VIAVI SOLUTIONS INC.

Viavi Solutions Inc. is a global leader in test and measurement and optical technologies, serving markets that include data center ecosystems, communication networks, military, aerospace, railway, and first responder communications. The company also develops technologies for high-volume optical applications across anti-counterfeiting, consumer electronics, aerospace, industrial, and automotive end markets. The industry is characterized by rapid growth in demand for network performance, speed, and bandwidth, driven by the buildout of AI data centers, high-performance computing, and the evolution of wireless networks toward 5G Standalone and 6G. In the optical security segment, the wide availability of advanced imaging and printing tools necessitates robust anti-counterfeiting features, while trends in 3D sensing and other applications focus on improving efficiency in size, weight, and power.

Primary competitors named in the filing for the Network and Service Enablement segment include Anritsu Corporation, EXFO Inc., Keysight Technologies Inc., NetScout Systems, Inc., Riverbed Technology, Inc., Rohde & Schwarz, and VeEX Inc. For the Optical Security and Performance Products segment, competitors include Giesecke & Devrient, Crane NXT, GNMI Group, FYOTEC, Materion, Zhejiang Crystal-Optech Co Ltd., Platinum Optics Technology, Inc., and Coherent. The company states it has one of the broadest portfolios of products and monitoring solutions in the network and service enablement industry. In anti-counterfeiting, VIAVI's technologies are deployed on the banknotes of more than 100 countries today, and the company believes it has established itself as one of the industry's leading suppliers of high-performance filters for depth-sensing systems in consumer electronics.

The company generates revenue through two business segments: Network and Service Enablement and Optical Security and Performance Products. Revenue is derived from both product sales and service revenue. The business model involves engaging customers early in the design phase of their programs and supporting them throughout product development and volume production. For NSE, products are marketed and sold to hyperscale data centers, communications service providers, network equipment manufacturers, original equipment manufacturers, enterprises, government and defense, distributors, and strategic partners worldwide. OSP sales efforts are directed primarily toward customers in consumer electronics, government, commercial aerospace, automotive, biomedical, and industrial end markets, utilizing a global direct sales organization supported by applications engineers and customer service professionals.

The Network and Service Enablement segment provides an integrated portfolio of test, monitoring, assurance, and resilient Position, Navigation and Timing solutions. Its Lab and Production products enable testing of high-performance integrated circuits and modules, and following the acquisition of certain businesses of Spirent Communications plc., VIAVI's combined high-speed Ethernet portfolio addresses layers 0-7 of the OSI protocol stack. Fiber products include instruments for construction, inspection, testing, activation, maintenance, troubleshooting, monitoring, sensing, and assurance of broadband networks. Wireless products consist of flexible application software, multi-functional hardware, and Lab-as-a-Service/Test-as-a-Service for developing wireless infrastructure products across the entire lifecycle. The Aerospace and Defense business provides test equipment for mission critical communication and avionics applications and products for resilient PNT. The security portfolio delivers threat detection and prevention, and the AIOps solutions portfolio leverages AI, machine learning, and big data analytics incorporating Agentic AI technology. The Network Performance and Threat Solutions portfolio helps enterprise IT and security teams monitor and optimize connectivity. The Mission Critical Communications portfolio enables Public Safety Networks globally.

The Optical Security and Performance Products segment leverages core optical coating technologies and volume manufacturing capability to design, manufacture, and sell technologies for anti-counterfeiting, 3D sensing, aerospace, industrial, and automotive markets. Anti-counterfeiting technologies deliver overt effects including color shift, depth, and motion for banknote protection. For consumer electronics and industrial markets, OSP manufactures and sells optical filters for 3D sensing products, multicavity and linear variable optical filters for applications including thermal imaging and spectroscopy, and handheld and process near infrared spectrometers. Government products include optics for inter-satellite laser communications, guidance systems, laser eye protection, and night vision systems. Automotive offerings include custom color solutions and optical filters for LiDAR and in-cabin monitoring. OSP's technologies are deployed on the banknotes of more than 100 countries today.

During the third quarter of fiscal 2026, a restructuring plan was announced (the Fiscal 2026 Plan) intended to improve operational efficiencies, better align the workforce with current business needs and strategic growth opportunities, and integrate recently acquired businesses. The plan included a global workforce reduction, facilities rationalization, and asset write-offs, with approximately 5% of the global workforce expected to be affected. The company estimates annualized gross cost savings of approximately $30.0 million upon completion of the plan, excluding any one-time charges. In October 2025, the company completed the acquisition of certain businesses of Spirent Communications plc. In January 2025, the company acquired Inertial Labs Inc. In May 2026, the company completed an underwritten public offering of common stock and a concurrent private placement of senior secured term loan notes. During fiscal 2026, the company also executed exchange transactions and redemptions related to its convertible notes.

For the fiscal year ended June 27, 2026, total net revenue was $1,283.5 million, compared to $1,007.6 million in the prior fiscal year. Net income was $37.9 million, compared to $47.5 million in the prior year. Diluted net income per share was $0.16, compared to $0.21 in the prior year. Gross margin was 59.5% compared to 60.5% in the prior year. Operating income was $27.9 million compared to $52.5 million in the prior year. Cash and cash equivalents totaled $1,033.0 million as of June 27, 2026, compared to $1,036.5 million as of June 28, 2025.

