Lumentum Holdings (LITE) 10-K risk factor changes: FY2021 vs FY2020

Our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives [added: has been affected, and] may be materially and adversely affected by the ongoing COVID-19 pandemic.

As a result of the COVID-19 outbreak around the world, [removed: Lumentum implemented certain travel restrictions] beginning in early February 2020, [added: Lumentum implemented certain travel restrictions,] temporarily closed or limited the number of employees permitted onsite in our offices and manufacturing sites in several heavily impacted locations, and implemented work-from-home rules at most of our facilities.

These measures as well as [removed: additional workforce disruptions due to quarantines, governmental actions, and/or the social distancing measures we have] [added: others] taken [removed: to mitigate the impact of COVID-19 at certain of our locations around the world in an effort to protect the health and well-being of our employees, customers, suppliers] [added: by us] and [removed: the communities in which we operate,] [added: others] have caused, and may continue to cause, disruption and delays in our ability to operate and manufacture, test and assemble products in our internal facilities, particularly in [removed: California,] [added: the United States,] China, Thailand and the United Kingdom.

Our ability to continue certain research and development activities has also been [removed: limited] [added: limited,] which could materially and adversely affect our ability to develop new products and technologies on the timelines we previously anticipated.

In addition, we have experienced disruption and delays [removed: in our supply chain and] with our manufacturing partners, [removed: primarily in Malaysia] [added: for example] in [removed: the first half of 2020, which imposed] [added: Malaysia,] limitations [added: were imposed at certain times] on which businesses could operate and the amount of the workforce permitted to perform manufacturing [removed: operations, and those limitations could be reinstated if the number of COVID-19 cases in particular regions were to increase.][added: operations.]

Our supply chain has also been affected by [removed: these] measures [added: implemented in response to the pandemic] and [added: in certain cases,] our suppliers [removed: may not] have [added: not had] the materials, capacity or capability to supply us with the components necessary for continuing our manufacturing operations or development efforts at our normal [removed: levels.][added: levels, such as the impacts we are experiencing from the shortages in semiconductor components.]

The ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control, including, but not limited, to: governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic (including restrictions on travel and transport and workforce pressures); the impact of the pandemic and actions taken in response on global and regional economies, travel, and economic activity; the availability of federal, state, local or non-U.S. funding programs; general economic uncertainty in key global markets and financial market volatility; global economic conditions and levels of economic growth; and the pace of recovery when the COVID-19 pandemic [removed: subsides.][added: subsides (including the availability of treatments and vaccines and the impact of new variants on recovery).]

In addition, the global economic volatility has significantly impacted the foreign exchange markets, and the currencies of various countries in which we operate and [added: in which we] have significant volume of local-currency denominated expenses have seen significant volatility.

[removed: Although the magnitude of the impact of COVID-19 on our business operations remains uncertain and difficult to predict, and the situation remains a highly dynamic, we] [added: We] have experienced and will continue to experience in subsequent periods, disruptions to our business that will adversely impact our business, financial condition and results of operations.

The markets for our products are characterized by rapid technological change, frequent new product [removed: introductions,] [added: introductions and enhancements,] substantial capital investment, changes in customer requirements, continued price pressures and a constantly evolving industry.

The development of new, technologically advanced products is a complex and uncertain process requiring high levels of innovation and the accurate prediction of technology and [added: market trends, and is further impacted by the disruptions caused by COVID-19 on our ability to continue with research and development activities.]

We expect that this customer concentration will continue in the future, and we expect that our growth prospects will continue to depend [added: in part] on a small number of customers.

Some customers provide us with their expected forecasts for our products several months in advance, but these customers may decrease, cancel or delay purchase orders already in place, including on short notice, [added: or may experience financial difficulty which affects their ability to pay for products,] particularly in light of the impacts of COVID-19 on their businesses and markets, and the impact of any such actions may be intensified given our dependence on a limited number of large customers.

[removed: In addition, changes in the business requirements, vendor selection, project] prioritization, financial prospects, capital resources, and expenditures, or purchasing behavior (including product mix purchased or timing of purchases) of our key customers, or any real or perceived quality issues related to the products that we sell to such customers, could significantly decrease our sales to such customers or could lead to delays or cancellations of planned purchases of our products or services, which increases the risk of quarterly fluctuations in our revenues and operating results.

