8-K
Viavi Solutions Inc. (VIAV)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): November 3, 2022
VIAVI SOLUTIONS INC.
(Exact name of Registrant as specified in its charter)
| Delaware | 000-22874 | 94-2579683 | |||||
|---|---|---|---|---|---|---|---|
| (State or other jurisdiction<br>of incorporation or organization) | (Commission file number) | (I.R.S. Employer<br>Identification Number) | 1445 South Spectrum Blvd, Suite 102 | Chandler, | Arizona | 85286 | |
| --- | --- | --- | --- | ||||
| (Address of principal executive offices and 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 |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
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. ☐
Item 2.02. Results of Operations and Financial Condition.
On November 3, 2022, Viavi Solutions Inc. (the “Company”) reported its preliminary results for its fiscal first quarter ended October 1, 2022. A copy of the Company’s press release is furnished herewith and attached hereto as Exhibit 99.1.
The information in this Current Report on Form 8-K, including Exhibit 99.1, is intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press release entitled “Viavi Announces First Quarter Fiscal 2023 Results” dated November 3, 2022. |
| 104 | Cover Page Interactive Data File - the cover page iXBRL tags are embedded within the Inline XBRL document |
Signature
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 hereunto duly authorized.
| VIAVI SOLUTIONS INC. | ||
|---|---|---|
| By: | /s/ HENK DERKSEN | |
| Name: | Henk Derksen | |
| Title: | Executive Vice President and Chief Financial Officer | |
| (Duly Authorized Officer and Principal Financial and Accounting Officer) | ||
| November 3, 2022 |
Document
Exhibit 99.1
VIAVI ANNOUNCES FIRST QUARTER FISCAL 2023 RESULTS
First Quarter
•Net revenue of $310.2 million, down $16.6 million or 5.1% year-over-year
•GAAP operating margin of 16.1%, up 170 bps year-over-year
•Non-GAAP operating margin of 21.7%, down 100 bps year-over-year
•GAAP EPS of $0.14, up $0.38 or 158.3% year-over-year
•Non-GAAP EPS of $0.23, down $0.01 or 4.2% year-over-year
Chandler, Arizona, November 3, 2022 — VIAVI (NASDAQ: VIAV) today reported results for its first fiscal quarter ended October 1, 2022.
First quarter of fiscal 2023 net revenue was $310.2 million. GAAP net income was $32.6 million, or $0.14 per share. Non-GAAP net income was $52.5 million, or $0.23 per share.
Fourth quarter of fiscal 2022 net revenue was $335.3 million. GAAP net income was $16.5 million or $0.07 per share. Non-GAAP net income was $55.8 million, or $0.24 per share.
First quarter of fiscal 2022 net revenue was $326.8 million. GAAP net loss was $(54.8) million, or $(0.24) per share. Non-GAAP net income was $58.2 million, or $0.24 per share.
“The September quarter was a challenging quarter for Viavi, coming in below our expectations. A rapid slowdown in order placement by a number of service providers significantly impacted our NSE business segment. Despite that, through disciplined OPEX management, we delivered the midpoint of our non-GAAP EPS guidance range, at 23 cents per share” said Oleg Khaykin, VIAVI’s President and Chief Executive Officer. “The Field instrument products were most impacted by this slowdown. The OSP business segment, on the other hand, saw some customer order upsides, coming in above the revenue and non-GAAP operating margin guidance range.”
Khaykin added, “VIAVI has a strong balance sheet with more than $510M in cash. This strong liquidity position, combined with operational execution and financial discipline, positions us well to manage the near-term macroeconomic uncertainty. We remain positive on our long-term growth drivers in 5G Wireless, Fiber and 3D Sensing.”
Financial Overview:
The tables below (in millions, except percentage, and per share data) provide comparisons of quarterly results to prior periods, including sequential quarterly and year-over-year changes. A full reconciliation between the GAAP and non-GAAP measures included in the tables is contained in this release under the section titled “Use of Non-GAAP (Adjusted) Financial Measures.”