A key growth vector is the data center ecosystem, where the rapid buildout of AI data centers and high-performance computing is driving higher speed optical transceivers and increasing numbers of data center interconnects and multi-fiber connectivity. The company's high-speed optical and Ethernet solutions address lab, production, and manufacturing environments to ensure network equipment is designed and built at peak performance to support AI and HPC workloads. Following the Spirent acquisition, VIAVI's combined high-speed Ethernet portfolio addresses layers 0-7 of the OSI protocol stack, positioning the company to capture demand from semiconductor vendors, transceiver and module developers, network equipment manufacturers, hyperscalers, and data center operators.

Another growth vector is next-generation wireless networks, as networks evolve with service providers deploying 5G Standalone with 5G-specific core networks and the industry conducting research to define the path to 6G along vectors including AI across all network functions, new frequency bands, integrated sensing and communications, multiple access, and ray tracing. The company's Wireless products enable the development of wireless infrastructure products across the entire lifecycle, as well as the buildout and management of next-generation wireless networks, including 5G, 5GA, 6G, and Open RAN networks. Additionally, the company is extending its technologies into adjacent markets such as aerospace and defense, resilient PNT, and network security, leveraging its optical coating technologies for high-performance optical applications in aerospace, defense, industrial, and automotive markets.

The company announced a restructuring plan in the third quarter of fiscal 2026 (the Fiscal 2026 Plan) intended to improve operational efficiencies and better align the workforce with current business needs and strategic growth opportunities. The company estimates annualized gross cost savings of approximately $30.0 million upon completion of the plan, excluding any one-time charges. The plan includes a global workforce reduction of approximately 5% of the global workforce, facilities rationalization, and asset write-offs. The company expects that a substantial portion of the plan will be completed by the end of calendar year 2026.

The company has manufacturing facilities for its NSE and OSP segments located in the United States, France, Germany, the United Kingdom, and China as of June 27, 2026. Contract manufacturing partners have a global footprint that includes facilities in China and Thailand, from where the company currently sources a significant portion of its products and components. The company uses various suppliers and contract manufacturers to supply parts and components, and for certain components, the company has sole or limited source supply arrangements.

The company's long-term capital allocation strategy includes maintenance and run-rate investments to support operations, organic investments in initiatives to support revenue growth and productivity, execution on debt management strategy, return of capital to shareholders through share buybacks, leveraging net operating loss carryforwards, and inorganic investments synergistic to business segments. The company devotes substantial resources in Research and Development to develop new and innovative products. The filing does not specify exact R&D spending levels, capital expenditure plans, share repurchase authorization amounts, or dividend policy figures for the upcoming period.

The company faces structural headwinds including the consolidation of the communication industry and continued reliance on key customers for a significant portion of revenue. Macroeconomic factors such as inflation, fiscal tightening at central banks, changes in foreign exchange rates, the risk of increased tensions and trade actions including global tariffs, ongoing geopolitical tensions including the conflicts between Russia and Ukraine and in the Middle East, and political instability and economic uncertainty in the Middle East are identified as factors that could impact business, operations, and financial results. The company also notes that internal and/or external factors could impact its ability to meet its strategic objectives.

The company's business is seasonal, with NSE revenue typically higher in the second and fourth fiscal quarters, and the third fiscal quarter being NSE's weakest revenue quarter. For OSP, given exposure to the consumer smartphone market, revenue is expected to be seasonally higher in the first and second fiscal quarters followed by seasonal demand declines in the third and fourth fiscal quarters.

A material reduction in sales or loss of the relationship with SICPA Holding SA Company, a key customer for the OSP segment's anti-counterfeiting products, may harm business and operating results as the company may be unable to find a substitute marketing and sales partner or develop these capabilities in a timely manner. The company relies on a limited number of customers for a significant portion of its sales, which may increase pressure on pricing and contract terms. The company sources a significant portion of its products and components from contract manufacturing partners with facilities in China and Thailand, exposing it to supply chain disruptions, geopolitical tensions, and trade actions including global tariffs. The company faces intense competition in both segments, with multiple named competitors for each product family, and failure to compete effectively on brand recognition, product quality, price, and innovation could adversely affect results. The company's substantial debt, including convertible notes and a senior secured term loan, exposes it to interest rate risk and covenant compliance requirements, and as of June 27, 2026, the company had $1,033.0 million in cash and cash equivalents against outstanding debt obligations.

Management's message emphasizes a corporate strategy to accelerate profitable growth by leveraging VIAVI technologies and capabilities into attractive high-growth markets and applications. The strategy includes defending and consolidating leadership in core business segments (NSE and OSP), investing in secular trends such as the data center ecosystem, next-gen wireless networks, and service enablement, and extending technologies into adjacent markets like aerospace and defense, resilient PNT, and network security. The long-term capital allocation strategy supports this corporate strategy through maintenance investments, organic growth initiatives, debt management, share buybacks, leveraging NOLs, and synergistic inorganic investments.