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Item 7. Management’s Discussion and Analysis

2025-08-11 compared with 2024-08-16 · 160 added, 147 removed, 271 unchanged (53% of the section changed)

1 unchanged sentence

The following discussion and analysis summarizes the significant factors affecting our consolidated operating results, financial condition, liquidity and capital resources during the period ended June 28, 2025.

Unless otherwise noted, all references herein for the years 2024, 2023 and 2022 represent the fiscal years ended June 29, 2024, July 1, 2023 and July 2, 2022, respectively.

Unless otherwise noted, all references herein for the years 2025, 2024 and 2023 represent the fiscal years ended June 28, 2025, June 29, 2024 and July 1, 2023, respectively.

We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from year-to-year and the primary factors that accounted for those changes, as well as how certain accounting estimates affect our financial statements.

Factors that could cause or contribute to these differences include those discussed below and in this Annual Report on Form 10-K, particularly in “Risk Factors” and “Forward-Looking Statements.”

This discussion should be read in conjunction with our consolidated financial statements and notes to the consolidated financial statements included in this Annual Report that have been prepared in accordance with accounting principles generally accepted in the United States of America.

This discussion should be read in conjunction with our consolidated financial statements and notes to the consolidated financial statements included in this Annual Report on Form 10-K that have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.

Our actual results could differ materially from those discussed in the forward-looking statements.

VIAVI 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 for 3D sensing, anti-counterfeiting, consumer electronics, industrial, automotive, government and aerospace applications.

VIAVI is a global provider of network test, monitoring and assurance solutions for telecommunications, cloud, enterprises, first responders, military, aerospace and critical infrastructure.

VIAVI is also a leader in optical processing technologies for anti-counterfeiting, 3D sensing, aerospace, automotive and industrial applications.

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

• Network Enablement (NE);

• Service Enablement (SE);

• Network and Service Enablement (NSE);

• Optical Security and Performance Products (OSP).

During fiscal 2024, the VIAVI business environment continued to be challenging, particularly in the North American service provider and enterprise customer markets.

Field Instruments demand remained largely at the “maintenance” level due to the absence of major network build-outs and upgrades by Tier 1 service providers, particularly in North America.

NE product demand continues to be impacted by sharply reduced research and development (R&D) and production capital expenditure spend by major wireless network equipment manufacturers (NEMs), who have reduced investment in response to significant cutbacks in 5G deployment by wireless operators.

We expect the end market weakness in NE and SE to persist through the end of this calendar year and are executing on the previously announced restructuring plan initiated in the fourth quarter of fiscal 2024 to better align our business with the current environment.

OSP demand is expected to be similar in fiscal 2025 as compared to fiscal 2024.

Effective March 30, 2025, the Company realigned its segment reporting structure.

As a result, the company’s Network Enablement (NE) and Service Enablement (SE) business activities are now reported as a single operating and reportable segment, NSE.

Recent acquisitions have reduced the SE segment revenue as a percentage of total VIAVI revenue.

In addition, NE and SE are managed under common leadership, share many of the same customers and suppliers and operating expenses associated with the NSE business are not exclusively allocated to either NE or SE.

During fiscal 2025, NSE revenue growth was mainly driven by strong demand primarily from the data center ecosystem for field, lab and production products for fiber and data center buildouts.

We also saw growth in our aerospace and defense products.

This was partially offset by a decline in spend for wireless and cable products by network equipment manufacturers (NEMs) and service providers.

OSP performance slightly improved year-over-year with growth in our Anti-Counterfeiting and Other products as the industry’s inventory levels normalized.

Our financial results and long-term growth model will continue to be driven by revenue growth, non-GAAP operating income, non-GAAP operating margin, non-GAAP diluted earnings per share (EPS) and cash flow from operations.

We believe these key operating metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies.

Proposed Acquisition of Spirent

On March 5, 2024, we announced a transaction under which the Company and VIAVI Solutions Acquisitions Limited, our wholly-owned subsidiary (Bidco), intended to acquire the entire issued and to be issued ordinary share capital of Spirent Communications plc, a public company incorporated in England and Wales and a global provider of automated test and assurance solutions for networks, cybersecurity and positioning (Spirent, and such transaction, the Proposed Acquisition).

The Proposed Acquisition was to be implemented by way of a Court-sanctioned scheme of arrangement under Part 26 of the U.K.

Companies Act (the VIAVI Scheme), and was conditioned on, among other things, holding meetings of Spirent shareholders to approve the VIAVI Scheme (the VIAVI Scheme Meetings) on or before May 23, 2024.

The VIAVI Scheme Meetings were not held on or before May 23, 2024, and accordingly, the VIAVI Scheme lapsed, and on May 23, 2024, Bidco terminated the Co-operation Agreement, and the various previously disclosed financing arrangements were terminated or cancelled as a result.

Proposed Acquisition

On March 2, 2025, the Company entered into a purchase agreement to acquire Spirent Communications plc’s (Spirent) high-speed ethernet and network security business lines and subsequently amended the agreement on May 28, 2025 to also purchase Spirent’s channel emulation testing business (collectively, the HSE, network security and CE businesses) from Keysight Technologies, Inc.

for our NSE segment.

The total purchase consideration of $425 million will be paid at closing, subject to customary closing adjustments and conditions.

The Company expects to fund this transaction with proceeds from a Term Loan B.

The consummation of the acquisition is conditioned on regulatory approvals and is currently estimated to close by the end of September 2025.

During the fourth quarter, we successfully priced and allocated the $600 million Term Loan B which will be used to fund the transaction at close and for general corporate purposes.

The Term Loan B will close concurrently with the transaction.

Looking Ahead to 2026

As we look forward to fiscal 2025, we expect the conservative spend environment to persist for the remainder of calendar 2024 and a gradual demand recovery in the first half of calendar 2025.

As we look forward to fiscal 2026, we expect to continue to see stabilization and growth in many of our traditional businesses.

Our long-term focus remains on executing against our strategic priorities to drive revenue and earnings growth, capture market share and continue to optimize our capital structure.

