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Operating Segments and Geographic Information
 12 Months Ended
Jun. 29, 2019
Segment Reporting [Abstract]  
Operating Segments and Geographic Information
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”), uses 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 its products. NE’s avionics products provide test and measuring solutions for aviation, aerospace, government, defense, communications and public safety.
(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.
Segment Reporting
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, changes in fair value of contingent consideration liabilities, 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.
Information on the Company’s reportable segments is as follows (in millions):
 
Year Ended June 29, 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
$
666.2

 
$
49.7

 
$
715.9

 
$
288.3

 
$
—

 
$
1,004.2

Service revenue
71.6

 
53.7

 
125.3

 
0.8

 
—

 
126.1

Net revenue
$
737.8

 
$
103.4

 
$
841.2

 
$
289.1

 
$
—

 
$
1,130.3

 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
473.3

 
71.0

 
544.3

 
145.8

 
(38.7
)
 
651.4

Gross margin
64.2
%
 
68.7
%
 
64.7
%
 
50.4
%
 
 
 
57.6
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
 
 
 
99.6

 
98.0

 
(130.2
)
 
67.4

Operating margin
 
 
 
 
11.8
%
 
33.9
%
 
 
 
6.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended June 30, 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
$
497.1

 
$
59.3

 
$
556.4

 
$
216.0

 
$
—

 
$
772.5

Service revenue
42.0

 
59.2

 
101.2

 
2.1

 
—

 
103.2

Net revenue
$
539.1

 
$
118.5

 
$
657.6

 
$
218.1

 
$
—

 
$
875.7

 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
334.3

 
82.6

 
416.9

 
115.2

 
(43.7
)
 
488.4

Gross margin
62.0
%
 
69.7
%
 
63.4
%
 
52.8
%
 
 
 
55.8
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
 
 
 
43.6

 
78.2

 
(119.9
)
 
1.9

Operating margin
 
 
 
 
6.6
%
 
35.9
%
 
 
 
0.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended July 1, 2017
 
Network and Service Enablement
 
 
 
 
 
 
 
 
 
Network Enablement
 
Service Enablement
 
Network and
Service
Enablement
 
Optical Security and Performance Products
 
Other Items
 
Consolidated GAAP Measures
Product revenue
$
410.6

 
$
64.6

 
$
475.2

 
$
230.8

 
$
—

 
$
706.0

Service revenue
34.5

 
63.1

 
97.6

 
1.4

 
—

 
99.0

Net revenue
$
445.1

 
$
127.7

 
$
572.8

 
$
232.2

 
$
—

 
$
805.0

 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
287.5

 
78.0

 
365.5

 
133.8

 
(20.3
)
 
479.0

Gross margin
64.6
%
 
61.1
%
 
63.8
%
 
57.6
%
 
 
 
59.5
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
 
 
 
0.5

 
100.5

 
(94.0
)
 
7.0

Operating margin
 
 
 
 
0.1
%
 
43.3
%
 
 
 
0.9
%

 
Years Ended
 
June 29, 2019
 
June 30, 2018
 
July 1, 2017
Corporate reconciling items impacting gross profit:
 
 
 
 
 
Total segment gross profit
$
690.1

 
$
532.1

 
$
499.3

Stock-based compensation
(3.8
)
 
(3.3
)
 
(3.6
)
Amortization of intangibles
(34.4
)
 
(26.7
)
 
(14.3
)
Other charges unrelated to core operating performance (2)
(0.5
)
 
(13.7
)
 
(2.4
)
GAAP gross profit
$
651.4

 
$
488.4

 
$
479.0

 
 
 
 
 
 
Corporate reconciling items impacting operating income:
 
 
 
 
 
Total segment operating income
$
197.6

 
$
121.8

 
$
101.0

Stock-based compensation
(38.2
)
 
(30.5
)
 
(33.2
)
Amortization of intangibles
(72.5
)
 
(47.7
)
 
