Viavi Presentation Template
VIAVI SolutionsWilliam Blair 201838th Annual Growth Stock ConferenceJune 12, 2018
Cautionary Language Concerning Forward-LookingStatementsThis presentation contains forward-looking statements under Section 27A of the SecuritiesAct of 1934. Forward-looking statements are all statements we make other than thosedealing specifically with historical matters. These forward-looking statements include,among other things, financial guidance. Please refer to the Company’s filings with theSecurities and Exchange Commission, including our annual report on Form 10-K filedAugust 29, 2017 for additional factors that could cause actual results to materially differfrom current expectations. The forward-looking statements included in this presentationare valid only as of today’s date except where otherwise noted. Viavi Solutions Inc.undertakes no obligation to update these statements.This presentation and the Q&A that follows include non-GAAP financial measures whichcomplement the Company’s consolidated GAAP financial statements. These non-GAAPfinancial measures are not intended to supersede or replace the Company’s preliminaryGAAP financials. We provide a detailed reconciliation of preliminary GAAP results to thenon-GAAP results in the Appendix to this presentation. This presentation is located in theInvestor Relations section of our web site at www.www.viavisolutions.com.Note: Amounts presented in all slides are on a continuing operations basis unlessotherwise noted.viavisolutions.com 2018 VIAVI Solutions Inc.2
VIAVI OverviewLeader in Network Service Enablement and Optical Security and Performance ApplicationsNSEOSPProducts and solutions that help serviceproviders and IT organizations optimizeand maintain their networksAdvanced thin film optics and highperformance optical materials for AMI*specialty applications Test and Measurement Anti-Counterfeiting and Optical Security Service Activation & Assurance 3D Optical Sensing Performance Management Thin Film Optical Coatings*Automotive, Military & Industrialviavisolutions.com 2018 VIAVI Solutions Inc.3
Leadership Position in All Target Market SegmentsTest & Measurement LeadershipNSE#1#1#1AvComm and Wireless T&Min Cable#1in RAN-to-CoreNetwork Test#1in Land-Mobile& Military Radio#1In Nav/Comm& Transponderin Accessin Metro andTransport#1/#2in FiberOSPSecurity Authentication/Sensing Leadership#1in Anti-CounterfeitingPigment Materials#1viavisolutions.comin 3DSOptical Filters 2018 VIAVI Solutions Inc.4
Business Driven by Many Secular Growth TrendsGrowth DriversOSPNSETarget MarketsTelecom Service Providers5G Wireless FiberGovernment/MilitaryPent-up Demand – NetworkModernization and DigitizationAvionicsFleet Growth Next Gen ATCAnti-CounterfeitingCurrency RedesignsConsumer Electronics3DS AR/VRAutomotiveADAS LiDARviavisolutions.com 2018 VIAVI Solutions Inc.5
VIAVI’s StrategyVisionTo be #1 or a strong #2 in all market segments where we competeNSEStrategyMarket leadership in Network Enablement (NE), reinforced by highlyfocused Service Enablement (SE) Scale NE through share gain, consolidation, and expansion intoadjacent markets Highly focused SE that is synergistic with and leverages our NEposition Corporate development model to drive financial leverage and utilizenet operating losses (NOLs)OSPStrategyLeverage proprietary Pigments and Optical Coating technologies to buildmarket leadership in large, high value applications Defend and expand core Anti-Counterfeiting business Grow leadership in 3D Sensing beyond consumer electronics Expand into high value existing and emerging AMI* applications* Automotive, Military & Industrialviavisolutions.com 2018 VIAVI Solutions Inc.6
Network andService Enablementviavisolutions.com 2018 VIAVI Solutions Inc.7