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• Invest in secular trends to drive growth and expand total addressable market (TAM);

• Extend VIAVI technologies and platforms into adjacent markets and applications;

• Continue productivity improvement in Operations, R&D and Selling, General and Administrative (SG&A).

• Extend VIAVI technologies and platforms into lucrative adjacent markets and applications.

administration has implemented and could implement further broad-based, updated global tariffs and the situation continues to be dynamic and evolving.

As we operate in this challenging environment, we are focused on continuing to deliver our products and services to our customers.

Given our global business, tariffs will result in additional cost for us and our suppliers.

We are analyzing ways to optimize our operations and supply chain strategies, control costs and implement pricing actions to reduce the impact from tariffs.

FINANCIAL HIGHLIGHTS

Our fiscal 2025 results included the following notable items:

• Net revenue of $1.0 billion, down $105.7 million or 9.6% year-over-year

• GAAP operating margin of 2.1%, down 530 bps year-over-year

• Non-GAAP operating margin of 11.5%, down 410 bps year-over-year

• GAAP diluted EPS of $(0.12), down $0.23 or 209.1% year-over-year

• Non-GAAP diluted EPS of $0.33, down $0.22 or 40.0% year-over-year

In fiscal 2024 VIAVI continued to experience constrained demand and end market volatility.

Net revenue of $1.0 billion was down $105.7 million compared to fiscal 2023, primarily due to conservative spend by service providers and NEMs.

VIAVI's fiscal 2024 GAAP operating margin of 2.1% was down 530 bps compared to fiscal 2023 primarily due to the decline in revenue and charges related to the proposed acquisition of Spirent, partially offset by the decrease in intangible amortization and the change in fair value of contingent liability.

Non-GAAP operating margin of 11.5% decreased 410 basis points largely due to the decline in revenue partially offset by lower operating expenses.

GAAP diluted EPS of $(0.12) decreased $0.23 from fiscal 2023 primarily due to the decrease in revenue and higher acquisition related charges.

Non-GAAP diluted EPS of $0.33 decreased $0.22 from fiscal 2023 due to the decline in revenue.

• Net revenue of $1.08 billion, up $83.9 million or 8.4% year-over-year

• GAAP operating margin of 5.3%, up 320 bps year-over-year

• Non-GAAP operating margin of 14.2%, up 270 bps year-over-year

• GAAP diluted EPS of $0.15, up $0.27 or 225.0% year-over-year

• Non-GAAP diluted EPS of $0.47, up $0.14 or 42.4% year-over-year

In fiscal 2025, VIAVI began to experience stabilization and growth across many of our product segments.

Net revenue of $1.08 billion was up $83.9 million compared to fiscal 2024, primarily from the data center ecosystem for field, lab and production products for fiber and data center buildouts, as well as growth in our aerospace and defense products, which was partially offset by a decline in spend by NEMs and service providers for wireless and cable products.

Our acquisition of Inertial Labs contributed $25.2 million of net revenue in fiscal 2025.

OSP performance slightly improved year-over-year with growth in our Anti-Counterfeiting and Other products.

VIAVI's fiscal 2025 GAAP operating margin of 5.3% was up 320 bps compared to fiscal 2024 primarily due to higher volumes and favorable product mix, partially offset by the increase in intangible amortization.

Non-GAAP operating margin of 14.2% increased 270 basis points primarily due to the increase in revenue, partially offset by higher operating expenses.

GAAP diluted EPS of $0.15 increased $0.27 from fiscal 2024 primarily due to the increase in revenue.

Non-GAAP diluted EPS of $0.47 increased $0.14 from fiscal 2024 also due to the increase in revenue.

In fiscal 2025, we generated $89.8 million in operating cash flow and deployed $27.8 million or 2.6% of revenue towards capital expenditures.

We further improved our balance sheet by retiring the 2024 Senior Convertible Notes upon maturity and repurchasing 2.3 million shares of our common stock for $20.0 million.

We also expended $121.7 million towards the acquisition of Inertial Labs and repurchased 2.0 million shares of our common stock for $16.4 million.

A reconciliation of GAAP financial measures to Non-GAAP financial measures is provided below ( in millions, except EPS amounts ):

June 29, 2024 July 1, 2023

June 28, 2025 June 29, 2024

Operating Income Operating Margin Operating Income Operating Margin

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Change in fair value of contingent liability (8.3) (0.8) % (9.5) (1.0) %

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

Acquisition and integration related charges 22.3 2.1 % 18.1 1.9 %

Other charges unrelated to core operating performance (1)

1.3 0.1 % 2.5 0.2 %

Amortization of acquisition related inventory step-up 4.3 0.4 % — — %

Amortization of intangibles 24.3 2.2 % 20.1 2.0 %

Restructuring and related charges 0.7 0.1 % 13.6 1.4 %

Total related to Cost of Revenue and Operating Expenses 94.2 9.4 % 90.1 8.2 %

Litigation settlement (1.3) (0.1) % — — %

Total related to Cost of Revenues and Operating Expenses 96.4 8.9 % 94.2 9.4 %

Non-GAAP measures $ 153.9 14.2 % $ 115.0 11.5 %

June 29, 2024 July 1, 2023

Net (Loss) Income Diluted

EPS Net Income Diluted

June 28, 2025 June 29, 2024

Net Income Diluted

EPS Net (Loss) Income Diluted

GAAP measures $ 34.8 $ 0.15 $ (25.8) $ (0.12)

Items reconciling GAAP Net (Loss) Income and EPS to Non-GAAP Net Income and EPS:

Items reconciling GAAP Net Income (Loss) and EPS to Non-GAAP Net Income and EPS:

Stock-based compensation 53.1 0.24 49.4 0.22

Change in fair value of contingent liability (8.3) (0.03) (9.5) (0.04)

Other charges (benefits) unrelated to core operating performance (2)

Acquisition and integration related charges 22.3 0.10 18.1 0.08

Other charges unrelated to core operating performance (1)

1.3 0.01 2.5 0.01

Amortization of acquisition related inventory step-up 4.3 0.02 — —

Amortization of intangibles 24.3 0.11 20.1 0.09

Restructuring and related charges 0.7 — 13.6 0.06

Litigation settlement (1.3) (0.01) (6.3) (0.02)

Non-cash interest expense and other expense 4.7 0.02 4.9 0.02

Provision for income taxes 6.5 0.03 5.2 0.02

Total related to Net (Loss) Income and EPS 99.3 0.45 99.2 0.44

(Benefit from) provision for income taxes (30.5) (0.14) 6.5 0.03

Total related to Net Income and EPS 70.6 0.32 99.3 0.45

Non-GAAP measures $ 105.4 $ 0.47 $ 73.5 $ 0.33

Shares used in per share calculation for Non-GAAP EPS 225.7 224.1

(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.

