Item 8. Financial Statements and Supplementary Data
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Viavi Solutions Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Viavi Solutions Inc. and its subsidiaries (the "Company") as of June 27, 2026 and June 28, 2025, and the related consolidated statements of operations, of comprehensive (loss) income, of stockholders’ equity and of cash flows for each of the three years in the period ended June 27, 2026, including the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of June 27, 2026, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 27, 2026 and June 28, 2025, and the results of its operations and its cash flows for each of the three years in the period ended June 27, 2026 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 27, 2026, based on criteria established in I nternal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Revenue Recognition - Network and Service Enablement Reportable Segment
As described in Notes 1 and 19 to the consolidated financial statements, the Company had $1,518.3 million of total net revenue for the year ended June 27, 2026, of which $1,182.9 million related to the Network and Service Enablement reportable segment. Revenue is recognized at the point in time control is transferred to the customer. For hardware sales, transfer of control to the customer typically occurs at the point the product is shipped or delivered to the customer’s designated location. For software license sales, transfer of control to the customer typically occurs upon shipment, electronic delivery, or when the software is available for download by the customer. For sales of implementation service and solution contracts or in instances where software is sold along with essential installation services, transfer of control occurs and revenue is typically recognized upon customer acceptance.
The principal consideration for our determination that performing procedures relating to revenue recognition for the Network and Service Enablement reportable segment is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company’s revenue recognition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the recognition of revenue for the Network and Service Enablement reportable segment. These procedures also included, among others, for the Network and Service Enablement reportable segment (i) testing the revenue recognized, on a sample basis, by obtaining and inspecting source documents, such as contracts, invoices, evidence of transfer of control, and payment receipts, and recalculating revenue recognized; (ii) confirming outstanding customer invoice balances as of June 27, 2026, on a sample basis, and, for confirmations not returned, obtaining and inspecting source documents, such as contracts, invoices, evidence of transfer of control, subsequent payment receipts, and other source documents to support collectability of outstanding customer invoice balances; (iii) testing the issuance of credit memos, on a sample basis, by obtaining and inspecting source documents, such as credit memos, original invoices, and re-issued invoices; and (iv) testing the timing of revenue recognition, on a sample basis, for revenue transactions that occurred near period end by obtaining and inspecting source documents, such as invoices, evidence of transfer of control, and payment receipts.
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Acquisition of Spirent Communications plc’s High-speed Ethernet, Network Security and Channel Emulation Testing Business – Valuation of Customer Relationships and Certain Developed Technology
As described in Note 5 to the consolidated financial statements, on October 16, 2025, the Company acquired Spirent Communications plc’s high-speed ethernet, network security and channel emulation testing business (collectively, the HSE and CE business). The total purchase consideration was $399.3 million. Of the identified intangible assets acquired, management recorded $162.3 million of customer relationships and $134.8 million of developed technology, a significant portion of which relates to certain developed technology. Management valued customer relationships using the multi-period excess earnings method and valued developed technology using the relief-from-royalty method. Management’s significant assumptions related to customer relationships included projected revenues, projected expenses, contributory asset charges, discount rate, income tax rate, and customer attrition rate. Management’s significant assumptions related to developed technology included projected revenues, royalty rate, discount rate, income tax rate, and technology obsolescence rate.
The principal considerations for our determination that performing procedures relating to the valuation of customer relationships and certain developed technology acquired in the acquisition of the HSE and CE business is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of customer relationships and certain developed technology acquired; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to projected revenues, projected expenses, contributory asset charges, discount rate, and customer attrition rate for customer relationships and projected revenues, royalty rate, discount rate, and technology obsolescence rate for certain developed technology; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of customer relationships and certain developed technology acquired. These procedures also included, among others (i) reading the purchase agreement; (ii) testing management’s process for developing the fair value estimate of customer relationships and certain developed technology acquired; (iii) evaluating the appropriateness of the multi-period excess earnings and relief-from-royalty methods used by management; (iv) testing the completeness and accuracy of the underlying data used in the multi-period excess earnings and relief-from-royalty methods; and (v) evaluating the reasonableness of the significant assumptions used by management related to projected revenues, projected expenses, contributory asset charges, discount rate, and customer attrition rate for customer relationships and projected revenues, royalty rate, discount rate, and technology obsolescence rate for certain developed technology. Evaluating management’s assumptions related to projected revenues and projected expenses for customer relationships and projected revenues for certain developed technology involved considering (i) the current and past performance of the HSE and CE business; (ii) the consistency with external market and industry data; and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the multi-period excess earnings and relief-from-royalty methods and (ii) the reasonableness of the contributory asset charges, discount rate, and customer attrition rate assumptions for customer relationships and the royalty rate, discount rate, and technology obsolescence rate assumptions for certain developed technology.
/s/ PricewaterhouseCoopers LLP
Phoenix, Arizona
August 13, 2026
We have served as the Company’s auditor since 2005.
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VIAVI SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
Years Ended
June 27, 2026 June 28, 2025 June 29, 2024
Revenues:
Product revenue $ 1,324.6 $ 912.0 $ 834.8
Service revenue 193.7 172.3 165.6
Total net revenue 1,518.3 1,084.3 1,000.4
Cost of revenues:
Product cost of revenue 526.7 366.2 335.2
Service cost of revenue 70.8 77.5 75.5
Amortization of acquired technologies 45.4 19.5 13.8
Total cost of revenues 642.9 463.2 424.5
Gross profit 875.4 621.1 575.9
Operating expenses:
Research and development 262.7 208.7 201.9
Selling, general and administrative 469.2 349.4 333.3
Amortization of other intangibles 22.5 4.8 6.3
Restructuring and related charges 15.9 0.7 13.6
Total operating expenses 770.3 563.6 555.1
Income from operations 105.1 57.5 20.8
Loss on debt extinguishment (Note 11) ( 56.7 ) — —
Interest and other income, net 15.3 11.1 21.7
Interest expense ( 47.4 ) ( 30.0 ) ( 30.9 )
Income before income taxes and equity investment earnings 16.3 38.6 11.6
Provision for income taxes 47.5 4.4 37.4
Equity investment earnings 0.8 0.6 —
Net (loss) income $ ( 30.4 ) $ 34.8 $ ( 25.8 )
Net (loss) income per share:
Basic $ ( 0.13 ) $ 0.16 $ ( 0.12 )
Diluted $ ( 0.13 ) $ 0.15 $ ( 0.12 )
Shares used in per-share calculations:
Basic 229.5 222.5 222.6
Diluted 229.5 225.7 222.6
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
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VIAVI SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in millions)
Years Ended
June 27, 2026 June 28, 2025 June 29, 2024
Net (loss) income $ ( 30.4 ) $ 34.8 $ ( 25.8 )
Other comprehensive (loss) income:
Net change in cumulative translation adjustment, net of tax ( 7.4 ) 33.9 ( 6.0 )
Net change in defined benefit obligation, net of tax:
Unrealized actuarial gains (losses) arising during period 1.0 0.1 ( 2.1 )
Amortization of actuarial losses 0.2 0.2 0.1
Net change in accumulated other comprehensive (loss) income ( 6.2 ) 34.2 ( 8.0 )
Comprehensive (loss) income $ ( 36.6 ) $ 69.0 $ ( 33.8 )
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
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VIAVI SOLUTIONS INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except share and par value data)
June 27, 2026 June 28, 2025
ASSETS
Current assets:
Cash and cash equivalents $ 647.8 $ 423.6
Short-term investments 2.0 1.7
Restricted cash 6.9 3.7
Accounts receivable, net 351.3 261.0
Inventories, net 155.3 117.9
Prepayments and other current assets 93.2 77.3
Total current assets 1,256.5 885.2
Property, plant and equipment, net 224.5 231.9
Goodwill, net 700.7 595.7
Intangibles, net 377.6 131.6
Deferred income taxes 74.5 87.2
Other non-current assets 71.8 62.2
Total assets $ 2,705.6 $ 1,993.8
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 92.2 $ 68.8
Accrued payroll and related expenses 98.4 63.6
Deferred revenue 101.9 74.1
Accrued expenses 27.3 28.7
Short-term debt 244.8 246.2
Other current liabilities 115.9 108.3
Total current liabilities 680.5 589.7
Long-term debt 397.1 396.3
Other non-current liabilities 179.5 227.6
Total liabilities 1,257.1 1,213.6
Commitments and contingencies (Note 18)
Stockholders’ equity:
Preferred stock, $ 0.001 par value; 1 million shares authorized, no shares issued or outstanding at June 27, 2026 and June 28, 2025
— —
Common stock, $ 0.001 par value; 1 billion shares authorized; 247 million shares at June 27, 2026 and 223 million shares at June 28, 2025, issued and outstanding
0.2 0.2
Additional paid-in capital 71,252.8 70,517.9
Accumulated deficit ( 69,688.5 ) ( 69,628.1 )
Accumulated other comprehensive loss ( 116.0 ) ( 109.8 )
Total stockholders’ equity 1,448.5 780.2
Total liabilities and stockholders’ equity $ 2,705.6 $ 1,993.8
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
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VIAVI SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Years Ended
June 27, 2026 June 28, 2025 June 29, 2024
OPERATING ACTIVITIES:
Net (loss) income $ ( 30.4 ) $ 34.8 $ ( 25.8 )
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation expense 40.4 38.4 38.6
Amortization of acquired technologies and other intangibles 67.9 24.3 20.1
Stock-based compensation 55.4 53.1 49.4
Amortization of debt issuance costs and accretion of debt discount 5.8 7.3 7.5
Net change in fair value of contingent liabilities 33.0 ( 8.3 ) ( 9.5 )
Loss on debt extinguishment 56.7 — —
Deferred taxes, net 10.6 ( 28.4 ) 0.3
Amortization of acquisition related inventory step-up 6.1 4.3 —
Restructuring 15.9 0.7 13.6
Other 9.0 ( 6.2 ) 5.5
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable ( 94.9 ) ( 34.1 ) 13.9
Inventories ( 49.0 ) ( 7.5 ) 10.5
Other current and non-currents assets ( 21.7 ) ( 4.0 ) ( 2.1 )
Accounts payable 24.0 14.6 3.2
Income taxes payable 2.7 ( 6.3 ) 1.6
Deferred revenue, current and non-current 7.9 7.9 ( 8.8 )
Accrued payroll and related expenses 34.9 12.7 ( 4.6 )
Accrued expenses and other current and non-current liabilities ( 60.4 ) ( 13.5 ) 3.0
Net cash provided by operating activities 113.9 89.8 116.4
INVESTING ACTIVITIES:
Purchases of short-term investments ( 125.0 ) ( 148.8 ) ( 225.1 )
Maturities of short-term investments 125.3 167.7 219.6
Acquisitions, net of cash acquired and holdbacks ( 399.3 ) ( 120.9 ) —
Purchase price adjustment related to business acquisition ( 0.7 ) ( 0.7 ) —
Capital expenditures ( 31.1 ) ( 27.8 ) ( 19.5 )
Proceeds from the sale of assets 4.0 5.1 3.4
Other investing activities — ( 3.0 ) —
Net cash used in investing activities ( 426.8 ) ( 128.4 ) ( 21.6 )
FINANCING ACTIVITIES:
Proceeds from issuance of debt 749.1 — —
Proceeds from issuance of common stock - public offering 575.0 — —
Repayment of debt ( 649.0 ) — ( 96.4 )
Payment of debt and equity issuance costs ( 40.7 ) — —
Repurchase and retirement of common stock ( 30.0 ) ( 16.4 ) ( 20.0 )
Payment of financing obligations ( 0.3 ) ( 0.2 ) ( 0.2 )
Cash paid to third parties in convertible note extinguishment ( 1.0 ) — —
Proceeds from exercise of employee stock purchase plan 6.5 6.0 6.3
Withholding tax payment on vesting of restricted stock awards and performance-based awards ( 24.9 ) ( 13.2 ) ( 11.1 )
Payment of acquisition related contingent consideration and obligations ( 43.7 ) — ( 4.3 )
Other financing activities — 0.2 —
Net cash provided by (used in) financing activities 541.0 ( 23.6 ) ( 125.7 )
Effect of exchange rates on cash, cash equivalents and restricted cash ( 0.4 ) 12.5 ( 2.9 )
Net increase (decrease) in cash, cash equivalents and restricted cash 227.7 ( 49.7 ) ( 33.8 )
Cash, cash equivalents and restricted cash at beginning of period (1)
432.1 481.8 515.6
Cash, cash equivalents and restricted cash at end of period (2)
$ 659.8 $ 432.1 $ 481.8
Supplemental disclosure of cash flow information
Cash paid for interest $ 38.7 $ 22.9 $ 23.9
Cash paid for income taxes, net of refunds $ 23.8 $ 29.5 $ 30.9
(1) These amounts include both current and non-current balances of restricted cash totaling $ 8.5 million, $ 10.5 million and $ 9.1 million as of June 28, 2025, June 29, 2024, and July 1, 2023, respectively.
(2) These amounts include both current and non-current balances of restricted cash totaling $ 12.0 million, $ 8.5 million and $ 10.5 million as of June 27, 2026, June 28, 2025 and June 29, 2024, respectively.
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
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VIAVI SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions)
Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total
Shares Amount
Balance at July 1, 2023 221.5 $ 0.2 $ 70,427.3 $ ( 69,600.7 ) $ ( 136.0 ) $ 690.8
Net loss — — — ( 25.8 ) — ( 25.8 )
Other comprehensive loss — — — — ( 8.0 ) ( 8.0 )
Shares issued under employee stock plans, net of tax effects 2.7 — ( 4.8 ) — — ( 4.8 )
Stock-based compensation — — 49.4 — — 49.4
Repurchase of common stock ( 2.3 ) — — ( 20.0 ) — ( 20.0 )
Balance at June 29, 2024 221.9 $ 0.2 $ 70,471.9 $ ( 69,646.5 ) $ ( 144.0 ) $ 681.6
Net income — — — 34.8 — 34.8
Other comprehensive income — — — — 34.2 34.2
Shares issued under employee stock plans, net of tax effects 3.3 — ( 7.2 ) — — ( 7.2 )
Stock-based compensation — — 52.9 — — 52.9
Repurchase of common stock ( 2.0 ) — 0.3 ( 16.4 ) — ( 16.1 )
Balance at June 28, 2025 223.2 $ 0.2 $ 70,517.9 $ ( 69,628.1 ) $ ( 109.8 ) $ 780.2
Net loss — — — ( 30.4 ) — ( 30.4 )
Issuance of common stock - public offering, net of offering costs 12.8 — 557.1 — — 557.1
Other comprehensive loss — — — — ( 6.2 ) ( 6.2 )
Shares issued under employee stock plans, net of tax effects 3.7 — ( 18.3 ) — — ( 18.3 )
Stock-based compensation — — 55.4 — — 55.4
Repurchase of common stock ( 2.7 ) — — ( 30.0 ) — ( 30.0 )
Convertible note extinguishment (Note 11)
9.7 — 140.7 — — 140.7
Balance at June 27, 2026 246.7 $ 0.2 $ 71,252.8 $ ( 69,688.5 ) $ ( 116.0 ) $ 1,448.5
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
Description of Business
Viavi Solutions, Inc. (VIAVI, also referred to as the Company, we, our and us), is a global leader in test and measurement and optical technologies. Our test and measurement, and resilient position, navigation and timing (PNT) 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.
Fiscal Years
The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to June 30th. The Company’s 2026, 2025 and 2024 fiscal years were 52-week years ending on June 27, 2026, June 28, 2025, and June 29, 2024, respectively.
Principles of Consolidation
The Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and include the Company and its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated.
Use of Estimates
The preparation of the Company’s Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements, the reported amount of net revenue and expenses and the disclosure of commitments and contingencies during the reporting periods. Estimates are based on historical factors, current circumstances and the experience and judgment of management. Under changed conditions the Company’s reported financial positions or results of operations may be materially impacted when using different estimates and assumptions, particularly with respect to significant accounting policies. If estimates or assumptions differ from actual results, subsequent periods are adjusted to reflect more readily available information.
Cash and Cash Equivalents
The Company considers highly liquid instruments such as treasury bills, commercial paper and other money market instruments with original maturities of 90 days or less at the time of purchase to be cash equivalents.
Restricted Cash
At June 27, 2026 and June 28, 2025, the Company’s short-term restricted cash balances were $ 6.9 million and $ 3.7 million, respectively. The Company’s long-term restricted cash balances, included in Other non-current assets on the Consolidated Balance Sheets, were $ 5.1 million and $ 4.9 million as of June 27, 2026 and June 28, 2025, respectively. These balances primarily include interest-bearing investments in bank deposit and money market funds which act as collateral supporting the issuance of standby letters of credit and performance bonds for the benefit of third parties. Refer to “Note 18. Commitments and Contingencies” for more information.
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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Investments
The Company’s investments in debt securities are classified as available for sale investments, recorded at fair value. The cost of securities sold is based on the specific identification method. Unrealized gains and losses resulting from changes in fair value on available-for-sale investments, net of tax, are reported as a component of Accumulated other comprehensive loss on the Consolidated Balance Sheets.
The Company periodically reviews investments in debt securities for impairment. If a debt security’s fair value is below amortized cost and the Company either intends to sell the security or it is more likely than not that the Company will be required to sell the security before its anticipated recovery, the Company records an other-than-temporary impairment charge to current earnings for the entire amount of the impairment. If a debt security’s fair value is below amortized cost and the Company does not expect to recover the entire amortized cost of the security, the Company separates the other-than-temporary impairment into: (i) the portion of the loss related to credit factors, or the credit loss portion; and, (ii) the portion of the loss that is not related to credit factors, or the non-credit loss portion. The credit loss portion is recorded as an allowance to credit loss through Interest and other income, net, in the Consolidated Statements of Operations and the non-credit loss portion is recorded as a component of Accumulated other comprehensive loss on the Consolidated Balance Sheets.
The Company’s investments also include fixed term deposits with interest earned recorded as a component of Interest and other income, net, in the Consolidated Statements of Operations.
Equity Investments
The Company accounts for investments in entities for which it does not have a controlling financial interest or majority voting interest but has a significant influence over operating and financial policies, if any, under the equity method of accounting. Earnings and losses from such investments are recorded as Equity investment earnings in the Consolidated Statements of Operations.
Fair Value of Financial Instruments
Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. There is an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the most observable inputs be used when available. Observable inputs are inputs which market participants would use in valuing an asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs which reflect the assumptions market participants would use in valuing an asset or liability.
The three levels of inputs that may be used to measure fair value are:
• Level 1 : includes financial instruments for which quoted market prices for identical instruments are available in active markets. Level 1 assets of the Company include money market funds, U.S. Treasury securities and marketable equity securities as they are traded with sufficient volume and frequency of transactions.