First Quarter Ended October 1, 2022
| GAAP Results | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Q1 | Q4 | Q1 | Change | ||||||||||||||||||||||
| FY 2023 | FY 2022 | FY 2022 | Q/Q | Y/Y | |||||||||||||||||||||
| Net revenue | $ | 310.2 | $ | 335.3 | $ | 326.8 | (7.5) | % | (5.1) | % | |||||||||||||||
| Gross margin | 59.6 | % | 60.0 | % | 59.7 | % | (40) bps | (10) bps | |||||||||||||||||
| Operating margin | 16.1 | % | 14.3 | % | 14.4 | % | 180 bps | 170 bps | |||||||||||||||||
| Income from operations | 49.8 | 48.0 | 46.9 | 3.8 | % | 6.2 | % | ||||||||||||||||||
| Net income per share | 0.14 | 0.07 | (0.24) | 100.0 | % | 158.3 | % | Non-GAAP Results | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||||||||||||
| Q1 | Q4 | Q1 | Change | ||||||||||||||||||||||
| FY 2023 | FY 2022 | FY 2022 | Q/Q | Y/Y | |||||||||||||||||||||
| Non-GAAP gross margin | 62.3 | % | 62.5 | % | 62.6 | % | (20) bps | (30) bps | |||||||||||||||||
| Non-GAAP operating margin | 21.7 | % | 21.3 | % | 22.7 | % | 40 bps | (100) bps | |||||||||||||||||
| Non-GAAP income from operations | 67.4 | 71.5 | 74.3 | (5.7) | % | (9.3) | % | ||||||||||||||||||
| Non-GAAP net earnings per share | 0.23 | 0.24 | 0.24 | (4.2) | % | (4.2) | % | Net Revenue by Segment | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||||||||||||||
| Q1 | Q4 | Q1 | Change | ||||||||||||||||||||||
| FY 2023 | FY 2022 | FY 2022 | Q/Q | Y/Y | |||||||||||||||||||||
| Network Enablement | $ | 194.9 | $ | 222.2 | $ | 204.9 | (12.3) | % | (4.9) | % | |||||||||||||||
| Service Enablement | 24.0 | 24.0 | 23.0 | — | % | 4.3 | % | ||||||||||||||||||
| Optical Security and Performance Products | 91.3 | 89.1 | 98.9 | 2.5 | % | (7.7) | % | ||||||||||||||||||
| Total | $ | 310.2 | $ | 335.3 | $ | 326.8 | (7.5) | % | (5.1) | % |
•Americas, Asia-Pacific and EMEA customers represented 39.6%, 36.0% and 24.4%, respectively, of total net revenue for the quarter ended October 1, 2022.
•As of October 1, 2022, the Company held $517.1 million in total cash, short-term restricted cash and short-term investments.
•As of October 1, 2022, the Company had $223.9 million aggregate principal amount of 1.00% Senior Convertible Notes, $68.1 million aggregate principal amount of 1.75% Senior Convertible Notes and $400 million aggregate principal amount of 3.75% Senior Notes with a total net carrying value of $684.9 million.
•During the fiscal quarter ended October 1, 2022, the Company generated $26.6 million of cash flows from operations.
Business Outlook for the Second Quarter of Fiscal 2023
For the second quarter of fiscal 2023 ending December 31, 2022, the Company expects net revenue to be between $261 million to $281 million and non-GAAP earnings per share to be between $0.10 to $0.12.
With respect to our expectations above, the Company has not reconciled non-GAAP net income per share to GAAP net income per share in this press release because it is unable to provide a meaningful or accurate estimate of certain reconciling items described in the “Use of Non-GAAP (Adjusted) Financial Measures” section below and the information is not available without unreasonable effort as a result of the inherent difficulty of forecasting the timing and/or amounts of certain items, including certain charges related to restructuring, acquisition, integration and related charges. In addition, the Company believes such reconciliations would imply a degree of precision that may be confusing or misleading to investors.
Conference Call
The Company will discuss these results and other related matters at 1:30 p.m. Pacific Time on November 3, 2022 in a live webcast, which will also be archived for replay on the Company’s website at https://investor.viavisolutions.com. The Company will post supplementary slides outlining the Company’s latest financial results on https://investor.viavisolutions.com under the “Quarterly Results” section concurrently with this earnings press release. This press release is being furnished as a Current Report on Form 8-K with the Securities and Exchange Commission, and will be available at www.sec.gov.
About VIAVI Solutions
VIAVI (NASDAQ: VIAV) is a global provider of network test, monitoring, and assurance solutions for communications service providers, hyperscalers, equipment manufacturers, enterprises, government and avionics. VIAVI is also a leader in light management technologies for 3D sensing, anti-counterfeiting, consumer electronics, industrial, automotive, government and aerospace applications. Together with our customers and partners we are United in Possibility, finding innovative ways to solve real-world problems.