(2) 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, offset by a net gain on litigation settlement of $6.3 million.

(1) Included in the year ended June 28, 2025 is a gain of $0.9 million on the sale of assets previously classified as held for sale and other charges unrelated to core operating performance of $2.2 million.

Use of Non-GAAP (Adjusted) Financial Measures

The Company uses the measures disclosed in this report to evaluate the Company’s historical and prospective financial performance, as well as its performance relative to its competitors.

Specifically, management uses these items to further its own understanding of the Company’s core operating performance, which the Company believes represent its performance in the ordinary, ongoing and customary course of its operations.

Accordingly, management excludes from core operating performance items such as those relating to certain purchase price accounting adjustments, amortization of acquisition-related intangibles, stock-based compensation, legal settlements, restructuring, changes in fair value of contingent consideration liabilities and certain investing and acquisition related expenses and other activities that management believes are not reflective of such ordinary, ongoing and core operating activities.

The Company believes providing this additional information allows investors to see Company results through the eyes of management.

The Company further believes that providing this information allows investors to better understand the Company’s financial performance and, importantly, to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance.

The non-GAAP adjustments described in this report are excluded by the Company from its GAAP financial measures because the Company believes excluding these items enables investors to evaluate more clearly and consistently the Company’s core operational performance.

The Company provides non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP EPS financial measures as supplemental information regarding the Company’s operational performance and believes providing this additional information allows investors to see Company results through the eyes of management, and better to evaluate more clearly and consistently the Company’s core operational performance and expenses and evaluate the efficacy of the methodology used by management to measure such performance.

The Company uses the measures disclosed in this Annual Report on Form 10-K to evaluate the Company’s historical and prospective financial performance, as well as its performance relative to its competitors.

Specifically, management uses these items to further its own understanding of the Company’s core operating performance, which the Company believes represents its performance in the ordinary, ongoing and customary course of its operations.

Accordingly, management excludes from core operating performance items such as those relating to certain purchase price accounting adjustments, amortization of acquisition related intangibles, amortization expense related to acquisition related inventory step-up, stock-based compensation, legal settlements, restructuring, changes in fair value of contingent consideration liabilities, certain investing and acquisition related expenses and other activities and income tax expenses or benefits that management believes are not reflective of such ordinary, ongoing and core operating activities.

The non-GAAP adjustments are outlined below.

Cost of revenues, costs of research and development and costs of selling, general and administrative :

The Company’s GAAP presentation of operating expenses may include (i) additional depreciation and amortization from changes in estimated useful life and the write-down of certain property, equipment and intangibles that have been identified for disposal but remained in use until the date of disposal, (ii) charges such as severance, benefits and outplacement costs related to restructuring plans, (iii) costs for facilities not required for ongoing operations, and costs related to the relocation of certain equipment from these facilities and/or contract manufacturer facilities, (iv) stock-based compensation, (v) amortization expense related to acquired intangibles, (vi) changes in fair value of contingent consideration liabilities and (vii) other charges unrelated to our core operating performance comprised mainly of acquisition related transaction costs, integration costs related to acquired entities, litigation and legal settlements and other costs and contingencies unrelated to current and future operations, including transformational initiatives such as the implementation of simplified automated processes, site consolidations, and reorganizations.

The Company’s GAAP presentation of gross margin and operating expenses may include (i) additional depreciation and amortization from changes in estimated useful life and the write-down of certain property, plant and equipment and intangibles, (ii) charges such as severance, benefits and outplacement costs related to restructuring plans with a specific and defined term, (iii) costs for facilities not required for ongoing operations, and costs related to the relocation of certain equipment from these facilities and/or contract manufacturer facilities, (iv) stock-based compensation, (v) amortization expense related to acquired intangibles, (vi) amortization expense related to acquisition related inventory step-up, (vii) changes in fair value of contingent consideration liabilities, (viii) acquisition related transaction and integration costs related to acquired entities, (ix) litigation and legal settlements and (x) other charges unrelated to our core operating performance comprised mainly of other costs and contingencies unrelated to current and future operations, including transformational initiatives such as the implementation of simplified automated processes, site consolidations and reorganizations.

The Company excludes these items in calculating non-GAAP operating margin, non-GAAP net income and non-GAAP EPS.

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Income tax expense or benefit :

The Company excludes certain non-cash tax expense or benefit items, such as the utilization of net operating losses (NOLs) where valuation allowances were released, intra-period tax allocation benefit and the tax effect for amortization of non-tax deductible intangible assets, in calculating non-GAAP net income and non-GAAP EPS.

The Company excludes certain non-cash tax expense or benefit items, such as (i) the utilization of net operating losses (NOLs) where valuation allowances were released, (ii) intra-period tax allocation benefit and (iii) the tax effect for amortization of non-tax deductible intangible assets, in calculating non-GAAP net income and non-GAAP EPS.

Non-GAAP financial measures are not in accordance with, preferable to, or an alternative for, generally accepted accounting principles in the United States.

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The GAAP measure most directly comparable to non-GAAP EPS is earnings per share.

The Company believes these GAAP measures alone are not fully indicative of its core operating expenses and performance and that providing non-GAAP financial measures in conjunction with GAAP measures provides valuable supplemental information regarding the Company’s overall performance.

RESULTS OF OPERATIONS

This section of this Annual Report on Form 10-K generally discusses the results of operations for the fiscal years ended June 29, 2024 and July 1, 2023 and year-to-year comparisons between such fiscal years.

