What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-01-29 compared with 2025-10-30 · 154 added, 110 removed, 270 unchanged (49% of the section changed)

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Forward-looking statements include statements, but are not limited to statements such as:

• Financial projections and expectations, including profitability of certain business units, synergies, benefits and other matters related to the acquisition of the high-speed ethernet, network security and channel emulation testing business of Spirent Communications plc, plans to reduce costs and improve efficiencies including through restructuring programs, the effects of seasonality on certain business units, the consolidation of the communication industry and continued reliance on key customers for a significant portion of our revenue, future sources of revenue, competition and pricing pressures, the future impact of certain accounting pronouncements, and our estimation of the potential impact and materiality of litigation;

• Financial projections and expectations, including profitability of certain business units, synergies, benefits and other matters related to completed and contemplated acquisitions and strategic transactions, plans to reduce costs and improve efficiencies including through restructuring programs, the effects of seasonality on certain business units, the consolidation of the communication industry and continued reliance on key customers for a significant portion of our revenue, future sources of revenue, competition and pricing pressures, the future impact of certain accounting pronouncements, and our estimation of the potential impact and materiality of litigation;

• Sufficiency of our sources of funding for working capital, capital expenditures, contractual obligations, acquisitions, stock repurchases, debt repayments and other matters;

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• Our expectations related to future tax liabilities resulting from future tax legislation;

• Our expectations related to macro-economic conditions, including the impact of inflation, fiscal tightening at central banks, changes in foreign exchange rates, the risk of increased tensions and trade actions, including global tariffs, ongoing geopolitical tensions including the conflict between Russia and Ukraine, the instability in the Middle East, on our business, operations and financial results.

• Our expectations related to macro-economic conditions, including the impact of inflation, fiscal tightening at central banks, changes in foreign exchange rates, the risk of increased tensions and trade actions, including global tariffs, ongoing geopolitical tensions including the conflict between Russia and Ukraine, and political instability and economic uncertainty in the Middle East, on our business, operations and financial results.

Management cautions that forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in such forward-looking statements.

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Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in “Risk Factors” and “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 leader in test and measurement and optical technologies.

Our test, monitoring, assurance, and resilient position, navigation and timing solutions enable and secure critical infrastructure ranging from data center ecosystems and communication networks to military, aerospace, railway and first responder communications.

In addition, we develop and advance technologies used in high-volume optical applications across anti-counterfeiting, consumer electronics, aerospace industrial and automotive end markets.

To serve our markets we operate the following business segments:

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• Optical Security and Performance Products (OSP).

During the first quarter of fiscal 2026, the NSE business grew year-over-year as a result of strong demand for lab and production and field products driven by the data center ecosystem as well as growth in aerospace and defense products.

Our acquisition of Inertial Labs contributed $18.7 million of net revenue in the first quarter of fiscal 2026.

OSP performance improved year-over-year primarily as a result of strength in Anti-Counterfeiting and Other products.

During the second quarter of fiscal 2026, the NSE business grew year-over-year as a result of our acquisitions of Spirent Communications plc’s (Spirent) high-speed ethernet, network security and channel emulation testing business (collectively, the HSE and CE business) and Inertial Labs, Inc.

(Inertial Labs) which contributed net revenues of $43.0 million and $21.1 million, respectively.

Additionally, we continue to see demand of lab and production and field products driven by the data center ecosystem.

OSP performance improved year-over-year driven by anti-counterfeiting and other products.

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.

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Looking Ahead

As we look forward to the second quarter of fiscal 2026, we expect NSE to be up driven mainly by the data center ecosystem as well as aerospace and defense and the acquisition of Spirent Communications plc’s (Spirent) high-speed ethernet, network security and channel emulation testing business.

As we look forward to the third quarter of fiscal 2026, we expect NSE to be up driven mainly by growth in many of our end markets and the acquisition of Spirent’s HSE and CE business.

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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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.

We continue to take actions to optimize our supply chain, control costs and implement pricing actions to mitigate the evolving impact from tariffs.

Financial Highlights

First quarter fiscal 2026 results included the following notable items:

Second quarter fiscal 2026 results included the following notable items:

• Net revenue of $369.3 million, up $98.5 million or 36.4% year-over-year.

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• Non-GAAP operating margin of 19.3%, up 440 bps year-over-year.

• GAAP net loss of $21.4 million, up $19.6 million or 1,088.9% year-over-year.

• GAAP net loss of $48.1 million, down $57.2 million or 628.6% year-over-year.

• Non-GAAP net income of $51.5 million, up $22.1 million or 75.2% year-over-year.