• Level 2 : includes financial instruments for which the valuations are based on quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. Level 2 instruments of the Company include asset-backed securities, foreign currency forward contracts and debt. To estimate their fair value, the Company utilizes pricing models based on market data. The significant inputs for the valuation model usually include benchmark yields, reported trades, broker and dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data, and industry and economic events.
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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
• Level 3 : includes financial instruments for which fair value is derived from valuation-based inputs, that are unobservable and significant to the overall fair value measurement. As of June 27, 2026 and June 28, 2025, the Company’s Level 3 assets consist of an investment in a non-marketable equity security in a privately held company. We measure the non-marketable equity security under the Measurement Alternative at cost minus impairment, if any, adjusted for observable price changes in orderly transactions for an identical or similar investment in the same issuer. The Company’s Level 3 liabilities as of June 27, 2026 and June 28, 2025 consist of contingent purchase consideration liabilities related to business acquisitions. The fair value of such 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 certain liabilities is derived using the estimated probability of success of achieving the earn-out milestones discounted to present value. The fair value of contingent consideration liabilities is remeasured at each reporting period at the estimated fair value based on the inputs on the date of remeasurement, with the change in fair value recognized as a component of Selling, general and administrative (SG&A) expense in the Consolidated Statements of Operations.
Inventories
The Company’s inventory is valued at standard cost, which approximates actual cost computed on a first-in, first-out basis, not in excess of net realizable value. On a quarterly basis, the Company assesses the value of its inventory and writes down those inventories determined to be obsolete or in excess of its forecasted usage to their market value. The Company’s estimates of realizable value are based upon management analysis and assumptions including, but not limited to, forecasted sales levels by product, expected product life cycle, product development plans and future demand requirements. The Company’s product line management personnel play a key role in its excess review process by providing updated sales forecasts, managing product transitions and working with manufacturing to minimize excess inventory. Differences between actual market conditions and customer demand to the Company’s forecasts, may create favorable or unfavorable inventory positions, and may result in additional inventory write-downs or higher than expected income from operations. The Company’s inventory amounts include material, labor and manufacturing overhead costs.
Leases
The Company determines if an arrangement is a lease or contains a lease at inception. Operating lease liabilities are recognized based on the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. If the rate implicit in the lease is not readily determinable for our operating leases, the Company uses an incremental borrowing rate based on information available at the commencement date to determine the present value of future lease payments. The lease term is the non-cancelable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that an option will be exercised. Operating right-of-use (ROU) assets are recognized at commencement based on the amount of the initial measurement of the lease liability. Operating ROU assets also include any lease payments made prior to lease commencement and exclude lease incentives. Lease expense is recognized on a straight-line basis over the lease term.
Operating ROU assets are included in Other non-current assets and lease liabilities are included in Other current liabilities and Other non-current liabilities on the Consolidated Balance Sheets. Lease and non-lease components for all leases are accounted for separately. The Company does not recognize ROU assets and lease liabilities for leases with a lease term of twelve months or less.
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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using a straight-line method, over the estimated useful lives of the assets: building and improvements 5 to 50 years; machinery and equipment 3 to 30 years; and furniture, fixtures, software and office equipment 2 to 10 years.
Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful lives of the asset or the remaining lease term.
Demonstration units are Company products used for demonstration purposes for existing and prospective customers and are amortized using the straight-line method. These assets are generally not intended to be sold and have an estimated useful life of 3 to 5 years.
Costs related to software acquired, developed or modified solely to meet the Company’s internal requirements and for which there are no substantive plans to market are capitalized in accordance with the authoritative guidance on accounting for the costs of computer software developed or obtained for internal use. Only costs incurred after the preliminary planning stage of the project and after management has authorized and committed funds to the project are eligible for capitalization. Costs capitalized for computer software developed or obtained for internal use are included in Property, plant and equipment, net, on the Consolidated Balance Sheets.
Business Combinations
The Company includes the results of operations of the businesses that it acquires from the acquisition date. In allocating the purchase price of a business combination, the Company records all assets acquired and liabilities assumed at fair value as of the date of acquisition, with the excess of the purchase price over the aggregate fair values recorded as goodwill. Additionally, any contingent consideration is recorded at fair value on the acquisition date and classified as a liability. Contingent consideration amounts expected to be paid within one year of the balance sheet date are included in Other current liabilities on the Consolidated Balance Sheets. Contingent consideration amounts expected to be paid more than one year after the balance sheet date are included in Other non-current liabilities on the Consolidated Balance Sheets.
The Company determines the estimated fair values after review and consideration of relevant information, including discounted cash flows, quoted market prices and estimates made by management. The fair value assigned to identifiable intangible assets acquired is based on estimates and assumptions made by management at the time of the acquisition. The Company adjusts the preliminary purchase price allocation, as necessary, during the measurement period of up to one year after the acquisition closing date as it obtains more information as to facts and circumstances existing as of the acquisition date.
Acquisition related costs are recognized separately from the business combination and are expensed as incurred.
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Goodwill
Goodwill represents the excess of the purchase price paid over the net fair value of assets acquired and liabilities assumed in a business combination. The Company tests goodwill for impairment at the reporting unit level at least annually, during the fourth quarter of each fiscal year, or more frequently if events or changes in circumstances indicate that the asset may be impaired.
The accounting guidance provides the Company with the option to perform a qualitative assessment to determine whether further impairment testing is necessary. The qualitative assessment considers events and circumstances that might indicate that a reporting unit’s fair value is less than its carry amount. These events and circumstances include, macro-economic conditions, such as a significant adverse change in the Company’s operating environment, industry or market considerations, entity-specific events such as increasing costs, declining financial performance, or loss of key personnel, or other events, such as the sale of a reporting unit, adverse regulatory developments or a sustained decrease in the Company’s stock price.
If it is determined, as a result of the qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative test is required. Otherwise, no further testing is required.
Under the quantitative test, the Company compares the fair value of a reporting unit to its carrying value. If the estimated fair value exceeds book value, goodwill is considered not to be impaired. However, if the fair value of the reporting unit is less than book value, then goodwill will be impaired by the amount that the carrying amount exceeds the fair value, not to exceed the carrying amount of the goodwill.
To estimate the fair value of each reporting unit, a combination of the income and market approach is used. The income approach uses discounted future cash flows in which sales, operating income and cash flow projections are based on assumptions driven by current economic conditions. Key assumptions used in the discounted future cash flow model include, but are not limited to, long-term annual growth rates, terminal growth rates, weighted average cost of capital and the Company’s effective tax rate.
The market approach utilizes the Guideline Public Company Method and Guideline Transaction Method to derive fair value. The Guideline Public Company Method determines the fair value of an entity based upon trading multiples calculated using market value of minority interests in publicly-traded companies that are similar to the subject company. The Guideline Transaction Method calculates the fair value of an entity by analyzing recent sales of comparable entities.
Refer to “Note 9. Goodwill” for more information.
Intangible Assets
In connection with the Company’s acquisitions, the Company generally recognizes assets for customer relationships, acquired developed technologies, patents, proprietary know-how, trade secrets, in-process research and development (IPR&D) and trademarks and trade names. Finite lived intangible assets are amortized using the straight-line method over the estimated economic useful lives of the assets, which is the period during which expected cash flows support the fair value of such intangible assets. Refer to “Note 10. Intangibles” for more information.
Long-lived Assets
Long-lived assets, including intangible assets and property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of any asset or asset group may not be recoverable. Such an evaluation is performed at the lowest identifiable level of cash flows independent of other assets. An impairment loss would be recognized when estimated undiscounted future cash flows generated from the assets are less than their carrying amount. Measurement of an impairment loss would be based on the excess of the carrying amount of the asset or asset group over its estimated fair value. Estimates of future cash flow require significant judgment based on anticipated future operating results, which are subject to variability and change.
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Losses from Involuntary Events and Insurance Recoveries
Assets destroyed or damaged as a result of involuntary events are written off or reduced to their salvage value. When recovery of all or a portion of property damage losses or other covered expenses through insurance proceeds is determined to be probable, a receivable is recorded and offsets the related loss or expense, not to exceed the amount of the recorded loss or expense. No gain is recognized until all contingencies related to the insurance claim have been resolved. Once contingencies are resolved, any gain is recorded as a component of Interest and other income, net, in the Consolidated Statements of Operations.
Pension and Other Post-retirement Benefits
The funded status of the Company’s retirement-related benefit plans is recognized on the Consolidated Balance Sheets. The funded status is measured as the difference between the fair value of plan assets and the benefit obligation at fiscal year end, the measurement date. For defined benefit pension plans, the benefit obligation is the projected benefit obligation (PBO) and for the non-pension post-retirement benefit plan the benefit obligation is the accumulated post-retirement benefit obligation (APBO). The PBO represents the actuarial present value of benefits expected to be paid upon its employees’ retirement. The APBO represents the actuarial present value of post-retirement benefits attributed to employee services already rendered. Unfunded or partially funded plans, with the benefit obligation exceeding the fair value of plan assets, are aggregated and recorded as a retirement and non-pension post-retirement benefit obligation equal to this excess. The current portion of the retirement-related benefit obligation represents the actuarial present value of benefits payable in the next 12 months in excess of the fair value of plan assets, measured on a plan-by-plan basis. This liability is recorded in Other current liabilities on the Consolidated Balance Sheets.
Net periodic pension cost is recorded in the Consolidated Statements of Operations and includes service cost, interest cost, expected return on plan assets, amortization of prior service cost or credit, and gains or losses previously recognized as a component of Accumulated other comprehensive loss on the Consolidated Balance Sheets. Service cost represents the actuarial present value of participant benefits attributed to services rendered by employees in the current year. Interest cost represents the time value of money cost associated with the passage of time. Gains or losses arise as a result of differences between actual experience and assumptions or as a result of changes in actuarial assumptions. Prior service cost or credit represents the cost of benefit improvements attributable to prior service granted in plan amendments. Gains or losses and prior service cost or credit not recognized as a component of net periodic pension cost in the Consolidated Statements of Operations are recognized as a component of Accumulated other comprehensive loss on the Consolidated Balance Sheets, net of tax. Those gains or losses and prior service cost or credit are subsequently recognized as a component of net periodic pension cost pursuant to the recognition and amortization provisions of the authoritative guidance.
The measurement of the benefit obligation and net periodic pension cost is based on the Company’s estimates and actuarial valuations provided by third-party actuaries and are approved by management. These valuations reflect the terms of the plans and use participant-specific information such as compensation, age and years of service, as well as certain assumptions, including estimates of discount rates, expected return on plan assets, rate of compensation increases and mortality rates. The Company evaluates these assumptions periodically but not less than annually. In estimating the expected return on plan assets, the Company considers historical returns on plan assets, diversification of plan investments, adjusted for forward-looking considerations, inflation assumptions and the impact of the active management of the plan’s invested assets.
The Company measures its benefit obligation and plan assets using the month-end date of June 30, which is closest to the Company’s fiscal year-end.
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Concentration of Credit and Other Risks
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, restricted cash, trade receivables and foreign currency forward contracts. The Company’s cash and cash equivalents and short-term investments are held in safekeeping by large, creditworthy financial institutions. The Company invests its excess cash primarily in institutional money market funds, short-term deposits and similar short duration high quality, investment grade instruments.
The Company has established guidelines relative to credit ratings, diversification and maturities that seek to maintain the safety and liquidity of these investments. The Company’s foreign exchange derivative instruments expose the Company to credit risk to the extent that the counterparties may be unable to meet the terms of the agreements. The Company seeks to mitigate such risk by limiting its counterparties to major financial institutions and by spreading such risk across several major financial institutions. Potential risk of loss with any one counterparty resulting from such risk is monitored by the Company on an ongoing basis.
The Company maintains an allowance for credit losses for estimated losses resulting from the inability of its customers to make required payments. When the Company becomes aware that a specific customer is unable to meet its financial obligations, the Company records a specific allowance to reflect the level of credit risk in the customer’s outstanding receivable balance. In addition, the Company records additional allowances based on certain percentages of aged receivable balances. These percentages consider a variety of factors including, but not limited to, current economic trends, historical payment and bad debt write-off experience. The Company classifies bad debt expenses as SG&A expense in the Consolidated Statements of Operations.
The Company is not able to predict changes in the financial stability of its customers. Any material changes in the financial status of any one customer or a group of customers could have a material adverse effect on the Company’s results of operations and financial condition. Although such losses have been within management’s expectations to date, there can be no assurance that such allowances will continue to be adequate. The Company has significant trade receivables concentrated in the telecommunications industry. While the Company’s allowance for credit losses balance is based on historical loss experience along with anticipated economic trends, unanticipated financial instability in the telecommunications industry could lead to higher than anticipated losses.
As of June 27, 2026 and June 28, 2025, there were no customer balances that represented 10% or more of the Company’s total accounts receivable, net.
During fiscal 2026, 2025 and 2024, one customer generated 10 % or more of total net revenues. Refer to “Note 19. Operating Segments and Geographic Information” for more information.
The Company relies on a limited number of suppliers and contract manufacturers for a number of key components and sub-assemblies contained in the Company’s products.
The Company generally uses a rolling twelve-month forecast based on anticipated product orders, customer forecasts, product order history and backlog to determine its materials requirements for any one period. Lead times for the parts and components that the Company orders may vary significantly and depend on factors such as the specific supplier, contract terms and demand for a component at any given time. If the forecast does not meet actual demand, the Company may have surplus or dearth of some materials and components, as well as excess inventory purchase commitments. The Company could experience reduced or delayed product shipments or incur additional inventory write-downs and cancellation charges or penalties, which may result in increased costs and have a material adverse impact on the Company’s results of operations.
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Foreign Currency Forward Contracts
The Company conducts its business and sells its products to customers primarily in North America, Europe, Asia and South America. In the normal course of business, the Company’s financial position is routinely subject to market risks associated with foreign currency rate fluctuations due to balance sheet positions in foreign currencies. The Company evaluates foreign exchange risks and utilizes foreign currency forward contracts to reduce such risks, hedging the gains or losses generated by the re-measurement of significant foreign currency-denominated monetary assets and liabilities. The fair value of these contracts is reflected as other current assets or liabilities and the change in fair value of these foreign currency forward contracts is recorded as gain or loss in the Consolidated Statements of Operations as a component of Interest and other income, net. The gain or loss from the change in fair value of these foreign currency forward contracts largely offsets the change in fair value of the foreign currency denominated monetary assets or liabilities, which is also recorded as a component of Interest and other income, net in the Consolidated Statements of Operations.
Foreign Currency Translation
The Company transacts business in various foreign currencies. In general, the functional currency of our non-US subsidiaries is the country’s local currency. Consequently, the assets and liabilities of non-U.S. subsidiaries are translated into U.S. dollars at exchange rates in effect at the balance sheet date, with the resulting translation adjustments directly recorded as a component of Accumulated other comprehensive loss on the Consolidated Balance Sheets. Income and expense accounts are translated at exchange rates from the prior month end, which are deemed to approximate the exchange rate when the income and expense is recognized. Gains and losses from re-measurement of monetary assets and liabilities that are denominated in currencies other than the respective functional currencies are included in the Consolidated Statements of Operations as a component of Interest and other income, net.
Revenue Recognition
The Company derives revenue from a diverse portfolio of network solutions and optical technology products and services, as follows:
• Products: Network and Service Enablement (NSE) products include instruments, microprobes and perpetual software licenses that support the development, production, maintenance and optimization of network systems. The Company’s Optical Security and Performance (OSP) products include proprietary pigments used for optical security and optical filters used in commercial, government and 3D sensing applications.
• Services: The Company also offers a range of product support and professional services, primarily in the NSE segment, designed to comprehensively address customer requirements. These include repair, calibration, extended warranty, software support, technical assistance, training and consulting services. Implementation services provided in conjunction with hardware or software solution projects include sale of the products along with project management, set-up and installation.
Steps of revenue recognition
The Company accounts for revenue in accordance with ASC 606: Revenue from Contracts with Customers , in which the following five steps are applied to recognize revenue:
1. Identify the contract with a customer: Generally, the Company considers customer purchase orders which, in some cases are governed by master sales or other purchase agreements, to be the customer contract. All of the following criteria must be met before the Company considers an agreement to qualify as a contract with a customer under the revenue standard: (i) it must be approved by all parties; (ii) each party’s rights regarding the goods and services to be transferred can be identified; (iii) the payment terms for the goods and services can be identified; (iv) the customer has the ability and intent to pay and collection of substantially all of the consideration is probable; and, (v) the agreement has commercial substance. The Company utilizes judgment to determine the customer’s ability and intent to pay, which is based upon various factors including the customer’s historical payment experience or credit and financial information and credit risk management measures implemented by the Company.
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2. Identify the performance obligations in the contract: The Company assesses whether each promised good or service is distinct for the purpose of identifying the various performance obligations in each contract. Promised goods and services are considered distinct provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer; and, (ii) the Company's promise to transfer the good or service to the customer is separately identifiable or distinct from other promises in the contract. The Company's performance obligations consist of a variety of products and services offerings, which include networking equipment; proprietary pigment, optical filters, proprietary software licenses; support and maintenance, which includes software and hardware support that extends beyond the Company's standard warranties; installation, professional and implementation services, and training.
Identifying and evaluating whether products and services are considered distinct performance obligations may require significant judgment particularly in NSE due to the nature of the product and service offerings. The Company may enter into contracts that involve a significant level of integration and interdependency between a software license and installation services. Judgment may be required to determine whether the software license is considered distinct in the context of the contract and accounted for separately, or not distinct in the context of the contract and accounted for together with the installation service.
3. Determine the transaction price: Transaction price reflects the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services to the customer. The Company’s contracts may include terms that could cause variability in the transaction price including rebates, sales returns, market incentives and volume discounts. Variable consideration is generally accounted for at the portfolio level and estimated based on historical information. If a contract includes a variable amount, the price adjustments are estimated at contract inception. In both cases, estimates are updated at the end of each reporting period as additional information becomes available.
4. Allocate the transaction price to performance obligations in the contract: If the contract contains a single performance obligation, the entire transaction price is allocated to that performance obligation. Many of the Company’s contracts include multiple performance obligations with a combination of distinct products and services, maintenance and support, professional services and/or training. Contracts may also include rights or options to acquire future products and/or services, which are accounted for as separate performance obligations by the Company, only if the right or option provides the customer with a material right that it would not receive without entering into the contract. For contracts with multiple performance obligations, the Company allocates the total transaction value to each distinct performance obligation based on relative standalone selling price (SSP). Judgment is required to determine the SSP for each distinct performance obligation. The best evidence of SSP is the observable price of a good or service when the Company sells that good or service separately under similar circumstances to similar customers. If a directly observable price is not available, the SSP must be estimated based on multiple factors including, but not limited to, historical pricing practices, internal costs and profit objectives, as well as overall market conditions.