Discussions of the year-to-year comparisons between the fiscal years ended July 1, 2023 and July 2, 2022, that are not included in this Annual Report on Form 10-K, can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended July 1, 2023 .

This section of this Annual Report on Form 10-K generally discusses the results of operations for the fiscal years ended June 28, 2025 and June 29, 2024 and year-to-year comparisons between such fiscal years.

Discussions of the year-to-year comparisons between the fiscal years ended June 29, 2024 and July 1, 2023, that are not included in this Annual Report on Form 10-K, can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended June 29, 2024 .

The results of operations for the current period are not necessarily indicative of results to be expected for future periods.

The following table summarizes selected Consolidated Statements of Operations items as a percentage of net revenue:

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

June 28, 2025 June 29, 2024 July 1, 2023

Segment net revenue:

Network Enablement 61.6 % 63.9 % 66.2 %

Service Enablement 8.6 8.5 7.2

Optical Security and Performance 29.8 27.6 26.6

Network and Service Enablement 71.6 % 70.2 % 72.4 %

Optical Security and Performance Products 28.4 29.8 27.6

Net revenue 100.0 100.0 100.0

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Income from operations 5.3 2.1 7.4

Loss on convertible note settlement — — (7.9)

Loss on convertible note modification — — (0.2)

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Interest expense (2.8) (3.1) (2.4)

Income before income taxes 1.2 5.5 5.0

Income before income taxes and equity investment earnings 3.6 1.2 5.5

Provision for income taxes 0.4 3.8 3.2

Net (loss) income (2.6) % 2.3 % 1.2 %

Equity investment earnings — — —

Net income (loss) 3.2 % (2.6) % 2.3 %

Financial Data for Fiscal 2025, 2024 and 2023

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Segment net revenue:

NE $ 615.7 $ 707.2 $ (91.5) (12.9) % $ 707.2 $ 855.7 $ (148.5) (17.4) %

SE 86.3 94.0 (7.7) (8.2) % 94.0 93.4 0.6 0.6 %

NSE $ 776.6 $ 702.0 $ 74.6 10.6 % $ 702.0 $ 801.2 $ (99.2) (12.4) %

OSP 307.7 298.4 9.3 3.1 % 298.4 304.9 (6.5) (2.1) %

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Percentage of net revenue 0.4 % 0.6 % 0.6 % 0.8 %

Restructuring and related charges (benefits) $ 13.6 $ 12.1 $ 1.5 12.4 % $ 12.1 $ (0.1) $ 12.2 NM

Percentage of net revenue 1.4 % 1.2 % 1.2 % — %

Loss on convertible note settlement $ — $ — $ — —% $ — $ (101.8) $ — NM

Restructuring and related charges $ 0.7 $ 13.6 $ (12.9) (94.9) % $ 13.6 $ 12.1 $ 1.5 12.4 %

Percentage of net revenue 0.1 % 1.4 % 1.4 % 1.2 %

Loss on convertible note modification $ — $ (2.2) $ 2.2 NM $ (2.2) $ — $ (2.2) NM

Loss on convertible note modification $ — $ — $ — — % $ — $ (2.2) $ 2.2 NM

Percentage of net revenue — % — % — % (0.2) %

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Percentage of net revenue 0.4 % 3.8 % 3.8 % 3.2 %

Equity investment earnings $ 0.6 $ — $ 0.6 NM $ — $ — $ — — %

Percentage of net revenue — % — % — % — %

NM - Percentage change not considered meaningful

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GAAP and not using constant dollars.

If currency exchange rates had been constant in fiscal 2024 and 2023, our consolidated net revenue in “constant dollars” would have decreased by approximately $3.3 million, or 0.3% of net revenue, which primarily impacted our NE and SE segments.

If currency exchange rates had been constant in fiscal 2025 and 2024, our consolidated net revenue in “constant dollars” would have increased from fiscal 2024 to fiscal 2025 by an additional $3.3 million, or 0.3% of net revenue, which primarily impacted our NSE segment.

The impact of foreign currency fluctuations on net revenue was not indicative of the impact on net income due to the offsetting foreign currency impact on operating costs and expenses.

If currency exchange rates had been constant in fiscal 2024 and 2023, our consolidated operating expenses in “constant dollars” would have decreased by approximately $4.1 million, or 0.4% of net revenue.

If currency exchange rates had been constant in fiscal 2025 and 2024, our consolidated operating expenses in “constant dollars” would have increased from fiscal 2024 to fiscal 2025 by an additional $0.1 million.

Refer to Item 7A “Qualitative and Quantitative Disclosures about Market Risk” of this Annual Report on Form 10-K for further details on foreign currency instruments and our related risk management strategies.

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Consequently, the following discussion of business segment performance focuses on total net revenue, gross profit and operating income consistent with our approach for managing the business.

Net revenue decreased $105.7 million, or 9.6%, during fiscal 2024 when compared to fiscal 2023.

This decrease was primarily a result of the continued conservative service provider and NEM spend and lower anti-counterfeiting revenue.

Product revenues decreased $101.3 million, or 10.8%, during fiscal 2024 when compared to fiscal 2023, driven by volume decline in all segments.

Service revenues decreased $4.4 million, or 2.6%, during fiscal 2024 when compared to fiscal 2023, driven by volume decline in all segments.

Net revenue increased $83.9 million, or 8.4%, during fiscal 2025 when compared to fiscal 2024.

This increase was primarily from the data center ecosystem for field, lab and production products for fiber and data center buildouts, as well as growth in our aerospace and defense products ($25.2 million contributed by our acquisition of Inertial Labs), which was partially offset by a decline in spend by NEMs and service providers for wireless and cable products.

OSP performance slightly improved year-over-year driven by Anti-Counterfeiting and Other products.

Product revenues increased $77.2 million, or 9.2%, during fiscal 2025 when compared to fiscal 2024, driven by volume increases in NSE and OSP.

Service revenues increased $6.7 million, or 4.0%, during fiscal 2025 when compared to fiscal 2024, driven by a volume increase in NSE.

Going forward, we expect to continue to encounter a number of industry and market risks and uncertainties.

