VIAVI SOLUTIONS INC
For the period ended Sep 28, 2024. Filed Nov 1, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 28, 2024 · Filed Nov 1, 2024
VIAV$28.47+8.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-30; filed 2024-05-03.
0000912093-24-000033
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-28; filed 2024-11-01.
0000912093-24-000093
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 180 previous paragraphs and 158 current paragraphs.
95 unchanged; 48 reworded; 11 added; 33 removed; 4 previous and 4 current paragraphs rearranged.
Tables are not compared: 5 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
•Sufficiency of our sources of funding for working capital, capital expenditures, contractual obligations, acquisitions, stock repurchases, debt repayments and other matters;
Current report
•Net revenue of $238.2 million, down $9.7 million or 3.9% year-over-year.
Current report
•GAAP net loss of $1.8 million, down $11.6 million or 118.4% year-over-year.
Current report
•Non-GAAP net income of $12.4 million, down $7.1 million or 36.4% year-over-year.
Current report
(1)Included in the three months ended September 28, 2024 is a gain of $0.9 million on the sale of assets previously classified as held for sale and other charges unrelated to core operating performance of $0.4 million.
Current report
As of September 28, 2024, our total restructuring accrual was $6.8 million.
Current report
Interest expense decreased by $0.3 million, or 3.8% during the three months ended September 28, 2024 compared to the same period a year ago. This decrease was primarily driven by lower outstanding debt when compared to the prior period.
Current report
SE gross margin decreased by 6.5 percentage points during the three months ended September 28, 2024 to 60.7% from 67.2% in the same period a year ago primarily due to lower volume.
Current report
NSE operating margin decreased by 5.5 percentage points during the three months ended September 28, 2024 to (4.6)% from 0.9% in the same period a year ago primarily due to lower volume.
Current report
OSP gross margin increased by 2.8 percentage points during the three months ended September 28, 2024 to 55.3% from 52.5% in the same period a year ago primarily due to manufacturing volume.
Current report
•Factors beyond our control that may impact timing of and/or appropriation of government funding for certain of our strategic research and development programs;
Removed paragraphs (33)
Previous report
Proposed Acquisition of Spirent
Previous report
On March 5, 2024, we announced a transaction under which the Company and VIAVI Solutions Acquisitions Limited, our wholly-owned subsidiary (Bidco), intends to acquire the entire issued and to be issued ordinary share capital of Spirent Communications plc, a public company incorporated in England and Wales and a global provider of automated test and assurance solutions for networks, cybersecurity and positioning (Spirent, and such transaction, the Proposed Acquisition). The Proposed Acquisition is to be implemented by means of a court-sanctioned scheme of arrangement under the United Kingdom (U.K.) Companies Act 2006, as amended (the VIAVI Offer Scheme). Under the terms of the Proposed Acquisition, Spirent shareholders, in connection with the consummation of the VIAVI Offer Scheme, would receive 172.5 pence per ordinary Spirent share in cash and would also be entitled to retain a special dividend of 2.5 pence per ordinary Spirent share.
Previous report
The Proposed Acquisition was approved by our Board of Directors and was recommended by the board of directors of Spirent. The Proposed Acquisition is conditioned upon, among other things, (i) certain meetings of the shareholders of Spirent to approve the VIAVI Offer Scheme being held no later than May 23, 2024, (ii) the VIAVI Offer Scheme being approved by the requisite majorities of Spirent shareholders at such meetings, (iii) the receipt of applicable antitrust and other regulatory clearances, and, following the satisfaction or waiver of all other conditions, (iv) the sanction of the VIAVI Offer Scheme by the High Court of Justice in England and Wales.
Previous report
On March 28, 2024, Spirent announced that it had received from another bidder a competing offer (the Competing Offer) at a higher nominal price per share of Spirent than that reflected in the Proposed Acquisition and that the board of directors of Spirent had withdrawn its recommendation of the Proposed Acquisition and instead had recommended Spirent shareholders vote in favor of the Competing Offer. The Competing Offer is conditioned on, among other things, the receipt of applicable antitrust and other regulatory clearances.
