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What changed in VIAVI SOLUTIONS INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of VIAVI SOLUTIONS INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+292 added−304 removedSource: 10-K (2024-08-16) vs 10-K (2022-08-19)

Top changes in VIAVI SOLUTIONS INC.'s 2024 10-K

292 paragraphs added · 304 removed · 207 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

53 edited+11 added−23 removed57 unchanged
Biggest changeIn our OSP segment, our R&D efforts concentrate on developing more innovative technologies and products for customers in the anti-counterfeiting, consumer electronics, industrial, government and automotive markets. Our strength in the banknote anti-counterfeiting market is complemented by our advances in developing novel pigments for a variety of applications.
Biggest changeThis service is designed to manage and support 5G and ORAN deployments that would benefit new entrants, startups and educational institutions to access tools with a minimal ramp-up time. In our OSP segment, our R&D efforts concentrate on developing more innovative technologies and products for customers in the anti-counterfeiting, consumer electronics, industrial, government and automotive markets.
In support of our business segments, we are pursuing a corporate strategy that we believe will best position us for future opportunities as follows: • Market leadership in physical and virtualized test and measurement instruments and assurance systems with opportunity to grow market share; • Market leadership in anti-counterfeiting pigments, 3D sensing optical filters and other light management technologies; • Market leadership in 5G wireless, public safety radio and navigation/communication transponder test instruments as well as passive optical components for 3D sensing and other optical sensors; • Increase benefit from the use of our net operating loss carryforwards (NOL) by improving our profitability organically and inorganically; and • Greater flexibility in capital structure in support of our strategic plans.
In support of our business segments, we are pursuing a corporate strategy that we believe will best position us for future opportunities as follows: • Market leadership in physical and virtualized test and measurement instruments and assurance systems with the opportunity to grow market share; • Market leadership in anti-counterfeiting pigments, 3D sensing optical filters and other light management technologies; • Market leadership in 5G wireless, public safety radio and navigation/communication transponder test instruments as well as passive optical components for 3D sensing and other optical sensors; • Increase benefit from the use of our net operating loss carryforwards (NOL) by improving our profitability organically and inorganically; and • Greater flexibility in capital structure in support of our strategic plans.
Our assurance solutions let carriers remotely monitor performance and quality of network, service and applications performance throughout the entire network.
Our assurance solutions let carriers remotely monitor the performance and quality of network, service and applications performance throughout the entire network.
We seek to empower our employees to learn and develop their skills to accelerate their career and to attract best in class talent. The CEO and the SVP Human Resources are responsible for the development of our People Strategy and execute on this with the support of the Executive Management Team.
We seek to empower our employees to learn and develop their skills to accelerate their career and to attract best-in-class talent. The CEO and the SVP of Human Resources are responsible for the development of our People Strategy and execute on this with the support of the Executive Management Team.
VIAVI has long been committed to ensuring that all individuals have an equal opportunity to enjoy a fair, safe and productive work environment – regardless of age, ancestry, race, color, mental or physical disability or medical condition, gender, gender identity, gender expression, genetic information, family or marital status, registered domestic partner status, medical condition, military and veteran status, race, religious creed, language, national origin, citizenship status, sex (including pregnancy, childbirth, breastfeeding and any related medical conditions), sexual orientation, socio-economic status, or any other protected category under applicable law.
VIAVI has long been committed to ensuring that all individuals have an equal opportunity to enjoy a fair, safe and productive work environment – regardless of age, ancestry, race, color, mental or physical disability or medical condition, gender, gender identity, gender expression, genetic information, family or marital status, registered domestic partner status, military and veteran status, race, religious creed, language, national origin, citizenship status, sex (including pregnancy, childbirth, breastfeeding and any related medical conditions), sexual orientation, socio-economic status, or any other protected category under applicable law.
Consumer Electronics and Industrial : Our OSP business manufactures and sells optical filters for 3D sensing products that separate out ambient light from incoming data to allow devices to be controlled by a person’s movements or gestures. Our Engineered Diffusers shape light emitted for 3D sensing applications and also enhance eye safety.
Consumer Electronics and Industrial : Our OSP business manufactures and sells optical filters for 3D sensing products that separate ambient light from incoming data to allow devices to be controlled by a person’s movements or gestures. Our Engineered Diffusers shape light emitted for 3D sensing applications and also enhance eye safety.
Our test instrument portfolio is one of the largest in the industry, with hundreds of thousands of units in active use by major NEMs, operators and service providers worldwide.
Our test instrument portfolio is one of the largest in the industry, with hundreds of thousands of units in active use by NEMs, operators and service providers worldwide.
We seek to drive talent conversations at all levels, which is complemented by Everyday Development, our performance management check-in process. Check-ins ensure that teams are being coached and supported throughout the year with relevant and timely discussions on expectations, feedback, and development.
We seek to drive talent conversations at all levels, which is complemented by Everyday Development, our performance management check-in process. Check-ins ensure that employees are being coached and supported throughout the year with relevant and timely discussions on expectations, feedback, and development.
Through the development of multiple generations of products for 3D sensing and by delivering improved performance and competitive value with each iteration, we believe we have established ourselves as one of the industry’s leading supplier of high-performance filters enabling depth-sensing systems in consumer electronics.
Through the development of multiple generations of products for 3D sensing and by delivering improved performance and competitive value with each iteration, we believe we have established ourselves as one of the industry’s leading suppliers of high-performance filters enabling depth-sensing systems in consumer electronics.
ITEM 1. BUSINESS GENERAL Overview Viavi Solutions Inc. (VIAVI, also referred to as the Company, we, our, and us) is a global provider of network test, monitoring and assurance solutions for communications service providers (CSPs), enterprises, network equipment manufacturers (NEMs), original equipment manufacturers (OEMs), government and avionics. We help these customers harness the power of instruments, automation, intelligence and virtualization.
ITEM 1. BUSINESS GENERAL Overview Viavi Solutions Inc. (VIAVI, also referred to as the Company, we, our, and us) is a global provider of network test, monitoring, and assurance solutions for communications service providers (CSPs), hyperscalers, network equipment manufacturers (NEMs), original equipment manufacturers (OEMs), government and avionics. We help customers harness the power of instruments, automation, intelligence and virtualization.
OSP also produces precise, high-performance, optical thin-film coatings and light shaping optics capabilities for a variety of applications including, for example, optical filters and Engineered Diffusers, marketed under the trademark “Engineered Diffusers®.”, for 3D sensing applications. Customers OSP customers include SICPA Holding SA Company (SICPA), STMicroelectronics Holding N.V., Lockheed Martin Corporation and Seiko Epson Corporation.
OSP also produces precise, high-performance, optical thin-film coatings and light shaping optics capabilities for a variety of applications including, for example, optical filters and Engineered Diffusers, marketed under the trademark “Engineered Diffusers®”, for 3D sensing applications. Customers OSP customers include SICPA Holding SA Company (SICPA), Lockheed Martin Corporation and Seiko Epson Corporation.
The increase in demand for 5G services will be increasingly supported by automation and associated artificial intelligence and machine learning, which will further enable enterprise requirements for private 5G as well as numerous use cases such as remote working and energy efficiency. Such increases in demand of pervasive on-premise/off-premise services will further drive the need for cybersecurity.
We believe the increase in demand for 5G services will be increasingly supported by automation and associated artificial intelligence and machine learning, which will further enable enterprise requirements for private 5G as well as numerous use cases such as remote working and energy efficiency. Such increases in demand for pervasive on-premise/off-premise services will further drive the need for cybersecurity.
For further information related to our acquisitions, refer to “Note 5. Acquisitions” under Item 8 of this Annual Report on Form 10-K. Restructuring Programs We may continue to engage in targeted restructuring events, to consolidate our operations and align our businesses in response to market conditions and our current investment strategy.
For further information related to our acquisitions, refer to “Note 5. Acquisitions” under Item 8 of this Annual Report on Form 10-K. 9 Table of Contents Restructuring Programs We may continue to engage in targeted restructuring events, to consolidate our operations and align our businesses in response to market conditions and our current investment strategy.
For our OSP business, given our exposure to the consumer market, namely our 3D sensing products into the smart phone market, OSP revenue is expected to be seasonally higher in the first and second fiscal quarter followed by seasonal demand declines in the third and fourth fiscal quarters.
For our OSP business, given our exposure to the consumer market, namely our 3D sensing products into the smartphone market, OSP revenue is expected to be seasonally higher in the first and second fiscal quarter followed by seasonal demand declines in the third and fourth fiscal quarters.
Competition OSP competitors include providers of anti-counterfeiting technologies such as Giesecke & Devrient, De La Rue plc; special-effect pigments such as Merck KGA; coating companies such as Nidek, Toppan and Toray; optics companies such as Materion; and manufacturers of passive and other optical components such as II-VI Inc. and AMS. 7 T a b le of Contents Offerings Our OSP business provides innovative light management technologies for the anti-counterfeiting, consumer electronics, industrial, government and automotive markets.
Competition OSP competitors include providers of anti-counterfeiting technologies such as Giesecke & Devrient, De La Rue plc; special-effect pigments such as Merck KGA; coating companies such as Nidek, Toppan and Toray; optics companies such as Materion; and manufacturers of passive and other optical components such as II-VI Inc. and AMS. 7 Table of Contents Offerings Our OSP business provides innovative light management technologies for the anti-counterfeiting, consumer electronics, industrial, government and automotive markets.
We believe the collective sum of our individual differences, life experiences, knowledge, innovation, business acumen, self-expression, and unique capabilities contributes to a culture that enhances our reputation and achievement.
We believe the collective sum of our individual differences, life experiences, knowledge, innovation, business acumen, self-expression, and unique capabilities promotes a culture that enhances our reputation and achievement.
For further information related to our customers, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 7 of this Annual Report on Form 10-K. 5 T a b le of Contents Competition SE segment competitors include NetScout Systems, Inc., Riverbed Technology, Inc. and Spirent Communications plc.
For further information related to our customers, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 7 of this Annual Report on Form 10-K. 5 Table of Contents Competition SE segment competitors include NetScout Systems, Inc., Riverbed Technology, Inc. and Spirent Communications plc.
While we face multiple competitors for each of our product families, we continue to have one of the broadest portfolios of wireline and wireless products available in the network enablement industry. 4 T a b le of Contents Offerings Our NE solutions include instruments and software that support the development and production of network systems in the lab.
While we face multiple competitors for each of our product families, we continue to have one of the broadest portfolios of wireline and wireless products available in the network enablement industry. 4 Table of Contents Offerings Our NE solutions include instruments and software that support the development and production of network systems in the lab.
We are a member of the Responsible Business Alliance, which further strengthens our efforts and commitment. 10 T a b le of Contents We realize that being a responsible global citizen is important to the sustainability and commercial success of our business and encompasses more than just complying with local regulations.
We are a member of the Responsible Business Alliance, which further strengthens our efforts and commitment. We realize that being a responsible global citizen is important to the sustainability and commercial success of our business and encompasses more than just complying with local regulations.
VIAVI is committed to respecting human rights and acknowledges the fundamental principles contained in the Universal Declaration of Human Rights, the tenets of the United Nations Guiding Principles on Business and Human Rights, core International Labor Organization Conventions and the laws of countries in which we operate, to the extent they are applicable and important to our business.
VIAVI is committed to respecting human rights and acknowledges the fundamental principles contained in the Universal Declaration of Human Rights, the tenets of the United Nations Guiding Principles on Business and Human Rights, and core International Labor Organization Conventions to the extent they are applicable and important to our business.
We strictly comply with all applicable health and safety regulations, offer robust training to our employees on health and safety matters, maintain controls and proper disposal of hazardous materials and track workplace incidents and injuries. We maintain and regularly update emergency and disaster recovery plans.
We demand strict compliance with all applicable health and safety regulations, offer robust training to our employees on health and safety matters, maintain controls and proper disposal of hazardous materials and track workplace incidents and injuries. We maintain and regularly update emergency and disaster recovery plans.
Human Capital Management The VIAVI culture is made up of the diverse contributions of our 3,600 employees worldwide (as of July 2, 2022) representing more than 30 self-identified nationalities working across 30 countries. VIAVI is committed to promoting and maintaining a diverse and inclusive work environment and offering equal opportunities to everyone.
Human Capital Management The VIAVI culture is made up of the diverse contributions of our approximately 3,600 employees worldwide (as of June 29, 2024) representing more than 30 self-identified nationalities working across 30 countries. VIAVI is committed to promoting and maintaining a diverse and inclusive work environment and offering equal opportunities to everyone.
Our SE products and associated services are, as follows: Data Center : Primarily consisting of our network performance monitoring and diagnostic tools (Apex, GigaStor, Observer). Assurance : Primarily consisting of our growth products (location intelligence and NITRO mobile products) and mature products.
Our SE products and associated services are, as follows: Data Center : Primarily consisting of our network performance monitoring and diagnostic tools (Apex, GigaStor, Observer). Assurance : Primarily consisting of our growth products (Nitro Geo, NITRO Mobile and AI Ops products) and mature products.
These factors are discussed under Item 1A “Risk Factors” of this Annual Report on Form 10-K. 3 T a b le of Contents Business Segments We operate in two broad business categories: Network and Service Enablement (NSE) and Optical Security and Performance Products (OSP). NSE operates in two reportable segments, NE and SE, whereas OSP operates as a single segment.
These factors are discussed under Item 1A “Risk Factors” of this Annual Report on Form 10-K. 3 Table of Contents Business Segments We operate in two broad business categories: Network and Service Enablement (NSE) and OSP. NSE operates in two reportable segments, NE and SE, whereas OSP operates as a single segment.
We leverage our capabilities to deliver technologies that enable anti-counterfeiting solutions designed to protect the integrity of banknotes and other documents of value. The wide availability of advanced and relatively low-cost imaging technologies and printing tools threatens the integrity of critical printed documents, necessitating robust, technically sophisticated and easy to validate anti-counterfeiting features.
We leverage our capabilities to deliver technologies that enable anti-counterfeiting solutions designed to protect the integrity of banknotes and other documents of value. The wide availability of advanced and relatively low-cost imaging technologies and printing tools presents a consistent threat to the integrity of secure documents, necessitating robust, technically sophisticated and easy to validate anti-counterfeiting features.
VIAVI expects that all employees will act in a manner that complies both with the letter and spirit of this code of conduct. Diversity, Equity, and Inclusion (DEI) VIAVI is committed to fostering, cultivating, and preserving a culture of diversity, equity and inclusion. Our human capital is one of our most valuable assets.
VIAVI expects that all employees will act in a manner that complies both with the letter and spirit of this code of conduct. Diversity, Equity, and Inclusion (DEI) VIAVI is committed to fostering, cultivating, and preserving a culture of diversity, equity and inclusion. We believe the unique contributions and capabilities of our employees comprise one of our most valuable assets.
The information contained on any of the websites referenced in this Annual Report on Form 10-K are not part of or incorporated by reference into this or any other report we file with, or furnish to, the SEC. 13 T a b le of Contents
The information contained on any of the websites referenced in this Annual Report on Form 10-K are not part of or incorporated by reference into this or any other report we file with, or furnish to, the SEC. 12 Table of Contents
Offerings Our SE solutions are embedded network systems, including instruments, microprobes and software that collect and analyze network data to reveal the actual customer experience and identify opportunities for new revenue streams and network optimization. These solutions provide our customers enhanced network management, control, optimization and differentiation.
Offerings Our SE solutions are embedded network systems, including instruments, microprobes and software that collect and analyze network data to reveal the actual customer experience and identify opportunities for new revenue streams and network optimization.
Both managers and employees have a role to play to ensure that they are connected on the activities that drive our business forward. Our employees can expect to engage regularly with their manager, and to have their support to accelerate their performance and development.
Both managers and employees have a role to play to ensure that they are connected to the activities that drive our business forward. We aim for a work environment in which our employees can expect to engage regularly with their manager, and to have their support to accelerate their performance and development.
VIAVI is also a leader in light management solutions for the anti-counterfeiting, consumer electronics, industrial, government and automotive markets. To serve our markets, we operate in the following business segments: • Network Enablement (NE); • Service Enablement (SE); and • Optical Security and Performance Products (OSP).
VIAVI is also a leader in light management technologies which are used in anti-counterfeiting, 3D sensing, consumer electronics, industrial, automotive, government and aerospace applications. To serve our markets, we operate the following business segments: • Network Enablement (NE); • Service Enablement (SE); and • Optical Security and Performance Products (OSP).
For our avionics products, many governments across the globe are increasing their military and public safety budgets to upgrade communication infrastructure. 6 T a b le of Contents The convergence of network technologies requires significant investments from both traditional carriers and cloud service providers.
For our avionics products, many governments across the globe are increasing their military and public safety budgets to upgrade communication infrastructure. 6 Table of Contents The convergence of network technologies requires significant investments from both traditional carriers and cloud service providers. In recent years, there has been consolidation of some traditional service providers.
They help service provider technicians assess the performance of network elements and segments and verify the integrity of the information being transmitted across the network. These instruments are highly intelligent and have user interfaces that are designed to simplify operations and minimize the training required to operate them.
They help service provider technicians assess the performance of network elements and segments and verify the integrity of the information being transmitted across the network. These instruments are enhanced with artificial intelligence and machine learning and built-in automation and analytics with user interfaces that are designed to simplify operations and minimize the training required to operate them.
We embrace, encourage, and celebrate our employees’ differences and what makes them unique. Talent Development Our talent development programs promote the VIAVI Business Values through a passion for learning and performance. We are developing relevant and useful learning resources for our employees, managers, and leaders that invite a growth mindset and create an appetite for lifelong learning.
We embrace, encourage, and celebrate our employees’ differences and what makes them unique. Talent Development Our talent development offerings provide relevant and useful learning resources for our employees, managers, and leaders that invite a growth mindset and create an appetite for lifelong learning.
Restructuring and Related Charges” under Item 8 of this Annual Report on Form 10-K. 9 T a b le of Contents Manufacturing As of July 2, 2022, we have significant manufacturing facilities for our NE, SE and OSP segments located in China, France, Germany, Mexico, United Kingdom and the United States.
