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What changed in VIAVI SOLUTIONS INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of VIAVI SOLUTIONS INC.'s 2024 and 2025 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 2025 report.

+284 added−293 removedSource: 10-K (2025-08-11) vs 10-K (2024-08-16)

Top changes in VIAVI SOLUTIONS INC.'s 2025 10-K

284 paragraphs added · 293 removed · 212 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

51 edited+20 added−47 removed23 unchanged
Biggest changeVIAVI 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).
Biggest changeTo serve our markets, we operate the following business segments: • Network and Service Enablement (NSE); and • Optical Security and Performance Products (OSP). Effective March 30, 2025, the Company realigned its segment reporting structure. As a result, the company’s Network Enablement (NE) and Service Enablement (SE) business activities are now reported as a single operating and reportable segment, NSE.
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.
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. Understanding employee experience continues to be an important focus of our People Strategy.
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
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. 10 Table of Contents
Seasonality Our business is seasonal, as is typical for our competitors and many large companies. For NSE, revenue is typically higher in the second and fourth fiscal quarter, all else being equal. There is typically a modest end of calendar year customer spending budget that benefits our second fiscal quarter.
Seasonality Our business is seasonal, as is typical for our competitors and many large companies. For our NSE segment, revenue is typically higher in the second and fourth fiscal quarters, all else being equal. There is typically a modest end of calendar year customer spending budget that benefits our second fiscal quarter.
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.
Our technologies enable solutions for designers to address these trends. 6 Table of Contents 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.
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.
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. Research and Development We devote substantial resources to research and development (R&D) to develop new and enhanced products to serve our markets.
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.
The success of our Safety program is demonstrated by our best-in-class Total Recordable Injury Rate (TRIR) of only 0.08 injuries per 100 full-time workers per year.
OSP sales and marketing efforts are targeted primarily toward customers in the consumer electronics, government, automotive and industrial markets. We have a dedicated direct global sales force focused on understanding customers’ requirements and building market awareness and acceptance of our products.
OSP sales and marketing efforts are targeted primarily toward customers in the consumer electronics, government, commercial aerospace, automotive, biomedical and industrial markets. We have a dedicated direct global sales force focused on understanding customers’ requirements and building market awareness and acceptance of our products.
Our filters play an important role in those applications, separating out ambient light from the incoming data used by sensors to make precise measurements. Notably, our patented low angle shift technology enables our customers to significantly improve the signal-to-noise ratio of their systems and deliver reliable system performance.
Our filters play an important role in those applications, separating out ambient light from the incoming data used by sensors to make precise measurements. Notably, our patented LAS technology enables our customers to significantly improve the signal-to-noise ratio of their systems and deliver reliable system performance.
We have a dedicated sales force organized around each of the markets that we serve that works directly with customers’ executive, technical, manufacturing and purchasing personnel to determine design, performance and cost requirements. We are also supported by a worldwide channel community, including our Velocity Solution Partners, who support our NSE segment.
We have a dedicated sales force organized around each of the markets that we serve that works directly with customers’ executive, technical, manufacturing and purchasing personnel to determine design, performance and cost requirements. We are also supported by a worldwide channel community who support our NSE segment.
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.
VIAVI expects that all employees will act in a manner that complies both with the letter and spirit of this code of conduct. Inclusion and Opportunity VIAVI is committed to fostering, cultivating, and preserving a culture of inclusion and opportunity. We believe the unique contributions and capabilities of our employees comprise one of our most valuable assets.
In our NE and SE segments, we develop portable test instruments for field service technicians, systems and software used in Network Operations Centers, and instruments used in the development, testing and production of communications network components, modules and equipment. We have centers of excellence for product marketing and development in Asia, Europe and North America.
In our NSE segment, we develop portable test instruments for field service technicians, systems and software used in Network Operations Centers, and instruments used in the development, testing and production of communications network components, modules and equipment. We have centers of excellence for product marketing and development in Asia, Europe and North America.
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.
Restructuring and Related Charges” under Item 8 of this Annual Report on Form 10-K. Manufacturing As of June 28, 2025, we have significant manufacturing facilities for our NSE and OSP segments located in China, France, Germany, the United Kingdom and the United States. Our most significant contract manufacturing partners are located in China and Thailand.
For additional information please see the Risk Factor entitled “ 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 ” under Item 1A “Risk Factors,” and “Note 19.
For additional information please see the Risk Factor entitled “ 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 ” under Item 1A “Risk Factors” included in this Annual Report on Form 10-K.
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.
We are committed to fostering an environment where employees are treated fairly, respectfully and without favoritism. 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.
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.
We seek to drive frequent and meaningful talent conversations through Everyday Development, our performance management check-in process. Check-ins ensure that employees are coached and supported throughout the year with relevant and timely discussions on expectations, feedback and development.
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.
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. Competition NSE competitors include Anritsu Corporation, EXFO Inc., Keysight Technologies Inc., NetScout Systems, Inc., Riverbed Technology, Inc., Rohde & Schwarz, VeEX Inc. and Spirent Communications plc.
OVP enables color-shifting effects, and OVMP enables depth and motion effects in addition to color-shifting effects. Both OVP and OVMP are formulated into inks used by banknote issuers and security printers worldwide for anti-counterfeiting applications on banknotes and other high-value documents. Our technologies are deployed on the banknotes of more than 100 countries today.
Our technologies targeting anti-counterfeiting applications include Optical Variable Pigment (OVP®) and Optical Variable Magnetic Pigment (OVMP®). OVP enables color-shifting effects, and OVMP enables depth and motion effects in addition to color-shifting effects. Both OVP and OVMP are formulated into inks used by banknote issuers and security printers worldwide for anti-counterfeiting applications on banknotes and other high-value documents.
Automotive : For product differentiation and brand enhancement, we provide custom color solutions for a variety of applications using our ChromaFlair® and SpectraFlair® pigments to create color effects that emphasize body contours, create dynamic environments, or enhance products in motion. These pigments are added to paints, plastics or textiles for automotive, sports apparel, and other applications.
These products, including coatings and optical filters, are optimized for each specific application. Automotive : For product differentiation and brand enhancement, we provide custom color solutions for a variety of applications using our ChromaFlair® and SpectraFlair® pigments to create color effects that emphasize body contours, create dynamic environments, or enhance products in motion.
In addition, our segments share common corporate services that provide capital, legal, infrastructure, resources and functional support, allowing them to focus on core technological strengths to compete and innovate in their markets. Network Enablement Our NE segment provides an integrated portfolio of testing solutions that access the network to perform build-out and maintenance tasks.
In addition, our segments share common corporate services that provide capital, legal, infrastructure, resources and functional support, allowing them to focus on core technological strengths to compete and innovate in their markets. Network and Service Enablement Our NSE segment provides an integrated portfolio of testing, monitoring, assurance and security solutions to help build, maintain and optimize telecom and datacom networks.
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.
As of June 28, 2025, we own approximately 1,085 U.S. patents and 2,075 foreign patents and have 1,164 patent applications pending throughout the world. The average age of the patents we hold is 9.0 years, which is younger than the midpoint of the average 20-year life of a patent.
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.
These factors are discussed under Item 1A “Risk Factors” of this Annual Report on Form 10-K. Business Segments We operate in two broad business categories: NSE and OSP.
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.
OSP also develops, manufactures and sells a line of hand-held and process spectrometers with applications in the agriculture, law enforcement, pharmaceuticals and food markets. Sales and Marketing We market and sell products to communications service providers (CSPs), NEMs, original equipment manufacturers (OEMs), enterprises, governmental organizations, distributors and strategic partners worldwide.
Markets Our OSP segment delivers overt and covert technologies to protect banknotes and documents of value against counterfeiting, with a primary focus on the currency market.
Custom color solutions include innovative special effects pigments and spectral sensing solutions include handheld and process near infrared spectrometers. Markets Our OSP segment delivers overt and covert technologies to protect banknotes and documents of value against counterfeiting, with a primary focus on the currency market.
Our long-term capital allocation strategy, which supports our corporate strategy, is as follows: • Maintenance and run-rate investments to support operations; • Organic investments in initiatives to support revenue growth and productivity; • Return capital to shareholders through share buybacks and execute on capital allocation and debt management strategy; and • Mergers and acquisitions that are synergistic to company strategy and business segments.
Our long-term capital allocation strategy, which supports our corporate strategy, is as follows: • Maintenance and run-rate investments to support operations; • Organic investments in initiatives to support revenue growth and productivity; • Execute on debt management strategy; • Return capital to shareholders through share buybacks; • Leverage our net operating loss carryforwards (NOLs); and • Mergers and acquisitions that are synergistic to company strategy and business segments. 3 Table of Contents Although we are working to successfully implement our strategy, internal and/or external factors could impact our ability to meet any, or all, of our objectives.
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.
Major trends in 3D sensing and other applications we target include an ongoing drive toward enabling increased efficiency in size, weight and power (SWaP). 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.
While we face multiple competitors for each of our product families, we continue to have one of the broadest portfolios of wireline and wireless monitoring solutions available in the service enablement industry.
While we face multiple competitors for each of our product families, we continue to have one of the broadest portfolios of products and monitoring solutions available in the network and service enablement industry. 4 Table of Contents Industry Trends for NSE Rapid growth in network bandwidth demand is the primary driver for our products.
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.
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.
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.
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 quarters followed by seasonal demand declines in the third and fourth fiscal quarters. 8 Table of Contents Human Capital Management The VIAVI culture is made up of the contributions of our approximately 3,600 employees worldwide (as of June 28, 2025) working across 31 countries.
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.
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. Our security pigment technologies enable intuitive overt optical effects that consumers can easily and quickly recognize, and that counterfeiters find very difficult to reproduce.
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.
These technologies deliver a range of intuitive overt effects that enable the rapid verification of banknotes without requiring a specialized device or reader. 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.
A high level of support is a critical part of our strategy to develop and maintain long-term collaborative relationships with our customers. We develop innovative products by engaging our customers at the initial design phase and continue to build that relationship as our customers’ needs change and develop.
We develop innovative products by engaging our customers at the initial design phase and continue to build that relationship as our customers’ needs change and develop. Service and support are provided through our offices and those of our partners worldwide.
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.