Previous report
On April 17, 2024, Spirent announced the indefinite adjournment of the meetings of the shareholders of Spirent relating to the VIAVI Offer Scheme, which were scheduled to be held on May 1, 2024. If those meetings are not held by May 23, 2024, the VIAVI Offer Scheme will lapse, unless VIAVI elects to waive the relevant condition to the Proposed Acquisition or such deadline is extended with the consent of the U.K. Panel on Takeovers and Mergers.
Previous report
For more information on the risks related to the Proposed Acquisition, see Part II, Item 1A, Risk Factors, of this Quarterly Report.
Previous report
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 report
• Net revenue of $246.0 million, down $1.8 million or 0.7% year-over-year.
Previous report
(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 report
(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 report
Three and Nine Months Ended March 30, 2024 and April 1, 2023
Previous report
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 report
R&D expense decreased by $5.9 million, or 3.8% during the nine 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 increased by 1.6 percentage points during the nine months ended March 30, 2024 compared to the same period a year ago.
Previous report
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 report
The first phase of the Fiscal 2023 Plan impacted all segments and corporate functions and was substantially complete as of March 30, 2024. The second phase of the Fiscal 2023 Plan is primarily focused on reducing costs in our SE segment and the Company anticipates this phase to be substantially complete by the end of fiscal 2024.
Previous report
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 report
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 report
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.
Previous report
SE gross margin decreased by 9.3 percentage points during the three months ended March 30, 2024 to 60.8% from 70.1% in the same period a year ago primarily due to lower volume.
Previous report
SE gross margin decreased by 0.9 percentage points during the nine months ended March 30, 2024 to 66.0% from 66.9% in the same period a year ago primarily due to unfavorable product mix.
Previous report
NSE operating margin decreased by 3.2 percentage points during the three months ended March 30, 2024 to (1.8)% from 1.4% in the same period a year ago primarily due to lower volume.
Previous report
NSE operating margin decreased by 7.4 percentage points during the nine months ended March 30, 2024 to 0.9% from 8.3% in the same period a year ago primarily due to lower volume.
Previous report
OSP net revenue decreased by $10.6 million, or 4.4%, during the nine months ended March 30, 2024 compared to the same period a year ago. This decrease was primarily driven by lower anti-counterfeiting, consumer and industrial and government revenues.
Previous report
OSP gross margin decreased by 0.5 percentage points during the three months ended March 30, 2024 to 50.1% from 50.6% in the same period a year ago primarily due to the reversal of variable compensation that benefited the year ago period.
Previous report
OSP gross margin decreased by 1.9 percentage points during the nine months ended March 30, 2024 to 51.6% from 53.5% in the same period a year ago primarily due to lower volume and unfavorable manufacturing variances.
Previous report
OSP operating margin decreased by 2.2 percentage points during the nine months ended March 30, 2024 to 36.2% from 38.4% in the same period a year ago primarily due to the aforementioned reduction in gross margin.
Previous report
Goodwill Impairment
Previous report
Goodwill is recognized and initially measured as the excess of the purchase price paid over the net fair value of assets acquired and liabilities assumed in a business combination. Goodwill is not amortized but is tested for impairment annually, or more frequently if an event occurs or circumstances change that would more likely than not result in an impairment of goodwill. The Company tests goodwill at the reporting unit level for impairment during the fourth quarter of each fiscal year, or more frequently if events or circumstances indicate that the asset may be impaired.
Previous report
First, we assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we conduct a quantitative goodwill impairment test comparing the fair value of the applicable reporting unit with 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 of goodwill exceeds the fair value.
Previous report
As part of the annual impairment test, the Company performed a quantitative assessment of goodwill impairment for all reporting units during the fourth quarter of fiscal 2023.