Restructuring and Related Charges” under Item 8 of this Annual Report on Form 10-K. Manufacturing As of June 29, 2024, we have significant manufacturing facilities for our NE, SE and OSP segments located in China, France, Germany, Mexico, the United Kingdom and the United States. Our most significant contract manufacturing partners are located in China and Mexico.
In addition, the new cloud service providers and virtualized networks create new NSE opportunities. We believe our NSE products and solutions are well positioned to meet these rapidly changing industry trends, given our technology and products, as well as customer installed base.
We believe our NSE products and solutions are well positioned to meet these rapidly changing industry trends, given our technology and products, as well as customer installed base.
We provide talent rewards that are competitive in the marketplace. We support equal pay for equal work, pay transparency as well as all federal anti-discrimination laws applicable to employment, including those within Title VII of the Civil Rights Act. Health and Safety VIAVI is committed to maintaining an inclusive, supportive, safe and healthy work environment where our employees can thrive.
We provide talent rewards that are competitive in the marketplace and support equal pay for equal work and pay transparency. Health and Safety VIAVI is committed to maintaining an inclusive, supportive, safe and healthy work environment where our employees can thrive.
AvComm solutions encompass a full spectrum of instrumentation from turnkey systems, stand-alone instruments or modular components that provide customers with highly reliable, customized, innovative and cost-effective testing tools.
AvComm solutions encompass a full spectrum of instrumentation, which include turnkey systems, stand-alone instruments and modular components that provide customers with highly reliable, customized, innovative and cost-effective testing tools and resilient Positioning, Navigation and Timing (PNT) solutions for critical infrastructure serving military and civilian applications.
In addition to anti-counterfeiting and 3D sensing applications, OSP technologies enable optical solutions in industries we believe the applications of which will mature or there will be development of new applications for OSP technologies that will grow demand for our OSP products and solutions. 8 T a b le of Contents Research and Development We devote substantial resources to R&D to develop new and enhanced products to serve our markets.
In addition to anti-counterfeiting and 3D sensing applications, OSP technologies enable optical solutions for a range of other applications for customers in the aerospace, defense, biomedical, and industrial markets. 8 Table of Contents Research and Development We devote substantial resources to R&D to develop new and enhanced products to serve our markets.
Sales and Marketing CSPs make up the majority of our NSE revenues. We also market and sell products to NEMs, OEMs, enterprises, governmental organizations, distributors and strategic partners worldwide.
OSP also develops, manufactures and sells a line of miniature hand-held spectrometers with applications in the agriculture, healthcare and defense markets. Sales and Marketing CSPs make up the majority of our NSE revenues. We also market and sell products to NEMs, OEMs, enterprises, governmental organizations, distributors and strategic partners worldwide.
Our employees regularly participate in mandatory training courses covering data privacy, cyber-security, health and safety as well as the prevention of sexual harassment in the workplace. 11 T a b le of Contents Talent Rewards Our compensation and benefit programs are designed to recognize our employees' individual performance and contributions to our business results, including competitive base salaries and variable pay for all employees, share-based equity award grants, health and welfare benefits, time-off, development programs and training, and opportunities to give back to our communities.
Talent Rewards Our compensation and benefits programs are designed to recognize our employees' individual performance and contributions to our business results, including competitive base salaries and variable pay for all employees, share-based equity award grants, health and welfare benefits, time-off, development programs and training, and opportunities to give back to our communities.
The participants come from a diverse pool and complete rotations from their home country over the two year program while being supported by a mentor and their manager to coach them as they take on exciting new technical challenges. We believe their program experiences will unleash innovation and creativity while enabling our long-term talent pipeline.
We maintain early-in-career rotation programs for engineers and sales talent. Our diverse and global program participants are supported by a mentor and their manager to coach them as they take on exciting new technical challenges. We believe their program experiences will help to unleash innovation and creativity for our organization while enabling our long-term talent pipeline.
Operating Segments and Geographic Information” of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K. For further information related to our customers, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 7 of this Annual Report on Form 10-K.
Operating Segments and Geographic Information” of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
Existing network infrastructure that is not otherwise being upgraded is also expected to be modernized with new cable and access technologies. Cable providers are investing in DOCSIS 3.1 to enhance existing cable networks while DSL copper lines are being upgraded to GFast.
Existing network infrastructure that is not otherwise being upgraded is also expected to be modernized with new cable and access technologies. Cable operators are investing in Distributed Access Architecture (DAA) and extending frequencies and network capacity.
Our OVP, and OVMP technologies enable intuitive overt optical effects that consumers can easily recognize but counterfeiters find very difficult to reproduce. We also design, manufacture and sell optical filters for 3D sensing applications that allow consumers to interact with their devices more naturally by enabling electronic devices to accurately measure depth and motion.
Our technologies enable solutions for designers to address these trends. We also design, manufacture and sell optical filters to improve the performance of optical sensors for a range of applications including 3D sensing. 3D sensing applications allow consumers to interact with their devices more naturally by enabling electronic devices to accurately measure depth and motion.
Other areas for OSP include our efforts to leverage our optical coating technology expertise to develop applications for the government and defense markets as well as efforts related to new products for 3D sensing and smart phone sensors. OSP also develops, manufactures and sells a line of miniature hand-held spectrometers with applications in the agriculture, healthcare and defense markets.
Our strength in the banknote anti-counterfeiting market is complemented by our advances in developing novel pigments for a variety of applications. Other areas for OSP include our efforts to leverage our optical coating technology expertise to develop applications for the government and defense markets as well as efforts related to new products for 3D sensing and smartphone sensors.
Similarly Engineered Diffusers, diffuse the infrared laser light transmitted by a smartphone in 3D sensing applications, enabling reliable system performance while also guarding eye safety.
Similarly Engineered DiffusersTM, shape the infrared laser light transmitted by a smartphone in 3D sensing applications, enabling reliable system performance while also guarding eye safety. Major trends in 3D sensing and other applications we target including an ongoing drive toward enabling increased efficiency in size, weight, and power (SWaP).
We have a strategic alliance and rely exclusively on SICPA to market and sell our OVP and OVMP product lines for banknote anti-counterfeiting applications worldwide. Sales of these products to SICPA generated approximately 10% of our net revenue from continuing operations during fiscal 2020, 2021 and 2022.
We have a strategic alliance with SICPA to market and sell our OVP and OVMP product lines for banknote anti-counterfeiting applications worldwide.
Although we intend to establish at least two sources of supply for materials whenever possible, for certain components we have sole or limited source supply arrangements. Patents and Proprietary Rights Intellectual property rights apply to our various products include patents, trade secrets and trademarks.
Sources and Availability of Raw Materials We use various suppliers and contract manufacturers to supply parts and components for the manufacture and support of multiple product lines. Although we intend to establish at least two sources of supply for materials whenever possible, for certain components we have sole or limited source supply arrangements.
The average age of the patents we hold is 8.9 years, which is younger than the midpoint of the average 20-year life of a patent.
As of June 29, 2024, we own 994 U.S. patents and 1,969 foreign patents and have 1,195 patent applications pending throughout the world. The average age of the patents we hold is 8.8 years, which is younger than the midpoint of the average 20-year life of a patent.
We do not intend to broadly license our intellectual property rights unless we can obtain adequate consideration or enter into acceptable intellectual property cross-licensing agreements. As of July 2, 2022, we own 890 U.S. patents and 1,607 foreign patents and have 1,090 patent applications pending throughout the world.
Patents and Proprietary Rights Intellectual property rights apply to our various products include patents, trade secrets and trademarks. We do not intend to broadly license our intellectual property rights unless we can obtain adequate consideration or enter into acceptable intellectual property cross-licensing agreements.
Competition NE competitors include Anritsu Corporation, EXFO Inc., Keysight Technologies Inc., Rohde & Schwarz, VeEX Inc. and Spirent Communications plc.
Our customers include América Móvil, AT&T Inc., Lumen Technologies, Inc. (formerly CenturyLink, Inc.), Cisco Systems, Inc., Nokia Corporation, British Telecom Openreach, Deutsche Telekom AG and Verizon Communications Inc. Competition NE competitors include Anritsu Corporation, EXFO Inc., Keysight Technologies Inc., Rohde & Schwarz, VeEX Inc. and Spirent Communications plc.
We regularly update and partner with the Compensation Committee of the Board of Directors on human capital matters. Business Values & Standards The VIAVI business values articulate the internal cultural identity for VIAVI employees and provide a shared understanding of expectations across the Company.
We measure employee sentiment and gather data that provides insight into our culture, the working environment, and our employee’s drivers for engagement. 10 Table of Contents Business Values & Standards The VIAVI business values articulate the internal cultural identity of VIAVI employees and provide a shared understanding of expectations across the Company.
While traditional services providers, in recent years, have continued to consolidate to gain scale and capital spending in physical networks has been declining, it also creates additional opportunities as service providers deploy NE products and solutions to improve average revenue per user (ARPU) metrics by reducing the need for physical customer service visits through faster installation and repair completion.
This has created scale and capital spending in physical networks has been declining. However, it has also created additional opportunities as service providers deploy NE products and solutions to reduce cost of repair and maintenance of their networks.
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Our customers include América Móvil, AT&T Inc., Lumen Technologies, Inc. (formerly CenturyLink, Inc.), Cisco Systems, Inc., Nokia Corporation, British Telecom Openreach, Deutsche Telekom AG and Verizon Communications Inc. For further information related to our customers, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 7 of this Annual Report on Form 10-K.
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These solutions provide our customers enhanced network management, control, optimization and differentiation and a complete service assurance platform for mobile communications, providing operators with network performance, inventory, configuration and fault management solutions through artificial intelligence driven key performance indicator analysis.
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Many operators have decided to run existing legacy networks by deploying superior technologies or continue to run until they are no longer operable and then replace them with new optical fiber.
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These products and solutions also improve efficiency of new service installation, activation and services by reducing the need for physical customer service visits and faster installation and repair completion. In addition, the new cloud service providers and virtualized networks create new NSE opportunities.
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Our most significant contract manufacturing partners are located in China and Mexico. Sources and Availability of Raw Materials We use various suppliers and contract manufacturers to supply parts and components for the manufacture and support of multiple product lines.
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Our security pigment technologies enable intuitive overt optical effects that consumers can easily and quickly recognize and that counterfeiters find very difficult to reproduce. Major trends in banknote design include an interest in incorporating more security features even on lower value denominations, a greater variety of colors, development of eye-catching abstract images, and implementing vertical orientation more frequently.
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We continue to deliver our global Leadership Development Program, with over 70% of our managers joining the Manager Development and Strategic Leadership Series in fiscal 2022. We intend for this to create alignment across the organization on the expectations of leaders, and how we can continue to develop leadership capabilities.
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As an example, customers in the mobile handset market are increasingly interested in delivering products that have increasingly thin physical profiles, necessitating innovation in the design and manufacturing of optical filters to meet those expectations.
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Hybrid work continues to be an important topic as evidenced by organizations needing to be highly adaptive to continuous change. In fiscal 2022, we sponsored a virtual learning event for our manager community, Leading Hybrid Teams, which attracted 300 participants. In fiscal 2022, VIAVI also instituted the Dr. H.
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In fiscal 2024, the Company was approved for a grant expected to provide approximately $21.7 million in funding over a three-year performance period from the Public Wireless Supply Chain Innovation Fund. The grant is intended to facilitate a fully automated, cooperative, open and unbiased testing environment dedicated to ORAN interoperability, performance and security.
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Angus Macleod Scholarship program at the University of Arizona Wyant College of Optical Sciences to honor a pioneer of optical science who mentored a generation of students to become foundational contributors to the field.
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We regularly update and partner with the Compensation Committee of the Board of Directors on human capital matters. The VIAVI People Strategy articulates our talent priorities and provides the road map for the execution of human capital management in support of our business strategy. Employee experience continues to be an important focus of our People Strategy.
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It is our hope that this gift creates access for more talent to enter the optical space as a career, and to increase our local connection to the community. Our early-in-career developmental rotation program for engineers has completed its first year.
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In fiscal 2025, we are evolving internal employee outreach to enhance business knowledge, drive organizational awareness and to foster cross-functional collaboration.
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Technical talent thought leadership is an area we intend to focus on in the coming year, developing a program to support the leadership and innovation skills of key technical talent.
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Our global Leadership Development Program has now reached over 79% of our managers in fiscal 2024. We introduced advanced leadership concepts this year, enabling our participants to connect globally and cross functionally while advancing their skills. We provide guidance and best practices in hybrid working for our employees and managers, which are supported by our Flexible Work policy.
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We are encouraged that VIAVI employees exhibit commitment to their ongoing career development, with 60% of our LinkedIn learning users building learning habits and logging in monthly to leverage the over 20,000 courses in LinkedIn Learning.
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Technical talent thought leadership is a continued focus at our annual Technology Council event for engineering talent. 11 Table of Contents Our employees regularly participate in mandatory training courses covering data privacy, cybersecurity, health and safety as well as the prevention of sexual harassment in the workplace, each achieving over 98% compliance by employees.
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We continue to support the workforce through the ongoing COVID-19 pandemic, guided by our policies and local site leadership.
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In addition, approximately 78% of individual contributors take advantage of additional training resources provided by the Company to support them in ongoing career and professional skills development.
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Our global COVID-19 Committee at the executive level, regional and local Pandemic Response Teams, Return to Work guidelines and flexible workplace practices all enable us to help our employees and their families stay healthy and safely navigate the challenging and changing environment.
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The success of our Safety program is demonstrated by our best-in-class Total Recordable Injury Rate (TRIR) of only 0.15 injuries per 100 full-time workers per year.
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Environmental, Social and Governance Matters We believe that serving our stakeholders including our stockholders, customers, suppliers, employees, communities and the environment drives commercial success, and that implementing environmental, social and governance (ESG) practices makes our business more sustainable. We take immense pride in the progress we are making within our ESG initiatives.
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VIAVI is committed to transparency in its environmental practices, and we publicly report our key environmental metrics. VIAVI continues to focus on energy efficiency, both in our products and business practices – which has resulted in a significant reduction of our carbon footprint over the years.
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We detail our approach to ESG, including the results of our ESG Priority Assessment in our ESG Report, which can be found at www.viavisolutions.com/esg . 12 T a b le of Contents Information Security Information security is the responsibility of our Information Security team, overseen by the Chief Information Security Officer.
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We leverage a combination of the National Institute of Standards and Technology Cybersecurity Framework, the International Organization for Standardization and the Center for Internet Security best practice standards to measure security posture, deliver risk management and provide effective security controls.
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Our information security program includes development, implementation, and improvement of policies and procedures to safeguard information and ensure availability of critical data and systems. Our Information Security team conducts annual information security awareness training for employees involved in our systems and processes that handle customer data and audits of our systems and enhanced training for specialized personnel.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeStrategic transactions of this nature involve numerous risks, including the following: • Diversion of management’s attention from normal daily operations of the business; • Potential difficulties in completing projects associated with in-process R&D; • Difficulties in entering markets in which we have no or limited prior experience and where competitors have stronger market positions; 17 T a b le of Contents • Difficulties in obtaining or providing sufficient transition services and accurately projecting the time and cost associated with providing these services; • An acquisition may not further our business strategy as we expected or we may overpay for, or otherwise not realize the expected return on, our investments; • Expected earn-outs may not be achieved in the time frame or at the level expected or at all; • We may not be able to recognize or capitalize on expected growth, synergies or cost savings; • Insufficient net revenue to offset increased expenses associated with acquisitions; • Potential loss of key employees of the acquired companies; • Difficulty in forecasting revenues and margins; • The impact of the COVID-19 pandemic, and any other adverse public health developments, epidemic disease or other pandemic in the countries in which we operate or our customers are located, including regional quarantines restricting the movement of people or goods, reductions in labor supply or staffing, the closure of facilities to protect employees, including those of our customers, disruptions to global supply chains and both our and our suppliers’ ability to deliver materials and products on a timely or cost-effective basis, shipment, acceptance or verification delays, the resulting overall significant volatility and disruption of financial markets, and economic instability affecting customer spending patterns; and • Inadequate internal control procedures and disclosure controls to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or poor integration of a target company’s or business’s procedures and controls.
Biggest changeStrategic transactions of this nature involve numerous risks, including the following: • Competition for suitable acquisition targets; • Inability to consummate deals on favorable or acceptable terms, or due to failure to obtain stockholder, government, regulatory or other necessary approvals or satisfy other closing conditions; • Diversion of management’s attention from normal daily operations of the business; • Potential difficulties in completing projects associated with in-process R&D; • Difficulties in entering markets in which we have no or limited prior experience and where competitors have stronger market positions; • Difficulties in obtaining or providing sufficient transition services and accurately projecting the time and cost associated with providing these services; • Inability of an acquisition to further our business strategy as expected or overpay for, or otherwise not realize the expected return on our investments; • Expected earn-outs may not be achieved in the time frame or at the level expected or at all; • Lack of ability to recognize or capitalize on expected growth, synergies or cost savings; • Insufficient net revenue to offset increased expenses associated with acquisitions; • Potential loss of key employees of the acquired companies; • Difficulty in forecasting revenues and margins; • Adverse public health developments, epidemic disease or pandemics in the countries in which we operate or our customers are located, including regional quarantines restricting the movement of people or goods, reductions in labor supply or staffing, the closure of facilities to protect employees, including those of our customers, disruptions to global supply chains and both our and our suppliers’ ability to deliver materials and products on a timely or cost-effective basis, shipment, acceptance or verification delays, the resulting overall significant volatility and disruption of financial markets, and economic instability affecting customer spending patterns; and 16 Table of Contents • Inadequate internal control procedures and disclosure controls to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or poor integration of a target company’s or business’s procedures and controls.
Management changes could adversely impact our results of operations and our customer relationships and may make recruiting for future management positions more difficult. Our executives and other key personnel are at-will employees and we generally do not have employment or non-compete agreements with our other employees, and we cannot assure you that we will be able to retain them.