We believe the collective sum of our individual differences, life experiences, knowledge, innovation, business acumen and self-expression promotes a culture that enhances our reputation and achievement. VIAVI has long been committed to ensuring that all individuals have an equal opportunity to enjoy a fair, safe and productive work environment.
They represent the principles that will help guide us to achieve our objectives globally and the desired operating environment of the employees and management.
Business Values and Standards The VIAVI business values articulate the internal cultural identity for VIAVI employees and provide a shared understanding of expectations across the Company. They represent the principles that help guide us to achieve our objectives globally and the desired operating environment of the employees and management.
Additionally, our optical filters and Engineered Diffusers enable automotive sensing applications including LiDAR and in-cabin monitoring. Industry Trends For nearly 75 years, OSP has developed and deployed capabilities that alter how the light is transmitted, reflected, and absorbed, enabling a range of mission critical and high-volume optical solutions.
Industry Trends For over 75 years, OSP has developed and deployed capabilities that alter how the light is transmitted, reflected and absorbed, enabling a range of mission critical and high-volume optical solutions. We leverage our capabilities to deliver technologies that enable anti-counterfeiting solutions designed to protect the integrity of banknotes and other documents of value.
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.
Both managers and employees have a role to play to ensure that they are connected to the activities that drive our business forward.
Service and support are provided through our offices and those of our partners worldwide. Acquisitions As part of our strategy, we are committed to the ongoing evaluation of strategic opportunities and, where appropriate, the acquisition of additional products, technologies or businesses that are complementary to, or strengthen, our existing products.
Acquisitions As part of our strategy, we are committed to the ongoing evaluation of strategic opportunities and, where appropriate, the acquisition of additional products, technologies or businesses that are complementary to, or strengthen, our existing products. For further information related to our acquisitions, refer to “Note 5. Acquisitions” under Item 8 of this Annual Report on Form 10-K.
Government : Our products are used in a variety of government and aerospace applications, including optics for inter-satellite laser communications, guidance systems, laser eye protection and night vision systems. These products, including coatings and optical filters, are optimized for each specific application.
We also develop and manufacture handheld and process near infrared spectrometers that leverage our linear variable optical filters for use in applications for agriculture, law enforcement, pharmaceutical and other markets. Government : Our products are used in a variety of government and aerospace applications, including optics for inter-satellite laser communications, guidance systems, laser eye protection and night vision systems.
Our direct sales force is complemented by a highly trained team of field applications engineers who assist customers in designing, testing and qualifying our products. We market our products and capabilities through attendance at trade shows, the production of promotional webinars, the development of samples and product demonstrations, participation in technical forums, select advertising and by developing customer partnerships.
We market our products and capabilities through attendance at trade shows, the production of promotional webinars, the development of samples and product demonstrations, participation in technical forums, select advertising and by developing customer partnerships. 7 Table of Contents A high level of support is a critical part of our strategy to develop and maintain long-term collaborative relationships with our customers.
Optical Security and Performance Products Our OSP segment leverages its core optical coating technologies and volume manufacturing capability to design, manufacture, and sell technologies for the anti-counterfeiting, consumer electronics, industrial, government and automotive markets. Our technologies targeting anti-counterfeiting applications include Optical Variable Pigment (OVP®) and Optical Variable Magnetic Pigment (OVMP®).
For our avionics products, many governments across the globe are increasing their military and public safety budgets to upgrade communication infrastructure. Optical Security and Performance Products Our OSP segment leverages its core optical coating technologies and volume manufacturing capability to design, manufacture and sell technologies for the anti-counterfeiting, 3D sensing, government and aerospace, automotive and industrial markets .
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.
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.
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.
The program provides a venue for managers to network with their cross functional and global peer group while developing their skills. We continue to provide guidance and best practices in hybrid working for our employees and managers, which are supported by our Flexible Work policy.
We provide multicavity and linear variable optical filters on a variety of substrates for applications, including thermal imaging, spectroscopy and pollution monitoring. We also develop and manufacture miniature handheld and process near infrared spectrometers that leverage our linear variable optical filters for use in applications for agriculture, pharmaceutical and other markets.
Our Engineered Diffusers shape light emitted for industrial, consumer electronics and biomedical applications and also enhance eye safety. We provide multicavity and linear variable optical filters on a variety of substrates for applications, including thermal imaging, spectroscopy and pollution monitoring.
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.
Customers NSE customers include telecom and datacom service providers, critical infrastructure operators, semiconductor and network equipment vendors, state and federal agencies, utilities and the armed forces. Examples of our customers include América Móvil, AT&T Inc., Lumen Technologies, Inc. (formerly CenturyLink, Inc.), Ciena, Cisco Systems, Inc., Ericsson, Nokia Corporation, British Telecom Openreach, Deutsche Telekom AG and Verizon Communications Inc.
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.
Our test instrument portfolio is one of the largest in the industry, with millions of units in active use by service providers and network equipment manufacturers (NEMs) worldwide. Our Fiber products include an extensive range of instruments and systems enabling the development and testing of high-performance integrated circuits, telecom and datacom equipment, modules and networks.
Anti-Counterfeiting : Our OVP and OVMP technologies are incorporated into inks used by many government and state-owned security printers worldwide for banknote protection. These technologies deliver a range of intuitive overt effects that enable the rapid verification of banknotes without requiring a specialized device or reader.
Offerings Our OSP business provides innovative light management technologies for the anti-counterfeiting, consumer electronics, industrial, government and automotive markets. Anti-Counterfeiting : Our OVP and OVMP technologies are incorporated into inks used by many government and state-owned security printers worldwide for banknote protection.
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.
We provide managers with comprehensive leadership training through our manager development series. Our People Strategy The Chief Executive Officer (CEO) and the Senior Vice President (SVP) of Human Resources are responsible for the development of our People Strategy and execute this with the support of the Executive Management Team.
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.
Competition OSP competitors include providers of anti-counterfeiting technologies such as Giesecke & Devrient and Crane NXT; special-effect pigments such as Merck KGA and FYOTEC; optical coatings companies such as Materion, Zhejiang Crystal-Optech Co Ltd. and Platinum Optics Technology, Inc.; and manufacturers of passive and other optical components such as Coherent and ams OSRAM.
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.
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 telecommunications, cloud, enterprises, first responders, military, aerospace and critical infrastructure. VIAVI is also a leader in optical processing technologies for anti-counterfeiting, 3D sensing, aerospace, automotive and industrial applications.
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.
The industry is conducting research to define the path to 6G along vectors including AI across all network functions, new frequency bands, integrated sensing and communications, multiple access and ray tracing. In fiber, existing network infrastructure that is not otherwise being upgraded is also expected to be modernized with new cable and access technologies.
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.
Through focused internal employee outreach, we seek to enhance business knowledge, drive organizational awareness and foster cross-functional collaboration. We frequently measure employee sentiment and gather data that provides all employees with insight into our culture, the working environment and our employees’ drivers for engagement.
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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.
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Recent acquisitions have reduced the SE segment revenue as a percentage of total VIAVI revenue. In addition, NE and SE are managed under common leadership, share many of the same customers and suppliers and operating expenses associated with the NSE business are not exclusively allocated to either NE or SE.
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Our near-term strategy, and next transformation phase, will be more focused on growth, both organic and inorganic. We plan to leverage major secular growth trends in 5G wireless, fiber and 3D sensing to achieve higher levels of revenue and profitability.
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In support of our business segments, we are pursuing a corporate strategy that we believe will best position us for future opportunities as follows: • Defend and consolidate leadership in core business segments: – NSE: Lab-to-Field integration across NE Platforms; integration between NE and SE platforms; and – OSP: continued innovation in anti-counterfeiting pigments and 3D sensing. • Invest in secular trends to drive growth and expand total addressable market (TAM): – Fiber densification: Fiber-to-the-everywhere (FTTx), cable, wireless backhaul and data centers; – Wireless: 5G-to-6G evolution, Open Radio Access Network (ORAN), AI-RAN, RAN optimization, private 5G networks and intelligent edge; and – High-performance optical applications: free-space optical communications, quantum key distribution and quantum computing and automotive LiDAR. • Extend VIAVI technologies and platforms into lucrative adjacent markets and applications: – Expand and grow mission-critical applications such as aerospace and defense, resilient positioning, navigation and timing (PNT) and network security; and – Transform and extend SE business unit through cloud-centric architecture, artificial intelligence (AI) and machine learning (ML), analytics, automation and security.
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Although we are working to successfully implement our strategy, internal and/or external factors could impact our ability to meet any, or all, of our objectives.
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Our solutions address lab and production environments, network management, service assurance and artificial intelligence for IT operations (AIOps) for any kind of network, including wireless, wireline, cloud, satellite, public safety, military and critical infrastructure.
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These solutions include instruments, software and services to design, build, turn-up, certify, troubleshoot, and optimize networks. These solutions also support more profitable, higher-performing networks and help speed time-to-revenue. Our solutions address lab and production environments, field deployment and service assurance for wireless and wireline networks, including computing and storage networks.
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Our Wireless products consist of flexible application software and multi-functional hardware to enable the development of wireless infrastructure products and the buildout and management of wireless networks. Our AIOps solutions portfolio leverages AI, ML and big data analytics to automate and enhance end-to-end, multi-domain network operations and automation.
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Within the NE product portfolio, our wireless products consist of flexible application software and multi-function hardware that our customers can easily use as standalone test and measurement solutions or combine with industry-standard computers, networks and third-party devices to create measurement, automation and embedded systems.
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Our Network Performance and Threat Solutions (NPTS) portfolio helps enterprise IT and security teams monitor and optimize connectivity for their employees and conducts preventative and forensic analysis to address rising network and security challenges from remote work. Our Aerospace and Defense business is a leading provider of test equipment for mission critical communication and avionics applications.
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Our Radio Access Network (RAN) to Core test and validation product addresses the various communications infrastructure market segments. Our AvComm products are a global leader in test and measurement (T&M) instrumentation for communication and safety in the government, aerospace and military markets.
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In addition, we are also a leading provider of products and modules to ensure resilient PNT for civilian and aerospace and defense customers. Markets Our NSE segment provides solutions and services for telecommunications service providers, NEMs, communication integrated circuit developers, cloud operators, enterprises, first responders, military, aerospace and critical infrastructure customers.
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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.