Previous report
The Company estimated the fair value of each reporting unit by applying a combination of the income approach and the market approach. The income approach used discounted future cash flows in which sales, operating income and cash flow projections were based on assumptions driven by current economic conditions. In developing these assumptions, we relied on various factors including operating results, business plans, economic projections, anticipated future cash flows, and other market data. The market approach was based on trading multiples of companies comparable to each reporting unit and analysis of recent sales of comparable entities. We corroborated the fair value estimates by comparing the sum of the fair values of the reporting units and corporate net assets to VIAVI’s market capitalization as of the valuation date.
Previous report
The Company believes the assumptions used in the goodwill impairment test were reasonable, but future changes in the underlying assumptions could occur due to the inherent uncertainty in making such estimates. Further declines in the Company’s operating results due to challenging economic conditions, an unfavorable industry or macroeconomic development or other adverse changes in market conditions could change one of the key assumptions the Company used in the goodwill impairment assessment, which could result in a further decline in fair value and require the Company to record an impairment charge in future periods.
Previous report
Based on our testing, the fair value of each of the Company’s reporting units was at least two times the carrying value, and therefore no impairment was identified.
Reworded paragraphs (48)
Previous wording
•Financial projections and expectations, including profitability of certain business units, plans to reduce costs and improve efficiencies including through restructuring programs, the effects of seasonality on certain business units, continued reliance on key customers for a significant portion of our revenue, future sources of revenue, competition and pricing pressures, the future impact of certain accounting pronouncements, and our estimation of the potential impact and materiality of litigation;
Current wording
•Financial projections and expectations, including profitability of certain business units, plans to reduce costs and improve efficiencies including through restructuring programs, the effects of seasonality on certain business units, the consolidation of the communication industry and continued reliance on key customers for a significant portion of our revenue, future sources of revenue, competition and pricing pressures, the future impact of certain accounting pronouncements, and our estimation of the potential impact and materiality of litigation;
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 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., the ongoing conflict between Russia and Ukraine and the ongoing conflict between Israel and Hamas and the expansion of conflict in the Middle East, including in Lebanon and with Iran, on our business, operations and financial results.
Previous wording
During the third quarter of fiscal 2024, the VIAVI business environment continued to be challenging, particularly in the service provider and enterprise customer markets, partially offset by stronger OSP demand.
Current wording
During the first quarter of fiscal 2025, the VIAVI business environment continued to be challenging, particularly in the North American service provider and enterprise customer markets. NE product demand continues to be impacted by reduced research and development (R&D) and production capital expenditure spend by major wireless network equipment manufacturers (NEMs), offset by OSP performance.
Previous 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:
Current wording
As we look forward to the second quarter of fiscal 2025, we are seeing many of our end markets show signs of stabilization which we believe indicates the beginning of a gradual recovery and expect this to continue in the second half of fiscal 2025. 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 and will continue to focus on executing our strategic priorities over the long-term to:
Previous wording
•Continued productivity improvements in Operations, Research & Development (R&D) and Selling, General and Administrative (SG&A).
Current wording
•Continue productivity improvements in Operations, R&D and Selling, General and Administrative (SG&A).
Previous wording
Third quarter fiscal 2024 results included the following notable items:
Current wording
First quarter fiscal 2025 results included the following notable items:
Previous wording
• GAAP operating margin of (4.8)%, down 400 bps year-over-year.
Current wording
•GAAP operating margin of 4.8%, down 170 bps year-over-year.
Previous wording
• Non-GAAP operating margin of 9.3%, down 210 bps year-over-year.
Current wording
•Non-GAAP operating margin of 10.0%, down 240 bps year-over-year.
Previous wording
• GAAP diluted EPS of $(0.11), down $0.04 or 57.1% year-over-year.
Current wording
•GAAP diluted EPS of $(0.01), down $0.05 or 125.0% year-over-year.
Previous wording
• Non-GAAP diluted EPS of $0.06, down $0.02 or 25.0% year-over-year.
