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

(Mark One)
x☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year endedJuly 1, 20172023
OR
o☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period fromto


Commission File Number 0-22874000-22874
Viavi Solutions Inc.
(Exact name of Registrant as specified in its charter)
Delaware94-2579683
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification Number)


430 North McCarthy Boulevard, Milpitas, California 950351445 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 Symbol(s)Name of each exchange on which registered
Common Stock, par value of $0.001 per shareVIAVThe NASDAQNasdaq Stock Market LLC


Securities registered pursuant to Section 12(g) of the Act:
None


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒  No ☐    
Yes x    No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o☐  No x☒


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 x☒  No o☐


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x☒  No o☐


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x


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 definition 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 filerx☒Accelerated filero☐
Non-accelerated filer
(Do not check if a smaller reporting company)
o☐Smaller reporting companyo☐
Emerging growth company

o☐
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.
o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with a new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b).☐

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


As of December  31, 2016 2022, the last business day of the registrant’s most recently completed second fiscal quarter,the aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant was approximately $1.9$2.3 billion, based upon the closing sale prices of the common stock as reported on the NASDAQNasdaq Stock Market LLC. Shares of common stock held by executive officers and directors have been excluded from this calculation because such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.


As of July 28, 201729, 2023, the Registrant had 227,547,102221,495,490 shares of common stock outstanding.


Documents Incorporated by Reference:DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Notice of Annual Meeting of Stockholders and Proxy Statement to be filed pursuant to Regulation 14A within 120 days after Registrant’s fiscal year end of July 1, 20172023 are incorporated by reference into Part III of this Report.






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FORWARD-LOOKING STATEMENTS
Statements contained in this Annual Report on Form 10-K for the year ended July 1, 2023 (Annual Report on Form 10-K), which we also refer to as the Report, which are not historical facts, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. A forward-looking statement may contain words such as “anticipates,“anticipate,” “believes,“believe,” “can,” “can impact,” “could,” “continue,” “estimates,“estimate,” “expects,“expect,” “intends,“intend,” “may,” “ongoing,” “plans,“plan,” “potential,” “projects,” “should,” “will,” “will continue to be,” “would,” or the negative thereof or other comparable terminology regarding beliefs, plans, expectations or intentions regarding the future. Forward-looking statements include statements, but are not limited to statements such as:
Our expectations regarding demand for our products, including industry trends and technological advancements that may drive such demand, the role we will play in those advancements and our ability to benefit from such advancements;
Our plans for growth and innovation opportunities;
•Financial projections and expectations, including profitability of certain business units, plans to reduce costs and improve efficiencies including through restructuring programs, the effects of seasonality on certain business units, continued reliance on key customers for a significant portion of our revenue, future sources of revenue, competition and pricing pressures, the future impact of certain accounting pronouncements, and our estimation of the potential impact and materiality of litigation;
•Our expectations regarding demand for our products and services, including industry trends and technological advancements that may drive such demand, the role we will play in those advancements and our ability to benefit from such advancements;
•Our plans for growth and innovation opportunities;
•Our plans for continued development, use and protection of our intellectual property;
•Our strategies for achieving our current business objectives, including related risks and uncertainties;
•Our plans or expectations relating to investments, execution of capital allocation and debt management strategies, acquisitions, partnerships and other strategic opportunities;
Our strategies for reducing our dependence on sole suppliers or otherwise mitigating the risk of supply chain interruptions;
•Our research and development plans and investments and the expected impact of such plans on our financial performance; and
•Our expectations related to our products, including costs associated with the development of new products, product yields, quality and other issues.issues; and
•Our expectations related to macro-economic conditions, including the impact of inflation, fiscal tightening at central banks, changes in foreign exchange rates, the risk of increased tensions between China and the U.S., and the ongoing military conflict between Russia and Ukraine, on our business, operations and financial results.
Management cautions that forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from those projected in such forward-looking statements. These forward-looking statements are only predictions and are subject to risks and uncertainties including those set forth in Part I, Item 1A “Risk Factors” and elsewhere in this Annual Report on Form 10-K and in other documents we file with the U.S. Securities and Exchange Commission. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. Forward-looking statements are made only as of the date of this Report and subsequent facts or circumstances may contradict, obviate, undermine or otherwise fail to support or substantiate such statements. We are under no duty to update any of the forward-looking statements after the date of this Form 10-K to conform such statements to actual results or to changes in our expectations.

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PART I
ITEM 1.    BUSINESS
GENERAL
Overview
Viavi Solutions Inc. (“Viavi,”(VIAVI, also referred to as “thethe Company,” “we,” “our,” we, our, and “us”), formerly JDS Uniphase Corporation (“JDSU”),us) is a global provider of network test, monitoring, and assurance solutions tofor communications service providers enterprises(CSPs), hyperscalers, network equipment manufacturers (NEMs), original equipment manufacturers (OEMs), government and their ecosystems, supported by a worldwide channel community including Viavi Velocity Solution Partners. Our Velocity program (“Velocity”) allows us to optimizeavionics. We help customers harness the usepower of direct or partner sales depending on applicationinstruments, automation, intelligence and sales volume. Velocity expands our reach into new market segments as well as expands our capability to sell and deliver solutions. Our solutions deliver end-to-end visibility across physical, virtual and hybrid networks, enabling customers to optimize connectivity, quality of experience and profitability. Viavivirtualization. VIAVI is also a leader in high performance thin film optical coatings, providing light management solutions totechnologies for 3D sensing, for the anti-counterfeiting, consumer andelectronics, industrial, automotive, government and healthcare and other markets. On August 1, 2015,aerospace applications.
To serve our markets, we completedoperate the separation (“Separation”) of our optical components and lasersfollowing business and created two publicly-traded companies:segments:
an optical components and commercial lasers company, Lumentum Holdings Inc. (“Lumentum”), consisting of our former Communications and Commercial Optical Products (“CCOP”) segment and the WaveReady product line within our •Network Enablement (“NE”) segment; and(NE);
a network and service enablement and optical coatings company, renamed Viavi, consisting of our NE, •Service Enablement (“SE”)(SE); and
•Optical Security and Performance Products (“OSP”) segments.
In connection with the Separation we distributed approximately 80.1% of the outstanding shares of Lumentum common stock to our stockholders on August 1, 2015. The Company was renamed Viavi and, at the time of the distribution, retained ownership of approximately 19.9% of Lumentum’s outstanding shares. Activities related to the Lumentum business have been presented as discontinued operations in all periods of the Company’s consolidated financial statements in this Annual Report on Form 10-K and the accompanying disclosures, discussion and analysis herein pertains to the Company’s continuing operations, unless noted otherwise.
To serve our markets, during fiscal 2017 we operated the following business segments:
Network Enablement
Service Enablement
Optical Security and Performance Products
Industry Trends
NE and SE
The telecommunication (“Telecom”) and cable industries are facing substantial business and technology disruptions that are transforming the users’ experience in accessing voice, data, social media and video content. Multiple network technologies are being deployed to meet the needs of increased network capacity and faster transmission speeds across both the physical and the virtual networks and across the airwaves. All forms of the network are being upgraded to faster speeds to achieve multi-gigabit per second (“Gbps”) broadband speeds and faster response time. 100G optical fiber is being deployed in the Metro networks. Optical is being delivered to fiber-to-the-home (“FTTH”) and permeating to everywhere. Cable service providers are investing in high speed connections and increased bandwidth availability with the deployment of DOCSIS 3.1. Telecom operators are upgrading legacy copper digital subscriber line (“DSL”) networks to G.fast technology. Over the airwaves, 4G/Long Term Evolution (“LTE”) wireless technology is expected to expand coverage with advanced LTE and 5G in the next couple years and provide 100x faster speeds than current LTE networks.
With the growing number of connected smart mobile devices, the exponential growth in Internet of Things (“IOT”) devices, and demand for high-speed broadband access to support video and other high-bandwidth applications, capacity and intelligence are increasing at the edge of the network pushing the expansion of the overall network and larger links along with new networks requiring re-architecture for scalability and flexibility. This increased demand for capacity will require networks to be more agile, flexible, programmable and more cost effective. It also will drive the network transition from a hardware-centric approach to a hybrid of physical and virtualized software-centric approach through software defined networking (“SDN”) and network function virtualization (“NFV”)(OSP). Long term, network providers are pursuing automation to provide enhanced offerings including machine to machine communications, connected cars, mobile payment and security.

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The convergence of network technologies requires sizable investments from communication service providers (“CSPs”), which consist of telecommunications, cable and cloud service providers. In order to achieve scale and a profitable return on investment, the telecom and cable industries in recent years are experiencing increased consolidation. New entrants have emerged with the rise of cloud service providers, who are increasing their capital expenditures and investing in advanced networks as enterprises are off-loading private corporate networks to the cloud. Traditional service provider capital spending in physical networks has been declining, which impacts the served available market opportunity for our NSE segment. However, the emergence of cloud service providers and virtualized networks create new opportunities for NSE. We believe our NE and SE products and solutions are well positioned to meet these rapidly changing industry trends, given our technology, installed base and product offerings.
OSP
Counterfeiting of banknotes and other goods is on the rise because counterfeiters now have access to a broad range of advanced but relatively low-cost imaging technologies and printing tools giving them the ability to create convincing simulations of actual documents and products for illicit purposes. At the same time, the penalties for counterfeiting can often be relatively modest when compared to the penalties for other crimes. We have decades of anti-counterfeiting expertise leveraging our Optically Variable Pigment (“OVP®”), and more recently our Optically Variable Magnetic Pigment (“OVMP®”) technologies to protect the integrity of banknotes and other high-value documents by delivering optical effects that are very easy for consumers to recognize but also very difficult for counterfeiters to reproduce. We also provide optical technologies for government, healthcare, consumer electronics and industrial markets.
In addition to anti-counterfeiting solutions, we extend our technology expertise to solve complex problems and deliver unique solutions in other industries. For example, we manufacture and sell optical filters for 3D sensing products that separate out ambient light from incoming data to allow devices to be controlled by a person’s movements or gestures.
Sales and Marketing
CSPs make up the majority of NE and SE revenues. We also market and sell our products to network-equipment manufacturers ("NEMs"), original equipment manufacturers (“OEMs”), enterprises, governmental organizations, distributors and strategic partners worldwide. We have a dedicated sales force organized around the markets our segments 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 Viavi’s Velocity Solution Partners who support our NE and SE segments.
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. Service and support are provided through our offices and those of our partners worldwide.
Corporate Information
We were incorporated in California in 1979 as Uniphase Corporation and reincorporated in Delaware in 1993. We are the product of several significant mergers and acquisitions including, among others, the combination of Uniphase Corporation and JDS FITEL in 1999. In 2000 we acquired Optical Coatings Lab, Inc., which is currently part of our OSP business, and in 2005 we acquired Acterna, Inc. which is currently part of our Network and Service Enablement (“NSE”) business, which consists of our NE and SE segments. Following these acquisitions, we operated as a company comprised of a portfolio of businesses with a focus on optical innovation, communications network and service enablement, commercial lasers and anti-counterfeiting solutions. In August 2015, we separated our portfolio of businesses into two separate publicly-traded companies to gain greater strategic flexibility to address rapidly changing market dynamics. At the same time, we changed our name to Viavi Solutions Inc. Our headquarters are located at 430 North McCarthy Boulevard, Milpitas, CA 95035, and our telephone number is (408) 404-3600. Our website address is www.viavisolutions.com.
We are subject to the requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, pursuant to which we file annual, quarterly and periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements, and other information are available for inspection and copying at the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549 or may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. We also make available free of charge all of our SEC filings on our website at www.viavisolutions.com/investors as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. The information contained on our website is not incorporated by reference into this Annual Report on Form 10-K, and you should not consider any information contained on, or that can be accessed through, our website as part of this Annual Report on Form 10-K or in deciding whether to

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purchase our common stock. We have included our website address only as an inactive textual reference and do not intend it to be an active link to our website.
Corporate Strategy
Our objective is to continue to be a leading provider for allin the markets and industries we serve. 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 shareshare;
•Market leadership in anti-counterfeiting pigments, 3D sensing optical filters and other light management technologies;
Acceleration•Market leadership in OSP growth through diversification in high value applications5G wireless, public safety radio and navigation/communication transponder test instruments as well as passive optical components for 3D sensing and other optical sensors;
•Increase the benefit from the use of our net operating loss carryforwards (“NOL”)(NOL) by improving our profitability organically and inorganicallyinorganically; and
•Greater flexibility in capital structure enabling greater capital return to shareholders

in support of our strategic plans.
Our long termnear-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.
Our long-term capital allocation strategy, which supports our corporate strategy, is as follows:

•Maintenance and run-rate investments to support operational and capital spendingoperations;
•Organic investments in initiatives to support revenue growth and productivityproductivity;
•Return capital to shareholders through share buybacks and execute on capital allocation and debt management strategy; and
•Mergers and acquisitionacquisitions that are synergistic to company strategy and business segmentssegments.
Although we expectare working to successfully implement our strategy, internal and/or external factors could impact our ability to meet any, or all, of our objectives. These factors are discussed under Item 1A - Risk Factors.“Risk Factors” of this Annual Report on Form 10-K.
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Business Segments
Following the Separation of the Lumentum business on August 1, 2015, we operatedWe operate in two broad business categories: NSENetwork and OSP.Service Enablement (NSE) and Optical Security and Performance Products (OSP). NSE operates in two reportable segments, NE and SE, whereas OSP operates as a single segment. Our NSE and OSP businesses are each are organized with itstheir own engineering, manufacturing and dedicated sales and marketing groups focused on each of the markets we serve to better support our customers and respond quickly to market needs. 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.
The table below discloses the percentage of our total net revenue attributable to each of our three reportable segments.
 Years Ended
 July 1, 2017 July 2, 2016 June 27, 2015
Network Enablement54.7% 55.7% 58.0%
Service Enablement16.7
 16.9
 19.9
Optical Security and Performance Products28.6
 27.4
 22.1
Network Enablement
Our NE segment provides an integrated portfolio of testing solutions that access the network to perform build-out and maintenance tasks. These solutions include instruments, software and services to design, build, turn-up, certify, troubleshoot, and optimize networks. TheyThese 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. Our test instrument portfolio is one of the largest in the industry, with hundreds of thousands of units in active use by major NEMs,network equipment manufacturers (NEMs), operators and servicesservice providers worldwide. Designed
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 be mobile, thesecreate measurement, automation and embedded systems. 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.  AvComm solutions encompass a full spectrum of instrumentation, which include turnkey systems, stand-alone instruments and softwaremodular components that access the network to perform installationprovide customers with highly reliable, customized, innovative and maintenance tasks that help service provider technicians assess the performance of network elementscost-effective testing tools and segmentsresilient Positioning, Navigation and verify the integrity of the information being transmitted across the network. These instruments are highly intelligentTiming (PNT) solutions for critical infrastructure serving military and have user interfaces that are designed to simplify operations and minimize the training required to operate them. Our NE solutions are also used by NEMs in the design and production of next-generation network equipment.civilian applications.
Viavi also offers 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 offerMarkets

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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.
Markets
Viavi’s 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. 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.
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, original equipment manufacturers (OEMs), state and federal agencies, utilities, law enforcement, military contractors and the armed forces and deployed private enterprise customers. Our customers include Alcatel-Lucent International, América Móvil, S.A.B. de C.V., AT&T Inc., Lumen Technologies, Inc. (formerly CenturyLink, Inc.), Cisco Systems, Inc., ComcastNokia Corporation, Nokia Solutions and Networks, Reliance Industries, Time Warner Inc.British Telecom Openreach, Deutsche Telekom AG and Verizon Communications Inc.
No single customer accounted for more than 10% of Viavi net revenue from continuing operations during fiscal 2017, 2016 or 2015.
Trends
Several network technology trends are taking place to support the growing bandwidth demand and are impacting the way NEMs and CSPs design, build and deploy new network systems. These trends are driving shifts in capital spending with the deployment of 100G Metro optical fiber, cable upgrade to DOCSIS 3.1, DSL copper line upgrade to G.fast as well as increased wireless deployment of 4G/LTE and emergence of advanced LTE and 5G. As service providers face pricing pressure on their average revenue per user (“ARPU”) metrics, they are turningFor further information related to our NE products solutionscustomers, refer to reduce customer service call truck rolls through faster installation“Management’s Discussion and repair completionAnalysis of Financial Condition and improve user satisfaction.
Strategy
We plan to maintain market leadership in NE reinforced by:
Scaling NE through share gain, consolidation, and expansion into adjacent markets
Scale down, highly focused investment in SE that is synergistic with and leverages our NE position
“Go deep” corporate development model to drive operating leverageResults of Operations” under Item 7 of this Annual Report on Form 10-K.
Competition
Our NE segment competes against various companies, includingcompetitors include Anritsu Corporation, EXFO Inc., Keysight Technologies Inc., Rohde & Schwarz, VeEX Inc., and Spirent Communications plc. While we face multiple competitors for each of our product families, we continue to have one of the broadest portfolios of wireline and wireless products available in the network enablement industry.
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Offerings
Viavi’sOur NE solutions include instruments and software that support the development and production of network systems in the lab. 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. They help service provider technicians assess the performance of network elements and segments and verify the integrity of the information being transmitted across the network. These instruments are highly intelligent and have user interfaces that are designed to simplify operations and minimize the training required to operate them. 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.
The CompanyWe also offersoffer 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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During the first quarter of fiscal 2017, we re-grouped ourOur NE products and associated services from three product groupings to twoare, as described below:follows:
Field Instruments: Primarily consisting of (a) Accessaccess and Cablecable products; (b) Fiber Instrumentavionics products; (c) Metrofiber instrument products; (d) metro products; (e) RF test products; and (d) RF Test(f) radio test products.
Lab Instruments: Primarily consisting of (a) Capacity Advisorfiber optic production lab tests; (b) optical transport products; (b) Fiber Optic Production Lab Test; (c) Optical Transportcomputing and storage network test products; and (d) Storage Network Testwireless products.
Additionally, following the Separation we no longer sell products or services from the WaveReady product line.
For the purposes of providing year-over-year variance analysis in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of this Annual Report on Form 10-K, we have reflected these changes for all prior periods presented so that they are comparable with our current groupings.
Service Enablement
SE provides embedded systems and enterprise performance management solutions that give global CSPs, enterprises and cloud operators visibility into network, service and application data. These solutions - which primarily consist of instruments, microprobes and software - monitor, collect and analyze network data to reveal the actual customer experience and identify opportunities for new revenue streams and network optimization.
Our portfolio of SE solutions addresses the same lab and production environments, field deployment and service assurance for wireless and fixed communications networks, including storage networks, as our NE portfolio. Our solutions let carriers remotely monitor the performance and quality of network, service and applications performance throughout the entire network. This provides our customers with enhanced network management, control, and optimization that allow network operators to initiate service to new customers faster, decrease the need for technicians to make on-site service calls, help to make necessary repairs faster and, as a result, lower costs while providing higher quality and more reliable services. Remote monitoring decreases operating expenses, while early detection helps increase uptime, preserve revenue, and helps operators better monetize their networks.
Our network performance management products help enterprise IT and security teams monitor and optimize connectivity for their employees across on-premise and cloud domains and conduct preventative and forensic analysis to address rising security challenges. This functionality has become more critical as organizations continue to operate under remote working procedures, increasing network challenges and security risks.
Markets
Our SE segment provides solutions and services primarily for communication service providersCSPs and enterprises 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. These solutions provide network and application visibility to enable more cost-effective ways to provide a higher-quality customer experience.
Customers
SE customers include similar CSPs, NEMs, government organizations, large corporate customers and storage-segment customers that are served by our NE segment.
Trends
Our Service Enablement solutions portfolio grew as a result of several acquisitions made during the past several years to address the network industry shift to a more agile, flexible, programmable, and cost-effective virtualized software-centric network. Our Data Center (formerly called Enterprise) product and solutions offerings address customers’ needs to support data center network traffic through application and performance monitoring.
While the network industry is shifting towards SDN and NFV, in fiscal 2016 we experienced a decline in SE net revenue compared to fiscal 2015 and certain growth products will require a longer investment cycle than originally expected. In accordance with the authoritative guidance, the Company recorded a goodwill impairment charge of $91.4 millionFor further information related to our SE segment in fiscal 2016. Refercustomers, refer to “Note 8. Goodwill” included in“Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 87 of this Annual Report on Form 10-K.
Strategy
5
Consistent with the communication on our last Analyst Day on September 15, 2016, we have taken steps to follow the “Big NE, Focused SE” strategy to emphasize Virtualized Instruments and Assurance and invest in areas of tight integration and synergies with NE to align with industry macro trends and focus the SE portfolio on products and solutions we believe will provide meaningful return on investment (“ROI”) and drive profitability.


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Competition
Competition
Our NE and SE segments compete against many of the same companies. Competitors of SEsegment competitors include NetScout Systems, Inc., Riverbed Technology, Inc. and Spirent Communications plc. While we face multiple competitors for each of our product families, we continue to have one of the broadest portfolios of wireline and wireless monitoring solutions available in the service enablement industry.
Offerings
Viavi’sOur SE solutions are embedded network systems-includingsystems, including instruments, microprobes and software-thatsoftware that collect and analyze network data to reveal the actual customer experience and identify opportunities for new revenue streams.streams and network optimization. These solutions provide our customers enhanced network management, control, optimization and differentiation and a complete service assurance platform for our customers. Using thesemobile communications, providing operators with network performance, inventory, configuration and fault management solutions ourthrough artificial intelligence driven key performance indicator analysis. Our customers are able to access and analyze the growing amount of network data from a single console, simplifying the process of deploying, provisioning and managing network equipment and services. These capabilities allow network operators to initiate service to new customers faster, decrease the need for technicians to make on-site service calls, and help to make necessary repairs faster, and, as a result, lowerwhich lowers costs while providing higher quality and more reliable services.
During the first quarter of fiscal 2017, we re-grouped ourOur SE products and associated services from three product groupings to twoare, as described below:follows:
Data Center: Consisting of our Network Instrument products.
Assurance: Primarily consisting of our (a) Mature Products (Legacy network performance monitoring and diagnostic tools (Apex, GigaStor, Observer).
Assurance Legacy Wireline, Protocol Test, Video Assurance: Primarily consisting of our growth products (location intelligence and NITRO mobile products) and mature products.
Industry Trends for NSE
The telecommunications industry is experiencing a major evolution in technology as wireless communications expand and evolve from 4G to 5G technology. 5G’s increased bandwidth capacity and speed, as well as lower latency will expand applications beyond mobile devices. 5G is expected to enable numerous use cases including greater device-to-device connectivity, smart applications, autonomous cars, factory automation and other applications that are yet to be conceptualized. The increase in demand for openness and scalability in the 5G Radio Access Network is motivating the push towards O-RAN standards and ecosystems. O-RAN will eventually improve the time-to-market for new verticals and innovations as well as reduce the total cost of ownership. The 5G transition is being deployed globally and is expected to be disruptive to businesses, consumers and potentially create new applications and vertical industries.
The increase in demand for 5G services will be increasingly supported by automation and associated artificial intelligence and machine learning, which will further enable enterprise requirements for private 5G as well as numerous use cases such as remote working and energy efficiency. Such increases in demand for pervasive on-premise/off-premise services will further drive the need for cybersecurity. Further adoption of 5G will require optical fiber upgrades and buildouts driven by traditional CSPs as well as enterprise networks. Hyperscale service providers have become significant drivers of technology innovation, including optical fiber up to 800GbE. The scale and complexity of these technology shifts are also challenging service providers to rearchitect their networks, becoming more virtualized, and optimized based on real-time intelligence. We believe these investments will extend fiber connectivity beyond the office and home and permeate “fiber-to-the-everywhere” leading to potential new business opportunities for VIAVI.
Existing network infrastructure that is not otherwise being upgraded is also expected to be modernized with new cable and access technologies. Cable providers are investing in DOCSIS 3.1 to enhance existing cable networks while DSL copper lines are being upgraded to GFast. Many operators have decided to run existing legacy networks by deploying superior technologies or continuing to run such networks until they are no longer operable and then replacing them with new optical fiber. For our avionics products, many governments across the globe are increasing their military and public safety budgets to upgrade communication infrastructure.
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The convergence of network technologies requires significant investments from both traditional carriers and cloud service providers. While traditional services providers, in recent years, have continued to consolidate to gain scale, and capital spending in physical networks has been declining, it also creates additional opportunities as service providers deploy NE products and RAN (formerly component of Wireless)) (b) Growth Products (Xsight, Packet Portal products, Location Intelligence (formerly components of Wireless)).
For the purposes of providing year-over-year variance analysis in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of this Annual Report on Form 10-K, we have reflected these changes for all prior periods presented so that they are comparable with our current groupings.
In the second half fiscal 2017, Viavi implemented our Focused NSE restructuring plan as part of its strategysolutions to improve profitability inaverage revenue per user (ARPU) metrics by reducing the Company’s NSE business by narrowingneed for physical customer service visits through faster installation and repair completion. In addition, the scope and focus of the SE business. The smaller, more focused SE segment includes Data Center products, mobile assurance products like Xsight and Location Intelligence and invest in development of automationnew cloud service providers and virtualized network. The SE segment also retains the more mature Assurance product portfolio that is largely maintenancenetworks create new NSE opportunities. We believe our NSE products and service contract.
solutions are well positioned to meet these rapidly changing industry trends, given our technology and products, as well as customer installed base.
Optical Security and Performance Products
Our OSP segment leverages its core optical coating technologies and volume manufacturing capability to design, manufacture, and sell productstechnologies for the anti-counterfeiting, consumer electronics, industrial, government and automotive markets.
Our technologies targeting anti-counterfeiting consumerapplications include Optical Variable Pigment (OVP®) and industrial, government, healthcareOptical Variable Magnetic Pigment (OVMP®). OVP enables color-shifting effects, and other markets.
Our security offerings for the currency market include OVP®, OVMP®OVMP enables depth and banknote thread substrates. OVP® enables amotion effects in addition to color-shifting effecteffects. 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.
Other OSP also developsproduct lines include custom color solutions and spectral sensing. Custom color solutions include innovative special effects pigments for the automotive market. Spectral sensing solutions include handheld and process miniature near infrared spectrometers for pharmaceutical, agriculture, food, feed, and industrial applications.
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. OSP also produces precise, high-performance, optical thin-film coatings and light shaping optics capabilities for a variety of applications including, for example, optical filters and Engineered Diffusers, marketed under the trademark “Engineered Diffusers®”, for 3D sensing applications.
Customers
OSP customers include SICPA Holding SA Company (SICPA), STMicroelectronics Holding N.V., Lockheed Martin Corporation and Seiko Epson Corporation.
We have a strategic alliance with SICPA to market and sell our OVP and OVMP product lines for banknote anti-counterfeiting applications worldwide. Sales of these products that utilize its proprietary printing platformto SICPA generated approximately 10% of our net revenue from continuing operations during fiscal 2021, 2022 and are targeted primarily at2023. A material reduction in sales, or loss of the pharmaceuticalrelationship with SICPA, may harm our business and consumer-electronicsoperating results as we may be unable to find a substitute marketing and sales partner or develop these capabilities ourselves in a timely manner. 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. Operating Segments and Geographic Information” of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
For further information related to our customers, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 7 of this Annual Report on Form 10-K.
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.
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Offerings
Our OSP business provides innovative light management technologies for the anti-counterfeiting, consumer electronics, industrial, government and automotive markets.
Leveraging our expertise in spectral managementAnti-Counterfeiting: Our OVP and our unique high-precision coating capabilities, OSP providesOVMP technologies are incorporated into inks used by many government and state-owned security printers worldwide for banknote protection. These technologies deliver a range of productsintuitive overt effects that enable the rapid verification of banknotes without requiring a specialized device or reader.
Consumer Electronics and technologiesIndustrial: Our OSP business manufactures and sells optical filters for the consumer and industrial market, including, for example, 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. We provide multicavity and linear variable optical filters.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.
OSP value-added solutions meet the stringent requirements of commercial and government customers.Government: Our products are used in a variety of aerospacegovernment and defenseaerospace 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.
Markets
Our OSP segment delivers overt and covert features to protect governments and brand owners against counterfeiting, with a primary focus on the currency market. OSP also produces precise, high-performance, optical thin-film coatings for a variety of applications in consumer electronics, government, healthcare and other markets. For example, optical filters are used in 3D sensing products and other applications.

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In addition, we offer custom color solutions that include innovative optically-based color-shifting and other features that provide product enhancement for brands in the automotive and other industries.
Customers
OSP serves customers such as 3M Company, FLIR Systems, Inc., IDT Corporation, Lockheed Martin Corporation, Seiko Epson Corporation, SICPA Holding SA Company (SICPA) and STMicroelectronics Holding N.V.. Following the separation from Lumentum, one OSP customer generated more than 10% of Viavi net revenue from continuing operations. During fiscal 2017, 2016 and 2015, net revenue from SICPA represented 20.6%, 21.0% and 16.4%, respectively, of Viavi net revenue from continuing operations.
Trends
Counterfeiting of banknotes and other goods is on the rise because counterfeiters now have access to a broad range of advanced but relatively low-cost imaging technologies and printing tools, giving them the ability to create convincing simulations of actual documents and products for illicit purposes. At the same time, the penalties for counterfeiting can often be relatively modest when compared to the penalties for other crimes. As a result of these trends, demand is increasing for sophisticated overt anti-counterfeiting features, such as Viavi’s OVP® and OVMP® technologies, which are easy for consumers to validate without the use of special tools but are difficult to create or simulate using conventional printing technology.
The aerospace, defense, consumer electronics and medical/environmental instrumentation markets require customized, high-precision coated products and optical components that selectively absorb, transmit or reflect light to meet the performance requirements of sophisticated systems. Our custom optics products offer an array of advanced technologies and precision optics-from the UV to the far IR portion of the light spectrum to meet the specific requirements of our customers.
3D sensing is an emerging technology, where OSP’s optical filters plan to be deployed in smartphones for facial recognition biometric authentication. 3D sensing optical filters separate out ambient light from incoming data to allow devices to be controlled by a person’s movements, gestures or features. Other potential technology markets for OSP’s optical filters include augmented/virtual reality, sensors deployed in autonomous vehicles and Internet of Things (IoT).
Strategy
Our strategy is to leverage proprietary pigments and optical coating technologies to build market leadership in large, high value applications.
Defend and expand core anti-counterfeiting product offering
Expand into high value existing and emerging automotive, military and industrial applications
Selectively target high volume consumer 3D sensing applications
Competition
OSP’s competitors include providers of anti-counterfeiting features such as Giesecke & Devrient, De La Rue plc; special-effect pigments like Merck KGA; coating companies such as Nidek, Toppan, and Toray and optics companies such as Materion and Deposition Sciences.
Offerings
Viavi’s OSP business provides innovative optical security and performance products which serve a variety of applications for customers in the anti-counterfeiting, consumer and industrial, government, healthcare and other markets.
Anti-counterfeiting: Viavi’s OVP® technology has become a standard used by many governments worldwide for currency protection. This technology provides a color-shifting effect that enables intuitive visual verification of banknotes. We also provide other technologies to the banknote market including OVMP®, a technology that delivers depth and other visual effects for intuitive overt verification. In addition, our proprietary printing processes deliver anti-counterfeiting solutions for security labels, used by the pharmaceutical and consumer electronics industries for brand protection.
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 productsautomotive, sports apparel, and packaging.other applications. Additionally, our optical filters and Engineered Diffusers enable automotive sensing applications including LiDAR and in-cabin monitoring.
ConsumerIndustry Trends
For nearly 75 years, OSP has developed and Industrial: 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. The wide availability of advanced and relatively low-cost imaging technologies and printing tools threatens the integrity of critical printed documents, necessitating robust, technically sophisticated and easy to validate anti-counterfeiting features. Our OSP business manufacturesOVP, and sellsOVMP technologies enable intuitive overt optical effects that consumers can easily recognize but counterfeiters find very difficult to reproduce.
We also design, manufacture and sell optical filters for 3D sensing productsapplications that separateallow consumers to interact with their devices more naturally by enabling electronic devices to accurately measure depth and motion. Our filters play an important role in those applications, separating out ambient light from the incoming data used by sensors to allow devicesmake precise measurements. Notably, our patented low angle shift technology enables our customers to be controlledsignificantly improve the signal-to-noise ratio of their systems and deliver reliable system performance. Through the development of multiple generations of products for 3D sensing and by delivering improved performance and competitive value with each iteration, we believe we have established ourselves as one of the industry’s leading supplier of high-performance filters enabling depth-sensing systems in consumer electronics. Similarly Engineered Diffusers, diffuse the infrared laser light transmitted by a person’s movementssmartphone in 3D sensing applications, enabling reliable system performance while also guarding eye safety.
In addition to anti-counterfeiting and 3D sensing applications, OSP technologies enable optical solutions in industries we believe the applications of which will mature or gestures.there will be development of new applications for OSP technologies that will grow demand for our OSP products and solutions.

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Government: Viavi products are used in a variety of aerospace and defense applications, including optics for guidance systems, laser eye protection and night vision systems. These products, including coatings and optical filters, are optimized for each specific application.
Healthcare and Other Markets: Viavi provides multicavity and linear variable optical filters on a variety of substrates for applications including, thermal imaging, and spectroscopy and pollution monitoring. We also develop and manufacture miniature spectrometers that leverage our linear variable optical filters for use in applications for agriculture, pharmaceuticals, government and other markets.
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.
In January 2014, we completed the acquisition of Network Instruments, a privately-held U.S. company and leading developer of enterprise network and application-performance management solutions for global 2000 companies. The acquisition diversified our position as a key solutions provider to the enterprise, data center and cloud networking markets. Network Instruments helps enterprises simplify the management and optimization of their networks with high-performance solutions that provide actionable intelligence and deep network visibility. We acquired all outstanding shares of Network Instruments for a total purchase price of approximately $208.5 million in cash. This acquisition was integrated into our SE segment.
 In December 2013, we acquired certain technology and other assets from Trendium, a privately-held provider of real-time intelligence software solutions for customer experience assurance (“CEA”), asset optimization and monetization of big data for 4G/LTE mobile network operators. The addition of Trendium employees and technology enabled the Company to introduce a new paradigm of CEA in our Assurance solutions, enabling operators of 4G/LTE networks to achieve a real and relevant improvement in customer satisfaction while maximizing productivity and profitability for dynamic converged 4G/LTE networks and beyond. We acquired certain technology and other assets from Trendium for a total purchase price of approximately $26.1 million in cash. This acquisition was integrated into SE segment.
Restructuring Programs
We continue to engage in targeted restructuring events intended to consolidate our operations, and align our businesses in response to market conditions and our current investment strategy. In fiscal 2017, we initiated a restructuring plan within the NE and SE business segments as part of our continued strategy to improve profitability in NSE business by narrowing the scope of the SE business and reducing costs by streamlining NSE operations. We also continued to restructure and reorganize our segments to eliminate certain positions by consolidating and shifting resources in our sales, manufacturing and R&D functions to focus on our strategic growth areas and optimize our operational efficiency.
Please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations under Item 7 and “Note 11. Restructuring and Related Charges” under Item 8 of this Annual Report on Form 10-K for further discussion on these charges.
Research and Development
During fiscal 2017, 2016 and 2015, we incurred R&D expenses of $136.3 million, $166.4 million, and $173.3 million, respectively. The number of employees engaged in R&D was approximately 600 as of July 1, 2017.
We devote substantial resources to R&D to develop new and enhanced products to serve our markets. Once the design of a product is complete, our engineering efforts shift to enhancing both product performance and our ability to manufacture it in greater volume and at lower cost.
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 are increasing our focus on IP-based service assurance and customer experience management, and test instruments for wireless networks and services, while continuing to develop tools for fiber optic, optical transport, Ethernet, broadband access, video test and storage network testing. We have centers of excellence for product marketing and development in Asia, Europe and North America.
In our OSP segment, our R&D efforts concentrate on developing more innovative technologies and products for customers in the anti-counterfeiting, consumer electronics, industrial, government healthcare and automotive markets. Our strength in the banknote anti-counterfeiting market is complemented by our advances in developing novel pigments and foils for a variety of applications. Other areas of R&D focus for OSP include our efforts to leverage our optical coating technology expertise to develop applications

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for the government and defense markets as well as efforts related to new products for 3D sensing and smart phonesmartphone sensors. OSP has also introduced an innovative handheld spectrometer solutiondevelops, 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. 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.
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. 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.
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. 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.
For further information related to our acquisitions, refer to “Note 5. Acquisitions” under Item 8 of this Annual Report on Form 10-K.
Restructuring Programs
We may continue to engage in targeted restructuring events, to consolidate our operations and align our businesses in response to market conditions and our current investment strategy. Such actions are intended to further drive our strategy for organizational alignment and consolidation as part of our continued commitment to a more cost effective and agile organization and to improve overall profitability in our business segments.
For further information refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 7 and “Note 13. Restructuring and Related Charges” under Item 8 of this Annual Report on Form 10-K.
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Manufacturing
As of July 1, 20172023, we have significant manufacturing facilities for our NE, SE and OSP segments were located in China, France, Germany, KoreaMexico, the United Kingdom and the United States and ourStates. Our most significant contract manufacturing partners wereare located in China and Mexico.
Sources and Availability of Raw Materials
Viavi usesWe use various suppliers and contract manufacturers to supply parts and components for the manufacture and support of multiple product lines. Although our intention iswe intend to establish at least two sources of supply for materials whenever possible, for certain components we have sole or limited source supply arrangements. We may not be able to procure these components from alternative sources at acceptable prices within a reasonable time, or at all; therefore, the loss or interruption of such arrangements could impact our ability to deliver certain products on a timely basis.
Patents and Proprietary Rights
Intellectual property rights apply to our various products include patents, trade secrets and trademarks. We do not intend to broadly license our intellectual property rights unless we can obtain adequate consideration or enter into acceptable patent cross-licenseintellectual property cross-licensing agreements. As of July 1, 2017,2023, we owned approximately 740own 956 U.S. patents and 10151,892 foreign patents and have 5351,155 patent applications pending throughout the world.
The average age of the patents we hold is 8.9 years, which is younger than the midpoint of the average 20-year life of a patent.
Backlog
We consider our backlog balance to be an estimate of future revenue to be earned from contractually committed product and service arrangements. As of July 1, 2017 and July 2, 2016, our backlog was approximately $177 million and $234 million, respectively.
Due to possible changes in product delivery schedules and cancellation of product orders, and because our sales often reflect orders shipped in the same quarter in which they are received, our backlog at any particular date is not necessarily indicative of actual revenue or the level of orders for any succeeding period.
Seasonality
EmployeesOur 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. Telecom and cable spending budgets are typically set at the start of a new calendar year, thus with all else being equal, our third fiscal quarter is NSE’s weakest revenue quarter with spending release benefiting our fourth fiscal quarter.
We employedFor 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.
Human Capital Management
The VIAVI culture is made up of the diverse contributions of our approximately 2,7003,600 employees asworldwide (as of July 1, 2017,2023) representing more than 30 self-identified nationalities working across 30 countries. VIAVI is committed to promoting and maintaining a diverse and inclusive work environment and offering equal opportunities to everyone. 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 regularly update and partner with the Compensation Committee of the Board of Directors on human capital matters. Employee experience continues to be an important focus of our People Strategy, including implementing automation to increase efficiency in our business processes, manager and employee self-service for transactions and advanced reporting for organizational insight. In addition, we launched a new learning management system to allow for micro-learning in the flow of work. Our next phase will include improving our approach to measuring employee sentiment and drivers for engagement.
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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. They represent the principles that will help guide us to achieve our objectives globally and the desired operating environment of the employees and management. VIAVI is committed to respecting human rights and acknowledges the fundamental principles contained in the Universal Declaration of Human Rights, the tenets of the United Nations Guiding Principles on Business and Human Rights, and core International Labor Organization Conventions to the extent they are applicable and important to our business. We are a member of the Responsible Business Alliance, which included approximately 900 employees in manufacturing, 600 employees in R&D, 750 employees in salesfurther strengthens our efforts and marketing,commitment.
We realize that being a responsible global citizen is important to the sustainability and 450 employees in generalcommercial success of our business and administration. This compared to a workforceencompasses more than just complying with local regulations. It’s about how we do business, and how our organization’s activities affect the people and communities where we live and work. The VIAVI Code of approximately 3,000 asBusiness Conduct captures the broad principles of July 2, 2016,legal and 4,900 as of June 27, 2015 which also included employees who transferred to Lumentumethical business conduct embraced by the Company as part of its commitment to integrity. VIAVI expects that all employees will act in a manner that complies both with the Separation. On August 1, 2015, approximately 1,700letter and spirit of this code of conduct.
Diversity, Equity, and Inclusion (DEI)
VIAVI is committed to fostering, cultivating, and preserving a culture of diversity, equity and inclusion. Our human capital is one of our most valuable assets. We believe the collective sum of our individual differences, life experiences, knowledge, innovation, business acumen, self-expression, and unique capabilities contributes to a culture that enhances our reputation and achievement.
VIAVI has long been committed to ensuring that all individuals have an equal opportunity to enjoy a fair, safe and productive work environment – regardless of age, ancestry, race, color, mental or physical disability or medical condition, gender, gender identity, gender expression, genetic information, family or marital status, registered domestic partner status, military and veteran status, race, religious creed, language, national origin, citizenship status, sex (including pregnancy, childbirth, breastfeeding and any related medical conditions), sexual orientation, socio-economic status, or any other protected category under applicable law. We seek to 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, were transferredmanagers, and leaders that invite a growth mindset and create an appetite for lifelong learning.
We seek to Lumentumdrive 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. Both managers and employees have a role to play to ensure that they are connected to the activities that drive our business forward. Our employees can expect to engage regularly with their manager, and to have their support to accelerate their performance and development.
Our global Leadership Development Program has now reached over 70% of our leaders in fiscal 2023. We introduced advanced leadership concepts this year, enabling our participants to connect globally and cross functionally while advancing 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.

The early-in-career rotation programs for engineers and sales talent continue.Our diverse and global program participants are supported by a mentor and their manager to coach them as partthey take on exciting new technical challenges. We believe their program experiences will unleash innovation and creativity for our organization while enabling our long-term talent pipeline.

Technical talent thought leadership is a continued focus at our annual Technology Council event for engineering talent.

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We are encouraged that VIAVI employees exhibit commitment to their ongoing career development, with 70% of our individual contributors building the professional and technical skills they need to advance their careers.

Our employees regularly participate in mandatory training courses covering data privacy, cybersecurity, health and safety as well as the prevention of sexual harassment in the workplace, each achieving over 99% compliance by employees.
Talent Rewards
Our compensation and benefits programs are designed to recognize our employees' individual performance and contributions to our business results, including competitive base salaries and variable pay for all employees, share-based equity award grants, health and welfare benefits, time-off, development programs and training, and opportunities to give back to our communities. We provide talent rewards that are competitive in the marketplace. We support equal pay for equal work, pay transparency as well as all federal anti-discrimination laws applicable to employment, including those within Title VII of the separationCivil Rights Act.
Health and Safety
VIAVI is committed to maintaining an inclusive, supportive, safe and healthy work environment where our employees can thrive. We demand strict compliance with all applicable health and safety regulations, offer robust training to our employees on health and safety matters, maintain controls and proper disposal of hazardous materials and track workplace incidents and injuries. We maintain and regularly update emergency and disaster recovery plans.
The success of our Safety program is demonstrated by our best-in-class Total Recordable Injury Rate (TRIR) of only 0.13 injuries per 100 full-time workers per year.

Environmental, Social and Governance Matters
We believe that serving our stakeholders, including our stockholders, customers, suppliers, employees, communities and the environment, drives commercial success and that implementing environmental, social and governance (ESG) practices makes our business more sustainable. We take immense pride in the progress we are making within our ESG initiatives. VIAVI is committed to transparency in its environmental practices, and we publicly report our key environmental metrics. VIAVI continues to focus on energy efficiency, both in our products and business practices – which has resulted in a significant reduction of our carbon footprint over the years. Our annual ESG report can be found at www.viavisolutions.com/esg.
Information Security
Information security is the responsibility of our Information Security team, overseen by our Chief Information Security Officer. Our enterprise risk management program considers cybersecurity risks alongside other company risks, and our enterprise risk professionals consult with company subject matter experts to gather information necessary to identify cybersecurity risks, and evaluate their nature and severity, as well as identify mitigations and assess the impact of those mitigations on residual risk. We leverage a combination of the Lumentum businessNational Institute of Standards and Technology Cybersecurity Framework, International Organization for Standardization and Center for Internet Security best practice standards to measure our security posture and manage risk.

Our information security practices include development, implementation, and improvement of policies and procedures to safeguard information and ensure availability of critical data and systems. Our Information Security team conducts annual information security awareness training for employees involved in our systems and processes that handle customer data and audits of our systems and enhanced training for specialized personnel. We also conduct semi-annual cyber awareness training and run tabletop exercises to simulate a response to a cybersecurity incident, and use the findings to improve our practices, procedures, and technologies. Our Incident Response Plan coordinates the activities we take to prepare for, detect, respond to and recover from cybersecurity incidents, which included approximately 850 employeesinclude 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.

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Our program further includes review and assessment by external, independent third-parties, who assess and report on our internal incident response preparedness and help identify areas for continued focus and improvement. We also carry insurance that provides protection against the potential losses arising from manufacturing, 550 employeesa cybersecurity incident. In the last fiscal three years, we have not experienced any material information security breach incidences and the expenses we have incurred from R&D, 150 employees from salesinformation security breach incidences were immaterial. This includes penalties and marketingsettlements, of which there were none.

As set forth in its charter, our Audit Committee, comprised fully of independent directors, is responsible for oversight of risk, including cybersecurity and 150 employees from generalinformation security risk. Our Audit Committee has established a Cybersecurity Steering Committee consisting of three independent directors, Laura Black (who serves as Chair of the Cybersecurity Steering Committee), Douglas Gilstrap and administration.
Similar to other technology companies, we rely uponJoanne Solomon, as well as our ability to use “Full Value Awards” (as defined below)Chief Information Officer, our Chief Information Security Officer and other forms of stock-based compensation as key componentsmembers of our executivemanagement representing a variety of teams and employee compensation structure. Full Value Awards referfunctions including legal, finance, and internal audit. Members of our Cybersecurity Steering Committee have work experience managing cybersecurity and information security risks, an understanding of the cybersecurity threat landscape and/or knowledge of emerging privacy risks.
The purpose of the Cybersecurity Steering Committee is to Restricted Stock Units (“RSUs”)oversee our compliance with reasonable and performance-based RSUs that are granted withappropriate organizational, physical, administrative and technical measures designed to protect the exercise price equalintegrity, security and operations of our information technology systems, transactions, and data owned by us, by providing guidance and oversight of our information technology and cybersecurity program.
The Cybersecurity Steering Committee generally meets on a quarterly basis and generally delivers reports and updates to zerothe Audit Committee at each scheduled Audit Committee meeting. The Audit Committee or, at the Audit Committee’s instruction, the Cybersecurity Steering Committee regularly briefs the full Board on these matters, and are convertedthe Board receives regular updates on the status of the information security program, including but not limited to shares immediately upon vesting. The performance-based RSUsrelevant cyber threats, roadmap and key initiative updates, and the identification and management of information security risks. Our full Board reviews cybersecurity related opportunities as they relate to our business strategy, and cybersecurity-related matters are also referredfactored into business continuity planning.

Where You Can Find More Information
Our website address is www.viavisolutions.com, which the Company uses as a means to as Market Stock Units (“MSUs”)disclose important information about the Company and have vesting requirements tied to the performance of the Company’s stock as compared to the NASDAQ telecommunications index, and could vest at a higher or lower rate or not at all, based on this relative performance. Historically, these components have been critical to our ability to retain important personnel and offer competitive compensation packages. Without these components, we would be required to significantly increase cash compensation levels or develop alternative compensation structures to retain our key employees.
Outside of the United States, our businessescomply with its disclosure obligations under Regulation Fair Disclosure. We are subject to labor laws that differ from thosethe requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act), under which we file annual, quarterly and periodic reports, proxy statements and other information with the SEC, which can be accessed on www.sec.gov. We also make available free of charge all of our SEC filings on our website at www.viavisolutions.com/investors as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. 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 United States. The Company follows statutory requirements, and in certain European countries it is common for a works council, consisting of elected employees, to represent the sites when discussing matters such as compensation, benefits or terminations of employment. We consider our employee relations to be good.SEC.

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ITEM 1A. RISK FACTORS 
Global Risks

Geopolitical conditions, including political turmoil and volatility, regional conflicts, terrorism and war could result in market instability, which could negatively impact our business results.

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 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. Foreign companies with a presence in China are facing increasing operational challenges and enhanced scrutiny from governmental entities in region. Further, it is possible that the U.S.-Chinese geopolitical tensions could result in government measures that could adversely impact our business. For example, in May of 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. This could have an adverse impact on our revenues in region.International conflict has resulted in (i) 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 (ii) inflation, which could result in increases in the cost of manufacturing products, reduced customer purchasing power, increased price pressure, and reduced or cancelled orders (iii) increased risk of cybersecurity attacks and (iv) general market instability, all of which could adversely impact our financial results. Moreover, domestically, U.S. political dissension on raising the debt ceiling may increase the possibility of a historygovernment shutdown, default by the U.S. government on its debt obligations, or related credit-rating downgrades, all of net losses,which could also have adverse effects on the broader global economy and contribute to, or worsen, an economic recession.

The COVID-19 pandemic has and may continue to adversely affect how we and our customers are operating our businesses.

The worldwide spread of the COVID-19 virus resulted in a global slowdown of economic activity which led, at times, to slowdowns in shipping and commercial activities.

The lingering impacts of the COVID-19 pandemic may continue to adversely affect the financial markets in many countries. In addition, the emergence of new and potentially more contagious variants of the virus, new shutdowns or quarantines, and the resulting staffing and labor supply challenges may impact our suppliers and our ability to source materials in a timely manner, may negatively impact manufacturing or shipment of our products and hence adversely affect our results of operations and financial conditions.

Risks Related to Our Business Strategy and Industry

Our future profitability is not assured.
We earned net income of $166.9 million in fiscal 2017 including recognized gross gains on sales of Lumentum common stock of $203.0 million. We also incurred net losses of $99.2 million and $88.1 million in fiscal 2016 and 2015, respectively. Historically, Viavi operated as a portfolio company comprised of many product lines, with diverse operating metrics and markets. As a result, ourOur profitability in a particular period waswill be impacted by revenue, product mix and operational costs that variedvary significantly across our product portfolio and business segments. While we completed the separation of our Lumentum business in 2015, this variability continues to be a factor across our remaining business segments.
Additionally, for the last several years, we have undergone multiple manufacturing, facility, organizational and product line transitions. We expect some of these activities to continue for the foreseeable future. These activities are costly and may impair our profitability objectives. Specific factors that may undermine our profit and financial objectives include, among others:
uncertain•Uncertain future telecom carrier and cable operator capital and R&D spending levels, which particularly affects our NE and SE segments; 
adverse•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•Pricing pressure across our NSE product lines due to competitive forces, increasingly from Asia,advanced chip component shortages, and to a highly concentrated customer base for many of our product lines, which may offset some of the cost improvements; 
our•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•Limited availability of components and resources for our products which leads to higher component prices;
increasing
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•Resource rationing, including rationing of utilities like electricity by governments and/or service providers;
•Increasing commoditization of previously differentiated products, and the attendant negative effect on average selling prices and profit margins;
execution•Execution challenges, which limit revenue opportunities and harm profitability, market opportunities and customer relations;
decreased•Decreased revenue associated with terminated or divested product lines; 
redundant•Redundant costs related to periodic transitioning of manufacturing and other functions to lower-cost locations;
ongoing•Ongoing costs associated with organizational transitions, consolidations and restructurings, which are expected to continue in the nearer term; 
continuing high levels of selling, general and administrative, (“SG&A”) expenses; and
cyclical•Cyclical demand for our currency products.products;
•Changing market and economic conditions, including the impacts due to tariffs, the ongoing conflict between Russia and Ukraine, tensions 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 such as the COVID-19 pandemic, manufacturing restrictions, travel restrictions and shelter-in-place orders to control the spread of a disease regionally and globally, and limitations on the ability of our employees and our suppliers’ and customers’ employees to work and travel.
Taken together, these factors limit our ability to predict future profitability levels and to achieve our long-term profitability objectives. If we fail to achieve profitability expectations, the price of our debt and equity securities, as well as our business and financial condition, may be materially adversely impacted.
The separation of the Lumentum business could result in substantial tax liability to us and our stockholders.
One of the conditions for completing the Separation was our receipt of a tax opinion from our advisors substantially to the effect that, for U.S. federal income tax purposes, the Separation will qualify as a tax-free distribution under certain sections of the Internal Revenue Code. If any of the factual representations and assumptions made in connection with obtaining the tax opinion were inaccurate or incomplete in any material respect, then we will not be able to rely on the tax opinion. Furthermore, the tax opinion is not binding on the Internal Revenue Service (IRS) or the courts. Accordingly, the IRS or the courts may challenge the conclusions stated in the tax opinion and such challenge could prevail.
If, notwithstanding our receipt of the tax opinion, the Separation is determined to be taxable, then (i) we would be subject to tax as if we sold the stock distributed in the Separation in a taxable sale for its fair market value; and (ii) each stockholder who received stock distributed in the Separation would be treated as receiving a distribution of property in an amount equal to the fair market value of the stock that would generally result in tax liabilities for each stockholder, which may be substantial.

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Management turnover creates uncertainties and could harm our business.
We hired a new President and Chief Executive Officer in February 2016 and a new Chief Financial Officer in September 2015. In addition, during fiscal years 2016 and 2017 we made leadership changes in several other key functions throughout the Company, including sales, HR, IT and others. The extent of our management changes could adversely impact our results of operations and our customer relationships and may make recruiting for future management positions more difficult. 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.
Restructuring
We continue to restructure and realign our cost base with current and anticipated future market conditions. Significant risks associated with these actions that may impair our ability to achieve the anticipated cost reductions or that may disrupt our business include delays in the implementation of anticipated workforce reductions in highly regulated locations outside of the U.S. and the failure to meet operational targets due to the loss of key employees. In addition, our ability to achieve the anticipated cost savings and other benefits from these actions within the expected timeframe is subject to many estimates and assumptions. These estimates and assumptions are subject to significant economic, competitive and other uncertainties, some of which are beyond our control. 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.
Our operating results may be adversely affected by unfavorable economic and market conditions.
Global macroeconomic and geopolitical risks could adversely impact customer business conditions that could decrease or delay capital spending among communications service providers, enterprise budgets and consumer demand. This could also result in increased price competition for our products, increase our risk of excess and obsolete inventories and higher overhead costs as a percentage of revenue.
Impairment in the carrying value of goodwill or other assets could negatively affect our results of operations or net worth.
We have significant long-lived assets recorded on our balance sheet. We evaluate intangible assets and goodwill for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We monitor factors or indicators, such as unfavorable variances from forecasted cash flows, established business plans or volatility inherent to external markets and industries that would require an impairment test. The test for impairment of intangible assets requires a comparison of the carrying value of the asset or asset group with their estimated undiscounted future cash flows. If the carrying value of the asset or asset group is considered impaired, an impairment charge is recorded for the amount by which the carrying value of the asset or asset group exceeds its fair value. The test for impairment of goodwill requires a comparison of the carrying value of the reporting unit for which goodwill is assigned with the fair value of the reporting unit calculated based on discounted future cash flows. When testing goodwill for impairment during the fourth quarter of fiscal 2016, we concluded that the carrying value of the SE reporting unit was higher than its fair value. Accordingly step two of the impairment analysis was performed which indicated that the entire SE goodwill balance was impaired resulting in an impairment charge of $91.4 million. This charge does not impact our liquidity, cash flows from operations, future operations, or compliance with debt covenants. Although the analysis indicated only the SE reporting unit was impaired, we will continue to monitor the remaining reporting units which had an excess fair value over carrying value as of the date of annual impairment assessment. As of July 1, 2017 our NE and OSP reporting goodwill balances were $143.3 million and $8.3 million, respectively. Refer to Note 8 and Note 9 of the Notes to the Consolidated Financial Statements and “Critical Accounting Policies and Estimates” in Management's Discussion and Analysis of Financial Condition and Results of Operations for further discussion of the impairment testing of goodwill and long-lived assets.
We will continue to evaluate the recoverability of the carrying amount of our goodwill and long-lived assets on an ongoing basis, and we may incur substantial impairment charges, which would adversely affect our financial results. There can be no assurance that the outcome of such reviews in the future will not result in substantial impairment charges. Impairment assessment inherently involves judgment as to assumptions about expected future cash flows and the impact of market conditions on those assumptions. Future events and changing market conditions may impact our assumptions as to prices, costs, holding periods or other factors that may result in changes in our estimates of future cash flows. Although we believe the assumptions we used in testing for impairment are reasonable, significant changes in any one of our assumptions could produce a significantly different result. If, in any period, our stock price decreases to the point where the fair value of the Company, as determined by our market capitalization, is less than our book value, this too could indicate a potential impairment and we may be required to record an impairment charge in that period.
Rapid technological change in our industry presents us with significant risks and challenges, and if we are unable to keep up with the rapid changes, our customers may purchase less of our products which could adversely affect our operating results.

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products.
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.
Our success depends upon our ability to deliver both our current product offerings and new products and technologies on time and at an acceptable cost to our customers. The markets for our products are characterized by rapid technological change, frequent new product introductions, substantial capital investment, changes in customer requirements and a constantly evolving industry. Our future performance will depend on the successful development, introduction and market acceptance of new and enhanced products that address these issues and provide solutions that meet our customers’ current and future needs. As a technology company, we also constantly encounter quality, volume and cost concerns such as:

•Our continuing cost reduction programs which include site and organization consolidations, asset divestitures, outsourcing the manufacture of certain products to contract manufacturers, other outsourcing initiatives, and reductions in employee headcount, require therequirements related to re-establishment and re-qualification by our customers of complex manufacturing lines, as well asand modifications to systems, planning and operational infrastructure. 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.

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•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. These difficulties can reduce yields or disrupt production and thereby increase our manufacturing costs and adversely affect our margin.

•We may incur significant costs to correct defective products (despite rigorous testing for quality both by our customers and by us), which could include lost future sales of the affected product and other products, and potentially severe customer relations problems, litigation and damage to our reputation. 

•We are dependent on a limited number of vendors, who are often small and specialized, for raw materials, packages and standard components. We also rely on contract manufacturers around the world to manufacture certain of our products. Our business and results of operations have been, and could continue to be adversely affected by this dependency. 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. Additionally, the ability of our contract manufacturers to fulfill their obligations may be affected by economic, political or other forces that are beyond our control. 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 with their increased complexity, which expose us to yield and product risk internally and with our suppliers.

These factors have caused considerable strain on our execution capabilities and customer relations. We have seen and could continue to see (a) periodic difficulty responding to customer delivery expectations for some of our products, (b)and yield and quality problems, particularly with some of our new products and higher volume products and (c)which could require additional funds and other resources required to respond to these execution challenges. From time to time, we have had to divert resources from new product R&D and other functions to assist with resolving these matters. 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.
Unfavorable, uncertain or unexpected conditions in the transition to new technologies may cause our growth forecasts to be inaccurate and/or cause fluctuations in our financial results.
Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates which may not prove to be accurate. Our estimates of the market opportunities related to 5G infrastructure, 3D sensing and other developing technologies are subject to significant uncertainty and are based on assumptions and estimates, including our internal analysis, industry experience and third-party data. Accordingly, these markets may not develop in the manner or in the time periods we anticipate and our estimated market opportunities may prove to be materially inaccurate.
If domestic and global economic conditions worsen, including as a result of pricing and inflationary pressures, overall spending on 5G infrastructure, 3D sensing and other developing technologies may be reduced, which would adversely impact demand for our products in these markets. In addition, unfavorable developments with evolving laws and regulations worldwide related to such technologies may limit or slow the rate of global adoption, impede our strategy, and negatively impact our long-term expectations in these markets.
Our growth and ability to serve a significant portion of these markets is subject to many factors including our success in implementing our business strategy as well as market adoption and expansion of 5G infrastructure, 3D sensing and other applications for consumer electronics. We relycannot assure you that we will be able to serve a significant portion of these markets and the growth forecasts should not be taken as indicative of our future growth. 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.
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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. Any failure by us to continue capturing a significant share of these customerskey 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. Further, to the extent that there is consolidation among communications equipment manufacturers and service providers, we will have increased dependence on fewer customers who may be able to exert increased pressure on our prices and other contract terms. Customer consolidation activity and periodic manufacturing and inventory initiatives could also create the potential for disruptions in demand for our products as a consequence of such customers streamlining, reducing or delaying purchasing decisions.
We have a strategic alliance with SICPA our principal customer for our light interference microflakes that are used to, among other things, provide security features in currency. Under a license and supply agreement, we rely exclusively on SICPA to market

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and sell one of theseour OVP and OVMP product lines optically variable pigment, for document authenticationbanknote anti-counterfeiting applications worldwide. The agreement requires SICPA to purchase minimum quantities of these pigments over the termA material reduction in sales, or loss of the agreement. Ifrelationship with SICPA, fails to purchase these quantities, as and when required by the agreement,may harm our business and operating results (including, among other things, our revenue and gross margin) will be harmed as we may be unable to find a substitute marketing and sales partner or develop these capabilities ourselves.
Our forecasts related to our growth strategyourselves in 3D sensing and other applications may prove to be inaccurate.
Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates which may not prove to be accurate. Our estimate of the market opportunity related to 3D sensing is subject to significant uncertainty and is based on assumptions and estimates, including our internal analysis, industry experience and third-party data. Accordingly, our estimated market opportunity may prove to be materially inaccurate. In addition, our growth and ability to serve a significant portion of this estimated market is subject to many factors, including our success in implementing our business strategy and expansion of 3D sensing and other applications for consumer electronics. We cannot assure you that we will be able to serve a significant portion of this market and the growth forecasts should not be taken as indicative of our future growth.timely manner.
Movement towards virtualized networks and software solutions may result in lower demand for our hardware products and increased competition.
The markets for our NE and SE segments are increasingly looking towards virtualized networks and software solutions. While we are devoting substantial resources to meet these needs, thisThis 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.
We face a number of risks related to our strategic transactions.
Our strategy continues to include periodic acquisitions and divestitures of businesses and technologies. Strategic transactions of this nature involve numerous risks, including the following:
inadequate•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; controls.
diversion
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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; 
an acquisition may not further our business strategy as we expected or we may overpay for, or otherwise not realize the expected return on, our investments; 
insufficient net revenue to offset increased expenses associated with acquisitions; 
potential loss of key employees of the acquired companies; and 
difficulty in forecasting revenues and margins.
Acquisitions may also cause us to:
issue•Issue common stock that would dilute our current stockholders’ percentage ownership and may decrease earnings per share; 
assume•Assume liabilities, some of which may be unknown at the time of the acquisitions; 
record•Record goodwill and non-amortizable intangible assets that will be subject to impairment testing and potential periodic impairment charges; 
incur•Incur additional debt to finance such acquisitions; 
incur•Incur amortization expenses related to certain intangible assets; orand
acquire,•Acquire, assume, or become subject to litigation related to the acquired businesses or assets.

We may not generate positive returns on our research and development strategy.
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Certain ofDeveloping our products is expensive, and the investment in product development may involve a long payback cycle. We expect to continue to invest heavily in R&D in order to expand the capabilities of 3D sensing and smart phone sensors, handheld spectrometer solution and portable test instruments, introduce new products and features and build upon our technology. We expect that our results of operations may be impacted by the timing and size of these investments. In addition, these investments may take several years to generate positive returns, if ever.
Operational Risks

Restructuring

We have from time to time engaged in restructuring activities to realign our cost base with current and anticipated future market conditions, including one recently announced for fiscal 2023. Significant risks associated with these types of actions that may impair our ability to achieve the anticipated cost reductions or disrupt our business include delays in the implementation of anticipated workforce reductions in highly regulated locations outside of the U.S. and the failure to meet operational targets due to the loss of key employees. In addition, our ability to achieve the anticipated cost savings and other benefits from these actions within the expected timeframe is subject to many estimates and assumptions. These estimates and assumptions are subject to governmentalsignificant economic, competitive and industry regulations, certificationsother uncertainties, some of which are beyond our control. If these estimates and approvals.assumptions are incorrect, if we experience delays, or if other unforeseen events occur, our business and results of operations could be adversely affected.
The commercialization
Management transitions and talent retention create uncertainties and could harm our business.

Management changes could adversely impact our results of certain ofoperations 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. We have in the productspast experienced, and could continue to experience changes in our leadership team. Competition for people with the specific technical and other skills we design, manufacturerequire is significant. Moreover, we may face new and distribute through our OSP segment may be more costly due to required government approvalunanticipated difficulties in attracting, retaining and industry acceptance processes. Development of applications for our light interference and diffractive microflakes may require significant testing that could delay our sales. For example, certain usesmotivating employees in cosmetics may be regulated byconnection with the U.S. Food and Drug Administration, which has extensive and lengthy approval processes. Durability testing by the automobile industrychange of our decorative microflakes used with automotive paints can take upheadquarters to three years. If we change a productChandler, Arizona. As remote work has become more available the competition for any reason, including technological changes or changes in the manufacturing process, prior approvals or certifications may be invalid and we may need to go through the approval process again.highly qualified talent has intensified. If we are unable to obtain theseattract and retain qualified executives and employees, or other government or industry certifications in a timely manner, or at all,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 could be adversely affected.of operations.

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We face risks related to our international operations and revenue.
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.
Our international presence exposes us to certain risks, including the following:
currency fluctuations; •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 resultsby negatively impacting our revenues or increasing our expenses;
our•Our ability to comply with a wide variety of laws and regulations of the countries in which we do business, including, among other things, customs, import/export, anti-bribery, anti-competition, tax and data privacy laws, which may be subject to sudden and unexpected changes; 
difficulties•Difficulties in establishing and enforcing our intellectual property rights; 
tariffs•Tariffs and other trade barriers; 
political,•Political, legal and economic instability in foreign markets, particularly in those markets in which we maintain manufacturing and product development facilities; 
difficulties•Strained or worsening relations between the United States, Russia and China and related impacts on other countries;
•Difficulties in staffing and management;
language•Language and cultural barriers; 
seasonal•Seasonal reductions in business activities in the countries where our international customers are located; 
integration•Integration of foreign operations; 
longer•Longer payment cycles; 
difficulties•Difficulties in management of foreign distributors; and 
potential•Potential adverse tax consequences.
Net revenue from customers outsideThe spread of COVID-19 affected the Americas accounted for 53.3%, 48.9%manufacturing and 44.3%shipment of goods globally. Any delay in production or delivery of our total net revenue, for fiscal 2017, 2016 and 2015 respectively. products due to an extended closure of our suppliers’ plants could adversely impact our business along with delays in shipment of our products as well as increased logistics costs.
We expect that net revenue from customers outside North America will continue to account for a significant portion of our total net revenue. Lower sales levels that typically occur during the summer months in Europe and some other overseas markets may materially and adversely affect our business. 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.
Legal, Regulatory and Compliance Risks

Certain of our products are subject to governmental and industry regulations, certifications and approvals.

The commercialization of certain of the products we design, manufacture and distribute through our OSP segment may be more costly due to required government approval and industry acceptance processes. Development of applications for our anti-counterfeiting and special effects pigments may require significant testing that could delay our sales. For example, durability testing by the automobile industry of our special effects pigments used with automotive paints can take up to three years. If we change a product for any reason, including technological changes or changes in the manufacturing process, prior approvals or certifications may be invalid and we may need to go through the approval process again. If we are unable to obtain these or other government or industry certifications in a timely manner, or at all, our operating results could be adversely affected.
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U.S. Government trade actions 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. 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.
On May 16, 2019, Huawei Technologies Co. Ltd. and 68 designated non-U.S. affiliates (collectively, Huawei) were added to the Entity List of the Bureau of Industry and Security of the U.S. Department of Commerce (BIS), which imposes limitations on the supply of certain U.S. items and product support to Huawei. On 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.
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. As a result, these actions, including potential retaliatory measures by China and further escalation into a potential “trade war”, may adversely impact our business. While recent US export controls on China’s semiconductor and artificial intelligence industries may have an indirect impact on VIAVI, the implications of such controls are still being evaluated and are not expected to have a material impact on our consolidated annual revenues.
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. For example, certain of our suppliers are dependent on products sourced from Taiwan which has been distinguished in its prevalence in certain global markets, most specifically semiconductor manufacturing. 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.
Due to the ongoing conflict between Russia and Ukraine, the U.S., E.U. and U.K. have broadened restrictions on exports to Russia, thereby blocking shipments of technology, telecommunications and consumer electronics products to Russia. This caused us to suspend transactions in the region effective February 2022 and has negatively impacted our business in the region. Sales in the region are not material to our total consolidated revenues or net income and 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 at this time. 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 situation in Ukraine as well as the potential for additional trade actions or retaliatory cyber-attacks aimed at infrastructure or supply chains, and the impact on our future operations and results in the region remains uncertain.
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Failure to maintain satisfactory compliance with certain privacy and data protections laws and regulations may harm our business.
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. In addition, our legal and regulatory obligations in jurisdictions outside of the U.S. are subject to unexpected changes, including the potential for regulatory or other governmental entities to enact new or additional laws or regulations, to issue rulings that invalidate prior laws or regulations, or to increase penalties significantly. 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. 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. 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. Further, there are a number of new state privacy laws that have gone into effect in 2023, the California Privacy Rights Act, expanding the CCPA to provide for certain obligations with respect to California employee’s sensitive personal data and an expansion of rights, including the right to limit, correct and request deletion of certain sensitive personal data, the Virginia Consumer Data Protection Act, the Utah Consumer Privacy Act, the Colorado Privacy Act and the Connecticut Data Privacy Act, and a number of other states have passed laws that will go into effect in the next few years, including Tennessee, Montana, Indiana and Iowa and many more that are considering similar laws. 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. 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.
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.
Information Security, Technology and Intellectual Property Risks
Our business and operations wouldcould be adversely impacted in the event of a failure of our information technology infrastructure.infrastructure of ours, our suppliers, customers, vendors or our service providers.
We rely upon the capacity, reliability and security of our information technology infrastructure and our ability to expand and continually update this infrastructure in response to our changing needs. In some cases, we rely upon third partythird-party hosting and support services to meet these needs. The internet has experienced increasingly sophisticated and damaging threats in the form of phishing emails, malware, malicious websites, ransomware, exploitation of application vulnerabilities, and nation-state attacks. It is also becoming more common for these attacks to leverage previously unknown vulnerabilities. The growing cyber riskand evolving cyber-risk environment means that individuals, companies, and organizations of all sizes, including Viavi,ourselves, our customers, suppliers and our hosting and support partners, are increasingly subjectvulnerable to the threat of intrusionsattacks and disruptions on their networks and systems by a wide range of actors on an ongoing and regular basis. Any failureWe also design and manage IT systems and products that contain IT systems for various customers, and generally face the same threats for these systems as for our own internal systems.
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We maintain information security tools and technologies, staff, policies and procedures for managing risk to manage, expandour networks and updateinformation systems, and conduct employee training on cybersecurity to mitigate persistent and continuously evolving cybersecurity threats. Our network security controls are comprised of administrative, physical and technical controls, which include, but are not limited to, the implementation of firewalls, anti-virus protection, patches, log monitors, routine backups, off-site storage, network audits and other routine updates and modifications. We also routinely monitor and develop our internal information technology systems to address risks to our information technology infrastructure, any failure in the extension or operation of this infrastructure, or any failure by our hosting and support partners in the performance of their services could materially and adversely harm our business.
systems. Despite our implementation of these and other security measures and those of our third-party vendors, our systems are vulnerableregularly targeted by bad actors and have been subject to damages from computer viruses, natural disasters, unauthorized access and other similar disruptions.disruptions and attacks that continue to emerge and evolve. Any system failure, accident or security breach could result in disruptions to our operations.business processes, network degradation, and system down time, along with the potential that a third-party will gain unauthorized access to, or acquire intellectual property, proprietary business information, and data related to our employees, customers, suppliers, and business partners, including personal data. To the extent that any disruptionsdisruption, degradation, downtime or other security breachevent results in a loss or damage to our data or systems, or in inappropriate disclosure of confidential or personal information, it could cause significantadversely impact us and our clients, potentially resulting in, among other things, financial losses, loss of customers or business, our inability to transact business on behalf of our clients, adverse impact on our brand and reputation, violations of applicable privacy and other laws, regulatory fines, penalties, litigation, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs. We may also incur additional costs related to cybersecurity risk management and remediation. There can be no assurance that we or our reputation and

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affect our relationships with our customers and ultimately harm our business. In addition, we may be requiredservice providers, if applicable, will not suffer losses relating to incur significant costs to protect against damage caused by these disruptionscyber-attacks or other information security breaches in the future.
Failurefuture or that our insurance coverage will be adequate to maintain effective internal controls may adversely affectcover all the costs resulting from such events. No assurances can be given that our stock price.
Effective internal controls are necessary for us to provide reliable financial reports and to effectively prevent fraud. The Company is required to annually evaluate the effectiveness of the design and operation of its internal controls over financial reporting. Based on these evaluations, the Company may conclude that enhancements, modifications, or changes to internal controls are necessary or desirable. In addition, our independent registered public accounting firm must report on the effectiveness of our internal control over financial reporting. While management evaluates the effectiveness of the Company’s internal controls on a regular basis, these controls may not always be effective. In August 2016 we determined that we had a material weakness related to an error in the determination of interim income taxes which caused our independent registered public accounting firm to issue a qualified report on our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended July 2, 2016. As a result, management initiated a thorough and detailed remediation plan which included enhanced processes and designed controls to ensure a more precise review of the interim income tax provisions beginning in the first quarter of fiscal 2017. As of July 1, 2017, the remediation plan has been completed and the material weakness has been remediated.
There are inherent limitations on the effectiveness of internal controls, including collusion, management override, and failure in human judgment. In addition, control procedures are designedefforts to reduce rather than eliminate financial statement risk. Additionally, if wethe risk of such attacks or our independent registered public accounting firm are not satisfied with our internal control over financial reporting or the level at which these controls are documented, designed, operated or reviewed in the future, or if our independent registered public accounting firm interprets the requirements, rules and/or regulations differently from our interpretation, then they may issue a qualified report. Furthermore, we may discoverto detect attacks that the internal controls of businesses we acquire are inadequate or changes to our existing businesses may impact the effectiveness of our internal controls. These situations could require us to make changes to our internal controls and could cause our independent registered public accounting firm to issue a qualified report, which could result in a loss of investor confidence in the reliability of our financial statements, and could negatively impact our stock price.occur will be successful.
In August 2013, we issued $650.0 million of 0.625% Senior Convertible Notes due 2033, and in March 2017, we issued $460.0 million of 1.00% Senior Convertible Notes due 2024. The issuance of the Notes could dilute our existing stockholders and lower our reported earnings per share.
We issued $650.0 million of indebtedness in August 2013 in the form of 0.625% Senior Convertible Notes due 2033 (the “2033 Notes”) of which $610.0 million are outstanding as of July 1, 2017 and $460.0 million of indebtedness in March 2017 in the form of 1.00% Senior Convertible Notes due 2024 (the “2024 Notes” and, together with the 2033 Notes, the “Notes”). The issuance of the Notes substantially increased our principal payment obligations. Additionally, in fiscal 2016 we contributed $137.6 million in cash to Lumentum in connection with the Separation, subject to the requirements as set forth in the Contribution Agreement between the Company and Lumentum Operations LLC. Following the Separation we have substantially lower cash flow which increased our leverage. The degree to which we are leveraged could materially and adversely affect our ability to successfully obtain financing for working capital, acquisitions or other purposes and could make us more vulnerable to industry downturns and competitive pressures. In addition, the holders of the Notes are entitled to convert the Notes into shares of our common stock or a combination of cash and shares of common stock under certain circumstances which would dilute our existing stockholders and lower our reported per share earnings.
If we have insufficient proprietary rights or if we fail to protect those we have, our business would be materially harmed.Our intellectual property rights may not be adequate to protect our products or product roadmaps.
We seek to protect our products and our product roadmaps in part by developing and/or securing proprietary rights relating to those products, including patents, trade secrets, know-how and continuing technological innovation. The steps taken by us to protect our intellectual property may not adequately prevent misappropriation or ensure that others will not develop competitive technologies or products. Other companies may be investigating or developing other technologies that are similar to our own. It is possible that patents may not be issued from any of our pending applications or those we may file in the future and, if patents are issued, the claims allowed may not be sufficiently broad to deter or prohibit others from making, using or selling products that are similar to ours. We do not own patents in every country in which we sell or distribute our products, and thus others may be able to offer identical products in countries where we do not have intellectual property protection. In addition, the laws of some territories in which our products are or may be developed, manufactured or sold, including Europe, Asia-Pacific or Latin America, may not protect our products and intellectual property rights to the same extent as the laws of the United States.
Any patents issued to us may be challenged, invalidated or circumvented. Additionally, we are currently a licensee in all of our operating segments for a number of third-party technologies, software and intellectual property rights from academic institutions, our competitors and others, and are required to pay royalties to these licensors for the use thereof. Unless we are able

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to obtain such licenses on commercially reasonable terms, patents or other intellectual property held by others could inhibit our development of new products, impede the sale of some of our current products, substantially increase the cost to provide these products to our customers, and could have a significant adverse impact on our operating results. 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.
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Our products may be subject to claims that they infringe the intellectual property rights of others.
Lawsuits and allegations of patent infringement and violation of other intellectual property rights occur in our industry on a regular basis. We have received in the past, and anticipate that we will receive in the future, notices from third parties claiming that our products infringe their proprietary rights. Over the past several years there has been a marked increase in the number and potential severity of third-party patent infringement claims, primarily from two distinct sources. First, large technology companies, including some of our customers and competitors, are seeking to monetize their patent portfolios and have developed large internal organizations that have approached us with demands to enter into license agreements. Second, patent-holding companies, entities that do not make or sell products (often referred to as “patent trolls”), have claimed that our products infringe upon their proprietary rights. We will continue to respond to these claims in the course of our business operations. In the past, the resolution of these disputes has not had a material adverse impact on our business or financial condition,condition; however, this may not be the case in the future. Further, the litigation or settlement of these matters, regardless of the merit of the claims, could result in significant expense to us and divert the efforts of our technical and management personnel, whether or not we are successful. If we are unsuccessful, we could be required to expend significant resources to develop non-infringing technology or to obtain licenses to the technology that is the subject of the litigation. We may not be successful in such development, or such licenses may not be available on terms acceptable to us, if at all. Without such a license, we could be enjoined from future sales of the infringing product or products, which could adversely affect our revenues and operating results.
The use of open sourceopen-source software in our products, as well as those of our suppliers, manufacturers and customers, may expose us to additional risks and harm our intellectual property position.
Certain of the software and/or firmware that we use and distribute (as well as that of our suppliers, manufacturers and customers) may be, be derived from, or contain, “open source” software, which is software that is generally made available to the public by its authors and/or other third parties. Such open sourceopen-source software is often made available under licenses which impose obligations in the event the software or derivative works thereof are distributed or re-distributed. These obligations may require us to make source code for the derivative works available to the public, and/or license such derivative works under a particular type of license, rather than the forms of license customarily used to protect our own software products. While we believe we have complied with our obligations under the various applicable licenses for open source software, inIn the event that a court rules that these licenses are unenforceable, or in the event the copyright holder of any open source software were to successfully establish in court that we had not complied with the terms of a license for a particular work, we could be required to release the source code of that work to the public and/or stop distribution of that work. Additionally, open sourceopen-source licenses are subject to occasional revision. In the event future iterations of open sourceopen-source software are made available under a revised license, such license revisions may adversely affect our ability to use such future iterations.
We face certain litigation risks that could harm our business.
We areEnvironmental, Social and may become subject to various legal proceedings and claims that arise in or outside the ordinary course of business. The results of complex legal proceedings are difficult to predict. Moreover, many of the complaints filed against us do not specify the amount of damages that plaintiffs seek, and we therefore are unable to estimate the possible range of damages that might be incurred should these lawsuits be resolved against us. While we are unable to estimate the potential damages arising from such lawsuits, certain of them assert types of claims that, if resolved against us, could give rise to substantial damages. Thus, an unfavorable outcome or settlement of one or more of these lawsuits could have a material adverse effect on our financial condition, liquidity and results of operations. Even if these lawsuits are not resolved against us, the uncertainty and expense associated with unresolved lawsuits could seriously harm our business, financial condition and reputation. Litigation is costly, time-consuming and disruptive to normal business operations. The costs of defending these lawsuits have been significant, will continue to be costly and may not be covered by our insurance policies. The defense of these lawsuits could also result in continued diversion of our management’s time and attention away from business operations, which could harm our business. For additional discussion regarding litigation, see the “Legal Proceedings” portion of this Annual Report.Governance Risks
We may be subject to environmental liabilities which could increase our expenses and harm our operating results.
We are subject to various federal, state and foreign laws and regulations, governing the environment, including those governing pollution, and protection of human health, and the environment and recently, those restricting the presence of certain substances in electronic products andas well as holding producers of those products financially responsible for the collection, treatment, recycling and disposal of certain products. Such laws and regulations have been passed in several jurisdictions in which we operate, are often

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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 environmental laws and regulations, and as appropriate or required, that our component suppliers 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.
With respect to compliance with environmental laws and regulations in general, we have incurred, and in the future could incur, substantial costs for the cleanup of contaminated properties, either those we own or operate or to which we have sent wastes in the past, or to comply with such environmental laws and regulations. Additionally, we could be subject to disruptions to our operations and logistics as a result of such clean-up or compliance obligations. If we were found to be in violation of these laws, we could be subject to governmental fines and liability for damages resulting from such violations. 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.
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Our business is subject to evolving regulations and expectations with respect to environmental, social and governance matters that could expose us to numerous risks.

Increasingly regulators, customers, investors, employees and other stakeholders are focusing on ESG-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 ESG-related requirements and expectations. 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 proposed climate-related reporting requirements. We may also communicate certain initiatives and goals regarding ESG-related matters in our SEC filings or in other public disclosures. 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. 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 provisionschange in the future. In addition, we could be criticized for the scope or nature of such initiatives or goals, or for any revisions to these goals. 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.

We may be subject to risks related to climate change, natural disasters and catastrophic events.
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. It is impossible to predict the Dodd-Frank Wall Street Reformtiming, magnitude or location of such natural disasters or their impacts on the local economy and Consumer Protection Act thaton our operations. If a major earthquake, wildfire or other natural disaster were to damage or destroy our facilities or manufacturing equipment, we may experience potential impacts ranging from production and shipping delays to lost profits and revenues. In October 2017 and again in October 2019, we temporarily closed our Santa Rosa, California facility resulting in production stoppage, due to wildfires in the region and the facility’s close proximity to the wildfire evacuation zone. The location of our production facility could subject us to production delays and/or equipment and property damage. 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.

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. When the capital or credit markets deteriorate or are disrupted, our ability to incur additional costsindebtedness to fund a portion of our working capital needs and liabilities.other general corporate purposes, or to refinance maturing obligations as they become due, may be constrained. In the event that we were to seek to access the capital markets or other sources of financing, there can be no assurance that we will be able to obtain financing on acceptable terms or within an acceptable time, if at all. 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. Our access to the financial markets and the pricing and terms we receive in the financial markets could be adversely impacted by various factors, including changes in financial markets and interest rates. In addition, if we do access the capital or credit markets, agreements governing any borrowing arrangement could contain covenants restricting our operations.
We
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Our notes increased our overall leverage and our convertible notes could dilute our existing stockholders and lower our reported earnings per share.

The issuance of our 1.00% Senior Convertible Notes due 2024, our 1.625% Senior Convertible Notes due 2026 and our 3.75% Senior Notes due 2029 (together the “Notes”) substantially increased our principal payment obligations. The degree to which we are leveraged could materially and adversely affect our ability to successfully obtain financing for working capital, acquisitions or other purposes and could make us more vulnerable to industry downturns and competitive pressures. In addition, the holders of the 2024 and 2026 Notes are entitled to convert the Notes into shares of our common stock or a combination of cash and shares of common stock under certain circumstances which would dilute our existing stockholders and lower our reported per share earnings.
Our ability to make payments on our indebtedness when due, to make payments upon conversion with respect to our convertible senior notes or to refinance our indebtedness as we may need or desire, depends on our future performance and our ability to generate cash flow from operations, which is subject to the SEC rules implementing the requirements of Section 1502 of the Dodd-Frank Wall Street Reformeconomic, financial, competitive and Consumer Protection Act which establish disclosure and reporting requirements for companies who use “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries in their products. Complying with the disclosure requirements requires substantial diligence efforts to determine the source of any conflict minerals used inother factors beyond our products and may require third-party auditing of our diligence process. These efforts may require internal resources that would otherwise be directed towards operational activities.
Since our supply chain is complex, we may face reputational challenges ifcontrol. If we are unable to sufficiently verify the origins of the conflict minerals usedgenerate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing or obtaining additional equity capital on terms that may be onerous or highly dilutive. We may not be able to engage in these activities on desirable terms or at all, which may result in a default on our products. Additionally, if we are unable to satisfy those customers who require that all of the components of our products are certified as conflict free, they may choose a competitor’s products which could materially impactexisting or future indebtedness and harm our financial condition and operating results.
Certain provisionsOur outstanding indebtedness may limit our operational and financial flexibility.

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 charterdebt 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 Delaware lawsthe 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 hinder a takeover attempt.result in all of our debt becoming immediately due and payable and could permit certain of our lenders to foreclose on our assets securing such debt.
We may not generate sufficient cash flow to meet our debt service and working capital requirements, which may expose us to the risk of default under our debt obligations.
We will need to implement our business strategy successfully on a timely basis to meet our debt service and working capital needs. We may not successfully implement our business strategy, and even if we do, we may not realize the anticipated results of our strategy and generate sufficient operating cash flow to meet our debt service obligations and working capital needs. 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 the event our cash flow is inadequate to meet our debt service and working capital requirements, we may be required, to the extent permitted under the indentures covering the Notes and any other debt agreements, to seek additional financing in the debt or equity markets, refinance or restructure all or a portion of our indebtedness, sell selected assets or reduce or delay planned capital or operating expenditures. Any insufficient cash flow may make it more difficult for us to obtain financing on terms that are acceptable to us, or at all.
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Despite our current level of indebtedness, we and our subsidiaries may still be able to incur substantially more debt.
We and our subsidiaries may be able to incur significant additional indebtedness in the future. The indentures that govern the Notes and the agreement that governs our secured credit facility contain restrictions on the incurrence of additional indebtedness, which are subject to a number of qualifications and exceptions, and the provisions of Section 203additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness under the agreements governing our existing debt.
The terms of the Delaware General Corporation Law prohibiting, under some circumstances, publicly-held Delaware corporations from engagingindentures that govern the Notes and the agreement that governs our secured credit facility restrict our current and future operations.
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 business combinations with some stockholders for a specified period of time without the approval of the holders ofacts 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 outstanding voting stock. Such provisions could delayassets;
•Sell assets;
•Pay dividends or impede the removalother 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 incumbent directorsbusiness;
•Amend certain material agreements, including material leases and could make more difficult a merger, tender offer or proxy contest involving us, even if such events could be beneficial, in the short-term, to the interests of the stockholders. In addition, such provisions could limit the price that some investors might be willing to pay in the future for shares of our common stock. Our certificate of incorporationdebt agreements; 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. These provisions may also have the effect of deterring hostile takeovers or delaying changes in control or change in our management.
•Enter into sale leaseback transactions.

Tax Risks

Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.limitations and/or changes in regulations.
As of July 1, 2017, we hadChanges in U.S. federal and state net operating losses,income or NOLs,other tax laws or the interpretation of $5,115.1 million and $762.2 million, respectively, and U.S. federal and state tax credit carryforwardslaws, including the Inflation Reduction Act of $103.9 million and $40.7 million respectively, which2022, as recently passed by Congress, may be utilized against future income taxes.impact our tax liabilities. Utilization of theseour NOLs and tax credit carryforwards may be subject to a substantial annual limitation if the ownership change limitations under Sections 382 and 383 of the Internal Revenue Code and similar state provisions are triggered by changes in the ownership of our capital stock. In general, an ownership change occurs if there is a cumulative change in our ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. Accordingly, purchases of our capital stock by others could limit our ability to utilize our NOLs and tax credit carryforwards in the future.
Furthermore, we may not be able to generate sufficient taxable income to utilize our NOLs and tax credit carryforwards before they expire. Due to uncertainty regarding the timing and extent of our future profitability, we continue to record a valuation allowance to offset our U.S. and certain of our foreign deferred tax assets because of uncertainty related to our ability to utilize our NOLs and tax credit carryforwards before they expire.
If any of these events occur, we may not derive some or all of the expected benefits from our NOLs and tax credit carryforwards.

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General Risks

Certain provisions in our charter and under Delaware laws could hinder a takeover attempt.
We are subject to the provisions of Section 203 of the Delaware General Corporation Law prohibiting, under some circumstances, publicly-held Delaware corporations from engaging in business combinations with some stockholders for a specified period of time without the approval of the holders of substantially all of our outstanding voting stock. Such provisions could delay or impede the removal of incumbent directors and could make more difficult a merger, tender offer or proxy contest involving us, even if such events could be beneficial, in the short-term, to the interests of the stockholders. In addition, such provisions could limit the price that some investors might be willing to pay in the future for shares of our common stock. 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. These provisions may also have the effect of deterring hostile takeovers or delaying changes in control or change in our management.

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ITEM 1B.  UNRESOLVED STAFF COMMENTS 
None.
ITEM 2.    PROPERTIES 
We own and lease various properties in the United States and in 21 other countries around the world. We use the properties for executive and administrative offices, data centers, product development offices, customer service offices, and manufacturing facilities. Our corporate headquarters of approximately 54,000 square feet is located in Milpitas, California. As of July 1, 2017, our leased and owned properties in total were approximately 1.3 million square feet, of which approximately 18,000 square feet is owned. Larger leased sites include properties located in China, France, Germany, and the United States. We believe our existing properties, including both owned and leased sites, are in good condition and suitable for the conduct of our business.Not applicable.
While we believe our existing facilities are adequate to meet our immediate needs, it may become necessary to lease, acquire, or sell additional or alternative space to accommodate future business needs.
ITEM 3.     LEGAL PROCEEDINGS 
We are subject to a variety of claimsThe information set forth under the heading “Legal Proceedings” in Note 18. Commitments and suits that arise from time to timeContingencies in the ordinary courseNotes to Consolidated Financial Statements in Item 8 of our business. While management currently believes that resolving claims against us, individually or in aggregate, will not have a material adverse impact on our financial position, results of operations or statement of cash flows, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. If an unfavorable final outcome to occur, it may have a material adverse impact on our financial position, results of operations or cash flows for the period in which the effect becomes reasonably estimable.this Report is incorporated herein by reference.
ITEM 4.     MINE SAFETY DISCLOSURES
None.Not applicable.

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PART II 
ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 
Our common stock is traded on the NASDAQNasdaq Global Select Market under the symbol “VIAV.” Prior to the separation of the Lumentum business, our common stock was traded on the NASDAQ Global Select Market under the symbol “JDSU.” As of July 28, 2017 we had 227,547,102 shares of common stock outstanding. The closing price on July 28, 2017 was $11.00.
On August 1, 2015, we completed the previously announced distribution of approximately 80.1% of the outstanding shares of Lumentum common stock to Viavi’s stockholders (the “Distribution”)(VIAV). JDSU was renamed Viavi Solutions Inc. and, at the time of the Distribution, retained ownership of approximately 19.9% of Lumentum’s outstanding shares. We agreed not to liquidate the retained shares during the first six months following the Distribution. However, in connection with a private letter ruling from the Internal Revenue Service, we committed to liquidate these shares within three years from the Distribution. We have sold all of our ownership of Lumentum common stock as of July 1, 2017. The Distribution was made to Viavi’s stockholders of record as of the close of business on July 27, 2015 (the “Record Date”), who received one share of Lumentum common stock for every five shares of Viavi common stock held as of the close of business on the Record Date and not sold prior to August 4, 2015. Viavi stockholders received cash in lieu of any fractional shares of Lumentum common stock. Our trading commenced “regular-way” trading on August 4, 2015 on NASDAQ under the ticker symbol “VIAV.”
The following table summarizes the high and low intraday sales prices for our common stock as reported on the NASDAQ Global Select Market during fiscal 2017 and 2016. The stock prices in the following table prior to August 4, 2015, the date of “regular-way” trading commenced following the Lumentum separation, have not been adjusted for the distribution.
 High Low
Fiscal 2017   
Fourth Quarter$11.89
 $9.46
Third Quarter11.15
 8.13
Second Quarter8.76
 6.99
First Quarter7.94
 6.36
    
Fiscal 2016   
Fourth Quarter$7.20
 $5.93
Third Quarter6.94
 4.68
Second Quarter6.56
 5.45
First Quarter subsequent to August 3, 20156.88
 4.99
First Quarter through August 3, 201512.00
 10.68
As of July 29, 2017,2023, we had 3,7161,747 holders of record of our common stock. We have not paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future.
DuringThe following table provides stock repurchase activity during the fourth quarter of the fiscal 2017wethree months ended July 1, 2023 (in millions, except per share amounts):
 Total Number of Shares PurchasedAverage Price Paid per Share
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs(1)
Maximum Dollar Value of Shares that May Still Be Purchased Under the Plans or Programs(1)
Period
April 2 - April 29, 2023— — — $244.8 
April 30- May 27, 20230.3 $9.740.3 $242.2 
May 28 - July 1, 20230.7 $10.020.7 $234.8 
  Total1.0 1.0 
(1) Share repurchases made the following repurchasesunder our 2022 Repurchase Plan for up to $300 million of our common stock, (in millions, except shares and per share amounts):which was announced September 11, 2022. Refer to “Note 15. Stockholders' Equity” of Item 8 for more details.
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Period Total Number of Shares Purchased Average Price Paid per share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
April 2, 2017 to April 29, 2017 (1) 8,000
 $9.50
 8,000
 $53.8
April 30, 2017 to May 27, 2017 —
 —
 —
 53.8
May 28, 2017 to July 1, 2017 (1) 30,430
 10.92
 30,430
 53.5
  38,430
 $10.62
 38,430
 $53.5
(1)Repurchases were made in open market transactions pursuant to the program announced in February 2016. In February 2016, the Company's Board of Directors authorized a stock repurchase program under which the Company may purchase shares of its common stock worth up to an aggregate purchase price of $100.0 million through open market or private transactions.In September 2016, the Board of Directors increased the Company’s previously authorized stock


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repurchase program from $100 million to $150 million. Under the revised repurchase authorization, the Company may repurchase up to $150 million of the Company’s common stock from time to time at the discretion of the Company’s management. This stock repurchase authorization expires on December 31, 2017.
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.
The following graph and table set forth the total cumulative return, assuming reinvestment of dividends, on an investment of $100 in June 20122018 and ending June 20172023 in: (i) our Common Stock, (ii) the S&P 500 Index, (iii) the NASDAQNasdaq Stock Market (U.S.) Index, and (iv) the NASDAQNasdaq Telecommunications Index. The table below includes our stock performance prior to the separation of the Lumentum business as traded on the NASDAQ Global Select Market under the symbol “JDSU.” Historical stock price performance is not necessarily indicative of future stock price performance. For the purpose of this graph, the distribution of approximately 80.1% of the outstanding common stock of Lumentum to our stockholders, pursuant to which Lumentum became an independent company, is treated as a non-taxable cash dividend of $21.15 for every five shares of Viavi common stock held, an amount equal to the closing price of Lumentum common stock on August 4, 2015 which was deemed reinvested in Viavi common stock at the closing price on August 4, 2015.
1618
*$100 invested on 6/30/1218 in stock or index.

6/20186/20196/20206/20216/20226/2023
VIAVI$100.00 $129.79 $122.07 $170.61 $127.83 $110.64 
S&P 500$100.00 $110.42 $115.19 $169.29 $150.97 $178.66 
Nasdaq Composite$100.00 $107.78 $132.70 $200.58 $153.53 $191.93 
Nasdaq Telecommunications$100.00 $117.72 $137.47 $190.00 $201.30 $214.56 
ITEM 6.    [RESERVED]
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 6/12 6/13 6/14 6/15 6/16 6/17
Viavi$100.00
 $130.82
 $113.36
 $105.27
 $101.13
 $160.62
S&P 500100.00
 117.92
 143.91
 151.46
 154.08
 177.91
NASDAQ Composite100.00
 115.95
 150.19
 169.91
 164.99
 209.21
NASDAQ Telecommunications100.00
 124.28
 141.30
 143.68
 142.22
 161.85

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ITEM 6.    SELECTED FINANCIAL DATA 
This table sets forth selected financial data of Viavi (in millions, except share and per share amounts) for the periods indicated. This data should be read in conjunction with and is qualified by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of this Annual Report on Form 10-K and our audited consolidated financial statements, including the notes thereto and the other financial information included in Item 8 of this Annual Report on Form 10-K. The selected financial data presented in this section is not intended to replace the consolidated financial statements included in this report.
 Years Ended
 July 1, 2017 July 2, 2016 June 27, 2015 June 28, 2014 June 29, 2013
 (8)(10) (8)(9)(10) (7)(8) (5)(6)(8) (1)(2)(3)(4)(8)
Consolidated Statements of Operations Data:         
Net revenue$811.4
 $906.3
 $873.9
 $926.9
 $909.1
Income (loss) from continuing operations, net of tax165.3
 (50.4) (131.4) (74.6) 11.0
Income (loss) from discontinued operations, net of tax1.6
 (48.8) 43.3
 56.8
 46.0
Net income (loss)$166.9
 $(99.2) $(88.1) $(17.8) $57.0
          
Net income (loss) per share from - basic:         
Continuing operations$0.72
 $(0.22) $(0.57) $(0.32) $0.04
Discontinued operations0.01
 (0.20) 0.19
 0.24
 0.20
Net income (loss)$0.73
 $(0.42) $(0.38) $(0.08) $0.24
          
Net income (loss) per share from - diluted:         
Continuing operations$0.70
 $(0.22) $(0.57) $(0.32) $0.04
Discontinued operations0.01
 (0.20) 0.19
 0.24
 0.20
Net income (loss)$0.71
 $(0.42) $(0.38) $(0.08) $0.24
 Years Ended
 July 1, 2017 July 2, 2016 June 27, 2015 June 28, 2014 June 29, 2013
 (8)(10) (8)(9) (7)(8) (5)(6) (2)(3)(4)
Consolidated Balance Sheets Data:         
Cash and cash equivalents, short-term investments, and restricted cash$1,447.8
 $979.8
 $825.6
 $881.3
 $515.9
Working capital1,438.2
 985.3
 1,004.6
 1,001.1
 682.6
Total assets2,110.5
 1,678.1
 2,210.6
 2,342.7
 1,715.2
Long-term obligations1,095.3
 762.4
 722.8
 746.6
 206.2
Total stockholders’ equity786.4
 689.3
 1,101.4
 1,187.7
 1,161.3
(1)During the first quarter of fiscal 2013, we entered into a definitive agreement to sell the hologram business (“Hologram Business”) within our OSP segment, which subsequently closed on October 12, 2012. As a result, the operations of the Hologram Business have been presented as discontinued operations for the period presented. 
(2)During the third quarter of fiscal 2013, we acquired Arieso Ltd. (“Arieso”) in a transaction accounted for in accordance with the authoritative guidance on business combinations. The Consolidated Statements of Operations for fiscal 2013 included the results of Arieso subsequent to March 7, 2013 and the Consolidated Balance Sheet as of June 29, 2013 included Arieso’s financial position. 
(3)During the third quarter of fiscal 2013, we approved a strategic plan to exit NSE’s legacy low-speed wireline product line, which resulted in a $2.2 million charge for accelerated amortization of related intangibles, of which $1.8 million and $0.4 million are included in amortization of acquired technologies and amortization of other intangibles in the Consolidated Statement of Operations, respectively. In addition, we incurred $11.3 million of inventory-related charges included in cost of revenues in the Consolidated Statement of Operations, primarily related to the write-off of inventory no longer being sold due to the legacy low-speed wireline product line exit. 

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(4)During the fourth quarter of fiscal 2013, we determined that it is more likely than not that a portion of the deferred tax assets of a non-U.S. jurisdiction will be realized after considering all positive and negative evidence. Accordingly, a deferred tax valuation allowance release of $107.9 million was recorded as an income tax benefit during the quarter. 
(5)During the third quarter of fiscal 2014, we recognized $21.7 million of uncertain tax benefits related to deferred tax assets due to the expiration of the statute of limitations in a non-U.S. jurisdiction. 
(6)During the third quarter of fiscal 2014, we acquired Network Instruments in a transaction accounted for in accordance with the authoritative guidance on business combinations. The Consolidated Statement of Operations for fiscal 2014 included the results of operations from Network Instruments subsequent to January 6, 2014 and the Consolidated Balance Sheet as of June 28, 2014 included Network Instruments’ financial position.
(7)In the third quarter of fiscal 2015, we recognized a $21.8 million tax benefit upon the settlement of an audit in a non-U.S. jurisdiction.
(8)During the first quarter of fiscal 2016, we completed the Separation. As a result, the operations of the Lumentum business have been presented as discontinued operations in all periods of the Company’s Consolidated Statements of Operations and in the Consolidated Balance Sheet as of June 27, 2015.
(9)
During the fourth quarter of fiscal 2016, the Company recorded a $91.4 million goodwill impairment charge related to the SE reporting unit in the Consolidated Statements of Operations.Refer to “Note 8. Goodwill” for more information.
(10)
During fiscal year ended 2017 and 2016, the Company recorded $203.0 million and $71.5 million, respectively, gross realized gains on the sale of Lumentum common stock that was retained as part of the Separation. Refer to “Note 7. Investments, Forward Contracts and Fair Value Measurements”for more information.


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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-lookingand analysis summarizes the significant factors affecting our consolidated operating results, financial condition, liquidity and capital resources during the period ended July 1, 2023. Unless otherwise noted, all references herein for the years 2023, 2022,and 2021 represent the fiscal years ended July 1, 2023, July 2, 2022, and July 3, 2021, respectively. We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that reflectaccounted for those changes, as well as how certain accounting estimates affect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-lookingfinancial statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere 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. Our Industries and Developmentsactual results could differ materially from those discussed in the forward-looking statements.
Viavi, formerly JDSU, isOVERVIEW
We are a global provider of network test, monitoring, and assurance solutions tofor communications service providers enterprises(CSPs), hyperscalers, network equipment manufacturers (NEMs), original equipment manufacturers (OEMs), government and their ecosystems, supported by a worldwide channel community including Viavi Velocity Solution Partners (“Velocity”). Our Velocity program allows us to optimizeavionics. We help these customers harness the usepower of direct or partner sales depending on applicationinstruments, automation, intelligence, and sales volume. Its strategy is to expand our reach into new market segments as well as expand our capability to sell and deliver solutions. Our solutions deliver end-to-end visibility across physical, virtual and hybrid networks, enabling customers to optimize connectivity, quality of experience and profitability. Viavivirtualization. VIAVI is also a leader in high performance thin film optical coatings, providing light management solutions totechnologies for 3D sensing for the anti-counterfeiting, consumer andelectronics, industrial, automotive, government and healthcareaerospace applications.

To serve our markets, we operate the following business segments:

•Network Enablement (NE);
•Service Enablement (SE); and other markets. On August 1, 2015,
•Optical Security and Performance Products (OSP).
During fiscal 2023, we completedexperienced a constrained demand outlook and continued inflationary pressures. Weakness in CSP and NEM spending created headwinds for our NE segment. Softening demand for anti-counterfeiting driven by fiscal tightening as central banks continue to normalize currency printing from elevated levels during the separationpandemic created pressure on OSP revenues. Despite the slowdown in overall service provider spend, some service providers have begun to free up funds for network maintenance and optimization, which benefits VIAVI’s NSE business segment.

Any prolonged disruption of manufacturing of our optical componentsproducts, commerce and lasersrelated activity or significant decrease in demand for our products could materially and adversely affect our results of business, operations, and financial conditions.
Our financial results and long-term growth model will continue to be driven by revenue growth, non-GAAP operating income, non-GAAP operating margin, non-GAAP diluted earnings per share (EPS) and cash flow from operations. We believe these key operating metrics are useful to investors because management uses these metrics to assess the growth of our business and created two publicly traded companies:
an optical components and commercial lasers company named Lumentum, consistingthe effectiveness of our CCOP segmentmarketing and operational strategies.
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Looking Ahead to 2024
As we look forward to the WaveReady product line formerly withinyear ahead, our focus remains on executing against our strategic priorities to drive revenue and earnings growth, capture market share and continue to optimize our capital structure. We remain positive on our long-term growth drivers in 5G Wireless, Fiber, 3D Sensing and Resilient Position, Navigation and Timing (PNT). We will continue to focus on executing against our strategic priorities highlighted during our September 2022 Analyst Day Event such as our plans 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, Research & Development (R&D) and Selling, General and Administrative (SG&A).
FINANCIAL HIGHLIGHTS
Our fiscal 2023 results included the following notable items:
•Net revenues of $1.1 billion, down $186.3 million or 14.4% year-over-year
•GAAP operating margin of 7.4%, down 690 bps year-over-year
•Non-GAAP operating margin of 15.6%, down 660 bps year-over-year
•GAAP Diluted EPS of $0.11, up $0.04 or 57.1% year-over-year
•Non-GAAP Diluted EPS of $0.55, down $0.40 or 42.1% year-over-year
In fiscal 2023, VIAVI experienced a constrained demand outlook and end market volatility. Net revenue of $1.1 billion, down $186.3 million or 14.4%, demonstrated the challenging macro-economic environment faced by our NE segment; and
a network and service enablement and optical coatings company, renamed Viavi, consisting of our NE, SE and OSP segments.
InVIAVI's fiscal 2023 GAAP operating margin of 7.4% was down 690 bps compared to fiscal 2022 due to the decline in revenues, partially offset by lower operating expenses. Non-GAAP operating margin of 15.6% decreased 660 basis points largely due to a decline in revenue partially offset by lower operating expenses.
GAAP Diluted EPS of $0.11 increased 57.1%, or $0.04, from fiscal 2022 largely due to the loss incurred in connection with the Separationrepurchase of certain 1.00% and 1.75% Senior Convertible Notes in fiscal 2022. Non-GAAP Diluted EPS of $0.55 decreased 42.1% or $0.40 from a record of $0.95 in fiscal 2022 due to the decline in revenues.
In fiscal 2023, we distributed approximately 80.1%generated $114.1 million in operating cash flow and deployed $51.1 million or 4.6% of revenues towards capital expenditures. We further improved our balance sheet by retiring the remaining 1.75% 2023 Senior Convertible Notes and partially exchanging the 1.0% 2024 Senior Convertible Notes at comparable terms into 1.625% 2026 Senior Convertible Notes. We continued to execute our capital allocation strategy by deploying $72.3 million towards acquisitions and also repurchasing 7.3 million shares of our common stock for $83.9 million.

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A reconciliation of GAAPfinancial measures to Non-GAAP financial measures is provided below (in millions, except EPS amounts):
 Years Ended
 July 1, 2023July 2, 2022
 Operating IncomeOperating MarginOperating IncomeOperating Margin
GAAP measures$82.4 7.4 %$185.0 14.3 %
Stock-based compensation51.2 4.7 %52.3 4.1 %
Change in fair value of contingent liability(4.5)(0.4)%0.3 — %
Other (benefits) charges unrelated to core operating performance(1)
(2.0)(0.2)%9.6 0.7 %
Amortization of intangibles33.3 3.0 %39.7 3.1 %
Restructuring and related charges (benefits)12.1 1.1 %(0.1)— %
Total related to Cost of Revenue and Operating Expenses90.1 8.2 %101.8 7.9 %
Non-GAAP measures$172.5 15.6 %$286.8 22.2 %
 Years Ended
 July 1, 2023July 2, 2022
 Net IncomeDiluted
 EPS		Net IncomeDiluted
 EPS
GAAP measures$25.5 $0.11 $15.5 $0.07 
Items reconciling GAAP net income and EPS to non-GAAP net income and EPS:
Stock-based compensation51.2 0.23 52.3 0.22 
Change in fair value of contingent liability(4.5)(0.02)0.3 — 
Other (benefits) charges unrelated to core operating performance(1)
(2.0)(0.01)9.6 0.04 
Amortization of intangibles33.3 0.15 39.7 0.17 
Restructuring and related charges (benefits)12.1 0.05 (0.1)— 
Non-cash interest expense and other expense (2)
3.9 0.02 102.2 0.43 
Benefit from income taxes5.2 0.02 5.8 0.02 
Total related to Net income and EPS99.2 0.44 209.8 0.88 
Non-GAAP measures$124.7 $0.55 $225.3 $0.95 
Shares used in per share calculation for Non-GAAP EPS226.6 238.2 
(1) Other items include (benefits) charges unrelated to core operating performance primarily consisting of certain acquisition and integration related charges, transformational initiatives such as site consolidations, accretion of debt discount, intangible impairment and loss on disposal of long-lived assets.
(2) The Company incurred a loss of $2.2 million for the twelve months ended July 1, 2023 in connection with the modification of certain 1.00% Senior Convertible Notes. The Company incurred a loss of $101.8M for the twelve months ended July 2, 2022 in connection with the repurchase of certain 1.00% and 1.75% Senior Convertible Notes. The Company eliminates this in calculating non-GAAP net income and non-GAAP EPS, because it believes that in so doing, it can provide investors a clearer and more consistent view of the outstanding sharesCompany’s core operating performance.
Use of Lumentum common stock to our stockholders on August 1, 2015. Non-GAAP (Adjusted) Financial Measures
The Company was renamed Viaviprovides non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and atnon-GAAP EPS financial measures as supplemental information regarding the timeCompany’s operational performance. The Company uses the measures disclosed in this Report to evaluate the Company’s historical and prospective financial performance, as well as its performance relative to its competitors. Specifically, management uses these items to further its own understanding of the distribution, retained ownershipCompany’s core operating performance, which the Company believes represent its performance in the ordinary, ongoing and customary course of approximately 19.9%its operations. Accordingly, management excludes from core operating performance items such as those relating to certain purchase price accounting adjustments, amortization of Lumentum’s outstanding shares. Activitiesacquisition-related intangibles, stock-based compensation, legal settlements, restructuring, changes in fair value of contingent consideration liabilities and certain investing expenses and other activities that management believes are not reflective of such ordinary, ongoing and core operating activities.  
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The Company believes providing this additional information allows investors to see Company results through the eyes of management. The Company further believes that providing this information allows investors to better understand the Company’s financial performance and, importantly, to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance.
The non-GAAP adjustments described in this report are excluded by the Company from its GAAP financial measures because the Company believes excluding these items enables investors to evaluate more clearly and consistently the Company’s core operational performance. The non-GAAP adjustments are outlined below.
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) workforce related charges such as severance, retention bonuses and employee relocation costs related to formal restructuring plans, (iii) costs for facilities not required for ongoing operations, and costs related to the Lumentum business have been presentedrelocation 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 discontinuedthe implementation of simplified automated processes, site consolidations, and reorganizations. The Company excludes these items in calculating non-GAAP operating margin, non-GAAP net income and non-GAAP EPS.
Non-cash interest expense and other expense: The Company excludes certain investing expenses and non-cash activities that management believes are not reflective of such ordinary, ongoing and core operating activities, 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 the utilization of net operating losses where valuation allowances were released, intra-period tax allocation benefit and the tax effect for amortization of non-tax deductible intangible assets, in calculating non-GAAP net income and non-GAAP EPS.
Non-GAAP financial measures are not in accordance with, preferable to, or an alternative for, generally accepted accounting principles in the United States. The GAAP measure most directly comparable to non-GAAP operating income is operating income. The GAAP measure most directly comparable to non-GAAP operating margin is operating margin. The GAAP measure most directly comparable to non-GAAP net income is net income. The GAAP measure most directly comparable to non-GAAP EPS is earnings per share. The Company believes these GAAP measures alone are not fully indicative of its core operating expenses and performance and that providing non-GAAP financial measures in conjunction with GAAP measures provides valuable supplemental information regarding the Company’s overall performance.
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RESULTS OF OPERATIONS
This section of this Annual Report on Form 10-K generally discusses the results of operations in all periodsfor the fiscal year ended July 1, 2023 and July 2, 2022 and year-to-year comparisons between such fiscal years. Discussions of the Company’s consolidated financial statementsyear-to-year comparisons between the fiscal year ended July 2, 2022 and July 3, 2021, that are not included in this Annual Report on Form 10-K, can be found in “Management’s Discussion and the accompanying disclosures, discussionAnalysis of Financial Condition and analysis herein pertains to the Company’s continuing operations, unless noted otherwise.
To serveResults of Operations” in Part II, Item 7 of our markets, during fiscal 2017 we operated the following business segments:
•Network Enablement
•Service Enablement
•Optical Security and Performance Products
Network Enablement
NE provides an integrated portfolio of testing solutions that access the network to perform build-out and maintenance tasks. These solutions include instruments, software and services to design, build, activate, certify, troubleshoot and optimize networks. They also support more profitable, higher-performing networks and facilitate time-to-revenue.
Our solutions address lab and production environments, field deployment and service assurance for wireless and fixed communications networks, including storage networks. Our test instrument portfolio is one of the largest in the industry, with hundreds of thousands of units in active use by major NEMs, operators and services providers worldwide. Designed to be mobile, these products include instruments and software that access the network to perform installation and maintenance tasks. They help service provider technicians assess the performance of network elements and segments and verify the integrity of the information being transmitted across the network. These instruments are highly intelligent and have user interfaces that are designed to simplify operations and minimize the training required to operate them. Our NE solutions are also used by network-equipment manufacturers (“NEMs”) in the design and production of next-generation network equipment.
Viavi also offers 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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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, and deployed private enterprise customers. Our customers include Alcatel-Lucent International, América Móvil, S.A.B. de C.V., AT&T Inc., CenturyLink, Inc., Cisco Systems, Inc., Comcast Corporation, Nokia Solutions and Networks, Reliance Industries, Time Warner Inc. and Verizon Communications Inc..
Service Enablement
SE provides embedded systems and enterprise performance management solutions that give global CSPs, enterprises and cloud operators visibility into network, service and application data. These solutions - which primarily consist of instruments, microprobes and software - monitor, collect and analyze network data to reveal the actual customer experience and identify opportunities for new revenue streams and network optimization.
Our portfolio of SE solutions addresses the same lab and production environments, field deployment and service assurance for wireless and fixed communications networks, including storage networks, as our NE portfolio. Our solutions let carriers remotely monitor performance and quality of network, service and applications performance throughout the entire network. This provides our customers with enhanced network management, control, and optimization that allow network operators to initiate service to new customers faster, decrease the need for technicians to make on-site service calls, help to make necessary repairs faster and, as a result, lower costs while providing higher quality and more reliable services. Remote monitoring decreases operating expenses, while early detection helps increase uptime, preserve revenue, and helps operators better monetize their networks.
SE customers include similar CSPs, NEMs, government organizations, large corporate customers, and storage-segment customers that are served by our NE segment.
Optical Security and Performance Products
Our OSP segment leverages its core optical coating technologies and volume manufacturing capability to design, manufacture, and sell products targeting anti-counterfeiting, consumer and industrial, government, healthcare and other markets.
Our security offeringsAnnual Report on Form 10-K for the currency market include OVP®, OVMP® and banknote thread substrates. OVP® enables a color-shifting effect 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. OSP also develops and delivers overt and covert anti-counterfeiting products that utilize its proprietary printing platform and are targeted primarily at the pharmaceutical and consumer-electronics markets.
Leveraging our expertise in spectral management and our unique high-precision coating capabilities, OSP provides a range of products and technologies for the consumer and industrial market, including, for example, 3D sensing optical filters.
OSP value-added solutions meet the stringent requirements of commercial and government customers. Our products are used in a variety of aerospace and defense applications, including optics for guidance systems, laser eye protection and night vision systems. These products, including coatings and optical filters, are optimized for each specific application.
OSP serves customers such as FLIR Systems, Kingston Digital, L-3 Communications, Lockheed Martin and SICPA.
Recently Issued Accounting Pronouncements
Refer to “Note 2. Recently Issued Accounting Pronouncements” regarding the effect of certain recent accounting pronouncements on our consolidated financial statements.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, net revenue and expenses, and the related disclosures. We base our estimates on historical experience, our knowledge of economic and market factors and various other assumptions that we believe to be reasonable under the circumstances. Estimates and judgments used in the preparation of our financial statements are, by their nature, uncertain and unpredictable, and depend upon, among other things, many factors outside of our control, such as demand for our products and economic conditions. Accordingly, our estimates and judgments may prove to be incorrect and actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies are affected by significant estimates, assumptions and judgments used in the preparation of our consolidated financial statements:

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Revenue Recognition
We recognize revenue when it is realized or realizable and earned. We consider revenue realized or realizable and earned when there is persuasive evidence of an arrangement, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. Delivery does not occur until products have been shipped or services have been provided, risk of loss has transferred and in cases where formal acceptance is required, customer acceptance has been obtained or customer acceptance provisions have lapsed. In situations where a formal acceptance is required but the acceptance only relates to whether the product meets its published specifications, revenue is recognized upon delivery provided all other revenue recognition criteria are met.
Historical return rates are monitored on a product-by-product basis. In addition, some distributor agreements allow for partial return of products and/or price protection under certain conditions within limited time periods. Such return rights are generally limited to contractually defined, short-term stock rotation and defective or damaged product. We maintain reserves for sales returns and price adjustments based on historical experience and other qualitative factors. As new products or distributors are introduced, these historical rates are used to establish initial sales returns reserves and are adjusted as better information becomes available. We also have market development incentive programs for certain distributors whereby rebates are offered based upon exceeding volume goals. Estimated rebates, sales returns and other such allowances are deducted from revenue.
In addition to the aforementioned general policies, the following are the specific revenue recognition policies for multiple-element arrangements and for each major category of revenue.
Multiple-Element Arrangements
When a sales arrangement contains multiple deliverables, such as sales of products that include services, the multiple deliverables are evaluated to determine whether there are one or more units of accounting. Where there is more than one unit of accounting, then the entire fee from the arrangement is allocated to each unit of accounting based on the relative selling price. Under this approach, the selling price of a unit of accounting is determined by using a selling price hierarchy which requires the use of vendor-specific objective evidence (“VSOE”) of fair value if available, third-party evidence (“TPE”) if VSOE is not available, or management’s best estimate of selling price (“BESP”) if neither VSOE nor TPE is available. Revenue is recognized when the revenue recognition criteria for each unit of accounting are met.
We establish VSOE of selling price using the price charged for a deliverable when sold separately. TPE of selling price is established by evaluating similar and interchangeable competitor goods or services in sales to similarly situated customers. When VSOE or TPE are not available then we use BESP. Generally, we are not able to determine TPE because our product strategy differs from that of others in our markets, and the extent of customization varies among comparable products or services from our peers. We establish BESP using historical selling price trends and considering multiple factors including, but not limited to geographies, market conditions, competitive landscape, internal costs, gross margin objectives, and pricing practices.
The determination of BESP is made through consultation with and approval by the Pricing Committee. We may modify or develop new pricing practices and strategies in the future. As these pricing strategies evolve, we may modify our pricing practices in the future, which may result in changes in BESP. The aforementioned factors may result in a different allocation of revenue to the deliverables in multiple element arrangements from the current fiscal year which may change the pattern and timing of revenue recognition for these elements but will not change the total revenue recognized for the arrangement.
To the extent a deliverable(s) in a multiple-element arrangement is subject to specific guidance (for example, software that is subject to the authoritative guidance on software revenue recognition), we allocate the fair value of the units of accounting using relative selling price and that unit of accounting is accounted for in accordance with the specific guidance. Some of our product offerings include hardware that are integrated with or sold with software that delivers the functionality of the equipment. We believe this equipment is not considered software-related and would therefore be excluded from the scope of the authoritative guidance on software revenue recognition.
Hardware
Revenue from hardware sales is typically recognized when the product meet delivery criteria.
Services
Revenue from services and system maintenance is recognized on a straight-line basis over the services term. Revenue from professional service engagements is recognized once its delivery obligation is fulfilled. Revenue related to extended warranty and product maintenance contracts is deferred and recognized on a straight-line basis over the delivery period. We also generate service revenue from hardware repairs and calibration which is recognized as revenue upon completion of the service.

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Software
The Company’s software arrangements generally consist of a perpetual license fee, installation services and Post-Contract Support (“PCS”) as well as other non-software deliverables.

VSOE of fair value for PCS is established based on the renewal rate or the bell curve methodology. Non-software and software-related arrangements are bifurcated based on a relative selling price using BESP. The software related elements are bifurcated into separate units of accounting if VSOE of fair value has been established for the undelivered element(s) and the functionality of the delivered element(s) is not dependent on the undelivered element(s).

Revenue from multiple-element software arrangements that include installation services, is deferred until installation service obligation for the software solution is fulfilled. If VSOE has been established for the undelivered elements, the software, installation services and non-software elements are recognized upon completion of delivery and the PCS is recognized ratably over the remaining support contract term. If VSOE has not been established for the undelivered element, the software related elements are recognized ratably over the remaining support period.  
Investments
Our investments in debt securities and marketable equity securities are primarily classified as available-for-sale investments or trading securities and are recorded at fair value. The cost of securities sold is based on the specific identification method. Unrealized gains and losses on available-for-sale investments, net of tax, are reported as a separate component within our Consolidated Statements of Stockholders’ Equity. Unrealized gains or losses on trading securities resulting from changes in fair value are recognized in current earnings. Our short-term investments, which are classified as current assets, include certain securities with stated maturities of longer than twelve months as they are highly liquid and available to support current operations. We periodically review our investments for impairment. If a debt security’s market value is below amortized cost and we either intend to sell the security or it is more likely than not that we will be required to sell the security before its anticipated recovery, we record an other-than-temporary impairment charge to investment income (loss) for the entire amount of the impairment. If a debt security’s market value is below amortized cost and we do not expect to recover the entire amortized cost of the security, we separate the other-than-temporary impairment into the portion of the loss related to credit factors, or the credit loss portion, and the portion of the loss that is not related to credit factors, or the non-credit loss portion. The credit loss portion is the difference between the amortized cost of the security and our best estimate of the present value of the cash flows expected to be collected from the debt security. The non-credit loss portion is the residual amount of the other-than-temporary impairment. The credit loss portion is recorded as a charge to income (loss), and the non-credit loss portion is recorded as a separate component of other comprehensive income (loss).
Inventory Valuation
We assess the value of our inventory on a quarterly basis and write down those inventories that are obsolete or in excess of our forecasted usage to their estimated realizable value. Our estimates of realizable value are based upon our analysis and assumptions including, but not limited to, forecasted sales levels by product, expected product lifecycle, product development plans and future demand requirements. Our product line management personnel play a key role in our excess review process by providing updated sales forecasts, managing product transitions and working with manufacturing to maximize recovery of excess inventory. If actual market conditions are less favorable than our forecasts or actual demand from our customers is lower than our estimates, we may be required to record additional inventory write-downs. If actual market conditions are more favorable than anticipated, inventory previously written down may be sold, resulting in lower cost of sales and higher income from operations than expected in that period.
Goodwill Valuation
We test goodwill for possible impairment on an annual basis in our fourth quarter and at any other time if events occur or circumstances indicate that the carrying amount of goodwill may not be recoverable. Circumstances that could trigger an impairment test include, but are not limited to, a significant adverse change in the business climate or legal factors, an adverse action or assessment by a regulator, change in customers, target market and strategy, unanticipated competition, loss of key personnel, or the likelihood that a reporting unit or significant portion of a reporting unit will be sold or otherwise disposed.
The authoritative guidance allows an entity to assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. If an entity determines that as a result of the qualitative assessment that it is more likely than not (i.e. greater than 50% likelihood) that the fair value of a reporting unit is less than its carrying amount, then the quantitative test is required. Otherwise, no further testing is required. The quantitative goodwill impairment test requires us to estimate and compare the fair value of our reporting units with their carrying values.

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In the fourth quarter of fiscal 2017, we early adopted the new authoritative guidance issued by the Financial Accounting Standards Board (“FASB”) that eliminated the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, any impairment charge would be based on the excess of a reporting unit's carrying amount over its fair value as determined under the quantitative goodwill impairment test.
Application of the goodwill impairment test requires judgments, including: identification of the reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, a qualitative assessment to determine whether there are any impairment indicators, and determining the fair value of each reporting unit. We generally estimate the fair value of a reporting unit using a combination of the income approach, which estimates the fair value based on the future discounted cash flows, and the market approach, which estimates the fair value based on comparable market prices. Our significant estimates in the income approach include our weighted average cost of capital, long-term rate of growth and profitability of the reporting unit’s business, and working capital effects. The market approach estimates the fair value of the business based on a comparison of the reporting unit to comparable publicly traded companies in similar lines of business. Significant estimates in the market approach include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment, and assessing comparable revenue and operating income multiples in estimating the fair value of the reporting unit.
We base our estimates on historical experience and on various assumptions about the future that we believe are reasonable based on available information. Unanticipated events and circumstances may occur that affect the accuracy of our assumptions, estimates and judgments. For example, if the price of our common stock were to significantly decrease combined with other adverse changes in market conditions, thus indicating that the underlying fair value of our reporting units may have decreased, we might be required to reassess the value of our goodwill in the period such circumstances were identified.
In the fourth quarter of fiscal 2017, we performed the goodwill impairment test in accordance with the authoritative guidance for NE and OSP reporting units, and determined no indicator of impairment. As of ended July 1, 2017, the SE reporting unit did not have any goodwill, which was fully impaired in the fourth quarter of fiscal 2016. Refer to “Note 8. Goodwill” for more information.
Long-lived Asset Valuation (Property, Plant and Equipment and Intangible Assets)
We test long-lived assets for recoverability, at the asset group level, when events or changes in circumstances indicate that their carrying amounts may not be recoverable. Circumstances which could trigger a review include, but are not limited to, significant decreases in the market price of the asset, significant adverse changes in the business climate or legal factors, accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset, current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset, or current expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life. 
Recoverability is assessed based on the difference between the carrying amount of the asset and the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.
Income Taxes
In accordance with the authoritative guidance on accounting for income taxes, we recognize income taxes using an asset and liability approach. This approach requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. The measurement of current and deferred taxes is based on provisions of the enacted tax law and the effects of future changes in tax laws or rates are not anticipated.
The authoritative guidance provides for recognition of deferred tax assets if the realization of such deferred tax assets is more likely than not to occur based on an evaluation of both positive and negative evidence and the relative weight of the evidence. With the exception of certain international jurisdictions, we have determined that at this time it is more likely than not that deferred tax assets attributable to the remaining jurisdictions will not be realized, primarily due to uncertainties related to our ability to utilize our net operating loss carryforwards before they expire. Accordingly, we have established a valuation allowance for such deferred tax assets. If there is a change in our ability to realize our deferred tax assets for which a valuation allowance has been established, then our tax provision may decrease in the period in which we determine that realization is more likely than not. Likewise, if we determine that it is not more likely than not that our deferred tax assets will be realized, then a valuation allowance may be established for such deferred tax assets and our tax provision may increase in the period in which we make the determination.
The authoritative guidance on accounting for uncertainty in income taxes prescribes the recognition threshold and measurement attributes for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Additionally, it provides guidance on recognition, classification, and disclosure of tax positions. We are subject to

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income tax audits by the respective tax authorities in all of the jurisdictions in which we operate. The determination of tax liabilities in each of these jurisdictions requires the interpretation and application of complex and sometimes uncertain tax laws and regulations. We recognize liabilities based on our estimate of whether, and the extent to which, additional tax liabilities are more likely than not. If we ultimately determine that the payment of such a liability is not necessary, then we reverse the liability and recognize a tax benefit during the period in which the determination is made that the liability is no longer necessary.
The recognition and measurement of current taxes payable or refundable and deferred tax assets and liabilities requires that we make certain estimates and judgments. Changes to these estimates or a change in judgment may have a material impact on our tax provision in a future period.
Restructuring Accrual
In accordance with authoritative guidance on accounting for costs associated with exit or disposal activities, generally costs associated with restructuring activities are recognized when they are incurred. However, in the case of leases, the expense is estimated and accrued when the property is vacated. Given the significance of, and the timing of the execution of such activities, this process is complex and involves periodic reassessments of estimates made from the time the property was vacated, including evaluating real estate market conditions for expected vacancy periods and sub-lease income. Additionally, a liability for post-employment benefits for workforce reductions related to restructuring activities is recorded when payment is probable and, the amount is reasonably estimable. We continually evaluate the adequacy of the remaining liabilities under our restructuring initiatives. Although we believe that these estimates accurately reflect the costs of our restructuring plans, actual results may differ, thereby requiring us to record additional provisions or reverse a portion of such provisions.
Pension and Other Postretirement Benefits
The funded status of our retirement-related benefit plans is recognized in the Consolidated Balance Sheets. The funded status is measured as the difference between the fair value of plan assets and the benefit obligation at fiscal year end, the measurement date. For defined benefit pension plans, the benefit obligation is the projected benefit obligation (“PBO”); and for the non-pension postretirement benefit plan, the benefit obligation is the accumulated postretirement benefit obligation (“APBO”)2, 2022. The PBO represents the actuarial present value of benefits expected to be paid upon our employee’s retirement. The APBO represents the actuarial present value of postretirement benefits attributed to employee services already rendered. Unfunded or partially funded plans, with the benefit obligation exceeding the fair value of plan assets, are aggregated and recorded as a retirement and non-pension postretirement benefit obligation equal to this excess. The current portion of the retirement-related benefit obligation represents the actuarial present value of benefits payable in the next 12 months in excess of the fair value of plan assets, measured on a plan-by-plan basis. This liability is recorded in other current liabilities in the Consolidated Balance Sheets.
Net periodic pension cost is recorded in the Consolidated Statements of Operations and includes service cost, interest cost, expected return on plan assets, amortization of prior service cost (credit) and (gains) losses previously recognized as a component of accumulated other comprehensive income. Service cost represents the actuarial present value of participant benefits attributed to services rendered by employees in the current year. Interest cost represents the time value of money cost associated with the passage of time. (Gains) losses arise as a result of differences between actual experience and assumptions or as a result of changes in actuarial assumptions. Prior service cost (credit) represents the cost of or credit resulting from benefit improvements attributable to prior service granted in plan amendments. (Gains) losses and prior service cost (credit) not recognized as a component of net periodic pension cost in the Consolidated Statements of Operations as they arise are recognized as a component of accumulated other comprehensive income (loss) on the Consolidated Balance Sheets, net of tax. Those (gains) losses and prior service cost (credit) are subsequently recognized as a component of net periodic pension cost pursuant to the recognition and amortization provisions of the authoritative guidance.
The measurement of the benefit obligation and net periodic pension cost is based on our estimates and actuarial valuations, provided by third-party actuaries, which are approved by our management. These valuations reflect the terms of the plans and use participant-specific information such as compensation, age and years of service, as well as certain assumptions, including estimates of discount rates, expected return on plan assets, rate of compensation increases, and mortality rates. We evaluate these assumptions periodically but not less than annually. In estimating the expected return on plan assets, we consider historical returns on plan assets, diversification of plan investments, adjusted for forward-looking considerations, inflation assumptions and the impact of the active management of the plan’s invested assets.
Beginning in the fourth quarter of fiscal 2016, we measure our benefit obligation and plan assets using the month-end date of June 30, which is closest to our fiscal year-end.

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Loss Contingencies
We are subject to the possibility of various loss contingencies arising in the ordinary course of business. We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss is accrued when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether such accruals should be adjusted and whether new accruals are required.
RESULTS OF OPERATIONS
The results of operations for the current period are not necessarily indicative of results to be expected for future periods. The following table summarizes selected Consolidated Statements of Operations items as a percentage of net revenue:
Years EndedYears Ended
July 1, 2017 July 2, 2016 June 27, 2015July 1, 2023July 2, 2022July 3, 2021
Segment net revenue:     Segment net revenue:
NE54.7 % 55.7 % 58.0 %
SE16.7
 16.9
 19.9
OSP28.6
 27.4
 22.1
Network EnablementNetwork Enablement63.0 %65.4 %62.3 %
Service EnablementService Enablement9.4 8.0 7.6 
Optical Security and PerformanceOptical Security and Performance27.6 26.6 30.1 
Net revenue100.0
 100.0
 100.0
Net revenue100.0 100.0 100.0 
Cost of revenues38.3
 37.4
 36.8
Cost of revenues40.0 37.9 37.6 
Amortization of acquired technologies1.8
 1.9
 3.7
Amortization of acquired technologies2.2 2.3 2.8 
Gross profit59.9
 60.7
 59.5
Gross profit57.8 59.8 59.6 
Operating expenses:     Operating expenses:
Research and development16.8
 18.4
 19.8
Research and development18.7 16.5 16.9 
Selling, general and administrative37.0
 38.7
 43.1
Selling, general and administrative29.7 28.3 28.2 
Impairment of goodwill—
 10.1
 —
Amortization of other intangibles1.7
 1.6
 2.2
Amortization of other intangibles0.8 0.7 2.8 
Restructuring and related charges2.7
 1.2
 3.1
Restructuring and related charges (benefits)Restructuring and related charges (benefits)1.2 — (0.1)
Total operating expenses58.2
 70.0
 68.2
Total operating expenses50.4 45.5 47.8 
Income (loss) from operations1.7
 (9.3) (8.7)
Income from operationsIncome from operations7.4 14.3 11.8 
Loss on convertible note settlementLoss on convertible note settlement— (7.9)— 
Loss on convertible note modificationLoss on convertible note modification(0.2)— — 
Interest and other income, net1.6
 0.3
 0.5
Interest and other income, net0.7 0.4 0.3 
Gain on sale of investments25.0
 7.8
 —
Interest expense(5.3) (3.9) (3.8)Interest expense(2.4)(1.8)(1.2)
Income (loss) from continuing operations before income taxes23.0
 (5.1) (12.0)
Income before income taxesIncome before income taxes5.5 5.0 10.9 
Provision for income taxes2.6
 0.5
 3.0
Provision for income taxes3.2 3.8 5.3 
Income (loss) from continuing operations, net of taxes20.4
 (5.6) (15.0)
Income (loss) from discontinued operations, net of taxes0.2
 (5.3) 4.9
Net income (loss)20.6 % (10.9)% (10.1)%
Net incomeNet income2.3 %1.2 %5.6 %

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Financial Data for Fiscal 2017, 20162023, 2022 and 20152021
The following table summarizes selected Consolidated Statement of Operations items (in(in millions, except for percentages)percentages):
20232022ChangePercent Change20222021ChangePercent Change
Segment net revenue:
NE$697.5 $845.8 $(148.3)(17.5)%$845.8 $746.6 $99.2 13.3 %
SE103.7 103.3 0.4 0.4 %103.3 91.3 12.0 13.1 %
OSP304.9 343.3 (38.4)(11.2)%343.3 361.0 (17.7)(4.9)%
Net revenue$1,106.1 $1,292.4 $(186.3)(14.4)%$1,292.4 $1,198.9 $93.5 7.8 %
Amortization of acquired technologies$24.6 $30.0 $(5.4)(18.0)%$30.0 $33.2 $(3.2)(9.6)%
Percentage of net revenue2.2 %2.3 %2.3 %2.8 %
Gross profit$638.8 $773.5 $(134.7)(17.4)%$773.5 $714.4 $59.1 8.3 %
Gross margin57.8 %59.8 %59.8 %59.6 %
Research and development$206.9 $213.2 $(6.3)(3.0)%$213.2 $203.0 $10.2 5.0 %
Percentage of net revenue18.7 %16.5 %16.5 %16.9 %
Selling, general and administrative$328.7 $365.7 $(37.0)(10.1)%$365.7 $337.5 $28.2 8.4 %
Percentage of net revenue29.7 %28.3 %28.3 %28.2 %
Amortization of intangibles$8.7 $9.7 $(1.0)(10.3)%$9.7 $33.3 $(23.6)(70.9)%
Percentage of net revenue0.8 %0.7 %0.7 %2.8 %
Restructuring and related charges (benefits)$12.1 $(0.1)$12.2 NM$(0.1)$(1.6)$1.5 (93.8)%
Percentage of net revenue1.2 %— %— %(0.1)%
Loss on convertible note settlement$— $(101.8)$101.8 NM$(101.8)$— $(101.8)NM
Percentage of net revenue— %(7.9)%(7.9)%— %
Loss on convertible note modification$(2.2)$— $(2.2)NM$— $— $— — %
Percentage of net revenue(0.2)%— %— %— %
Interest and other income, net$7.6 $5.2 $2.4 46.2 %$5.2 $3.3 $1.9 57.6 %
Percentage of net revenue0.7 %0.4 %0.4 %0.3 %
Interest expense$(27.1)$(23.3)$(3.8)16.3 %$(23.3)$(14.7)$(8.6)58.5 %
Percentage of net revenue(2.5)%(1.8)%(1.8)%(1.2)%
Provision for income taxes$35.2 $49.6 $(14.4)(29.0)%$49.6 $63.3 $(13.7)(21.6)%
Percentage of net revenue3.2 %3.8 %3.8 %5.3 %
36

 2017 2016 Change Percent Change 2016 2015 Change Percent Change
Segment net revenue:               
NE$444.0
 $504.6
 $(60.6) (12.0)% $504.6
 $506.8
 $(2.2) (0.4)%
SE135.2
 153.6
 (18.4) (12.0) 153.6
 174.3
 (20.7) (11.9)
OSP232.2
 248.1
 (15.9) (6.4) 248.1
 192.8
 55.3
 28.7
Net revenue$811.4
 $906.3
 $(94.9) (10.5)% $906.3
 $873.9
 $32.4
 3.7 %
                
Amortization of acquired technologies$14.3
 $17.3
 $(3.0) (17.3)% $17.3
 $31.9
 $(14.6) (45.8)%
Percentage of net revenue1.8 % 1.9 %     1.9 % 3.7 %    
                
Gross profit486.0
 549.7
 $(63.7) (11.6)% 549.7
 520.1
 $29.6
 5.7 %
Gross margin59.9 % 60.7 %     60.7 % 59.5 %    
                
Amortization of intangibles14.0
 14.6
 (0.6) (4.1)% 14.6
 19.5
 (4.9) (25.1)%
Percentage of net revenue1.7 % 1.6 %     1.6 % 2.2 %    
                
Research and development136.3
 166.4
 (30.1) (18.1)% 166.4
 173.3
 (6.9) (4.0)%
Percentage of net revenue16.8 % 18.4 %     18.4 % 19.8 %    
                
Selling, general and administrative300.5
 351.1
 (50.6) (14.4)% 351.1
 376.3
 (25.2) (6.7)%
Percentage of net revenue37.0 % 38.7 % 
   38.7 % 43.1 %    
                
Impairment of goodwill—
 91.4
 (91.4) 100.0 % 91.4
 —
 91.4
 100.0 %
Percentage of net revenue— % 10.1 %     10.1 % — %    
                
Restructuring and related charges21.6
 10.5
 11.1
 105.7 % 10.5
 26.8
 (16.3) (60.8)%
Percentage of net revenue2.7 % 1.2 %     1.2 % 3.1 %    
                
Interest and other income, net13.1
 2.5
 10.6
 424.0 % 2.5
 3.7
 (1.2) (32.4)%
Percentage of net revenue1.6 % 0.3 %     0.3 % 0.5 %    
                
Interest expense(43.2) (35.7) (7.5) 21.0 % (35.7) (33.3) (2.4) 7.2 %
Percentage of net revenue(5.3)% (3.9)%     (3.9)% (3.8)%    
                
Gain on sale of investments203.1
 71.6
 131.5
 183.7 % 71.6
 0.1
 71.5
 71,500.0 %
Percentage of net revenue25.0 % 7.8 %     7.8 % — %    
                
Provision for income taxes21.3
 4.5
 16.8
 373.3 % 4.5
 26.1
 (21.6) (82.8)%
Percentage of net revenue2.6 % 0.5 %     0.5 % 3.0 %    
                
Income (loss) from discontinued operations, net of taxes1.6
 (48.8) 50.4
 (103.3)% (48.8) 43.3
 (92.1) (212.7)%
Percentage of net revenue0.2 % (5.3)%     (5.3)% 4.9 %    

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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. Changes in foreign exchange rates may significantly affect revenue and expenses. While we use foreign currency hedging contracts to mitigate some foreign currency exchange risk, these activities are limited in the protection that they provide us and can themselves result in losses. We have presented below “constant

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dollar” comparisons of our net sales and operating expenses which exclude the impact of currency exchange rate fluctuations. Constant dollar net revenue and operating expenses are non-GAAP financial measures, which is information derived from consolidated financial information but not presented in our financial statements prepared in accordance with U.S. GAAP. Our management believes these non-GAAP measures, when considered in conjunction with the corresponding U.S. GAAP measures, may facilitate a better understanding of changes in net revenue and operating expenses.
Fiscal 20172023 and 20162022
If currency exchange rates had been constant in fiscal 20172023 and fiscal 2016,2022, our consolidated net revenue in “constant dollars” would have increased by approximately $4$23.0 million, or 0.5%2.1% of net revenue, which primarily impacted our NE and SE segments. The impact of foreign currency fluctuations on net revenue was not indicative of the impact on net income due to the offsetting foreign currency impact on operating costs and expenses. If currency exchange rates had been constant in fiscal 20172023 and fiscal 2016,2022, our consolidated operating expenses in “constant dollars” would have increased by approximately $4$17.5 million, or 0.5% of net revenue.
Fiscal 2016 and 2015
If currency exchange rates had been constant in fiscal 2016 and fiscal 2015, our consolidated net revenue in “constant dollars” would have increased by approximately $22 million, or 2.5% of net revenue, which primarily impacted our NE and SE segments. The impact of foreign currency fluctuations on net revenue was not indicative of the impact on net income due to the offsetting foreign currency impact on operating costs and expenses. If currency exchange rates had been constant in fiscal 2016 and fiscal 2015, our consolidated operating expenses in “constant dollars” would have increased by approximately $16 million, or 1.8%1.6% of net revenue.
The Results of Operations are presented in accordance with U.S. GAAP and not using constant dollars. Refer to Item 7A. Qualitative7A “Qualitative and Quantitative Disclosures about Market RiskRisk” of this Annual Report on Form 10-K for further details on foreign currency instruments and our related risk management strategies.
Net Revenue
Following the Separation, revenueRevenue from our service offerings exceeds 10% of our total consolidated net revenue and is presented separately in our Consolidated Statements of Operations. Service revenue primarily consists of maintenance and support, extended warranty, professional services and post-contract support in addition to other services such as calibration and repair services. When evaluating the performance of our segments, Managementmanagement focuses on total net revenue, gross profit and operating income and not the product or service categories. Consequently, the following discussion of business segment performance focuses on total net revenue, gross profit, and operating income consistent with our approach for managing the business.
Fiscal 20172023 and 20162022
Net revenue decreased by $94.9$186.3 million, or 10.5%14.4%, during fiscal 20172023 when compared to fiscal 2016. There has not been any significant changes in our pricing strategy. This decrease was primarily due to decreases across the three segments as discussed below.
Product revenues decreased by $82.4 million, or 10.2%, during fiscal 2017 compared to fiscal 2016. This decrease was primarily due to end market demand weakness in our NE Field Instruments and our planned restructuring to narrow the scope of SE segment as we exited certain SE product lines. The OSP segment experienced lower demand for our Anti-Counterfeiting product offerings driven by decreased banknote volume.
Service revenues decreased $12.5 million, or 12.8%, during fiscal 2017 compared to fiscal 2016. This decrease was due to a decline in support contract renewals for SE segment, resulting from our continued run-off of our more mature Assurance portfolio solutions, as well as reduction in revenue from repair services in our NE segment.
NE net revenue decreased by $60.6 million, or 12.0%, during fiscal 2017 compared to fiscal 2016. This decrease was driven by a $53.2 million net decrease in Field Instruments offerings and a $6.9 million net decrease in our Lab Instruments offerings. Most of the Field Instruments product offerings experienced decreases due to weaker demand in North America from communication service providers. This was offset by increased demand for Cable products driven by a DOCSIS 3.1 technology upgrade cycle. The decrease in our Lab Instruments was primarily due to weak spending by NEMs and slowdown in spending by Chinese telecommunication companies impacting our lab customers.
SE net revenue decreased by $18.4 million, or 12.0%, during fiscal 2017 compared to fiscal 2016.2022. This decrease was primarily driven by $13.7 million of net revenue decreases from our Assurance offerings. The decrease was attributable to the planned restructuring that narrowed the scope of SE segmentlower volumes in NE and our more mature Assurance product offerings being negatively impacted by service maintenance contracts expiration,OSP, partially offset by an increase in Growth Assurance product offerings. Additionally, aSE.

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net revenue decrease of $4.7 million from our Data Center primarily relating to prior large deals that did not recur in the current period.
OSP net revenueProduct revenues decreased by $15.9$199.4 million, or 6.4%17.6%, during fiscal 20172023 when compared to fiscal 2016. This decrease was primarily2022, driven by net revenue decreases from our Anti-Counterfeiting product line. The Company expects the anti-counterfeiting business to continue to follow its historical pattern of cyclicality as currency customers continually rebalance their inventories relative to market demand. The decrease was partially offset by net revenue growthvolume decline in our Consumer and Industrial product lines.all segments.
Fiscal 2016 and 2015
Net revenueService revenues increased by $32.4$13.1 million, or 3.7%8.3%, during fiscal 20162023 when compared to fiscal 2015.2022. This increase was primarily due to an increaseincreased support revenue from our NSE segment, offset by a declines in our OSP segment, partially offset by decreases in our SE and NE segments as discussed below.segment.
Product revenues increased by $37.6 million, or 4.9%, during fiscal 2016 compared to fiscal 2015. This increase was driven by $62.4 million of product revenue increases from our OSP and NE segments, primarily due to higher demand for our Anti-Counterfeiting product line in our OSP segment as discussed below. This was partially offset by a $24.8 million product revenue decrease from our SE segment primarily due to a decline in our more mature Assurance solutions.
Service revenues decreased $5.2 million, or 5.1%, during fiscal 2016 compared to fiscal 2015. This decrease was driven by a $9.6 million decline in service revenue from our NE segment primarily related to the release of new product offerings impacting the timing of renewals for support and maintenance contracts, coupled with lower revenue from repair services. This was partially offset by $4.4 million of service revenue increases from SE driven by maintenance and support contracts for our Data Center offerings.
NE net revenue remained relatively flat, decreasing by $2.2 million or 0.4%, during fiscal 2016 compared to fiscal 2015. This was driven by $21.7 million of net revenue decreases from our Field Instruments offerings, partially offset by $19.5 million of net revenue increases from our Lab Instruments offerings. Field Instruments net revenue decreased in the fiscal 2016 primarily as the prior period net revenue from a significant ramp for a one-time project from a key customer, coupled with lower services revenue. This was partially offset by strength in our fiber lab and field test instruments driven by “FTTH” and “Fiber for Wireless Backhaul” deployments in North America and 100G deployments globally as well as higher demand for our optical transport products.
SE net revenue decreased by $20.7 million, or 11.9%, during fiscal 2016 compared to fiscal 2015. This decrease was driven by $23.5 million of net revenue decreases from our Assurance offerings primarily due to a change in product mix as our more mature offerings declined at a steeper pace than the growth in our new offerings. This was partially offset by $2.8 million of net revenue increases from our Data Center offerings.
OSP net revenue increased by $55.3 million, or 28.7%, during fiscal 2016 compared to fiscal 2015. This increase was driven by net revenue increases primarily from our Anti-Counterfeiting product line driven by cyclical demand for our currency products resulting from an increase in currency reprinting and banknote redesigns over the normal run-rate in fiscal 2016, coupled with net revenue growth in our Consumer and Industrial and Government product lines.
Going forward, we expect to continue to encounter a number of industry and market risks and uncertainties thatuncertainties. 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. This may limit our visibility, and consequently, our ability to predict future revenue, seasonality, profitability, and general financial performance, and thatwhich could create quarter over quarterperiod-over-period variability in our financial measures. For example, while the majoritymeasures and present foreign exchange rate risks.
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Table of our net revenue and expenses are denominated in U.S. dollars, a portion of our international operations are denominated in foreign currencies. The strengthening of the U.S. dollar relative to foreign currencies could negatively impact reported revenue and expenses.Contents
Additionally, we have seen demand for our NE and SE products affected by macroeconomic uncertainty. We cannot predict when or to what extent these uncertainties will be resolved. Our revenues, profitability, and general financial performance may also be affected by: (a) pricing pressures due to, among other things, a highly concentrated customer base, increasing competition, particularly from Asia-based competitors, and a general commoditization trend for certain products; (b) product mix variability in our NE and SE markets, which affects revenue and gross margin; (c) fluctuations in customer buying patterns, which cause demand, revenue and profitability volatility; and (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.projections; (e) chip component shortages, supply chain and shipping logistic constraints; (f) the impact of ongoing global trade policies, tariffs and sanctions; and (g) regulatory or economic developments and/or technology challenges that slow or change the rate of adoption of 5G, 3D Sensing and other emerging secular technologies and platforms.
In fiscal 2018, we expect to continue to see a decline in net revenue from our more mature Assurance product offerings within our SE segment. In our OSP segment, we expect Anti-Counterfeiting net revenue to moderate in first half of fiscal 2018 due to customer inventory rebalancing to realign with end market demand before rebounding in second half of fiscal 2018. We also expect to initially ship 3D sensing products in the first half fiscal of fiscal 2018 with a greater revenue ramp in second half of fiscal 2018.

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Revenue by Region
We operate in three geographic regions:regions, including the Americas, Asia-Pacific and Europe Middle East and Africa (“EMEA”)(EMEA). Net revenue is assigned to the geographic region and country where our product is initially shipped. For example, certain customers may request shipment of our product to a contract manufacturer in one country, which may differ from the location of their end customers. 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 (dollars in millions):
Years Ended Years Ended
July 1, 2017 July 2, 2016 June 27, 2015 July 1, 2023July 2, 2022July 3, 2021
Americas:           Americas:
United States$307.3
 37.9% $396.6
 43.8% $424.3
 48.5%United States$362.9 32.8 %$388.9 30.1 %$330.0 27.5 %
Other Americas71.3
 8.8% 66.0
 7.3% 62.5
 7.2%Other Americas75.2 6.8 %96.8 7.5 %85.6 7.2 %
Total Americas$378.6
 46.7% $462.6
 51.1% $486.8
 55.7%Total Americas$438.1 39.6 %$485.7 37.6 %$415.6 34.7 %
           
Asia-Pacific           
Asia-Pacific:Asia-Pacific:
Greater China$100.8
 12.4% $103.2
 11.3% $83.1
 9.5%Greater China$210.9 19.1 %$256.4 19.8 %$277.0 23.1 %
Other Asia72.4
 8.9% 63.1
 7.0% 61.4
 7.0%
Other Asia-PacificOther Asia-Pacific166.6 15.0 %205.3 15.9 %133.5 11.1 %
Total Asia-Pacific$173.2
 21.3% $166.3
 18.3% $144.5
 16.5%Total Asia-Pacific$377.5 34.1 %$461.7 35.7 %$410.5 34.2 %
           
EMEA:           EMEA:$290.5 26.3 %$345.0 26.7 %$372.8 31.1 %
Switzerland$124.0
 15.3% $135.6
 15.0% $97.7
 11.2%
Other EMEA135.6
 16.7% 141.8
 15.6% 144.9
 16.6%
Total EMEA$259.6
 32.0% $277.4
 30.6% $242.6
 27.8%
           
Total net revenue$811.4
 100.0% $906.3
 100.0% $873.9
 100.0%Total net revenue$1,106.1 100.0 %$1,292.4 100.0 %$1,198.9 100.0 %
Net revenue from customers outside the Americas for the fiscal years ended 2017, 2016 and 20152023, represented 53.3%, 48.9% and 44.3%60.4% of net revenue, respectively.a decrease of 2.0% year-over-year. This decrease is due to larger declines in revenues from Asia-Pacific and EMEA compared to the decline in the Americas. 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.
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Amortization of Acquired Technologies (Cost of revenues)
Amortization of acquired technologies within Cost of revenues for fiscal 2023 decreased $5.4 million, or 18.0%, to $24.6 million from $30.0 million in fiscal 2022. This decrease is primarily due to intangible assets becoming fully amortized in fiscal 2022 offset by amortization of intangibles acquired through current year acquisitions.
Gross Margin
Gross margin in fiscal 2017 decreased 0.8 percentage points2023 declined 2.0% to 59.9%57.8% from 60.7%59.8% in fiscal 2016.2022. This decrease was primarily due to reduction in NE and SE gross margin as discussed below in the “Operating Segment Information” section.
Gross margin in fiscal 2016 increased 1.2 percentage points to 60.7% from 59.5% in fiscal 2015. This increase was primarily due to a $14.6 million reduction in amortization of developed technology driven by certain intangible assets becoming fully amortized during fiscal 2015, coupled with an improvement in gross margin from our OSP segment primarily due to favorablelower volume and product mix with higher anti-counterfeiting revenue in fiscal 2016. This was partially offset by lower gross margin in our SE segment and a change in overall segment mix as our OSP segment, whose products generally carry a lower gross margin than our NE and SE products, represented a higher percentage of our total net revenue in fiscal 2016.mix.
As discussed in more detail under “Net Revenue” above, we sell products in certain markets that are consolidating, undergoing product, architectural and business model transitions, have high customer concentrations, are highly competitive (increasingly due to Asia-Pacific-based competition), are price sensitive and/or are affected by customer seasonal and mix variant buying patterns. We expect these factors to continue to result in variability of our gross margin.
Research and Development
R&D expense decreased by $30.1$6.3 million, or 18.1%3.0%, during fiscal 20172023 compared to fiscal 2016.2022. This decrease was primarily driven by net cost savings realized from our strategic restructuring activities pertaining to the NSE business in the fourth quarter of fiscal 2016 and the third quarter of fiscal 2017 and internal reorganizations to align our investment strategy following the Separation, coupled with a $2.7 million net reduction in stock-based compensation primarily due to modification of equity awards in connection with the Separation that did not recur this period.variable expense reductions. As a percentage of net revenue, R&D decreased by 1.6 percentage pointsincreased 2.2% during fiscal 20172023 when compared to fiscal 2016 as the Company continues to execute targeted cost savings initiatives.

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R&D expense decreased by $6.9 million, or 4.0%, during fiscal 2016 compared to fiscal 2015. This decrease was primarily due to a $3.6 million in-process research and development (“IPR&D”) impairment charge in the prior year related to a fiscal 2014 acquisition, coupled with $4.0 million net cost savings realized from our strategic restructuring activities related to site consolidations, reorganizations, and the insourcing or outsourcing of R&D activities to align our investment strategy following the Separation. This was partially offset by various other incremental expenses incurred, including additional cost as fiscal 2016 was a 53-week fiscal year and contained one additional week compared to fiscal 2015. As a percentage of net revenue, R&D decreased 1.4 percentage points in fiscal 2016 compared to fiscal 2015 as the Company continues to execute targeted cost savings initiatives.2022.
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
SG&A expense decreased by $50.6$37.0 million, or 14.4%10.1%, in fiscal 20172023 compared to fiscal 2016.2022. This decrease was primarily due to (a) a $16.8 million reduction in labor and facilities expenses driven by lower headcount and site consolidations associated with our strategic restructuring activities and ongoing cost reduction efforts, (b) a $5.3 million net reduction in stock-based compensation primarily due to the impactreversal of Separation related activities on equity awards that did not recur this year and (c) a $3.9 million reduction in coststhe U.K. pension accrued liability, fair value adjustment of contingent consideration related to Viavi-specific activities to complete the Separation.acquisitions, lower commission expense, variable pay and outside service expenses. As a percentage of net revenue, SG&A decreased by 1.7 percentage pointsincreased 1.5% in fiscal 2017 primarily driven by our strategic cost reduction efforts to optimize our expense structure.
SG&A expense decreased by $25.2 million, or 6.7%, in fiscal 20162023 when compared to fiscal 2015. This decrease was primarily due to $30.5 million reduction in labor, benefits and facilities expenses driven by lower headcount and site consolidations associated with our strategic restructuring activities and ongoing cost reduction efforts coupled with incremental charge from modification of equity awards pursuant to Change of Control Benefits Plan covering spin-off in the prior year that were not there this fiscal year. This was partially offset by an $8.4 million charge in fiscal 2016 related to a litigation ruling impacting our pension obligation. As a percentage of net revenue, SG&A decreased by 4.4 percentage points in fiscal 2016 primarily driven by our strategic cost reduction efforts to optimize our expense structure.2022.
We intend to continue to focus on reducing our SG&A expense as a percentage of net revenue. 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 mergersacquisitions and acquisitions-relatedintegration related expenses and litigation expenses, which could increase our SG&A expenses and potentially impact our profitability expectations in any particular quarter.
ImpairmentAmortization of Goodwill
In the fourth quarter of fiscal 2017, we performed the goodwill impairment test in accordance with the authoritative guidance for NE and OSP reporting units, and determined no indicator of impairment. As of July 1, 2017, the SE reporting unit did not have any goodwill, which was fully impaired in the fourth quarter of fiscal 2016 . Refer to “Note 8. Goodwill” for more information.
Intangibles (Operating expenses)
Amortization of Acquired Technologies and Intangibles
Amortization of acquired technologies and intangibles within Operating expenses for fiscal 20172023 decreased $3.6$1.0 million, or 11.3%10.3%, to $28.3$8.7 million from $31.9$9.7 million in fiscal 2016.2022. This decrease is primarily due to impact from foreign exchange and acquisition related intangible assets becoming fully amortized in 2016 and 2017.
Amortization of acquired technologies and intangibles for fiscal 2016 decreased $19.5 million, or 37.9%, to $31.9 million from $51.4 million in fiscal 2015. This decrease is driven2022 offset by a $14.6 million reduction in amortization of developed technology primarily due to acquisition related intangible assets becoming fully amortized in the fourth quarter of fiscal 2015.intangibles acquired through current year acquisitions.
Acquired In-Process Research and Development (“IPR&D”)
In accordance with authoritative guidance, we recognize IPR&Dacquired in-process research and development (IPR&D) at fair value as of the acquisition date, and subsequently account for it as an indefinite-lived intangible asset until completion or abandonment of the associated research and developmentR&D efforts. We periodically review the stage of completion and likelihood of success of each IPR&D project. The nature of the efforts required to develop IPR&D projects into commercially viable products principally relates to the completion of all planning, designing, prototyping, verification and testing activities that are necessary to establish that the products can be produced to meet their design specifications, including functions, features and technical performance requirements.
During fiscal 2014 we acquired IPR&D through the acquisitions of Network Instruments and Trendium. The status of our significant IPR&D projects from acquisitions was as follows:
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Network Instruments Acquisition
Network Instruments was acquired in the third quarter of fiscal 2014 and was accounted for in accordance with the authoritative guidance on business combinations. At the time of acquisition, Network Instruments was in the process of developing next generation integrated network software solutions. During the first quarter of fiscal 2015, we completed our IPR&D project related to the acquisition of Network Instruments. Accordingly, $1.7 million was transferred from indefinite life intangible assets to acquired developed technology intangible assets and began amortizing over its useful life of fifty-two months.
Trendium Acquisition
Trendium was acquired in the second quarter of fiscal 2014 and was accounted for in accordance with the authoritative guidance on business combinations. At the time of acquisition, Trendium was in the process of developing network probe software and next generation service assurance solutions. During fiscal 2015, we recorded a $3.6 million IPR&D impairment charge related to the fiscal 2014 acquisition of Trendium in accordance with the authoritative accounting guidance. The charge was recorded to research and development expense in the Consolidated Statements of Operations. During fiscal 2016, we completed our IPR&D project related to the acquisition of Trendium. Accordingly, $1.8 million was transferred from indefinite life intangible assets to acquired developed technology intangible assets and began amortizing over its useful life of thirty-six months.
Restructuring and Related Charges
From time to time we have initiated strategicThe Company restructuring events are primarily intended to reduce costs, consolidate our operations, rationalize theintegrate various acquisitions, streamline product manufacturing of our products and align our businesses in response toaddress market conditions. During the second quarter of fiscal 2023, Management approved a restructuring and workforce reduction plan (the Fiscal 2023 Plan) to better align the Company’s workforce with current business needs and strategic growth opportunities. The Company expects approximately 5% of its global workforce to be affected. We estimate annualized gross cost savings of approximately $43.0$28.0 million excluding any one-time charges as a result of the restructuring activities initiated inunder the past year.Plan. Refer to “Note 11.13. Restructuring and Related Charges” for more information.
As of July 1, 2017,2023, our total restructuring accrual was $11.0$5.8 million.
During fiscal 2017,2023, we recorded $21.6charges and other adjustments of $12.1 million in restructuringrelated to the Fiscal 2023 Plan. Restructuring charges consisting of severance, benefit and outplacement costs were recorded to the Restructuring and related charges.charges (benefits) line within our Consolidated Statements of Operations. These charges are combination of new and previously announced restructuring plans and are primarily the result of the following:
i.During the fourth quarter of fiscal 2017, Management approved a plan within the OSP business segment to realign its operations and exit from the printed security product offering. As a result, a restructuring charge of $0.8 million was recorded for severance and employee benefits for approximately 30 employees in manufacturing and SG&A functions located in the United States. Payments related to the severance and benefits accrual are expected to be paid by the end of the third quarter of fiscal 2018.
ii.During the second and third quarters of fiscal 2017, Management approved a plan within the NE and SE business segments as part of Viavi’s continued strategy to improve profitability in the Company’s Network and Service Enablement (NSE) business by narrowing the scope of the Service Enablement business and reducing costs by streamlining NSE operations. As a result, a restructuring charge of $21.0 million was recorded for severance and employee benefits for approximately 300 employees in manufacturing, R&D and SG&A functions located in North America, Latin America, Europe and Asia. Payments related to the severance and benefits accrual are expected to be paid by the end of second quarter of fiscal 2018.
During fiscal 2016, we recorded $10.5 million in restructuring and related charges. i.The charges are a combination of new and previously announced restructuring plans and are primarily the resultfirst phase of the following:
i.During May and June of fiscal 2016, Management approved a plan within the NE and SE business segment and Shared Services function for organizational alignment and consolidation in as part of Viavi’s continued commitment for a more cost effective organization. As a result, a restructuring charge of $8.8 million was recorded for severance and employee benefits for approximately 190 employees primarily in manufacturing, R&D, and SG&A functions located in North America, Latin America, Europe and Asia. Payments related to the remaining severance and benefits accrual are expected to be paid by the end of the first quarter of fiscal 2018.
ii.During the second quarter of fiscal 2016, Management approved a plan primarily impacting the NE and SE business segments as part of Viavi’s ongoing commitment for an agile and more efficient operating structure. As a result, a restructuring charge of $2.4 million was recorded for severance and employee benefits for approximately 50 employees primarily in manufacturing, R&D, and SG&A functions located in North America, Latin America, Europe and Asia. Payments related to the remaining severance and benefits accrual are expected to be paid by the end of the second quarter of fiscal 2018.
iii.A restructuring benefit of $1.0 million primarily related to a reduction in the number of employees impacted by the Central Finance and IT Restructuring Plan.

Fiscal 2023 Plan impacted all segments and corporate functions. The Company anticipates this phase of the Fiscal 2023 Plan to be substantially complete by the end of the first quarter of fiscal 2024.
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the Fiscal 2023 Plan is primarily focused on reducing costs in our SE segment. The Company anticipates this phase of the Fiscal 2023 Plan to be substantially complete by the end of the second quarter of fiscal 2024.

We estimate future cash payments of $6.0 million under the Fiscal 2023 Plan during fiscal 2024, funded by operating cash flow. Future charges under the Fiscal 2023 Plan are not expected to be material.

During fiscal 2015, we2022 and 2021, the Company recorded $26.8a benefit related to other restructuring actions of $0.1 million and $1.6 million, respectively.
Loss on Convertible Note Modification
During fiscal 2023, the Company exchanged $127.5 million principal value of its 1.00% Senior Convertible Notes due 2024 for $132.0 million principal value of its 1.625% Senior Convertible Notes due 2026 and issued $118.0 million principal value of its 1.625% Senior Convertible Notes due 2026 for cash. The Company incurred $4.2 million of issuance costs related to the transaction, of which $2.2 million of the issuance costs were recorded as Loss on convertible note modification in the Consolidated Statements of Operations. 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.
Loss on Convertible Note Settlement
During fiscal 2022, the Company entered into separate privately-negotiated agreements with certain holders of its 1.75% Senior Convertible Notes due 2023 and 1.00% Senior Convertible Notes due 2024. The Company paid an aggregate of 10.6 million shares of its common stock, par value $0.001 per share, and $347.3 million in restructuring and related charges. The charges are a combination of new and previously announced restructuring plans and are primarily the resultcash in exchange for $156.9 million principal amount of the following:
i.During the second, third and fourth quarters of fiscal 2015, Management approved a plan to eliminate certain positions in its shared services functions in connection with the Company’s plan to split into two separate public companies. Further, Management consolidated its operations, sales and R&D organizations and eliminated positions within the NE and SE segments to align to the Company’s product market strategy and lower manufacturing costs in connection with the Separation. As a result, a restructuring charge of $24.9 million was recorded for severance and employee benefits for approximately 330 employees in manufacturing, R&D and SG&A functions located in North America, Latin America, Europe and Asia were impacted. Payments related to the remaining severance and benefits accrual are expected to be paid by the end of the third quarter of fiscal 2018.
ii.A restructuring charge of $1.9 million for previously announced restructuring plans.
Our restructuring2023 Notes and other lease exit cost obligations are net of sublease income or lease settlement estimates of approximately $2.1 million. Our ability to generate sublease income, as well as our ability to terminate lease obligations and recognize the anticipated related savings, is highly dependent upon the economic conditions, particularly commercial real estate market conditions in certain geographies, at the time we negotiate the lease termination and sublease arrangements with third parties as well as the performances by such third parties of their respective obligations. While the$236.1 million principal amount we have accrued represents the best estimate of the remaining obligations we expect to incur2024 Notes. The Company recorded a loss of $101.8 million in connection with these plans, estimates are subject to change. Routine adjustments are required and may be required in the future as conditions and facts change through the implementation period. If adverse macroeconomic conditions continue, particularly as they pertain to the commercial real estate market, or if, for any reason, tenants under subleases fail to perform their obligations, we may be required to reduce estimated future sublease income and adjust the estimated amounts of future settlement agreements, and accordingly, increase estimated costs to exit certain facilities. Amounts related to the lease expense, net of anticipated sublease proceeds, will be paid over the respective lease terms through fiscal 2019.
transactions.
Interest and Other Income, Net
Interest and other income, net was $13.1$7.6 million in fiscal 20172023 as compared to $2.5$5.2 million in fiscal 2016.2022. This $10.6$2.4 million increase was primarily driven by (i) an increase inhigher interest income of $5.2 million primarily due to higher cash and short-term investment balances coupled with higher yield, (ii) a $3.5 million more favorableoffset by an unfavorable foreign exchange impact as the balance sheet hedging program provided a moreless favorable offset to the remeasurement of underlying foreign exchange exposures during the current period, (iii) a $3.0 million gain on sale of other assets. This was partially offset by $1.1 million loss on extinguishment of debt.period.
Interest and other income, net was $2.5 million in fiscal 2016 as compared to $3.7 million in fiscal 2015. This $1.2 million change was primarily driven by $3.6 million of more gains recorded during fiscal 2015 mostly related to our receipt of proceeds from the Fair Fund established to provide compensation for losses incurred from investments in Nortel securities in connection with the SEC’s claims against Nortel as well as higher sublease rental income. This was partially offset by (i) a $1.3 million more interest income during fiscal 2016 due to balance in higher-yielding investment vehicles in our investment portfolios, (ii) a decrease in foreign exchange loss of $1.2 million during fiscal 2016 as the balance sheet hedging program provided a more favorable offset to the remeasurement of underlying foreign exchange exposures.
Gain on Sale of Investments
During fiscal 2017, the Company sold approximately 7.2 million shares of the 11.7 million shares of Lumentum common stock which was retained as part of the Separation. We recognized a gross realized gain of $203.0 million from the sale.
During fiscal 2016, the Company sold approximately 4.5 million shares of the 11.7 million shares of Lumentum common stock which was retained as part of the Separation. We recognized a gross realized gain of $71.5 million from the sale.
As of July 1, 2017, the Company has sold all ownership of Lumentum’s common stock. Refer to “Note 7. Investments, Forward Contracts and Fair Value Measurements” for more information.
Interest Expense
Interest expense increased by $7.5$3.8 million, or 21.0%16.3%, during fiscal 20172023 compared to fiscal 2016.2022. This increase was primarily due to the increase of $1.5 million in accretion of unamortized debt discount and debt issuance cost related to the 2033 Notes. Additionally,driven by full year interest expense on the Senior Notes due 2029 in the current period as a result of $5.7 million was incurredthe issuance in relation to the 2024 Notes newly issued in March 2017.
Interest expense increased by $2.4 million, or 7.2%, during fiscal 2016 compared to fiscal 2015. This was primarily due toSeptember 2021 and the accretion of unamortized debt discount related toon the 2033 Notes.Senior Convertible Notes due 2026 as a result of the issuance in March 2023 offset by lower interest expense on our convertible notes as a result of convertible notes settlement transactions during fiscal 2022.

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Provision for (Benefit from) Income Tax
Fiscal 2017 Tax Expense/Benefit
We recorded an income tax expenseprovision of $21.3$35.2 million for fiscal 2017.2023. The expected tax expenseprovision derived by applying the federal statutory rate to our income before income taxes for fiscal 20172023 differed from the incomeincome tax expenseexpense recorded primarily as a result of domestic and foreign losses that were not realized due to valuation allowances.allowances in addition to withholding taxes, foreign tax rates higher than the federal statutory rate and the U.S. inclusion of foreign earnings.

Based on a jurisdiction by jurisdictionjurisdiction-by-jurisdiction review of anticipated future income and due to the continued economic uncertainty in the industry, management has determined that in many of our jurisdictions,the U.S., it is more likely than not that our net deferred tax assets will not be realized in those jurisdictions.realized. During fiscal 2017,2023, the valuation allowance for deferred tax assets decreasedincreased by $76.5$30.7 million which was primarily due the utilization of deferred tax assets andto the increase in deferredcapitalization of federal research expenditures in the U.S.

The decrease in income tax liabilitiesprovision of $14.4 million or 29.0% during fiscal 2023 was due primarily to a reduction in foreign earnings in the current year as resultcompared to the fiscal 2022 foreign earnings and a charge of the issuance of convertible debt. $13.2 million related to internal intellectual properties restructuring.

We are routinely subject to various federal, state and foreign audits by taxing authorities. We believe that adequate amounts have been provided for any adjustments that may result from these examinations.
Fiscal 2016 Tax Expense/Benefit
We recorded an income tax expense
Operating Segment Information (in millions):
 20232022ChangePercentage Change20222021ChangePercentage Change
NE
Net revenue$697.5 $845.8 $(148.3)(17.5)%$845.8 $746.6 $99.2 13.3 %
Gross profit440.1 543.6 (103.5)(19.0)%543.6 474.2 69.4 14.6 %
Gross margin63.1 %64.3 %64.3 %63.5 %
SE
Net revenue$103.7 $103.3 $0.4 0.4 %$103.3 $91.3 $12.0 13.1 %
Gross profit70.1 71.5 (1.4)(2.0)%71.5 59.9 11.6 19.4 %
Gross margin67.6 %69.2 %69.2 %65.6 %
NSE
Net revenue$801.2 $949.1 $(147.9)(15.6)%$949.1 $837.9 $111.2 13.3 %
Operating income61.2 147.8 (86.6)(58.6)%147.8 92.2 55.6 60.3 %
Operating margin7.6 %15.6 %15.6 %11.0 %
OSP
Net revenue$304.9 $343.3 $(38.4)(11.2)%$343.3 $361.0 $(17.7)(4.9)%
Gross profit158.6 193.6 (35.0)(18.1)%193.6 218.1 (24.5)(11.2)%
Gross margin52.0 %56.4 %56.4 %60.4 %
Operating income111.3 139.0 (27.7)(19.9)%139.0 161.3 (22.3)(13.8)%
Operating margin36.5 %40.5 %40.5 %44.7 %
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Network Enablement
NE net revenue decreased $148.3 million, foror 17.5% during fiscal 2016. The expected tax benefit derived2023 when compared to fiscal 2022, This decrease was primarily driven by applyinglower volumes in Field Instruments, Lab & Production and Wireless products compared to the federal statutory rate to our loss before income taxes for fiscal 2016 differed from the income tax expense recorded primarily as a result of domestic and foreign losses that were not realized due to valuation allowances and a tax expense of $8.9 million related to a one-time increase in valuation allowance associated with deferred tax assets transferred to Lumentum in connection with the Separation. The tax expense wasprior year partially offset by a deferred tax benefit of $9.5 million related to the write off of tax deductible goodwill and a tax benefit of $20.7 million related to the income tax intraperiod tax allocation rules for discontinued operations and other comprehensive income.
Based on a jurisdiction by jurisdiction review of anticipated future income and due to the continued economic uncertaintyPNT revenue not included in the industry, Management has determined that in many of our jurisdictions, it is more likely than not that our net deferred tax assets will not be realized in those jurisdictions. During fiscal 2016, the valuation allowance for deferred tax assets decreased by $160.2 million primarily due to the Lumentum transaction. We are routinely subject to various federal, state and foreign audits by taxing authorities. We believe that adequate amounts have been provided for any adjustments that may result from these examinations.
Fiscal 2015 Tax Expense/Benefit
We recorded an income tax expense of $26.1 million for fiscal 2015. The expected tax benefit derived by applying the federal statutory rate to our loss before income taxes for fiscal 2015 differed from the income tax expense recorded primarily assame period a result of domestic and foreign losses that were not realized due to valuation allowances.
Based on a jurisdiction by jurisdiction review of anticipated future income and due to the continued economic uncertainty in the industry, Management has determined that in many of our jurisdictions, it is more likely than not that our net deferred tax assets will not be realized in those jurisdictions. During fiscal 2015, the valuation allowance for deferred tax assets increased by $12.7 million. The increase was primarily related to the increases in the deferred tax assets and intangible amortization. We are routinely subject to various federal, state and foreign audits by taxing authorities. We believe that adequate amounts have been provided for any adjustments that may result from these examinations.
Discontinued Operations
Our discontinued operations activities during fiscal 2017, 2016 and 2015 related to the Separation on August 1, 2015 and activities in fiscal 2016 related to the sale of the hologram business (“Hologram Business”).
Lumentum Separation
As a result of the Separation, the financial results of Lumentum are presented as discontinued operations during fiscal 2017, 2016 and 2015. Net revenue attributable to the Lumentum discontinued operations was $66.5 million and $835.2 million during fiscal 2016 and 2015, respectively. Net income (loss) attributable to the Lumentum discontinued operations was $1.6 million,$(49.0) million, and $43.3 million during fiscal 2017, 2016 and 2015, respectively. Refer to “Note 3. Discontinued Operations” for more information.
Hologram Business Disposition
During fiscal 2016, we recorded $0.3 million of net income from discontinued operations related to the Hologram Business related to proceeds received following a favorable arbitration ruling to resolve a dispute regarding the amount we were owed under an earnout clause in connection with the sale in 2013.

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Operating Segment Information (in millions):
 2017 2016 Change Percentage Change 2016 2015 Change Percentage Change
NE               
Net revenue$444.0
 $504.6
 $(60.6) (12.0)% $504.6
 $506.8
 $(2.2) (0.4)%
Gross profit286.3
 329.7
 (43.4) (13.2)% 329.7
 333.9
 (4.2) (1.3)%
Gross margin64.5% 65.3%     65.3% 65.9%    
                
SE               
Net revenue$135.2
 $153.6
 $(18.4) (12.0)% $153.6
 $174.3
 $(20.7) (11.9)%
Gross profit86.2
 99.4
 (13.2) (13.3)% 99.4
 119.2
 (19.8) (16.6)%
Gross margin63.8% 64.7%     64.7% 68.4%    
                
NSE               
Net revenue$579.2
 $658.2
 $(79.0) (12.0)% $658.2
 $681.1
 $(22.9) (3.4)%
Operating income (loss)7.3
 12.7
 (5.4) (42.5)% 12.7
 (0.1) 12.8
 (12,800.0)%
Operating margin1.3% 1.9%     1.9% —%    
                
OSP               
Net revenue$232.2
 $248.1
 $(15.9) (6.4)% $248.1
 $192.8
 $55.3
 28.7 %
Operating income100.3
 102.9
 (2.6) (2.5)% 102.9
 68.1
 34.8
 51.1 %
Operating margin43.2% 41.5%     41.5% 35.3%    
Network Enablementyear ago.
NE gross margin decreased 0.8 percentage pointsby 1.2% during fiscal 20172023 to 64.5%63.1% from 65.3%64.3% in fiscal 2016.2022. This decrease was primarily due to a decline inlower volumes.
Service Enablement
SE net revenue from high margin product lines within our Field Instruments product offerings, resulting in unfavorable product mix, and partially offset by favorable manufacturing costs.increased $0.4 million, or 0.4%, during fiscal 2023 when compared to fiscal 2022, primarily due to higher Growth Assurance revenue.
NESE gross margin decreased 0.6 percentage pointsby 1.6% during fiscal 20162023 to 65.3%67.6% from 65.9%69.2% in fiscal 2015.2022. This decrease was primarily due to lower volumes.
Network and Service Enablement
NSE operating margin decreased by 8.0% during fiscal 2023 to 7.6% from 15.6% in fiscal 2022. The decrease in operating margin was primarily driven by lower volumes.
Optical Security and Performance Products
OSP net revenue decreased $38.4 million, or 11.2%, during fiscal 2023 when compared to fiscal 2022. This decrease was primarily driven by lower Anti-Counterfeiting and consumer and industrial revenues.
OSP gross margin decreased by 4.4% during fiscal 2023 to 52.0% from 56.4% in fiscal 2022. This decrease was primarily due to unfavorable product mix, coupledmanufacturing variances associated with a declinelower volumes and startup costs in net revenue as discussed above.our new Arizona facility.
Service Enablement
SE gross margin decreased 0.9 percentage points during fiscal 2017 to 63.8% from 64.7% in fiscal 2016. This gross margin decrease was due to unfavorable product mix, primarily as a result of lower revenue levels from the continued run-off of our more mature but higher margin Assurance solutions.
SE gross margin decreased 3.7 percentage points during fiscal 2016 to 64.7% from 68.4% in fiscal 2015. This gross margin erosion was primarily driven by lower revenue levels and unfavorable product mix from the continued run-off of our more mature, but high margin, Assurance solutions. This was coupled with gross margin dilution driven by initial acceptances being received in the second half of fiscal 2016 for growth Assurance solutions resulting in recognition of revenue at lower margin from hardware components included in these solutions.
Network and Service Enablement (“NSE”)
NSEOSP operating margin decreased 0.6 percentage pointsby 4.0% during fiscal 20172023 to 1.3%36.5% from 1.9%40.5% in fiscal 2016.2022. The decrease in operating margin was primarily due to decline in NE and SE revenue and gross margin as discussed above, partially offset by decrease in operating expenses as a percentage of net revenue. Thethe aforementioned reduction in operating expenses as a percentage of net revenue, which was largely from reductions in research and development spending and helped mitigate the impact from the decline in NE and SE revenue and gross margin, is driven by lower headcount as a result of the strategic restructuring plans initiated in prior and current years and our ongoing cost reduction initiatives.margin.
NSE operating margin increased 1.9 percentage points during fiscal 2016 compared to a break-even operating margin in fiscal 2015. The increase in operating margin was primarily due to a decrease in operating expenses as a percentage of net revenue,

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largely from reductions in general and administrative spending, driven by lower headcount as a result of strategic restructuring plans initiated in current and prior years and our ongoing cost reduction initiatives. This was partially offset by a decline in NE and SE gross margin as discussed above.
Optical Security and Performance Products
OSP operating margin increased 1.7 percentage points during fiscal 2017 to 43.2% from 41.5% in fiscal 2016. OSP gross margin remained relatively flat year over year. The increase in operating margin was primarily driven by our ongoing cost reduction initiatives which reduced operating expense as a percentage of revenue.
OSP operating margin increased 6.2 percentage points during fiscal 2016 to 41.5% from 35.3% in fiscal 2015. The increase in operating margin was primarily due to an improvement in gross margin driven by an increase in revenue from our higher margin Anti-Counterfeiting product line, as discussed above, coupled with a reduction in operating expenses as a percentage of net revenue.
Liquidity and Capital Resources
We believe our existing liquidity and sources of liquidity, namely operating cash flows, credit facility capacity, and access to capital markets, will continue to be adequate to meet our liquidity needs, including but not limited to, contractual obligations, working capital and capital expenditure requirements, financing strategic initiatives, funding debt maturities, and execution of purchases under our share repurchase program over the next twelve months and beyond. However, there are a number of factors that could positively or negatively impact our liquidity position, including:
•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;
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•Possible investments or acquisitions of complementary businesses, products or technologies;
•While the principal payment obligations of our 1.00% Senior Convertible Notes due 2024, our 1.625% Senior Convertible Notes due 2026, and our 3.75% Senior Notes due 2029 (together the “Notes”) are substantial and there are covenants that restrict our debt level and credit facility capacity, we may be able to incur substantially more debt;
•Issuance or repurchase of debt which may include open market purchases of our 2024 Notes, 2026 Notes and/or 2029 Notes prior to their maturity;
•Issuance or repurchase of our common stock or other equity securities;
•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.
Cash and Cash Equivalents and Short-Term Investments
Our cash and cash equivalents and short-term investments are madeconsist mainly of investments in accordance with aninstitutional money market funds and short-term deposits at major global financial institutions. Our strategy is focused on the preservation of capital and supporting our liquidity requirements that meet high credit quality standards, as specified in our investment policy approved by the Audit Committee of our Board of Directors. In general, our investment policy requires that securities purchased be rated A-1/P-1, A/A2 or better. Our policy allows an allocation to securities rated A-2/P-2, BBB/Baa2 or better, so long as such allocation below A-1/P-1, A/A2 but minimum A-2/P-2, BBB/Baa2 does not exceed 10% of any investment portfolio. Securities that are downgraded subsequent to purchase are evaluated and may be sold or held at management’s discretion. No security may have an effective maturity that exceeds 37 months, and the average duration of our holdings may not exceed 18 months. At any time, no more than 5.0% or $5.0 million, whichever is greater, of each of our investment portfolios may be concentrated in a single issuer other than the U.S. or sovereign governments or agencies. Our investments in debt securities and marketable equity securities are primarily classified as available-for-sale investmentsavailable for sale or trading assets and are recorded at fair value. The cost of securities sold is based on the specific identification method. Unrealized gains and losses on available-for-sale investments are recorded as otherOther comprehensive (loss) income (loss) and are reported as a separate component of stockholders’ equity. We did not hold any investments in auction rate securities, mortgage backed securities, collateralized debt obligations, or variable rate demand notes at July 1, 2017 and virtually all debt securities held were minimum BBB/Baa2. As of July 1, 2017,2023, U.S. entitiessubsidiaries owned approximately 76.0%34.7% of our cash and cash equivalents, short-term investments and restricted cash.
As of July 1, 2017,2023, the majority of our cash investments have maturities of 90 days or less and are of high credit quality. AlthoughNonetheless we intend to hold these investments to maturity, in the event that we are required to sell any of these securitiescould realize investment losses under adverse market conditions, losses could be recognized on such sales.conditions. During the yeartwelve months ended July 1, 2017,2023, we have not realized material investment losses but can provide no assurance that the value or the liquidity of our investments will not be impacted by adverse conditions in the financial markets. In addition, we maintain cash balances in operating accounts that are with third partythird-party financial institutions. These balances in the U.S. may exceed the Federal Deposit Insurance Corporation (“FDIC”)(FDIC) insurance limits. While we monitor the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail.
Senior Secured Asset-Based Revolving Credit Facility
On March 3, 2017, the Company issued $400 millionDecember 30, 2021, we entered into a credit agreement (the Credit Agreement) with Wells Fargo Bank, National Association (Wells Fargo) as administrative agent, and other lender related parties. The Credit Agreement provides for a senior secured asset-based revolving credit facility in a maximum aggregate principal amount of 1.00% Senior Convertible Notes due 2024 in a private offering to qualified institutional buyers pursuant to Rule 144A$300.0 million, which matures on December 30, 2026. The Credit Agreement also provides that, under certain circumstances, we may increase the Securities Act of 1933, as amended. On March 22, 2017, the Company issued an additional $60 million upon exercise of the over-allotment option of the initial purchasers. The total proceeds from the 2024 Notes amounted to $451.1 million after issuance costs. The 2024 Notes are an unsecured obligation of the Company and bear interest at an annual rate of 1.00% payable in cash semi-annually in arrears on March 1 and September 1 of each year. The 2024 Notes mature on March 1, 2024 unless earlier converted or repurchased. Refer to “Note 10. Debt” for more information.
During fiscal 2017, the Company repurchased $40.0 million aggregate principal amount of the 2033 Notes for $45.4 million in cash. In connection with the repurchase, a loss on extinguishment of $1.1 million was recognized in interest and other income, net in compliance with the authoritative guidance. After giving effect to the repurchase, the totalrevolving commitments thereunder by an aggregate amount of 2033 Notes outstandingup to $100.0 million so long as of July 1, 2017 was $610.0 million.
Year Ended July 1, 2017certain conditions are met.
As of July 1, 20172023, we had no borrowings under this facility and our available borrowing capacity was approximately $172.5 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.
Revolving Credit Facility
On May 5, 2020, we entered into a credit agreement with Wells Fargo as administrative agent, and other lender related parties. We borrowed $150.0 million and repaid $150.0 million under this credit agreement during the first quarter of fiscal 2022. In connection with the entry into the senior secured asset-based revolving credit facility noted above, we terminated this facility.
Refer to “Note 11. Debt” under Item 8 of this Annual Report on Form 10-K for more information.
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Cash Flows Year Ended July 1, 2023
As of July 1, 2023, our combined balance of cash and cash equivalents short-term investments and restricted cash increaseddecreased by $468.0$57.2 million to $1,447.8$515.6 million from $979.8a balance of $572.8 million as of July 2, 2016.2022.
Cash provided by operating activities was $80.0$114.1 million, consisted of net income of $166.9$25.5 million adjusted for non-cash charges (e.g., depreciation, amortization, of intangibles, stock-based compensation, amortization of debt issuance cost, and discount, and loss on extinguishmentconvertible note modification and accretion and net change in fair value of debt) which totaled $139.4 million,contingent liabilities), including changes in deferred tax balances less gain on sales

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of investments of $203.1which totaled $138.3 million, offset by changes in operating assets and liabilities that used $23.2$49.7 million. Changes in our operating assets and liabilities related primarily to a decrease in deferred revenue of $27.4 million due to amortization of support agreementsaccrued expenses and the release of revenue upon customer acceptance, an increase in other current and non-current assetsliabilities of $17.4$47.4 million due primarily due to changetiming in forward contract that were effectively closed but not settled at year endpayments of tax withholding and other prepayments,interest coupled with lower manufacturing accruals, a decrease in accrued payroll and related expenses of $15.4$25.8 million due primarily to timinglower commissions and variable pay, an increase in inventories of salary and bonus payments,$10.7 million to meet demand, a decrease in accounts payable of $14.8$9.4 million driven by timing of purchases and related payments, a decrease in deferred revenue of $2.1 million due to higher payment activitytiming of support billings and lower overall spend. This wasproject acceptance and a decrease in income taxes payable of $2.0 million. These were partially offset by cash inflows from an increase in accrued expenses and other current and non-current liabilities of $29.1 million primarily due to customer deposit offset by restructuring payments and a decrease in accounts receivable of $24.5$37.4 million primarily driven by timingdue to collections outpacing billings and a decrease in other current and non-current assets of collections.$10.3 million.
Cash provided byused in investing activities was $113.7$127.1 million, primarily related to $67.3 million used for acquisitions, $51.1 million used for capital expenditures, $13.1 million used for purchases of short-term investments and $0.7 million purchase price adjustment related to business acquisition. These were partially offset by $5.1 million proceeds from sales of assets.
Cash used in financing activities was $50.0 million, primarily resulting from $831.5$83.9 million of proceeds from the sales and maturities of available-for-sale investments and other assets, which included proceeds of $265.0 million from the sale of 7.2 million shares of Lumentum common stock in fiscal 2017, partially offset by $679.4 million of purchases of available-for-sale investments and $38.6 million of cash used for capital expenditures. As of July 1, 2017, the Company has sold all of our ownership of Lumentum common stock.
Cash provided by financing activities was $325.3 million, primarily resulting from $451.1 million net proceeds from issuance of 2024 Notes and $12.4 million in proceeds from the exercise of stock options and the issuance of common stock under our employee stock purchase plan, partially offset by $92.0 million of cash usedpaid to repurchase common stock under our share repurchase programs and $45.4 million used for repurchase of our 2033 Notes. 
Year Ended July 2, 2016
As of July 2, 2016 our combined balance of cash and cash equivalents, short-term investments and restricted cash increased by $140.4program, $68.1 million to $979.8retire 2023 Senior Convertible Notes upon maturity, $11.8 million from $839.4in withholding tax payments on the vesting of restricted stock awards, $7.8 million aspayment of June 27, 2015, including cashacquisition related contingent consideration and cash equivalentsobligations and short-term investments$4.3 million in other payments, primarily payments of $13.8 million transferred to Lumentum. Additionally, the cash provided by and used in operating, investing and financing activities below contains activities related to Lumentum through the separation date.
 Cash provided by operating activities was $52.9 million, consisted of net loss of $99.2 million adjusted for non-cash charges (e.g., depreciation, amortization and stock-based compensation, goodwill impairment) which totaled $239.8 million, including changes in our deferred tax balance less gain on sale of investment of $71.6 million, offset by changes in operating assets and liabilities that used $16.1 million. Our cash provided by operating activities was also impacted by our Separation related activities. Changes in our operating assets and liabilities related primarily to a decrease in accrued payroll and related expenses of $25.2 million due to timing of salary and bonus payments, a decrease in accounts payable of $2.1 million due to higher payment activity and a decrease in accrued expenses and other current and non-current liabilities of $10.8 million primarily due to separation related liabilities for both employee severance and third party payments paid after Separation. This wasdebt issuance costs. These were partially offset by cash inflows from a decrease in accounts receivable of $23.4$118.0 million primarily driven by timing of collections of Lumentum related accounts receivable prior to the Separation.
Cash provided by investing activities was $244.2 million, primarily resulting from $689.0 million of proceeds from the salesissuance of 2026 Senior Convertible Notes and maturities of available-for-sale investments and other assets, which included proceeds of $109.7 million from the sale of 4.5 million shares of Lumentum common stock in fiscal 2016, and a $14.0 million decrease in restricted cash, partially offset by $422.4 million of purchases of available-for-sale investments and $35.5 million of cash used for capital expenditures.
Cash used in financing activities was $147.7 million, primarily resulting from activities related to the Separation during first quarter of fiscal 2016 and $44.5 million used in share repurchase programs. In accordance with the Contribution Agreement, the Company made cash contributions of $137.6 million Lumentum, which was partially offset by $35.8 million from the sale of Lumentum Series A Preferred Stock to Amada Holdings Co., Ltd. (“Amada”) pursuant to a binding commitment under the Securities Purchase Agreement. Cash used in financing activities also include payment of financing obligations of $5.9 million primarily related to holdback payment related to a 2013 acquisition, partially offset by $4.5$7.9 million in proceeds from the exercise of stock options and the issuance of common stock under our employee stock purchase plan. 
Year Ended June 27, 2015
As of June 27, 2015 our combined balance of cash and cash equivalents, short-term investments and restricted cash decreased by $41.9 million to $839.4 million, which includes $13.8 million which was transferred to Lumentum as part of the Separation, from $881.3 million as of June 28, 2014. Additionally, the cash provided by and used in operating, investing and financing activities during fiscal 2015 below contains activities related to Lumentum.
Cash provided by operating activities was $82.3 million, consisted of net loss of $88.1 million adjusted for non-cash charges (e.g., depreciation, amortization and stock-based compensation) which totaled $243.5 million, including changes in our deferred

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tax and other tax liabilities balances which are non-cash in nature, partially offset by changes in operating assets and liabilities that used $73.1 million. Our cash provided by operating activities was also impacted by our Separation related activities including our restructuring events. Changes in our operating assets and liabilities related primarily to a decrease in accrued payroll and related expenses of $32.4 million due to timing of salary and bonus payments, an increase in accounts receivable of $12.5 million primarily due to collections timing, a decrease in accounts payable of $10.1 million due to higher payment activity and a decrease in accrued expenses and other current and non-current liabilities of $6.8 million.
Cash used in investing activities was $5.8 million, primarily resulting from $562.7 million of purchases of available-for-sale investments and $101.5 million of cash used for capital expenditures, partially offset by $652.4 million of proceeds from the sales and maturities of available-for-sale investments and other assets and a $6.0 million decrease in restricted cash.
Cash used in financing activities was $7.3 million, primarily resulting from holdback payments of $22.2 million related to our acquisitions in fiscal 2015 and $4.8 million of cash used to repurchase our common stock, partially offset by $20.8 million of proceeds from the exercise of stock options and the issuance of common stock under our employee stock purchase plan.
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Material Contractual and Material Cash Obligations
The following summarizes our contractual obligations at July 1, 2017,2023, 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
Contractual Obligations         
Asset retirement obligations—expected cash payments$3.6
 $0.3
 $0.9
 $1.5
 $0.9
Long-term debt:         
2033 Notes610.0
 —
 610.0
 —
 —
2024 Notes460.0
 —
 —
 —
 460.0
Estimated interest payments37.9
 8.4
 11.1
 9.2
 9.2
Purchase obligations (1)56.8
 48.0
 7.0
 1.8
 —
Operating lease obligations (1)64.4
 18.8
 28.9
 16.2
 0.5
Pension and post-retirement benefit payments (2)106.2
 7.5
 11.6
 11.8
 75.3
Total$1,338.9
 $83.0
 $669.5
 $40.5
 $545.9
Payments due by period
TotalLess than
1 year		1 - 3 years3 - 5 yearsMore than
5 years
Asset retirement obligations—expected cash payments$4.3 $1.0 $0.9 $0.9 $1.5 
Debt:
2029 3.75% Senior Notes (1)
400.0 — — — 400.0 
2026 1.625% Senior Convertible Notes (1)
250.0 — 250.0 — — 
2024 1.00% Senior Convertible Notes (1)
96.4 96.4 — — — 
Estimated interest payments111.8 20.5 38.4 30.4 22.5 
Purchase obligations(2)
124.0 41.7 79.0 2.3 1.0 
Operating lease obligations(3)
46.2 10.3 16.6 9.6 9.7 
Non-cancelable leaseback obligations(2)
26.0 3.0 6.2 5.9 10.9 
Royalty payment1.5 0.8 0.7 — — 
Pension and post-retirement benefit payments(4)
58.8 9.2 12.4 11.8 25.4 
Total$1,119.0 $182.9 $404.2 $60.9 $471.0 
(1)Refer to “Note 16. Commitments and Contingencies” for more information. 
(2)Refer to “Note 15.
(1) Refer to “Note 11. 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. 
As of July 1, 2017, we have accrued on our Consolidated Balance Sheet $3.7 million in connection with restructuring and related activities relating to our operating lease obligations disclosed above, of which $2.0 million was included in other current liabilities and $1.7 million was included in other non-current liabilities.
Purchase obligations represent legally-binding commitments to purchase inventory and other commitments made in the normal course of business to meet operational requirements. Of the $56.8$124.0 million of purchase obligations as of July 1, 2017, $10.12023, $42.1 million are related to inventory and the other $46.7$81.9 million are non-inventory items.
As of July 1, 2017,2023, 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.
Off-Balance Sheet ArrangementsShare Repurchase Program
We do not have any off-balance sheet arrangements, as such term is defined in rules promulgated by the SEC, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Liquidity and Capital Resources Requirement

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We believe that our existing cash balances and investments will be sufficient to meet our liquidity and capital spending requirements over the next twelve months. 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 market which impact the liquidity and valuation of our investment portfolios;
volatility in foreign exchange market which impacts our financial results;
possible investments or acquisitions of complementary businesses, products or technologies;
issuance or repurchase of debt or equity securities, which may include open market purchases of our 2033 Notes prior to their maturity orDuring fiscal 2023 we repurchased 7.3 million shares of our common stock;
potential funding of pension liabilities either voluntarily or as required by law or regulation; and
compliance with covenants and other terms and conditions relatedstock outstanding for $83.9 million pursuant to our financing arrangements.
Employee Equity Incentive Plan
 Our stock option2019 and Full Value Award program is a broad-based, long-term retention program that is intended to attract and retain employees and align stockholder and employee interests.2022 Share Repurchase Plans. As of July 1, 2017, we have available2023, the Company had remaining authorization of $234.8 million for issuance 15.4 million shares of common stock for grant primarilyfuture share repurchases under our Amended and Restated 2003 Equity Incentive Plan (the “2003 Plan”) and 2005 Acquisition Equity Incentive Plan (the “2005 Plan”). The exercise price for the options is equal to the fair market value of the underlying stock at the date of grant. Options generally become exercisable over a three- or four-year period and, if not exercised, expire from five to ten years post grant date. Full Value Awards refer to RSUs and performance-based RSUs that are granted with the exercise price equal to zero and are converted to shares immediately upon vesting. The performance-based RSUs, or MSUs, have vesting requirements tied to the performance of the Company’s stock as compared to the NASDAQ telecommunications index, and could vest at a higher or lower rate or not at all, based on this relative performance. Full Value Awards are expected to vest over one to four years. The fair value of the time-based Full Value Awards is based on the closing market price of our common stock on the grant date of the award. 2022 Repurchase Plan.
Refer to “Note 14. Stock-Based Compensation”15. Stockholders Equity” under Item 8 of this Annual Report on Form 10-K for more information.
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Employee Defined Benefit Plans and Other Post-retirement Benefits
The Company sponsorsWe sponsor significant qualified and non-qualified pension plans for certain past and present employees in the U.K. and Germany. The Company also is responsible for the non-pension post-retirement benefit obligation assumed from a past acquisition. Most of 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.accrued.
TheAs of July 1, 2023, the U.K. plan is partially fundedfully funded. During fiscal 2023, we (amounts represented as £ and $ denote GBP and USD, respectively) contributed £1.0 million or approximately $1.2 million, while in fiscal 2022, we contributed £1.0 million or approximately $1.3 million to the otherU.K. pension plan. These contributions allowed us to comply with regulatory funding requirements.

As of July 1, 2023, our German pension plans, which were initially established as unfunded or “pay-as-you-go” plans, are unfunded. As of July 1, 2017, our pension plans, were underfunded by $105.1$55.0 million since the PBOPension Benefit Obligation (PBO) exceeded the fair value of plan assets. Similarly, we had a liability of $1.1 million related to our non-pension post-retirement benefit plan.
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 $4.7$4.2 million and $6.8$7.9 million per annum. In addition,

We also are responsible for the non-pension post-retirement benefit obligation assumed from a past acquisition with a liability of $0.4 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.
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. Our estimates are based on historical experience and assumptions that we expectbelieve to contribute approximately $1.0 millionbe reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. 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 U.K. plan during fiscal 2018.estimates used in preparation our Consolidated Financial Statements.
During fiscal 2017 we contributed GBP 0.5 million, or approximately USD 0.6 million, while in fiscal 2016, we contributed GBP 0.5 million or approximately USD 0.7 million toFor our U.K. pension plan. These contributions allowed the Company to comply with regulatory funding requirements.

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A keyPension accounting, significant judgment is required in actuarial assumption in calculatingused when establishing the discount rate for the net periodic cost and the PBO is the discount rate.projected benefit obligation (PBO) calculations. Changes in the discount rate impact the interest cost component of the net periodic benefit cost calculation and PBO due to the fact that the PBO is calculated on a net present value basis. Decreases in the discount rate will generally increase pre-tax cost, recognized expense and the PBO. Increases in the discount rate tend to have the opposite effect. We estimate a 50 basis50-basis point (“BPS”) decrease or increase in the discount rate would cause a corresponding increase or decrease, respectively, in the PBO of approximately $9.5$4.0 million based upon data as of July 1, 2017.2023.

Goodwill is recognized and initially measured as the excess of the purchase price paid over the net fair value of assets acquired and liabilities assumed in a business combination. Goodwill is not amortized but is tested for impairment annually, or more frequently if an event occurs or circumstances change that would more likely than not result in an impairment of goodwill. The Company tests goodwill at the reporting unit level for impairment during the fourth quarter of each fiscal year, or more frequently if events or circumstances indicate that the asset may be impaired.

First, we assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we conduct a quantitative goodwill impairment test comparing the fair value of the applicable reporting unit with its carrying value. If the estimated fair value exceeds book value, goodwill is considered not to be impaired. However, if the fair value of the reporting unit is less than book value, then goodwill will be impaired by the amount that the carrying amount of goodwill exceeds the fair value.

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As part of the annual impairment test, the Company performed a quantitative assessment of goodwill impairment for all reporting units.
The Company estimated the fair value of each reporting unit by applying a combination of the income approach and the market approach. The income approach used discounted future cash flows in which sales, operating income and cash flow projections were based on assumptions driven by current economic conditions. In developing these assumptions, we relied on various factors including operating results, business plans, economic projections, anticipated future cash flows, and other market data. The market approach was based on trading multiples of companies comparable to each reporting unit and analysis of recent sales of comparable entities. We corroborated the fair value estimates by comparing the sum of the fair values of the reporting units and corporate net assets to VIAVI’s market capitalization as of the valuation date.
The Company believes the assumptions used in the goodwill impairment test were reasonable, but future changes in the underlying assumptions could occur due to the inherent uncertainty in making such estimates. Further declines in the Company’s operating results due to challenging economic conditions, an unfavorable industry or macroeconomic development or other adverse changes in market conditions could change one of the key assumptions the Company used in the goodwill impairment assessment, which could result in a further decline in fair value and require the Company to record an impairment charge in future periods.
Based on our testing, the fair value of each of the Company’s reporting units was at least two times the carrying value, and therefore no impairment was identified.





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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 
Foreign Exchange Risk
We utilizeuse foreign exchange forward contracts to hedge foreign currency risk associated with foreign currency denominated monetary assets and liabilities, primarily certain short-term intercompany receivables and payables. Our foreign exchange forward contracts are accounted for as derivatives whereby the fair value of the contracts are reflected as other current assets or other current liabilities and the associated gains and losses are reflected in interestInterest and other income, net in the Consolidated Statements of Operations. Our hedging programs reduce, but do not eliminate, the impact of currency exchange rate movements. The gains and losses on those derivatives are expected to be offset by re-measurement gains and losses on the foreign currency denominated monetary assets and liabilities.
As of July 1, 2017, the Company2023, we had forward contracts that were effectively closed but not settled with the counterparties by year end. Therefore, theThe fair value of these contracts of $7.3$3.5 million and $1.3$2.4 million is reflected as prepaymentsPrepayments and other current assets and otherOther current liabilities inon the Consolidated Balance Sheets as of July 1, 2017,2023, respectively.
The forward contracts outstanding and not effectively closed, with a term of less than 120 days, were transacted near year end; therefore, theend and had minimal value as of July 1, 2023 and a fair value of $0.1 million which is reflected in Other current liabilities on the contracts is not significant.Consolidated Balance Sheets as of July 2, 2022. As of July 1, 20172023 and July 2, 2016,2022, the notional amounts of the forward contracts the Companythat we held to purchase foreign currencies were $134.3$87.5 million and $110.0$119.1 million, respectively, and the notional amounts of forward contracts the Companythat we held to sell foreign currencies were $25.4$19.3 million and $55.2$80.5 million, respectively.
The counterparties to these hedging transactions are creditworthy multinational banks. The risk of counterparty nonperformance associated with these contracts is not considered to be material. Notwithstanding our efforts to mitigate some foreign exchange risks, we do not hedge all of our foreign currency exposures, and there can be no assurances that our mitigating activities related to the exposures that we do hedge will adequately protect us against the risks associated with foreign currency fluctuations.
Investments
We maintain an investment portfolio in a varietyMajority of financial instruments, including, but not limitedour investments have maturities 90 days or less. Due to U.S. government and agency securities, corporate obligations, money market funds, asset-backed securities, and other investment-grade securities. The majoritythe short-term nature of these investments, pay a fixed rate of interest. The securities in the investment portfolio are subjectwe believe that we do not have any material exposure to market price risk due to changes in interest rates, perceived issuer creditworthiness, marketability, and other factors. These investments are generally classified as available-for-sale and, consequently, are recorded on our Consolidated Balance Sheets at fair value with unrealized gains or losses reported as a separate component of Other comprehensive (loss) income.
Investments in both fixed-rate and floating-rate interest earning instruments carry a degree of interest rate risk. The fair market values of our fixed-rate securities decline if interest rates rise, while floating-rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may be less than expectations because of changes in interest rates or we may suffer losses in principal if we sell securities that have experienced a decline in market value because of changes in interest rates. As of July 1, 2017, a hypothetical 100 basis point increase or decrease in interest rates would not result in a material change in the fair value of our available-for-sale debt instruments held that are sensitive toinvestments as a result of changes in interest rates. Changes in interest rates which includes U.S. treasuries, U.S. agencies, municipals, asset-backed securities and corporate securities.can affect the interest earned on our investments.
We seek to mitigate the credit risk of our portfolio of fixed-income securitiesinvestments by holding only high-quality, investment-grade obligations with effective maturities of 37 months or less.debt instruments. We also seek to mitigate marketability risk by holding only highly liquid securities with active secondary or resale markets. However, the investments may decline in value or marketability due to changes in perceived credit quality or changes in market conditions.
Long-term As of July 1, 2023, the Company’s short-term investments of $14.6 million were comprised of a 30-day term deposit of $13.1 million and trading securities related to the deferred compensation plan of $1.5 million, of which $0.1 million was invested in debt securities, $1.2 million was invested in equity securities and $0.2 million was invested in money market instruments.
Debt
The fair value of our 2029 Notes is subject to interest rate risk while the fair values of our 2024 and 20332026 Notes isare subject to interest rate and market price risk due to the convertible feature of the Notes and other factors. Generally, the fair value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. The fair value of the 2024 and 2026 Notes may also increase as the market price of Viaviour stock rises and decrease as the market

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price of our stock falls. Changes in interest rates and Viaviour stock price in the case of convertible notes affect the fair value of the Notes but does not impact our financial position, cash flows or results of operations.
Based on quoted market prices, as of July 1, 2017,2023, the fair value of the 2024 Notes was approximately $481.7 million.$95.6 million, the fair value of the 2026 Notes was $262.7 million and the fair value of the 20332029 Notes was approximately $676.1$341.8 million. The carrying value of the 2024 Notes was $96.2 million, the carrying value of the 2026 Notes was $235.0 million and the carrying value of the 2029 Notes was $394.5 million. Refer to “Note 10.11. Debt” under Item 8 of this Annual Report on Form 10-K for more information.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 
To the Board of Directors and Stockholders of Viavi Solutions Inc.


In our opinion,Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Viavi Solutions Inc. and its subsidiaries (the “Company”) as of July 1, 2023 and July 2, 2022, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity and of cash flows, for each of the three years in the period ended July 1, 2023, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of July 1, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Viavi Solutions Inc. and its subsidiariesthe Company as of July 1, 20172023 and July 2, 2016,2022, and the results of theirits operations and theirits cash flows for each of the three years in the period ended July 1, 20172023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 1, 2017,2023, based on criteria established in Internal Control - Integrated Framework (2013)issued by the CommitteeCOSO.

Changes in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for convertible debt instruments as of Sponsoring Organizations of the Treadway Commission (COSO). July 3, 2021.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on thesethe Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our integrated audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, andas well as evaluating the overall presentation of the consolidated financial statement presentation.statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

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Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



Critical Audit Matters
/s/ PRICEWATERHOUSECOOPERS LLP

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
San Jose, California
August 29, 2017Revenue Recognition – Identifying and Evaluating Performance Obligations in Certain Customer Contracts in the Network Enablement and Service Enablement Reportable Segments

As described in Notes 1 and 19 to the consolidated financial statements, the Company had $1,106.1 million of revenue for the year ended July 1, 2023 of which $697.5 million and $103.7 million related to the Network Enablement and Service Enablement segments, respectively. The Company’s revenue recognition is determined by management through the following steps: 1) identification of the contract with a customer; 2) identification of the performance obligations in the contract; 3) determination of the transaction price; 4) allocation of the transaction price to the performance obligations in the contract; and 5) recognition of revenue when (or as) the performance obligations are satisfied. Certain of the Company’s contracts with customers include performance obligations consisting of a variety of products and services and may involve a significant level of integration and interdependency between performance obligations. Identifying and evaluating whether products and services are considered distinct performance obligations may require significant management judgment, particularly in the Network Enablement and Service Enablement reportable segments due to the nature of the product and service offerings.

The principal considerations for our determination that performing procedures relating to revenue recognition – identifying and evaluating performance obligations in certain customer contracts in the Network Enablement and Service Enablement reportable segments is a critical audit matter are the significant judgment by management in identifying and evaluating performance obligations, which in turn led to a high degree of auditor judgment and effort in performing procedures and evaluating audit evidence obtained related to whether such performance obligations were appropriately identified and evaluated by management.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls related to the identification and evaluation of performance obligations in contracts with customers. These procedures also included, among others, testing on a sample basis, the completeness and accuracy of management’s identification and evaluation of performance obligations in certain customer contracts in the Network Enablement and Service Enablement reportable segments.


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/s/ PricewaterhouseCoopers LLP

Phoenix, Arizona
August 17, 2023

We have served as the Company’s auditor since 2005.
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VIAVI SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
 Years Ended
 July 1, 2023July 2, 2022July 3, 2021
Revenues:
Product revenue$936.1 $1,135.5 $1,051.4 
Service revenue170.0 156.9 147.5 
Total net revenue1,106.1 1,292.4 1,198.9 
Cost of revenues:
Product cost of revenue364.9 421.3 391.7 
Service cost of revenue77.8 67.6 59.6 
Amortization of acquired technologies24.6 30.0 33.2 
Total cost of revenues467.3 518.9 484.5 
Gross profit638.8 773.5 714.4 
Operating expenses:
Research and development206.9 213.2 203.0 
Selling, general and administrative328.7 365.7 337.5 
Amortization of other intangibles8.7 9.7 33.3 
Restructuring and related charges (benefits)12.1 (0.1)(1.6)
Total operating expenses556.4 588.5 572.2 
Income from operations82.4 185.0 142.2 
Loss on convertible note settlement (Note 11)— (101.8)— 
Loss on convertible note modification (Note 11)(2.2)— — 
Interest and other income, net7.6 5.2 3.3 
Interest expense(27.1)(23.3)(14.7)
Income before income taxes60.7 65.1 130.8 
Provision for income taxes35.2 49.6 63.3 
Net income$25.5 $15.5 $67.5 
Net income per share:
Basic$0.11 $0.07 $0.30 
Diluted$0.11 $0.07 $0.29 
Shares used in per-share calculations:
Basic224.6 230.9 228.7 
Diluted226.6 238.2 236.3 
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
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 Years Ended
 July 1, 2017 July 2, 2016 June 27, 2015
Revenues:     
Product revenue$726.4
 $808.8
 $771.2
Service revenue85.0
 97.5
 102.7
Total net revenues811.4
 906.3
 873.9
Cost of revenues:     
Product cost of revenues260.9
 278.1
 259.1
Service cost of revenues50.2
 61.2
 62.8
Amortization of acquired technologies14.3
 17.3
 31.9
Total cost of revenues325.4
 356.6
 353.8
Gross profit486.0
 549.7
 520.1
Operating expenses:     
Research and development136.3
 166.4
 173.3
Selling, general and administrative300.5
 351.1
 376.3
Impairment of goodwill—
 91.4
 —
Amortization of other intangibles14.0
 14.6
 19.5
Restructuring and related charges21.6
 10.5
 26.8
Total operating expenses472.4
 634.0
 595.9
Income (loss) from operations13.6
 (84.3) (75.8)
Interest and other income, net13.1
 2.5
 3.7
Gain on sale of investments203.1
 71.6
 0.1
Interest expense(43.2) (35.7) (33.3)
Income (loss) from continuing operations before income taxes186.6
 (45.9) (105.3)
Provision for income taxes21.3
 4.5
 26.1
Income (loss) from continuing operations, net of taxes$165.3
 $(50.4) $(131.4)
Income (loss) from discontinued operations, net of taxes1.6
 (48.8) 43.3
Net income (loss)$166.9
 $(99.2) $(88.1)
      
Net income (loss) per share from - basic:     
Continuing operations$0.72
 $(0.22) $(0.57)
Discontinued operations0.01
 (0.20) 0.19
Net income (loss)$0.73
 $(0.42) $(0.38)
      
Net income (loss) per share from - diluted:     
Continuing operations$0.70
 $(0.22) $(0.57)
Discontinued operations0.01
 (0.20) 0.19
Net income (loss)$0.71
 $(0.42) $(0.38)
      
Shares used in per-share calculation - basic229.9
 234.0
 232.7
Shares used in per-share calculation - diluted234.5
 234.0
 232.7

See accompanying notes to consolidated financial statements.

VIAVI SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
 Years Ended
 July 1, 2023July 2, 2022July 3, 2021
Net income$25.5 $15.5 $67.5 
Other comprehensive income (loss):
 Net change in cumulative translation adjustment, net of tax18.8 (76.1)61.5 
 Net change in available-for-sale investments, net of tax:
  Unrealized holding (losses) gains arising during period(0.3)0.1 — 
    Net change in defined benefit obligation, net of tax:
  Unrealized actuarial gains arising during period2.0 13.9 4.1 
  Amortization of actuarial (gains) losses(0.1)2.9 3.1 
Net change in accumulated other comprehensive income (loss)20.4 (59.2)68.7 
Comprehensive income (loss)$45.9 $(43.7)$136.2 

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
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 Years Ended
 July 1, 2017 July 2, 2016 June 27, 2015
Net income (loss)$166.9
 $(99.2) $(88.1)
Other comprehensive (loss) income:     
Net change in cumulative translation adjustment, net of tax4.8
 (32.0) (55.4)
Net change in available-for-sale investments, net of tax:     
Unrealized holding gains (losses) arising during period92.1
 177.3
 (0.4)
   Less: reclassification adjustments included in net income (loss)(201.9) (69.6) —
Net change in defined benefit obligation, net of tax:     
Unrealized actuarial gains (loss) arising during period0.7
 (10.6) (3.7)
Amortization of actuarial losses1.9
 0.7
 0.4
Net change in accumulated other comprehensive (loss) income(102.4) 65.8
 (59.1)
Comprehensive income (loss)$64.5
 $(33.4) $(147.2)

See accompanying notes to consolidated financial statements.

VIAVI SOLUTIONS INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except share and par value data)
July 1, 2023July 2, 2022
ASSETS  
Current assets:  
Cash and cash equivalents$506.5 $559.9 
Short-term investments14.6 1.4 
Restricted cash4.5 3.6 
Accounts receivable, net231.2 260.9 
Inventories, net116.1 110.1 
Prepayments and other current assets72.1 69.2 
Total current assets945.0 1,005.1 
Property, plant and equipment, net243.0 228.9 
Goodwill, net455.2 387.6 
Intangibles, net58.6 54.2 
Deferred income taxes87.0 86.3 
Other non-current assets61.7 65.8 
Total assets$1,850.5 $1,827.9 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$47.2 $58.3 
Accrued payroll and related expenses50.5 76.0 
Deferred revenue78.6 81.0 
Accrued expenses21.2 29.3 
Short-term debt96.2 68.4 
Other current liabilities49.8 56.3 
Total current liabilities343.5 369.3 
Long-term debt629.5 616.5 
Other non-current liabilities186.7 170.4 
Commitments and contingencies (Note 18)
Stockholders’ equity:
Preferred stock, $0.001 par value; 1 million shares authorized, no shares issued or outstanding at July 1, 2023 and July 2, 2022.— — 
Common stock, $0.001 par value; 1 billion shares authorized; 222 million shares at July 1, 2023 and 226 million shares at July 2, 2022, issued and outstanding0.2 0.2 
Additional paid-in capital70,427.3 70,370.2 
Accumulated deficit(69,600.7)(69,542.3)
Accumulated other comprehensive loss(136.0)(156.4)
Total stockholders’ equity690.8 671.7 
Total liabilities and stockholders’ equity$1,850.5 $1,827.9 
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
54

 July 1, 2017 July 2, 2016
ASSETS 
  
Current assets: 
  
Cash and cash equivalents$1,004.4
 $482.9
Short-term investments432.2
 484.7
Restricted cash11.2
 12.2
Accounts receivable, net120.4
 148.4
Inventories, net48.0
 51.4
Prepayments and other current assets50.8
 32.1
Total current assets1,667.0
 1,211.7
Property, plant and equipment, net136.9
 133.0
Goodwill151.6
 152.1
Intangibles, net31.1
 59.9
Deferred income taxes109.5
 108.8
Other non-current assets14.4
 12.6
Total assets$2,110.5
 $1,678.1
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable$32.6
 $47.0
Accrued payroll and related expenses43.8
 44.9
Deferred revenue60.2
 78.6
Accrued expenses30.8
 24.9
Other current liabilities61.4
 31.0
Total current liabilities228.8
 226.4
Long-term debt931.4
 583.3
Other non-current liabilities163.9
 179.1
Commitments and contingencies (Note 16)
 
Stockholders’ equity:   
Preferred Stock, $0.001 par value; 1 million shares authorized; 1 share at July 1, 2017 and July 2, 2016, issued and outstanding—
 —
Common Stock, $0.001 par value; 1 billion shares authorized; 228 million shares at July 1, 2017 and 232 million shares at July 2, 2016, issued and outstanding0.2
 0.2
Additional paid-in capital70,184.4
 70,059.8
Accumulated deficit(69,305.8) (69,380.7)
Accumulated other comprehensive (loss) income(92.4) 10.0
Total stockholders’ equity786.4
 689.3
Total liabilities and stockholders’ equity$2,110.5
 $1,678.1
See accompanying notes to consolidated financial statements.

VIAVI SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Years Ended
July 1, 2023July 2, 2022July 3, 2021
OPERATING ACTIVITIES:
Net income$25.5 $15.5 $67.5 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense36.2 35.7 35.8 
Amortization of acquired technologies and other intangibles33.3 39.7 66.5 
Stock-based compensation51.2 52.3 48.3 
Amortization of debt issuance costs and accretion of debt discount4.2 2.8 2.3 
Net change in fair value of contingent liabilities(4.6)— (5.3)
Loss on disposal of long-lived assets0.9 2.3 0.1 
Loss on convertible note debt modification and settlement2.2 101.8 — 
Deferred taxes, net4.8 (10.5)0.6 
Restructuring12.1 — — 
Gain on legal settlement(6.7)— — 
Other4.7 2.0 2.8 
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable37.4 (18.3)(15.0)
Inventories(10.7)(27.7)(14.3)
Other current and non-currents assets10.3 (11.3)14.9 
Accounts payable(9.4)(5.6)7.0 
Income taxes payable(2.0)(18.2)18.1 
Deferred revenue, current and non-current(2.1)13.2 12.3 
Accrued payroll and related expenses(25.8)3.0 23.1 
Accrued expenses and other current and non-current liabilities(47.4)1.4 (21.4)
Net cash provided by operating activities114.1 178.1 243.3 
INVESTING ACTIVITIES:
Purchases of short-term investments(13.1)— — 
Acquisition of businesses, net of cash acquired(67.3)(8.3)(0.7)
Purchase price adjustment related to business acquisition(0.7)— — 
Capital expenditures(51.1)(72.5)(52.1)
Proceeds from the sale of assets5.1 9.8 4.1 
Net cash used in investing activities(127.1)(71.0)(48.7)
FINANCING ACTIVITIES:
Proceeds from issuance of senior notes118.0 400.0 — 
Payment of debt issuance costs(4.2)(10.5)(0.1)
Repurchase and retirement of common stock(83.9)(235.9)(42.2)
Payment of financing obligations(0.1)(0.1)(1.2)
Retirement of convertible notes upon maturity(68.1)— — 
Cash paid in convertible note settlement— (351.6)— 
Proceeds from exercise of employee stock options and employee stock purchase plan7.9 7.8 6.6 
Withholding tax payment on vesting of restricted stock awards(11.8)(14.1)(17.9)
Proceeds from revolving credit facility— 150.0 — 
Repayment of revolving credit facility— (150.0)— 
Payment of acquisition related contingent consideration and obligations(7.8)(6.0)(4.0)
Net cash used in financing activities(50.0)(210.4)(58.8)
Effect of exchange rates on cash, cash equivalents and restricted cash5.8 (32.3)25.2 
Net (decrease) increase in cash, cash equivalents and restricted cash(57.2)(135.6)161.0 
Cash, cash equivalents and restricted cash at beginning of period(1)
572.8 708.4 547.4 
Cash, cash equivalents and restricted cash at end of period(2)
$515.6 $572.8 $708.4 
Supplemental disclosure of cash flow information
Cash paid for interest$22.0 $17.9 $12.3 
Cash paid for income taxes, net of refunds$47.5 $77.1 $36.7 
 Years Ended
 July 1, 2017 July 2, 2016 June 27, 2015
OPERATING ACTIVITIES:     
Net income (loss)$166.9
 $(99.2) $(88.1)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:     
Depreciation expense29.4
 38.1
 80.8
Amortization of acquired technologies and other intangibles28.3
 32.5
 59.2
Stock-based compensation33.2
 44.0
 66.9
Amortization of debt issuance costs and accretion of debt discount34.6
 28.8
 27.3
Amortization of discount and premium on investments, net0.8
 0.8
 3.2
Impairment of goodwill—
 91.4
 —
Gain on sales of investments(203.1) (71.6) (0.1)
Loss on disposal of long-lived assets5.7
 1.5
 1.1
Loss on extinguishment of debt1.1
 —
 —
Other4.8
 2.1
 7.1
            Changes in operating assets and liabilities, net of impact of Lumentum distribution:     
Accounts receivable24.5
 23.4
 (12.5)
Inventories(1.6) (2.6) (6.0)
Other current and non-currents assets(17.4) 5.1
 (9.0)
Accounts payable(14.8) (2.1) (10.1)
Income taxes payable(0.2) (1.5) (21.3)
Deferred revenue, current and non-current(27.4) (2.4) 3.2
Deferred taxes, net1.5
 0.6
 19.8
Accrued payroll and related expenses(15.4) (25.2) (32.4)
Accrued expenses and other current and non-current liabilities29.1
 (10.8) (6.8)
Net cash provided by operating activities80.0
 52.9
 82.3
      
INVESTING ACTIVITIES:     
Purchases of available-for-sale investments(679.4) (422.4) (562.7)
Maturities of available-for-sale investments470.4
 395.7
 574.8
Sales of available-for-sale investments355.2
 287.3
 71.4
Changes in restricted cash0.2
 14.0
 6.0
Acquisition of businesses, net of cash acquired—
 (0.9) —
Capital expenditures(38.6) (35.5) (101.5)
Proceeds from the sale of assets5.9
 6.0
 6.2
Net cash provided by (used in) investing activities113.7
 244.2
 (5.8)
      
FINANCING ACTIVITIES:     
Proceeds from sale of Lumentum Holdings Inc. Series A Preferred Stock—
 35.8
 —
Cash contribution to Lumentum Holdings Inc.—
 (137.6) —
Proceeds from issuance of senior convertible debt460.0
 —
 —
Payment of debt issuance costs(8.9) —
 —
Repurchase and retirement of common stock(92.0) (44.5) (4.8)
Payment of financing obligations(0.8) (5.9) (23.3)
Redemption of convertible debt(45.4) —
 —
Proceeds from exercise of employee stock options and employee stock purchase plan12.4
 4.5
 20.8
Net cash provided by (used in) financing activities325.3
 (147.7) (7.3)
      
Effect of exchange rates on cash and cash equivalents2.5
 (14.4) (18.5)
Net increase in cash and cash equivalents521.5
 135.0
 50.7
Cash and cash equivalents at beginning of period482.9
 347.9* 297.2
Cash and cash equivalents at end of period$1,004.4
 482.9
 $347.9*
Supplemental disclosure of cash flow information     
Cash paid for interest$6.7
 $6.6
 $6.5
Cash paid for taxes$23.1
 $31.8
 $23.8
*Cash(1)These amounts include both current and non-current balances of restricted cash equivalents attotaling $12.9 million, $10.6 million and $8.4 million as of July 2, 2022, July 3, 2021, and June 27, 2015 included $13.42020, respectively.
(2) These amounts include both current and non-current balances of restricted cash totaling $9.1 million, in current assets$12.9 million and $10.6 million as of July 1, 2023, July 2, 2022 and July 3, 2021, respectively.
The accompanying Notes to the discontinued operationsConsolidated Financial Statements are an integral part of Lumentum Holdings Inc.these statements.
See accompanying notes to consolidated financial statements.

55


Table of Contents

VIAVI SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions)
Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total
SharesAmount
Balance at June 27, 2020228.3 $0.2 $70,146.1 $(69,347.2)$(165.9)$633.2 
Net income— — — 67.5 — 67.5 
Other comprehensive income— — — — 68.7 68.7 
Shares issued under employee stock plans, net of tax effects3.0 — (11.5)— — (11.5)
Stock-based compensation— — 48.6 — — 48.6 
Repurchase of common stock(3.0)— — (42.6)— (42.6)
Balance at July 3, 2021228.3 $0.2 $70,183.2 $(69,322.3)$(97.2)$763.9 
Net income— — — 15.5 — 15.5 
Other comprehensive loss— — — — (59.2)(59.2)
Shares issued under employee stock plans, net of tax effects2.3 — (6.1)— — (6.1)
Stock-based compensation— — 52.0 — — 52.0 
Repurchase of common stock(14.8)— — (235.5)— (235.5)
Convertible note settlement (Note 11)
10.6 — 141.1 — — 141.1 
Balance at July 2, 2022226.4$0.2 $70,370.2 $(69,542.3)$(156.4)$671.7 
Net income— — — 25.5 — 25.5 
Other comprehensive income— — — — 20.4 20.4 
Shares issued under employee stock plans, net of tax effects2.4 — (3.9)— — (3.9)
Stock-based compensation— — 51.2 — — 51.2 
Repurchase of common stock(7.3)— (0.3)(83.9)— (84.2)
Convertible note modification (Note 11)
— — 10.1 — — 10.1 
Balance at July 1, 2023221.5$0.2 $70,427.3 $(69,600.7)$(136.0)$690.8 
The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.
56

 Common Stock Additional Paid-In Capital Accumulated Deficit 
Accumulated
Other
Comprehensive
Income (Loss)
 Total
 Shares Amount    
Balance at June 28, 2014230.4
 $0.2
 $69,957.0
 $(68,780.6) $11.1
 $1,187.7
Net loss—
 —
 —
 (88.1) —
 (88.1)
Comprehensive loss—
 —
 —
 —
 (59.1) (59.1)
Shares issued under employee stock plans, net of tax effects5.3
 —
 (1.2) —
 —
 (1.2)
Stock-based compensation—
 —
 66.9
 —
 —
 66.9
Repurchases of common stock(0.4) —
 —
 (4.8) —
 (4.8)
Balance at June 27, 2015235.3
 $0.2
 $70,022.7
 $(68,873.5) $(48.0) $1,101.4
Net loss—
 —
 —
 (99.2)   (99.2)
Distribution of Lumentum Holdings Inc.—
 —
 —
 (363.5) (7.8) (371.3)
Comprehensive income—
 —
 —
 —
 65.8
 65.8
Shares issued under employee stock plans, net of tax effects4.5
 —
 (6.9) —
 —
 (6.9)
Stock-based compensation—
 —
 44.0
 —
 —
 44.0
Repurchases of common stock(7.3) —
 —
 (44.5) —
 (44.5)
Balance at July 2, 2016232.5
 $0.2
 $70,059.8
 $(69,380.7) $10.0
 $689.3
Net income—
 —
 —
 166.9
 —
 166.9
Comprehensive loss—
 —
 —
 —
 (102.4) (102.4)
Shares issued under employee stock plans, net of tax effects5.6
 —
 (1.9) —
 —
 (1.9)
Stock-based compensation—
 —
 33.2
 —
 —
 33.2
Repurchases of common stock(10.5) —
 —
 (92.0) —
 (92.0)
Issuance of senior convertible notes—
 —
 99.9
 —
 —
 99.9
Reacquisition of 2033 Notes equity component—
 —
 (6.6) —
 —
 (6.6)
Balance at July 1, 2017227.6
 $0.2
 $70,184.4
 $(69,305.8) $(92.4) $786.4
See accompanying notes to consolidated financial statements.


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation
Description of Business
Viavi Solutions, Inc. (“Viavi,”(VIAVI, also referred to as “thethe Company,” “we,” “our,” we, our and “us”), formerly JDS Uniphase Corporation (“JDSU”)us), is a global provider of network test, monitoring and assurance solutions to communications service providers (CSPs), enterprises, network equipment manufacturers (NEMs), original equipment manufacturers (OEMs), government and their ecosystems, supported by a worldwide channel community including Viavi Velocity Solution Partners. The Velocity program (“Velocity”) allows the Company to optimize the use of direct or partner sales depending on application and sales volume. Velocity expands the Company’s reach into new market segments as well as expands the capability to sell and deliver solutions. Viavi’s solutions deliver end-to-end visibility across physical, virtual and hybrid networks, enabling customers to optimize connectivity, quality of experience and profitability. Viaviavionics. VIAVI is also a leader in high performance thin film optical coatings, providing light management solutions tofor the anti-counterfeiting, consumer andelectronics, industrial, government and healthcare and otherautomotive markets.
Lumentum Separation
On August 1, 2015 (the “Separation Date”), Viavi completed the distribution of approximately 80.1% of the outstanding shares of Lumentum Holdings Inc. (“Lumentum”) common stock (the “Distribution”). Concurrent with the Distribution, JDSU was renamed Viavi Solutions Inc. and, at the time of the Distribution, retained ownership of approximately 19.9% of Lumentum’s outstanding shares. Lumentum was formed to hold Viavi’s communications and commercial optical products business segment (“CCOP”) and the WaveReady product line and, as a result of the Distribution, is now an independent public company trading under the symbol “LITE” on The Nasdaq Stock Market (“NASDAQ”). The Distribution was made to Viavi’s stockholders of record as of the close of business on July 27, 2015 (the “Record Date”), who received one share of Lumentum common stock for every five shares of Viavi common stock held as of the close of business on the Record Date and not sold prior to August 4, 2015, the ex-dividend date. The historical results of operations and the financial position have been recasted to present the Lumentum business as discontinued operations as described in “Note 3. Discontinued Operations.” Unless noted otherwise, discussion in the Notes to Consolidated Financial Statements pertains to continuing operations.
Fiscal Years
The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to June 30th. The Company’s 2023 and 2022 fiscal 2017years were 52-week years ending on July 1, 2023 and July 2, 2022, respectively. The Company’s 2021 fiscal year was a 52-week53-week fiscal year ending on July 1, 2017. The Company’s3, 2021 as the first quarter of fiscal 2016 and 2015 were 53-week and 52-week fiscal years ending on July 2, 2016, and June 27, 2015, respectively.year 2021 was a 14-week quarter compared to the standard 13-week quarters.
Principles of Consolidation
The consolidated financial statementsConsolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”)(U.S. GAAP) and include the Company and its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated.
Use of Estimates
The preparation of the Company’s consolidated financial statementsConsolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affecteffect 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 estimatesEstimates are based on historical factors, current circumstances and the experience and on various assumptions aboutjudgment of management. Under changed conditions the future 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 orimpacted 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 more currentreadily available information.
Cash and Cash Equivalents
The Company considers highly liquid instruments such as treasury bills, commercial paper and other money market instruments with original maturities of 90 days or less at the time of purchase to be cash equivalents. Cash equivalents also include certain term deposit with financial institutions that the Company can liquidate with 30-day advance notice without incurring penalty.

Table of Contents
VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Restricted Cash
At July 1, 20172023 and July 2, 2016,2022, the Company’s short-term restricted cash balances were $11.2$4.5 million and $12.2$3.6 million, respectively, and therespectively. The Company’s long-term restricted cash balances, included in Other non-current assets on the Consolidated Balance Sheets, were $6.8$4.6 million and $6.0$9.3 million as of July 1, 2023 and July 2, 2022, respectively. These balances primarily include interest-bearing investments in bank certificates of deposit and money market funds which act as collateral supporting the issuance of standby letters of credit and performance bonds for the benefit of third parties. Refer to the Company’s “Note 16.18. Commitments and Contingencies” for more information.
Investments
The Company’s investments in debt securities and marketable equity securities, including the Company’s ownership of Lumentum’s common stock, are primarily classified as available-for-saleavailable for sale investments, or trading securities and are recorded at fair value. The cost of securities sold is based on the specific identificationidentified method. Unrealized gains and losses resulting from changes in fair value on available-for-sale investments, net of tax, are reported within accumulatedas a component of Accumulated other comprehensive income (loss), a separate component of stockholders’ equity. Unrealized gains or lossesloss on trading securities resulting from changes in fair value are recognized in current earnings. The Company’s short-term investments, which are classified as current assets, include certain securities with stated maturities of longer than twelve months as they are highly liquid and available to support current operations.the Consolidated Balance Sheets.
57


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company periodically reviews these investments in debt securities for impairment. If a debt security’s fair value is below amortized cost and the Company either intends to sell the security or it is more likely than not that the Company will be required to sell the security before its anticipated recovery, the Company records an other-than-temporary impairment charge to current earnings for the entire amount of the impairment; ifimpairment. If a debt security’s fair value is below amortized cost and the Company does not expect to recover the entire amortized cost of the security, the Company separates the other-than-temporary impairment intointo: (i) the portion of the loss related to credit factors, or the credit loss portion,portion; and, (ii) the portion of the loss that is not related to credit factors, or the non-credit loss portion. The credit loss portion is the difference between the amortized cost of the security and the Company’s best estimate of the present value of the cash flows expectedrecorded as an allowance to be collected from the debt security. The non-credit loss portion is the residual amount of the other-than-temporary impairment. The credit loss portion is recorded as a charge tothrough Interest and other income, (loss),net, in the Consolidated Statement of Operations and the non-credit loss portion is recorded as a separate component of Accumulated other comprehensive (loss) income.loss on the Consolidated Balance Sheets.
The Company’s investments also include fixed term deposits with interest earned recorded as a component of Interest and other income, net, in the Consolidated Statement of Operations.
Fair Value of Financial Instruments
The carrying amounts of certain of the Company’s financial instruments, including cash equivalents, accounts receivable, accounts payable, and deferred compensation liability, approximate fair value because of their short maturities. 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 thean asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs thatwhich reflect the assumptions about the factors that market participants would use in valuing thean asset or liability.
EstimatesThe three levels of inputs that may be used to measure fair value are:
•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 include asset-backed securities, 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 July 1, 2023 and July 2, 2022, the Company did not hold any Level 3 investment securities. The Company’s Level 3 liabilities as of July 1, 2023 and July 2, 2022 consist of contingent purchase consideration liabilities related to business acquisitions. The fair value of fixed-income securitiessuch earn-out liabilities are generally 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 third party, market-based pricing sources which the Company believes to be reliable. These estimates representinputs on the third parties’ good faith opinion as to what a buyerdate of remeasurement, with the change in fair value recognized in the marketplace would pay for a security in a current sale. For instruments that are not actively traded, estimates may be based on current treasury yields adjusted by an estimated market credit spread for the specific instrument. The fair market valueSelling, general and administrative (SG&A) expense of the Company’s 0.625% Senior Convertible Notes due 2033 and 1.00% Senior Convertible Notes due 2024 fluctuates with interest rates and with the market priceConsolidated Statements of the stock, but does not affect the carrying value of the debt on the balance sheet. Refer to the Company’s “Note 10. Debt” for more information.Operations.
58


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Inventories
InventoryThe Company’s inventory is valued at standard cost, which approximates actual cost computed on a first-in, first-out basis, not in excess of net realizable value. On a quarterly basis, the Company assesses the value of its inventory and writes down those inventories determined to be obsolete or in excess of its forecasted usage to their market value. The Company assesses the valuation on a quarterly basis and writes down theCompany’s estimates of realizable value for estimated excess and obsolete inventoryare based upon estimates ofmanagement analysis and assumptions including, but not limited to, forecasted sales levels by product, expected product life cycle, product development plans and future demand including warranty requirements. Our inventoriesThe Company’s product line management personnel play a key role in its excess review process by providing updated sales forecasts, managing product transitions and working with manufacturing to minimize excess inventory. Differences between actual market conditions and customer demand to the Company’s forecasts, may create favorable or unfavorable inventory positions, and may result in additional inventory write-downs or higher than expected income from operations. The Company’s inventory amounts include material, labor, and manufacturing overhead costs.

Leases
Table of Contents
VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company determines if an arrangement is a lease or contains a lease at inception. Operating lease liabilities are recognized based on the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. If the rate implicit in the lease is not readily determinable for our operating leases, the Company uses an incremental borrowing rate based on information available at the commencement date to determine the present value of future lease payments. The lease term is the non-cancelable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that an option will be exercised. Operating right-of-use (ROU) assets are recognized at commencement based on the amount of the initial measurement of the lease liability. Operating ROU assets also include any lease payments made prior to lease commencement and exclude lease incentives. Lease expense is recognized on a straight-line basis over the lease term. 

Operating ROU assets are included in Other non-current assets and lease liabilities are included in Other current liabilities and Other non-current liabilities on the Consolidated Balance Sheets. Lease and non-lease components for all leases are accounted for separately. The Company does not recognize ROU assets and lease liabilities for leases with a lease term of twelve months or less.
Property, Plant and Equipment
Property, plant and equipment are stated at cost.cost, net of accumulated depreciation. Depreciation is computed by theusing a straight-line method, over the following estimated useful lives of the assets: 10 to 50 years for building and improvements 25 to 20 years for50 years; machinery and equipment and 23 to 5 years for30 years; and furniture, fixtures, software and office equipment. equipment 2 to 10 years.
Leasehold improvements are amortized byusing the straight-line method over the shorterlesser of the estimated useful lives of the assetsasset or the term of the lease. remaining lease term.
Demonstration units whichare amortized using the straight-line method and are Company products used for demonstration purposes for customers and/or potential customersexisting and prospective customers. These assets are generally not intended to be sold and have an estimated useful life of 3 to 5 years and are amortized by the straight-line method.years.
Costs related to software acquired, developed or modified solely to meet the Company’s internal requirements and for which there are no substantive plans to market are capitalized in accordance with the authoritative guidance on accounting for the costs of computer software developed or obtained for internal use. Only costs incurred after the preliminary planning stage of the project and after management has authorized and committed funds to the project are eligible for capitalization. Costs capitalized for computer software developed or obtained for internal use are included in property,Property, plant and equipment, net, on the Consolidated Balance Sheets.
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Business Combinations
The Company includes the results of operations of the businesses that it acquires from the acquisition date. In allocating the purchase price of a business combination, the Company records all assets acquired and liabilities assumed at fair value as of the date of acquisition, with the excess of the purchase price over the aggregate fair values recorded as goodwill. Additionally, any contingent consideration is recorded at fair value on the acquisition date and classified as a liability.
The Company determines the estimated fair values after review and consideration of relevant information, including discounted cash flows, quoted market prices and estimates made by management. The fair value assigned to identifiable intangible assets acquired is based on estimates and assumptions made by management at the time of the acquisition. The Company adjusts the preliminary purchase price allocation, as necessary, during the measurement period of up to one year after the acquisition closing date as it obtains more information as to facts and circumstances existing as of the acquisition date.
Acquisition-related costs are recognized separately from the business combination and are expensed as incurred.
Goodwill
Goodwill represents the excess of the purchase price of an acquired enterprise or assetspaid over the net fair value of the identifiable assets acquired and liabilities assumed. The Company tests goodwill for impairment of goodwill on an annual basis inat the reporting unit level at least annually, during the fourth quarter and at any other time whenof each fiscal year, or more frequently if events occur or changes in circumstances indicate that the carrying amount of goodwillasset may not be recoverable. Referimpaired.
The accounting guidance provides the Company with the option to “Note 8. Goodwill” for more information.
Circumstancesperform a qualitative assessment to determine whether further impairment testing is necessary. The qualitative assessment considers events and circumstances that could trigger an impairment testmight indicate that a reporting unit’s fair value is less than its carry amount. These events and circumstances include, but are not limited to,macro-economic conditions, such as a significant adverse change in the business climateCompany’s operating environment, industry or legal factors, an adverse actionmarket considerations; entity-specific events such as increasing costs, declining financial performance, or assessment by a regulator, change in customers, target market and strategy, unanticipated competition, loss of key personnel, or other events, such as the likelihood that a reporting unit or significant portionsale of a reporting unit, will be soldadverse regulatory developments or otherwise disposed.a sustained decrease in the Company’s stock price.
An assessment of qualitative factors may be performed to determine whetherIf it is necessary to perform the quantitative goodwill impairment test. If thedetermined, as a result of the qualitative assessment, is that it is more likely than not (i.e., greater than 50% likelihood) that the fair value of a reporting unit is less than its carrying amount, then thea quantitative test is required. Otherwise, no further testing is required.
Under the quantitative test, if the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recorded in the Consolidated Statements of Operations as “impairment of goodwill.” Measurement ofCompany compares the fair value of a reporting unit to its carrying value. If the estimated fair value exceeds book value, goodwill is based on one or moreconsidered not to be impaired. However, if the fair value of the followingreporting unit is less than book value, then goodwill will be impaired by the amount that the carrying amount exceeds the fair value, measures: using presentnot to exceed the carrying amount of the goodwill.

To estimate the fair value techniques of estimatedeach reporting unit, a combination of the income and market approach is used. The income approach uses discounted future cash flows or using valuation techniquesin which sales, operating income and cash flow projections are based on multiplesassumptions driven by current economic conditions. Key assumptions used in the discounted future cash flow model include, but are not limited to, long-term annual growth rates, terminal growth rates, weighted average cost of earnings or revenue, or a similar performance measure.capital and the Company’s effective tax rate.
In
The market approach utilizes the fourth quarter of fiscal 2017,Guideline Public Company Method and Guideline Transaction Method to derive fair value. The Guideline Public Company Method determines the Company early adopted the new accounting guidance issued by the FASB that eliminated the requirement to calculate the implied fair value of goodwillan entity based upon trading multiples calculated using market value of minority interests in publicly-traded companies that are similar to measure a goodwill impairment charge. Instead, any impairment charge would be based on the excesssubject company. The Guideline Transaction Method calculates the fair value of a reporting unit's carrying amount over its fair value.an entity by analyzing recent sales of comparable entities.

Refer to “Note 9. Goodwill” for more information.
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Intangible Assets
IntangibleIn connection with the Company’s acquisitions, the Company generally recognizes assets consist primarily of purchased intangible assets through acquisitions. Purchased intangible assets primarily includefor customer relationships, acquired developed technologies, (developed and core technology), customer relationships,patents, proprietary know-how, trade secrets, in-process research and development (IPR&D) and trademarks and trade names. IntangibleFinite lived intangible assets are amortized using the straight-line method over the estimated economic useful lives of the assets, which is the period during which expected cash flows support the fair value of such intangible assets. Refer to “Note 9.10. Acquired Developed Technology and Other Intangibles” for more information.
Long-lived Asset Valuation (Property, Plant and Equipment and Intangible Assets Subject to Amortization)
Long-lived assets, heldincluding intangible assets and used
The Company tests long-lived assetsproperty and equipment, are reviewed for recoverability, at the asset group level, whenimpairment whenever events or changes in circumstances indicate that theirthe carrying amount of any asset or asset group may not be recoverable. Circumstances which could trigger a review include, butSuch an evaluation is performed at the lowest identifiable level of cash flows independent of other assets. An impairment loss would be recognized when estimated undiscounted future cash flows generated from the assets are not limited to, significant decreases in the market priceless than their carrying amount. Measurement of the asset, significant adverse changes in the business climate or legal factors, accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset,

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current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset, or current expectation that the asset will more likely than notan impairment loss would be sold or disposed significantly before the end of its estimated useful life.
 Recoverability is assessed based on the difference betweenexcess of the carrying amount of the asset and the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset. An impairment loss is recognized when the carrying amount is not recoverable and exceeds theor asset group over its estimated fair value. Estimates of future cash flow require significant judgment based on anticipated future operating results, which are subject to variability and change.
Pension and Other PostretirementPost-retirement Benefits
In the fourth quarter of fiscal 2016 the Company early adopted the authoritative guidance issued by the FASB that provides a practical expedient permitting an entity to measure defined benefit plan assets and obligations using the month-end that is closest to the entity’s fiscal year-end and apply that practical expedient consistently from year to year. The Company has adopted the month-end date of June 30, which is the closest month-end to the Company’s fiscal year as the measurement date for all of the Company's qualified and the non-qualified pension plans in certain countries beginning in fiscal 2016. Measurement dates for prior periods are not impacted. 
The funded status of the Company’s retirement-related benefit plans is recognized on the Consolidated Balance Sheets. The funded status is measured as the difference between the fair value of plan assets and the benefit obligation at fiscal year end, the measurement date. For defined benefit pension plans, the benefit obligation is the projected benefit obligation (“PBO”)(PBO) and for the non-pension postretirementpost-retirement benefit plan the benefit obligation is the accumulated postretirementpost-retirement benefit obligation (“APBO”)(APBO). The PBO represents the actuarial present value of benefits expected to be paid upon its employee’semployees’ retirement. The APBO represents the actuarial present value of postretirementpost-retirement benefits attributed to employee services already rendered. Unfunded or partially funded plans, with the benefit obligation exceeding the fair value of plan assets, are aggregated and recorded as a retirement and non-pension postretirementpost-retirement benefit obligation equal to this excess. The current portion of the retirement-related benefit obligation represents the actuarial present value of benefits payable in the next 12 months in excess of the fair value of plan assets, measured on a plan-by-plan basis. This liability is recorded in otherOther current liabilities inon the Consolidated Balance Sheets.
Net periodic pension cost is recorded in the Consolidated Statements of Operations and includes service cost, interest cost, expected return on plan assets, amortization of prior service cost (credit),or credit, and (gains)gains or losses previously recognized as a component of accumulatedAccumulated other comprehensive income (loss).loss on the Consolidated Balance Sheets. Service cost represents the actuarial present value of participant benefits attributed to services rendered by employees in the current year. Interest cost represents the time value of money cost associated with the passage of time. (Gains)Gains or losses arise as a result of differences between actual experience and assumptions or as a result of changes in actuarial assumptions. Prior service cost (credit)or credit represents the cost of benefit improvements attributable to prior service granted in plan amendments. (Gains)Gains or losses and prior service cost (credit)or credit not recognized as a component of net periodic pension cost in the Consolidated Statements of Operations as they arise are recognized as a component of accumulatedAccumulated other comprehensive income (loss)loss on the Consolidated Balance Sheets, net of tax. Those (gains)gains or losses and prior service cost (credit)or credit are subsequently recognized as a component of net periodic pension cost pursuant to the recognition and amortization provisions of the authoritative guidance.
The measurement of the benefit obligation and net periodic pension cost is based on the Company’s estimates and actuarial valuations provided by third-party actuaries and are approved by management. These valuations reflect the terms of the plans and use participant-specific information such as compensation, age and years of service, as well as certain assumptions, including estimates of discount rates, expected return on plan assets, rate of compensation increases and mortality rates. The Company evaluates these assumptions periodically but not less than annually. In estimating the expected return on plan assets, the Company considers historical returns on plan assets, diversification of plan investments, adjusted for forward-looking considerations, inflation assumptions and the impact of the active management of the plan’s invested assets.
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The Company measures its benefit obligation and plan assets using the month-end date of June 30, which is closest to the Company’s fiscal year-end.
Concentration of Credit and Other Risks
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, restricted cash, trade receivables and foreign currency forward contracts. The Company’s cash and cash equivalents and short-term investments are held in safekeeping by large, creditworthy financial institutions. The Company invests its excess cash primarily in U.S. government and agency bonds securities, corporate securities,institutional money market funds, asset-backed securities, other investment-grade securitiesshort-term deposits and certificates of deposit. similar short duration high quality, investment grade instruments.
The Company has established guidelines relative to credit ratings, diversification and maturities that seek to maintain the safety and liquidity of these investments. The Company’s foreign exchange derivative instruments expose the Company to credit risk to the extent that the counterparties may be unable to

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meet the terms of the agreements. The Company seeks to mitigate such risk by limiting its counterparties to major financial institutions and by spreading such risk across several major financial institutions. In addition, the potentialPotential risk of loss with any one counterparty resulting from such risk is monitored by the Company on an ongoing basis.
The Company performs credit evaluations of its customers’ financial condition and generally does not require collateral from its customers. These evaluations require significant judgment and are based on a variety of factors including, but not limited to, current economic trends, historical payment, bad debt write-off experience, and financial review of the customer.
The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. When the Company becomes aware that a specific customer is unable to meet its financial obligations, the Company records a specific allowance to reflect the level of credit risk in the customer’s outstanding receivable balance. In addition, the Company records additional allowances based on certain percentages of aged receivable balances. These percentages take into accountconsider a variety of factors including, but not limited to, current economic trends, historical payment and bad debt write-off experience. The Company classifies bad debt expenses as selling, general and administrative (“SG&A”) expense.&A expense in the Consolidated Statements of Operations.
The Company is not able to predict changes in the financial stability of its customers. Any material changechanges in the financial status of any one customer or a group of customers could have a material adverse effect on the Company’s results of operations and financial condition. Although such losses have been within management’s expectations to date, there can be no assurance that such allowances will continue to be adequate. The Company has significant trade receivables concentrated in the telecommunications industry. While the Company’s allowance for doubtful accounts balance is based on historical loss experience along with anticipated economic trends, unanticipated financial instability in the telecommunications industry could lead to higher than anticipated losses.
As of July 1, 2017 and2023, there were no customer balances that represented 10% or more of the Company’s total accounts receivable, net. As of July 2, 2016,2022, one customer represented 10% or more of ourthe Company’s total accounts receivable, net.
During fiscal 2017, 20162023, 2022 and 2015, certain customers2021, one customer generated 10% or more of total net revenues. Refer to "Note 17.“Note 19. Operating Segments and Geographic Information"Information” for more information.
The Company relies on a limited number of suppliers and contract manufacturers for a number of key components and sub-assemblies contained in our products. The Company also relies on a limited number of significant independent contract manufacturers for the production of certain key components and subassemblies contained in ourCompany’s products.
The Company generally uses a rolling twelve monthtwelve-month forecast based on anticipated product orders, customer forecasts, product order history and backlog to determine its materials requirements.requirements for any one period. Lead times for the parts and components that the Company orders may vary significantly and depend on factors such as the specific supplier, contract terms and demand for a component at aany given time. If the forecast does not meet actual demand, the Company may have excesssurplus or shortfallsdearth of some materials and components, as well as excess inventory purchase commitments. The Company could experience reduced or delayed product shipments or incur additional inventory write-downs and cancellation charges or penalties, which would increasemay result in increased costs and could have a material adverse impact on the Company’s results of operations.
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Foreign Currency Forward Contracts
The Company conducts its business and sells its products to customers primarily in North America, Europe, Asia and Asia.South America. In the normal course of business, the Company’s financial position is routinely subject to market risks associated with foreign currency rate fluctuations due to balance sheet positions in foreign currencies. The Company evaluates foreign exchange risks and utilizes foreign currency forward contracts to reduce such risks, hedging the gains or losses generated by the re-measurement of significant foreign currency denominatedcurrency-denominated monetary assets and liabilities. The fair value of these contracts is reflected as other current assets or other current liabilities and the change in 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 interestInterest and other income, net. The gain or loss from the change in fair value of these foreign currency forward contracts largely offsets the change in fair value of the foreign currency denominated monetary assets andor liabilities, which is also recorded as a component of interestInterest and other income, net.net in the Consolidated Statements of Operations.
Foreign Currency Translation
AssetsVIAVI transacts business in various foreign currencies. In general, the functional currency of our non-US subsidiaries is the country’s local currency. Consequently, the assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where that local currency is the functional currency, are translated into U.S. dollars at exchange rates in effect at the balance sheet date, with the resulting translation adjustments directly recorded as a component of accumulatedAccumulated other comprehensive income (loss)loss on the Consolidated Balance Sheets. Income and expense accounts are translated at exchange rates from the prior month end, exchange rates, which are deemed to approximate the

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exchange rate when the income and expense areis recognized. Gains and losses from re-measurement of monetary assets and liabilities that are denominated in currencies other than the respective functional currencies are included in the Consolidated Statements of Operations as a component of interestInterest and other income, net.
Revenue Recognition
The Company recognizesderives revenue when it is realized or realizablefrom a diverse portfolio of network solutions and earned. optical technology products and services, as follows:
•Products: Network Enablement (NE) and Service Enablement (SE) products include instruments, microprobes and perpetual software licenses that support the development, production, maintenance and optimization of network systems. NE and SE are collectively referred to as Network and Service Enablement (NSE). The Company’s Optical Security and Performance (OSP) products include proprietary pigments used for optical security and optical filters used in commercial, government and 3D Sensing applications.
•Services: The Company also offers a range of product support and professional services, primarily in the NE and SE segments, designed to comprehensively address customer requirements. These include repair, calibration, extended warranty, software support, technical assistance, training and consulting services. Implementation services provided in conjunction with hardware or software solution projects include sale of the products along with project management, set-up and installation.
Steps of revenue recognition
The Company accounts for revenue in accordance with ASC 606: Revenue from Contracts with Customers, in which the following five steps are applied to recognize revenue:
1.Identify the contract with a customer: Generally, the Company considers customer purchase orders which, in some cases are governed by master sales or other purchase agreements, to be the customer contract. All of the following criteria must be met before the Company considers an agreement to qualify as a contract with a customer under the revenue realizedstandard: (i) it must be approved by all parties; (ii) each party’s rights regarding the goods and services to be transferred can be identified; (iii) the payment terms for the goods and services can be identified; (iv) the customer has the ability and intent to pay and collection of substantially all of the consideration is probable; and, (v) the agreement has commercial substance. The Company utilizes judgment to determine the customer’s ability and intent to pay, which is based upon various factors including the customer’s historical payment experience or realizablecredit and earned when it has persuasive evidencefinancial information and credit risk management measures implemented by the Company.
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2.Identify the performance obligations in the contract: The Company assesses whether each promised good or service is distinct for the purpose of an arrangement, delivery has occurred,identifying the various performance obligations in each contract. Promised goods and services are considered distinct provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer; and, (ii) the Company's promise to transfer the good or service to the customer is separately identifiable or distinct from other promises in the contract. The Company's performance obligations consist of a variety of products and services offerings which include networking equipment; proprietary pigment, optical filters, proprietary software licenses; support and maintenance which includes hardware support that extends beyond the Company's standard warranties, software maintenance, installation, professional and implementation services, and training.
Identifying and evaluating whether products and services are considered distinct performance obligations may require significant judgment particularly in NSE due to the nature of the product and service offerings. The Company may enter into contracts that involve a significant level of integration and interdependency between a software license and installation services. Judgment may be required to determine whether the software license is considered distinct in the context of the contract and accounted for separately, or not distinct in the context of the contract and accounted for together with the installation service.
3.Determine the transaction price: Transaction price reflects the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services to the customer. The Company’s contracts may include terms that could cause variability in the transaction price including rebates, sales returns, market incentives and volume discounts. Variable consideration is generally accounted for at the portfolio level and estimated based on historical information. If a contract includes a variable amount, the price adjustments are estimated at contract inception. In both cases, estimates are updated at the end of each reporting period as additional information becomes available.
4.Allocate the transaction price to performance obligations in the contract: If the contract contains a single performance obligation, the entire transaction price is fixed allocated to that performance obligation. Many of the Company’s contracts include multiple performance obligations with a combination of distinct products and services, maintenance and support, professional services and/or determinable and collectibility is reasonably assured. Delivery does not occur until products have been shippedtraining. Contracts may also include rights or services have been provided, risk of loss has transferred and in cases where formal acceptance is required, customer acceptance has been obtained or customer acceptance provisions have lapsed. In situations where a formal acceptance is required but the acceptance only relatesoptions to whether the product meets its published specifications, revenue is recognized upon delivery provided that all other revenue recognition criteria are met. Historical return rates are monitored on a product-by-product basis. In addition, some distributor agreements allow for partial return ofacquire future products and/or price protection under certain conditions within limited time periods. Such return rightsservices, which are generally limitedaccounted for as separate performance obligations by the Company, only if the right or option provides the customer with a material right that it would not receive without entering into the contract. For contracts with multiple performance obligations, the Company allocates the total transaction value to contractually defined, short-term stock rotation and defective or damaged product. We maintain reserves for sales returns and price adjustmentseach distinct performance obligation based on historical experience and other qualitative factors. As new products or distributors are introduced, these historical rates are usedrelative standalone selling price (SSP). Judgment is required to establish initial sales returns reserves and are adjusted as better information becomes available. We also have market development incentive programs for certain distributors whereby rebates are offered based upon exceeding volume goals. Estimated rebates, sales returns and other such allowances are deducted from revenue.
In addition todetermine the aforementioned general policies, the following are the specific revenue recognition policies for multiple-element arrangements andSSP for each major categorydistinct performance obligation. The best evidence of revenue.
Multiple-Element Arrangements
When a sales arrangement contains multiple deliverables, such as sales of products that include services,SSP is the multiple deliverables are evaluated to determine whether there are one or more units of accounting. Where there is more than one unit of accounting, then the entire fee from the arrangement is allocated to each unit of accounting based on the relative selling price. Under this approach, the sellingobservable price of a unit of accounting is determined by using a selling price hierarchy which requires the use of vendor-specific objective evidence (“VSOE”) of fair value if available, third-party evidence (“TPE”) if VSOE is not available,good or best estimate of selling price (“BESP”) if neither VSOE nor TPE is available. Revenue is recognizedservice when the revenue recognition criteria for each unit of accounting are met.
The Company establishes VSOE of sellingsells that good or service separately under similar circumstances to similar customers. If a directly observable price using the price charged for a deliverable when sold separately and, in remote circumstances, using the price established by management having the relevant authority. TPE of selling price is established by evaluating similar and interchangeable competitor goods or services in sales to similarly situated customers. When VSOE or TPE is not available, the Company then uses BESP. Generally, the Company is not able to determine TPE because its product strategy differs from that of others in our markets, and the extent of customization varies among comparable products or services from its peers. The Company establishes BESP using historical selling price trends and consideringSSP must be estimated based on multiple factors including, but not limited to, geographies, market conditions, competitive landscape,historical pricing practices, internal costs, gross marginand profit objectives and pricing practices. When determining BESP,as well as overall market conditions.
5.Recognize revenue when (or as) performance obligations are satisfied: Revenue is recognized at the Company applies significant judgmentpoint in establishing pricing strategies and evaluating market conditions and product lifecycles.
To the extent a deliverable(s) in a multiple-element arrangementtime control is subject to specific guidance (for example, software that is subjecttransferred to the authoritative guidance on software revenue recognition), the Company allocates the fair value of the units of accounting using relative selling price and that unit of accounting is accounted for in accordance with the specific guidance. Some product offerings include hardware that are integrated with or sold with software that delivers the functionality of the equipment. The Company believes this equipment is not considered software-related and would therefore be excluded from the scope of the authoritative guidance on software revenue recognition.
Hardware
Revenue fromcustomer. For hardware sales, is recognized whentransfer of control to the customer typically occurs at the point the product is shipped or delivered to the customer’s designated location. For software license sales transfer of control to the customer typically occurs upon shipment, electronic delivery, or when the software is available for download by the customer. For sales of implementation service and when there are no unfulfilled obligations fromsolution contracts or in instances where software is sold along with essential installation services, transfer of control occurs and revenue is typically recognized upon customer acceptance. In certain instances, acceptance is deemed to have occurred if all acceptance provisions lapse, or if the Company has evidence that affect the customer’s finalall acceptance of the arrangement. Any cost of warrantiesprovisions will be, or have been, satisfied. For fixed-price support and remaining obligations that are inconsequentialextended warranty contracts, or perfunctory are accrued when the correspondingcertain software arrangements which provide customers with a right to access over a discrete period, control is deemed to transfer over time and revenue is recognized.
Services

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Revenue from services and system maintenance is recognized on a straight-line basis over the contract term due to the stand-ready nature of the service.performance obligation. Revenue from professional service engagements is recognized once its delivery obligation is fulfilled. Revenue related to extended warranty and product maintenance contracts is deferred and recognized on a straight-line basis over the delivery period. The Company also generates service revenue from hardware repairs and calibration whichservices outside of an extended warranty or support contract is recognized at the time of completion of the related service. For other professional services or time-based labor contracts, revenue is recognized as the Company performs the services and the customers receive and/or consume the benefits.

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Revenue policy and practical expedients

The following policy and practical expedient elections have been made by the Company under the revenue upon completionstandard:
•Revenue-based taxes as assessed by governmental authorities have been excluded from the measurement of transaction price.
•Shipping and handling activities performed after the customer obtains control of the service.good are treated as activities to fulfill the promise (cost of fulfillment). Therefore, the Company does not evaluate whether the shipping and handling activities are promised services.
Software•Incremental costs of obtaining contracts that would have been recognized within one year or less are recognized as an expense when incurred. These costs are included in SG&A expense in the Consolidated Statements of Operations. The costs of obtaining contracts where the amortization period for recognition of the expense is beyond a year are capitalized and recognized over the revenue recognition period of the original contract.
•The portfolio approach is used for certain types of variable consideration for contracts with similar characteristics. The methodology is used when the effects on the financial statements of applying this guidance to the portfolio would not differ materially from applying this guidance to the individual contracts within that portfolio.
•If at contract inception, the expected period between the transfer of promised goods or services and payment is within one year or less, the Company forgoes adjustment for the impact of significant financing component for the contract.
Disaggregation of Revenue
The Company’s software arrangements generally consist of a perpetual license fee, installation services and Post-Contract Support (“PCS”) as well as other non-software deliverables.

VSOE of fair value for PCSCompany's revenue is established based on the renewal rate or the bell curve methodology. Non-software and software-related arrangements are bifurcated basedpresented on a relative selling price using BESP. The software related elements are bifurcated into separate unitsdisaggregated basis in the Consolidated Statements of accounting if VSOEOperations and in “Note 19. Operating Segments and Geographic Information”. This information includes revenue from reportable segments and a break-out of fair value has been establishedproducts and services for which the undelivered element(s)nature and the functionalitytiming of the delivered element(s)revenue as characterized above is not dependent on the undelivered element(s).

Revenue from multiple-element software arrangements that include installation services, is deferred until installation service obligation for the software solution is fulfilled. If VSOE has been established for the undelivered elements, the software, installation servicesgenerally at a point in time and non-software elements are recognized upon completion of delivery and the PCS is recognized ratably over the remaining support contract term. If VSOE has not been established for the undelivered element, the software related elements are recognized ratably over the remaining support period.time, respectively.
Warranty
The Company provides reserves for the estimated costs of product warranties at the time revenue is recognized. ItWarranty cost estimates the costs of its warranty obligationsare based on its historical experience of known product failure rates, use of materials to repair or replace defective products, and service delivery costs incurred in correcting product failures. In addition, from time to time, specific warranty accruals may be made if unforeseen technical problems arise.
Shipping and Handling Costs
The Company records costs related to shipping and handling of revenue in cost of sales for all periods presented.
Advertising Expense
The Company expenses advertising costs as incurred. Advertising costs totaled $2.1 million, $2.6 million, $3.2 million and $1.7$2.7 million in fiscal 2017, 20162023, 2022 and 2015,2021, respectively.
Research and Development (“R&D”) Expense
Costs related to R&D, whichResearch and Development (R&D) primarily consists of labor and benefits, supplies, facilities, consulting and outside service fees, are charged to expense as incurred.fees. The authoritative guidance allows for capitalization of software development costs incurred after a product’s technological feasibility has been established until the product is available for general release to the public. To date, the period between achieving technological feasibility, which theThe Company has defined asbelieves its software development process is completed concurrent with the establishment of a working model and typically occurs when beta testing commences, and the general availability oftechnological feasibility. As such, software has been very short. Accordingly, software development costs have been expensed as incurred.
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Government Assistance
From time to time the Company will receive government assistance in the form of grants and tax credits in certain jurisdictions, generally recorded as a reduction of R&D expense in the Consolidated Statements of Operations. The Company recorded approximately $4.0 million in the form of R&D credits during fiscal 2023. As of July 1, 2023, the Company had pending receipts of approximately $14.5 million related to government assistance primarily in the U.K. included in Prepayments and other current assets on the Consolidated Balance Sheets.
Stock-Based Compensation
Stock-basedThe Company's stock-based compensation is measured at grant date,includes a combination of time-based restricted stock awards and recognizedperformance-based awards, stock options, and an Employee Stock Purchase Plan (ESPP).
Restricted stock awards are granted without an exercise price and are converted to shares immediately upon vesting. When converted into shares upon vesting, shares equivalent in expense overvalue to the requisite service period basedminimum withholding taxes liability on the fair valuevested shares are withheld by the Company for the payment of such taxes. Time-based restricted stock awards will generally vest in annual installments over a period ofthree to four years subject to the employees’ continuing service to the Company.
The Company's performance-based awards may include performance conditions, market conditions, time-based service conditions or a combination there of and are generally expected to vest over one to four years. The actual number of shares awarded upon vesting of performance-based grants may vary from the target shares depending upon the achievement of the equity award.relevant performance or market-based conditions. The fair value ofshares attained over target upon vesting for performance-based awards are reflected as awards granted during the time-based Full Value Awards is based on the closing market price of the Company’s common stock on the grant date of the award. The Company uses the Monte Carlo simulation to estimate the fair value of Full Value Awards with market conditions (“MSUs”). period.
The Company estimates the fair value of ESPP and stock options and employee stock purchase plan awards (“ESPP”)rights using the Black-Scholes Merton (“BSM”)(BSM) option-pricing model. This option-pricing model requires the input of assumptions, including the award’s expected life and the price volatility of the underlying stock.
The Company estimates thedoes not apply expected forfeiture rate pursuant to the authoritative guidance, and only recognizes expenseaccounts for those shares expected to vest. When estimating forfeitures the Company considers voluntary termination behavior as well as future workforce reduction programs. Estimated forfeiture is trued up to actual forfeiture as the equity awards vest.they occur. The total fair value

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

of the equity awards net of forfeiture, is recorded on a straight-line basis, over the requisite service period of the awards for each separatelyseparate vesting period of the award, except for MSUs,certain performance-based awards which are amortized based upon the graded vesting method.
Income Taxes
In accordance with the authoritative guidance on accounting for income taxes, the Company recognizes income taxes using an asset and liability approach. This approach requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in its consolidated financial statementsthe Company’s Consolidated Financial Statements or tax returns. The measurement of current and deferred taxes is based on provisions of the enacted tax law and the effects of future changes in tax laws or rates are not anticipated.
The authoritative guidance provides for recognition of deferred tax assets if the realization of such deferred tax assets is more likely than not to occur based on an evaluation of both positive and negative evidence and the relative weight of the evidence. With the exception of certain international jurisdictions, the Company has determined that at this time it is more likely than not that deferred tax assets attributable to the remaining jurisdictions will not be realized, primarily due to uncertainties related to its ability to utilize its net operating loss carryforwards before they expire. Accordingly, the Company has established a valuation allowance for such deferred tax assets. If there is a change in the Company’s ability to realize its deferred tax assets for which a valuation allowance has been established, then its tax provision may decrease in the period in which it determines that realization is more likely than not. Likewise, if the Company determines that it is not more likely than not that ourits deferred tax assets will be realized, then a valuation allowance may be established for such deferred tax assets and the Company’s tax provision may increase in the period in which we makethe Company makes the determination.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The authoritative guidance on accounting for uncertainty in income taxes prescribes the recognition threshold and measurement attributes for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Additionally, it provides guidance on recognition, classification, and disclosure of tax positions. The Company is subject to income tax audits by the respective tax authorities in all of the jurisdictions in which it operates. The determination of tax liabilities in each of these jurisdictions requires the interpretation and application of complex and sometimes uncertain tax laws and regulations. The Company recognizes liabilities based on its estimate of whether, and the extent to which, additional tax liabilities are more likely than not. If the Company ultimately determines that the payment of such a liability is not necessary, then it reverses the liability and recognizes a tax benefit during the period in which the determinationit is made that the liability isdetermined no longer necessary.
The recognition and measurement of current taxes payable or refundable and deferred tax assets and liabilities requires that the Company make certain estimates and judgments. Changes to these estimates or a change in judgment may have a material impact on the Company’s tax provision in a future period.
Restructuring Accrual
In accordance with authoritative guidance on accounting for costs associated with exit or disposal activities, generally costs associated with restructuring activities are recognized when they are incurred. However, in the case of operating and direct financing leases, the expense is estimated and accrued when the property is vacated. Given the significance of, and the timing of the execution of such activities, this process is complex and involves periodic reassessments of estimates made from the time the property was vacated, including evaluating real estate market conditions for expected vacancy periods and sub-lease income.
Additionally, aA liability for post-employment benefits for workforce reductions related to restructuring activities is recorded when payment is probable, and the amount is reasonably estimable. The Company continually evaluates the adequacy of the remaining liabilities under its restructuring initiatives. Although the Company believes that these estimates accurately reflect the costs of its restructuring plans, actual results may differ, thereby requiring the Company to record additional liabilities or reverse a portion of existing liabilities.
Loss Contingencies
The Company is subject to the possibility of various potential loss contingencies arising in the ordinary course of business. TheIn determining a loss contingency, the Company considers the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as its ability to reasonably estimate the amount of loss in determining loss contingencies.loss. An estimated loss is accrued when it is probable that an asset has been impaired, or a liability has been incurred and the amount of loss can be reasonably estimated. The Company regularly evaluates current information available to determine whether such accruals should be adjusted and whether new accruals are required.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contingent liabilities include contingent consideration in connection with the Company’s acquisitions, which represent earn-out payments and is recognized at fair value on the acquisition date and is remeasured each reporting period with subsequent adjustments recognized in the SG&A expense of the Consolidated Statements of Operations. While the Company believes the estimates and assumptions are reasonable, there is significant judgment and uncertainty involved.
Asset Retirement Obligations (“ARO”)
AROAsset Retirement Obligations (ARO) are legal obligations associated with the retirement of long-lived assets pertaining to leasehold improvements. These liabilities are initially recorded at fair value and the related asset retirement costs are capitalized by increasing the asset carrying amount of the related assetsvalue and ARO by the same amount as the liability.amount. Asset retirement costs are subsequently depreciated over the useful lives of the related assets. Subsequent to initial recognition, the Company records period-to-period changes in the ARO liability resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows. The Company derecognizes ARO liabilities when the related obligations are settled. As of July 1, 20172023, and July 2, 2016,2022, the Consolidated Balance Sheets included ARO balance of $0.3$0.5 million in Other current liabilities and $3.8 million and $0.2$3.7 million, respectively, in other current liabilities and $3.3 million and $3.5 million, respectively, in otherOther non-current liabilities. The activities and balances forA summary of the activity in the ARO are as followsaccrual is outlined below (in millions):
Balance at Beginning of PeriodLiabilities IncurredLiabilities SettledAccretion ExpenseRevisions to EstimatesBalance at End of Period
Year ended July 1, 2023$4.2 $0.3 $(0.3)$0.1 $— $4.3 
Year ended July 2, 2022$3.7 $0.8 $(0.4)$0.1 $— $4.2 
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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Balance at Beginning of Period Liabilities Incurred Liabilities Settled Accretion Expense Revisions to Estimates Balance at End of Period
Year ended July 1, 2017$3.7
 0.1
 (0.1) 0.2
 (0.3) $3.6
Year ended July 2, 2016$4.4
 0.4
 (0.9) 0.2
 (0.4) $3.7


Note 2. Recently Issued Accounting Pronouncements
Recent Accounting Pronouncements Adopted
In May 2017,August 2020, the Financial FASB issued ASU 2020-06, Accounting Standards Board (“FASB”) issuedfor Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments with characteristics of liability and equity. This new guidance that clarifiesremoves separation models for certain convertible debt instruments which will now be accounted for as a single liability measured at amortized cost. In addition, the types of changesinterest expense recognized for these instruments will typically be closer to the terms or conditionscoupon interest rate due to the removal of share-based payment awards to which an entity would be required to apply modification accounting under the relevant authoritative guidance. separation model's non-cash discount amortization.

The guidance is to be applied prospectively, and isCompany adopted ASU 2020-06 effective for the Company in the first quarter of fiscal 2019. Early2022, on a full retrospective basis. The elimination of the separation model for the convertible debt instruments reclassified the equity components of the Company’s Senior Convertible Notes previously in Additional paid-in capital to Long-term debt. Consequently, the temporary equity balance for the Senior Convertible Notes as of July 3, 2021 was eliminated. In addition, interest expense was reduced and net income was increased by $21.4 million for fiscal 2021. The adoption is permitted. The Company does not anticipate the adoption of this guidance to have a materialhad no impact on its consolidated financial statements, absent any award(s) modified ontotal cash provided by (used in) operating, investing or afterfinancing activities in the Consolidated Statements of Cash Flows.

The following table presents the impact of the standard adoption date.to select line items of the Consolidated Balance Sheet as of July 3, 2021 (in millions):

July 3, 2021
As ReportedAdjustmentAs Adjusted
LIABILITIES AND STOCKHOLDERS’ EQUITY
Short-term debt$414.2 $42.4 $456.6 
Long-term debt209.8 14.3 224.1 
Mezzanine equity - Senior Convertible Notes45.8 (45.8)— 
Additional paid-in capital70,265.5 (82.3)70,183.2 
Accumulated deficit$(69,393.7)$71.4 $(69,322.3)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table presents the impact of the standard adoption to select line items of the Consolidated Statement of Operations for the year ended July 3, 2021 (in millions, except per-share data):

Year Ended July 3, 2021
As ReportedAdjustmentAs Adjusted
Interest Expense$(36.1)$21.4 $(14.7)
Net income$46.1 $21.4 $67.5 
Net income per share:
Basic$0.20 $0.10 $0.30 
Diluted$0.20 $0.09 $0.29 
Shares used in per-share calculation:
Basic228.7— 228.7
Diluted235.90.4 236.3
In November 2016,2021, the FASB issued guidanceASU 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 will require thatare accounted for by applying a grant or contribution accounting model including the amounts generally described as restricted cashdisclosure of the types of assistance, an entity's accounting for the assistance, and restricted cash equivalents would be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts showneffect of the assistance on the statement of cash flows. The new guidance also requires certain disclosures to supplement the statement of cash flows. The guidancean entity's financial statements. ASU 2021-10 is effective for annual periods beginning after December 15, 2021. The Company adopted ASU 2021-10 on July 3, 2022 on a prospective basis. We often receive government assistance in the form of research grants and tax credits in certain jurisdictions, recorded as a reduction of R&D expense in the Consolidated Statements of Operations. The Company recorded approximately $4.0 million in R&D credits during fiscal 2023. As of July 1, 2023, the Company had pending receipts of approximately $14.5 million related to government assistance primarily in the firstU.K. included in Prepayments and other current assets on the Consolidated Balance Sheets.
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 now allow designation of multiple hedged layers with a single closed portfolio. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method. The Company adopted this guidance in the fourth quarter of fiscal 2019. Other than changes in the presentation within the statements of cash flows and additional required disclosures, the adoption of this new accounting guidance will2023, which did not have an impact on the consolidated financial statements.Company’s Consolidated Financial Statements. We will assess future impact, if any, in subsequent periods.
In October 2016,March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326), which eliminates the accounting guidance that requires entitieson troubled debt restructurings for creditors in ASC 310 and amends the guidance on vintage disclosures to recognize atrequire disclosure of current-period gross write-offs by year of origination. The ASU also updates the transaction daterequirements related to the income tax consequences of intra-entity transfer of an asset other than inventory.accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancing and restructurings for borrowers experiencing financial difficulty. The Company adopted this guidance is effective for the Company in the firstfourth quarter of fiscal 2019. The Company is evaluating the2023, which did not have an impact of adopting this new accounting guidance on its consolidated financial statements.
In June 2016, the FASB issued guidance that changes the accounting for recognizing impairments of financial assets. Under the new guidance, credit losses for certain types of financial instruments will be estimated based on expected losses. The new guidance also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. The guidance is effective for the Company in the first quarter of fiscal 2021 and earlier adoption is permitted. The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements.
In March 2016, the FASB issued guidance which simplifies several aspects of accounting for share-based payment award transactions including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The guidance is effective for the Company in the first quarter of fiscal 2018. The most significant impact from this guidance upon adoption for the Company relates to the classification of employee tax paid by withholding shares of restricted stock units on the statements of cash flows and excess tax benefit. Upon adoption, the related cash flows will be classified as financing activity, from the current classification as operating activity and all prior periods presented will be retrospectively adjusted to reflect this change. The employee tax paid by withholding shares totaled $14.3 million and $11.4 million in fiscal 2017 and 2016, respectively. In addition, the guidance requires that the excess tax benefits to be recorded on the income statement as opposed to additional paid-in-capital. Due to the Company’s valuation allowance on its deferred tax assets, no income tax benefit is expected to be recognized upon adoption. All other aspects of the guidance are not expected to have a material effect on the Company’s consolidated financial statements.Consolidated Financial Statements. We will assess future impact, if any, in subsequent periods.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In February 2016,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 regarding both operating and financing leases, requiring lessees to recognize on their balance sheets “right-of-use assets” and corresponding lease liabilities, measured on a discounted basis over the lease term. Virtually all leases will bealso requires certain disclosures for equity securities subject to this treatment except leases that meetcontractual sale restrictions. The new guidance is required to be applied prospectively with any adjustments from the definition of a “short-term lease.” The guidance requires a modified retrospective transition approach for leases existing at, or entered into after, the beginningadoption of the earliest comparative period presentedamendments recognized in earnings and disclosed on the date of adoption. The Company adopted this guidance in the financial statements. The guidance is effective for the Company in the firstfourth quarter of fiscal 2020. While2023, which had no impact on the Company is not yetCompany’s Consolidated Financial Statements. We will assess future impact, if any, in a position to assess the full impact of the application of the new guidance, the Company expects adoption of this guidance will materially increase the assets and liabilities recorded on its Consolidated Balance Sheets.subsequent periods.

In May 2014,September 2022, the FASB issued new authoritative guidanceASU 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 to revenue recognition from contracts with customers. This new guidance will replace current U.S. GAAP guidance on this topic and eliminate industry-specific guidance. The new guidance provides a unified model to determine when and how revenue is recognized. The core principleamounts, the confirmed amount outstanding at the end of the new guidance is that a company should recognize revenue to depictperiod, and associated rollforward information. Only the transferamount outstanding at the end of promised goods or services to customersthe period must be disclosed in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. This new guidance allows for either full retrospective adoption or modified retrospective adoption. The FASB deferred the effective date for this new guidance by one year to December 15, 2017 for annual reporting periods beginning after such date. Earlier application of this new guidance is permitted.interim periods. The Company currently anticipates adopting theadopted this guidance in the firstfourth quarter of fiscal 2019 using the full retrospective method, reflecting the application of the new standard in each prior reporting period.

In preparation for the implementation and adoption of the new guidance, the Company has established a cross-functional team and implementation plan to identify processes, systems and internal controls over financial reporting impacted by the new guidance. The implementation plan includes comparison of the Company’s historical accounting policies and practices to the requirements of the new guidance, and identifying differences from applying the requirements of the new guidance to the Company’s contracts, consolidated financial statements and related disclosures.
While the Company’s assessment of the potential impacts of the new guidance is2023, which did not yet complete, initially the Company believes the most significanthave an impact on the accounting for contracts with customers will be for certain arrangements that include sales of software solutions bundled with post-contract support (PCS) and/or services, where VSOE has not been establishedCompany’s disclosures in the Annual Report on Form 10-K for the PCS and/or the services. Due to lack of VSOE under the current guidance, the Company defers recognition of any revenue attributable to such arrangements until the services lacking VSOE are complete. Such revenue is then recognized ratably over the remaining support term. The requirement to have VSOE for undelivered elements to enable the separation of the revenue for delivered software is eliminated under the new guidance and the Company will be required to allocate total contract revenue to each element (referred to as a distinct performance obligation under the new standard) based on either an established or estimated standalone selling price. Accordingly, a portion of the revenue for these types of contracts with customers will be recognized when the software or software solution is transferred to the customer. Dependent on contract-specific terms, the Company expects the actual revenue recognition treatment and timing will vary under the new guidance for some of these arrangements. The Company will continue to evaluate the impact of this new guidance on its consolidated financial statements and related disclosures.
Note 3. Discontinued Operations
On August 1, 2015, the Company completed the separation of the Lumentum business (the “Separation”) and made a tax-free distribution of approximately 80.1% of the outstanding shares of Lumentum common stock to Viavi shareholders who received one share of Lumentum common stock for every five shares of Viavi common stock held as of the close of business on July 27, 2015 (the “Record Date”) and not sold prior to August 4, 2015 (the “ex-dividend date”). In connection with the Separation Viavi agreed to contribute $137.6 million all of which was contributed during fiscal 2016. As of the Distribution, Viavi retained ownership of approximately 19.9%, or 11.7 million shares, of Lumentum’s outstanding common stock. Lumentum was formed to hold Viavi’s CCOP business and the WaveReady product line. As a result of the Distribution, Lumentum is now an independent public company trading under the symbol “LITE” on The Nasdaq Stock Market (“NASDAQ”). The Company agreed not to liquidate the retained shares during the first six months following the Distribution. However, in connection with a private letter ruling from the Internal Revenue Service, the Company committed to liquidate these shares within three years from the Distribution. As ofyear ended July 1, 2017, the Company had sold all of its ownership of Lumentum’s common stock. Refer to “Note 7. Investments, Forward Contracts and Fair Value Measurements” for more information.2023. We will assess future impact, if any, in subsequent periods.
In connection with the Separation, the Company entered into a Contribution Agreement, Separation and Distribution Agreement, a Tax Matters Agreement, Employee Matters Agreement, Securities Purchase Agreement, a Supply Agreement, and an Intellectual Property Matters Agreement with Lumentum and others.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Contribution Agreement identifies the assets to be transferred, the liabilities to be assumed and the contracts to be assigned and it provides for when and how these transfers, assumptions and assignments will occur.
The Separation and Distribution Agreement governs the separation of the CCOP and WaveReady business, the transfer of assets and other matters related to Viavi’s relationship with Lumentum.
The Tax Matters Agreement governs the respective rights, responsibilities and obligations of Lumentum and Viavi with respect to tax liabilities and benefits, tax attributes, tax contests, tax returns, and certain other tax matters.
The Employee Matters Agreement governs the compensation and employee benefit obligations with respect to the current and former employees and non-employee directors of Lumentum and Viavi, and generally allocates liabilities and responsibilities relating to employee compensation, benefit plans and programs. The Employee Matters Agreement provides that employees of Lumentum will no longer participate in benefit plans sponsored or maintained by Viavi.
The Securities Purchase Agreement with the Company, Lumentum and Amada Holdings Co., Ltd. (“Amada”) set forth terms whereby the Company received 40,000 shares of Lumentum’s Series A Preferred Stock (“Series A Preferred Stock”) pursuant to a binding commitment to sell the Series A Preferred Stock to Amada following the Separation. Upon Separation, in connection with the agreement, during the first quarter of fiscal 2016 the Company sold 35,805 shares of the Series A Preferred Stock to Amada for $35.8 million and the remaining 4,195 shares of the Series A Preferred Stock were canceled. The $35.8 million is included as a part of financing activities in the Statement of Cash Flows.
The Supply Agreement outlines that Viavi will supply test equipment to Lumentum and Lumentum will supply components related to the Company’s metro, fiber and optical product lines and development services related to smart transceivers. The most significant component of the Supply Agreement is $15.0 million related to the sale of certain optical test equipment to Lumentum from the date of the agreement through July 2, 2016, of which the company recorded $14.1 million of net revenue during the fiscal year ended July 2, 2016.
The Intellectual Property Matters Agreement outlines the intellectual property rights and technology transferred to Lumentum upon the Separation, as well as the intellectual property and technology both companies can license from each other. In addition it outlines non-compete restrictions between Viavi and Lumentum.
As the separation of the Lumentum business represented a strategic shift that had and will have a major effect on the Company’s operations and financial results, the results of operations of the Lumentum business are presented separately as discontinued operations for the years ended July 1, 2017 , July 2, 2016 and June 27, 2015 in accordance with the authoritative guidance.
As of the Separation Date, Lumentum became a stand-alone public company that separately reports its financial results. Due to the difference between the basis of presentation for discontinued operations and the basis of presentation as a stand-alone company, the financial results of Lumentum included within discontinued operations for the Company may not be indicative of actual financial results of Lumentum as a stand-alone company.
In connection with the Separation, $7.8 million of accumulated other comprehensive loss, net of income taxes, related to foreign currency translation adjustments and the pension plan obligation was transferred to Lumentum on the Separation Date.
The Company also transferred deferred tax assets of $29.5 million, deferred tax liabilities of $1.0 million, current income tax payables of $3.3 million, an income tax receivable of $1.3 million and other long-term liabilities related to uncertain tax positions totaling $0.1 million on the Separation date. The Company utilized approximately $1.0 billion of federal net operating losses to offset income recognized as a result of the Separation and the license of Lumentum’s intellectual property to a foreign subsidiary.
The removal of Lumentum’s net assets and equity related adjustments upon the Separation are presented as an increase of Viavi's accumulated deficit in the Consolidated Statements of Stockholders’ Equity and represents a non-cash financing activity, excluding the cash transferred. Refer to “Note 14. Stock-Based Compensation” for information on modifications to stock-based compensation awards as a result of the Distribution.

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes results from discontinued operations of the Lumentum business included in the Consolidated Statement of Operations (in millions):
 Years Ended
 July 1, 2017 July 2, 2016 June 27, 2015
Net revenues$—
��$66.5
 $835.2
Cost of revenues—
 49.8
 569.1
Amortization of acquired technologies—
 0.6
 7.5
Gross profit—
 16.1
 258.6
Operating expenses:     
Research and development—
 12.5
 139.9
Selling, general and administrative(0.8) 24.7
 87.5
Restructuring charges—
 0.1
 7.7
Total operating expenses(0.8) 37.3
 235.1
Income (loss) from operations0.8
 (21.2) 23.5
Interest and other income, net—
 —
 (1.1)
Income (loss) before income taxes0.8
 (21.2) 22.4
(Benefit from) provision for income taxes(0.8) 27.8
 (20.9)
Net income (loss) from discontinued operations (1)$1.6
 $(49.0) $43.3

(1)  No income or expense relating to the Lumentum business was recorded after the Separation Date.
During the fiscal year ended July 1, 2017, the Net income from discontinued operations had a benefit of $0.8 million related to the true up of contractual obligations between the company and Lumentum per the Tax Matters Agreement and the Company recognized a tax benefit of $0.8 million relating to the income taxes incurred as a result of the Separation.
During the fiscal year ended July 2, 2016, the income tax provision for discontinued operations of $27.8 million included approximately $6.2 million cash taxes that are due to federal and state authorities as a result of the Separation. In addition, approximately $19.0 million of the income tax provision for discontinued operations related to the income tax intraperiod tax allocation rules in relation to continuing operations and other comprehensive income.
Net income (loss) from discontinued operations also includes other costs incurred by the Company to separate Lumentum. These costs include transaction charges, advisory and consulting fees, of $16.5 million and $21.4 million for the years ended July 2, 2016 and June 27, 2015, respectively.
The following table presents supplemental cash flow information: depreciation expense, amortization expense, stock-based compensation expense and capital expenditures of the Lumentum business (in millions):
 Years Ended
 July 2, 2016 June 27, 2015
Operating activities:   
Depreciation expense$3.7
 $43.4
Amortization expense0.6
 7.9
Stock-based compensation expense1.6
 19.4
Investing activities:   
Capital expenditures$5.8
 $55.9
(1) No depreciation expense, amortization expense, stock based compensation expense and capital expenditures relating to the Lumentum business are presented after the Separation Date.

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4.3. Earnings Per Share
Basic net income (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period. TheIf dilutive, the effect of outstanding ESPP, Full Value Awards,Employee Stock Purchase Program (ESPP) purchase rights, restricted stock units (RSUs), performance-based stock units (PSUs), market-based stock units (MSUs), stock options and optionsSenior Convertible Notes is reflected in diluted net income (loss) per share by application of the treasury stock method.method and/or the if-converted method, as applicable. The calculation of diluted net income (loss) per share excludes all anti-dilutive common shares.
The following table sets forth the computation of basic and diluted net income (loss) per share (in millions, except per share data):
 Years Ended
 July 1, 2023July 2, 2022July 3, 2021
Numerator:   
Net income$25.5 $15.5 $67.5 
Denominator:
Weighted-average shares outstanding:
Basic224.6 230.9 228.7 
Shares issuable assuming conversion of convertible notes(1)
0.3 4.8 5.0 
Effect of dilutive securities from stock-based compensation plans1.7 2.5 2.6 
Diluted226.6 238.2 236.3 
Net income per share:
Basic$0.11 $0.07 $0.30 
Diluted$0.11 $0.07 $0.29 
 Years Ended
 July 1, 2017 July 2, 2016 June 27, 2015
Numerator: 
  
  
Income (loss) from continuing operations, net of taxes$165.3
 $(50.4) $(131.4)
Income (loss) from discontinued operations, net of taxes1.6
 (48.8) 43.3
Net income (loss)$166.9
 $(99.2) $(88.1)
Denominator:     
Weighted-average number of common shares outstanding     
Basic229.9
 234.0
 232.7
Effect of dilutive securities from stock-based benefit plans4.6
 —
 —
Diluted234.5
 234.0
 232.7
      
Net income (loss) per share from - basic:     
Continuing operations$0.72
 $(0.22) $(0.57)
Discontinued operations0.01
 (0.20) 0.19
Net income (loss)$0.73
 $(0.42) $(0.38)
      
Net income (loss) per share from - diluted:     
Continuing operations$0.70
 $(0.22) $(0.57)
Discontinued operations0.01
 (0.20) 0.19
Net income (loss)$0.71
 $(0.42) $(0.38)
(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). The par amount of the Company’s convertible notes is payable in cash equal to the principal amount of the notes plus any accrued and unpaid interest and the “in-the money” conversion benefit feature above the conversion price is payable in cash, shares of the Company’s common stock or a combination of both, at the Company’s election. Refer to “Note 11. Debt” for more information.
The following table sets forth the weighted-average potentially dilutive securities excluded from the computation of the diluted net income (loss) per share because their effect would have been anti-dilutive (in millions):
 Years Ended
 July 1, 2023July 2, 2022July 3, 2021
Full Value Awards(1)
3.7 0.6 0.4 
(1) See Note 16. Stock-Based Compensation for definition of Full Value Awards.
71

 Years Ended
 July 1, 2017 (2)(3) July 2, 2016 (1)(2) June 27, 2015 (1)(2)
Stock options and ESPP0.9
 3.4
 3.6
Full Value Awards0.6
 10.9
 10.3
Total potentially dilutive securities1.5
 14.3
 13.9

(1)As the Company incurred a net loss from continuing operations in the period, potential dilutive securities from employee stock options, employee stock purchase plan (“ESPP”) and restricted stock units (“RSUs”) have been excluded from the diluted net loss per share computations as their effects were deemed anti-dilutive.
(2)The Company’s 0.625% Senior Convertible Notes due 2033 are not included in the table above. The par amount of convertible notes is payable in cash equal to the principal amount of the notes plus any accrued and unpaid interest and then the “in-the-money” conversion benefit feature at the conversion price above $11.28 per share is payable in cash,

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

shares of the Company’s common stock or a combination of both at the Company’s election. Refer to “Note 10. Debt” for more details.
(3)The Company’s 1.00% Senior Convertible Notes due 2024 are not included in the table above. The par amount of convertible notes is payable in cash equal to the principal amount of the notes plus any accrued and unpaid interest and then the “in-the-money” conversion benefit feature at the conversion price above $13.22 per share is payable in cash, shares of the Company’s common stock or a combination of both at the Company’s election. Refer to “Note 10. Debt” for more details.
Note 5.4. Accumulated Other Comprehensive Income (Loss)Loss
The Company’s accumulated other comprehensive income (loss)loss consists of the accumulated net unrealized gains and losses on available-for-sale investments, foreign currency translation adjustments and change in unrealized components of defined benefit obligations.
At July 1, 2017 and July 2, 2016, the changesChanges in accumulated other comprehensive income (loss)loss by component, net of tax, were as follows (in millions):
Unrealized (losses)
on available-for-sale 
investments		Foreign currency translation adjustments
Change in unrealized components of defined benefit
obligations, net of tax(1)
Total
Beginning balance as of July 2, 2022$(5.0)$(144.2)$(7.2)$(156.4)
Other comprehensive (loss) income before reclassification(0.3)18.8 2.0 20.5 
Amounts reclassified from accumulated other comprehensive (loss) income— — (0.1)(0.1)
Net current period other comprehensive (loss) income(0.3)18.8 1.9 20.4 
Ending balance as of July 1, 2023$(5.3)$(125.4)$(5.3)$(136.0)
(1) Activity before reclassifications to the Consolidated Statements of Operations during the fiscal year ended July 1, 2023 relates to the unrealized actuarial gain of $2.8 million, net of income tax effect of $0.8 million. The amount reclassified out of accumulated other comprehensive (loss) income represents the amortization of actuarial losses included as a component of SG&A expense in the Consolidated Statement of Operations for the year ended July 1, 2023. Refer to “Note 17. Employee Pension and Other Benefit Plans” for more details on the computation of net periodic cost for pension plans.
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 met the definition of a business and 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. Acquisition related costs incurred were approximately $0.8 million and have been recorded within SG&A expense in the Consolidated Statements of Operations. The Company has included the financial results of Jackson Labs in its consolidated financial statements from the date of acquisition. Pro forma results of operations have not been presented because the effect of the acquisition was not material to the Consolidated Statements of Operations.
72

 
Unrealized gains (losses) 
on available-for-sale 
investments (1)
 Foreign currency translation adjustments 
Change in unrealized components of defined benefit
obligations, net of tax (2)
 Total
Beginning balance as of July 2, 2016$104.5
 $(70.1) $(24.4) $10.0
Other comprehensive income before reclassification92.1
 4.8
 0.7
 97.6
Amounts reclassified from accumulated other comprehensive income (loss)(201.9) —
 1.9
 (200.0)
Net current period other comprehensive (loss) income(109.8) 4.8
 2.6
 (102.4)
Ending balance as of July 1, 2017$(5.3) $(65.3) $(21.8) $(92.4)

(1)Activity before reclassifications to the Consolidated Statements
VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The total purchase consideration was allocated to tangible and intangible assets acquired and liabilities assumed based on the preliminary fair value on the acquisition date. The following table presents the allocation of the purchase price (in millions):
(2)Activity before reclassificationsAmount
Cash and cash equivalents$1.1 
Accounts receivable, net2.3 
Inventory, net3.2 
Goodwill (1)
48.3 
Identified intangible assets acquired30.6 
Other non-current assets0.1 
Accounts payable(0.6)
Accrued expenses(3.4)
Deferred revenue(2.1)
Other current liabilities(0.5)
  Total purchase consideration$79.0 
1) Goodwill at acquisition date of $48.8 million reduced by measurement period adjustment of $0.5 million.
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (in millions, except useful life):
Estimated Useful LifeAmount
Developed technology6 years$25.0 
Customer relationship3 years2.7 
Tradename2 years0.5 
Backlog1 year2.4 
  Total identifiable assets acquired$30.6 

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 is expected to be deductible for U.S. income tax purposes.

Other Acquisitions:

On March 29, 2023, April 21, 2023 and June 8, 2023, the Company completed acquisitions accounted for as asset purchases consisting of cash paid at closing of $2.9 million and $0.2 million of indemnity holdback. In connection with these acquisitions, the Company recorded developed technology intangibles of $2.5 million which will be amortized over their estimated useful life of five years.

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.

73


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 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.
Acquisition-related Contingent Consideration
The following table provides a reconciliation of changes in fair value of the Company’s earn-out liabilities for the years ended July 1, 2023 and July 2, 2022, as follows (in millions):
Total
Balance July 3, 2021$4.0 
Additions to the Consolidated StatementsContingent Consideration2.5 
Change in Fair Value measurement0.3 
Currency translation adjustment0.1 
Payments of Operations during the year endedContingent Consideration(4.4)
Balance July 2, 2022(1)
$2.5 
Additions to Contingent Consideration29.4 
Change in Fair Value measurement(4.6)
Payments of Contingent Consideration(7.6)
Balance July 1, 2017 relates to the unrealized actuarial gain of $2.1 million, net of income tax expense of $1.4 million. The amount reclassified out of accumulated other comprehensive income (loss) represents the amortization of actuarial losses included as a component of selling, general and administrative expense (“SG&A”) in the Consolidated Statement of Operations for the year ended July 1, 2017. Refer to “Note 15. Employee Pension and Other Benefit Plans” for more details on the computation of net periodic cost for pension plans.2023(2)
$19.7 
(1) Includes $1.8 million in Other current liabilities and $0.7 million in Other non-current liabilities on the Consolidated Balance Sheets.
(2) Includes $1.1 million in Other current liabilities and $18.6 million in Other non-current liabilities on the Consolidated Balance Sheets.
Note 6. Balance Sheet and Other Details
Contract Balances
Unbilled Receivables: The Company records a receivable when an unconditional right to consideration exists and transfer of control has occurred, such that only the passage of time is required before payment of consideration is due. Timing of revenue recognition may differ from the timing of customer invoicing. Payment terms vary based on product or service offerings and payment is generally required within 30 to 90 days from date of invoicing. Certain performance obligations may require payment before delivery of the service to the customer.
Contract assets: A Contract Asset is recognized when a conditional right to consideration exists and transfer of control has occurred. Contract Assets include fixed fee professional services, where the transfer of services has occurred in advance of the Company's right to invoice. Contract Assets, included in Accounts receivable, reservesnet, on the Consolidated Balance Sheets, are not material to the Consolidated Financial Statements. Contract Asset balances will fluctuate based upon the timing of transfer of services, billings and allowancescustomers’ acceptance of contractual milestones.
The componentsGross receivables include both billed and Unbilled Receivables/Contract Assets. As of accounts receivable reservesJuly 1, 2023 and allowances were as follows (July 2, 2022, the Company had total Unbilled Receivables/Contract Assets of $13.7 million and $7.3 million, respectively.
Deferred revenue: Deferred revenue consists of contract liabilities primarily related to support, solution deployment services, software maintenance, product, professional services, and training when the Company has a right to invoice or payments have been received and transfer of control has not occurred. Revenue is recognized on these items when the revenue recognition criteria are met, generally resulting in millions):ratable recognition over the contract term. Contract liabilities are included in Other current liabilities on the Consolidated Balance Sheets.
74

 July 1, 2017 July 2, 2016
Allowance for doubtful accounts$1.6
 $2.2
Sales allowance3.4
 2.5
Total accounts receivable reserves and allowances$5.0
 $4.7


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company also has short-term and long-term deferred revenues related to undelivered hardware 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 table summarizes the activity related to deferred revenue, for the year ended July 1, 2023 (in millions):
July 1, 2023
Deferred revenue:
Balance at beginning of period$100.4 
Revenue deferrals for new contracts(1)
127.9 
Revenue recognized during the period(2)
(126.3)
Balance at end of period(3)
$102.0 
Short-term deferred revenue$78.6 
Long-term deferred revenue$23.4 
(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 following period quarter-end deferrals.
(3) The long-term portion of deferred revenue is included as a component of Other non-current liabilities on the Consolidated Balance Sheets.

Remaining performance obligations: Remaining performance obligations represent the aggregate amount of the transaction price allocated to performance obligations not delivered or are incomplete, as of July 1, 2023. Remaining performance obligations include deferred revenue plus unbilled amounts not yet recorded. The aggregate amount of the transaction price allocated to remaining performance obligations does not include amounts owed under cancellable contracts where there is no substantive termination penalty.
Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidation, adjustments for revenue that has not materialized, and adjustments for currency.
The value of the transaction price allocated to remaining performance obligations as of July 1, 2023, was $256.3 million. The Company expects to recognize 89% of remaining performance obligations as revenue within the next 12 months, and the remainder thereafter.
Accounts Receivable Allowances
The table below presents the activities and balances for allowance for doubtful accounts, are as follows (in millions):
 Balance at Beginning of Period Charged to Costs and Expenses Deduction (1) 
Balance at
End of Period
Year Ended July 1, 2017$2.2
 $(0.2) $(0.4) $1.6
Year Ended July 2, 20162.4
 0.3
 (0.5) 2.2
Year Ended June 27, 20152.9
 0.3
 (0.8) 2.4

Balance at Beginning of PeriodCharged to Costs and Expenses
Deduction(1)
Balance at
End of Period
Year Ended July 1, 2023$1.4 $0.4 $(0.8)$1.0 
Year Ended July 2, 2022$2.0 $0.9 $(1.5)$1.4 
Year Ended July 3, 2021$3.0 $1.1 $(2.1)$2.0 
(1) Represents the effect of currency translation adjustments and write-offs of uncollectible accounts, net of recoveries.
75


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Inventories, net
The following table presents the components of inventories, net, were as follows (in millions):
July 2, 2016 July 2, 2016July 1, 2023July 2, 2022
Finished goods$24.9
 $29.1
Finished goods$49.0 $41.6 
Work in process10.3
 7.5
Work in process17.7 17.7 
Raw materials12.8
 14.8
Raw materials49.4 50.8 
Inventories, net$48.0
 $51.4
Inventories, net$116.1 $110.1 
Prepayments and other current assetsOther Current Assets
The following table presents the components of prepayments and other current assets, were as follows (in millions):
July 1, 2023July 2, 2022
July 1, 2017 July 2, 2016
Refundable income taxesRefundable income taxes$27.6 $14.5 
Prepayments$8.3
 $10.4
Prepayments16.5 16.0 
Advances to contract manufacturersAdvances to contract manufacturers9.8 11.8 
Transaction tax receivablesTransaction tax receivables5.1 10.4 
Fair value of forward contractsFair value of forward contracts3.5 3.8 
Assets held for saleAssets held for sale2.5 2.5 
Other current assets42.5
 21.7
Other current assets7.1 10.2 
Prepayments and other current assets$50.8
 $32.1
Prepayments and other current assets$72.1 $69.2 
Property, plantPlant and equipment,Equipment, net
The following table presents the components of property, plant and equipment, net, were as follows (in millions):
July 1, 2023July 2, 2022
Land$19.6 $19.2 
Buildings and improvements74.9 41.7 
Machinery and equipment362.6 316.7 
Furniture, fixtures, software and office equipment76.7 74.0 
Leasehold improvements70.7 69.8 
Construction in progress24.5 71.2 
Property, plant and equipment, gross629.0 592.6 
Less: Accumulated depreciation and amortization
(386.0)(363.7)
Property, plant and equipment, net$243.0 $228.9 
76

 July 1, 2017 July 2, 2016
Land$14.5
 $14.6
Buildings and improvements31.4
 32.4
Machinery and equipment225.8
 218.7
Furniture, fixtures, software and office equipment111.2
 120.5
Leasehold improvements58.1
 54.3
Construction in progress17.8
 10.3
Property, plant and equipment, gross458.8
 450.8
Less: Accumulated depreciation(321.9) (317.8)
Property, plant and equipment, net$136.9
 $133.0


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other non-current assets

The following table presents the components of other non-current assets, as follows (in millions):
July 1, 2023July 2, 2022
Operating ROU assets (Note 12)$40.4 $45.2 
Long-term restricted cash4.6 9.3 
Deferred contract cost2.9 2.4 
Debt issuance cost - Revolving Credit Facility2.8 3.5 
Deposits2.3 1.9 
Other non-current assets8.7 3.5 
Other non-current assets$61.7 $65.8 

Other current liabilities
The following table presents the components of other current liabilities, were as follows (in millions):
July 1, 2023July 2, 2022
July 1, 2017 July 2, 2016
Customer prepayments$35.2
 $0.4
Restructuring accrual8.8
 13.3
Operating lease liabilities (Note 12)
Operating lease liabilities (Note 12)
$10.1 $10.1 
Income tax payable3.3
 3.3
Income tax payable4.4 9.6 
Restructuring accrual (Note 13)
Restructuring accrual (Note 13)
5.8 —
Interest payableInterest payable5.5 4.6 
Transaction tax payableTransaction tax payable4.3 11.5 
Warranty accrual2.9
 2.6
Warranty accrual4.2 4.4 
VAT liabilities2.2
 2.3
Deferred compensation plan2.0
 2.4
Acquisition related holdback and related accrualsAcquisition related holdback and related accruals4.1 0.1 
Fair value of forward contractsFair value of forward contracts2.4 8.4 
Fair value of contingent consideration (Note 5)
Fair value of contingent consideration (Note 5)
1.1 1.8 
Other7.0
 6.7
Other7.9 5.8 
Other current liabilities$61.4
 $31.0
Other current liabilities$49.8 $56.3 
Other non-current liabilitiesNon-current Liabilities
The following table presents the components of other non-current liabilities, were as follows (in millions):
July 1, 2023July 2, 2022
Pension and post-employment benefits$53.2 $59.6 
Operating lease liabilities (Note 12)
29.4 33.5 
Long-term deferred revenue23.4 19.4 
Fair value of contingent consideration (Note 5)
18.6 0.7 
Financing obligation15.8 16.0 
Uncertain tax position15.8 12.9 
Deferred tax liability13.9 9.5 
Warranty accrual4.8 6.2 
Asset retirement obligations3.83.7
Other8.08.9
Other non-current liabilities$186.7 $170.4 
77

 July 1, 2017 July 2, 2016
Pension and post-employment benefits$99.4
 $103.0
Financing obligation27.8
 28.7
Long-term deferred revenue14.0
 22.7
Other22.7
 24.7
Other non-current liabilities$163.9
 $179.1

VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Interest and other income,Other Income, net
The following table presents the components of interest and other income, net, were as follows (in millions):
Years Ended
July 1, 2023July 2, 2022July 3, 2021
Interest income$10.2 $3.4 $2.9 
Foreign exchange gain, net(2.2)1.4 — 
Other income, net(0.4)0.4 0.4 
Interest and other income, net$7.6 $5.2 $3.3 
 Years Ended
 July 1, 2017 July 2, 2016 June 27, 2015
Interest income$11.1
 5.9
 $4.6
Foreign exchange gains (loss), net0.9
 (2.6) (3.8)
Proceeds from Nortel (1)—
 —
 2.2
Loss on extinguishment of debt (2)(1.1) —
 —
Other income (expense), net2.2
 (0.8) 0.7
Interest and other income, net$13.1
 $2.5
 $3.7
(1)During fiscal 2015, the Company received proceeds of $2.2 million from the Fair Fund established to provide compensation for losses incurred in connection with investments in Nortel Networks Corporation (“Nortel”) securities from the SEC’s claims against Nortel.
(2)During fiscal 2017, the Company repurchased $40.0 million aggregate principal amount of the 2033 Notes for $45.4 million in cash. In connection with the repurchase, a loss on extinguishment of $1.1 million was recognized. Refer to “Note 10. Debt” for more information.

Table of Contents
VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7. Investments and Forward Contracts and Fair Value Measurements
Available-For-SaleShort-Term Investments
The Company’s investments in marketable debt securities were primarily classified as available-for-sale investments. As of July 1, 2017, the Company’s available-for-sale securities were as follows (in millions):
 Amortized Cost/
Carrying Cost		 Gross Unrealized
Gains		 Gross Unrealized
Losses		 Estimated
Fair Value
Available-for-sale securities: 
  
  
  
U.S. treasuries$56.8
 $—
 $(0.1) $56.7
U.S. agencies45.0
 —
 (0.1) 44.9
Municipal bonds and sovereign debt instruments4.4
 —
 —
 4.4
Asset-backed securities71.5
 —
 (0.4) 71.1
Corporate securities326.1
 0.1
 (0.2) 326.0
Certificates of deposit6.0
 —
 —
 6.0
Total available-for-sale securities$509.8
 $0.1
 $(0.8) $509.1
The Company generally classifies debt securities as cash equivalents, short-term investments or other non-current assets based on the stated maturities; however, certain securities with stated maturities of longer than twelve months which are highly liquid and available to support current operations are also classified as short-term investments. As of July 1, 2017, of the total estimated fair value, $78.2 million was classified as cash equivalents, $430.2 million was classified as short-term investments and $0.7 million was classified as other non-current assets.
As of July 1, 2017, the Company had sold all of its ownership of Lumentum common stock in connection with the Separation. The Lumentum common stock was previously classified as available-for-sale marketable equity securities. During fiscal 2017, the Company sold 7.2 million Lumentum common shares and recognized gross gains of $203.0 million, reflected in "gain on sale of investments" in the Company’s Consolidated Statements of Operations. The sale resulted in no tax effect. The realized gain is also reflected within the operating activities section of the Consolidated Statements of Cash Flows, while the cash proceeds received are reflected in “sales of available-for-sale investments” within the investing activities section.
 In addition to the amounts presented above, as of July 1, 2017,2023, the Company’s short-term investments classified asof $14.6 million were comprised of a 30-day term deposit of $13.1 million and trading securities related to the deferred compensation plan were $2.0of $1.5 million, of which $0.5$0.1 million was invested in debt securities, $0.3$1.2 million was invested in equity securities and $0.2 million was invested in money market instruments and funds and $1.2 million was invested in equity securities.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 interestInterest and other income, net.
During the year ended July 1, 2017, July 2, 2016 and June 27, 2015, the Company recorded no other-than-temporary impairment charges in each respective period.

Table of Contents
VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of July 1, 2017, the Company’s total gross unrealized losses on available-for-sale securities, aggregated by type of investment instrument, were as follows (in millions):
 Less than 12 Months Greater than 12 Months Total
U.S. treasuries and agencies$(0.2) —
 $(0.2)
Asset-backed securities(0.1) $(0.3) $(0.4)
Corporate securities(0.2) —
 (0.2)
Total gross unrealized losses$(0.5) $(0.3) $(0.8)
As of July 1, 2017, contractual maturities of the Company’s debt securities classified as available-for-sale securities were as follows (in millions):
 Amortized Cost/Carrying Cost 
Estimated
Fair Value
Amounts maturing in less than 1 year$365.3
 $365.2
Amounts maturing in 1 - 5 years143.5
 143.2
Amounts maturing in more than 5 years1.0
 0.7
Total debt available-for-sale securities$509.8
 $509.1
As of July 2, 2016, the Company’s available-for-sale securities were as follows (in millions):
 
Amortized Cost/
Carrying Cost
 Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
Debt securities: 
  
  
  
U.S. treasuries$46.1
 $—
 $—
 $46.1
U.S. agencies24.9
 —
 —
 24.9
Municipal bonds and sovereign debt instruments2.0
 —
 —
 2.0
Asset-backed securities50.4
 0.1
 (0.3) 50.2
Corporate securities224.5
 0.2
 (0.1) 224.6
Total debt securities347.9
 0.3
 (0.4) 347.8
Marketable equity securities62.1
 109.2
 —
 171.3
Total available-for-sale securities$410.0
 $109.5
 $(0.4) $519.1
 As of July 2, 2016, of the total estimated fair value of debt securities, $36.1 million was classified as cash equivalents, $311.1 million was classified as short-term investments and $0.6 million was classified as other non-current assets.
Marketable equity securities consisted of the Company’s ownership of 7.2 million shares of Lumentum common stock remaining as of July 2, 2016 in connection with the Separation. These securities are stated at fair value, with change in unrealized gains and losses reported in other comprehensive income, net of tax and are classified as short-term investments on the Consolidated Balance Sheet as of July 2, 2016 at $171.3 million. The Company sold 4.5 million Lumentum common shares during the third and fourth quarters of fiscal 2016 and recognized gross realized gain of $71.5 million, reflected in "Gain on sale of investments" in the Company’s Consolidated Statements of Operations. The sale resulted in $2.0 million tax effect related to the intraperiod tax allocation rules. 
In addition to the amounts presented above, as of July 2, 2016,2022, the Company’s short-term investments classified asof $1.4 million were comprised of trading securities related to the deferred compensation plan, were $2.4 million, of which $0.3 million was invested in debt securities, $0.8$1.0 million was invested in equity securities and $0.1 million was invested in money market instruments and funds and $1.3 million was invested in equity securities.

Table of Contents
VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of July 2, 2016, the Company’s total gross unrealized losses on available-for-saleinstruments. Trading securities aggregated by type of investment instrument, were as follows (in millions):
 Less than 12 Months Greater than 12 Months Total
Asset-backed securities$—
 $(0.3) $(0.3)
Corporate securities(0.1) —
 (0.1)
Total gross unrealized losses$(0.1) $(0.3) $(0.4)
Fair Value Measurements
Assets measuredare reported at fair value, as of July 1, 2017 and July 2, 2016 are summarized below (in millions):
 Fair Value Measurement as of Fair Value Measurement as of
 July 1, 2017 July 2, 2016
 Total 
Quoted Prices in Active
Markets for Identical
Assets (Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2)
Assets: 
  
  
  
  
  
Debt available-for-sale securities: 
  
  
  
  
  
U.S. treasuries$56.7
 $56.7
 $—
 $46.1
 $46.1
 $—
U.S. agencies44.9
 —
 44.9
 24.9
 —
 24.9
Municipal bonds and sovereign debt instruments4.4
 —
 4.4
 2.0
 —
 2.0
Asset-backed securities71.1
 —
 71.1
 50.2
   50.2
Corporate securities326.0
 —
 326.0
 224.6
 —
 224.6
Certificate of deposits6.0
 —
 6.0
 —
    
Total debt available-for-sale securities509.1
 56.7
 452.4
 347.8
 46.1
 301.7
Marketable equity securities—
 —
 —
 171.3
 171.3
 —
Money market funds726.4
 726.4
 —
 274.4
 274.4
 —
Trading securities2.0
 2.0
 —
 2.4
 2.4
 —
Foreign currency forward contracts7.3
 —
 7.3
 —
    
Total assets (1)$1,244.8
 $785.1
 $459.7
 $795.9
 $494.2
 $301.7
            
Liability:           
Foreign currency forward contracts1.3
 —
 1.3
 —

—
 —
Total liabilities (2)$1.3
 $—
 $1.3
 $—

$—

$—
(1)$789.2 million in cash and cash equivalents, $432.2 million in short-term investments, $11.0 million in restricted cash, $7.3 million in other current assets, and $5.1 million in other non-current assets on the Company’s Consolidated Balance Sheets as of July 1, 2017. $295.4 million in cash and cash equivalents, $484.7 million in short-term investments, $11.3 million in restricted cash, and $4.5 million in other non-current assets on the Company’s Consolidated Balance Sheets as of July 2, 2016.
(2)$1.3 million in other current liabilities on the Company’s Consolidated Balance Sheets as of July 1, 2017.

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair value is defined aswith the exit price,unrealized gains or the amount that would be received to sell an asset or paid to transfer a liabilitylosses resulting from changes 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 maximizesrecognized in the useConsolidated Statements of observable inputsOperations as a component of Interest and minimizes the use of unobservable inputs by requiring the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the assumptions about the factors that market participants would use in valuing the asset or liability.other income, net.
The Company’s cash and investment instruments are classified within Level 1 or Level 2 of the fair value hierarchy based on quoted prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.
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, and foreign currency forward contracts. 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 on inputs that are unobservable and significant to the overall fair value measurement. As of July 1, 2017 and July 2, 2016, the Company did not hold any Level 3 investment securities.
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 July 1, 2017,2023, the Company had forward contracts that were effectively closed but not settled with the counterparties by year end. Therefore, the fair value of these contracts of $7.3$3.5 million and $1.3$2.4 million is reflected as prepaymentsPrepayments and other current assets and otherOther current liabilities inon the Consolidated Balance Sheets, asrespectively. As of July 1, 2017,2, 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 on the Consolidated Balance Sheets, respectively.
The forward contracts outstanding and not effectively closed, with a term of less than 120 days, were transacted near fiscal year end; therefore, the fair value of the contracts is not significant.minimal as of July 1, 2023 and a value of $0.1 million is reflected in Other current liabilities on the Consolidated Balance Sheets as of July 2, 2022. As of July 1, 20172023 and July 2, 2016,2022, the notional amounts of the forward contracts that the Company held to purchase foreign currencies were $134.3$87.5 million and $110.0$119.1 million, respectively, and the notional amounts of forward contracts thethat Company held to sell foreign currencies were $25.4$19.3 million and $55.2$80.5 million, respectively.
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 interestInterest 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 earnedincurred a gain of $3.3$1.2 million and incurred a loss of $9.6$8.3 million for the years ended July 1, 20172023 and July 2, 20162022, respectively.

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 8. GoodwillFair Value Measurements
Fair Value Measurements
The following table presentsCompany’s assets and liabilities measured at fair value for the changes periods presented are as follows (in millions):
July 1, 2023July 2, 2022
TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Assets:      
Debt available-for-sale securities:      
Asset-backed securities(1)
$0.3 $— $0.3 $— $0.6 $— $0.6 $— 
Total debt available-for-sale securities0.3 — 0.3 — 0.6 — 0.6 — 
Money market funds(2)
344.8 344.8 — — 313.2 313.2 — — 
Trading securities(3)
1.5 1.5 — — 1.4 1.4 — — 
Foreign currency forward contracts(4)
3.5 — 3.5 — 3.8 — 3.8 — 
Total assets$350.1 $346.3 $3.8 $— $319.0 $314.6 $4.4 $— 
Liability:
Foreign currency forward contracts(5)
2.4 $— 2.4 — 8.4 — 8.4 $— 
Contingent consideration(6)
19.7 — — 19.7 2.5 — — 2.5 
Total liabilities$22.1 $— $2.4 $19.7 $10.9 $— $8.4 $2.5 
(1) Included in Other non-current assets on the Consolidated Balance Sheets.
(2) Includes, as of July 1, 2023, $336.5 million in cash and cash equivalents, $4.3 million in restricted cash and $4.0 million in Other non-current assets on the 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 Consolidated Balance Sheets.
(3) Included in Short-term investments on the Consolidated Balance Sheets.
(4) Included in Other current assets on the Consolidated Balance Sheets.
(5) Included in Other current liabilities on the Consolidated Balance Sheets.
(6) As of July 1, 2023 and July 2,2022, includes certain amounts in Other current liabilities and Other non-current liabilities on the Consolidated Balance Sheets.

Other Fair Value Measures
Fair Value of Debt: If measured at fair value on the Consolidated Balance Sheets, the Company’s 3.75% Senior Notes (2029 Notes), 1.625% Senior Convertible Notes (2026 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:
July 1, 2023July 2, 2022
TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Debt:      
3.75% Senior Notes$341.8 $— $341.8 $— $337.5 $— $337.5 $— 
1.625% Senior Convertible Notes262.7 — 262.7 — — — — — 
1.00% Senior Convertible Notes95.6 — 95.6 — 250.7 — 250.7 — 
1.75% Senior Convertible Notes— — — — 73.4 — 73.4 — 
Total liabilities$700.1 $— $700.1 $— $661.6 $— $661.6 $— 
See “Note 11. Debt”, for further discussion of the Company’s debt.

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 9. Goodwill
Changes in the carry value of goodwill allocated segment are as follows (in millions):
Network
Enablement		Service
Enablement		Optical Security
and Performance
Products		Total
Balance as of July 3, 2021(1)
$349.7 $4.6 $42.2 $396.5 
Acquisitions(2)
— 10.0 — 10.0 
Currency translation and other adjustments(18.1)(0.8)— (18.9)
Balance as of July 2, 2022(3)
$331.6 $13.8 $42.2 $387.6 
Acquisitions(2)
60.0 — — 60.0 
Measurement period adjustment (2)
(0.5)— — (0.5)
Currency translation adjustments6.9 1.2 — 8.1 
Balance as of July 1, 2023(4)
$398.0 $15.0 $42.2 $455.2 
(1) Gross goodwill balances for NE, SE and OSP were $651.6 million, $277.2 million and $126.7 million, respectively as of July 3, 2021. Accumulated impairment for NE, SE and OSP was $301.9 million, $272.6 million and $84.5 million, respectively as of July 3, 2021.
(2) See “Note 5. Acquisitions” of the Notes to Consolidated Financial Statement for additional information related to the Company’s reportable segments (in millions):acquisitions.
 
Network
Enablement
 
Service
Enablement
 
Optical Security
and Performance
Products
 Total
Balance as of June 27, 2015 (1)$154.5
 $92.7
 $8.3
 $255.5
Goodwill allocation - WaveReady (3)(6.0) —
 —
 $(6.0)
Currency translation and other adjustments(4.7) (1.3) —
 $(6.0)
Goodwill impairment charge—
 (91.4) —
 (91.4)
Balance as of July 2, 2016 (2)$143.8

$—

$8.3

$152.1
Currency translation(0.5) —
 —
 $(0.5)
Balance as of July 1, 2017 (4)$143.3
 $—
 $8.3
 $151.6
(1)(3) Gross goodwill balances for NE, SE and OSP were $456.4 million, $273.9 million and $92.8 million, respectively as of June 27, 2015. Accumulated impairment for NE, SE and OSP was $301.9 million, $181.2 million and $84.5 million, respectively as of June 27, 2015.
(2)Gross goodwill balances for NE, SE and OSP were $445.7 million, $272.6 million and $92.8 million, respectively as of July 2, 2016. Accumulated impairment for NE, SE and OSP was $301.9 million, $272.6 million and $84.5 million, respectively as of July 2, 2016.
(3)Amount represents a release of the relative fair value of goodwill in our NE reporting unit related to the WaveReady products line, which is now a part of Lumentum as of the Separation Date. Refer to “Note 3. Discontinued Operations” for more information about the Separation.
(4)Gross goodwill balances for NE, SE and OSP were $445.2 million, $272.6 million and $92.8 million, respectively as of July 1, 2017. Accumulated impairment for NE, SE and OSP was $301.9 million, $272.6 million and $84.5 million, respectively as of July 1, 2017.
The following table presents gross goodwill and aggregate impairment balances for the fiscal years endedNE, SE and OSP were $633.5 million, $286.4 million and $126.7 million, respectively as of July 2, 2022. Accumulated impairment for NE, SE and OSP was $301.9 million, $272.6 million and $84.5 million, respectively as of July 2, 2022.
(4) Gross goodwill balances for NE, SE and OSP were $699.9 million, $287.6 million and $126.7 million, respectively as of July 1, 2017,2023. Accumulated impairment for NE, SE and OSP was $301.9 million, $272.6 million and $84.5 million, respectively as of July 2, 2016 (in millions):
 years ended
 July 1, 2017 July 2, 2016
Gross goodwill balance$810.6
 $811.1
Accumulated impairment losses(659.0) (659.0)
Net goodwill balance$151.6
 $152.1
1, 2023.
Impairment of Goodwill
The Company reviewstests goodwill at the reporting unit level for impairment annually, during the fourth quarter of theeach fiscal year, or more frequently if events or circumstances indicate that an impairment lossthe asset may have occurred.be impaired. The Company determined that, based on its organizational structure and the financial information that is provided to and reviewed by managementthe Company’s Chief Operating Decision Maker (CODM) during fiscal 20172023, 2022 and 2016,2021 that its reporting units were NE, SE and OSP.
Fiscal 2017
DuringAs part of the fourth quarter of fiscal 2017, the Company early adopted the new authoritative guidance that eliminated the requirement to calculate the implied fair value of goodwill to measure a goodwillannual impairment charge. Instead, any impairment charge would be based on the excess of a reporting unit's carrying amount over its fair value.
During the fourth quarter of fiscal 2017,test, the Company performed thea quantitative assessment of goodwill impairment test in accordance withfor all reporting units.

For the authoritative guidance for impairment test of the NE reporting unit. The fair value of NE was determined based on a

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

combination of the income approach, which estimates the fair value based on the future discounted cash flows, and the market approach, which estimates the fair value based on multiples of earnings or revenue, or a similar performance measure. Based on the first step of thequantitative analysis, the Company determined thatcompares the fair value of NE is abovea reporting unit to its carrying amount.
The Company reviewed goodwill ofvalue. If the OSP reporting unit under the qualitative assessment of the authoritative guidance for impairment testing. The Company concluded that it was more likely than not that theestimated fair value of OSP exceeded its carrying amount. In assessing the qualitative factors, the Companyexceeds book value, goodwill is considered the impact of key factors, including changes in industry and competitive environment, market capitalization, earnings multiples, budgeted-to-actual operating performance from prior year, and consolidated company stock price and performance. As such, it was not necessary to perform the first step of the goodwill impairment test at this time.
The Company recorded no impairment charge in accordance with its annual impairment test.
Fiscal 2016
Interim Review
During the first quarter of fiscal 2016, the Company released the relative fair value of goodwill in its NE reporting unit related to the WaveReady products line which became part of Lumentum as of the Separation Date. In connection with this change in the NE reporting unit, the Company performed a goodwill impairment test for its NE reporting unit under the qualitative assessment of the authoritative guidance for impairment testing. The Company concluded that it was more likely than not thatbe impaired. However, if the fair value of the NE reporting unit exceeded itsis less than book value, then goodwill will be impaired by the amount that the carrying amount. There were no events or changes in circumstances which triggered an impairment review for the remaining reporting units.
Annual Review
During the fourth quarter the Company performed the goodwill impairment test for all its reporting units under the two-step quantitative goodwill impairment test in accordance with the authoritative guidance. Other than noted above, there were no other triggering events during the interim periods of fiscal 2016. Thus, the Company reviewed goodwill for impairment during the fourth quarter, in line with the completion of its annual operating plan for fiscal 2017.
Under the first step of the authoritative guidance for impairment testing,amount exceeds the fair value, not to exceed the carrying amount of the NE and OSP reporting units was determined based on a combination of the income approach, which estimates the fair value based on the future discounted cash flows, and the market approach, which estimates the fair value based on multiples of earnings or revenue, or a similar performance measure. The market approach estimates the fair value of the business based on a comparison of the reporting unit to comparable publicly traded companies in similar lines of business. Due to lack of comparability with its peer companies, the fair value of the SE reporting unit was determined only utilizing the income approach. The Company assumed a cash flow period of 10 years, long-term annual growth rates of 3.0% to 7.0%, discount rates of 14.0% to 17.0% and terminal value growth rates of 3.0% to 5.0%. The Company believes that the assumptions and rates used in the impairment test are reasonable, but they are judgmental, and variations in any of the assumptions or rates could result in materially different calculations of impairment amounts. The determination of the estimated fair value of goodwill required the use of significant unobservable inputs which are considered Level 3 fair value measurements. The sum of the fair values of the reporting units was reconciled to the Company’s current market capitalization plus an estimated control premium. Based on the first step of the authoritative guidance for impairment testing, the Company concluded that the fair value of all reporting units, except SE, were in excess of their carrying value. The fair value of the SE reporting unit was lower than the carrying value based on the completion of its annual operating plan for fiscal 2017 in the fourth quarter which revealed a longer investment cycle being needed for certain growth products within SE, coupled with a decline in the reporting unit’s revenue and operating profitability in fiscal 2016 as compared to fiscal 2015 when goodwill was last tested for impairment.goodwill.
The second step of the goodwill impairment test involved performing a hypothetical purchase price allocation to determine the implied fair value of the SE reporting unit’s goodwill. This process is complex and required judgment in the development of assumptions that affected the determination of the fair value of the SE reporting unit’s individual assets and liabilities, including previously unrecognized intangible assets. Based on the step two analysis, the Company determined that all of the SE goodwill balance of $91.4 million was impaired and therefore recorded an impairment charge in the fourth quarter of fiscal 2016 in the accompanying Consolidated Statements of Operations. Prior to completing the goodwill impairment test, the Company tested the recoverability of the SE long-lived assets (other than goodwill) and concluded that such assets were not impaired.

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fiscal 2015
Interim Review
As the Company reorganized its NSE segment into two reportable segments, NE and SE, during the first quarter of fiscal 2015, goodwill allocated to the new NE and SE reporting units was reviewed under the two-step quantitative goodwill impairment test in accordance with the authoritative guidance.
The fair value of the new reporting units was determined based on a combination of the income approach, which estimates the fair value based on the future discounted cash flows, and the market approach, which estimates the fair value based on multiples of earnings or revenue, or a similar performance measure. Based on the first step of the analysis, the Company determined thatTo estimate the fair value of each reporting unit, is significantly above its carrying amount. As such, the Company was not required to perform step twowe applied a combination of the analysis.income approach and the market approach. The income approach used discounted future cash flows in which sales, operating income and cash flow projections were based on assumptions driven by current economic conditions. The market approach utilized the Guideline Public Company recorded no impairment charge as a result of the interim period impairment test performed during the three months ended September 27, 2014. There were no events or changes in circumstances which triggered an impairment review for the remaining reporting units.
Annual Review
During the fourth quarter, theMethod and Guideline Transaction Method to derive fair value. The Guideline Public Company reviewed the goodwill of all its reporting units under the qualitative assessment of the authoritative guidance for impairment testing. The Company concluded that it was more likely than not thatMethod determines the fair value of an entity based upon trading multiples calculated using market value of minority interests in publicly-traded companies that are similar to the subject company. The Guideline Transaction Method calculates the fair value of an entity by analyzing recent sales of comparable entities.
Based on our testing during the fourth quarter of fiscal 2023, the fair value of each of the Company’s reporting units with goodwill exceeded itswas at least two times the carrying amount.value, and therefore no impairment was identified. In assessingaddition, no indications of impairment were identified under the qualitative factors, the Company considered the impact of key factors, including changes in industrytests performed for fiscal years ending on July 2, 2022 and competitive environment, budgeted-to-actual operating performance from prior year, and consolidated company stock price and performance. As such, it was not necessary to perform the two-step goodwill impairment test at that time and the Company recorded no impairment charge as a result of its annual impairment test.July 3, 2021.
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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 9.10. Acquired Developed Technology and Other Intangibles
The following tables present details of the Company’s acquired developed technology, customer relationships and other intangibles as of July 1, 2023, and July 2, 2022, (in millions):
As of July 1, 2023Weighted-Average Remaining Useful LifeGross Carrying AmountAccumulated AmortizationNet
Acquired developed technology (1)
3.9 years$438.5 $(390.2)$48.3 
Customer relationships2.0 years195.2 (185.9)9.3 
Other (2)
0.7 years39.8 (38.8)1.0 
Total intangibles$673.5 $(614.9)$58.6 
As of July 1, 2017Gross Carrying Amount Accumulated Amortization Net
As of July 2, 2022As of July 2, 2022Weighted-Average Remaining Useful LifeGross Carrying AmountAccumulated AmortizationNet
Acquired developed technology$369.3
 $(352.0) $17.3
Acquired developed technology3.3 years$416.6 $(375.8)$40.8 
Customer relationships94.9
 (81.3) 13.6
Customer relationships2.8 years189.7 (177.8)11.9 
Other (1)(2)9.9
 (9.7) 0.2
0.7 years36.0 (34.5)1.5 
Total intangibles$474.1
 $(443.0) $31.1
Total intangibles$642.3 $(588.1)$54.2 
As of July 2, 2016Gross Carrying Amount Accumulated Amortization Net
Acquired developed technology$369.3
 $(337.3) $32.0
Customer relationships95.6
 (68.0) 27.6
Other (1)10.8
 (10.5) 0.3
Total intangibles475.7
 (415.8) 59.9
(1)Other intangibles consist of customer backlog, non-competition agreements, patents, proprietary know-how and trade secrets, trademarks and trade names.
Fiscal 2016
(1) During the first quarter of fiscal 2016, the Company completed its in-process research and development (“IPR&D”) project related2023, we recorded a $0.6 million non-cash charge due to the fiscal 2014 acquisitiondiscontinued use of Trendium. Accordingly, $1.8 million was transferred from indefinite life intangible assets to acquired developed technology intangible assets with a useful life of thirty-six months.
Fiscal 2015

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During fiscal 2015, the Company completed its IPR&D project related to the fiscal 2014 acquisition of Network Instruments. Accordingly, $1.7 million was transferred from indefinite life intangible assets to acquired developed technology intangible assets and the Company began amortizing over its useful life of fifty-two months. Also during fiscal 2015, the Companycertain intellectual property. This charge has been recorded a $3.6 million IPR&D impairment charge for an ongoing project related to the fiscal 2014 acquisition of Trendium in accordance with the authoritative accounting guidance. The charge was recorded to Research and development (“R&D”) expensewithin SG&A in the Consolidated Statements of Operations.
During fiscal 2017, 2016(2) Other intangibles consist of customer backlog, patents, proprietary know-how and 2015, the Company recorded $28.3 million, $31.9 milliontrade secrets, trademarks and $51.4 million, respectively, of amortization related to acquired developed technology and other intangibles. The following table presents details of the Company’s amortization (in millions):trade names.
 Years Ended
 July 1, 2017 July 2, 2016 June 27, 2015
Cost of revenues$14.3
 $17.3
 $31.9
Operating expense14.0
 14.6
 19.5
Total$28.3
 $31.9
 $51.4
Based on the carrying amount of acquired developed technology, customer relationships and other intangibles as of July 1, 2017,2023, and assuming no future impairment of the underlying assets, the estimated future amortization is as follows (in millions):
Fiscal Years 
2024$20.2 
202515.9 
202611.4 
20277.5 
20283.0 
Thereafter0.6 
Total amortization$58.6 
81

Fiscal Years 
2018$20.1
20199.3
20201.4
20210.3
Total amortization$31.1

VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 10.11. Debt
As of July 1, 20172023 and July 2, 2016,2022, the Company’s long-term debt on the Consolidated Balance Sheets represented the carrying amount of the liability component, net of unamortized debt discounts and issuance cost, of the Senior Convertible Noteswas as discussed below. The following table presentsfollows, including the carrying amounts of the liabilitySenior Convertible and equity componentsSenior Notes, net of unamortized issuance costs (in millions):
July 1, 2023July 2, 2022
Principal amount of 1.00% Senior Convertible Notes$96.4 $— 
Unamortized 1.00% Senior Convertible Notes debt issuance cost(0.2)— 
Principal amount of 1.75% Senior Convertible Notes— 68.1 
Unamortized 1.75% Senior Convertible Notes debt issuance cost— (0.1)
Other short-term debt— 0.4 
Short-term debt$96.2 $68.4 
Principal amount of 3.75% Senior Notes$400.0 $400.0 
Unamortized 3.75% Senior Notes debt issuance cost(5.5)(6.4)
Principal amount of 1.625% Senior Convertible Notes250.0 — 
Unamortized 1.625% Senior Convertible Notes debt discount(12.9)— 
Unamortized 1.625% Senior Convertible Notes debt issuance cost(2.1)— 
Principal amount of 1.00% Senior Convertible Notes— 223.9 
Unamortized 1.00% Senior Convertible Notes debt issuance cost— (1.0)
Long-term debt$629.5 $616.5 
 July 1, 2017 July 2, 2016
Principal amount of 0.625% Senior Convertible Notes$610.0
 $650.0
Principal amount of 1.00% Senior Convertible Notes460.0
 —
Unamortized discount of liability component(129.4) (61.7)
Unamortized debt issuance cost (1)(9.2) (5.0)
Carrying amount of liability component$931.4
 $583.3
    
Carrying amount of equity component (2)$229.7
 $134.4
(1)In April 2015, the Financial Accounting Standards Board ("FASB") issued new authoritative guidance to simplify the presentation of debt issuance costs by requiring debt issuance costs to be presented as a deduction from the corresponding liability, consistent with debt discounts or premiums. This guidance was effective for the Company in the first quarter of fiscal 2017 for its convertible debt, and was applied retrospectively for all periods reported.
(2)Included in additional paid-in-capital on the Consolidated Balance Sheets.
The Company was in compliance with all debt covenants and held no short term debt as of July 1, 20172023 and July 2, 2016.2022.
1.00%1.625% Senior Convertible Notes (“(2026 Notes)
On March 6, 2023, the Company issued $250.0 million aggregate principal amount of 1.625% Senior Convertible Notes due 2026 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The Company issued $132.0 million aggregate principal amount of the 2026 Notes to certain holders of the 1.00% Senior Convertible Notes due 2024 Notes”)(2024 Notes) in exchange for $127.5 million principal amount of the 2024 Notes (the Exchange Transaction) and issued and sold $118.0 million aggregate principal amount of the 2026 Notes in a private placement to accredited institutional buyers (the Subscription Transactions).
The Exchange Transaction was accounted for as a modification. The $127.5 million principal of the 2024 Notes was reduced by $10.1 million, with offsetting increase to additional paid-in capital, to account for the increase in the fair value of the embedded conversion option in the modification. The increase in principal and coupon interest, along with the increased option value, totaled $14.6 million and is a direct reduction from the carrying amount of the debt on the Consolidated Balance Sheets. This amount will be accreted as an adjustment to interest expense on a straight-line basis and will accrete up to the full face value of the 2026 Notes at maturity.
The proceeds of the Subscription Transactions amounted to $113.8 million after issuance costs of $4.2 million. The exchange resulted in $2.2 million of the issuance costs to be recorded as Loss on convertible note modification in the Consolidated Statements of Operations. The remaining issuance costs of $2.0 million as well as $0.3 million of unamortized issuance costs carried over from the 2024 Notes at the exchange date were 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.
The 2026 Notes are an unsecured obligation of the Company and bear interest at an annual rate of 1.625%, payable in cash semi-annually in arrears on March 15 and September 15 of each year, beginning September 15, 2023. The 2026 Notes mature on March 15, 2026 unless earlier converted, redeemed or repurchased.

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The 2026 Notes may be converted under certain circumstances, based on an initial conversion rate of 75.7963 shares (equivalent to an initial conversion price of approximately $13.19 per share) at the option of the holders into cash up to the principal amount, with the remaining amount converted into cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock at the Company’s election. The initial conversion price represents a 22.5% premium to the closing price of the Company’s common stock on the pricing date, March 1, 2023, which will be subject to customary anti-dilution adjustments.

The 2026 Notes may be converted at any time on or prior to the close of business on the business day immediately preceding December 15, 2025, in multiples of $1,000 principal amount, at the option of the holder under the following circumstances:
•On any date during any calendar quarter beginning after June 30, 2023 (and only during such calendar quarter) if the closing price of the Company’s common stock was more than 130% of the then current conversion price for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading-day period ending on the last trading day of the previous calendar quarter;
•If the Company distributes to all or substantially all holders of its common stock rights or warrants (other than pursuant to a stockholder rights plan) entitling them to purchase, for a period of 45 calendar days or less, shares of VIAVI’s common stock at a price less than the average closing sale price of VIAVI’s common stock for the ten trading days preceding the declaration date for such distribution;

•If the Company distributes to all or substantially all holders of its common stock, cash or other assets, debt securities or rights to purchase our securities (other than pursuant to a stockholder rights plan), at a per share value exceeding 10% of the closing sale price of the Company’s common stock on the trading day preceding the declaration date for such distribution;
•If the Company is party to a specified transaction, a fundamental change or a make-whole fundamental change (each as defined in the indenture of the 2026 Notes); or
•During the five consecutive business-day period immediately following any ten consecutive trading-day period in which the trading price per $1,000 principal amount of the 2026 Notes for each day during such ten consecutive trading-day period was less than 98% of the product of the closing sale price of VIAVI’s common stock and the applicable conversion rate on such date.
•If the Company calls any or all of the 2026 Notes for Optional Redemption.
During the periods from, and including, December 15, 2025 until the close of business on the business day immediately preceding March 15, 2026, holders may convert the 2026 Notes at any time regardless of the foregoing circumstances.
Holders of the 2026 Notes may require the Company to purchase all or a portion of the 2026 Notes upon the occurrence of a fundamental change at a purchase price equal to 100% of the principal amount of the 2026 Notes to be purchased, plus accrued and unpaid interest to, but excluding, the fundamental repurchase date.
The Company may not redeem the 2026 Notes prior to March 20, 2025. The Company may redeem for cash all or part of the 2026 Notes, at its option, on or after March 20, 2025 if the closing price of the Company’s common stock was at least 130% of the then current conversion price for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides the redemption notice in accordance with the Indenture. If the Company redeems less than all the outstanding 2026 Notes, at least $75.0 million aggregate principal amount of 2026 Notes must be outstanding and not subject to redemption as of the relevant redemption notice date.
83


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Indenture provides for customary events of default, including payment defaults, breaches of covenants, failure to pay certain judgments and certain events of bankruptcy, insolvency and reorganization. If an event of default occurs and is continuing, the principal amount of the 2026 Notes, plus accrued and unpaid interest, if any, may be declared immediately due and payable, subject to certain conditions set forth in the Indenture. These amounts automatically become due and payable if an event of default relating to certain events of bankruptcy, insolvency or reorganization occurs.
As of July 1, 2023, the expected remaining term of the 2026 Notes is 2.7 years.
3.75% Senior Notes (2029 Notes)
On September 29, 2021, the Company issued $400.0 million aggregate principal amount of 3.75% Senior Notes due 2029 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. In connection with the issuance of the 2029 Notes, the Company incurred $7.0 million of issuance costs. The debt issuance costs were capitalized and are being amortized to interest expense using the straight-line method.The 2029 Notes are an unsecured obligation of the Company and bear annual interest of 3.75%, payable semi-annually in arrears on April 1 and October 1 of each year, beginning April 1, 2022. The 2029 Notes mature on October 1, 2029 unless earlier redeemed or repurchased. As of July 1, 2023, the expected remaining term of the 2029 Notes is 6.2 years.
1.75% Senior Convertible Notes (2023 Notes)
On May 29, 2018, the Company issued $225.0 million aggregate principal amount of 1.75% Senior Convertible Notes due 2023 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The Company issued $155.5 million aggregate principal of the 2023 Notes to certain holders of the 2033 Notes in exchange for $151.5 million principal of the 2033 Notes and issued and sold $69.5 million aggregate principal amount of the 2023 Notes in a private placement to accredited institutional buyers (the Private Placement).
In connection with the issuance of the 2023 Notes, the Company incurred $2.2 million of issuance costs. The debt issuance costs were capitalized and amortized to interest expense using the effective interest rate method from issuance date through maturity on June 1, 2023.
See Senior Convertible Notes Settlement section below for details of the 2023 Notes exchange transactions during fiscal 2022. On June 1, 2023, remaining 2023 Notes were retired upon maturity.
1.00% Senior Convertible Notes (2024 Notes)
On March 3, 2017, the Company issued $400$400.0 million aggregate principal amount of 1.00% Senior Convertible Notes due 2024 (the “2024 Notes”) in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. On March 22, 2017, the Company issued an additional $60$60.0 million upon exercise of the over-allotment option of the initial purchasers. The total proceeds from the 2024 Notes amounted to $451.1 million after issuance costs. The 2024 Notes are an unsecured obligation of the Company and bear interest at an annual rate of 1.00% payable in cash semi-annually in arrears on March 1 and September 1 of each year. The 2024 Notes mature on March 1, 2024 unless earlier converted or repurchased.
Under certain circumstancesIn connection with the issuance of the 2024 Notes, the Company incurred $8.9 million of issuance costs. The debt issuance costs were capitalized and during certain periods,are being amortized to interest expense using the straight-line method.
The 2024 Notes may be converted under certain circumstances, based on an initial conversion rate of 75.6229 shares (equivalent to an initial conversion price of approximately $13.22 per share), at the option of the holders into cash up to the principal amount, with the remaining amount converted into cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock at the Company’s election. The conversion rate, and thus the conversion price, may be adjusted under certain circumstances. The initial conversion price is $13.22 per share, representingrepresents a 32.5% premium to the closing sale price of the Company’s common stock on the pricing date, February 27, 2017, which will be subject to customary anti-dilution adjustments.
84


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The 2024 Notes may be converted at any time on or prior to the close of business on the business day immediately preceding December 1, 2023, in multiples of $1,000 principal amount, at the option of the holder only under the following circumstances: (i) on
• On any date during any calendar quarter beginning after June 30, 2017 (and only during such calendar quarter) if the closing price of Viavi’sthe Company’s common stock was more than 130% of the then current conversion price for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading-day period ending on the last trading day of the previous calendar quarter, (ii)ifquarter;
• If the Company distributes to all or substantially all holders of ourits common stock rights or warrants (other than pursuant to a stockholder rights plan) entitling them to purchase, for a period of 45 calendar days or less, shares of ourVIAVI’s common stock at a price less than the average closing sale price of ourVIAVI’s common stock for the ten trading days preceding the declaration date for such distribution, (iii) ifdistribution;
• If the Company distributes to all or substantially all holders of ourits common stock, cash or other assets, debt securities or rights to purchase our securities (other than pursuant to a stockholder rights plan), at a per share value exceeding 10% of the closing sale price of ourthe Company’s common stock on the trading day preceding the declaration date for such distribution, (iv) ifdistribution;
• If the Company is party to a specified transaction, a fundamental change or a make-whole fundamental change (each as defined in the Indenture),Indenture of the 2024 Notes); or (v) during
• During the five consecutive business-day period immediately following any 10ten consecutive trading-day period in which the trading price per $1,000 principal amount of the 2024 Notes for each day duringof such 10ten consecutive trading-day period was less than 98% of the product of the closing sale price of Viavi’sVIAVI’s common stock and the applicable conversion rate on such date.
During the periods from, and including December 1, 2023 until the close of business on the business day immediately preceding the maturity date,March 1, 2024, holders of the Notes may convert the 2024 Notes at any time regardless of the circumstances described in the immediately preceding sentence.foregoing circumstances.
Holders of the 2024 Notes may require Viavithe Company to repurchase for cashpurchase all or a portion of the 2024 Notes upon the occurrence of a fundamental change (as defined in the Indenture) at a repurchasepurchase price equal to 100% of the principal amount of the 2024 Notes to be repurchased,purchased, plus accrued and unpaid interest to, but excluding, the date of repurchase.fundamental repurchase date.
The Indenture provides for customary events of default, including payment defaults, breaches of covenants, failure to pay certain judgments and certain events of bankruptcy, insolvency and reorganization. If an event of default occurs and is continuing, the principal amount of the 2024 Notes, plus accrued and unpaid interest, if any, may be declared immediately due and payable, subject to certain conditions set forth in the Indenture. These amounts automatically become due and payable if an event of default relating to certain events of bankruptcy, insolvency or reorganization occurs.
In accordance with the authoritative accounting guidance, the Company separated the 2024 Notes into liability and equity components. The carrying value of the liability component at issuance was calculated as the present value of its cash flows using a discount rate of 4.8% based on the 7-year swap rate plus credit spread as of the issuance date. The credit spread for the Company is based on the historical average “yield to worst” rate for BB rated issuers. The difference between the 2024 Notes principal and the carrying value of the liability component, representing the value of conversion premium assigned to the equity component, was recorded as a debt discount on the issuance date and is being accreted using the effective interest rate of 4.8% over the period from the issuance date through March 1, 2024 as a non-cash charge to interest expense. The carrying value of the liability component was determined to be $358.1 million, and the equity component, or debt discount, of the 2024 Notes was determined to be $101.9 million. As of July 1, 2017,2023, the expected remaining term of the 2024 Notes is 6.70.7 years.
In connection with the issuance See Senior Convertible Notes Settlement section below for details of the 2024 Notes exchange transactions during fiscal 2022.
Senior Convertible Notes Settlement
On September 2, 2021, the Company incurred $8.9entered into separate privately-negotiated agreements with certain holders of its 2023 and 2024 Notes. The Company settled $93.8 million principal amount of issuance costs,the 2023 Notes and $181.2 million principal amount of the 2024 Notes in exchange for an aggregate of 10.6 million shares of its common stock, par value $0.001 per share, and $196.5 million in cash. The Company recorded a loss of $85.9 million in connection with the settlement transactions which were bifurcated intois presented as Loss on convertible note settlement in the debt issuance costs (attributable to the liability component)Consolidated Statements of $6.9 million and the equity issuance costs (attributable to the equity component) of $2.0 million based on their relative values. The debt issuance costs were capitalized and are being amortized to interest expense using the effective interest rate method from issuance date through March 1, 2024. The equity issuance costs were netted against the equity component in additional paid-in capital at the issuance date. As of July 1, 2017, the unamortizedOperations.

85


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

portionOn November 17, 2021 and November 22, 2021, the Company entered into separate privately-negotiated agreements with certain holders of the debt issuance costs related to theits 2023 and 2024 Notes was $6.6Notes. The Company settled $20.6 million which was included as a direct reduction from the carryingprincipal amount of the debt on the Consolidated Balance Sheets.
Based on quoted market prices as of July 1, 2017, the fair value2023 Notes and $25.0 million principal amount of the 2024 Notes was approximately $481.7 million.in exchange for $59.0 million in cash. The 2024 Notes are classified within Level 2Company recorded a loss of $6.4 million in connection with the settlement transactions which is presented as they are not actively tradedLoss on convertible note settlement in markets.
0.625% Senior Convertible Notes (“2033 Notes”)the Consolidated Statements of Operations.
On August 21, 2013,March 2, 2022, the Company issued $650.0entered into separate privately-negotiated agreements with certain holders of its 2023 and 2024 Notes. The Company settled $23.2 million aggregate principal amount of 0.625% the 2023 Notes and $26.8 million principal amount of the 2024 Notes in exchange for $64.7 million in cash. The Company recorded a loss of $6.4 million in connection with the settlement transactions which is presented as Loss on convertible note settlement in the Consolidated Statements of Operations.
On June 3, 2022, the Company entered into separate privately-negotiated agreements with certain holders of its 2023 and 2024 Notes. The Company settled $19.3 million principal amount of the 2023 Notes and $3.1 million principal amount of the 2024 Notes in exchange for $27.1 million in cash. The Company recorded a loss of $3.1 million in connection with the settlement transactions which is presented as Loss on convertible note settlement in the Consolidated Statements of Operations.
Senior Convertible Notes due 2033Secured Asset-Based Revolving Credit Facility
On December 30, 2021, we entered into a credit agreement (the Credit Agreement) with Wells Fargo Bank, National Association (Wells Fargo) as administrative agent, and other lender related parties. The Credit Agreement provides for a senior secured asset-based revolving credit facility in a private offeringmaximum aggregate amount of $300 million, which matures on December 30, 2026. The Credit Agreement also provides that, under certain circumstances, the Company may increase the aggregate amount of revolving commitments thereunder by an aggregate amount of up to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933,$100 million so long as amended.certain conditions are met. The proceeds from the 2033 Notes amounted to $636.3 million after issuance costs.credit facility established under the Credit Agreement will be used for working capital and other general corporate purposes. The 2033 Notesobligations under the Credit Agreement are an unsecured obligationsecured by substantially all of the assets of the Company and bearthose of its subsidiaries that are borrowers and guarantors under the Credit Agreement.
Amounts outstanding under the Credit Agreement accrue interest as follows: (i) if the amounts outstanding are denominated in US Dollars, at an annuala per annum rate of 0.625% payable in cash semi-annually in arrears on February 15 and August 15 of each year. The 2033 Notes mature on August 15, 2033 unless earlier converted, redeemed or repurchased.
Under certain circumstances and during certain periods, the 2033 Notes may be converted at the option of the holders into cash upequal to the principal amount, with the remaining amount converted into cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stockeither, at the Company’s election. The initial conversion price is $18.83election, Term Secured Overnight Financing Rate (SOFR) plus a margin of 1.35% to 1.85% per share, representingannum, or a 40.0% premiumspecified base rate plus a margin of 0.25% to 0.75%, in each case, depending on the average excess availability under the facility, (ii) if the amounts outstanding are denominated in Sterling, at a per annum rate equal to the closing sale priceSterling Overnight Interbank Average Rate (SONIA) plus a margin of 1.2825% to 1.7825%, depending on the average excess availability under the facility, (iii) if the amounts outstanding are denominated in Euros, at a per annum rate equal to the Euro Interbank Offered Rate plus a margin of 1.25% to 1.75%, depending on the average excess availability under the facility, or (iv) if the amounts outstanding are denominated in Canadian Dollars, at a per annum rate equal to either, at the Company’s election, the Canadian Dollar Offered Rate plus a margin of 1.25% to 1.75%, or a specified base rate plus a margin of 0.25% to 0.75%, in each case, depending on the average excess availability under the facility.
The covenants of the Company’s common stock on the pricing date, August 15, 2013, which will be subject toCredit Agreement include customary anti-dilution adjustments. Holders may convert the 2033 Notes at any time on or prior to the close of business on the business day immediately preceding February 15, 2033, andrestrictive covenants that, among other than during the period from, and including, February 15, 2018 until the close of business on the business day immediately preceding August 20, 2018, in multiples of $1,000 principal amount, under the following circumstances:
on any date during any calendar quarter beginning after December 31, 2013 (and only during such calendar quarter) if the closing price ofthings, restrict the Company’s common stock was more than 130% ofability to incur additional indebtedness, grant liens and make certain acquisitions, investments, asset dispositions and restricted payments. In addition, the then current conversion price for at least 20 trading days during the 30 consecutive trading-day period ending the last trading day of the previous calendar quarter; 
if the 2033 Notes are called for redemption; 
upon the occurrence of specified corporate events; 
if the Company is party to a specified transaction, a fundamental change or a make-whole fundamental change (each as defined in the indenture of the 2033 Notes); or 
during the five consecutive business-day period immediately following any 10 consecutive trading-day period in which the trading price per $1,000 principal amount of the 2033 Notes for each day of such 10 consecutive trading-day period was less than 98% of the product of the closing sale price of the Company’s common stock and the applicable conversion rate on such date.
During the periods from, and including, February 15, 2018 until the close of business on the business day immediately preceding August 20, 2018 and from, and including, February 15, 2033 until the close of business on the business day immediately preceding the maturity date, holders may convert the 2033 Notes at any time, regardless of the foregoing circumstances.
In the fourth quarter of fiscal 2015, holders of the 2033 Notes were given notice of the planned separation of the Lumentum business and the right to convert any debentures they own from the date of notice through the end of the business day preceding the ex-dividend date. No holders of the 2033 Notes exercised the conversion right before it expired.
Following the separation of the Lumentum business on August 1, 2015, the conversion price per share was adjusted pursuant to the terms of the 2033 Notes relating to the occurrence of a spin-off event. Effective as of the end of the business day on August 17, 2015, the initial conversion price per share was adjusted to $11.28 per share of the Company’s common stock traded on NASDAQ under the ticker symbol “VIAV.”
Holders of the 2033 Notes mayCredit Agreement contains certain financial covenants that require the Company to purchase all ormaintain a portionfixed charge coverage ratio of at least 1.00 to 1.00 if excess availability under the facility is less than the greater of 10% of the 2033 Notes on eachlesser of August 15, 2018, August 15,maximum revolver amount and borrowing base and $20 million.
As of July 1, 2023, we had no borrowings under this facility and August 15, 2028, or upon the occurrenceour available borrowing capacity was approximately $172.5 million, net of a fundamental change, in each case, at a price equal to 100%outstanding standby letters of the principal amountcredit of the 2033 Notes to be purchased, plus accrued and unpaid interest to, but excluding the purchase date. The Company may redeem all or a portion of the 2033 Notes for cash at any time on or after August 20, 2018, at a redemption price equal to 100% of the principal amount of the 2033 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.$4.1 million.

86


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Revolving Credit Facility

In accordance with the authoritative accounting guidance,On May 5, 2020, the Company separated the 2033 Notesentered into liabilitya credit agreement with Wells Fargo as administrative agent, and equity components.other lender related parties. The carrying value of the liability component at issuance was calculated as the present value of its cash flows using a discount rate of 5.4% based on the 5-year swap rate plus credit spread as of the issuance date. The credit spread for the Company is based on the historical average “yield to worst” rate for BB rated issuers. The difference between the 2033 Notes principal and the carrying value of the liability component, representing the value of conversion premium assigned to the equity component, was recorded as a debt discount on the issuance date and is being accreted using the effective interest rate of 5.4% over the period from the issuance date through August 15, 2018 as a non-cash charge to interest expense. The carrying value of the liability component was determined to be $515.6borrowed $150 million and repaid $150 million under this Credit Agreement during the equity component, or debt discount,first quarter of the 2033 Notes was determined to be $134.4 million. As of July 1, 2017, the expected remaining term of the 2033 Notes is 1.1 years.
fiscal 2022. In connection with the issuance ofentry into the 2033 Notes,Senior Secured Asset-Based Revolving Credit Facility noted above, the Company incurred $13.7 million of issuance costs, which were bifurcated into the debt issuance costs, attributable to the liability component of $10.9 million and the equity issuance costs, attributable to the equity component of $2.8 million based on their relative values. The debt issuance costs were capitalized and are being amortized to interest expense using the effective interest rate method from issuance date through August 15, 2018. The equity issuance costs were netted against the equity component in additional paid-in capital at the issuance date. As of July 1, 2017, the unamortized portion of the debt issuance costs related to the 2033 Notes was $2.6 million, which was included as a direct reduction from the carrying amount of the debt on the Consolidated Balance Sheets.
During fiscal 2017, the Company repurchased $40.0 million aggregate principal amount of the notes for $45.4 million in cash. In connection with the repurchase, a loss on extinguishment of $1.1 million was recognized in interest and other income, net in compliance with the authoritative guidance. After giving effect to the repurchase, the total amount of 0.625% Senior Convertible Notes outstanding as of July 1, 2017 was $610.0 million.
Based on quoted market prices as of July 1, 2017 and July 2, 2016, the fair value of the 2033 Notes was approximately $676.1 million and $633.0 million. The 2033 Notes are classified within Level 2 as they are not actively traded in markets.terminated this facility.
Interest Expense
The following table presents the interest expense for contractual interest and amortization of debt issuance costcosts (in millions):
Years Ended
July 1, 2023July 2, 2022July 3, 2021
Interest expense-contractual interest$19.2 $16.5 $8.5 
Amortization of debt issuance cost2.5 2.8 2.3 
Accretion of debt discount1.6 — — 
Other3.8 4.0 3.9 
  Total Interest Expense$27.1 $23.3 $14.7 
The effective interest rate on the Company’s contractual debt was 2.65%, 2.25% and accretion of debt discount (in millions):1.25% for fiscal 2023, 2022 and 2021, respectively.
87

 Years ended
 July 1, 2017 July 2, 2016
Interest expense-contractual interest$5.5
 $4.1
Amortization of debt issuance cost2.5
 2.1
Accretion of debt discount32.1
 26.7



VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 12. Leases

The Company is a lessee in several operating leases, primarily real estate facilities for office space. The Company's lease arrangements are composed of operating leases with various expiration dates through March 31, 2042. The Company's leases do not contain any material residual value guarantees.
Lease expense, cash flow and balance sheet information related to our operating leases is as follows (in millions):
July 1, 2023July 2, 2022
Operating lease costs (1)
$13.1 $14.0 
Cash paid for amounts included in the measurement of operating lease liabilities14.4 15.5 
Operating ROU assets obtained in exchange for operating lease obligations7.0 14.7 
Operating ROU assets (Other non-current assets)40.4 45.2 
Other current liabilities10.1 10.1 
Other non-current liabilities29.4 33.5 
Total operating lease liabilities$39.5 $43.6 
Weighted-average remaining lease term6.8 years7.2 years
Weighted-average discount rate4.8 %4.4 %
(1) Total variable lease costs were immaterial during the fiscal years ended July 1, 2023 and July 2, 2022. The total operating costs were included in cost of revenues, R&D and SG&A in the Consolidated Statements of Operations.
Future minimum operating lease payments as of July 1, 2023 are as follows (in millions):
Operating Leases
Fiscal 2024$10.3 
Fiscal 20259.4 
Fiscal 20267.2 
Fiscal 20275.6 
Fiscal 20284.0 
Thereafter9.7 
Total lease payments46.2 
Less: Interest(6.7)
Present value of lease liabilities$39.5 
88


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Future minimum operating lease payments as of July 2, 2022, were as follows (in millions):
Operating Leases
Fiscal 2023$10.2 
Fiscal 20249.8 
Fiscal 20257.8 
Fiscal 20266.0 
Fiscal 20274.6 
Thereafter12.8 
Total lease payments51.2 
Less: Interest(7.6)
Present value of lease liabilities$43.6 
Note 11.13. Restructuring and Related Charges
The Company has initiated various strategicCompany’s restructuring events are primarily intended to reduce its costs, consolidate its operations, rationalize theintegrate various acquisitions, streamline product manufacturing of its products and align its businesses in response toaddress market conditions. As of July 1, 2017 and July 2, 2016, the Company’s total restructuring accrual was $11.0 million and $18.0 million, respectively. During fiscal years 2017, 2016 and 2015 the Company recorded restructuring and relatedRestructuring charges of $21.6 million, $10.5 million and $26.8 million, respectively. The Company’s restructuring charges can include severance, benefit and benefitoutplacement costs to eliminate a specified number of positions, facilities and equipment costs to vacate facilities and consolidate operations, and lease termination costs.positions. The timing of associated cash payments is dependent upon the typejurisdiction of restructuring chargethe affected employees and can extend over multiple periods.
Summary of Restructuring Plans
The adjustments to the accrued restructuring expenses related to all of the Company’s restructuring plans described below for the fiscal year ended July 1, 2017 were as follows (in millions):
 Balance as of July 2, 2016 Fiscal Year 2017 Charges (Releases) 
Cash
Settlements
 
Non-cash
Settlements
and Other
Adjustments
 Balance as of July 1, 2017
Fiscal 2017 Plan         
OSP Restructuring Plan (1)$—
 $0.8
 $—
 $—
 $0.8
Focused NSE Restructuring Plan (1) (2)—
 21.3
 (16.5) 0.1
 4.9
Other Plans (2)—
 0.4
 (0.4) —
 —
Fiscal 2016 Plan         
NE, SE and Shared Services Agile Restructuring Plan (1) (2)8.6
 (0.7) (7.7) —
 0.2
NE and SE Agile Restructuring Plan (1)0.8
 (0.1) (0.3) —
 0.4
Fiscal 2015 Plan 
  
  
  
  
NE, SE and Shared Service Separation Restructuring Plan (1) (2)1.4
 (0.2) (1.1) —
 0.1
Plans Prior to Fiscal 2015

 

 

 

 

NE Product Strategy Restructuring Plan (1)1.5
 —
 (0.5) (0.1) 0.9
NE Lease Restructuring Plan (2)4.0
 0.1
 (1.5) —
 2.6
Other Plans (1) (2)1.7
 —
 (0.6) —
 1.1
Total$18.0
 $21.6
 $(28.6) $—
 $11.0
(1)Plan type includes workforce reduction cost.
(2)Plan type includes lease exit cost.
As of July 1, 2017 and July 2, 2016, $2.2 million and $4.7 million, respectively, of our restructuring liability was long-term in nature and included as a component of Other non-current liabilities, with the remaining short-term portion included as a component of Other current liabilities on the Consolidated Balance Sheets.
Fiscal 2017 Plans
OSP Restructuring2023 Plan
During the fourth quarter of fiscal 2017, Management approved a plan within the OSP business segment to realign its operations and exit from the printed security product portfolio. As a result, a restructuring charge of $0.8 million was recorded for severance and employee benefits for approximately 30 employees in manufacturing and SG&A functions locatedin the United States. Payments related to the severance and benefits accrual are expected to be paid by the end of the third quarter of fiscal 2018.
Focused NSE Restructuring Plan

Table of Contents
VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the third and second quarters of fiscal 2017, Management approved a plan within the NE and SE business segments as part of Viavi’s continued strategy to improve profitability in the Company’s Network and Service Enablement (NSE) business by narrowing the scope of the Service Enablement business and reducing costs by streamlining NSE operations. As a result, a restructuring charge of $21.0 million was recorded for severance and employee benefits for approximately 300 employees in manufacturing, R&D and SG&A functions located in North America, Latin America, Europe and Asia. Payments related to the severance and benefits accrual are expected to be paid in the second quarter of fiscal 2018.
Fiscal 2016 Plans
NE, SE and Shared Service Agile Restructuring Plan
During the fourth quarter of fiscal 2016,2023, Management approved a restructuring and workforce reduction plan within the NE and SE business segment and Shared Services function for organizational alignment and consolidation as part of(the Fiscal 2023 Plan) to better align the Company’s continued commitment for a more cost effective organization. workforce with current business needs and strategic growth opportunities. The Company expects approximately 5% of its global workforce to be affected.
As a result, approximately 170 employees primarily in manufacturing, R&Dthe Company recorded charges of $12.1 million during the year to Restructuring and SG&A functions located in North America, Latin America, Europe and Asia were impacted. Paymentsrelated charges (benefits) line within our Consolidated Statements of Operations, of which $10.4 million is related to Phase I of the remaining severanceFiscal 2023 Plan and benefits accrual are expected$1.7 million is related to Phase II of the Fiscal 2023 Plan. The first phase of the Fiscal 2023 Plan impacted all segments and corporate functions and the Company anticipates this phase of the Fiscal 2023 Plan to be paidsubstantially complete by the end of the first quarter of fiscal 2018.
NE2024. The second phase of the Fiscal 2023 Plan is primarily focused on reducing costs in our SE segment and SE Agile Restructuringthe Company anticipates this phase of the Fiscal 2023 Plan
During the second quarter of fiscal 2016, Management approved a plan primarily impacting the NE and SE business segments as part of Company’s ongoing commitment for an agile and more efficient operating structure. As a result, approximately 40 employees primarily in manufacturing, R&D and SG&A functions located in North America, Latin America, Europe and Asia were impacted. Payments related to the remaining severance and benefits accrual are expected to be paidsubstantially complete by the end of the second quarter of fiscal 2018.2024.
Fiscal 2015 Plans
89
NE, SE and Shared Service Separation Restructuring Plan
During the second, third and fourth quarters of fiscal 2015, Management approved a plan to eliminate certain positions in its shared services functions in connection with the Company’s plan to split into two separate public companies. Further, Management consolidated its operations, sales and R&D organizations and eliminated positions within the NE and SE segments to align to the Company’s product market strategy and lower manufacturing costs in connection with the Separation. As a result, approximately 330 employees in manufacturing, R&D and SG&A functions located in North America, Latin America, Europe and Asia were impacted. Payments related to the remaining severance and benefits accrual are expected to be paid by the end of the third quarter of fiscal 2018. During the fourth quarter of fiscal 2015, Management also approved a plan in the NE and SE segment to exit the space in Roanoke, Virginia. As of July 2, 2016, the Company exited the workspace in Roanoke under the plan and all payment were paid by the end of the fourth quarter of fiscal 2017.
Plans Prior to Fiscal 2015
NE Product Strategy Restructuring Plan
During the third quarter of fiscal 2014, Management approved a NE plan to realign its services, support and product resources in response to market conditions in the mobile assurance market and to increase focus on software products and next generation solutions through acquisitions and R&D. As a result, approximately 60 employees primarily in SG&A and manufacturing functions located in North America, Latin America, Asia and Europe were impacted. Payments related to the remaining severance and benefits accrual are expected to be paid by the end of the first quarter of fiscal 2020.
NE Lease Restructuring Plan
During the second quarter of fiscal 2014, Management approved a NE plan to exit the remaining space in Germantown, Maryland. As of June 28, 2014, the Company exited the space in Germantown under the plan. The fair value of the remaining contractual obligations, net of sublease income, as of July 1, 2017 was $2.6 million. Payments related to the Germantown lease costs are expected to be paid by the end of the second quarter of fiscal 2019.
As of July 1, 2017, the restructuring accrual for other plans that commenced prior to fiscal year 2015 was $1.1 million, which consists of immaterial accruals from various restructuring plans.


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A summary of the activity in the restructuring accrual is outlined below (in millions):

Balance as of July 2, 2022Restructuring and related chargesCash SettlementsBalance as of July 1, 2023
Fiscal 2023 Plan
NSE/Corp$— $9.1 $(5.6)$3.5 
OSP— 1.3 (0.7)0.6 
Fiscal 2023 Plan Phase I— 10.4 (6.3)4.1 
NSE— 1.7 — 1.7 
Fiscal 2023 Plan Phase II— 1.7 — 1.7 
Total (1)
$— $12.1 $(6.3)$5.8 
(1) Included in Other current liabilities on the Consolidated Balance Sheets as of July 1, 2023.


Other Plans

During fiscal 2022 and 2021, the Company recorded a benefit related to restructuring actions of $0.1 million and $1.6 million, respectively.


Note 12.14. Income Taxes
The Company’s income (loss) before income taxes consisted of the following (in millions):
Years Ended
July 1, 2023July 2, 2022July 3, 2021
Domestic$(37.6)$(82.6)$(21.7)
Foreign98.3 147.7 152.5 
Income before income taxes$60.7 $65.1 $130.8 
 Years Ended
 July 1, 2017 July 2, 2016 June 27, 2015
Domestic$94.7
 $(110.9) $(173.1)
Foreign91.9
 65.0
 67.8
Income (loss) before income taxes$186.6
 $(45.9) $(105.3)
The Company’s income tax expense (benefit) consisted of the following (in millions):
Years EndedYears Ended
July 1, 2017 July 2, 2016 June 27, 2015July 1, 2023July 2, 2022July 3, 2021
Federal:     Federal:
Current$—
 $—
 $0.1
Current$— $— $— 
Deferred1.0
 (26.2) 2.3
Deferred— — — 
1.0
 (26.2) 2.4
Total federal income tax expenseTotal federal income tax expense— — — 
State:     State:
Current0.2
 —
 (0.1)Current2.6 (2.2)20.1 
Deferred—
 (1.5) 0.1
Deferred— — — 
0.2
 (1.5) —
Total state income tax expense (benefit)Total state income tax expense (benefit)2.6 (2.2)20.1 
Foreign:     Foreign:
Current18.0
 21.3
 17.9
Current27.6 63.2 44.8 
Deferred2.1
 10.9
 5.8
Deferred5.0 (11.4)(1.6)
20.1
 32.2
 23.7
Total foreign income tax expenseTotal foreign income tax expense32.6 51.8 43.2 
Total income tax expense$21.3
 $4.5
 $26.1
Total income tax expense$35.2 $49.6 $63.3 
The federal deferred taxstate current expense primarily relates to the amortizationimpact of tax deductible goodwill. additional capitalization of R&D costs.
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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The foreign current expense primarily relates to the Company’s profitable operations in certain foreign jurisdictions. The foreign deferred tax expense primarily relates to the use of deferred tax assets in profitable foreign jurisdictions.expense accrued on intercompany dividends.
There was no material tax benefit associated with exercise of stock options for the fiscal years ended July 1, 2017, July 2, 2016 and June 27, 2015.

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A reconciliation of the Company’s income tax expense (benefit) at the federal statutory rate to the income tax expense at the effective tax rate is as follows (in millions):
Years Ended
July 1, 2023July 2, 2022July 3, 2021
Income tax expense computed at federal statutory rate$12.8 $13.7 $27.5 
Withholding Taxes8.0 8.7 8.7 
U.S. Inclusion of foreign earnings1.3 19.8 3.6 
Internal Intellectual Property Restructuring1.2 10.1 19.1 
Valuation allowance0.5 3.3 1.0 
Foreign rate differential4.5 6.9 3.9 
Reserves2.9 1.7 1.5 
Permanent items1.1 0.3 (0.6)
Fair value change of the earn-out liability(1.0)0.1 (1.5)
Impact of prior years’ taxes(0.5)(8.6)(2.1)
Research and experimentation benefits and other tax credits(1.3)(1.1)(0.5)
State taxes2.6 0.8 0.9 
Disallowed compensations3.3 2.2 1.4 
Senior Convertible Notes settlements— (8.3)— 
Other(0.2)— 0.4 
Income tax expense$35.2 $49.6 $63.3 
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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Years Ended
 July 1, 2017 July 2, 2016 June 27, 2015
Income tax expense (benefit) computed at federal statutory rate$65.3
 $(16.1) $(36.8)
Goodwill impairment—
 19.4
 —
Intraperiod allocation—
 (20.7) —
Foreign rate differential(6.6) (2.0) (2.3)
Valuation allowance(27.4) 18.2
 56.7
Research and experimentation benefits and other tax credits(1.4) (1.1) (0.9)
Reversal of previously accrued taxes(0.2) —
 (0.8)
Permanent items(9.1) 6.7
 8.0
Other0.7
 0.1
 2.2
Income tax expense$21.3
 $4.5
 $26.1
The components of the Company’s net deferred taxes consisted of the following (in millions):
Years EndedBalance as of
July 1, 2017 July 2, 2016 June 27, 2015July 1, 2023July 2, 2022July 3, 2021
Gross deferred tax assets:     Gross deferred tax assets:
Tax credit carryforwards$150.6
 $141.0
 $131.4
Tax credit carryforwards$136.4 $136.7 $135.7 
Net operating loss carryforwards1,875.4
 1,846.3
 2,226.1
Net operating loss carryforwards437.5 491.8 536.1 
Capital loss carryforwards102.4
 145.9
 4.1
Capital loss carryforwards1.1 1.0 1.1 
Inventories5.4
 6.1
 6.7
Inventories40.2 34.5 28.9 
Accruals and reserves30.3
 27.4
 30.2
Accruals and reserves58.1 58.5 66.5 
Investments0.7
 34.4
 0.7
Intangibles including acquisition-related itemsIntangibles including acquisition-related items597.5 603.6 632.4 
Capitalized research costsCapitalized research costs186.7 100.3 15.7 
Other51.9
 60.3
 55.5
Other44.3 45.7 65.9 
Acquisition-related items55.5
 65.2
 59.9
Gross deferred tax assets2,272.2
 2,326.6
 2,514.6
Gross deferred tax assets1,501.8 1,472.1 1,482.3 
Valuation allowance(2,097.8) (2,174.3) (2,334.5)Valuation allowance(1,351.5)(1,320.8)(1,308.9)
Deferred tax assets174.4
 152.3
 180.1
Deferred tax assets150.3 151.3 173.4 
Gross deferred tax liabilities:     Gross deferred tax liabilities:
Acquisition-related items(6.5) (13.2) (20.9)Acquisition-related items(30.9)(31.9)(29.1)
Undistributed foreign earnings(3.0) —
 (4.7)
Tax on unrepatriated earningsTax on unrepatriated earnings(13.7)(7.2)(18.4)
Foreign branch taxesForeign branch taxes(15.0)(17.8)(22.2)
Other(57.3) (31.1) (44.5)Other(17.7)(17.6)(18.7)
Deferred tax liabilities(66.8) (44.3) (70.1)Deferred tax liabilities(77.3)(74.5)(88.4)
Total net deferred tax assets$107.6
 $108.0
 $110.0
Total net deferred tax assets$73.0 $76.8 $85.0 
As of July 1, 2017,2023, the Company had federal, state and foreign tax net operating loss carryforwards of $5,115.1$1,695.5 million, $762.2$364.6 million and $624.0$461.0 million, respectively, and federal and state and foreign research and other tax credit carryforwards of $103.9 million, $40.7$81.9 million and $1.4$54.2 million respectively. Under current guidance, approximately $117.7 million of the net operating losses when realized, would have been credited to additional paid-in capital. The Company’s policy is to account for the utilization of tax attributes under a with-and-without approach. Upon the Company’s adoption of the new guidance on share-based payment awards in fiscal 2018, we expect our deferred tax assets related to the $117.7 million net operating losses to increase which will

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

be offset by a corresponding increase in our valuation allowance. Thefederal tax net operating loss carryforwards start to expire in fiscal 2024 and at various dates through 2038 if not utilized. The federal research credit carryforwards start to expire fiscal 2024 and at various dates through fiscal 2044 if not utilized. The state tax net operating loss carryforwards start to expire in fiscal 2024 and at various dates through 2041 if not utilized. The state research credit start to expire in fiscal 2024 but a majority of the state credits have an indefinite carryforward period. In addition, a portion of the foreign tax net operating loss and capital loss carryforwards will start to expire in calendar 2018 and at various other dates through 2037 if not utilized.have an indefinite carryforward period. Utilization of the tax net operating losses may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state and foreign provisions. Loss carryforward limitations may result in the expiration or reduced utilization of a portion of the Company’s net operating losses.
During fiscal 2022, the Company completed a planned internal transaction moving certain of VIAVI’s intellectual properties out of a foreign jurisdiction where tax rates are scheduled to increase to the U.S. incomeentity established in fiscal 2021 to own and manage VIAVI’s other intellectual properties. The Company recorded foreign tax expense of $13.2 million related to this transaction.
Foreign withholding taxes associated with the repatriation of earnings of foreign subsidiaries have not been provided on $373.3$7.9 million of undistributed earnings for certain foreign subsidiaries. The Company intends to reinvest these earnings indefinitely outside of the United States. The Company estimates that an additional $21.5$1.0 million of U.S. income or foreign withholding taxes would have to be provided if these earnings were repatriated back to the U.S.
92


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During fiscal 2021, the Company completed a planned series of internal transactions restructuring certain of VIAVI’s intellectual properties. The result of which aligned the properties in a single entity which owns, manages, directs, and protects the properties, including but not limited to patents, product designs, processes, manufacturing technologies, know-how, and trade secrets. In conjunction with the internal restructuring $2.3 billion ($482 million tax effected) of U.S. federal net operating loss carryforwards were utilized, and the Company recognized a new deferred tax asset relating to the book and tax basis difference of certain intangible assets of $589 million. Given the full valuation allowance that is carried on the Company’s U.S. deferred tax assets, the change in the deferred taxes as a result of the transaction does not have a material impact on the financial statements. The Company recorded state tax expense including reserves for uncertain tax positions of $19.1 million related to this transaction.
The valuation allowance decreasedincreased by $76.5$30.7 million in fiscal 2017,2023, increased by $11.9 million in fiscal 2022, and decreased by $160.2$114.2 million in fiscal 2016, and increased by $12.7 million in fiscal 2015.2021. The decreaseincrease during fiscal 20172023 was primarily due to the utilizationincrease in capitalization of deferred tax assetsfederal research expenditures in the U.S. This includes the effects of the mandatory capitalization and amortization of research and development expenses incurred in fiscal 2023, as required by the 2017 Tax Cuts and Jobs Act (Tax Act). The increase during fiscal 2022 was primarily due to the increase in deferred tax liabilities as resultcapitalization of federal research expenditures in the issuance of convertible debt.U.S. The decrease during fiscal 20162021 was primarily relateddue to the Lumentum transaction. The increase during fiscal 2015 was primarily related to an increase in the deferred tax assetsexpiration of federal net operating losses, federal capital losses, and intangible amortization.federal research credits. The following table provides information about the activity of our deferred tax valuation allowance (in millions):
Deferred Tax Valuation AllowanceBalance at
Beginning
of Period
Additions Charged
to Expenses or
Other Accounts(1)
Deductions Credited to Expenses or Other Accounts(2)
Balance at
End of
Period
Year Ended July 1, 2023$1,320.8 $114.4 $(83.7)$1,351.5 
Year Ended July 2, 2022$1,308.9 $101.7 $(89.8)$1,320.8 
Year Ended July 3, 2021$1,423.1 $617.5 $(731.7)$1,308.9 
Deferred Tax Valuation Allowance Balance at
Beginning
of Period		 
Additions Charged
to Expenses or
Other Accounts(1)
 Deductions Credited to Expenses or Other Accounts(2) Balance at
End of
Period
Year Ended July 1, 2017 $2,174.3
 $44.7
 $(121.2) $2,097.8
Year Ended July 2, 2016 $2,334.5
 $227.5
 $(387.7) $2,174.3
Year Ended June 27, 2015 $2,321.8
 $39.5
 $(26.8) $2,334.5
(1)(1) Additions include current year additions charged to expenses and current year build due to increases in net deferred tax assets, return to provision true-ups, other adjustments.
(2)Deductions include current year releases credited to expenses and current year reductions due to decreases in net deferred tax assets, return to provision true-ups, other adjustments and increases in deferred tax liabilities.
Under current guidance, approximately $514.7 million of the valuation allowance as of July 1, 2017 was attributable to pre-fiscal 2006 windfall stock option deductions, the benefit of which would have been credited to paid-in-capital if and when realized through a reduction in income tax payable. Beginning with fiscal 2006, the Company began to track the windfall stock option deductions off-balance sheet. If and when realized, the tax benefit associated with those deductions would have been credited to additional paid-in-capital. Upon the Company’s adoption of the new guidance on share-based payment awards in fiscal 2018, the benefit if realized will no longer be credited to additional paid-in capital.
During fiscal 2016, the Company recognized a tax expense of $8.9 million related to a one-time increase in valuation allowance associated with deferred tax assets, transferredreturn to Lumentumprovision true-ups, and other adjustments.
(2) Deductions include current year releases credited to expenses and current year reductions due to decreases in connection with the Separation. The tax expense was partially offset by anet deferred tax benefit of $9.5 million relatedassets, return to the write off ofprovision true-ups, other adjustments and increases in deferred tax deductible goodwill and a tax benefit of $20.7 million related to the income tax intraperiod tax allocation rules for discontinued operations and other comprehensive income.liabilities.



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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A reconciliation of unrecognized tax benefits between June 28, 201427, 2020 and July 1, 20172023 is as follows (in millions):
Balance at June 27, 2020$52.0 
Additions based on tax positions related to current year14.8 
Reduction based on tax positions related to prior year(6.8)
Reduction related to settlement(0.5)
Reductions for lapse of statute of limitations(0.4)
Balance at July 3, 202159.1 
Additions based on tax positions related to current year0.4 
Additions based on tax positions related to prior year2.6 
Reduction based on tax positions related to prior year(2.6)
Reductions for lapse of statute of limitations(6.1)
Balance at July 2, 202253.4 
Additions based on tax positions related to current year2.7 
Addition based on tax positions related to prior year0.1 
Reduction based on tax positions related to prior year(1.1)
Reductions for lapse of statute of limitations(0.2)
Balance at July1, 2023$54.9 
93

Balance at June 28, 2014$38.3
Additions based on tax positions related to current year1.9
Reductions for lapse of statute of limitations(3.3)
Reductions due to foreign currency rate fluctuations(0.1)
Balance at June 27, 201536.8
Additions based on tax positions related to current year5.1
Reductions for lapse of statute of limitations(0.2)
Balance at July 2, 201641.7
Additions based on tax positions related to current year1.6
Additions based on tax positions related to prior year0.9
Reduction based on tax positions related to prior year(3.5)
Reductions for lapse of statute of limitations(1.8)
Balance at July 1, 2017$38.9

VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The unrecognized tax benefits relate primarily to the allocations of revenue and costs among the Company’s global operations and the validity of some U.S. tax credits. Included in the balance of unrecognized tax benefits at July 1, 20172023 are $3.0$12.9 million of tax benefits that, if recognized, would impact the effective tax rate. Also included in the balance of unrecognized tax benefits at July 1, 20172023 are $36.0$38.2 million of tax benefits that, if recognized, would result in adjustments to the valuation allowance and are included in deferred taxes and other non-current tax liabilities, net in the Consolidated Balance Sheets.allowance.
The Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits within thethe income tax provision. The amount of interest and penalties accrued as of July 1, 20172023, July 2, 2022 and July 2, 20163, 2021 was approximately $1.8$2.9 million, $2.1 million, and $1.7$4.0 million, respectively. During fiscal 2017,2023, the Company’s accrued interest and penalties increased by $0.1 million primarily relating to$0.8 million. The timing and resolution of income tax examinations is uncertain, and the lapseamounts ultimately paid, if any, upon resolution of statute in a non-US jurisdiction. Theissues raised by the taxing authorities may differ from the amounts accrued for each year. Although we do not expect that our balance of gross unrecognized tax benefits that may be recognized duringwill change materially in the next twelve12 months, is approximately $0.1 million.given the uncertainty in the development of ongoing income tax examinations, we are unable to estimate the full range of possible adjustments to this balance.
The Company is routinely subject to various federal, state and foreign audits by taxing authorities. The Company believes that adequate amounts have been provided for any adjustments that may result from these examinations.
The following table summarizes the Company’s major tax jurisdictions and the tax years that remain subject to examination by such jurisdictions as of July 1, 2017:
2023:
Tax JurisdictionsTax Years
United States(1)
20142005 and onward
Canada20162022 and onward
China20122018 and onward
France20142020 and onward
Germany20142018 and onward
Korea20122019 and onward
United Kingdom20162020 and onward
(1) Although the Company is generally subject to a three-year statute of limitations in the U.S., tax authorities maintain the ability to adjust tax attribute carryforwards generated in earlier years.
Note 13.15. Stockholders' Equity
Repurchase of Common Stock
Fiscal 2017
In September 2016,2022 the Board of Directors increasedauthorized a new stock repurchase plan (“2022 Repurchase Plan”) of up to $300 million effective October 1, 2022 which will remain in effect until the amount authorized has been fully repurchased or until suspension or termination of the program. Under the 2022 Repurchase Plan, the Company is authorized to repurchase shares through a variety of methods, including open market purchases, privately-negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans. The timing of repurchases under the plan will depend upon business and financial market conditions.

The 2022 Repurchase Plan replaces the $200 million stock repurchase plan that the Board previously authorized in September 2019 (“2019 Repurchase Plan”) and expired on September 30, 2022, as well as the stock repurchase plan that the Board of Directors authorized in September 2021 (“2021 Repurchase Plan”) used during fiscal 2022 for the purpose of repurchasing the Company’s previously authorizedcommon stock repurchase program from $100 millionissued in connection with the exchange transactions with certain holders of its Senior Convertible Notes (refer to $150 million. Under the revised repurchase authorization,Senior Convertible Notes Settlement section of “Note 11. Debt” for more details).

During fiscal 2023, the Company may repurchase up to $150repurchased 1.3 million shares of its common stock for $18.7 million under the 2019 Repurchase Plan. During fiscal 2023, the Company repurchased 6.0 million shares of its common stock for $65.2 million under the 2022 Repurchase Plan. As of July 1, 2023, the Company had remaining authorization of $234.8 million for future share repurchases under the 2022 Repurchase Plan.

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes share repurchase activity related to the Company’s common stock from time to time at the discretion of the Company’s management. This stock repurchase authorization expires on December 31, 2017.
During fiscal 2017, the Company repurchased approximately 10.5 million shares of common stock in open market purchases at an average price of $8.75 per share under the stock repurchase program authorized on February 1, 2016. (in millions, except average price per share amounts):
Years Ended
July 1, 2023July 2, 2022July 3, 2021
Total number of shares repurchased7.3 14.8 3.0 
Average price per share$11.49 $15.91 $14.21 
Total purchase price$83.9 $235.5 $42.6 
Remaining authorization at end of period$234.8 $67.3 $112.9 
The total purchase price of these repurchases under the stock repurchase program of $92.0 million was reflected as a decrease to common stock based on the stated par value per share with the remainder charged to accumulated deficit.
Fiscal 2016
In November 2015, the Company entered into a $40.0 million accelerated share repurchase agreement (the “ASR”) with a financial institution that was completed during the third quarter of fiscal 2016. Upon making the upfront payment of $40.0 million, the Company received an initial delivery of 5.3 million shares from the financial institution during the second quarter of fiscal 2016, which were retired and recorded as a $32.0 million reduction to stockholder’s equity on the Consolidated Balance Sheet. During the third quarter of fiscal 2016 the ASR was completed and an additional 1.3 million shares were delivered from the financial institution, based on the final settlement price of $6.05 per share, which were retired and recorded as an $8.0 million reduction to stockholder’s equity on the Consolidated Balance Sheet. The Company reflects the repurchase of common stock under the ASR in the period the shares are delivered for the purposes of calculating earnings per share.
On February 1, 2016, the Company’s Board of Directors authorized a stock repurchase program under which the Company may purchase shares of its common stock worth up to an aggregate purchase price of $100.0 million through open market or private transactions between February 1, 2016 and February 1, 2017. During the fourth quarter of fiscal 2016, the Company repurchased approximately 0.7 million shares of common stock in open market purchases at an average price of $6.60 per share under the stock repurchase program authorized on February 1, 2016. The total purchase price of these repurchases under the stock repurchase program of $4.5 million was reflected as a decrease to common stock based on the stated par value per share with the remainder charged to accumulated deficit.
Fiscal 2015
During the first quarter of fiscal 2015, the Company repurchased approximately 0.4 million shares of common stock in open market purchases at an average price of $11.93 per share under the stock repurchase program authorized on May 21, 2014. The total purchase price of these repurchases under the stock repurchase program of $60.0 million was reflected as a decrease to common stock based on the stated par value per share with the remainder charged to accumulated deficit.
All common shares repurchased during fiscal 2017, 20162023, 2022 and 2015 under this program2021 have been canceled and retired.
On August 16, 2022, the Inflation Reduction Act of 2022 (IRA) was enacted into law. The Company evaluated the provisions of the new legislation, which included an excise tax on share repurchases. The IRA was effective as of January 1, 2023 and repurchase activity after that date resulted in an accrual of $0.3 million recorded in Other current liabilities on the Consolidated Balance Sheets.
Preferred Stock
The Company’s Board of Directors has authority to issue up to 1,000,000 shares of undesignated preferred stock and to determine the powers, preferences and rights and the qualifications, limitations or restrictions granted to or imposed upon any wholly unissued shares of undesignated preferred stock and to fix the number of shares constituting any series and the designation of such series, without the consent of the Company’s stockholders. The preferred stock could be issued with voting, liquidation, dividend and other rights superior to those of the holders of common stock. Subsequent issuance of any preferred stock by the Company’s Board of Directors, under some circumstances, could have the effect of delaying, deferring or preventing a change in control.
Note 14.16. Stock-Based Compensation
Stock-Based Benefit Plans
Stock Option Plans
The Company’s Amended and Restated 2003 Plan provides for the granting of stock options, stock appreciation rights (SARs), dividend equivalent rights, restricted stocks, restricted stock units, performance units and performance shares, the vesting of which may be time-based or upon satisfaction of performance criteria or other conditions.
As of July 1, 2017,2023, the Company had 8.88.7 million shares of stock options andsubject to (i) Full Value Awards (defined below) issued and outstanding to employees and directors under the Restated 2005 Acquisition Equity Incentive Plan (“the 2005 Plan”),Amended and Restated 2003 Equity Incentive Plan (“the 2003 Plan”), inducement grantsand (ii) stock options grant made in connection with the appointment of our new CEO appointment in fiscal 2016 and various other plans the Company assumed through acquisitions.2016. The exercise price for stock options is equal to the fair value of the underlying stock at the date of grant. The Company issues new shares of common stock upon exercise of stock options. Options generally become exercisable over a three- or four-year period and, if not exercised, expire from five to ten years after the date of grant.

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On November 14, 2012, the Company’s shareholders approved two amendments to the 2003 Plan. The first amendment increased the number of shares that may be issued under this plan by 10,000,000 shares. The second amendment extended the 2003 Plan’s terms for an additional ten year period after the date of approval of the amendment. On December 5, 2014, the Company’s shareholders approved another amendment to the 2003 Plan to increase the number of shares that may be issued under the plan by 9,000,000 shares. On August 1, 2015, following the Separation, the number of shares available for grant and all outstanding awards were automatically adjusted pursuant to the terms of the 2003 Plan and the 2005 Plan.
As of July 1, 2017, 15.42023, 7.5 million shares of common stock, primarily under theAmended and Restated 2003 Plan and the 2005 Plan, were available for grant.
Employee Stock Purchase Plans
In June 1998, the Company adopted the 1998 Employee Stock Purchase Plan, as amended (the “1998 Purchase Plan”). The 1998 Purchase Plan,ESPP, which became effective August 1, 1998 and provides eligible employees with the opportunity to acquire an ownership interest in the Company through periodic payroll deductions and provides a discounted purchase price as well as a look-back period. The 1998 Purchase PlanESPP is structured as a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986. However, the 1998 Purchase Plan is not intended to be a qualified pension, profit sharing or stock bonus plan under Section 401(a) of the Internal Revenue Code of 1986 and is not subject to the provisions of the Employee Retirement Income Security Act of 1974. The 1998 Purchase Plan will terminate upon the earlier of August 1, 2018 or the date on which all shares available for issuance have been sold. On August 1, 2015, following the Separation, the number of shares available for issuance was automatically adjusted pursuant to the terms of the 1998 Purchase Plan. As of July 1, 2017, 4.82023, 1.5 million shares remained available for issuance. The 1998 Purchase PlanESPP as amended provides for a 5%15% discount andwith a look-back period of six month look-back period.months.
95


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Full Value Awards
Full Value Awards refer toThe Company's stock-based compensation includes a combination of time-based RSUs (time-based, non-performance shares) and performance- based MSUs (market-based, performance shares) thatand PSUs. RSUs are granted with thewithout an exercise price equal to zero and are converted to shares immediately upon vesting. These Full Value Awards are performance-based with market conditions, time-based or a combination of both and expected to vest over one to four years. The fair value of the time-based Full Value Awards is based on the closing market price of the Company’s common stock on the date of award.
Stock-Based Compensation
The impact on the Company’s results of operations of recording stock-based compensation expense by function for fiscal 2017, 2016 and 2015 was as follows (in millions):
 Years Ended
 July 1, 2017 July 2, 2016 June 27, 2015
Cost of revenue$3.6
 $4.8
 $4.2
Research and development5.7
 8.4
 8.1
Selling, general and administrative23.9
 29.2
 35.2
Total stock-based compensation expense$33.2
 $42.4
 $47.5
Approximately $0.7 million of stock-based compensation expense was capitalized to inventory at July 1, 2017.
Impact on Stock-based Compensation Due to Separation
In connection with the separation of the Lumentum business on August 1, 2015 and in accordance with the Employee Matters Agreement, the Company made certain adjustments to the exercise price and number of shares underlying stock-based compensation awards with the intention of preserving the economic value of the awards for Viavi employees. These adjustments resulted in a modification of equity awards with total incremental stock-based compensation of $13.6 million, to be amortized over the remaining service periods of the underlying awards.

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unless otherwise noted, share amounts and grant-date fair values for periods prior to the Separation Date represent the Company’s historical information and have not been adjusted to remove grants made to employees who transferred to Lumentum as part of the Separation. Refer to “Note 3. Discontinued Operations” for more information about the Separation.
Impact on Stock-based Compensation Due to Amendments in the Change of Control Benefits Plan
During the year ended June 27, 2015, the Company amended its Change of Control Benefits Plan (the “Plan”) to add a spin-off of certain Company assets to the circumstances that could trigger benefits under the Plan, as well as other revisions. The Chief Executive Officer of the Company and the Chairman of the Compensation Committee approved the separation of certain executives in the current fiscal year. Pursuant to the Plan, upon termination, all unvested equity awards that have been granted or issued to certain terminated executives become immediately vested and stock options shall become fully exercisable with an extended exercise period of two years from the termination date.
The amendments resulted in a modification of equity awards for six executives and total incremental stock-based compensation of $6.3 million, which was amortized over the period between the modification date and the termination dates of the executives.
Stock Option Activity
The following is a summary of stock option activities (amount in millions except per share amounts):
 Options Outstanding
 Number of Shares 
Weighted-Average
Exercise Price (1)
Balance as of June 28, 20143.5
 $10.13
Exercised(0.9) 7.58
Canceled(0.1) 14.54
Balance as of June 27, 20152.5
 10.84
Granted1.2
 5.95
Exercised(0.7) 4.74
Canceled(0.4) 10.52
Net adjustment due to the separation0.5
  
Balance as of July 2, 20163.1

5.91
Granted—
 —
Exercised(1.6) 5.66
Canceled—
 —
Balance as of July 1, 20171.5
 $6.16
    
Expected to vest1.4
 $6.18
(1) Weighted average exercise price is calculated using exercise prices prior to the Separation and after the Separation.
The total intrinsic value of options exercised during the year ended July 1, 2017 was $5.9 million. In connection with these exercises, the tax benefit realized by the Company was immaterial due to the fact that the Company has no material benefit in foreign jurisdictions and a full valuation allowance on its domestic deferred tax assets. As of July 1, 2017, $1.5 million of unrecognized stock-based compensation expense related to stock options remains to be amortized. That cost is expected to be recognized over an estimated amortization period of 2.6 years.

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes significant ranges of outstanding and exercisable options as of July 1, 2017, adjusted to reflect the impact of the Lumentum separation.
  Options Outstanding Options Exercisable
Range of Exercise Prices Number of Shares 
Weighted Average Remaining Contractual Term
(in years)
 Weighted Average Exercise Price 
Aggregate Intrinsic Value
(in millions)
 Number of Shares 
Weighted Average Remaining Contractual Term
(in years)
 Weighted Average Exercise Price 
Aggregate Intrinsic Value
(in millions)
$3.28 - $3.28 104,352
 0.12 $3.28
 
 104,352
 0.12 $3.28
 
$5.74 - $5.74 132,544
 0.92 5.74
 
 132,544
 0.92 5.74
 
$5.95 - $5.95 1,180,257
 6.62 5.95
 
 295,065
 6.62 5.95
 
$11.82 - $11.82 107,412
 1.87 11.82
 
 107,412
 1.87 11.82
 
  1,524,565
 5.35 $6.16
 $6.8
 639,373
 3.58 $6.46
 $2.7
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $10.53 as of July 1, 2017, which would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money options exercisable as of July 1, 2017 was 0.5 million.
Employee Stock Purchase Plan Activity
The expense related to the plan is recorded on a straight-line basis over the relevant subscription period.
The following summarizes the shares issued and the fair market value at purchase date, pursuant to the Company’s ESPP during the year ended July��1, 2017:
Purchase dateJuly 29, 2016
January 31, 2017
Shares issued410,737
269,102
Fair market value at purchase date$4.76
$6.77
As of July 1, 2017, there was $0.1 million of unrecognized stock-based compensation cost related to ESPP remains to be amortized. The cost will be recognized in the first quarter of fiscal 2018.

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Full Value Awards Activity
A summary of the status of the Company’s non-vested Full Value Awards as of July 1, 2017 and changes during the same period is presented below (amount in millions, except per share amounts):
 Full Value Awards
 Performance Shares (1) Non-Performance Shares Total Number of Shares Weighted-average grant-dated fair value
Non-vested at June 28, 20141.1

8.3

9.4
 $13.19
Awards granted0.7
 5.3
 6.0
 11.78
Awards vested(0.8) (4.4) (5.2) 12.96
Awards forfeited—
 (1.4) (1.4) 13.10
Non-vested at June 27, 20151.0

7.8

8.8
 12.36
Awards granted0.7
 6.1
 6.8
 5.75
Awards vested(0.7) (4.8) (5.5) 6.01
Awards forfeited(0.4) (1.8) (2.2) 7.89
Net adjustment due to the separation0.4
 1.1
 1.5
  
Non-vested at July 2, 20161.0
 8.4
 9.4
 6.55
Awards granted0.6
 3.7
 4.3
 7.86
Awards vested(0.6) (4.5) (5.1) 6.66
Awards forfeited—
 (1.3) (1.3) 6.83
Non-vested at July 1, 20171.0
 6.3
 7.3
 $7.17
(1)Performance Shares refer to the Company’s MSU awards, where the actual number of shares awarded upon vesting may be higher or lower than the target amount depending on the achievement of the relevant market conditions. The majority of MSUs vest in equal annual installments over three to four years based on the attainment of certain total shareholder return performance measures and the employee’s continued service through the vest date. The aggregate grant-date fair value of MSUs granted during fiscal 2017, 2016 and 2015 were estimated to be $3.3 million, $3.7 million and $9.4 million respectively, and were calculated using a Monte Carlo simulation.
As of July 1, 2017, $31.4 million of unrecognized stock-based compensation cost related to Full Value Awards remains to be amortized. That cost is expected to be recognized over an estimated amortization period of 1.75 years.
Full Value Awards areWhen converted into shares upon vesting. Sharesvesting, shares equivalent in value to the minimum withholding taxes liability on the vested shares are withheld by the Company for the payment of such taxes. For performance-based awards, shares attained over target upon vesting are reflected as awards granted during the period.
Time-based RSU awards will generally vest in annual installments over a period of three to four years subject to the employees’ continuing service to the Company. The Company's performance-based MSU and PSU awards may include performance conditions, market conditions, time-based service conditions or a combination thereof and are generally expected to vest over one to four years. In addition, the actual number of shares awarded upon vesting of performance-based grants may vary from the target shares depending upon the achievement of the relevant performance or market-based conditions.
Stock-Based Compensation
The impact on the Company’s results of operations of recording stock-based compensation expense by function for fiscal 2023, 2022 and 2021 was as follows (in millions):
Years Ended
July 1, 2023July 2, 2022July 3, 2021
Cost of revenue$4.8 $5.2 $4.8 
Research and development8.6 8.6 8.9 
Selling, general and administrative37.8 38.5 34.6 
Total stock-based compensation expense$51.2 $52.3 $48.3 
Approximately $1.2 million of stock-based compensation expense was capitalized to inventory at July 1, 2023 and July 2, 2022.
Stock Option Activity
There has been no activity for stock-based compensation expense related to stock options during the fiscal years ended July 1, 2023, July 2, 2022, and July 3, 2021. The following table summarizes outstanding and exercisable options as of July 1, 2023 all of which have been fully amortized and recognized since before June 29, 2019.
Options OutstandingOptions Exercisable
Exercise PriceNumber of SharesWeighted Average Remaining Contractual Term
(years)		Weighted Average Exercise PriceAggregate Intrinsic Value
(millions)		Number of SharesWeighted Average Remaining Contractual Term
(years)		Weighted Average Exercise PriceAggregate Intrinsic Value
(millions)
$5.951,180,257 0.62$5.95 $6.3 1,180,257 0.62$5.95 $6.3 
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $11.33 as of July 1, 2023, which would have been received had the options been exercised as of that date. The total number of in-the-money options exercisable as of July 1, 2023 was 1.2 million.
Employee Stock Purchase Plan Activity
The expense related to the ESPP is recorded on a straight-line basis over the relevant subscription period. During fiscal 2017, 2016 and 2015,2023, the Company paid $14.3issued shares of 435,195 and 292,910 on January 31, 2023 and July 31, 2022, respectively, as part of the ESPP. As of July 1, 2023, there was $0.2 million of unrecognized stock-based compensation cost related to the ESPP that remains to be amortized. The cost will be recognized in the first quarter of fiscal 2024.
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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Full Value Awards Activity
A summary of the status of the Company’s non-vested Full Value Awards as of July 1, 2023 and changes during the same period is presented below (amount in millions, except per share amounts):
Full Value Awards
Performance Shares(1)
Non-Performance SharesTotal Number of SharesWeighted-average Grant-dated Fair Value
Non-vested June 27, 20201.0 5.1 6.1 $12.97 
Awards granted1.3 3.3 4.6 $14.15 
Awards vested(0.6)(3.1)(3.7)$12.58 
Awards forfeited(0.2)(0.5)(0.7)$13.83 
Non-vested July 3, 20211.5 4.8 6.3 $13.98 
Awards granted0.4 2.4 2.8 $16.95 
Awards vested(0.4)(2.2)(2.6)$13.38 
Awards forfeited(0.1)(0.2)(0.3)$14.64 
Non-vested July 2, 20221.4 4.8 6.2 $15.55 
Awards granted0.9 3.1 4.0 $14.35 
Awards vested(0.6)(1.8)(2.4)$15.23 
Awards forfeited— (0.3)(0.3)$14.78 
Non-vested July 1, 20231.7 5.8 7.5 $15.06 
(1) Performance Shares refer to the Company’s MSU and PSU awards, where the actual number of shares awarded upon vesting may be higher or lower than the target amount depending on the achievement of the relevant market conditions and performance goal achievement. The majority of MSUs vest in equal annual installments over three to four years based on the attainment of certain total shareholder performance measures and the employee’s continued service through the vest date. The aggregate grant-date fair value of MSUs granted during fiscal 2023, 2022 and 2021 was estimated to be $11.4 million, $7.9 million and $22.1$15.6 million, respectively, and classifiedwas calculated using a Monte Carlo simulation. The fair value of PSU awards granted in fiscal 2021 was $2.0 million. The Company did not grant any PSU awards in fiscal 2023 and 2022. PSU awards vest based on the payments as operating cash outflows inattainment of certain performance measures and the Consolidated Statementsemployee’s continued service through the vest date.
As of Cash Flows.July 1, 2023, $60.1 million of unrecognized stock-based compensation cost related to Full Value Awards remains to be amortized. That cost is expected to be recognized over the remaining amortization period of 1.6 years.
Valuation Assumptions
The Company estimates the fair value of time-based RSU awards based on the MSUsclosing market price of the Company’s common stock on the date of grantgrant. In the case of PSUs that are performance-based awards without a market condition, the Company will estimate the fair value of the awards using a probability weighted model. In the case of MSUs or PSUs, that are performance-based awards and include a market condition, the Company will estimate the fair value of the awards using a combination of the closing market price of the Company’s common stock on the grant date and the Monte Carlo simulation model. The weighted-average assumptions used to measure fair value of performance-based awards with the following assumptions:a market condition were as follows:
Years Ended
July 1, 2023July 2, 2022July 3, 2021
Volatility of common stock31.2 %33.8 %38.5 %
Average volatility of peer companies62.1 %58.7 %65.7 %
Average correlation coefficient of peer companies0.3111 0.3442 0.3653 
Risk-free interest rate3.4 %0.2 %0.3 %
97

 Years Ended
 July 1, 2017 July 2, 2016 June 27, 2015
Volatility of common stock33.2% 33.8% 40.8%
Average volatility of peer companies36.9% 52.9% 53.4%
Average correlation coefficient of peer companies0.1856
 0.1103
 0.2156
Risk-free interest rate0.7% 0.8% 0.6%


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company did not issue stock option grants during the fiscal years ended July 1, 2023, July 2, 2022 and July 3, 2021. The Company estimates the fair value of Stock Options and ESPP purchase rights using a BSM valuation model. The fair value is estimated on the date of grant using the BSM option valuation model with the following weighted-average assumptions:
Employee Stock Purchase Plans
July 1, 2023July 2, 2022July 3, 2021
Expected term (in years)0.50.50.5
Expected volatility37.2 %24.3 %44.9 %
Risk-free interest rate3.8 %0.3 %0.1 %
 Stock Options Employee Stock Purchase Plans
 July 2, 2016 July 1, 2017 July 2, 2016 June 27, 2015
Expected term (in years)5.2
 0.5
 0.5
 0.5
Expected volatility42.3% 33.4% 45.7% 37.9%
Risk-free interest rate1.2% 0.5% 0.4% 0.1%
Expected Term: The Company's expected term for stock options was calculated utilizing the simplified method in accordance with the authoritative guidance. The Company used the simplified method as the Company does not have sufficient historical share option exercise data due to the limited number of shares granted as well as changes in the Company's business following the Separation,separation from Lumentum, rendering existing historical experience less reliable in formulating expectations for current grants. The Company’s expected term for ESPPpurchase right period is in line withsix months under the six month look-back period of its ESPP.
Expected Volatility: The Company has limited trading history following the Separation; therefore, the expected volatility for stock options was based on the historical volatility of the Company's common stock and its peers. For grants prior to the Separation andThe expected volatility for ESPP grants,purchase rights was based on the Company determined that a combination of the implied volatility of its traded options and historical volatility of its stock price based on the expected term of the equity instrument most appropriately reflects market expectation of future volatility. Implied volatility is based on traded options of the Company’s common stock with a remaining maturity of four and a half months or greater.similar expected term.
Risk-Free Interest Rate: The Company bases the risk-free interest rate used in the BSM valuation method on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term.
Expected Dividend: The BSM valuation model calls for a single expected dividend yield as an input. The Company has not paid and does not anticipate paying any dividends in the near future.
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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 15.17. Employee Pension and Other Benefit Plans
Employee 401(k) Plans
The Company sponsors the Viavi Solutions 401(k) Plan (the “401(k) Plan”)401(k) Plan), a Defined Contribution Plandefined contribution plan under ERISA, which provides retirement benefits for its eligible employees through tax deferred salary deductions. The 401(k) Plan allows employees to contribute up to 50% of their annual compensation, with contributions limited to $18,000$22,500 in calendar year 20172023 as set by the Internal Revenue Service.
For all eligible participants who have completed 180 days of service with Viavi,employees, the Company offers a 401(k) Plan provided forthat provides a 100% match of employees’ contributions up to the first 3% of annual compensation and 50% match on the next 2% of compensation. All matching contributions are made in cash and vest immediately. The Company’s matching contributions to the 401(k) Plan were $4.1$5.4 million, $4.7$5.1 million and $4.8$4.7 million in fiscal 2017, 20162023, 2022 and 2015,2021, respectively.
Deferred Compensation Plan
The Company also provides for the benefit of certain eligible employees in the U.S. a non-qualified retirement plan. This plan is designed to permit employee deferral of a portion of salaries in excess of certain tax limits and deferral of bonuses. This plan’s assets are designated as trading securities on the Company’s Consolidated Balance Sheets. Refer to “Note 7. Investments, Forward Contracts and Fair Value Measurements” for more information. Effective January 1, 2011, the Company suspended all employee contributions into the plan.
Employee Defined Benefit Plans
The Company is responsible for a non-pension post-retirement benefit obligation assumed from a past acquisition, which is closed to new participants. As of July 1, 2023 and July 2, 2022, the liability balances related to the non-pension post-retirement benefit plan were $0.4 million. The liability balances were included in Other non-current liabilities on the Consolidated Balance Sheets.
The Company sponsors significant qualified and non-qualified pension plans for certain past and present employees in the U.K. and Germany. The Company also is responsible forGermany including the non-pension post-retirement benefit obligationplan assumed fromin a pastprior acquisition. In connection with the Separation, the Company transferred the liabilities and assets of the Switzerland defined benefit pension plans to Lumentum in the amount of $6.7 million and $4.6 million, respectively.

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Most of thethese pension 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. Benefits are generally based upon years of service and compensation or stated amounts for each year of service. As of July 1, 2017,2023, the U.K. plan was partiallyfully funded while the other plans were unfunded. The Company’s policy for funded plans is to make contributions equal to or greater than the requirements prescribed by law or regulation. For unfunded plans, the Company pays the post-retirement benefits when due. Future estimated benefit payments are summarized under the Future Benefit Payments’ section below. No other required contributions are expected in fiscal 2018,2024, but the Company, at its discretion, can make contributions to one or more of the defined benefit plans.
The Company accounts for its obligations under these pension plans in accordance with the authoritative guidance which requires the Company to record its obligation to the participants, as well as the corresponding net periodic cost. The Company determines its obligation to the participants and its net periodic cost principally using actuarial valuations provided by third-party actuaries. The obligation the Company records on its Consolidated Balance Sheets is reflective of the total PBO and the fair value of plan assets.
The following table presents the components of the net periodic benefit cost for the pension and benefits plans (in millions):
 Years Ended
July 1, 2023July 2, 2022July 3, 2021
Service cost$— $0.2 $0.2 
Interest cost2.7 1.6 1.5 
Expected return on plan assets(1.7)(1.7)(1.7)
Recognized net actuarial (gains) losses(0.1)2.9 3.1 
Net periodic benefit cost$0.9 $3.0 $3.1 
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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Years Ended
Pension Benefits2017 2016 2015
Service cost$0.3
 $0.2
 $0.2
Interest cost2.1
 3.0
 3.7
Expected return on plan assets(1.1) (1.5) (1.6)
Recognized net actuarial losses1.9
 0.7
 0.4
Provision for legal proceeding—
 8.4
 —
Net periodic cost$3.2
 $10.8
 $2.7
The Company’s accumulated other comprehensive (loss) income includes unrealized net actuarial (gains)/losses. The amount of unrealized net actuarial (gain)/loss expected to be recognized in net periodic benefit cost during fiscal 20182024 is $1.4$0.1 million. Refer to “Note 16. Commitments and Contingencies” for further information on the provision for legal proceeding.

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The changes in the benefit obligations and plan assets of the pension and benefits plans were (in millions):
Pension Benefit Plans
July 1, 2023July 2, 2022
Change in benefit obligation
Benefit obligation at beginning of year$95.5 $140.5 
Service cost— 0.2 
Interest cost2.7 1.6 
Actuarial gains(4.2)(25.7)
Benefits paid(5.6)(6.3)
Foreign exchange impact(2.3)(14.8)
Benefit obligation at end of year$86.1 $95.5 
Change in plan assets
Fair value of plan assets at beginning of year$29.3 $36.2 
Actual return on plan assets0.2 (3.0)
Employer contributions5.6 6.7 
Benefits paid(5.6)(6.3)
Foreign exchange impact1.6 (4.3)
Fair value of plan assets at end of year31.1 29.3 
Funded status(55.0)(66.2)
Accumulated benefit obligation$86.1 $95.5 
 Pension Benefit Plans
 2017 2016
Change in benefit obligation   
Benefit obligation at beginning of year$134.6
 $121.2
Service cost0.3
 0.2
Interest cost2.1
 3.0
Actuarial (gains) losses(1.2) 14.5
Benefits paid(4.2) (4.7)
Provision for legal proceeding—
 8.4
Foreign exchange impact1.8
 (8.0)
Benefit obligation at end of year$133.4
 $134.6
Change in plan assets   
Fair value of plan assets at beginning of year$27.2
 $30.2
Actual return on plan assets2.0
 1.8
Employer contributions4.0
 4.6
Benefits paid(4.2) (4.7)
Foreign exchange impact(0.7) (4.7)
Fair value of plan assets at end of year$28.3
 $27.2
Funded status$(105.1) $(107.4)
Accumulated benefit obligation$133.0
 $133.9
 Pension Benefit Plans
 2017 2016
Amount recognized in the Consolidated Balance Sheets at end of year:   
Current liabilities$6.8
 $5.5
Non-current liabilities98.3
 101.9
Net amount recognized at end of year$105.1

$107.4
Amount recognized in accumulated other comprehensive income (loss) at end of year:   
Actuarial losses, net of tax$(21.8) $(24.4)
Net amount recognized at end of year$(21.8)
$(24.4)
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):   
Net actuarial gain (loss)$0.7
 $(10.6)
Amortization of accumulated net actuarial losses1.9
 0.7
Total recognized in other comprehensive income (loss)$2.6

$(9.9)
As of July 1, 2017 and July 2, 2016, the liability balances related to the post retirement benefit plan were $1.1 million and $1.1 million respectively. The liability balances were included in other non-current liabilities on the Consolidated Balance Sheets.
Pension Benefit Plans
July 1, 2023July 2, 2022
Amount recognized on the Consolidated Balance Sheets at end of year:
Non-current assets$5.6 $— 
Current liabilities7.8 7.0 
Non-current liabilities52.8 59.2 
Other changes in plan assets and benefit obligations recognized in other comprehensive (loss) income:
Net actuarial gain$2.0 $13.9 
Amortization of accumulated net actuarial (gains) losses(0.1)2.9 
Total recognized in other comprehensive income (loss)$1.9 $16.8 
During fiscal 2017,2023, the Company (amounts represented as £ and $ denote GBP and USD, respectively) contributed GBP 0.5£1.0 million or approximately USD 0.6$1.2 million, while in fiscal 2016,2022, the Company contributed GBP 0.5£1.0 million or approximately USD 0.7$1.3 million to its U.K. pension plan. These contributions allowed the Company to comply with regulatory funding requirements.

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Assumptions
Underlying both the calculation of the PBO and net periodic cost are actuarial valuations. These valuations use participant-specific information such as salary, age, years of service, and assumptions about interest rates, compensation increases and other factors. At a minimum, the Company evaluates these assumptions annually and makes changes as necessary.
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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The discount rate reflects the estimated rate at which the pension benefits could be effectively settled. In developing the discount rate, the Company considered the yield available on an appropriate AA corporate bond index, adjusted to reflect the term of the scheme’s liabilities as well as a yield curve model developed by the Company’s actuaries.
The expected return on assets was estimated by using the weighted average of the real expected long termlong-term return (net of inflation) on the relevant classes of assets based on the target asset mix and adding the chosen inflation assumption.
The following table summarizes the weighted average assumptions used to determine net periodic cost and benefit obligation for the Company’s U.K. and German pension plans:
Pension Benefit Plans
Pension Benefit PlansJuly 1, 2023July 2, 2022July 3, 2021
2017 2016 2015
Weighted-average assumptions used to determine net period cost:     
Used to determine net period cost at end of year:Used to determine net period cost at end of year:
Discount rate2.1% 2.1% 3.0%Discount rate4.1 %3.2 %1.2 %
Expected long-term return on plan assets4.8
 5.3
 5.8
Expected long-term return on plan assets5.9 %6.2 %5.4 %
Rate of pension increase2.2
 2.3
 2.3
Rate of pension increase2.5 %2.2 %2.2 %
     
Weighted-average assumptions used to determine benefit obligation at end of year:     
Used to determine benefit obligation at end of year:Used to determine benefit obligation at end of year:
Discount rate2.0% 1.7% 2.6%Discount rate4.1 %3.2 %1.2 %
Rate of pension increase2.3
 2.1
 2.2
Rate of pension increase2.5 %2.2 %2.3 %
Investment Policies and Strategies
The Company’s investment objectives for its funded pension plan are to ensure that there are sufficient assets available to pay out members’ benefits as and when they arise and that, should the plan be discontinued at any point in time, there would be sufficient assets to meet the discontinuance liabilities.
To achieve thethese objectives, the trusteestrustee of the U.K. pension plan areis responsible for regularly monitoring the funding position and managing the risk by investing in assets expected to outperform the increase in value of the liabilities in the long term and by investing in a diversified portfolio of assets in order to minimize volatility in the funding position. The trustees investtrustee invests in a range of frequently traded funds (“pooled funds”)(pooled funds) rather than direct holdings in individual securities to maintain liquidity, achieve diversification and reduce the potential for risk concentration. The funded plan assets are managed by professional third-party investment managers.

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value Measurement of Plan Assets
The following table sets forth the U.K. plan assets at fair value and the percentage of assets allocations as of July 1, 20172023 (in millions, except percentage data):
Fair value as of
July 1, 2023
Target AllocationTotalPercentage of Plan AssetsLevel 1Level 2
Assets:
Global equity40 %$10.5 33.8 %$— $10.5 
Fixed income40 %10.0 32.1 %— 10.0 
Other20 %7.9 25.4 %— 7.9 
Cash2.7 8.7 %2.7 — 
Total assets$31.1 100.0 %$2.7 $28.4 
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       Fair value measurement as of
       July 1, 2017
 Target Allocation Total Percentage of Plan Assets 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
Assets:         
Global equity40% $11.7
 41.3% $—
 $11.7
Fixed income40% 10.7
 37.8% —
 10.7
Other20% 5.8
 20.5% —
 5.8
Cash  0.1
 0.4% 0.1
 —
Total assets  $28.3
 100.0% $0.1
 $28.2
The following table sets forth the plan’s assets at fair value and the percentage of assets allocations as of July 2, 20162022 (in millions, except percentage data).:
      Fair value measurement as ofFair value as of
      July 2, 2016July 2, 2022
Target Allocation Total Percentage of Plan Assets 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
Target AllocationTotalPercentage of Plan AssetsLevel 1Level 2
Assets:         Assets:
Global equity40% $10.5
 38.6% $—
 $10.5
Global equity40 %$10.3 35.2 %$— $10.3 
Fixed income40% 10.7
 39.3% —
 10.7
Fixed income40 %10.4 35.5 %— 10.4 
Other20% 5.4
 19.9% —
 5.4
Other20 %6.4 21.8 %— 6.4 
Cash  0.6
 2.2% 0.6
 —
Cash2.2 7.5 %2.2 — 
Total assets  $27.2
 100.0% $0.6
 $26.6
Total assets$29.3 100.0 %$2.2 $27.1 
The Company’s pension assets consist of multiple institutional funds (“pension funds”)(pension funds) of which the fair values are based on the quoted prices of the underlying funds. Pension funds are classified as Level 2 assets since such funds are not directly traded in active markets.
Global equity consists of several index funds that invest primarily in U.K. equities and other overseas equities.
Fixed income consists of several funds that invest primarily in index-linked Gilts (over 5 year), sterling-denominated investment grade corporate bonds, and overseas government bonds.
Other consists of several funds that primarily invest in global equities, bonds, private equity, global real estate and infrastructure funds.

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Future Benefit Payments
The following table reflects the total expected benefit payments to defined benefit pension plan participants. These payments have been estimated based on the same assumptions used to measure the Company’s PBO at fiscal year end and include benefits attributable to estimated future compensation increases.increases (in millions).
Pension Benefit Plans
2024$9.2 
20256.1 
20266.3 
20276.2 
20285.6 
2029-203325.4 
102

(in millions)Pension Benefit Plans
2018$7.5
20196.1
20205.5
20215.7
20226.1
2023 - 202729.7
Thereafter44.5
Total$105.1

Timing of the payment relating to the legal proceeding, which is included in the above table under “Thereafter,” is not yet determined. Refer to “Note 16. Commitments and Contingencies” for further information.
VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 16.18. Commitments and Contingencies
Operating LeasesRoyalty payments
The Company leases certain real and personal property from unrelated third parties under non-cancelable operating leases that expire at various dates through fiscal 2023. Certain leases require the Companyis obligated to pay property taxes, insurance and routine maintenance, and include escalation clauses. As of July 1, 2017,make future minimum annual leaseroyalty payments under non-cancelable operating leases were as follows (in millions):
2018$18.8
201916.7
202012.2
202110.1
20226.1
Thereafter0.5
Total minimum operating lease payments$64.4
Included in the future minimum lease payments table above is $3.7of $1.5 million related to lease commitments in connection with the Company’s restructuring and related activities. Refer to “Note 11. Restructuring and Related Charges” for more information.
The aggregate future minimum rentals to be received under non-cancelable subleases totaled $2.9 millionmeasured as of July 1, 2017. Rental expense relating2023 for the use of certain licensed technologies. Future minimum payments are expected to building and equipment was $12.1 million, $13.8 million and $14.3 million be paid through the third quarter of fiscal 2026, as follows (in fiscal 2017, 2016 and 2015, respectively.millions):
Royalty Payments
2024$0.8 
20250.4 
20260.3 
Total$1.5 
Purchase Obligations
Purchase obligations of $56.8$124.0 million as of July 1, 2017,2023, represent legally-binding commitments to purchase inventory and other commitments made in the normal course of business to meet operational requirements. Although open purchase orders are considered enforceable and legally binding, the terms generally allow the option to cancel, reschedule and adjust the requirements based on the Company’s business needs prior to the delivery of goods or performance of services. Obligations to purchase inventory and other commitments are generally expected to be fulfilled within one year.
The Company depends on a limited number of contract manufacturers, subcontractors, and suppliers for raw materials, packages and standard components. The Company generally purchases these single or limited source products through standard

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

purchase orders or one-year supply agreements and has no significant long-term guaranteed supply agreements with such vendors. While the Company seeks to maintain a sufficient safety stock of such products and maintains on-going communications with its suppliers to guard against interruptions or cessation of supply, the Company’s business and results of operations could be adversely affected by a stoppage or delay of supply, substitution of more expensive or less reliable products, receipt of defective parts or contaminated materials, increases in the price of such supplies, or the Company’s inability to obtain reduced pricing from its suppliers in response to competitive pressures.
Financing Obligations - Eningen and Santa Rosa
Eningen
On December 16, 2011, the Company executed and closed the sale and leaseback transaction of certain buildings and land in Eningen, Germany (the “Eningen Transactions”). The Company sold approximately 394,217 square feet of land, nine buildings with approximately 386,132 rentable square feet, and parking areas. The Company leased back approximately 158,154 rentable square feet comprised of two buildings and a portion of a basement of another building (the “Leased Premises”). The lease term is 10 years with the right to cancel a certain portion of the lease after 5 years.
Concurrent with the sale and lease back, the Company has provided collateral in case of a default by the Company relative to future lease payments for the Leased Premises. Due to this continuing involvement, the related portion of the cash proceeds and transaction costs, associated with the Leased Premises and other buildings which the Company continues to occupy, was recorded under the financing method in accordance with the authoritative guidance on leases and sales of real estate. Accordingly, the carrying value of these buildings and associated land will remain on the Company’s books and the buildings will continue to be depreciated over their remaining useful lives. The portion of the proceeds received have been recorded as a financing obligation, a portion of the lease payments are recorded as a decrease to the financing obligation and a portion is recognized as interest expense. Imputed rental income from the buildings sold but not leased back and currently being occupied is recorded as a reduction in the financing obligation.
As of July 1, 2017, of the total financing obligation related to the Eningen Transactions, $0.1 million was included in Other current liabilities, and $3.9 million was included in Other non-current liabilities. As of July 2, 2016, of the total financing obligation related to the Eningen Transactions, $0.1 million was included in Other current liabilities, and $4.0 million was included in Other non-current liabilities.
Santa Rosa
On August 21, 2007, the Company entered into a sale and lease backlease-back of certain buildings and land in Santa Rosa, California (the “SantaSanta Rosa Transactions”). The Company sold approximately 45 acres of land, 13 buildings with approximately 492,000 rentable square feet, a building pad, and parking areas. The CompanyTransactions), under which we leased back 7 buildings with approximately 286,000 rentable square feet.certain buildings. The net cash proceeds received from the transaction were $32.2 million. The lease terms range from a one-year lease with multiple renewal options to a ten-year lease with two five-year renewal options.
The Company has an ongoing obligation to remediate environmental matters, impacting the entire site, as required by the North Coast Regional Water Quality Control Board which existed at the time of sale. Concurrent with the These buildings did not qualify for sale and lease back the Company has issued an irrevocable letter of credit for $3.8 million as security for the remediation of the environmental matter that remains in effect until the issuance of a notice of no further action letter from the North Coast Regional Water Quality Control Board. In addition, the lease agreement for one building included an optionaccounting due to purchase at fair market value, at the end of the lease term. Due to these various forms of continuing involvement and, as a result, they were accounted for as financing transactions.
In August 2012 and May 2019, the transaction was recorded underCompany entered into two lease amendments to extend the financing methodterm of the lease to August 31, 2032 with a ten-year renewal option. In the first quarter of fiscal 2020, the Company reassessed whether a sale would have occurred on the date of adoption of ASC 842 and, at which time, concluded that the buildings did not qualify for sale and lease back accounting in accordance with the authoritative guidance on leases and sales of real estate.ASC 842. As a result, they were continuously accounted for as financing transactions.
Accordingly, the value of the buildings and land will remain on the Company’s books and the buildings will continue to be depreciated over their remaining useful lives. The proceeds received have been recorded as a financing obligation, a portion of the lease payments are recorded as a decrease to the financing obligation and a portion is recognized as interest expense. Imputed rental income from the buildings sold but not leased back is recorded as a reduction in the financing obligation.
As of July 1, 2017, $0.82023, $0.2 million was included in Other current liabilities, and $23.9$15.8 million was included in Other non-current liabilities.liabilities. As of July 2, 2016, $0.82022, $0.1 million was included in Other current liabilities, and $24.7$16.0 million was included in Other non-current liabilities.liabilities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

TheAs of July 1, 2023, future minimum annual lease payments due under the agreement reset to fair market rental rates upon the Company’s execution of the renewal options.Santa Rosa’s non-cancelable leaseback agreements were as follows (in millions):
2024$3.0 
20253.1 
20263.1 
20273.2 
20282.7 
Thereafter10.9 
Total minimum leaseback payments$26.0 
Guarantees
In accordance with authoritativeAuthoritative guidance which requires that upon issuance of a guarantee the guarantor must recognize a liability for the fair value of the obligation that it assumes under thatthe guarantee. In addition, disclosures about the guarantees that an entity has issued, including a tabular reconciliation of the changes of the entity’s product warranty liabilities, are required.
The Company from time to time enters into certain types of contracts that contingently require the Company to indemnify parties against third-party claims. These contracts primarily relate to: (i) divestiture agreements, under which the Company may provide customary indemnifications to purchasers of the Company’s businesses or assets; (ii) certain real estate leases, under which the Company may be required to indemnify property owners for environmental and other liabilities, and other claims arising from the Company’s use of the applicable premises; and (iii) certain agreements with the Company’s officers, directors and employees, under which the Company may be required to indemnify such persons for liabilities arising out of their employment relationship.
The terms of such obligations vary. Generally, a maximum obligation is not explicitly stated. Because the obligated amounts of these types of agreements often are not explicitly stated, the overall maximum amount of the obligations cannot be reasonably estimated. Historically, the Company has not been obligated to make significant payments for these obligations, and no liabilities have been recorded for these obligations on the Consolidated Balance Sheets as of July 1, 20172023 and July 2, 2016.2022.
Outstanding Standby Letters of Credit and Performance Bonds
As of July 1, 2017,2023, the Company had standby letters of credit of $15.3$8.4 million, and performance bondsother claims of $2.7$0.7 million collateralized by restricted cash.
Product Warranties
In general, the Company offers a three-year warranty for most of its products. The Company provides reserves for the estimated costs of product warranties at the time revenue is recognized. Prior to January 1, 2023 the Company offered its customers warranties up to three years for most of its products. On January 1, 2023, the Company changed the standard warranty for most of its products to one year. The Company estimates the costs of its warranty obligations based on its historical experience of known product failure rates, use of materials to repair or replace defective products and service delivery costs incurred in correcting product failures. In addition, from time to time, specific warranty accruals may be made if unforeseen technical problems arise with specific products.arise. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.
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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table presents the changes in the Company’s warranty reserve during fiscal years 20172023 and 20162022 (in millions):
Year Ended Year Ended
July 1, 2017 July 2, 2016 July 1, 2023July 2, 2022
Balance as of beginning of period$4.9
 $3.7
Balance as of beginning of period$10.6 $9.7 
Provision for warranty4.2
 3.9
Provision for warranty1.6 5.2 
Utilization of reserve(3.8) (3.3)Utilization of reserve(1.2)(2.4)
Adjustments related to pre-existing warranties (including changes in estimates)0.5
 0.6
Adjustments related to pre-existing warranties (including changes in estimates)(2.0)(1.9)
Balance as of end of period$5.8

$4.9
Balance as of end of period$9.0 $10.6 
Legal Proceedings
In June 2016, the Company received a court decision regarding the validity of an amendment to a pension deed of trust related to one of its foreign subsidiaries which the Company contends contained an error requiring the Company to increase the pension plan’s benefit. The Company had subsequently further amended the deed to rectify the error. The court ruled that the amendment increasing the pension plan benefit was valid until the subsequent amendment. PriorThe Company estimated the liability to this decision, therange from (amounts represented as £ denote GBP) £5.7 million to £8.4 million. The Company in consultation with outside legal counsel, believed that the pension deed of trust document was invalid or, alternatively, that the subsequent rectification should be applied retroactively. Under both scenarios, the Company believed thatdetermined the likelihood of loss to be probable and accrued £5.7 million as of July 2, 2016 in accordance with authoritative guidance on contingencies.
The Company pursued an increase in plan benefits was remote. While the Company is pursuing other legal arguments in this matter, such as appealingappeal of the court decision. In March 2018, the appellate court affirmed the decision of the lower court. The Company pursued a motion for summary judgement on the deed of rectification claim and pursuingcontinues to pursue a claim against the U.K. law firm responsible for the error, the Company determined that the likelihood of loss to be probable aserror. As of July 2, 20162022, the related accrued pension liability of £5.4 million or $6.5 million was included in pension and July 1, 2017post-employment benefits within Other non-current liabilities on the Consolidated Balance Sheets.
In September 2022, the Company received a favorable court decision which removed completely and estimateddefinitively the increase in liabilityobligation to range from GBP 5.7 million

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(USD 7.4 million)fund the increased pension benefit with retrospective effect to GBP 8.4 million (USD 10.9 million). The Company accrued GBP 5.7 million (USD 7.4 million),1999. As a result of the judgment, and in accordance with authoritative guidance on contingencies. The accrual is included ascontingencies, the Company reversed the liability and recorded a component of selling, general and administrativegain (reduction to SG&A expense and included in pension and post-employment benefits, which is a component of other non-current liabilities, in the Company’s Consolidated StatementStatements of Operations and Consolidated Balance Sheets, respectively.Operations) of £5.7 million or $6.7 million during fiscal 2023.
The Company is subject to a variety of claims and suits that arise from time to time in the ordinary course of ourits business. While management currently believes that resolving claims against the Company, individually or in aggregate, will not have a material adverse impact on its financial position, results of operations or statement of cash flows, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. Were an unfavorable final outcome to occur, there exists the possibility of a material adverse impact on the Company’s financial position, results of operations or cash flows for the period in which the effect becomes reasonably estimable.

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VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 17.19. Operating Segments and Geographic Information
The Company evaluates its reportable segments in accordance with the authoritative guidance on segment reporting. The Company’s Chief Executive Officer, isas the Company’s Chief Operating Decision Maker (“CODM”) pursuant(CODM), uses operating segment financial information to the guidance. The CODM allocates resourcesevaluate segment performance and to the segments based on their business prospects, competitive factors, net revenue and operating results.allocate resources.
The Company’s reportable segments are:
(i) Network Enablement (“NE”):Enablement:
NE provides an integrated portfolio of testing solutions that access the network to perform build-out and maintenance tasks. These solutions include instruments, software and services to design, build, activate,turn-up, certify, troubleshoot and optimize networks. The companyCompany also offers a range of product support and professional services such as repair, calibration, software support and technical assistance for ourits products. NE’s avionics products provide test and measuring solutions for aviation, aerospace, government, defense, communications and public safety.
(ii) Service Enablement (“SE”):Enablement:
SE solutions areprovides embedded systems and enterprise performance management solutions that yieldgive global CSPs, enterprises and cloud operators visibility into network, service and application performance data. These solutions—including instruments, microprobes and software—monitor, collect and analyze network data to reveal the actual customer experience and to identify opportunities for new revenue streams and network optimization.
(iii) Optical Security and Performance Products (“OSP”):Products:
OSP provides innovative, precision, high performanceleverages its core optical productscoating technologies and volume manufacturing capability to design, manufacture, and sell technologies for the anti-counterfeiting, consumer electronics, industrial, government industrial,and automotive and consumer electronic markets, including 3D sensing applications.markets.
Changes to Segment Reporting
Following the Separation in the first quarter of fiscal 2016, the Company made changes to its segment measures to reflect how the CODM manages the business post-separation as described below.
The CODM manages the Company in two broad business categories: NetworkNSE and Service Enablement ("NSE") and OSP. NSE operates in two segments, NE and SE, whereas OSP operates as a single segment. The CODM evaluates segment performance of the NSE business based on NE and SEthe combined segment gross margin and NSE operating margin as a whole.margins. Operating expenses associated with the NSE business are not allocated to the NE and SEindividual segments within NSE, as they are managed centrally at the business unit level. The CODM evaluates segment performance of the OSP business based on OSP segment operating margin. In addition, prior to the first quarter of fiscal 2016, theThe Company did not allocate certain corporate-level operating expenses associated with its shared-service function to its segment results. Beginning in the first quarter of fiscal 2016, the Company has allocated theseallocates corporate-level operating expenses to its segment results, with the exception ofexcept for certain non-core operating and non-operating activities as discussed below.
The Company does not allocate stock-based compensation, acquisition-related charges, amortization of intangibles, restructuring and related charges, impairment of goodwill, non-operating income and expenses, changes in fair value of contingent consideration liabilities, or other charges unrelated to core operating performance to its segments because Managementmanagement does not include this information in its measurement of the performance of the operating segments. These items are presented as “Reconciling“Other Items” in the table below. Additionally, the Company does not specifically identify and allocate all assets by operating segment.
As a result of the Separation, the Company excluded the results of the Lumentum business which historically consisted of the CCOP segment and the WaveReady product line within the NE segment for all periods presented. Refer to “Note 3. Discontinued Operations” for more information on the Separation. Additionally, the Company’s Video Assurance product line was moved out of its NE segment and into its SE segment during the first quarter of fiscal 2016.
106
The segment information for all periods presented has been revised to be comparable with the changes implemented in the first quarter of fiscal 2016 in the Company’s segment reporting measures.


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Information on the Company’s reportable segments is as follows (in millions):
Year Ended July 1, 2023
Network and Service Enablement
 Network EnablementService EnablementNetwork and
Service
Enablement		Optical Security and Performance ProductsOther ItemsConsolidated GAAP Measures
Product revenue$583.9 $47.4 $631.3 $304.8 $— $936.1 
Service revenue113.6 56.3 169.9 0.1 — 170.0 
Net revenue$697.5 $103.7 $801.2 $304.9 $— $1,106.1 
Gross profit440.1 70.1 510.2 158.6 (30.0)638.8 
Gross margin63.1 %67.6 %63.7 %52.0 %57.8 %
Operating income61.2 111.3 (90.1)82.4 
Operating margin7.6 %36.5 %7.4 %
Year Ended July 2, 2022
Network and Service Enablement
Network EnablementService EnablementNetwork and
Service
Enablement		Optical Security and Performance ProductsOther ItemsConsolidated GAAP Measures
Product revenue$739.7 $53.0 $792.7 $342.8 $— $1,135.5 
Service revenue106.1 50.3 156.4 0.5 — 156.9 
Net revenue$845.8 $103.3 $949.1 $343.3 $— $1,292.4 
Gross profit543.6 71.5 615.1 193.6 (35.2)773.5 
Gross margin64.3 %69.2 %64.8 %56.4 %59.8 %
Operating income147.8 139.0 (101.8)185.0 
Operating margin15.6 %40.5 %14.3 %
Year Ended July 3, 2021
Network and Service Enablement
 Network EnablementService EnablementNetwork and
Service
Enablement		Optical Security and Performance ProductsOther ItemsConsolidated GAAP Measures
Product revenue$650.5 $40.6 $691.1 $360.3 $— $1,051.4 
Service revenue96.1 50.7 146.8 0.7 — 147.5 
Net revenue$746.6 $91.3 $837.9 $361.0 $— $1,198.9 
Gross profit474.2 59.9 534.1 218.1 (37.8)714.4 
Gross margin63.5 %65.6 %63.7 %60.4 %59.6 %
Operating income92.2 161.3 (111.3)142.2 
Operating margin11.0 %44.7 %11.9 %
107

 Year Ended July 1, 2017
 Network and Service Enablement          
 Network Enablement Service Enablement 
Network and
Service
Enablement
 Optical Security and Performance Products Total Segment Measures Reconciling Items Consolidated GAAP Measures
Net revenue$444.0
 $135.2
 $579.2
 $232.2
 $811.4
 $—
 $811.4
              
Gross profit286.3
 86.2
 372.5
 133.8
 506.3
 (20.3) 486.0
Gross margin64.5% 63.8% 64.3% 57.6% 62.4%   59.9 %
              
Operating income    7.3
 100.3
 107.6
 (94.0) 13.6
Operating margin    1.3% 43.2% 13.3%   1.7 %
              
              
 Year Ended July 2, 2016
 Network and Service Enablement          
 Network Enablement Service Enablement Network and
Service
Enablement		 Optical Security and Performance Products Total Segment Measures Reconciling Items Consolidated GAAP Measures
Net revenue$504.6
 $153.6
 $658.2
 $248.1
 $906.3
 $—
 $906.3
              
Gross profit329.7
 99.4
 429.1
 143.1
 572.2
 (22.5) 549.7
Gross margin65.3% 64.7% 65.2% 57.7% 63.1%   60.7 %
              
Operating income (loss)    12.7
 102.9
 115.6
 (199.9) (84.3)
Operating margin    1.9% 41.5% 12.8%   (9.3)%
              
 Year Ended June 27, 2015
 Network and Service Enablement          
 Network Enablement Service Enablement Network and
Service
Enablement		 Optical Security and Performance Products Total Segment Measures Reconciling Items Consolidated GAAP Measures
Net revenue$506.8
 $174.3
 $681.1
 $192.8
 $873.9
 $—
 $873.9
              
Gross profit333.9
 119.2
 453.1
 104.3
 557.4
 (37.3) 520.1
Gross margin65.9% 68.4% 66.5% 54.1% 63.8%   59.5 %
              
Operating income (loss)    (0.1) 68.1
 68.0
 (143.8) (75.8)
Operating margin    —% 35.3% 7.8%   (8.7)%


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended
 July 1, 2023July 2, 2022July 3, 2021
Corporate reconciling items impacting gross profit:
Total segment gross profit$668.8 $808.7 $752.2 
Stock-based compensation(4.8)(5.2)(4.8)
Amortization of intangibles(24.6)(30.0)(33.2)
Other (charges) benefits unrelated to core operating performance(1)
(0.6)— 0.2 
GAAP gross profit$638.8 $773.5 $714.4 
Corporate reconciling items impacting operating income:
Total segment operating income$172.5 $286.8 $253.5 
Stock-based compensation(51.2)(52.3)(48.3)
Amortization of intangibles(33.3)(39.7)(66.5)
Change in fair value of contingent liability4.5 (0.3)5.3 
Other benefits (charges) unrelated to core operating performance(1)
2.0 (9.6)(3.4)
Restructuring and related (charges) benefits(12.1)0.1 1.6 
GAAP operating income from continuing operations$82.4 $185.0 $142.2 


(1) During the years ended July 1, 2023, July 2, 2022, and July 3, 2021 other benefits (charges) unrelated to core operating performance primarily consisted of certain acquisition and integration related charges, transformational initiatives such as site consolidations, reorganization, accretion of debt discount, intangible impairment and loss on disposal of long-lived assets.
 Years Ended
 July 1, 2017 July 2, 2016 June 27, 2015
Corporate reconciling items impacting gross profit:     
Total segment gross profit$506.3
 $572.2
 $557.4
Stock-based compensation(3.6) (4.8) (4.2)
Amortization of intangibles(14.3) (17.3) (31.9)
Other charges unrelated to core operating performance(2.4) (0.4) (1.2)
GAAP gross profit$486.0
 $549.7
 $520.1
      
Corporate reconciling items impacting operating income:     
Total segment operating income$107.6
 $115.6
 $68.0
Stock-based compensation(33.2) (42.4) (47.5)
Amortization of intangibles(28.3) (31.9) (51.4)
Impairment of goodwill—
 (91.4) —
Other charges unrelated to core operating performance (1)(2)(3)(10.9) (23.7) (18.1)
Restructuring and related charges(21.6) (10.5) (26.8)
GAAP operating income (loss) from continuing operations$13.6
 $(84.3) $(75.8)

(1)During the year ended July 1, 2017, other charges unrelated to core operating performance primarily consisted of $5.7 million loss on disposal of long-lived assets and $1.5 million of Viavi-specific charges related to the Separation.

(2)During the year ended July 2, 2016, other charges unrelated to core operating performance primarily consisted of (a) an $8.4 million charge related to a litigation ruling impacting our U.K. pension obligation, (b) $5.0 million of Viavi-specific charges related to the Separation and (c) $3.5 million of non-recurring incremental severance and related costs upon the exit of a key executive.
(3)
During the year endedJune 27, 2015, other charges unrelated to core operating performance primarily consisted of $9.8 million of Viavi-specific charges related to the Separation and $3.6 million IPR&D impairment charge for an ongoing project related to the fiscal 2014 acquisition of Trendium as discussed in “Note 9. Acquired Developed Technology and Other Intangibles.”

Table of Contents
VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company operates primarily in three geographic regions: Americas, Asia-Pacific, and Europe, Middle East and Africa (“EMEA”)(EMEA). Net revenue is assigned to the geographic region and country where ourthe Company’s product is initially shipped. For example, certain customers may request shipment of our product to a contract manufacturer in one country, which may differ from the location of their end customers. The following table presents net revenue by the three geographic regions we operatethe Company operates in and net revenue from countries that exceeded 10% of ourthe Company’s total net revenue (dollars in millions)millions):
 Years Ended
 July 1, 2023July 2, 2022July 3, 2021
Product RevenueService RevenueTotalProduct RevenueService RevenueTotalProduct RevenueService RevenueTotal
Americas:
United States$303.5 $59.4 $362.9 $332.5 $56.4 $388.9 $275.8 $54.2 $330.0 
Other Americas60.3 14.9 75.2 82.2 14.6 96.8 72.7 12.9 85.6 
Total Americas$363.8 $74.3 $438.1 $414.7 $71.0 $485.7 $348.5 $67.1 $415.6 
Asia-Pacific:
Greater China$203.5 $7.4 $210.9 $247.5 $8.9 $256.4 $265.8 $11.2 $277.0 
Other Asia140.2 26.4 166.6 185.2 20.1 205.3 118.5 15.0 133.5 
Total Asia-Pacific$343.7 $33.8 $377.5 $432.7 $29.0 $461.7 $384.3 $26.2 $410.5 
EMEA:$228.6 $61.9 $290.5 $288.1 $56.9 $345.0 $318.6 $54.2 $372.8 
Total net revenue$936.1 $170.0 $1,106.1 $1,135.5 $156.9 $1,292.4 $1,051.4 $147.5 $1,198.9 
108


VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Years Ended
 July 1, 2017 July 2, 2016 June 27, 2015
Americas:           
United States$307.3
 37.9% $396.6
 43.8% $424.3
 48.5%
Other Americas71.3
 8.8% $66.0
 7.3% $62.5
 7.2%
Total Americas$378.6
 46.7% $462.6
 51.1% $486.8
 55.7%
            
Asia-Pacific           
Greater China$100.8
 12.4% $103.2
 11.3% $83.1
 9.5%
 Other Asia72.4
 8.9% 63.1
 7.0% 61.4
 7.0%
          Total Asia-Pacific$173.2
 21.3% $166.3
 18.3% $144.5
 16.5%
            
EMEA:           
Switzerland$124.0
 15.3% $135.6
 15.0% $97.7
 11.2%
Other EMEA135.6
 16.7% 141.8
 15.6% 144.9
 16.6%
Total EMEA$259.6
 32.0% $277.4
 30.6% $242.6
 27.8%
            
Total net revenue$811.4
 100.0% $906.3
 100.0% $873.9
 100.0%

FollowingSICPA Holding SA Company (SICPA), a customer of the separation from Lumentum, one customer served by ourCompany’s OSP segment, generated more than 10% or more of ViaviVIAVI net revenue from continuing operations during fiscal 2017, 20162023, 2022 and 20152021 as summarized below (in millions):
Years Ended
July 1, 2023July 2, 2022July 3, 2021
SICPA - OSP customer$157.7 $178.4 $193.9 
 Years Ended
 July 1, 2017 July 2, 2016 June 27, 2015
Customer A - OSP customer$166.8
 $190.1
 $143.0
Property, plant and equipment, net werewas identified based on the operations in the corresponding geographic areas (in millions):
Years Ended
July 1, 2023July 2, 2022
United States$166.9 $148.3 
Other Americas1.3 1.8 
China33.6 39.7 
Other Asia-Pacific4.0 4.5 
United Kingdom24.6 25.7 
Other EMEA12.6 8.9 
Total property, plant and equipment, net$243.0 $228.9 

109

 Years Ended
 July 1, 2017 July 2, 2016
United States$76.0
 $85.6
Other Americas4.4
 4.3
China41.1
 27.3
Other Asia-Pacific5.0
 4.8
Germany7.9
 7.9
Other EMEA2.5
 3.1
Total property, plant and equipment, net$136.9
 $133.0



VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 18.20. Selected Quarterly Financial Information (unaudited)
The following table presents the Company’s selected quarterly financial information from the Consolidated Statements of Operations for fiscal 20172023 and 20162022 (in millions, except per share data):
July 1, 2023April 1, 2023December 31, 2022October 1, 2022July 2, 2022April 2, 2022January 1, 2022October 2, 2021
Net revenue$263.6 $247.8 $284.5 $310.2 $335.3 $315.5 $314.8 $326.8 
Gross profit146.0 141.0 167.0 184.8 201.1 186.9 190.5 195.0 
Net (loss) income$(0.1)$(15.4)$8.4 $32.6 $16.5 $19.2 $34.6 $(54.8)
Net (loss) income per share - basic:
Net (loss) income (1)
$— $(0.07)$0.04 $0.14 $0.07 $0.08 $0.15 $(0.24)
Net (loss) income per share - diluted:
Net (loss) income (1)
$— $(0.07)$0.04 $0.14 $0.07 $0.08 $0.14 $(0.24)
Shares used in per-share calculation:
  Basic222.2 224.1 225.9 226.3 227.2 229.2 236.0 231.1 
  Diluted222.2 224.1 227.1 230.4 231.3 236.8 242.3 231.1 
 July 1, 2017 April 1, 2017 December 31, 2016 October 1, 2016 July 2, 2016 April 2, 2016 January 2, 2016 October 3, 2015
 (1) (2) (2) (2) (2) (1)(2)(3) (1)(2) (1) (1)
Net revenue$198.1
 $196.0
 $206.5
 $210.8
 $224.1
 $220.4
 $232.1
 $229.7
Gross profit119.2
 117.0
 124.7
 125.1
 136.1
 131.3
 141.8
 140.5
Net income(loss) from continuing operations, net of tax12.1
 26.0
 49.2
 78.0
 (64.5) 28.8
 1.0
 (15.7)
Net income (loss) from discontinued operations, net of tax1.6
 —
 —
 —
 (3.4) 5.0
 3.0
 (53.4)
Net income (loss)$13.7
 $26.0
 $49.2
 $78.0
 $(67.9) $33.8
 $4.0
 $(69.1)
                
Net income (loss) per share from - basic:               
Continuing operations (4)$0.05
 $0.11
 $0.21
 $0.34
 $(0.28) $0.13
 $0.01
 $(0.07)
Discontinued operations (4)0.01
 —
 —
 —
 (0.01) 0.02
 0.01
 (0.22)
Net income (loss) (4)$0.06
 $0.11
 $0.21
 $0.34
 $(0.29) $0.15
 $0.02
 $(0.29)
                
Net income (loss) per share from - diluted:               
Continuing operations (4)$0.05
 $0.11
 $0.21
 $0.33
 $(0.28) $0.12
 $0.01
 $(0.07)
Discontinued operations (4)0.01
 —
 —
 —
 (0.01) 0.02
 0.01
 (0.22)
Net income (loss) (4)$0.06
 $0.11
 $0.21
 $0.33
 $(0.29) $0.14
 $0.02
 $(0.29)
                
Shares used in per-share calculation (basic)227.3
 229.4
 230.5
 232.4
 232.7
 232.0
 234.9
 236.0
Shares used in per-share calculation (diluted)232.5
 234.6
 234.2
 236.8
 232.7
 234.6
 237.1
 236.0

(1)During the first quarter of fiscal 2016, we completed the Separation. As a result, the operations of the Lumentum business have been presented as discontinued operations in all periods of the Company’s Consolidated Statement of Operations.
(2)
During fiscal year ended 2017 and 2016, the Company recorded $203.0 million and $71.5 million, respectively, gain on sale of Lumentum common stock which was retained as part of the Separation of Lumentum. Refer to “Note 7. Investments, Forward Contracts and Fair Value Measurements”for more information.
(3)During the fourth quarter of fiscal 2016, the Company recorded a $91.4 million goodwill impairment charge related to the SE reporting unit.
(4)
(1) Net (loss) income (loss) per share is computed independently for each of the fiscal quarters presented. Therefore, the sum of the quarterly basic and diluted net income (loss) per share amounts may not equal the annual basic and diluted net income (loss) per share amount for the full fiscal years.
Note 19. Subsequent Events
Repurchase of Common Stock
Subsequent to our fiscal year ended July 1, 2017, the Company repurchased approximately 0.3 million shares of common stock purchases at an average price of $10.58 per share under the stock repurchase program authorized on February 1, 2016. All common shares repurchased have been canceled and retired.

Table of Contents
VIAVI SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Repurchase of 2033 Notes
Subsequent to our fiscal year ended July 1, 2017, the Company repurchased $146.5 million of our 2033 Notesis computed independently for $162.0 million in cash.
Acquisition of Trilithic, Inc.
On August 9, 2017, the Company acquired Trilithic, Inc. (“Trilithic”), a privately-held provider of electronic test and measurement equipment for telecommunications service providers and will be part of NE operating segment. The Company acquired Trilithic for $55.0 million in cash, net of cash acquired, subject to working capital adjustments. The acquisition will be accounted for as a business combination in accordance with the authoritative guidance.
Due to the closing of this acquisition subsequent to the period end, the Company is currently determining the fair value of assets acquired and liabilities assumed necessary to develop the purchase price allocation. Therefore, disclosureeach of the purchase price allocation tofiscal quarters presented. Therefore, the tangiblesum of the quarterly basic and intangible assets acquireddiluted Net (loss) income per share amounts may not equal the annual basic and liabilities assumed is not practicable.

diluted Net (loss) income per share amount for the full fiscal years.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
None.
ITEM 9A. CONTROLS AND PROCEDURES 
(a)   EVALUATION OF DISCLOSURE CONTROL AND PROCEDURES
Our management is responsible for establishing and maintaining disclosureThe SEC defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) for our Companythat are designed to ensure that the information required to be disclosed by us in the reports that we fileit files or submitsubmits under the Exchange Act was (i)is recorded, processed, summarized, and reported, within the time periods specified in the SEC'sSEC’s rules and formsforms. “Disclosure controls and (ii)procedures” include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act of 1934, as amended, is accumulated and communicated to ourthe issuer’s management, including ourits principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.disclosure. Our disclosure controls and procedures are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Our management under(with the supervision and with participation of our chief executive officer (“CEO”Chief Executive Officer (CEO) and Chief Financial Officer (CFO)) and chief financial officer (“CFO”), evaluatedhas conducted an evaluation of the effectiveness of our disclosure controls and procedures.procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act). Based on such evaluation, our CEO and our CFO have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report. Based on such evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective as of July 1, 2017.2023.
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Table of Contents
(b)   MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act). Our management, including our CEO and CFO, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.Commission (COSO). Based on its evaluation under the framework in the Internal Control-Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of July 1, 2017.2023.
The effectiveness of the Company’s internal control over financial reporting as of July 1, 20172023 has been audited by PricewaterhouseCoopers LLP, anour independent registered public accounting firm PricewaterhouseCoopers LLP, as stated in their report which appears in this Annual Report on Form 10-K under Item 8.8 “Financial Statements and Supplementary Information.”
(c)   REMEDIATION OF MATERIAL WEAKNESS IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
As described in Item 9A. Controls and Procedures in our Annual Report on Form 10-K for the fiscal year ended July 2, 2016 and Item 4 of our fiscal 2017 Form 10-Qs, we identified a material weakness related to the design of certain internal controls related to the accounting for the interim income tax provision. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
During fiscal 2017, in response to the material weakness identified, management has evaluated the design and operating effectiveness of internal controls related to the interim income tax provision and has implemented additional controls related to the preparation and review of the interim income tax provision.
During fiscal 2017, management tested the remedial controls related to the material weakness described above for a sufficient period of time and management has concluded, through testing, that by the end of the fourth quarter of fiscal 2017, these controls were operating effectively. Therefore, we have concluded that the material weakness previously identified in the Company’s internal control over financial reporting has been remediated as of July 1, 2017.
(d)   CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have beenwere no changes in our internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f) that occurred, during our most recently completed fiscalthe quarter ended July 1, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

(d)   LIMITATIONS ON EFFECTIVENESS OF CONTROLS
TableOur management, including our CEO and CFO, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of Contents
the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. Accordingly, our disclosure controls and procedures and our internal controls provide reasonable assurance of achieving their objectives.

ITEM 9B. OTHER INFORMATION 
On August 25, 2017,None of VIAVI’s directors or Section 16 officers adopted, modified or terminated a trading arrangement intended to satisfy the Compensation Committeeaffirmative defense conditions of Rule 10b5-1(c) or a “non-Rule” 10b5–1 trading arrangement, as those terms are defined in Regulation S-K, Item 408, during the Boardfiscal quarter ended July 1, 2023.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
111


Table of Directors approved the grant of 90,000 performance-based RSUs (“PSUs”) to Mr. Khaykin and 45,000 PSUs to Mr. Maletira, in each case, effective as of August 28, 2017, pursuant to the Company’s 2003 Plan. The PSUs will vest upon achievement of a Network and Service Enablement ("NSE") operating income margin rate target (the “Achievement Metric”) for two consecutive quarters within the period commencing on the first day of the second quarter of fiscal year 2018 and ending on the last day of the third quarter of fiscal year 2019 (the “Measurement Period”). If the Achievement Metric is determined by the Compensation Committee to have been satisfied, 50% of each executive officer’s PSUs will vest on such determination date; 25% of each executive officer’s PSUs will vest 24 months from the first day of the Measurement Period; and 25% of each executive officer’s PSUs will vest 36 months from the first day of the Measurement Period. The vested PSUs will be settled for shares of Company common stock as soon as practicable following the date on which PSUs vest.  The vesting and settlement of the PSUs is subject to the executive officer being continually employed through each vesting date.Contents
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 
Information regarding the Company’s executive officers and directors required by this Item is incorporated by reference to the sectionsections entitled “Proposal One—Elections of Directors” and “Corporate Governance” in the Company’s Definitive Proxy Statement in connection with the 20172023 Annual Meeting of Stockholders (the “Proxy Statement”)Proxy Statement), which will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended July 1, 2017.2023. Information required by Item 405 of Regulation S-K is incorporated by reference to the section entitled “Beneficial Ownership Reporting Compliance” in the Proxy Statement.
Information regarding the Company’s executive officers and Audit Committee of the Company’s Board of Directors required by this Item is incorporated by reference to the section entitled “Corporate Governance” in the Proxy Statement.
With regard to the information required by this item regarding the compliance with Section 16(a) of the Exchange Act, we will provide disclosure of delinquent Section 16(a) reports, if any, in our Proxy Statement, and such disclosure, if any, is incorporated herein by reference.
The Company has adopted the “Viavi“VIAVI Code of Business Conduct” as its code of ethics, which is applicable to all employees, officers and directors of the Company. The full text of the ViaviVIAVI Code of Business Conduct is available under Corporate Governance Information which can be found under the Investors tab on the Company’s website at www.viavisolutions.com.www.viavisolutions.com.
We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of our Code of Business Conduct by posting such information on our investor relations website under the heading “Governance-Governance Documents” at http:https://investor.viavisolutions.com/corporate-governance/default.aspx.governance/governance-overview/default.aspx.
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Table of Contents
ITEM 11.    EXECUTIVE COMPENSATION
Information required by this item is incorporated by reference to the sections entitled “Executive Compensation,” “Director“Corporate Governance - Director Compensation,” “Compensation“Corporate Governance - Compensation Program Risk Assessment,” “Corporate Governance—Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report” in the Proxy Statement.
ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 
Information regarding security ownership of certain beneficial owners and management is incorporated by reference to the section entitled “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement.
Information regarding the Company’s stockholder approved and non-approved equity compensation plans is incorporated by reference to the section entitled “Equity Compensation Plans” in the Proxy Statement.
ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE 
Information required by this item is incorporated by reference to the sections entitled “Certain“Corporate Governance - Certain Relationships and Related Person Transactions,” and “Code of Ethics,” “Director Independence,” and “Board Committees and Meetings” under the “Corporate Governance” headingGovernance - Director Independence” in the Proxy Statement.
ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES 
Information required by this item is incorporated by reference to the section entitled “Audit and Non-Audit Fees” in the Proxy Statement.

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Table of Contents

PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)The following items are filed as part of this Annual Report on Form 10-K:
(1)Financial Statements:
(a)The following items are filed as part of this Annual Report on Form 10-K: 
(1)Financial Statements:
Page
4849
4952
5053
5154
5255
5356
5457
(2)Financial Statement Schedules:

(2)Financial Statement Schedules: All financial statement schedules have been omitted because the required information is not present in amounts sufficient to require submission of the schedule, not applicable, or because the required information is included in the Consolidated Financial Statements or Notes thereto.
(3)Exhibits:
(3)Exhibits:
See Item 15(b)


(b)    Exhibits:
The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the Securities and Exchange Commission.
   Incorporated by Reference Filed  Incorporated by ReferenceFiledFurnished
Exhibit No. Exhibit Description Form Exhibit Filing Date HerewithExhibit No.Exhibit DescriptionFormExhibitFiling DateHerewithNot Filed
2.1 Agreement and Plan of Merger, dated December 6, 2013, by and among NI Holdings I, Inc., a Delaware corporation, the Company, Jade Acquisition I, Inc., a Delaware corporation and wholly owned subsidiary of the Company, Thoma Bravo, LLC, a Delaware limited liability company, solely in its capacity as Representative for NI Holdings’ stockholders, Thoma Bravo Fund X, L.P., a Delaware limited partnership, and Thoma Bravo Fund X-A., L.P., a Delaware limited partnership. 8-K 2.1 12/11/2013 
2.1
8-K2.38/5/2015
2.2 Contribution Agreement by and between JDS Uniphase Corporation and Lumentum Operations LLC 8-K 2.1 8/5/2015 
2.3 Membership Interest Transfer Agreement by and between JDS Uniphase Corporation and Lumentum Inc. 8-K 2.2 8/5/2015 
2.4 Separation and Distribution Agreement by and between JDS Uniphase Corporation, Lumentum Holdings Inc. and Lumentum Operations LLC 8-K 2.3 8/5/2015 
3.1 Restated Certificate of Incorporation 8-K 3.1 11/18/2013 
3.1
8-K3.111/20/2018
3.2 Certificate of Amendment to Restated Certificate of Incorporation 8-K 3.1 8/5/2015 
3.2
10-Q3.12/7/2018 
3.5 Amended and Restated Bylaws of Viavi Solutions Inc. 8-K 3.1 6/1/2016  
4.1 Indenture, dated as of August 21, 2013, between JDS Uniphase Corporation and Wells Fargo Bank, National Association, as Trustee 8-K 4.1 8/21/2013 
4.1
8-K4.13/6/2017
4.2 Form of 0.625% Senior Convertible Debentures due 2033 8-K 4.2 8/21/2013 
4.2
8-K4.2 (Incl. in 4.1)3/6/2017
4.3 Stockholder’s and Registration Rights Agreement by and between JDS Uniphase Corporation and Lumentum Holdings Inc. 8-K 4.1 8/5/2015 
4.3
8-K4.13/7/2023
4.4 Indenture, dated as of March 3, 2017 between Viavi Solutions Inc. and Wells Fargo Bank, National Association as Trustee 8-K 4.1 3/6/2017 
4.4
8-K4.2 (Incl. in 4.1)3/7/2023
4.5
4.5
8-K4.19/29/2021
4.6
4.6
8-K4.2 (Inc. in 4.1)9/29/2021
4.7
4.7
10-K4.68/24/2020

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Table of Contents

10.1+
8-K10.12/2/2016
10.2+
8-K10.15/7/2021
10.3+
10-K10.38/27/2019
10.4+
8-K10.94/20/2015
10.5+
10-Q10.12/6/2020
10.6+
8-K10.36/20/2020
10.7
8-K10.18/5/2015
10.8+
8-K10.16/22/2020
10.9+
S-899.12/11/2016
10.10+
8-K10.26/22/2020
10.11
8-K10.11/6/2022
10-12+
10-Q10.15/3/2023
21.1
X
23.1
X
24.1Power of Attorney (included on the signature page to the Report)
31.1
  3X
31.2
   X
32.1
   X
32.2
   X
101.SCHInline XBRL Taxonomy Extension Schema Document   X
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document   X
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document   X
101.LABInline XBRL Taxonomy Extension Label Linkbase Document   X
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document   X
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101)X
+Indicates management contract or compensation plan, contract or arrangement.
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4.5 Form of 1.00% Senior Convertible Notes due 2024 8-K 4.2 3/6/2017  
10.1 Employment Agreement between Oleg Khaykin and Viavi Solutions Inc. effective as of February 3, 2016 8-K 10.1 2/2/2016  
10.2 Amended and Restated 1993 Flexible Stock Incentive Plan (Amended and Restated as of November 9, 2001) 10-Q 10.1 2/11/2002  
10.3 Restated 1998 Employee Stock Purchase Plan 10-K 10.3 8/25/2015  
10.4 Amended and Restated 1999 Canadian Employee Stock Purchase Plan (Amended and Restated as of July 31, 2002) 10-K 10.4 9/17/2002  
10.5 Restated 2005 Acquisition Equity Incentive Plan 10-K 10.5 8/25/2015  
10.6 2005 Acquisition Equity Incentive Plan Form of Stock Option Award Agreement 10-K 10.6 9/30/2005  
10.7 2005 Acquisition Equity Incentive Plan Form of Restricted Stock Unit Award Agreement 10-K 10.7 9/30/2005  
10.9 Form of Indemnification Agreement 8-K 10.9 4/20/2015  
10.10 Restated 2003 Equity Incentive Plan 10-K 10.10 8/25/2015  
10.11 Separation Agreement and General Release between Viavi Solutions Inc. and Thomas Waechter dated August 13, 2015 8-K 10.1 8/19/2015  
10.12 Employment Agreement between Viavi Solutions Inc. and Richard Belluzzo dated August 19, 2015 8-K 10.2 8/19/2015  
10.13 Tax Matters Agreement by and between JDS Uniphase Corporation and Lumentum Holdings Inc. 8-K 10.1 8/5/2015  
10.14 Employee Matters Agreement by and between JDS Uniphase Corporation, Lumentum Holdings Inc. and Lumentum Operations LLC 8-K 10.2 8/5/2015  
10.15 Intellectual Property Matters Agreement by and between JDS Uniphase Corporation and Lumentum Operations LLC 8-K 10.3 8/5/2015  
10.16 Viavi Solutions Inc. 2015 Change of Control Benefits Plan, effective June 20, 2017 8-K 10.1 12/17/2015  
10.17 2003 Equity Incentive Plan Form of Stock Option Award Agreement (for the U.S) 10-K 10.20 8/31/2010  
10.18 2003 Equity Incentive Plan Form of Restricted Stock Unit Award Agreement (for the U.S) 10-K 10.24 8/31/2010  
10.19 Viavi Solutions Inc. Executive Severance and Retention Plan 8-K 10.1 10/19/2015  
10.20 Settlement Agreement, dated September 30, 2015 by and among
Viavi Solutions Inc. and each of the signatories identified therein		 8-K 10.1 10/1/2015  
10.21 Viavi Solutions Inc. 2016 MSU Policy Summary 8-K 10.1 8/24/2015  
21.1 Subsidiaries of Viavi Solutions Inc.       X
23.1 Consent of Independent Registered Public Accounting Firm (PricewaterhouseCoopers LLP)       X
31.1 Certification of the Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.     3 X
31.2 Certification of the Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.       X
32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.       X
32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.       X
101.INS XBRL Instance       X
101.SCH XBRL Taxonomy Extension Schema       X


Table of Contents

101.CALXBRL Taxonomy Extension CalculationX
101.DEFXBRL Taxonomy Extension Definition Linkbase DocumentX
101.LABXBRL Taxonomy Extension Label LinkbaseX
101.PREXBRL Taxonomy Extension PresentationX

ITEM 16.    10-K SUMMARY
None.

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Table of Contents

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
  Date: August 29, 201717, 2023VIAVI SOLUTIONS INC.
By: /s/ AMAR MALETIRA/s/ HENK DERKSEN
Name: Amar MaletiraHENK DERKSEN
Title:Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SignatureTitleDate
/s/ OLEG KHAYKINPresident and Chief Executive OfficerAugust 17, 2023
Oleg Khaykin(Principal Executive Officer)
 SignatureTitleDate
/s/ OLEG KHAYKINHENK DERKSENPresident and Chief Executive OfficerAugust 29, 2017
Oleg Khaykin(Principal Executive Officer)
/s/ AMAR MALETIRAExecutive Vice President and Chief Financial OfficerAugust 29, 201717, 2023
Amar MaletiraHenk Derksen(Duly Authorized Officer and Principal Financial and Accounting Officer)
/s/ RICHARD BELLUZZOChairmanAugust 29, 201717, 2023
Richard Belluzzo
/s/ KEITH BARNESDirectorAugust 29, 201717, 2023
Keith Barnes
/s/ LAURA BLACKDirectorAugust 17, 2023
Laura Black
/s/ TOR BRAHAMDirectorAugust 29, 201717, 2023
Tor Braham
/s/ TIMOTHY E. CAMPOSDirectorAugust 29, 2017
Timothy E. Campos
/s/ DONALD COLVINDirectorAugust 29, 201717, 2023
Donald Colvin
/s/ DOUGLAS GILSTRAPDirectorAugust 17, 2023
Douglas Gilstrap
/s/ MASOOD JABBARDirectorAugust 29, 201717, 2023
Masood Jabbar
/s/ PAMELA STRAYERJOANNE SOLOMONDirectorAugust 29, 201717, 2023
Pamela StrayerJoanne Solomon

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