[removed: On] [added: For example, on] May 16, 2019, Huawei [removed: Technologies Co. Ltd. and 68 designated non-U.S. affiliates (collectively, “Huawei”) were] [added: was] added to the Entity List of the Bureau of Industry and Security of the U.S. Department of Commerce, [added: additional regulatory restrictions were imposed in May and August 2020 to the Foreign-Produced Direct Product Rule,] which [removed: imposes] [added: impose] limitations on the supply of certain U.S. items and product support to [removed: Huawei.][added: Huawei, and FiberHome Technologies was added to the Entity List on May 22, 2020.]

[removed: Notwithstanding our determination in 2019 that we were able to ship certain products in compliance with applicable law, we believe that under] [added: Under] the current regulatory regime, our business with Huawei has been and will continue to be more limited than it was in the past.

For example, we [removed: may be] [added: have been] unable to supply certain additional products [removed: or] [added: and may] be limited or unable to work with Huawei on future product developments while Huawei remains on the Entity List, which may negatively impact our financial condition [added: and results of operations.]

We cannot be certain what additional actions the U.S. government may take with respect to [removed: Huawei,] [added: Huawei or other entities in China or other countries,] including [added: additional] changes to the Entity List restrictions, export regulations, tariffs or other trade restrictions.

We are unable to predict the duration of the restrictions enacted in May 2019 [removed: or of additional actions, such as the changes published in May] through August 2020, [removed: or] [added: including] the [removed: recent] restrictions on Huawei’s access to foreign-made chips made using U.S. technology which could have a long-term adverse effect on our business.

We also manufacture customized products for Huawei, and therefore may be unable to sell certain finished goods inventory to alternative customers, or may be unable to utilize such manufacturing capabilities for products for alternative customers, which may result in [added: further] excess and obsolete [removed: changes] [added: inventory charges and/or underutilized capacity charges] in future periods.

[removed: Such] [added: Additional] charges [removed: could] [added: may] also occur with respect to customized products [added: that] we manufacture for other customers [removed: should] [added: in] the [removed: U.S. government add] [added: event that] such customers [added: were] to [added: be added to] the Entity List or otherwise [removed: restrict] [added: if] our ability to sell to such [removed: customers.][added: customers were restricted.]

[removed: Continued] [added: Intense] competition in our markets may lead to an accelerated reduction in our prices, [removed: revenues] [added: revenues, margins] and market share.

Our competitors include [removed: II-VI] [added: II-VI, Acacia Communications] (which [added: was] acquired [removed: Finisar] [added: by Cisco] in [removed: September 2019), Acacia Communications] [added: March 2021), Accelink, ams AG, Broadcom Inc., Coherent] (which has entered into [removed: an] [added: a merger] agreement [removed: to be acquired by Cisco), AMS (which acquired OSRAM in December 2019), Broadcom, Coherent,] [added: with II-VI),] Fujitsu Optical Components, Furukawa Electric, IPG Photonics, [removed: MACOM,] Mitsubishi Electric, [added: MKS Instruments,] Molex, Neophotonics, [removed: nLight, O-net] [added: O-Net] Communications, Sumitomo Electric [removed: Industries] [added: Industries,] and [removed: Trumpf.][added: Trumpf Group.]

We may not be able to compete successfully against either current or future [removed: competitors.][added: competitors, particularly, in light of increasing]

Additionally, the merger or consolidation of significant competitors, for example, II-VI’s acquisition of Finisar in September of [removed: 2019, the] [added: 2019 and its] pending acquisition of [added: Coherent, the acquisition of] Acacia Communications by [removed: Cisco,] [added: Cisco in March 2021,] and the acquisition of OSRAM by AMS in December 2019, may [removed: enable our] [added: result in] competitors [added: with greater resources, enable them] to offer a different market approach, or a lower cost structure through economies of scale or other efficiencies that we may be unable to match and which may intensify competition in the various markets.

