Viavi Solutions Inc 10-Q for FY2021 Q1

Viavi Solutions Inc. (VIAV)

10-Q 2020-11-10 For: 2020-10-03

Added on April 11, 2026

About this 10-Q

Viavi Solutions Inc filed this 10-Q on November 10, 2020, covering the quarter ended October 3, 2020 (FY2021 Q1).

Headline figures

Quarter ended October 3, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $284.7M; down 5.0% from $299.8M a year earlier
Net income: $14.3M; up 110.3% from net income of $6.8M a year earlier
Diluted EPS: $0.06; up 100.0% from $0.03 a year earlier

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



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



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.									☐




TABLE OF CONTENTS			Page
PART I - FINANCIAL INFORMATION			2
	Item 1.	Financial Statements (Unaudited)	2
		Consolidated Statements of Operations for the Three Months Ended October 3, 2020 and September 28, 2019	2
		Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended October 3, 2020 and September 28, 2019	3
		Consolidated Balance Sheets as of October 3, 2020 and June 27, 2020	4
		Consolidated Statements of Cash Flows for the Three Months Ended October 3, 2020 and September 28, 2019	5
		Consolidated Statements of Stockholders’ Equity for the Three Months Ended October 3, 2020 and September 28, 2019	6
		Notes to Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
	Item 3.	Quantitative and Qualitative Disclosure About Market Risks	39
	Item 4.	Controls and Procedures	39

PART II - OTHER INFORMATION			41
	Item 1.	Legal Proceedings	41
	Item 1A.	Risk Factors	41
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
	Item 3.	Defaults Upon Senior Securities	54
	Item 4.	Mine Safety Disclosures	54
	Item 5.	Other Information	54
	Item 6.	Exhibits	54

SIGNATURES			55



	Three Months Ended
	October 3, 2020			September 28, 2019
Revenues:
Product revenue	$	247.9		$	264.8
Service revenue	36.8			35.0
Total net revenue	284.7			299.8
Cost of revenues:
Product cost of revenue	93.6			104.3
Service cost of revenue	13.5			12.7
Amortization of acquired technologies	8.2			8.4
Total cost of revenues	115.3			125.4
Gross profit	169.4			174.4
Operating expenses:
Research and development	48.8			51.5
Selling, general and administrative	81.4			93.2
Amortization of other intangibles	8.5			8.7
Restructuring and related (benefits) charges	(0.6		)	0.3
Total operating expenses	138.1			153.7
Income from operations	31.3			20.7
Interest income and other income, net	0.6			2.7
Interest expense	(9.0		)	(8.3		)
Income before taxes	22.9			15.1
Provision for income taxes	8.6			8.3
Net income	$	14.3		$	6.8

Net income per share:
Basic	$	0.06		$	0.03
Diluted	$	0.06		$	0.03

Shares used in per-share calculations:
Basic	228.8			229.4
Diluted	231.8			236.4



	October 3, 2020			June 27, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	590.8		$	539.0
Short-term investments	1.5			1.5
Restricted cash	3.2			3.5
Accounts receivable, net	220.1			235.5
Inventories, net	87.3			83.3
Prepayments and other current assets	58.7			50.8
Total current assets	961.6			913.6
Property, plant and equipment, net	175.4			172.5
Goodwill, net	387.9			381.4
Intangibles, net	134.4			148.1
Deferred income taxes	110.2			105.4
Other non-current assets	54.9			55.3
Total assets	$	1,824.4		$	1,776.3
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	45.2		$	53.0
Accrued payroll and related expenses	51.2			51.4
Deferred revenue	60.1			54.6
Accrued expenses	21.4			22.6
Current portion of long-term debt	—			2.8
Other current liabilities	49.6			48.4
Total current liabilities	227.5			232.8
Long-term debt	606.6			600.9
Other non-current liabilities	236.5			231.2
Commitments and contingencies (Note 18)
Stockholders’ equity:
Common stock, $0.001 par value; 1 billion shares authorized; 229 million shares at October 3, 2020 and 229 million shares at June 27, 2020, issued and outstanding	0.2			0.2
Additional paid-in capital	70,280.7			70,274.3
Accumulated deficit	(69,389.6		)	(69,397.2		)
Accumulated other comprehensive loss	(137.5		)	(165.9		)
Total stockholders’ equity	753.8			711.4
Total liabilities and stockholders’ equity	$	1,824.4		$	1,776.3