Management changes could adversely impact our results of operations and our customer relationships and may make recruiting for future management positions more difficult. Our executives and other key personnel are generally at-will employees and we generally do not have employment or non-compete agreements with our other employees, and we cannot assure you that we will be able to retain them.
To the extent that any disruption, degradation, downtime or other security event results in a loss or damage to our data or systems, or in inappropriate disclosure of confidential or personal information, it could adversely impact us and our clients, potentially resulting in, among other things, financial losses, loss of customers or business, our inability to transact business on behalf of our clients, adverse impact on our brand and reputation, violations of applicable privacy and other laws, regulatory fines, penalties, litigation, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs.
To the extent that any disruption, degradation, downtime or other security event results in a loss or damage to our data or systems, or in inappropriate disclosure of confidential or personal information, it could adversely impact us and our clients, potentially resulting in, among other things, financial losses, loss of customers or business, our inability to transact business on behalf of our clients, adverse impact on our brand and reputation, violations of applicable privacy and other laws, regulatory fines, penalties, litigation, reimbursement or other compensation costs, and/or additional compliance costs.
Further, statements about our ESG initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
Further, statements about our ESG-related initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
These difficulties can reduce yields or disrupt production and thereby increase our manufacturing costs and adversely affect our margin. • We may incur significant costs to correct defective products (despite rigorous testing for quality both by our customers and by us), which could include lost future sales of the affected product and other products, and potentially severe customer relations problems, litigation and damage to our reputation. • We are dependent on a limited number of vendors, who are often small and specialized, for raw materials, packages and standard components.
These difficulties can reduce yields or disrupt production and thereby increase our manufacturing costs and adversely affect our margin. • We may incur significant costs to correct defective products (despite rigorous testing for quality both by our customers and by us), which could include lost future sales of the affected product and other products, and potentially severe customer relations problems, litigation and damage to our reputation. 14 Table of Contents • We are dependent on a limited number of vendors, who are often small and specialized, for raw materials, packages and standard components.
The growing and evolving cyber-risk environment means that individuals, companies, and organizations of all sizes, including ourselves and our hosting and support partners, are increasingly vulnerable to attacks and disruptions on their networks and systems by a wide range of actors on an ongoing and regular basis.
The growing and evolving cyber-risk environment means that individuals, companies, and organizations of all sizes, including ourselves, our customers, suppliers and our hosting and support partners, are increasingly vulnerable to attacks and disruptions on their networks and systems by a wide range of actors on an ongoing and regular basis.
We are subject to various federal, state and foreign laws and regulations governing the environment, including those governing pollution and protection of human health and the environment and, recently, those restricting the presence of certain substances in electronic products and holding producers of those products financially responsible for the collection, treatment, recycling and disposal of certain products.
We are subject to various federal, state and foreign laws and regulations, including those governing pollution, protection of human health, the environment and recently, those restricting the presence of certain substances in electronic products as well as holding producers of those products financially responsible for the collection, treatment, recycling and disposal of certain products.
We operate in geographic regions which face a number of climate and environmental challenges. Our new corporate headquarters are located in Chandler, Arizona, a desert climate, subject to extreme heat and drought. The geographic location of our Northern California offices and production facilities subject them to drought, earthquake and wildfire risks.
We operate in geographic regions which face a number of climate and environmental challenges. Our new corporate headquarters is located in Chandler, Arizona, a desert climate, subject to extreme heat and drought. The geographic location of our Northern California offices and production facilities subject them to drought, earthquake and wildfire risks.
We have and could continue to see periodic difficulty responding to customer delivery expectations for some of our products, and yield and quality problems, particularly with some of our new products and higher volume products which could require additional funds and other resources required to respond to these execution challenges.
We have seen and could continue to see periodic difficulty responding to customer delivery expectations for some of our products, and yield and quality problems, particularly with some of our new products and higher volume products which could require additional funds and other resources to respond to these execution challenges.
Although the indentures that govern the Notes and the agreement that governs our secured credit facility contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial.
The indentures that govern the Notes and the agreement that governs our secured credit facility contain restrictions on the incurrence of additional indebtedness, which are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial.
Any system failure, accident or security breach could result in disruptions to our business processes, network degradation, and system down time, along with the potential that a third-party will gain unauthorized access to, or acquire intellectual property, proprietary business information, and data related to our employees, customers, suppliers, and business partners, including personal data.
Any system failure, accident or security breach could result in disruptions to our business processes, network degradation, and system downtime, along with the potential that a third-party will gain unauthorized access to, or acquire intellectual property, proprietary business information, and data related to our employees, customers, suppliers, and business partners, including personal data.
In addition, the laws of some territories in which our products are or may be developed, manufactured or sold, including Europe, Asia-Pacific or Latin America, may not protect our products and intellectual property rights to the same extent as the laws of the United States. Any patents issued to us may be challenged, invalidated or circumvented.
In addition, the laws of some territories in which our products are or may be developed, manufactured or sold, including Europe, Asia-Pacific or Latin America, may not protect our products and intellectual property rights to the same extent as the laws of the United States. 21 Table of Contents Any patents issued to us may be challenged, invalidated or circumvented.
Utilization of our NOLs and tax credit carryforwards may be subject to a substantial annual limitation if the ownership change limitations under Sections 382 and 383 of the Internal Revenue Code and similar state provisions are triggered by changes in the ownership of our capital stock.
Utilization of our net operating losses (NOLs) and tax credit carryforwards may be subject to a substantial annual limitation if the ownership change limitations under Sections 382 and 383 of the Internal Revenue Code and similar state provisions are triggered by changes in the ownership of our capital stock.
Our international presence exposes us to certain risks, including the following: • Fluctuations in exchange rates between the U.S. dollar and among the currencies of the countries in which we do business may adversely affect our operating results by negatively impacting our revenues or increasing our expenses; • Our ability to comply with a wide variety of laws and regulations of the countries in which we do business, including, among other things, customs, import/export, anti-bribery, anti-competition, tax and data privacy laws, which may be subject to sudden and unexpected changes; • Difficulties in establishing and enforcing our intellectual property rights; • Tariffs and other trade barriers; • Political, legal and economic instability in foreign markets, particularly in those markets in which we maintain manufacturing and product development facilities; • Strained or worsening relations between the United States, Russia and China and related impacts on other countries; • Difficulties in staffing and management; • Language and cultural barriers; • Seasonal reductions in business activities in the countries where our international customers are located; • Integration of foreign operations; • Longer payment cycles; • Difficulties in management of foreign distributors; and • Potential adverse tax consequences.
Our international presence exposes us to certain risks, including the following: • Fluctuations in exchange rates between the U.S. dollar and among the currencies of the countries in which we do business may adversely affect our operating results by negatively impacting our revenues or increasing our expenses; • Our ability to comply with the laws and regulations of the countries in which we do business, including, among others, customs, import/export, economic sanctions, anti-bribery, anti-competition, climate/sustainability regulations, and tax and data privacy laws, which may be subject to sudden and unexpected changes; • Difficulties in establishing and enforcing our intellectual property rights; • Tariffs and other trade restrictions; • Political, legal and economic instability in foreign markets, particularly in those markets in which we maintain manufacturing and product development facilities; • Strained or worsening relations between the United States, Russia and China and related impacts on other countries; • Difficulties in staffing and management; • Language and cultural barriers; • Seasonal reductions in business activities in the countries where our international customers are located; • Integration of foreign operations; • Longer payment cycles; • Difficulties in management of foreign distributors; and • Potential adverse tax consequences.
In October 2017 and again in October 2019, we temporarily closed our Santa Rosa, California facility resulting in production stoppage, due to wildfires in the region and the facility’s close proximity to the wildfire evacuation zone. The location of our production facility could subject us to production delays and/or equipment and property damage.
In October 2017 and again in October 2019, we temporarily closed our Santa Rosa, California facility due to wildfires in the region and the facility’s close proximity to the wildfire evacuation zone which resulted in production stoppage. The location of our production facility could subject us to production delays and/or equipment and property damage.
These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness under the agreements governing our existing debt. The terms of the indentures that govern the Notes and the agreement that governs our secured credit facility restrict our current and future operations.
These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness under the agreements governing our existing debt. 25 Table of Contents The terms of the indentures that govern the Notes and the agreement that governs our secured credit facility restrict our current and future operations.
If our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our ESG goals on a timely basis, or at all, our reputation, business, financial performance and growth could be adversely affected. We may be subject to risks related to climate change, natural disasters and catastrophic events.
If our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our ESG-related goals on a timely basis, or at all, our reputation, business, financial performance and growth could be adversely affected. 23 Table of Contents We may be subject to risks related to climate change, natural disasters and catastrophic events.
In addition, the holders of the 2023 and 2024 Notes are entitled to convert the Notes into shares of our common stock or a combination of cash and shares of common stock under certain circumstances which would dilute our existing stockholders and lower our reported per share earnings.
In addition, the holders of the 2026 Notes are entitled to convert the Notes into shares of our common stock or a combination of cash and shares of common stock under certain circumstances which would dilute our existing stockholders and lower our reported per share earnings.
If domestic and global economic conditions worsen, including as a result of the COVID-19 pandemic, pricing and inflationary pressures, overall spending on 5G infrastructure, 3D sensing and other developing technologies may be reduced, which would adversely impact demand for our products in these markets.
If domestic and global economic conditions worsen, including as a result of pricing and inflationary pressures, overall spending on 5G infrastructure, 3D sensing and other developing technologies may be reduced, which would adversely impact demand for our products in these markets.
In addition, our ability to make scheduled payments on our indebtedness, including the notes, is affected by general and regional economic, financial, competitive, business and other factors beyond our control, including the COVID-19 pandemic.
In addition, our ability to make scheduled payments on our indebtedness, including the Notes, is affected by general and regional economic, financial, competitive, business and other factors beyond our control.
On May 16, 2019, Huawei Technologies Co. Ltd. and 68 designated non-U.S. affiliates (collectively, Huawei) were added to the Entity List of the Bureau of Industry and Security of the U.S. Department of Commerce (BIS), which imposes limitations on the supply of certain U.S. items and product support to Huawei.
On May 16, 2019, Huawei Technologies Co. Ltd. and a score of non-U.S. affiliates (collectively, Huawei) were added to the Entity List of the Bureau of Industry and Security of the U.S. Department of Commerce (BIS), which imposes limitations on the supply of certain U.S. items and product support to Huawei.
Our level of indebtedness could have important consequences, including: • Impairing our ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes; • Requiring us to dedicate a substantial portion of our operating cash flow to paying principal and interest on our indebtedness, thereby reducing the funds available for operations; • Limiting our ability to grow and make capital expenditures due to the financial covenants contained in our debt arrangements; • Impairing our ability to adjust rapidly to changing market conditions, invest in new or developing technologies, or take advantage of significant business opportunities that may arise; • Making us more vulnerable if a general economic downturn occurs or if our business experiences difficulties; and • Resulting in an event of default if we fail to satisfy our obligations under the Notes or our other debt or fail to comply with the financial and other restrictive covenants contained in the indentures governing the Notes, or any other debt instruments, which event of default could result in all of our debt becoming immediately due and payable and could permit certain of our lenders to foreclose on our assets securing such debt. 25 T a b le of Contents We may not generate sufficient cash flow to meet our debt service and working capital requirements, which may expose us to the risk of default under our debt obligations.
Our level of indebtedness could have important consequences, including: • Impairing our ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes; • Requiring us to dedicate a substantial portion of our operating cash flow to paying principal and interest on our indebtedness, thereby reducing the funds available for operations; • Limiting our ability to grow and make capital expenditures due to the financial covenants contained in our debt arrangements; • Impairing our ability to adjust rapidly to changing market conditions, invest in new or developing technologies, or take advantage of significant business opportunities that may arise; • Making us more vulnerable if a general economic downturn occurs or if our business experiences difficulties; and • Resulting in an event of default if we fail to satisfy our obligations under the Notes or our other debt or fail to comply with the financial and other restrictive covenants contained in the indentures governing the Notes, or any other debt instruments, which event of default could result in all of our debt becoming immediately due and payable and could permit certain of our lenders to foreclose on our assets securing such debt.
We may not be able to engage in these activities on desirable terms or at all, which may result in a default on our existing or future indebtedness and harm our financial condition and operating results. Our outstanding indebtedness may limit our operational and financial flexibility.
We may not be able to engage in these activities on desirable terms or at all, which may result in a default on our existing or future indebtedness and harm our financial condition and operating results. 24 Table of Contents Our outstanding indebtedness may limit our operational and financial flexibility.
Our growth and ability to serve a significant portion of these markets is subject to many factors, including our success in implementing our business strategy and market adoption and expansion of 5G infrastructure, 3D sensing and other applications for consumer electronics.
Our growth and ability to serve a significant portion of these markets are subject to many factors including our success in implementing our business strategy as well as market adoption and expansion of 5G infrastructure, 3D sensing and other applications for consumer electronics.
We have recently and could continue to experience changes in our leadership team. Competition for people with the specific technical and other skills we require is significant. Moreover, we may face new and unanticipated difficulties in attracting, retaining and motivating employees in connection with the change of our headquarters to Chandler, Arizona.
We have in the past experienced, and could continue to experience changes in our leadership team. Competition for people with the specific technical and other skills we require is significant. Moreover, we may face difficulties in attracting, retaining and motivating employees in connection with the change of our headquarters to Chandler, Arizona.
Additionally, the ability of our contract manufacturers to fulfill their obligations may be affected by economic, political or other forces that are beyond our control, including the COVID-19 pandemic.
Additionally, the ability of our contract manufacturers to fulfill their obligations may be affected by economic, political or other forces that are beyond our control.
Specific factors that may undermine our profit and financial objectives include, among others: • Uncertain future telecom carrier and cable operator capital and R&D spending levels, which particularly affects our NE and SE segments; • Adverse changes to our product mix, both fundamentally (resulting from new product transitions, the declining profitability of certain legacy products and the termination of certain products with declining margins, among other things) and due to quarterly demand fluctuations; • Pricing pressure across our NSE product lines due to competitive forces, advanced chip component shortages, and a highly concentrated customer base for many of our product lines, which may offset some of the cost improvements; • Our OSP operating margin may experience some downward pressure as a result of a higher mix of 3D sensing products and increased operating expenses; • Limited availability of components and resources for our products which leads to higher component prices; • Resource rationing, including rationing of utilities like electricity by governments and/or service providers; • Increasing commoditization of previously differentiated products, and the attendant negative effect on average selling prices and profit margins; • Execution challenges, which limit revenue opportunities and harm profitability, market opportunities and customer relations; • Decreased revenue associated with terminated or divested product lines; • Redundant costs related to periodic transitioning of manufacturing and other functions to lower-cost locations; • Ongoing costs associated with organizational transitions, consolidations and restructurings, which are expected to continue in the nearer term; • Cyclical demand for our currency products; • Changing market and economic conditions, including the impacts due to tariffs, the COVID-19 pandemic, the ongoing conflict between Russia and Ukraine, supply chain constraints, pricing and inflationary pressures; • Ability of our customers, partners, manufacturers and suppliers to purchase, market, sell, manufacture and/or supply our products and services, including as a result of disruptions arising from the COVID-19 pandemic; • Financial stability of our customers, including the solvency of private sector customers and statutory authority for government customers to purchase goods and services; and • Factors beyond our control resulting from pandemics and similar outbreaks such as the COVID-19 pandemic, manufacturing restrictions, travel restrictions and shelter-in-place orders to control the spread of a disease regionally and globally, and limitations on the ability of our employees and our suppliers’ and customers’ employees to work and travel.
Specific factors that may undermine our profit and financial objectives include, among others: • Uncertainty around the timing of our customers procurement decisions on infrastructure maintenance and upgrades; • Uncertain future telecom carrier and cable operator capital and R&D spending levels, which particularly affects our NE and SE segments; • Adverse changes to our product mix, both fundamentally (resulting from new product transitions, the declining profitability of certain legacy products and the termination of certain products with declining margins, among other things) and due to quarterly demand fluctuations; • Pricing pressure across our NSE product lines due to competitive forces, particularly from Asia-based competitors, advanced chip component shortages, and a highly concentrated customer base for many of our product lines, which may offset some of the cost improvements; • Our OSP operating margin may experience some downward pressure as a result of a higher mix of 3D sensing products and increased operating expenses; • Limited availability of components and resources for our products which leads to higher component prices; • Resource rationing, including rationing of utilities like electricity by governments and/or service providers; • Budgetary constraints that impact or slow customer inventory consumption; • Increasing commoditization of previously differentiated products, and the attendant negative effect on average selling prices and profit margins; • Execution challenges, which limit revenue opportunities and harm profitability, market opportunities and customer relations; • Decreased revenue associated with terminated or divested product lines; 13 Table of Contents • Redundant costs related to periodic transitioning of manufacturing and other functions to lower-cost locations; • Ongoing costs associated with organizational transitions, consolidations and restructurings, which are expected to continue in the nearer term; • Cyclical demand for our currency products; • Changing market and economic conditions, including the impacts due to tariffs, economic sections and export restrictions, the ongoing conflict between Russia and Ukraine, the armed conflict between Israel and Hamas; tensions and trade sanctions between the U.S. and China, supply chain constraints, pricing and inflationary pressures; • Ability of our customers, partners, manufacturers and suppliers to purchase, market, sell, manufacture and/or supply our products and services, including as a result of disruptions arising from supply chain constraints; • Financial stability of our customers, including the solvency of private sector customers and statutory authority for government customers to purchase goods and services; and • Factors beyond our control resulting from pandemics and similar outbreaks, manufacturing restrictions, travel restrictions and shelter-in-place orders to control the spread of a disease regionally and globally, and limitations on the ability of our employees and our suppliers’ and customers’ employees to work and travel.
While we believe we have complied with our obligations under the various applicable licenses for open-source software, in the event that a court rules that these licenses are unenforceable, or in the event the copyright holder of any open source software were to successfully establish in court that we had not complied with the terms of a license for a particular work, we could be required to release the source code of that work to the public and/or stop distribution of that work.
In the event that a court rules that these licenses are unenforceable, or in the event the copyright holder of any open-source software were to successfully establish in court that we had not complied with the terms of a license for a particular work, we could be required to release the source code of that work to the public and/or stop distribution of that work.