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

Three Months Ended

September 27, 2025 September 28, 2024

Operating Income Operating Margin Operating Income Operating Margin

Three Months Ended Six Months Ended

December 27, 2025 December 28, 2024 December 27, 2025 December 28, 2024

Operating Income Operating Margin Operating Income Operating Margin Operating Income Operating Margin Operating Income Operating Margin

GAAP measures $ 11.4 3.1 % $ 22.2 8.2 % $ 19.0 2.8 % $ 33.7 6.6 %

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Acquisition and integration related charges 7.8 2.1 % 2.8 1.0 % 11.7 1.8 % 3.4 0.7 %

Other charges unrelated to core operating performance (1)

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

6.2 1.7 % 0.1 — % 6.8 1.0 % (0.4) (0.1) %

Amortization of inventory step-up 2.6 0.9 % — — %

Amortization of acquisition related inventory step-up 2.6 0.7 % — — % 5.2 0.8 % — — %

Amortization of intangibles 18.8 5.1 % 4.3 1.6 % 27.2 4.1 % 8.7 1.7 %

Restructuring and related benefits (0.3) (0.1) % — — %

Restructuring and related (benefits) charges (0.1) — % 1.2 0.4 % (0.4) (0.1) % 1.2 0.2 %

Litigation settlement — — % — — % — — % (1.3) (0.3) %

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Non-GAAP measures $ 71.4 19.3 % $ 40.4 14.9 % $ 118.5 17.7 % $ 64.3 12.6 %

Three Months Ended

September 27, 2025 September 28, 2024

Net (Loss) Income Diluted EPS Net (Loss) Income Diluted EPS

Three Months Ended Six Months Ended

December 27, 2025 December 28, 2024 December 27, 2025 December 28, 2024

Net (Loss) Income Diluted EPS Net Income Diluted EPS Net (Loss) Income Diluted EPS Net Income Diluted EPS

GAAP measures $ (48.1) $ (0.21) $ 9.1 $ 0.04 $ (69.5) $ (0.31) $ 7.3 $ 0.03

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

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

Stock-based compensation 13.9 0.06 13.7 0.06 27.3 0.12 26.4 0.12

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6.2 0.03 0.1 — 6.8 0.03 (0.4) (0.01)

Amortization of inventory step-up 2.6 0.01 — —

Amortization of acquisition related inventory step-up 2.6 0.01 — — 5.2 0.02 — —

Amortization of intangibles 18.8 0.08 4.3 0.02 27.2 0.12 8.7 0.04

Restructuring and related benefits (0.3) — — —

Restructuring and related (benefits) charges (0.1) — 1.2 0.01 (0.4) — 1.2 0.01

Litigation settlement — — — — — — (1.3) (0.01)

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Shares used in per share calculation for Non-GAAP EPS 233.4 224.8 230.7 224.4

(1) Included in the three months ended September 28, 2024 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 $0.4 million.

(2) The Company incurred a loss of $3.8 million for the three months ended September 27, 2025 in connection with the extinguishment of certain 1.625% Senior Convertible Notes.

(1) Included in the three and six months ended December 27, 2025 is $3.5 million of losses on disposal of long-lived assets, $2.1 million charge for restoration services for a VIAVI facility impacted by a fire and other charges unrelated to core operating performance.

Included in the six months ended December 28, 2024 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 $0.5 million.

(2) The Company incurred losses of $38.7 million and $42.5 million for the three and six months ended December 27, 2025, respectively, in connection with the extinguishment of certain 1.625% Senior Convertible Notes.

Use of Non-GAAP (Adjusted) Financial Measures

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Non-cash interest expense and other expense :

The Company excludes certain investing expenses, including accretion of debt discount, and other non-cash activities that management believes are not reflective of such ordinary, ongoing and core operating activities, when calculating non-GAAP net income and non-GAAP EPS.

The Company excludes certain expenses, including loss on debt extinguishment, accretion of debt discount, and other non-cash activities that management believes are not reflective of such ordinary, ongoing and core operating activities, when calculating non-GAAP net income and non-GAAP EPS.

Income tax expense or benefit :

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The following table summarizes selected Consolidated Statements of Operations items ( in millions ):

Three Months Ended

September 27, 2025 September 28, 2024 Change Percent Change

Three Months Ended Six Months Ended

December 27, 2025 December 28, 2024 Change Percent Change December 27, 2025 December 28, 2024 Change Percent Change

Segment net revenue:

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Percentage of net revenue 1.7 % 0.4 % 1.2 % 0.4 %

Restructuring and related benefits $ (0.3) $ — $ (0.3) NM

Restructuring and related (benefits) charges $ (0.1) $ 1.2 $ (1.3) (108.3) % $ (0.4) $ 1.2 $ (1.6) (133.3) %

Percentage of net revenue — % 0.4 % (0.1) % 0.2 %

Loss on convertible note extinguishment $ (3.8) $ — $ (3.8) NM

Loss on convertible note extinguishment $ (38.7) $ — $ (38.7) NM $ (42.5) $ — $ (42.5) NM

Percentage of net revenue 10.5 % — % 6.4 % — %

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Percentage of net revenue 2.6 % 3.5 % 4.3 % 3.6 %

Equity investment losses $ (0.1) $ — $ (0.1) NM

Equity investment earnings $ 0.3 $ — $ 0.3 NM $ 0.2 $ — $ 0.2 NM

Percentage of net revenue (0.1) % — % — % — %

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Service revenue primarily consists of maintenance and support, extended warranty, professional services and post-contract support in addition to other services such as calibration and repair services.

