Viavi Solutions(VIAV) - 2025 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements (Unaudited) Presents unaudited consolidated financial statements for the three and nine months ended March 29, 2025 Consolidated Statements of Operations Highlights (in millions, except per share data) | Metric | Three Months Ended March 29, 2025 | Three Months Ended March 30, 2024 | Nine Months Ended March 29, 2025 | Nine Months Ended March 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total net revenue | $284.8 | $246.0 | $793.8 | $748.4 | | Gross profit | $160.7 | $137.9 | $457.6 | $430.3 | | Income (loss) from operations | $8.5 | $(11.9) | $42.2 | $26.5 | | Net income (loss) | $19.5 | $(24.6) | $26.8 | $(4.1) | | Diluted EPS | $0.09 | $(0.11) | $0.12 | $(0.02) | Consolidated Balance Sheets Highlights (in millions) | Metric | March 29, 2025 | June 29, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $374.2 | $471.3 | | Total current assets | $835.4 | $876.5 | | Goodwill, net | $585.4 | $452.9 | | Total assets | $1,933.2 | $1,736.3 | | Total current liabilities | $544.7 | $247.1 | | Long-term debt | $396.1 | $636.0 | | Total liabilities | $1,204.4 | $1,054.7 | | Total stockholders' equity | $728.8 | $681.6 | Consolidated Statements of Cash Flows Highlights (in millions) | Metric | Nine Months Ended March 29, 2025 | Nine Months Ended March 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $66.0 | $90.2 | | Net cash used in investing activities | $(140.7) | $(27.2) | | Net cash used in financing activities | $(23.5) | $(115.3) | | Net increase in cash, cash equivalents and restricted cash | $(99.1) | $(52.5) | Note 5. Acquisitions Details the recent acquisition of Inertial Labs and a planned acquisition of Spirent's business lines - On January 28, 2025, the Company acquired Inertial Labs, LLC for approximately $134.4 million in cash at closing, with up to an additional $175.0 million in contingent consideration based on revenue targets over four years[52][53] - The Inertial Labs acquisition resulted in the recognition of $129.7 million in goodwill and $117.6 million in identifiable intangible assets[55][57] - On March 2, 2025, the Company entered into an agreement to acquire Spirent Communications plc's high-speed ethernet and network security businesses for $410 million in base consideration, expected to close by July 31, 2025[64] Note 11. Debt Outlines the company's debt structure, including senior notes and a revolving credit facility Debt Summary (in millions) | Debt Instrument | Principal Amount (March 29, 2025) | Classification | | :--- | :--- | :--- | | 1.625% Senior Convertible Notes (due 2026) | $250.0 | Short-term debt | | 3.75% Senior Notes (due 2029) | $400.0 | Long-term debt | - The company has a senior secured asset-based revolving credit facility of up to $300 million; as of March 29, 2025, there were no borrowings under this facility, and the available borrowing capacity was approximately $165.6 million[123][126] Note 13. Restructuring Details ongoing restructuring plans to reduce costs, including workforce reductions and expected savings - The Fiscal 2024 Plan is expected to affect 7% of the global workforce and result in annualized gross cost savings of approximately $25.0 million[134][223] - The Fiscal 2023 Plan was completed in the first quarter of fiscal 2025, having impacted approximately 5% of the workforce[135][224] - As of March 29, 2025, the total restructuring accrual was $4.5 million[225] Note 19. Operating Segments and Geographic Information Provides a breakdown of company performance by operating segment and geographic region Net Revenue by Segment (in millions) | Segment | Three Months Ended March 29, 2025 | Nine Months Ended March 29, 2025 | | :--- | :--- | :--- | | Network Enablement (NE) | $188.0 | $508.6 | | Service Enablement (SE) | $20.2 | $58.9 | | Optical Security and Performance Products (OSP) | $76.6 | $226.3 | | Total | $284.8 | $793.8 | Net Revenue by Geographic Region (in millions) | Region | Three Months Ended March 29, 2025 | Nine Months Ended March 29, 2025 | | :--- | :--- | :--- | | Americas | $108.1 | $312.9 | | Asia-Pacific | $100.7 | $280.2 | | EMEA | $76.0 | $200.7 | | Total | $284.8 | $793.8 | Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes Q3 FY2025 financial results, highlighting revenue growth driven by the NSE business recovery Q3 FY2025 Financial Highlights (YoY) | Metric | Q3 FY2025 | Change (YoY) | | :--- | :--- | :--- | | Net revenue | $284.8 million | +15.8% | | GAAP operating margin | 3.0% | +780 bps | | Non-GAAP operating margin | 16.7% | +740 bps | | GAAP diluted EPS | $0.09 | +$0.20 | | Non-GAAP diluted EPS | $0.15 | +$0.09 | - Revenue increase for Q3 was driven by higher spending from Network Equipment Manufacturers (NEMs), and aerospace and defense customers[203] - The Network Enablement (NE) segment revenue grew 23.9% YoY in Q3, driven by higher volume in Lab and Production, Aerospace and Defense, and Fiber and Access Solutions[238] - The Optical Security and Performance Products (OSP) segment revenue increased 0.5% YoY in Q3, driven by Anti-Counterfeiting, offset by a decrease in 3D sensing revenue[244] - Cash provided by operating activities was $66.0 million for the nine months ended March 29, 2025, a decrease from $90.2 million in the prior year period[255] Quantitative and Qualitative Disclosure About Market Risks States no material changes to market risks since the last Annual Report on Form 10-K - The Company's market risk has not changed materially from the foreign exchange and interest rate risks disclosed in its most recent Annual Report on Form 10-K[270] Controls and Procedures Confirms the effectiveness of disclosure controls and procedures with no material changes in internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 29, 2025[271] - No changes in internal control over financial reporting occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[272] PART II - OTHER INFORMATION Legal Proceedings Discloses that current legal proceedings are not expected to have a material adverse impact - The company is subject to a variety of claims and suits that arise from time to time in the ordinary course of its business, but management does not currently believe they will have a material adverse impact[274] Risk Factors Outlines significant risks including geopolitical tensions, technology changes, and cybersecurity threats - Geopolitical conditions, including the Russian invasion of Ukraine, conflict in the Middle East, and US-China tensions, could negatively impact business results through sanctions, tariffs, and market instability[276] - The company faces risks from rapid technological change, pricing pressure from competitors (especially from Asia), and a highly concentrated customer base, which can impact profitability[278][280] - The company relies on a strategic alliance with SICPA for its banknote anti-counterfeiting products; a material reduction in sales or loss of this relationship could harm the business[290] - The business is exposed to cybersecurity risks, including sophisticated attacks that could lead to operational impairment, intellectual property theft, and reputational harm[310] - Evolving ESG regulations and expectations could lead to increased costs, and failure to meet goals could result in reputational damage and adverse financial performance[320] Unregistered Sales of Equity Securities and Use of Proceeds Reports no share repurchases in the quarter and the remaining authorization under the repurchase plan - No shares were repurchased during the three months ended March 29, 2025[339] - As of March 29, 2025, the company had a remaining authorization of $198.4 million for future share repurchases under its 2022 Repurchase Plan[142][339] Defaults Upon Senior Securities Reports no defaults upon senior securities during the period - None[340] Mine Safety Disclosures States that mine safety disclosures are not applicable to the company's operations - None[340] Other Information Discloses the establishment of a Rule 10b5-1 trading plan by the Chairman of the Board - On February 4, 2025, Richard E Belluzzo, Chairman of the Board, entered into a Rule 10b5-1 trading plan for the sale of 50,312 shares of common stock, effective until October 31, 2025[341] Exhibits Lists all exhibits filed with the Form 10-Q, including certifications and agreements - Exhibits filed include CEO/CFO certifications (31.1, 31.2, 32.1, 32.2), an Asset Purchase Agreement dated March 2, 2025 (10.1), and various Inline XBRL files[343]