Operating Segments and Geographic Information

6 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Operating Segments and Geographic Information

Note 17. Operating Segments and Geographic Information

The Company evaluates its reportable segments in accordance with the authoritative guidance on segment reporting. The Company’s Chief Executive Officer, Oleg Khaykin, is the Company’s Chief Operating Decision Maker (“CODM”) pursuant to the guidance. The CODM allocates resources to the segments based on their business prospects, competitive factors, net revenue and operating results.

The Company is a leading provider of software and hardware platforms and instruments that deliver end-to-end visibility across physical, virtual and hybrid networks. Our solutions provide precise intelligence and actionable insight from across the network ecosystem to optimize networks and support more profitable, higher-performing networks and quicker transition to next-generation technologies for our customers. Viavi is also a leader in anti-counterfeiting solutions for currency authentication and high-value optical components and instruments for diverse government and commercial applications.

The Company’s reportable segments are:

(i) Network Enablement (“NE”):

NE provides testing solutions that access the network to perform build-out and maintenance tasks. These solutions include instruments, software and services to design, build, activate, certify, troubleshoot and optimize networks. The company also offers a range of product support and professional services such as repair, calibration, software support and technical assistance for our products.

(ii) Service Enablement (“SE”):

SE solutions are embedded systems that yield network, service and application performance data. These solutions—including microprobes and software—monitor, collect and analyze network data to reveal the actual customer experience and to identify opportunities for new revenue streams and network optimization.

(iii) Optical Security and Performance Products (“OSP”):

OSP provides innovative optical security solutions, with a strategic focus on serving the anti-counterfeiting market through advanced security pigments, thread substrates and printed features for the currency, pharmaceutical and consumer electronic segments. OSP also provides thin-film coating solutions for 3D sensing applications.

The CODM manages the Company in two broad business categories: Network and Service Enablement ("NSE") and OSP. NSE operates in two segments, NE and SE, whereas OSP operates as a single segment. The CODM evaluates segment performance of the NSE business based on NE and SE segment gross margin and NSE operating margin as a whole. Operating expenses associated with the NSE business are not allocated to the NE and SE segments within NSE, as they are managed centrally at the business unit level. The CODM evaluates segment performance of the OSP business based on OSP segment operating margin.

The Company does not allocate stock-based compensation, acquisition-related charges, amortization of intangibles, restructuring and related charges, impairment of goodwill, non-operating income and expenses, or other non-core operating and non-recurring charges to its segments because Management does not include this information in its measurement of the performance of the operating segments. These items are presented as “Reconciling Items” in the table below. Additionally, the Company does not specifically identify and allocate all assets by operating segment.

The segment information for all periods presented has been revised to be comparable with the changes in the Company’s segment reporting measures.

Information on reportable segments is as follows (in millions):

	Three Months Ended December 31, 2016
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Total Segment Measures			Reconciling Items			Consolidated GAAP Measures
Net revenue	$	117.0		$	40.6		$	157.6		$	48.9		$	206.5		$	—		$	206.5
Gross profit	74.6			27.1			101.7			28.2			129.9			(5.2		)	124.7
Gross margin	63.8		%	66.7		%	64.5		%	57.7		%	62.9		%				60.4		%
Operating income							6.0			20.9			26.9			(20.2		)	6.7
Operating margin							3.8		%	42.7		%	13.0		%				3.2		%

	Three Months Ended January 2, 2016
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Total Segment Measures			Reconciling Items			Consolidated GAAP Measures
Net revenue	$	136.4		$	36.9		$	173.3		$	58.8		$	232.1		$	—		$	232.1
Gross profit	90.6			24.5			115.1			32.8			147.9			(6.1		)	141.8
Gross margin	66.4		%	66.4		%	66.4		%	55.8		%	63.7		%				61.1		%
Operating income							8.0			22.5			30.5			(21.3		)	9.2
Operating margin							4.6		%	38.3		%	13.1		%				4.0		%

	Three Months Ended
	December 31, 2016			January 2, 2016
Corporate reconciling items impacting gross profit:
Total segment gross profit	$	129.9		$	147.9
Stock-based compensation	(1.0		)	(1.4		)
Amortization of intangibles	(3.7		)	(4.6		)
Other charges unrelated to core operating performance (1)	(0.5		)	(0.1		)
GAAP gross profit	$	124.7		$	141.8
Corporate reconciling items impacting operating income (loss):
Total segment operating income	$	26.9		$	30.5
Stock-based compensation	(9.1		)	(8.9		)
Amortization of intangibles	(7.1		)	(8.3		)
Other charges unrelated to core operating performance (1)	(2.2		)	(2.7		)
Restructuring and related charges	(1.8		)	(1.4		)
GAAP operating income (loss) from continuing operations	$	6.7		$	9.2

(1) During the three months endedDecember 31, 2016 and January 2, 2016, other charges related to non-recurring activities primarily consisted of transformational initiatives such as the implementation of simplified automated processes, write-down of fixed assets, site consolidations, reorganizations, and the insourcing or outsourcing of activities.

	Six Months Ended December 31, 2016
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Total Segment Measures			Reconciling Items			Consolidated GAAP Measures
Net revenue	$	235.6		$	77.0		$	312.6		$	104.7		$	417.3		$	—		$	417.3
Gross profit	152.0			48.4			200.4			59.8			260.2			(10.4		)	249.8
Gross margin	64.5		%	62.9		%	64.1		%	57.1		%	62.4		%				59.9		%
Operating income							10.1			44.3			54.4			(37.6		)	16.8
Operating margin							3.2		%	42.3		%	13.0		%				4.0		%

	Six Months Ended January 2, 2016
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Total Segment Measures			Reconciling Items			Consolidated GAAP Measures
Net revenue	$	254.0		$	84.8		$	338.8		$	123.0		$	461.8		$	—		$	461.8
Gross profit	166.3			57.9			224.2			69.8			294.0			(11.7		)	282.3
Gross margin	65.5		%	68.3		%	66.2		%	56.7		%	63.7		%				61.1		%
Operating income							10.4			48.8			59.2			(52.9		)	6.3
Operating margin							3.1		%	39.7		%	12.8		%				1.4		%

	Six Months Ended
	December 31, 2016			January 2, 2016
Corporate reconciling items impacting gross profit:
Total segment gross profit	$	260.2		$	294.0
Stock-based compensation	(2.0		)	(2.6		)
Amortization of intangibles	(7.5		)	(8.9		)
Other charges unrelated to core operating performance (1)	(0.9		)	(0.2		)
GAAP gross profit	$	249.8		$	282.3
Corporate reconciling items impacting operating income (loss):
Total segment operating income	$	54.4		$	59.2
Stock-based compensation	(17.8		)	(24.9		)
Amortization of intangibles	(14.4		)	(16.4		)
Other charges unrelated to core operating performance (1)	(3.6		)	(9.8		)
Restructuring and related charges	(1.8		)	(1.8		)
GAAP operating income (loss) from continuing operations	$	16.8		$	6.3

(1) During the six months endedDecember 31, 2016 and January 2, 2016, other charges related to non-recurring activities primarily consisted of Viavi-specific incremental charges for professional fees and additional personnel costs to complete the separation as well as transformational initiatives such as the implementation of simplified automated processes, write-down of fixed assets, site consolidations, reorganizations, and the insourcing or outsourcing of activities.