ 0.7 million collateralized by restricted cash.

As of June 29, 2024, the Company had standby letters of credit of $ 8.6 million, and other claims of $ 1.9 million collateralized by restricted cash.

Product Warranties

5 unchanged sentences

The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the changes in the Company’s warranty reserve during fiscal 2024 and 2023 ( in millions ):

July 1, 2023 July 2, 2022

June 29, 2024 July 1, 2023

Balance as of beginning of period $ 9.0 $ 10.6

4 unchanged sentences

Legal Proceedings

Tel-Instruments Electronics Corp.

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

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

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

Army contract.

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

VIAVI subsequently received total payments of $ 7.3 million from TIC and the two former employees and recorded a gain to Interest and other income, net in the Consolidated Statements of Operations for the year ended June 29, 2024.

Pension Settlement

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

1 unchanged sentence

The court ruled that the amendment increasing the pension plan benefit was valid until the subsequent amendment.

The Company estimated the liability to range from (amounts represented as £ denote GBP) £ 5.7 million to £ 8.4 million.

The Company estimated the liability to range from £ 5.7 million to £ 8.4 million.

The Company determined the likelihood of loss to be probable and accrued £ 5.7 million as of July 2, 2016 in accordance with authoritative guidance on contingencies.

1 unchanged sentence

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.

law firm responsible for the error.

The Company pursued a motion for summary judgement on the deed of rectification claim.

As of July 2, 2022, the related accrued pension liability of £ 5.4 million or $ 6.5 million was included in pension and post-employment benefits within Other non-current liabilities on the Consolidated Balance Sheets.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

3 unchanged sentences

Were an unfavorable final outcome to occur, there exists the possibility of a material adverse impact on the Company’s financial position, results of operations or cash flows for the period in which the effect becomes reasonably estimable.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Operating Segments and Geographic Information

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:

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These solutions include instruments, software and services to design, build, turn-up, certify, troubleshoot and optimize networks.

The Company also offers a range of product support and professional services such as repair, calibration, software support and technical assistance for its products.

NE also offers a range of product support and professional services such as repair, calibration, software support and technical assistance for its products.

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

(ii) Service Enablement:

SE provides embedded systems and enterprise performance management solutions that give global CSPs, enterprises and cloud operators visibility into network, service and application data.

SE provides embedded systems and enterprise performance management solutions that give global communications service providers, enterprises and cloud operators visibility into network, service and application data.

These solutions—including instruments, microprobes and software—monitor, collect and analyze network data to reveal the actual customer experience and to identify opportunities for new revenue streams and network optimization.

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

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

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.

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Information on the Company’s reportable segments is as follows ( in millions ):

Year Ended July 1, 2023

Year Ended June 29, 2024

Network and Service Enablement

Network Enablement Service Enablement Network and

Enablement Optical Security and Performance Products Other Items Consolidated GAAP Measures

Enablement Optical Security and Performance Products Other Items (1)

Consolidated GAAP Measures

Product revenue $ 499.1 $ 37.3 $ 536.4 $ 298.4 $ — $ 834.8

8 unchanged sentences

Network Enablement Service Enablement Network and

Enablement Optical Security and Performance Products Other Items Consolidated GAAP Measures

Enablement Optical Security and Performance Products Other Items (1)

Consolidated GAAP Measures

Product revenue $ 588.1 $ 43.2 $ 631.3 $ 304.8 $ — $ 936.1

8 unchanged sentences

Network Enablement Service Enablement Network and

Enablement Optical Security and Performance Products Other Items Consolidated GAAP Measures

Enablement Optical Security and Performance Products Other Items (1)

Consolidated GAAP Measures

Product revenue $ 745.1 $ 47.6 $ 792.7 $ 342.8 $ — $ 1,135.5

5 unchanged sentences

Operating margin 15.6 % 40.5 % 14.3 %

(1) See below tables for details of reconciling items impacting gross profit and operating income.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

July 1, 2023 July 2, 2022 July 3, 2021

June 29, 2024 July 1, 2023 July 2, 2022

Corporate reconciling items impacting gross profit:

2 unchanged sentences

Amortization of intangibles ( 13.8 ) ( 24.6 ) ( 30.0 )

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

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

0.1 ( 0.6 ) —

Total reconciling items ( 18.6 ) ( 30.0 ) ( 35.2 )

GAAP gross profit $ 575.9 $ 638.8 $ 773.5

4 unchanged sentences

Change in fair value of contingent liability 9.5 4.6 ( 0.3 )

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

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

( 20.6 ) 1.9 ( 9.6 )

Restructuring and related (charges) benefits ( 13.6 ) ( 12.1 ) 0.1

GAAP operating income from continuing operations $ 82.4 $ 185.0 $ 142.2

(1) During the years ended July 1, 2023, July 2, 2022, and July 3, 2021 other benefits (charges) unrelated to core operating performance primarily consisted of certain acquisition and integration related charges, transformational initiatives such as site consolidations, reorganization, accretion of debt discount, intangible impairment and loss on disposal of long-lived assets.