Three Months Ended October 3, 2020
	Common Stock
	Shares		Amount		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total
Balance at June 27, 2020	228.3		$	0.2	$	70,274.3		$	(69,397.2	)	$	(165.9	)	$	711.4
Net income	—		—		—			14.3			—			14.3
Other comprehensive income	—		—		—			—			28.4			28.4
Shares issued under employee stock plans, net of tax	1.6		—		(6.1		)	—			—			(6.1		)
Stock-based compensation	—		—		12.5			—			—			12.5
Repurchase of common stock	(0.6	)	—		—			(6.7		)	—			(6.7		)
Balance at October 3, 2020	229.3		$	0.2	$	70,280.7		$	(69,389.6	)	$	(137.5	)	$	753.8



Three Months Ended September 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	—		—		—			6.8			—			6.8
Other comprehensive loss	—		—		—			—			(26.7		)	(26.7		)
Shares issued under employee stock plans, net of tax	1.7		—		(9.7		)	—			—			(9.7		)
Stock-based compensation	—		—		10.4			—			—			10.4
Repurchase of common stock	(0.1	)	—		—			(1.5		)	—			(1.5		)
Balance at September 28, 2019	230.4		$	0.2	$	70,245.4		$	(69,376.2	)	$	(161.3	)	$	708.1



	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 27, 2020	$	(5.1	)	$	(129.6	)	$	(31.2	)	$	(165.9	)
Other comprehensive income before reclassification	—			27.6			—			27.6
Amounts reclassified to accumulated other comprehensive loss	—			—			0.8			0.8
Net current-period other comprehensive income	—			27.6			0.8			28.4
Ending balance as of October 3, 2020	$	(5.1	)	$	(102.0	)	$	(30.4	)	$	(137.5	)



	October 3, 2020
		Three Months Ended
Deferred revenue:
Balance at beginning of period		$	74.6
Revenue deferrals for new contracts ⁽¹⁾		29.8
Revenue recognized during the period		(24.3		)
Balance at end of period		$	80.1

Short-term deferred revenue		$	60.1
Long-term deferred revenue		$	20.0



	June 27, 2020		Charged to Costs and Expenses		Deductions ⁽¹⁾			October 3, 2020
Allowance for doubtful accounts	$	3.0	$	0.1	$	(0.4	)	$	2.7



	October 3, 2020		June 27, 2020
Finished goods	$	30.8	$	30.0
Work in process	13.6		22.5
Raw materials	42.9		30.8
Inventories, net	$	87.3	$	83.3



	October 3, 2020		June 27, 2020
Prepayments	$	11.8	$	10.9
Asset held for sale	2.5		2.5
Advances to contract manufacturers	7.0		7.3
Refundable income taxes	12.3		10.8
Transaction tax receivables	9.7		10.6
Other current assets	15.4		8.7
Prepayments and other current assets	$	58.7	$	50.8



	October 3, 2020		June 27, 2020
Customer prepayments	$	0.4	$	0.5
Restructuring accrual	4.0		6.5
Income tax payable	13.1		10.7
Warranty accrual	4.6		4.6
Transaction tax payable	4.2		3.2
Operating lease liabilities (Note 12)	12.0		11.7
Foreign exchange forward contracts liability	1.5		1.5
Other	9.8		9.7
Other current liabilities	$	49.6	$	48.4



	October 3, 2020		June 27, 2020
Pension and post-employment benefits	$	106.2	$	102.7
Financing obligation	16.2		16.2
Deferred tax liability	23.6		23.9
Long-term deferred revenue	20.0		20.0
Fair value of contingent consideration ⁽¹⁾	8.9		9.4
Operating lease liabilities (Note 12)	26.3		28.1
Uncertain tax position	11.9		11.6
Other	23.4		19.3
Other non-current liabilities	$	236.5	$	231.2



	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



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


•	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.