In addition, if we experience problems with our manufacturing facilities or are unable to continue operations at any of these sites, including as a result of [added: social, geopolitical, environmental or health factors, damage caused by natural disasters, or other problems, including pandemics or widespread health epidemics such as] COVID-19 impacts, it would be costly and require a long period of time to move the manufacture of these components and finished good products to a different facility or contract manufacturer which could then result in interruptions in supply, and would likely materially impact our financial condition and results of operations.

Our manufacturing is heavily concentrated in [removed: central] [added: regions in] Asia, and we would be severely impacted if there were further escalation of COVID-19 [added: or related restrictions imposed by governments or private industry] in that region.

If operations at these contract manufacturers is adversely impacted, such as by [added: natural disasters, or] restrictions due to COVID-19 or any resulting economic impact to their business, this would likely materially impact our financial condition and results of operations.

We may incur significant costs to correct defective products which could result in the loss of future sales and revenue, indemnification costs or costs to replace or repair the defective products, litigation and damage [removed: to our reputation and customer relations.]

Additionally, our [removed: ability to fulfill our customers’ demand, or the ability] [added: manufacturing operations and those] of our contract manufacturers [removed: to fulfill their obligations,] may be affected by natural disasters, including a global pandemic such as COVID-19, changes in legal requirements, labor strikes and other labor unrest and economic, political or other forces that are beyond our control.

For example, in the past [removed: we experienced a labor strike at] one of our [added: former] contract manufacturers [added: experienced a labor strike] which threatened the contract manufacturer’s ability to fulfill its product commitments to us and, in turn, our ability to fulfill our obligations to our customers.

Any such developments could have a material impact on our ability to meet our customers’ expectations and may materially impact our operating [removed: results.][added: results and financial condition.]

In addition, for a variety of reasons, including changes in circumstances at our contract [removed: manufacturers] [added: manufacturers, restrictions] or [added: inability to operate due to COVID-19, or] regarding our own business strategies, we may choose or be required to transfer the manufacturing of certain products to other manufacturing sites, including to our own manufacturing facilities.

If such transfers are unsuccessful or take a longer period of time than expected, it could result in interruptions in supply and [added: supply chain, and] would likely impact our financial condition and results of operations.

Major developments in tax policy or trade relations, such as the imposition of tariffs on imported products, [added: for example, tariffs on the import of certain products manufactured in China,] could increase our product and product-related costs or require us to seek alternative suppliers, either of which could result in decreased sales or increased product and product-related costs.

Any delays or failure to obtain qualifications would harm our [added: reputation,] operating [removed: results] [added: results,] and customer relationships.

Specific concerns we periodically encounter with our sole suppliers or limited number of suppliers include receipt of defective parts or contaminated materials, stoppages or delays of supply, insufficient resources to supply our requirements, substitution of more expensive or less reliable materials, increases in the price of supplies, and an inability to obtain reduced pricing from our [added: suppliers in response to competitive pressures.]

Our products are complex and defects [removed: may be] [added: and quality issues are] found from time to time.

In addition, our products are often embedded in or deployed in conjunction with our customers’ products which incorporate a variety of components produced by third [removed: parties.][added: parties, which may contain defects.]

These problems may cause us to incur significant damages or warranty and repair costs, divert the attention of our engineering personnel from our product development efforts and [added: manufacturing resources, and] cause significant customer relation problems or loss of customers, [added: or risk exposure to product liability suits,] all of which would harm our business.

*Investing in our common stock involves a high degree of risk.

You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before making a decision to invest in our common stock.

Our business, financial condition, results of operations or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.

If any of the risks actually occur, our business, financial condition, results of operations and prospects could be adversely affected.