When evaluating the performance of our segments, management focuses on total net revenue, gross profit and operating income and not the product or service categories.

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.

Three Months Ended September 27, 2025 and September 28, 2024

Net revenue increased by $60.9 million, or 25.6%, during the three months ended September 27, 2025 compared to the same period a year ago.

This increase was primarily from lab and production and field products driven by the data center ecosystem, as well as growth in our aerospace and defense products.

Our acquisition of Inertial Labs contributed $18.7 million of net revenue in the first quarter of fiscal 2026.

When evaluating the performance of our segments, management focuses on total net revenue, gross profit and segment operating income and not the product or service categories.

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

Three and Six Months Ended December 27, 2025 and December 28, 2024

Net revenue increased by $98.5 million, or 36.4%, during the three months ended December 27, 2025 compared to the same period a year ago.

Our acquisitions of Spirent’s HSE and CE business and Inertial Labs contributed $43.0 million and $21.1 million, respectively, during the three months ended December 27, 2025.

Additionally, we continue to see demand of lab and production and field products driven by the data center ecosystem.

OSP performance improved year-over-year driven by anti-counterfeiting and other products.

Product revenues increased by $59.9 million, or 30.3%, during the three months ended September 27, 2025 compared to the same period a year ago, driven by volume increases in NSE and OSP.

Service revenues increased by $1.0 million, or 2.5% during the three months ended September 27, 2025, compared to the same period a year ago, driven by a volume increase in NSE.

Net revenue increased by $159.4 million, or 31.3%, during the six months ended December 27, 2025 compared to the same period a year ago.

Our acquisitions of Spirent’s HSE and CE business and Inertial Labs contributed $43.0 million and $39.8 million, respectively, during the six months ended December 27, 2025.

Additionally, we continue to see demand of lab and production and field products driven by the data center ecosystem.

OSP performance improved year-over-year driven by anti-counterfeiting and other products.

Product revenues increased by $91.6 million, or 40.6%, during the three months ended December 27, 2025 compared to the same period a year ago, driven by volume increases in NSE and OSP.

Product revenues from Spirent’s HSE and CE business and Inertial Labs contributed $32.9 million and $21.1 million, respectively, during the three months ended December 27, 2025.

Product revenues increased by $151.5 million, or 35.8%, during the six months ended December 27, 2025 compared to the same period a year ago, driven by volume increases in NSE and OSP.

Product revenues from Inertial Labs and Spirent’s HSE and CE business contributed $39.8 million and $32.9 million, respectively, during the six months ended December 27, 2025.

Service revenues increased by $6.9 million, or 15.3%, during the three months ended December 27, 2025 compared to the same period a year ago, driven by a volume increase in NSE.

Service revenues from Spirent’s HSE and CE business contributed $10.1 million during the three months ended December 27, 2025.

Service revenues increased by $7.9 million, or 9.2%, during the six months ended December 27, 2025 compared to the same period a year ago, driven by a volume increase in NSE.

Service revenues from Spirent’s HSE and CE business contributed $10.1 million during the six months ended December 27, 2025.

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

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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 ):

Three Months Ended

September 27, 2025 September 28, 2024

Three Months Ended Six Months Ended

December 27, 2025 December 28, 2024 December 27, 2025 December 28, 2024

United States $ 144.6 39.2 % $ 98.5 36.4 % $ 251.3 37.6 % $ 171.5 33.7 %

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Total net revenue $ 369.3 100.0 % $ 270.8 100.0 % $ 668.4 100.0 % $ 509.0 100.0 %

Net revenue from customers outside the Americas represented 56.9% and 62.8% of net revenue, respectively, during the three months ended September 27, 2025 and September 28, 2024.

Net revenue from customers outside the Americas represented 53.7% and 55.2% of net revenue, respectively, during the three and six months ended December 27, 2025.

Net revenue from customers outside the Americas represented 57.1% and 59.8% of net revenue, respectively, during the three and six months ended December 28, 2024.

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 increased $3.6 million or 109.1% during the three months ended September 27, 2025 compared to the same period a year ago.

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

Gross margin decreased by 0.6 percentage points during the three months ended September 27, 2025 from 57.1% in the same period a year ago to 56.5% in the current period.

Amortization of acquired technologies within Cost of revenues increased $9.2 million or 278.8% and $12.8 million or 193.9% during the three and six months ended December 27, 2025 compared to the same period a year ago.

This increase is primarily due to the amortization of intangibles acquired through Spirent’s HSE and CE business and Inertial Labs.

Gross margin decreased by 2.4 percentage points during the three months ended December 27, 2025 from 59.4% in the same period a year ago to 57.0% in the current period.

The decrease was primarily driven by the increase in amortization of intangibles and amortization of acquisition related inventory step-up.

Gross margin decreased by 1.5 percentage points during the six months ended December 27, 2025 from 58.3% in the same period a year ago to 56.8% in the current period.

The 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.

