Viavi Solutions(VIAV) - 2026 Q2 - Quarterly Report

Financial Performance - Net revenue for the second quarter of fiscal 2026 was $369.3 million, an increase of $98.5 million or 36.4% year-over-year[207] - GAAP net loss was $48.1 million, a decrease of $57.2 million or 628.6% year-over-year[207] - Non-GAAP net income reached $51.5 million, up $22.1 million or 75.2% year-over-year[207] - Non-GAAP diluted EPS was $0.22, an increase of $0.09 or 69.2% year-over-year[207] - Total net revenue increased by $98.5 million, or 36.4%, for the three months ended December 27, 2025, compared to the same period a year ago[218] - Total net revenue increased by $159.4 million, or 31.3%, for the six months ended December 27, 2025, compared to the same period a year ago[219] - Product revenues increased by $91.6 million, or 40.6%, for the three months ended December 27, 2025, driven by volume increases in NSE and OSP[220] - Product revenues increased by $151.5 million, or 35.8%, for the six months ended December 27, 2025, driven by volume increases in NSE and OSP[221] - Service revenues increased by $6.9 million, or 15.3%, for the three months ended December 27, 2025, driven by a volume increase in NSE[222] - Service revenues increased by $7.9 million, or 9.2%, for the six months ended December 27, 2025, driven by a volume increase in NSE[223] Acquisitions and Contributions - The acquisition of Spirent Communications contributed net revenues of $43.0 million, while Inertial Labs added $21.1 million[202] - The acquisitions of Spirent's HSE and CE business and Inertial Labs contributed $43.0 million and $21.1 million, respectively, during the three months ended December 27, 2025[218] Margins and Expenses - GAAP operating margin was 3.1%, down 510 basis points year-over-year, while non-GAAP operating margin improved to 19.3%, up 440 basis points[207] - Gross margin decreased by 2.4 percentage points to 57.0% for the three months ended December 27, 2025, primarily due to increased amortization of intangibles[230] - Research and Development (R&D) expense increased by $13.8 million, or 26.5%, during the three months ended December 27, 2025, driven by costs from recent acquisitions[233] - Selling, General and Administrative (SG&A) expense rose by $42.8 million, or 50.8%, during the three months ended December 27, 2025, largely due to acquisition-related costs[236] - Amortization of acquired technologies increased by $9.2 million, or 278.8%, during the three months ended December 27, 2025, due to intangibles from recent acquisitions[229] Future Outlook - The company expects continued growth in the NSE segment driven by end market demand and acquisitions[204] - The company plans to invest in secular trends to drive growth and expand its total addressable market (TAM)[206] - The company expects to face industry and market risks, including uncertainty around customer procurement decisions and the adoption of 5G technology[224] - Pricing pressures and competition from Asia-based competitors may affect revenues and profitability[225] Cash Flow and Financing - Cash provided by operating activities was $73.5 million, with a net loss of $69.5 million adjusted for non-cash charges totaling $162.9 million[274] - Cash used in investing activities totaled $412.6 million, primarily for the acquisition of Spirent's HSE and CE business[275] - Cash provided by financing activities was $680.6 million, mainly from a $600 million Term Loan B issuance[276] Pension and Liabilities - The pension plans in the U.K. and India are fully funded, while the German plans are unfunded, resulting in an under-funding of $50.9 million as of December 27, 2025[282] - The fair value of pension plan assets increased approximately 1.2% since June 28, 2025[282] - A 50-basis point change in the discount rate would result in a corresponding increase or decrease in the post-retirement benefit obligation (PBO) of approximately $4.0 million[288] - The company is responsible for a non-pension post-retirement benefit obligation of $0.3 million from a past acquisition[283] - The fair value of contingent purchase consideration liabilities is remeasured at each reporting period, with significant judgment involved in the estimates[287] Market and Geographic Information - The company operates in three geographic regions: Americas, Asia-Pacific, and EMEA, with net revenue assigned to the region where products are initially shipped[226] - Net revenue from customers outside the Americas represented 53.7% of total net revenue during the three months ended December 27, 2025, compared to 57.1% in the same period of the previous year[227] Risk Management - The company's market risk related to foreign exchange and interest rates has not changed materially since the last annual report[289] - The accounting estimates used in the financial statements are based on historical experience and reasonable assumptions, but actual results may differ materially[286] - Recent accounting pronouncements may affect the consolidated financial statements, as detailed in the relevant note[285]