Our notes increased our overall leverage and our convertible notes could dilute our existing stockholders and lower our reported earnings per share. The issuance of our 1.00% Senior Convertible Notes due 2024, our 1.75% Senior Convertible Notes due 2023, and our 3.75% Senior Notes due 2029 (together the “Notes”) substantially increased our principal payment obligations.
Our term notes increased our overall leverage and our convertible notes could dilute our existing stockholders and lower our reported earnings per share. The issuance of our 1.625% Senior Convertible Notes due 2026 and our 3.75% Senior Notes due 2029 (together the “Notes”) substantially increased our principal payment obligations.
We may also incur additional costs related to cyber-security risk management and remediation. There can be no assurance that we or our service providers, if applicable, will not suffer losses relating to cyber-attacks or other information security breaches in the future or that our insurance coverage will be adequate to cover all the costs resulting from such events.
We may also incur additional costs related to cybersecurity risk management and remediation. We or our service providers, if applicable, may suffer losses relating to cyber-attacks or other information security breaches in the future and any insurance coverage may not be adequate to cover all the costs resulting from such events.
Hence, greater restrictions and/or disruptions of our suppliers’ ability to operate facilities and/or do business in and with Taiwan may increase the cost of certain materials and/or limit the supply of products sourced from Taiwan and may result in deterioration of our profit margins, a potential need to increase our pricing and, in so doing, may decrease demand for our products and thereby adversely impact our revenue or profitability. 20 T a b le of Contents Due to the ongoing conflict between Russia and Ukraine, the U.S., E.U. and U.K. have broadened restrictions on exports to Russia, thereby blocking shipments of technology, telecommunications and consumer electronics products to Russia.
Hence, greater restrictions and/or disruptions of our suppliers’ ability to operate facilities and/or do business in these jurisdictions may increase the cost of certain materials and/or limit the supply of products and may result in deterioration of our profit margins, a potential need to increase our pricing and, in so doing, may decrease demand for our products and thereby adversely impact our revenue or profitability. 19 Table of Contents Due to the ongoing conflict between Russia and Ukraine, the U.S., E.U. and U.K. have broadened restrictions on supply to Russia, thereby blocking shipments of technology, telecommunications and consumer electronics products to Russia.
Certain of the software and/or firmware that we use and distribute (as well as that of our suppliers, manufacturers and customers) may be, be derived from, or contain, “open source” software, which is software that is generally made available to the public by its authors and/or other third parties.
Certain of the software and/or firmware that we use and distribute (as well as that of our suppliers, manufacturers and customers) may be, derived from, or contain, “open-source” software, which is software that is generally made available to the public by its authors and/or other third parties, as well as generative artificial intelligence (GenAI) technology (discussed further below).
The markets for our NE and SE segments are increasingly looking towards virtualized networks and software solutions. While we are devoting substantial resources to meet these needs, this trend may result in lower demand for our legacy hardware products. Additionally, barriers to entry are generally lower for software solutions, which may lead to increased competition for our products and services.
The markets for our NE and SE segments are increasingly looking towards virtualized networks and software solutions. This trend may result in lower demand for our legacy hardware products. Additionally, barriers to entry are generally lower for software solutions, which may lead to increased competition for our products and services.
The indentures governing the Notes and the agreement governing the secured credit facility contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including restrictions on our ability to: • Incur or guarantee additional indebtedness; • Incur or suffer to exist liens securing indebtedness; • Make investments; • Consolidate, merge or transfer all or substantially all of our assets; • Sell assets; • Pay dividends or other distributions on, redeem or repurchase capital stock; • Enter into transactions with affiliates; • Amend, modify, prepay or redeem subordinated indebtedness; • Enter into certain restrictive agreements; • Engage in a new line of business; • Amend certain material agreements, including material leases and debt agreements; and • Enter into sale leaseback transactions. 26 T a b le of Contents Tax Risks Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations and/or changes in regulations.
The indentures governing the Notes and the agreement governing the secured credit facility contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including restrictions on our ability to: • Incur or guarantee additional indebtedness; • Incur or suffer to exist liens securing indebtedness; • Make investments; • Consolidate, merge or transfer all or substantially all of our assets; • Sell assets; • Pay dividends or other distributions on, redeem or repurchase capital stock; • Enter into transactions with affiliates; • Amend, modify, prepay or redeem subordinated indebtedness; • Enter into certain restrictive agreements; • Engage in a new line of business; • Amend certain material agreements, including material leases and debt agreements; and • Enter into sale leaseback transactions.
Our failure to comply with applicable laws and regulations or other obligations to which we may be subject relating to personal data, or to protect personal data from unauthorized access, use, or other processing, could result in enforcement actions and regulatory investigations against us, claims for damages by customers and other affected individuals, fines, damage to our reputation, and loss of goodwill, any of which could have a material adverse effect on our operations, financial performance, and business.
Our failure to comply with applicable laws and regulations or other obligations to which we may be subject relating to personal data, or to protect personal data from unauthorized access, use, or other processing, could result in enforcement actions and regulatory investigations against us, claims for damages by customers and other affected individuals, fines, damage to our reputation, and loss of goodwill, any of which could have a material adverse effect on our operations, financial performance, and business. 20 Table of Contents Information Security, Technology and Intellectual Property Risks Our business and operations could be adversely impacted in the event of a failure of information technology infrastructure.
Moreover, Pacific Gas and Electric (PG&E), the public electric utility in our Northern California region, has previously implemented and may continue to implement widespread blackouts during the peak wildfire season to avoid and contain wildfires sparked during strong wind events by downed power lines or equipment failure.
Moreover, Pacific Gas and Electric (PG&E), the public electric utility in our Northern California region, has previously implemented and may continue to implement widespread blackouts during the peak wildfire season to avoid and contain wildfires sparked during strong wind events by downed power lines or equipment failure. Ongoing blackouts, particularly if prolonged or frequent, could impact our operations going forward.
Global economic conditions have caused and may cause volatility and disruptions in the capital and credit markets. When the capital or credit markets deteriorate or are disrupted, our ability to incur additional indebtedness to fund a portion of our working capital needs and other general corporate purposes, or to refinance maturing obligations as they become due, may be constrained.
When the capital or credit markets deteriorate or are disrupted, our ability to incur additional indebtedness to fund a portion of our working capital needs and other general corporate purposes, or to refinance maturing obligations as they become due, may be constrained.
Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates which may not prove to be accurate. Our estimates of the market opportunities related to 5G infrastructure, 3D sensing and other developing technologies are subject to significant uncertainty and are based on assumptions and estimates, including our internal analysis, industry experience and third-party data.
Our estimates of the market opportunities related to 5G infrastructure, 3D sensing and other developing technologies are subject to significant uncertainty and are based on assumptions and estimates, including our internal analysis, industry experience and third-party data.
We cannot assure you that we will be able to serve a significant portion of these markets and the growth forecasts should not be taken as indicative of our future growth.
We may not be able to serve a significant portion of these markets and the growth forecasts should not be taken as indicative of our future growth.
For example, certain of our suppliers are dependent on products sourced from Taiwan which has been distinguished in its prevalence in certain global markets, most specifically semiconductor manufacturing.
For example, certain of our suppliers are dependent on products sourced from Taiwan which are prevalent in certain global markets, most specifically semiconductor manufacturing.
Without such a license, we could be enjoined from future sales of the infringing product or products, which could adversely affect our revenues and operating results. The use of open-source software in our products, as well as those of our suppliers, manufacturers and customers, may expose us to additional risks and harm our intellectual property position.
Without such a license, we could be enjoined from future sales of the infringing product or products, which could adversely affect our revenues and operating results. The use of open-source software and generative artificial intelligence may expose us to risks and harm our intellectual property position.
Even if the markets and rates of adoption develop in the manner or in the time periods we anticipate, if we do not have timely, competitively priced, market-accepted products available to meet our customers’ planned roll-out of 5G platforms and systems, 3D sensing products and other technologies, we may miss a significant opportunity and our business, financial condition, results of operations and cash flows could be materially and adversely affected.
Even if the markets and rates of adoption develop in the manner or in the time periods we anticipate, if we do not have timely, competitively priced, market-accepted products available to meet our customers’ planned roll-out of 5G platforms and systems, 3D sensing products and other technologies, we may miss a significant opportunity and our business, financial condition, results of operations and cash flows could be materially and adversely affected. 15 Table of Contents We may experience increased pressure on our pricing and contract terms due to our reliance on a limited number of customers for a significant portion of our sales.
No assurances can be given that our efforts to reduce the risk of such attacks will be successful. If we have insufficient proprietary rights or if we fail to protect those we have, our business would be materially harmed.
Our efforts to reduce the risk of such attacks or to detect attacks that occur may not be successful. If we have insufficient proprietary rights or if we fail to protect those we have, our business would be materially harmed.
If we have to make significant capital expenditures to comply with environmental laws, or if we are subject to significant expenditures in connection with a violation of these laws, our financial condition or operating results could be materially adversely impacted. Our disclosures, initiatives and goals related to ESG matters expose us to numerous risks.
If we have to make significant capital expenditures to comply with environmental laws, or if we are subject to significant expenditures in connection with a violation of these laws, our financial condition or operating results could be materially adversely impacted.
Our profitability in a particular period will be impacted by revenue, product mix and operational costs that vary significantly across our product portfolio and business segments.
Risks Related to Our Business Strategy and Industry Our future profitability is not assured. Our profitability in a particular period will be impacted by revenue, product mix and operational costs that vary significantly across our product portfolio and business segments.
In addition, we have significant operations outside North America, including product development, manufacturing, sales and customer support operations.
Our customers are located throughout the world. In addition, we have significant operations outside North America, including product development, manufacturing, sales and customer support operations.
If we do not improve our performance in all of these areas, our operating results will be harmed, the commercial viability of new products may be challenged, and our customers may choose to reduce or terminate their purchases of our products and purchase additional products from our competitors. 16 T a b le of Contents Unfavorable, uncertain or unexpected conditions in the transition to new technologies may cause our growth forecasts to be inaccurate and/or cause fluctuations in our financial results.
If we do not improve our performance in all of these areas, our operating results will be harmed, the commercial viability of new products may be challenged, and our customers may choose to reduce or terminate their purchases of our products and purchase additional products from our competitors.
Furthermore, the geopolitical and economic uncertainty and/or instability that may result from changes in the relationship among the United States, Taiwan and China, may, directly or indirectly, materially harm our business, financial condition and results of operations.
As a result, these actions, including potential retaliatory measures by China and further escalation of trade restrictions could adversely impact our business. Furthermore, the geopolitical and economic uncertainty and/or instability that may result from changes in the relationship among the United States, Taiwan and China, may, directly or indirectly, materially harm our business, financial condition and results of operations.
In addition, these investments may take several years to generate positive returns, if ever. 18 T a b le of Contents Operational Risks Restructuring We have from time to time engaged in restructuring activities to realign our cost base with current and anticipated future market conditions.
In addition, these investments may take several years to generate positive returns, if ever. Operational Risks Our restructuring activities could adversely affect our business and results of operations. We have from time-to-time engaged in restructuring activities to realign our cost base with current and anticipated future market conditions, including ones initiated during fiscal 2023 and fiscal 2024.
The new and proposed privacy laws may result in further uncertainty and would require us to incur additional expenditures to comply. These regulations and legislative developments have potentially far-reaching consequences and may require us to modify our data management practices and incur substantial compliance expense.
These regulations and legislative developments have potentially far-reaching consequences and may require us to modify our data management practices and incur substantial compliance expense.
If we are unable to attract and retain qualified executives and employees, or to successfully integrate any newly hired personnel within our organization, we may be unable to achieve our operating objectives, which could negatively impact our financial performance and results of operations. 24 T a b le of Contents Risks Related to our Liquidity and Indebtedness Any deterioration or disruption of the capital and credit markets may adversely affect our access to sources of funding.
If we are unable to attract and retain qualified executives and employees, or to successfully integrate any newly hired personnel within our organization, we may be unable to achieve our operating objectives, which could negatively impact our financial performance and results of operations. 17 Table of Contents We face risks related to our international operations and revenue.
In the future licenses to third-party technology may not be available on commercially reasonable terms, if at all. 22 T a b le of Contents Our products may be subject to claims that they infringe the intellectual property rights of others.
In the past, licenses generally have been available to us where third-party technology was necessary or useful for the development or production of our products. In the future licenses to third-party technology may not be available on commercially reasonable terms, if at all. Our products may be subject to claims that they infringe the intellectual property rights of others.
We seek to protect our products and our product roadmaps in part by developing and/or securing proprietary rights relating to those products, including patents, trade secrets, know-how and continuing technological innovation. The steps taken by us to protect our intellectual property may not adequately prevent misappropriation or ensure that others will not develop competitive technologies or products.
We seek to protect our products and our product roadmaps in part by developing and/or securing proprietary rights relating to those products, including patents, trade secrets, know-how and continuing technological innovation.
If we are unable to obtain such a license, our business, financial condition and results of operations could be negatively impacted. These measures, along with any additional tariffs or other trade actions that may be implemented, may increase the cost of certain materials and/or products that we import from China, thereby adversely affecting our profitability.
These measures, along with any additional tariffs or other trade actions that may be implemented, may increase the cost of certain materials and/or products that we import from China, thereby adversely affecting our profitability. These actions could require us to raise our prices, which could decrease demand for our products.
These initiatives and goals could be difficult and expensive to implement, and we could be criticized for the accuracy, adequacy, or completeness of the disclosure of our ESG initiatives.
These ESG-related initiatives and goals could be difficult and expensive to implement, the technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and we could be criticized for the accuracy, adequacy or completeness of the disclosure.
In addition, a federal privacy bill, called the American Data Privacy and Protection Act was recently published. The new state privacy laws and proposed federal law will impose additional data protection obligations on covered businesses, including additional consumer rights, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.
The new state privacy laws will impose additional data protection obligations on covered businesses, including additional consumer rights, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data. The new and proposed privacy laws may result in further uncertainty and would require us to incur additional expenditures to comply.
If we change a product for any reason, including technological changes or changes in the manufacturing process, prior approvals or certifications may be invalid and we may need to go through the approval process again.
In addition, durability testing by the automobile industry of our special effects pigments used with automotive paints can take up to three years. If we change a product for any reason, including technological changes or changes in the manufacturing process, prior approvals or certifications may be invalid and we may need to go through the approval process again.
The United States and China have been engaged in protracted negotiations over the Chinese government’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.
U.S. government trade actions and restrictions could have an adverse impact on our business, financial position, and results of operation. The United States and China have been engaged in protracted negotiations over the Chinese government’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.
If we fail to comply with such laws, we could face sanctions for such noncompliance, and our customers may refuse to purchase our products, which would have a materially adverse effect on our business, financial condition and results of operations. 23 T a b le of Contents With respect to compliance with environmental laws and regulations in general, we have incurred, and in the future could incur, substantial costs for the cleanup of contaminated properties, either those we own or operate or to which we have sent wastes in the past, or to comply with such environmental laws and regulations.
With respect to compliance with environmental laws and regulations in general, we have incurred, and in the future could incur, substantial costs for the cleanup of contaminated properties, either those we own or operate or to which we have sent wastes in the past, or to comply with such environmental laws and regulations.
These provisions may also have the effect of deterring hostile takeovers or delaying changes in control or change in our management. 27 T a b le of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None. ITEM 2. PROPERTIES Not applicable. ITEM 3. LEGAL PROCEEDINGS The information set forth under the heading “Legal Proceedings” in Note 18.
These provisions may also have the effect of deterring hostile takeovers or delaying changes in control or change in our management. 27 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Additionally, open-source licenses are subject to occasional revision. In the event future iterations of open-source software are made available under a revised license, such license revisions may adversely affect our ability to use such future iterations. Environmental, Social and Governance Risks We may be subject to environmental liabilities which could increase our expenses and harm our operating results.
Additionally, open-source licenses are subject to occasional revision. In the event future iterations of open-source software are made available under a revised license, such license revisions may adversely affect our ability to use such future iterations. Similarly, GenAI technology has proliferated including as a feature in existing commercially available products, some of which we use.
If these estimates and assumptions are incorrect, if we experience delays, or if other unforeseen events occur, our business and results of operations could be adversely affected. We face risks related to our international operations and revenue. Our customers are located throughout the world.
If these estimates and assumptions are incorrect, if we experience delays, or if other unforeseen events occur, our business and results of operations could be adversely affected. Management transitions and talent retention create uncertainties that could harm our business.
We will need to implement our business strategy successfully on a timely basis to meet our debt service and working capital needs.
We may not generate sufficient cash flow to meet our debt service and working capital requirements, which may expose us to the risk of default under our debt obligations. We will need to implement our business strategy successfully on a timely basis to meet our debt service and working capital needs.
If we fail to achieve profitability expectations, the price of our debt and equity securities, as well as our business and financial condition, may be materially adversely impacted. 15 T a b le of Contents Rapid technological change in our industry presents us with significant risks and challenges, and if we are unable to keep up with the rapid changes, our customers may purchase less of our products.
Rapid technological change in our industry presents us with significant risks and challenges, and if we are unable to keep up with the rapid changes, our customers may purchase less of our products.
On August 17, 2020, BIS issued final rules that further restrict access by Huawei to items produced domestically and abroad from U.S. technology and software. While the majority of our products were unaffected, the final rules prevent us from selling certain products to Huawei entities without a license issued subject to the Export Administration Regulations.
On August 17, 2020, BIS issued final rules that further restrict access by Huawei to items produced domestically and abroad from U.S. technology and software. Certain products of VIAVI are subject to the restrictions; however, the impact is not expected to be material to our overall operations.
Information Security, Technology and Intellectual Property Risks Our business and operations could be adversely impacted in the event of a failure of our information technology infrastructure. We rely upon the capacity, reliability and security of our information technology infrastructure and our ability to expand and continually update this infrastructure in response to our changing needs.
We rely upon the capacity, reliability and security of our information technology infrastructure and our ability to expand and continually update this infrastructure in response to our changing needs. In some cases, we rely upon third-party hosting and support services to meet these needs.
