Note 18. 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 is the Company’s Chief Operating Decision Maker (“CODM”), use operating segment financial information to evaluate segment performance and to allocate resources.

The Company’s reportable segments are:

(i) Network Enablement:

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 solutions are embedded systems that yield network, service and application performance data. These solutions—including instruments, 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 provides innovative, precision, high performance optical products for anti-counterfeiting, government, industrial, automotive and consumer electronic markets, including 3D Sensing applications.

The CODM manages the Company in two broad business categories: NSE and OSP. The CODM evaluates segment performance of the NSE business based on the combined segment gross and operating margins. Operating expenses associated with the NSE business are not allocated to the individual segments within NSE, as they are managed centrally at the business unit level. The CODM evaluates segment performance of the OSP business based on segment operating margin. The Company allocates corporate-level operating expenses to its segment results, except for certain non-core operating and non-operating activities as discussed below.

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 charges unrelated to core operating performance 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 “Other Items” in the table below. Additionally, the Company does not specifically identify and allocate all assets by operating segment.

The following tables presents information on the Company’s reportable segments (in millions):



	Three Months Ended March 30, 2019
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Other Items			Consolidated GAAP Measures
Product revenue	$	160.8		$	11.6		$	172.4		$	59.7		$	—		$	232.1
Service revenue	19.7			13.3			33.0			0.1			—			33.1
Net revenue	$	180.5		$	24.9		$	205.4		$	59.8		$	—		$	265.2

Gross profit	$	115.8		$	15.9		$	131.7		$	30.8		$	(9.0	)	$	153.5
Gross margin	64.2		%	63.9		%	64.1		%	51.5		%				57.9		%

Operating income							$	20.7		$	18.3		$	(31.1	)	$	7.9
Operating margin							10.1		%	30.6		%				3.0		%



	Three Months Ended March 31, 2018
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Other Items			Consolidated GAAP Measures
Product revenue	$	116.0		$	15.4		$	131.4		$	61.8		$	—		$	193.2
Service revenue	10.5			14.5			25.0			0.5			—			25.5
Net revenue	$	126.5		$	29.9		$	156.4		$	62.3		$	—		$	218.7

Gross profit	$	80.4		$	20.8		$	101.2		$	32.8		$	(10.7	)	$	123.3
Gross margin	63.6		%	69.6		%	64.7		%	52.6		%				56.4		%

Operating income							$	9.5		$	23.7		$	(32.8	)	$	0.4
Operating margin							6.1		%	38.0		%				0.2		%



	Three Months Ended
	March 30, 2019			March 31, 2018
Corporate reconciling items impacting gross profit:
Total segment gross profit	$	162.5		$	134.0
Stock-based compensation	(1.1		)	(0.8		)
Amortization of intangibles	(7.9		)	(6.2		)
Other charges unrelated to core operating performance ⁽¹⁾	—			(3.7		)
GAAP gross profit	$	153.5		$	123.3

Corporate reconciling items impacting operating income:
Total segment operating income	$	39.0		$	33.2
Stock-based compensation	(10.8		)	(7.6		)
Amortization of intangibles	(17.1		)	(10.7		)
Other charges unrelated to core operating performance ⁽²⁾	(2.3		)	(14.2		)
Restructuring and related charges	(0.9		)	(0.3		)
GAAP operating income	$	7.9		$	0.4


⁽¹⁾	During the three months ended March 31, 2018, other charges unrelated to core operating performance primarily consisted of acquisition and integration related expenses such as amortization of acquisition related inventory step-up, site consolidations and reorganizations.

⁽²⁾

During the three months ended March 30, 2019 and March 31, 2018, other charges unrelated to core operating performance primarily consisted of acquisition and integration related transformational initiatives such as the implementation of simplified automated processes, site consolidation and reorganizations, amortization of acquisition related inventory step-up, and loss on disposal of long-lived assets.



	Nine Months Ended March 30, 2019
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Other Items			Consolidated GAAP Measures
Product revenue	$	486.7		$	39.0		$	525.7		$	220.3		$	—		$	746.0
Service revenue	53.8			40.3			94.1			0.5			—			94.6
Net revenue	$	540.5		$	79.3		$	619.8		$	220.8		$	—		$	840.6

Gross profit	$	344.4		$	54.5		$	398.9		$	112.0		$	(29.0	)	$	481.9
Gross margin	63.7		%	68.7		%	64.4		%	50.7		%				57.3		%

Operating income							$	69.9		$	76.8		$	(107.1	)	$	39.6
Operating margin							11.3		%	34.8		%				4.7		%