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Research and Development

Research and Development (R&D) expense increased by $6.6 million, or 13.4% during the three months ended September 27, 2025 compared to the same period a year ago.

This increase was primarily due to higher variable expenses and incremental cost from the acquisition of Inertial Labs.

As a percentage of net revenue, R&D expense decreased by 2.0 percentage points during the three months ended September 27, 2025 compared to the same period a year ago.

Research and Development (R&D) expense increased by $13.8 million, or 26.5% during the three months ended December 27, 2025 compared to the same period a year ago.

This increase was primarily due to incremental cost from the acquisitions of Spirent’s HSE and CE business and Inertial Labs.

As a percentage of net revenue, R&D expense decreased by 1.4 percentage points during the three months ended December 27, 2025 compared to the same period a year ago.

R&D expense increased by $20.4 million, or 20.1% during the six months ended December 27, 2025 compared to the same period a year ago.

This increase was primarily due to incremental cost from the acquisitions of Spirent’s HSE and CE business and Inertial Labs.

As a percentage of net revenue, R&D expense decreased by 1.7 percentage points during the six months ended December 27, 2025 compared to the same period a year ago.

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

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Selling, General and Administrative

Selling, General and Administrative (SG&A) expense increased by $30.1 million, or 40.6%, during the three months ended September 27, 2025 compared to the same period a year ago.

This increase was primarily due to the change in fair value of acquisition related contingent consideration, higher variable expenses and higher acquisition and integration related charges.

As a percentage of net revenue, SG&A expense increased 3.7 percentage points during the three months ended September 27, 2025 compared to the same period a year ago.

Selling, General and Administrative (SG&A) expense increased by $42.8 million, or 50.8%, during the three months ended December 27, 2025 compared to the same period a year ago.

This increase was primarily due to the change in fair value of acquisition related contingent consideration, incremental cost from the acquisitions of Spirent’s HSE and CE business and Inertial Labs and higher acquisition and integration related charges.

As a percentage of net revenue, SG&A expense increased 3.3 percentage points during the three months ended December 27, 2025 compared to the same period a year ago.

SG&A expense increased by $72.9 million, or 46.0%, during the six months ended December 27, 2025 compared to the same period a year ago.

As a percentage of net revenue, SG&A expense increased 3.5 percentage points during the six months ended December 27, 2025 compared to the same period a year ago.

Amortization of Intangibles (Operating expenses)

Amortization of intangibles within Operating expenses increased $0.4 million or 36.4% during the three months ended September 27, 2025 compared to the same period a year ago.

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

Amortization of intangibles within Operating expenses increased $5.3 million or 530.0% and $5.7 million or 271.4% during the three and six months ended December 27, 2025 compared to the same period a year ago.

This increase is primarily due to the amortization of intangibles acquired through Spirent’s HSE and CE business and Inertial Labs, partially offset by certain intangibles becoming fully amortized.

Restructuring

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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 the second quarter of fiscal 2026.

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

As of September 27, 2025, our total restructuring accrual was $2.7 million.

During the three months ended September 27, 2025, the Company recorded restructuring benefits of $0.3 million related to the Fiscal 2024 Plan.

During the three months ended September 28, 2024, the Company recorded restructuring charges of $0.2 million related to the Fiscal 2024 Plan and benefits of $0.2 million related to the Fiscal 2023 Plan.

As of December 27, 2025, our total restructuring accrual was $2.1 million.

During the three and six months ended December 27, 2025, the Company recorded restructuring benefits of $0.1 million and $0.4 million, respectively, related to the Fiscal 2024 Plan.

During the three and six months ended December 28, 2024, the Company recorded restructuring charges of $1.2 million and $1.4 million, respectively, related to the Fiscal 2024 Plan.

During the six months ended December 27, 2024, the Company recorded restructuring benefits of $0.2 million related to the Fiscal 2023 Plan.

We estimate future cash payments of $2.1 million under the Fiscal 2024 Plan, funded by operating cash flow.

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Loss on Convertible Note Extinguishment

During the three months ended September 27, 2025, the Company issued $100.9 million aggregate principal amount of 0.625% Senior Convertible Notes due 2031 (2031 Notes) to certain holders of the 1.625% Senior Convertible Notes (2026 Notes) in exchange for $97.5 million principal amount of the 2026 Notes.

This exchange transaction was accounted for as an extinguishment which resulted in the write-off of unamortized debt discount and issuance costs of $1.1 million on the extinguished notes.

Accrued interest of $0.7 million on the 2026 Notes was included in the exchange for the 2031 Notes.

During the three months ended December 27, 2025, the Company entered into separate privately-negotiated agreements with certain holders of its 1.625% Senior Convertible Notes due 2026 (2026 Notes).

The Company issued 7.9 million shares of its common stock in exchange for $103.5 million principal amount of the 2026 Notes.

This exchange transaction was accounted for as a debt extinguishment which resulted in the write-off of unamortized debt discount and issuance costs of $0.5 million on the extinguished notes.

The total loss from the exchange was $38.7 million recorded as Loss on convertible note extinguishment in the Consolidated Statements of Operations.