Target Markets: Network Communication T&M Solutionsfrom Lab to FieldWe partner withour customersCustomersWho manage networksNetwork SPs, Cable,Wireless/MobileCloudProvidersNetwork EquipmentManufacturersEnterprisesAccess 10MB – 1GBTransportBackboneWireless 4G – 5G10G – 100G100G – 400GGovernment,Aerospace andDefenseCloudNetworksTo optimize performancethroughout the networklifecycleNetwork eManageMonitorActivateviavisolutions.com 2018 VIAVI Solutions Inc.8
VIAVI Network SolutionsInstruments Data Management & Analytics Integrated PlatformsProducts for Lab, Manufacturing, Field Deployment, Monitoring, and OptimizationTest and MeasurementAssurance SolutionsPerformance Management(Field and Lab Instruments)(Network Intelligence)(Data Center and Cloud)TBERD/MTS5800 & 2000FiberChek ProbeMicroscopeOneExpertCATVGigaStorNitro MobileONTWiFi tions.com 2018 VIAVI Solutions Inc.9
Acquisition of Cobham’s Wireless Test Business BroughtSignificant Strategic Benefits to VIAVI Significantly strengthened VIAVI’s position in emerging 5G wireless Increased scale and presence with Tier 1 NEMs and Service Providers Market leadership position in military, public safety and avionics testmarkets Strong profitability and free cash flow leveraging VIAVI’s NOLsviavisolutions.com 2018 VIAVI Solutions Inc.10
Example: Leadership in 5G from Lab to FieldRANtoCore TM500,E500:Deviceemulationand networktestMobile networkand IP data /Apps emulationLABSFiber, Metro, and RF Field Test ProductsCellAdvisor 5G:signal analysis,interferenceanalysis,beamforminganalysis andcable/antennaanalysisTRIALST-BERD/Fiber optic testMTS-5800-100Gsolutions:T-BERD/MTS-2000and viavisolutions.comOPTIMIZATIONVIAVI NITRONetworkIntegratedTest, Realtime analyticsandOptimizationAUTOMATION 2018 VIAVI Solutions Inc.11
Optical SecurityandPerformanceProductsviavisolutions.com 2018 VIAVI Solutions Inc.12
Anti-Counterfeiting ApplicationsCurrency Protection 30 year heritage Close engagement with government andsecurity channel 100 currencies using OSP technologies- OVP - Optically Variable Pigment- OVMP - Optically Variable MagneticPigmentviavisolutions.com 2018 VIAVI Solutions Inc.13
3D Sensing ApplicationsHigh-performance optical solutions for a wide range of smart electronics (i.e. mobilephones, robotics and drones) Current Applications-3D Sensing for AR/VR and FacialRecognition-Ambient Light Sensors-RGB Sensors-Proximity SensorsEmerging Applications-Multimodal Biometrics Facial mapping/recognition Iris scanningviavisolutions.com 2018 VIAVI Solutions Inc.14
Automotive ApplicationsHigh-performance Filters for Advanced Sensors In cabin driver & passenger monitoring for personalization, comfort and security Facial and gesture recognition for driver monitoring and interior controls 3D external environment monitoring for Advanced Driving Assisted Systems(ADAS) and LiDAR for autonomous drivingviavisolutions.com 2018 VIAVI Solutions Inc.15
Financials/Summaryviavisolutions.com 2018 VIAVI Solutions Inc.16
Recent Financial Performance and Anticipated Near-TermTrajectoryFY 2015-18* EPS CAGR 31% Millions, except EPS 0.43 0.40 0.38RevenueFY19 Non-GAAPOperating Profit& EPS GrowthNon-GAAP Operating ProfitNon-GAAP EPS 0.19 906 874OpM%OpM%VIAVI 12.8%OSP 41.5%NSE 1.9%VIAVI 13.3%OSP 43.2%NSE 1.3%OpM%VIAVI 7.8%OSP 35.3%NSE 0%OpM% 871VIAVI 13.5%OSP 35.9%NSE 6.1% 811 116 118 108 68Non-GAAPOperatingProfit MixFY2015FY2016FY2017FY2018**Reflects stated F4Q18 GuidanceMidpoint from May 3rd, 20187%11%12%OSPCore NSEAvComm &Wireless22%100%66%89%viavisolutions.com93% 2018 VIAVI Solutions Inc.17