The spread of COVID-19 has and is likely to continue to affect the manufacturing and shipment of goods globally. Any delay in production or delivery of our products due to an extended closure of our suppliers’ plants as a result of efforts to limit the spread of COVID-19 could adversely impact our business.
Global and regional health pandemics have affected and may in the future affect the manufacturing and shipment of goods globally. Any delay in production or delivery of our products due to an extended closure of our suppliers’ plants could adversely impact our business, along with delays in shipment of our products as well as increased logistics costs.
If we are unable to obtain these or other government or industry certifications in a timely manner, or at all, our operating results could be adversely affected. U.S. Government trade actions could have an adverse impact on our business, financial position, and results of operation.
If we are unable to obtain these or other government or industry certifications in a timely manner, or at all, our operating results could be adversely affected. We receive formal and informal government inquiries or audits related to our products, practices or services from time to time.
Lower sales levels that typically occur during the summer months in Europe and some other overseas markets may materially and adversely affect our business. In addition, the revenues we derive from many of our customers depend on international sales and further expose us to the risks associated with such international sales.
We expect that net revenue from customers outside North America will continue to account for a significant portion of our total net revenue. Lower sales levels that typically occur during the summer months in Europe and some other overseas markets may materially and adversely affect our business.
Changes in U.S. federal income or other tax laws or the interpretation of tax laws, including the Inflation Reduction Act of 2022, as recently passed by Congress, may impact our tax liabilities.
Tax Risks Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations and/or changes in regulations. Changes in U.S. federal income or other tax laws or the interpretation of tax laws, including the Inflation Reduction Act of 2022, may impact our tax liabilities.
Actual results may differ materially from these estimates assumptions or conditions due to risks and uncertainties, including the ongoing situation in Ukraine as well as the potential for additional trade actions or retaliatory cyber-attacks aimed at infrastructure or supply chains, the impact on our future operations and results in the region remains uncertain.
This caused us to suspend transactions in the region effective February 2022 and has negatively impacted our business in the region. The ongoing situation in Ukraine as well as the potential for additional trade actions or retaliatory cyber-attacks aimed at infrastructure or supply chains, could have an impact on our future operations and financial results.
We may experience increased pressure on our pricing and contract terms due to our reliance on a limited number of customers for a significant portion of our sales. We believe that we will continue to rely upon a limited number of customers for a significant portion of our revenues for the foreseeable future.
We believe that we will continue to rely upon a limited number of customers for a significant portion of our revenues for the foreseeable future. Any failure by us to continue capturing a significant share of key customer sales could materially harm our business.
Legal, Regulatory and Compliance Risks Certain of our products are subject to governmental and industry regulations, certifications and approvals. The commercialization of certain of the products we design, manufacture and distribute through our OSP segment may be more costly due to required government approval and industry acceptance processes.
The commercialization of certain of the products we design, manufacture and distribute may be more costly due to required government approval and industry acceptance processes. For example, in our OSP segment, development of applications for our anti-counterfeiting and special effects pigments may require significant testing that could delay our sales.
Any failure by us to continue capturing a significant share of these customers could materially harm our business. Dependence on a limited number of customers exposes us to the risk that order reductions from any one customer can have a material adverse effect on periodic revenue.
Dependence on a limited number of customers exposes us to the risk that order reductions from any one customer can have a material adverse effect on periodic revenue. Due to the current trend of communication industry consolidation, we may have increased dependence on fewer customers who may be able to exert increased pressure on our prices and other contract terms.
Taken together, these factors limit our ability to predict future profitability levels and to achieve our long-term profitability objectives.
Taken together, these factors limit our ability to predict future profitability levels and to achieve our long-term profitability objectives. If we fail to achieve profitability expectations, the price of our debt and equity securities, as well as our business and financial condition, may be materially adversely impacted.
If any of these events occur, we may not derive some or all of the expected benefits from our NOLs and tax credit carryforwards. General Risks Certain provisions in our charter and under Delaware laws could hinder a takeover attempt.
If any of these events occur, we may not derive some or all of the expected benefits from our NOLs and tax credit carryforwards. 26 Table of Contents Changes in tax legislation or policies could materially impact our financial position and results of operations. VIAVI operates in many jurisdictions around the world.
We also design and manage IT systems and products that contain IT systems for various customers, and generally face the same threats for these systems as for our own internal systems. 21 T a b le of Contents We maintain information security tools and technologies, staff, policies and procedures for managing risk to our networks and information systems, and conduct employee training on cyber-security to mitigate persistent and continuously evolving cyber-security threats.
We also design and manage IT systems and products that contain IT systems for various customers, and generally face the same threats for these systems as for our own internal systems.
Further, there are five new state privacy laws that will go into effect in 2023, the California Privacy Rights Act, the Virginia Consumer Data Protection Act, the Utah Consumer Privacy Act, the Colorado Privacy Act and the Connecticut Data Privacy Act, and a number of other states are considering similar laws.
Additional state privacy laws become effective in 2024, including the Montana Consumer Data Privacy Act, Oregon Consumer Data Privacy Act and Texas Data Privacy and Security Act, and a number of other states have passed laws that will go into effect in the next few years, including Delaware, Kentucky, Maryland, Minnesota, Nebraska, New Hampshire, New Jersey, Rhode Island, Tennessee, Indiana and Iowa and many more that are considering similar laws.
Other companies may be investigating or developing other technologies that are similar to our own.
The steps taken by us to protect our intellectual property may not adequately prevent misappropriation or ensure that others will not develop competitive technologies or products and the costs associated with protecting our intellectual property may outweigh the benefits. Other companies may be investigating or developing other technologies that are similar to our own.
Removed
ITEM 1A. RISK FACTORS COVID-19 Risks The COVID-19 pandemic has and may continue to adversely affect how we and our customers are operating our businesses. The ongoing COVID-19 pandemic has resulted in a widespread health crisis that adversely affected the broader economies, financial markets and may affect the overall demand environment for our products and services.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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ITEM 3. LEGAL PROCEEDINGS 28 ITEM 4. MINE SAFETY DISCLOSURE 28 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 29 ITEM 6 . RESERVED 30 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 31 I TEM 7A.
Added
ITEM 3. LEGAL PROCEEDINGS The information set forth under the heading “Legal Proceedings” in “Note 18. Commitments and Contingencies” in the Notes to Consolidated Financial Statements in Item 8 of this Report is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 29 Table of Contents PART II
Removed
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 45 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 47

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table provides stock repurchase activity during the three months ended July 2, 2022 (in millions, except per share amounts): Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Dollar Value of Shares that May Still Be Purchased Under the Plans or Programs (1) Period April 3 - April 30, 2022 0.7 $14.96 0.7 $ 86.0 May 1- May 28, 2022 0.9 $14.37 0.9 $ 73.7 May 29 - July 2, 2022 0.5 $13.81 0.5 $ 67.3 Total 2.1 2.1 (1) Share repurchases made under our 2019 Repurchase Plan for up to $200 million of our common stock, which was announced September 12, 2019 and expires September 30, 2022.
Biggest changeThe following table provides stock repurchase activity during the three months ended June 29, 2024 ( in millions, except per share amounts ): Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Dollar Value of Shares that May Still Be Purchased Under the Plans or Programs (1) Period March 31 - April 27, 2024 — — — $ 224.8 April 28 - May 25, 2024 — — — $ 224.8 May 26 - June 29, 2024 1.3 $7.69 1.3 $ 214.8 Total 1.3 1.3 (1) Share repurchases were made under our 2022 Repurchase Plan with authorization up to $300 million.
The following graph and table set forth the total cumulative return, assuming reinvestment of dividends, on an investment of $100 in June 2017 and ending June 2022 in: (i) our Common Stock, (ii) the S&P 500 Index, (iii) the Nasdaq Stock Market (U.S.) Index, and (iv) the Nasdaq Telecommunications Index.
The following graph and table set forth the total cumulative return, assuming reinvestment of dividends, on an investment of $100 in June 2019 and ending June 2024 in: (i) our Common Stock, (ii) the S&P 500 Index, (iii) the Nasdaq Stock Market (U.S.) Index, and (iv) the Nasdaq Telecommunications Index.
Stockholders' Equity” of Item 8 for more details. 29 T a b le of Contents STOCK PERFORMANCE GRAPH The information contained in the following graph shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference in such filing.
Stockholders' Equity” of Item 8 for more details. 30 Table of Contents STOCK PERFORMANCE GRAPH The information contained in the following graph shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference in such filing.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the Nasdaq Global Select Market under the symbol (VIAV). As of July 30, 2022, we had 1,942 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the Nasdaq Global Select Market under the symbol (VIAV). As of July 27, 2024, we had 1,569 holders of record of our common stock.
Removed
Historical stock price performance is not necessarily indicative of future stock price performance. *$100 invested on 6/30/17 in stock or index. 6/2017 6/2018 6/2019 6/2020 6/2021 6/2022 VIAVI $ 100.00 $ 97.25 $ 126.21 $ 118.71 $ 165.91 $ 124.31 S&P 500 $ 100.00 $ 114.37 $ 126.29 $ 131.74 $ 193.63 $ 172.67 Nasdaq Composite $ 100.00 $ 123.60 $ 133.22 $ 164.02 $ 247.91 $ 189.76 Nasdaq Telecommunications $ 100.00 $ 118.27 $ 139.22 $ 141.63 $ 180.39 $ 131.62
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Historical stock price performance is not necessarily indicative of future stock price performance. *$100 invested on 6/30/19 in stock or index. 6/2019 6/2020 6/2021 6/2022 6/2023 6/2024 VIAVI $ 100.00 $ 94.06 $ 131.45 $ 98.50 $ 85.25 $ 51.69 S&P 500 $ 100.00 $ 104.32 $ 153.32 $ 136.72 $ 161.80 $ 201.53 Nasdaq Composite $ 100.00 $ 123.12 $ 186.10 $ 142.44 $ 178.08 $ 230.80 Nasdaq Telecommunications $ 100.00 $ 101.73 $ 129.57 $ 94.54 $ 96.22 $ 94.88 ITEM 6. [RESERVED] 31 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table summarizes selected Consolidated Statements of Operations items as a percentage of net revenue: Years Ended July 2, 2022 July 3, 2021 June 27, 2020 Segment net revenue: Network Enablement 65.4 % 62.3 % 65.7 % Service Enablement 8.0 7.6 9.0 Optical Security and Performance 26.6 30.1 25.3 Net revenue 100.0 100.0 100.0 Cost of revenues 37.9 37.6 38.6 Amortization of acquired technologies 2.3 2.8 2.9 Gross profit 59.8 59.6 58.5 Operating expenses: Research and development 16.5 16.9 17.0 Selling, general and administrative 28.3 28.2 27.7 Amortization of other intangibles 0.7 2.8 3.1 Restructuring and related (benefits) charges — (0.1) 0.3 Total operating expenses 45.5 47.8 48.1 Income from operations 14.3 11.8 10.4 Loss on convertible note settlement (7.9) — — Interest and other (loss) income, net 0.4 0.3 0.9 Interest expense (1.8) (1.2) (1.2) Income before income taxes 5.0 10.9 10.1 Provision for income taxes 3.8 5.3 5.8 Net income 1.2 % 5.6 % 4.3 % 35 T a b le of Contents Financial Data for Fiscal 2022, 2021 and 2020 The following table summarizes selected Consolidated Statement of Operations items ( in millions, except for percentages ): 2022 2021 Change Percent Change 2021 2020 Change Percent Change Segment net revenue: NE $845.8 $746.6 $99.2 13.3% $746.6 $746.7 $(0.1) —% SE 103.3 91.3 12.0 13.1% 91.3 102.7 (11.4) (11.1)% OSP 343.3 361.0 (17.7) (4.9)% 361.0 286.9 74.1 25.8% Net revenue $1,292.4 $1,198.9 $93.5 7.8% $1,198.9 $1,136.3 $62.6 5.5% Amortization of acquired technologies $30.0 $33.2 $(3.2) (9.6)% $33.2 $32.7 $0.5 1.5% Percentage of net revenue 2.3 % 2.8% 2.8% 2.9% Gross profit $773.5 $714.4 $59.1 8.3% $714.4 $665.3 $49.1 7.4% Gross margin 59.8% 59.6% 59.6% 58.5% Amortization of intangibles $9.7 $33.3 $(23.6) (70.9)% $33.3 $35.1 $(1.8) (5.1)% Percentage of net revenue 0.7% 2.8% 2.8% 3.1% Research and development $213.2 $203.0 $10.2 5.0% $203.0 $193.6 $9.4 4.9% Percentage of net revenue 16.5% 16.9% 16.9% 17.0% Selling, general and administrative $365.7 $337.5 $28.2 8.4% $337.5 $315.0 $22.5 7.1% Percentage of net revenue 28.3% 28.2% 28.2% 27.7% Restructuring and related (benefits) charges $(0.1) $(1.6) $1.5 (93.8)% $(1.6) $3.5 $(5.1) (145.7)% Percentage of net revenue —% (0.1)% (0.1)% 0.3% Loss on convertible note exchange $(101.8) $— $(101.8) 100.0% $— $— $— —% Percentage of net revenue (7.9)% —% —% —% Interest and other income, net $5.2 $3.3 $1.9 57.6% $3.3 $9.6 $(6.3) (65.6)% Percentage of net revenue 0.4% 0.3% 0.3% 0.8% Interest expense $(23.3) $(14.7) $(8.6) 58.5% $(14.7) $(13.4) $(1.3) 9.7% Percentage of net revenue (1.8)% (1.2)% (1.2)% (1.2)% Provision for income taxes $49.6 $63.3 $(13.7) (21.6)% $63.3 $65.3 $(2.0) (3.1)% Percentage of net revenue 3.8% 5.3% 5.3% 5.8% Foreign Currency Impact on Results of Operations While the majority of our net revenue and operating expenses are denominated in U.S. dollar, a portion of our international operations are denominated in currencies other than the U.S. dollar.
Biggest changeThe following table summarizes selected Consolidated Statements of Operations items as a percentage of net revenue: Years Ended June 29, 2024 July 1, 2023 July 2, 2022 Segment net revenue: Network Enablement 61.6 % 63.9 % 66.2 % Service Enablement 8.6 8.5 7.2 Optical Security and Performance 29.8 27.6 26.6 Net revenue 100.0 100.0 100.0 Cost of revenues 41.0 40.0 37.9 Amortization of acquired technologies 1.4 2.2 2.3 Gross profit 57.6 57.8 59.8 Operating expenses: Research and development 20.2 18.7 16.5 Selling, general and administrative 33.3 29.7 28.3 Amortization of other intangibles 0.6 0.8 0.7 Restructuring and related charges 1.4 1.2 — Total operating expenses 55.5 50.4 45.5 Income from operations 2.1 7.4 14.3 Loss on convertible note settlement — — (7.9) Loss on convertible note modification — (0.2) — Interest and other income, net 2.2 0.7 0.4 Interest expense (3.1) (2.4) (1.8) Income before income taxes 1.2 5.5 5.0 Provision for income taxes 3.8 3.2 3.8 Net (loss) income (2.6) % 2.3 % 1.2 % 36 Table of Contents Financial Data for Fiscal 2024, 2023 and 2022 The following table summarizes selected Consolidated Statement of Operations items ( in millions ): 2024 2023 Change Percent Change 2023 2022 Change Percent Change Segment net revenue: NE $ 615.7 $ 707.2 $ (91.5) (12.9) % $ 707.2 $ 855.7 $ (148.5) (17.4) % SE 86.3 94.0 (7.7) (8.2) % 94.0 93.4 0.6 0.6 % OSP 298.4 304.9 (6.5) (2.1) % 304.9 343.3 (38.4) (11.2) % Net revenue $ 1,000.4 $ 1,106.1 $ (105.7) (9.6) % $ 1,106.1 $ 1,292.4 $ (186.3) (14.4) % Amortization of acquired technologies $ 13.8 $ 24.6 $ (10.8) (43.9) % $ 24.6 $ 30.0 $ (5.4) (18.0) % Percentage of net revenue 1.4 % 2.2 % 2.2 % 2.3 % Gross profit $ 575.9 $ 638.8 $ (62.9) (9.8) % $ 638.8 $ 773.5 $ (134.7) (17.4) % Gross margin 57.6 % 57.8 % 57.8 % 59.8 % Research and development $ 201.9 $ 206.9 $ (5.0) (2.4) % $ 206.9 $ 213.2 $ (6.3) (3.0) % Percentage of net revenue 20.2 % 18.7 % 18.7 % 16.5 % Selling, general and administrative $ 333.3 $ 328.7 $ 4.6 1.4 % $ 328.7 $ 365.7 $ (37.0) (10.1) % Percentage of net revenue 33.3 % 29.7 % 29.7 % 28.3 % Amortization of other intangibles $ 6.3 $ 8.7 $ (2.4) (27.6) % $ 8.7 $ 9.7 $ (1.0) (10.3) % Percentage of net revenue 0.6 % 0.8 % 0.8 % 0.7 % Restructuring and related charges (benefits) $ 13.6 $ 12.1 $ 1.5 12.4 % $ 12.1 $ (0.1) $ 12.2 NM Percentage of net revenue 1.4 % 1.2 % 1.2 % — % Loss on convertible note settlement $ — $ — $ — —% $ — $ (101.8) $ — NM Percentage of net revenue — % — % — % (7.9) % Loss on convertible note modification $ — $ (2.2) $ 2.2 NM $ (2.2) $ — $ (2.2) NM Percentage of net revenue — % (0.2) % (0.2) % — % Interest and other income, net $ 21.7 $ 7.6 $ 14.1 185.5 % $ 7.6 $ 5.2 $ 2.4 46.2 % Percentage of net revenue 2.2 % 0.7 % 0.7 % 0.4 % Interest expense $ (30.9) $ (27.1) $ (3.8) 14.0 % $ (27.1) $ (23.3) $ (3.8) 16.3 % Percentage of net revenue (3.1) % (2.4) % (2.4) % (1.8) % Provision for income taxes $ 37.4 $ 35.2 $ 2.2 6.3 % $ 35.2 $ 49.6 $ (14.4) (29.0) % Percentage of net revenue 3.8 % 3.2 % 3.2 % 3.8 % NM - Percentage change not considered meaningful 37 Table of Contents Foreign Currency Impact on Results of Operations While the majority of our net revenue and operating expenses are denominated in U.S. dollar, a portion of our international operations are denominated in currencies other than the U.S. dollar.