Current wording
•Non-GAAP diluted EPS of $0.06, down $0.03 or 33.3% year-over-year.
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 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.
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.
Previous wording
Non-GAAP financial measures are not in accordance with, preferable to, or an alternative for, generally accepted accounting principles in the United States. The GAAP measure most directly comparable to non-GAAP operating income is operating income. The GAAP measure most directly comparable to non-GAAP operating margin is operating margin. The GAAP measure most directly comparable to non-GAAP net income is net income. The GAAP measure most directly comparable to non-GAAP EPS is net income per share. The Company believes these GAAP measures alone are not fully indicative of its core operating expenses and performance and that providing non-GAAP financial measures in conjunction with GAAP measures provides valuable supplemental information regarding the Company’s overall performance.
Current wording
Non-GAAP financial measures are not in accordance with, preferable to, or an alternative for, generally accepted accounting principles in the United States. The GAAP measure most directly comparable to non-GAAP operating income is operating income. The GAAP measure most directly comparable to non-GAAP operating margin is operating margin. The GAAP measure most directly comparable to non-GAAP net income is net income. The GAAP measure most directly comparable to non-GAAP EPS is earnings per share. The Company believes these GAAP measures alone are not fully indicative of its core operating expenses and performance and that providing non-GAAP financial measures in conjunction with GAAP measures provides valuable supplemental information regarding the Company’s overall performance.
Previous wording
Net revenue decreased by $1.8 million, or 0.7%, during the three months ended March 30, 2024 compared to the same period a year ago. This decrease reflects the continuing weakness in service provider spending partially offset by higher anti-counterfeiting revenue.
Current wording
Net revenue decreased by $9.7 million, or 3.9%, during the three months ended September 28, 2024 compared to the same period a year ago. This decrease reflects the continuing weakness in service provider spending partially offset by higher consumer and industrial, government and anti-counterfeiting revenue.
Previous 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.
Current wording
Product revenues decreased by $8.1 million, or 3.9%, during the three months ended September 28, 2024 compared to the same period a year ago, driven by revenue decreases in our NE and SE segments partially offset by revenue increases in our OSP segment.
Previous wording
Service revenues decreased by $3.9 million, or 9.2% and $3.5 million, or 2.7% during the three and nine months ended March 30, 2024, respectively, compared to the same periods a year ago. This was driven by revenue decreases from our NE and SE segments.
Current wording
Service revenues decreased by $1.6 million, or 3.8% during the three months ended September 28, 2024, respectively, compared to the same periods a year ago. This was driven by revenue decreases from our NE and SE segments.
Previous wording
We cannot predict when or to what extent these uncertainties will be resolved. Our revenues, profitability, and general financial performance may also be affected by: (a) pricing pressures due to, among other things, a highly concentrated customer base, increasing competition, particularly from Asia-based competitors, and a general commoditization trend for certain products; (b) product mix variability in our markets, which affects revenue and gross margin; (c) fluctuations in customer buying patterns, which cause demand, revenue and profitability volatility; (d) the current trend of communication industry consolidation, which is expected to continue, that directly affects our NE and SE customer bases and adds additional risk and uncertainty to our financial and business projections; (e) chip component shortages, supply chain and shipping logistic constraints; (f) the impact of ongoing global trade policies, tariffs and sanctions; and (g) regulatory or economic developments and/or technology challenges that slow or change the rate of adoption of 5G, 3D sensing and other emerging secular technologies and platforms.