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This may limit our visibility, and consequently, our ability to predict future revenue, seasonality, profitability and general financial performance, which could create period-over-period variability in our financial measures and present foreign exchange rate risks.

The recent global tariffs implemented could increase our costs and impact our business.

We cannot predict when or to what extent these uncertainties will be resolved.

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(a) pricing pressures due to, among other things, a highly concentrated customer base, increasing competition, particularly from Asia-based competitors and a general commoditization trend for certain products;

(b) product mix variability in our markets, which affects revenue and gross margin;

(d) the current trend of communication industry consolidation, which is expected to continue, that directly affects our NE and SE customer bases and adds additional risk and uncertainty to our financial and business projections;

(e) the impact of ongoing global trade policies, tariffs and sanctions;

and (f) regulatory or economic developments and/or technology challenges that slow or change the rate of adoption of 5G, 3D sensing and other emerging secular technologies and platforms.

(b) strategic execution challenges arising from competition with larger and more well-resourced competitors;

(d) fluctuations in customer buying patterns, which cause demand, revenue and profitability volatility;

(e) the current trend of communication industry consolidation, which is expected to continue, that directly affects our NSE customer base and adds additional risk and uncertainty to our financial and business projections;

(f) the impact of ongoing global trade policies, tariffs and sanctions;

and (g) regulatory or economic developments and/or technology challenges that slow or change the rate of adoption of 5G, 3D sensing and other emerging secular technologies and platforms.

Revenue by Region

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The following table presents net revenue by the three geographic regions we operate in and net revenue from countries that exceeded 10% of our total net revenue (in millions) :

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

June 28, 2025 June 29, 2024 July 1, 2023

United States $ 356.0 32.8 % $ 325.4 32.5 % $ 362.9 32.8 %

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Total net revenue $ 1,084.3 100.0 % $ 1,000.4 100.0 % $ 1,106.1 100.0 %

Net revenue from customers outside the Americas for fiscal 2024, represented 60.9% of net revenue, an increase of 0.5 percentage points year-over-year.

Net revenue from customers outside the Americas for fiscal 2025, represented 60.8% of net revenue, a decrease of 0.1 percentage points year-over-year.

We expect revenue from customers outside of the United States to continue to be an important part of our overall net revenue and an increasing focus for net revenue growth opportunities.

Amortization of Acquired Technologies (Cost of revenues)

Amortization of acquired technologies within Cost of revenues for fiscal 2024 decreased $10.8 million, or 43.9%, to $13.8 million from $24.6 million in fiscal 2023.

This decrease is primarily due to certain intangible assets becoming fully amortized in fiscal 2023 offset in part by amortization of intangibles acquired through acquisitions in fiscal 2023.

Amortization of acquired technologies within Cost of revenues for fiscal 2025 increased $5.7 million, or 41.3%, to $19.5 million from $13.8 million in fiscal 2024.

This increase is primarily due to the amortization of intangibles acquired through Inertial Labs, partially offset by certain intangibles becoming fully amortized.

Gross margin in fiscal 2025 declined 0.3 percentage points to 57.3% from 57.6% in fiscal 2024.

This decrease was primarily driven by lower volume and product mix.

This decrease was primarily driven by the increase in amortization of intangibles and amortization of acquisition related inventory step-up, partially offset by higher volume and favorable product mix.

As discussed in more detail under “Net Revenue” above, we sell products in certain markets that are consolidating, undergoing product, architectural and business model transitions, have high customer concentrations, are highly competitive (increasingly due to Asia-Pacific-based competition), are price sensitive and/or are affected by customer seasonal and mix variant buying patterns.

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Research and Development

R&D expense decreased $5.0 million, or 2.4%, during fiscal 2024 compared to fiscal 2023.

This decrease was primarily due to benefits from our restructuring activity initiated during fiscal 2023 to drive greater efficiencies.

As a percentage of net revenue, R&D increased 1.5 percentage points during fiscal 2024 when compared to fiscal 2023.

Research and Development (R&D) expense increased $6.8 million, or 3.4%, during fiscal 2025 compared to fiscal 2024.

This increase was primarily due to higher variable expenses and incremental cost from the acquisition of Inertial Labs, partially offset by a one-time R&D tax credit catch-up.

As a percentage of net revenue, R&D decreased 0.9 percentage points during fiscal 2025 when compared to fiscal 2024.

We believe that continuing our investments in R&D is critical to attaining our strategic objectives.

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Selling, General and Administrative

SG&A expense increased $4.6 million, or 1.4%, in fiscal 2024 compared to fiscal 2023.

This increase was primarily due to expenses related to the proposed acquisition of Spirent offset by benefits from our restructuring activity initiated during fiscal 2023 and the change in fair value of acquisition-related contingent consideration.

As a percentage of net revenue, SG&A increased 3.6 percentage points in fiscal 2024 when compared to 2023.

Selling, General and Administrative (SG&A) expense increased $16.1 million, or 4.8%, in fiscal 2025 compared to fiscal 2024.

This increase was primarily due to higher variable expenses, higher acquisition and integration related charges and higher stock-based compensation.

As a percentage of net revenue, SG&A decreased 1.1 percentage points in fiscal 2025 when compared to 2024.

We intend to continue to focus on reducing our SG&A expense as a percentage of net revenue.

However, we have in the recent past experienced, and may continue to experience in the future, certain charges unrelated to our core operating performance, such as acquisitions and integration related expenses and litigation expenses, which could increase our SG&A expenses and potentially impact our profitability expectations in any particular quarter.

However, we have in the recent past experienced, and may continue to experience in the future, certain charges unrelated to our core operating performance, such as acquisitions and integration related expenses and litigation expenses, which could increase our SG&A expense and potentially impact our profitability expectations in any particular quarter.

Amortization of Other Intangibles (Operating expenses)

Amortization of intangibles within Operating expenses for fiscal 2025 decreased $1.5 million, or 23.8%, to $4.8 million from $6.3 million in fiscal 2024.

This decrease is primarily due to certain intangible assets becoming fully amortized in fiscal 2023 offset in part by amortization of intangibles acquired through acquisitions in fiscal 2023.

This decrease is primarily due to certain intangible assets becoming fully amortized, partially offset by amortization of intangibles acquired through Inertial Labs.