Capital Structure and Allocation Priorities Aligned withOur Operational and Financial StrategyCapital StructureAs of3/31/2018Net CashCash, RestrictedCash and STInvestmentsDebtNet Cash 738.0M 888.5M Cash position provides capital deploymentflexibility Recent 2023 convert exchange as well as privateplacement addressed upcoming August 2018Put/Call for the 2033 convert and otheropportunities 137.4M returned to shareholders in form of sharebuyback under the Board approved 200Mrepurchase program- 150.5MPositive Cash Flowfrom Operations All business segments profitableLow CapEx intensityPositive operating cash to fund organic andinorganic investments and capital return toshareholdersviavisolutions.com 2018 VIAVI Solutions Inc.18
Summary – Investment ThesisI. Core BusinessTurnaroundII. SecularGrowthDriversIII. CapitalAllocationDiscipline Core Business Turnaround Driving Margin Expansion Significant financial leverage from top line growth 5G Wireless OEMs/NEMs: Simulation/Testing Field Instruments: 5G Trials and Network Deployment Fiber proliferation 3D Sensing Consumer Electronics today Automotive in 2-3 years Mil/Aero Installed Base Refresh Spend Cycle Corporate development model to drive financial leverageand utilize net operating losses (NOLs)viavisolutions.com 2018 VIAVI Solutions Inc.19
Appendixviavisolutions.com 2018 VIAVI Solutions Inc.20
Convertible Notes( millions)TermsCurrent Convertible Notes2033Note2023Note2024NoteIssue Size 650.0M 225.0M 460.0MCurrent Outstanding * 277.0M 225.0M 460.0MCoupon0.625%1.75%1.00%Final Maturity8/15/20336/1/20233/1/2024First Put Date8/15/2018N/AN/AFirst Call Date8/20/20186/1/2021**N/ACall / Put Price (%)100%100%100%Conversion Price 11.28 13.94 13.22Shares Underlying *24.6MPar in Cash;Balance in stock &cash16.1MPar in Cash;Balance in stock &cash34.8MPar in Cash;Balance in stock &cashSettlement* As of June 1, 2018; **Provisional Callviavisolutions.com 2018 VIAVI Solutions Inc.21
Non-GAAP Reconciliations- millionsNon-GAAP Gross ProfitNon-GAAP Gross ProfitFY15FY16FY17Q3FY18 YTD(9 Months) 557.4 572.2 506.3 379.3Stock-Based Compensation( 4.2)( 4.8)( 3.6)( 2.4)Amortization of Intangibles( 31.9)( 17.3)( 14.3)( 14.4)( 1.2)( 0.4)( 2.4)( 6.5) 520.1 549.7 486.0 356.0Other Charges unrelated to core operationsGAAP Gross Profit as reportedNon-GAAP Operating IncomeFY15FY16FY17Q3FY18 YTD(9 Months)NSE Segment operating income( 0.1) 12.7 7.3 24.8OSP Segment operating income 68.1 102.9 100.3 63.2Total Segment operating income 68.0 115.6 107.6 88.0Stock-Based Compensation( 47.5)( 42.4)( 33.2)( 22.8)Amortization of Intangibles( 51.4)( 31.9)( 28.3)( 25.4) 0.0( 91.4) 0.0 0.0Other Charges unrelated to core operations( 18.1)( 23.7)( 10.9)( 21.4)Restructuring and related charges( 26.8)( 10.5)( 21.6)( 4.3)( 75.8)( 84.3) 13.6 14.1Impairment of goodwillGAAP operating (loss) income as reportedviavisolutions.com 2018 VIAVI Solutions Inc.22
Non-GAAP Reconciliations- millions (continued)Adjusted EBITDAAdjusted EBITDA from continuing operationsFY15FY16FY17Q3FY18 YTD(9 Months) 105.4 150.0 137.0 113.5Costs related to restructuring and related charges( 26.8)( 10.5)( 21.6)( 4.3)Costs related to stock-based compensation( 47.4)( 42.4)( 33.2)( 22.8) 0.0( 91.4) 0.0 0.0( 18.1)( 23.7)( 10.9)( 21.4) 13.1( 18.0) 71.3 65.0Depreciation( 37.5)( 34.4)( 29.4)( 25.5)Amortization( 51.4)( 31.9)( 28.3)( 25.4)Income Taxes( 26.1)( 4.5)( 21.3)( 2.2)Gain on sale of investments 0.1 71.6 203.1( 0.1)Interest and other income (expense), net 3.7 2.5 13.1 6.6( 33.3)( 35.7)( 43.2)( 35.6)( 131.4)( 50.4) 165.3( 17.2)Impairment of goodwillOther charges unrelated to core operationsEBITDA from continuing operationsInterest expenseGAAP net (loss) / income from continuing operationsviavisolutions.com 2018 VIAVI Solutions Inc.23