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Network service providers, data centers operators and their ecosystems are being compelled to upgrade their infrastructure to support the rapid increase in demand for bandwidth and compute power. Service providers and data center operators are investing in new products and technologies that increase the bandwidth and performance of their networks.
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Markets Our NE segment provides solutions for CSPs, as well as NEMs and data center providers that deliver and/or operate broadband/IP networks (fixed and mobile) supporting voice, video and data services as well as a wide range of applications.
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For wireline operators this means expanding and increasing the fiber bandwidth and for wireless operators it means migrating their networks to the next generations of wireless technologies.
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These solutions support the development and production of network equipment, the deployment of next generation network technologies and services, and ensure a higher-quality customer experience. AvComm products are positioned in all of the customers’ product life cycle phases from research & development (R&D), manufacturing, installation, deployment and field, to depot repair and maintenance of devices.
Added
The data center ecosystem, consisting of semiconductor vendors, transceiver and module developers, NEMs, and end users including hyperscalers and data center operators amongst others, is also driving rapid change and strong demand in the industry.
Removed
Customers NE customers include CSPs, NEMs, government organizations and large corporate customers, such as major telecom, mobility and cable operators, chip and infrastructure vendors, storage-device manufacturers, storage-network and switch vendors, radio and avionics commercial companies, OEMs, state and federal agencies, utilities, law enforcement, military contractors and the armed forces and deployed private enterprise customers.
Added
In the wireless sector, 5G networks are evolving as service providers deploy 5G Standalone (5GSA) with 5G-specific core networks, enabling differentiated services through network slicing and private networks.
Removed
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.
Added
The formal inclusion of non-terrestial networks in the 3GPP standards has led to a rise in collaboration between the wireless and satellite sectors and the introduction of satellite-based services including direct-to-cell and satellite broadband.
Removed
These solutions activate, certify, troubleshoot and optimize networks that are differentiated through superior efficiency, reliable performance and greater customer satisfaction. Designed to be mobile, these products include instruments and software that access the network to perform installation and maintenance tasks.
Added
Cable operators are investing in Distributed Access Architecture (DAA) and extending frequencies and network capacity. In aerospace and defense, the increased threat of disruption, jamming and spoofing of GPS and GNSS signal is driving the need for solutions to mitigate this threat. Resilient PNT is a broad set of technologies and products that are used to achieve these goals.
Removed
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.
Added
Our technologies are deployed on the banknotes of more than 100 countries today. Our technologies targeting 3D sensing, consumer electronics, industrial, government and automotive sensing include precise, high-performance, optical thin-film coatings and light shaping optics capabilities.
Removed
Our NE solutions are also used by NEMs in the design and production of next-generation network equipment. Thorough testing by NEMs plays a critical role in producing the components and equipment that are the building blocks of network infrastructure. We leverage our installed base and knowledge of network management methods and procedures to develop these advanced customer experience solutions.
Added
VIAVI offerings for 3D sensing applications include Low Angle Shift (LAS) optical filters that offer the system designer unprecedented control over performance variation and signal-to-noise ratio, especially in 3D depth sensing camera systems. VIAVI also offers Engineered Diffusers, marketed under the trademark “Engineered Diffusers®”, for 3D sensing applications. Other OSP product lines include custom color solutions and spectral sensing.
Removed
We also offer a range of product support and professional services designed to comprehensively address our customers’ requirements. These services include repair, calibration, software support and technical assistance for our products. We offer product and technology training as well as consulting services. Our professional services, provided in conjunction with system integration projects, include project management, installation and implementation.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

72 edited+19 added−14 removed87 unchanged
Biggest changeThis 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.
Biggest changeThe 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. 19 Table of Contents Failure to maintain satisfactory compliance with certain privacy and data protections laws and regulations may harm our business.
During this process, we have experienced, and may continue to experience, additional costs, delays in re-establishing volume production levels, planning difficulties, inventory issues, factory absorption concerns and systems integration problems. • We have experienced variability of manufacturing yields caused by difficulties in the manufacturing process, the effects from a shift in product mix, changes in product specifications and the introduction of new product lines.
During this process, we have experienced, and may continue to experience, additional costs, delays in re-establishing volume production levels, planning difficulties, inventory issues, factory absorption concerns and systems integration problems. • Variability of manufacturing yields caused by difficulties in the manufacturing process, the effects from a shift in product mix, changes in product specifications and the introduction of new product lines.
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.
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, 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.
Strategic 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.
Strategic 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 • 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.
Specific concerns we periodically encounter with our suppliers include stoppages or delays of supply, insufficient vendor resources to supply our requirements, substitution of more expensive or less reliable products, receipt of defective parts or contaminated materials, increases in the price of supplies and an inability to obtain reduced pricing from our suppliers in response to competitive pressures.
Specific concerns we periodically encounter with our suppliers include stoppages or delays of supply, insufficient vendor resources to supply our requirements, substitution of more expensive or less reliable parts, receipt of defective parts or contaminated materials, increases in the price of supplies and an inability to obtain reduced pricing from our suppliers in response to competitive pressures.
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.
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. However, 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.
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.
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, product compliance, 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 U.S., 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.
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.
If domestic and global economic conditions worsen, including as a result of pricing and inflationary pressures, overall spending on infrastructure, 3D sensing and other developing technologies may be reduced, which would adversely impact demand for our products in these markets.
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 operate in geographic regions which face a number of climate and environmental challenges. Our 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.
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.
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 22 Table of Contents • 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.
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.
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 23 Table of Contents • Enter into sale leaseback transactions.
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.
We may not be able to serve a significant portion of these markets and our growth forecasts should not be taken as indicative of our future growth.
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.
If we do not improve our performance in these areas, our operating results may 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.
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.
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 network infrastructure, 3D sensing and other applications for consumer electronics.
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.
Further, statements about our sustainability-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.
A material reduction in sales, or loss of the relationship with SICPA, may harm our business and operating results as we may be unable to find a substitute marketing and sales partner or develop these capabilities ourselves in a timely manner. Movement towards virtualized networks and software solutions may result in lower demand for our hardware products and increased competition.
A material reduction in sales, or loss of the relationship with SICPA, may harm our business and operating results as we may be unable to find a substitute marketing and sales partner or develop these capabilities ourselves in a timely manner. 13 Table of Contents Movement towards virtualized networks and software solutions may result in lower demand for our hardware products and increased competition.
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.
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 the restructuring programs initiated during fiscal 2023 and fiscal 2024.
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.
If any of these events occur, we may not derive some or all of the expected benefits from our NOLs and tax credit carryforwards. Changes in tax legislation or policies could materially impact our financial position and results of operations. VIAVI operates in many jurisdictions around the world.
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.
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 NSE segment; • 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; • Strategic execution challenges arising from competition with larger and more well-resourced competitors; • Our OSP segment 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; • Redundant costs related to periodic transitioning of manufacturing and other functions to lower-cost locations; 11 Table of Contents • 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 impacts due to tariffs, economic sanctions and export restrictions, the ongoing conflict between Russia and Ukraine, conflict in the Middle East, 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.
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.
Moreover, 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.
Recent escalation in regional conflicts, including the Russian invasion of Ukraine, resulting in ongoing and expanding economic sanctions, the armed conflict between Israel and Hamas, resulting in instability in the Middle East, and the risk of increased tensions between the U.S. and China, could curtail or prohibit our ability to transfer certain technologies, to sell our products and solutions, or to continue to operate in certain locations.
Recent escalation in regional conflicts, including the Russian invasion of Ukraine, resulting in ongoing and expanding economic sanctions, conflict in the Middle East, and the risk of increased tensions between the U.S. and China, could curtail or prohibit our ability to transfer certain technologies, to sell our products and solutions, or to continue to operate in certain locations.
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.
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. 15 Table of Contents Management transitions and talent retention create uncertainties that could harm our business.
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 network infrastructure, 3D sensing and other developing technologies, including AI, are subject to significant uncertainty and are based on assumptions and estimates, including our internal analysis, industry experience and third-party data.
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.
These provisions may have the effect of deterring hostile takeovers or delaying changes in control or change in our management. 25 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
However, there can be no assurance that the controls we implement and internal information technology systems we develop will be adequate and successful. Our systems are regularly targeted by bad actors and have been exposed to computer viruses, natural disasters, unauthorized access and other similar disruptions and attacks that continue to emerge and evolve.
However, there can be no assurance that the controls we implement and internal information technology systems we develop will be adequate and successful. Our systems are regularly targeted by bad actors and, in some cases, have been affected by computer viruses, natural disasters, unauthorized access and other similar disruptions and attacks that continue to emerge and evolve.
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.
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.
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.
These difficulties can reduce yields or disrupt production and thereby increase our manufacturing costs and adversely affect our margin. • Potentially 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. • Our dependence on a limited number of vendors, who are often small and specialized, for raw materials, packages and standard components.
Any such failure could have a material impact on our ability to meet customers’ expectations and may materially impact our operating results. • New product programs and introductions involve changing product specifications and customer requirements, unanticipated engineering complexities, difficulties in reallocating resources and overcoming resource limitations and increased complexity, which expose us to yield and product risk internally and with our suppliers.
Any such failure could have a material impact on our ability to meet customers’ expectations and may materially impact our operating results. 12 Table of Contents • New product programs and introductions, which involve changing product specifications and customer requirements, unanticipated engineering complexities, difficulties in reallocating resources and overcoming resource limitations and increased complexity, exposing us to yield and product risk internally and with our suppliers.
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.
U.S. government trade actions and restrictions could have an adverse impact on our business, financial position, and results of operation. The U.S. 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. Huawei Technologies Co.
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.
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 ongoing impact is not expected to be material to our overall 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-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.
If our sustainability-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our sustainability-related 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.
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.
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 U.S. 17 Table of Contents Any patents issued to us may be challenged, invalidated or circumvented.
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.
In the past, 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.
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.
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 may impact our tax liabilities.
Complying with these laws and regulations can be costly and can impede the development and offering of new products and services. For example, the E.U. General Data Protection Regulation (GDPR), which became effective in May 2018, imposes stringent data protection requirements and provides for significant penalties for noncompliance.
Complying with these laws and regulations can be costly and can impede the development and offering of new products and services. For example, the E.U. General Data Protection Regulation (GDPR), imposes stringent data protection requirements and provides for significant penalties for noncompliance.
Such threats can lead to increased operational risks; intellectual property theft; fraud; extortion; harm to employees or customers; violation of privacy or security laws and other litigation and legal risks; and reputational risks.
These kinds of attacks or threats of attacks can lead to increased operational impairment; intellectual property theft; fraud; extortion; harm to employees or customers; violation of privacy or security laws and other litigation and legal risks; and reputational risks.
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.
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. We face risks related to our international operations and revenue. Our customers are located throughout the world.
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.
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.
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.
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.
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.
As appropriate or required, our component suppliers must also comply with such laws and regulations. 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.
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.
Ltd. and a score of non-U.S. affiliates (collectively, Huawei) are on 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.
Measures to contain a global pandemic may intensify other risks described in these Risk Factors. 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. Global economic conditions have caused and may cause volatility and disruptions in the capital and credit markets.
Measures to contain a global pandemic may intensify other risks described in these Risk Factors. 21 Table 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.
Our certificate of incorporation and bylaws contain provisions providing for the limitations of liability and indemnification of our directors and officers, allowing vacancies on our Board of Directors to be filled by the vote of a majority of the remaining directors, granting our Board of Directors the authority to establish additional series of preferred stock and to designate the rights, preferences and privileges of such shares (commonly known as “blank check preferred”), and providing that our stockholders can take action only at a duly called annual or special meeting of stockholders, which may only be called by the Chairman of the Board, the Chief Executive Officer or the Board of Directors.
Our certificate of incorporation and bylaws contain provisions granting our Board of Directors the authority to establish additional series of preferred stock and to designate the rights, preferences and privileges of such shares (commonly known as “blank check preferred”), and provisions permitting our stockholders to take action only at a duly called annual or special meeting of stockholders, which may only be called by the Chairman of the Board, the Chief Executive Officer or the Board of Directors.
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.
We may also communicate certain initiatives and goals regarding sustainability-related matters in our public disclosures. These sustainability-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.
Acquisitions may also cause us to: • Issue common stock that would dilute our current stockholders’ percentage ownership and may decrease earnings per share; • Assume liabilities, some of which may be unknown at the time of the acquisitions; • Record goodwill and non-amortizable intangible assets that will be subject to impairment testing and potential periodic impairment charges; • Incur additional debt to finance such acquisitions; • Incur amortization expenses related to certain intangible assets; or • Acquire, assume, or become subject to litigation related to the acquired businesses or assets.
Acquisitions may also cause us to: • Issue common stock that would dilute our current stockholders’ percentage ownership and may decrease earnings per share; • Assume liabilities, some of which may be unknown at the time of the acquisitions; • Record goodwill and non-amortizable intangible assets that will be subject to impairment testing and potential periodic impairment charges; • Incur additional debt to finance such acquisitions; • Incur amortization expenses related to certain intangible assets; and/or • Acquire, assume, or become subject to litigation related to the acquired businesses or assets. 14 Table of Contents VIAVI is subject to risks associated with its recent and proposed acquisitions, including completion of proposed acquisitions in the anticipated timeframes or at all, and any failure to realize anticipated benefits of such acquisitions.
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.
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 infrastructure 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.
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.
In addition, we have significant operations outside North America, including product development, manufacturing, sales and customer support operations.
These developments have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting ESG-related requirements and expectations.
Regulators, customers, investors, employees and other stakeholders continue to focus on sustainability-related matters and related disclosures. These developments have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting sustainability-related requirements and expectations.
The Organization for Economic Co-operation & Development (OECD) has issued BEPS Pillar Two Model Rules. Pillar Two establishes a minimum global effective tax rate of 15% on profits of large multinational companies. While the U.S. has not adopted the Pillar Two rules, many countries where we operate have adopted or are expected to adopt the OECD Pillar Two Model.
The Organization for Economic Co-operation and Development (OECD) issued the BEPS Pillar Two Model Rules, which establish a minimum global effective tax rate of 15% on the profits of large multinational companies. Although the United States has not adopted these rules, many countries in which we operate have either implemented or are expected to implement the OECD Pillar Two framework.
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.
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.
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.
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.
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 market for our NSE segment is 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, solutions and services. We face a number of risks related to our strategic transactions.
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.
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. 20 Table of Contents Our business is subject to evolving regulations and expectations with respect to sustainability matters that could expose us to numerous risks.
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.
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.
Company and third-party providers have experienced increasingly sophisticated and damaging cybersecurity threats in the form of phishing emails, malware, malicious websites, ransomware, exploitation of application vulnerabilities, and nation-state attacks, and the threat landscape continues to evolve.
We and our third-party providers have experienced increasingly sophisticated cybersecurity attacks, which can take the form of phishing emails, malware, malicious websites, ransomware, exploitation of application vulnerabilities, and nation-state attacks.
These risks include the exposure of our intellectual property, confidential and proprietary information (including customer information) to unknown recipients; the introduction of malware into our network; and the creation of content subject to copyright, trademark, or other intellectual property protection of an unknown third party. 22 Table of Contents Environmental, Social and Governance (ESG) Risks We may be subject to environmental liabilities.
These risks include the exposure of our intellectual property, confidential and proprietary information (including customer information) to unknown recipients; the introduction of malware into our network; and the creation of content subject to copyright, trademark, or other intellectual property protection of an unknown third party. 18 Table of Contents Legal, Regulatory and Compliance Risks Certain of our products are subject to governmental and industry regulations, certifications and approvals.
We will continue to monitor the tax legislation for any future implications. General Risks Certain provisions in our charter and under Delaware laws could hinder a takeover attempt.
We will monitor tax developments for any future implications with respect to our tax burden, net income, and cash flow. 24 Table of Contents General Risks Certain provisions in our charter and under Delaware laws could hinder a takeover attempt.
We face a number of risks related to our strategic transactions. Our strategy continues to include periodic acquisitions and divestitures of businesses and technologies.
Our strategy continues to include periodic acquisitions and divestitures of businesses and technologies.
For example, developing and acting on ESG-related initiatives and collecting, measuring and reporting ESG-related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including the SEC’s climate-related reporting requirements, which are currently stayed pending legal challenges but which could come into effect in the coming years along with reporting requirements in California and other jurisdictions which we may be subject to.
For example, developing and acting on sustainability-related initiatives and collecting, measuring and reporting sustainability-related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including reporting requirements in California and other jurisdictions, such as the European Union which we may be subject to.
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.
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.
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.
Moreover, the additional tariffs announced by the U.S. administration in 2025, or other trade actions that may be implemented, may increase the cost of certain materials and/or products, thereby adversely affecting our profitability. These actions could require us to pass these costs to our customers, which could decrease demand for our products, and could adversely impact our business.
We may seek to access the capital or credit markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. For example, in December 2021, we entered into a $300 million asset-based secured credit facility which has certain limitations based on our borrowing capacity.
We may seek to access the capital or credit markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.
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.
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. For example, we generate cash in a number of jurisdictions globally, including China, in which there can be challenges to repatriate those funds which can impact our overall liquidity.
Such laws and regulations have been passed in several jurisdictions in which we operate, are often complex and are subject to frequent changes.
Such laws and regulations, passed in several jurisdictions in which we operate, are often complex and are subject to frequent changes. We will need to ensure that we comply with such laws and regulations as they are enacted, as well as all other environmental laws and regulations.
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.
These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness under the agreements governing our existing debt.
Additionally, California enacted legislation, the California Consumer Privacy Act (CCPA), which became effective January 1, 2020. The CCPA requires, among other things, covered companies to provide new disclosures to California consumers, and allow such consumers new abilities to opt-out of certain sales of personal data.
Additionally the California Consumer Privacy Act (CCPA) requires, among other things, covered companies to provide disclosures to California consumers, and allow such consumers new abilities to opt-out of certain sales of personal data. The CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches that may increase data breach litigation.
These privacy laws and regulations are quickly evolving, with new or modified laws and regulations proposed and implemented frequently and existing laws and regulations subject to new or different interpretations.
Complex local, state, national, foreign, and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer, and other processing of personal data. These privacy laws and regulations are quickly evolving, with new or modified laws and regulations proposed and implemented frequently and existing laws and regulations subject to new or different interpretations.
The manufacture, quality and distribution of our products, as well as our customer relations, may be affected by several factors, including the rapidly changing market for our products, supply chain issues and internal restructuring efforts. We expect the impact of these issues will become more pronounced as we continue to introduce new product offerings and when overall demand increases.
These factors could cause strain on our execution capabilities and customer relations. We expect the impact of these issues will become more pronounced as we continue to introduce new product offerings and when overall demand increases.
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.
In recent years, many other states have enacted privacy laws that have gone or will go into effect and which impose additional data protection obligations on covered businesses, including consumer rights, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.
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.
Any failure by us to continue capturing a significant share of key customer sales 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.
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.
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. We could be impacted by new restrictions imposed by the U.S. government on, or curtailing of H1-B and other work visas and permits.
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. 18 Table of Contents Legal, Regulatory and Compliance Risks Certain of our products are subject to governmental and industry regulations, certifications and approvals.
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. 16 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.
Removed
For example, in May 2023, China announced controls on the use of Micron products in China, following a cybersecurity review of Micron. At this time, the scope of these restrictions and entities impacted, and impact on VIAVI, is unclear.
Added
Further, the U.S. administration has implemented and could implement further broad-based global tariffs that could adversely impact trade relations and result in higher costs. The final timing and amount of tariff rates continues to evolve and therefore the impact, including those of any potential retaliatory tariffs, is difficult to forecast.
Removed
These factors have caused considerable strain on our execution capabilities and customer relations.
Added
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.
Removed
As remote work has become more available, the competition for highly qualified talent has intensified.
Added
In January 2025, VIAVI completed the acquisition of Inertial Labs, Inc. (the Inertial Labs Acquisition). VIAVI also previously announced its proposed acquisition of Spirent Communications plc’s (Spirent) high-speed ethernet and network security business lines from Keysight Technologies, Inc., (the Proposed Acquisition), which is currently estimated to close by the end of September 2025, subject to customary closing conditions.
Removed
For example, the United States has increased tariffs on certain categories of high-tech and consumer goods imported from China pursuant to Section 301 of the Trade Act of 1974, including a current 25% tariff on List 1, List 2 and List 3 goods, which lists cover certain materials and/or products that we import from China.
Added
VIAVI is subject to risks and uncertainties associated with the Proposed Acquisition, including the risk that a condition to closing may not be satisfied or waived, the possibility of failure to obtain any outstanding necessary regulatory approvals, which may be outside the control of VIAVI or Keysight Technologies, Inc., or the possibility that the Proposed Acquisition does not close in the anticipated timeframe or at all.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

6 edited+2 added−0 removed17 unchanged
Biggest changeWe leverage industry standard security frameworks, including from the National Institute of Standards and Technology and the International Organization for Standardization, to evaluate our security controls and manage risk. We also carry insurance that provides protection against the potential losses arising from a cybersecurity incident.
Biggest changeWe leverage industry standard security frameworks, including from the National Institute of Standards and Technology and the International Organization for Standardization, to evaluate our security controls and manage risk.
Our Incident Response Plan coordinates the activities we take to prepare for, detect, respond to and recover from cybersecurity incidents, which include processes to triage, assess severity for, escalate, contain, investigate, and remediate the incident, as well as to comply with potentially applicable legal obligations and mitigate brand and reputational damage.
Our Incident Response Plan coordinates the activities we take to prepare for, detect, respond to and recover from cybersecurity incidents, which include processes to triage, assess severity, escalate, contain, investigate, and remediate the incident, as well as to comply with potentially applicable legal obligations and mitigate brand and reputational damage.
As set forth in its charter, our Audit Committee, comprised fully of independent directors, is responsible for oversight of risk, including cybersecurity and information security risk.
As set forth in its charter, our Audit Committee, comprised fully of independent directors, is responsible for oversight of risk, including cybersecurity and information security risks.
Please see the risk factor “ Our business and operations could be adversely impacted in the event of a failure of information technology infrastructure. ” included as part of our risk factor disclosures at Item 1A of this Annual Report on Form 10-K, which disclosure is incorporated by reference herein.
Please see the risk factor “ Our business and operations could be adversely impacted in the event of a failure of information technology infrastructure. ” included as part of our risk factor disclosures under Item 1A of this Annual Report on Form 10-K, which disclosure is incorporated by reference herein.
This includes penalties and settlements, of which there were none. 28 Table of Contents Governance Our Board of Directors (the Board) considers risks from cybersecurity threats as part of its risk oversight function and has delegated to the Audit Committee of the Board oversight of cybersecurity and other information technology risks.
This includes penalties and settlements, of which there were none. 26 Table of Contents Governance Our Board of Directors (the Board) considers risks from cybersecurity threats as part of its risk oversight function and has delegated to the Audit Committee of the Board oversight of cybersecurity and other information technology risks.
Our CISO has more than 9 years of experience in cybersecurity and information technology risk managing, including at another large public company. He also has a degree in computer science. Our CIO has over 15 years of information technology experience, which includes managing information security systems, developing cybersecurity strategy and implementing effective information and cybersecurity programs.
Our CISO has more than 10 years of experience in cybersecurity and information technology risk management, including at another large public company. He also has a degree in computer science. Our CIO has over 15 years of information technology experience, which includes managing information security systems, developing cybersecurity strategies and implementing effective information and cybersecurity programs.
Added
This does not imply that we meet any particular technical standards, specifications, or requirements, only that we use these frameworks as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business. We also carry insurance that provides protection against the potential losses arising from a cybersecurity incident.
Added
ITEM 2. PROPERTIES Not applicable. ITEM 3. LEGAL PROCEEDINGS The information set forth under the heading “Legal Proceedings” in “Note 18. Commitments and Contingencies” is under Item 8 of this Annual Report on Form 10-K. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 27 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+1 added−1 removed1 unchanged
Biggest changeHistorical 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
Biggest changeHistorical stock price performance is not necessarily indicative of future stock price performance. *$100 invested on 6/30/20 in stock or index. 6/2020 6/2021 6/2022 6/2023 6/2024 6/2025 VIAVI $ 100.00 $ 139.76 $ 104.72 $ 90.64 $ 54.96 $ 80.00 S&P 500 $ 100.00 $ 146.97 $ 131.06 $ 155.10 $ 193.19 $ 221.32 Nasdaq Composite $ 100.00 $ 151.15 $ 115.69 $ 144.64 $ 187.46 $ 215.81 Nasdaq Telecommunications $ 100.00 $ 127.36 $ 92.93 $ 94.58 $ 93.26 $ 119.47 ITEM 6. [RESERVED] 29 Table of Contents
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.
The following graph and table set forth the total cumulative return, assuming reinvestment of dividends, on an investment of $100 in June 2020 and ending June 2025 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. 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.
Stockholders' Equity” under Item 8 of this Annual Report on Form 10-K for more details. 28 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 27, 2024, we had 1,569 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 26, 2025, we had 1,392 holders of record of our common stock.
Removed
The 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.
Added
There were no shares repurchased under our stock repurchase plan of up to $300 million authorized by the Board of Directors in September 2022 (2022 Repurchase Plan) during the three months ended June 28, 2025, with remaining authorization of $198.4 million for future share repurchases. Refer to “Note 15.

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 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.
Biggest changeThe following table summarizes selected Consolidated Statements of Operations items as a percentage of net revenue: Years Ended June 28, 2025 June 29, 2024 July 1, 2023 Segment net revenue: Network and Service Enablement 71.6 % 70.2 % 72.4 % Optical Security and Performance Products 28.4 29.8 27.6 Net revenue 100.0 100.0 100.0 Cost of revenues 40.9 41.0 40.0 Amortization of acquired technologies 1.8 1.4 2.2 Gross profit 57.3 57.6 57.8 Operating expenses: Research and development 19.3 20.2 18.7 Selling, general and administrative 32.2 33.3 29.7 Amortization of other intangibles 0.4 0.6 0.8 Restructuring and related charges 0.1 1.4 1.2 Total operating expenses 52.0 55.5 50.4 Income from operations 5.3 2.1 7.4 Loss on convertible note modification — — (0.2) Interest and other income, net 1.1 2.2 0.7 Interest expense (2.8) (3.1) (2.4) Income before income taxes and equity investment earnings 3.6 1.2 5.5 Provision for income taxes 0.4 3.8 3.2 Equity investment earnings — — — Net income (loss) 3.2 % (2.6) % 2.3 % 34 Table of Contents Financial Data for Fiscal 2025, 2024 and 2023 The following table summarizes selected Consolidated Statement of Operations items ( in millions ): 2025 2024 Change Percent Change 2024 2023 Change Percent Change Segment net revenue: NSE $ 776.6 $ 702.0 $ 74.6 10.6 % $ 702.0 $ 801.2 $ (99.2) (12.4) % OSP 307.7 298.4 9.3 3.1 % 298.4 304.9 (6.5) (2.1) % Net revenue $ 1,084.3 $ 1,000.4 $ 83.9 8.4 % $ 1,000.4 $ 1,106.1 $ (105.7) (9.6) % Amortization of acquired technologies $ 19.5 $ 13.8 $ 5.7 41.3 % $ 13.8 $ 24.6 $ (10.8) (43.9) % Percentage of net revenue 1.8 % 1.4 % 1.4 % 2.2 % Gross profit $ 621.1 $ 575.9 $ 45.2 7.8 % $ 575.9 $ 638.8 $ (62.9) (9.8) % Gross margin 57.3 % 57.6 % 57.6 % 57.8 % Research and development $ 208.7 $ 201.9 $ 6.8 3.4 % $ 201.9 $ 206.9 $ (5.0) (2.4) % Percentage of net revenue 19.3 % 20.2 % 20.2 % 18.7 % Selling, general and administrative $ 349.4 $ 333.3 $ 16.1 4.8 % $ 333.3 $ 328.7 $ 4.6 1.4 % Percentage of net revenue 32.2 % 33.3 % 33.3 % 29.7 % Amortization of other intangibles $ 4.8 $ 6.3 $ (1.5) (23.8) % $ 6.3 $ 8.7 $ (2.4) (27.6) % Percentage of net revenue 0.4 % 0.6 % 0.6 % 0.8 % Restructuring and related charges $ 0.7 $ 13.6 $ (12.9) (94.9) % $ 13.6 $ 12.1 $ 1.5 12.4 % Percentage of net revenue 0.1 % 1.4 % 1.4 % 1.2 % Loss on convertible note modification $ — $ — $ — — % $ — $ (2.2) $ 2.2 NM Percentage of net revenue — % — % — % (0.2) % Interest and other income, net $ 11.1 $ 21.7 $ (10.6) (48.8) % $ 21.7 $ 7.6 $ 14.1 185.5 % Percentage of net revenue 1.1 % 2.2 % 2.2 % 0.7 % Interest expense $ (30.0) $ (30.9) $ 0.9 (2.9) % $ (30.9) $ (27.1) $ (3.8) 14.0 % Percentage of net revenue (2.8) % (3.1) % (3.1) % (2.4) % Provision for income taxes $ 4.4 $ 37.4 $ (33.0) (88.2) % $ 37.4 $ 35.2 $ 2.2 6.3 % Percentage of net revenue 0.4 % 3.8 % 3.8 % 3.2 % Equity investment earnings $ 0.6 $ — $ 0.6 NM $ — $ — $ — — % Percentage of net revenue — % — % — % — % NM - Percentage change not considered meaningful 35 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.
We believe that the accounting estimates employed and the resulting balances are reasonable; however, actual results may differ from these estimates and such differences may be material. Refer to “Note 1. Basis of Presentation” under Item 8 of this Annual Report on Form 10-K, for a discussion of the estimates used in preparation our Consolidated Financial Statements.
We believe that the accounting estimates employed and the resulting balances are reasonable; however, actual results may differ from these estimates and such differences may be material. Refer to “Note 1. Basis of Presentation” under Item 8 of this Annual Report on Form 10-K, for a discussion of the estimates used in preparation of our Consolidated Financial Statements.
However, we have in the recent past experienced, and may continue to experience in the future, certain charges unrelated to our core operating performance, such as acquisitions and integration related expenses and litigation expenses, which could increase our SG&A expenses and potentially impact our profitability expectations in any particular quarter.
However, we have in the recent past experienced, and may continue to experience in the future, certain charges unrelated to our core operating performance, such as acquisitions and integration related expenses and litigation expenses, which could increase our SG&A expense and potentially impact our profitability expectations in any particular quarter.
Factors that could cause or contribute to these differences include those discussed below and in this Annual Report on Form 10-K, particularly in “Risk Factors” and “Forward-Looking Statements.” This discussion should be read in conjunction with our consolidated financial statements and notes to the consolidated financial statements included in this Annual Report that have been prepared in accordance with accounting principles generally accepted in the United States of America.
Factors that could cause or contribute to these differences include those discussed below and in this Annual Report on Form 10-K, particularly in “Risk Factors” and “Forward-Looking Statements.” This discussion should be read in conjunction with our consolidated financial statements and notes to the consolidated financial statements included in this Annual Report on Form 10-K that have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.
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.
The expected tax provision derived by applying the federal statutory rate to our income before income taxes for fiscal 2025 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.
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.
Income tax expense or benefit : The Company excludes certain non-cash tax expense or benefit items, such as (i) the utilization of net operating losses (NOLs) where valuation allowances were released, (ii) intra-period tax allocation benefit and (iii) the tax effect for amortization of non-tax deductible intangible assets, in calculating non-GAAP net income and non-GAAP EPS.
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.
During the twelve months ended June 28, 2025, 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.
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 .
Discussions of the year-to-year comparisons between the fiscal years ended June 29, 2024 and July 1, 2023, 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 June 29, 2024 .
Our revenues, profitability, and general financial performance may also be affected by: (a) pricing pressures due to, among other things, a highly concentrated customer base, increasing competition, particularly from Asia-based competitors, and a general commoditization trend for certain products; (b) product mix variability in our markets, which affects revenue and gross margin; (c) fluctuations in customer buying patterns, which cause demand, revenue and profitability volatility; (d) the current trend of communication industry consolidation, which is expected to continue, that directly affects our NE and SE customer bases and adds additional risk and uncertainty to our financial and business projections; (e) the impact of ongoing global trade policies, tariffs and sanctions; and (f) regulatory or economic developments and/or technology challenges that slow or change the rate of adoption of 5G, 3D sensing and other emerging secular technologies and platforms.
Our revenues, profitability and general financial performance may also be affected by: (a) pricing pressures due to, among other things, a highly concentrated customer base, increasing competition, particularly from Asia-based competitors and a general commoditization trend for certain products; (b) strategic execution challenges arising from competition with larger and more well-resourced competitors; (c) product mix variability in our markets, which affects revenue and gross margin; (d) fluctuations in customer buying patterns, which cause demand, revenue and profitability volatility; (e) the current trend of communication industry consolidation, which is expected to continue, that directly affects our NSE customer base and adds additional risk and uncertainty to our financial and business projections; (f) the impact of ongoing global trade policies, tariffs and sanctions; and (g) regulatory or economic developments and/or technology challenges that slow or change the rate of adoption of 5G, 3D sensing and other emerging secular technologies and platforms.
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.
As of June 28, 2025, the majority of our cash investments have maturities of 90 days or less and are of high credit quality. Nonetheless we could realize investment losses under adverse market conditions.
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.
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 28, 2025.
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.
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; • The pending close of our acquisition of Spirent’s HSE, network security and CE businesses and the related Term Loan B, which has been priced and allocated, with funding contingent upon closing; • 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 that 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; • Challenges in repatriating funds from certain foreign jurisdictions; • 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 under Item 1A “Risk Factors” section of this Annual Report on Form 10-K. 41 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.
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.
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.
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.
Accordingly, management excludes from core operating performance items such as those relating to certain purchase price accounting adjustments, amortization of acquisition related intangibles, amortization expense related to acquisition related inventory step-up, stock-based compensation, legal settlements, restructuring, changes in fair value of contingent consideration liabilities, certain investing and acquisition related expenses and other activities and income tax expenses or benefits that management believes are not reflective of such ordinary, ongoing and core operating activities.
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.
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 income (loss) and are reported as a separate component of stockholders’ equity. As of June 28, 2025, U.S. subsidiaries owned approximately 23.7% of our cash and cash equivalents, short-term investments and restricted cash.
During fiscal 2024, we recorded charges of $14.8 million related to the Fiscal 2024 Plan and a benefit of $1.2 million related to the Fiscal 2023 Plan. During fiscal 2023, we recorded restructuring charges of $12.1 million related to the Fiscal 2023 Plan.
During fiscal 2025, we recorded restructuring charges of $0.9 million related to the Fiscal 2024 Plan and a benefit of $0.2 million related to the Fiscal 2023 Plan. During fiscal 2024, we recorded charges of $14.8 million related to the Fiscal 2024 Plan and a benefit of $1.2 million related to the Fiscal 2023 Plan.
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.
Unless otherwise noted, all references herein for the years 2025, 2024 and 2023 represent the fiscal years ended June 28, 2025, June 29, 2024 and July 1, 2023, respectively.
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.
As of June 28, 2025, we had no borrowings under this facility and our available borrowing capacity was approximately $170.8 million, net of outstanding standby letters of credit of $4.4 million. Refer to “Note 11. Debt” under Item 8 of this Annual Report on Form 10-K for more information.
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
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 28, 2025. 44 Table of Contents
The remaining issuance costs of $2.0 million was capitalized within Long-term debt (as a contra-balance) on the Consolidated Balance Sheets and will be amortized as an adjustment to interest expense on a straight-line basis until maturity. Interest and Other Income, Net Interest and other income, net was $21.7 million in fiscal 2024 as compared to $7.6 million in fiscal 2023.
The remaining issuance costs of $2.0 million were capitalized within Long-term debt (as a contra-balance) on the Consolidated Balance Sheets and are being amortized as an adjustment to interest expense on a straight-line basis until maturity. Interest and Other Income, Net Interest and other income, net was $11.1 million in fiscal 2025 as compared to $21.7 million in fiscal 2024.
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.
GAAP). 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 critical infrastructure. VIAVI is also a leader in optical processing technologies for anti-counterfeiting, 3D sensing, aerospace, automotive and industrial applications.
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.
Cost of revenues, costs of research and development and costs of selling, general and administrative : The Company’s GAAP presentation of gross margin and operating expenses may include (i) additional depreciation and amortization from changes in estimated useful life and the write-down of certain property, plant and equipment and intangibles, (ii) charges such as severance, benefits and outplacement costs related to restructuring plans with a specific and defined term, (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) amortization expense related to acquisition related inventory step-up, (vii) changes in fair value of contingent consideration liabilities, (viii) acquisition related transaction and integration costs related to acquired entities, (ix) litigation and legal settlements and (x) other charges unrelated to our core operating performance comprised mainly of 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.
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).
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); and • Extend VIAVI technologies and platforms into lucrative adjacent markets and applications.
OSP operating margin decreased by 0.6 percentage points during fiscal 2024 to 35.9% from 36.5% in fiscal 2023, primarily due to the aforementioned reduction in gross margin.
OSP operating margin increased by 0.6 percentage points during fiscal 2025 to 36.5% from 35.9% in fiscal 2024, primarily due to the aforementioned increase in gross margin.
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.
Changes in our operating assets and liabilities related primarily to an increase in accounts receivable of $34.1 million due to billings outpacing collections, a decrease in accrued expenses and other current and non-current liabilities of $13.5 million due primarily to restructuring payments, an increase in inventory of $7.5 million related to demand changes, a decrease in income taxes payable of $6.3 million and an increase in other current and non-current assets of $4.0 million.
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.
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 28, 2025 June 29, 2024 July 1, 2023 Americas: United States $ 356.0 32.8 % $ 325.4 32.5 % $ 362.9 32.8 % Other Americas 69.2 6.4 % 65.3 6.6 % 75.2 6.8 % Total Americas $ 425.2 39.2 % $ 390.7 39.1 % $ 438.1 39.6 % Asia-Pacific: Greater China $ 215.1 19.8 % $ 194.0 19.4 % $ 210.9 19.1 % Other Asia-Pacific 164.5 15.2 % 152.5 15.2 % 166.6 15.0 % Total Asia-Pacific $ 379.6 35.0 % $ 346.5 34.6 % $ 377.5 34.1 % EMEA: $ 279.5 25.8 % $ 263.2 26.3 % $ 290.5 26.3 % Total net revenue $ 1,084.3 100.0 % $ 1,000.4 100.0 % $ 1,106.1 100.0 % Net revenue from customers outside the Americas for fiscal 2025, represented 60.8% of net revenue, a decrease of 0.1 percentage points year-over-year.
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 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. The recent global tariffs implemented could increase our costs and impact our business. We cannot predict when or to what extent these uncertainties will be resolved.
The GAAP measure most directly comparable to non-GAAP net income is net income. The GAAP measure most directly comparable to non-GAAP EPS is earnings per share.
The GAAP measure most directly comparable to non-GAAP net income is net income.
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.
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. 37 Table of Contents Amortization of Acquired Technologies (Cost of revenues) Amortization of acquired technologies within Cost of revenues for fiscal 2025 increased $5.7 million, or 41.3%, to $19.5 million from $13.8 million in fiscal 2024.
Restructuring charges consisting of severance, benefit and outplacement costs were recorded to the Restructuring and related charges (benefits) line within our Consolidated Statements of Operations. We estimate future cash payments of $14.6 million under the Fiscal 2024 Plan, funded by operating cash flow. Future payments under the Fiscal 2023 Plan are not expected to be material. Refer to “Note 13.
During fiscal 2023, we recorded restructuring charges of $12.1 million related to the Fiscal 2023 Plan. Restructuring charges consisting of severance, benefit and outplacement costs were recorded to the Restructuring and related charges line within our Consolidated Statements of Operations. We estimate future cash payments of $3.5 million under the Fiscal 2024 Plan, funded by operating cash flow.
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.
If currency exchange rates had been constant in fiscal 2025 and 2024, our consolidated net revenue in “constant dollars” would have increased from fiscal 2024 to fiscal 2025 by an additional $3.3 million, or 0.3% of net revenue, which primarily impacted our NSE segment.
Going forward, we expect to continue to encounter a number of industry and market risks and uncertainties. For example, uncertainty around the timing of our customers procurement decisions on infrastructure maintenance and upgrades and decisions on new infrastructure investments or uncertainty about speed of adoption of 5G technology at a commercially viable scale.
For example, uncertainty around the timing of our customers’ procurement decisions on infrastructure maintenance and upgrades and decisions on new infrastructure investments or uncertainty about speed of adoption of 5G technology at a commercially viable scale.
The Company uses the measures disclosed in this report to evaluate the Company’s historical and prospective financial performance, as well as its performance relative to its competitors. Specifically, management uses these items to further its own understanding of the Company’s core operating performance, which the Company believes represent its performance in the ordinary, ongoing and customary course of its operations.
Specifically, management uses these items to further its own understanding of the Company’s core operating performance, which the Company believes represents its performance in the ordinary, ongoing and customary course of its operations.
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.
Material Contractual and Cash Obligations The following summarizes our material contractual obligations at June 28, 2025, 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 $ 3.9 $ 0.2 $ 1.4 $ 1.1 $ 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 72.6 19.7 30.4 22.5 — Purchase obligations (2) 160.7 141.7 18.5 0.4 0.1 Operating lease obligations (3) 41.2 10.6 16.6 6.0 8.0 Non-cancelable leaseback obligations (2) 19.9 3.1 5.9 5.3 5.6 Royalty payment 0.2 0.2 — — — Pension and post-retirement benefit payments (4) 60.4 7.4 13.0 12.5 27.5 Total $ 1,008.9 $ 432.9 $ 85.8 $ 447.8 $ 42.4 (1) Refer to “Note 11.
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.
If currency exchange rates had been constant in fiscal 2025 and 2024, our consolidated operating expenses in “constant dollars” would have increased from fiscal 2024 to fiscal 2025 by an additional $0.1 million.
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.
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. Selling, General and Administrative Selling, General and Administrative (SG&A) expense increased $16.1 million, or 4.8%, in fiscal 2025 compared to fiscal 2024.
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.
We estimate annualized gross cost savings of approximately $25.0 million excluding any one-time charges as a result of the restructuring activities initiated under the Fiscal 2024 Plan. The Company anticipates the Fiscal 2024 Plan to be substantially complete by the end of the second quarter of fiscal 2026.
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.
This $10.6 million decrease was primarily driven by a legal settlement in our favor in the amount of $7.3 million in fiscal 2024 and a decrease in interest income due to lower cash balances and lower yields compared to fiscal 2024. Interest Expense Interest expense decreased $0.9 million, or 2.9%, during fiscal 2025 compared to fiscal 2024.
This decrease was primarily driven by lower anti-counterfeiting and government revenues partially offset by higher consumer and industrial revenue. OSP gross margin decreased by 0.1 percentage point during fiscal 2024 to 51.9% from 52.0% in fiscal 2023.
This increase was primarily driven by higher Anti-Counterfeiting and Other revenues, partially offset by a decrease in 3D sensing revenue. OSP gross margin increased by 1.2 percentage point during fiscal 2025 to 53.1% from 51.9% in fiscal 2024 primarily due to higher volume.
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.
Looking Ahead to 2026 As we look forward to fiscal 2026, we expect to continue to see stabilization and growth in many of our traditional businesses. 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.
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.
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 increased $83.9 million, or 8.4%, during fiscal 2025 when compared to fiscal 2024.
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.
Employee Pension and Other Benefit Plans” under Item 8 of this Annual Report on Form 10-K 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.
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.
This increase is primarily due to the amortization of intangibles acquired through Inertial Labs, partially offset by certain intangibles becoming fully amortized. Gross Margin Gross margin in fiscal 2025 declined 0.3 percentage points to 57.3% from 57.6% in fiscal 2024.
In fiscal 2024, we generated $116.4 million in operating cash flow and deployed $19.5 million or 1.9% of revenue towards capital expenditures.
In fiscal 2025, we generated $89.8 million in operating cash flow and deployed $27.8 million or 2.6% of revenue towards capital expenditures.
Network and Service Enablement NSE operating margin decreased by 6.5 percentage points during fiscal 2024 to 1.1% from 7.6% in fiscal 2023, primarily driven by lower volume. 42 Table of Contents Optical Security and Performance Products OSP net revenue decreased $6.5 million, or 2.1%, during fiscal 2024 when compared to fiscal 2023.
NSE operating margin increased by 4.3 percentage points during fiscal 2025 to 5.4% from 1.1% in fiscal 2024, primarily driven by higher volume and a one-time R&D tax credit catch-up. 40 Table of Contents Optical Security and Performance Products OSP net revenue increased $9.3 million, or 3.1%, during fiscal 2025 when compared to fiscal 2024.
Cash used in investing activities was $21.6 million, primarily resulting from $19.5 million used for capital expenditures and $5.5 million used for purchases of short-term investments, partially offset by $3.4 million proceeds from sales of assets.
Cash used in investing activities was $128.4 million, primarily resulting from $121.6 million used for the acquisition of Inertial Labs, $27.8 million used for capital expenditures and $3.0 million investment in a non-marketable equity security, partially offset by $18.9 million net maturities of short-term investments and $5.1 million proceeds from sales of assets.
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.
During fiscal 2025, the valuation allowance for deferred tax assets decreased by $69.7 million, which was primarily due to the increase in the deferred tax liability that resulted from the acquisition of Inertial Labs and its intangible assets, and the expiration of federal NOLs in the U.S.
The Fiscal 2023 Plan affected approximately 5% of the Company's workforce and resulted in an estimated annualized gross cost savings of approximately $25.0 million excluding any one-time charges. 40 Table of Contents The first phase of the Fiscal 2023 Plan impacted our Network and Service Enablement (NSE) and OSP segments and corporate functions and was substantially complete as of March 30, 2024.
The Fiscal 2023 Plan affected approximately 5% of the Company's workforce and resulted in an estimated annualized gross cost savings of approximately $25.0 million excluding any one-time charges. As of June 28, 2025, our total restructuring accrual was $3.5 million.
The Company anticipates the Fiscal 2024 Plan to be substantially complete by the end of fiscal 2025. During the second quarter of fiscal 2023, management approved a restructuring and workforce reduction plan (the Fiscal 2023 Plan) to better align the Company’s workforce with current business needs and strategic growth opportunities.
The restructuring and workforce reduction plan, initiated in the second quarter of fiscal 2023 (the Fiscal 2023 Plan) across various functions to better align the Company’s workforce with current business needs and strategic growth opportunities, was completed in the first quarter of fiscal 2025.
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.
As of June 28, 2025, our German pension plans, which were initially established as unfunded or “pay-as-you-go” plans, were underfunded by $59.6 million since the projected benefit obligation (PBO) exceeded the fair value of plan assets. We anticipate future annual outlays related to the German plans will approximate estimated future benefit payments.
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.
We expect these factors to continue to result in variability of our gross margin. Research and Development Research and Development (R&D) expense increased $6.8 million, or 3.4%, during fiscal 2025 compared to fiscal 2024.
These were partially offset by a decrease in deferred revenue of $8.8 million due to timing of support billings and project acceptances, a decrease in accrued payroll and related expenses of $4.6 million due primarily to lower commissions and an increase in other current and non-current assets of $2.1 million.
These were partially offset by an increase in accounts payable of $14.6 million driven by timing of purchases and related payments, an increase in accrued payroll and related expenses of $12.7 million due primarily to variable pay and an increase in deferred revenue of $7.9 million due to timing of support billings and project acceptances.
Restructuring The Company’s restructuring events are primarily intended to reduce costs, consolidate operations, integrate various acquisitions, streamline product manufacturing and address market conditions. During the fourth quarter of fiscal 2024, management approved a restructuring and workforce reduction plan (the Fiscal 2024 Plan) across various functions intended to improve operational efficiencies and better align the Company’s workforce with current business needs.
During the fourth quarter of fiscal 2024, management approved a restructuring and workforce reduction plan (the Fiscal 2024 Plan) across various functions intended to improve operational efficiencies and better align the Company’s workforce with current business needs. The Company expects approximately 7% of its global workforce to be affected, impacting both segments and corporate functions.
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.
We also expended $121.7 million towards the acquisition of Inertial Labs and repurchased 2.0 million shares of our common stock for $16.4 million. 31 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 28, 2025 June 29, 2024 Operating Income Operating Margin Operating Income Operating Margin GAAP measures $ 57.5 5.3 % $ 20.8 2.1 % Stock-based compensation 53.1 4.9 % 49.4 4.9 % Change in fair value of contingent liability (8.3) (0.8) % (9.5) (1.0) % Acquisition and integration related charges 22.3 2.1 % 18.1 1.9 % Other charges unrelated to core operating performance (1) 1.3 0.1 % 2.5 0.2 % Amortization of acquisition related inventory step-up 4.3 0.4 % — — % Amortization of intangibles 24.3 2.2 % 20.1 2.0 % Restructuring and related charges 0.7 0.1 % 13.6 1.4 % Litigation settlement (1.3) (0.1) % — — % Total related to Cost of Revenues and Operating Expenses 96.4 8.9 % 94.2 9.4 % Non-GAAP measures $ 153.9 14.2 % $ 115.0 11.5 % Years Ended June 28, 2025 June 29, 2024 Net Income Diluted EPS Net (Loss) Income Diluted EPS GAAP measures $ 34.8 $ 0.15 $ (25.8) $ (0.12) Items reconciling GAAP Net Income (Loss) and EPS to Non-GAAP Net Income and EPS: Stock-based compensation 53.1 0.24 49.4 0.22 Change in fair value of contingent liability (8.3) (0.03) (9.5) (0.04) Acquisition and integration related charges 22.3 0.10 18.1 0.08 Other charges unrelated to core operating performance (1) 1.3 0.01 2.5 0.01 Amortization of acquisition related inventory step-up 4.3 0.02 — — Amortization of intangibles 24.3 0.11 20.1 0.09 Restructuring and related charges 0.7 — 13.6 0.06 Litigation settlement (1.3) (0.01) (6.3) (0.02) Non-cash interest expense and other expense 4.7 0.02 4.9 0.02 (Benefit from) provision for income taxes (30.5) (0.14) 6.5 0.03 Total related to Net Income and EPS 70.6 0.32 99.3 0.45 Non-GAAP measures $ 105.4 $ 0.47 $ 73.5 $ 0.33 Shares used in per share calculation for Non-GAAP EPS 225.7 224.1 (1) Included in the year ended June 28, 2025 is a gain of $0.9 million on the sale of assets previously classified as held for sale and other charges unrelated to core operating performance of $2.2 million. 32 Table of Contents Use of Non-GAAP (Adjusted) Financial Measures The Company provides non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP EPS financial measures as supplemental information regarding the Company’s operational performance and believes providing this additional information allows investors to see Company results through the eyes of management, and better to evaluate more clearly and consistently the Company’s core operational performance and expenses and evaluate the efficacy of the methodology used by management to measure such performance.
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.
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. Critical Accounting Estimates Our Consolidated Financial Statements have been prepared in accordance with U.S.
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.
These future benefit payments have been estimated based on the same actuarial assumptions used to measure our PBO and currently are forecasted to range between $4.3 million and $5.9 million per annum. We also are responsible for the non-pension post-retirement benefit obligation assumed from a past acquisition with a liability of $0.3 million.
Critical Accounting Estimates Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), which require management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, net revenue and expenses, and the disclosure of contingent assets and liabilities.
GAAP, which requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, net revenue and expenses, and the disclosure of contingent assets and liabilities.
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.
This increase was primarily due to higher variable expenses, higher acquisition and integration related charges and higher stock-based compensation. As a percentage of net revenue, SG&A decreased 1.1 percentage points in fiscal 2025 when compared to 2024. We intend to continue to focus on reducing our SG&A expense as a percentage of net revenue.
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.
Cash provided by operating activities was $89.8 million, consisting of net income of $34.8 million adjusted for non-cash charges (e.g., depreciation, amortization, stock-based compensation and other non-cash items), and changes in deferred tax balances which totaled $85.2 million, offset by changes in operating assets and liabilities that used $30.2 million.
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.
Cash used in financing activities was $23.6 million, primarily resulting from $16.4 million cash paid to repurchase common stock under our share repurchase program, $13.2 million in withholding tax payments on the vesting of restricted stock and performance-based awards, partially offset by $6.0 million in proceeds from the issuance of common stock under our employee stock purchase plan.
Non-GAAP operating margin of 11.5% decreased 410 basis points largely due to the decline in revenue partially offset by lower operating expenses. GAAP diluted EPS of $(0.12) decreased $0.23 from fiscal 2023 primarily due to the decrease in revenue and higher acquisition related charges. Non-GAAP diluted EPS of $0.33 decreased $0.22 from fiscal 2023 due to the decline in revenue.
Non-GAAP operating margin of 14.2% increased 270 basis points primarily due to the increase in revenue, partially offset by higher operating expenses. GAAP diluted EPS of $0.15 increased $0.27 from fiscal 2024 primarily due to the increase in revenue. Non-GAAP diluted EPS of $0.47 increased $0.14 from fiscal 2024 also due to the increase in revenue.
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.
As of June 28, 2025, 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. 43 Table of Contents Share Repurchase Program During fiscal 2025, we repurchased 2.0 million shares of our common stock outstanding for $16.4 million pursuant to our 2022 Share Repurchase Plan.
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.
FINANCIAL HIGHLIGHTS Our fiscal 2025 results included the following notable items: • Net revenue of $1.08 billion, up $83.9 million or 8.4% year-over-year • GAAP operating margin of 5.3%, up 320 bps year-over-year • Non-GAAP operating margin of 14.2%, up 270 bps year-over-year • GAAP diluted EPS of $0.15, up $0.27 or 225.0% year-over-year • Non-GAAP diluted EPS of $0.47, up $0.14 or 42.4% year-over-year In fiscal 2025, VIAVI began to experience stabilization and growth across many of our product segments.
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.
As of June 28, 2025, the U.K. plan is fully funded. During each of fiscal 2025 and fiscal 2024, we contributed £1.0 million or approximately $1.3 million to the U.K. pension plan. These contributions allowed us to comply with regulatory funding requirements.
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.
The term loan funding, as upsized, remains subject to customary closing conditions and the satisfaction or waiver of all closing conditions to the pending acquisition. 42 Table of Contents Cash Flows Year Ended June 28, 2025 As of June 28, 2025, our combined balance of cash and cash equivalents and restricted cash decreased by $49.7 million to $432.1 million from a balance of $481.8 million as of June 29, 2024.
This decrease was primarily driven by lower volume in Fiber and Access, Wireless and Lab and Production partially offset by higher AvComm revenue. NE gross margin decreased by 1.2 percentage points during fiscal 2024 to 62.1% from 63.3% in fiscal 2023. This decrease was primarily due to lower volume and unfavorable product mix.
This increase was primarily driven by higher volume in Lab and Production, Aerospace and Defense ($25.2 million contributed by our acquisition of Inertial Labs), partially offset by lower volume in Wireless. NSE gross margin increased by 0.2 percentage points during fiscal 2025 to 62.8% from 62.6% in fiscal 2024.
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.
Amortization of Other Intangibles (Operating expenses) Amortization of intangibles within Operating expenses for fiscal 2025 decreased $1.5 million, or 23.8%, to $4.8 million from $6.3 million in fiscal 2024.
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.
Operating Segment Information Information related to our operating segments was as follows ( in millions ): 2025 2024 Change Percentage Change 2024 2023 Change Percentage Change NSE Net revenue $ 776.6 $ 702.0 $ 74.6 10.6 % $ 702.0 $ 801.2 $ (99.2) (12.4) % Gross profit 487.9 439.6 48.3 11.0 % 439.6 510.2 (70.6) (13.8) % Gross margin 62.8 % 62.6 % 62.6 % 63.7 % Operating income $ 41.6 $ 8.0 $ 33.6 420.0 % $ 8.0 $ 61.2 $ (53.2) (86.9) % Operating margin 5.4 % 1.1 % 1.1 % 7.6 % OSP Net revenue $ 307.7 $ 298.4 $ 9.3 3.1 % $ 298.4 $ 304.9 $ (6.5) (2.1) % Gross profit 163.5 154.9 8.6 5.6 % 154.9 158.6 (3.7) (2.3) % Gross margin 53.1 % 51.9 % 51.9 % 52.0 % Operating income $ 112.3 $ 107.0 $ 5.3 5.0 % $ 107.0 $ 111.3 $ (4.3) (3.9) % Operating margin 36.5 % 35.9 % 35.9 % 36.5 % Network and Service Enablement NSE net revenue increased $74.6 million, or 10.6% during fiscal 2025 when compared to fiscal 2024.
The Company believes these GAAP measures alone are not fully indicative of its core operating expenses and performance and that providing non-GAAP financial measures in conjunction with GAAP measures provides valuable supplemental information regarding the Company’s overall performance. 35 Table of Contents RESULTS OF OPERATIONS This section of this Annual Report on Form 10-K generally discusses the results of operations for the fiscal years ended June 29, 2024 and July 1, 2023 and year-to-year comparisons between such fiscal years.
The GAAP measure most directly comparable to non-GAAP EPS is earnings per share. 33 Table of Contents RESULTS OF OPERATIONS This section of this Annual Report on Form 10-K generally discusses the results of operations for the fiscal years ended June 28, 2025 and June 29, 2024 and year-to-year comparisons between such fiscal years.
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.
As of June 28, 2025, the Company had remaining authorization of $198.4 million for future share repurchases under the 2022 Repurchase Plan. Refer to “Note 15. Stockholders Equity” under Item 8 of this Annual Report on Form 10-K for more information.
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.
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. These plans have been closed to new participants and no additional service costs are being accrued, except for certain plans in Germany assumed in connection with an acquisition during fiscal 2010.
This increase was primarily driven by the accretion of debt discount and interest expense on the Senior Convertible Notes due 2026 as a result of the issuance in March 2023. Provision for Income Tax We recorded an income tax provision of $37.4 million for fiscal 2024 .
This decrease was primarily driven by lower outstanding debt when compared to fiscal 2024. 39 Table of Contents Provision for Income Tax We recorded an income tax provision of $4.4 million for fiscal 2025 .
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.
To serve our markets, we operate the following business segments: • Network and Service Enablement (NSE); and • Optical Security and Performance Products (OSP). Effective March 30, 2025, the Company realigned its segment reporting structure. As a result, the company’s Network Enablement (NE) and Service Enablement (SE) business activities are now reported as a single operating and reportable segment, NSE.
Removed
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.
Added
Recent acquisitions have reduced the SE segment revenue as a percentage of total VIAVI revenue. In addition, NE and SE are managed under common leadership, share many of the same customers and suppliers and operating expenses associated with the NSE business are not exclusively allocated to either NE or SE.
Removed
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.
Added
During fiscal 2025, NSE revenue growth was mainly driven by strong demand primarily from the data center ecosystem for field, lab and production products for fiber and data center buildouts. We also saw growth in our aerospace and defense products.
Removed
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.
Added
This was partially offset by a decline in spend for wireless and cable products by network equipment manufacturers (NEMs) and service providers. OSP performance slightly improved year-over-year with growth in our Anti-Counterfeiting and Other products as the industry’s inventory levels normalized.
Removed
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+0 added−0 removed10 unchanged
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.
Biggest changeAs of June 28, 2025, the Company’s short-term investments of $1.7 million were primarily related to the deferred compensation plan, of which $1.6 million was invested in equity securities.
Refer to “Note 11. Debt” under Item 8 of this Annual Report on Form 10-K for more information. 47 Table of Contents
Refer to “Note 11. Debt” under Item 8 of this Annual Report on Form 10-K for more information. 45 Table of Contents
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 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 28, 2025 and June 29, 2024.
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 June 28, 2025, 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 $4.9 million and $3.1 million is reflected as Prepayments and other current assets and Other current liabilities on the Consolidated Balance Sheets, respectively.
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.
As of June 28, 2025 and June 29, 2024, the notional amounts of the forward contracts that we held to purchase foreign currencies were $60.4 million and $81.9 million, respectively, and the notional amounts of forward contracts that we held to sell foreign currencies were $24.1 million and $26.8 million, respectively.
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.
Based on quoted market prices, as of June 28, 2025, the fair value of the 2026 Notes was $252.0 million and the fair value of the 2029 Notes was $373.6 million. As of June 28, 2025, the carrying value of the 2026 Notes was $246.2 million and the carrying value of the 2029 Notes was $396.3 million.

Other VIAV 10-K year-over-year comparisons