Restructuring

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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, impacting all segments and corporate functions.

The Company expects approximately 7% of its global workforce to be affected, impacting both segments and corporate functions.

We estimate annualized gross cost savings of approximately $25.0 million excluding any one-time charges as a result of the restructuring activities initiated under the Fiscal 2024 Plan.

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

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

The Company anticipates the Fiscal 2024 Plan to be substantially complete by the end of the second quarter of fiscal 2026.

The restructuring and workforce reduction plan, initiated in the second quarter of fiscal 2023 (the Fiscal 2023 Plan) across various functions to better align the Company’s workforce with current business needs and strategic growth opportunities, was completed in the first quarter of fiscal 2025.

The Fiscal 2023 Plan affected approximately 5% of the Company's workforce and resulted in an estimated annualized gross cost savings of approximately $25.0 million excluding any one-time charges.

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

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

As of June 28, 2025, our total restructuring accrual was $3.5 million.

During fiscal 2025, we recorded restructuring charges of $0.9 million related to the Fiscal 2024 Plan and a benefit of $0.2 million related to the Fiscal 2023 Plan.

During fiscal 2024, we recorded charges of $14.8 million related to the Fiscal 2024 Plan and a benefit of $1.2 million related to the Fiscal 2023 Plan.

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

Restructuring charges consisting of severance, benefit and outplacement costs were recorded to the Restructuring and related charges (benefits) line within our Consolidated Statements of Operations.

Restructuring charges consisting of severance, benefit and outplacement costs were recorded to the Restructuring and related charges line within our Consolidated Statements of Operations.

We estimate future cash payments of $3.5 million under the Fiscal 2024 Plan, funded by operating cash flow.

Future payments under the Fiscal 2023 Plan are not expected to be material.

Refer to “Note 13.

Restructuring and Related Charges” for more information.

Restructuring and Related Charges” under Item 8 of this Annual Report on Form 10-K for more information.

Loss on Convertible Note Modification

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The Company incurred $4.2 million of issuance costs related to this exchange, of which $2.2 million of the issuance costs were recorded as Loss on convertible note modification in the Consolidated Statements of Operations.

The remaining issuance costs of $2.0 million was capitalized within Long-term debt (as a contra-balance) on the Consolidated Balance Sheets and will be amortized as an adjustment to interest expense on a straight-line basis until maturity.

The remaining issuance costs of $2.0 million were capitalized within Long-term debt (as a contra-balance) on the Consolidated Balance Sheets and are being amortized as an adjustment to interest expense on a straight-line basis until maturity.

Interest and Other Income, Net

Interest and other income, net was $11.1 million in fiscal 2025 as compared to $21.7 million in fiscal 2024.

This $14.1 million increase was primarily driven by higher interest income and a legal settlement in our favor in the amount of $7.3 million during fiscal 2024.

This $10.6 million decrease was primarily driven by a legal settlement in our favor in the amount of $7.3 million in fiscal 2024 and a decrease in interest income due to lower cash balances and lower yields compared to fiscal 2024.

Interest Expense

Interest expense increased $3.8 million, or 14.0%, during fiscal 2024 compared to fiscal 2023.

This increase was primarily driven by the accretion of debt discount and interest expense on the Senior Convertible Notes due 2026 as a result of the issuance in March 2023.

Interest expense decreased $0.9 million, or 2.9%, during fiscal 2025 compared to fiscal 2024.

This decrease was primarily driven by lower outstanding debt when compared to fiscal 2024.

Provision for Income Tax

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Based on a jurisdiction-by-jurisdiction review of anticipated future income and due to the continued economic uncertainty in the industry, management has determined that in the U.S., it is more likely than not that our net deferred tax assets will not be realized.

During fiscal 2024, the valuation allowance for deferred tax assets decreased by $15.5 million which was primarily due to the amortization of intangibles assets, and utilization of federal NOLs in the U.S.

The increase in income tax provision of $2.2 million or 6.3% during fiscal 2024 was due primarily to an increase in foreign earnings in the current year as compared to the fiscal 2023 earnings.

During fiscal 2025, the valuation allowance for deferred tax assets decreased by $69.7 million, which was primarily due to the increase in the deferred tax liability that resulted from the acquisition of Inertial Labs and its intangible assets, and the expiration of federal NOLs in the U.S.

The decrease in income tax provision of $33.0 million or 88.2% during fiscal 2025 was due primarily to a $25.0 million release of valuation allowance related to our acquisition of Inertial Labs and a $7.5 million release of state income tax reserves due to the lapse in the statute of limitations.

We are routinely subjec t to various federal, state and foreign audits by taxing authorities.

We believe that adequate amounts have been provided for any adjustments that may result from these examinations.

Operating Segment Information ( in millions ):

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA), which includes a broad range of tax reform provisions, was signed into law in the United States.

The effect of OBBBA will be recorded in the first quarter of fiscal 2026, as a change in tax law is accounted for in the period of enactment.

We are currently evaluating the provisions of OBBBA, however we currently do not expect the OBBBA to have a material impact on our annual effective tax rate in fiscal 2026.

Operating Segment Information

Information related to our operating segments was as follows ( in millions ):

2025 2024 Change Percentage Change 2024 2023 Change Percentage Change

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Gross margin 62.8 % 62.6 % 62.6 % 63.7 %

Net revenue $ 86.3 $ 94.0 $ (7.7) (8.2) % $ 94.0 $ 93.4 $ 0.6 0.6 %

Gross profit 57.3 62.6 (5.3) (8.5) % 62.6 64.3 (1.7) (2.6) %

Gross margin 66.4 % 66.6 % 66.6 % 68.8 %

Net revenue $ 702.0 $ 801.2 $ (99.2) (12.4) % $ 801.2 $ 949.1 $ (147.9) (15.6) %

Operating income $ 41.6 $ 8.0 $ 33.6 420.0 % $ 8.0 $ 61.2 $ (53.2) (86.9) %

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Operating margin 36.5 % 35.9 % 35.9 % 36.5 %

Network Enablement

NE net revenue decreased $91.5 million, or 12.9% during fiscal 2024 when compared to fiscal 2023.