	Nine Months Ended March 31, 2018
	Network and Service Enablement
	Network Enablement			Service Enablement			Network and Service Enablement			Optical Security and Performance Products			Other Items			Consolidated GAAP Measures
Product revenue	$	333.3		$	43.1		$	376.4		$	163.2		$	—		$	539.6
Service revenue	26.8			46.9			73.7			1.7			—			75.4
Net revenue	$	360.1		$	90.0		$	450.1		$	164.9		$	—		$	615.0

Gross profit	$	225.1		$	63.2		$	288.3		$	90.4		$	(23.3	)	$	355.4
Gross margin	62.5		%	70.2		%	64.1		%	54.8		%				57.8		%

Operating income							$	24.6		$	63.3		$	(73.9	)	$	14.0
Operating margin							5.5		%	38.4		%				2.3		%



	Nine Months Ended
	March 30, 2019			March 31, 2018
Corporate reconciling items impacting gross profit:
Total segment gross profit	$	510.9		$	378.7
Stock-based compensation	(2.8		)	(2.4		)
Amortization of intangibles	(25.8		)	(14.4		)
Other charges unrelated to core operating performance ⁽¹⁾	(0.4		)	(6.5		)
GAAP gross profit	$	481.9		$	355.4

Corporate reconciling items impacting operating income:
Total segment operating income	$	146.7		$	87.9
Stock-based compensation	(28.5		)	(22.8		)
Amortization of intangibles	(55.2		)	(25.4		)
Other charges unrelated to core operating performance ⁽²⁾	(7.4		)	(21.4		)
Restructuring and related charges	(16.0		)	(4.3		)
GAAP operating income (loss) from continuing operations	$	39.6		$	14.0


⁽¹⁾	During the nine months ended March 30, 2019 and March 31, 2018, other charges unrelated to core operating performance primarily consisted of acquisition and integration related expenses such as amortization of acquisition related inventory step-up, site consolidations and reorganizations.

⁽²⁾

During the nine months ended March 30, 2019 and March 31, 2018, other charges unrelated to core operating performance primarily consisted of acquisition and integration related transformational initiatives such as the implementation of simplified automated processes, site consolidation and reorganizations, amortization of acquisition related inventory step-up, and loss on disposal of long-lived assets.

The Company operates primarily in three geographic regions: Americas, Asia-Pacific, and Europe, Middle East and Africa (“EMEA”). Net revenue is assigned to the geographic region and country where our product is initially shipped. For example, certain customers may request shipment of our product to a contract manufacturer in one country, which may differ from the location of their end customers. The following table presents net revenue by the three geographic regions we operate in and net revenue from countries that exceeded 10% of our total net revenue, (in millions):



	Three Months Ended
	March 30, 2019						March 31, 2018
	Product Revenue		Service Revenue		Total		Product Revenue		Service Revenue		Total
Americas:
United States	$	63.4	$	13.7	$	77.1	$	66.8	$	12.1	$	78.9
Other Americas	14.4		3.7		18.1		13.9		3.0		16.9
Total Americas	$	77.8	$	17.4	$	95.2	$	80.7	$	15.1	$	95.8

Asia-Pacific:
Greater China	$	36.5	$	2.9	$	39.4	$	37.7	$	0.5	$	38.2
Other Asia	41.0		2.9		43.9		22.6		2.7		25.3
Total Asia-Pacific	$	77.5	$	5.8	$	83.3	$	60.3	$	3.2	$	63.5

EMEA:
Switzerland	$	23.9	$	—	$	23.9	$	15.9	$	—	$	15.9
Other EMEA	52.9		9.9		62.8		36.3		7.2		43.5
Total EMEA	$	76.8	$	9.9	$	86.7	$	52.2	$	7.2	$	59.4

Total net revenue	$	232.1	$	33.1	$	265.2	$	193.2	$	25.5	$	218.7



	Nine Months Ended
	March 30, 2019						March 31, 2018
	Product Revenue		Service Revenue		Total		Product Revenue		Service Revenue		Total
Americas:
United States	$	213.3	$	40.7	$	254.0	$	207.9	$	38.9	$	246.8
Other Americas	49.6		10.8		60.4		46.0		11.6		57.6
Total Americas	$	262.9	$	51.5	$	314.4	$	253.9	$	50.5	$	304.4

Asia-Pacific:
Greater China	$	160.0	$	5.2	$	165.2	$	88.8	$	1.5	$	90.3
Other Asia	107.4		10.0		117.4		51.6		4.7		56.3
Total Asia-Pacific	$	267.4	$	15.2	$	282.6	$	140.4	$	6.2	$	146.6

EMEA:
Switzerland	$	72.6	$	—	$	72.6	$	56.4	$	—	$	56.4
Other EMEA	143.1		27.9		171.0		88.9		18.7		107.6
Total EMEA	$	215.7	$	27.9	$	243.6	$	145.3	$	18.7	$	164.0

Total net revenue	$	746.0	$	94.6	$	840.6	$	539.6	$	75.4	$	615.0