During the six months ended December 27, 2025, the Company entered into separate privately-negotiated agreements with certain holders of its 2026 Notes.

The Company issued 7.9 million shares of its common stock for $103.5 million principal amount of the 2026 Notes.

The Company also issued $100.9 million aggregate principal amount of 0.625% Senior Convertible Notes due 2031 (2031 Notes) to certain holders of the 2026 Notes in exchange for $97.5 million principal amount of the 2026 Notes.

These exchange transactions were accounted for as extinguishments which resulted in the write-off of unamortized debt discount and issuance costs of $1.6 million on the extinguished notes.

Accrued interest of $0.7 million on the 2026 Notes was included in the exchange for the 2031 Notes.

The total loss from the exchanges was $42.5 million recorded as Loss on convertible note extinguishment in the Consolidated Statements of Operations.

Refer to “Note 11.

Debt” for more information

Interest and other income, net

Interest and other income, net, was $1.3 million during the three months ended September 27, 2025 compared to $3.2 million during the same period a year ago.

This $1.9 million decrease was primarily driven by a decrease in interest income due to lower average cash balances and lower yields compared to the prior period.

Interest and other income, net, remained flat at $3.9 million during the three months ended December 27, 2025 and December 28, 2024, with increase in interest income during the current period due to higher cash balance largely offset by an unfavorable foreign exchange impact as the balance sheet hedging program provided a less favorable offset to the remeasurement of underlying foreign exchange exposures during the current period.

Interest and other income, net, was $5.2 million during the six months ended December 27, 2025 compared to $7.1 million during the same period a year ago.

This $1.9 million decrease was primarily driven by an unfavorable foreign exchange impact as the balance sheet hedging program provided a less favorable offset to the remeasurement of underlying foreign exchange exposures during the current period.

Interest Expense

Interest expense decreased by $0.1 million, or 1.3% during the three months ended September 27, 2025 compared to the same period a year ago.

This change was primarily driven by a decrease in the accretion of debt discount on the 2026 Notes as a result of the debt extinguishment.

Interest expense increased by $7.8 million, or 104.0% during the three months ended December 27, 2025 compared to the same period a year ago.

This increase was primarily a result of entering into the Term Loan B with high interest rate and additional amortization of debt issuance costs in the current period partially offset by a decrease in the accretion of debt discount on the 2026 Notes as a result of the debt extinguishments.

Interest expense increased by $7.7 million, or 51.3% during the six months ended December 27, 2025 compared to the same period a year ago.

Provision for Income Taxes

We recorded an income tax provision of $19.0 million and $9.0 million for the three months ended September 27, 2025 and September 28, 2024, respectively.

The income tax provision for the three months ended September 27, 2025 primarily relates to income tax in certain foreign jurisdictions based on our forecasted pre-tax income or loss and a $9.7 million provision related to a revaluation of our deferred tax assets due to a change in the German corporate income tax rate.

The income tax provision for the three months ended September 28, 2024, primarily relates to income tax in certain foreign jurisdictions based on our forecasted pre-tax income or loss.

The income tax provision recorded differs from the expected tax provision that would be calculated by applying the federal statutory rate to our income from continuing operations before taxes primarily due to changes in the valuation allowance for deferred tax assets attributable to our domestic and foreign income from continuing operations and the revaluation of our German deferred tax assets .

As of September 27, 2025, and June 28, 2025, our unrecognized tax benefits (net of Federal benefits) totaled $42.5 million and $42.4 million, respectively, and are included in deferred taxes and other non-current tax liabilities.

We had $3.4 million accrued for the payment of interest and penalties as of September 27, 2025.

We recorded an income tax provision of $9.7 million and $28.7 million for the three and six months ended December 27, 2025, respectively.

We recorded an income tax provision of $9.5 million and $18.5 million for the three and six months ended December 28, 2024, respectively.

The income tax provision for the three and six months ended December 27, 2025 and December 28, 2024, primarily relates to income tax in certain foreign jurisdictions based on our forecasted pre-tax income or loss.

The income tax provision for the six months ended December 27, 2025, also includes a $9.7 million provision related to a revaluation of our deferred tax assets due to a change in the German corporate income tax rate.

As of December 27, 2025 and June 28, 2025, our unrecognized tax benefits (net of Federal benefits) totaled $42.8 million and $42.4 million, respectively, and are included in deferred taxes and other non-current tax liabilities.

We had $3.6 million accrued for the payment of interest and penalties as of December 27, 2025.

The timing and resolution of income tax examinations are 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.

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

We have considered the provisions of OBBBA, which did not have a material impact on our tax provision this quarter.