5. Recognize revenue when (or as) performance obligations are satisfied: Revenue is recognized at the point in time control is transferred to the customer. For hardware sales, transfer of control to the customer typically occurs at the point the product is shipped or delivered to the customer’s designated location. For software license sales, transfer of control to the customer typically occurs upon shipment, electronic delivery, or when the software is available for download by the customer. For sales of implementation service and solution contracts or in instances where software is sold along with essential installation services, transfer of control occurs and revenue is typically recognized upon customer acceptance. In certain instances, acceptance is deemed to have occurred if all acceptance provisions lapse, or if the Company has evidence that all acceptance provisions will be, or have been, satisfied. For fixed-price support and extended warranty contracts, or certain software arrangements which provide customers with a right to access over a discrete period, control is deemed to transfer over time and revenue is recognized on a straight-line basis over the contract term due to the stand-ready nature of the performance obligation. Revenue from hardware repairs and calibration services outside of an extended warranty or support contract is recognized at the time of completion of the related service. For other professional services or time-based labor contracts, revenue is recognized as the Company performs the services and the customers receive and/or consume the benefits.
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Revenue policy and practical expedients
The following policy and practical expedient elections have been made by the Company under the revenue standard:
• Revenue-based taxes as assessed by governmental authorities have been excluded from the measurement of transaction price.
• Shipping and handling activities performed after the customer obtains control of the good are treated as activities to fulfill the promise (cost of fulfillment). Therefore, the Company does not evaluate whether the shipping and handling activities are promised services.
• Incremental costs of obtaining contracts that would have been recognized within one year or less are recognized as an expense when incurred. These costs are included in SG&A expense in the Consolidated Statements of Operations. The costs of obtaining contracts where the amortization period for recognition of the expense is beyond a year are capitalized and recognized over the revenue recognition period of the original contract.
• The portfolio approach is used for certain types of variable consideration for contracts with similar characteristics. The methodology is used when the effects on the financial statements of applying this guidance to the portfolio would not differ materially from applying this guidance to the individual contracts within that portfolio.
• If at contract inception, the expected period between the transfer of promised goods or services and payment is within one year or less, the Company forgoes adjustment for the impact of significant financing component for the contract.
Disaggregation of Revenue
The Company's revenue is presented on a disaggregated basis in the Consolidated Statements of Operations and in “Note 19. Operating Segments and Geographic Information.” This information includes a break-out of product and service revenue, revenue from reportable segments and revenue from each of the three geographic regions in which we operate.
Warranty
The Company provides reserves for the estimated costs of product warranties at the time revenue is recognized. Warranty cost estimates are based on historical experience of known product failure rates, use of materials to repair or replace defective products, and service delivery costs incurred in correcting product failures. In addition, from time to time, specific warranty accruals may be made if unforeseen technical problems arise.
Shipping and Handling Costs
The Company records costs related to shipping and handling of revenue in cost of sales for all periods presented.
Advertising Expense
The Company expenses advertising costs as incurred. Advertising costs totaled $ 2.5 million, $ 2.0 million and $ 1.3 million in fiscal 2026, 2025 and 2024, respectively.
Research and Development Expense
Costs related to research and development (R&D) primarily consist of labor and benefits, supplies, facilities, consulting and outside service fees. The authoritative guidance allows for capitalization of software development costs incurred after a product’s technological feasibility has been established until the product is available for general release to the public. The Company believes its software development process is completed concurrent with the establishment of technological feasibility. As such, software development costs have been expensed as incurred.
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Government Assistance
From time to time, the Company will receive government assistance in the form of grants and tax credits from government agencies in certain jurisdictions in which it operates. The Company applies International Accounting Standards 20 (IAS 20), Accounting for Government Grants and Disclosure of Government Assistance , by analogy when accounting for government assistance until Accounting Standards Update (ASU) 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities is adopted. Under IAS 20, grants are recognized when there is reasonable assurance the conditions of the grant will be met and the grant will be received. After initial recognition, government assistance is recognized in a manner consistent with the manner in which the Company recognizes the underlying costs in the Consolidated Statement of Operations for which the grant is intended to compensate. Government assistance related to assets will generally be deducted from the asset’s carrying value.
Stock-Based Compensation
The Company's stock-based compensation includes a combination of time-based restricted stock awards and performance-based awards, stock options, and an Employee Stock Purchase Plan (ESPP).
Restricted stock awards are granted without an exercise price and are converted to shares immediately upon vesting. When converted into shares upon vesting, shares equivalent in value to the minimum withholding taxes liability on the vested shares are withheld by the Company for the payment of such taxes. Time-based restricted stock awards will generally vest in annual installments over a period of three to four years subject to the employees’ continuing service to the Company.
The Company's performance-based awards may include performance conditions, market conditions, time-based service conditions or a combination thereof and are generally expected to vest over one to four years . The actual number of shares awarded upon vesting of performance-based grants may vary from the target shares depending upon the achievement of the relevant performance or market-based conditions. The shares attained over target upon vesting for performance-based awards are reflected as awards granted during the period.
The Company estimates the fair value of ESPP and stock options purchase rights using the Black-Scholes Merton (BSM) option-pricing model. This option-pricing model requires the input of assumptions, including the award’s expected life and the price volatility of the underlying stock.
The Company does not apply expected forfeiture rate and accounts for forfeitures as they occur. The total fair value of the equity awards is recorded on a straight-line basis, over the requisite service period of the awards for each separate vesting period of the award, except for certain performance-based awards which are amortized based upon the graded vesting method.
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Income Taxes
In accordance with the authoritative guidance on accounting for income taxes, the Company recognizes income taxes using an asset and liability approach. This approach requires the recognition of taxes payable or refundable for the current year, and deferred tax liabilities and assets for future tax consequences of events that have been recognized in the Company’s Consolidated Financial Statements or tax returns. The measurement of current and deferred taxes is based on provisions of the enacted tax law and the effects of future changes in tax laws or rates are not anticipated.
The authoritative guidance provides for recognition of deferred tax assets if the realization of such deferred tax assets is more likely than not to occur based on an evaluation of both positive and negative evidence and the relative weight of the evidence. With the exception of certain international jurisdictions, the Company has determined that at this time it is more likely than not that deferred tax assets attributable to the remaining jurisdictions will not be realized, primarily due to uncertainties related to its ability to utilize its net operating loss carryforwards before they expire. Accordingly, the Company has established a valuation allowance for such deferred tax assets. If there is a change in the Company’s ability to realize its deferred tax assets for which a valuation allowance has been established, then its tax provision may decrease in the period in which it determines that realization is more likely than not. Likewise, if the Company determines that it is not more likely than not that its deferred tax assets will be realized, then a valuation allowance may be established for such deferred tax assets and the Company’s tax provision may increase in the period in which the Company makes the determination.
The authoritative guidance on accounting for uncertainty in income taxes prescribes the recognition threshold and measurement attributes for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Additionally, it provides guidance on recognition, classification, and disclosure of tax positions. The Company is subject to income tax audits by the respective tax authorities in the jurisdictions in which it operates. The determination of tax liabilities in each of these jurisdictions requires the interpretation and application of complex and sometimes uncertain tax laws and regulations. The Company recognizes liabilities based on its estimate of whether, and the extent to which, additional tax liabilities are more likely than not. If the Company ultimately determines that the payment of such a liability is not necessary, then it reverses the liability and recognizes a tax benefit during the period it is determined no longer necessary.
The recognition and measurement of current taxes payable or refundable and deferred tax assets and liabilities requires that the Company make certain estimates and judgments. Changes to these estimates or a change in judgment may have a material impact on the Company’s tax provision in a future period.
Restructuring Accrual
In accordance with authoritative guidance on accounting for costs associated with exit or disposal activities, generally costs associated with restructuring activities are recognized when they are incurred. A liability for post-employment benefits for workforce reductions related to restructuring activities is recorded when payment is probable, and the amount is reasonably estimable. The Company continually evaluates the adequacy of the remaining liabilities under its restructuring initiatives. Although the Company believes that these estimates accurately reflect the costs of its restructuring plans, actual results may differ, thereby requiring the Company to record additional liabilities or reverse a portion of existing liabilities.
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Contingencies
The Company is subject to various potential loss contingencies arising in the ordinary course of business. In determining a loss contingency, the Company considers the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as its ability to reasonably estimate the amount of loss. An estimated loss is accrued when it is probable that an asset has been impaired, a liability has been incurred and the amount of loss can be reasonably estimated. The Company regularly evaluates current information available to determine whether such accruals should be adjusted and whether new accruals are required.
Contingent liabilities include contingent consideration in connection with the Company’s acquisitions, which represent earn-out payments and is recognized at fair value on the acquisition date and is remeasured each reporting period with subsequent adjustments recognized in SG&A expense in the Consolidated Statements of Operations. While the Company believes the estimates and assumptions are reasonable, there is significant judgment and uncertainty involved.
Asset Retirement Obligations
Asset retirement obligations (ARO) are legal obligations associated with the retirement of long-lived assets pertaining to leasehold improvements. These liabilities are initially recorded at fair value and the related asset retirement costs are capitalized by increasing the asset carrying value and ARO by the same amount. Asset retirement costs are subsequently depreciated over the useful lives of the related assets. Subsequent to initial recognition, the Company records period-to-period changes in the ARO liability resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows.
Note 2. Recently Issued Accounting Pronouncements
Recent Accounting Pronouncements Adopted
In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740), to enhance the transparency and decision usefulness of income tax disclosures through changes to the rate reconciliation and income taxes paid information. This guidance is effective for fiscal years beginning after December 15, 2024 (fiscal 2026 for the Company), with early and retrospective adoption permitted. The Company adopted this guidance on a prospective basis for annual disclosures for the year ended June 27, 2026. See “Note 14. Income Taxes” for the disclosure applying the guidance of ASU 2023-09.
Accounting Pronouncements Issued But Not Yet Adopted
In May 2026, the FASB issued ASU 2026-02, Environmental Credits and Environmental Credit Obligations (Topic 818) , which establish the recognition, measurement, presentation, and disclosure requirements for all entities that generate, purchase, or receive environmental credits or have a regulatory compliance obligation that may be settled with environmental credits. This guidance is effective for fiscal years beginning after December 15, 2027 (fiscal 2029 for the Company), and interim periods within those annual reporting periods, with early adoption permitted. The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.
In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities , which provides guidance for a government grant received by a business entity. This guidance is effective for fiscal years beginning after December 15, 2028 (fiscal 2030 for the Company), and interim periods within those annual reporting periods, with early adoption permitted. The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.
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In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets , which provides a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606: Revenue from Contracts with Customers , including those assets acquired in a business combination. The practical expedient permits an entity to assume that current conditions as of the balance sheet date do not change for the remaining life of the current accounts receivable and current contract assets. This guidance is effective for fiscal years beginning after December 15, 2025 (fiscal 2027 for the Company), and interim periods within those annual reporting periods. This ASU is not expected to have a material impact on our Consolidated Financial Statements or related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which requires disaggregated disclosure of income statement expenses for public business entities. The objective of this guidance is to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization and depletion) in commonly presented expense captions such as Cost of revenues, R&D and SG&A. This guidance is effective for fiscal years beginning after December 15, 2026 (fiscal 2028 for the Company), and interim periods within fiscal years beginning after December 15, 2027, with early and retrospective adoption permitted. The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements-Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative . The amendments clarify or improve disclosure and presentation requirements on various disclosure areas, including the statement of cash flows, earnings per share, debt, equity and derivatives. The amendments will align the requirements in the FASB Accounting Standards Codification (ASC) with the SEC’s regulations. The amendments in this ASU will be effective on the date the related disclosures are removed from Regulation S-X or Regulation S-K by the SEC, and will not be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027. This ASU is not expected to have a material impact on our Consolidated Financial Statements or related disclosures.
We reviewed all other accounting pronouncements issued during fiscal 2026 and concluded that they were not applicable to the Company.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 3. Earnings Per Share
Basic net (loss) income per share is computed by dividing net (loss) income for the period by the weighted average number of common shares outstanding during the period. Diluted net (loss) income per share is computed by dividing net (loss) income for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period. If dilutive, the effect of outstanding ESPP purchase rights, restricted stock units (RSUs), performance-based stock units (PSUs), market-based stock units (MSUs), stock options and Senior Convertible Notes is reflected in diluted net (loss) income per share by application of the treasury stock method and/or the if-converted method, as applicable. The calculation of diluted net (loss) income per share excludes all anti-dilutive common shares.
The following table sets forth the computation of basic and diluted net (loss) income per share ( in millions, except per share data ):
Years Ended
June 27, 2026 June 28, 2025 June 29, 2024
Numerator:
Net (loss) income $ ( 30.4 ) $ 34.8 $ ( 25.8 )
Denominator:
Weighted-average shares outstanding:
Basic 229.5 222.5 222.6
Effect of dilutive securities from stock-based compensation plans — 3.2 —
Diluted 229.5 225.7 222.6
Net (loss) income per share:
Basic $ ( 0.13 ) $ 0.16 $ ( 0.12 )
Diluted $ ( 0.13 ) $ 0.15 $ ( 0.12 )
In periods where the Company recognized a net loss, the impact of potentially dilutive outstanding stock-based awards and the “in-the-money” conversion benefit feature above the conversion price of the 1.00 % Senior Convertible Notes due 2024 (2024 Notes), 1.625 % Senior Convertible Notes due 2026 (2026 Notes) and 0.625 % Senior Convertible Notes due 2031 (2031 Notes) of $ 13.22 , $ 13.19 , and $ 13.79 per share, respectively, have been excluded from the calculation of diluted loss per share as their inclusion would have an anti-dilutive effect.
The following table represents potential common shares that were not included in the computation of the diluted net (loss) income per share because their effect would have been anti-dilutive ( in millions ):
Years Ended
June 27, 2026 June 28, 2025 June 29, 2024
Restricted stock units 1
0.4 1.0 3.3
(1) The amount for the year-ended June 29, 2024 has been updated to reflect current year table of potential common shares that were not included in the computation of the diluted net (loss) income per share because their effect would have been anti-dilutive.
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Note 4. Accumulated Other Comprehensive Loss
The Company’s accumulated other comprehensive loss consists of the accumulated net unrealized gains or losses on available-for-sale investments, foreign currency translation adjustments and change in unrealized components of defined benefit obligations.
Changes in accumulated other comprehensive loss by component, net of tax, were as follows ( in millions ):
Unrealized losses
on available-for-sale
investments Foreign currency translation adjustments Change in unrealized components of defined benefit
obligations, net of tax (1)
Total
Beginning balance as of June 28, 2025 $ ( 5.3 ) $ ( 97.5 ) $ ( 7.0 ) $ ( 109.8 )
Other comprehensive (loss) income before reclassification — ( 7.4 ) 1.0 ( 6.4 )
Amounts reclassified from accumulated other comprehensive loss — — 0.2 0.2
Net current period other comprehensive (loss) income — ( 7.4 ) 1.2 ( 6.2 )
Ending balance as of June 27, 2026 $ ( 5.3 ) $ ( 104.9 ) $ ( 5.8 ) $ ( 116.0 )
(1) Activity before reclassifications to the Consolidated Statements of Operations during the fiscal year ended June 27, 2026 relates to the unrealized actuarial gain of $ 1.4 million, net of income tax effect of $ 0.4 million. The amount reclassified out of accumulated other comprehensive loss represents the amortization of actuarial loss included as a component of Cost of revenues, R&D and SG&A in the Consolidated Statements of Operations for the year ended June 27, 2026. Refer to “Note 17. Employee Pension and Other Benefit Plans” for more details on the computation of net periodic cost for pension plans.
Note 5. Acquisitions
High-speed Ethernet, Network Security and Channel Emulation Testing Business
On October 16, 2025, the Company acquired Spirent Communications plc’s (Spirent) high-speed ethernet, network security and channel emulation testing business (collectively, the HSE and CE business) from Keysight Technologies, Inc. (Keysight). The transaction provides a complementary addition to VIAVI’s ethernet testing platform within its NSE segment.
The cash consideration paid at closing of $ 399.3 million is subject to final net working capital adjustments. The acquisition met the definition of a business and has been accounted for in accordance with the authoritative guidance on business combinations; therefore, the tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the acquisition date. Acquisition related costs incurred were approximately $ 20.6 million, of which $ 11.4 million was incurred in fiscal 2026, and were recorded within SG&A expense in the Consolidated Statements of Operations.
The total purchase consideration was allocated to tangible and intangible assets acquired and liabilities assumed based on the preliminary fair value on the acquisition date. The Company elected to apply both practical expedients permitted under ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, in measuring contract assets and contract liabilities acquired in the acquisition. Specifically, we have elected the practical expedient that permits an entity to reflect the aggregate effect of all modifications (on a contract-by-contract basis) as if they occurred on the acquisition date. In addition, the Company elected to determine the standalone selling prices of performance obligations as of the acquisition date, rather than at contract inception, for purpose of allocating transaction consideration.
The Company is in the process of obtaining additional information to refine its preliminary fair value estimates related to certain acquired assets and assumed liabilities. We may revise the preliminary purchase price allocation during the remainder of the measurement period as additional information becomes available. Any such revisions or changes may be material. We expect to finalize the purchase price allocation by the end of the first quarter of fiscal 2027.
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The following table presents the preliminary allocation of the purchase price ( in millions ):
Amount
Inventory, net $ 7.7
Prepayments and other current assets 1.0
Property, plant and equipment, net 2.9
Goodwill (1)
111.5
Identified intangible assets acquired 314.2
Other non-current assets 1.7
Deferred revenue (2)
( 25.6 )
Accrued payroll and related expenses ( 0.8 )
Other current liabilities ( 3.9 )
Other non-current liabilities (3)
( 9.4 )
Total purchase consideration $ 399.3
(1) Goodwill at acquisition date of $ 111.3 million increased by $ 0.2 million for measurement period adjustments.
(2) Represents the current portion of deferred revenue.
(3) Includes long-term deferred revenue of $ 8.2 million.
The Company valued the customer relationships using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the customer relationships. Significant assumptions related to customer relationships included (i) projected revenues, (ii) projected expenses, (iii) contributory asset charges, (iv) discount rate, (v) income tax rate and (vi) customer attrition rate.
Developed technology relates to products used for our lab and production and wireless solutions. The Company valued the developed technology using the relief-from-royalty method under the income approach. This method is based on the application of a royalty rate to forecasted revenue from the developed technology. Significant assumptions related to developed technology included (i) projected revenues, (ii) royalty rate, (iii) discount rate, (iv) income tax rate and (v) technology obsolescence rate.
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition ( in millions, except useful lives ):
Estimated Useful Life Amount
Customer relationships 9 years $ 162.3
Developed technology 5 years 134.8
Backlog 2 years 10.1
Trade name 6 years 7.0
Total identifiable intangible assets acquired $ 314.2
Goodwill represents the excess of the preliminary estimated purchase consideration over the preliminary estimates of the fair value of the net tangible and intangible assets acquired and has been allocated to the NSE segment. Goodwill is primarily attributable to expected synergies in the acquired technologies that may be leveraged by the Company in future solution offerings. The goodwill recognized is deductible for U.S. income tax purposes.