Current wording
We cannot predict when or to what extent these uncertainties will be resolved. Our revenues, profitability, and general financial performance may also be affected by: (a) pricing pressures due to, among other things, a highly concentrated customer base, increasing competition, particularly from Asia-based competitors, and a general commoditization trend for certain products; (b) strategic execution challenges arising from competition with larger and more well-resourced competitors; (c) product mix variability in our markets, which affects revenue and gross margin; (d) fluctuations in customer buying patterns, which cause demand, revenue and profitability volatility; (e) the current trend of communication industry consolidation, which is expected to continue, that directly affects our NE and SE customer bases and adds additional risk and uncertainty to our financial and business projections; (f) the impact of ongoing global trade policies, tariffs and sanctions; and (g) regulatory or economic developments and/or technology challenges that slow or change the rate of adoption of 5G, 3D sensing and other emerging secular technologies and platforms.
Previous 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.
Current wording
Net revenue from customers outside the Americas represented 62.8% and 59.5% of net revenue, respectively, during the three months ended September 28, 2024 and September 30, 2023.
Previous 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.
Current wording
Amortization of acquired technologies within Cost of revenues decreased $0.2 million or 5.7% during the three months ended September 28, 2024 compared to the same period a year ago. This decrease is primarily due to certain intangible assets becoming fully amortized in fiscal 2024.
Previous 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.
Current wording
Gross margin decreased by 1.1 percentage points during the three months ended September 28, 2024 from 58.2% in the same period a year ago to 57.1% in the current period. The decrease was primarily due to gross margin reduction in NE and SE, partially offset by gross margin increase in OSP, as discussed below in the Operating Segment Information section.
Previous 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.
Current wording
R&D expense decreased by $0.5 million, or 1.0% during the three months ended September 28, 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 increased by 0.6 percentage points during the three months ended September 28, 2024 compared to the same period a year ago.
Previous wording
We believe that continuing our investments in R&D is critical to attaining our strategic objectives. We plan to continue to invest in R&D and new products that will further differentiate us in the marketplace.
Current wording
We believe that continuing our investments in R&D is critical to attaining our strategic objectives. We plan to continue to invest in R&D and new products that will further differentiate us in the marketplace. One such investment is the VIAVI Automated Lab-as-a-Service for Open RAN (VALOR), which became fully operational in the second quarter of fiscal 2025.
Previous wording
SG&A expense of $250.2 million during the nine months ended March 30, 2024 was flat when compared to the same period a year ago. This was primarily due to expenses related to the proposed acquisition of Spirent offset by benefits from our restructuring activities and the change in fair value of acquisition-related contingent consideration. As a percentage of net revenue, SG&A increased 3.7 percentage points during the nine months ended March 30, 2024 compared to the same period a year ago.
Current wording
SG&A expense decreased by $3.1 million, or 4.0%, during the three months ended September 28, 2024 compared to the same period a year ago. This decrease was primarily due to the change in fair value of acquisition-related contingent consideration and the gain on litigation settlement partially offset by higher variable expenses. As a percentage of net revenue, SG&A was flat during the three months ended September 28, 2024 compared to the same period a year ago.
Previous 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.
Current wording
Amortization of intangibles within Operating expenses decreased $1.0 million or 47.6% during the three months ended September 28, 2024 compared to the same period a year ago. This decrease is primarily due to certain intangible assets becoming fully amortized in fiscal 2024.
Previous wording
The Company’s restructuring events are primarily intended to reduce costs, consolidate operations, integrate various acquisitions, streamline product manufacturing and address market conditions. During the second quarter of fiscal 2023, Management approved a restructuring and workforce reduction plan (the Fiscal 2023 Plan) to better align the Company’s workforce with current business needs and strategic growth opportunities. The Fiscal 2023 Plan, which affected approximately 5% of the Company's workforce, resulted in an estimated annualized gross cost savings of approximately $25.0 million excluding any one-time charges as a result of the restructuring activities.
Current wording
The restructuring and workforce reduction plan initiated in the second quarter of fiscal 2023 (the Fiscal 2023 Plan) across various functions to better align the Company’s workforce with current business needs and strategic growth opportunities was completed in the first quarter of fiscal 2025. The Fiscal 2023 Plan affected approximately 5% of the Company's workforce and resulted in an estimated annualized gross cost savings of approximately $25.0 million excluding any one-time charges.