These balances in the U.S. may exceed the Federal Deposit Insurance Corporation (FDIC) insurance limits. While we monitor the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail.
These balances in the U.S. may exceed the Federal Deposit Insurance Corporation (FDIC) insurance limits. While we monitor the cash balances in our operating accounts and adjust as appropriate, these cash balances could be impacted if the underlying financial institutions fail.
We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements.
We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from year-to-year, and the primary factors that accounted for those changes, as well as how certain accounting estimates affect our financial statements.
Liquidity and Capital Resources 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 execute purchases under our share repurchase program over the next twelve months and beyond.
Liquidity and Capital Resources 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.
Commitments and Contingencies” for more information. (2) Refer to “Note 12. Leases” for more information. (3) Refer to “Note 17. Employee Pension and Other Benefit Plans” for more information. Purchase obligations represent legally-binding commitments to purchase inventory and other commitments made in the normal course of business to meet operational requirements.
Debt” for more information. (2) Refer to “Note 18. Commitments and Contingencies” for more information. (3) Refer to “Note 12. Leases” for more information. (4) Refer to “Note 17. Employee Pension and Other Benefit Plans” for more information. Purchase obligations represent legally-binding commitments to purchase inventory and other commitments made in the normal course of business to meet operational requirements.
Our financial results and long-term growth model will continue to be driven by revenue growth, non-GAAP operating profit, non-GAAP diluted earnings per share (EPS) and cash flow from operations.
Our financial results and long-term growth model will continue to be driven by revenue growth, non-GAAP operating income, non-GAAP operating margin, non-GAAP diluted earnings per share (EPS) and cash flow from operations.
We anticipate future annual outlays related to the German plans will approximate estimated future benefit payments. These future benefit payments have been estimated based on the same actuarial assumptions used to measure our projected benefit obligation and currently are forecasted to range between $5.1 million and $8.0 million per annum.
We anticipate future annual outlays related to the German plans will approximate estimated future benefit payments. These future benefit payments have been estimated based on the same actuarial assumptions used to measure our projected benefit obligation and currently are forecasted to range between $4.0 million and $7.6 million per annum.
Cost of revenues, costs of research and development and costs of selling, general and administrative : The Company’s GAAP presentation operating expenses may include (i) additional depreciation and amortization from changes in estimated useful life and the write-down of certain property, equipment and intangibles that have been identified for disposal but remained in use until the date of disposal, (ii) workforce related charges such as severance, retention bonuses and employee relocation costs related to formal restructuring plans, (iii) costs for facilities not required for ongoing operations, and costs related to the relocation of certain equipment from these facilities and/or contract manufacturer facilities, (iv) stock-based compensation, (v) changes in fair value of contingent consideration liabilities and (vi) other charges unrelated to our core operating performance comprising mainly of acquisition related transaction costs, amortization of acquisition related inventory step-up, integration costs related to acquired entities, litigation and other costs and contingencies unrelated to current and future operations, including transformational initiatives such as the implementation of simplified automated processes, site consolidations, and reorganizations.
Cost of revenues, costs of research and development and costs of selling, general and administrative : The Company’s GAAP presentation of operating expenses may include (i) additional depreciation and amortization from changes in estimated useful life and the write-down of certain property, equipment and intangibles that have been identified for disposal but remained in use until the date of disposal, (ii) charges such as severance, benefits and outplacement costs related to restructuring plans, (iii) costs for facilities not required for ongoing operations, and costs related to the relocation of certain equipment from these facilities and/or contract manufacturer facilities, (iv) stock-based compensation, (v) amortization expense related to acquired intangibles, (vi) changes in fair value of contingent consideration liabilities and (vii) other charges unrelated to our core operating performance comprised mainly of acquisition related transaction costs, integration costs related to acquired entities, litigation and legal settlements and other costs and contingencies unrelated to current and future operations, including transformational initiatives such as the implementation of simplified automated processes, site consolidations, and reorganizations.
During the twelve months ended July 2, 2022, we have not realized material investment losses but can provide no assurance that the value or the liquidity of our investments will not be impacted by adverse conditions in the financial markets. In addition, we maintain cash balances in operating accounts that are with third-party financial institutions.
During the twelve months ended June 29, 2024, we have not realized material investment losses but can provide no assurance that the value or the liquidity of our investments will not be impacted by adverse conditions in the financial markets. In addition, we maintain cash balances in operating accounts with third-party financial institutions.
Stockholders Equity” under Item 8 of this Annual Report on Form 10-K for more information. 43 T a b le of Contents Employee Defined Benefit Plans and Other Post-retirement Benefits We sponsor significant qualified and non-qualified pension plans for certain past and present employees in the U.K. and Germany.
Stockholders Equity” under Item 8 of this Annual Report on Form 10-K for more information. 45 Table of Contents Employee Defined Benefit Plans and Other Post-retirement Benefits We sponsor significant qualified and non-qualified pension plans for certain past and present employees in the U.K. and Germany.
As of July 2, 2022, the majority of our cash investments have maturities of 90 days or less and are of high credit quality. Nonetheless we could realize investment losses under adverse market conditions.
As of June 29, 2024, the majority of our cash investments have maturities of 90 days or less and are of high credit quality. Nonetheless we could realize investment losses under adverse market conditions.
However, there are a number of factors that could positively or negatively impact our liquidity position, including: • Global economic conditions which affect demand for our products and services and impact the financial stability of our suppliers and customers; • Impact of the COVID-19 pandemic on our financial condition; • Changes in accounts receivable, inventory or other operating assets and liabilities which affect our working capital; • Increase in capital expenditure to support the revenue growth opportunity of our business; • Changes in customer payment terms and patterns, which typically results in customers delaying payments or negotiating favorable payment terms to manage their own liquidity positions; • Timing of payments to our suppliers; • Factoring or sale of accounts receivable; • Volatility in fixed income and credit market which impact the liquidity and valuation of our investment portfolios; • Volatility in credit markets which would impact our ability to obtain additional financing on favorable terms or at all; • Volatility in foreign exchange market which impacts our financial results; • Possible investments or acquisitions of complementary businesses, products or technologies; • While the principal payment obligations of our 1.00% Senior Convertible Notes due 2024, our 1.75% Senior Convertible Notes due 2023, and our 3.75% Senior Notes due 2029 (together the “Notes”) are substantial and there are covenants that restrict our debt level and credit facility capacity, we may be able to incur substantially more debt; • Issuance or repurchase of debt or equity securities, which may include open market purchases of our 2023 Notes, 2024 Notes and/or 2029 Notes prior to their maturity or of our common stock; • Potential funding of pension liabilities either voluntarily or as required by law or regulation; • Compliance with covenants and other terms and conditions related to our financing arrangements; and • The risks and uncertainties detailed in Item 1A “Risk Factors” section of our Annual Report on Form 10-K. 41 T a b le of Contents Cash and Cash Equivalents and Short Term Investments Our cash and cash equivalents consist mainly of investments in institutional money market funds, short-term deposits held at major global financial institutions, and similar short duration instruments.
However, there are a number of factors that could positively or negatively impact our liquidity position, including: • Global economic conditions which affect demand for our products and services and impact the financial stability of our suppliers and customers; • Changes in accounts receivable, inventory or other operating assets and liabilities which affect our working capital; • Increase in capital expenditure to support the revenue growth opportunity of our business; • Changes in customer payment terms and patterns, which typically results in customers delaying payments or negotiating favorable payment terms to manage their own liquidity positions; • Timing of payments to our suppliers; • Factoring or sale of accounts receivable; • Volatility in fixed income and credit markets which impact the liquidity and valuation of our investment portfolios; • Volatility in credit markets which would impact our ability to obtain additional financing on favorable terms or at all; • Volatility in foreign exchange markets which impacts our financial results; • Possible investments or acquisitions of complementary businesses, products or technologies; • 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; • Issuance or repurchase of debt which may include open market purchases of our 2026 Notes and/or 2029 Notes prior to their maturity; • Issuance or repurchase of our common stock or other equity securities; • Factors beyond our control that may impact timing of and/or appropriation of government funding for certain of our strategic research and development programs; • Potential funding of pension liabilities either voluntarily or as required by law or regulation; • Compliance with covenants and other terms and conditions related to our financing arrangements; and • The risks and uncertainties detailed in Item 1A “Risk Factors” section of our Annual Report on Form 10-K. 43 Table of Contents Cash and Cash Equivalents and Short-Term Investments Our cash and cash equivalents and short-term investments consist mainly of investments in institutional money market funds and short-term deposits at major global financial institutions.
Accordingly, management excludes from core operating performance items such as those relating to certain purchase price accounting adjustments, amortization of acquisition-related intangibles and inventory step-up, stock-based compensation, restructuring, separation costs, changes in fair value of contingent consideration liabilities and certain investing expenses and non-cash activities that management believes are not reflective of such ordinary, ongoing and core operating activities.
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.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis summarizes the significant factors affecting our consolidated operating results, financial condition, liquidity and capital resources during the period ended July 2, 2022.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis summarizes the significant factors affecting our consolidated operating results, financial condition, liquidity and capital resources during the period ended June 29, 2024.
Discussions of the year to-year comparisons between the fiscal year ended July 3, 2021 and June 27, 2020, that are not included in this Annual Report on Form 10-K, can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended July 3, 2021 .
Discussions of the year-to-year comparisons between the fiscal years ended July 1, 2023 and July 2, 2022, that are not included in this Annual Report on Form 10-K, can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended July 1, 2023 .
As a percentage of net revenue, R&D slightly decreased during fiscal 2022 when compared to fiscal 2021. 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.
As a percentage of net revenue, R&D increased 1.5 percentage points during fiscal 2024 when compared to fiscal 2023. 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.
The Company recorded foreign tax expense of $13.2 million related to this transaction. Based on a jurisdiction-by-jurisdiction review of anticipated future income and due to the continued economic uncertainty in the industry, management has determined that in many of our jurisdictions, it is more likely than not that our net deferred tax assets will not be realized in those jurisdictions.
Based on a jurisdiction-by-jurisdiction review of anticipated future income and due to the continued economic uncertainty in the industry, management has determined that in the U.S., it is more likely than not that our net deferred tax assets will not be realized.
Of the $188.9 million of purchase obligations as of July 2, 2022, $76.2 million are related to inventory and the other $112.7 million are non-inventory items. As of July 2, 2022, our other non-current liabilities primarily relate to asset retirement obligations, pension and financing obligations which are presented in various lines in the preceding table.
Of the $101.1 million of purchase obligations as of June 29, 2024, $34.2 million are related to inventory and the other $66.9 million are non-inventory items. As of June 29, 2024, our other non-current liabilities primarily relate to asset retirement obligations, pension and financing obligations which are presented in various lines in the preceding table.
Unless otherwise noted, all references herein for the years 2022, 2021, and 2020 represent the fiscal years ended July 2, 2022, July 3, 2021, and June 27, 2020, respectively.
Unless otherwise noted, all references herein for the years 2024, 2023 and 2022 represent the fiscal years ended June 29, 2024, July 1, 2023 and July 2, 2022, respectively.
Cash provided by operating activities was $178.1 million, consisted of net income of $15.5 million adjusted for non-cash or non-operating charges (e.g., depreciation, amortization of intangibles, stock-based compensation, amortization of debt issuance cost, loss on convertible note settlement and discount and net change in fair value of contingent liabilities), including changes in deferred tax balances which totaled $226.1 million, offset by changes in operating assets and liabilities that used $63.5 million.
Cash provided by operating activities was $116.4 million, consisted of net loss of $25.8 million adjusted for non-cash charges (e.g., depreciation, amortization, stock-based compensation, amortization of debt issuance cost, loss on convertible note modification and accretion and net change in fair value of contingent liabilities), including changes in deferred tax balances which totaled $125.5 million and changes in operating assets and liabilities that generated $16.7 million.
We estimate a 50-basis point decrease or increase in the discount rate would cause a corresponding increase or decrease, respectively, in the PBO of approximately $5.0 million based upon data as of July 2, 2022. 44 T a b le of Contents
We estimate a 50-basis point decrease or increase in the discount rate would cause a corresponding increase or decrease, respectively, in the PBO of approximately $4.0 million based upon data as of June 29, 2024. 46 Table of Contents
Unrealized gains and losses on available-for-sale investments are recorded as other comprehensive (loss) income and are reported as a separate component of stockholders’ equity. As of July 2, 2022, U.S. subsidiaries owned approximately 40.3% of our cash and cash equivalents, short-term investments and restricted cash.
The cost of securities sold is based on the specific identification method. Unrealized gains and losses on available-for-sale investments are recorded as Other comprehensive (loss) income and are reported as a separate component of stockholders’ equity. As of June 29, 2024, U.S. subsidiaries owned approximately 16.9% of our cash and cash equivalents, short-term investments and restricted cash.
As a percentage of net revenue, SG&A increased slightly to 28.3% in fiscal 2022 when compared to 2021. 38 T a b le of Contents We intend to continue to focus on reducing our SG&A expense as a percentage of net revenue.
As a percentage of net revenue, SG&A increased 3.6 percentage points in fiscal 2024 when compared to 2023. We intend to continue to focus on reducing our SG&A expense as a percentage of net revenue.
We cannot predict when or to what extent these uncertainties will be resolved. 37 T a b le of Contents Revenue by Region We operate in three geographic regions, including Americas, Asia-Pacific and Europe Middle East and Africa (EMEA). Net revenue is assigned to the geographic region and country where our product is initially shipped.
Revenue by Region We operate in three geographic regions, including the Americas, Asia-Pacific and Europe Middle East and Africa (EMEA). Net revenue is assigned to the geographic region and country where our product is initially shipped.
Our strategy is focused on the preservation of capital 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 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 Credit Agreement also provides that, under certain circumstances, we may increase the aggregate amount of revolving commitments thereunder by an aggregate amount of up to $100.0 million so long as certain conditions are met. As of July 2, 2022, we had no borrowings under this facility and our available borrowing capacity was approximately $206.4 million. Refer to “Note 11.
The Credit Agreement also provides that, under certain circumstances, we may increase the aggregate amount of revolving commitments thereunder by an aggregate amount of up to $100.0 million so long as certain conditions are met.
The Company further believes that providing this information allows investors to better understand the Company’s financial performance and, importantly, to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance. The non-GAAP adjustments described in this Report are excluded by the Company from its GAAP financial measures. The non-GAAP adjustments are outlined below.
The Company believes providing this additional information allows investors to see Company results through the eyes of management. The Company further believes that providing this information allows investors to better understand the Company’s financial performance and, importantly, to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance.
Our management believes these non-GAAP measures, when considered in conjunction with the corresponding U.S.
Our management believes these non-GAAP measures, when considered in conjunction with the corresponding U.S. GAAP measures, may facilitate a better understanding of changes in net revenue and operating expenses.
Cash Flows Year Ended July 2, 2022 As of July 2, 2022, our combined balance of cash and cash equivalents and restricted cash decreased by $135.6 million to $572.8 million from a balance of $708.4 million as of July 3, 2021.
Cash Flows Year Ended June 29, 2024 As of June 29, 2024, our combined balance of cash and cash equivalents and restricted cash decreased by $33.8 million to $481.8 million from a balance of $515.6 million as of July 1, 2023.
If currency exchange rates had been constant in fiscal 2022 and 2021, our consolidated operating expenses in “constant dollars” would have increased by approximately $4.8 million, or 0.4% of net revenue. The Results of Operations are presented in accordance with U.S. GAAP and not using constant dollars.
If currency exchange rates had been constant in fiscal 2024 and 2023, our consolidated operating expenses in “constant dollars” would have decreased by approximately $4.1 million, or 0.4% of net revenue.
Share Repurchase Program During fiscal 2022 we repurchased 14.8 million shares of our common stock outstanding for $235.5 million pursuant to our 2019 and 2021 Share Repurchase Plans. As of July 2, 2022, the 2019 plan had $67.3 million of the authorized amount remaining; the 2021 plan had no authorized amount remaining. Refer to “Note 15.
Share Repurchase Program During fiscal 2024 we repurchased 2.3 million shares of our common stock outstanding for $20.0 million pursuant to our 2022 Share Repurchase Plan. As of June 29, 2024, the Company had remaining authorization of $214.8 million for future share repurchases under the 2022 Repurchase Plan. Refer to “Note 15.
GAAP measures, may facilitate a better understanding of changes in net revenue and operating expenses. 36 T a b le of Contents Fiscal 2022 and 2021 If currency exchange rates had been constant in fiscal 2022 and 2021, our consolidated net revenue in “constant dollars” would have increased by approximately $10.8 million, or 0.8% of net revenue, which primarily impacted our NE and SE segments.
If currency exchange rates had been constant in fiscal 2024 and 2023, our consolidated net revenue in “constant dollars” would have decreased by approximately $3.3 million, or 0.3% of net revenue, which primarily impacted our NE and SE segments.
During fiscal 2022, the valuation allowance for deferred tax assets increased by $11.9 million which was primarily due to the increase in capitalization of federal research expenditures in the U.S.
During fiscal 2024, the valuation allowance for deferred tax assets decreased by $15.5 million which was primarily due to the amortization of intangibles assets, and utilization of federal NOLs in the U.S.
