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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

(Mark One)
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 2022
 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period fromto

Commission File Number 000-22874
Viavi Solutions Inc.
(Exact name of Registrant as specified in its charter)
 
Delaware 94-2579683
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification Number)

1445 South Spectrum Blvd, Suite 102, Chandler, Arizona 85286
(Address of principal executive offices including Zip code)

(408) 404-3600
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of the exchange on which registered
Common Stock, par value of $0.001 per share
VIAV
The Nasdaq Stock Market LLC

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filerAccelerated filerNon-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes No

As of October 29, 2022, the Registrant had 226,358,479 shares of common stock outstanding.


TABLE OF CONTENTSPage

1


PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
VIAVI SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
 Three Months Ended
 October 1, 2022October 2, 2021
Revenues:
Product revenue$267.7 $289.1 
Service revenue42.5 37.7 
Total net revenue310.2 326.8 
Cost of revenues:
Product cost of revenue98.9 106.7 
Service cost of revenue19.4 17.2 
Amortization of acquired technologies7.1 7.9 
Total cost of revenues125.4 131.8 
Gross profit184.8 195.0 
Operating expenses:
Research and development52.6 53.6 
Selling, general and administrative80.2 91.8 
Amortization of other intangibles2.2 2.7 
Total operating expenses135.0 148.1 
Income from operations49.8 46.9 
Loss on convertible note settlement (Note 11) (85.9)
Interest income and other income, net1.1 1.4 
Interest expense(6.1)(3.6)
Income (loss) before income taxes44.8 (41.2)
Provision for income taxes12.2 13.6 
Net income (loss)$32.6 $(54.8)
Net income (loss) per share:
Basic$0.14 $(0.24)
Diluted$0.14 $(0.24)
Shares used in per share calculations:
Basic226.3 231.1 
Diluted230.4 231.1 
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
2

VIAVI SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
(unaudited)
Three Months Ended
October 1, 2022October 2, 2021
Net income (loss)$32.6 $(54.8)
Other comprehensive income (loss):
Net change in cumulative translation adjustment, net of tax(42.6)(9.6)
Unrealized holding gain arising during period 0.1 
Amortization of net actuarial losses and other pension adjustments
(0.3)0.8 
Net change in accumulated other comprehensive loss(42.9)(8.7)
Comprehensive loss$(10.3)$(63.5)

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

3

VIAVI SOLUTIONS INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except share and par value data)
(unaudited)
October 1, 2022July 2, 2022
ASSETS 
Current assets:  
Cash and cash equivalents$512.6 $559.9 
Short-term investments1.3 1.4 
Restricted cash3.2 3.6 
Accounts receivable, net246.3 260.9 
Inventories, net110.6 110.1 
Prepayments and other current assets76.8 69.2 
Total current assets950.8 1,005.1 
Property, plant and equipment, net231.7 228.9 
Goodwill, net387.8 387.6 
Intangibles, net48.7 54.2 
Deferred income taxes83.0 86.3 
Other non-current assets63.1 65.8 
Total assets$1,765.1 $1,827.9 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$62.0 $58.3 
Accrued payroll and related expenses48.6 76.0 
Deferred revenue71.4 81.0 
Accrued expenses26.7 29.3 
Short-term debt (Note11)
68.0 68.4 
Other current liabilities56.5 56.3 
Total current liabilities333.2 369.3 
Long-term debt616.9 616.5 
Other non-current liabilities166.6 170.4 
Stockholders’ equity:
Preferred stock, $0.001 par value; 1 million shares authorized,
no shares issued or outstanding at October 1, 2022 and July 2, 2022
  
Common stock, $0.001 par value; 1 billion shares authorized; 227 million shares at October 1, 2022 and 226 million shares at July 2, 2022, issued and outstanding
0.2 0.2 
Additional paid-in capital70,375.9 70,370.2 
Accumulated deficit(69,528.4)(69,542.3)
Accumulated other comprehensive loss(199.3)(156.4)
Total stockholders’ equity648.4 671.7 
Total liabilities and stockholders’ equity$1,765.1 $1,827.9 
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
4

VIAVI SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Three Months Ended
October 1, 2022October 2, 2021
OPERATING ACTIVITIES:
Net income (loss)$32.6 $(54.8)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation expense8.5 8.9 
Amortization of acquired technologies and other intangibles9.3 10.6 
Stock-based compensation13.0 13.6 
Loss on convertible note settlement 85.9 
Amortization of debt issuance costs0.6 0.5 
Deferred taxes, net2.1 0.2 
Gain on legal settlement(6.7) 
Other0.8 1.3 
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable11.3 10.9 
Inventories(6.6)(10.3)
Other current and non-currents assets4.0 (7.4)
Accounts payable5.4 3.4 
Income taxes payable(10.4) 
Deferred revenue, current and non-current(6.6)(3.8)
Accrued payroll and related expenses(25.7)(9.6)
Accrued expenses and other current and non-current liabilities(5.0)4.0 
Net cash provided by operating activities$26.6 $53.4 
INVESTING ACTIVITIES:
Capital expenditures$(14.8)$(15.7)
Proceeds from the sale of assets0.6 2.1 
Acquisitions, net of cash hold back(15.5)(1.2)
Net cash used in investing activities$(29.7)$(14.8)
FINANCING ACTIVITIES:
Proceeds from issuance of 3.75% senior notes
$ $400.0 
Payment of debt issuance costs (4.9)
Repurchase and retirement of common stock(18.7)(8.8)
Withholding tax payment on vesting of restricted stock and performance based-awards(11.1)(7.2)
Cash paid to note holders in convertible note settlement (196.5)
Cash paid to third parties in convertible note settlement (3.5)
Proceeds from employee stock purchase plan3.7 3.7 
Proceeds from revolving credit facility 150.0 
Repayment of revolving credit facility (150.0)
Payment of acquisition related holdback(0.3) 
Payment of acquired debt(0.4) 
Net cash (used in) provided by financing activities$(26.8)$182.8 
Effect of exchange rates on cash, cash equivalents and restricted cash$(17.9)$(3.1)
Net (decrease) increase in cash, cash equivalents and restricted cash(47.8)218.3 
Cash, cash equivalents and restricted cash at the beginning of the period (1)
572.8 708.4 
Cash, cash equivalents and restricted cash at the end of the period (2)
$525.0 $926.7 
(1)    These amounts include both current and non-current balances of restricted cash totaling $12.9 million and $10.6 million as of July 2, 2022 and July 3, 2021, respectively.
(2)    These amounts include both current and non-current balances of restricted cash totaling $12.4 million and $11.1 million as of October 1, 2022 and October 2, 2021, respectively.
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
5

VIAVI SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions)
(unaudited)
Three Months Ended October 1, 2022
Common Stock
SharesAmountAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal
Balance at July 2, 2022226.4 $0.2 $70,370.2 $(69,542.3)$(156.4)$671.7 
Net income— — — 32.6 — 32.6 
Other comprehensive loss— — — — (42.9)(42.9)
Shares issued under employee stock plans, net of tax1.7 — (7.3)— — (7.3)
Stock-based compensation— — 13.0 — — 13.0 
Repurchase of common stock (1.3)— — (18.7)— (18.7)
Balance at October 1, 2022226.8 $0.2 $70,375.9 $(69,528.4)$(199.3)$648.4 

Three Months Ended October 2, 2021
Common Stock
Shares
Amount
Additional Paid-In Capital
Accumulated Deficit
Accumulated Other Comprehensive Loss
Total
Balance at July 3, 2021228.3 $0.2 $70,183.2 $(69,322.3)$(97.2)$763.9 
Net loss— — — (54.8)— (54.8)
Other comprehensive loss— — — — (8.7)(8.7)
Shares issued under employee stock plans, net of tax1.3 — (5.8)— — (5.8)
Stock-based compensation— — 13.4 — — 13.4 
Repurchase of common stock(0.5)— — (8.5)— (8.5)
Convertible note settlement (Note 11)10.6 — 159.1 — — 159.1 
Balance at October 2, 2021239.7 $0.2 $70,349.9 $(69,385.6)$(105.9)$858.6 
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.


6


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The financial information for Viavi Solutions Inc. (VIAVI also referred to as the Company) for the three months ended October 1, 2022 and October 2, 2021 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 2, 2022.
There have been no material changes to the Company’s accounting policies during the three months ended October 1, 2022 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 2, 2022 on Form 10-K, filed with the SEC on August 19, 2022.
The Consolidated Balance Sheet as of July 2, 2022 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 months ended October 1, 2022 and October 2, 2021 may not be indicative of results for the fiscal year ending July 1, 2023 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 fiscal 2023 is a 52-week year ending on July 1, 2023. The Company’s fiscal 2022 was a 52-week year ending on July 2, 2022.
Principles of Consolidation
The consolidated financial statements include the Company and its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated.
7


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Use of Estimates
The preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements, the reported amount of net revenues and expenses and the disclosure of commitments and contingencies during the reporting periods. The Company bases estimates on historical experience and assumptions about future periods that are believed to be reasonable based on available information. The Company’s reported financial positions or results of operations may be materially different under changed conditions or when using different estimates and assumptions, particularly with respect to significant accounting policies. If estimates or assumptions differ from actual results, subsequent periods are adjusted to reflect readily available current information.
We operate globally and sell our products in countries throughout the world. Recent escalation in regional conflicts, including the Russian invasion of Ukraine, resulting in ongoing economic sanctions, and the risk of increased tensions between China and Taiwan, could curtail or prohibit our ability to transfer certain technologies, to sell our products and solutions, or to continue to operate in certain locations. Moreover, international conflict has resulted in increased pressure on the supply chain and could further result in increased energy costs, which could increase the cost of manufacturing, selling and delivering products and solutions; inflation, which could result in increases in the cost of manufacturing products, reduced customer purchasing power, increased price pressure, and reduced or cancelled orders; increased risk of cybersecurity attacks; and general market instability, all of which could adversely impact our financial results. As a result of the restrictions on exports to Russia, we suspended transactions in the region effective February 2022, which has negatively impacted our business. While sales in this jurisdiction are not material to our total consolidated revenues or net income, we are not aware of any specific event or circumstances that would require an update to the estimates or judgments or a revision of the carrying value of assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. However, these estimates may change, as new events occur and additional information becomes available. Actual results may differ materially from these estimates, assumptions or conditions due to risks and uncertainties, including the ongoing geopolitical instability as well as the potential for additional trade actions or retaliatory cyber-attacks aimed at infrastructure or supply chains, the impact on our future operations and results remains uncertain.

The worldwide spread of the COVID-19 virus and global slowdown of economic activity could continue to impact demand for a broad variety of goods and services, including from the Company’s customers, while also continuing to disrupt sales channels and marketing activities for an unknown period of time. New and potentially more contagious variants of the virus have emerged over the course of the pandemic, along with a surge in cases in several regions across the globe, including Europe and Asia, resulting in renewed shutdown, mandatory quarantines and shelter in place orders in certain regions. These events have led, at times, to slowdowns in shipping and commercial activities. Through continued economic challenges, there continue to be periodic shipping and logistics challenges and continued supply chain constraints, shortages and delays, along with inflationary pricing pressures. While the Company expects that all of this could have a negative impact to its sales and its results of operations, the Company is not aware of any specific event or circumstances that would require an update to the estimates or judgments or a revision of the carrying value of assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change, as new events occur and additional information becomes available. Actual results may differ materially from these estimates, assumptions or conditions.









8


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2. Recently Issued Accounting Pronouncements
Recent Accounting Pronouncements Adopted
In November 2021, the FASB issued ASU 2021-10 Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. ASU 2021-10 requires annual disclosures about transactions with a government entity that are accounted for by applying a grant or contribution accounting model including the disclosure of the types of assistance, an entity's accounting for the assistance, and the effect of the assistance on an entity's financial statements. ASU 2021-10 is effective for annual periods beginning after December 15, 2021. The Company adopted the ASU on July 3, 2022 with no material impact expected to disclosures in the Annual Report on Form 10-K for the year ended July 1, 2023.
Recent Accounting Pronouncements Not Yet Adopted

In March 2022, the FASB issued ASU 2022-01 Derivatives and Hedging (Topic 815), which clarifies guidance on fair value hedge accounting of interest rate risk for portfolios of financial assets. The amendments in this update expand the current last-of-layer method of hedge accounting that permits only one hedged layer to allow multiple hedged layers of a single closed portfolio. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method. This guidance is effective for the Company in the first quarter of fiscal 2024 with early adoption permitted. The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.

In March 2022, the FASB issued ASU 2022-02 Financial Instruments - Credit Losses (Topic 326), which eliminates the accounting guidance on troubled debt restructurings for creditors in ASC 310 and amends the guidance on vintage disclosures to require disclosure of current-period gross write-offs by year of origination. The ASU also updates the requirements related to the accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. This guidance is effective for the Company in the first quarter of fiscal 2024 with early adoption permitted. The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.
In June 2022, the FASB issued ASU 2022-03 Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. This guidance also requires certain disclosures for equity securities subject to contractual sale restrictions. The new guidance is required to be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. This guidance is effective for the Company in the first quarter of fiscal 2025 with early adoption permitted. The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.
In September 2022, the FASB issued ASU 2022-04 Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, which makes a number of changes meant to add certain disclosure requirements for a buyer in a supplier finance program. The amendments require a buyer that uses supplier finance programs to make annual disclosures about the program’s key terms, the balance sheet presentation of related amounts, the confirmed amount outstanding at the end of the period, and associated rollforward information. Only the amount outstanding at the end of the period must be disclosed in interim periods. This guidance is effective for the Company in the first quarter of fiscal 2024 with early adoption permitted. The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.
9


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 3. Earnings Per Share
The following table sets forth the computation of basic and diluted net income (loss) per share (in millions, except per share data):
 Three Months Ended
 October 1, 2022October 2, 2021
Numerator:
Net income (loss)$32.6 $(54.8)
Denominator:
Weighted-average shares outstanding:
Basic 226.3 231.1 
Shares issuable assuming conversion of convertible notes (1)
1.4  
Effect of dilutive securities from stock-based compensation plans2.7  
Diluted230.4 231.1 
Net income (loss) per share:
Basic$0.14 $(0.24)
Diluted$0.14 $(0.24)
(1)    Represents the dilutive impact for the Company’s 1.75% Senior Convertible Notes due 2023 (2023 Notes) and the 1.00% Senior Convertible Notes due 2024 (2024 Notes). As of October 1, 2022, the if-converted value in excess of outstanding principal of the 2023 and 2024 Notes was $1.6 million and $17.7 million, respectively. 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
 October 1, 2022October 2, 2021
(1)
Restricted stock units (2)
1.4 6.1 
Stock options and Employee Stock Purchase Plan 1.5 
Shares issuable from Senior Convertible Notes 8.3 
Total potentially dilutive securities1.4 15.9 
(1)     As the Company incurred a loss from continuing operations in the period, potential securities from employee stock options, Employee Stock Purchase Plan (ESPP), restricted stock units (RSUs), performance stock units (PSUs) and Senior Convertible Notes have been excluded from the dilutive net loss per share computations as their effects were deemed anti-dilutive.
(2)     Represents the number of RSUs that are excluded from the computation of diluted earnings per share as their inclusion would have been anti-dilutive.


10


VIAVI SOLUTIONS INC.
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 three months ended October 1, 2022, the changes in accumulated other comprehensive loss, net of tax, by component were as follows (in millions):
Unrealized losses on available-for sale investmentsForeign 
currency translation adjustments, net of tax
Change in unrealized components of defined benefit obligations (1)
Total
Beginning balance as of July 2, 2022$(5.0)$(144.2)$(7.2)$(156.4)
Other comprehensive loss before reclassification (42.6) (42.6)
Amounts reclassified out of accumulated other comprehensive loss  (0.3)(0.3)
Net current-period other comprehensive loss (42.6)(0.3)(42.9)
Ending balance as of October 1, 2022$(5.0)$(186.8)$(7.5)$(199.3)
(1)     The amount reclassified out of accumulated other comprehensive loss represents the amortization of actuarial losses included as a component of cost of revenues, research and development (R&D) and selling, general and administrative (SG&A) in the Consolidated Statement of Operations, net of reclassification adjustments, for the three months ended October 1, 2022. There was no tax impact for the three months ended October 1, 2022. Refer to “Note 16. Employee Pension and Other Benefit Plans” for more details on the computation of net periodic cost for pension plans.
Note 5. Acquisitions
On July 18, 2022, the Company completed an acquisition accounted for as a business combination consisting of cash paid at closing of $17.5 million and $2.0 million of indemnity holdback. In connection with this acquisition, the Company recorded approximately $11.2 million of goodwill, $5.1 million of developed technology and $1.8 million of deferred tax liability. The acquired developed technology asset is being amortized over its estimated useful life of four years.
On May 13, 2022 and May 20, 2022, the Company completed acquisitions accounted for as business combinations for cash paid at close of $9.5 million, additional earn-outs of up to $3.3 million in cash to be paid based on the occurrence or achievement of certain agreed upon targets and $2.0 million of indemnity holdback. In connection with these acquisitions, the Company recorded $10.0 million of goodwill, $7.3 million of developed technology and other intangibles and $1.6 million of deferred tax liability. The acquired developed technology and other intangible assets are being amortized over their estimated useful lives ranging from one to six years.
On September 17, 2021, the Company acquired all of the equity of one business for approximately $1.6 million. The acquisition was accounted for as an asset purchase. The developed technology will be amortized over its estimated useful life of five years.
On October 30, 2018, the Company acquired all of the equity interest of RPC Photonics, Inc. (RPC) for approximately $33.4 million in cash as part of a business combination. An additional earn-out of up to $53.0 million, subject to achievement of certain gross profit targets over an approximate four year period through December 31, 2022, is currently not expected to be paid. The acquisition of RPC expands the Company’s 3D Sensing offerings.
11


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Acquisition-related Contingent Consideration

The following table provides a reconciliation of changes in the fair value of the Company’s earn-out liabilities associated with the Company’s acquisitions for the three months ended October 1, 2022 and October 2, 2021 (in millions):

Three Months Ended
October 1, 2022October 2, 2021
Beginning period balance$2.5 $4.0 
Fair value adjustment of earn-out liabilities0.5 0.3 
Currency translation adjustment(0.1) 
Ending period balance$2.9 $4.3 
Note 6. Balance Sheet and Other Details
Contract Balances
Gross receivables include both billed and unbilled receivables (including Contract assets). As of October 1, 2022, and July 2, 2022, the Company had total unbilled receivables of $8.3 million and $7.3 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):
October 1, 2022
Three Months Ended
Deferred revenue:
Balance at beginning of period$100.4 
Revenue deferrals for new contracts (1)
26.6 
Revenue recognized during the period (2)
(35.5)
Balance at end of period (3)
$91.5 
(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.
(3)    The long-term portion of deferred revenue is included as a component of other non-current liabilities on the Consolidated Balance Sheets and included below.
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 October 1, 2022, was $246.0 million. The Company expects to recognize approximately 91% of remaining performance obligations as revenue within the next 12 months, and the remainder thereafter.
12


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Accounts receivable allowance - Credit losses
The following table presents the activities and balances for allowance for credit losses (in millions):
July 2, 2022Charged to Costs and Expenses
Deductions (1)
October 1, 2022
Allowance for credit losses$1.4 $0.3 $(0.2)$1.5 
(1)     Represents the effect of currency translation adjustments and write-offs of uncollectible accounts, net of recoveries.
Inventories, net
The following table presents the components of inventories, net (in millions):
October 1, 2022July 2, 2022
Finished goods$40.5 $41.6 
Work in process18.3 17.7 
Raw materials51.8 50.8 
Inventories, net$110.6 $110.1 
Prepayments and other current assets
The following table presents the components of prepayments and other current assets (in millions):
October 1, 2022July 2, 2022
Refundable income taxes$25.1 $14.5 
Prepayments13.8 16.0 
Advances to contract manufacturers12.7 11.8 
Transaction tax receivables8.3 10.4 
Asset held for sale2.5 2.5 
Other current assets14.4 14.0 
Prepayments and other current assets$76.8 $69.2 
Other current liabilities
The following table presents the components of other current liabilities (in millions):
October 1, 2022July 2, 2022
Fair value of forward contracts$11.2 $8.4 
Income tax payable10.2 9.6 
Operating lease liabilities (Note 12)9.8 10.1 
Interest payable8.3 4.6 
Transaction tax payable4.6 11.5 
Warranty accrual4.0 4.4 
Fair value of contingent consideration2.5 1.8 
Other5.9 5.9 
Other current liabilities$56.5 $56.3 
13


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other non-current liabilities
The following table presents components of other non-current liabilities (in millions):
October 1, 2022July 2, 2022
Pension and post-employment benefits$50.2 $59.6 
Operating lease liabilities (Note 12)30.5 33.5 
Long-term deferred revenue20.1 19.4 
Financing obligation15.9 16.0 
Deferred tax liability15.3 9.5 
Uncertain tax position13.3 12.9 
Warranty accrual5.5 6.2 
Other15.8 13.3 
Other non-current liabilities$166.6 $170.4 
Note 7. Investments and Forward Contracts
Short-Term Investments
As of October 1, 2022 the Company’s short-term investments of $1.3 million were comprised primarily of trading securities related to the deferred compensation plan, of which $0.9 million was invested in equity securities, $0.3 million was invested in debt securities and $0.1 million was invested in money market instruments.
As of July 2, 2022, the Company’s short-term investments of $1.4 million were comprised primarily of trading securities related to the deferred compensation plan, of which $1.0 million was invested in equity securities, $0.3 million was invested in debt securities and $0.1 million was invested in money market instruments.
Trading securities are reported at fair value, with the unrealized gains or losses resulting from changes in fair value recognized in the Company’s Consolidated Statements of Operations as a component of Interest income and other income, net.
Non-Designated Foreign Currency Forward Contracts
The Company has foreign subsidiaries that operate and sell the Company’s products in various markets around the world. As a result, the Company is exposed to foreign exchange risks. The Company utilizes foreign exchange forward contracts to manage foreign currency risk associated with foreign currency denominated monetary assets and liabilities, primarily certain short-term intercompany receivables and payables, and to reduce the volatility of earnings and cash flows related to foreign-currency transactions. The Company does not use these foreign currency forward contracts for trading purposes.
As of October 1, 2022, the Company had forward contracts that were effectively closed but not settled with the counterparties as of the balance sheet date. Therefore, the fair value of these contracts of $4.5 million and $11.2 million is reflected as prepayments and other current assets and other current liabilities, respectively. As of July 2, 2022, the fair value of these contracts of $3.8 million and $8.3 million is reflected as prepayments and other current assets and other current liabilities, respectively.
The forward contracts outstanding and not effectively closed, with a term of less than 120 days, were transacted near quarter end; therefore, the fair value of the contracts is not significant. As of October 1, 2022 and July 2, 2022, the notional amounts of the forward contracts the Company held to purchase foreign currencies were $90.6 million and $119.1 million, respectively, and the notional amounts of forward contracts the Company held to sell foreign currencies were $19.2 million and $80.5 million, respectively.
14


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The change in the fair value of these foreign currency forward contracts is recorded as gain or loss in the Company’s Consolidated Statements of Operations as a component of Interest income and other income, net. The cash flows related to the settlement of foreign currency forward contracts are classified as operating activities. The foreign exchange forward contracts incurred losses of $6.7 million and $1.8 million for the three months ended October 1, 2022 and October 2, 2021, respectively.
Note 8. Fair Value Measurements
Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. There is an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the most observable inputs be used when available. Observable inputs are inputs which market participants would use in valuing an asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs which reflect the assumptions market participants would use in valuing an asset or liability.
The three levels of inputs that may be used to measure fair value are as follows:
Level 1: includes financial instruments for which quoted market prices for identical instruments are available in active markets. Level 1 assets of the Company include money market funds, U.S. Treasury securities and marketable equity securities as they are traded with sufficient volume and frequency of transactions.
Level 2: includes financial instruments for which the valuations are based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. Level 2 instruments of the Company generally include certain U.S. and foreign government and agency securities, commercial paper, corporate and municipal bonds and notes, asset-backed securities, certificates of deposit, foreign currency forward contracts and debt. To estimate their fair value, the Company utilizes pricing models based on market data. The significant inputs for the valuation model usually include benchmark yields, reported trades, broker and dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data, and industry and economic events.
Level 3: includes financial instruments for which fair value is derived from valuation-based inputs, that are unobservable and significant to the overall fair value measurement. As of October 1, 2022 and July 2, 2022, the Company did not hold any Level 3 investment securities. The Company’s Level 3 liabilities as of October 1, 2022 and July 2, 2022 consist of contingent purchase consideration. The Company has aggregate contingent liabilities related to its business acquisitions. The fair value of certain earn-out liabilities is determined using a Monte Carlo Simulation that includes significant unobservable inputs such as the risk-adjusted discount rate, gross profit volatility, and projected financial forecast of acquired business over the earn-out period. The fair value of certain earn-out liabilities is derived using the estimated probability of success of achieving the earn-out milestones discounted to present value. The fair value of contingent consideration liabilities is remeasured at each reporting period at the estimated fair value based on the inputs on the date of remeasurement, with the change in fair value recognized in the Selling, general and administrative expense of the Consolidated Statements of Operations.
15


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fair Value Measurements
The Company’s assets and liabilities measured at fair value for the periods presented are as follows (in millions):
October 1, 2022July 2, 2022
TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Assets:      
Debt available-for-sale securities:   40   
Asset-backed securities (1)
$0.6 $ $0.6 $ $0.6 $ $0.6 $ 
Total debt available-for-sale securities0.6  0.6  0.6  0.6  
Money market funds (2)
287.6 287.6   313.2 313.2   
Trading securities (3)
1.3 1.3   1.4 1.4   
Foreign currency forward contracts (4)
4.5  4.5  3.8  3.8  
Total assets $294.0 $288.9 $5.1 $ $319.0 $314.6 $4.4 $ 
Liability:
Foreign currency forward contracts (5)
$11.2 $ $11.2 $ $8.4 $ $8.4 $ 
Contingent consideration (6)
2.9   2.9 2.5   2.5 
Total liabilities$14.1 $ $11.2 $2.9 $10.9 $ $8.4 $2.5 
(1)Included in other non-current assets on the Company’s Consolidated Balance Sheets.
(2)Includes, as of October 1, 2022, $276.0 million in cash and cash equivalents, $3.1 million in restricted cash, and $8.5 million in other non-current assets on the Company’s Consolidated Balance Sheets. Includes, as of July 2, 2022, $301.5 million in cash and cash equivalents, $3.1 million in restricted cash, and $8.6 million in other non-current assets on the Company’s Consolidated Balance Sheets.
(3)Included in short-term investments on the Company’s Consolidated Balance Sheets.
(4)Included in other current assets on the Company’s Consolidated Balance Sheets.
(5)Included in other current liabilities on the Company’s Consolidated Balance Sheets.
(6)Includes certain amounts in other current liabilities and other non-current liabilities on the Company’s Consolidated Balance Sheets.

Other Fair Value Measures
Fair Value of Debt: If measured at fair value in the Consolidated Balance Sheets, the Company’s 3.75% Senior Notes (2029 Notes), 1.00% Senior Convertible Notes (2024 Notes) and 1.75% Senior Convertible Notes (2023 Notes) would be classified in Level 2 of the fair value hierarchy as they are not actively traded in the markets. The Company’s debt measured at fair value for the periods presented are as follows:
October 1, 2022July 2, 2022
TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Debt:
3.75% Senior Notes
$320.0 $ $320.0 $ $337.5 $ $337.5 $ 
1.00% Senior Convertible Notes