Operating Segment Information

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

Three Months Ended

September 27, 2025 September 28, 2024 Change Percentage Change

Three Months Ended Six Months Ended

December 27, 2025 December 28, 2024 Change Percentage Change December 27, 2025 December 28, 2024 Change Percentage Change

Network and Service Enablement

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Gross margin 64.7 % 64.8 % 64.0 % 63.1 %

Operating income (loss) $ 16.3 $ (7.3) $ 23.6 (323.3) %

Operating income $ 45.4 $ 17.4 $ 28.0 160.9 % $ 61.7 $ 10.1 $ 51.6 510.9 %

Operating margin 15.6 % 8.7 % 12.2 % 2.8 %

Optical Security and Performance

Optical Security and Performance Products

Net revenue $ 77.8 $ 70.9 $ 6.9 9.7 % $ 160.9 $ 149.7 $ 11.2 7.5 %

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Network and Service Enablement

NSE net revenue increased by $56.6 million, or 35.5%, during the three months ended September 27, 2025 compared to the same period a year ago, primarily driven by higher volume in Lab and Production, Aerospace and Defense and Fiber and Access Solutions, partially offset by lower volume in Wireless.

NSE gross margin increased by 2.1 percentage points during the three months ended September 27, 2025 to 63.0% from 60.9% in the same period a year ago primarily due to higher volume and favorable product mix.

NSE operating margin increased by 12.1 percentage points during the three months ended September 27, 2025 to 7.5% from (4.6)% in the same period a year ago primarily due to the aforementioned increase in gross margin.

NSE net revenue increased by $91.6 million, or 45.8%, during the three months ended December 27, 2025 compared to the same period a year ago, primarily driven by higher volume in Lab and Production ($41.3 million contributed by our acquisition of Spirent’s HSE business), Fiber and Access Solutions and Aerospace and Defense ($21.1 million contributed by our acquisition of Inertial Labs), partially offset by lower volume in Wireless.

NSE net revenue increased by $148.2 million, or 41.2%, during the six months ended December 27, 2025 compared to the same period a year ago, primarily driven by higher volume in Lab and Production ($41.3 million contributed by our acquisition of Spirent’s HSE business), Aerospace and Defense ($39.8 million contributed by our acquisition of Inertial Labs) and Fiber and Access Solutions, partially offset by lower volume in Wireless.

NSE gross margin remained relatively flat with a decrease of 0.1 percentage points during the three months ended December 27, 2025 to 64.7% from 64.8% in the same period a year ago.

NSE gross margin increased by 0.9 percentage points during the six months ended December 27, 2025 to 64.0% from 63.1% in the same period a year ago primarily due to higher volume and favorable product mix.

NSE operating margin increased by 6.9 percentage points during the three months ended December 27, 2025 to 15.6% from 8.7% in the same period a year ago primarily due to higher volume resulting in operating leverage.

NSE operating margin increased by 9.4 percentage points during the six months ended December 27, 2025 to 12.2% from 2.8% in the same period a year ago primarily due to higher volume resulting in operating leverage.

Optical Security and Performance Products

OSP net revenue increased by $4.3 million, or 5.5%, during the three months ended September 27, 2025 compared to the same period a year ago.

OSP net revenue increased by $6.9 million, or 9.7%, during the three months ended December 27, 2025 compared to the same period a year ago.

This increase was primarily driven by Anti-Counterfeiting and Other revenues.

OSP gross margin decreased by 3.0 percentage points during the three months ended September 27, 2025 to 52.3% from 55.3% in the same period a year ago primarily due to unfavorable product mix.

OSP operating margin decreased by 2.5 percentage points during the three months ended September 27, 2025 to 37.1% from 39.6% in the same period a year ago primarily due to the aforementioned decrease in gross margin.

OSP net revenue increased by $11.2 million, or 7.5%, during the six months ended December 27, 2025 compared to the same period a year ago.

This increase was primarily driven by Anti-Counterfeiting and Other revenues.

OSP gross margin remained relatively flat with an increase of 0.2 percentage points during the three months ended December 27, 2025 to 50.8% from 50.6% in the same period a year ago.

OSP gross margin decreased by 1.5 percentage points during the six months ended December 27, 2025 to 51.6% from 53.1% in the same period a year ago primarily due to unfavorable product mix.

OSP operating margin increased by 1.0 percentage points during the three months ended December 27, 2025 to 33.4% from 32.4% in the same period a year ago primarily due to higher volume.

OSP operating margin decreased by 0.9 percentage points during the six months ended December 27, 2025 to 35.3% from 36.2% in the same period a year ago primarily due to the aforementioned decrease in gross margin.

Liquidity and Capital Resources

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• Possible investments or acquisitions of complementary businesses, products or technologies;

• Principal payment obligations of our 1.625% Senior Convertible Notes due 2026, our 3.75% Senior Notes due 2029 and 0.625% Senior Convertible Notes due 2031 (together the “Notes”), Term Loan B Facility maturing in 2032 and covenants that restrict our debt level and credit facility capacity;

• Issuance or repurchase of debt which may include open market purchases of our 2026 Notes, 2029 Notes and/or 2031 Notes prior to their maturity and repayment of Term Loan B facility maturing 2032;

• Principal payment obligations of our 1.625% Senior Convertible Notes due 2026, our 3.75% Senior Notes due 2029 and 0.625% Senior Convertible Notes due 2031 (together the “Notes”), Term Loan B maturing in 2032 and covenants that restrict our debt level and credit facility capacity;

• Issuance or repurchase of debt which may include open market purchases of the Notes prior to their maturity and prepayment of Term Loan B;

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

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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 reported as a separate component of stockholders’ equity.