Material Contractual and Material Cash Obligations The following summarizes our contractual obligations at July 2, 2022, and the effect such obligations are expected to have on our liquidity and cash flow over the next five years ( in millions ): Payments due by period Total Less than 1 year 1 - 3 years 3 - 5 years More than 5 years Asset retirement obligations—expected cash payments $ 4.2 $ 0.5 $ 1.1 $ 0.9 $ 1.7 Debt: 2029 3.75% Senior Notes 400.0 — — — 400.0 2023 1.75% Senior Convertible Notes 68.1 68.1 — — — 2024 1.00% Senior Convertible Notes 223.9 — 223.9 — — Estimated interest payments 120.8 19.1 33.0 31.2 37.5 Purchase obligations (1) 188.9 177.7 10.3 0.9 — Operating lease obligations (2) 51.2 10.2 17.6 10.6 12.8 Non-cancelable leaseback obligations (1) 29.0 3.0 6.1 6.3 13.6 Royalty payment 2.8 1.7 0.8 0.3 — Pension and post-retirement benefit payments (3) 66.2 8.0 10.9 10.9 36.4 Total $ 1,155.1 $ 288.3 $ 303.7 $ 61.1 $ 502.0 (1) Refer to “Note 18.
These were partially offset by $6.3 million in proceeds from the issuance of common stock under our employee stock purchase plan. 44 Table of Contents Material Contractual and Material Cash Obligations The following summarizes our material contractual obligations at June 29, 2024, and the effect such obligations are expected to have on our liquidity and cash flow over the next five years ( in millions ): Payments due by period Total Less than 1 year 1 - 3 years 3 - 5 years More than 5 years Asset retirement obligations—expected cash payments $ 4.2 $ 1.1 $ 1.0 $ 0.9 $ 1.2 Debt: 2029 3.75% Senior Notes (1) 400.0 — — — 400.0 2026 1.625% Senior Convertible Notes (1) 250.0 — 250.0 — — Estimated interest payments 91.3 18.8 35.0 30.0 7.5 Purchase obligations (2) 101.1 93.4 7.5 0.1 0.1 Operating lease obligations (3) 42.8 10.2 16.0 8.1 8.5 Non-cancelable leaseback obligations (2) 23.0 3.1 6.3 5.3 8.3 Royalty payment 0.8 0.6 0.2 — — Pension and post-retirement benefit payments (4) 53.7 8.5 11.9 10.2 23.1 Total $ 966.9 $ 135.7 $ 327.9 $ 54.6 $ 448.7 (1) Refer to “Note 11.
Consequently, the following discussion of business segment performance focuses on total net revenue, gross profit, and operating income consistent with our approach for managing the business. Fiscal 2022 and 2021 Net revenue increased $93.5 million, or 7.8%, during fiscal 2022 when compared to fiscal 2021.
Consequently, the following discussion of business segment performance focuses on total net revenue, gross profit, and operating income consistent with our approach for managing the business. Net revenue decreased $105.7 million, or 9.6%, during fiscal 2024 when compared to fiscal 2023. This decrease was primarily a result of the continued conservative service provider and NEM spend and lower anti-counterfeiting revenue.
The following table presents net revenue by the three geographic regions we operate in and net revenue from countries that exceeded 10% of our total net revenue (in millions) : Years Ended July 2, 2022 July 3, 2021 June 27, 2020 Americas: United States $ 388.9 30.1 % $ 330.0 27.5 % $ 341.6 30.1 % Other Americas 96.8 7.5 % 85.6 7.2 % 73.2 6.4 % Total Americas $ 485.7 37.6 % $ 415.6 34.7 % $ 414.8 36.5 % Asia-Pacific: Greater China $ 256.4 19.8 % $ 277.0 23.1 % $ 245.7 21.6 % Other Asia-Pacific 205.3 15.9 % 133.5 11.1 % 122.5 10.8 % Total Asia-Pacific $ 461.7 35.7 % $ 410.5 34.2 % $ 368.2 32.4 % EMEA: Switzerland $ 62.7 4.9 % $ 76.6 6.4 % $ 64.6 5.7 % Other EMEA 282.3 21.8 % 296.2 24.7 % 288.7 25.4 % Total EMEA $ 345.0 26.7 % $ 372.8 31.1 % $ 353.3 31.1 % Total net revenue $ 1,292.4 100.0 % $ 1,198.9 100.0 % $ 1,136.3 100.0 % Net revenue from customers outside the Americas for fiscal 2022, represented 62.4% of net revenue, a decrease of 2.9% year-over-year.
The following table presents net revenue by the three geographic regions we operate in and net revenue from countries that exceeded 10% of our total net revenue (in millions) : Years Ended June 29, 2024 July 1, 2023 July 2, 2022 Americas: United States $ 325.4 32.5 % $ 362.9 32.8 % $ 388.9 30.1 % Other Americas 65.3 6.6 % 75.2 6.8 % 96.8 7.5 % Total Americas $ 390.7 39.1 % $ 438.1 39.6 % $ 485.7 37.6 % Asia-Pacific: Greater China $ 194.0 19.4 % $ 210.9 19.1 % $ 256.4 19.8 % Other Asia-Pacific 152.5 15.2 % 166.6 15.0 % 205.3 15.9 % Total Asia-Pacific $ 346.5 34.6 % $ 377.5 34.1 % $ 461.7 35.7 % EMEA: $ 263.2 26.3 % $ 290.5 26.3 % $ 345.0 26.7 % Total net revenue $ 1,000.4 100.0 % $ 1,106.1 100.0 % $ 1,292.4 100.0 % Net revenue from customers outside the Americas for fiscal 2024, represented 60.9% of net revenue, an increase of 0.5 percentage points year-over-year.
We expect these factors to continue to result in variability of our gross margin. Research and Development R&D expense increased $10.2 million, or 5.0%, during fiscal 2022 compared to fiscal 2021. This increase was primarily driven by targeted investments to support increased demand in our growth products.
We expect these factors to continue to result in variability of our gross margin. Research and Development R&D expense decreased $5.0 million, or 2.4%, during fiscal 2024 compared to fiscal 2023. This decrease was primarily due to benefits from our restructuring activity initiated during fiscal 2023 to drive greater efficiencies.
Looking Ahead to 2023 As we look forward to the year ahead, our focus remains on executing against our strategic priorities to drive revenue and earnings growth, capture market share and continue to optimize our capital structure. Our emphasis is to continue to execute successfully despite supply chain shortages.
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.
Changes in the discount rate impact the interest cost component of the net periodic benefit cost calculation and PBO due to the fact that the PBO is calculated on a net present value basis. Decreases in the discount rate will generally increase pre-tax cost, recognized expense and the PBO. Increases in the discount rate tend to have the opposite effect.
Decreases in the discount rate will generally increase pre-tax cost, recognized expense and the PBO. Increases in the discount rate tend to have the opposite effect.
For our Pension accounting, significant judgment is required i n actuarial assumption used when establishing the discount rate for the net periodic cost and the projected benefit obligation (PBO) calculations.
For our Pension accounting, significant judgment is required in actuarial assumption used when establishing the discount rate for the net periodic cost and the PBO calculations. Changes in the discount rate impact the interest cost component of the net periodic benefit cost calculation and PBO due to the fact that the PBO is calculated on a net present value basis.
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 net income per share. 34 T a b le of Contents RESULTS OF OPERATIONS This section of this Annual Report on Form 10-K generally discusses the results of operations for the fiscal year ended July 2, 2022 and July 3, 2021 and year to-year comparisons between such fiscal years.
Income tax expense or benefit : The Company excludes certain non-cash tax expense or benefit items, such as the utilization of net operating losses (NOLs) where valuation allowances were released, intra-period tax allocation benefit and the tax effect for amortization of non-tax deductible intangible assets, in calculating non-GAAP net income and non-GAAP EPS.
These contributions allowed us to comply with regulatory funding requirements. Recently Issued Accounting Pronouncements Refer to “Note 2. Recently Issued Accounting Pronouncements” under Item 8 of this Annual Report on Form 10-K, regarding the effect of certain recent accounting pronouncements on our Consolidated Financial Statements.
We also are responsible for the non-pension post-retirement benefit obligation assumed from a past acquisition with a liability of $0.3 million. Recently Issued Accounting Pronouncements Refer to “Note 2. Recently Issued Accounting Pronouncements” under Item 8 of this Annual Report on Form 10-K, regarding the effect of certain recent accounting pronouncements on our Consolidated Financial Statements.
Cash used in financing activities was $210.4 million, primarily resulting from $351.6 million paid connection with the repurchase of certain Original Senior Convertible Notes, $235.9 million of cash used to repurchase common stock under our share repurchase program, $14.1 million in withholding tax payment on vesting of restricted stock awards, $10.5 million debt issuance costs paid in the period and $6.1 million in other payments.
Cash used in financing activities was $125.7 million, primarily resulting from $96.4 million to retire the 2024 Senior Convertible Notes upon maturity, $20.0 million cash paid to repurchase common stock under our share repurchase program, $11.1 million in withholding tax payments on the vesting of restricted stock awards and $4.3 million paid for acquisition related liabilities.
Amortization of Acquired Technologies and Intangibles Amortization of acquired technologies and intangibles for fiscal 2022 decreased $26.8 million, or 40.3%, to $39.7 million from $66.5 million in fiscal 2021. This decrease is primarily due to intangible assets becoming fully amortized.
Amortization of Other Intangibles (Operating expenses) Amortization of intangibles within Operating expenses for fiscal 2024 decreased $2.4 million, or 27.6%, to $6.3 million from $8.7 million in fiscal 2023. This decrease is primarily due to certain intangible assets becoming fully amortized in fiscal 2023 offset in part by amortization of intangibles acquired through acquisitions in fiscal 2023.
The Company excludes these items in calculating non-GAAP operating margin, non-GAAP net income and non-GAAP net income per share. The Company believes excluding these items enables investors to evaluate more clearly and consistently the Company’s core operational performance.
The non-GAAP adjustments described in this report are excluded by the Company from its GAAP financial measures because the Company believes excluding these items enables investors to evaluate more clearly and consistently the Company’s core operational performance. The non-GAAP adjustments are outlined below.
Changes in our operating assets and liabilities related primarily to an increase in deferred revenue of $13.2 million, an increase in accrued payroll and related expenses of $3.0 million and an increase in accrued expenses and other current and non-current liabilities of $1.4 million.
Changes in our operating assets and liabilities related primarily to a decrease in accounts receivable of $13.9 million due to collections outpacing billings, a decrease in inventory of $10.5 million related to demand changes, an increase in accounts payable of $3.2 million driven by timing of purchases and related payments, an increase in accrued expenses and other current and non-current liabilities of $3.0 million due primarily to timing in payments and an increase in income taxes payable of $1.6 million.
Also during fiscal 2022 we repurchased 14.8 million shares of our common stock for $235.5 million. 32 T a b le of Contents A reconciliation of Non-GAAP financial measures to GAAP financial measures is provided below (in millions, except EPS amounts): Years Ended July 2, 2022 July 3, 2021 Operating Income Operating Margin Operating Income Operating Margin GAAP measures $ 185.0 14.3 % $ 142.2 11.9 % Stock-based compensation 52.3 4.1 % 48.3 3.9 % Change in fair value of contingent liability 0.3 — % (5.3) (0.4) % Other charges unrelated to core operating performance (1) 9.6 0.7 % 3.4 0.3 % Amortization of intangibles 39.7 3.1 % 66.5 5.5 % Restructuring and related benefits (0.1) — % (1.6) (0.1) % Total related to Cost of Revenue and Operating Expenses 101.8 7.9 % 111.3 9.2 % Non-GAAP measures $ 286.8 22.2 % $ 253.5 21.1 % Years Ended July 2, 2022 July 3, 2021 Net income Diluted EPS Net Income Diluted EPS GAAP measures $ 15.5 $ 0.07 $ 67.5 $ 0.29 Items reconciling GAAP net income and EPS to non-GAAP net income and EPS: Stock-based compensation 52.3 0.22 48.3 0.21 Change in fair value of contingent liability 0.3 — (5.3) (0.02) Other charges unrelated to core operating performance (1) 9.6 0.04 3.4 0.01 Amortization of intangibles 39.7 0.17 66.5 0.28 Restructuring and related benefits (0.1) — (1.6) (0.01) Non-cash interest expense and other expense 102.2 0.43 0.2 — Benefit from income taxes 5.8 0.02 16.2 0.07 Total related to net income and EPS 209.8 0.88 127.7 0.54 Non-GAAP measures $ 225.3 $ 0.95 $ 195.2 $ 0.83 Shares used in per share calculation for Non-GAAP EPS 238.2 236.3 (1) Other items include charges unrelated to core operating performance primarily consisting of acquisition and integration related charges, transformational initiatives such as site consolidations, and reorganization, loss on sale of investments and loss on disposal of long-lived assets. 33 T a b le of Contents Use of Non-GAAP (Adjusted) Financial Measures The Company provides non-GAAP operating margin, non-GAAP net income and non-GAAP net income per share financial measures as supplemental information regarding the Company’s operational performance.
We further improved our balance sheet by retiring the 2024 Senior Convertible Notes upon maturity and repurchasing 2.3 million shares of our common stock for $20.0 million. 33 Table of Contents A reconciliation of GAAP financial measures to Non-GAAP financial measures is provided below ( in millions, except EPS amounts ): Years Ended June 29, 2024 July 1, 2023 Operating Income Operating Margin Operating Income Operating Margin GAAP measures $ 20.8 2.1 % $ 82.4 7.4 % Stock-based compensation 49.4 4.9 % 51.2 4.7 % Change in fair value of contingent liability (9.5) (1.0) % (4.6) (0.4) % Other charges (benefits) unrelated to core operating performance (1) 20.6 2.1 % (1.9) (0.2) % Amortization of intangibles 20.1 2.0 % 33.3 3.0 % Restructuring and related charges 13.6 1.4 % 12.1 1.1 % Total related to Cost of Revenue and Operating Expenses 94.2 9.4 % 90.1 8.2 % Non-GAAP measures $ 115.0 11.5 % $ 172.5 15.6 % Years Ended June 29, 2024 July 1, 2023 Net (Loss) Income Diluted EPS Net Income Diluted EPS GAAP measures $ (25.8) $ (0.12) $ 25.5 $ 0.11 Items reconciling GAAP Net (Loss) Income and EPS to Non-GAAP Net Income and EPS: Stock-based compensation 49.4 0.22 51.2 0.23 Change in fair value of contingent liability (9.5) (0.04) (4.6) (0.02) Other charges (benefits) unrelated to core operating performance (2) 14.3 0.07 (1.9) (0.01) Amortization of intangibles 20.1 0.09 33.3 0.15 Restructuring and related charges 13.6 0.06 12.1 0.05 Non-cash interest expense and other expense 4.9 0.02 3.9 0.02 Provision for income taxes 6.5 0.03 5.2 0.02 Total related to Net (Loss) Income and EPS 99.3 0.45 99.2 0.44 Non-GAAP measures $ 73.5 $ 0.33 $ 124.7 $ 0.55 Shares used in per share calculation for Non-GAAP EPS 224.1 226.6 (1) For the year ended June 29, 2024, Other charges (benefits) unrelated to core operating performance consisted of $18.1 million of certain acquisition and integration related charges and $2.5 million of net losses primarily related to long-lived assets.
FINANCIAL HIGHLIGHTS Our fiscal 2022 results included the following notable items: • Net revenues of $1.3 billion, up $93.5 million or 7.8% year-over-year • GAAP operating margin of 14.3%, up 240 bps year-over-year • Non-GAAP operating margin of 22.2%, up 110 bps year-over-year • GAAP Diluted EPS of $0.07, down $0.22 or 75.9% year-over-year • Non-GAAP Diluted EPS of $0.95, up $0.12 or 14.5% year-over-year In fiscal 2022, VIAVI achieved new highs despite the COVID-19 related supply chain issues and inflationary pressures.
FINANCIAL HIGHLIGHTS Our fiscal 2024 results included the following notable items: • Net revenue of $1.0 billion, down $105.7 million or 9.6% year-over-year • GAAP operating margin of 2.1%, down 530 bps year-over-year • Non-GAAP operating margin of 11.5%, down 410 bps year-over-year • GAAP diluted EPS of $(0.12), down $0.23 or 209.1% year-over-year • Non-GAAP diluted EPS of $0.33, down $0.22 or 40.0% year-over-year In fiscal 2024 VIAVI continued to experience constrained demand and end market volatility.
VIAVI is also a leader in light management solutions for the anti-counterfeiting, consumer electronics, industrial, government, and automotive markets. To serve our markets, we operate in the following business segments: • Network Enablement (NE); • Service Enablement (SE); and • Optical Security and Performance Products (OSP).
To serve our markets, we operate the following business segments: • Network Enablement (NE); • Service Enablement (SE); and • Optical Security and Performance Products (OSP). During fiscal 2024, the VIAVI business environment continued to be challenging, particularly in the North American service provider and enterprise customer markets.
Going forward, we expect to continue to encounter a number of industry and market risks and uncertainties that may limit our visibility, and consequently, our ability to predict future revenue, profitability and general financial performance, and that could create quarter over quarter variability in our financial measures.
This may limit our visibility, and consequently, our ability to predict future revenue, seasonality, profitability, and general financial performance, which could create period-over-period variability in our financial measures and present foreign exchange rate risks. 38 Table of Contents We cannot predict when or to what extent these uncertainties will be resolved.
This decrease is primarily due to lower revenues from EMEA and strong NSE North America revenues. We expect revenue from customers outside of the United States to continue to be an important part of our overall net revenue and an increasing focus for net revenue growth opportunities.
We expect revenue from customers outside of the United States to continue to be an important part of our overall net revenue and an increasing focus for net revenue growth opportunities. 39 Table of Contents Amortization of Acquired Technologies (Cost of revenues) Amortization of acquired technologies within Cost of revenues for fiscal 2024 decreased $10.8 million, or 43.9%, to $13.8 million from $24.6 million in fiscal 2023.
Non-GAAP financial measures are not in accordance with, preferable to, or an alternative for, generally accepted accounting principles in the United States. The Company believes providing this additional information allows investors to see Company results through the eyes of management and that providing non-GAAP financial measures in conjunction with GAAP measures provides valuable supplemental information regarding the Company’s overall performance.
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.
Restructuring and Related Charges” under Item 8 of this Annual Report on Form 10-K for more information. Loss on Convertible Note Exchange During fiscal 2022, the Company entered into separate privately-negotiated agreements with certain holders of its 1.75% Senior Convertible Notes due 2023 and 1.00% Senior Convertible Notes due 2024.
Restructuring and Related Charges” for more information. Loss on Convertible Note Modification During fiscal 2023, the Company exchanged $127.5 million principal value of its 1.00% Senior Convertible Notes due 2024 for $132.0 million principal value of its 1.625% Senior Convertible Notes due 2026 and issued $118.0 million principal value of its 1.625% Senior Convertible Notes due 2026 for cash.
The U.K. plan is partially funded and the other plans, which were initially established as “pay-as-you-go” plans, are unfunded. As of July 2, 2022, our pension plans were underfunded by $66.2 million since the Pension Benefit Obligation (PBO) exceeded the fair value of plan assets. Similarly, we had a liability of $0.4 million related to our non-pension post-retirement benefit plan.
These contributions allowed us to comply with regulatory funding requirements. As of June 29, 2024, our German pension plans, which were initially established as unfunded or “pay-as-you-go” plans, were underfunded by $58.3 million since the projected benefit obligation (PBO) exceeded the fair value of plan assets.
Operating Segment Information ( in millions ): 2022 2021 Change Percentage Change 2021 2020 Change Percentage Change NE Net revenue $845.8 $746.6 $99.2 13.3% $746.6 $746.7 $(0.1) —% Gross profit 543.6 474.2 69.4 14.6% 474.2 482.4 (8.2) (1.7)% Gross margin 64.3% 63.5% 63.5% 64.6% SE Net revenue $103.3 $91.3 $12.0 13.1% $91.3 $102.7 $(11.4) (11.1)% Gross profit 71.5 59.9 11.6 19.4% 59.9 68.8 (8.9) (12.9)% Gross margin 69.2% 65.6% 65.6% 67.0% NSE Net revenue $949.1 $837.9 $111.2 13.3% $837.9 $849.4 $(11.5) (1.4)% Operating income 147.8 92.2 55.6 60.3% 92.2 108.8 (16.6) (15.3)% Operating margin 15.6% 11.0% 11.0% 12.8% OSP Net revenue $343.3 $361.0 $(17.7) (4.9)% $361.0 $286.9 $74.1 25.8% Gross profit 193.6 218.1 (24.5) (11.2)% 218.1 153.0 65.1 42.5% Gross margin 56.4% 60.4% 60.4% 53.3% Operating income 139.0 161.3 (22.3) (13.8)% 161.3 102.1 59.2 58.0% Operating margin 40.5% 44.7% 44.7% 35.6% Network Enablement NE gross margin increased by 0.8% during fiscal 2022 to 64.3% from 63.5% in fiscal 2021.
We believe that adequate amounts have been provided for any adjustments that may result from these examinations. 41 Table of Contents Operating Segment Information ( in millions ): 2024 2023 Change Percentage Change 2023 2022 Change Percentage Change NE Net revenue $ 615.7 $ 707.2 $ (91.5) (12.9) % $ 707.2 $ 855.7 $ (148.5) (17.4) % Gross profit 382.3 447.6 (65.3) (14.6) % 447.6 550.8 (103.2) (18.7) % Gross margin 62.1 % 63.3 % 63.3 % 64.4 % SE Net revenue $ 86.3 $ 94.0 $ (7.7) (8.2) % $ 94.0 $ 93.4 $ 0.6 0.6 % Gross profit 57.3 62.6 (5.3) (8.5) % 62.6 64.3 (1.7) (2.6) % Gross margin 66.4 % 66.6 % 66.6 % 68.8 % NSE Net revenue $ 702.0 $ 801.2 $ (99.2) (12.4) % $ 801.2 $ 949.1 $ (147.9) (15.6) % Operating income 8.0 61.2 (53.2) (86.9) % 61.2 147.8 (86.6) (58.6) % Operating margin 1.1 % 7.6 % 7.6 % 15.6 % OSP Net revenue $ 298.4 $ 304.9 $ (6.5) (2.1) % $ 304.9 $ 343.3 $ (38.4) (11.2) % Gross profit 154.9 158.6 (3.7) (2.3) % 158.6 193.6 (35.0) (18.1) % Gross margin 51.9 % 52.0 % 52.0 % 56.4 % Operating income $ 107.0 $ 111.3 $ (4.3) (3.9) % $ 111.3 $ 139.0 $ (27.7) (19.9) % Operating margin 35.9 % 36.5 % 36.5 % 40.5 % Network Enablement NE net revenue decreased $91.5 million, or 12.9% during fiscal 2024 when compared to fiscal 2023.
The expected tax provision derived by applying the federal statutory rate to our income before income taxes for fiscal 2022 differed from the income tax expense recorded primarily due to valuation allowances in addition to the foreign tax impact of the internal intellectual property restructuring transaction and withholding taxes offset by a tax benefit recognized upon the statute of limitations on a transfer pricing reserve in a non-US jurisdiction. 39 T a b le of Contents On July 2, 2022, the Company completed a planned internal transaction moving certain of VIAVI’s intellectual properties out of a foreign jurisdiction where tax rates are scheduled to increase to the U.S. entity established in fiscal 2021 to own and manage VIAVI’s other intellectual properties.
The expected tax provision derived by applying the federal statutory rate to our income before income taxes for fiscal 2024 differed from the income tax expense recorded primarily due to valuation allowances in addition to withholding taxes, foreign tax rates higher than the federal statutory rate and the U.S. inclusion of foreign earnings.
During fiscal 2022, we recorded a net restructuring benefit of $0.1 million and made final remaining payments of $0.4 million, after which the plan was closed. We estimate annualized gross cost savings of approximately $16.8 million excluding any one-time charges as a result of the recent restructuring activities. Refer to “Note 13.
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.
Our actual results could differ materially from those discussed in the forward-looking statements. OVERVIEW We are a global provider of network test, monitoring, and assurance solutions for communications service providers (CSPs), enterprises, network equipment manufacturers (NEMs), original equipment manufacturers (OEMs), government and avionics. We help these customers harness the power of instruments, automation, intelligence, and virtualization.
Our actual results could differ materially from those discussed in the forward-looking statements. OVERVIEW 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.
In addition, we expect to contribute approximately $1.2 million to the U.K. plan during fiscal 2023. During fiscal 2022, we (amounts represented as £ and $ denote GBP and USD, respectively) contributed £1.0 million or approximately $1.3 million, while in fiscal 2021, we contributed £1.5 million or approximately $2.0 million to its U.K. pension plan.
Most of these plans have been closed to new participants and no additional service costs are being accrued. As of June 29, 2024, the U.K. plan is fully funded. During fiscal 2024, we contributed £1.0 million or approximately $1.3 million, while in fiscal 2023, we contributed £1.0 million or approximately $1.2 million to the U.K. pension plan.
In connection with the entry into the senior secured asset-based revolving credit facility noted above, we terminated this facility. Refer to “Note 11. Debt” under Item 8 of this Annual Report on Form 10-K for more information.
As of June 29, 2024, we had no borrowings under this facility and our available borrowing capacity was approximately $153.3 million, net of outstanding standby letters of credit of $4.1 million. Refer to “Note 11. Debt” under Item 8 of this Annual Report on Form 10-K for more information.
Gross Margin Gross margin in fiscal 2022 improved by 0.2% to 59.8% from 59.6% in fiscal 2021. This increase was primarily driven by higher revenue volume and favorable product mix.
This decrease is primarily due to certain intangible assets becoming fully amortized in fiscal 2023 offset in part by amortization of intangibles acquired through acquisitions in fiscal 2023. Gross Margin Gross margin in fiscal 2024 declined 0.2 percentage points to 57.6% from 57.8% in fiscal 2023. This decrease was primarily driven by lower volume and product mix.
Interest Expense Interest expense increased $8.6 million, or 58.5%, during fiscal 2022 compared to fiscal 2021. This increase was primarily due to higher debt levels, higher interest rate on Senior Notes due 2029 and higher amortization of issuance costs as a result of the issuance of Senior Notes due 2029.
This $14.1 million increase was primarily driven by higher interest income and a legal settlement in our favor in the amount of $7.3 million during fiscal 2024. Interest Expense Interest expense increased $3.8 million, or 14.0%, during fiscal 2024 compared to fiscal 2023.
Removed
During fiscal 2022, we experienced global supply chain disruptions, increased raw material costs, higher shipping-related charges, and inflationary pressures. Nevertheless, our ability to secure critical components, build inventory and meet customer demands has helped enable us to grow revenue and market share.
Added
Field Instruments demand remained largely at the “maintenance” level due to the absence of major network build-outs and upgrades by Tier 1 service providers, particularly in North America.
Removed
We saw strong revenue growth in our NE business segment driven by fiber and wireless, as North American service providers upgraded and expanded their networks with fiber optic, and wireless demand increased in fiscal 2022.
Added
NE product demand continues to be impacted by sharply reduced research and development (R&D) and production capital expenditure spend by major wireless network equipment manufacturers (NEMs), who have reduced investment in response to significant cutbacks in 5G deployment by wireless operators.
Removed
Our SE business segment also experienced an increase in revenue year over year as we saw strong growth in assurance solutions and data center products, in part due to increased market demand for 5G and growth in network traffic.
Added
We expect the end market weakness in NE and SE to persist through the end of this calendar year and are executing on the previously announced restructuring plan initiated in the fourth quarter of fiscal 2024 to better align our business with the current environment. OSP demand is expected to be similar in fiscal 2025 as compared to fiscal 2024.
Removed
Revenue from our OSP business segment did decrease, primarily driven by a decrease in demand for our consumer electronics and industrial products. However, any prolonged disruption of manufacturing of our products, commerce and related activity caused by the pandemic or significant decrease in demand for our products could materially and adversely affect our results of business, operations, and financial conditions.
Added
We believe these key operating metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies.
Removed
It may also have the effect of heightening many of the other risks such as those relating to our quarterly revenue and operating results as well as on our liquidity and on our ability to satisfy our indebtedness obligations, including the compliance with the covenants that apply to our indebtedness.
Added
Proposed Acquisition of Spirent On March 5, 2024, we announced a transaction under which the Company and VIAVI Solutions Acquisitions Limited, our wholly-owned subsidiary (Bidco), intended to acquire the entire issued and to be issued ordinary share capital of Spirent Communications plc, a public company incorporated in England and Wales and a global provider of automated test and assurance solutions for networks, cybersecurity and positioning (Spirent, and such transaction, the Proposed Acquisition).
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We believe these key operating metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies. 31 T a b le of Contents We continue to make strategic investments to support our three-year strategic plan highlighted during our September 2019 Analyst Day Event such as: • Continued to invest in R&D to revamp product portfolio and enable the business to leverage secular trends in 5G, Fiber and 3D Sensing. • Enhanced the sales team to continue expanding Total Addressable Market (TAM), gain market share and execute successfully against our competitors. • Successfully completed four acquisitions, consistent with our acquisition strategy.
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The Proposed Acquisition was to be implemented by way of a Court-sanctioned scheme of arrangement under Part 26 of the U.K. Companies Act (the VIAVI Scheme), and was conditioned on, among other things, holding meetings of Spirent shareholders to approve the VIAVI Scheme (the VIAVI Scheme Meetings) on or before May 23, 2024.
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Our ability to secure critical components, build inventory and meet customer demands has been a great differentiator and enabled us to grow revenue and market share. We plan to improve profitably driven by operating leverage in the business model as we grow both organically and inorganically.
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The VIAVI Scheme Meetings were not held on or before May 23, 2024, and accordingly, the VIAVI Scheme lapsed, and on May 23, 2024, Bidco terminated the Co-operation Agreement, and the various previously disclosed financing arrangements were terminated or cancelled as a result. 32 Table of Contents Looking Ahead to 2025 As we look forward to fiscal 2025, we expect the conservative spend environment to persist for the remainder of calendar 2024 and a gradual demand recovery in the first half of calendar 2025.
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Net revenue of $1.3 billion, up $93.5 million or 7.8%, was led by our NSE segment, which reached a record revenue of $949.1 million, up 13.3% year-over-year. VIAVI's fiscal 2022 GAAP operating margin of 14.3% was up 240bps over fiscal 2021 due to leverage on revenue growth.
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We remain positive on our long-term growth drivers and will continue to focus on executing our strategic priorities over the long-term to: • Defend and consolidate leadership in core business segments; • Invest in secular trends to drive growth and expand Total Addressable Market (TAM); • Extend VIAVI technologies and platforms into adjacent markets and applications; and • Continue productivity improvement in Operations, R&D and Selling, General and Administrative (SG&A).
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Non-GAAP operating margin of 22.2% expanded 110 basis points largely due to revenue growth and a lower intangible amortization. GAAP Diluted EPS of $0.07 decreased 75.9%, or $0.22, from fiscal 2021 largely due to the loss incurred in connection with the repurchase of certain 1.00% and 1.75% Senior Convertible Notes (the Original Senior Convertible Notes).
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Net revenue of $1.0 billion was down $105.7 million compared to fiscal 2023, primarily due to conservative spend by service providers and NEMs.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of July 2, 2022, the Company’s short-term investments of $1.4 million were comprised primarily of trading securities related to the deferred compensation plan, of which $0.3 million was invested in debt securities, $1.0 million was invested in equity securities and $0.1 million was invested in money market instruments. 45 T a b le of Contents Debt The fair value of our 2029 Notes is subject to interest rate risk while the fair values of our 2023 and 2024 Notes are subject to interest rate and market price risk due to the convertible feature of the Notes and other factors.
Biggest changeAs of June 29, 2024, the Company’s short-term investments of $19.9 million were comprised of 30-day term deposits of $18.4 million and trading securities related to the deferred compensation plan of $1.5 million, of which $1.4 million was invested in equity securities and $0.1 million was invested in debt securities.
Generally, the fair value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. The fair value of the 2023 and 2024 Notes may also increase as the market price of our stock rises and decrease as the market price of our stock falls.
Generally, the fair value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. The fair value of the 2026 Notes may also increase as the market price of our stock rises and decrease as the market price of our stock falls.
Due to the short-term nature of these investments, we believe that we do not have any material exposure to changes in the fair value of our investments as a result of changes in interest rates. Changes in interest rates can affect the interest earned on our investments.
Investments The majority of our investments have maturities of 90 days or less. Due to the short-term nature of these investments, we believe that we do not have any material exposure to changes in the fair value of our investments as a result of changes in interest rates. Changes in interest rates can affect the interest earned on our investments.
Notwithstanding our efforts to mitigate some foreign exchange risks, we do not hedge all of our foreign currency exposures, and there can be no assurances that our mitigating activities related to the exposures that we do hedge will adequately protect us against the risks associated with foreign currency fluctuations. Investments Majority of our investments have maturities 90 days or less.
Notwithstanding our efforts to mitigate some foreign exchange risks, we do not hedge all of our foreign currency exposures, and there can be no assurances that our mitigating activities related to the exposures that we do hedge will adequately protect us against the risks associated with foreign currency fluctuations.
As of July 2, 2022, we had forward contracts that were effectively closed but not settled with the counterparties by year end. The fair value of these contracts of $3.8 million and $8.3 million is reflected as prepayments and other current assets and other current liabilities in the Consolidated Balance Sheets as of July 2, 2022, respectively.
As of June 29, 2024, we 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 $1.7 million and $1.5 million is reflected as Prepayments and other current assets and Other current liabilities on the Consolidated Balance Sheets, respectively.
As of July 2, 2022 and July 3, 2021, the notional amounts of the forward contracts that we held to purchase foreign currencies were $119.1 million and $114.0 million, respectively, and the notional amounts of forward contracts that we held to sell foreign currencies were $80.5 million and $27.8 million, respectively.
As of June 29, 2024 and July 1, 2023, the notional amounts of the forward contracts that we held to purchase foreign currencies were $81.9 million and $87.5 million, respectively, and the notional amounts of forward contracts that we held to sell foreign currencies were $26.8 million and $19.3 million, respectively.
The forward contracts outstanding and not effectively closed, with a term of less than 120 days, were transacted near year end and had a fair value of $0.1 million which is reflected in other current liabilities in the Consolidated Balance Sheets as of July 2, 2022.
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 29, 2024 and July 1, 2023.
The carrying value of the 2023 Notes was $68.0 million, the carrying value of the 2024 Notes was $222.9 million and the carrying value of the 2029 Notes was $393.6 million. Refer to “Note 11. Debt” under Item 8 of this Annual Report on Form 10-K for more information. 46 T a b le of Contents
Refer to “Note 11. Debt” under Item 8 of this Annual Report on Form 10-K for more information. 47 Table of Contents
Based on quoted market prices, as of July 2, 2022, the fair value of the 2023 Notes was $73.4 million, the fair value of the 2024 Notes was $250.7 million and the fair value of the 2029 Notes was $337.5 million.
Based on quoted market prices, as of June 29, 2024, the fair value of the 2026 Notes was $238.1 million and the fair value of the 2029 Notes was $338.9 million. As of June 29, 2024, the carrying value of the 2026 Notes was $240.6 million and the carrying value of the 2029 Notes was $395.4 million.
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During the fourth quarter of fiscal 2021, the closing price of the Company’s common stock exceeded 130% of the applicable conversion price of the 2024 Notes on at least 20 of the last 30 consecutive trading days of the calendar quarter, causing the 2024 Notes to be convertible by the holders for the period of July 1, 2021 to September 30, 2021.
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Debt The fair value of our 2029 Notes is subject to interest rate risk while the fair value of our 2026 Notes is subject to interest rate and market price risk due to the convertible feature of the Notes and other factors.
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As a result, $456.6 million carrying value of the notes was reclassified to short-term debt as of July 3, 2021. The Company received four requests for conversion when the conversion was opened during the first quarter of fiscal 2022. The requests were for trivial amounts.
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During fiscal 2022 the closing price of the Company’s stock did not exceed 130% of the applicable conversion price of the 2024 Notes for at least 20 of the last 30 consecutive trading days of any of the calendar quarters. The carrying value of the 2024 Notes was reclassified to long-term debt as of October 2, 2021.

Other VIAV 10-K year-over-year comparisons