This decrease was primarily driven by lower volume in Fiber and Access, Wireless and Lab and Production partially offset by higher AvComm revenue.

NE gross margin decreased by 1.2 percentage points during fiscal 2024 to 62.1% from 63.3% in fiscal 2023.

This decrease was primarily due to lower volume and unfavorable product mix.

Service Enablement

SE net revenue decreased $7.7 million, or 8.2%, during fiscal 2024 when compared to fiscal 2023, primarily due to lower Assurance and Data Center revenue.

SE gross margin decreased by 0.2 percentage points during fiscal 2024 to 66.4% from 66.6% in fiscal 2023, primarily due to unfavorable product mix.

Network and Service Enablement

NSE operating margin decreased by 6.5 percentage points during fiscal 2024 to 1.1% from 7.6% in fiscal 2023, primarily driven by lower volume.

NSE net revenue increased $74.6 million, or 10.6% during fiscal 2025 when compared to fiscal 2024.

This increase was primarily driven by higher volume in Lab and Production, Aerospace and Defense ($25.2 million contributed by our acquisition of Inertial Labs), partially offset by lower volume in Wireless.

NSE gross margin increased by 0.2 percentage points during fiscal 2025 to 62.8% from 62.6% in fiscal 2024.

This increase was primarily due to higher volume and favorable product mix.

NSE operating margin increased by 4.3 percentage points during fiscal 2025 to 5.4% from 1.1% in fiscal 2024, primarily driven by higher volume and a one-time R&D tax credit catch-up.

Optical Security and Performance Products

OSP net revenue decreased $6.5 million, or 2.1%, during fiscal 2024 when compared to fiscal 2023.

This decrease was primarily driven by lower anti-counterfeiting and government revenues partially offset by higher consumer and industrial revenue.

OSP gross margin decreased by 0.1 percentage point during fiscal 2024 to 51.9% from 52.0% in fiscal 2023.

OSP operating margin decreased by 0.6 percentage points during fiscal 2024 to 35.9% from 36.5% in fiscal 2023, primarily due to the aforementioned reduction in gross margin.

OSP net revenue increased $9.3 million, or 3.1%, during fiscal 2025 when compared to fiscal 2024.

This increase was primarily driven by higher Anti-Counterfeiting and Other revenues, partially offset by a decrease in 3D sensing revenue.

OSP gross margin increased by 1.2 percentage point during fiscal 2025 to 53.1% from 51.9% in fiscal 2024 primarily due to higher volume.

OSP operating margin increased by 0.6 percentage points during fiscal 2025 to 36.5% from 35.9% in fiscal 2024, primarily due to the aforementioned increase in gross margin.

Liquidity and Capital Resources

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• Global economic conditions which affect demand for our products and services and impact the financial stability of our suppliers and customers;

• The pending close of our acquisition of Spirent’s HSE, network security and CE businesses and the related Term Loan B, which has been priced and allocated, with funding contingent upon closing;

• Changes in accounts receivable, inventory or other operating assets and liabilities which affect our working capital;

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• Volatility in fixed income and credit markets which impact the liquidity and valuation of our investment portfolios;

• Volatility in credit markets which would impact our ability to obtain additional financing on favorable terms or at all;

• Volatility in credit markets that impact our ability to obtain additional financing on favorable terms or at all;

• Volatility in foreign exchange markets which impacts our financial results;

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• Issuance or repurchase of our common stock or other equity securities;

• Challenges in repatriating funds from certain foreign jurisdictions;

• Factors beyond our control that may impact timing of and/or appropriation of government funding for certain of our strategic research and development programs;

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• Compliance with covenants and other terms and conditions related to our financing arrangements;

• The risks and uncertainties detailed in Item 1A “Risk Factors” section of our Annual Report on Form 10-K.

• The risks and uncertainties detailed under Item 1A “Risk Factors” section of this Annual Report on Form 10-K.

Cash and Cash Equivalents and Short-Term Investments

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The cost of securities sold is based on the specific identification method.

Unrealized gains and losses on available-for-sale investments are recorded as Other comprehensive (loss) income and are reported as a separate component of stockholders’ equity.

Unrealized gains and losses on available-for-sale investments are recorded as Other comprehensive income (loss) and are reported as a separate component of stockholders’ equity.

As of June 28, 2025, U.S.

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The Credit Agreement also provides that, under certain circumstances, we may increase the aggregate amount of revolving commitments thereunder by an aggregate amount of up to $100.0 million so long as certain conditions are met.

The Company is currently considering reducing the commitment under the Senior Secured Asset-Based Revolving Credit Facility to $200 million to be in line with borrowing base capacity and extend the maturity.

As of June 28, 2025, we had no borrowings under this facility and our available borrowing capacity was approximately $170.8 million, net of outstanding standby letters of credit of $4.4 million.

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Debt” under Item 8 of this Annual Report on Form 10-K for more information.

In March 2025, we obtained commitments for a $425 million 7-year term loan facility the proceeds of which would be available, subject to customary conditions, to fund our pending acquisition of Spirent’s HSE and network security business from Keysight Technologies, Inc.

We subsequently marketed and upsized to a $600 million 7-year term loan facility and successfully allocated the loan to prospective lenders at an initial interest rate of SOFR+2.50% and an original issue price of 99.75%.

The incremental $175 million is intended for general corporate purposes.

The term loan funding, as upsized, remains subject to customary closing conditions and the satisfaction or waiver of all closing conditions to the pending acquisition.

Cash Flows Year Ended June 28, 2025

As of June 29, 2024, our combined balance of cash and cash equivalents and restricted cash decreased by $33.8 million to $481.8 million from a balance of $515.6 million as of July 1, 2023.

Cash provided by operating activities was $116.4 million, consisted of net loss of $25.8 million adjusted for non-cash charges (e.g., depreciation, amortization, stock-based compensation, amortization of debt issuance cost, loss on convertible note modification and accretion and net change in fair value of contingent liabilities), including changes in deferred tax balances which totaled $125.5 million and changes in operating assets and liabilities that generated $16.7 million.

