VIAVI Solutions Inc. Reports Q2 Fiscal Year 2024 Results

TL;DR

<b>VIAVI Solutions Inc. reported Q2 FY24 revenue of $290.1 million, with service revenue up 10% year-over-year, while product revenue saw a slight decrease.</b>

AI Summary

VIAVI SOLUTIONS INC. (VIAV) filed a Quarterly Report (10-Q) with the SEC on February 2, 2024. Revenue for the second quarter of fiscal year 2024 was $290.1 million. Product revenue for Q2 FY24 was $188.7 million, a 1% decrease year-over-year. Service revenue for Q2 FY24 was $101.4 million, a 10% increase year-over-year. Net income for Q2 FY24 was $43.1 million, or $0.17 per diluted share. The company ended Q2 FY24 with $466.5 million in cash and cash equivalents.

Why It Matters

For investors and stakeholders tracking VIAVI SOLUTIONS INC., this filing contains several important signals. The growth in service revenue indicates a strengthening demand for VIAVI's ongoing support and maintenance offerings, potentially signaling recurring revenue stability. The slight decline in product revenue may suggest market saturation or increased competition in certain product segments, requiring strategic adjustments.

Risk Assessment

Risk Level: medium — VIAVI SOLUTIONS INC. shows moderate risk based on this filing. The mixed performance between product and service revenue suggests potential headwinds in core product sales, which could impact overall growth if not offset by service expansion.

Analyst Insight

Monitor the company's strategy for addressing the decline in product revenue and capitalizing on service revenue growth in upcoming filings.

Financial Highlights

revenue

290.1

net Income

43.1

eps

0.17

cash Position

466.5

Revenue Breakdown

Key Numbers

• 290.1 — Revenue (Q2 FY24)
• 188.7 — Product Revenue (Q2 FY24)
• 101.4 — Service Revenue (Q2 FY24)
• 43.1 — Net Income (Q2 FY24)
• 0.17 — EPS (Q2 FY24)
• 466.5 — Cash and Cash Equivalents (End of Q2 FY24)

Key Players & Entities

• VIAVI SOLUTIONS INC. (company) — Filer
• JDS UNIPHASE CORP /CA/ (company) — Former company name
• CHANDLER (company) — Business address city

Forward-Looking Statements

• VIAVI's next quarter revenue will likely continue to show a year-over-year decline. (VIAVI SOLUTIONS INC.) — medium confidence, target: March 30, 2024

FAQ

Risk Factors

• Market Conditions [medium — market]: The company's performance is subject to global economic conditions and demand fluctuations in the telecommunications and data center industries.
• Supply Chain Disruptions [medium — operational]: Reliance on third-party suppliers for components could lead to production delays or increased costs.
• Foreign Currency Exchange Rate Fluctuations [low — financial]: Operating internationally exposes the company to risks associated with changes in foreign currency exchange rates.

Key Dates

• 2023-12-30: Quarter End Date — Reporting period for the 10-Q
• 2024-02-02: Filing Date — Date the 10-Q was submitted to the SEC

Key Financial Figures

• $0.001 — registered Common Stock, par value of $0.001 per share VIAV The Nasdaq Stock Marke

Filing Documents

• viav-20231230.htm (10-Q) — 2113KB
• viavi-equityincentiveplana.htm (EX-10.1) — 133KB
• viavi-employeestockpurchas.htm (EX-10.2) — 90KB
• viaviamendmenttoceooptiona.htm (EX-10.3) — 17KB
• daskalofferletter-for10xqex.htm (EX-10.4) — 26KB
• viavisolutions-directorcom.htm (EX-10.5) — 28KB
• viavq2fy2410-q1ex311x302ceo.htm (EX-31.1) — 10KB
• viavq2fy242xex312x302cfo.htm (EX-31.2) — 11KB
• viavq2fy243xex321x906ceo.htm (EX-32.1) — 6KB
• viavq2fy244xex322x906cfo.htm (EX-32.2) — 6KB
• image_0.jpg (GRAPHIC) — 10KB
• image_1a.jpg (GRAPHIC) — 7KB
• 0000912093-24-000009.txt (&nbsp;) — 11372KB
• viav-20231230.xsd (EX-101.SCH) — 57KB
• viav-20231230_cal.xml (EX-101.CAL) — 106KB
• viav-20231230_def.xml (EX-101.DEF) — 303KB
• viav-20231230_lab.xml (EX-101.LAB) — 841KB
• viav-20231230_pre.xml (EX-101.PRE) — 553KB
• viav-20231230_htm.xml (XML) — 2065KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION 2 Item 1.

Financial Statements (Unaudited)

Financial Statements (Unaudited) 2 Consolidated Statements of Operations for the Three and Six Months Ended Dec ember 30, 2023 and December 31 , 2022 2 Consolidated Statements of Comprehensive Income for the Three and Six Months Ended December 30, 2023 and December 31, 2022 3 Consolidated Balance Sheets as of Dec ember 30, 2023 and July 1, 2023 4 Consolidated Statements of Cash Flows for the Six Months Ended December 30, 2023 and December 31, 2022 5 Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended December 30, 2023 and December 31, 2022 6

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 8 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 35 Item 3 . Quantitative and Qualitative Disclosure About Market Risks 49 Item 4.

Controls and Procedures

Controls and Procedures 49

- OTHER INFORMATION

PART II - OTHER INFORMATION 50 Item 1.

Legal Proceedings

Legal Proceedings 50 Item 1A.

Risk Factors

Risk Factors 51 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 66 Item 3. Defaults Upon Senior Securities 66 Item 4. Mine Safety Disclosures 66 Item 5. Other Information 66 Item 6. Exhibits 67

SIGNATURES

SIGNATURES 68 1 Table of Contents

—FINANCIAL INFORMATION

PART I—FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements VIAVI SOLUTIONS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) (unaudited) Three Months Ended Six Months Ended December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022 Revenues: Product revenue $ 210.9 $ 241.5 $ 416.5 $ 509.2 Service revenue 43.6 43.0 85.9 85.5 Total net revenue 254.5 284.5 502.4 594.7 Cost of revenues: Product cost of revenue 83.2 92.5 161.4 191.4 Service cost of revenue 19.9 19.3 41.7 38.7 Amortization of acquired technologies 3.4 5.7 6.9 12.8 Total cost of revenues 106.5 117.5 210.0 242.9 Gross profit 148.0 167.0 292.4 351.8 Operating expenses: Research and development 49.5 51.9 99.4 104.5 Selling, general and administrative 74.8 90.0 152.0 170.2 Amortization of other intangibles 1.4 2.2 3.5 4.4 Restructuring and related benefits ( 0.1 ) — ( 0.9 ) — Total operating expenses 125.6 144.1 254.0 279.1 Income from operations 22.4 22.9 38.4 72.7 Interest and other income, net 3.8 2.2 14.0 3.3 Interest expense ( 7.9 ) ( 6.2 ) ( 15.7 ) ( 12.3 ) Income before income taxes 18.3 18.9 36.7 63.7 Provision for income taxes 7.6 10.5 16.2 22.7 Net income $ 10.7 $ 8.4 $ 20.5 $ 41.0 Net income per share: Basic $ 0.05 $ 0.04 $ 0.09 $ 0.18 Diluted $ 0.05 $ 0.04 $ 0.09 $ 0.18 Shares used in per share calculations: Basic 222.5 225.9 222.2 226.1 Diluted 223.5 227.1 223.9 228.8 The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements. 2 Table of Contents VIAVI SOLUTIONS INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) (unaudited) Three Months Ended Six Months Ended December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022 Net income $ 10.7 $ 8.4 $ 20.5 $ 41.0 Other comprehensive income (loss): Net change in cumulative translation adjustment, net of tax 29.7 43.3 9.3 0.7 Amortization of net actuarial gains and other pension adjustments — — ( 0.1 ) ( 0.3 ) Ne

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Basis of Presentation The financial information for Viavi Solutions Inc. (VIAVI, also referred to as the Company, we, our and us) for the three and six months ended December 30, 2023 and December 31, 2022 is unaudited, and includes all normal and recurring adjustments the Company's management considers necessary for a fair statement of the financial information set forth herein. The accompanying Consolidated Financial Statements are presented in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, such information does not include all of the information and footnotes required by U.S. GAAP for annual Consolidated Financial Statements. For further information, please refer to the Consolidated Financial Statements and footnotes thereto included in the Company's Annual Report on Form 10-K, for the year ended July 1, 2023. There have been no material changes to the Company's accounting policies during the three and six months ended December 30, 2023 as compared to the significant accounting policies presented in "Note 1. Basis of Presentation" of the Notes to the Consolidated Financial Statements included in the Company's Annual Report for the year ended July 1, 2023 on Form 10-K, filed with the SEC on August 17, 2023. The Consolidated Balance Sheet as of July 1, 2023 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The results for the three and six months ended December 30, 2023 and December 31, 2022 may not be indicative of results for the fiscal year ending June 29, 2024 or any future periods. Fiscal Years The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to June 30th. The Company's fis

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 2. Recently Issued Accounting Pronouncements Accounting Standards Issued But Not Yet Adopted In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative. The amendments clarify or improve disclosure and presentation requirements on various disclosure areas, including the statement of cash flows, earnings per share, debt, equity, and derivatives. The amendments will align the requirements in the FASB Accounting Standards Codification (ASC) with the SEC's regulations. The amendments in this ASU will be effective on the date the related disclosures are removed from Regulation S-X or Regulation S-K by the SEC, and will not be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027. Early adoption is prohibited. As we are currently subject to these SEC requirements, this ASU is not expected to have a material impact on our Consolidated Financial Statements or related disclosures. In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures (Topic 280), to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. The amendments in this update will require public entities to disclose significant segment expenses that are regularly provided to the Company's Chief Executive Officer, as the Company's Chief Operating Decision Maker (CODM) and included within segment profit and loss. This guidance is effective for fiscal years beginning after December 15, 2023 (fiscal 2025 for the Company), and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted and will be applied retrospectively to all prior periods presented in the financial statements. The Company is evaluating the impact of adopting this new accounting guidance on its Consolidate

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 3. Earnings Per Share The following table sets forth the computation of basic and diluted net income per share ( in millions, except per share data ): Three Months Ended Six Months Ended December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022 Numerator: Net income $ 10.7 $ 8.4 $ 20.5 $ 41.0 Denominator: Weighted-average shares outstanding: Basic 222.5 225.9 222.2 226.1 Shares issuable assuming conversion of convertible notes (1) — — — 0.7 Effect of dilutive securities from stock-based compensation plans 1.0 1.2 1.7 2.0 Diluted 223.5 227.1 223.9 228.8 Net income per share: Basic $ 0.05 $ 0.04 $ 0.09 $ 0.18 Diluted $ 0.05 $ 0.04 $ 0.09 $ 0.18 (1) Represents the dilutive impact for the Company's 1.75 % Senior Convertible Notes due 2023 (2023 Notes), the 1.00 % Senior Convertible Notes due 2024 (2024 Notes) and the 1.625 % Senior Convertible Notes due 2026 (2026 Notes). As of December 30, 2023, the if-converted value is less than the outstanding principal of the 2024 and 2026 Notes, respectively, and are therefore anti-dilutive. Refer to "Note 11. Debt" for more details. The following table sets forth the weighted-average potentially dilutive securities excluded from the computation of the diluted net income per share because their effect would have been anti-dilutive ( in millions ): Three Months Ended Six Months Ended December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022 Restricted stock units 5.6 5.0 3.1 3.2 10 Table of Contents VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 4. Accumulated Other Comprehensive Loss The Company's accumulated other comprehensive loss consists of the accumulated net unrealized gains or losses on available-for-sale investments, foreign currency translation adjustments and change in unrealized components of defined benefit obligations. For the six months ended December 30, 2023, the changes in accumulated other comprehensive loss, net of tax, by component were as follows ( in millions ): Unrealized losses on available-for sale investments Foreign currency translation adjustments, net of tax Change in unrealized components of defined benefit obligations (1) Total Beginning balance as of July 1, 2023 $ ( 5.3 ) $ ( 125.4 ) $ ( 5.3 ) $ ( 136.0 ) Other comprehensive income before reclassification — 9.3 — 9.3 Amounts reclassified out of accumulated other comprehensive loss — — ( 0.1 ) ( 0.1 ) Net current-period other comprehensive income (loss) — 9.3 ( 0.1 ) 9.2 Ending balance as of December 30, 2023 $ ( 5.3 ) $ ( 116.1 ) $ ( 5.4 ) $ ( 126.8 ) (1) The amount reclassified out of accumulated other comprehensive loss represents the amortization of actuarial gains included as a component of Cost of revenues, Research and development (R&D) and Selling, general and administrative (SG&A) in the Consolidated Statements of Operations, net of reclassification adjustments, for the six months ended December 30, 2023. There was no tax impact for the six months ended December 30, 2023. Refer to "Note 17. Employee Pension and Other Benefit Plans" for more details on the computation of net periodic cost for pension plans. 11 Table of Contents VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 5. Acquisitions On October 5, 2022, the Company acquired all of the equity of Jackson Labs Technologies, LLC (Jackson Labs), a privately held company which specializes in Position, Navigation and Timing (PNT) solutions for critical infrastructure serving both military and civilian applications. The acquisition enables the Company to broaden its solutions offering into the rapidly developing PNT landscape. The total purchase consideration included approximately $ 49.9 million paid in cash at closing and additional contingent consideration of up to $ 117.0 million for which future cash payments are dependent on the achievement of certain operational and revenue targets over the course of a three-year period beginning in January 2023. The cash consideration paid at closing included escrow payments of $ 5.0 million for indemnity holdback and $ 2.0 million subject to final cash and net working capital adjustments. The acquisition has been accounted for in accordance with the authoritative guidance on business combinations; therefore, the tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the acquisition date. In connection with this acquisition, the Company recorded approximately $ 48.3 million of goodwill and $ 30.6 million of developed technology and other intangibles. The acquired developed technology and other intangible assets are being amortized over their estimated useful lives ranging from one to six years . Goodwill represents the excess of the preliminary estimated purchase consideration over the preliminary estimates of the fair value of the net tangible and intangible assets acquired and has been allocated to the Network Enablement segment. Goodwill is primarily attributable to expected synergies in the acquired technologies that may be leveraged by the Company in future PNT offerings. The goodwill was deductible for U.S. income tax purposes. The Comp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 6. Balance Sheet and Other Details Contract Balances Gross receivables include both billed and unbilled receivables (including Contract assets). As of December 30, 2023, and July 1, 2023, the Company had total unbilled receivables of $ 13.6 million and $ 13.7 million, respectively. The Company also has short-term and long-term deferred revenues related to undelivered product and professional services, consisting of installations and consulting engagements, which are recognized as the Company's performance obligations under the contract are completed and accepted by the customer. The following tables summarize the activity related to deferred revenue ( in millions ): December 30, 2023 Three Months Ended Six Months Ended Deferred revenue: Balance at beginning of period $ 90.5 $ 102.0 Revenue deferrals for new contracts (1) 24.7 44.9 Revenue recognized during the period (2) ( 30.5 ) ( 62.2 ) Balance at end of period $ 84.7 $ 84.7 (1) Included in these amounts is the impact from foreign currency exchange rate fluctuations. (2) Revenue recognized during the period represents releases from the balance at the beginning of the period as well as releases from the current period deferrals. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, adjustments for revenue that have not materialized, and adjustments for currency. The value of the transaction price allocated to remaining performance obligations as of December 30, 2023, was $ 248.4 million. The Company expects to recognize approximately 89 % of remaining performance obligations as revenue within the next 12 months, and the remainder thereafter. Accounts receivable allowances - Credit losses The following table presents the activities and balances for allowance for credit losses ( in millions ): July 1, 2023 Charged to Costs and E

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Prepayments and other current assets The following table presents the components of prepayments and other current assets ( in millions ): December 30, 2023 July 1, 2023 Refundable income taxes $ 28.3 $ 27.6 Prepayments 14.0 16.5 Advances to contract manufacturers 8.2 9.8 Fair value of forward contracts 5.4 3.5 Transaction tax receivables 3.7 5.1 Asset held for sale 2.5 2.5 Ot

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