Previous 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.
Current wording
During the three months ended September 28, 2024, the Company recorded restructuring charges of $0.2 million related to the Fiscal 2024 Plan and benefits of $0.2 million related to the Fiscal 2023 Plan. During the three months ended September 30, 2023, the Company recorded benefits of $0.8 million related to the Fiscal 2023 Plan.
Previous wording
We estimate future cash payments of $0.8 million under the Fiscal 2023 Plan, funded by operating cash flow.
Current wording
We estimate future cash payments of $6.8 million under the Fiscal 2024 Plan, funded by operating cash flow.
Previous 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.
Current wording
Interest and other income, net, was $3.2 million during the three months ended September 28, 2024 compared to $10.2 million during the same period a year ago. This $7.0 million decrease was primarily driven by a legal settlement in our favor in the amount of $7.3 million in the prior period.
Previous 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.
Current wording
We recorded an income tax provision of $9.0 million and $8.6 million for the three months ended September 28, 2024 and September 30, 2023, respectively.
Previous 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.
Current wording
The income tax provision for the three months ended September 28, 2024 and September 30, 2023 primarily relates to income tax in certain foreign and state jurisdictions based on our forecasted pre-tax income or loss.
Previous 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.
Current wording
Asof September 28, 2024, and June 29, 2024, our unrecognized tax benefits (net of Federal benefits) totaled $50.8 million and $50.7 million, respectively, and are included in deferred taxes and other non-current tax liabilities. We had $4.0 million accrued for the payment of interest and penalties as of September 28, 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
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.
Current wording
NE net revenue decreased by $8.4 million, or 5.6% during the three months ended September 28, 2024 compared to the same period a year ago, primarily driven by lower volume in Fiber and Access and Lab and Production and Wireless, partially offset by higher AvComm revenue.
Previous 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.
Current wording
NE gross margin decreased by 2.2 percentage points during the three months ended September 28, 2024 to 60.9% from 63.1% in the same period a year ago primarily due to lower volume and unfavorable product mix.
Previous wording
SE net revenue decreased by $7.3 million, or 28.7%, during the three months ended March 30, 2024 compared to the same period a year ago primarily due to lower Data Center and Assurance revenue.
Current wording
SE net revenue decreased by $2.6 million, or 12.7%, during the three months ended September 28, 2024 compared to the same period a year ago primarily due to lower Data Center and Assurance revenue.
Previous wording
OSP net revenue increased by $5.7 million, or 8.1%, during the three months ended March 30, 2024 compared to the same period a year ago. This increase was primarily driven by higher anti-counterfeiting and consumer and industrial revenues partially offset by lower government revenue.
Current wording
OSP net revenue increased by $1.3 million, or 1.7%, during the three months ended September 28, 2024 compared to the same period a year ago. This increase was primarily driven by higher consumer and industrial, government and anti-counterfeiting revenue.
Previous wording
OSP operating margin decreased by 2.3 percentage points during the three months ended March 30, 2024 to 34.3% from 36.6% in the same period a year ago primarily due to the aforementioned reduction in gross margin.
Current wording
OSP operating margin increased by 1.8 percentage points during the three months ended September 28, 2024 to 39.6% from 37.8% in the same period a year ago primarily due to the aforementioned increase in gross margin.