In that event, the market price of our common stock could decline, and you could lose part or all of your investment.*

Risk Factor Summary

Our business operations are subject to numerous risks, factors and uncertainties, including those outside of our control, that could cause our actual results to be harmed, including risks regarding the following:

*General economic factors*

- the impact of the COVID-19 pandemic and responsive measures;

*Operational factors*

- changes in technology and intense competition;

- our reliance on a limited number of customers;

- our ability to sell to a significant customer;

- our reliance on a limited number of suppliers;

- our ability to manufacture our products;

- our leverage in negotiations with large customers;

- order cancellations, reductions or delays in delivery schedules by our customers or distributors;

- any delay in collecting or failure to collect accounts receivable;

- defects in our products;

- our international operations;

- our strategic transactions;

- our implementation strategy for our acquisitions;

- changes in demand and customer requirements for our products;

- our international tax structure;

- fluctuations in foreign currency;

- our ability to hire and retain key personnel;

- the effects of immigration policy on our ability to hire and retain employees;

- our ability to protect our product and proprietary rights;

- our reliance on licensed third-party technology;

- the unpredictability of our results of operations;

- actual or perceived security or privacy breaches, as well as defects, errors or vulnerabilities in our technology and that of third-party providers;

- factors relating to our intellectual property rights as well as the intellectual property rights of others;

*Regulatory and Legal factors*

- our ability to obtain government authorization to export our products;

- the threat of tariffs;

- changes in tax laws;

- litigation risks;

- changes in laws and the adoption and interpretation of administrative rules and regulations, including U.S. and international customs and export regulations;

- intellectual property litigation;

- our ability to maintain an effective system of disclosure controls and internal control over financial reporting;

*Investors in our securities should carefully consider all of the relevant factors disclosed by us, including the following factors that could affect our results of operations, financial condition or stock price.*

These restrictions have been lifted in some locations where local governments have relaxed restrictions due to decreases in the number of COVID-19 cases, but we continue to monitor changes in each location and we may need or choose to impose restrictions again as the situation evolves.

The COVID-19 pandemic has created economic uncertainty and volatility in the financial markets around the world, resulting in an economic downturn that has affected and may continue to affect demand for our products and impact our results of operations.

market trends, and is further impacted by the disruptions caused by COVID-19 on our ability to continue with research and development activities.

We suspended shipments of all products to Huawei until we were able to review our product portfolio and determine whether our products are subject to the Export Administration Regulations (“EAR”), and therefore within the scope of the Entity List restrictions.

We resumed shipments of certain of our products to Huawei during the quarter ended June 29, 2019 after determining that such products are not subject to the EAR.

In May 2020 and August 2020, additional regulatory restrictions were imposed on the sale of items with certain U.S. controlled technology or software to Huawei and related entities.

We continue to review the applicability of these limitations and other changes implemented by the Bureau of Industry and Security on our ability to sell our products.

and results of operations.

Tensions between the governments of the US and China have continued to escalate.

The United States has imposed tariffs on the import of certain products manufactured in China, and may propose further tariffs in the future, which could increase costs associated with the manufacturing of our products in China, and potentially other countries, and negatively impact our sales levels and profit margins.

For example, in 2019 we transitioned the manufacturing of our products with one of our contract manufacturers in China to our Shenzhen and Thailand manufacturing facilities and to other contract manufacturers.

As a result, these suppliers may stop supplying us materials and equipment at any time.

suppliers in response to competitive pressures.

Additionally, these suppliers may be unable to operate under restrictions due to COVID-19 or any resulting economic impact to their business and ability to continue operations, and the supply of and costs of raw materials may be negatively impacted by the COVID-19 pandemic, trade protection policies such as tariffs, or escalating trade tensions, particularly with countries in Asia.

| | |

| --- | --- |

We may continue to expand and diversify our operations with additional acquisitions.

| • | potential difficulties in completing projects associated with in-process R&D; |

| • | an acquisition or strategic transaction may not further our business strategy as we expected or we may overpay for, or otherwise not realize the expected return on, our investments; |

We initiated a new international corporate structure more closely aligned with our international operations during the third quarter of fiscal 2018.

The new corporate structure is intended to reduce our overall effective tax rate through changes among our wholly-owned subsidiaries in how we use our intellectual property, and how we structure our international procurement and sales operations.

The new structure includes legal entities located in jurisdictions with income tax rates lower than the U.S. statutory tax rate.

The intercompany arrangements are intended to result in income earned by such entities in accordance with arm’s-length principles and commensurate with functions performed, risks assumed and ownership of valuable corporate assets.

We have not yet operationalized the new structure to the full extent possible due to various factors including the acquisition of Oclaro in the second quarter of fiscal 2019.