Learn more about VIAVI at www.viavisolutions.com. Follow us on VIAVI Perspectives, LinkedIn, Twitter, YouTube and Facebook.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include any expectation, anticipation or guidance as to future financial performance, including future revenue, gross margin, operating expense, operating margin, profitability targets, cash flow and other financial metrics, as well as the impact and duration of certain trends and market position and conditions. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. In particular, the Company’s ability to predict future financial performance continues to be difficult due to, among other things: (a) continuing general limited visibility across many of our product lines; (b) quarter-over-quarter product mix fluctuations, which can materially impact profitability measures due to the broad gross margin ranges across our portfolio; (c) consolidations in our customer base; (d) unforeseen changes or deceleration in the demand for current and new products, technologies, services, delays or unforeseen events in the roll-out of new industry platforms such as 5G or evolving technology such as 3D sensing and customer purchasing delays due to macroeconomic conditions, tightening of expenditures or as they assess or transition to such new technologies and/or architectures, all of which limit near-term demand visibility, and could negatively impact potential revenue; (e) continued decline of average selling prices across our businesses; (f) notable seasonality and a significant level of in-quarter book-and-ship business; (g) various product and manufacturing transfers, site consolidations, product discontinuances and restructuring and workforce reduction plans; (h) challenges integrating the businesses the Company has acquired and realizing all of the expected benefits and savings; (i) supply chain and materials constraints and the ability of our suppliers and contract manufacturers to meet production and delivery requirements to our forecasted demand; (j) potential disruptions or delays to our manufacturing and operations due to climate conditions and natural disasters in the regions where we operate, such as wildfires, drought conditions and related water shortages in Arizona, as well as wildfires in Northern California and related blackouts and power outages in that region; (k) the uncertain and ongoing impact to our supply chain of military conflicts, such as the escalating conflict between Russia and Ukraine, tariffs, sanctions and other trade measures imposed by domestic and foreign governments and the possibility of escalation of “trade wars,” cyber-attacks, and retaliatory measures; (l) the impact of infectious disease outbreaks, epidemics, and pandemics including the ongoing effects of the COVID-19 global pandemic on our financial results, revenues, customer demand, business operations and manufacturing and on the business operations of our customers, contract manufacturers and suppliers; and (m) inherent uncertainty related to global markets, including inflationary pressures, recessions, tightening monetary policy and liquidity, and the effect of such markets on demand for our products. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. For more information on the risks and uncertainties associated with the Company’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of the Company’s filings with the Securities and Exchange Commission, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q. The forward-looking statements contained in this press release are made as of the date thereof and the Company assumes no obligation to update such statements. We have not filed our Form 10-Q for the quarter ended October 1, 2022. As a result, all financial results described in this earnings release should be considered preliminary, and are subject to change to reflect any necessary adjustments or changes in accounting estimates, that are identified prior to the time we file the Form 10-Q.
Contact Information
Investors:
Sagar Hebbar
408-404-4507
sagar.hebbar@viavisolutions.com
Press:
Amit Malhotra
202-341-8624
amit.malhotra@viavisolutions.com
The following financial tables are presented in accordance with GAAP, unless otherwise specified.
-SELECTED PRELIMINARY FINANCIAL DATA -
VIAVI SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
PRELIMINARY
| Three Months Ended | |||||
|---|---|---|---|---|---|
| October 1, 2022 | October 2, 2021 | ||||
| Net revenue | $ | 310.2 | $ | 326.8 | |
| Cost of revenues | 118.3 | 123.9 | |||
| Amortization of acquired technologies | 7.1 | 7.9 | |||
| Gross profit | 184.8 | 195.0 | |||
| Operating expenses: | |||||
| Research and development | 52.6 | 53.6 | |||
| Selling, general and administrative | 80.2 | 91.8 | |||
| Amortization of other intangibles | 2.2 | 2.7 | |||
| Total operating expenses | 135.0 | 148.1 | |||
| Income from operations | 49.8 | 46.9 | |||
| Interest income and other income (expense), net | 1.1 | (84.5) | |||
| Interest expense | (6.1) | (3.6) | |||
| Income (loss) before income taxes | 44.8 | (41.2) | |||
| Provision for income taxes | 12.2 | 13.6 | |||
| Net income (loss) | $ | 32.6 | $ | (54.8) | |
| Net income (loss) per share: | |||||
| Basic | $ | 0.14 | $ | (0.24) | |
| Diluted | $ | 0.14 | $ | (0.24) | |
| Shares used in per share calculations: | |||||
| Basic | 226.3 | 231.1 | |||
| Diluted | 230.4 | 231.1 |
The preliminary financial statements are estimated based on our current information.