As of September 27, 2025, U.S.

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

As of December 27, 2025, U.S.

subsidiaries owned approximately 53.9% of our cash and cash equivalents, short-term investments and restricted cash.

As of September 27, 2025, the majority of our cash investments have maturities of 90 days or less and are of high credit quality.

As of December 27, 2025, the majority of our cash investments have maturities of 90 days or less and are of high credit quality.

Nonetheless we could realize investment losses under adverse market conditions.

During the three months ended September 27, 2025, we have not realized material investment losses but we can provide no assurance that the value or liquidity of our investments will not be impacted by adverse conditions in the financial markets.

During the three months ended December 27, 2025, we have not realized material investment losses but we can provide no assurance that the value or liquidity of our investments will not be impacted by adverse conditions in the financial markets.

In addition, we maintain cash balances in operating accounts with third-party financial institutions.

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On December 30, 2021, we entered into a credit agreement (the Credit Agreement) with Wells Fargo Bank, National Association (Wells Fargo), as administrative agent, and other lender-related parties.

The Credit Agreement provides for a senior secured asset-based revolving credit facility in a maximum aggregate amount of $300.0 million and matures on December 30, 2026.

The Credit Agreement provides for a senior secured asset-based revolving credit facility.

On October 16, 2025, we amended the Credit Agreement to reduce the commitment from a maximum aggregate amount of $300.0 million to $200.0 million to be in line with borrowing base availability and extend the maturity from December 30, 2026 to October 16, 2030.

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.

On October 16, 2025, we amended the Credit Agreement to reduce the commitment to $200 million to be in line with borrowing base availability and extend the maturity to October 2030.

As of September 27, 2025, we had no borrowings under this facility and our available borrowing capacity was approximately $181.0 million, net of outstanding standby letters of credit of $3.8 million.

As of December 27, 2025, we had no borrowings under this facility and our available borrowing capacity was approximately $183.7 million, net of outstanding standby letters of credit of $3.8 million.

Refer to “Note 11.

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On August 20, 2025, the Company issued $100.9 million aggregate principal amount of the 2031 Notes in exchange for $97.5 million principal amount of the 2026 Notes and issued and sold $149.1 million aggregate principal amount of the 2031 Notes.

The Company intends to use the proceeds to retire the remaining principal amount of the 2026 Notes upon maturity on March 15, 2026.

Concurrent with this transaction, the Company repurchased and subsequently retired 2.7 million shares of its common stock for $30.0 million under the 2022 Repurchase Plan.

On December 22, 2025, the Company settled $103.5 million principal amount of the 2026 Notes in exchange for 7.9 million shares of its common stock.

The 2026 Notes became convertible effective December 15, 2025.

On January 12, 2026, the Company delivered notification that upon conversion from note holders, the principal amount will be paid in cash with the remaining amount settled with its shares of common stock.

Refer to “Note 11.

Debt” for more information.

On October 16, 2025, we entered into a Term Loan Credit Agreement with Wells Fargo, as administrative agent, and certain lender-related parties.

The Term Loan Credit Agreement provides for senior secured $600 million maturing on October 16, 2032.

The proceeds from the Term Loan Credit Agreement were used to finance a portion of the acquisition of Spirent’s high-speed ethernet, network security and channel emulation testing business from Keysight Technologies, Inc., acquisition related expenses and will be used for general corporate purposes.

Refer to “Note 20.

Subsequent Events” for more information.

Cash Flows for the Three Months Ended September 27, 2025

As of September 27, 2025, our combined balance of cash and cash equivalents and restricted cash increased by $120.0 million to $552.1 million from $432.1 million as of June 28, 2025.

During the three months ended September 27, 2025, Cash provided by operating activities was $31.0 million, consisting of net loss of $21.4 million adjusted for non-cash charges (e.g., depreciation, amortization, stock-based compensation and other non-cash items) totaling $62.3 million, including changes in deferred tax balances, and changes in operating assets and liabilities that used $9.9 million.

Changes in our operating assets and liabilities related to an increase in inventory of $11.6 million related to demand changes, a decrease in deferred revenue of $10.7 million due to timing of support billings and project acceptances, a decrease in accrued payroll and related expenses of $9.1 million due primarily to variable pay and timing of payroll, an increase in other current and non-current assets of $0.5 million and a decrease in accounts payable of $0.5 million.

These were partially offset by a decrease in accounts receivable of $17.4 million due to collections outpacing billings, an increase in accrued expenses and other current and non-current liabilities of $4.3 million and an increase in income taxes payable of $0.8 million.

During the three months ended September 27, 2025, Cash used in investing activities was $8.3 million, primarily resulting from $8.5 million used for capital expenditures, $0.7 million used for the acquisition of Inertial Labs partially offset by $0.9 million in proceeds from the sale of assets.