Total reconciling items ( 94.2 ) ( 90.1 ) ( 101.8 )

GAAP operating income $ 20.8 $ 82.4 $ 185.0

(1) For the year ended June 29, 2024, Other charges (benefits) unrelated to core operating performance consisted of $ 18.1 million of certain acquisition and integration related charges and $ 2.5 million of net losses primarily related to long-lived assets.

For the year ended July 1, 2023, Other charges (benefits) unrelated to core operating performance consisted of a $ 6.7 million gain on litigation settlement, offset by $ 2.5 million of certain acquisition and integration related charges and $ 2.3 million of net losses primarily related to long-lived assets.

For the year ended July 2, 2022, Other charges (benefits) unrelated to core operating performance consisted of $ 5.1 million of certain acquisition and integration related charges and $ 4.5 million of net losses primarily related to long-lived assets.

The Company operates primarily in three geographic regions:

1 unchanged sentence

Net revenue is assigned to the geographic region and country where the Company’s product is initially shipped.

For example, certain customers may request shipment of 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 the Company operates in and net revenue from countries that exceeded 10% of the Company’s total net revenue ( in millions ):

July 1, 2023 July 2, 2022 July 3, 2021

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.

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 years ended June 29, 2024, July 1, 2023 and July 2, 2022 ( in millions ):

June 29, 2024 July 1, 2023 July 2, 2022

Product Revenue Service Revenue Total Product Revenue Service Revenue Total Product Revenue Service Revenue Total

8 unchanged sentences

Total net revenue $ 834.8 $ 165.6 $ 1,000.4 $ 936.1 $ 170.0 $ 1,106.1 $ 1,135.5 $ 156.9 $ 1,292.4

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SICPA Holding SA Company (SICPA), a customer of the Company’s OSP segment, generated more than 10% of VIAVI net revenue from continuing operations during fiscal 2023, 2022 and 2021 as summarized below ( in millions ):

July 1, 2023 July 2, 2022 July 3, 2021

SICPA - OSP customer $ 157.7 $ 178.4 $ 193.9

One customer of the Company generated $ 154.1 million, $ 157.7 million and $ 178.4 million of net revenue, which represented more than 10% of total net revenue, during fiscal 2024, 2023 and 2022, respectively.

Property, plant and equipment, net was identified based on the operations in the corresponding geographic areas ( in millions ):

July 1, 2023 July 2, 2022

June 29, 2024 July 1, 2023

United States $ 165.0 $ 166.9

7 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Selected Quarterly Financial Information (unaudited)

The following table presents the Company’s selected quarterly financial information from the Consolidated Statements of Operations for fiscal 2023 and 2022 ( in millions, except per share data ):

July 1, 2023 April 1, 2023 December 31, 2022 October 1, 2022 July 2, 2022 April 2, 2022 January 1, 2022 October 2, 2021

Net revenue $ 263.6 $ 247.8 $ 284.5 $ 310.2 $ 335.3 $ 315.5 $ 314.8 $ 326.8

Gross profit 146.0 141.0 167.0 184.8 201.1 186.9 190.5 195.0

Net (loss) income $ ( 0.1 ) $ ( 15.4 ) $ 8.4 $ 32.6 $ 16.5 $ 19.2 $ 34.6 $ ( 54.8 )

Net (loss) income per share - basic:

Net (loss) income (1)

$ — $ ( 0.07 ) $ 0.04 $ 0.14 $ 0.07 $ 0.08 $ 0.15 $ ( 0.24 )

Net (loss) income per share - diluted:

Net (loss) income (1)

$ — $ ( 0.07 ) $ 0.04 $ 0.14 $ 0.07 $ 0.08 $ 0.14 $ ( 0.24 )

Shares used in per-share calculation:

Basic 222.2 224.1 225.9 226.3 227.2 229.2 236.0 231.1

Diluted 222.2 224.1 227.1 230.4 231.3 236.8 242.3 231.1

(1) Net (loss) income per share is computed independently for each of the fiscal quarters presented.

Therefore, the sum of the quarterly basic and diluted Net (loss) income per share amounts may not equal the annual basic and diluted Net (loss) income per share amount for the full fiscal years.

Government Assistance

In the third quarter of fiscal 2024, the U.S.

National Telecommunications and Information Administration (NTIA) awarded VIAVI 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 performance period for the VIAVI Automated Lab-as-a-Service for Open RAN (VALOR).

During the three-year performance period, VIAVI will be required to spend $ 5.8 million, consisting of $ 4.0 million for software license fees and $ 1.8 million for management/administrative fees to operate the lab.

The Company recorded $ 1.6 million in the form of R&D credits in the Consolidated Statements of Operations during fiscal 2024 under the VALOR Grant.

In addition, funding of $ 1.3 million offset the carrying value of lab equipment purchased as of June 29, 2024.

For the year ended June 29, 2024, we received cash reimbursement of $ 0.3 million and had pending receipts of $ 2.6 million included in Prepayments and other current assets on the Consolidated Balance Sheets.

Other Government Assistance

The Company recorded approximately $ 5.3 million in the form of R&D credits for other government assistance in the Consolidated Statements of Operations during fiscal 2024.

As of June 29, 2024, the Company had pending receipts of approximately $ 6.9 million related to other government assistance included in Prepayments and other current assets on the Consolidated Balance Sheets.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data