The Company has included the financial results of Spirent’s HSE and CE business in its Consolidated Financial Statements from the date of acquisition. Pro forma results of operations have not been presented because the effect of the acquisition was not material to the Consolidated Statements of Operations.
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Inertial Labs, Inc.
On January 28, 2025, the Company acquired all of the equity of Inertial Labs, Inc. (Inertial Labs), a privately held company which specializes in resilient PNT solutions for aerospace, defense and industrial applications. The acquisition enables the Company to further broaden its solutions offering into the rapidly developing PNT landscape.
The total purchase consideration included approximately $ 134.4 million paid in cash at closing and additional contingent consideration of up to $ 175.0 million, payable upon the achievement of certain revenue targets over the course of a four-year period beginning in January 2025. As of the acquisition date, the fair value of the contingent consideration was $ 116.2 million. The net cash paid for the acquisition, with purchase price adjustment, was $ 121.6 million, which reflects the cash paid less cash acquired of $ 16.5 million. From the contingent consideration of $ 175.0 million, $ 3.4 million was set aside for the payment of retention bonuses over the four-year earn-out period to key personnel and service providers, contingent on continued service to the Company. Any forfeited amount will be removed from the retention bonus pool and re-distributed to the shareholders of Inertial Labs upon the achievement of the earn-out targets. The portion of the estimated fair value of the contingent consideration liability allocated to the retention bonuses will be accounted for as post combination expense over the requisite service period.
The cash consideration paid at closing included an escrow payment of $ 1.0 million subject to final net working capital adjustments. The Company paid $ 3.7 million in our fourth fiscal quarter of 2025 comprised of the net working capital holdback of $ 3.0 million and $ 0.7 million of the purchase price adjustment of $ 1.4 million. The remainder of the purchase price adjustment of $ 0.7 million was paid in fiscal 2026 and refund of prepaid tax of $ 0.6 million is expected to be paid in fiscal 2027. In addition, the Company held back $ 15.0 million for indemnity claims. In fiscal 2026, the indemnity holdback was reduced by $ 1.1 million from noncash financing activities and the Company paid the remaining $ 13.9 million to the Inertial Labs shareholders. The acquisition met the definition of a business and has been accounted for in accordance with the authoritative guidance on business combinations; therefore, the tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the acquisition date. Acquisition related costs incurred were approximately $ 11.7 million and have been recorded within SG&A expense in the Consolidated Statements of Operations. These costs included $ 9.5 million in transaction bonuses that were paid at closing to key personnel and service providers of Inertial Labs.
The total purchase consideration was allocated to tangible and intangible assets acquired and liabilities assumed based on the fair value on the acquisition date. The following table presents the allocation of the purchase price ( in millions ):
Amount
Cash and cash equivalents $ 16.5
Accounts receivable, net 8.1
Inventory, net 26.0
Prepayments and other current assets 1.1
Property, plant and equipment, net 1.9
Goodwill (1)
130.3
Identified intangible assets acquired 117.6
Other non-current assets 1.9
Accounts payable ( 1.4 )
Accrued payroll and related expenses ( 0.5 )
Deferred revenue ( 0.3 )
Accrued expenses ( 3.5 )
Other non-current liabilities (2)
( 27.1 )
Total purchase consideration $ 270.6
(1) Goodwill at acquisition date of $ 129.7 million increased by $ 0.6 million for purchase price and measurement period adjustments.
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(2) Includes $ 25.0 million of deferred tax liability and $ 0.9 million of liability related to uncertain tax positions.
Developed technology relates to products used for PNT solutions for aerospace, defense and industrial applications. The Company valued the developed technology using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the developed technology. Significant assumptions used in the discounted cash flow analysis include (i) projected revenues, (ii) discount rate, and (iii) technology obsolescence rate.
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition ( in millions, except useful lives ):
Estimated Useful Life Amount
Developed technology 4 to 7 years
$ 102.0
Customer relationships 6 years 9.6
Tradename 3 years 0.8
Backlog 2 years 5.2
Total identifiable intangible assets acquired $ 117.6
Goodwill represents the excess of the purchase consideration over the fair value of the net tangible and intangible assets acquired and has been allocated to the NSE segment. Goodwill is primarily attributable to expected synergies in the acquired technologies that may be leveraged by the Company in future PNT offerings. None of the goodwill recognized is deductible for U.S. income tax purposes.
The Company has included the financial results of Inertial Labs in its Consolidated Financial Statements from the date of acquisition. Pro forma results of operations have not been presented because the effect of the acquisition was not material to the Consolidated Statements of Operations.
Jackson Labs Technologies, LLC
On October 5, 2022, the Company acquired all of the equity of Jackson Labs Technologies, LLC (Jackson Labs), a privately held company which specializes in PNT solutions for critical infrastructure serving both military and civilian applications. The acquisition enables the Company to broaden its solutions offering into the rapidly developing PNT landscape. The total purchase consideration included approximately $ 49.9 million paid in cash at closing and additional contingent consideration of up to $ 117.0 million.
Acquisition related Contingent Consideration
Refer to “Note 8. Fair Value Measurements” for information on the contingent consideration activity for the year ended June 27, 2026.
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Note 6. Balance Sheet and Other Details
Contract Balances
Unbilled Receivables: The Company records a receivable when an unconditional right to consideration exists and transfer of control has occurred, such that only the passage of time is required before payment of consideration is due. Timing of revenue recognition may differ from the timing of customer invoicing. Payment terms vary based on product or service offerings and payment is generally required within 30 to 90 days from date of invoicing. Certain performance obligations may require payment before delivery of the service to the customer .
Contract Assets: A Contract Asset is recognized when a conditional right to consideration exists and transfer of control has occurred. Contract Assets include fixed fee professional services, where the transfer of services has occurred in advance of the Company's right to invoice. Contract Assets, included in Accounts receivable, net, on the Consolidated Balance Sheets, are not material to the Consolidated Financial Statements. Contract Asset balances will fluctuate based upon the timing of transfer of services, billings and customers’ acceptance of contractual milestones.
Gross Receivables: Includes both billed and Unbilled Receivables/Contract Assets. As of June 27, 2026 and June 28, 2025, the Company had total Unbilled Receivables/Contract Assets of $ 22.7 million and $ 14.1 million, respectively.
Deferred Revenue: Deferred revenue consists of contract liabilities primarily related to support, solution deployment services, software maintenance, product, professional services and training when the Company has a right to invoice or payments have been received and transfer of control has not occurred. Revenue is recognized on these items when the revenue recognition criteria are met, generally resulting in ratable recognition over the contract term.
The Company also has short-term and long-term deferred revenue related to undelivered hardware and professional services, consisting of installations and consulting engagements, which are recognized as the Company's performance obligations under the contract are completed and accepted by the customer.
The following table summarizes the activity related to deferred revenue, for the year ended June 27, 2026 ( in millions ):
Balance as of June 28, 2025
$ 102.3
Revenue deferrals for new contracts (1)
149.8
Acquisition (2)
33.8
Revenue recognized during the period (3)
( 143.7 )
Balance as of June 27, 2026 (4)
$ 142.2
Short-term deferred revenue $ 101.9
Long-term deferred revenue 40.3
(1) Included in these amounts is the impact from foreign currency exchange rate fluctuations.
(2) This amount includes deferred revenue at acquisition date and measurement period adjustments. Refer to “Note 5. Acquisitions” for more information.
(3) Revenue recognized during the period represents releases from the balance at the beginning of the period as well as releases from the following period quarter-end deferrals.
(4) The long-term portion of deferred revenue is included as a component of Other non-current liabilities on the Consolidated Balance Sheets.
Remaining Performance Obligations: Remaining performance obligations represent the aggregate amount of the transaction price allocated to performance obligations not delivered or are incomplete as of June 27, 2026. Remaining performance obligations include deferred revenue plus unbilled amounts not yet recorded. The aggregate amount of the transaction price allocated to remaining performance obligations does not include amounts owed under cancellable contracts where there is no substantive termination penalty.
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Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, adjustments for revenue that has not materialized and currency fluctuations.
The value of the transaction price allocated to remaining performance obligations as of June 27, 2026 was $ 610.1 million. The Company expects to recognize 92 % of the remaining performance obligations as revenue within the next 12 months, and the residual thereafter.
Accounts Receivable - Allowance for Credit Losses
The table below presents the activities and balances for allowance for credit losses, as follows ( in millions ):
Balance at Beginning of Period Acquisition (1)
Charged to Costs and Expenses Deduction (2)
Balance at
End of Period
Year Ended June 27, 2026 $ 1.9 $ — $ 1.6 $ ( 0.7 ) $ 2.8
Year Ended June 28, 2025 1.6 0.6 1.0 ( 1.3 ) 1.9
Year Ended June 29, 2024 1.0 — 1.3 ( 0.7 ) 1.6
(1) Refer to “Note 5. Acquisitions” for details of acquisition.
(2) Represents the effect of foreign currency translation adjustments and write-offs of uncollectible accounts, net of recoveries.
Inventories, net
The following table presents the components of inventories, net, as follo ws ( in millions ):
June 27, 2026 June 28, 2025
Finished goods $ 65.2 $ 52.5
Work in process 25.3 18.3
Raw materials 64.8 47.1
Inventories, net $ 155.3 $ 117.9
Prepayments and Other Current Assets
The following table presents the components of prepayments and other current assets, as follo ws ( in millions ):
June 27, 2026 June 28, 2025
Prepayments $ 26.8 $ 21.9
Refundable income taxes 24.6 32.0
Advances to contract manufacturers 22.0 5.8
Fair value of forward contracts 1.6 4.9
Other current assets 18.2 12.7
Prepayments and other current assets $ 93.2 $ 77.3
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Property, Plant and Equipment, net
The following table presents the components of property, plant and equipment, net, as follows ( in millions ):
June 27, 2026 June 28, 2025
Land $ 19.6 $ 19.9
Buildings and improvements 80.6 79.6
Machinery and equipment 412.1 400.5
Furniture, fixtures, software and office equipment 68.9 67.8
Leasehold improvements 78.4 75.9
Construction in progress 20.9 26.5
Property, plant and equipment, gross 680.5 670.2
Less : Accumulated depreciation
( 456.0 ) ( 438.3 )
Property, plant and equipment, net $ 224.5 $ 231.9
Other Non-Current Assets
The following table presents the components of other non-current assets, as follo ws ( in millions ):
June 27, 2026 June 28, 2025
Operating ROU assets, net $ 42.6 $ 34.1
Long-term restricted cash 5.1 4.9
Deferred contract cost 3.0 3.0
Long-term investment (Note 7)
3.0 3.0
Debt issuance cost - Revolving Credit Facility 2.6 1.4
Deposits 2.5 2.4
Other 13.0 13.4
Other non-current assets $ 71.8 $ 62.2
Other Current Liabilities
The following table presents the components of other current liabilities, as follows ( in millions ):
June 27, 2026 June 28, 2025
Fair value of contingent consideration (Note 8)
$ 58.5 $ 41.5
Operating lease liabilities
11.8 10.2
Income tax payable 7.7 8.2
Warranty accrual 6.6 5.9
Restructuring accrual (Note 13)
6.5 3.5
Interest payable 4.5 5.1
Acquisition related holdback and related accruals 2.9 16.5
Fair value of forward contracts 2.5 3.1
Other 14.9 14.3
Other current liabilities $ 115.9 $ 108.3
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Other Non-Current Liabilities
The following table presents the components of other non-current liabilities, as follo ws ( in millions ):
June 27, 2026 June 28, 2025
Pension and post-employment benefits $ 47.3 $ 54.1
Long-term deferred revenue 40.3 28.2
Operating lease liabilities 31.2 24.1
Fair value of contingent consideration (Note 8)
18.4 75.9
Financing obligation 13.4 15.5
Uncertain tax position 10.0 11.4
Deferred tax liability 7.0 6.0
Asset retirement obligations 4.6 3.5
Warranty accrual — 0.8
Other 7.3 8.1
Other non-current liabilities $ 179.5 $ 227.6
Interest and Other Income, net
The following table presents the components of interest and other income, net, as follows ( in millions ):
Years Ended
June 27, 2026 June 28, 2025 June 29, 2024
Interest income $ 15.4 $ 13.1 $ 18.9
Foreign exchange loss, net ( 2.4 ) ( 1.7 ) ( 3.1 )
Gain on litigation settlement — — 7.3
Other gain (loss), net 2.3 ( 0.3 ) ( 1.4 )
Interest and other income, net $ 15.3 $ 11.1 $ 21.7
Note 7. Investments and Forward Contracts
Short-Term Investments
As of June 27, 2026, the Company’s short-term investments of $ 2.0 million were primarily related to the deferred compensation plan and was invested in equity securities.
As of June 28, 2025, the Company’s short-term investments of $ 1.7 million were primarily related to the deferred compensation plan, of which $ 1.6 million was invested in equity securities.
Trading securities are reported at fair value, with the unrealized gains or losses resulting from changes in fair value recognized in the Consolidated Statements of Operations as a component of Interest and other income, net.
Strategic Investment
During the first fiscal quarter of 2025, the Company invested $ 3.0 million in a non-marketable equity security in a privately held company. The investment is included in Other non-current assets on the Consolidated Balance Sheets and is classified as Level 3 within the fair value hierarchy.
This investment is carried at cost and because the investment does not have a readily determinable fair value, it will be adjusted for changes resulting from observable price changes under the Measurement Alternative methodology. There were no impairments or adjustments to the carrying value for the year ended June 27, 2026.
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Equity Investment
The Company acquired an equity interest in Sensorsan Sensor Teknolojileri Anonim Sirketi (Sensorsan), a privately held entity and owns 40 % percent of Sensorsan, through its acquisition of Inertial Labs.
The Company accounts for its investment in Sensorsan under the equity method of accounting. Under the equity method, the carrying value of the Company's investment is adjusted for its proportionate share of Sensorsan's net income or loss and the elimination of unrealized profits on transactions with Sensorsan, as applicable.
The Company recognized equity method earnings related to its investment in Sensorsan of $ 0.8 million and $ 0.6 million for the fiscal years ended June 27, 2026 and June 28, 2025, respectively. As of June 27, 2026 and June 28, 2025, the carrying value of the Company’s investment in Sensorsan was $ 2.0 million and $ 1.3 million, respectively, and was included in Other non-current assets on the Consolidated Balance Sheets. The Company sells certain products to Sensorsan. During the fiscal years ended June 27, 2026 and June 28, 2025, revenue from sales to Sensorsan was $ 6.5 million and $ 1.8 million, respectively.
Non-Designated Foreign Currency Forward Contracts
The Company has foreign subsidiaries that operate and sell the Company’s products in various markets around the world. As a result, the Company is exposed to foreign exchange risks. The Company utilizes foreign exchange forward contracts to manage foreign currency risk associated with foreign currency denominated monetary assets and liabilities, primarily certain short-term intercompany receivables and payables, and to reduce the volatility of earnings and cash flows related to foreign-currency transactions. The Company does not use these foreign currency forward contracts for trading purposes.
As of June 27, 2026, the Company had forward contracts that were effectively closed but not settled with the counterparties by fiscal year end. Therefore, the fair value of these contracts of $ 1.6 million and $ 2.5 million is reflected as Prepayments and other current assets and Other current liabilities on the Consolidated Balance Sheets, respectively. As of June 28, 2025, the fair value of these contracts of $ 4.9 million and $ 3.1 million is reflected as Prepayments and other current assets and Other current liabilities on the Consolidated Balance Sheets, respectively.
The forward contracts outstanding and not effectively closed, with a term of less than 120 days, were transacted near fiscal year ends; therefore, the fair value of the contracts was minimal as of June 27, 2026 and June 28, 2025. As of June 27, 2026 and June 28, 2025, the notional amounts of the forward contracts that the Company held to purchase foreign currencies were $ 66.2 million and $ 60.4 million, respectively, and the notional amounts of forward contracts the Company held to sell foreign currencies were $ 38.9 million and $ 24.1 million, respectively.
The change in the fair value of these foreign currency forward contracts is recorded as a gain or loss in the Consolidated Statements of Operations as a component of Interest and other income, net. The cash flows related to the settlement of foreign currency forward contracts are classified as operating activities. The foreign exchange forward contracts incurred losses of $ 1.4 million and $ 1.0 million for the years ended June 27, 2026 and June 28, 2025, respectively.
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Note 8. Fair Value Measurements
Fair Value Measurements
The Company’s assets and liabilities measured at fair value on a recurring basis for the periods presented are as follows ( in millions ):
June 27, 2026 June 28, 2025
Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Assets:
Debt available-for-sale securities (1)
$ 0.3 $ — $ 0.3 $ — $ 0.3 $ — $ 0.3 $ —
Money market funds (2)
452.6 452.6 — — 229.0 229.0 — —
Trading securities (3)
1.9 1.9 — — 1.6 1.6 — —
Foreign currency forward contracts (4)
1.6 — 1.6 — 4.9 — 4.9 —
Total assets $ 456.4 $ 454.5 $ 1.9 $ — $ 235.8 $ 230.6 $ 5.2 $ —
Liability:
Foreign currency forward contracts (5)
$ 2.5 $ — $ 2.5 $ — $ 3.1 $ — $ 3.1 $ —
Contingent consideration (6)
76.9 — — 76.9 117.4 — — 117.4
Total liabilities $ 79.4 $ — $ 2.5 $ 76.9 $ 120.5 $ — $ 3.1 $ 117.4
(1) Included in Other non-current assets on the Consolidated Balance Sheets.
(2) Includes, as of June 27, 2026, $ 443.3 million in Cash and cash equivalents, $ 6.4 million in Restricted cash and $ 2.9 million in Other non-current assets on the Consolidated Balance Sheets. Includes, as of June 28, 2025, $ 222.4 million in Cash and cash equivalents, $ 3.5 million in Restricted cash, and $ 3.1 million in Other non-current assets on the Consolidated Balance Sheets.
(3) Included in Short-term investments on the Consolidated Balance Sheets.
(4) Included in Prepayments and other current assets on the Consolidated Balance Sheets.
(5) Included in Other current liabilities on the Consolidated Balance Sheets.
(6) As of June 27, 2026 and June 28, 2025, includes certain amounts in Other current liabilities and Other non-current liabilities on the Consolidated Balance Sheets.
Contingent Consideration
As of June 27, 2026, the fair value of the contingent consideration liability for Inertial Labs was $ 76.9 million, compared to $ 117.1 million at June 28, 2025. As of June 27, 2026, $ 58.5 million and $ 18.4 million of the liability are included in Other current liabilities and Other non-current liabilities, respectively, on the Consolidated Balance Sheets. As of June 28, 2025, $ 41.2 million and $ 75.9 million of the liability are included in Other current liabilities and Other non-current liabilities, respectively, on the Consolidated Balance Sheets. During the year ended June 27, 2026, the Company made a contingent consideration payment of $ 73.5 million for Inertial Labs, of which acquisition date fair value of $ 29.8 million was classified as a financing outflow and the remaining classified as an operating activity within Accrued expenses and other current and non-current liabilities in the Consolidated Statements of Cash Flows.
The earn-out period for Jackson Labs ended on December 31, 2025. The Company was not required to make a contingent consideration payment as the revenue targets were not met.
Instrument Measured at Fair Value on Non-recurring Basis
Our non-marketable equity security accounted for using the Measurement Alternative is measured at fair value on a non-recurring basis and is classified within Level 3 of the fair value hierarchy because we use significant unobservable inputs to estimate its fair value. Refer to “Note 7. Investments and Forward Contracts” for additional information.
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Other Fair Value Measures
Fair Value of Debt: If measured at fair value on the Consolidated Balance Sheets, the Company’s 0.625 % Senior Convertible Notes (2031 Notes), 3.75 % Senior Notes (2029 Notes) and 1.625 % Senior Convertible Notes (2026 Notes) would be classified in Level 2 of the fair value hierarchy as they are not actively traded in the markets.
The Company’s debt measured at fair value for the periods presented are as follows ( in millions ):
June 27, 2026 June 28, 2025
Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Debt:
0.625 % Senior Convertible Notes (1)
$ 889.1 $ — $ 889.1 $ — $ — $ — $ — $ —
3.75 % Senior Notes
381.8 — 381.8 — 373.6 — 373.6 —
1.625 % Senior Convertible Notes (2)
— — — — 252.0 — 252.0 —
Total liabilities $ 1,270.9 $ — $ 1,270.9 $ — $ 625.6 $ — $ 625.6 $ —
(1) The 2031 Notes were issued on August 20, 2025. See “Note 11. Debt”, for further discussion of the Company’s debt.
(2) The 2026 Notes were settled upon maturity on March 15, 2026. See “Note 11. Debt”, for further discussion of the Company’s debt.
Note 9. Goodwill
The following table presents the changes in goodwill allocated to the Company’s reportable segments (in millions) :
Network and Service
Enablement Optical Security
and Performance
Products Total
Balance as of June 29, 2024 (1)
$ 410.7 $ 42.2 $ 452.9
Acquisition (2)
129.7 — 129.7
Measurement period adjustmen t (2)
0.6 — 0.6
Currency translation 12.5 — 12.5
Balance as of June 28, 2025 (3)
$ 553.5 $ 42.2 $ 595.7
Acquisition (2)
111.3 — 111.3
Measurement period adjustmen t (2)
0.2 0.2
Currency translation ( 6.5 ) — ( 6.5 )
Balance as of June 27, 2026 (4)
$ 658.5 $ 42.2 $ 700.7
(1) Gross goodwill balances for NSE and OSP were $ 985.2 million and $ 126.7 million, respectively, as of June 29, 2024. Accumulated impairment for NSE and OSP was $ 574.5 million and $ 84.5 million, respectively, as of June 29, 2024.
(2) Goodwill at acquisition date and adjustments. Refer to “Note 5. Acquisitions” for additional information.
(3) Gross goodwill balances for NSE and OSP were $ 1,128.0 million and $ 126.7 million, respectively, as of June 28, 2025. Accumulated impairment for NSE and OSP was $ 574.5 million and $ 84.5 million, respectively, as of June 28, 2025.
(4) Gross goodwill balances for NSE and OSP were $ 1,233.0 million and $ 126.7 million, respectively, as of June 27, 2026. Accumulated impairment for NSE and OSP was $ 574.5 million and $ 84.5 million, respectively, as of June 27, 2026.
Impairment of Goodwill
The Company tests goodwill at the reporting unit level for impairment annually, during the fourth quarter of each fiscal year, or more frequently if events or circumstances indicate that the asset may be impaired. The Company determined that, based on its organizational structure and the financial information that is provided to and reviewed by the Company’s Chief Operating Decision Maker (CODM) during fiscal 2026 and 2025 that its reporting units were NSE and OSP.
No indications of impairment were identified under the qualitative assessment of goodwill impairment for fiscal years ending on June 27, 2026 and June 28, 2025.
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Note 10. Intangibles
The following tables present details of the Company’s acquired developed technology, customer relationships and other intangibles as of June 27, 2026, and June 28, 2025 ( in millions, except useful lives ):
As of June 27, 2026 Weighted-Average Remaining Useful Life Gross Carrying Amount Accumulated Amortization Net
Acquired developed technology 4.5 years $ 667.5 $ ( 461.5 ) $ 206.0
Customer relationships 8.1 years 346.4 ( 189.4 ) 157.0
Other (1)
2.9 years 60.4 ( 45.8 ) 14.6
Total intangibles $ 1,074.3 $ ( 696.7 ) $ 377.6
As of June 28, 2025 Weighted-Average Remaining Useful Life Gross Carrying Amount Accumulated Amortization Net
Acquired developed technology 5.5 years $ 534.5 $ ( 417.7 ) $ 116.8
Customer relationships 5.2 years 209.0 ( 199.1 ) 9.9
Other (1)
1.7 years 44.1 ( 39.2 ) 4.9
Total intangibles $ 787.6 $ ( 656.0 ) $ 131.6
(1) Other intangibles consist of proprietary know-how and trade secrets, trademarks and trade names.
During fiscal 2026, the Company wrote off customer relationship intangible assets with a gross carrying amount of $ 22.5 million related to legacy products and associated support services that are no longer offered. The write-off had no impact on the Company's Consolidated Financial Statements because the assets had a net carrying amount of zero.
Amortization expense related to intangibles was $ 67.9 million, $ 24.3 million and $ 20.1 million in fiscal 2026, 2025 and 2024, respectively.
Based on the carrying amount of acquired developed technology, customer relationships and other intangibles as of June 27, 2026, and assuming no future impairment of the underlying assets, the estimated future amortization is as follows ( in millions ):
Fiscal Years
2027 $ 77.6
2028 67.9
2029 63.4
2030 62.4
2031 40.7
Thereafter 65.6
Total amortization $ 377.6
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 11. Debt
As of June 27, 2026 and June 28, 2025, the Company’s debt on the Consolidated Balance Sheets represented the carrying amount of the Senior Convertible and Senior Notes, net of unamortized debt discount and issuance costs, as follows ( in millions ):
June 27, 2026 June 28, 2025
Principal amount of 0.625 % Senior Convertible Notes
$ 250.0 $ —
Unamortized 0.625 % Senior Convertible Notes debt issuance cost
( 5.2 ) —
Principal amount of 1.625 % Senior Convertible Notes
— 250.0
Unamortized 1.625 % Senior Convertible Notes debt discount
— ( 3.3 )
Unamortized 1.625 % Senior Convertible Notes debt issuance cost
— ( 0.5 )
Short-term debt $ 244.8 $ 246.2
Principal amount of 3.75 % Senior Notes
$ 400.0 $ 400.0
Unamortized 3.75 % Senior Notes debt issuance cost
( 2.9 ) ( 3.7 )
Long-term debt $ 397.1 $ 396.3
The Company was in compliance with all debt covenants as of June 27, 2026 and June 28, 2025.
Term Loan B
On October 16, 2025, concurrent with the closing of the acquisition of Spirent’s HSE and CE business, the Company entered into a $ 600.0 million senior secured term loan credit agreement (Term Loan Credit Agreement) with Wells Fargo Bank, National Association (Wells Fargo), as administrative agent, and other lenders. The term loans, which mature on October 16, 2032, are secured by substantially all of the assets of the Company and those of its domestic subsidiaries. The proceeds from the term loans were used to finance a portion of the acquisition, acquisition related expenses and will be used for general corporate purposes. In connection with the issuance of the term loans, the Company incurred $ 15.2 million of issuance costs. The debt issuance costs were capitalized in Long-term debt on the Consolidated Balance Sheets and were amortized to interest expense using the straight-line method except for the unamortized debt issuance costs derecognized as part of the extinguishments.
During fiscal 2026, the Company voluntarily prepaid the entire $ 600.0 million outstanding principal balance under the Term Loan Credit Agreement. The prepayments were accounted for as extinguishments, with the carrying amount of the debt prepaid, including the unamortized debt issuance costs, derecognized, and any difference between the reacquisition price and the carrying amount recognized as a loss on debt extinguishment. The total loss from the prepayments was $ 14.2 million recorded as Loss on debt extinguishment in the Consolidated Statements of Operations.
0.625 % Senior Convertible Notes (2031 Notes)
On August 20, 2025, the Company issued $ 250.0 million aggregate principal amount of 0.625 % Senior Convertible Notes due 2031 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The Company issued $ 100.9 million aggregate principal amount of the 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 (the 2025 Exchange Transaction) and issued and sold $ 149.1 million aggregate principal amount of the 2031 Notes in a private placement to accredited institutional buyers (the 2025 Subscription Transactions).
The 2025 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. The total loss from the exchange was $ 3.8 million recorded as Loss on debt extinguishment in the Consolidated Statements of Operations.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Concurrent with the transactions discussed above, the Company repurchased and subsequently retired 2.7 million shares of its common stock for $ 30.0 million under the 2022 Repurchase Plan.
In connection with the issuance of the 2031 Notes, the Company incurred $ 6.1 million of issuance costs. The debt issuance costs were capitalized and will be amortized to interest expense using the straight-line method until maturity.
The 2031 Notes are an unsecured obligation of the Company and bear interest at an annual rate of 0.625 %, payable semi-annually in arrears on March 1 and September 1 of each year, beginning March 1, 2026. The 2031 Notes mature on March 1, 2031 unless earlier converted, redeemed or repurchased.
The 2031 Notes may be converted under certain circumstances, based on an initial conversion rate of 72.5295 shares (equivalent to an initial conversion price of approximately $ 13.79 per share) at the option of the holders into cash up to the principal amount, with the remaining amount converted into cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock at the Company’s election. The initial conversion price represents a 25.0 % premium to the closing price of the Company’s common stock on the pricing date, August 13, 2025, which will be subject to customary anti-dilution adjustments.
The 2031 Notes may be converted at any time on or prior to the close of business on the business day immediately preceding December 1, 2030, in multiples of $1,000 principal amount, at the option of the holder under the following circumstances:
• On any date during any calendar quarter beginning after December 31, 2025 (and only during such calendar quarter) if the closing price of the Company’s common stock was more than 130 % of the then current conversion price for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading-day period ending on the last trading day of the previous calendar quarter;
• If the Company distributes to all or substantially all holders of its common stock rights or warrants (other than pursuant to a stockholder rights plan) entitling them to purchase, for a period of 45 calendar days or less, shares of VIAVI’s common stock at a price less than the average closing sale price of VIAVI’s common stock for the ten trading days preceding the declaration date for such distribution;
• If the Company distributes to all or substantially all holders of its common stock, cash or other assets, debt securities or rights to purchase our securities (other than pursuant to a stockholder rights plan), at a per share value exceeding 10 % of the closing sale price of the Company’s common stock on the trading day preceding the declaration date for such distribution;
• If the Company is party to a specified transaction, a fundamental change or a make-whole fundamental change (each as defined in the indenture of the 2031 Notes);
• During the five consecutive business-day period immediately following any ten consecutive trading-day period in which the trading price per $1,000 principal amount of the 2031 Notes for each day during such ten consecutive trading-day period was less than 98 % of the product of the closing sale price of VIAVI’s common stock and the applicable conversion rate on such date; or
• If the Company calls any or all of the 2031 Notes for Optional Redemption.
During the periods from, and including, December 1, 2030 until the close of business on the business day immediately preceding March 1, 2031, holders may convert the 2031 Notes at any time regardless of the foregoing circumstances.
Holders of the 2031 Notes may require the Company to purchase all or a portion of the 2031 Notes upon the occurrence of a fundamental change at a purchase price equal to 100 % of the principal amount of the 2031 Notes to be purchased, plus accrued and unpaid interest to, but excluding, the fundamental repurchase date.
The Company may not redeem the 2031 Notes prior to September 6, 2028. The Company may redeem for cash all or part of the 2031 Notes, at its option, on or after September 6, 2028 if the closing price of the Company’s common stock was at least 130 % of the then current conversion price for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides the redemption notice in accordance with the Indenture. If the Company redeems less than all the outstanding 2031 Notes, at least
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
$ 75.0 million aggregate principal amount of 2031 Notes must be outstanding and not subject to redemption as of the relevant redemption notice date.
The Indenture provides for customary events of default, including payment defaults, breaches of covenants, failure to pay certain judgments and certain events of bankruptcy, insolvency and reorganization. If an event of default occurs and is continuing, the principal amount of the 2031 Notes, plus accrued and unpaid interest, if any, may be declared immediately due and payable, subject to certain conditions set forth in the Indenture. These amounts automatically become due and payable if an event of default relating to certain events of bankruptcy, insolvency or reorganization occurs.
During the fourth quarter of fiscal 2026, the closing price of the Company’s common stock exceeded 130 % of the applicable conversion price of the 2031 Notes, on at least 20 of the last 30 consecutive trading days of the calendar quarter, causing the 2031 Notes to be convertible by their holders for the period July 1, 2026 to September 30, 2026. As a result, the $ 244.8 million carrying value of the 2031 Notes has been classified as short-term debt.
As of June 27, 2026, the expected remaining term of the 2031 Notes is 4.7 years.
1.625 % Senior Convertible Notes (2026 Notes)
On March 6, 2023, the Company issued $ 250.0 million aggregate principal amount of 1.625 % Senior Convertible Notes due 2026 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The Company issued $ 132.0 million aggregate principal amount of the 2026 Notes to certain holders of the 1.00 % Senior Convertible Notes due 2024 (2024 Notes) in exchange for $ 127.5 million principal amount of the 2024 Notes (the 2023 Exchange Transaction) and issued and sold $ 118.0 million aggregate principal amount of the 2026 Notes in a private placement to accredited institutional buyers (the 2023 Subscription Transactions).
The 2023 Exchange Transaction was accounted for as a modification. The $ 127.5 million principal of the 2024 Notes was reduced by $ 10.1 million, with offsetting increase to additional paid-in capital, to account for the increase in the fair value of the embedded conversion option in the modification. The increase in principal and coupon interest, along with the increased option value, totaled $ 14.6 million and is a direct reduction from the carrying amount of the debt on the Consolidated Balance Sheets. This amount has been accreted as an adjustment to interest expense on a straight-line basis up to the full face value of the 2026 Notes through maturity on March 15, 2026.
The proceeds of the 2023 Subscription Transactions amounted to $ 113.8 million after issuance costs of $ 4.2 million. The exchange resulted in $ 2.2 million of the issuance costs recorded as Loss on convertible note modification in the Consolidated Statements of Operations. The remaining issuance costs of $ 2.0 million, as well as $ 0.3 million of unamortized costs carried over from the 2024 Notes at the exchange date were capitalized within Long-term debt (as a contra-balance) on the Consolidated Balance Sheets and were amortized to interest expense using the straight-line method until maturity on March 15, 2026.
On August 20, 2025, as part of the 2025 Exchange Transaction, the Company exchanged $ 97.5 million aggregate principal amount of the 2026 Notes for $ 100.9 million aggregate principal amount of the 2031 Notes.
On December 15, 2025, the Company entered into separate privately-negotiated agreements with certain holders of the 2026 Notes. On December 22, 2025, the Company settled $ 103.5 million principal amount of 2026 Notes in exchange for an aggregate of 7.9 million shares of its common stock, par value $ 0.001 per share. Accrued interest was paid in cash. The transaction was accounted for as a debt extinguishment. The exchange did not qualify as an induced conversion. The Company recorded a loss on debt extinguishment of $ 38.7 million, representing the excess of the fair value of the shares issued over the carrying amount of the notes extinguished and transaction costs associated with the settlement. The loss is presented as Loss on debt extinguishment in the Company’s Consolidated Statements of Operations.
On March 15, 2026, the outstanding $ 49.0 million principal amount of the 2026 Notes matured. Nearly all holders of the 2026 Notes chose to convert and the settlement of the conversion resulted in a cash payment of $ 49.4 million, including $ 49.0 million in principal and $ 0.4 million in accrued interest, and the issuance of 1.8 million shares of its common stock for conversion value above par.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3.75 % Senior Notes (2029 Notes)
On September 29, 2021, the Company issued $ 400.0 million aggregate principal amount of 3.75 % Senior Notes due 2029 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. In connection with the issuance of the 2029 Notes, the Company incurred $ 7.0 million of issuance costs. The debt issuance costs were capitalized and will be amortized to interest expense using the straight-line method until maturity. The 2029 Notes are an unsecured obligation of the Company and bear annual interest of 3.75 %, payable semi-annually in arrears on April 1 and October 1 of each year, beginning April 1, 2022. The 2029 Notes mature on October 1, 2029 unless earlier redeemed or repurchased. As of June 27, 2026, the expected remaining term of the 2029 Notes is 3.3 years.
1.00 % Senior Convertible Notes (2024 Notes)
On March 3, 2017, the Company issued $ 400.0 million aggregate principal amount of 1.00 % Senior Convertible Notes due 2024 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. On March 22, 2017, the Company issued an additional $ 60.0 million upon exercise of the over-allotment option of the initial purchasers. The total proceeds from the 2024 Notes amounted to $ 451.1 million after issuance costs of $ 8.9 million. The debt issuance costs were capitalized and amortized to interest expense using the straight-line method from the issuance date through maturity on March 1, 2024.
During fiscal 2022, the Company entered into separate privately-negotiated agreements with certain holders of the 2024 Notes, settling $ 236.1 million principal in exchange for an aggregate of 8.6 million shares of its common stock, par value $ 0.001 per share, and $ 178.8 million in cash. The 2023 Exchange Transaction resulted in the reduction of $ 127.5 million principal of the 2024 Notes. On March 1, 2024, the Company converted two notes at the request of the respective note-holders and retired the remaining 2024 Notes principal of $ 96.4 million upon maturity.
Senior Secured Asset-Based Revolving Credit Facility
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. On October 16, 2025, the Company entered into an agreement with Wells Fargo to amend and extend the Credit Agreement. The Credit Agreement, as amended, provides for a senior secured asset-based revolving credit facility in a maximum aggregate amount of $ 200 million and matures on October 16, 2030. The Credit Agreement also provides that, under certain circumstances, the Company may increase the aggregate amount of revolving commitments thereunder by an aggregate amount of up to $ 100 million so long as certain conditions are met. The proceeds from the credit facility established under the Credit Agreement will be used for working capital and other general corporate purposes. The obligations under the Credit Agreement are secured by substantially all of the assets of the Company and those of its subsidiaries that are borrowers and guarantors under the Credit Agreement.