Non-GAAP Reconciliations- millions (continued)Adjusted cash flow from operationsAdjusted cash flow from operationsSpin and Restructuring related cash outflowsCash flow from operations as reportedAdjusted Free cash flowAdjusted free cash flowFY15FY16FY17Q3FY18 YTD(9 Months) 117.3 104.9 110.1 59.5( 35.0)( 52.0)( 30.1)( 11.0) 82.3 52.9 80.0 48.5FY15FY16FY17Q3FY18 YTD(9 Months) 14.8 69.4 71.5 29.7Spin and Restructuring related cash outflows( 35.0)( 52.0)( 30.1)( 11.0)CAPEX 101.5 35.5 38.6 29.8 82.3 52.9 80.0 48.5Cash flow from operations as reportedNOTE: FY 2015 includes the CCOP business which was later carved out as Lumentum. CCOP CAPEX was approximately 56 million for FY 2015. While VIAVI did not separatelycalculate CCOP cash flow from operations, Lumentum’s Annual Report on Form 10-K filed on September 2, 2016, reflected 9.3 million cash flows from operations based on a carveout basis.viavisolutions.com 2018 VIAVI Solutions Inc.24
Significant Strategic Benefits to VIAVI Significantly strengthened VIAVI’s position in emerging 5G wireless Increased scale and presence with Tier 1 NEMs and Service Providers Market leadership position in military, public safety and avionics test markets Strong profitability and free cash flow leveraging VIAVI’s NOLs
VIAVI Solutions Data Sheet VIAVI Trilithic DSP Series Meters Value-based models for every technician work group The DSP Series Meters As cable networks migrate to newer technologies, and anticipating an eventual move to DOCSIS 3.1 and 1.2 GHz downstream range for all meters, the complete VIAVI meter line provides these installation and service
VIAVI Solutions Data Sheet VIAVI OLP-82/82P SmartClass fiber power meter and microscope The new OLP-82 from VIAVI Solutions is the first handheld tool to combine pass/fail fiber inspection and optical power measurement (OPM) into one solution. As part of the new VIAVI SmartClass Fiber family, the OLP-82 helps service providers guarantee a .
VIAVI Solutions Inc. Subject: The VIAVI OLS-3x series consists of small and rugged optical light sources for quick, easy, and convenient field insertion loss measurement and continuity checks. Created Date: 4/2/2020 3:17:10 PM
VIAVI Solutions Data Sheet VIAVI OneExpert DSL (ONX-580) For xDSL, G.fast and FTTH Fast, consistent, and complete! Key Benefits and Features y Modular platform scales for new WiFi, fiber, and xDSL technology including VDSL Profile 35b and G.fast y OneCheck automates field tests and simplifies Copper and DSL results to consistently close jobs .
VIAVI Solutions Data Sheet VIAVI Optimeter A simple to use, intelligent optical fiber meter to certify and troubleshoot fiber links The Optimeter is the ideal fiber test tool for novice or entry-level technicians in charge of fiber premises installation and repair. Benefits y Ramp-up new fiber techs faster y Deliver repeatable test procedure for
The VIAVI Solutions Multiple Application Platform (MAP-300) is an optical test and measurement platform optimized for compact cost-effective development and manufacturing of optical communications technology. Key Features y Available in rackmount, reverse-rackmount and
Viavi will ensure that all waste equipment and batteries returned are reused, recycled, or disposed of in an environmentally friendly manner, and in compliance with all applicable national and international waste legislation. It is the responsibility of the equipment owner to return equipment and batteries to Viavi for appropriate disposal. If the
asset management markets such as Australia, Japan, Hong Kong and Singapore will continue to grow, though they will be outpaced by growth economies of the region such as China and India who are experiencing strong flows associated with burgeoning asset management markets. The opening up of China’s economy to offshore investors, India’s decreasing interest rates and disinflation, and the .