Previous wording
We believe our existing liquidity and sources of liquidity, namely operating cash flows, credit facility capacity, and access to capital markets, will continue to be adequate to meet our liquidity needs, including but not limited to, contractual obligations, working capital and capital expenditure requirements, financing strategic initiatives, fund debt maturities, and execution of purchases under our share repurchase program over the next twelve months and beyond. However, there are a number of factors that could positively or negatively impact our liquidity position, including:
Current wording
We believe our existing liquidity and sources of liquidity, namely operating cash flows, credit facility capacity, and access to capital markets, will continue to be adequate to meet our liquidity needs, including but not limited to, contractual obligations, working capital and capital expenditure requirements, financing strategic initiatives, funding debt maturities, and executing purchases under our share repurchase program over the next twelve months and beyond. However, there are a number of factors that could positively or negatively impact our liquidity position, including:
Previous wording
•While the principal payment obligations of our 1.625% Senior Convertible Notes due 2026 and our 3.75% Senior Notes due 2029 (together the “Notes”) are substantial and have covenants that restrict our debt level and credit facility capacity, we may be able to incur substantially more debt;
Current wording
•Principal payment obligations of our 1.625% Senior Convertible Notes due 2026, and our 3.75% Senior Notes due 2029 (together the Notes) and covenants that restrict our debt level and credit facility capacity;
Previous wording
Our cash and cash equivalents and short-term investments mainly consist of investments in institutional money market funds and short-term deposits at major global financial institutions. Our strategy is focused on capital preservation and supporting our liquidity requirements that meet high credit quality standards, as specified in our investment policy approved by the Audit Committee of our Board of Directors. Our investments in debt securities and marketable equity securities are primarily classified as available for sale or trading assets and are recorded at fair value. The cost of securities sold is based on the specific identification method. Unrealized gains and losses on available-for-sale investments are recorded as Other comprehensive (loss) income and reported as a separate component of stockholders’ equity. As of March 30, 2024, U.S. subsidiaries owned approximately 17.9% of our cash and cash equivalents, short-term investments and restricted cash.
Current wording
Our cash and cash equivalents and short-term investments mainly consist of investments in institutional money market funds and short-term deposits at major global financial institutions. Our strategy is focused on capital preservation and supporting our liquidity requirements that meet high credit quality standards, as specified in our investment policy approved by the Audit Committee of our Board of Directors. Our investments in debt securities and marketable equity securities are primarily classified as available for sale or trading assets and are recorded at fair value. The cost of securities sold is based on the specific identification method. Unrealized gains and losses on available-for-sale investments are recorded as Other comprehensive (loss) income and reported as a separate component of stockholders’ equity. As of September 28, 2024, U.S. subsidiaries owned approximately 19.9% of our cash and cash equivalents, short-term investments and restricted cash.
Previous wording
As of March 30, 2024, we had no borrowings under this facility and our available borrowing capacity was approximately $147.5 million, net of outstanding standby letters of credit of $4.1 million.
Current wording
As of September 28, 2024, we had no borrowings under this facility and our available borrowing capacity was approximately $143.7 million, net of outstanding standby letters of credit of $4.2 million.
Previous wording
Cash Flows for the Nine Months Ended March 30, 2024
Current wording
Cash Flows for the Three Months Ended September 28, 2024
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Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Three Months Ended September 28, 2024 and September 30, 2023
Current report — wording carried from elsewhere
The Company’s restructuring events are primarily intended to reduce costs, consolidate operations, integrate various acquisitions, streamline product manufacturing and address market conditions.
Current report — wording carried from elsewhere
During the fourth quarter of fiscal 2024, management approved a restructuring and workforce reduction plan (the Fiscal 2024 Plan) across various functions intended to improve operational efficiencies and better align the Company’s workforce with current business needs. The Company expects approximately 6% of its global workforce to be affected, impacting all segments and corporate functions. We estimate annualized gross cost savings of approximately $25.0 million excluding any one-time charges as a result of the restructuring activities initiated under the Fiscal 2024 Plan. The Company anticipates the Fiscal 2024 Plan to be substantially complete by the end of fiscal 2025.
Current report — wording carried from elsewhere
Refer to “Note 13. Restructuring and Related Charges” for more information.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
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 report — wording carried elsewhere
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 report — wording carried elsewhere
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 report — wording carried elsewhere
SE net revenue decreased by $9.0 million, or 12.6%, during the nine months ended March 30, 2024 compared to the same period a year ago primarily due to lower Data Center and Assurance revenue.