VIAVI SOLUTIONS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, unaudited)
PRELIMINARY
| October 1, 2022 | July 2, 2022 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 512.6 | $ | 559.9 |
| Short-term investments | 1.3 | 1.4 | ||
| Restricted cash | 3.2 | 3.6 | ||
| Accounts receivable, net | 246.3 | 260.9 | ||
| Inventories, net | 110.6 | 110.1 | ||
| Prepayments and other current assets | 76.8 | 69.2 | ||
| Total current assets | 950.8 | 1,005.1 | ||
| Property, plant and equipment, net | 231.7 | 228.9 | ||
| Goodwill, net | 387.8 | 387.6 | ||
| Intangibles, net | 48.7 | 54.2 | ||
| Deferred income taxes | 83.0 | 86.3 | ||
| Other non-current assets | 63.1 | 65.8 | ||
| Total assets | $ | 1,765.1 | $ | 1,827.9 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 62.0 | $ | 58.3 |
| Accrued payroll and related expenses | 48.6 | 76.0 | ||
| Deferred revenue | 71.4 | 81.0 | ||
| Accrued expenses | 26.7 | 29.3 | ||
| Short-term debt | 68.0 | 68.4 | ||
| Other current liabilities | 56.5 | 56.3 | ||
| Total current liabilities | 333.2 | 369.3 | ||
| Long-term debt | 616.9 | 616.5 | ||
| Other non-current liabilities | 166.6 | 170.4 | ||
| Total stockholders’ equity | 648.4 | 671.7 | ||
| Total liabilities and stockholders’ equity | $ | 1,765.1 | $ | 1,827.9 |
The preliminary financial statements are estimated based on our current information.
VIAVI SOLUTIONS INC.
REPORTABLE SEGMENT INFORMATION
(in millions, unaudited)
PRELIMINARY
| Three Months Ended October 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 | ||||||||||||||||||||||||||||
| Net revenue | $ | 194.9 | $ | 24.0 | $ | 218.9 | $ | 91.3 | $ | — | $ | 310.2 | |||||||||||||||||||||
| Gross profit | $ | 125.6 | $ | 16.0 | $ | 141.6 | $ | 51.8 | $ | (8.6) | $ | 184.8 | |||||||||||||||||||||
| Gross margin | 64.4 | % | 66.7 | % | 64.7 | % | 56.7 | % | 59.6 | % | |||||||||||||||||||||||
| Operating income | $ | 28.8 | $ | 38.6 | $ | (17.6) | $ | 49.8 | |||||||||||||||||||||||||
| Operating margin | 13.2 | % | 42.3 | % | 16.1 | % | Three Months Ended October 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 | ||||||||||||||||||||||||||||
| Net revenue | $ | 204.9 | $ | 23.0 | $ | 227.9 | $ | 98.9 | $ | — | $ | 326.8 | |||||||||||||||||||||
| Gross profit | $ | 132.7 | $ | 14.7 | $ | 147.4 | $ | 57.1 | $ | (9.5) | $ | 195.0 | |||||||||||||||||||||
| Gross margin | 64.8 | % | 63.9 | % | 64.7 | % | 57.7 | % | 59.7 | % | |||||||||||||||||||||||
| Operating income | $ | 30.7 | $ | 43.6 | $ | (27.4) | $ | 46.9 | |||||||||||||||||||||||||
| Operating margin | 13.5 | % | 44.1 | % | 14.4 | % |
(1) Other items include charges unrelated to core operating performance primarily consisting of stock-based compensation, amortization of acquisition-related intangibles, restructuring and related charges, changes in fair value of contingent consideration liabilities and other charges unrelated to core operating performance.
The preliminary financial schedules are estimated based on our current information.
Use of Non-GAAP (Adjusted) Financial Measures
The Company provides non-GAAP gross margin, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per share, EBITDA and adjusted EBITDA financial measures as supplemental information regarding the Company’s operational performance. The Company uses the measures disclosed in this release to evaluate the Company’s historical and prospective financial performance, as well as its performance relative to its competitors. Specifically, management uses these items to further its own understanding of the Company’s core operating performance, which the Company believes represent its performance in the ordinary, ongoing and customary course of its operations. Accordingly, management excludes from core operating performance items such as those relating to certain purchase price accounting adjustments, amortization of acquisition-related intangibles, stock-based compensation, legal settlements, restructuring, separation costs, changes in fair value of contingent consideration liabilities and certain investing expenses and other activities that management believes are not reflective of such ordinary, ongoing and core operating activities. Additionally, the Company excludes the results of discontinued operations in calculating non-GAAP net income, non-GAAP net income per share, EBITDA and adjusted EBITDA for all periods reported. The Company believes excluding these items enables investors to evaluate more clearly and consistently the Company’s core operational performance.
