10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 28, 2019

 OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-22874

Viavi Solutions Inc.

(Exact name of Registrant as specified in its charter)

 

Delaware	94-2579683
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

6001 America Center Drive, San Jose, California 95002

(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 class	Trading Symbol	Name of the exchange on which registered
Common Stock, par value of $0.001 per share	VIAV	The Nasdaq Stock Market LLC

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

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

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

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

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

As of January 25, 2020, the Registrant had 230,252,773 shares of common stock outstanding.

TABLE OF CONTENTS			Page
PART I - FINANCIAL INFORMATION			2
	Item 1.	Financial Statements (Unaudited)	2
		Consolidated Statements of Operations for the Three and Six Months Ended December 28, 2019 and December 29, 2018	2
		Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended December 28, 2019 and December 29, 2018	3
		Consolidated Balance Sheets as of December 28, 2019 and June 29, 2019	4
		Consolidated Statements of Cash Flows for the Six Months Ended December 28, 2019 and December 29, 2018	5
		Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended December 28, 2019 and December 29, 2018	6
		Notes to Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
	Item 3.	Quantitative and Qualitative Disclosure About Market Risks	45
	Item 4.	Controls and Procedures	46
PART II - OTHER INFORMATION			47
	Item 1.	Legal Proceedings	47
	Item 1A.	Risk Factors	47
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
	Item 3.	Defaults Upon Senior Securities	47
	Item 4.	Mine Safety Disclosures	47
	Item 5.	Other Information	47
	Item 6.	Exhibits	48
SIGNATURES			49

1

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

VIAVI SOLUTIONS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(unaudited)

	Three Months Ended						Six Months Ended
	December 28, 2019			December 29, 2018			December 28, 2019			December 29, 2018
Revenues:
Product revenue	$	281.9		$	272.8		$	546.7		$	513.9
Service revenue	31.8			34.1			66.8			61.5
Total net revenue	313.7			306.9			613.5			575.4
Cost of revenues:
Product cost of revenue	103.7			106.0			208.0			203.9
Service cost of revenue	12.1			14.4			24.8			25.2
Amortization of acquired technologies	8.4			8.5			16.8			17.9
Total cost of revenues	124.2			128.9			249.6			247.0
Gross profit	189.5			178.0			363.9			328.4
Operating expenses:
Research and development	50.3			45.9			101.8			88.5
Selling, general and administrative	86.3			88.5			179.5			172.9
Amortization of other intangibles	8.8			10.4			17.5			20.2
Restructuring and related (benefits) charges	(0.9		)	0.3			(0.6		)	15.1
Total operating expenses	144.5			145.1			298.2			296.7
Income from operations	45.0			32.9			65.7			31.7
Interest income and other income, net	1.3			1.5			4.0			3.2
Interest expense	(8.4		)	(8.1		)	(16.7		)	(18.2		)
Income before taxes	37.9			26.3			53.0			16.7
Provision for income taxes	9.9			10.9			18.2			16.6
Income from continuing operations	28.0			15.4			34.8			0.1
Loss from discontinued operations, net of taxes	—			(2.4		)	—			(2.4		)
Net income (loss)	$	28.0		$	13.0		$	34.8		$	(2.3	)
Income (loss) per share - basic:
Continuing operations	$	0.12		$	0.07		$	0.15		$	0.00
Discontinued operations	—			(0.01		)	—			(0.01		)
Net income (loss) per share - basic	$	0.12		$	0.06		$	0.15		$	(0.01	)
Income (loss) per share - diluted:
Continuing operations	$	0.12		$	0.07		$	0.15		$	0.00
Discontinued operations	—			(0.01		)	—			(0.01		)
Net income (loss) per share - diluted	$	0.12		$	0.06		$	0.15		$	(0.01	)
Shares used in per-share calculations:
Basic	230.0			228.3			229.7			227.8
Diluted	238.3			230.4			237.4			230.5

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

2

VIAVI SOLUTIONS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)

(unaudited)

	Three Months Ended					Six Months Ended
	December 28, 2019		December 29, 2018			December 28, 2019		December 29, 2018
Net income (loss)	$	28.0	$	13.0		$	34.8	$	(2.3	)
Other comprehensive (loss) income:
Net change in cumulative translation adjustment, net of tax	28.0		(13.0		)	0.6		(26.1		)
Net change in available-for-sale investments, net of tax:
Unrealized holding gain arising during period	—		—			—		0.2
Plus: reclassification adjustments included in net loss	—		0.2			—		0.4
Net change in defined benefit obligation, net of tax:
Amortization of actuarial losses	0.8		0.4			1.5		1.0
Net change in accumulated other comprehensive income (loss)	28.8		(12.4		)	2.1		(24.5		)
Comprehensive income (loss)	$	56.8	$	0.6		$	36.9	$	(26.8	)

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

3

VIAVI SOLUTIONS INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except share and par value data)

(unaudited) 

	December 28, 2019			June 29, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	551.8		$	521.5
Short-term investments	1.6			1.5
Restricted cash	3.5			3.5
Accounts receivable, net	251.5			237.7
Inventories, net	91.9			102.7
Prepayments and other current assets	54.5			49.9
Total current assets	954.8			916.8
Property, plant and equipment, net	173.5			179.9
Goodwill, net	384.5			381.1
Intangibles, net	179.3			211.6
Deferred income taxes	106.8			108.4
Other non-current assets	60.8			17.3
Total assets	$	1,859.7		$	1,815.1
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	48.9		$	63.4
Accrued payroll and related expenses	66.5			58.7
Deferred revenue	53.2			55.3
Accrued expenses	32.1			34.2
Other current liabilities	61.2			72.4
Total current liabilities	261.9			284.0
Long-term debt	589.8			578.8
Other non-current liabilities	243.7			226.5
Commitments and contingencies (Note 18)
Stockholders’ equity:
Common stock, $0.001 par value; 1 billion shares authorized; 230 million shares at December 28, 2019 and 229 million shares at June 29, 2019, issued and outstanding	0.2			0.2
Additional paid-in capital	70,254.0			70,244.7
Accumulated deficit	(69,357.4		)	(69,384.5		)
Accumulated other comprehensive loss	(132.5		)	(134.6		)
Total stockholders’ equity	764.3			725.8
Total liabilities and stockholders’ equity	$	1,859.7		$	1,815.1

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

4

VIAVI SOLUTIONS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

	Six Months Ended
	December 28, 2019			December 29, 2018
OPERATING ACTIVITIES:
Net income (loss)	$	34.8		$	(2.3	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation expense	19.7			19.7
Amortization of acquired technologies and other intangibles	34.3			38.1
Stock-based compensation	21.6			17.7
Amortization of debt issuance costs and accretion of debt discount	11.0			12.1
Amortization of discount and premium on investments, net	—			(0.2		)
Net change in fair value of contingent liabilities	(4.3		)	—
Loss on disposal of long-lived assets	—			0.7
Other	2.4			1.6
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(13.5		)	(33.5		)
Inventories	3.2			3.4
Other current and non-currents assets	(2.5		)	(0.7		)
Accounts payable	(14.2		)	(3.0		)
Income taxes payable	5.8			7.0
Deferred revenue, current and non-current	2.9			0.3
Deferred taxes, net	(2.8		)	(4.5		)
Accrued payroll and related expenses	8.2			9.5
Accrued expenses and other current and non-current liabilities	(37.3		)	3.2
Net cash provided by operating activities	$	69.3		$	69.1
INVESTING ACTIVITIES:
Maturities of available-for-sale investments	$	—		$	42.2
Sales of available-for-sale investments	—			97.0
Capital expenditures	(13.3		)	(24.2		)
Proceeds from the sale of assets	3.1			3.0
Acquisitions, net of cash acquired	(0.5		)	(28.1		)
Net cash (used in) provided by investing activities	$	(10.7	)	$	89.9
FINANCING ACTIVITIES:
Payment of debt issuance costs	$	—		$	(0.5	)
Repurchase and retirement of common stock	(10.7		)	(8.5		)
Withholding tax payment on vesting of restricted stock awards	(15.1		)	(9.8		)
Repurchase and redemption of convertible debt	—			(276.9		)
Payment of financing obligations	(1.8		)	(0.4		)
Proceeds from exercise of employee stock options and employee stock purchase plan	2.3			2.1
Net cash used in financing activities	(25.3		)	(294.0		)
Effect of exchange rates on cash, cash equivalents and restricted cash	(3.5		)	(11.2		)
Net increase (decrease) in cash, cash equivalents and restricted cash	29.8			(146.2		)
Cash, cash equivalents and restricted cash at the beginning of the period	530.4			624.3
Cash, cash equivalents and restricted cash at the end of the period	$	560.2		$	478.1

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

5

VIAVI SOLUTIONS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions)

(unaudited)

Three Months Ended December 28, 2019
	Common Stock
	Shares		Amount		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total
Balance at September 28, 2019	230.4		$	0.2	$	70,245.4		$	(69,376.2	)	$	(161.3	)	$	708.1
Net income	—		—		—			28.0			—			28.0
Other comprehensive income	—		—		—			—			28.8			28.8
Shares issued under employee stock plans, net of tax	0.5		—		(2.9		)	—			—			(2.9		)
Stock-based compensation	—		—		11.5			—			—			11.5
Repurchase of common stock	(0.7	)	—		—			(9.2		)	—			(9.2		)
Balance at December 28, 2019	230.2		$	0.2	$	70,254.0		$	(69,357.4	)	$	(132.5	)	$	764.3

Three Months Ended December 29, 2018
	Common Stock
	Shares		Amount		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total
Balance at September 29, 2018	228.2		$	0.2	$	70,218.6		$	(69,394.1	)	$	(115.1	)	$	709.6
Net income	—		—		—			13.0			—			13.0
Other comprehensive loss	—		—		—			—			(12.4		)	(12.4		)
Shares issued under employee stock plans, net of tax	0.7		—		(1.5		)	—			—			(1.5		)
Stock-based compensation	—		—		9.7			—			—			9.7
Repurchase of commons stock	(0.9	)	—		—			(8.5		)	—			(8.5		)
Other	—		—		—			0.1			0.1			0.2
Balance at December 29, 2018	228.0		$	0.2	$	70,226.8		$	(69,389.5	)	$	(127.4	)	$	710.1

Six Months Ended December 28, 2019
	Common Stock
	Shares		Amount		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total
Balance at June 29, 2019	228.8		$	0.2	$	70,244.7		$	(69,384.5	)	$	(134.6	)	$	725.8
Cumulative adjustment for adoption of ASC 842	—		—		—			3.0			—			3.0
Net income	—		—		—			34.8			—			34.8
Other comprehensive income	—		—		—			—			2.1			2.1
Shares issued under employee stock plans, net of tax	2.2		—		(12.6		)	—			—			(12.6		)
Stock-based compensation	—		—		21.9			—			—			21.9
Repurchase of common stock	(0.8	)	—		—			(10.7		)	—			(10.7		)
Balance at December 28, 2019	230.2		$	0.2	$	70,254.0		$	(69,357.4	)	$	(132.5	)	$	764.3

6

Six Months Ended December 29, 2018
	Common Stock
	Shares		Amount		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total
Balance at June 30, 2018	226.7		$	0.2	$	70,216.2		$	(69,378.6	)	$	(102.9	)	$	734.9
Net loss	—		—		—			(2.3		)	—			(2.3		)
Other comprehensive loss	—		—		—			—			(24.5		)	(24.5		)
Shares issued under employee stock plans, net of tax	2.2		—		(7.3		)	—			—			(7.3		)
Stock-based compensation	—		—		17.9			—			—			17.9
Repurchase of common stock	(0.9	)	—		—			(8.5		)	—			(8.5		)
Other	—		—		—			(0.1		)	—			(0.1		)
Balance at December 29, 2018	228.0		$	0.2	$	70,226.8		$	(69,389.5	)	$	(127.4	)	$	710.1

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

7

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

The financial information for Viavi Solutions Inc. (“VIAVI” also referred to as “the Company”) for the three and six months ended December 28, 2019 and December 29, 2018 is unaudited, and includes all normal and recurring adjustments Company management considers necessary for a fair statement of the financial information set forth herein. The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such information does not include all of the information and footnotes required by U.S. GAAP for annual consolidated financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 29, 2019.

Other than updates to the Company’s lease accounting policy under Accounting Standards Codification (“ASC”) 842 - Leases, as disclosed in “Note 2. Recently Issued Accounting Pronouncements” and “Note 12. Leases”, there have been no material changes to the Company’s accounting policies during the three and six months ended December 28, 2019, as compared to the significant accounting policies presented in “Note 1. Basis of Presentation” of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report for the year ended June 29, 2019 on Form 10-K filed with the SEC on August 27, 2019.

The balance sheet as of June 29, 2019 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The results for the three and six months ended December 28, 2019 and December 29, 2018 may not be indicative of results for the fiscal year ending June 27, 2020 or any future periods.

Fiscal Years

The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to June 30th. The Company’s fiscal 2020 is a 52-week year ending on June 27, 2020. The Company’s fiscal 2019 was a 52-week year ending on June 29, 2019.

Principles of Consolidation

The consolidated financial statements 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 statements requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements, the reported amount of net revenues and expenses and the disclosure of commitments and contingencies during the reporting periods. The Company bases estimates on historical experience and assumptions about future periods that are believed to be reasonable based on available information. The Company’s reported financial positions or results of operations may be materially different under changed conditions or when using different estimates and assumptions, particularly with respect to significant accounting policies. If estimates or assumptions differ from actual results, subsequent periods are adjusted to reflect readily available current information.

Note 2. Recently Issued Accounting Pronouncements

Recent Accounting Pronouncements Adopted

In 2016, the Financial Accounting Standards Board (“FASB”) issued guidance on the financial reporting requirements for leasing arrangements, ASC 842 - Leases. ASC 842 requires lessees to recognize operating leases with a term greater than one year on their balance sheets as Right-of-Use (“ROU”) assets and corresponding lease liabilities, measured at the present value of the lease payments. In the first quarter of fiscal 2020 the Company adopted this standard using the modified retrospective approach. The Company elected to apply the optional transition approach of not adjusting comparative period financial statements for the adoption impact. The Company also elected the package of practical expedients to not reassess whether a contract contains a lease, lease classification and accounting for initial direct costs. Adoption of the leasing standard resulted in $35.5 million of ROU assets and $37.0 million of lease

8

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

liabilities on June 30, 2019. In addition, the Company recorded an adjustment to accumulative deficit, net of taxes, of $3.0 million from the recognition of previously deferred profit under sale-leaseback arrangements and de-recognition of related real estate assets of $7.1 million and financing obligations of $10.1 million. The adoption of the new standard did not have a material impact on the Company’s Consolidated Statements of Operations and Statements of Cash Flows. For additional information refer to “Note 12. Leases.”

Recent Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued guidance which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. The guidance is effective for the Company in the first quarter of fiscal year 2022 and early adoption is permitted. The Company is evaluating the effects that the adoption of this guidance will have on its consolidated financial statements.

In August 2018, the FASB issued guidance to amend the disclosure requirements related to defined benefit pension and other post-retirement plans. Some of the changes include adding a disclosure requirement for significant gains and losses related to changes in the benefit obligation for the period and removing the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year. This guidance is effective for the Company in the first quarter of fiscal 2021 and early adoption is permitted. The Company is evaluating the 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.

Note 3. Revenue

The Company accounts for revenue in accordance with ASC 606, which was adopted in fiscal 2019 using the retrospective transition method. The Company’s revenue is derived from a diverse portfolio of network solutions and 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. The Company’s Optical Security and Performance (“OSP”) products include proprietary pigments used for optical security and optical filters used in commercial and government 3D Sensing applications.

• Services: The Company also offers a range of product support and professional services 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.

9

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Balance sheet and other details

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, net, on the Consolidated Balance Sheets, are not material to the Consolidated Financial Statements. The prior year’s Consolidated Balance Sheets and Statements of Cash Flows have been updated to conform to the current period’s presentation. Contract asset balances will fluctuate based upon the timing of transfer of services, billings and customers’ acceptance of contractual milestones.

Gross receivables include both billed and Unbilled Receivables/Contract Assets. As of December 28, 2019 and June 29, 2019, the Company had total non-billed receivables (Unbilled Receivables/Contract Assets) of $5.4 million and $11.5 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 ratable recognition over the contract term. Contract liabilities are included in deferred revenue and non-current liabilities on the Consolidated Balance Sheets.

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 tables summarize the activity related to deferred revenue (in millions):

	December 28, 2019
	Three Months Ended			Six Months Ended
Deferred revenue:
Balance at beginning of period	$	64.4		$	68.5
Revenue deferrals for new contracts (1)	33.6			52.5
Revenue recognized during the period	(26.1		)	(49.1		)
Balance at end of period	$	71.9		$	71.9
Short-term deferred revenue	$	53.2		$	53.2
Long-term deferred revenue	$	18.7		$	18.7

⁽¹⁾  Included in these amounts is the impact from foreign currency exchange rate fluctuations.

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 December 28, 2019. 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 cancelable 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.

10

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The value of the transaction price allocated to remaining performance obligations as of December 28, 2019, was $238.1 million. The Company expects to recognize 89% of remaining performance obligations as revenue within the next 12 months, and the remainder thereafter.

Disaggregation of revenue

The Company's revenue is presented on a disaggregated basis on the Consolidated Statements of Operations and in “Note 19. Operating Segments and Geographic Information”. This information includes revenue from reportable segments and a break-out of products and services for which the nature and timing of the revenue as characterized above is generally at a point in time and over time, respectively.

Note 4. Earnings Per Share

The following table sets forth the computation of basic and diluted net loss per share (in millions, except per share data):

	Three Months Ended					Six Months Ended
	December 28, 2019		December 29, 2018			December 28, 2019		December 29, 2018
Numerator:
Income from continuing operations	$	28.0	$	15.4		$	34.8	$	0.1
Loss from discontinued operations, net of taxes	—		(2.4		)	—		(2.4		)
Net income (loss)	$	28.0	$	13.0		$	34.8	$	(2.3	)
Denominator:
Weighted-average shares outstanding:
Basic	230.0		228.3			229.7		227.8
Shares issuable assuming conversion of convertible notes (1)	5.1		—			4.0		—
Effect of dilutive securities from stock-based benefit plans	3.2		2.1			3.7		2.7
Diluted	238.3		230.4			237.4		230.5
Net income (loss) per share - basic:
Continuing operations	$	0.12	$	0.07		$	0.15	$	0.00
Discontinued operations	—		(0.01		)	—		(0.01		)
Net income (loss) per share	$	0.12	$	0.06		$	0.15	$	(0.01	)
Net income (loss) per share - diluted:
Continuing operations	$	0.12	$	0.07		$	0.15	$	0.00
Discontinued operations	—		(0.01		)	—		(0.01		)
Net income (loss) per share	$	0.12	$	0.06		$	0.15	$	(0.01	)

⁽¹⁾  Represents the number of shares that would be issued if the Company’s Senior Convertible Notes had been converted. 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.

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VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table sets forth the weighted-average potentially dilutive securities excluded from the computation of the diluted net loss per share because their effect would have been anti-dilutive (in millions):

	Three Months Ended		Six Months Ended
	December 28, 2019	December 29, 2018	December 28, 2019	December 29, 2018
		(2) (3)		(2) (3)
Restricted stock units	0.3	0.2	0.2	0.7
Stock options and ESPP	—	0.1	—	0.1
Total potentially dilutive securities	0.3	0.2	0.2	0.7

⁽²⁾  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 payable in cash, shares of the Company’s common stock or a combination of both at the Company’s election. The Company’s average quarterly stock price for the period presented did not exceed the conversion price of $13.22. Refer to “Note 11. Debt” for more details.

⁽³⁾  The Company’s 1.75% Senior Convertible Notes due 2023 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 $13.94 per share payable in cash, shares of the Company’s common stock or a combination of both at the Company’s election. The Company’s average quarterly stock price for the period presented did not exceed the conversion price of $13.94. Refer to “Note 11. Debt” for more details.

Note 5. Accumulated Other Comprehensive Loss

The Company’s accumulated other comprehensive loss consists of the accumulated net unrealized gains or losses on available-for-sale investments, foreign currency translation adjustments and change in unrealized components of defined benefit obligations.

For the six months ended December 28, 2019, the changes in accumulated other comprehensive loss, net of tax, by component were as follows (in millions):

	Unrealized losses on available-for sale investments			Foreign  currency translation adjustments			Change in unrealized components of defined benefit obligations (1)			Total
Beginning balance as of June 29, 2019	$	(5.0	)	$	(101.0	)	$	(28.6	)	$	(134.6	)
Other comprehensive income (loss) before reclassification	—			0.6			—			0.6
Amounts reclassified to accumulated other comprehensive loss	—			—			1.5			1.5
Net current-period other comprehensive income	—			0.6			1.5			2.1
Ending balance as of December 28, 2019	$	(5.0	)	$	(100.4	)	$	(27.1	)	$	(132.5	)

(1)  The amount reclassified out of accumulated other comprehensive loss represents the amortization of actuarial losses included as a component of cost of revenues, research and development (“R&D”) and SG&A in the Consolidated Statement of Operations for the six months ended December 28, 2019. There was no tax impact for the six months ended December 28, 2019. Refer to “Note 17. Employee Pension and Other Benefit Plans” for more details on the computation of net periodic cost for pension plans.

Note 6. Acquisitions

3Z Telecom, Inc. Acquisition

On May 31, 2019 (“3Z Close Date”), the Company acquired all of the equity of 3Z Telecom, Inc. (“3Z”) for approximately $23.2 million in cash and contingent consideration (“earn-out”) liability of up to $7.0 million in cash based on the achievement of certain net revenue targets over approximately a two year period, subsequent to the 3Z Close Date. The acquisition of 3Z expands the Company’s Field Instrument offerings.

12

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The 3Z acquisition meets 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 not material.

The fair value of consideration transferred for the 3Z acquisition consists of the following (in millions):

Cash consideration paid at closing	$	18.9
Escrow payments	4.3
Fair value of contingent consideration	5.5
Total purchase consideration	$	28.7

The fair value of the earn-out payments at the 3Z Close Date was determined by applying a risk-neutral framework using a Monte Carlo Simulation, which includes inputs not observable in the market, and therefore represents a Level 3 measurement. The fair value of the Company’s earn-out liabilities is further discussed in “Note 8. Investments, Forward Contracts and Fair Value Measurements.”

The identified tangible and intangible assets acquired, as of the 3Z Close Date, were as follows (in millions):

Tangible assets acquired:	$	4.1
Intangible assets acquired:
Developed technology	4.4
Customer relationships	7.9
Customer backlog	0.1
Goodwill	12.2
Total consideration transferred	$	28.7

The allocation of the purchase price to tangible assets, based on the estimated fair values of assets acquired and liabilities assumed on the 3Z Close Date, was as follows (in millions):

Cash	$	2.2
Total other assets	3.6
Total liabilities	(1.7		)
Net tangible assets acquired	$	4.1

Acquired intangible assets are classified as Level 3 assets for which fair value is derived from a valuation based on inputs that are unobservable and significant to the overall fair value measurement. The fair values of acquired customer relationships and developed technology were determined based on the excess earnings method and relief from royalty method, respectively, variations of the income approach. The intangible assets are being amortized over their estimated useful lives, which range from five to six years. Customer backlog will be fully amortized within one year.

Goodwill arising from this acquisition is primarily attributed to sales of future products and services of 3Z. Goodwill has been assigned to the NE segment and is not deductible for tax purposes.

Results of operations of 3Z have been included in the Company’s Consolidated Financial Statements subsequent to the date of acquisition. Proforma or historical post-acquisition results of operations have not been presented because the effect of the acquisition was not material to prior period financial statements.

RPC Photonics, Inc. Acquisition

On October 30, 2018 (“RPC Close Date”), the Company acquired all of the equity interest of RPC Photonics, Inc. (“RPC”) for approximately $33.4 million in cash and an additional earn-out of up to $53.0 million in cash based on the achievement of certain gross profit targets over approximately a four years period, subsequent to the RPC Close Date.

13

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The achievement or distributions of earn-out payments are not limited in any one period. The acquisition of RPC expands the Company’s 3D Sensing offerings.

The Company accounted for the transaction in accordance with the authoritative guidance on business combination; therefore, the tangible and intangible assets acquired and liabilities assumed are recorded at fair value on the acquisition date.

The fair value of consideration transferred for the RPC Close Date, were as follows (in millions):

Cash consideration paid at closing	$	29.9
Escrow payments	3.5
Fair value of contingent consideration	36.2
Total purchase consideration	$	69.6

The fair value of the earn-out payments at the RPC Close Date were determined by applying a risk-neutral framework using a Monte Carlo Simulation, which includes inputs that are not observable in the market, and therefore represents a Level 3 measurement. The fair value of this earn-out is discussed further in “Note 8. Investments, Forward Contracts and Fair Value Measurements”.

The identified tangible and intangible assets acquired, as of the RPC Close Date, were as follows (in millions):

Tangible assets acquired:	$	5.7
Intangible assets acquired:
Developed technology	15.7
Customer relationships	14.0
Customer backlog	0.3
Goodwill	33.9
Total consideration transferred	$	69.6

The allocation of the purchase price to tangible assets, based on the estimated fair values of assets acquired and liabilities assumed on the RPC Close Date, were as follows (in millions):

Cash	$	1.8
Other current assets	1.8
Property and equipment	2.6
Total liabilities	(0.5		)
Net tangible assets acquired	$	5.7

The allocation of the purchase price was based upon a valuation performed. Acquired intangible assets are classified as Level 3 assets for which fair value is derived from a valuation based on inputs that are unobservable and significant to the overall fair value measurement. The fair values of acquired customer relationships and developed technology were determined based on the excess earnings method and relief from royalty method, respectively, variations of the income approach. The intangible assets are being amortized over their estimated useful lives that range from six to seven years. Customer backlog will be fully amortized within one year.

Goodwill arising from this acquisition is primarily attributed to sales of future products and services of RPC. Goodwill has been assigned to the OSP segment and is not deductible for tax purposes.

Results of operations of RPC have been included in the Company’s Consolidated Financial Statements subsequent to the date of acquisition. Proforma or historical post-acquisition results of operations have not been presented because the effect of the acquisition was not material to prior period financial statements.

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VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7. Balance Sheet and Other Details

Accounts receivable allowance

The following table presents the activities and balances for allowance for doubtful accounts (in millions):

	June 29, 2019		Charged to Costs and Expenses		Deductions (1)			December 28, 2019
Allowance for doubtful accounts	$	2.0	$	0.6	$	(0.3	)	$	2.3

⁽¹⁾ Represents the effect of currency translation adjustments and write-offs of uncollectible accounts, net of recoveries.

Inventories, net

The following table presents the components of inventories, net (in millions):

	December 28, 2019		June 29, 2019
Finished goods	$	36.3	$	36.7
Work in process	20.4		26.5
Raw materials	35.2		39.5
Inventories, net	$	91.9	$	102.7

Prepayments and other current assets

The following table presents the components of prepayments and other current assets (in millions):

	December 28, 2019		June 29, 2019
Prepayments	$	13.3	$	14.2
Asset held for sale	2.5		2.5
Advances to contract manufacturers	6.2		5.1
Refundable income taxes	9.1		8.9
Transaction tax receivables	10.5		11.8
Other current assets	12.9		7.4
Prepayments and other current assets	$	54.5	$	49.9

Other current liabilities

The following table presents the components of other current liabilities (in millions):

	December 28, 2019		June 29, 2019
Customer prepayments	$	4.7	$	30.2
Restructuring accrual	5.4		8.6
Income tax payable	14.3		8.5
Warranty accrual	5.1		4.7
Transaction tax payable	5.0		3.8
Operating lease liabilities (Note 12)	12.4		—
Foreign exchange forward contracts liability	1.1		4.0
Other	13.2		12.6
Other current liabilities	$	61.2	$	72.4

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VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other non-current liabilities

The following table presents components of other non-current liabilities (in millions):

	December 28, 2019		June 29, 2019
Pension and post-employment benefits	$	101.7	$	103.2
Financing obligation	16.3		25.5
Deferred tax liability	12.2		14.6
Long-term deferred revenue	18.7		13.2
Fair value of contingent consideration (1)	33.3		37.7
Operating lease liabilities (Note 12)	31.4		—
Uncertain tax position	13.9		13.6
Other	16.2		18.7
Other non-current liabilities	$	243.7	$	226.5

⁽¹⁾ See “Note 6. Acquisitions” of the Notes to our Consolidated Financial Statements for more detail.

Note 8. Investments, Forward Contracts and Fair Value Measurements

Available-For-Sale Investments

The following table presents the Company’s available-for-sale securities as of December 28, 2019 (in millions):

	Amortized Cost/ Carrying Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale debt securities:
Asset-backed securities	$	0.9	$	—	$	(0.4	)	$	0.5
Total available-for-sale debt securities	$	0.9	$	—	$	(0.4	)	$	0.5

The Company generally classifies debt securities as available-for-sale and 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 December 28, 2019, the total estimated fair value of $0.5 million was classified as other non-current assets.

 In addition to the amounts presented above, the Company’s short-term investments classified as trading securities related to the deferred compensation plan as of December 28, 2019, were $1.6 million, of which $0.5 million was invested in debt securities, $0.3 million was invested in money market instruments and funds and $0.8 million was invested in equity securities. Trading securities are reported at fair value, with the unrealized gains or losses resulting from changes in fair value recognized in the Company’s Consolidated Statements of Operations as a component of interest and other income, net.

During the three and six months ended December 28, 2019 and December 29, 2018, the Company recorded no other-than-temporary impairment charges in each respective period.

The following table presents contractual maturities of the Company’s debt securities classified as available-for-sale as of December 28, 2019, (in millions):

	Amortized Cost/ Carrying Cost		Estimated Fair Value
Amounts maturing in more than 5 years	$	0.9	$	0.5
Total debt available-for-sale securities	$	0.9	$	0.5

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VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the Company’s available-for-sale securities as of June 29, 2019, (in millions):

	Amortized Cost/ Carrying Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale securities:
Asset-backed securities	$	0.9	$	—	$	(0.3	)	$	0.6
Total available-for-sale securities	$	0.9	$	—	$	(0.3	)	$	0.6

As of June 29, 2019, of the estimated fair value of $0.6 million was classified as other non-current assets.

In addition to the amounts presented above, as of June 29, 2019, the Company’s short-term investments classified as trading securities, related to the deferred compensation plan, were $1.5 million, of which $0.4 million was invested in debt securities, $0.3 million was invested in money market instruments and funds and $0.8 million was invested in equity securities. Trading securities are reported at fair value, with the unrealized gains or losses resulting from changes in fair value recognized in the Company’s Consolidated Statements of Operations as a component of interest and other income, net.

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. There is an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the most observable inputs be used when available. Observable inputs are, inputs which market participants would use in valuing an asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs, which reflect the assumptions market participants would use in valuing an asset or liability.

The 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 inputs, that are unobservable and significant to the overall fair value measurement. As of December 28, 2019 and June 29, 2019, the Company did not hold any Level 3 investment securities. The fair value of the Company’s contingent liability was determined using Level 3 inputs, as discussed below.

17

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value Measurements

The following table presents assets and liabilities measured at fair value as of December 28, 2019 and June 29, 2019, (in millions):

	December 28, 2019								June 29, 2019
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Debt available-for-sale securities
Asset-backed securities	$	0.5	$	—	$	0.5	$	—	$	0.6	$	—	$	0.6	$	—
Total debt available-for-sale securities	0.5		—		0.5		—		0.6		—		0.6		—
Money market funds	349.3		349.3		—		—		322.9		322.9		—		—
Trading securities	1.6		1.6		—		—		1.5		1.5		—		—
Foreign currency forward contract (1)	5.9		—		5.9		—		1.2		—		1.2		—
Total assets (2)	$	357.3	$	350.9	$	6.4	$	—	$	326.2	$	324.4	$	1.8	$	—
Liability:
Foreign currency forward contract (3)	$	1.1	$	—	$	1.1	$	—	$	4.0	$	—	$	4.0	$	—
Contingent consideration (4)	34.1		—		—		34.1		38.4		—		—		38.4
Total liabilities	$	35.2	$	—	$	1.1	$	34.1	$	42.4	$	—	$	4.0	$	38.4

⁽¹⁾  $5.9 million and $1.2 million in prepayments and other current assets on the Company’s Consolidated Balance Sheets as of December 28, 2019 and June 29, 2019, respectively.

⁽²⁾   $341.9 million in cash and cash equivalents, $1.6 million in short-term investments, $3.4 million in restricted cash, $5.9 million in prepayments and other current assets, and $4.5 million in other non-current assets on the Company’s Consolidated Balance Sheets as of December 28, 2019. $315.5 million in cash and cash equivalents, $1.5 million in short-term investments, $3.5 million in restricted cash, $1.2 million in other current assets, and $4.5 million in other non-current assets on the Company’s Consolidated Balance Sheets as of June 29, 2019.

⁽³⁾  $1.1 million and $4.0 million in other current liabilities on the Company’s Consolidated Balance Sheets as of December 28, 2019 and June 29, 2019, respectively.

⁽⁴⁾  $0.8 million and $0.7 million in other current liabilities on the Company’s Consolidated Balance Sheets as of December 28, 2019 and June 29, 2019, respectively. $33.3 million and $37.7 million in other non-current liabilities on the Company’s Consolidated Balance Sheets as of December 28, 2019 and June 29, 2019, respectively.

The Company’s Level 3 liabilities as of December 28, 2019, consist of contingent purchase consideration. The Company has aggregate contingent liabilities related to its acquisitions. The earn-out liabilities represent future payments by the Company of up to $63.0 million over three years, that are contingent on the achievement of certain revenue and gross profit targets. As of December 28, 2019, the aggregate fair value of our contingent consideration was $34.1 million. The fair value of earn-out liabilities were determined using a Monte Carlo Simulation that includes significant unobservable inputs such as the risk-free rate, risk-adjusted discount rate, the volatility of the underlying financial metrics and projected financial forecast of the acquired business over the earn-out period. The fair value of contingent consideration liabilities is remeasured at each reporting period at the estimated fair value based on the input on the date of remeasurement, with the change in fair value recognized in Selling, General and Administrative expense of the Consolidated Statements of Operations.

18

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides a reconciliation of changes in fair value of the Company’s Level 3 liabilities for the three and six months ended December 28, 2019 (in millions):

	Three Months Ended					Six Months Ended
	December 28, 2019			December 29, 2018		December 28, 2019			December 29, 2018
Beginning period balance	$	40.1		$	—	$	38.4		$	—
Additions: To Level 3 contingent consideration liabilities	—			36.2		—			36.2
Fair value adjustment of contingent consideration liabilities	(6.0		)	—		(4.3		)	—
Ending period balance	$	34.1		$	36.2	$	34.1		$	36.2

No payments were made in connection with the Company’s contingent earn-out liabilities during the three and six months ended December 28, 2019 and December 29, 2018.

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 December 28, 2019, the Company had forward contracts that were effectively closed but not settled with the counterparties by quarter end. Therefore, the fair value of these contracts of $5.9 million and $1.1 million is reflected as prepayments and other current assets and other current liabilities, respectively. As of June 29, 2019, the fair value of these contracts of $1.2 million and $4.0 million is reflected as prepayments and other current assets and other current liabilities, respectively.

The forward contracts outstanding and not effectively closed, with a term of less than 120 days, were transacted near quarter end; therefore, the fair value of the contracts is not significant. As of December 28, 2019 and June 29, 2019, the notional amounts of the forward contracts the Company held to purchase foreign currencies were $124.7 million and $117.8 million, respectively, and the notional amounts of forward contracts the Company held to sell foreign currencies were $36.6 million and $31.3 million, respectively.

The change in the fair value of foreign currency forward contracts is recorded as gain or loss in the Company’s Consolidated Statements of Operations as a component of interest and other income, net. The cash flows related to the settlement of foreign currency forward contracts are classified as operating activities. The foreign exchange forward contracts incurred a gain of $4.8 million and $2.2 million for the three and six months ended December 28, 2019, respectively. The foreign exchange forward contracts incurred a loss of $4.5 million and $5.8 million for the three and six months ended December 29, 2018, respectively.

19

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9. Goodwill

The following table presents changes in goodwill allocated to the Company’s reportable segments (in millions):

	Network Enablement		Service Enablement		Optical Security and Performance Products		Total
Balance as of June 29, 2019	$	338.9	$	—	$	42.2	$	381.1
Currency translation adjustments	3.4		—		—		3.4
Balance as of December 28, 2019	$	342.3	$	—	$	42.2	$	384.5

The Company tests goodwill for impairment at the reporting unit level annually during the fourth quarter of each fiscal year, or more frequently if events or circumstances indicate that the asset may be impaired. In the fourth quarter of fiscal 2019, the Company reviewed goodwill under the qualitative assessment of the authoritative guidance and concluded that it was more likely than not that the fair value of each reporting unit exceeded its carrying amount and that no indication of impairment existed.

There were no events or changes in circumstances which triggered an impairment review during the three and six months ended December 28, 2019.

Note 10. Acquired Developed Technology and Other Intangibles

The following tables present details of the Company’s acquired developed technology, customer relationships and other intangibles (in millions):

As of December 28, 2019	Gross Carrying Amount		Accumulated Amortization			Net
Acquired developed technology	$	439.7	$	(329.4	)	$	110.3
Customer relationships	195.3		(141.9		)	53.4
Other (1)	36.7		(21.1		)	15.6
Total intangibles	$	671.7	$	(492.4	)	$	179.3

As of June 29, 2019	Gross Carrying Amount		Accumulated Amortization			Net
Acquired developed technology	$	437.0	$	(311.1	)	$	125.9
Customer relationships	193.7		(126.3		)	67.4
Other (1)	36.1		(17.8		)	18.3
Total intangibles	$	666.8	$	(455.2	)	$	211.6

⁽¹⁾  Other intangibles consist of customer backlog, non-competition agreements, patents, proprietary know-how and trade secrets, trademarks and trade names.

20

VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the amortization recorded relating to acquired developed technology, customer relationships and other intangibles (in millions):    

	Three Months Ended				Six Months Ended
	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
Cost of revenues	$	8.4	$	8.5	$	16.8	$	17.9
Operating expenses	8.8		10.4		17.5		20.2
Total amortization of intangible assets	$	17.2	$	18.9	$	34.3	$	38.1

Based on the carrying amount of acquired developed technology, customer relationships and other intangibles as of December 28, 2019, and assuming no future impairment of the underlying assets, the estimated future amortization is as follows (in millions):

Fiscal Years
Remainder of 2020	$	34.0
2021	64.4
2022	37.7
2023	23.8
2024	9.2
Thereafter	10.2
Total amortization	$	179.3

The acquired developed technology, customer relationships and other intangibles balance are adjusted quarterly to record the effect of currency translation adjustments.

Note 11. Debt

As of December 28, 2019 and June 29, 2019, the Company’s long-term debt on the Consolidated Balance Sheets represented the carrying amount of the liability component of the Senior Convertible Notes, net of unamortized debt discounts and issuance costs.

The following table presents the carrying amounts of the liability and equity components of our debt (in millions):

	December 28, 2019			June 29, 2019
Principal amount of 1.00% Senior Convertible Notes	$	460.0		$	460.0
Principal amount of 1.75% Senior Convertible Notes	225.0			225.0
Unamortized discount of liability component	(89.5		)	(99.8		)
Unamortized debt issuance cost	(5.7		)	(6.4		)
Carrying amount of liability component	$	589.8		$	578.8
Carrying amount of equity component (1)	$	136.8		$	136.8

⁽¹⁾  Included in additional paid-in-capital on the Consolidated Balance Sheets.

The Company was in compliance with all debt covenants as of December 28, 2019 and June 29, 2019.

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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 (the “Exchange Transaction”) 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”). The carrying value of the liability component at issuance was calculated as the present value of its cash flows using a discount rate of 5.3% based on the 5-year swap rate plus credit spread as of the issuance date. As of December 28, 2019, the expected remaining term of the 2023 Notes is 3.4 years.

The proceeds from the 2023 Notes Private Placement amounted to $67.3 million after issuance costs. The 2023 Notes are an unsecured obligation of the Company and bear interest at an annual rate of 1.75% payable in cash semi-annually in arrears on June 1st and December 1st of each year, beginning December 1, 2018. The 2023 Notes mature on June 1, 2023 unless earlier converted, redeemed or repurchased.

Based on quoted market prices as of December 28, 2019 and June 29, 2019, the fair value of the 2023 Notes was approximately $282.5 million and $261.3 million, respectively. The 2023 Notes are classified within Level 2 as they are not actively traded in markets.

1.00% Senior Convertible Notes (“2024 Notes”)

On March 3, 2017, the Company issued $400.0 million aggregate principal amount of 1.00% Senior Convertible Notes due 2024 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 $60.0 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. 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. As of December 28, 2019, the expected remaining term of the 2024 Notes is 4.2 years.

Based on quoted market prices as of December 28, 2019 and June 29, 2019, the fair value of the 2024 Notes was approximately $596.3 million and $540.8 million, respectively. The 2024 Notes are classified within Level 2 as they are not actively traded in markets.

Interest Expense

The following table presents the interest expense for contractual interest, amortization of debt issuance costs and accretion of debt discount (in millions):

	Three Months Ended				Six Months Ended
	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
Interest expense-contractual interest	$	2.2	$	2.1	$	4.3	$	4.5
Amortization of debt issuance cost	0.4		0.3		0.7		0.7
Accretion of debt discount	5.2		4.9		10.3		11.4

Note 12. Leases

The Company is a lessee in several operating leases, primarily real estate facilities for office space. 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. As 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

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or terminate the lease when it is reasonably certain that an option will be exercised. Operating 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 in the Company’s 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.

The Company's lease arrangements are composed of operating leases with various expiration dates through February 28, 2030. The Company's leases do not contain any material residual value guarantees.

For the three and six months ended December 28, 2019, the total operating lease costs were $3.3 million and $6.6 million, respectively. Total variable lease costs were immaterial during the three and six months ended December 28, 2019. The total operating costs were included in cost of revenues, research and development, selling, general and administrative in the Company’s Consolidated Statements of Operations.

As of December 28, 2019, the weighted-average remaining lease term was 5.4 years, and the weighted-average discount rate was 4.7%.

For the three and six months ended December 28, 2019, cash paid for amounts included in the measurement of operating lease liabilities were $5.8 million and $9.2 million, respectively; and operating ROU assets obtained in exchange of new operating lease liabilities were $12.6 million and $14.5 million, respectively.

The balance sheet information related to our operating leases is as follows (in millions):

	December 28, 2019
Other non-current assets	$	44.9
Total operating ROU assets	$	44.9
Other current liabilities	$	12.4
Other non-current liabilities	31.4
Total operating lease liabilities	$	43.8

Future minimum operating lease payments as of December 28, 2019 are as follows (in millions):

	Operating Leases
Remainder of 2020	$	6.0
2021	12.8
2022	9.9
2023	5.6
2024	4.2
Thereafter	10.8
Total lease payments	$	49.3
Less: Interest	(5.5		)
Present value of lease liabilities	$	43.8

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Prior to the adoption of the new lease standard, future minimum undiscounted operating lease payments as of June 29, 2019, excluding non-lease components, were as follows (in millions):

	Operating Leases
Fiscal 2020	$	11.7
Fiscal 2021	10.8
Fiscal 2022	7.4
Fiscal 2023	3.9
Fiscal 2024	2.5
Thereafter	5.3
Less: sublease income	(0.1		)
Total lease payments	$	41.5

Note 13. Restructuring and Related Charges

The Company has initiated restructuring events primarily intended to reduce its costs, consolidate its operations, integrate various acquisitions, streamline product manufacturing and align its business to address market conditions. The Company’s restructuring charges primarily include severance and benefit costs to eliminate a specific number of positions, facilities and equipment costs to vacate facilities and consolidate operations, and lease termination costs. The timing of associated cash payments is dependent upon the type of restructuring charge and can extend over multiple periods.

As of December 28, 2019 and June 29, 2019, the Company’s total restructuring accrual was $5.4 million and $8.8 million, respectively. During the three and six months ended December 28, 2019, the Company recorded restructuring and related benefits of $0.9 million and $0.6 million, respectively. During the three and six months ended December 29, 2018, the Company recorded restructuring and related charges of $0.3 million and $15.1 million, respectively.

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Summary of Restructuring Plans

The following table presents the adjustments to the accrued restructuring expenses related to all of the Company’s restructuring plans described below for the three and six months ended December 28, 2019 (in millions):

	Balance June 29, 2019		Six Months Ended December 28, 2019 Benefits			Cash Settlements			Non-cash Settlements and Other Adjustments (2)			Balance December 28, 2019		Three Months Ended December 28, 2019 Benefits
Fiscal 2019 Plan
NSE, including AW (1)	$	8.7	$	(0.6	)	$	(2.3	)	$	(0.4	)	$	5.4	$	(0.9	)
Plans Prior to Fiscal 2017
Other Plans (1)	0.1		—			—			(0.1		)	—		—
Total (3)	$	8.8	$	(0.6	)	$	(2.3	)	$	(0.5	)	$	5.4	$	(0.9	)

⁽¹⁾  Plan type includes workforce reduction cost.

⁽²⁾  Other adjustments including $0.2 million lease liability reclassification to Operating lease liability upon ASC 842 adoption.

⁽³⁾  $5.4 million and $8.6 million in other current liabilities on the Consolidated Balance Sheets as of December 28, 2019 and June 29, 2019, respectively. $0.2 million in other non-current liabilities on the Consolidated Balance Sheets as of June 29, 2019.

Fiscal 2019 Plans

NSE, including AW Restructuring Plan

During the first quarter of fiscal 2019, Management approved restructuring and workforce reduction plans within its Network Service and Enablement (“NSE”) business, including actions related to the recently acquired AW business. These actions further drive the Company’s strategy for organizational alignment and consolidation as part of its continued commitment to a more cost effective and agile organization and to improve overall profitability in the Company’s NSE business. Included in these restructuring plans are specific actions to consolidate and integrate the newly acquired AW business within the NSE business segment. During the third quarter of fiscal 2019, the Company has updated the plan to include additional headcount primarily to transfer a portion of the manufacturing operations related to the recently acquired AW business to a contract manufacturer. A restructuring benefits of $0.6 million was recorded in the six months ended December 28, 2019 for adjustments to severance and employee benefits. Payments related to the severance and benefits accrual are expected to be paid by the end of the fourth quarter of fiscal 2020.

Note 14. Income Taxes

The Company recorded an income tax expense of $9.9 million and $18.2 million for the three and six months ended December 28, 2019, respectively. The Company recorded an income tax expense of $10.9 million and $16.6 million for the three and six months ended December 29, 2018, respectively.

The income tax expense for the three and six months ended December 28, 2019 and December 29, 2018 primarily relates to income tax in certain foreign and state jurisdictions based on the Company’s forecasted pre-tax income or loss for the respective fiscal year.

The income tax expense recorded differs from the expected tax expense that would be calculated by applying the federal statutory rate to the Company’s income from continuing operations before taxes primarily due to the changes in valuation allowance for deferred tax assets attributable to the Company’s domestic and foreign income (loss) from continuing operations.

As of December 28, 2019, and June 29, 2019, the Company’s unrecognized tax benefits totaled $50.7 million and $50.9 million, respectively, and are included in deferred taxes and other non-current tax liabilities, net. The Company had $4.2 million accrued for the payment of interest and penalties at December 28, 2019. The timing and resolution of income tax examinations is uncertain, and the amounts ultimately paid, if any, upon resolution of issues raised by the taxing authorities may differ from the amounts accrued for each year. Although the Company does not expect that our balance of gross unrecognized tax benefits will change materially in the next 12 months, given the uncertainty in the development of ongoing income tax examinations, the Company is unable to estimate the full range of possible adjustments to this balance.

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Note 15. Stockholders' Equity

Repurchase of Common Stock

In September 2019, the Board of Directors authorized a stock repurchase program up to $200 million of the Company’s common stock through open market or private transactions before September 30, 2021. The new stock repurchase program replaces the previous $200 million stock repurchase program that was set to expire on September 30, 2019. Under the new repurchase program, the Company may repurchase its common stock from time to time at the discretion of the Company’s management.

During the three and six months ended December 28, 2019, the Company repurchased 659 thousand and 763 thousand shares of its common stock for $9.2 million and $10.7 million, respectively. As of December 28, 2019, the Company had remaining authorization of $189.3 million for future share repurchases. The number of shares to be repurchased and the timing of such repurchases will be based on several factors, including business and financial market conditions.

Note 16. Stock-Based Compensation

Overview

The impact on the Company’s results of operations of recording stock-based compensation by function for the three and six months ended December 28, 2019 and December 29, 2018, as follows (in millions):

	Three Months Ended				Six Months Ended
	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
Cost of revenues	$	1.0	$	0.9	$	2.0	$	1.7
Research and development	2.0		1.6		3.7		2.8
Selling, general and administrative	8.3		7.1		15.9		13.2
Total stock-based compensation expense	$	11.3	$	9.6	$	21.6	$	17.7

Approximately $1.2 million and $1.0 million of stock-based compensation expense was capitalized to inventory as of December 28, 2019 and December 29, 2018, respectively.

Full Value Awards

Full Value Awards refer to restricted stock units that are granted without an exercise price and are converted to shares immediately upon vesting. Performance-based awards are performance-based with market conditions, performance conditions, time-based or a combination, and are expected to vest over one to four years. When converted into shares upon vesting, 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.

During the six months ended December 28, 2019 and December 29, 2018, the Company granted 3.1 million and 3.7 million time-based awards, respectively. 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. The majority of these time-based awards vest over three years, with 33% vesting after one year and the balance vesting quarterly over the remaining two years.

During the six months ended December 28, 2019 and December 29, 2018, the Company granted 0.5 million and 0.5 million, performance-based awards, respectively. These performance-based shares represent the target amount of grants, and the actual number of shares awarded upon vesting may vary depending upon the achievement of the relevant performance conditions. The shares attained over target upon vesting are reflected as awards granted during the period. Accordingly, during the six months ended December 28, 2019 and December 29, 2018, the Company granted additional 0.2 million and 0.1 million shares due to performance-based shares attained over target. The aggregate grant-date fair value of performance-based awards granted during the six months ended December 28, 2019 and December 29, 2018 were estimated to be $7.7 million and $6.2 million, respectively. The majority of performance-based awards vest in equal annual installments over three years based on the attainment of certain

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performance measures and the employee’s continued service through the vest date. The performance-based awards with market conditions were valued using a Monte Carlo simulation.

As of December 28, 2019, $76.5 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 2.0 years.

Note 17. Employee Pension and Other Benefit Plans

The Company sponsors significant qualified and non-qualified pension plans for certain past and present employees in the United Kingdom (“U.K.”) and Germany. The Company also is responsible for the non-pension post-retirement benefit obligation assumed from a past acquisition.

Most of the 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 in fiscal 2010. Benefits are generally based upon years of service and compensation or stated amounts for each year of service.

As of December 28, 2019, the U.K. plan was partially 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. During the six months ended December 28, 2019, the Company contributed $0.6 million to the U.K. plan and $1.8 million to the other plans. The funded plan assets consist primarily of managed investments.

The following table presents the components of net periodic cost for the pension and benefits plans (in millions):

	Three Months Ended						Six Months Ended
	December 28, 2019			December 29, 2018			December 28, 2019			December 29, 2018
Service cost	$	0.1		$	0.1		$	0.2		$	0.1
Interest cost	0.5			0.6			0.9			1.2
Expected return on plan assets	(0.4		)	(0.4		)	(0.8		)	(0.8		)
Amortization of net actuarial losses	0.8			0.4			1.5			1.0
Net periodic benefit cost	$	1.0		$	0.7		$	1.8		$	1.5

Both the calculation of the projected benefit obligation and net periodic cost are based upon 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.

The Company expects to incur cash outlays of approximately $7.9 million related to its defined benefit pension plans during fiscal 2020 to make current benefit payments and fund future obligations. As of December 28, 2019, approximately $2.4 million had been incurred. These payments have been estimated based on the same assumptions used to measure the Company’s projected benefit obligation at June 29, 2019.

Note 18. Commitments and Contingencies

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. The Company estimated the liability to range from (amounts represented as £ denote GBP) £5.7 million to £8.4 million. The Company determined 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 accrual is included in pension and post-employment benefits, which is a component of other non-current liabilities in the Company’s Consolidated Balance Sheets.

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The Company pursued an appeal of the court decision. In March 2018, the appellate court affirmed the decision of the lower court. The Company is pursuing a deed of rectification claim and continues to pursue a claim against the U.K. law firm responsible for the error. As of December 28, 2019, the related accrued pension liability was £6.5 million or $8.5 million.

The Company is subject to a variety of claims and suits that arise from time to time in the ordinary course of our 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.

Guarantees

The Company follows authoritative guidance which requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that 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 December 28, 2019 and June 29, 2019.

Outstanding Letters of Credit and Performance Bonds

As of December 28, 2019, the Company had standby letters of credit of $7.4 million and performance bonds of $1.0 million collateralized by restricted cash.

Product Warranties

The Company provides reserves for the estimated costs of product warranties at the time revenue is recognized. In general, the Company offers its customers warranties up to three years and has accrued a reserve for the estimated costs of product warranties at the time revenue is recognized. It 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. From time to time, specific warranty accruals may be made if unforeseen technical problems arise. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

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The following table presents the changes in the Company’s warranty reserve during the three and six months ended December 28, 2019 and December 29, 2018, (in millions):

	Three Months Ended						Six Months Ended
	December 28, 2019			December 29, 2018			December 28, 2019			December 29, 2018
Balance as of beginning of period	$	8.8		$	9.0		$	8.7		$	8.2
Provision for warranty	0.9			1.0			1.3			1.4
Utilization of reserve	(0.8		)	(1.5		)	(1.8		)	(2.7		)
Adjustments related to pre-existing warranties (including changes in estimates)	0.3			0.7			1.0			2.3
Balance as of end of period	$	9.2		$	9.2		$	9.2		$	9.2

Note 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 is the Company’s Chief Operating Decision Maker (“CODM”). The Company's reportable segments reflect the way the Company's CODM review and assess performance of the business.

The Company’s reportable segments are:

(i) Network Enablement:

NE provides 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. The Company also offers a range of product support and professional services such as repair, calibration, software support and technical assistance for our products.

(ii) Service Enablement:

SE solutions are embedded systems that yield 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 provides innovative, precision, high performance optical products for anti-counterfeiting, government, industrial, automotive and consumer electronic markets, including 3D Sensing applications.

The CODM manages the Company in two broad business categories: NSE and OSP. The CODM evaluates segment performance of the NSE business based on the combined segment gross and operating margins. Operating expenses associated with the NSE business are not allocated to the individual segments within NSE, as they are managed centrally at the business unit level. The CODM evaluates segment performance of the OSP business based on segment operating margin. The Company allocates corporate-level operating expenses to its segment results, except 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 (benefits) charges, impairment of goodwill, changes in fair value of contingent consideration liabilities, non-operating income and expenses, or other charges unrelated to core operating performance to its segments because management does not include this information in its measurement of the performance of the operating segments. These items are presented as “Other Items” in the table below. Additionally, the Company does not specifically identify and allocate all assets by operating segment.

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The following tables presents information on the Company’s reportable segments for the three months ended December 28, 2019 and December 29, 2018 (in millions):

	Three Months Ended December 28, 2019
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Other Items			Consolidated GAAP Measures
Product revenue	$	183.9		$	18.6		$	202.5		$	79.4		$	—		$	281.9
Service revenue	19.1			12.6			31.7			0.1			—			31.8
Net revenue	$	203.0		$	31.2		$	234.2		$	79.5		$	—		$	313.7
Gross profit	$	134.8		$	20.8		$	155.6		$	43.6		$	(9.7	)	$	189.5
Gross margin	66.4		%	66.7		%	66.4		%	54.8		%				60.4		%
Operating income							$	37.5		$	30.4		$	(22.9	)	$	45.0
Operating margin							16.0		%	38.2		%				14.3		%

	Three Months Ended December 29, 2018
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Other Items			Consolidated GAAP Measures
Product revenue	$	176.0		$	13.8		$	189.8		$	83.0		$	—		$	272.8
Service revenue	19.5			14.4			33.9			0.2			—			34.1
Net revenue	$	195.5		$	28.2		$	223.7		$	83.2		$	—		$	306.9
Gross profit	$	125.7		$	20.3		$	146.0		$	41.8		$	(9.8	)	$	178.0
Gross margin	64.3		%	72.0		%	65.3		%	50.2		%				58.0		%
Operating income							$	32.8		$	31.1		$	(31.0	)	$	32.9
Operating margin							14.7		%	37.4		%				10.7		%

	Three Months Ended
	December 28, 2019			December 29, 2018
Corporate reconciling items impacting gross profit:
Total segment gross profit	$	199.2		$	187.8
Stock-based compensation	(1.0		)	(0.9		)
Amortization of intangibles	(8.4		)	(8.5		)
Other charges unrelated to core operating performance	(0.3		)	(0.4		)
GAAP gross profit	$	189.5		$	178.0
Corporate reconciling items impacting operating income:
Total segment operating income	$	67.9		$	63.9
Stock-based compensation	(11.3		)	(9.6		)
Amortization of intangibles	(17.2		)	(18.9		)
Change in fair value of contingent liability	6.0			—
Other charges unrelated to core operating performance (1)	(1.3		)	(2.2		)
Restructuring and related (benefits) charges	0.9			(0.3		)
GAAP operating income from continuing operations	$	45.0		$	32.9

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⁽¹⁾  During the three months ended December 28, 2019 and December 29, 2018, other charges unrelated to core operating performance primarily consisted of certain acquisition and integration related changes, transformational initiatives such as, site consolidations, and reorganization, loss on sale of investments and loss on disposal of long-lived assets.

The following tables presents information on the Company’s reportable segments for the six months ended December 28, 2019 and December 29, 2018 (in millions):

	Six Months Ended December 28, 2019
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Other Items (1)			Consolidated GAAP Measures
Product revenue	$	361.2		$	26.3		$	387.5		$	159.2		$	—		$	546.7
Service revenue	40.7			25.8			66.5			0.3			—			66.8
Net revenue	$	401.9		$	52.1		$	454.0		$	159.5		$	—		$	613.5
Gross profit	$	262.8		$	33.4		$	296.2		$	86.9		$	(19.2	)	$	363.9
Gross margin	65.4		%	64.1		%	65.2		%	54.5		%				59.3		%
Operating income							$	59.8		$	60.8		$	(54.9	)	$	65.7
Operating margin							13.2		%	38.1		%				10.7		%

	Six Months Ended December 29, 2018
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Other Items (1)			Consolidated GAAP Measures
Product revenue	$	325.9		$	27.4		$	353.3		$	160.6		$	—		$	513.9
Service revenue	34.1			27.0			61.1			0.4			—			61.5
Net revenue	$	360.0		$	54.4		$	414.4		$	161.0		$	—		$	575.4
Gross profit	$	228.6		$	38.6		$	267.2		$	81.2		$	(20.0	)	$	328.4
Gross margin	63.5		%	71.0		%	64.5		%	50.4		%				57.1		%
Operating income							$	49.2		$	58.5		$	(76.0	)	$	31.7
Operating margin							11.9		%	36.3		%				5.5		%

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VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	Six Months Ended
	December 28, 2019			December 29, 2018
Corporate reconciling items impacting gross profit:
Total segment gross profit	$	383.1		$	348.4
Stock-based compensation	(2.0		)	(1.7		)
Amortization of intangibles	(16.8		)	(17.9		)
Other charges unrelated to core operating performance (2)	(0.4		)	(0.4		)
GAAP gross profit	$	363.9		$	328.4
Corporate reconciling items impacting operating income:
Total segment operating income	$	120.6		$	107.7
Stock-based compensation	(21.6		)	(17.7		)
Amortization of intangibles	(34.3		)	(38.1		)
Change in fair value of contingent liability	4.3			—
Other charges unrelated to core operating performance (2)	(3.9		)	(5.1		)
Restructuring and related (benefits) charges	0.6			(15.1		)
GAAP operating income from continuing operations	$	65.7		$	31.7

The Company operates primarily in three geographic regions: Americas, Asia-Pacific, and Europe, Middle East and Africa (“EMEA”). Net revenue is assigned to the geographic region and country where our product is initially shipped. 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 tables presents net revenue by the three geographic regions we operate in and net revenue from countries that exceeded 10% of our total net revenue for the three and six months ended December 28, 2019 and December 29, 2018, (in millions):

	Three Months Ended
	December 28, 2019						December 29, 2018
	Product Revenue		Service Revenue		Total		Product Revenue		Service Revenue		Total
Americas:
United States	$	83.1	$	13.1	$	96.2	$	89.8	$	14.3	$	104.1
Other Americas	17.2		3.4		20.6		17.3		4.0		21.3
Total Americas	$	100.3	$	16.5	$	116.8	$	107.1	$	18.3	$	125.4
Asia-Pacific:
Greater China	$	78.4	$	2.1	$	80.5	$	64.8	$	2.1	$	66.9
Other Asia-Pacific	28.7		3.8		32.5		30.4		3.6		34.0
Total Asia-Pacific	$	107.1	$	5.9	$	113.0	$	95.2	$	5.7	$	100.9
EMEA:
Switzerland	$	13.4	$	0.1	$	13.5	$	23.0	$	—	$	23.0
Other EMEA	61.1		9.3		70.4		47.5		10.1		57.6
Total EMEA	$	74.5	$	9.4	$	83.9	$	70.5	$	10.1	$	80.6
Total net revenue	$	281.9	$	31.8	$	313.7	$	272.8	$	34.1	$	306.9

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VIAVI SOLUTIONS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	Six Months Ended
	December 28, 2019						December 29, 2018
	Product Revenue		Service Revenue		Total		Product Revenue		Service Revenue		Total
Americas:
United States	$	154.5	$	26.7	$	181.2	$	149.9	$	27.0	$	176.9
Other Americas	33.8		7.5		41.3		35.2		7.1		42.3
Total Americas	$	188.3	$	34.2	$	222.5	$	185.1	$	34.1	$	219.2
Asia-Pacific:
Greater China	$	148.9	$	3.5	$	152.4	$	123.5	$	2.3	$	125.8
Other Asia-Pacific	60.0		7.8		67.8		66.4		7.1		73.5
Total Asia-Pacific	$	208.9	$	11.3	$	220.2	$	189.9	$	9.4	$	199.3
EMEA:
Switzerland	$	25.6	$	0.1	$	25.7	$	48.7	$	—	$	48.7
Other EMEA	123.9		21.2		145.1		90.2		18.0		108.2
Total EMEA	$	149.5	$	21.3	$	170.8	$	138.9	$	18.0	$	156.9
Total net revenue	$	546.7	$	66.8	$	613.5	$	513.9	$	61.5	$	575.4

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Statements contained in this Quarterly report on Form 10-Q, 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,” “believes,” “can,” “can impact,” “could,” “continue,” “estimates,” “expects,” “intends,” “may,” “ongoing,” “plans,” “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 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, 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 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, 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 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.

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 II, Item 1A “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q 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-Q to conform such statements to actual results or to changes in our expectations.

In addition, Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended June 29, 2019.

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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 Quarterly Report on Form 10-Q. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in “Risk Factors” and “Forward-Looking Statements.”

OUR INDUSTRIES AND QUARTERLY DEVELOPMENTS

Viavi Solutions Inc. (“VIAVI” also referred to as “the Company”, “we”, “our” and “us”), is a global provider of network test, monitoring and assurance solutions to communications service providers (“CSPs”), enterprises, network equipment manufacturers, government and avionics. We help these customers harness the power of instruments, automation, intelligence and virtualization to command the network. VIAVI is also a leader in light management solutions for 3D sensing, anti-counterfeiting, consumer electronics, industrial, automotive, and defense applications.

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

• Network Enablement (“NE”);

• Service Enablement (“SE”), and;

• Optical Security and Performance Products (“OSP”).

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 network equipment manufacturers (“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 NEMs in the design and production of next-generation network equipment. Other Test & Measurement communications products also serve the public safety, government, and, aerospace and defense markets.

We also offer a range of product support and professional services designed to comprehensively address our customers’ requirements. These services include repair, calibration, software support and technical assistance for our products. We offer product and technology training as well as consulting services. Our professional services, provided in conjunction with system integration projects, include project management, installation and implementation.

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 América Móvil, AT&T Inc., CenturyLink Inc., Cisco Systems, Inc., Comcast Corporation, Nokia Networks and Verizon Communications, Inc.

Our NE products and associated services including acquired business are described below:

Field Instruments: Primarily consisting of (a) Cable and Access products; (b) Fiber Instrument products; (c) Metro products; (d) RF Test products; (e) Radio Test products; and (f) Avionics products.

Lab Instruments: Primarily consisting of (a) Fiber Optic Production Lab Test; (b) Optical Transport products; (c) Storage Network Test products; and (d) Wireless products.

Service Enablement

SE provides embedded systems and performance management solutions that give global CSPs, enterprises and cloud operators visibility into network, service and application data. These solutions - which primarily consist of

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instruments, microprobes and software - monitor, collect and analyze network data to reveal the actual customer experience, deliver insights to optimize performance, detect security threats, and identify opportunities for new revenue streams.

Our SE solutions portfolio delivers service assurance for operational wireless and fixed communications networks also addressed by our NE portfolio, primarily supporting CSPs. Additionally, our SE portfolio supports network performance monitoring for enterprises and cloud operators. As service providers and enterprises shift their networks to a hybrid physical-cloud state, the SE portfolio provides our customers with dynamic and remote network management, control, and optimization. They can initiate service to new customers faster, decrease the need for technicians to make on-site service calls, reduce mean time to repair 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.

Our SE products and associated services are described below:

Data Center: Consisting of our Network Performance Monitoring and Security products.

Assurance: Primarily consisting of our (a) Growth Products (Core and Edge Assurance products) and (b) Mature Products (Legacy Assurance and Legacy Wireline).

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 offerings for the currency market include, Optically Variable Pigment (“OVP®”) and Optically Variable Magnetic Pigment (“OVMP®”). 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. OVMP is an advanced product version of OVP with the added magnetic property feature.

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 and Engineered Diffusers^TM.

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, L-3 Communications, Lockheed Martin, Seiko Epson, SICPA and STMicroelectronics.

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.

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

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which require management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, net revenues and expenses, and the disclosure of contingent assets and liabilities. Our estimates are based on historical experience and assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying

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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.

For a description of the critical accounting policies that affect our more significant judgments and estimates used in the preparation of our consolidated financial statements, refer to Item 7 on Management Discussion and Analysis of Financial Condition and Results of Operations in our Fiscal 2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”). There have been no material changes to our critical accounting policies and estimates, except with respect to financial reporting of leasing arrangements from the adoption of ASC 842 - Leases. Refer to “Note 12. Leases” for more details.

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 (in millions, except for percentages):

	Three Months Ended											Six Months Ended
	December 28, 2019			December 29, 2018			Change			Percent Change		December 28, 2019			December 29, 2018			Change			Percent Change
Segment net revenue:
NE	$	203.0		$	195.5		$	7.5		3.8	%	$	401.9		$	360.0		$	41.9		11.6	%
SE	31.2			28.2			3.0			10.6	%	52.1			54.4			(2.3		)	(4.2	)%
OSP	79.5			83.2			(3.7		)	(4.4	)%	159.5			161.0			(1.5		)	(0.9	)%
Total net revenue	$	313.7		$	306.9		$	6.8		2.2	%	$	613.5		$	575.4		$	38.1		6.6	%
Gross profit	$	189.5		$	178.0		$	11.5		6.5	%	$	363.9		$	328.4		$	35.5		10.8	%
Gross margin	60.4		%	58.0		%						59.3		%	57.1		%
Research and development	$	50.3		$	45.9		$	4.4		9.6	%	$	101.8		$	88.5		$	13.3		15.0	%
Percentage of net revenue	16.0		%	15.0		%						16.6		%	15.4		%
Selling, general and administrative	$	86.3		$	88.5		$	(2.2	)	(2.5	)%	$	179.5		$	172.9		$	6.6		3.8	%
Percentage of net revenue	27.5		%	28.8		%						29.3		%	30.0		%
Restructuring and related (benefits) charges	$	(0.9	)	$	0.3		$	(1.2	)	(400.0	)%	$	(0.6	)	$	15.1		$	(15.7	)	(104.0	)%
Percentage of net revenue	(0.3		)%	0.1		%						(0.1		)%	2.6		%
Interest and other income, net	$	1.3		$	1.5		$	(0.2	)	(13.3	)%	$	4.0		$	3.2		$	0.8		25.0	%
Percentage of net revenue	0.4		%	0.5		%						0.7		%	0.6		%
Interest expense	$	(8.4	)	$	(8.1	)	$	0.3		3.7	%	$	(16.7	)	$	(18.2	)	$	(1.5	)	(8.2	)%
Percentage of net revenue	2.7		%	2.6		%						2.7		%	3.2		%
Provision for income taxes	$	9.9		$	10.9		$	(1.0	)	(9.2	)%	$	18.2		$	16.6		$	1.6		9.6	%
Percentage of net revenue	3.2		%	3.6		%						3.0		%	2.9		%

Net Revenue

Revenue 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, training, professional services and post-contract support in addition to other services such as calibration and repair services. When evaluating the performance of our segments, management focuses on total net

37

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.

Three months ended December 28, 2019 and December 29, 2018

Net revenue increased by $6.8 million, or 2.2%, during the three months ended December 28, 2019 compared to the same period a year ago. This increase was due to revenue increase from our NE and SE segments, partially offset by revenue declines in our OSP segment.

Product revenues increased by $9.1 million, or 3.3%, during the three months ended December 28, 2019 compared to the same period a year ago, due to revenue increase from our NE and SE segments, partially offset by revenue declines in our OSP segment as discussed below.

Service revenues decreased by $2.3 million, or 6.7%, during the three months ended December 28, 2019 compared to the same period a year ago primarily due to revenue decreased from our SE segment.

NE net revenue increased by $7.5 million, or 3.8%, during the three months ended December 28, 2019 compared to the same period a year ago. This increase was driven by 5G wireless secular growth trends, higher fiber demand from Field Instruments due to the 400Gb upgrade cycle and cable demand strength of DOCSIS 3.1.

SE net revenue increased by $3.0 million, or 10.6%, during the three months ended December 28, 2019 compared to the same period a year ago. Due to higher demand in our Growth Assurance and Data Center products. This increase was partially offset by revenue declines from the continued runoff of Mature Assurance products.

OSP net revenue decreased by $3.7 million, or 4.4%, during the three months ended December 28, 2019 compared to the same period a year ago. This decrease is primarily driven by declines in demand for our Anti-Counterfeiting products, which benefited from higher banknote redesign demand in the fiscal first half of 2019. This decrease was partially offset by continued increasing 3D Sensing product demand driven by further adoption and the broadening of our customer base.

Six Months Ended December 28, 2019 and December 29, 2018

Net revenue increased by $38.1 million, or 6.6%, during the six months ended December 28, 2019 compared to the same period a year ago due to revenue increase from our NE segment, partially offset by our SE and OSP segments as discussed below.

Product revenues increased by $32.8 million, or 6.4% during the six months ended December 28, 2019 compared to the same period a year ago, primarily from our NE segment as discussed below.

Service revenues increased by $5.3 million, or 8.6%, during the six months ended December 28, 2019 compared to the same period a year ago primarily due to increased support revenue from the NE segment, partially offset by a decline in support contract renewals for the SE segment as discussed below.

NE net revenue increased by $41.9 million, or 11.6%, during the six months ended December 28, 2019 compared to the same period a year ago. This increase was driven by 5G wireless secular growth trends, higher fiber demand from Field Instruments due to the 400Gb upgrade cycle and cable demand strength of DOCSIS 3.1.

SE net revenue decreased by $2.3 million, or 4.2%, during the six months ended December 28, 2019 compared to the same period a year ago. This decrease was primarily driven by continued run-off of our Mature Assurance portfolio solutions, partially offset by an increase in revenues from our Growth Assurance products.

OSP net revenue decreased by $1.5 million, or 0.9%, during the six months ended December 28, 2019 compared to the same period a year ago. This decrease is primarily driven by declines in demand for our Anti-Counterfeiting products, which benefited from higher banknote redesign demand in the fiscal first half of 2019. This decrease was partially offset by continued 3D Sensing product demand driven by further adoption and the broadening of our customer base.

Going forward, we expect to continue to encounter a number of industry and market risks and uncertainties that may limit our visibility, and consequently, our ability to predict future revenue, seasonality, profitability and general financial performance, and that could create period over period variability in our financial measures. For example, while the majority of our net revenue and expenses are denominated in U.S. dollars, a portion of our international operations

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are denominated in foreign currencies. The strengthening of the U.S. dollar relative to foreign currencies could negatively impact reported revenue.

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; (d) the current trend of communication industry consolidation, which is expected to continue, that directly affects our NE and SE customer bases and adds additional risk and uncertainty to our financial and business projections; (e) the impact of ongoing global trade policies, tariffs and sanctions; and (f) regulatory or economic developments that slow or change the rate of adoption of 5G, 3D Sensing and other emerging secular technologies and platforms.

Revenue by Region

We operate in three geographic regions: Americas, Asia-Pacific and Europe Middle East and Africa (“EMEA”). Net revenue is assigned to the geographic region and country where our product is initially shipped. 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 (in millions):

	Three Months Ended								Six Months Ended
	December 28, 2019				December 29, 2018				December 28, 2019				December 29, 2018
Americas:
United States	$	96.2	30.7	%	$	104.1	33.9	%	$	181.2	29.5	%	$	176.9	30.7	%
Other Americas	20.6		6.5	%	21.3		6.9	%	41.3		6.8	%	42.3		7.4	%
Total Americas	$	116.8	37.2	%	$	125.4	40.8	%	$	222.5	36.3	%	$	219.2	38.1	%
Asia-Pacific:
Greater China	$	80.5	25.7	%	$	66.9	21.8	%	$	152.4	24.8	%	$	125.8	21.9	%
Other Asia-Pacific	32.5		10.3	%	34.0		11.1	%	67.8		11.1	%	73.5		12.7	%
Total Asia-Pacific	$	113.0	36.0	%	$	100.9	32.9	%	$	220.2	35.9	%	$	199.3	34.6	%
EMEA:
Switzerland	$	13.5	4.3	%	$	23.0	7.5	%	$	25.7	4.2	%	$	48.7	8.5	%
Other EMEA	70.4		22.5	%	57.6		18.8	%	145.1		23.6	%	108.2		18.8	%
Total EMEA	$	83.9	26.8	%	$	80.6	26.3	%	$	170.8	27.8	%	$	156.9	27.3	%
Total net revenue	$	313.7	100.0	%	$	306.9	100.0	%	$	613.5	100.0	%	$	575.4	100.0	%

Net revenue from customers outside the Americas during the three months ended December 28, 2019 and December 29, 2018 represented 62.8% and 59.2% of net revenue, respectively.

Net revenue from customers outside the Americas during the six months ended December 28, 2019 and December 29, 2018 represented 63.7% and 61.9% of net revenue, respectively. 

We expect revenue from customers outside of United States to continue to be an important part of our overall net revenue and an increasing focus for net revenue growth opportunities.

Gross Margin

Gross margin increased by 2.4 percentage points during the three months ended December 28, 2019 from 58.0% in the same period a year ago to 60.4% in the current period. This increase was primarily driven by higher revenue volume and favorable product mix within our NE segment and better manufacturing absorption in our OSP segment.

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The increase was partially offset by gross margin reduction in our SE segment as discussed below in the Operating Segment Information section.

Gross margin increased by 2.2 percentage points during the six months ended December 28, 2019 from 57.1% in the same period a year ago to 59.3% in the current period. This increase was primarily driven by higher revenue volume and favorable product mix within our NE segment and better manufacturing absorption in our OSP segment. This increase was partially offset by gross margin reduction in our SE segment as discussed below in the Operating Segment Information section.

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 increased by $4.4 million, or 9.6%, during the three months ended December 28, 2019 compared to the same period a year ago. This increase was primarily driven by targeted investments to support increased demand for our Wireless products. As a percentage of net revenue, R&D increased by 1.0 percentage points during the three months ended December 28, 2019 compared to the same period a year ago.

R&D expense increased by $13.3 million, or 15.0%, during the six months ended December 28, 2019 compared to the same period a year ago. This increase was primarily driven by targeted investments to support increased demand for our key product lines and additional R&D costs incurred from our acquired businesses. As a percentage of net revenue R&D increased by 1.2 percentage points during the six months ended December 28, 2019 compared to the same period a year ago.

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 $2.2 million or 2.5%, during the three months ended December 28, 2019 compared to the same period a year ago. This decrease was primarily due to change in fair value of contingent consideration, partially offset by targeted investments including upgrading our ERP and related systems, 3D Sensing products and additional SG&A costs incurred from our acquired businesses. As a percentage of net revenue, SG&A decreased 1.3 percentage points during the three months ended December 28, 2019 compared to the same period a year ago.

SG&A expense increased by $6.6 million, or 3.8%, during the six months ended December 28, 2019 compared to the same period a year ago. This increase is primarily due to ongoing investments including upgrading our ERP and related systems, targeted investments to support increased demand for our Wireless, Fiber and 3D Sensing products and additional SG&A costs incurred from our acquired businesses. It is partially offset by the change in fair value of contingent consideration. As a percentage of net revenue, SG&A decreased 0.7 percentage points during the six months ended December 28, 2019 compared to the same period a year ago.

We intend to continue to focus on reducing our SG&A expense as a percentage of net revenue. However, we may experience in the future, certain charges unrelated to our core operating performance, such as mergers and acquisitions-related expenses, litigation expenses and charges from changes in the fair value measurement of our contingent consideration liabilities, which could increase our SG&A expenses and potentially impact our profitability expectations in any particular quarter.

Restructuring and Related Charges

From time to time we have initiated strategic restructuring events primarily intended to reduce costs, consolidate our operations, integrate various acquisitions, rationalize the manufacturing of our products and align our businesses to address market conditions. We estimate annualized gross cost savings of approximately $24.3 million excluding any one-time charges as a result of recent restructuring activities initiated in the last twelve months. Refer to “Note 13. Restructuring and Related Charges” for more information.

As of December 28, 2019, our total restructuring accrual was $5.4 million. During the three and six months ended December 28, 2019, we recorded $(0.9) million and $(0.6) million respectively, in restructuring and related (benefits)

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charges. During the three and six months ended December 29, 2018, we recorded $0.3 million and $15.1 million respectively, in restructuring and related (benefit) charges.

Interest and Other Income, Net

Interest and other income, net, was $1.3 million during the three months ended December 28, 2019 compared to $1.5 million the same period a year ago. This $0.2 million decrease was primarily driven by$0.5 million unfavorable foreign exchange impact as the balance sheet hedging program provided a less favorable offset to the remeasurement of underlying foreign exchange exposures during the current period, offset by $0.4 million more in interest income due to higher average investment balance during the current period.

Interest and other income, net, was $4.0 million during the six months ended December 28, 2019 compared to $3.2 million the same period a year ago. This $0.8 million increase was primarily driven by $1.3 million favorable foreign exchange impact as the balance sheet hedging program provided a more favorable offset to the remeasurement of underlying foreign exchange exposures during the current period, offset by a $0.4 million decrease in interest income during the current period due to much lower average investment balance during the current period.

Interest Expense

Interest expense increased by $0.3 million, or 3.7%, during the three months ended December 28, 2019 compared to the same period a year ago. This increase was primarily due to the increase in debt discount accretion of the 2023 Notes and 2024 Notes during the current period.

Interest expense decreased by $1.5 million, or 8.2%, during the six months ended December 28, 2019 compared to the same period a year ago. This decrease was primarily due to a decrease in debt discount accretion of the 2033 Notes during the current period as the notes were fully redeemed or converted in the second quarter of fiscal 2019.

Provision for Income Taxes

We recorded an income tax expense of $9.9 million and $18.2 million for the three and six months ended December 28, 2019, respectively. We recorded an income tax expense of $10.9 million and $16.6 million for the three and six months ended December 29, 2018, respectively.

The income tax expense for the three and six months ended December 28, 2019 and December 29, 2018 primarily relates to income tax in certain foreign and state jurisdictions based on our forecasted pre-tax income or loss for the respective fiscal year.

The income tax expense recorded differs from the expected tax expense that would be calculated by applying the federal statutory rate to our income from continuing operations before taxes primarily due to the changes in valuation allowance for deferred tax assets attributable to our domestic and foreign income (loss) from continuing operations.

As of December 28, 2019, and June 29, 2019, our unrecognized tax benefits totaled $50.7 million and $50.9 million, respectively, and are included in deferred taxes and other non-current tax liabilities, net. We had $4.2 million accrued for the payment of interest and penalties at December 28, 2019. The timing and resolution of income tax examinations is uncertain, and the amounts ultimately paid, if any, upon resolution of issues 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 will change materially in the next 12 months, 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. 

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Operating Segment Information

Information related to our operating segments were as follows, (in millions):

	Three Months Ended											Six Months Ended
	December 28, 2019			December 29, 2018			Change			Percentage Change		December 28, 2019			December 29, 2018			Change			Percentage Change
Network Enablement
Net revenue	$	203.0		$	195.5		$	7.5		3.8	%	$	401.9		$	360.0		$	41.9		11.6	%
Gross profit	134.8			125.7			9.1			7.2	%	262.8			228.6			34.2			15.0	%
Gross margin	66.4		%	64.3		%						65.4		%	63.5		%
Service Enablement
Net revenue	$	31.2		$	28.2		$	3.0		10.6	%	$	52.1		$	54.4		$	(2.3	)	(4.2	)%
Gross profit	20.8			20.3			0.5			2.5	%	33.4			38.6			(5.2		)	(13.5	)%
Gross margin	66.7		%	72.0		%						64.1		%	71.0		%
Network and Service Enablement
Net revenue	$	234.2		$	223.7		$	10.5		4.7	%	$	454.0		$	414.4		$	39.6		9.6	%
Operating income	37.5			32.8			4.7			14.3	%	59.8			49.2			10.6			21.5	%
Operating margin	16.0		%	14.7		%						13.2		%	11.9		%
Optical Security and Performance
Net revenue	$	79.5		$	83.2		$	(3.7	)	(4.4	)%	$	159.5		$	161.0		$	(1.5	)	(0.9	)%
Gross profit	43.6			41.8			1.8			4.3	%	86.9			81.2			5.7			7.0	%
Gross margin	54.8		%	50.2		%						54.5		%	50.4		%
Operating income	30.4			31.1			(0.7		)	(2.3	)%	60.8			58.5			2.3			3.9	%
Operating margin	38.2		%	37.4		%						38.1		%	36.3		%

Network Enablement

During the three months ended December 28, 2019, NE gross margin increased by 2.1 percentage points from 64.3% in the same period a year ago to 66.4% in the current period. This increase was primarily due to higher revenue volume and gross margin improvement from favorable product mix.

During the six months ended December 28, 2019, NE gross margin increased by 1.9 percentage points from 63.5% in the same period a year ago to 65.4% in the current period. This increase was primarily due to higher revenue volume and gross margin improvement from favorable product mix.

Service Enablement

During the three months ended December 28, 2019, SE gross margin decreased by 5.3 percentage points from 72.0% in the same period a year ago to 66.7% in the current period. This decrease was primarily due to unfavorable product mix and under absorption of fixed costs.

During the six months ended December 28, 2019, SE gross margin decreased by 6.9 percentage points from 71.0% in the same period a year ago to 64.1% in the current period. This decrease was primarily due to lower revenue volume and unfavorable product mix.

Network and Service Enablement (“NSE”)

During the three months ended December 28, 2019, NSE operating margin increased by 1.3 percentage points from 14.7% in the same period a year ago to 16.0% in the current period. This increase in operating margin was primarily driven by higher gross margins as discussed above, partially offset by targeted investments to support our growth initiatives for our Wireless products.

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During the six months ended December 28, 2019, NSE operating margin increased by 1.3 percentage points from 11.9% in the same period a year ago to 13.2% in the current period. This increase in operating margin was primarily driven by increase in gross margin as discussed above, partially offset by targeted investments to support our growth initiatives for our Wireless products.

Optical Security and Performance Products

During the three months ended December 28, 2019 OSP gross margin increased by 4.6 percentage points from 50.2% in the same period a year ago to 54.8% in the current period. This increase was primarily due to gross margin improvement in our Consumer and Industrial products, favorable manufacturing overhead absorption, partially offset by unfavorable product mix due to lower revenue from Anti-Counterfeiting products.

During the six months ended December 28, 2019, OSP gross margin increased by 4.1 percentage points from 50.4% in the same period a year ago to 54.5% in the current period. This increase was primarily due to gross margin improvement in our Consumer and Industrial products, favorable manufacturing overhead absorption, partially offset by unfavorable product mix due to lower revenue from Anti-Counterfeiting products.

OSP operating margin increased by 0.8 percentage points during the three months ended December 28, 2019 from 37.4% in the same period a year ago to 38.2% in the current period. The increase in operating margin was primarily due to higher gross margins as discussed above, offset by increased 3D Sensing investments.

OSP operating margin increased by 1.8 percentage points during the six months ended December 28, 2019 from 36.3% in the same period a year ago to 38.1% in the current period. The increase in operating margin was primarily due to higher gross margins as discussed above, offset by increased 3D Sensing investments.

Liquidity and Capital Resources

Our cash investments are made in accordance with an investment policy approved by the Audit Committee of our Board of Directors and has not changed from that disclosed in our 10-K. As of December 28, 2019, U.S. entities owned approximately 26.3% of our cash and cash equivalents, short-term investments and restricted cash.

As of December 28, 2019, the majority of our cash investments have maturities of 90 days or less and are of high credit quality. Although we intend to hold these investments to maturity, in the event that we are required to sell any of these securities under adverse market conditions, losses could be recognized on such sales. During the three months ended December 28, 2019, we have not realized material investment losses but can provide no assurance that the value or the liquidity of our investments will not be impacted by adverse conditions in the financial markets. In addition, we maintain cash balances in operating accounts that are with third party financial institutions. These balances in the U.S. may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. While we monitor the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail.

On August 15, 2018, certain holders of the 2033 Notes issued in August 2013 exercised the put option and an aggregate principal amount of $134.3 million of the 2033 Notes was validly surrendered for repurchase. The Company accepted all such notes for payment with available cash. On September 5, 2018, the Company elected to exercise its optional redemption right to redeem all $142.7 million aggregate principal amount of its outstanding 2033 Notes. The date fixed for the redemption of the Notes was October 10, 2018 (Redemption Date). In connection with the redemption, holders of $112.0 million aggregate principal amount of Notes converted their Notes in accordance with the terms and conditions of the Notes. Note holders who converted their notes received an aggregate payout of $111.8 million in cash and were issued 231,795 shares of the Company’s common stock. The Company redeemed the remaining $30.7 million aggregate principal amount of outstanding Notes in accordance with its notice of redemption dated September 5, 2018. The Company paid to the registered holders of the Notes that were redeemed an aggregate amount of approximately $30.8 million, including accrued and unpaid interest up to, but excluding, the Redemption Date. As of December 28, 2019, none of the 2033 Notes remain outstanding. For additional information related to our debt refer to “Note 11. Debt.”

Six Months Ended December 28, 2019

As of December 28, 2019, our combined balance of cash and cash equivalents, short-term investments, and restricted cash increased by $30.4 million to $556.9 million from $526.5 million as of June 29, 2019.

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During the six months ended December 28, 2019, Cash provided by operating activities was $69.3 million, consisting of net income of $34.8 million adjusted for non-cash charges (e.g., depreciation, amortization, stock-based compensation and change in fair value of contingent liabilities) which totaled $81.9 million, including changes in deferred tax balances, and changes in operating assets and liabilities that used $47.4 million. Changes in our operating assets and liabilities related primarily to an increase in accounts receivable of $13.5 million mainly driven by revenue growth, a decrease in accounts payable of $14.2 million primarily driven by timing of purchases and related payments, a decrease in accrued expenses and other current and non-current liabilities of $37.3 million, and an increase in other current and non-current assets of $2.5 million. These changes were partially offset by an increase in accrued payroll and related expenses of $8.2 million, an increase in income taxes payable of $5.8 million, a decrease in inventories of $3.2 million due to higher shipment volume at the end of the quarter, and an increase in deferred revenue of $2.9 million.

During the six months ended December 28, 2019, Cash used in investing activities was $10.7 million, primarily related to $13.3 million of cash used for capital expenditures, offset by $3.1 million proceeds from sales of assets.

During the six months ended December 28, 2019, Cash used in financing activities was $25.3 million, primarily resulting from $15.1 million in withholding tax payments on the vesting of restricted stock awards, $10.7 million in cash paid to repurchase common stock under our share repurchase program and $1.8 million payments on financing obligations; offset by $2.3 million in proceeds from the exercise of stock options and the issuance of common stock under our employee stock purchase plan.

Six Months Ended December 29, 2018

As of December 29, 2018, our combined balance of cash and cash equivalents, short-term investments, and restricted cash decreased by $285.5 million to $508.1 million from $793.6 million as of June 30, 2018.

During the six months ended December 29, 2018, Cash provided by operating activities was $69.1 million, consisting of net loss of $2.3 million adjusted for non-cash charges (e.g., depreciation, amortization and stock-based compensation) which totaled $85.2 million, including changes in deferred tax balance, and changes in operating assets and liabilities that provided $13.8 million. Changes in our operating assets and liabilities related primarily to an increase in accrued payroll and related expenses of $9.5 million, a decrease in inventories of $3.4 million due to increased shipments of 3D Sensing products, an increase in income taxes payable of $7.0 million, an increase in deferred revenue of $0.3 million, and an increase in accrued expenses and other current and non-current liabilities of $3.2 million. These changes were partially offset by an increase in accounts receivable of $33.5 million due to higher billings, a decrease in accounts payable of $3.0 million driven by the timing of payments, and an increase in other current and non-current assets of $0.7 million.

During the six months ended December 29, 2018, Cash provided by investing activities was $89.9 million, primarily related to $139.2 million in sales and maturities of available-for-sale debt securities and $3.0 million proceeds from sales of assets; offset by $24.2 million of cash used for capital expenditures and $28.1 million used for acquisitions of businesses, net of cash acquired.

During the six months ended December 29, 2018, Cash used in financing activities was $294.0 million, primarily resulting from $276.9 million used for redemption and conversion of our 2033 Notes, $9.8 million in withholding tax payments on vesting of restricted stock awards and $0.9 million in payment of financing obligations; offset by $2.1 million in proceeds from the exercise of stock options and the issuance of common stock under our employee stock purchase plan.

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;

44

• 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 2023 Notes and/or 2024 Notes prior to their maturity or 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 related to our financing arrangements.

Contractual Obligations

There were no material changes to our existing contractual commitments during the second quarter of fiscal 2020.

Off-Balance Sheet Arrangements

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, other than the guarantees discussed in “Note 18. Commitments and Contingencies.”

Employee Equity Incentive Plan

Our stock-based benefit plans are a broad-based, long-term retention program that is intended to attract and retain employees and align stockholder and employee interests. Refer to “Note 16. Stock-Based Compensation” for more details.

Pension and Other Post-retirement Benefits

We sponsor significant pension plans for certain past and present employees in the United Kingdom (“U.K.”) and Germany. We are also responsible for the non-pension post-retirement benefit obligation (“PBO”) assumed from a past acquisition. All 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 in fiscal 2010. The U.K. plan is partially funded, and the other Germany plans, which were initially established as “pay-as-you-go” plans, are unfunded. As of December 28, 2019, our pension plans were under funded by $107.0 million since the PBO exceeded the fair value of plan assets. Similarly, we had a liability of $0.4 million related to our non-pension post-retirement benefit plan. Pension plan assets are managed by external third parties and we monitor the performance of our investment managers. As of December 28, 2019, the fair value of plan assets had increased approximately 3.0% since June 29, 2019, our most recent fiscal year end.

A key actuarial assumption in calculating the net periodic cost and the PBO is the discount rate. 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 basis point decrease or increase in the discount rate would cause a corresponding increase or decrease, respectively, in the PBO of approximately $9.2 million based upon data as of June 29, 2019.

In estimating the expected return on plan assets, we consider historical returns on plan assets, adjusted for forward-looking considerations, inflation assumptions and the impact of active management of the plan’s invested assets. While it is not possible to accurately predict future rate movements, we believe our current assumptions are appropriate. Refer to “Note 17. Employee Pension and Other Benefit Plans” for more details.

Item 3. Quantitative and Qualitative Disclosure About Market Risks

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The Company’s market risk has not changed materially from the foreign exchange and interest rate risks disclosed in Item 7A of the Company’s Annual Report on Form 10-K for the fiscal year ended June 29, 2019.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), which are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 28, 2019.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Limitations on Effectiveness of Controls

Our management, including our CEO and CFO, does not expect that our disclosure controls and procedures of 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 the control systems will be achieved. 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 provide reasonable assurance of achieving their objective.

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PART II—OTHER INFORMATION

We are subject to a variety of claims and suits that arise from time to time in the ordinary course 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 were 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.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of our Annual Report for the fiscal year ended June 29, 2019, except as noted below.

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.

The geographic location of our Northern California headquarters and production facilities subject them to earthquake and wildfire risks. It is impossible to predict the timing, magnitude or location of such natural disasters or their impacts on the local economy and on 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. Moreover, in October 2019, Pacific Gas and Electric (“PG&E”), the public electric utility in our Northern California region commenced planned widespread blackouts during the peak wildfire season to avoid and contain wildfires sparked during strong wind events by downed power lines or equipment failure. While we have not experienced damage to our facilities or disruption to operations as a result of these power outages, ongoing blackouts, particularly if prolonged or frequent, could impact our operations going forward.

We face risks related to health epidemics and other widespread outbreaks of contagious disease, which could significantly disrupt our operations and impact our operating results.

Significant outbreaks of contagious diseases, and other adverse public health developments, could have a material impact on our business operations and operating results. In December 2019, a strain of novel coronavirus causing respiratory illness emerged in the city of Wuhan in the Hubei province of China. The Chinese government has taken certain emergency measures to combat the spread of the virus, including extension of the Lunar New Year holidays, implementation of travel bans and closure of factories and businesses. We have significant manufacturing facilities and contract manufacturers located in China. While the full impact of this outbreak is unknown at this time, we are closely monitoring the rapid developments in China and continually assessing the potential impact on our business, and have restricted employee travel to Asia and closed facilities in China in response to the emergency measures implemented by the government and as a safety precaution to our employees. Any prolonged disruption of our facilities, suppliers, contract manufacturers or customers could negatively impact our sales and operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

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None.

Item 6. Exhibits

The following documents are filed as Exhibits to this report:

		Incorporated by Reference			Filed	Furnished
Exhibit No.	Exhibit Description	Form	Exhibit	Filing Date	Herewith	Not Filed
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				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
10.1	Amended and Restated 2003 Equity Incentive Plan				X
101.SCH	Inline XBRL Taxonomy Extension Schema				X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document				X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document				X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document				X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document				X
104	Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101)				X

48

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: February 6, 2020	VIAVI SOLUTIONS INC.
	(Registrant)
	By:	/s/ AMAR MALETIRA
	Name:	Amar Maletira
	Title:	Executive Vice President and Chief Financial Officer
		(Duly Authorized Officer and Principal Financial and Accounting Officer)

49

EX-10.1

Exhibit 10.1

VIAVI SOLUTIONS INC.

2003 EQUITY INCENTIVE PLAN

(Restated effective as of November 13, 2019)

1.Establishment and Purpose of the Plan. The purpose of this Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company by offering them an opportunity to participate in the Company’s future performance. The Plan was initially established as the JDS Uniphase Corporation 2003 Equity Incentive Plan effective as of November 6, 2003 and has subsequently been amended a number of times. In connection with the spin-off of Lumentum Holdings, Inc. from the Company on August 1, 2015, and the related renaming of JDS Uniphase Corporation as Viavi Solutions Inc., the Plan was amended and restated in its entirety as the Viavi Solutions Inc. 2003 Equity Incentive Plan and certain adjustments were made to the number of Shares reserved for issuance under the Plan and subject to outstanding Awards granted under the Plan. Effective November 15, 2017, the Plan was amended and restated to among other things: (i) increase the number of Shares reserved under the Plan; (ii) set a limit on the total value of equity and cash compensation that may be paid to each Non-Employee Director during each fiscal year; (iii) provide that Awards granted under the Plan after the Restatement Effective Date will have a minimum one-year vesting period from the date of grant, subject to certain limited exceptions; and (iv) provide that any dividends or Dividend Equivalent Rights credited with respect to an Award will be paid or distributed only if, when and to the extent the Shares underlying the Award vest. Effective November 13, 2019 (the “Restatement Effective Date”), the Plan was further amended and restated to (i) increase the number of Shares reserved under the Plan; and (ii) to establish a new termination date for the Plan.

2.    Definitions. As used herein, the following definitions shall apply:

(a)    “Administrator” means the Board or any of the Committees appointed to administer the Plan.

(b)    “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.

(c)    “Applicable Laws” means the legal requirements relating to the Plan and the Awards under applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any non-U.S. jurisdiction applicable to Awards granted to residents therein.

(d)    “Assumed” means that pursuant to a Corporate Transaction either (i) the Award is expressly affirmed by the Company or (ii) the contractual obligations represented by the Award are expressly assumed (and not simply by operation of law) by the successor entity or its Parent in connection with the Corporate Transaction with appropriate adjustments to the number and type of securities of the successor entity or its Parent subject to the Award and the exercise or purchase price thereof which preserves the compensation element of the Award existing at the time of the Corporate Transaction as determined in accordance with the instruments evidencing the agreement to assume the Award.

(e)    “Award” means the grant of an Option, SAR, Dividend Equivalent Right, Restricted Stock, Restricted Stock Unit, Performance Unit, Performance Share, or other right or benefit under the Plan.

(f)    “Award Agreement” means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including any amendments thereto.

(g)    “Board” means the Board of Directors of the Company.

(h)    “Cause” means, with respect to the termination by the Company or a Related Entity of the Grantee’s Continuous Active Service, that such termination is for “Cause” as such term is expressly defined in a then-effective written agreement between the Grantee and the Company or such Related Entity, or in the absence of such then-effective written agreement and definition, is based on, in the determination of the Administrator, the Grantee’s: (i) performance of any act or failure to perform any act in bad faith and to the detriment of the Company or a Related Entity; (ii) dishonesty, intentional misconduct, material violation of any applicable Company or Related Entity policy, or material breach of any agreement with the Company or a Related Entity; or (iii) commission of a crime involving dishonesty, breach of trust, or physical or emotional harm to any person.

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(i)    “Change in Control” means a change in ownership or control of the Company effected through either of the following transactions:

(i)    the direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s stockholders which a majority of the Continuing Directors who are not Affiliates or Associates of the offeror do not recommend such stockholders accept, or

(ii)    a change in the composition of the Board over a period of thirty-six (36) months or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who are Continuing Directors.

(j)    “Code” means the Internal Revenue Code of 1986, as amended.

(k)    “Committee” means any committee composed of members of the Board appointed by the Board to administer the Plan.

(l)    “Common Stock” means the common stock of the Company.

(m)    “Company” means Viavi Solutions Inc., a Delaware corporation, formerly known as JDS Uniphase Corporation.

(n)    “Consultant” means any person (other than an Employee or a Director, solely with respect to rendering services in such person’s capacity as a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.

(o)    “Continuing Directors” means members of the Board who either (i) have been Board members continuously for a period of at least thirty-six (36) months or (ii) have been Board members for less than thirty-six (36) months and were elected or nominated for election as Board members by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board.

(p)    “Continuous Active Service” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant is not interrupted or terminated. In jurisdictions requiring notice in advance of an effective termination as an Employee, Director or Consultant, Continuous Active Service shall be deemed terminated upon the actual cessation of providing services to the Company or a Related Entity notwithstanding any required notice period that must be fulfilled before a termination as an Employee, Director or Consultant can be effective under Applicable Laws. Continuous Active Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement). An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave. For purposes of each Incentive Stock Option granted under the Plan, if such leave exceeds ninety (90) days, and reemployment upon expiration of such leave is not guaranteed by statute or contract, then the Incentive Stock Option shall be treated as a Non-Qualified Stock Option on the day three (3) months and one (1) day following the expiration of such ninety (90) day period.

(q)    “Corporate Transaction” means any of the following transactions:

(i)    a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated;

(ii)    the sale, transfer or other disposition of all or substantially all of the assets of the Company;

(iii)    the complete liquidation or dissolution of the Company;

(iv)    any reverse merger or series of related transactions culminating in a reverse merger (including, but not limited to, a tender offer followed by a reverse merger) in which the Company is the surviving entity but in which securities possessing more than forty percent (40%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger or the initial transaction culminating in such merger but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction; or

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(v)    acquisition in a single or series of related transactions by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction.

(r)    “Covered Employee” means an Employee who is a “covered employee” under Section 162(m)(3) of the Code.

(s)    “Director” means a member of the Board or the board of directors of any Related Entity.

(t)    “Disability” means as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy. If the Company or the Related Entity to which the Grantee provides service does not have a long-term disability plan in place, “Disability” means that a Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days. A Grantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.

(u)    “Dividend Equivalent Right” means a right entitling the Grantee to compensation measured by dividends paid with respect to Common Stock.

(v)    “Employee” means any person, including an Officer or Director, who is in the employ of the Company or any Related Entity, subject to the control and direction of the Company or any Related Entity as to both the work to be performed and the manner and method of performance. The payment of a director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.

(w)    “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(x)    “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

(i)    If the Common Stock is listed on any established stock exchange or a national market system, including without limitation The Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(ii)    If the Common Stock is regularly quoted on an automated quotation system (including the OTC Bulletin Board) or by a recognized securities dealer, but selling prices are not reported, the Fair Market Value of a share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the date of determination (or, if no such prices were reported on that date, on the last date such prices were reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

(iii)    In the absence of an established market for the Common Stock of the type described in (i) and (ii), above, the Fair Market Value thereof shall be determined by the Administrator in good faith.

(y)    “Full Value Award” means the grant of Restricted Stock, Restricted Stock Units, Performance Units or Performance Shares under the Plan with a per share or unit purchase price lower than 100% of Fair Market Value on the date of grant.

(z)    “Grantee” means an Employee, Director or Consultant who receives an Award under the Plan.

(aa)    “Immediate Family” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Grantee’s household (other than a tenant or employee), a trust in which these persons (or the Grantee) have more than fifty percent (50%) of the beneficial interest, a foundation in which these persons (or the Grantee) control the management of assets, and any other entity in which these persons (or the Grantee) own more than fifty percent (50%) of the voting interests.

(bb)    “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

(cc)    “Non-Employee Director” means a Director who is not an Employee.

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(dd)    “Non-Qualified Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

(ee)    “Officer” means a person who is an officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

(ff)    “Option” means an option to purchase Shares pursuant to an Award Agreement granted under the Plan.

(gg)    “Parent” means a “parent corporation”, whether now or hereafter existing, as defined in Section 424(e) of the Code.

(hh)    “Performance-Based Compensation” means compensation qualifying as “performance-based compensation” under Section 162(m) of the Code.

(ii)    “Performance Shares” means Shares or an Award denominated in Shares which may be earned in whole or in part upon attainment of performance criteria established by the Administrator.

(jj)    “Performance Units” means an Award which may be earned in whole or in part based upon attainment of performance criteria established by the Administrator and which may be settled for cash, Shares or other securities or a combination of cash, Shares or other securities as established by the Administrator.

(kk)    “Plan” means this 2003 Equity Incentive Plan.

(ll)    Related Entity” means any Parent or Subsidiary of the Company and any business, corporation, partnership, limited liability company or other entity in which the Company or a Parent or a Subsidiary of the Company holds a substantial ownership interest, directly or indirectly.

(mm)    “Replaced” means that pursuant to a Corporate Transaction the Award is replaced with a comparable stock award or a cash incentive program of the Company, the successor entity (if applicable) or Parent of either of them which preserves the compensation element of such Award existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same (or a more favorable) vesting schedule applicable to such Award. The determination of Award comparability shall be made by the Administrator and its determination shall be final, binding and conclusive.

(nn)    “Restricted Stock” means Shares issued under the Plan to the Grantee for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as established by the Administrator.

(oo)    “Restricted Stock Unit” means a grant of a right to receive in cash or stock, as established by the Administrator, the market value of one Share.

(pp)    “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor thereto.

(qq)    “SAR” means a stock appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator, measured by appreciation in the value of Common Stock.

(rr)    “Share” means a share of the Common Stock.

(ss)    “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.

3.    Stock Subject to the Plan.

(a)    Effective as of the Restatement Effective Date, subject to the provisions of Section 10 below, the maximum aggregate number of Shares which may be issued pursuant to all Awards (including Incentive Stock Options) shall be equal to the sum of (i) the number of Shares that were available for the future grant of Awards as of the Restatement Effective, (ii) 10,500,000 new Shares, (iii) the number of Shares subject to Awards outstanding under the Plan as of the Restatement Effective Date, and (iv) the number of Shares subject to outstanding stock awards granted under the Company’s 2005 Acquisition Equity Incentive Plan (“Acquisition Plan”) that on or after Restatement Date would have otherwise been available for reissuance under the Acquisition Plan. The Shares to be issued pursuant to Awards may be authorized, but unissued, or reacquired Common Stock.

(b)    Any Shares subject to Awards will be counted against the numerical limits of this Section 3 as one Share for every one Share subject thereto. To the extent that a Share that was subject to an Award that counted as 1.5 Shares against the Plan reserve prior to the Restatement Date is recycled back into the Plan under the next paragraph of this Section 3, the Plan will be credited with 1.5 Shares.

(c)    Any Shares covered by an Award (or portion of an Award) which is forfeited, canceled or expires (whether voluntarily or involuntarily) shall be deemed not to have been issued for purposes of determining the maximum aggregate number

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of Shares which may be issued under the Plan. Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited, or repurchased by the Company at the lower of their original purchase price or their Fair Market Value at the time of repurchase, such Shares shall become available for future grant under the Plan. With respect to Options and SARs, the gross number of Shares subject to the Award will cease to be available under the Plan (whether or not the Award is net settled for a lesser number of Shares, or if Shares are utilized to exercise such an Award). In addition, if Shares are withheld to pay any withholding taxes applicable to an Award, then the gross number of Shares subject to such Award will cease to be available under the Plan.

4.    Administration of the Plan.

(a)    Plan Administrator.

(i)    Administration with Respect to Directors and Officers. With respect to grants of Awards to Directors or Employees who are also Officers or Directors of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws and to permit such grants and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board.

(ii)    Administration With Respect to Consultants and Other Employees. With respect to grants of Awards to Employees or Consultants who are neither Directors nor Officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. The Board may authorize one or more Officers to grant such Awards and may limit such authority as the Board determines from time to time.

(iii)    Administration With Respect to Covered Employees. Notwithstanding the foregoing, grants of Awards to any Covered Employee intended to qualify as Performance-Based Compensation shall be made only by a Committee (or subcommittee of a Committee) which is comprised solely of two or more Directors eligible to serve on a committee making Awards qualifying as Performance-Based Compensation. In the case of such Awards granted to Covered Employees, references to the “Administrator” or to a “Committee” shall be deemed to be references to such Committee or subcommittee.

(iv)    Administration Errors. In the event an Award is granted in a manner inconsistent with the provisions of this subsection (a), such Award shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws.

(b)    Powers of the Administrator. Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion:

(i)    to select the Employees, Directors and Consultants to whom Awards may be granted from time to time hereunder;

(ii)    to determine whether and to what extent Awards are granted hereunder;

(iii)    to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder;

(iv)    to approve forms of Award Agreements for use under the Plan;

(v)    to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder;

(vi)    to amend the terms of any outstanding Award granted under the Plan, provided that (A) any amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent, (B) the reduction of the exercise price of any Option or SAR awarded under the Plan shall be subject to stockholder approval and (C) canceling or “buying-out” an Option or SAR at a time when its exercise price exceeds the Fair Market Value of the underlying Shares, in exchange for cash, another Option, SAR, Restricted Stock, Restricted Stock Unit, or other Award shall be subject to stockholder approval, unless the cancellation and exchange occurs in connection with a Corporate Transaction;

(vii)    to construe and interpret the terms of the Plan and Awards, including without limitation, any notice of Award or Award Agreement, granted pursuant to the Plan;

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(viii)    to establish additional terms, conditions, rules or procedures to accommodate the rules or laws of applicable non-U.S. jurisdictions and to afford Grantees favorable treatment under such rules or laws; provided, however, that no Award shall be granted under any such additional terms, conditions, rules or procedures with terms or conditions which are inconsistent with the provisions of the Plan; and

(ix)    to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.

(c)    Minimum Vesting Requirements. Notwithstanding any provision of the Plan to the contrary, all Awards granted under the Plan after the Restatement Effective Date shall have a minimum vesting period of one-year measured from the date of grant; provided, however, that up to 5% of the Shares available for future distribution under this Plan as of the Restatement Effective Date may be granted without such minimum vesting requirement. Nothing in this Section 4(c) shall limit the Company's ability to grant Awards that contain rights to accelerated vesting on a termination of employment or service (or to otherwise accelerate vesting), or limit any rights to accelerated vesting in connection with a Corporate Transaction.

(d)    Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or as Officers or Employees of the Company or a Related Entity, members of the Board and any Officers or Employees of the Company or a Related Entity to whom authority to act for the Board, the Administrator or the Company is delegated shall be defended and indemnified by the Company to the extent permitted by law on an after-tax basis against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any Award granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within thirty (30) days after the institution of such claim, investigation, action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at the Company’s expense to handle and defend the same.

5.    Eligibility. Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants. Incentive Stock Options may be granted only to Employees of the Company or a Parent or a Subsidiary of the Company. An Employee, Director or Consultant who has been granted an Award may, if otherwise eligible, be granted additional Awards. Awards may be granted to such Employees, Directors or Consultants who are residing in non-U.S. jurisdictions as the Administrator may determine from time to time.

6.    Terms and Conditions of Awards.

(a)    Type of Awards. The Administrator is authorized under the Plan to award any type of arrangement to an Employee, Director or Consultant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) cash or (iii) an Option, a SAR, or similar right with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions. Such Awards include, without limitation, Options, SARs, Restricted Stock, Restricted Stock Units, Dividend Equivalent Rights, Performance Units or Performance Shares, and an Award may consist of one such security or benefit, or two (2) or more of them in any combination or alternative.

(b)    Designation of Award. Each Award shall be designated in the Award Agreement. In the case of an Option, the Option shall be designated as either an Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of Shares subject to Options designated as Incentive Stock Options which become exercisable for the first time by a Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary of the Company) exceeds $100,000, such excess Options, to the extent of the Shares covered thereby in excess of the foregoing limitation, shall be treated as Non-Qualified Stock Options. For this purpose, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the grant date of the relevant Option.

(c)    Conditions of Award. Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance criteria. The performance criteria established by the Administrator may be based on any one of, or combination of, the following: (i) increase in share price, (ii) earnings per share, (iii) total stockholder return, (iv) operating margin, (v) gross margin, (vi) return on equity, (vii) return on assets, (viii) return on investment, (ix) operating income, (x) net operating income, (xi) pre-tax profit, (xii) cash flow, (xiii) revenue, (xiv) expenses, (xv) earnings before interest, taxes and depreciation, (xvi) economic value added, (xvii) market share, (xviii) personal management objectives, and (xix) other measures of performance selected by the Administrator. Partial achievement of the specified criteria may result in a

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payment or vesting corresponding to the degree of achievement as specified in the Award Agreement. The Administrator may provide at the time of grant for the adjustment of the performance criteria applicable to Performance-Based Compensation to include or exclude any objectively determinable components of such performance criteria.

(d)    Dividends and Dividend Equivalent Rights. The Administrator in its sole discretion may credit to each holder of an Award, in the form of Dividend Equivalent Rights or otherwise, an amount equal to the value of all dividends and other distributions (whether in cash, Shares or other property) paid or distributed by the Company on the equivalent number of Shares; provided, however, that such holder will not be paid any dividends or other distributions (or any related earnings or interest on such dividends or distributions, if the Administrator in its sole discretion provides for such payments) unless and until the underlying Award vests. The value of dividends or other distributions (or any related earnings or interest, if applicable) payable with respect to Awards that do not vest shall be forfeited.

(e)    Acquisitions and Other Transactions. The Administrator may issue Awards under the Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, stock purchase, asset purchase or other form of transaction.

(f)    Deferral of Award Payment. The Administrator may establish one or more programs under the Plan to permit selected Grantees the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the election would entitle the Grantee to payment or receipt of Shares or other consideration under an Award. The Administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Administrator deems advisable for the administration of any such deferral program.

(g)    Separate Programs. The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to time.

(h)    Individual Limitations on Awards. The maximum number of Shares with respect to which Awards may be granted to any Grantee in any fiscal year of the Company shall be 1,790,200 Shares. In connection with a Grantee’s (i) commencement of Continuous Active Service or (ii) first promotion in any fiscal year of the Company prior to the Restatement Effective Date, a Grantee may be granted Awards for up to an additional 1,790,200 Shares which shall not count against the limit set forth in the preceding sentence. The foregoing limitations shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 10, below. To the extent required by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitations with respect to a Grantee, if any Awards are canceled, the canceled Awards shall continue to count against the maximum number of Shares with respect to which Awards may be granted to the Grantee. For this purpose, the repricing of an Option (or in the case of a SAR, the base amount on which the stock appreciation is calculated is reduced to reflect a reduction in the Fair Market Value of the Common Stock) shall be treated as the cancellation of the existing Option or SAR and the grant of a new Option or SAR. If the vesting or receipt of Shares under the Award is deferred to a later date, any amount (whether denominated in Shares or cash) paid in addition to the original number of Shares subject to the Award will not be treated as an increase in the number of Shares subject to the Award if the additional amount is based either on a reasonable rate of interest or on one or more predetermined actual investments such that the amount payable by the Company at the later date will be based on the actual rate of return of a specific investment (including any decrease as well as any increase in the value of an investment).

(i)    Limitations on Awards to Non-Employee Directors. Notwithstanding any other provision of the Plan to the contrary, the maximum value of Awards granted under the Plan during a fiscal year of the Company to a Non-Employee Director for services on the Board, taken together with any cash fees paid by the Company to such Non-Employee Director during such fiscal year for services on the Board, shall not exceed $1,000,000 in total value (calculating the value of any such Awards based on the grant date fair value of such Awards under applicable financial accounting standards), including for this purpose the value of any Awards that are received in lieu of payment of all or a portion of his or her regular annual retainer or other similar cash based payments. For the avoidance of doubt, neither Awards granted or compensation paid to a Non-Employee Director for services as an Employee or Consultant nor any amounts paid to a Non-Employee Director as a reimbursement of an expense shall count against the foregoing limitation.

(j)    Early Exercise. The Award Agreement may, but need not, include a provision whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any part or all of the Award prior to full vesting of the Award. Any unvested Shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction the Administrator determines to be appropriate.

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(k)    Term of Award. The term of each Award shall be the term stated in the Award Agreement, provided, however, that the term of an Award shall be no more than eight (8) years from the date of grant thereof. However, in the case of an Incentive Stock Option granted to a Grantee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the term of the Incentive Stock Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Award Agreement.

(l)    Transferability of Awards. Incentive Stock Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Grantee, only by the Grantee. Other Awards shall be transferable by will and by the laws of descent and distribution, and during the lifetime of the Grantee, by gift or pursuant to a domestic relations order to members of the Grantee’s Immediate Family to the extent and in the manner determined by the Administrator. Notwithstanding the foregoing, the Grantee may designate a beneficiary of the Grantee’s Award in the event of the Grantee’s death on a beneficiary designation form provided by the Administrator.

(m)    Time of Granting Awards. The date of grant of an Award shall for all purposes be the date on which the Administrator makes the determination to grant such Award, or such later date as is determined by the Administrator.

7.    Award Exercise or Purchase Price, Consideration and Taxes.

(a)    Exercise or Purchase Price. The exercise or purchase price, if any, for an Award shall be as follows:

(i)    In the case of an Incentive Stock Option:

(A)    granted to an Employee who, at the time of the grant of such Incentive Stock Option owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the per Share exercise price shall be not less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant; or

(B)    granted to any Employee other than an Employee described in the preceding paragraph, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

(ii)    In the case of a Non-Qualified Stock Option, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

(iii)    In the case of a SAR, the base amount on which the stock appreciation is calculated shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

(iv)    In the case of Awards intended to qualify as Performance-Based Compensation, the exercise or purchase price, if any, shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

(v)    In the case of other Awards, such price as is determined by the Administrator.

(vi)    Notwithstanding the foregoing provisions of this Section 7(a), in the case of an Award issued pursuant to Section 6(d) above, the exercise or purchase price for the Award shall be determined in accordance with the provisions of the relevant instrument evidencing the agreement to issue such Award.

(b)    Consideration. Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of an Award including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant). In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following, provided that the portion of the consideration equal to the par value of the Shares must be paid in cash or other legal consideration permitted by the Delaware General Corporation Law:

(i)    cash;

(ii)    check;

(iii)    surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require (including withholding of Shares otherwise deliverable upon exercise of the Award) which have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which said Award shall be exercised, provided, however, that Shares acquired under the Plan or any other equity compensation plan or agreement of the Company must have been held by the Grantee for a period of more than six (6) months;

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(iv)    with respect to Options, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (A) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction; or

(v)    any combination of the foregoing methods of payment.

(c)    Taxes. No Shares shall be delivered under the Plan to any Grantee or other person until such Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of any non-U.S., federal, state, or local income and employment tax withholding obligations, including, without limitation, obligations incident to the receipt of Shares or the disqualifying disposition of Shares received on exercise of an Incentive Stock Option. Upon exercise of an Award the Company shall withhold or collect from Grantee an amount sufficient to satisfy such tax obligations.

8.    Exercise of Award.

(a)    Procedure for Exercise; Rights as a Stockholder.

(i)    Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Award Agreement.

(ii)    An Award shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 7(b)(iv).

(b)    Exercise of Award Following Termination of Continuous Active Service.

(i)    An Award may not be exercised after the termination date of such Award set forth in the Award Agreement and may be exercised following the termination of a Grantee’s Continuous Active Service only to the extent provided in the Award Agreement.

(ii)    Where the Award Agreement permits a Grantee to exercise an Award following the termination of the Grantee’s Continuous Active Service for a specified period, the Award shall terminate to the extent not exercised on the last day of the specified period or the last day of the original term of the Award, whichever occurs first.

(iii)    Any Award designated as an Incentive Stock Option to the extent not exercised within the time permitted by law for the exercise of Incentive Stock Options following the termination of a Grantee’s Continuous Active Service shall convert automatically to a Non-Qualified Stock Option and thereafter shall be exercisable as such to the extent exercisable by its terms for the period specified in the Award Agreement.

9.    Conditions Upon Issuance of Shares.

(a)    Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares pursuant thereto shall comply with all Applicable Laws, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

(b)    As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws.

10.    Adjustments Upon Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of Shares covered by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Award, the maximum number of Shares with respect to which Awards may be granted to any Grantee in any fiscal year of the Company, as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Shares, or similar transaction affecting the Shares, (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, or (iii) as the Administrator may determine in its discretion, any other transaction with respect to Common Stock including a corporate merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided, however that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Administrator and the Administrator’s determination shall be final, binding and conclusive.

9

Except as the Administrator determines, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Award.

11.    Corporate Transactions.

(a)    Termination of Award to Extent Not Assumed in Corporate Transaction. Effective upon the consummation of a Corporate Transaction, all outstanding Awards under the Plan shall terminate. However, all such Awards shall not terminate to the extent they are Assumed in connection with the Corporate Transaction.

(b)    Acceleration of Award Upon Corporate Transaction. Except as provided otherwise in an individual Award Agreement, in the event of a Corporate Transaction, for the portion of each Award that is neither Assumed nor Replaced, such portion of the Award shall automatically become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at fair market value) for all of the Shares at the time represented by such portion of the Award, immediately prior to the specified effective date of such Corporate Transaction.

(c)    Effect of Acceleration on Incentive Stock Options. Any Incentive Stock Option accelerated under this Section 11 in connection with a Corporate Transaction shall remain exercisable as an Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation of Section 422(d) of the Code is not exceeded. To the extent such dollar limitation is exceeded, the excess Options shall be treated as Non-Qualified Stock Options.

12.    Effective Date and Term of Plan. The Plan originally became effective upon its approval by the stockholders of the Company. The Plan, as amended and restated, shall become effective upon its approval by the stockholders of the Company. It shall continue in effect until November 13, 2029 unless sooner terminated. Subject to Applicable Laws, Awards may be granted under the Plan upon its becoming effective.

13.    Amendment, Suspension or Termination of the Plan.

(a)    The Board may at any time amend, suspend or terminate the Plan; provided, however, that no such amendment shall be made without the approval of the Company’s stockholders to the extent such approval is required by Applicable Laws, or if such amendment would change any of the provisions of Section 4(b)(vi) or this Section 13(a). Notwithstanding any other provision of the Plan to the contrary, the Board may, in its sole and absolute discretion and without the consent of any participant, amend the Plan or any Award Agreement, to take effect retroactively or otherwise, as it deems necessary or advisable for the purpose of conforming the Plan or such Award Agreement to any present or future law, regulation or rule applicable to the Plan, including, but not limited to, Section 409A of the Code.

(b)    No Award may be granted during any suspension of the Plan or after termination of the Plan.

(c)    No suspension or termination of the Plan (including termination of the Plan under Section 12, above) shall adversely affect any rights under Awards already granted to a Grantee.

14.    Reservation of Shares.

(a)    The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

(b)    The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

15.    No Effect on Terms of Employment/Consulting Relationship. The Plan shall not confer upon any Grantee any right with respect to the Grantee’s Continuous Active Service, nor shall it interfere in any way with his or her right or the right of the Company or any Related Entity to terminate the Grantee’s Continuous Active Service at any time, with or without Cause, and with or without notice. The ability of the Company or any Related Entity to terminate the employment of a Grantee who is employed at will is in no way affected by its determination that the Grantee’s Continuous Active Service has been terminated for Cause for the purposes of this Plan.

16.    No Effect on Retirement and Other Benefit Plans. Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. The Plan is not a “Retirement Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of 1974, as amended.

10

17.    Unfunded Obligation. Grantees shall have the status of general unsecured creditors of the Company. Any amounts payable to Grantees pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974, as amended. Neither the Company nor any Related Entity shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Grantee account shall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Related Entity and a Grantee, or otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any assets of the Company or a Related Entity. The Grantees shall have no claim against the Company or any Related Entity for any changes in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.

11

EX-31.1

Exhibit 31.1

VIAVI SOLUTIONS INC.

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Oleg Khaykin, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Viavi Solutions Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: February 6, 2020

/s/ OLEG KHAYKIN

Oleg Khaykin

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

VIAVI SOLUTIONS INC.

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Amar Maletira, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Viavi Solutions Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: February 6, 2020

/s/ AMAR MALETIRA

Amar Maletira

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

VIAVI SOLUTIONS INC.

CERTIFICATION PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Viavi Solutions Inc. (the “Company”) on Form 10-Q for the quarter ended December 28, 2019 as filed with the Securities and Exchange Commission (the “Report”), I, Oleg Khaykin, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Dated: February 6, 2020

/s/ OLEG KHAYKIN

Oleg Khaykin

Chief Executive Officer

(Principal Executive Officer)

EX-32.2

Exhibit 32.2

VIAVI SOLUTIONS INC.

CERTIFICATION PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Viavi Solutions Inc. (the “Company”) on Form 10-Q for the quarter ended December 28, 2019 as filed with the Securities and Exchange Commission (the “Report”), I, Amar Maletira, Executive Vice President and Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Dated: February 6, 2020

/s/ AMAR MALETIRA

Amar Maletira

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

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Employee Pension and Other Benefit Plans (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 28, 2019	Dec. 29, 2018	Dec. 28, 2019	Dec. 29, 2018
Employee Defined Benefit Plans
Employer contributions			$ 2.4
Components of the net periodic cost for the pension and benefits plans
Cash outlays expected during current fiscal year	$ 7.9		7.9
Pension Benefit Plans
Components of the net periodic cost for the pension and benefits plans
Service cost	0.1	$ 0.1	0.2	$ 0.1
Interest cost	0.5	0.6	0.9	1.2
Expected return on plan assets	(0.4)	(0.4)	(0.8)	(0.8)
Amortization of net actuarial losses	0.8	0.4	1.5	1.0
Net periodic benefit cost	$ 1.0	$ 0.7	1.8	$ 1.5
U.K. Plan
Employee Defined Benefit Plans
Employer contributions			0.6
Other Plans
Employee Defined Benefit Plans
Employer contributions			$ 1.8

XML

Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 28, 2019	Dec. 29, 2018	Dec. 28, 2019	Dec. 29, 2018	Jun. 29, 2019
Income Tax Disclosure [Abstract]
Income tax expense (benefit)	$ 9.9	$ 10.9	$ 18.2	$ 16.6
Unrecognized tax benefits	50.7		50.7		$ 50.9
Interest and penalties accrued	$ 4.2		$ 4.2

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Investments, Forward Contracts and Fair Value Measurements - Contractual Maturities of Debt Securities (Details) $ in Millions	Dec. 28, 2019 USD ($)
Amortized Cost/ Carrying Cost
Amounts maturing in more than 5 years	$ 0.9
Total debt available-for-sale securities	0.9
Estimated Fair Value
Amounts maturing in more than 5 years	0.5
Total debt available-for-sale securities	$ 0.5

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Acquisitions - Assets Acquired (Details) - USD ($) $ in Millions	May 31, 2019	Oct. 30, 2018
3Z Telecom, Inc.
Business Acquisition [Line Items]
Cash	$ 2.2
Other assets	3.6
Total liabilities	(1.7)
Net tangible assets acquired	$ 4.1
RPC Photonics, Inc.
Business Acquisition [Line Items]
Cash		$ 1.8
Other current assets		1.8
Property and equipment		2.6
Total liabilities		(0.5)
Net tangible assets acquired		$ 5.7

XML

Balance Sheet and Other Details - Other Current Liabilities (Details) - USD ($) $ in Millions	Dec. 28, 2019	Jun. 29, 2019
Other current liabilities
Customer prepayments	$ 4.7	$ 30.2
Restructuring accrual	5.4	8.6
Income tax payable	14.3	8.5
Warranty accrual	5.1	4.7
Transaction tax payable	5.0	3.8
Operating lease liabilities (Note 12)	12.4
Foreign exchange forward contracts liability	1.1	4.0
Other	13.2	12.6
Other current liabilities	$ 61.2	$ 72.4

XML

Goodwill (Tables)

6 Months Ended

Dec. 28, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of changes in goodwill

The following table presents changes in goodwill allocated to the Company’s reportable segments (in millions):

	Network Enablement		Service Enablement		Optical Security and Performance Products		Total
Balance as of June 29, 2019	$	338.9	$	—	$	42.2	$	381.1
Currency translation adjustments	3.4		—		—		3.4
Balance as of December 28, 2019	$	342.3	$	—	$	42.2	$	384.5

XML

Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Dec. 28, 2019

Equity [Abstract]

Schedule of components of accumulated other comprehensive loss

For the six months ended December 28, 2019, the changes in accumulated other comprehensive loss, net of tax, by component were as follows (in millions):

	Unrealized losses on available-for sale investments			Foreign  currency translation adjustments			Change in unrealized components of defined benefit obligations (1)			Total
Beginning balance as of June 29, 2019	$	(5.0	)	$	(101.0	)	$	(28.6	)	$	(134.6	)
Other comprehensive income (loss) before reclassification	—			0.6			—			0.6
Amounts reclassified to accumulated other comprehensive loss	—			—			1.5			1.5
Net current-period other comprehensive income	—			0.6			1.5			2.1
Ending balance as of December 28, 2019	$	(5.0	)	$	(100.4	)	$	(27.1	)	$	(132.5	)

(1)  The amount reclassified out of accumulated other comprehensive loss represents the amortization of actuarial losses included as a component of cost of revenues, research and development (“R&D”) and SG&A in the Consolidated Statement of Operations for the six months ended December 28, 2019. There was no tax impact for the six months ended December 28, 2019. Refer to “Note 17. Employee Pension and Other Benefit Plans” for more details on the computation of net periodic cost for pension plans.

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Restructuring and Related Charges (Tables)

6 Months Ended

Dec. 28, 2019

Restructuring and Related Activities [Abstract]

Schedule of various restructuring plans

The following table presents the adjustments to the accrued restructuring expenses related to all of the Company’s restructuring plans described below for the three and six months ended December 28, 2019 (in millions):

	Balance June 29, 2019		Six Months Ended December 28, 2019 Benefits			Cash Settlements			Non-cash Settlements and Other Adjustments (2)			Balance December 28, 2019		Three Months Ended December 28, 2019 Benefits
Fiscal 2019 Plan
NSE, including AW (1)	$	8.7	$	(0.6	)	$	(2.3	)	$	(0.4	)	$	5.4	$	(0.9	)
Plans Prior to Fiscal 2017
Other Plans (1)	0.1		—			—			(0.1		)	—		—
Total (3)	$	8.8	$	(0.6	)	$	(2.3	)	$	(0.5	)	$	5.4	$	(0.9	)

⁽¹⁾  Plan type includes workforce reduction cost.

⁽²⁾  Other adjustments including $0.2 million lease liability reclassification to Operating lease liability upon ASC 842 adoption.

⁽³⁾ 

$5.4 million and $8.6 million in other current liabilities on the Consolidated Balance Sheets as of December 28, 2019 and June 29, 2019, respectively. $0.2 million in other non-current liabilities on the Consolidated Balance Sheets as of June 29, 2019

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Acquisitions

6 Months Ended

Dec. 28, 2019

Business Combinations [Abstract]

Acquisitions

Note 6. Acquisitions

3Z Telecom, Inc. Acquisition

On May 31, 2019 (“3Z Close Date”), the Company acquired all of the equity of 3Z Telecom, Inc. (“3Z”) for approximately $23.2 million in cash and contingent consideration (“earn-out”) liability of up to $7.0 million in cash based on the achievement of certain net revenue targets over approximately a two year period, subsequent to the 3Z Close Date. The acquisition of 3Z expands the Company’s Field Instrument offerings.

The 3Z acquisition meets 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 not material.

The fair value of consideration transferred for the 3Z acquisition consists of the following (in millions):

Cash consideration paid at closing	$	18.9
Escrow payments	4.3
Fair value of contingent consideration	5.5
Total purchase consideration	$	28.7

The fair value of the earn-out payments at the 3Z Close Date was determined by applying a risk-neutral framework using a Monte Carlo Simulation, which includes inputs not observable in the market, and therefore represents a Level 3 measurement. The fair value of the Company’s earn-out liabilities is further discussed in “Note 8. Investments, Forward Contracts and Fair Value Measurements.”

The identified tangible and intangible assets acquired, as of the 3Z Close Date, were as follows (in millions):

Tangible assets acquired:	$	4.1
Intangible assets acquired:
Developed technology	4.4
Customer relationships	7.9
Customer backlog	0.1
Goodwill	12.2
Total consideration transferred	$	28.7

The allocation of the purchase price to tangible assets, based on the estimated fair values of assets acquired and liabilities assumed on the 3Z Close Date, was as follows (in millions):

Cash	$	2.2
Total other assets	3.6
Total liabilities	(1.7		)
Net tangible assets acquired	$	4.1

Acquired intangible assets are classified as Level 3 assets for which fair value is derived from a valuation based on inputs that are unobservable and significant to the overall fair value measurement. The fair values of acquired customer relationships and developed technology were determined based on the excess earnings method and relief from royalty method, respectively, variations of the income approach. The intangible assets are being amortized over their estimated useful lives, which range from five to six years. Customer backlog will be fully amortized within one year.

Goodwill arising from this acquisition is primarily attributed to sales of future products and services of 3Z. Goodwill has been assigned to the NE segment and is not deductible for tax purposes.

Results of operations of 3Z have been included in the Company’s Consolidated Financial Statements subsequent to the date of acquisition. Proforma or historical post-acquisition results of operations have not been presented because the effect of the acquisition was not material to prior period financial statements.

RPC Photonics, Inc. Acquisition

On October 30, 2018 (“RPC Close Date”), the Company acquired all of the equity interest of RPC Photonics, Inc. (“RPC”) for approximately $33.4 million in cash and an additional earn-out of up to $53.0 million in cash based on the achievement of certain gross profit targets over approximately a four years period, subsequent to the RPC Close Date.

The achievement or distributions of earn-out payments are not limited in any one period. The acquisition of RPC expands the Company’s 3D Sensing offerings.

The Company accounted for the transaction in accordance with the authoritative guidance on business combination; therefore, the tangible and intangible assets acquired and liabilities assumed are recorded at fair value on the acquisition date.

The fair value of consideration transferred for the RPC Close Date, were as follows (in millions):

Cash consideration paid at closing	$	29.9
Escrow payments	3.5
Fair value of contingent consideration	36.2
Total purchase consideration	$	69.6

The fair value of the earn-out payments at the RPC Close Date were determined by applying a risk-neutral framework using a Monte Carlo Simulation, which includes inputs that are not observable in the market, and therefore represents a Level 3 measurement. The fair value of this earn-out is discussed further in “Note 8. Investments, Forward Contracts and Fair Value Measurements”.

The identified tangible and intangible assets acquired, as of the RPC Close Date, were as follows (in millions):

Tangible assets acquired:	$	5.7
Intangible assets acquired:
Developed technology	15.7
Customer relationships	14.0
Customer backlog	0.3
Goodwill	33.9
Total consideration transferred	$	69.6

The allocation of the purchase price to tangible assets, based on the estimated fair values of assets acquired and liabilities assumed on the RPC Close Date, were as follows (in millions):

Cash	$	1.8
Other current assets	1.8
Property and equipment	2.6
Total liabilities	(0.5		)
Net tangible assets acquired	$	5.7

The allocation of the purchase price was based upon a valuation performed. Acquired intangible assets are classified as Level 3 assets for which fair value is derived from a valuation based on inputs that are unobservable and significant to the overall fair value measurement. The fair values of acquired customer relationships and developed technology were determined based on the excess earnings method and relief from royalty method, respectively, variations of the income approach. The intangible assets are being amortized over their estimated useful lives that range from six to seven years. Customer backlog will be fully amortized within one year.

Goodwill arising from this acquisition is primarily attributed to sales of future products and services of RPC. Goodwill has been assigned to the OSP segment and is not deductible for tax purposes.

Results of operations of RPC have been included in the Company’s Consolidated Financial Statements subsequent to the date of acquisition. Proforma or historical post-acquisition results of operations have not been presented because the effect of the acquisition was not material to prior period financial statements.

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Acquired Developed Technology and Other Intangibles

6 Months Ended

Dec. 28, 2019

Acquired Developed Technology and Other Intangibles

Acquired Developed Technology and Other Intangibles

Note 10. Acquired Developed Technology and Other Intangibles

The following tables present details of the Company’s acquired developed technology, customer relationships and other intangibles (in millions):

As of December 28, 2019	Gross Carrying Amount		Accumulated Amortization			Net
Acquired developed technology	$	439.7	$	(329.4	)	$	110.3
Customer relationships	195.3		(141.9		)	53.4
Other (1)	36.7		(21.1		)	15.6
Total intangibles	$	671.7	$	(492.4	)	$	179.3

As of June 29, 2019	Gross Carrying Amount		Accumulated Amortization			Net
Acquired developed technology	$	437.0	$	(311.1	)	$	125.9
Customer relationships	193.7		(126.3		)	67.4
Other (1)	36.1		(17.8		)	18.3
Total intangibles	$	666.8	$	(455.2	)	$	211.6

⁽¹⁾  Other intangibles consist of customer backlog, non-competition agreements, patents, proprietary know-how and trade secrets, trademarks and trade names.

The following table presents the amortization recorded relating to acquired developed technology, customer relationships and other intangibles (in millions):    

	Three Months Ended				Six Months Ended
	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
Cost of revenues	$	8.4	$	8.5	$	16.8	$	17.9
Operating expenses	8.8		10.4		17.5		20.2
Total amortization of intangible assets	$	17.2	$	18.9	$	34.3	$	38.1

Based on the carrying amount of acquired developed technology, customer relationships and other intangibles as of December 28, 2019, and assuming no future impairment of the underlying assets, the estimated future amortization is as follows (in millions):

Fiscal Years
Remainder of 2020	$	34.0
2021	64.4
2022	37.7
2023	23.8
2024	9.2
Thereafter	10.2
Total amortization	$	179.3

The acquired developed technology, customer relationships and other intangibles balance are adjusted quarterly to record the effect of currency translation adjustments.

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Earnings Per Share (Tables)

6 Months Ended

Dec. 28, 2019

Earnings Per Share [Abstract]

Schedule of computation of basic and diluted net (loss) income per share

The following table sets forth the computation of basic and diluted net loss per share (in millions, except per share data):

	Three Months Ended					Six Months Ended
	December 28, 2019		December 29, 2018			December 28, 2019		December 29, 2018
Numerator:
Income from continuing operations	$	28.0	$	15.4		$	34.8	$	0.1
Loss from discontinued operations, net of taxes	—		(2.4		)	—		(2.4		)
Net income (loss)	$	28.0	$	13.0		$	34.8	$	(2.3	)
Denominator:
Weighted-average shares outstanding:
Basic	230.0		228.3			229.7		227.8
Shares issuable assuming conversion of convertible notes (1)	5.1		—			4.0		—
Effect of dilutive securities from stock-based benefit plans	3.2		2.1			3.7		2.7
Diluted	238.3		230.4			237.4		230.5
Net income (loss) per share - basic:
Continuing operations	$	0.12	$	0.07		$	0.15	$	0.00
Discontinued operations	—		(0.01		)	—		(0.01		)
Net income (loss) per share	$	0.12	$	0.06		$	0.15	$	(0.01	)
Net income (loss) per share - diluted:
Continuing operations	$	0.12	$	0.07		$	0.15	$	0.00
Discontinued operations	—		(0.01		)	—		(0.01		)
Net income (loss) per share	$	0.12	$	0.06		$	0.15	$	(0.01	)

⁽¹⁾ 

Represents the number of shares that would be issued if the Company’s Senior Convertible Notes had been converted. 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.

Schedule of weighted average potentially dilutive securities excluded from the computation because their effect would have been anti-dilutive

The following table sets forth the weighted-average potentially dilutive securities excluded from the computation of the diluted net loss per share because their effect would have been anti-dilutive (in millions):

	Three Months Ended		Six Months Ended
	December 28, 2019	December 29, 2018	December 28, 2019	December 29, 2018
		(2) (3)		(2) (3)
Restricted stock units	0.3	0.2	0.2	0.7
Stock options and ESPP	—	0.1	—	0.1
Total potentially dilutive securities	0.3	0.2	0.2	0.7

⁽²⁾  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 payable in cash, shares of the Company’s common stock or a combination of both at the Company’s election. The Company’s average quarterly stock price for the period presented did not exceed the conversion price of $13.22. Refer to “Note 11. Debt” for more details.

⁽³⁾ 

The Company’s 1.75% Senior Convertible Notes due 2023 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 $13.94 per share payable in cash, shares of the Company’s common stock or a combination of both at the Company’s election. The Company’s average quarterly stock price for the period presented did not exceed the conversion price of $13.94. Refer to “Note 11. Debt” for more details.

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Income Taxes

6 Months Ended

Dec. 28, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Note 14. Income Taxes

The Company recorded an income tax expense of $9.9 million and $18.2 million for the three and six months ended December 28, 2019, respectively. The Company recorded an income tax expense of $10.9 million and $16.6 million for the three and six months ended December 29, 2018, respectively.

The income tax expense for the three and six months ended December 28, 2019 and December 29, 2018 primarily relates to income tax in certain foreign and state jurisdictions based on the Company’s forecasted pre-tax income or loss for the respective fiscal year.

The income tax expense recorded differs from the expected tax expense that would be calculated by applying the federal statutory rate to the Company’s income from continuing operations before taxes primarily due to the changes in valuation allowance for deferred tax assets attributable to the Company’s domestic and foreign income (loss) from continuing operations.

As of December 28, 2019, and June 29, 2019, the Company’s unrecognized tax benefits totaled $50.7 million and $50.9 million, respectively, and are included in deferred taxes and other non-current tax liabilities, net. The Company had $4.2 million accrued for the payment of interest and penalties at December 28, 2019. The timing and resolution of income tax examinations is uncertain, and the amounts ultimately paid, if any, upon resolution of issues raised by the taxing authorities may differ from the amounts accrued for each year. Although the Company does not expect that our balance of gross unrecognized tax benefits will change materially in the next 12 months, given the uncertainty in the development of ongoing income tax examinations, the Company is unable to estimate the full range of possible adjustments to this balance.

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Commitments and Contingencies

6 Months Ended

Dec. 28, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 18. Commitments and Contingencies

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. The Company estimated the liability to range from (amounts represented as £ denote GBP) £5.7 million to £8.4 million. The Company determined 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 accrual is included in pension and post-employment benefits, which is a component of other non-current liabilities in the Company’s Consolidated Balance Sheets.

The Company pursued an appeal of the court decision. In March 2018, the appellate court affirmed the decision of the lower court. The Company is pursuing a deed of rectification claim and continues to pursue a claim against the U.K. law firm responsible for the error. As of December 28, 2019, the related accrued pension liability was £6.5 million or $8.5 million.

The Company is subject to a variety of claims and suits that arise from time to time in the ordinary course of our 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.

Guarantees

The Company follows authoritative guidance which requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that 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 December 28, 2019 and June 29, 2019.

Outstanding Letters of Credit and Performance Bonds

As of December 28, 2019, the Company had standby letters of credit of $7.4 million and performance bonds of $1.0 million collateralized by restricted cash.

Product Warranties

The Company provides reserves for the estimated costs of product warranties at the time revenue is recognized. In general, the Company offers its customers warranties up to three years and has accrued a reserve for the estimated costs of product warranties at the time revenue is recognized. It 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. From time to time, specific warranty accruals may be made if unforeseen technical problems arise. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

The following table presents the changes in the Company’s warranty reserve during the three and six months ended December 28, 2019 and December 29, 2018, (in millions):

	Three Months Ended						Six Months Ended
	December 28, 2019			December 29, 2018			December 28, 2019			December 29, 2018
Balance as of beginning of period	$	8.8		$	9.0		$	8.7		$	8.2
Provision for warranty	0.9			1.0			1.3			1.4
Utilization of reserve	(0.8		)	(1.5		)	(1.8		)	(2.7		)
Adjustments related to pre-existing warranties (including changes in estimates)	0.3			0.7			1.0			2.3
Balance as of end of period	$	9.2		$	9.2		$	9.2		$	9.2

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Dec. 28, 2019	Jun. 29, 2019
Current assets:
Cash and cash equivalents	$ 551.8	$ 521.5
Short-term investments	1.6	1.5
Restricted cash	3.5	3.5
Accounts receivable, net	251.5	237.7
Inventories, net	91.9	102.7
Prepayments and other current assets	54.5	49.9
Total current assets	954.8	916.8
Property, plant and equipment, net	173.5	179.9
Goodwill, net	384.5	381.1
Intangibles, net	179.3	211.6
Deferred income taxes	106.8	108.4
Other non-current assets	60.8	17.3
Total assets	1,859.7	1,815.1
Current liabilities:
Accounts payable	48.9	63.4
Accrued payroll and related expenses	66.5	58.7
Deferred revenue	53.2	55.3
Accrued expenses	32.1	34.2
Other current liabilities	61.2	72.4
Total current liabilities	261.9	284.0
Long-term debt	589.8	578.8
Other non-current liabilities	243.7	226.5
Commitments and contingencies (Note 18)
Stockholders’ equity:
Common stock, $0.001 par value; 1 billion shares authorized; 230 million shares at December 28, 2019 and 229 million shares at June 29, 2019, issued and outstanding	0.2	0.2
Additional paid-in capital	70,254.0	70,244.7
Accumulated deficit	(69,357.4)	(69,384.5)
Accumulated other comprehensive loss	(132.5)	(134.6)
Total stockholders’ equity	764.3	725.8
Total liabilities and stockholders’ equity	$ 1,859.7	$ 1,815.1

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Basis of Presentation

6 Months Ended

Dec. 28, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Note 1. Basis of Presentation

The financial information for Viavi Solutions Inc. (“VIAVI” also referred to as “the Company”) for the three and six months ended December 28, 2019 and December 29, 2018 is unaudited, and includes all normal and recurring adjustments Company management considers necessary for a fair statement of the financial information set forth herein. The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such information does not include all of the information and footnotes required by U.S. GAAP for annual consolidated financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 29, 2019.

Other than updates to the Company’s lease accounting policy under Accounting Standards Codification (“ASC”) 842 - Leases, as disclosed in “Note 2. Recently Issued Accounting Pronouncements” and “Note 12. Leases”, there have been no material changes to the Company’s accounting policies during the three and six months ended December 28, 2019, as compared to the significant accounting policies presented in “Note 1. Basis of Presentation” of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report for the year ended June 29, 2019 on Form 10-K filed with the SEC on August 27, 2019.

The balance sheet as of June 29, 2019 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The results for the three and six months ended December 28, 2019 and December 29, 2018 may not be indicative of results for the fiscal year ending June 27, 2020 or any future periods.

Fiscal Years

The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to June 30th. The Company’s fiscal 2020 is a 52-week year ending on June 27, 2020. The Company’s fiscal 2019 was a 52-week year ending on June 29, 2019.

Principles of Consolidation

The consolidated financial statements 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 statements requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements, the reported amount of net revenues and expenses and the disclosure of commitments and contingencies during the reporting periods. The Company bases estimates on historical experience and assumptions about future periods that are believed to be reasonable based on available information. The Company’s reported financial positions or results of operations may be materially different under changed conditions or when using different estimates and assumptions, particularly with respect to significant accounting policies. If estimates or assumptions differ from actual results, subsequent periods are adjusted to reflect readily available current information.

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Acquired Developed Technology and Other Intangibles (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 28, 2019	Dec. 29, 2018	Dec. 28, 2019	Dec. 29, 2018	Jun. 29, 2019
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 671.7		$ 671.7		$ 666.8
Accumulated Amortization	(492.4)		(492.4)		(455.2)
Net	179.3		179.3		211.6
Cost of revenues	8.4	$ 8.5	16.8	$ 17.9
Operating expenses	8.8	10.4	17.5	20.2
Total amortization of intangible assets	17.2	$ 18.9	34.3	$ 38.1
Estimated future amortization expense
Remainder of 2020	34.0		34.0
2021	64.4		64.4
2022	37.7		37.7
2023	23.8		23.8
2024	9.2		9.2
Thereafter	10.2		10.2
Total amortization	179.3		179.3
Acquired developed technology
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	439.7		439.7		437.0
Accumulated Amortization	(329.4)		(329.4)		(311.1)
Net	110.3		110.3		125.9
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	195.3		195.3		193.7
Accumulated Amortization	(141.9)		(141.9)		(126.3)
Net	53.4		53.4		67.4
Other
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	36.7		36.7		36.1
Accumulated Amortization	(21.1)		(21.1)		(17.8)
Net	$ 15.6		$ 15.6		$ 18.3

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Leases - Narrative (Details) $ in Millions	3 Months Ended	6 Months Ended
	Dec. 28, 2019 USD ($)	Dec. 28, 2019 USD ($)
Leases [Abstract]
Operating lease cost	$ 3.3	$ 6.6
Weighted average remaining lease term	5 years 4 months 24 days	5 years 4 months 24 days
Weighted average discount rate	4.70%	4.70%
Cash paid for amounts included in the measurement of operating lease liabilities	$ 5.8	$ 9.2
Operating ROU assets obtained in exchange for new operating lease obligations	$ 12.6	$ 14.5

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Revenue (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Dec. 28, 2019	Dec. 28, 2019	Jun. 29, 2019
Disaggregation of Revenue [Line Items]
Unbilled receivables	$ 5.4	$ 5.4	$ 11.5
Change in Contract with Customer, Liability (Roll Forward)
Balance at beginning of period	64.4	68.5
Revenue deferrals for new contracts	33.6	52.5
Revenue recognized during the period	(26.1)	(49.1)
Balance at end of period	71.9	71.9
Short-term deferred revenue	53.2	53.2	55.3
Long-term deferred revenue	$ 18.7	$ 18.7	$ 13.2
Minimum
Disaggregation of Revenue [Line Items]
Payment period from invoice date		30 days
Maximum
Disaggregation of Revenue [Line Items]
Payment period from invoice date		90 days

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Employee Pension and Other Benefit Plans (Tables)

6 Months Ended

Dec. 28, 2019

Defined Benefit Plan [Abstract]

Schedule of net periodic cost for the pension and benefits plans

The following table presents the components of net periodic cost for the pension and benefits plans (in millions):

	Three Months Ended						Six Months Ended
	December 28, 2019			December 29, 2018			December 28, 2019			December 29, 2018
Service cost	$	0.1		$	0.1		$	0.2		$	0.1
Interest cost	0.5			0.6			0.9			1.2
Expected return on plan assets	(0.4		)	(0.4		)	(0.8		)	(0.8		)
Amortization of net actuarial losses	0.8			0.4			1.5			1.0
Net periodic benefit cost	$	1.0		$	0.7		$	1.8		$	1.5

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Acquisitions - Narrative (Details) - USD ($) $ in Millions			6 Months Ended
	May 31, 2019	Oct. 30, 2018	Dec. 28, 2019
Business Acquisition [Line Items]
Earn-out period			3 years
Performance based earn-out payments (up to)			$ 63.0
3Z Telecom, Inc.
Business Acquisition [Line Items]
Cash consideration paid at closing	$ 23.2
Earn-out liability	$ 7.0
Earn-out period	2 years
3Z Telecom, Inc. | Customer Backlog
Business Acquisition [Line Items]
Estimated useful life	1 year
3Z Telecom, Inc. | Minimum
Business Acquisition [Line Items]
Estimated useful life	5 years
3Z Telecom, Inc. | Maximum
Business Acquisition [Line Items]
Estimated useful life	6 years
RPC Photonics, Inc.
Business Acquisition [Line Items]
Cash consideration paid at closing		$ 33.4
Earn-out period		4 years
Performance based earn-out payments (up to)		$ 53.0
RPC Photonics, Inc. | Customer Backlog
Business Acquisition [Line Items]
Estimated useful life		1 year
RPC Photonics, Inc. | Minimum
Business Acquisition [Line Items]
Estimated useful life		6 years
RPC Photonics, Inc. | Maximum
Business Acquisition [Line Items]
Estimated useful life		7 years

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Restructuring and Related Charges

6 Months Ended

Dec. 28, 2019

Restructuring and Related Activities [Abstract]

Restructuring and Related Charges

Note 13. Restructuring and Related Charges

The Company has initiated restructuring events primarily intended to reduce its costs, consolidate its operations, integrate various acquisitions, streamline product manufacturing and align its business to address market conditions. The Company’s restructuring charges primarily include severance and benefit costs to eliminate a specific number of positions, facilities and equipment costs to vacate facilities and consolidate operations, and lease termination costs. The timing of associated cash payments is dependent upon the type of restructuring charge and can extend over multiple periods.

As of December 28, 2019 and June 29, 2019, the Company’s total restructuring accrual was $5.4 million and $8.8 million, respectively. During the three and six months ended December 28, 2019, the Company recorded restructuring and related benefits of $0.9 million and $0.6 million, respectively. During the three and six months ended December 29, 2018, the Company recorded restructuring and related charges of $0.3 million and $15.1 million, respectively.

Summary of Restructuring Plans

The following table presents the adjustments to the accrued restructuring expenses related to all of the Company’s restructuring plans described below for the three and six months ended December 28, 2019 (in millions):

	Balance June 29, 2019		Six Months Ended December 28, 2019 Benefits			Cash Settlements			Non-cash Settlements and Other Adjustments (2)			Balance December 28, 2019		Three Months Ended December 28, 2019 Benefits
Fiscal 2019 Plan
NSE, including AW (1)	$	8.7	$	(0.6	)	$	(2.3	)	$	(0.4	)	$	5.4	$	(0.9	)
Plans Prior to Fiscal 2017
Other Plans (1)	0.1		—			—			(0.1		)	—		—
Total (3)	$	8.8	$	(0.6	)	$	(2.3	)	$	(0.5	)	$	5.4	$	(0.9	)

⁽¹⁾  Plan type includes workforce reduction cost.

⁽²⁾  Other adjustments including $0.2 million lease liability reclassification to Operating lease liability upon ASC 842 adoption.

⁽³⁾  $5.4 million and $8.6 million in other current liabilities on the Consolidated Balance Sheets as of December 28, 2019 and June 29, 2019, respectively. $0.2 million in other non-current liabilities on the Consolidated Balance Sheets as of June 29, 2019.

Fiscal 2019 Plans

NSE, including AW Restructuring Plan

During the first quarter of fiscal 2019, Management approved restructuring and workforce reduction plans within its Network Service and Enablement (“NSE”) business, including actions related to the recently acquired AW business. These actions further drive the Company’s strategy for organizational alignment and consolidation as part of its continued commitment to a more cost effective and agile organization and to improve overall profitability in the Company’s NSE business. Included in these restructuring plans are specific actions to consolidate and integrate the newly acquired AW business within the NSE business segment. During the third quarter of fiscal 2019, the Company has updated the plan to include additional headcount primarily to transfer a portion of the manufacturing operations related to the recently acquired AW business to a contract manufacturer. A restructuring benefits of $0.6 million was recorded in the six months ended December 28, 2019 for adjustments to severance and employee benefits. Payments related to the severance and benefits accrual are expected to be paid by the end of the fourth quarter of fiscal 2020.

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Employee Pension and Other Benefit Plans

6 Months Ended

Dec. 28, 2019

Defined Benefit Plan [Abstract]

Employee Pension and Other Benefit Plans

Note 17. Employee Pension and Other Benefit Plans

The Company sponsors significant qualified and non-qualified pension plans for certain past and present employees in the United Kingdom (“U.K.”) and Germany. The Company also is responsible for the non-pension post-retirement benefit obligation assumed from a past acquisition.

Most of the 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 in fiscal 2010. Benefits are generally based upon years of service and compensation or stated amounts for each year of service.

As of December 28, 2019, the U.K. plan was partially 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. During the six months ended December 28, 2019, the Company contributed $0.6 million to the U.K. plan and $1.8 million to the other plans. The funded plan assets consist primarily of managed investments.

The following table presents the components of net periodic cost for the pension and benefits plans (in millions):

	Three Months Ended						Six Months Ended
	December 28, 2019			December 29, 2018			December 28, 2019			December 29, 2018
Service cost	$	0.1		$	0.1		$	0.2		$	0.1
Interest cost	0.5			0.6			0.9			1.2
Expected return on plan assets	(0.4		)	(0.4		)	(0.8		)	(0.8		)
Amortization of net actuarial losses	0.8			0.4			1.5			1.0
Net periodic benefit cost	$	1.0		$	0.7		$	1.8		$	1.5

Both the calculation of the projected benefit obligation and net periodic cost are based upon 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.

The Company expects to incur cash outlays of approximately $7.9 million related to its defined benefit pension plans during fiscal 2020 to make current benefit payments and fund future obligations. As of December 28, 2019, approximately $2.4 million had been incurred. These payments have been estimated based on the same assumptions used to measure the Company’s projected benefit obligation at June 29, 2019.

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Revenue (Tables)

6 Months Ended

Dec. 28, 2019

Revenue from Contract with Customer [Abstract]

Summary of activity related to deferred revenue and financed unearned services revenue

The following tables summarize the activity related to deferred revenue (in millions):

	December 28, 2019
	Three Months Ended			Six Months Ended
Deferred revenue:
Balance at beginning of period	$	64.4		$	68.5
Revenue deferrals for new contracts (1)	33.6			52.5
Revenue recognized during the period	(26.1		)	(49.1		)
Balance at end of period	$	71.9		$	71.9
Short-term deferred revenue	$	53.2		$	53.2
Long-term deferred revenue	$	18.7		$	18.7

⁽¹⁾  Included in these amounts is the impact from foreign currency exchange rate fluctuations.

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Recently Issued Accounting Pronouncements

6 Months Ended

Dec. 28, 2019

Accounting Policies [Abstract]

Recently Issued Accounting Pronouncements

Note 2. Recently Issued Accounting Pronouncements

Recent Accounting Pronouncements Adopted

In 2016, the Financial Accounting Standards Board (“FASB”) issued guidance on the financial reporting requirements for leasing arrangements, ASC 842 - Leases. ASC 842 requires lessees to recognize operating leases with a term greater than one year on their balance sheets as Right-of-Use (“ROU”) assets and corresponding lease liabilities, measured at the present value of the lease payments. In the first quarter of fiscal 2020 the Company adopted this standard using the modified retrospective approach. The Company elected to apply the optional transition approach of not adjusting comparative period financial statements for the adoption impact. The Company also elected the package of practical expedients to not reassess whether a contract contains a lease, lease classification and accounting for initial direct costs. Adoption of the leasing standard resulted in $35.5 million of ROU assets and $37.0 million of lease

liabilities on June 30, 2019. In addition, the Company recorded an adjustment to accumulative deficit, net of taxes, of $3.0 million from the recognition of previously deferred profit under sale-leaseback arrangements and de-recognition of related real estate assets of $7.1 million and financing obligations of $10.1 million. The adoption of the new standard did not have a material impact on the Company’s Consolidated Statements of Operations and Statements of Cash Flows. For additional information refer to “Note 12. Leases.”

Recent Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued guidance which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. The guidance is effective for the Company in the first quarter of fiscal year 2022 and early adoption is permitted. The Company is evaluating the effects that the adoption of this guidance will have on its consolidated financial statements.

In August 2018, the FASB issued guidance to amend the disclosure requirements related to defined benefit pension and other post-retirement plans. Some of the changes include adding a disclosure requirement for significant gains and losses related to changes in the benefit obligation for the period and removing the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year. This guidance is effective for the Company in the first quarter of fiscal 2021 and early adoption is permitted. The Company is evaluating the 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.

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Cover page - shares	6 Months Ended
	Dec. 28, 2019	Jan. 25, 2020
Cover page.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Dec. 28, 2019
Document Transition Report	false
Entity File Number	000-22874
Entity Registrant Name	Viavi Solutions Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	94-2579683
Entity Address, Address Line One	6001 America Center Drive
Entity Address, City or Town	San Jose
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	95002
City Area Code	408
Local Phone Number	404-3600
Title of 12(b) Security	Common Stock, par value of $0.001 per share
Trading Symbol	VIAV
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		230,252,773
Entity Central Index Key	0000912093
Amendment Flag	false
Current Fiscal Year End Date	--06-27
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 28, 2019	Jun. 29, 2019
Statement of Financial Position [Abstract]
Common Stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common Stock, shares authorized	1,000,000,000	1,000,000,000
Common Stock, shares issued	230,000,000	229,000,000
Common Stock, shares outstanding	230,000,000	229,000,000

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Goodwill (Details) $ in Millions	6 Months Ended
	Dec. 28, 2019 USD ($)
Changes in goodwill
Balance at the beginning of the period	$ 381.1
Currency translation adjustments	3.4
Balance at the end of the period	384.5
Network Enablement
Changes in goodwill
Balance at the beginning of the period	338.9
Currency translation adjustments	3.4
Balance at the end of the period	342.3
Service Enablement
Changes in goodwill
Balance at the beginning of the period	0.0
Currency translation adjustments	0.0
Balance at the end of the period	0.0
Optical Security and Performance Products
Changes in goodwill
Balance at the beginning of the period	42.2
Currency translation adjustments	0.0
Balance at the end of the period	$ 42.2

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Debt - Interest Expense (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 28, 2019	Dec. 29, 2018	Dec. 28, 2019	Dec. 29, 2018
Debt Disclosure [Abstract]
Interest expense-contractual interest	$ 2.2	$ 2.1	$ 4.3	$ 4.5
Amortization of debt issuance cost	0.4	0.3	0.7	0.7
Accretion of debt discount	$ 5.2	$ 4.9	$ 10.3	$ 11.4

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Acquisitions - Consideration Transferred (Details) - USD ($) $ in Millions	May 31, 2019	Oct. 30, 2018	Dec. 28, 2019	Jun. 29, 2019
Business Acquisition [Line Items]
Fair value of contingent consideration			$ 34.1	$ 38.4
3Z Telecom, Inc.
Business Acquisition [Line Items]
Cash consideration paid at closing	$ 18.9
Escrow payments	4.3
Fair value of contingent consideration	5.5
Total purchase consideration	$ 28.7
RPC Photonics, Inc.
Business Acquisition [Line Items]
Cash consideration paid at closing		$ 29.9
Escrow payments		3.5
Fair value of contingent consideration		36.2
Total purchase consideration		$ 69.6

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Revenue - Remaining Performance Obligation (Details) $ in Millions	Dec. 28, 2019 USD ($)
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 238.1
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-12-30
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, percentage	89.00%
Remaining performance obligation, period	12 months

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Commitments and Contingencies (Tables)

6 Months Ended

Dec. 28, 2019

Commitments and Contingencies Disclosure [Abstract]

Schedule of changes in the entity's warranty reserve

The following table presents the changes in the Company’s warranty reserve during the three and six months ended December 28, 2019 and December 29, 2018, (in millions):

	Three Months Ended						Six Months Ended
	December 28, 2019			December 29, 2018			December 28, 2019			December 29, 2018
Balance as of beginning of period	$	8.8		$	9.0		$	8.7		$	8.2
Provision for warranty	0.9			1.0			1.3			1.4
Utilization of reserve	(0.8		)	(1.5		)	(1.8		)	(2.7		)
Adjustments related to pre-existing warranties (including changes in estimates)	0.3			0.7			1.0			2.3
Balance as of end of period	$	9.2		$	9.2		$	9.2		$	9.2

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Commitments and Contingencies (Details) £ in Millions	3 Months Ended		6 Months Ended
	Dec. 28, 2019 USD ($)	Dec. 29, 2018 USD ($)	Dec. 28, 2019 USD ($)	Dec. 29, 2018 USD ($)	Dec. 28, 2019 GBP (£)	Jun. 29, 2019 USD ($)	Jul. 02, 2016 GBP (£)	Jun. 30, 2016 GBP (£)
Loss Contingencies [Line Items]
Guarantee liabilities	$ 0		$ 0			$ 0
Standby letters of credit	7,400,000		$ 7,400,000
Product Warranties
Warranty Term for most products			3 years
Changes in warranty reserve
Balance as of beginning of period	8,800,000	$ 9,000,000.0	$ 8,700,000	$ 8,200,000
Provision for warranty	900,000	1,000,000.0	1,300,000	1,400,000
Utilization of reserve	(800,000)	(1,500,000)	(1,800,000)	(2,700,000)
Adjustments related to pre-existing warranties (including changes in estimates)	300,000	700,000	1,000,000.0	2,300,000
Balance as of end of period	9,200,000	$ 9,200,000	9,200,000	$ 9,200,000
Performance bond
Loss Contingencies [Line Items]
Guarantee liabilities	1,000,000.0		1,000,000.0
Judicial ruling | Case related to amendment of pension for foreign subsidiary
Loss Contingencies [Line Items]
Loss contingency accrual	$ 8,500,000		$ 8,500,000		£ 6.5
Minimum | Judicial ruling | Case related to amendment of pension for foreign subsidiary
Loss Contingencies [Line Items]
Estimated liability (in pounds) | £								£ 5.7
Loss contingency accrual | £							£ 5.7
Maximum | Judicial ruling | Case related to amendment of pension for foreign subsidiary
Loss Contingencies [Line Items]
Estimated liability (in pounds) | £								£ 8.4

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Stockholders' Equity (Details) - USD ($) shares in Thousands	3 Months Ended		6 Months Ended
	Dec. 28, 2019	Dec. 29, 2018	Dec. 28, 2019	Dec. 29, 2018	Sep. 30, 2019
Class of Stock [Line Items]
Repurchase of common stock (in shares)	659		763
Repurchase of common stock	$ 9,200,000	$ 8,500,000	$ 10,700,000	$ 8,500,000
Common Stock
Class of Stock [Line Items]
Remaining authorization for future share repurchases	$ 189,300,000		$ 189,300,000
Share Repurchase Agreement September 2019 | Common Stock
Class of Stock [Line Items]
Authorized amount under stock repurchase program					$ 200,000,000
Share Repurchase Agreement February 2018 | Common Stock
Class of Stock [Line Items]
Authorized amount under stock repurchase program					$ 200,000,000

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Acquisitions - Purchase Price Allocation (Details) - USD ($) $ in Millions	Dec. 28, 2019	Jun. 29, 2019	May 31, 2019	Oct. 30, 2018
Business Acquisition [Line Items]
Goodwill	$ 384.5	$ 381.1
3Z Telecom, Inc.
Business Acquisition [Line Items]
Tangible assets acquired			$ 4.1
Goodwill			12.2
Total consideration transferred			28.7
3Z Telecom, Inc. | Developed technology
Business Acquisition [Line Items]
Intangible assets acquired			4.4
3Z Telecom, Inc. | Customer relationships
Business Acquisition [Line Items]
Intangible assets acquired			7.9
3Z Telecom, Inc. | Customer Backlog
Business Acquisition [Line Items]
Intangible assets acquired			$ 0.1
RPC Photonics, Inc.
Business Acquisition [Line Items]
Tangible assets acquired				$ 5.7
Goodwill				33.9
Total consideration transferred				69.6
RPC Photonics, Inc. | Developed technology
Business Acquisition [Line Items]
Intangible assets acquired				15.7
RPC Photonics, Inc. | Customer relationships
Business Acquisition [Line Items]
Intangible assets acquired				14.0
RPC Photonics, Inc. | Customer Backlog
Business Acquisition [Line Items]
Intangible assets acquired				$ 0.3

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Balance Sheet and Other Details - Prepayments and Other Current Assets (Details) - USD ($) $ in Millions	Dec. 28, 2019	Jun. 29, 2019
Prepayments and other current assets
Prepayments	$ 13.3	$ 14.2
Asset held for sale	2.5	2.5
Advances to contract manufacturers	6.2	5.1
Refundable income taxes	9.1	8.9
Transaction tax receivables	10.5	11.8
Other current assets	12.9	7.4
Prepayments and other current assets	$ 54.5	$ 49.9

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Investments, Forward Contracts and Fair Value Measurements - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 28, 2019	Dec. 29, 2018	Dec. 28, 2019	Dec. 29, 2018	Jun. 29, 2019
Investments, Forward Contracts and Fair Value Measurements
Term of maturities of securities classified as current assets included in short-term investments			12 months
Total debt available-for-sale securities	$ 500,000		$ 500,000		$ 600,000
Other-than-temporary impairment loss	0	$ 0	0	$ 0
Performance based earn-out payments (up to)	63,000,000.0		$ 63,000,000.0
Earn-out period			3 years
Fair value of contingent consideration	34,100,000		$ 34,100,000		38,400,000
Payments for continent earn-out liabilities	0	0	0	0
Not designated | Foreign exchange forward contracts
Foreign Currency Forward Contracts
Derivative asset, fair value	5,900,000		5,900,000		1,200,000
Derivative liability, fair value	1,100,000		$ 1,100,000		4,000,000.0
Derivative, term of contract			120 days
Gains (losses) on derivatives	4,800,000	$ (4,500,000)	$ 2,200,000	$ (5,800,000)
Not designated | Foreign exchange forward contracts | Held to purchase
Foreign Currency Forward Contracts
Notional amount of forward contracts	124,700,000		124,700,000		117,800,000
Not designated | Foreign exchange forward contracts | Held to sell
Foreign Currency Forward Contracts
Notional amount of forward contracts	36,600,000		36,600,000		31,300,000
Short-term investments
Investments, Forward Contracts and Fair Value Measurements
Deferred compensation plan assets	1,600,000		1,600,000		1,500,000
Debt securities | Short-term investments
Investments, Forward Contracts and Fair Value Measurements
Deferred compensation plan assets	500,000		500,000		400,000
Money market instruments and funds | Short-term investments
Investments, Forward Contracts and Fair Value Measurements
Deferred compensation plan assets	300,000		300,000		300,000
Equity securities | Short-term investments
Investments, Forward Contracts and Fair Value Measurements
Deferred compensation plan assets	$ 800,000		$ 800,000		$ 800,000

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Stock-Based Compensation (Tables)

6 Months Ended

Dec. 28, 2019

Share-based Payment Arrangement [Abstract]

Schedule of the impact on the entity's results of operations of recording stock-based compensation by function

The impact on the Company’s results of operations of recording stock-based compensation by function for the three and six months ended December 28, 2019 and December 29, 2018, as follows (in millions):

	Three Months Ended				Six Months Ended
	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
Cost of revenues	$	1.0	$	0.9	$	2.0	$	1.7
Research and development	2.0		1.6		3.7		2.8
Selling, general and administrative	8.3		7.1		15.9		13.2
Total stock-based compensation expense	$	11.3	$	9.6	$	21.6	$	17.7

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Acquired Developed Technology and Other Intangibles (Tables)

6 Months Ended

Dec. 28, 2019

Acquired Developed Technology and Other Intangibles

Schedule of acquired developed technology and other intangibles

The following tables present details of the Company’s acquired developed technology, customer relationships and other intangibles (in millions):

As of December 28, 2019	Gross Carrying Amount		Accumulated Amortization			Net
Acquired developed technology	$	439.7	$	(329.4	)	$	110.3
Customer relationships	195.3		(141.9		)	53.4
Other (1)	36.7		(21.1		)	15.6
Total intangibles	$	671.7	$	(492.4	)	$	179.3

As of June 29, 2019	Gross Carrying Amount		Accumulated Amortization			Net
Acquired developed technology	$	437.0	$	(311.1	)	$	125.9
Customer relationships	193.7		(126.3		)	67.4
Other (1)	36.1		(17.8		)	18.3
Total intangibles	$	666.8	$	(455.2	)	$	211.6

⁽¹⁾ 

Other intangibles consist of customer backlog, non-competition agreements, patents, proprietary know-how and trade secrets, trademarks and trade names.

Finite-lived intangible assets amortization expense

The following table presents the amortization recorded relating to acquired developed technology, customer relationships and other intangibles (in millions):    

	Three Months Ended				Six Months Ended
	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
Cost of revenues	$	8.4	$	8.5	$	16.8	$	17.9
Operating expenses	8.8		10.4		17.5		20.2
Total amortization of intangible assets	$	17.2	$	18.9	$	34.3	$	38.1

Schedule of estimated future amortization

Based on the carrying amount of acquired developed technology, customer relationships and other intangibles as of December 28, 2019, and assuming no future impairment of the underlying assets, the estimated future amortization is as follows (in millions):

Fiscal Years
Remainder of 2020	$	34.0
2021	64.4
2022	37.7
2023	23.8
2024	9.2
Thereafter	10.2
Total amortization	$	179.3

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Acquisitions (Tables)

6 Months Ended

Dec. 28, 2019

Business Combinations [Abstract]

Fair value of consideration transferred

The fair value of consideration transferred for the 3Z acquisition consists of the following (in millions):

Cash consideration paid at closing	$	18.9
Escrow payments	4.3
Fair value of contingent consideration	5.5
Total purchase consideration	$	28.7

The fair value of consideration transferred for the RPC Close Date, were as follows (in millions):

Cash consideration paid at closing	$	29.9
Escrow payments	3.5
Fair value of contingent consideration	36.2
Total purchase consideration	$	69.6

Preliminary identified intangible assets acquired

The identified tangible and intangible assets acquired, as of the 3Z Close Date, were as follows (in millions):

Tangible assets acquired:	$	4.1
Intangible assets acquired:
Developed technology	4.4
Customer relationships	7.9
Customer backlog	0.1
Goodwill	12.2
Total consideration transferred	$	28.7

The identified tangible and intangible assets acquired, as of the RPC Close Date, were as follows (in millions):

Tangible assets acquired:	$	5.7
Intangible assets acquired:
Developed technology	15.7
Customer relationships	14.0
Customer backlog	0.3
Goodwill	33.9
Total consideration transferred	$	69.6

Preliminary allocation of purchase price

The allocation of the purchase price to tangible assets, based on the estimated fair values of assets acquired and liabilities assumed on the 3Z Close Date, was as follows (in millions):

Cash	$	2.2
Total other assets	3.6
Total liabilities	(1.7		)
Net tangible assets acquired	$	4.1

The allocation of the purchase price to tangible assets, based on the estimated fair values of assets acquired and liabilities assumed on the RPC Close Date, were as follows (in millions):

Cash	$	1.8
Other current assets	1.8
Property and equipment	2.6
Total liabilities	(0.5		)
Net tangible assets acquired	$	5.7

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Accumulated Other Comprehensive Loss

6 Months Ended

Dec. 28, 2019

Equity [Abstract]

Accumulated Other Comprehensive Loss

Note 5. Accumulated Other Comprehensive Loss

The Company’s accumulated other comprehensive loss consists of the accumulated net unrealized gains or losses on available-for-sale investments, foreign currency translation adjustments and change in unrealized components of defined benefit obligations.

For the six months ended December 28, 2019, the changes in accumulated other comprehensive loss, net of tax, by component were as follows (in millions):

	Unrealized losses on available-for sale investments			Foreign  currency translation adjustments			Change in unrealized components of defined benefit obligations (1)			Total
Beginning balance as of June 29, 2019	$	(5.0	)	$	(101.0	)	$	(28.6	)	$	(134.6	)
Other comprehensive income (loss) before reclassification	—			0.6			—			0.6
Amounts reclassified to accumulated other comprehensive loss	—			—			1.5			1.5
Net current-period other comprehensive income	—			0.6			1.5			2.1
Ending balance as of December 28, 2019	$	(5.0	)	$	(100.4	)	$	(27.1	)	$	(132.5	)

(1)  The amount reclassified out of accumulated other comprehensive loss represents the amortization of actuarial losses included as a component of cost of revenues, research and development (“R&D”) and SG&A in the Consolidated Statement of Operations for the six months ended December 28, 2019. There was no tax impact for the six months ended December 28, 2019. Refer to “Note 17. Employee Pension and Other Benefit Plans” for more details on the computation of net periodic cost for pension plans.

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Goodwill

6 Months Ended

Dec. 28, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Note 9. Goodwill

The following table presents changes in goodwill allocated to the Company’s reportable segments (in millions):

	Network Enablement		Service Enablement		Optical Security and Performance Products		Total
Balance as of June 29, 2019	$	338.9	$	—	$	42.2	$	381.1
Currency translation adjustments	3.4		—		—		3.4
Balance as of December 28, 2019	$	342.3	$	—	$	42.2	$	384.5

The Company tests goodwill for impairment at the reporting unit level annually during the fourth quarter of each fiscal year, or more frequently if events or circumstances indicate that the asset may be impaired. In the fourth quarter of fiscal 2019, the Company reviewed goodwill under the qualitative assessment of the authoritative guidance and concluded that it was more likely than not that the fair value of each reporting unit exceeded its carrying amount and that no indication of impairment existed.

There were no events or changes in circumstances which triggered an impairment review during the three and six months ended December 28, 2019.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 28, 2019	Dec. 29, 2018	Dec. 28, 2019	Dec. 29, 2018
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 28.0	$ 13.0	$ 34.8	$ (2.3)
Other comprehensive (loss) income:
Net change in cumulative translation adjustment, net of tax	28.0	(13.0)	0.6	(26.1)
Net change in available-for-sale investments, net of tax:
Unrealized holding gain arising during period	0.0	0.0	0.0	0.2
Plus: reclassification adjustments included in net loss	0.0	0.2	0.0	0.4
Net change in defined benefit obligation, net of tax:
Amortization of actuarial losses	0.8	0.4	1.5	1.0
Net change in accumulated other comprehensive income (loss)	28.8	(12.4)	2.1	(24.5)
Comprehensive income (loss)	$ 56.8	$ 0.6	$ 36.9	$ (26.8)

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Millions	Total	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss
Balance at the beginning of the period (in shares) at Jun. 30, 2018		226,700
Balance at the beginning of the period at Jun. 30, 2018	$ 734.9	$ 0.2	$ 70,216.2	$ (69,378.6)	$ (102.9)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(2.3)			(2.3)
Other comprehensive income (loss)	(24.5)				(24.5)
Shares issued under employee stock plans, net of tax (in shares)		2,200
Shares issued under employee stock plans, net of tax	(7.3)		(7.3)
Stock-based compensation	17.9		17.9
Repurchase of common stock (in shares)		(900)
Repurchase of common stock	(8.5)			(8.5)
Other	(0.1)			(0.1)
Balance at the end of the period (in shares) at Dec. 29, 2018		228,000
Balance at the end of the period at Dec. 29, 2018	710.1	$ 0.2	70,226.8	(69,389.5)	(127.4)
Balance at the beginning of the period (in shares) at Sep. 29, 2018		228,200
Balance at the beginning of the period at Sep. 29, 2018	709.6	$ 0.2	70,218.6	(69,394.1)	(115.1)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	13.0			13.0
Other comprehensive income (loss)	(12.4)				(12.4)
Shares issued under employee stock plans, net of tax (in shares)		700
Shares issued under employee stock plans, net of tax	(1.5)		(1.5)
Stock-based compensation	9.7		9.7
Repurchase of common stock (in shares)		(900)
Repurchase of common stock	(8.5)			(8.5)
Other	0.2			0.1	0.1
Balance at the end of the period (in shares) at Dec. 29, 2018		228,000
Balance at the end of the period at Dec. 29, 2018	710.1	$ 0.2	70,226.8	(69,389.5)	(127.4)
Balance at the beginning of the period (in shares) at Jun. 29, 2019		228,800
Balance at the beginning of the period at Jun. 29, 2019	725.8	$ 0.2	70,244.7	(69,384.5)	(134.6)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	34.8			34.8
Other comprehensive income (loss)	2.1				2.1
Shares issued under employee stock plans, net of tax (in shares)		2,200
Shares issued under employee stock plans, net of tax	(12.6)		(12.6)
Stock-based compensation	$ 21.9		21.9
Repurchase of common stock (in shares)	(763)	(800)
Repurchase of common stock	$ (10.7)			(10.7)
Balance at the end of the period (in shares) at Dec. 28, 2019		230,200
Balance at the end of the period at Dec. 28, 2019	764.3	$ 0.2	70,254.0	(69,357.4)	(132.5)
Balance at the beginning of the period (in shares) at Sep. 28, 2019		230,400
Balance at the beginning of the period at Sep. 28, 2019	708.1	$ 0.2	70,245.4	(69,376.2)	(161.3)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	28.0			28.0
Other comprehensive income (loss)	28.8				28.8
Shares issued under employee stock plans, net of tax (in shares)		500
Shares issued under employee stock plans, net of tax	(2.9)		(2.9)
Stock-based compensation	$ 11.5		11.5
Repurchase of common stock (in shares)	(659)	(700)
Repurchase of common stock	$ (9.2)			(9.2)
Balance at the end of the period (in shares) at Dec. 28, 2019		230,200
Balance at the end of the period at Dec. 28, 2019	$ 764.3	$ 0.2	$ 70,254.0	$ (69,357.4)	$ (132.5)

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Stockholders' Equity

6 Months Ended

Dec. 28, 2019

Equity [Abstract]

Stockholders' Equity

Note 15. Stockholders' Equity

Repurchase of Common Stock

In September 2019, the Board of Directors authorized a stock repurchase program up to $200 million of the Company’s common stock through open market or private transactions before September 30, 2021. The new stock repurchase program replaces the previous $200 million stock repurchase program that was set to expire on September 30, 2019. Under the new repurchase program, the Company may repurchase its common stock from time to time at the discretion of the Company’s management.

During the three and six months ended December 28, 2019, the Company repurchased 659 thousand and 763 thousand shares of its common stock for $9.2 million and $10.7 million, respectively. As of December 28, 2019, the Company had remaining authorization of $189.3 million for future share repurchases. The number of shares to be repurchased and the timing of such repurchases will be based on several factors, including business and financial market conditions.

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Operating Segments and Geographic Information

6 Months Ended

Dec. 28, 2019

Segment Reporting [Abstract]

Operating Segments and Geographic Information

Note 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 is the Company’s Chief Operating Decision Maker (“CODM”). The Company's reportable segments reflect the way the Company's CODM review and assess performance of the business.

The Company’s reportable segments are:

(i) Network Enablement:

NE provides 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. The Company also offers a range of product support and professional services such as repair, calibration, software support and technical assistance for our products.

(ii) Service Enablement:

SE solutions are embedded systems that yield 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 provides innovative, precision, high performance optical products for anti-counterfeiting, government, industrial, automotive and consumer electronic markets, including 3D Sensing applications.

The CODM manages the Company in two broad business categories: NSE and OSP. The CODM evaluates segment performance of the NSE business based on the combined segment gross and operating margins. Operating expenses associated with the NSE business are not allocated to the individual segments within NSE, as they are managed centrally at the business unit level. The CODM evaluates segment performance of the OSP business based on segment operating margin. The Company allocates corporate-level operating expenses to its segment results, except 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 (benefits) charges, impairment of goodwill, changes in fair value of contingent consideration liabilities, non-operating income and expenses, or other charges unrelated to core operating performance to its segments because management does not include this information in its measurement of the performance of the operating segments. These items are presented as “Other Items” in the table below. Additionally, the Company does not specifically identify and allocate all assets by operating segment.

The following tables presents information on the Company’s reportable segments for the three months ended December 28, 2019 and December 29, 2018 (in millions):

	Three Months Ended December 28, 2019
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Other Items			Consolidated GAAP Measures
Product revenue	$	183.9		$	18.6		$	202.5		$	79.4		$	—		$	281.9
Service revenue	19.1			12.6			31.7			0.1			—			31.8
Net revenue	$	203.0		$	31.2		$	234.2		$	79.5		$	—		$	313.7
Gross profit	$	134.8		$	20.8		$	155.6		$	43.6		$	(9.7	)	$	189.5
Gross margin	66.4		%	66.7		%	66.4		%	54.8		%				60.4		%
Operating income							$	37.5		$	30.4		$	(22.9	)	$	45.0
Operating margin							16.0		%	38.2		%				14.3		%

	Three Months Ended December 29, 2018
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Other Items			Consolidated GAAP Measures
Product revenue	$	176.0		$	13.8		$	189.8		$	83.0		$	—		$	272.8
Service revenue	19.5			14.4			33.9			0.2			—			34.1
Net revenue	$	195.5		$	28.2		$	223.7		$	83.2		$	—		$	306.9
Gross profit	$	125.7		$	20.3		$	146.0		$	41.8		$	(9.8	)	$	178.0
Gross margin	64.3		%	72.0		%	65.3		%	50.2		%				58.0		%
Operating income							$	32.8		$	31.1		$	(31.0	)	$	32.9
Operating margin							14.7		%	37.4		%				10.7		%

	Three Months Ended
	December 28, 2019			December 29, 2018
Corporate reconciling items impacting gross profit:
Total segment gross profit	$	199.2		$	187.8
Stock-based compensation	(1.0		)	(0.9		)
Amortization of intangibles	(8.4		)	(8.5		)
Other charges unrelated to core operating performance	(0.3		)	(0.4		)
GAAP gross profit	$	189.5		$	178.0
Corporate reconciling items impacting operating income:
Total segment operating income	$	67.9		$	63.9
Stock-based compensation	(11.3		)	(9.6		)
Amortization of intangibles	(17.2		)	(18.9		)
Change in fair value of contingent liability	6.0			—
Other charges unrelated to core operating performance (1)	(1.3		)	(2.2		)
Restructuring and related (benefits) charges	0.9			(0.3		)
GAAP operating income from continuing operations	$	45.0		$	32.9

⁽¹⁾  During the three months ended December 28, 2019 and December 29, 2018, other charges unrelated to core operating performance primarily consisted of certain acquisition and integration related changes, transformational initiatives such as, site consolidations, and reorganization, loss on sale of investments and loss on disposal of long-lived assets.

The following tables presents information on the Company’s reportable segments for the six months ended December 28, 2019 and December 29, 2018 (in millions):

	Six Months Ended December 28, 2019
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Other Items (1)			Consolidated GAAP Measures
Product revenue	$	361.2		$	26.3		$	387.5		$	159.2		$	—		$	546.7
Service revenue	40.7			25.8			66.5			0.3			—			66.8
Net revenue	$	401.9		$	52.1		$	454.0		$	159.5		$	—		$	613.5
Gross profit	$	262.8		$	33.4		$	296.2		$	86.9		$	(19.2	)	$	363.9
Gross margin	65.4		%	64.1		%	65.2		%	54.5		%				59.3		%
Operating income							$	59.8		$	60.8		$	(54.9	)	$	65.7
Operating margin							13.2		%	38.1		%				10.7		%

	Six Months Ended December 29, 2018
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Other Items (1)			Consolidated GAAP Measures
Product revenue	$	325.9		$	27.4		$	353.3		$	160.6		$	—		$	513.9
Service revenue	34.1			27.0			61.1			0.4			—			61.5
Net revenue	$	360.0		$	54.4		$	414.4		$	161.0		$	—		$	575.4
Gross profit	$	228.6		$	38.6		$	267.2		$	81.2		$	(20.0	)	$	328.4
Gross margin	63.5		%	71.0		%	64.5		%	50.4		%				57.1		%
Operating income							$	49.2		$	58.5		$	(76.0	)	$	31.7
Operating margin							11.9		%	36.3		%				5.5		%

	Six Months Ended
	December 28, 2019			December 29, 2018
Corporate reconciling items impacting gross profit:
Total segment gross profit	$	383.1		$	348.4
Stock-based compensation	(2.0		)	(1.7		)
Amortization of intangibles	(16.8		)	(17.9		)
Other charges unrelated to core operating performance (2)	(0.4		)	(0.4		)
GAAP gross profit	$	363.9		$	328.4
Corporate reconciling items impacting operating income:
Total segment operating income	$	120.6		$	107.7
Stock-based compensation	(21.6		)	(17.7		)
Amortization of intangibles	(34.3		)	(38.1		)
Change in fair value of contingent liability	4.3			—
Other charges unrelated to core operating performance (2)	(3.9		)	(5.1		)
Restructuring and related (benefits) charges	0.6			(15.1		)
GAAP operating income from continuing operations	$	65.7		$	31.7

The Company operates primarily in three geographic regions: Americas, Asia-Pacific, and Europe, Middle East and Africa (“EMEA”). Net revenue is assigned to the geographic region and country where our product is initially shipped. 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 tables presents net revenue by the three geographic regions we operate in and net revenue from countries that exceeded 10% of our total net revenue for the three and six months ended December 28, 2019 and December 29, 2018, (in millions):

	Three Months Ended
	December 28, 2019						December 29, 2018
	Product Revenue		Service Revenue		Total		Product Revenue		Service Revenue		Total
Americas:
United States	$	83.1	$	13.1	$	96.2	$	89.8	$	14.3	$	104.1
Other Americas	17.2		3.4		20.6		17.3		4.0		21.3
Total Americas	$	100.3	$	16.5	$	116.8	$	107.1	$	18.3	$	125.4
Asia-Pacific:
Greater China	$	78.4	$	2.1	$	80.5	$	64.8	$	2.1	$	66.9
Other Asia-Pacific	28.7		3.8		32.5		30.4		3.6		34.0
Total Asia-Pacific	$	107.1	$	5.9	$	113.0	$	95.2	$	5.7	$	100.9
EMEA:
Switzerland	$	13.4	$	0.1	$	13.5	$	23.0	$	—	$	23.0
Other EMEA	61.1		9.3		70.4		47.5		10.1		57.6
Total EMEA	$	74.5	$	9.4	$	83.9	$	70.5	$	10.1	$	80.6
Total net revenue	$	281.9	$	31.8	$	313.7	$	272.8	$	34.1	$	306.9

	Six Months Ended
	December 28, 2019						December 29, 2018
	Product Revenue		Service Revenue		Total		Product Revenue		Service Revenue		Total
Americas:
United States	$	154.5	$	26.7	$	181.2	$	149.9	$	27.0	$	176.9
Other Americas	33.8		7.5		41.3		35.2		7.1		42.3
Total Americas	$	188.3	$	34.2	$	222.5	$	185.1	$	34.1	$	219.2
Asia-Pacific:
Greater China	$	148.9	$	3.5	$	152.4	$	123.5	$	2.3	$	125.8
Other Asia-Pacific	60.0		7.8		67.8		66.4		7.1		73.5
Total Asia-Pacific	$	208.9	$	11.3	$	220.2	$	189.9	$	9.4	$	199.3
EMEA:
Switzerland	$	25.6	$	0.1	$	25.7	$	48.7	$	—	$	48.7
Other EMEA	123.9		21.2		145.1		90.2		18.0		108.2
Total EMEA	$	149.5	$	21.3	$	170.8	$	138.9	$	18.0	$	156.9
Total net revenue	$	546.7	$	66.8	$	613.5	$	513.9	$	61.5	$	575.4

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Accumulated Other Comprehensive Loss (Details) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 28, 2019	Dec. 29, 2018	Dec. 28, 2019	Dec. 29, 2018
Changes in accumulated other comprehensive income (loss) by component
Balance at the beginning of the period	$ 708,100,000	$ 709,600,000	$ 725,800,000	$ 734,900,000
Other comprehensive income (loss) before reclassification			600,000
Amounts reclassified to accumulated other comprehensive loss			1,500,000
Net change in accumulated other comprehensive income (loss)	28,800,000	(12,400,000)	2,100,000	(24,500,000)
Balance at the end of the period	764,300,000	710,100,000	764,300,000	710,100,000
Tax impact of amortization of actuarial gains (losses)			0
Total
Changes in accumulated other comprehensive income (loss) by component
Balance at the beginning of the period	(161,300,000)	(115,100,000)	(134,600,000)	(102,900,000)
Net change in accumulated other comprehensive income (loss)	28,800,000	(12,400,000)	2,100,000	(24,500,000)
Balance at the end of the period	(132,500,000)	$ (127,400,000)	(132,500,000)	$ (127,400,000)
Unrealized losses on available-for sale investments
Changes in accumulated other comprehensive income (loss) by component
Balance at the beginning of the period			(5,000,000.0)
Other comprehensive income (loss) before reclassification			0
Amounts reclassified to accumulated other comprehensive loss			0
Net change in accumulated other comprehensive income (loss)			0
Balance at the end of the period	(5,000,000.0)		(5,000,000.0)
Foreign currency translation adjustments
Changes in accumulated other comprehensive income (loss) by component
Balance at the beginning of the period			(101,000,000.0)
Other comprehensive income (loss) before reclassification			600,000
Amounts reclassified to accumulated other comprehensive loss			0
Net change in accumulated other comprehensive income (loss)			600,000
Balance at the end of the period	(100,400,000)		(100,400,000)
Change in unrealized components of defined benefit obligations
Changes in accumulated other comprehensive income (loss) by component
Balance at the beginning of the period			(28,600,000)
Other comprehensive income (loss) before reclassification			0
Amounts reclassified to accumulated other comprehensive loss			1,500,000
Net change in accumulated other comprehensive income (loss)			1,500,000
Balance at the end of the period	$ (27,100,000)		$ (27,100,000)

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Recently Issued Accounting Pronouncements (Details) - USD ($) $ in Millions	Dec. 28, 2019	Jun. 30, 2019	Jun. 29, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Right of use asset	$ 44.9
Lease liability	43.8
Adjustment to accumulated deficit		$ 3.0
Derecognition of real estate assets	$ (173.5)		$ (179.9)
Accounting Standards Update 2014-09
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Right of use asset		35.5
Lease liability		37.0
Derecognition of financing obligation		10.1
Real Estate | Accounting Standards Update 2014-09
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Derecognition of real estate assets		7.1
Accumulated Deficit
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Adjustment to accumulated deficit		3.0
Accumulated Deficit | Accounting Standards Update 2014-09
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Adjustment to accumulated deficit		$ 3.0

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Leases - Supplemental Balance Sheet (Details) $ in Millions	Dec. 28, 2019 USD ($)
Leases [Abstract]
Other non-current assets	$ 44.9
Total operating ROU assets	44.9
Other current liabilities	12.4
Other non-current liabilities	31.4
Total operating lease liabilities	$ 43.8

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Investments, Forward Contracts and Fair Value Measurements - Assets and Liabilities Measured at Fair Value (Details) - USD ($) $ in Millions	Dec. 28, 2019	Jun. 29, 2019
Debt available-for-sale securities
Total debt available-for-sale securities	$ 0.5	$ 0.6
Money market funds	349.3	322.9
Trading securities	1.6	1.5
Foreign currency forward contract	5.9	1.2
Total assets	357.3	326.2
Liability:
Foreign currency forward contract	1.1	4.0
Contingent consideration	34.1	38.4
Total liabilities	35.2	42.4
Fair value of contingent consideration, current	0.8	0.7
Fair value of contingent consideration, noncurrent	33.3	37.7
Prepayments and other current assets
Debt available-for-sale securities
Total assets	5.9
Other current assets
Debt available-for-sale securities
Total assets		1.2
Cash and cash equivalents
Debt available-for-sale securities
Total assets	341.9	315.5
Short-term investments
Debt available-for-sale securities
Total assets	1.6	1.5
Restricted cash
Debt available-for-sale securities
Total assets	3.4	3.5
Other non-current assets
Debt available-for-sale securities
Total debt available-for-sale securities	0.5	0.6
Total assets	4.5	4.5
Other current liabilities
Liability:
Total liabilities	1.1	4.0
Asset-backed securities
Debt available-for-sale securities
Total debt available-for-sale securities	0.5	0.6
Level 1
Debt available-for-sale securities
Total debt available-for-sale securities	0.0	0.0
Money market funds	349.3	322.9
Trading securities	1.6	1.5
Foreign currency forward contract	0.0	0.0
Total assets	350.9	324.4
Liability:
Foreign currency forward contract	0.0	0.0
Contingent consideration	0.0	0.0
Total liabilities	0.0	0.0
Level 1 | Asset-backed securities
Debt available-for-sale securities
Total debt available-for-sale securities	0.0	0.0
Level 2
Debt available-for-sale securities
Total debt available-for-sale securities	0.5	0.6
Money market funds	0.0	0.0
Trading securities	0.0	0.0
Foreign currency forward contract	5.9	1.2
Total assets	6.4	1.8
Liability:
Foreign currency forward contract	1.1	4.0
Contingent consideration	0.0	0.0
Total liabilities	1.1	4.0
Level 2 | Asset-backed securities
Debt available-for-sale securities
Total debt available-for-sale securities	0.5	0.6
Level 3
Debt available-for-sale securities
Total debt available-for-sale securities	0.0	0.0
Money market funds	0.0	0.0
Trading securities	0.0	0.0
Foreign currency forward contract	0.0	0.0
Total assets	0.0	0.0
Liability:
Foreign currency forward contract	0.0	0.0
Contingent consideration	34.1	38.4
Total liabilities	34.1	38.4
Level 3 | Asset-backed securities
Debt available-for-sale securities
Total debt available-for-sale securities	$ 0.0	$ 0.0

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Debt - Carrying Amounts of the Liability and Equity Components (Details) - USD ($) $ in Millions	Dec. 28, 2019	Jun. 29, 2019	May 29, 2018
Carrying amounts of the liability and equity components:
Carrying amount of liability component	$ 589.8	$ 578.8
Convertible Notes
Carrying amounts of the liability and equity components:
Unamortized discount of liability component	(89.5)	(99.8)
Unamortized debt issuance cost	(5.7)	(6.4)
Carrying amount of liability component	589.8	578.8
Carrying amount of equity component	136.8	136.8
Convertible Notes | 1.00% Senior Convertible Notes
Carrying amounts of the liability and equity components:
Principal amount of notes	$ 460.0	460.0
Interest rate on senior convertible notes	1.00%
Convertible Notes | 1.75% Senior Convertible Notes
Carrying amounts of the liability and equity components:
Principal amount of notes	$ 225.0	$ 225.0
Interest rate on senior convertible notes	1.75%		1.75%

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Balance Sheet and Other Details - Accounts Receivable Reserves and Allowances (Details) $ in Millions	6 Months Ended
	Dec. 28, 2019 USD ($)
Components of accounts receivable reserves and allowances
Beginning balance	$ 2.0
Charged to Costs and Expenses	0.6
Deductions	(0.3)
Ending balance	$ 2.3

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Balance Sheet and Other Details - Other Non-Current Liabilities (Details) - USD ($) $ in Millions	Dec. 28, 2019	Jun. 29, 2019
Other non-current liabilities
Pension and post-employment benefits	$ 101.7	$ 103.2
Financing obligation	16.3	25.5
Deferred tax liability	12.2	14.6
Long-term deferred revenue	18.7	13.2
Fair value of contingent consideration	33.3	37.7
Operating lease liabilities (Note 12)	31.4
Uncertain tax position	13.9	13.6
Other	16.2	18.7
Other non-current liabilities	$ 243.7	$ 226.5

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Stock-Based Compensation - Additional Information (Details) - USD ($) shares in Millions, $ in Millions	6 Months Ended
	Dec. 28, 2019	Dec. 29, 2018
Stock-Based Compensation
Stock-based compensation capitalized to inventory	$ 1.2	$ 1.0
Full Value Awards - Total
Stock-Based Compensation
Unrecognized stock-based compensation	$ 76.5
Estimated amortization period for unrecognized compensation	2 years
Full Value Awards - Total | Minimum
Stock-Based Compensation
Vesting period	1 year
Full Value Awards - Total | Maximum
Stock-Based Compensation
Vesting period	4 years
RSUs
Stock-Based Compensation
Granted (in shares)	3.1	3.7
Restricted Stock Units with Time Based Conditions
Stock-Based Compensation
Vesting period	3 years
Percentage of first tranche vested	33.00%
Initial vesting period	1 year
Subsequent vesting period	2 years
Restricted Stock Units with Market and Performance Conditions
Stock-Based Compensation
Vesting period	3 years
Granted (in shares)	0.5	0.5
Aggregate grant-date fair value	$ 7.7	$ 6.2
Restricted Stock Units with Performance Conditions Over Target
Stock-Based Compensation
Granted (in shares)	0.2	0.1

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Restructuring and Related Charges (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 28, 2019	Dec. 29, 2018	Dec. 28, 2019	Dec. 29, 2018	Jun. 30, 2019	Jun. 29, 2019
Summary of various restructuring plans
Balance at the beginning of the period			$ 8.8
Restructuring and related (benefits) charges	$ (0.9)	$ 0.3	(0.6)	$ 15.1
Cash Settlements			(2.3)
Non-cash Settlements and Other Adjustments			(0.5)
Balance at the end of the period	5.4		5.4
Lease liability	43.8		43.8
Noncurrent restructuring accrual	5.4		5.4			$ 8.6
Noncurrent restructuring accrual						$ 0.2
NSE, including AW Restructuring Plan
Summary of various restructuring plans
Balance at the beginning of the period			8.7
Restructuring and related (benefits) charges	(0.9)		(0.6)
Cash Settlements			(2.3)
Non-cash Settlements and Other Adjustments			(0.4)
Balance at the end of the period	5.4		5.4
Other Plans - prior to fiscal 2017
Summary of various restructuring plans
Balance at the beginning of the period			0.1
Restructuring and related (benefits) charges	0.0		0.0
Cash Settlements			0.0
Non-cash Settlements and Other Adjustments			(0.1)
Balance at the end of the period	$ 0.0		$ 0.0
Accounting Standards Update 2016-02 | NSE, Including AW And Other Plans
Summary of various restructuring plans
Lease liability					$ 0.2

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Operating Segments and Geographic Information - Segment Reconciling Items (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 28, 2019	Dec. 29, 2018	Dec. 28, 2019	Dec. 29, 2018
Information on reportable segments
Gross profit	$ 189.5	$ 178.0	$ 363.9	$ 328.4
Income from operations	45.0	32.9	65.7	31.7
Stock-based compensation	(11.3)	(9.6)	(21.6)	(17.7)
Amortization of intangibles	(8.8)	(10.4)	(17.5)	(20.2)
Change in fair value of contingent liability			4.3	0.0
Restructuring and related (benefits) charges	0.9	(0.3)	0.6	(15.1)
Segment Measures
Information on reportable segments
Gross profit			383.1	348.4
Income from operations			120.6	107.7
Other Items
Information on reportable segments
Gross profit	(9.7)	(9.8)	(19.2)	(20.0)
Income from operations	(22.9)	(31.0)	(54.9)	(76.0)
Gross Profit
Information on reportable segments
Gross profit	189.5	178.0	363.9	328.4
Gross Profit | Segment Measures
Information on reportable segments
Gross profit	199.2	187.8	383.1	348.4
Gross Profit | Other Items
Information on reportable segments
Stock-based compensation	(1.0)	(0.9)	(2.0)	(1.7)
Amortization of intangibles	(8.4)	(8.5)	(16.8)	(17.9)
Other charges unrelated to core operating performance	(0.3)	(0.4)	(0.4)	(0.4)
Operating Income (Loss)
Information on reportable segments
Restructuring and related (benefits) charges	0.9	(0.3)	(0.6)	15.1
Operating Income (Loss) | Segment Measures
Information on reportable segments
Income from operations	67.9	63.9	120.6	107.7
Operating Income (Loss) | Other Items
Information on reportable segments
Stock-based compensation	(11.3)	(9.6)	(21.6)	(17.7)
Amortization of intangibles	(17.2)	(18.9)	(34.3)	(38.1)
Change in fair value of contingent liability	6.0	0.0	4.3	0.0
Other charges unrelated to core operating performance	$ (1.3)	$ (2.2)	(3.9)	(5.1)
Restructuring and related (benefits) charges			$ 0.0	$ (0.2)

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Debt

6 Months Ended

Dec. 28, 2019

Debt Disclosure [Abstract]

Debt

Note 11. Debt

As of December 28, 2019 and June 29, 2019, the Company’s long-term debt on the Consolidated Balance Sheets represented the carrying amount of the liability component of the Senior Convertible Notes, net of unamortized debt discounts and issuance costs.

The following table presents the carrying amounts of the liability and equity components of our debt (in millions):

	December 28, 2019			June 29, 2019
Principal amount of 1.00% Senior Convertible Notes	$	460.0		$	460.0
Principal amount of 1.75% Senior Convertible Notes	225.0			225.0
Unamortized discount of liability component	(89.5		)	(99.8		)
Unamortized debt issuance cost	(5.7		)	(6.4		)
Carrying amount of liability component	$	589.8		$	578.8
Carrying amount of equity component (1)	$	136.8		$	136.8

⁽¹⁾  Included in additional paid-in-capital on the Consolidated Balance Sheets.

The Company was in compliance with all debt covenants as of December 28, 2019 and June 29, 2019.

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 (the “Exchange Transaction”) 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”). The carrying value of the liability component at issuance was calculated as the present value of its cash flows using a discount rate of 5.3% based on the 5-year swap rate plus credit spread as of the issuance date. As of December 28, 2019, the expected remaining term of the 2023 Notes is 3.4 years.

The proceeds from the 2023 Notes Private Placement amounted to $67.3 million after issuance costs. The 2023 Notes are an unsecured obligation of the Company and bear interest at an annual rate of 1.75% payable in cash semi-annually in arrears on June 1st and December 1st of each year, beginning December 1, 2018. The 2023 Notes mature on June 1, 2023 unless earlier converted, redeemed or repurchased.

Based on quoted market prices as of December 28, 2019 and June 29, 2019, the fair value of the 2023 Notes was approximately $282.5 million and $261.3 million, respectively. The 2023 Notes are classified within Level 2 as they are not actively traded in markets.

1.00% Senior Convertible Notes (“2024 Notes”)

On March 3, 2017, the Company issued $400.0 million aggregate principal amount of 1.00% Senior Convertible Notes due 2024 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 $60.0 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. 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. As of December 28, 2019, the expected remaining term of the 2024 Notes is 4.2 years.

Based on quoted market prices as of December 28, 2019 and June 29, 2019, the fair value of the 2024 Notes was approximately $596.3 million and $540.8 million, respectively. The 2024 Notes are classified within Level 2 as they are not actively traded in markets.

Interest Expense

The following table presents the interest expense for contractual interest, amortization of debt issuance costs and accretion of debt discount (in millions):

	Three Months Ended				Six Months Ended
	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
Interest expense-contractual interest	$	2.2	$	2.1	$	4.3	$	4.5
Amortization of debt issuance cost	0.4		0.3		0.7		0.7
Accretion of debt discount	5.2		4.9		10.3		11.4

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Revenue

6 Months Ended

Dec. 28, 2019

Revenue from Contract with Customer [Abstract]

Revenue

Note 3. Revenue

The Company accounts for revenue in accordance with ASC 606, which was adopted in fiscal 2019 using the retrospective transition method. The Company’s revenue is derived from a diverse portfolio of network solutions and 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. The Company’s Optical Security and Performance (“OSP”) products include proprietary pigments used for optical security and optical filters used in commercial and government 3D Sensing applications.

• Services: The Company also offers a range of product support and professional services 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.

Balance sheet and other details

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, net, on the Consolidated Balance Sheets, are not material to the Consolidated Financial Statements. The prior year’s Consolidated Balance Sheets and Statements of Cash Flows have been updated to conform to the current period’s presentation. Contract asset balances will fluctuate based upon the timing of transfer of services, billings and customers’ acceptance of contractual milestones.

Gross receivables include both billed and Unbilled Receivables/Contract Assets. As of December 28, 2019 and June 29, 2019, the Company had total non-billed receivables (Unbilled Receivables/Contract Assets) of $5.4 million and $11.5 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 ratable recognition over the contract term. Contract liabilities are included in deferred revenue and non-current liabilities on the Consolidated Balance Sheets.

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 tables summarize the activity related to deferred revenue (in millions):

	December 28, 2019
	Three Months Ended			Six Months Ended
Deferred revenue:
Balance at beginning of period	$	64.4		$	68.5
Revenue deferrals for new contracts (1)	33.6			52.5
Revenue recognized during the period	(26.1		)	(49.1		)
Balance at end of period	$	71.9		$	71.9
Short-term deferred revenue	$	53.2		$	53.2
Long-term deferred revenue	$	18.7		$	18.7

⁽¹⁾  Included in these amounts is the impact from foreign currency exchange rate fluctuations.

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 December 28, 2019. 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 cancelable 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 December 28, 2019, was $238.1 million. The Company expects to recognize 89% of remaining performance obligations as revenue within the next 12 months, and the remainder thereafter.

Disaggregation of revenue

The Company's revenue is presented on a disaggregated basis on the Consolidated Statements of Operations and in “Note 19. Operating Segments and Geographic Information”. This information includes revenue from reportable segments and a break-out of products and services for which the nature and timing of the revenue as characterized above is generally at a point in time and over time, respectively.

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Balance Sheet and Other Details

6 Months Ended

Dec. 28, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Balance Sheet and Other Details

Note 7. Balance Sheet and Other Details

Accounts receivable allowance

The following table presents the activities and balances for allowance for doubtful accounts (in millions):

	June 29, 2019		Charged to Costs and Expenses		Deductions (1)			December 28, 2019
Allowance for doubtful accounts	$	2.0	$	0.6	$	(0.3	)	$	2.3

⁽¹⁾ Represents the effect of currency translation adjustments and write-offs of uncollectible accounts, net of recoveries.

Inventories, net

The following table presents the components of inventories, net (in millions):

	December 28, 2019		June 29, 2019
Finished goods	$	36.3	$	36.7
Work in process	20.4		26.5
Raw materials	35.2		39.5
Inventories, net	$	91.9	$	102.7

Prepayments and other current assets

The following table presents the components of prepayments and other current assets (in millions):

	December 28, 2019		June 29, 2019
Prepayments	$	13.3	$	14.2
Asset held for sale	2.5		2.5
Advances to contract manufacturers	6.2		5.1
Refundable income taxes	9.1		8.9
Transaction tax receivables	10.5		11.8
Other current assets	12.9		7.4
Prepayments and other current assets	$	54.5	$	49.9

Other current liabilities

The following table presents the components of other current liabilities (in millions):

	December 28, 2019		June 29, 2019
Customer prepayments	$	4.7	$	30.2
Restructuring accrual	5.4		8.6
Income tax payable	14.3		8.5
Warranty accrual	5.1		4.7
Transaction tax payable	5.0		3.8
Operating lease liabilities (Note 12)	12.4		—
Foreign exchange forward contracts liability	1.1		4.0
Other	13.2		12.6
Other current liabilities	$	61.2	$	72.4

Other non-current liabilities

The following table presents components of other non-current liabilities (in millions):

	December 28, 2019		June 29, 2019
Pension and post-employment benefits	$	101.7	$	103.2
Financing obligation	16.3		25.5
Deferred tax liability	12.2		14.6
Long-term deferred revenue	18.7		13.2
Fair value of contingent consideration (1)	33.3		37.7
Operating lease liabilities (Note 12)	31.4		—
Uncertain tax position	13.9		13.6
Other	16.2		18.7
Other non-current liabilities	$	243.7	$	226.5

⁽¹⁾ See “Note 6. Acquisitions” of the Notes to our Consolidated Financial Statements for more detail.

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Leases (Tables)

6 Months Ended

Dec. 28, 2019

Leases [Abstract]

Lease, Cost

The balance sheet information related to our operating leases is as follows (in millions):

	December 28, 2019
Other non-current assets	$	44.9
Total operating ROU assets	$	44.9
Other current liabilities	$	12.4
Other non-current liabilities	31.4
Total operating lease liabilities	$	43.8

Lessee, Operating Lease, Liability, Maturity

Future minimum operating lease payments as of December 28, 2019 are as follows (in millions):

	Operating Leases
Remainder of 2020	$	6.0
2021	12.8
2022	9.9
2023	5.6
2024	4.2
Thereafter	10.8
Total lease payments	$	49.3
Less: Interest	(5.5		)
Present value of lease liabilities	$	43.8

Lessee, Operating Lease, Liability, Maturity, Prior to Adoption

Prior to the adoption of the new lease standard, future minimum undiscounted operating lease payments as of June 29, 2019, excluding non-lease components, were as follows (in millions):

	Operating Leases
Fiscal 2020	$	11.7
Fiscal 2021	10.8
Fiscal 2022	7.4
Fiscal 2023	3.9
Fiscal 2024	2.5
Thereafter	5.3
Less: sublease income	(0.1		)
Total lease payments	$	41.5

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Investments, Forward Contracts and Fair Value Measurements (Tables)

6 Months Ended

Dec. 28, 2019

Fair Value Disclosures [Abstract]

Schedule of available-for-sale securities

The following table presents the Company’s available-for-sale securities as of June 29, 2019, (in millions):

	Amortized Cost/ Carrying Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale securities:
Asset-backed securities	$	0.9	$	—	$	(0.3	)	$	0.6
Total available-for-sale securities	$	0.9	$	—	$	(0.3	)	$	0.6

The following table presents the Company’s available-for-sale securities as of December 28, 2019 (in millions):

	Amortized Cost/ Carrying Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale debt securities:
Asset-backed securities	$	0.9	$	—	$	(0.4	)	$	0.5
Total available-for-sale debt securities	$	0.9	$	—	$	(0.4	)	$	0.5

Schedule of contractual maturities of available-for-sale securities

The following table presents contractual maturities of the Company’s debt securities classified as available-for-sale as of December 28, 2019, (in millions):

	Amortized Cost/ Carrying Cost		Estimated Fair Value
Amounts maturing in more than 5 years	$	0.9	$	0.5
Total debt available-for-sale securities	$	0.9	$	0.5

Schedule of assets measured at fair value

The following table presents assets and liabilities measured at fair value as of December 28, 2019 and June 29, 2019, (in millions):

	December 28, 2019								June 29, 2019
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Debt available-for-sale securities
Asset-backed securities	$	0.5	$	—	$	0.5	$	—	$	0.6	$	—	$	0.6	$	—
Total debt available-for-sale securities	0.5		—		0.5		—		0.6		—		0.6		—
Money market funds	349.3		349.3		—		—		322.9		322.9		—		—
Trading securities	1.6		1.6		—		—		1.5		1.5		—		—
Foreign currency forward contract (1)	5.9		—		5.9		—		1.2		—		1.2		—
Total assets (2)	$	357.3	$	350.9	$	6.4	$	—	$	326.2	$	324.4	$	1.8	$	—
Liability:
Foreign currency forward contract (3)	$	1.1	$	—	$	1.1	$	—	$	4.0	$	—	$	4.0	$	—
Contingent consideration (4)	34.1		—		—		34.1		38.4		—		—		38.4
Total liabilities	$	35.2	$	—	$	1.1	$	34.1	$	42.4	$	—	$	4.0	$	38.4

⁽¹⁾  $5.9 million and $1.2 million in prepayments and other current assets on the Company’s Consolidated Balance Sheets as of December 28, 2019 and June 29, 2019, respectively.

⁽²⁾   $341.9 million in cash and cash equivalents, $1.6 million in short-term investments, $3.4 million in restricted cash, $5.9 million in prepayments and other current assets, and $4.5 million in other non-current assets on the Company’s Consolidated Balance Sheets as of December 28, 2019. $315.5 million in cash and cash equivalents, $1.5 million in short-term investments, $3.5 million in restricted cash, $1.2 million in other current assets, and $4.5 million in other non-current assets on the Company’s Consolidated Balance Sheets as of June 29, 2019.

⁽³⁾  $1.1 million and $4.0 million in other current liabilities on the Company’s Consolidated Balance Sheets as of December 28, 2019 and June 29, 2019, respectively.

⁽⁴⁾ 

$0.8 million and $0.7 million in other current liabilities on the Company’s Consolidated Balance Sheets as of December 28, 2019 and June 29, 2019, respectively. $33.3 million and $37.7 million in other non-current liabilities on the Company’s Consolidated Balance Sheets as of December 28, 2019 and June 29, 2019, respectively.

Schedule of reconciliation of changes in fair value of Level 3 liabilities

The following table provides a reconciliation of changes in fair value of the Company’s Level 3 liabilities for the three and six months ended December 28, 2019 (in millions):

	Three Months Ended					Six Months Ended
	December 28, 2019			December 29, 2018		December 28, 2019			December 29, 2018
Beginning period balance	$	40.1		$	—	$	38.4		$	—
Additions: To Level 3 contingent consideration liabilities	—			36.2		—			36.2
Fair value adjustment of contingent consideration liabilities	(6.0		)	—		(4.3		)	—
Ending period balance	$	34.1		$	36.2	$	34.1		$	36.2

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Balance Sheet and Other Details - Inventories (Details) - USD ($) $ in Millions	Dec. 28, 2019	Jun. 29, 2019
Inventories, net
Finished goods	$ 36.3	$ 36.7
Work in process	20.4	26.5
Raw materials	35.2	39.5
Inventories, net	$ 91.9	$ 102.7

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Investments, Forward Contracts and Fair Value Measurements - Available for Sale Securities (Details) - USD ($) $ in Millions	Dec. 28, 2019	Jun. 29, 2019
Available-for-sale Debt Securities [Abstract]
Amortized Cost/ Carrying Cost	$ 0.9	$ 0.9
Gross Unrealized Gains	0.0	0.0
Gross Unrealized Losses	(0.4)	(0.3)
Fair Value	0.5	0.6
Asset-backed securities
Available-for-sale Debt Securities [Abstract]
Amortized Cost/ Carrying Cost	0.9	0.9
Gross Unrealized Gains	0.0	0.0
Gross Unrealized Losses	(0.4)	(0.3)
Fair Value	$ 0.5	$ 0.6

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Operating Segments and Geographic Information - Information on Reportable Segments (Details) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 28, 2019 USD ($)	Dec. 29, 2018 USD ($)	Dec. 28, 2019 USD ($) segment	Dec. 29, 2018 USD ($)
Information on reportable segments
Number of broad business categories (in segment) | segment			2
Total net revenue	$ 313.7	$ 306.9	$ 613.5	$ 575.4
Gross profit	$ 189.5	$ 178.0	$ 363.9	$ 328.4
Gross margin (as a percent)	60.40%	58.00%	59.30%	57.10%
Operating income	$ 45.0	$ 32.9	$ 65.7	$ 31.7
Operating margin (as a percent)	14.30%	10.70%	10.70%	5.50%
Segment Measures
Information on reportable segments
Total net revenue			$ 613.5	$ 575.4
Gross profit			$ 383.1	$ 348.4
Gross margin (as a percent)			62.40%	60.50%
Operating income			$ 120.6	$ 107.7
Operating margin (as a percent)			19.70%	18.70%
Other Items
Information on reportable segments
Total net revenue	$ 0.0	$ 0.0	$ 0.0	$ 0.0
Gross profit	(9.7)	(9.8)	(19.2)	(20.0)
Operating income	(22.9)	(31.0)	(54.9)	(76.0)
Network and Service Enablement | Segment Measures
Information on reportable segments
Total net revenue	234.2	223.7	454.0	414.4
Gross profit	$ 155.6	$ 146.0	$ 296.2	$ 267.2
Gross margin (as a percent)	66.40%	65.30%	65.20%	64.50%
Operating income	$ 37.5	$ 32.8	$ 59.8	$ 49.2
Operating margin (as a percent)	16.00%	14.70%	13.20%	11.90%
Network and Service Enablement | Network Enablement | Segment Measures
Information on reportable segments
Total net revenue	$ 203.0	$ 195.5	$ 401.9	$ 360.0
Gross profit	$ 134.8	$ 125.7	$ 262.8	$ 228.6
Gross margin (as a percent)	66.40%	64.30%	65.40%	63.50%
Network and Service Enablement | Service Enablement | Segment Measures
Information on reportable segments
Total net revenue	$ 31.2	$ 28.2	$ 52.1	$ 54.4
Gross profit	$ 20.8	$ 20.3	$ 33.4	$ 38.6
Gross margin (as a percent)	66.70%	72.00%	64.10%	71.00%
Optical Security and Performance Products | Segment Measures
Information on reportable segments
Total net revenue	$ 79.5	$ 83.2	$ 159.5	$ 161.0
Gross profit	$ 43.6	$ 41.8	$ 86.9	$ 81.2
Gross margin (as a percent)	54.80%	50.20%	54.50%	50.40%
Operating income	$ 30.4	$ 31.1	$ 60.8	$ 58.5
Operating margin (as a percent)	38.20%	37.40%	38.10%	36.30%
Product revenue
Information on reportable segments
Total net revenue	$ 281.9	$ 272.8	$ 546.7	$ 513.9
Product revenue | Other Items
Information on reportable segments
Total net revenue	0.0	0.0	0.0	0.0
Product revenue | Network and Service Enablement | Segment Measures
Information on reportable segments
Total net revenue	202.5	189.8	387.5	353.3
Product revenue | Network and Service Enablement | Network Enablement | Segment Measures
Information on reportable segments
Total net revenue	183.9	176.0	361.2	325.9
Product revenue | Network and Service Enablement | Service Enablement | Segment Measures
Information on reportable segments
Total net revenue	18.6	13.8	26.3	27.4
Product revenue | Optical Security and Performance Products | Segment Measures
Information on reportable segments
Total net revenue	79.4	83.0	159.2	160.6
Service revenue
Information on reportable segments
Total net revenue	31.8	34.1	66.8	61.5
Service revenue | Other Items
Information on reportable segments
Total net revenue	0.0	0.0	0.0	0.0
Service revenue | Network and Service Enablement | Segment Measures
Information on reportable segments
Total net revenue	31.7	33.9	66.5	61.1
Service revenue | Network and Service Enablement | Network Enablement | Segment Measures
Information on reportable segments
Total net revenue	19.1	19.5	40.7	34.1
Service revenue | Network and Service Enablement | Service Enablement | Segment Measures
Information on reportable segments
Total net revenue	12.6	14.4	25.8	27.0
Service revenue | Optical Security and Performance Products | Segment Measures
Information on reportable segments
Total net revenue	$ 0.1	$ 0.2	$ 0.3	$ 0.4

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Stock-Based Compensation - Compensation by Function (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 28, 2019	Dec. 29, 2018	Dec. 28, 2019	Dec. 29, 2018
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total stock-based compensation	$ 11.3	$ 9.6	$ 21.6	$ 17.7
Cost of revenues
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total stock-based compensation	1.0	0.9	2.0	1.7
Research and development
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total stock-based compensation	2.0	1.6	3.7	2.8
Selling, general and administrative
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Total stock-based compensation	$ 8.3	$ 7.1	$ 15.9	$ 13.2

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Leases - Prior Adoption Future Operating Lease Payments (Details) $ in Millions	Jun. 29, 2019 USD ($)
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
Fiscal 2020	$ 11.7
Fiscal 2021	10.8
Fiscal 2022	7.4
Fiscal 2023	3.9
Fiscal 2024	2.5
Thereafter	5.3
Less: sublease income	(0.1)
Total lease payments	$ 41.5

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Operating Segments and Geographic Information - Revenue by Geographic Area (Details) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 28, 2019 USD ($) region	Dec. 29, 2018 USD ($)	Dec. 28, 2019 USD ($) region	Dec. 29, 2018 USD ($)
Information on reportable segments
Number of geographic regions | region	3		3
Total net revenue	$ 313.7	$ 306.9	$ 613.5	$ 575.4
Product revenue
Information on reportable segments
Total net revenue	281.9	272.8	546.7	513.9
Service revenue
Information on reportable segments
Total net revenue	31.8	34.1	66.8	61.5
United States
Information on reportable segments
Total net revenue	96.2	104.1	181.2	176.9
United States | Product revenue
Information on reportable segments
Total net revenue	83.1	89.8	154.5	149.9
United States | Service revenue
Information on reportable segments
Total net revenue	13.1	14.3	26.7	27.0
Other Americas
Information on reportable segments
Total net revenue	20.6	21.3	41.3	42.3
Other Americas | Product revenue
Information on reportable segments
Total net revenue	17.2	17.3	33.8	35.2
Other Americas | Service revenue
Information on reportable segments
Total net revenue	3.4	4.0	7.5	7.1
Total Americas
Information on reportable segments
Total net revenue	116.8	125.4	222.5	219.2
Total Americas | Product revenue
Information on reportable segments
Total net revenue	100.3	107.1	188.3	185.1
Total Americas | Service revenue
Information on reportable segments
Total net revenue	16.5	18.3	34.2	34.1
Greater China
Information on reportable segments
Total net revenue	80.5	66.9	152.4	125.8
Greater China | Product revenue
Information on reportable segments
Total net revenue	78.4	64.8	148.9	123.5
Greater China | Service revenue
Information on reportable segments
Total net revenue	2.1	2.1	3.5	2.3
Other Asia-Pacific
Information on reportable segments
Total net revenue	32.5	34.0	67.8	73.5
Other Asia-Pacific | Product revenue
Information on reportable segments
Total net revenue	28.7	30.4	60.0	66.4
Other Asia-Pacific | Service revenue
Information on reportable segments
Total net revenue	3.8	3.6	7.8	7.1
Total Asia-Pacific
Information on reportable segments
Total net revenue	113.0	100.9	220.2	199.3
Total Asia-Pacific | Product revenue
Information on reportable segments
Total net revenue	107.1	95.2	208.9	189.9
Total Asia-Pacific | Service revenue
Information on reportable segments
Total net revenue	5.9	5.7	11.3	9.4
Switzerland
Information on reportable segments
Total net revenue	13.5	23.0	25.7	48.7
Switzerland | Product revenue
Information on reportable segments
Total net revenue	13.4	23.0	25.6	48.7
Switzerland | Service revenue
Information on reportable segments
Total net revenue	0.1	0.0	0.1	0.0
Other EMEA
Information on reportable segments
Total net revenue	70.4	57.6	145.1	108.2
Other EMEA | Product revenue
Information on reportable segments
Total net revenue	61.1	47.5	123.9	90.2
Other EMEA | Service revenue
Information on reportable segments
Total net revenue	9.3	10.1	21.2	18.0
Total EMEA
Information on reportable segments
Total net revenue	83.9	80.6	170.8	156.9
Total EMEA | Product revenue
Information on reportable segments
Total net revenue	74.5	70.5	149.5	138.9
Total EMEA | Service revenue
Information on reportable segments
Total net revenue	$ 9.4	$ 10.1	$ 21.3	$ 18.0

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Earnings Per Share

6 Months Ended

Dec. 28, 2019

Earnings Per Share [Abstract]

Earnings Per Share

Note 4. Earnings Per Share

The following table sets forth the computation of basic and diluted net loss per share (in millions, except per share data):

	Three Months Ended					Six Months Ended
	December 28, 2019		December 29, 2018			December 28, 2019		December 29, 2018
Numerator:
Income from continuing operations	$	28.0	$	15.4		$	34.8	$	0.1
Loss from discontinued operations, net of taxes	—		(2.4		)	—		(2.4		)
Net income (loss)	$	28.0	$	13.0		$	34.8	$	(2.3	)
Denominator:
Weighted-average shares outstanding:
Basic	230.0		228.3			229.7		227.8
Shares issuable assuming conversion of convertible notes (1)	5.1		—			4.0		—
Effect of dilutive securities from stock-based benefit plans	3.2		2.1			3.7		2.7
Diluted	238.3		230.4			237.4		230.5
Net income (loss) per share - basic:
Continuing operations	$	0.12	$	0.07		$	0.15	$	0.00
Discontinued operations	—		(0.01		)	—		(0.01		)
Net income (loss) per share	$	0.12	$	0.06		$	0.15	$	(0.01	)
Net income (loss) per share - diluted:
Continuing operations	$	0.12	$	0.07		$	0.15	$	0.00
Discontinued operations	—		(0.01		)	—		(0.01		)
Net income (loss) per share	$	0.12	$	0.06		$	0.15	$	(0.01	)

⁽¹⁾  Represents the number of shares that would be issued if the Company’s Senior Convertible Notes had been converted. 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.

The following table sets forth the weighted-average potentially dilutive securities excluded from the computation of the diluted net loss per share because their effect would have been anti-dilutive (in millions):

	Three Months Ended		Six Months Ended
	December 28, 2019	December 29, 2018	December 28, 2019	December 29, 2018
		(2) (3)		(2) (3)
Restricted stock units	0.3	0.2	0.2	0.7
Stock options and ESPP	—	0.1	—	0.1
Total potentially dilutive securities	0.3	0.2	0.2	0.7

⁽²⁾  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 payable in cash, shares of the Company’s common stock or a combination of both at the Company’s election. The Company’s average quarterly stock price for the period presented did not exceed the conversion price of $13.22. Refer to “Note 11. Debt” for more details.

⁽³⁾ 

The Company’s 1.75% Senior Convertible Notes due 2023 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 $13.94 per share payable in cash, shares of the Company’s common stock or a combination of both at the Company’s election. The Company’s average quarterly stock price for the period presented did not exceed the conversion price of $13.94. Refer to “Note 11. Debt” for more details.

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Investments, Forward Contracts and Fair Value Measurements

6 Months Ended

Dec. 28, 2019

Fair Value Disclosures [Abstract]

Investments, Forward Contracts and Fair Value Measurements

Note 8. Investments, Forward Contracts and Fair Value Measurements

Available-For-Sale Investments

The following table presents the Company’s available-for-sale securities as of December 28, 2019 (in millions):

	Amortized Cost/ Carrying Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale debt securities:
Asset-backed securities	$	0.9	$	—	$	(0.4	)	$	0.5
Total available-for-sale debt securities	$	0.9	$	—	$	(0.4	)	$	0.5

The Company generally classifies debt securities as available-for-sale and 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 December 28, 2019, the total estimated fair value of $0.5 million was classified as other non-current assets.

 In addition to the amounts presented above, the Company’s short-term investments classified as trading securities related to the deferred compensation plan as of December 28, 2019, were $1.6 million, of which $0.5 million was invested in debt securities, $0.3 million was invested in money market instruments and funds and $0.8 million was invested in equity securities. Trading securities are reported at fair value, with the unrealized gains or losses resulting from changes in fair value recognized in the Company’s Consolidated Statements of Operations as a component of interest and other income, net.

During the three and six months ended December 28, 2019 and December 29, 2018, the Company recorded no other-than-temporary impairment charges in each respective period.

The following table presents contractual maturities of the Company’s debt securities classified as available-for-sale as of December 28, 2019, (in millions):

	Amortized Cost/ Carrying Cost		Estimated Fair Value
Amounts maturing in more than 5 years	$	0.9	$	0.5
Total debt available-for-sale securities	$	0.9	$	0.5

The following table presents the Company’s available-for-sale securities as of June 29, 2019, (in millions):

	Amortized Cost/ Carrying Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale securities:
Asset-backed securities	$	0.9	$	—	$	(0.3	)	$	0.6
Total available-for-sale securities	$	0.9	$	—	$	(0.3	)	$	0.6

As of June 29, 2019, of the estimated fair value of $0.6 million was classified as other non-current assets.

In addition to the amounts presented above, as of June 29, 2019, the Company’s short-term investments classified as trading securities, related to the deferred compensation plan, were $1.5 million, of which $0.4 million was invested in debt securities, $0.3 million was invested in money market instruments and funds and $0.8 million was invested in equity securities. Trading securities are reported at fair value, with the unrealized gains or losses resulting from changes in fair value recognized in the Company’s Consolidated Statements of Operations as a component of interest and other income, net.

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. There is an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the most observable inputs be used when available. Observable inputs are, inputs which market participants would use in valuing an asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs, which reflect the assumptions market participants would use in valuing an asset or liability.

The 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 inputs, that are unobservable and significant to the overall fair value measurement. As of December 28, 2019 and June 29, 2019, the Company did not hold any Level 3 investment securities. The fair value of the Company’s contingent liability was determined using Level 3 inputs, as discussed below.

Fair Value Measurements

The following table presents assets and liabilities measured at fair value as of December 28, 2019 and June 29, 2019, (in millions):

	December 28, 2019								June 29, 2019
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Debt available-for-sale securities
Asset-backed securities	$	0.5	$	—	$	0.5	$	—	$	0.6	$	—	$	0.6	$	—
Total debt available-for-sale securities	0.5		—		0.5		—		0.6		—		0.6		—
Money market funds	349.3		349.3		—		—		322.9		322.9		—		—
Trading securities	1.6		1.6		—		—		1.5		1.5		—		—
Foreign currency forward contract (1)	5.9		—		5.9		—		1.2		—		1.2		—
Total assets (2)	$	357.3	$	350.9	$	6.4	$	—	$	326.2	$	324.4	$	1.8	$	—
Liability:
Foreign currency forward contract (3)	$	1.1	$	—	$	1.1	$	—	$	4.0	$	—	$	4.0	$	—
Contingent consideration (4)	34.1		—		—		34.1		38.4		—		—		38.4
Total liabilities	$	35.2	$	—	$	1.1	$	34.1	$	42.4	$	—	$	4.0	$	38.4

⁽¹⁾  $5.9 million and $1.2 million in prepayments and other current assets on the Company’s Consolidated Balance Sheets as of December 28, 2019 and June 29, 2019, respectively.

⁽²⁾   $341.9 million in cash and cash equivalents, $1.6 million in short-term investments, $3.4 million in restricted cash, $5.9 million in prepayments and other current assets, and $4.5 million in other non-current assets on the Company’s Consolidated Balance Sheets as of December 28, 2019. $315.5 million in cash and cash equivalents, $1.5 million in short-term investments, $3.5 million in restricted cash, $1.2 million in other current assets, and $4.5 million in other non-current assets on the Company’s Consolidated Balance Sheets as of June 29, 2019.

⁽³⁾  $1.1 million and $4.0 million in other current liabilities on the Company’s Consolidated Balance Sheets as of December 28, 2019 and June 29, 2019, respectively.

⁽⁴⁾  $0.8 million and $0.7 million in other current liabilities on the Company’s Consolidated Balance Sheets as of December 28, 2019 and June 29, 2019, respectively. $33.3 million and $37.7 million in other non-current liabilities on the Company’s Consolidated Balance Sheets as of December 28, 2019 and June 29, 2019, respectively.

The Company’s Level 3 liabilities as of December 28, 2019, consist of contingent purchase consideration. The Company has aggregate contingent liabilities related to its acquisitions. The earn-out liabilities represent future payments by the Company of up to $63.0 million over three years, that are contingent on the achievement of certain revenue and gross profit targets. As of December 28, 2019, the aggregate fair value of our contingent consideration was $34.1 million. The fair value of earn-out liabilities were determined using a Monte Carlo Simulation that includes significant unobservable inputs such as the risk-free rate, risk-adjusted discount rate, the volatility of the underlying financial metrics and projected financial forecast of the acquired business over the earn-out period. The fair value of contingent consideration liabilities is remeasured at each reporting period at the estimated fair value based on the input on the date of remeasurement, with the change in fair value recognized in Selling, General and Administrative expense of the Consolidated Statements of Operations.

The following table provides a reconciliation of changes in fair value of the Company’s Level 3 liabilities for the three and six months ended December 28, 2019 (in millions):

	Three Months Ended					Six Months Ended
	December 28, 2019			December 29, 2018		December 28, 2019			December 29, 2018
Beginning period balance	$	40.1		$	—	$	38.4		$	—
Additions: To Level 3 contingent consideration liabilities	—			36.2		—			36.2
Fair value adjustment of contingent consideration liabilities	(6.0		)	—		(4.3		)	—
Ending period balance	$	34.1		$	36.2	$	34.1		$	36.2

No payments were made in connection with the Company’s contingent earn-out liabilities during the three and six months ended December 28, 2019 and December 29, 2018.

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 December 28, 2019, the Company had forward contracts that were effectively closed but not settled with the counterparties by quarter end. Therefore, the fair value of these contracts of $5.9 million and $1.1 million is reflected as prepayments and other current assets and other current liabilities, respectively. As of June 29, 2019, the fair value of these contracts of $1.2 million and $4.0 million is reflected as prepayments and other current assets and other current liabilities, respectively.

The forward contracts outstanding and not effectively closed, with a term of less than 120 days, were transacted near quarter end; therefore, the fair value of the contracts is not significant. As of December 28, 2019 and June 29, 2019, the notional amounts of the forward contracts the Company held to purchase foreign currencies were $124.7 million and $117.8 million, respectively, and the notional amounts of forward contracts the Company held to sell foreign currencies were $36.6 million and $31.3 million, respectively.

The change in the fair value of foreign currency forward contracts is recorded as gain or loss in the Company’s Consolidated Statements of Operations as a component of interest and other income, net. The cash flows related to the settlement of foreign currency forward contracts are classified as operating activities. The foreign exchange forward contracts incurred a gain of $4.8 million and $2.2 million for the three and six months ended December 28, 2019, respectively. The foreign exchange forward contracts incurred a loss of $4.5 million and $5.8 million for the three and six months ended December 29, 2018, respectively.

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Leases

6 Months Ended

Dec. 28, 2019

Leases [Abstract]

Leases

Note 12. Leases

The Company is a lessee in several operating leases, primarily real estate facilities for office space. 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. As 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 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 in the Company’s 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.

The Company's lease arrangements are composed of operating leases with various expiration dates through February 28, 2030. The Company's leases do not contain any material residual value guarantees.

For the three and six months ended December 28, 2019, the total operating lease costs were $3.3 million and $6.6 million, respectively. Total variable lease costs were immaterial during the three and six months ended December 28, 2019. The total operating costs were included in cost of revenues, research and development, selling, general and administrative in the Company’s Consolidated Statements of Operations.

As of December 28, 2019, the weighted-average remaining lease term was 5.4 years, and the weighted-average discount rate was 4.7%.

For the three and six months ended December 28, 2019, cash paid for amounts included in the measurement of operating lease liabilities were $5.8 million and $9.2 million, respectively; and operating ROU assets obtained in exchange of new operating lease liabilities were $12.6 million and $14.5 million, respectively.

The balance sheet information related to our operating leases is as follows (in millions):

	December 28, 2019
Other non-current assets	$	44.9
Total operating ROU assets	$	44.9
Other current liabilities	$	12.4
Other non-current liabilities	31.4
Total operating lease liabilities	$	43.8

Future minimum operating lease payments as of December 28, 2019 are as follows (in millions):

	Operating Leases
Remainder of 2020	$	6.0
2021	12.8
2022	9.9
2023	5.6
2024	4.2
Thereafter	10.8
Total lease payments	$	49.3
Less: Interest	(5.5		)
Present value of lease liabilities	$	43.8

Prior to the adoption of the new lease standard, future minimum undiscounted operating lease payments as of June 29, 2019, excluding non-lease components, were as follows (in millions):

	Operating Leases
Fiscal 2020	$	11.7
Fiscal 2021	10.8
Fiscal 2022	7.4
Fiscal 2023	3.9
Fiscal 2024	2.5
Thereafter	5.3
Less: sublease income	(0.1		)
Total lease payments	$	41.5

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Debt (Tables)

6 Months Ended

Dec. 28, 2019

Debt Disclosure [Abstract]

Schedule of carrying amounts of the liability and equity components of convertible debt

The following table presents the carrying amounts of the liability and equity components of our debt (in millions):

	December 28, 2019			June 29, 2019
Principal amount of 1.00% Senior Convertible Notes	$	460.0		$	460.0
Principal amount of 1.75% Senior Convertible Notes	225.0			225.0
Unamortized discount of liability component	(89.5		)	(99.8		)
Unamortized debt issuance cost	(5.7		)	(6.4		)
Carrying amount of liability component	$	589.8		$	578.8
Carrying amount of equity component (1)	$	136.8		$	136.8

⁽¹⁾ 

Included in additional paid-in-capital on the Consolidated Balance Sheets.

Summary of effective interest rate and the interest expense for the contractual interest and the accretion of debt discount

The following table presents the interest expense for contractual interest, amortization of debt issuance costs and accretion of debt discount (in millions):

	Three Months Ended				Six Months Ended
	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
Interest expense-contractual interest	$	2.2	$	2.1	$	4.3	$	4.5
Amortization of debt issuance cost	0.4		0.3		0.7		0.7
Accretion of debt discount	5.2		4.9		10.3		11.4

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Balance Sheet and Other Details (Tables)

6 Months Ended

Dec. 28, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of components of accounts receivable allowance

The following table presents the activities and balances for allowance for doubtful accounts (in millions):

	June 29, 2019		Charged to Costs and Expenses		Deductions (1)			December 28, 2019
Allowance for doubtful accounts	$	2.0	$	0.6	$	(0.3	)	$	2.3

⁽¹⁾ Represents the effect of currency translation adjustments and write-offs of uncollectible accounts, net of recoveries.

Schedule of components of Inventories

The following table presents the components of inventories, net (in millions):

	December 28, 2019		June 29, 2019
Finished goods	$	36.3	$	36.7
Work in process	20.4		26.5
Raw materials	35.2		39.5
Inventories, net	$	91.9	$	102.7

Schedule of components of prepayments and other current assets

The following table presents the components of prepayments and other current assets (in millions):

	December 28, 2019		June 29, 2019
Prepayments	$	13.3	$	14.2
Asset held for sale	2.5		2.5
Advances to contract manufacturers	6.2		5.1
Refundable income taxes	9.1		8.9
Transaction tax receivables	10.5		11.8
Other current assets	12.9		7.4
Prepayments and other current assets	$	54.5	$	49.9

Schedule of components of other current liabilities

The following table presents the components of other current liabilities (in millions):

	December 28, 2019		June 29, 2019
Customer prepayments	$	4.7	$	30.2
Restructuring accrual	5.4		8.6
Income tax payable	14.3		8.5
Warranty accrual	5.1		4.7
Transaction tax payable	5.0		3.8
Operating lease liabilities (Note 12)	12.4		—
Foreign exchange forward contracts liability	1.1		4.0
Other	13.2		12.6
Other current liabilities	$	61.2	$	72.4

Schedule of components of other non-current liabilities

The following table presents components of other non-current liabilities (in millions):

	December 28, 2019		June 29, 2019
Pension and post-employment benefits	$	101.7	$	103.2
Financing obligation	16.3		25.5
Deferred tax liability	12.2		14.6
Long-term deferred revenue	18.7		13.2
Fair value of contingent consideration (1)	33.3		37.7
Operating lease liabilities (Note 12)	31.4		—
Uncertain tax position	13.9		13.6
Other	16.2		18.7
Other non-current liabilities	$	243.7	$	226.5

⁽¹⁾ See “Note 6. Acquisitions” of the Notes to our Consolidated Financial Statements for more detail.

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CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Dec. 28, 2019	Dec. 29, 2018	Dec. 28, 2019	Dec. 29, 2018
Revenues:
Total net revenue	$ 313.7	$ 306.9	$ 613.5	$ 575.4
Cost of revenues:
Amortization of acquired technologies	8.4	8.5	16.8	17.9
Total cost of revenues	124.2	128.9	249.6	247.0
Gross profit	189.5	178.0	363.9	328.4
Operating expenses:
Research and development	50.3	45.9	101.8	88.5
Selling, general and administrative	86.3	88.5	179.5	172.9
Amortization of other intangibles	8.8	10.4	17.5	20.2
Restructuring and related (benefits) charges	(0.9)	0.3	(0.6)	15.1
Total operating expenses	144.5	145.1	298.2	296.7
Income from operations	45.0	32.9	65.7	31.7
Interest income and other income, net	1.3	1.5	4.0	3.2
Interest expense	(8.4)	(8.1)	(16.7)	(18.2)
Income before taxes	37.9	26.3	53.0	16.7
Provision for income taxes	9.9	10.9	18.2	16.6
Income from continuing operations	28.0	15.4	34.8	0.1
Loss from discontinued operations, net of taxes	0.0	(2.4)	0.0	(2.4)
Net income (loss)	$ 28.0	$ 13.0	$ 34.8	$ (2.3)
Income (loss) per share - basic:
Continuing operations (in dollars per share)	$ 0.12	$ 0.07	$ 0.15	$ 0.00
Discontinued operations (in dollars per share)	0	(0.01)	0	(0.01)
Net income (loss) per share - basic (in dollars per share)	0.12	0.06	0.15	(0.01)
Income (loss) per share - diluted:
Continuing operations (in dollars per share)	0.12	0.07	0.15	0.00
Discontinued operations (in dollars per share)	0	(0.01)	0	(0.01)
Net income (loss) per share - diluted (in dollars per share)	$ 0.12	$ 0.06	$ 0.15	$ (0.01)
Shares used in per-share calculations:
Basic (in shares)	230.0	228.3	229.7	227.8
Diluted (in shares)	238.3	230.4	237.4	230.5
Product revenue
Revenues:
Total net revenue	$ 281.9	$ 272.8	$ 546.7	$ 513.9
Cost of revenues:
Cost of revenue	103.7	106.0	208.0	203.9
Service revenue
Revenues:
Total net revenue	31.8	34.1	66.8	61.5
Cost of revenues:
Cost of revenue	$ 12.1	$ 14.4	$ 24.8	$ 25.2

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	6 Months Ended
	Dec. 28, 2019	Dec. 29, 2018
OPERATING ACTIVITIES:
Net income (loss)	$ 34.8	$ (2.3)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation expense	19.7	19.7
Amortization of acquired technologies and other intangibles	34.3	38.1
Stock-based compensation	21.6	17.7
Amortization of debt issuance costs and accretion of debt discount	11.0	12.1
Amortization of discount and premium on investments, net	0.0	(0.2)
Net change in fair value of contingent liabilities	(4.3)	0.0
Loss on disposal of long-lived assets	0.0	0.7
Other	2.4	1.6
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(13.5)	(33.5)
Inventories	3.2	3.4
Other current and non-currents assets	(2.5)	(0.7)
Accounts payable	(14.2)	(3.0)
Income taxes payable	5.8	7.0
Deferred revenue, current and non-current	2.9	0.3
Deferred taxes, net	(2.8)	(4.5)
Accrued payroll and related expenses	8.2	9.5
Accrued expenses and other current and non-current liabilities	(37.3)	3.2
Net cash provided by operating activities	69.3	69.1
INVESTING ACTIVITIES:
Maturities of available-for-sale investments	0.0	42.2
Sales of available-for-sale investments	0.0	97.0
Capital expenditures	(13.3)	(24.2)
Proceeds from the sale of assets	3.1	3.0
Acquisitions, net of cash acquired	(0.5)	(28.1)
Net cash (used in) provided by investing activities	(10.7)	89.9
FINANCING ACTIVITIES:
Payment of debt issuance costs	0.0	(0.5)
Repurchase and retirement of common stock	(10.7)	(8.5)
Withholding tax payment on vesting of restricted stock awards	(15.1)	(9.8)
Repurchase and redemption of convertible debt	0.0	(276.9)
Payment of financing obligations	(1.8)	(0.4)
Proceeds from exercise of employee stock options and employee stock purchase plan	2.3	2.1
Net cash used in financing activities	(25.3)	(294.0)
Effect of exchange rates on cash, cash equivalents and restricted cash	(3.5)	(11.2)
Net increase (decrease) in cash, cash equivalents and restricted cash	29.8	(146.2)
Cash, cash equivalents and restricted cash at the beginning of the period	530.4	624.3
Cash, cash equivalents and restricted cash at the end of the period	$ 560.2	$ 478.1

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Stock-Based Compensation

6 Months Ended

Dec. 28, 2019

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Note 16. Stock-Based Compensation

Overview

The impact on the Company’s results of operations of recording stock-based compensation by function for the three and six months ended December 28, 2019 and December 29, 2018, as follows (in millions):

	Three Months Ended				Six Months Ended
	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
Cost of revenues	$	1.0	$	0.9	$	2.0	$	1.7
Research and development	2.0		1.6		3.7		2.8
Selling, general and administrative	8.3		7.1		15.9		13.2
Total stock-based compensation expense	$	11.3	$	9.6	$	21.6	$	17.7

Approximately $1.2 million and $1.0 million of stock-based compensation expense was capitalized to inventory as of December 28, 2019 and December 29, 2018, respectively.

Full Value Awards

Full Value Awards refer to restricted stock units that are granted without an exercise price and are converted to shares immediately upon vesting. Performance-based awards are performance-based with market conditions, performance conditions, time-based or a combination, and are expected to vest over one to four years. When converted into shares upon vesting, 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.

During the six months ended December 28, 2019 and December 29, 2018, the Company granted 3.1 million and 3.7 million time-based awards, respectively. 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. The majority of these time-based awards vest over three years, with 33% vesting after one year and the balance vesting quarterly over the remaining two years.

During the six months ended December 28, 2019 and December 29, 2018, the Company granted 0.5 million and 0.5 million, performance-based awards, respectively. These performance-based shares represent the target amount of grants, and the actual number of shares awarded upon vesting may vary depending upon the achievement of the relevant performance conditions. The shares attained over target upon vesting are reflected as awards granted during the period. Accordingly, during the six months ended December 28, 2019 and December 29, 2018, the Company granted additional 0.2 million and 0.1 million shares due to performance-based shares attained over target. The aggregate grant-date fair value of performance-based awards granted during the six months ended December 28, 2019 and December 29, 2018 were estimated to be $7.7 million and $6.2 million, respectively. The majority of performance-based awards vest in equal annual installments over three years based on the attainment of certain

performance measures and the employee’s continued service through the vest date. The performance-based awards with market conditions were valued using a Monte Carlo simulation.

As of December 28, 2019, $76.5 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 2.0 years.

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Basis of Presentation (Policies)

6 Months Ended

Dec. 28, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Fiscal Years

Fiscal Years

The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to June 30th. The Company’s fiscal 2020 is a 52-week year ending on June 27, 2020. The Company’s fiscal 2019 was a 52-week year ending on June 29, 2019.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the Company and its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated.

Use of Estimates

Use of Estimates

The preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements, the reported amount of net revenues and expenses and the disclosure of commitments and contingencies during the reporting periods. The Company bases estimates on historical experience and assumptions about future periods that are believed to be reasonable based on available information. The Company’s reported financial positions or results of operations may be materially different under changed conditions or when using different estimates and assumptions, particularly with respect to significant accounting policies. If estimates or assumptions differ from actual results, subsequent periods are adjusted to reflect readily available current information.

Recent Accounting Pronouncements

Recent Accounting Pronouncements Adopted

In 2016, the Financial Accounting Standards Board (“FASB”) issued guidance on the financial reporting requirements for leasing arrangements, ASC 842 - Leases. ASC 842 requires lessees to recognize operating leases with a term greater than one year on their balance sheets as Right-of-Use (“ROU”) assets and corresponding lease liabilities, measured at the present value of the lease payments. In the first quarter of fiscal 2020 the Company adopted this standard using the modified retrospective approach. The Company elected to apply the optional transition approach of not adjusting comparative period financial statements for the adoption impact. The Company also elected the package of practical expedients to not reassess whether a contract contains a lease, lease classification and accounting for initial direct costs. Adoption of the leasing standard resulted in $35.5 million of ROU assets and $37.0 million of lease

liabilities on June 30, 2019. In addition, the Company recorded an adjustment to accumulative deficit, net of taxes, of $3.0 million from the recognition of previously deferred profit under sale-leaseback arrangements and de-recognition of related real estate assets of $7.1 million and financing obligations of $10.1 million. The adoption of the new standard did not have a material impact on the Company’s Consolidated Statements of Operations and Statements of Cash Flows. For additional information refer to “Note 12. Leases.”

Recent Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued guidance which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. The guidance is effective for the Company in the first quarter of fiscal year 2022 and early adoption is permitted. The Company is evaluating the effects that the adoption of this guidance will have on its consolidated financial statements.

In August 2018, the FASB issued guidance to amend the disclosure requirements related to defined benefit pension and other post-retirement plans. Some of the changes include adding a disclosure requirement for significant gains and losses related to changes in the benefit obligation for the period and removing the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year. This guidance is effective for the Company in the first quarter of fiscal 2021 and early adoption is permitted. The Company is evaluating the 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.

Revenue Recognition

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 December 28, 2019. 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 cancelable 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 Company’s revenue is derived from a diverse portfolio of network solutions and 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. The Company’s Optical Security and Performance (“OSP”) products include proprietary pigments used for optical security and optical filters used in commercial and government 3D Sensing applications.

• Services: The Company also offers a range of product support and professional services 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.

Balance sheet and other details

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, net, on the Consolidated Balance Sheets, are not material to the Consolidated Financial Statements. The prior year’s Consolidated Balance Sheets and Statements of Cash Flows have been updated to conform to the current period’s presentation. Contract asset balances will fluctuate based upon the timing of transfer of services, billings and customers’ acceptance of contractual milestones.

Gross receivables include both billed and Unbilled Receivables/Contract Assets. As of December 28, 2019 and June 29, 2019, the Company had total non-billed receivables (Unbilled Receivables/Contract Assets) of $5.4 million and $11.5 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 ratable recognition over the contract term. Contract liabilities are included in deferred revenue and non-current liabilities on the Consolidated Balance Sheets.

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.

Fair Value Measurements

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 inputs, that are unobservable and significant to the overall fair value measurement. As of December 28, 2019 and June 29, 2019, the Company did not hold any Level 3 investment securities.

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Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Dec. 28, 2019	Dec. 29, 2018	Dec. 28, 2019	Dec. 29, 2018	May 29, 2018
Numerator:
Income from continuing operations	$ 28.0	$ 15.4	$ 34.8	$ 0.1
Loss from discontinued operations, net of taxes	0.0	(2.4)	0.0	(2.4)
Net income (loss)	$ 28.0	$ 13.0	$ 34.8	$ (2.3)
Weighted-average shares outstanding:
Basic (in shares)	230.0	228.3	229.7	227.8
Shares issuable assuming conversion of convertible notes (in shares)	5.1	0.0	4.0	0.0
Effect of dilutive securities from stock-based benefit plans (in shares)	3.2	2.1	3.7	2.7
Diluted (in shares)	238.3	230.4	237.4	230.5
Net income (loss) per share - basic:
Continuing operations (in dollars per share)	$ 0.12	$ 0.07	$ 0.15	$ 0.00
Discontinued operations (in dollars per share)	0	(0.01)	0	(0.01)
Net income (loss) per share - basic (in dollars per share)	0.12	0.06	0.15	(0.01)
Net income (loss) per share - diluted:
Continuing operations (in dollars per share)	0.12	0.07	0.15	0.00
Discontinued operations (in dollars per share)	0	(0.01)	0	(0.01)
Net income (loss) per share - diluted (in dollars per share)	$ 0.12	$ 0.06	$ 0.15	$ (0.01)
Anti-dilutive securities excluded from computation of earnings per share
Total potentially dilutive securities (in shares)	0.3	0.2	0.2	0.7
2024 Notes | Convertible Notes
Convertible notes
Interest rate on senior convertible notes	1.00%		1.00%
Conversion price of debt (in dollars per share)			$ 13.22
2023 Notes | Convertible Notes
Convertible notes
Interest rate on senior convertible notes	1.75%		1.75%		1.75%
Conversion price of debt (in dollars per share)			$ 13.94
Restricted stock units
Anti-dilutive securities excluded from computation of earnings per share
Total potentially dilutive securities (in shares)	0.3	0.2	0.2	0.7
Stock options and ESPP
Anti-dilutive securities excluded from computation of earnings per share
Total potentially dilutive securities (in shares)	0.0	0.1	0.0	0.1

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Operating Segments and Geographic Information (Tables)

6 Months Ended

Dec. 28, 2019

Segment Reporting [Abstract]

Schedule of information on reportable segments

The following tables presents information on the Company’s reportable segments for the three months ended December 28, 2019 and December 29, 2018 (in millions):

	Three Months Ended December 28, 2019
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Other Items			Consolidated GAAP Measures
Product revenue	$	183.9		$	18.6		$	202.5		$	79.4		$	—		$	281.9
Service revenue	19.1			12.6			31.7			0.1			—			31.8
Net revenue	$	203.0		$	31.2		$	234.2		$	79.5		$	—		$	313.7
Gross profit	$	134.8		$	20.8		$	155.6		$	43.6		$	(9.7	)	$	189.5
Gross margin	66.4		%	66.7		%	66.4		%	54.8		%				60.4		%
Operating income							$	37.5		$	30.4		$	(22.9	)	$	45.0
Operating margin							16.0		%	38.2		%				14.3		%

	Three Months Ended December 29, 2018
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Other Items			Consolidated GAAP Measures
Product revenue	$	176.0		$	13.8		$	189.8		$	83.0		$	—		$	272.8
Service revenue	19.5			14.4			33.9			0.2			—			34.1
Net revenue	$	195.5		$	28.2		$	223.7		$	83.2		$	—		$	306.9
Gross profit	$	125.7		$	20.3		$	146.0		$	41.8		$	(9.8	)	$	178.0
Gross margin	64.3		%	72.0		%	65.3		%	50.2		%				58.0		%
Operating income							$	32.8		$	31.1		$	(31.0	)	$	32.9
Operating margin							14.7		%	37.4		%				10.7		%

	Three Months Ended
	December 28, 2019			December 29, 2018
Corporate reconciling items impacting gross profit:
Total segment gross profit	$	199.2		$	187.8
Stock-based compensation	(1.0		)	(0.9		)
Amortization of intangibles	(8.4		)	(8.5		)
Other charges unrelated to core operating performance	(0.3		)	(0.4		)
GAAP gross profit	$	189.5		$	178.0
Corporate reconciling items impacting operating income:
Total segment operating income	$	67.9		$	63.9
Stock-based compensation	(11.3		)	(9.6		)
Amortization of intangibles	(17.2		)	(18.9		)
Change in fair value of contingent liability	6.0			—
Other charges unrelated to core operating performance (1)	(1.3		)	(2.2		)
Restructuring and related (benefits) charges	0.9			(0.3		)
GAAP operating income from continuing operations	$	45.0		$	32.9

⁽¹⁾  During the three months ended December 28, 2019 and December 29, 2018, other charges unrelated to core operating performance primarily consisted of certain acquisition and integration related changes, transformational initiatives such as, site consolidations, and reorganization, loss on sale of investments and loss on disposal of long-lived assets.

The following tables presents information on the Company’s reportable segments for the six months ended December 28, 2019 and December 29, 2018 (in millions):

	Six Months Ended December 28, 2019
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Other Items (1)			Consolidated GAAP Measures
Product revenue	$	361.2		$	26.3		$	387.5		$	159.2		$	—		$	546.7
Service revenue	40.7			25.8			66.5			0.3			—			66.8
Net revenue	$	401.9		$	52.1		$	454.0		$	159.5		$	—		$	613.5
Gross profit	$	262.8		$	33.4		$	296.2		$	86.9		$	(19.2	)	$	363.9
Gross margin	65.4		%	64.1		%	65.2		%	54.5		%				59.3		%
Operating income							$	59.8		$	60.8		$	(54.9	)	$	65.7
Operating margin							13.2		%	38.1		%				10.7		%

	Six Months Ended December 29, 2018
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Other Items (1)			Consolidated GAAP Measures
Product revenue	$	325.9		$	27.4		$	353.3		$	160.6		$	—		$	513.9
Service revenue	34.1			27.0			61.1			0.4			—			61.5
Net revenue	$	360.0		$	54.4		$	414.4		$	161.0		$	—		$	575.4
Gross profit	$	228.6		$	38.6		$	267.2		$	81.2		$	(20.0	)	$	328.4
Gross margin	63.5		%	71.0		%	64.5		%	50.4		%				57.1		%
Operating income							$	49.2		$	58.5		$	(76.0	)	$	31.7
Operating margin							11.9		%	36.3		%				5.5		%

	Six Months Ended
	December 28, 2019			December 29, 2018
Corporate reconciling items impacting gross profit:
Total segment gross profit	$	383.1		$	348.4
Stock-based compensation	(2.0		)	(1.7		)
Amortization of intangibles	(16.8		)	(17.9		)
Other charges unrelated to core operating performance (2)	(0.4		)	(0.4		)
GAAP gross profit	$	363.9		$	328.4
Corporate reconciling items impacting operating income:
Total segment operating income	$	120.6		$	107.7
Stock-based compensation	(21.6		)	(17.7		)
Amortization of intangibles	(34.3		)	(38.1		)
Change in fair value of contingent liability	4.3			—
Other charges unrelated to core operating performance (2)	(3.9		)	(5.1		)
Restructuring and related (benefits) charges	0.6			(15.1		)
GAAP operating income from continuing operations	$	65.7		$	31.7

Schedule of revenue by geographic regions

The following tables presents net revenue by the three geographic regions we operate in and net revenue from countries that exceeded 10% of our total net revenue for the three and six months ended December 28, 2019 and December 29, 2018, (in millions):

	Three Months Ended
	December 28, 2019						December 29, 2018
	Product Revenue		Service Revenue		Total		Product Revenue		Service Revenue		Total
Americas:
United States	$	83.1	$	13.1	$	96.2	$	89.8	$	14.3	$	104.1
Other Americas	17.2		3.4		20.6		17.3		4.0		21.3
Total Americas	$	100.3	$	16.5	$	116.8	$	107.1	$	18.3	$	125.4
Asia-Pacific:
Greater China	$	78.4	$	2.1	$	80.5	$	64.8	$	2.1	$	66.9
Other Asia-Pacific	28.7		3.8		32.5		30.4		3.6		34.0
Total Asia-Pacific	$	107.1	$	5.9	$	113.0	$	95.2	$	5.7	$	100.9
EMEA:
Switzerland	$	13.4	$	0.1	$	13.5	$	23.0	$	—	$	23.0
Other EMEA	61.1		9.3		70.4		47.5		10.1		57.6
Total EMEA	$	74.5	$	9.4	$	83.9	$	70.5	$	10.1	$	80.6
Total net revenue	$	281.9	$	31.8	$	313.7	$	272.8	$	34.1	$	306.9

	Six Months Ended
	December 28, 2019						December 29, 2018
	Product Revenue		Service Revenue		Total		Product Revenue		Service Revenue		Total
Americas:
United States	$	154.5	$	26.7	$	181.2	$	149.9	$	27.0	$	176.9
Other Americas	33.8		7.5		41.3		35.2		7.1		42.3
Total Americas	$	188.3	$	34.2	$	222.5	$	185.1	$	34.1	$	219.2
Asia-Pacific:
Greater China	$	148.9	$	3.5	$	152.4	$	123.5	$	2.3	$	125.8
Other Asia-Pacific	60.0		7.8		67.8		66.4		7.1		73.5
Total Asia-Pacific	$	208.9	$	11.3	$	220.2	$	189.9	$	9.4	$	199.3
EMEA:
Switzerland	$	25.6	$	0.1	$	25.7	$	48.7	$	—	$	48.7
Other EMEA	123.9		21.2		145.1		90.2		18.0		108.2
Total EMEA	$	149.5	$	21.3	$	170.8	$	138.9	$	18.0	$	156.9
Total net revenue	$	546.7	$	66.8	$	613.5	$	513.9	$	61.5	$	575.4

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Investments, Forward Contracts and Fair Value Measurements - Reconciliation of Changes in Level 3 Liabilities (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 28, 2019	Dec. 29, 2018	Dec. 28, 2019	Dec. 29, 2018
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Fair value adjustment of contingent consideration liabilities			$ 4.3	$ 0.0
Contingent Consideration
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning period balance	$ 40.1	$ 0.0	38.4	0.0
Additions: To Level 3 contingent consideration liabilities	0.0	36.2	0.0	36.2
Fair value adjustment of contingent consideration liabilities	(6.0)	0.0	(4.3)	0.0
Ending period balance	$ 34.1	$ 36.2	$ 34.1	$ 36.2

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Debt - Additional Information (Details) - Convertible Notes - USD ($)			1 Months Ended	6 Months Ended
	May 29, 2018	Mar. 03, 2017	Mar. 22, 2017	Dec. 28, 2019	Jun. 29, 2019
1.75% Senior Convertible Notes
Debt details
Interest rate on senior convertible notes	1.75%			1.75%
Aggregate principal amount of convertible debt	$ 225,000,000.0
Proceeds from convertible debt	$ 69,500,000
Effective discount rate	5.30%
Derivative, term of contract	5 years
Expected remaining term				3 years 4 months 24 days
Proceeds from debt, net of issuance costs	$ 67,300,000
Fair market value of convertible debt				$ 282,500,000	$ 261,300,000
1.75% Senior Convertible Notes | Exchange Transaction
Debt details
Debt issued	155,500,000
Repayments of debt	$ 151,500,000
1.00% Senior Convertible Notes
Debt details
Interest rate on senior convertible notes				1.00%
Aggregate principal amount of convertible debt		$ 400,000,000.0	$ 60,000,000.0
Effective discount rate		4.80%
Derivative, term of contract		7 years
Expected remaining term				4 years 2 months 12 days
Proceeds from debt, net of issuance costs			$ 451,100,000
Fair market value of convertible debt				$ 596,300,000	$ 540,800,000

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Leases - Future Minimum Operating Lease Payments (Details) $ in Millions	Dec. 28, 2019 USD ($)
Lessee, Operating Lease, Liability, Payment, Due [Abstract]
Remainder of 2020	$ 6.0
2021	12.8
2022	9.9
2023	5.6
2024	4.2
Thereafter	10.8
Total lease payments	49.3
Less: Interest	(5.5)
Total operating lease liabilities	$ 43.8