	Three Months Ended
	October 3, 2020
Balance as of June 27, 2020	$	9.9
Fair value adjustment of contingent consideration liabilities	—
Balance as of October 3, 2020	$	9.9



	Network Enablement		Service Enablement		Optical Security and Performance Products		Total
Balance as of June 27, 2020	$	334.9	$	4.3	$	42.2	$	381.4
Currency translation adjustments	6.5		—		—		6.5
Balance as of October 3, 2020	$	341.4	$	4.3	$	42.2	$	387.9



As of October 3, 2020	Gross Carrying Amount		Accumulated Amortization			Net
Acquired developed technology	$	441.9	$	(352.8	)	$	89.1
Customer relationships	197.3		(163.0		)	34.3
Other ⁽¹⁾	36.6		(25.6		)	11.0
Total intangibles	$	675.8	$	(541.4	)	$	134.4



As of June 27, 2020	Gross Carrying Amount		Accumulated Amortization			Net
Acquired developed technology	$	437.1	$	(341.6	)	$	95.5
Customer relationships	194.7		(154.1		)	40.6
Other ⁽¹⁾	35.7		(23.7		)	12.0
Total intangibles	$	667.5	$	(519.4	)	$	148.1


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



Fiscal Years
Remainder of 2021	$	48.4
2022	38.6
2023	24.7
2024	10.2
2025	5.6
Thereafter	6.9
Total amortization	$	134.4



	October 3, 2020			June 27, 2020
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	(73.7		)	(79.1		)
Unamortized debt issuance cost	(4.7		)	(5.0		)
Carrying amount of liability component	$	606.6		$	600.9

Carrying amount of equity component ⁽¹⁾	$	136.8		$	136.8


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



	October 3, 2020
Other non-current assets	$	40.2
Total operating ROU assets	$	40.2

Other current liabilities	$	12.0
Other non-current liabilities	26.3
Total operating lease liabilities	$	38.3



	Operating Leases
Remainder of 2021	$	9.1
2022	11.0
2023	6.6
2024	4.8
2025	3.9
Thereafter	7.7
Total lease payments	$	43.1
Less: Interest	(4.8		)
Present value of lease liabilities	$	38.3



	Operating Leases
Fiscal 2021	$	12.8
Fiscal 2022	10.2
Fiscal 2023	6.0
Fiscal 2024	4.6
Fiscal 2025	3.6
Thereafter	7.5
Total lease payments	$	44.7
Less: Interest	(4.9		)
Present value of lease liabilities	$	39.8



	Balance June 27, 2020		Three Months Ended October 3, 2020 Benefits			Cash Settlements			Non-cash Settlements and Other Adjustments⁽²⁾		Balance October 3, 2020
Fiscal 2019 Plan
NSE, including AW ⁽¹⁾	$	6.5	$	(0.6	)	$	(2.0	)	$	0.1	$	4.0
Total ⁽³⁾	$	6.5	$	(0.6	)	$	(2.0	)	$	0.1	$	4.0


⁽²⁾	Other adjustments represents the effect of currency translation adjustments.


⁽³⁾	$4.0 million and $6.5 million in other current liabilities on the Consolidated Balance Sheets as of October 3, 2020 and June 27, 2020, respectively.



	Three Months Ended October 3, 2020
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Other Items			Consolidated GAAP Measures
Product revenue	$	139.2		$	7.7		$	146.9		$	101.0		$	—		$	247.9
Service revenue	22.9			13.7			36.6			0.2			—			36.8
Net revenue	$	162.1		$	21.4		$	183.5		$	101.2		$	—		$	284.7

Gross profit	$	103.5		$	14.3		$	117.8		$	61.0		$	(9.4	)	$	169.4
Gross margin	63.8		%	66.8		%	64.2		%	60.3		%				59.5		%

Operating income							$	13.3		$	47.3		$	(29.3	)	$	31.3
Operating margin							7.2		%	46.7		%				11.0		%


⁽¹⁾	During the three months ended October 3, 2020 and September 28, 2019, 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.


•	Our expectations regarding the impact of the COVID-19 pandemic on our business, financial condition and results of operations;


•	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 continued development, use and protection of our intellectual property;


•	Our strategies for achieving our current business objectives, including related risks and uncertainties;