Changes in our operating assets and liabilities related primarily to a decrease in accounts receivable of $13.9 million due to collections outpacing billings, a decrease in inventory of $10.5 million related to demand changes, an increase in accounts payable of $3.2 million driven by timing of purchases and related payments, an increase in accrued expenses and other current and non-current liabilities of $3.0 million due primarily to timing in payments and an increase in income taxes payable of $1.6 million.

These were partially offset by a decrease in deferred revenue of $8.8 million due to timing of support billings and project acceptances, a decrease in accrued payroll and related expenses of $4.6 million due primarily to lower commissions and an increase in other current and non-current assets of $2.1 million.

Cash used in investing activities was $21.6 million, primarily resulting from $19.5 million used for capital expenditures and $5.5 million used for purchases of short-term investments, partially offset by $3.4 million proceeds from sales of assets.

Cash used in financing activities was $125.7 million, primarily resulting from $96.4 million to retire the 2024 Senior Convertible Notes upon maturity, $20.0 million cash paid to repurchase common stock under our share repurchase program, $11.1 million in withholding tax payments on the vesting of restricted stock awards and $4.3 million paid for acquisition related liabilities.

These were partially offset by $6.3 million in proceeds from the issuance of common stock under our employee stock purchase plan.

Material Contractual and Material Cash Obligations

As of June 28, 2025, our combined balance of cash and cash equivalents and restricted cash decreased by $49.7 million to $432.1 million from a balance of $481.8 million as of June 29, 2024.

Cash provided by operating activities was $89.8 million, consisting of net income of $34.8 million adjusted for non-cash charges (e.g., depreciation, amortization, stock-based compensation and other non-cash items), and changes in deferred tax balances which totaled $85.2 million, offset by changes in operating assets and liabilities that used $30.2 million.

Changes in our operating assets and liabilities related primarily to an increase in accounts receivable of $34.1 million due to billings outpacing collections, a decrease in accrued expenses and other current and non-current liabilities of $13.5 million due primarily to restructuring payments, an increase in inventory of $7.5 million related to demand changes, a decrease in income taxes payable of $6.3 million and an increase in other current and non-current assets of $4.0 million.

These were partially offset by an increase in accounts payable of $14.6 million driven by timing of purchases and related payments, an increase in accrued payroll and related expenses of $12.7 million due primarily to variable pay and an increase in deferred revenue of $7.9 million due to timing of support billings and project acceptances.

Cash used in investing activities was $128.4 million, primarily resulting from $121.6 million used for the acquisition of Inertial Labs, $27.8 million used for capital expenditures and $3.0 million investment in a non-marketable equity security, partially offset by $18.9 million net maturities of short-term investments and $5.1 million proceeds from sales of assets.

Cash used in financing activities was $23.6 million, primarily resulting from $16.4 million cash paid to repurchase common stock under our share repurchase program, $13.2 million in withholding tax payments on the vesting of restricted stock and performance-based awards, partially offset by $6.0 million in proceeds from the issuance of common stock under our employee stock purchase plan.

Material Contractual and Cash Obligations

The following summarizes our material contractual obligations at June 28, 2025, and the effect such obligations are expected to have on our liquidity and cash flow over the next five years ( in millions ):

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(1) Refer to “Note 11.

Debt” for more information.

Debt” under Item 8 of this Annual Report on Form 10-K for more information.

(2) Refer to “Note 18.

Commitments and Contingencies” for more information.

Commitments and Contingencies” under Item 8 of this Annual Report on Form 10-K or more information.

(3) Refer to “Note 12.

Leases” for more information.

Leases” under Item 8 of this Annual Report on Form 10-K for more information.

(4) Refer to “Note 17.

Employee Pension and Other Benefit Plans” for more information.

Employee Pension and Other Benefit Plans” under Item 8 of this Annual Report on Form 10-K for more information.

Purchase obligations represent legally-binding commitments to purchase inventory and other commitments made in the normal course of business to meet operational requirements.

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We sponsor significant qualified and non-qualified pension plans for certain past and present employees in the U.K.

Most of these plans have been closed to new participants and no additional service costs are being accrued.

These plans have been closed to new participants and no additional service costs are being accrued, except for certain plans in Germany assumed in connection with an acquisition during fiscal 2010.

As of June 28, 2025, the U.K.

plan is fully funded.

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

During each of fiscal 2025 and fiscal 2024, we contributed £1.0 million or approximately $1.3 million to the U.K.

pension plan.

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We anticipate future annual outlays related to the German plans will approximate estimated future benefit payments.

These future benefit payments have been estimated based on the same actuarial assumptions used to measure our projected benefit obligation and currently are forecasted to range between $4.0 million and $7.6 million per annum.

These future benefit payments have been estimated based on the same actuarial assumptions used to measure our PBO and currently are forecasted to range between $4.3 million and $5.9 million per annum.

We also are responsible for the non-pension post-retirement benefit obligation assumed from a past acquisition with a liability of $0.3 million.

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Critical Accounting Estimates

Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.

GAAP), which require management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, net revenue and expenses, and the disclosure of contingent assets and liabilities.

Our Consolidated Financial Statements have been prepared in accordance with U.S.

GAAP, which requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, net revenue and expenses, and the disclosure of contingent assets and liabilities.

Our estimates are based on historical experience and assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

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Refer to “Note 1.

Basis of Presentation” under Item 8 of this Annual Report on Form 10-K, for a discussion of the estimates used in preparation our Consolidated Financial Statements.

Basis of Presentation” under Item 8 of this Annual Report on Form 10-K, for a discussion of the estimates used in preparation of our Consolidated Financial Statements.

For contingent purchase consideration, the fair value of such earn-out liabilities are generally determined using a Monte Carlo Simulation that includes significant unobservable inputs such as the projected revenues of the acquired business over the earn-out period.

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.

The estimates used to determine the fair value of the contingent consideration liability are subject to significant judgment and given the inherent uncertainties in making these estimates, actual results are likely to differ from the amounts originally recorded and could be materially different.

For our Pension accounting, significant judgment is required in actuarial assumption used when establishing the discount rate for the net periodic cost and the PBO calculations.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis