VIAVI SOLUTIONS INC

Previous wording

•Our expectations related to our products, including costs associated with the development of new products, product yields, quality and other issues; and

Current wording

•Our expectations related to our products, including costs associated with the development of new products, product yields, quality and other issues;

Previous wording

•Our expectations related to macro-economic conditions, including the impact of inflation, fiscal tightening at central banks, changes in foreign exchange rates, the risk of increased tensions and trade actions between China and the U.S. and the ongoing military conflict between Russia and Ukraine and escalating armed conflict between Israel and Hamas, on our business, operations and financial results.

Current wording

•Our expectations related to macro-economic conditions, including the impact of inflation, fiscal tightening at central banks, changes in foreign exchange rates, the risk of increased tensions and trade actions between China and the U.S. and the ongoing military conflict between Russia and Ukraine and armed conflict between Israel and Hamas, on our business, operations and financial results.

Previous wording

VIAVI is a global provider of network test, monitoring, and assurance solutions for communications service providers (CSPs), hyperscalers, network equipment manufacturers (NEMs), enterprises, original equipment manufacturers, government and avionics. We help these customers harness the power of instruments, automation, intelligence, and virtualization. VIAVI is also a leader in light management technologies for 3D sensing, anti-counterfeiting, consumer electronics, industrial, automotive, government and aerospace applications.

Current wording

VIAVI is a global provider of network test, monitoring and assurance solutions for telecommunications, cloud, enterprises, first responders, military, aerospace and railway. VIAVI is also a leader in light management technologies for 3D sensing, anti-counterfeiting, consumer electronics, industrial, automotive, government and aerospace applications.

Previous wording

We continue to be impacted by macroeconomic conditions and end market demand volatility. As we look ahead to the third fiscal quarter of fiscal 2024, we expect revenue to be relatively flat sequentially primarily due to continued slow recovery in service provider spend and reduced seasonal demand in 3D sensing.

Current wording

We continue to be impacted by macroeconomic conditions and volatility in end market demand. As we look ahead to the fourth quarter of fiscal 2024, we expect revenue to be flat to slightly higher as our normal seasonal growth is expected to be adversely impacted by a continued conservative spend environment.

Previous wording

Despite near-term macroeconomic headwinds, our long-term focus remains on executing against our strategic priorities to drive revenue and earnings growth, capture market share and continue to optimize our capital structure. We remain positive on our long-term growth drivers in Wireless, Fiber, 3D sensing and PNT. We will continue to focus on executing against our strategic priorities over the long-term to:

Current wording

Despite near-term macroeconomic headwinds, our long-term focus remains on executing our strategic priorities to drive revenue and earnings growth, capture market share and continue to optimize our capital structure. We remain positive on our long-term growth drivers in Wireless, Fiber, 3D sensing and Position, Navigation and Timing (PNT). We will continue to focus on executing our strategic priorities over the long-term to:

Previous wording

Second quarter fiscal 2024 results included the following notable items:

Current wording

Third quarter fiscal 2024 results included the following notable items:

Previous wording

• GAAP operating margin of 8.8%, up 80 bps year-over-year.

Current wording

• GAAP operating margin of (4.8)%, down 400 bps year-over-year.

Previous wording

• Non-GAAP operating margin of 13.2%, down 300 bps year-over-year.

Current wording

• Non-GAAP operating margin of 9.3%, down 210 bps year-over-year.

Previous wording

• GAAP diluted EPS of $0.05, up $0.01 or 25.0% year-over-year.

Current wording

• GAAP diluted EPS of $(0.11), down $0.04 or 57.1% year-over-year.

Previous wording

• Non-GAAP diluted EPS of $0.11, down $0.03 or 21.4% year-over-year.

Current wording

• Non-GAAP diluted EPS of $0.06, down $0.02 or 25.0% year-over-year.

Previous wording

(1)Other items include charges (benefits) unrelated to core operating performance primarily consisting of certain acquisition and integration related charges, legal settlement, accretion of debt discount and losses on disposal of long-lived assets.

Current wording

(1)Other charges (benefits) unrelated to core operating performance primarily consisting of certain acquisition and integration related charges, legal costs, accretion of debt discount and loss on disposal of long-lived assets. During the three and nine months ended March 30, 2024, Other charges include expenses related to the proposed acquisition of Spirent.

Previous wording

(2)Unfavorable (favorable) litigation settlement recorded to Interest and other income, net in the Consolidated Statements of Operations for the three and six months ended December 30, 2023.

Current wording

(2)Gain on litigation settlement recorded to Interest and other income, net in the Consolidated Statements of Operations for the nine months ended March 30, 2024.

Previous wording

The Company provides non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP EPS financial measures as supplemental information regarding the Company’s operational performance. The Company uses the measures disclosed in this Report to evaluate the Company’s historical and prospective financial performance, as well as its performance relative to its competitors. Specifically, management uses these items to further its own understanding of the Company’s core operating performance, which the Company believes represents its performance in the ordinary, ongoing and customary course of its operations. Accordingly, management excludes from core operating performance items such as those relating to certain purchase price accounting adjustments, amortization of acquisition-related intangibles, stock-based compensation, legal settlements, restructuring, changes in fair value of contingent consideration liabilities and certain investing expenses and other activities that management believes are not reflective of such ordinary, ongoing and core operating activities. The Company believes excluding these items enables investors to evaluate more clearly and consistently the Company’s core operational performance.

Current wording

The Company provides non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP EPS financial measures as supplemental information regarding the Company’s operational performance. The Company uses the measures disclosed in this Report to evaluate the Company’s historical and prospective financial performance, as well as its performance relative to its competitors. Specifically, management uses these items to further its own understanding of the Company’s core operating performance, which the Company believes represents its performance in the ordinary, ongoing and customary course of its operations. Accordingly, management excludes from core operating performance items such as those relating to certain purchase price accounting adjustments, amortization of acquisition-related intangibles, stock-based compensation, legal settlements, restructuring, changes in fair value of contingent consideration liabilities and certain investing and acquisition related expenses and other activities that management believes are not reflective of such ordinary, ongoing and core operating activities. The Company believes excluding these items enables investors to evaluate more clearly and consistently the Company’s core operational performance.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Three months ended December 30, 2023 and December 31, 2022

Current wording

Three and Nine Months Ended March 30, 2024 and April 1, 2023

Previous wording

Net revenue decreased by $30.0 million, or 10.5%, during the three months ended December 30, 2023 compared to the same period a year ago. This decrease reflects the continuing weakness in service provider spending and softness in anti-counterfeiting.

Current wording

Net revenue decreased by $94.1 million, or 11.2%, during the nine months ended March 30, 2024 compared to the same period a year ago. This decrease reflects the continuing weakness in service provider spending and lower anti-counterfeiting revenue.

Previous wording

Service revenues increased by $0.6 million, or 1.4%, during the three months ended December 30, 2023 compared to the same period a year ago. This was driven by revenue increase from our SE segment offset by revenue decrease in our NE segment.

Current wording

Product revenues increased by $2.1 million, or 1.0%, during the three months ended March 30, 2024 compared to the same period a year ago, driven by revenue increases in our OSP and NE segments offset by revenue decrease in our SE segment.

Previous wording

Product revenues decreased by $30.6 million, or 12.7%, during the three months ended December 30, 2023 compared to the same period a year ago, driven by decreases in all segments.

Current wording

Product revenues decreased by $90.6 million, or 12.7%, during the nine months ended March 30, 2024 compared to the same period a year ago, driven by revenue decreases in all segments.

Previous wording

Net revenue from customers outside the Americas represented 59.5% of net revenue during the three and six months ended December 30, 2023. Net revenue from customers outside the Americas during the three and six months ended December 31, 2022 represented 62.6% and 61.4% of net revenue, respectively.

Current wording

Net revenue from customers outside the Americas during the three and nine months ended March 30, 2024 represented 64.1% and 61.0% of net revenue, respectively. Net revenue from customers outside the Americas during the three and nine months ended April 1, 2023 represented 59.5% and 60.9% of net revenue, respectively.

Previous wording

Amortization of acquired technologies within Cost of revenues decreased $2.3 million or 40.4% and $5.9 million or 46.1% during the three and six months ended December 30, 2023, respectively, compared to the same periods a year ago. These decreases are primarily due to certain intangible assets becoming fully amortized in fiscal 2023 offset in part by amortization of intangibles acquired through acquisitions in fiscal 2023.

Current wording

Amortization of acquired technologies within Cost of revenues decreased $2.4 million or 40.7% and $8.3 million or 44.4% during the three and nine months ended March 30, 2024, respectively, compared to the same periods a year ago. These decreases are primarily due to certain intangible assets becoming fully amortized in fiscal 2023 offset in part by amortization of intangibles acquired through acquisitions in fiscal 2023.

Previous wording

Gross margin decreased by 0.5 percentage points during the three months ended December 30, 2023 from 58.7% in the same period a year ago to 58.2% in the current period. The decrease was primarily due to gross margin reduction from our NE and OSP segments, partially offset by gross margin increase in our SE segment, as discussed below in the Operating Segment Information section.

Current wording

Gross margin decreased by 0.8 percentage points during the three months ended March 30, 2024 from 56.9% in the same period a year ago to 56.1% in the current period. The decrease was primarily due to gross margin reduction in all segments, as discussed below in the Operating Segment Information section.

Previous wording

Gross margin decreased by 1.0 percentage point during the six months ended December 30, 2023 from 59.2% in the same period a year ago to 58.2% in the current period. The decrease was primarily due to gross margin reduction from our NE and OSP segments, partially offset by gross margin increase in our SE segment, as discussed below in the Operating Segment Information section.

Current wording

Gross margin decreased by 1.0 percentage point during the nine months ended March 30, 2024 from 58.5% in the same period a year ago to 57.5% in the current period. The decrease was primarily due to gross margin reduction in all segments, as discussed below in the Operating Segment Information section.

Previous wording

R&D expense decreased by $2.4 million, or 4.6% and $5.1 million, or 4.9% during the three and six months ended December 30, 2023, respectively, compared to the same periods a year ago. These decreases were primarily due to benefits from our restructuring activities and variable expense reductions. As a percentage of net revenue, R&D expense increased by 1.2 percentage points during the three and six months ended December 30, 2023 compared to the same periods a year ago.

Current wording

R&D expense decreased by $0.8 million, or 1.6% during the three months ended March 30, 2024 compared to the same period a year ago. This decrease was primarily due to benefits from our restructuring activities. As a percentage of net revenue, R&D expense decreased by 0.2 percentage points during the three months ended March 30, 2024 compared to the same period a year ago.

Previous wording

SG&A expense decreased by $18.2 million, or 10.7%, during the six months ended December 30, 2023 compared to the same period a year ago. This decrease was primarily due to the fair value adjustment of contingent consideration related to acquisitions, benefits from our restructuring activities and variable expense reductions including lower commissions. As a percentage of net revenue, SG&A increased 1.7 percentage points during the six months ended December 30, 2023 compared to the same period a year ago.

Current wording

SG&A expense increased by $18.2 million, or 22.8%, during the three months ended March 30, 2024 compared to the same period a year ago. This increase was due to expenses related to the proposed acquisition of Spirent, the change in fair value of acquisition-related contingent consideration and reversal of variable compensation that benefited the same period a year ago. These increases were partially offset by benefits from our restructuring activities. As a percentage of net revenue, SG&A increased 7.6 percentage points during the three months ended March 30, 2024 compared to the same period a year ago.

Previous wording

Amortization of intangibles within Operating expenses decreased $0.8 million or 36.4% and $0.9 million or 20.5% during the three and six months ended December 30, 2023, respectively, compared to the same periods a year ago. These decreases are primarily due to certain intangible assets becoming fully amortized in fiscal 2023 offset in part by amortization of intangibles acquired through acquisitions in fiscal 2023.

Current wording

Amortization of intangibles within Operating expenses decreased $0.6 million or 28.6% and $1.5 million or 23.1% during the three and nine months ended March 30, 2024, respectively, compared to the same periods a year ago. These decreases are primarily due to certain intangible assets becoming fully amortized in fiscal 2023 offset in part by amortization of intangibles acquired through acquisitions in fiscal 2023.

Previous wording

We estimate future cash payments of $1.2 million under the Fiscal 2023 Plan during the remainder of fiscal 2024, funded by operating cash flow.

Current wording

We estimate future cash payments of $0.8 million under the Fiscal 2023 Plan, funded by operating cash flow.

Previous wording

During the three and six months ended December 30, 2023, the Company recorded restructuring benefits of $0.1 million and $0.9 million, respectively, related to the Fiscal 2023 Plan. Refer to “Note 13. Restructuring and Related Charges” for more information.

Current wording

During the three and nine months ended March 30, 2024, the Company recorded restructuring charges of $0.1 million and benefits of $0.8 million, respectively, related to the Fiscal 2023 Plan. Refer to “Note 13. Restructuring and Related Charges” for more information.

Previous wording

Interest and other income, net, was $3.8 million during the three months ended December 30, 2023 compared to $2.2 million during the same period a year ago. This $1.6 million increase was primarily driven by higher interest income during the current period partially offset by an unfavorable foreign exchange impact as the balance sheet hedging program provided a less favorable offset to the remeasurement of underlying foreign exchange exposures during the current period.

Current wording

Interest and other income, net, was $4.0 million during the three months ended March 30, 2024 compared to $1.6 million during the same period a year ago. This $2.4 million increase was primarily driven by higher interest income during the current period.

Previous wording

Interest and other income, net, was $14.0 million during the six months ended December 30, 2023 compared to $3.3 million during the same period a year ago. This $10.7 million increase was primarily driven by a legal settlement in our favor in the amount of $7.3 million and higher interest income during the current period partially offset by an unfavorable foreign exchange impact as the balance sheet hedging program provided a less favorable offset to the remeasurement of underlying foreign exchange exposures during the current period.

Current wording

Interest and other income, net, was $18.0 million during the nine months ended March 30, 2024 compared to $4.9 million during the same period a year ago. This $13.1 million increase was primarily driven by higher interest income during the current period and a legal settlement in our favor in the amount of $7.3 million partially offset by an unfavorable foreign exchange impact as the balance sheet hedging program provided a less favorable offset to the remeasurement of underlying foreign exchange exposures during the current period.

Previous wording

Interest expense increased by $1.7 million, or 27.4% and $3.4 million, or 27.6% during the three and six months ended December 30, 2023, respectively, compared to the same periods a year ago. These increases were primarily driven by the accretion of debt discount and interest expense on the Senior Convertible Notes due 2026 as a result of the issuance in March 2023.

Current wording

Interest expense increased by $1.0 million, or 14.9% and $4.4 million, or 23.2% during the three and nine months ended March 30, 2024, respectively, compared to the same periods a year ago. These increases were primarily driven by the accretion of debt discount and interest expense on the Senior Convertible Notes due 2026 as a result of the issuance in March 2023.

Previous wording

We recorded an income tax provision of $7.6 million and $16.2 million for the three and six months ended December 30, 2023, respectively. We recorded an income tax provision of $10.5 million and $22.7 million for the three and six months ended December 31, 2022, respectively.

Current wording

We recorded an income tax provision of $9.0 million and $25.2 million for the three and nine months ended March 30, 2024, respectively. We recorded an income tax provision of $6.0 million and $28.7 million for the three and nine months ended April 1, 2023, respectively.

Previous wording

The income tax provision for the three and six months ended December 30, 2023 and December 31, 2022 primarily relates to income tax in certain foreign and state jurisdictions based on our forecasted pre-tax income or loss.

Current wording

The income tax provision for the three and nine months ended March 30, 2024 and April 1, 2023 primarily relates to income tax in certain foreign and state jurisdictions based on our forecasted pre-tax income or loss.

Previous wording

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

Current wording

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

Previous wording

Asof December 30, 2023, and July 1, 2023, our unrecognized tax benefits totaling $50.8 million and $51.1 million, respectively, are included in deferred taxes and other non-current tax liabilities, net. We had $3.3 million accrued for the payment of interest and penalties as of December 30, 2023. The timing and resolution of income tax examinations is uncertain, and the amounts ultimately paid, if any, upon resolution of issues raised by the taxing authorities maydiffer from the amounts accrued for each year. Although we do not expect that our balance of gross unrecognized tax benefits will change materially in the next 12 months, given the uncertainty in the development of ongoing income tax examinations, we are unable to estimate the full range of possible adjustments to this balance.

Current wording

Asof March 30, 2024, and July 1, 2023, our unrecognized tax benefits totaling $51.1 million are included in deferred taxes and other non-current tax liabilities, net. We had $3.4 million accrued for the payment of interest and penalties as of March 30, 2024. The timing and resolution of income tax examinations are uncertain, and the amounts ultimately paid, if any, upon resolution of issues raised by the taxing authorities maydiffer from the amounts accrued for each year. Although we do not expect that our balance of gross unrecognized tax benefits will change materially in the next 12 months, given the uncertainty in the development of ongoing income tax examinations, we are unable to estimate the full range of possible adjustments to this balance.

Previous wording

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

Current wording

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

Previous wording

NE net revenue decreased by $27.8 million, or 15.2% during the three months ended December 30, 2023 compared to the same period a year ago, primarily driven by lower volumes in Fiber and Access, Wireless and Lab and Production partially offset by higher AvComm revenue.

Current wording

NE net revenue decreased by $0.2 million, or 0.1% during the three months ended March 30, 2024 compared to the same period a year ago, primarily driven by lower volume in Fiber and Access and Lab and Production, partially offset by higher Wireless and AvComm revenue.

Previous wording

NE net revenue decreased by $74.3 million, or 19.6% during the six months ended December 30, 2023 compared to the same period a year ago, primarily driven by lower volumes in Fiber and Access, Wireless and Lab and Production partially offset by higher AvComm revenue.

Current wording

NE net revenue decreased by $74.5 million, or 14.0% during the nine months ended March 30, 2024 compared to the same period a year ago, primarily driven by lower volume in Wireless, Fiber and Access and Lab and Production partially offset by higher AvComm revenue.

Previous wording

NE gross margin decreased by 1.9 percentage points during the three months ended December 30, 2023 to 62.5% from 64.4% in the same period a year ago primarily due to lower volumes and unfavorable product mix.

Current wording

NE gross margin decreased by 0.7 percentage points during the three months ended March 30, 2024 to 61.5% from 62.2% in the same period a year ago primarily due to lower volume and unfavorable product mix.

Previous wording

NE gross margin decreased by 1.7 percentage points during the six months ended December 30, 2023 to 62.8% from 64.5% in the same period a year ago primarily due to lower volumes and unfavorable product mix.

Current wording

NE gross margin decreased by 1.4 percentage points during the nine months ended March 30, 2024 to 62.4% from 63.8% in the same period a year ago primarily due to lower volume and unfavorable product mix.