During the three months ended September 27, 2025, Cash provided by financing activities was $97.7 million, primarily resulting from $149.1 million in proceeds from the issuance of the 2031 Notes and $2.7 million in proceeds from the issuance of common stock under our employee stock purchase plan.

These were partially offset by $30.0 million cash paid to repurchase common stock under our share repurchase program, $16.2 million in withholding tax payments on the vesting of restricted stock and performance-based awards and $7.8 million of debt issuance costs paid in the period.

On October 16, 2025, the Company entered into a Term Loan Credit Agreement with Wells Fargo, as administrative agent, and certain lender-related parties.

The Term Loan Credit Agreement provides for senior secured term loan of $600 million maturing on October 16, 2032.

The proceeds from the term loans under the Term Loan Credit Agreement were used to finance a portion of the acquisition of Spirent’s HSE and CE business, acquisition related expenses and will be used for general corporate purposes.

On January 5, 2026, the Company prepaid $100.0 million of the term loans under the Term Loan Credit Agreement.

Contingent Consideration

As of December 27, 2025, the fair value of the contingent consideration liability for Inertial Labs was $139.1 million with $72.5 million and $66.6 million included in Other current liabilities and Other non-current liabilities, respectively, on the Consolidated Balance Sheets.

The Company expects to pay the current portion of the contingent consideration liability in the third quarter of fiscal 2026.

Cash Flows for the Six Months Ended December 27, 2025

As of December 27, 2025, our combined balance of cash and cash equivalents and restricted cash increased by $344.0 million to $776.1 million from $432.1 million as of June 28, 2025.

During the six months ended December 27, 2025, Cash provided by operating activities was $73.5 million, consisting of net loss of $69.5 million adjusted for non-cash charges (e.g., depreciation, amortization, stock-based compensation and other non-cash items) totaling $162.9 million, including changes in deferred tax balances, and changes in operating assets and liabilities that used $19.9 million.

Changes in our operating assets and liabilities related to an increase in inventory of $24.7 million related to demand changes, an increase in accounts receivable of $24.1 million due to billings outpacing collections, a decrease in deferred revenue of $17.0 million, excluding the impact of deferred revenue from the acquisition of Spirent’s HSE and CE business, due to timing of support billings and project acceptances and an increase in other current and non-current assets of $5.3 million.

These were partially offset by an increase in accounts payable of $23.9 million, an increase in accrued payroll and related expenses of $15.8 million due primarily to variable pay and timing of payroll, an increase in accrued expenses and other current and non-current liabilities of $9.6 million and an increase in income taxes payable of $1.9 million.

During the six months ended December 27, 2025, Cash used in investing activities was $412.6 million, primarily resulting from $399.3 million used for the acquisition of Spirent’s HSE and CE business, $14.1 million used for capital expenditures and $0.7 million used for the acquisition of Inertial Labs partially offset by $1.5 million in proceeds from the sale of assets.

During the six months ended December 27, 2025, Cash provided by financing activities was $680.6 million, primarily resulting from $600 million in proceeds from the issuance of a Term Loan B, $149.1 million in proceeds from the issuance of the 2031 Notes and $2.7 million in proceeds from the issuance of common stock under our employee stock purchase plan.

These were partially offset by $30.0 million cash paid to repurchase common stock under our share repurchase program, $22.6 million of debt issuance costs paid in the period and $18.5 million in withholding tax payments on the vesting of restricted stock and performance-based awards.

Share Repurchase Program

During the three months ended September 27, 2025, we repurchased and subsequently retired 2.7 million shares of our common stock for $30.0 million pursuant to our 2022 Repurchase Plan.

As of September 27, 2025, the Company had remaining authorization of $168.4 million for future share repurchases under the 2022 Repurchase Plan.

During the six months ended December 27, 2025, we repurchased and subsequently retired 2.7 million shares of our common stock for $30.0 million pursuant to our 2022 Repurchase Plan.

As of December 27, 2025, the Company had remaining authorization of $168.4 million for future share repurchases under the 2022 Repurchase Plan.

Refer to “Note 15.

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Contractual Obligations

There were no material changes to our existing contractual commitments during the first quarter of fiscal 2026.

There were no material changes to our existing contractual commitments during the second quarter of fiscal 2026.

Off-Balance Sheet Arrangements

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and India plans were fully funded while the German plans, which were initially established as “pay-as-you-go” plans, are unfunded.

As of September 27, 2025, our pension plans were under-funded by $51.2 million since the post-retirement benefit obligation (PBO) exceeded the fair value of plan assets.

As of December 27, 2025, our pension plans were under-funded by $50.9 million since the post-retirement benefit obligation (PBO) exceeded the fair value of plan assets.

Pension plan assets are managed by external third parties and we monitor the performance of our investment managers.

As of September 27, 2025, the fair value of plan assets had decreased approximately 5.0% since June 28, 2025, our most recent fiscal year end.

As of December 27, 2025, the fair value of plan assets had increased approximately 1.2% since June 28, 2025, our most recent fiscal year end.

We are also responsible for the non-pension PBO assumed from a past acquisition of $0.3 million.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis