Operating Segments and Geographic Information

6 Months Ended

Jan. 01, 2022

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 reviews and assesses performance of the business.

The Company’s reportable segments are:

(i) Network Enablement (NE):

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 its products. NE’s avionics products provide test and measuring solutions for aviation, aerospace, government, defense, communications and public safety.

(ii) Service Enablement (SE):

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):

OSP provides innovative, precision, high performance optical products for anti-counterfeiting, consumer and industrial, government, automotive, industrial and other electronic markets.

Segment Reporting

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, impairment of goodwill, changes in fair value of contingent consideration liabilities, 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 present information on the Company’s reportable segments for the three months ended January 1, 2022 and January 2, 2021 (in millions):

	Three Months Ended January 1, 2022
	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	$	189.6		$	17.2		$	206.8		$	70.6		$	—	$	277.4
Service revenue	24.8			12.6			37.4			—			—		37.4
Net revenue	$	214.4		$	29.8		$	244.2		$	70.6		$	—	$	314.8
Gross profit	$	138.0		$	21.4		$	159.4		$	39.7		$	(8.6)	$	190.5
Gross margin	64.4		%	71.8		%	65.3		%	56.2		%			60.5		%
Operating income							$	45.6		$	27.7		$	(24.0)	$	49.3
Operating margin							18.7		%	39.2		%			15.7		%

	Three Months Ended January 2, 2021
	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	$	156.4		$	12.9		$	169.3		$	92.8		$	—	$	262.1
Service revenue	24.5			12.9			37.4			0.4			—		37.8
Net revenue	$	180.9		$	25.8		$	206.7		$	93.2		$	—	$	299.9
Gross profit	$	113.3		$	17.6		$	130.9		$	58.4		$	(9.2)	$	180.1
Gross margin	62.6		%	68.2		%	63.3		%	62.7		%			60.1		%
Operating income							$	22.2		$	44.6		$	(24.5)	$	42.3
Operating margin							10.7		%	47.9		%			14.1		%

	Three Months Ended
	January 1, 2022		January 2, 2021
Corporate reconciling items impacting gross profit:
Total segment gross profit	$	199.1	$	189.3
Stock-based compensation	(1.2)		(1.2)
Amortization of intangibles	(7.4)		(8.4)
Other benefits unrelated to core operating performance (1)	—		0.4
GAAP gross profit	$	190.5	$	180.1
Corporate reconciling items impacting operating income:
Total segment operating income	$	73.3	$	66.8
Stock-based compensation	(13.3)		(9.9)
Amortization of intangibles	(10.0)		(16.5)
Change in fair value of contingent liability	—		1.5
Other (charges) benefits unrelated to core operating performance (1)	(0.8)		0.6
Restructuring and related benefits (charges)	0.1		(0.2)
GAAP operating income from continuing operations	$	49.3	$	42.3

(1)    During the three months ended January 1, 2022 and January 2, 2021, other charges unrelated to core operating performance primarily consisted of certain acquisition and integration related changes, transformational initiatives such as site consolidations, reorganization, and loss on disposal of long-lived assets.

	Six Months Ended January 1, 2022
	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	$	369.2		$	28.1		$	397.3		$	169.2		$	—	$	566.5
Service revenue	50.1			24.7			74.8			0.3			—		75.1
Net revenue	$	419.3		$	52.8		$	472.1		$	169.5		$	—	$	641.6
Gross profit	$	270.7		$	36.1		$	306.8		$	96.8		$	(18.1)	$	385.5
Gross margin	64.6		%	68.4		%	65.0		%	57.1		%			60.1		%
Operating income							$	76.3		$	71.3		$	(51.4)	$	96.2
Operating margin							16.2		%	42.1		%			15.0		%

	Six Months Ended January 2, 2021
	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	$	295.6		$	20.6		$	316.2		$	193.8		$	—	$	510.0
Service revenue	47.4			26.6			74.0			0.6			—		74.6
Net revenue	$	343.0		$	47.2		$	390.2		$	194.4		$	—	$	584.6
Gross profit	$	216.8		$	31.9		$	248.7		$	119.4		$	(18.6)	$	349.5
Gross margin	63.2		%	67.6		%	63.7		%	61.4		%			59.8		%
Operating income							$	35.5		$	91.9		$	(53.8)	$	73.6
Operating margin							9.1		%	47.3		%			12.6		%

	Six Months Ended
	January 1, 2022		January 2, 2021
Corporate reconciling items impacting gross profit:
Total segment gross profit	$	403.6	$	368.1
Stock-based compensation	(2.8)		(2.4)
Amortization of intangibles	(15.3)		(16.6)
Other benefits unrelated to core operating performance (1)	—		0.4
GAAP gross profit	$	385.5	$	349.5
Corporate reconciling items impacting operating income:
Total segment operating income	$	147.6	$	127.4
Stock-based compensation	(26.9)		(22.4)
Amortization of intangibles	(20.6)		(33.2)
Change in fair value of contingent liability	(0.3)		1.5
Other charges unrelated to core operating performance (1)	(3.7)		(0.1)
Restructuring and related benefits	0.1		0.4
GAAP operating income from continuing operations	$	96.2	$	73.6

(1)    During the six months ended January 1, 2022 and January 2, 2021, other charges unrelated to core operating performance primarily consisted of certain acquisition and integration related changes, transformational initiatives such as site consolidations, reorganization, and loss on disposal of long-lived assets.

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 the Company’s product is initially shipped. For example, certain customers may request shipment of the Company’s 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 in which the Company operates and net revenue from countries that exceeded 10% of the Company’s total net revenue for the three and six months ended January 1, 2022 and January 2, 2021 (in millions):

	Three Months Ended
	January 1, 2022						January 2, 2021
	Product Revenue		Service Revenue		Total		Product Revenue		Service Revenue		Total
Americas:
United States	$	87.4	$	12.8	$	100.2	$	74.4	$	14.2	$	88.6
Other Americas	21.4		4.1		25.5		16.0		3.8		19.8
Total Americas	$	108.8	$	16.9	$	125.7	$	90.4	$	18.0	$	108.4
Asia-Pacific:
Greater China	$	54.4	$	2.1	$	56.5	$	69.9	$	3.3	$	73.2
Other Asia-Pacific	29.6		4.9		34.5		20.0		3.2		23.2
Total Asia-Pacific	$	84.0	$	7.0	$	91.0	$	89.9	$	6.5	$	96.4
EMEA:
Switzerland	$	11.6	$	0.1	$	11.7	$	19.8	$	0.1	$	19.9
Other EMEA	73.0		13.4		86.4		62.0		13.2		75.2
Total EMEA	$	84.6	$	13.5	$	98.1	$	81.8	$	13.3	$	95.1
Total net revenue	$	277.4	$	37.4	$	314.8	$	262.1	$	37.8	$	299.9

	Six Months Ended
	January 1, 2022						January 2, 2021
	Product Revenue		Service Revenue		Total		Product Revenue		Service Revenue		Total
Americas:
United States	$	167.3	$	26.2	$	193.5	$	138.1	$	28.3	$	166.4
Other Americas	46.4		7.3		53.7		30.3		7.1		37.4
Total Americas	$	213.7	$	33.5	$	247.2	$	168.4	$	35.4	$	203.8
Asia-Pacific:
Greater China	$	124.2	$	4.9	$	129.1	$	147.2	$	5.0	$	152.2
Other Asia	79.1		9.1		88.2		45.4		7.0		52.4
Total Asia-Pacific	$	203.3	$	14.0	$	217.3	$	192.6	$	12.0	$	204.6
EMEA:
Switzerland	$	24.7	$	0.2	$	24.9	$	37.7	$	0.2	$	37.9
Other EMEA	124.8		27.4		152.2		111.3		27.0		138.3
Total EMEA	$	149.5	$	27.6	$	177.1	$	149.0	$	27.2	$	176.2
Total net revenue	$	566.5	$	75.1	$	641.6	$	510.0	$	74.6	$	584.6