Amounts outstanding under the Credit Agreement accrue interest as follows:(i) if the amounts outstanding are denominated in U.S. Dollars, at a per annum rate equal to either, at the Company’s election, SOFR plus a margin of 1.50 % to 2.00 % per annum, or a specified base rate plus a margin of 0.50 % to 1.00 %, in each case, depending on the average excess availability under the facility, (ii) if the amounts outstanding are denominated in Sterling, at a per annum rate equal to the Sterling Overnight Interbank Average Rate (SONIA) plus a margin of 1.50 % to 2.00 %, depending on the average excess availability under the facility, (iii) if the amounts outstanding are denominated in Euros, at a per annum rate equal to the Euro Interbank Offered Rate plus a margin of 1.50 % to 2.00 %, depending on the average excess availability under the facility, or (iv) if the amounts outstanding are denominated in Canadian Dollars, at a per annum rate equal to either, at the Company’s election, the adjusted Term Canadian Overnight Repo Rate Average (CORRA) plus a margin of 1.50 % to 2.00 %, or a specified base rate plus a margin of 0.50 % to 1.00 %, in each case, depending on the average excess availability under the facility.
The covenants of the Credit Agreement include customary restrictive covenants that, among other things, restrict the Company’s ability to incur additional indebtedness, grant liens and make certain acquisitions, investments, asset dispositions and restricted payments. In addition, the Credit Agreement contains certain financial covenants that require the Company to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 if excess availability under the facility is less than the greater of 10 % of the lesser of maximum revolver amount and borrowing base and $ 13.3 million.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of June 27, 2026, we had no borrowings under this facility and our available borrowing capacity was approximately $ 183.1 million, net of outstanding standby letters of credit of $ 3.8 million.
Interest Expense
The following table presents the interest expense for contractual interest, amortization of debt issuance cost, accretion of debt discount and other ( in millions ):
Years Ended
June 27, 2026 June 28, 2025 June 29, 2024
Contractual interest $ 38.0 $ 19.1 $ 19.7
Amortization of debt issuance cost 3.9 2.4 2.6
Accretion of debt discount 1.9 4.9 4.9
Other 3.6 3.6 3.7
Total Interest Expense $ 47.4 $ 30.0 $ 30.9
The effective interest rate on the Company’s contractual debt was 3.50 %, 2.93 % and 2.77 % for fiscal 2026, 2025 and 2024, respectively.
Note 12. Leases
The Company is a lessee in several operating leases, primarily real estate facilities for office space. The Company's lease arrangements are composed of operating leases with various expiration dates through March 31, 2042. The Company's leases do not contain any material residual value guarantees.
Lease expense and cash flow information related to our operating leases is as follows ( in millions ):
June 27, 2026 June 28, 2025
Operating lease costs (1)
$ 14.6 $ 13.0
Cash paid for amounts included in the measurement of operating lease liabilities $ 14.9 $ 13.0
Operating ROU assets obtained in exchange for operating lease obligations $ 20.5 $ 8.5
Weighted-average remaining lease term 5.6 years 6.1 years
Weighted-average discount rate 6.4 % 6.0 %
(1) Total variable lease costs were immaterial during the fiscal years ended June 27, 2026 and June 28, 2025. The total operating lease costs were included in Cost of revenues, R&D and SG&A in the Consolidated Statements of Operations.
Future minimum operating lease payments as of June 27, 2026 are as follows ( in millions ):
Fiscal Years
2027 $ 12.6
2028 11.6
2029 8.8
2030 6.0
2031 4.2
Thereafter 8.3
Total lease payments 51.5
Less: Interest ( 8.5 )
Present value of lease liabilities $ 43.0
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company’s ARO liability is primarily associated with leasehold improvements which the Company is contractually obligated to remove at the end of a lease to comply with the lease agreement. The Company derecognizes ARO liabilities when the related obligations are settled. As of June 27, 2026 and June 28, 2025, the Consolidated Balance Sheets included ARO balances of $ 0.5 million and $ 0.4 million, respectively, in Other current liabilities and $ 4.6 million and $ 3.5 million, respectively, in Other non-current liabilities.
A summary of the activity in the ARO accrual is outlined below ( in millions ):
Balance at Beginning of Period Liabilities Incurred Liabilities Settled Accretion Expense Revisions to Estimates Balance at End of Period
Year ended June 27, 2026 $ 3.9 $ 1.1 $ — $ 0.1 $ — $ 5.1
Year ended June 28, 2025 4.2 0.4 ( 0.8 ) — 0.1 3.9
Note 13. Restructuring
The Company’s restructuring events are primarily intended to reduce costs, consolidate operations, integrate various acquisitions, streamline product manufacturing and address market conditions. Restructuring charges include severance, benefits and outplacement costs to eliminate a specified number of positions. The timing of associated cash payments is dependent upon the jurisdiction of the affected employees and can extend over multiple periods.
Fiscal 2026 Plan
During the third quarter of fiscal 2026, management approved a restructuring and workforce reduction plan (the Fiscal 2026 Plan) across our NSE and OSP segments and Corporate (Corp) functions intended to improve operational efficiencies, better align the Company’s workforce with current business needs and strategic growth opportunities and includes integration of recently acquired businesses. The Fiscal 2026 Plan includes a global workforce reduction, facilities rationalization and asset write-offs. The Company expects approximately 5 % of its global workforce to be affected. The Company anticipates the Fiscal 2026 Plan to be substantially complete by the end of calendar year 2026.
Fiscal 2024 Plan
During the fourth quarter of fiscal 2024, management approved a restructuring and workforce reduction plan (the Fiscal 2024 Plan) across our NSE and OSP segments and Corp functions intended to improve operational efficiencies and better align the Company’s workforce with current business needs. The Fiscal 2024 Plan was completed in the fourth quarter of fiscal 2026 and impacted approximately 7 % of the Company’s global workforce.
Fiscal 2023 Plan
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 impacted approximately 5 % of the Company’s global workforce.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A summary of the activity in the restructuring accrual for the fiscal year ended June 27, 2026 is outlined below ( in millions ):
Balance as of June 28, 2025 Restructuring and related charges (benefits) Cash settlements Foreign currency translation adjustments Balance as of June 27, 2026
Fiscal 2026 Plan
NSE/Corp $ — $ 14.4 $ ( 8.8 ) $ ( 0.2 ) $ 5.4
OSP — 2.0 ( 0.9 ) — 1.1
Fiscal 2026 Plan — 16.4 ( 9.7 ) ( 0.2 ) 6.5
Fiscal 2024 Plan
NSE/Corp 3.5 ( 0.5 ) ( 3.0 ) — —
Fiscal 2024 Plan 3.5 ( 0.5 ) ( 3.0 ) — —
Total (1)
$ 3.5 $ 15.9 $ ( 12.7 ) $ ( 0.2 ) $ 6.5
(1) Included in Other current liabilities on the Consolidated Balance Sheets as of June 27, 2026 and June 28, 2025.
The Company also recognized Fiscal 2026 Plan charges of $ 3.7 million and $ 0.3 million related to property, plant and equipment recorded within Cost of revenues and SG&A, respectively, and $ 0.5 million of accelerated depreciation recorded within SG&A, each in the Consolidated Statements of Operations.
During fiscal 2025, the Company 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, the Company recorded restructuring charges of $ 14.8 million related to the Fiscal 2024 Plan and a benefit of $ 1.2 million related to the Fiscal 2023 Plan.
Note 14. Income Taxes
The Company’s (loss) income before income taxes consisted of the following ( in millions ):
Years Ended
June 27, 2026 June 28, 2025 June 29, 2024
Domestic $ ( 119.7 ) $ ( 88.8 ) $ ( 95.8 )
Foreign 136.0 127.4 107.4
Income before income taxes and equity investment earnings $ 16.3 $ 38.6 $ 11.6
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company’s income tax (benefit) expense consisted of the following ( in millions ):
Years Ended
June 27, 2026 June 28, 2025 June 29, 2024
Federal:
Current $ — $ — $ 0.3
Deferred — ( 23.2 ) —
Total federal income tax (benefit) expense — ( 23.2 ) 0.3
State:
Current ( 0.4 ) ( 7.7 ) 3.3
Deferred — ( 1.8 ) —
Total state income tax (benefit) expense ( 0.4 ) ( 9.5 ) 3.3
Foreign:
Current 38.4 41.0 32.8
Deferred 9.5 ( 3.9 ) 1.0
Total foreign income tax expense 47.9 37.1 33.8
Total income tax expense $ 47.5 $ 4.4 $ 37.4
The foreign current expense primarily relates to the Company’s profitable operations in certain foreign jurisdictions. The foreign deferred tax expense primarily relates to the remeasurement of German deferred tax assets and liabilities as a result of changes in the applicable German tax rates.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A reconciliation of the Company’s income tax expense at the federal statutory rate to the income tax expense at the effective tax rate is as follows ( in millions ):
June 27, 2026
Amount Percent
U.S. federal statutory income tax rate $ 3.4 21.0 %
State and local income taxes, net of federal income tax effect (1)
0.1 0.5 %
Foreign tax effects:
China:
Statutory tax rate difference between China and United States 3.8 23.6 %
Withholding taxes 3.5 21.2 %
Other ( 0.4 ) ( 2.5 ) %
Germany:
Remeasurement of deferred tax assets and liabilities 7.2 43.9 %
Other 1.3 8.1 %
Other jurisdictions 3.1 19.6 %
Effect of cross-border tax laws:
U.S. inclusion of foreign earnings 4.1 24.8 %
Changes in valuation allowances 15.8 96.6 %
Tax credits ( 0.3 ) ( 2.1 ) %
Nontaxable or nondeductible items:
Fair value change of contingent consideration 6.9 42.5 %
Disallowed compensation 3.7 22.5 %
Stock-based compensation ( 5.0 ) ( 30.7 ) %
Permanent adjustments - other 1.1 7.6 %
Changes in unrecognized tax benefits ( 0.8 ) ( 5.2 ) %
Effective tax rate $ 47.5 291.4 %
(1) The tax effect in this category primarily reflects state and local income taxes in Kansas, Maryland and Wisconsin.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A reconciliation of the Company’s income tax expense at the federal statutory rate to the income tax expense at the effective tax rate is as follows ( in millions ):
Years ended
June 28, 2025 June 29, 2024
Income tax expense computed at federal statutory rate $ 8.1 $ 2.4
Withholding taxes 4.7 5.6
U.S. inclusion of foreign earnings 4.7 3.8
Internal restructuring — 1.2
Valuation allowance ( 14.4 ) 17.5
Foreign rate differential 4.5 3.8
Reserves ( 5.4 ) 1.2
Permanent items 0.1 ( 0.6 )
Fair value change of the contingent consideration ( 1.7 ) ( 2.0 )
Impact of prior years’ taxes 0.5 3.0
Research and experimentation benefits and other tax credits ( 1.7 ) —
State taxes 1.6 —
Disallowed compensations 3.2 2.0
Acquisition costs 0.5 —
Other ( 0.3 ) ( 0.5 )
Income tax expense $ 4.4 $ 37.4
The components of the Company’s net deferred taxes consisted of the following ( in millions ):
Balance as of
June 27, 2026 June 28, 2025 June 29, 2024
Gross deferred tax assets:
Tax credit carryforwards $ 143.2 $ 140.5 $ 138.2
Net operating loss carryforwards 240.2 337.9 381.0
Capital loss carryforwards 1.1 1.1 1.0
Inventories 63.1 48.9 37.2
Accruals and reserves 60.7 54.9 53.0
Intangibles including acquisition related items 439.6 461.8 510.6
Capitalized research costs 411.3 355.6 312.3
Other 56.8 48.3 43.5
Gross deferred tax assets 1,416.0 1,449.0 1,476.8
Valuation allowance ( 1,238.9 ) ( 1,266.3 ) ( 1,336.0 )
Deferred tax assets 177.1 182.7 140.8
Gross deferred tax liabilities:
Acquisition related items ( 53.8 ) ( 54.1 ) ( 29.4 )
Tax on unrepatriated earnings ( 5.0 ) ( 4.9 ) ( 9.5 )
Foreign branch tax adjustments ( 30.2 ) ( 25.2 ) ( 14.6 )
Other ( 20.5 ) ( 17.4 ) ( 16.5 )
Deferred tax liabilities ( 109.5 ) ( 101.6 ) ( 70.0 )
Total net deferred tax assets $ 67.6 $ 81.1 $ 70.8
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As of June 27, 2026, the Company had federal, state and foreign tax net operating loss carryforwards of $ 798.8 million, $ 273.8 million and $ 449.9 million, respectively, and federal and state research tax credit carryforwards of $ 85.9 million and $ 56.6 million, respectively. The federal tax net operating loss carryforwards start to expire in fiscal 2027 and at various dates through 2038, if not utilized. The federal research tax credit carryforwards start to expire in fiscal 2027, and at various dates through fiscal 2045, if not utilized. The state tax net operating loss carryforwards start to expire in fiscal 2027 and at various dates through 2045, if not utilized. The state research tax credit starts to expire in fiscal 2027, but a majority of the state credits have an indefinite carryforward period. In addition, a portion of the foreign tax net operating loss and capital loss carryforwards have an indefinite carryforward period. Utilization of the tax net operating losses may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state and foreign provisions. Loss carryforward limitations may result in the expiration or reduced utilization of a portion of the Company’s net operating losses.
During fiscal 2024, the Company completed a series of planned internal transactions between subsidiaries within the group to optimize our ability to repatriate earnings back to the U.S. As a result of these transactions, the Company is able to reduce the amount of withholding tax that will be accrued on current and future earnings. The tax expense of these transactions was approximately $ 1.2 million.
Foreign withholdi ng taxes associated with the repatriation of earnings of certain foreign subsidiaries have not been provided because the Company intends to reinvest these earnings indefinitely outside of the U.S. The Company estimates that an additional $ 1.6 million of foreign withholding taxes would have to be provided if these earnings were repatriated back to the U.S.
The valuation allowance decreased by $ 27.4 million in fiscal 2026, decreased by $ 69.7 million in fiscal 2025, and de creased by $ 15.5 million in fiscal 2024. The decrease during fiscal 2026 was primarily due to the expiration and utilization of federal net operating losses (NOLs) and amortization of intangibles assets, offset by an increase in the capitalization of federal research expenditures in the U.S. The decrease during fiscal 2025 was primarily due to the increase in the deferred tax liability that resulted from the acquisition of Inertial Labs and the expiration of NOLs in the U.S. The decrease during fiscal 2024 was primarily due to the amortization of intangibles assets and utilization of NOLs, offset by an increase in the capitalization of federal research expenditures in the U.S.
The following table provides information about the activity of our deferred tax valuation allowance (in millions) :
Deferred Tax Valuation Allowance Balance at
Beginning
of Period Additions Charged
to Expenses or
Other Accounts (1)
Deductions Credited to Expenses or Other Accounts (2)
Balance at
End of
Period
Year Ended June 27, 2026 $ 1,266.3 $ 91.7 $ ( 119.1 ) $ 1,238.9
Year Ended June 28, 2025 1,336.0 78.3 ( 148.0 ) 1,266.3
Year Ended June 29, 2024 1,351.5 132.7 ( 148.2 ) 1,336.0
(1) Additions include current year additions charged to expenses and current year build due to increases in net deferred tax assets, return to provision true-ups, and other adjustments.
(2) Deductions include current year releases credited to expenses and current year reductions due to decreases in net deferred tax assets, return to provision true-ups, other adjustments and increases in deferred tax liabilities.
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A reconciliation of unrecognized tax benefits between July 1, 2023 and June 27, 2026 is as follows ( in millions ):
Balance at July 1, 2023 $ 54.9
Additions based on tax positions related to current year 1.2
Additions based on tax positions related to prior year 0.5
Reductions based on tax positions related to prior year ( 1.9 )
Reductions for lapse of statute of limitations ( 0.2 )
Balance at June 29, 2024 54.5
Additions based on tax positions related to current year 2.2
Additions based on tax positions related to prior year 0.1
Reductions based on tax positions related to prior year ( 4.1 )
Reductions for lapse of statute of limitations ( 6.5 )
Balance at June 28, 2025 46.2
Additions based on tax positions related to current year 1.9
Additions based on tax positions related to prior year —
Reductions based on tax positions related to prior year ( 1.3 )
Reductions for lapse of statute of limitations ( 1.9 )
Balance at June 27, 2026 $ 44.9
The unrecognized tax benefits relate primarily to the allocations of revenue and costs among the Company’s global operations and the validity of some U.S. tax credits. Included in the balance of unrecognized tax benefits at June 27, 2026 is $ 7.1 million of tax benefits that, if recognized, would impact the effective tax rate. Also included in the balance of unrecognized tax benefits at June 27, 2026 is $ 33.9 million of tax benefits that, if recognized, would result in adjustments to the valuation allowance.
The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits within th e income tax provisio n. The amount of interest and penalties accrued as of June 27, 2026, June 28, 2025 and June 29, 2024 were approximately $ 3.0 million, $ 3.4 million and $ 3.8 million, respectively. T he timing and resolution of income tax examinations is uncertain, and the amounts ultimately paid, if any, upon resolution of issues raised by the taxing authorities may differ from the amounts accrued for each year.
The Company is routinely subject to various federal, state and foreign audits by taxing authorities. The Company believes that adequate amounts have been provided for any adjustments that may result from these examinations.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the Company’s major tax jurisdictions and the tax years that remain subject to examination by such jurisdictions as of June 27, 2026:
Tax Jurisdictions Tax Years
United States (1)
2006 and onward
Canada 2024 and onward
China 2021 and onward
France 2023 and onward
Germany 2018 and onward
Korea 2019 and onward
United Kingdom 2024 and onward
(1) Although the Company is generally subject to a three-year statute of limitations in the U.S., tax authorities maintain the ability to adjust tax attribute carryforwards generated in earlier years.
The following table presents income taxes paid, net of refunds received ( in millions ):
Year ended
June 27, 2026
Income taxes paid (net of refund)
Federal $ —
State 0.3
Foreign
Canada 2.2
China 27.4
United Kingdom ( 10.8 )
Other countries 4.7
Total cash paid for income taxes, net of refunds $ 23.8
Note 15. Stockholders' Equity
Issuance of Common Stock - Public Offering
On May 21, 2026, the Company completed an underwritten public offering of 12.8 million shares of our common stock (including the exercise in full by the underwriters of their 30-day option to purchase up to 1.7 million additional shares of common stock) at a public offering price of $ 45.00 per share. The net proceeds from the offering were approximately $ 557.7 million after deducting the underwriting discounts and commissions of $ 17.3 million. The Company also incurred transaction expenses of $ 0.6 million recorded as a reduction of Additional paid-in capital on the Consolidated Balance Sheets. The Company used the net proceeds of the offering to prepay the $ 450.0 million aggregate principal amount of the Term Loan B. The excess net proceeds will be used to fund working capital or for other general corporate purposes.
Issuance of Common Stock - Convertible Note Settlement
During the twelve months ended June 27, 2026, the Company issued approximately 9.7 million shares of its common stock related to the settlement of the 2026 Notes, including 7.9 million shares in December 2025 and 1.8 million shares in March 2026.
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Repurchase of Common Stock
In September 2022, the Board of Directors authorized a new stock repurchase plan (2022 Repurchase Plan) of up to $ 300 million effective October 1, 2022 which remains in effect until the amount authorized has been fully repurchased or until suspension or termination of the program. Under the 2022 Repurchase Plan, the Company is authorized to repurchase shares through a variety of methods, including open market purchases, privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans. The timing of repurchases under the plan will depend upon business and financial market conditions.
The following table summarizes share repurchase activity related to the Company’s 2022 Repurchase Plan (in millions, except average price per share amounts) :
Years Ended
June 27, 2026 June 28, 2025 June 29, 2024
Total number of shares repurchased 2.7 2.0 2.3
Average price per share $ 11.11 $ 8.20 $ 8.70
Total purchase price 30.0 16.4 20.0
Remaining authorization under 2022 Repurchase Plan at end of period 168.4 198.4 214.8
The total purchase price of these repurchases was reflected as a decrease to common stock based on the stated par value per share with the remainder charged to accumulated deficit. All common shares repurchased during fiscal 2026, 2025 and 2024 have been canceled and retired.
Preferred Stock
The Company’s Board of Directors has authority to issue up to 1,000,000 shares of undesignated preferred stock and to determine the powers, preferences and rights and the qualifications, limitations or restrictions granted to or imposed upon any wholly unissued shares of undesignated preferred stock and to fix the number of shares constituting any series and the designation of such series, without the consent of the Company’s stockholders. The preferred stock could be issued with voting, liquidation, dividend and other rights superior to those of the holders of common stock. Subsequent issuance of any preferred stock by the Company’s Board of Directors, under some circumstances, could have the effect of delaying, deferring or preventing a change in control.
Note 16. Stock-Based Compensation
Stock-Based Benefit Plans
Stock Award Plans
The Company’s Amended and Restated 2003 Plan provides for the granting of stock options, stock appreciation rights (SARs), dividend equivalent rights, restricted stocks, RSUs, performance units and performance shares, the vesting of which may be time-based or upon satisfaction of performance criteria or other conditions.
As of June 27, 2026, the Company had 10.1 million shares subject to Full Value Awards (defined below) issued and outstanding and 13.5 million shares of common stock available for grant under the Amended and Restated 2003 Plan.
Employee Stock Purchase Plans
The Company’s ESPP provides eligible employees with the opportunity to acquire an ownership interest in the Company through periodic payroll deductions and provides a discounted purchase price as well as a look-back period. The ESPP is structured as a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986. As of June 27, 2026, 5.1 million shares remained available for issuance. The ESPP, as amended, provides for a 15 % discount with a look-back period of six months .
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Full Value Awards
The Company's stock-based compensation includes a combination of time-based RSUs and MSUs and PSUs. RSUs are granted without an exercise price and are converted to shares immediately upon vesting. When converted into shares upon vesting, shares equivalent in value to the minimum withholding taxes liability on the vested shares are withheld by the Company for the payment of such taxes. For performance-based awards, shares attained over target upon vesting are reflected as awards granted during the period.
Time-based RSU awards will generally vest in annual installments over a period of three to four years subject to the employees’ continuing service to the Company. The Company's performance-based MSU and PSU awards may include performance conditions, market conditions, time-based service conditions or a combination thereof and are generally expected to vest over one to four years . In addition, the actual number of shares awarded upon vesting of performance-based grants may vary from the target shares depending upon the achievement of the relevant performance or market-based conditions.
Stock-Based Compensation
The impact on the Company’s results of operations of recording stock-based compensation expense by function for fiscal 2026, 2025 and 2024 was as follows ( in millions ):
Years Ended
June 27, 2026 June 28, 2025 June 29, 2024
Cost of revenues $ 4.4 $ 5.7 $ 4.9
Research and development 9.8 8.8 8.7
Selling, general and administrative 41.2 38.6 35.8
Total stock-based compensation expense $ 55.4 $ 53.1 $ 49.4
Approximately $ 1.0 million of stock-based compensation expense was capitalized to inventory at June 27, 2026 and June 28, 2025.
Stock Option Activity
During fiscal 2024, 1.2 million of stock options were exercised, all of which have been fully amortized and recognized since before June 29, 2019. There were no stock options outstanding as of June 27, 2026.
Employee Stock Purchase Plan Activity
The expense related to the ESPP is recorded on a straight-line basis over the relevant subscription period. During fiscal 2026, the Company issued shares of 465,738 and 311,785 on January 30, 2026 and July 31, 2025, respectively, as part of the ESPP. As of June 27, 2026, there was $ 0.3 million of unrecognized stock-based compensation cost related to the ESPP that remains to be amortized. The cost will be recognized in the first quarter of fiscal 2027.
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Full Value Awards Activity
A summary of the status of the Company’s non-vested Full Value Awards as of June 27, 2026 and changes during fiscal 2024, 2025 and 2026 are presented below ( in millions, except Weighted-Average Grant Date Fair Value Per Share amounts ):
Full Value Awards
Performance Shares (1)
Non-Performance Shares Total Number of Shares Weighted-Average Grant Date Fair Value Per Share
Non-vested July 1, 2023 1.7 5.8 7.5 $ 15.06
Awards granted 1.2 3.6 4.8 $ 10.28
Awards vested ( 0.5 ) ( 2.2 ) ( 2.7 ) $ 14.96
Awards forfeited ( 0.2 ) ( 0.3 ) ( 0.5 ) $ 15.55
Non-vested June 29, 2024 2.2 6.9 9.1 $ 12.51
Awards granted 1.5 4.6 6.1 $ 9.09
Awards vested ( 0.4 ) ( 3.4 ) ( 3.8 ) $ 13.43
Awards forfeited ( 0.8 ) ( 0.4 ) ( 1.2 ) $ 12.57
Non-vested June 28, 2025 2.5 7.7 10.2 $ 10.09
Awards granted 1.3 3.8 5.1 $ 12.68
Awards vested ( 1.1 ) ( 3.7 ) ( 4.8 ) $ 10.59
Awards forfeited ( 0.1 ) ( 0.3 ) ( 0.4 ) $ 12.71
Non-vested June 27, 2026 2.6 7.5 10.1 $ 11.06
(1) Performance Shares refer to the Company’s MSU and PSU awards, where the actual number of shares awarded upon vesting may be higher or lower than the target amount depending on the achievement of the relevant market conditions and performance goal achievement. The majority of MSUs vest in equal annual installments over three to four years based on the attainment of certain total shareholder performance measures and the employee’s continued service through the vest date. The aggregate grant-date fair value of MSUs granted during fiscal 2026, 2025 and 2024 was estimated to be $ 16.3 million, $ 15.4 million and $ 13.4 million, respectively, and was calculated using a Monte Carlo simulation. The Company did not grant any PSU awards in fiscal 2026, 2025 and 2024. PSU awards vest based on the attainment of certain performance measures and the employee’s continued service through the vest date.
As of June 27, 2026, $ 62.9 million of unrecognized stock-based compensation cost related to Full Value Awards remains to be amortized. That cost is expected to be recognized over the weighted-average remaining amortization period of 1.5 years.
Valuation Assumptions
The Company estimates the fair value of time-based RSU awards based on the closing market price of the Company’s common stock on the date of grant. In the case of PSUs that are performance-based awards without a market condition, the Company will estimate the fair value of the awards using a probability weighted model. In the case of MSUs or PSUs, that are performance-based awards and include a market condition, the Company will estimate the fair value of the awards using a combination of the closing market price of the Company’s common stock on the grant date and the Monte Carlo simulation model. The weighted-average assumptions used to measure fair value of performance-based awards with a market condition were as follows:
Years Ended
June 27, 2026 June 28, 2025 June 29, 2024
Volatility of common stock 38.3 % 37.6 % 34.8 %
Average volatility of peer companies 63.1 % 66.8 % 65.8 %
Average correlation coefficient of peer companies 0.1873 0.2053 0.2305
Risk-free interest rate 3.7 % 3.9 % 4.9 %
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company did no t issue stock option grants during fiscal 2026, 2025 and 2024. The Company estimates the fair value of ESPP purchase rights using a BSM valuation model. The fair value is estimated on the date of grant using the BSM option valuation model with the following weighted-average assumptions:
Employee Stock Purchase Plans
June 27, 2026 June 28, 2025 June 29, 2024
Expected term (in years) 0.5 0.5 0.5
Expected volatility 40.5 % 42.6 % 29.8 %
Risk-free interest rate 3.9 % 4.7 % 5.3 %
Expected Term: The Company’s purchase right period is six months under the ESPP.
Expected Volatility: The expected volatility for ESPP purchase rights was based on the historical volatility of its stock price with a similar expected term.
Risk-Free Interest Rate: The Company bases the risk-free interest rate used in the BSM valuation method on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term.
Expected Dividend: The BSM valuation model calls for a single expected dividend yield as an input. The Company has not paid and does not anticipate paying any dividends in the near future.
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Note 17. Employee Pension and Other Benefit Plans
Employee 401(k) Plans
The Company sponsors the Viavi Solutions 401(k) Plan (the 401(k) Plan), a defined contribution plan under ERISA, which provides retirement benefits for its eligible employees through tax deferred salary deductions. The 401(k) Plan allows employees to contribute up to 50 % of their annual compensation, with contributions limited to $ 24,500 (or $ 32,500 for employees over 50 years of age ) in calendar year 2026 as set by the Internal Revenue Service.
For all eligible employees, the Company offers a 401(k) Plan that provides a 100 % match of employees’ contributions up to the first 3 % of annual compensation and 50 % match on the next 2 % of compensation. All matching contributions are made in cash and vest immediately. The Company’s matching contributions to the 401(k) Plan were $ 6.5 million, $ 5.2 million and $ 5.3 million in fiscal 2026, 2025 and 2024, respectively.
Employee Defined Benefit Plans
The Company is responsible for a non-pension post-retirement benefit obligation assumed from a past acquisition, which is closed to new participants. As of June 27, 2026 and June 28, 2025, the liability balances related to the non-pension post-retirement benefit plan were $ 0.3 million. The liability balances were included in Other non-current liabilities on the Consolidated Balance Sheets.
The Company sponsors significant qualified and non-qualified pension plans for certain past and present employees in the U.K. and Germany including the plan assumed in a prior acquisition. The U.K. and German pension 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 in fiscal 2010. The Company also is responsible for a defined benefit plan comprising of gratuity payments open to current and new employees in India and includes an accrual for service costs. During fiscal 2026, the Government of India implemented four new labor codes which consolidated existing labor laws into a unified legislative framework. The implementation of the new labor codes had an approximate $ 0.6 million impact on the Company’s Indian plan, which was recognized as a service cost in Cost of revenues, R&D and SG&A in the Consolidated Statements of Operations.
Benefits are generally based upon years of service and compensation or stated amounts for each year of service. As of June 27, 2026, the U.K. plan was fully funded, the Indian plan was partially funded and the German plans were unfunded. The Company’s policy for funded plans is to make contributions equal to or greater than the requirements prescribed by law or regulation. For unfunded plans, the Company pays the post-retirement benefits when due. Future estimated benefit payments are summarized under the Future Benefit Payments section below. Except our Indian plan, no other required contributions are expected in fiscal 2027, but the Company, at its discretion, can make contributions to one or more of the defined benefit plans.
In July 2024, the U.K. Court of Appeal upheld a ruling in the matter of Virgin Media Limited v NTL Pension Trustees II Limited, a decision that VIAVI was not a party to or involved in, that certain historical amendments for contracted out defined benefit schemes were invalid if they were not accompanied by the correct actuarial confirmation. The Pension Schemes Act 2026 introduced legislation to allow affected schemes to retrospectively obtain written actuarial confirmation that historic changes did not reduce benefits below the minimum statutory level. The Financial Reporting Council and the Pensions Regulator have also published guidance on remediating missing historical contracting-out confirmations. The Company and Scheme Trustees will continue to monitor the implications of this case. The Company expects minimal, if any, impact on Scheme liability as a result of the initial ruling, given the recent legislation and accompanying guidance.
The Company accounts for its obligations under these pension plans in accordance with the authoritative guidance which requires the Company to record its obligation to the participants, as well as the corresponding net periodic cost. The Company determines its obligation to the participants and its net periodic cost principally using actuarial valuations provided by third-party actuaries. The amount recognized on the Consolidated Balance Sheets reflects the funded status of the plans, measured as the difference between the total PBO and the fair value of plan assets.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table presents the components of the net periodic benefit cost for the pension and benefits plans ( in millions ):
Years Ended
June 27, 2026 June 28, 2025 June 29, 2024
Service cost $ 1.0 $ — $ —
Interest cost 3.5 3.3 3.3
Expected return on plan assets ( 1.7 ) ( 1.8 ) ( 1.9 )
Recognized net actuarial losses 0.3 0.2 0.1
Net periodic benefit cost $ 3.1 $ 1.7 $ 1.5
The components of net periodic pension cost are included in Cost of revenues, R&D and SG&A in the Consolidated Statements of Operations.
The Company’s accumulated other comprehensive (loss) income includes unrealized net actuarial losses. The amount of unrealized net actuarial loss expected to be recognized in net periodic benefit cost during fiscal 2027 is $ 0.1 million.
The changes in the benefit obligations and plan assets of the pension and benefits plans were ( in millions ):
Pension Benefit Plans
June 27, 2026 June 28, 2025
Change in benefit obligation:
Benefit obligation at beginning of year: $ 84.9 $ 83.7
Service cost 1.0 —
Interest cost 3.5 3.3
Actuarial gains ( 3.0 ) ( 3.1 )
Acquisition (1)
0.6 —
Other (2)
1.0 —
Benefits paid ( 6.9 ) ( 6.2 )
Foreign exchange impact ( 2.6 ) 7.2
Benefit obligation at end of year $ 78.5 $ 84.9
Change in plan assets:
Fair value of plan assets at beginning of year $ 32.9 $ 32.0
Actual return on plan assets ( 0.1 ) ( 1.5 )
Other (2)
0.8 —
Employer contributions 7.3 6.0
Benefits paid ( 6.8 ) ( 6.2 )
Foreign exchange impact ( 1.3 ) 2.6
Fair value of plan assets at end of year 32.8 32.9
Funded status ( 45.7 ) ( 52.0 )
Accumulated benefit obligation $ 78.5 $ 84.9
(1) Represents the gratuity liability related to the Spirent HSE and CE business acquisition during fiscal 2026.
(2) Other represents balance for the Indian plan not included in the Accumulated benefit obligation or plan assets amounts as of June 28, 2025 in the table above.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Pension Benefit Plans
June 27, 2026 June 28, 2025
Amount recognized on the Consolidated Balance Sheets at end of year:
Non-current assets $ 7.1 $ 7.6
Current liabilities 5.8 5.8
Non-current liabilities 47.0 53.8
Other changes in plan assets and benefit obligations recognized in other comprehensive (loss) income:
Net actuarial gain $ 1.0 $ 0.1
Amortization of accumulated net actuarial losses 0.2 0.2
Total recognized in other comprehensive (loss) income $ 1.2 $ 0.3
During fiscal 2026, the Company contributed £ 0.8 million or approximately $ 1.0 million, while in fiscal 2025, the Company contributed £ 1.0 million or approximately $ 1.3 million to its U.K. pension plan. These contributions allowed the Company to comply with regulatory funding requirements. In addition, during fiscal 2026, the Company contributed Rs 90.7 million or approximately $ 1.0 million, while in fiscal 2025, the Company contributed Rs 16.4 million or approximately $ 0.2 million to its Indian plan.
Assumptions
Underlying both the calculation of the PBO and net periodic cost are actuarial valuations. These valuations use participant-specific information such as salary, age, years of service, and assumptions about interest rates, compensation increases and other factors. At a minimum, the Company evaluates these assumptions annually and makes changes as necessary.
The discount rate reflects the estimated rate at which the pension benefits could be effectively settled. In developing the discount rate, the Company considered the yield available on an appropriate AA corporate bond index, adjusted to reflect the term of the scheme’s liabilities as well as a yield curve model developed by the Company’s actuaries.
The expected return on assets was estimated by using the weighted average of the real expected long-term return (net of inflation) on the relevant classes of assets based on the target asset mix and adding the chosen inflation assumption.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the weighted average assumptions used to determine net periodic cost and benefit obligation for the Company’s U.K., German and Indian pension plans:
Pension Benefit Plans
June 27, 2026 June 28, 2025 June 29, 2024
Used to determine net periodic cost at end of year:
Discount rate 4.6 % 4.2 % 4.1 %
Expected long-term return on plan assets 5.4 % 5.3 % 5.9 %
Rate of pension increase 2.5 % 2.4 % 2.5 %
Used to determine benefit obligation at end of year:
Discount rate 4.7 % 4.2 % 4.1 %
Rate of pension increase 2.7 % 2.4 % 2.5 %
Investment Policies and Strategies
The Company’s investment objectives for its funded pension plan are to ensure that there are sufficient assets available to pay out members’ benefits as and when they arise and that, should the plan be discontinued at any point in time, there would be sufficient assets to meet the discontinuance liabilities.
To achieve these objectives, the trustee of the U.K. pension plan is responsible for regularly monitoring the funding position and managing the risk by investing in assets expected to perform approximately in line with the liabilities and help minimize volatility in the funding position. The trustee invests in a range of frequently traded funds (pooled funds) rather than direct holdings in individual securities to maintain liquidity, achieve diversification and reduce the potential for risk concentration. The funded plan assets are managed by professional third-party investment managers.
Fair Value Measurement of Plan Assets
The following table sets forth the plan assets at fair value and the percentage of assets allocations as of June 27, 2026 ( in millions ):
Target Allocation Total Percentage of Plan Assets Level 1 Level 2
Assets:
Fixed income 100 % $ 26.3 80.2 % — $ 26.3
Cash — % 6.5 19.8 % 6.5 —
Total assets $ 32.8 100.0 % $ 6.5 $ 26.3
The following table sets forth the plan’s assets at fair value and the percentage of assets allocations as of June 28, 2025 ( in millions ):
Fair value as of
June 28, 2025
Target Allocation Total Percentage of Plan Assets Level 1 Level 2
Assets:
Fixed income 100 % $ 32.5 98.8 % — $ 32.5
Cash — % 0.4 1.2 % 0.4 —
Total assets $ 32.9 100.0 % $ 0.4 $ 32.5
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company’s pension assets consist of a cash accumulation gratuity fund with value growing through guaranteed interest accumulation managed by an insurer for the Indian plan and multiple institutional funds (pension funds) of which the fair values are based on the quoted prices of the underlying securities for the U.K. Plan. Pension funds are classified as Level 2 assets since such funds are not directly traded in active markets.
Fixed income consists of a cash accumulation gratuity fund for our Indian plan and several funds that invest primarily in index-linked Gilts (over 5 years), Gilts index (over 15 years), sterling-denominated investment grade corporate bonds and overseas government bonds for our U.K. plan.
Future Benefit Payments
The following table reflects the expected benefit payments to defined benefit pension plan participants. These payments have been estimated based on the same assumptions used to measure the Company’s PBO at fiscal year end and include benefits attributable to estimated future compensation increases ( in millions ):
Fiscal Years
2027 $ 6.8
2028 6.7
2029 6.6
2030 6.0
2031 6.0
2032-2036 28.6
Note 18. Commitments and Contingencies
Purchase Obligations
Purchase obligations of $ 266.9 million as of June 27, 2026, represent legally-binding commitments to purchase inventory and other commitments made in the normal course of business to meet operational requirements. Certain purchase orders allow the option to cancel, reschedule and adjust the requirements based on the Company's business needs prior to the delivery of the goods or performance of the services. Obligations to purchase inventory and other commitments are generally expected to be fulfilled within one year .
The Company depends on a limited number of contract manufacturers, subcontractors, and suppliers for raw materials, packages and standard components. The Company generally purchases these single or limited source products through standard purchase orders or one-year supply agreements and has no significant long-term guaranteed supply agreements with such vendors. While the Company seeks to maintain a sufficient safety stock of such products and maintains on-going communications with its suppliers to guard against interruptions or cessation of supply, the Company’s business and results of operations could be adversely affected by a stoppage or delay of supply, substitution of more expensive or less reliable parts, receipt of defective parts or contaminated materials, increases in the price of such supplies, or the Company’s inability to obtain reduced pricing from its suppliers in response to competitive pressures.
Financing Obligations
On August 21, 2007, the Company entered into a sale and lease-back of certain buildings and land in Santa Rosa, California (the Santa Rosa Transactions), under which we leased back certain buildings. The net cash proceeds received from the transaction were $ 32.2 million. The lease terms range from a one-year lease with multiple renewal options to a ten-year lease with two five-year renewal options. These buildings did not qualify for sale and lease back accounting due to various forms of continuing involvement and, as a result, they were accounted for as financing transactions.
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In August 2012 and May 2019, the Company entered into two lease amendments to extend the term of the lease to August 31, 2032 with a ten-year renewal option. In the first quarter of fiscal 2020, the Company reassessed whether a sale would have occurred on the date of adoption of ASC 842, Leases, and, at which time, concluded that the buildings did not qualify for sale and lease back accounting in accordance with ASC 842. As a result, they were continuously accounted for as financing transactions.
As of June 27, 2026, $ 0.5 million was included in Other current liabilities , and $ 13.4 million was included in Other non-current liabilities on the Consolidated Balance Sheets. As of June 28, 2025, $ 0.2 million was included in Other current liabilities , and $ 15.5 million was included in Other non-current liabilities on the Consolidated Balance Sheets.
As of June 27, 2026, future minimum annual lease payments of Santa Rosa’s non-cancelable leaseback agreements were as follows (in millions) :
Fiscal Years
2027 $ 3.2
2028 2.7
2029 2.6
2030 2.7
2031 2.7
Thereafter 2.9
Total minimum leaseback payments $ 16.8
Guarantees
Authoritative guidance requires upon issuance of a guarantee the guarantor must recognize a liability for the fair value of the obligation that it assumes under the guarantee. In addition, disclosures about the guarantees that an entity has issued, including a tabular reconciliation of the changes of the entity’s product warranty liabilities, are required.
The Company from time to time enters into certain types of contracts that contingently require the Company to indemnify parties against third-party claims. These contracts primarily relate to: (i) divestiture agreements, under which the Company may provide customary indemnifications to purchasers of the Company’s businesses or assets; (ii) certain real estate leases, under which the Company may be required to indemnify property owners for environmental and other liabilities, and other claims arising from the Company’s use of the applicable premises; and (iii) certain agreements with the Company’s officers, directors and employees, under which the Company may be required to indemnify such persons for liabilities arising out of their employment relationship.
The terms of such obligations vary. Generally, a maximum obligation is not explicitly stated. Because the obligated amounts of these types of agreements often are not explicitly stated, the overall maximum amount of the obligations cannot be reasonably estimated. Historically, the Company has not been obligated to make significant payments for these obligations, and no liabilities have been recorded for these obligations on the Consolidated Balance Sheets as of June 27, 2026 and June 28, 2025.
Outstanding Standby Letters of Credit and Performance Bonds
As of June 27, 2026, the Company had standby letters of credit of $ 10.1 million, and other claims of $ 1.9 million collateralized by restricted cash.
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Product Warranties
The Company provides reserves for the estimated costs of product warranties at the time revenue is recognized. Prior to January 1, 2023 the Company offered its customers warranties up to three years for most of its products. On January 1, 2023, the Company changed the standard warranty for most of its products to one year. The Company estimates the costs of its warranty obligations based on its historical experience of known product failure rates, use of materials to repair or replace defective products and service delivery costs incurred in correcting product failures. In addition, from time to time, specific warranty accruals may be made if unforeseen technical problems arise. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.
The following table presents the changes in the Company’s warranty reserve during fiscal 2026 and 2025 ( in millions ):
Year Ended
June 27, 2026 June 28, 2025
Balance as of beginning of period $ 6.7 $ 7.4
Provision for warranty 1.5 2.3
Utilization of reserve ( 2.0 ) ( 2.6 )
Adjustments related to pre-existing warranties (including changes in estimates) ( 0.2 ) ( 0.4 )
Acquisition 0.6 —
Balance as of end of period $ 6.6 $ 6.7
Tariffs
On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were invalid. As of June 27, 2026, the Company had unrecognized refund claims totaling approximately $ 11.0 million, consisting of approximately $ 10.7 million of refund claims that had been approved as of June 27, 2026 but were paid in the first quarter of fiscal 2027, and approximately $ 0.3 million of refund claims that were approved and paid subsequent to June 27, 2026. The Company will recognize any recovery in the period in which the recognition criteria for contingent gains under ASC 450, Contingencies , are met. As of June 27, 2026, the Company had not recognized an asset related to these claims because realization of the claim was not considered assured until cash was received.
Legal Proceedings
Tel-Instruments Electronics Corp. Settlement
In July 2023, the Court of Appeals in the State of Kansas affirmed a lower court decision in a case filed by Aeroflex Wichita (Aeroflex), a VIAVI subsidiary, against Tel-Instrument Electronics Corp. (TIC) and two of its employees with total damages of $ 7.3 million owed to VIAVI. The lower court case, filed by Aeroflex prior to the acquisition by VIAVI and affirmed by the Kansas Court of Appeals, awarded damages caused by tortious interference and improper use and disclosure of Aeroflex’s confidential and proprietary business information used by the defendants to win a competitive U.S. Army contract.
TIC did not file a petition to appeal the decision and acknowledged its obligation to pay damages in full. VIAVI subsequently received total payments of $ 7.3 million from TIC and the two former employees and recorded a gain to Interest and other income, net in the Consolidated Statements of Operations for the year ended June 29, 2024.
The Company is subject to a variety of claims and suits that arise from time to time in the ordinary course of its business. While management currently believes that resolving claims against the Company, individually or in aggregate, will not have a material adverse impact on its financial position, results of operations or statement of cash flows, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. Were an unfavorable final outcome to occur, there exists the possibility of a material adverse impact on the Company’s financial position, results of operations or cash flows for the period in which the effect becomes reasonably estimable.
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Note 19. Operating Segments and Geographic Information
The Company evaluates its operating segments in accordance with the authoritative guidance on segment reporting. The Company’s Chief Executive Officer as the Company’s CODM uses operating segment financial information to evaluate segment performance and to allocate resources.
The Company’s operating and reportable segments are:
(i) Network and Service Enablement:
NSE provides an integrated portfolio of test, monitoring, assurance, and resilient PNT solutions that enable and secure critical infrastructure ranging from data center ecosystems and communication networks to military, aerospace, railway and first responder communications.
(ii) Optical Security and Performance Products:
OSP leverages its core optical coating technologies and volume manufacturing capability to design, manufacture and sell technologies for the anti-counterfeiting, 3D sensing, aerospace, industrial and automotive markets.
Beginning in the fourth quarter of fiscal 2026, employer payroll taxes related to stock-based compensation are no longer allocated to the Company's segment results and are instead included in the “Other segment items” row of the segment presentation. Prior-period segment results have been recast to conform to the current presentation. The Company believes excluding employer payroll taxes related to stock-based compensation aligns the treatment of these taxes, which are highly variable, with the underlying stock-based compensation expense and provides a more consistent measure of operating performance. Accordingly, this modification is intended to enhance investors’ understanding of the Company’s operating performance. These changes have no impact on any of the Company’s previously reported U.S. GAAP results.
Segment Reporting
The CODM manages the Company in two broad business categories: NSE and OSP. The CODM evaluates segment performance of the NSE and OSP business based on segment operating margins. The CODM uses segment operating margin to make budgeting and forecasting decisions and to assess the performance of our segments, primarily by monitoring actual results versus the prior year, the annual budget and forecasted results. In addition, the CODM reviews inventory levels and certain other current assets by segment. The Company allocates corporate-level operating expenses to its segment results, except for certain non-core operating and non-operating activities as discussed below.
The Company does not allocate stock-based compensation, including related employer payroll taxes, acquisition and integration related charges, amortization of acquisition related intangibles, amortization of acquisition related inventory step-up, legal settlements, restructuring, changes in fair value of contingent consideration liabilities, non-operating income and expenses, or other charges unrelated to core operating performance to its segments because management does not include this information in its measurement of the performance of the operating segments. These items are presented as “Unallocated other expenses” in the table below. Additionally, the Company does not specifically identify and allocate all assets by operating segment.
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Information on the Company’s reportable segments is as follows ( in millions ):
Year Ended June 27, 2026
Network and
Service
Enablement Optical Security and Performance Products Total
Product revenue $ 989.2 $ 335.4 $ 1,324.6
Service revenue 193.7 — 193.7
Net revenue 1,182.9 335.4 1,518.3
Cost of revenues 420.9 160.2
Research and development 231.1 13.5
Selling, general and administrative 219.5 25.8
Other segment items (1)
121.4 13.0
Total operating expense 572.0 52.3
Segment operating income $ 190.0 $ 122.9 $ 312.9
Segment operating margin 16.1 % 36.6 %
Unallocated other expenses ( 207.8 )
Loss on debt extinguishment ( 56.7 )
Interest and other income, net 15.3
Interest expense ( 47.4 )
Income before income taxes and equity investment earnings $ 16.3
Inventories, net $ 113.7 $ 41.6 $ 155.3
Prepayments and other current assets (2)
22.0 — 22.0
Assets not allocated to segments 2,528.3
Total assets $ 2,705.6
(1) Other segment items represents allocation of corporate level operating expenses.
(2) The amount presented represents the prepayments and other current assets attributed to NSE that are reviewed by the CODM. Other NSE related prepayments and current assets are not included as they are not part of the CODM’s measure of segment assets.
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Year Ended June 28, 2025
Network and
Service
Enablement Optical Security and Performance Products Total
Product revenue $ 604.3 $ 307.7 $ 912.0
Service revenue 172.3 — 172.3
Net revenue 776.6 307.7 1,084.3
Cost of revenues 288.6 144.1
Research and development 179.0 17.2
Selling, general and administrative 165.3 23.7
Other segment items (1)
101.1 10.1
Total operating expense 445.4 51.0
Segment operating income $ 42.6 $ 112.6 $ 155.2
Segment operating margin 5.5 % 36.6 %
Unallocated other expenses ( 97.7 )
Interest and other income, net 11.1
Interest expense ( 30.0 )
Income before income taxes and equity investment earnings $ 38.6
Inventories, net $ 74.4 $ 43.5 $ 117.9
Prepayments and other current assets (2)
5.8 — 5.8
Assets not allocated to segments 1,870.1
Total assets $ 1,993.8
(1) Other segment items represents allocation of corporate level operating expenses.
(2) The amount presented represents the prepayments and other current assets attributed to NSE that are reviewed by the CODM. Other NSE related prepayments and current assets are not included as they are not part of the CODM’s measure of segment assets.
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Year Ended June 29, 2024
Network and
Service
Enablement Optical Security and Performance Products Total
Product revenue $ 536.4 $ 298.4 $ 834.8
Service revenue 165.6 — 165.6
Net revenue 702.0 298.4 1,000.4
Cost of revenues 262.3 143.4
Research and development 173.4 16.4
Selling, general and administrative 160.5 23.1
Other segment items (1)
97.1 8.2
Total operating expense 431.0 47.7
Segment operating income $ 8.7 $ 107.3 $ 116.0
Segment operating margin 1.2 % 36.0 %
Unallocated other expenses ( 95.2 )
Interest and other income, net 21.7
Interest expense ( 30.9 )
Income before income taxes and equity investment earnings $ 11.6
Inventories, net $ 53.1 $ 43.4 $ 96.5
Prepayments and other current assets (2)
5.6 — 5.6
Assets not allocated to segments 1,634.2
Total assets $ 1,736.3
(1) Other segment items represents allocation of corporate level operating expenses.
(2) The amount presented represents the prepayments and other current assets attributed to NSE that are reviewed by the CODM. Other NSE related prepayments and current assets are not included as they are not part of the CODM’s measure of segment assets.
The Company operates primarily in three geographic regions: Americas, Asia-Pacific, and Europe, Middle East and Africa (EMEA). Net revenue is assigned to the geographic region and country where the Company’s product is initially shipped. For example, certain customers may request shipment of the Company’s product to a contract manufacturer in one country, which may differ from the location of their end customers.
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T he following table presents net revenue by the three geographic regions in which the Company operates and net revenue from countries that exceeded 10% of the Company’s total net revenue for the years ended June 27, 2026, June 28, 2025 and June 29, 2024 ( in millions ):
Years Ended
June 27, 2026 June 28, 2025 June 29, 2024
Product Revenue Service Revenue Total Product Revenue Service Revenue Total Product Revenue Service Revenue Total
Americas:
United States $ 503.8 $ 74.1 $ 577.9 $ 296.7 $ 59.3 $ 356.0 $ 265.0 $ 60.4 $ 325.4
Other Americas 87.8 17.3 105.1 51.2 18.0 69.2 50.3 15.0 65.3
Total Americas $ 591.6 $ 91.4 $ 683.0 $ 347.9 $ 77.3 $ 425.2 $ 315.3 $ 75.4 $ 390.7
Asia-Pacific:
Greater China $ 250.4 $ 8.4 $ 258.8 $ 209.1 $ 6.0 $ 215.1 $ 188.1 $ 5.9 $ 194.0
Other Asia-Pacific 182.1 29.0 211.1 136.0 28.5 164.5 126.5 26.0 152.5
Total Asia-Pacific $ 432.5 $ 37.4 $ 469.9 $ 345.1 $ 34.5 $ 379.6 $ 314.6 $ 31.9 $ 346.5
EMEA: $ 300.5 $ 64.9 $ 365.4 $ 219.0 $ 60.5 $ 279.5 $ 204.9 $ 58.3 $ 263.2
Total net revenue $ 1,324.6 $ 193.7 $ 1,518.3 $ 912.0 $ 172.3 $ 1,084.3 $ 834.8 $ 165.6 $ 1,000.4
One customer of the Company in the OSP segment generated $ 174.7 million, $ 166.7 million and $ 154.1 million of net revenue, which represented more than 10% of total net revenue, during fiscal 2026, 2025 and 2024, respectively.
Property, plant and equipment, net and Operating ROU assets, net were identified based on the operations in the corresponding geographic areas ( in millions ):
June 27, 2026 June 28, 2025
United States $ 174.0 $ 181.2
Other Americas 2.3 2.6
Greater China 36.6 23.6
Other Asia-Pacific 9.6 8.9
United Kingdom 17.3 23.3
Other EMEA 27.3 26.4
Total property, plant and equipment, net and Operating ROU assets, net $ 267.1 $ 266.0
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Note 20. Government Assistance
VALOR Grant
In the third quarter of fiscal 2024, the U.S. National Telecommunications and Information Administration (NTIA) awarded VIAVI a grant from the Public Wireless Supply Chain Innovation Fund. The grant is expected to provide approximately $ 21.7 million in funding over a three-year performance period for the VIAVI Automated Lab-as-a-Service for Open RAN (VALOR). During the three-year performance period, VIAVI will be required to spend $ 5.8 million, consisting of software license fees to operate the lab.
The Company recorded $ 6.1 million in the form of R&D credits in the Consolidated Statements of Operations during fiscal 2026 under the VALOR Grant. In addition, funding of $ 0.5 million offset the carrying value of lab equipment purchased during fiscal 2026. For the year ended June 27, 2026, we received cash reimbursement of $ 6.6 million and had pending receipts of $ 0.6 million included in Prepayments and other current assets on the Consolidated Balance Sheets.
Other Government Assistance
The Company recorded approximately $ 7.6 million for other government assistance, primarily R&D credits , in the Consolidated Statements of Operations during fiscal 2026. As of June 27, 2026, the Company had pending receipts of approximately $ 17.9 million related to other government assistance included in Prepayments and other current assets on the Consolidated Balance Sheets.
Note 21. Subsequent Events
The Company paid approximately $ 22.4 million in tariffs imposed under the IEEPA. Subsequent to June 27, 2026, the Company received approximately $ 11.0 million comprised primarily of tariff refunds (recovery of cost of sales) and related statutory interest associated with previously submitted IEEPA refund claims. These amounts were not recognized as of June 27, 2026 because the recognition criteria for contingent gains had not been met as of the balance sheet date.
On July 9, 2026, the Company completed the acquisition of substantially all of the assets of Direct Optical Research Company, a provider of optical fiber connector end-face quality measurement systems and interferometer technology. The transaction provides for base consideration of $ 14.0 million, subject to customary purchase price adjustments, and additional contingent consideration of up to $ 5.0 million based on the achievement of specified post-closing milestones. The acquisition will be included in the NSE segment and is expected to strengthen the Company's optical measurement technology portfolio and expand its capabilities in fiber optic test and measurement solutions.
Due to the closing of the acquisition subsequent to the fiscal year-end, the Company is currently determining the fair value of the acquired assets necessary to develop the purchase price allocation. Accordingly, it is not practicable to disclose the preliminary allocation of the purchase price as of the date these financial statements were issued.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.