(28.3
)
Change in fair value of contingent liability (4)
5.9

 
—

 
—

Other charges unrelated to core operating performance (1)(2)(3)
(10.0
)
 
(33.4
)
 
(10.9
)
Restructuring and related charges
(15.4
)
 
(8.3
)
 
(21.6
)
GAAP operating income
$
67.4

 
$
1.9

 
$
7.0



(1)
During the year ended June 29, 2019, other charges unrelated to core operating performance primarily consisted of $5.0 million in acquisition related costs.
(2)
During the year ended June 30, 2018, other charges unrelated to core operating performance primarily consisted of $12.7 million in acquisition related costs and $12.4 million in amortization of inventory step-up.
(3)
During the year ended July 1, 2017, other charges unrelated to core operating performance primarily consisted of a $5.7 million loss on disposal of long-lived assets.
(4)
Refer to “Note 8. Investments, Forward Contracts and Fair Value Measurements” for further detail.
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 the Company’s product is initially shipped. For example, certain customers may request shipment of 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 the Company operates in and net revenue from countries that exceeded 10% of the Company’s total net revenue (in millions):

 
Years Ended
 
June 29, 2019
 
June 30, 2018
 
July 1, 2017
 
Product Revenue
 
Service Revenue
 
Total
 
Product Revenue
 
Service Revenue
 
Total
 
Product Revenue
 
Service Revenue
 
Total
Americas:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States
$
287.1

 
$
55.0

 
$
342.1

 
$
282.6

 
$
52.9

 
$
335.5

 
$
245.7

 
$
54.3

 
$
300.0

Other Americas
69.4

 
14.8

 
84.2

 
64.2

 
16.8

 
81.0

 
59.2

 
13.5

 
72.7

Total Americas
$
356.5

 
$
69.8

 
$
426.3

 
$
346.8

 
$
69.7

 
$
416.5

 
$
304.9

 
$
67.8

 
$
372.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asia-Pacific:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Greater China
$
209.4

 
$
7.2

 
$
216.6

 
$
126.6

 
$
2.0

 
$
128.6

 
$
99.0

 
$
1.9

 
$
100.9

Other Asia
142.3

 
13.3

 
155.6

 
78.3

 
6.9

 
85.2

 
65.0

 
9.0

 
74.0

Total Asia-Pacific
$
351.7

 
$
20.5

 
$
372.2

 
$
204.9

 
$
8.9

 
$
213.8

 
$
164.0

 
$
10.9

 
$
174.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EMEA:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Switzerland
$
97.0

 
$
—

 
$
97.0

 
$
75.2

 
$
0.1

 
$
75.3

 
$
124.0

 
$
0.1

 
$
124.1

Other EMEA
199.0

 
35.8

 
234.8

 
145.6

 
24.5

 
170.1

 
113.1

 
20.2

 
133.3

Total EMEA
$
296.0

 
$
35.8

 
$
331.8

 
$
220.8

 
$
24.6

 
$
245.4

 
$
237.1

 
$
20.3

 
$
257.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total net revenue
$
1,004.2

 
$
126.1

 
$
1,130.3

 
$
772.5

 
$
103.2

 
$
875.7

 
$
706.0

 
$
99.0

 
$
805.0


One customer served by the Company’s OSP segment generated more than 10% of VIAVI net revenue from continuing operations during fiscal 2019, 2018 and 2017 as summarized below (in millions):
 
Years Ended
 
June 29, 2019
 
June 30, 2018
 
July 1, 2017
Customer A - OSP customer
$
161.1

 
$
129.3

 
$
166.8

Property, plant and equipment, net was identified based on the operations in the corresponding geographic areas (in millions):
 
Years Ended
 
June 29, 2019
 
June 30, 2018
United States
$
89.4

 
$
79.8

Other Americas
1.6

 
3.1

China
49.0

 
49.9

Other Asia-Pacific
5.6

 
5.9

United Kingdom
23.8

 
20.9

Other EMEA
10.5

 
10.9

Total property, plant and equipment, net
$
179.9

 
$
170.5