The Company believes providing this additional information allows investors to see Company results through the eyes of management. The Company further believes that providing this information allows investors to better understand the Company’s financial performance and, importantly, to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance.
The non-GAAP adjustments described in this release are excluded by the Company from its GAAP financial measures because the Company believes excluding these items enables investors to evaluate more clearly and consistently the Company’s core operational performance. The non-GAAP adjustments are outlined below.
Cost of revenues, costs of research and development and costs of selling, general and administrative: The Company’s GAAP presentation of gross margin and operating expenses may include (i) additional depreciation and amortization from changes in estimated useful life and the write-down of certain property, equipment and intangibles that have been identified for disposal but remained in use until the date of disposal, (ii) workforce related charges such as severance, retention bonuses and employee relocation costs related to formal restructuring plans, (iii) costs for facilities not required for ongoing operations, and costs related to the relocation of certain equipment from these facilities and/or contract manufacturer facilities, (iv) stock-based compensation, (v) amortization expense related to acquired intangibles, (vi) changes in fair value of contingent consideration liabilities and (vii) other charges unrelated to our core operating performance comprised mainly of acquisition related transaction costs, integration costs related to acquired entities, litigation and legal settlements and other costs and contingencies unrelated to current and future operations, including transformational initiatives such as the implementation of simplified automated processes, site consolidations, and reorganizations. The Company excludes these items in calculating non-GAAP gross margin, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per share, EBITDA and adjusted EBITDA.
Non-cash interest expense and other expense: The Company excludes certain investing expenses and non-cash activities that management believes are not reflective of such ordinary, ongoing and core operating activities, in calculating non-GAAP net income and non-GAAP net income per share.
Income tax expense or benefit: The Company excludes certain non-cash tax expense or benefit items, such as the utilization of net operating losses where valuation allowances were released, intra-period tax allocation benefit and the tax effect for amortization of non-tax deductible intangible assets, in calculating non-GAAP net income and non-GAAP net income per share.
Interest, taxes, depreciation, amortization and other adjustments: The Company’s EBITDA calculation primarily excludes interest income and other income (expense), interest expense, taxes, depreciation and amortization, and other items that are not part of its core operating performance described above. The Company’s adjusted EBITDA excludes, items in addition to the items excluded from the EBITDA calculation, such as stock-based compensation, restructuring and related charges (benefits), gain or loss on sale of available for-sale investments, changes in fair value of contingent consideration liabilities arising from prior acquisitions and other charges related to activities that are not part of its core operating performance described above. Management believes adjusted EBITDA is a helpful indicator of the Company’s core operational cash flow.
Non-GAAP financial measures are not in accordance with, preferable to, or an alternative for, generally accepted accounting principles in the United States. The GAAP measure most directly comparable to non-GAAP net income is net income. The GAAP measure most directly comparable to non-GAAP net income per share is net income per share. The Company believes these GAAP measures alone are not fully indicative of its core operating expenses and performance and that providing non-GAAP financial measures in conjunction with GAAP measures provides valuable supplemental information regarding the Company’s overall performance.
VIAVI SOLUTIONS INC.
RECONCILIATION OF GAAP MEASURES FROM CONTINUING OPERATIONS
TO NON-GAAP MEASURES
(in millions, except per share data)
(unaudited)
PRELIMINARY
The following tables reconcile GAAP measures to non-GAAP measures:
| Three Months Ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| October 1, 2022 | October 2, 2021 | |||||||||||||||
| Gross Profit | Gross Margin | Gross Profit | Gross Margin | |||||||||||||
| GAAP measures | $ | 184.8 | 59.6 | % | $ | 195.0 | 59.7 | % | ||||||||
| Stock-based compensation | 1.2 | 0.4 | % | 1.6 | 0.5 | % | ||||||||||
| Other charges unrelated to core operating performance (1) | 0.3 | 0.1 | % | — | — | % | ||||||||||
| Amortization of intangibles | 7.1 | 2.3 | % | 7.9 | 2.4 | % | ||||||||||
| Total related to Cost of Revenue | 8.6 | 2.8 | % | 9.5 | 2.9 | % | ||||||||||
| Non-GAAP measures | $ | 193.4 | 62.3 | % | $ | 204.5 | 62.6 | % | Three Months Ended | |||||||
| --- | --- | --- | --- | --- | ||||||||||||
| October 1, 2022 | October 2, 2021 | |||||||||||||||
| Operating Income | Operating Margin | Operating Income | Operating Margin | |||||||||||||
| GAAP measures | $ | 49.8 | 16.1 | % | $ | 46.9 | 14.4 | % | ||||||||
| Stock-based compensation | 13.0 | 4.2 | % | 13.6 | 4.1 | % | ||||||||||
| Change in fair value of contingent liability | 0.5 | 0.1 | % | 0.3 | 0.1 | % | ||||||||||
| Other (benefits) charges unrelated to core operating performance (1) | (5.2) | (1.7) | % | 2.9 | 0.9 | % | ||||||||||
| Amortization of intangibles | 9.3 | 3.0 | % | 10.6 | 3.2 | % | ||||||||||
| Total related to Cost of Revenue and Operating Expenses | 17.6 | 5.6 | % | 27.4 | 8.3 | % | ||||||||||
| Non-GAAP measures | $ | 67.4 | 21.7 | % | $ | 74.3 | 22.7 | % | Three Months Ended | |||||||
| --- | --- | --- | --- | --- | ||||||||||||
| October 1, 2022 | October 2, 2021 | |||||||||||||||
| Net income | Diluted<br> EPS | Net Income (loss) | Diluted<br> EPS | |||||||||||||
| GAAP measures | $ | 32.6 | $ | 0.14 | $ | (54.8) | $ | (0.24) | ||||||||
| Items reconciling GAAP net income (loss) and EPS to non-GAAP net income and EPS: | ||||||||||||||||
| Stock-based compensation | 13.0 | 0.06 | 13.6 | 0.06 | ||||||||||||
| Change in fair value of contingent liability | 0.5 | — | 0.3 | — | ||||||||||||
| Other (benefits) charges unrelated to core operating performance (1) | (5.2) | (0.02) | 2.9 | 0.01 | ||||||||||||
| Amortization of intangibles | 9.3 | 0.04 | 10.6 | 0.05 | ||||||||||||
| Non-cash interest expense and other expense (2) | — | — | 85.9 | 0.36 | ||||||||||||
| Provision for (benefit) from income taxes | 2.3 | 0.01 | (0.3) | — | ||||||||||||
| Total related to net income and EPS | 19.9 | 0.09 | 113.0 | 0.48 | ||||||||||||
| Non-GAAP measures | $ | 52.5 | $ | 0.23 | $ | 58.2 | $ | 0.24 | ||||||||
| Shares used in per share calculation for Non-GAAP EPS | 230.4 | 242.3 |
Note: Certain totals may not add due to rounding.
(1) Other items include charges (benefits) unrelated to core operating performance primarily consisting of acquisition and integration related charges, transformational initiatives such as site consolidations and reorganization, legal settlements, sale of investments and disposal of long-lived assets.
(2) The Company incurred a loss of $85.9M in the first quarter of fiscal 2022 in connection with the repurchase of certain 1.00% and 1.75% Senior Convertible Notes. The Company eliminates this in calculating non-GAAP net income and non-GAAP net income per share, because it believes that in so doing, it can provide investors a clearer and more consistent view of the Company’s core operating performance.
The preliminary financial schedules are estimated based on our current information.
VIAVI SOLUTIONS INC.
RECONCILIATION OF GAAP MEASURES FROM CONTINUING OPERATIONS
TO ADJUSTED EBITDA
(in millions, unaudited)
PRELIMINARY
| Three Months Ended | |||||
|---|---|---|---|---|---|
| October 1, 2022 | October 2, 2021 | ||||
| GAAP net income (loss) | $ | 32.6 | $ | (54.8) | |
| Interest income and other (income) expense, net | (1.1) | 84.5 | |||
| Interest expense | 6.1 | 3.6 | |||
| Provision for income taxes | 12.2 | 13.6 | |||
| Depreciation | 8.5 | 8.9 | |||
| Amortization | 9.3 | 10.6 | |||
| EBITDA | 67.6 | 66.4 | |||
| Stock-based compensation | 13.0 | 13.6 | |||
| Change in fair value of contingent liability | 0.5 | 0.3 | |||
| Other (benefits) charges unrelated to core operating performance | (5.2) | 2.9 | |||
| Adjusted EBITDA | $ | 75.9 | $ | 83.2 |
Note: Certain totals may not add due to rounding.
The preliminary financial schedules are estimated based on our current information.
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