We are currently in the process of assessing the Oclaro transaction’s impact to our tax structure and, depending on the outcome, we may make modifications to the new structure in order to achieve better tax and operational efficiency.

In particular, the Tax Cuts and Jobs Act (the “Tax Act”) contains many significant changes to the U.S. tax laws that affected our fiscal year ended June 27, 2020, and which will continue to affect our fiscal years

thereafter.

Information regarding the Tax Act and the impact of the Tax Act on our tax profile is included in our Annual Report on Form 10-K for our fiscal year ended June 29, 2019.

The reduction in the U.S. federal statutory rate is expected to positively impact our federal cash tax liability.

However, the ultimate impact is subject to the effect of other complex provisions in the Tax Act (including the BEAT and GILTI), and it is possible that any impact of BEAT, GILTI, or other provisions of the Tax Act could significantly reduce, or outweigh, the benefit of the reduction in the U.S. federal statutory rate.

The U.S. Treasury Department and the Internal Revenue Service (IRS), and other standards-setting bodies have issued and may continue to issue guidance on how the provisions of the Tax Act will be applied, which may be different from our interpretation.

The Tax Act requires complex computations not previously required or produced, and significant judgments and assumptions in the interpretation of the law were made in producing our provisional estimates.

We also anticipate that uncertainty in the application of the Tax Act to our ongoing operations as well as possible adverse future law changes attributable to changes in the U.S. political environment could have an adverse impact on our future tax rate.

On June 22, 2020, the U.S. Supreme Court declined a Writ of Certiorari in the case of *Altera Corp vs. Commissioner* challenging a decision by the Ninth Circuit Court of Appeals (which itself reversed a previous decision of the U.S. Tax Court) holding that the U.S. Treasury Department's regulations requiring the inclusion of stock-based compensation expense in a taxpayer's cost-sharing calculations were valid.

We have a research and development cost sharing arrangement with one of our foreign affiliates.

Our financial statements have been prepared consistent with this outcome.

Our subsidiary in Thailand currently operates under a tax holiday which will expire in fiscal 2025 unless extension is granted by the Thailand government and we continue to meet the requirements thereunder.

institutions, our competitors and others, and we are required to pay royalties to these licensors for the use thereof.

Additionally, if we are unable to satisfy those customers who require that all of the

We are an industry-leading provider of optical and photonic [removed: products] [added: products,] defined by revenue and market [removed: share] [added: share,] addressing a range of end-market applications including Optical Communications, which we refer to as OpComms, and Lasers for manufacturing, inspection and life-science applications.

We seek to use our core optical and photonic technology and our volume manufacturing capability to expand into attractive emerging markets that benefit from advantages that optical or photonics-based solutions [removed: provide, including 3D sensing for consumer electronics and diode light sources for a variety of consumer and industrial applications.][added: provide.]

We believe the world is becoming more reliant on ever-increasing amounts of data flowing through optical networks and data [removed: centers, which require new networks and data centers to satisfy this demand.][added: centers.]

As manufacturers demand higher levels of precision, new materials, and factory and energy efficiency, suppliers of manufacturing tools globally are turning to [removed: laser based] [added: laser-based] approaches, including the types of lasers Lumentum supplies.

We maintain leading positions in these fast growing OpComms markets through our extensive product portfolio, including reconfigurable optical add/drop multiplexers (“ROADMs”), coherent [removed: DWDM] [added: dense wavelength division multiplexing (“DWDM”)] pluggable transceivers, and tunable small form-factor pluggable transceivers.

[removed: In the Consumer and Industrial market, our OpComms products include laser light sources, which are integrated into 3D sensing] platforms being used in applications for mobile devices, gaming, computers, and other consumer electronics devices.

Our OpComms customers include Alphabet, Apple, Ciena, Cisco Systems (which [removed: announced the acquisition of] [added: acquired] Acacia [removed: Communications,] [added: Communications on March 1, 2021,] another customer of ours), Huawei Technologies (including HiSilicon), Infinera, Innolight, [added: NEC,] Nokia Networks (including Alcatel-Lucent International), [removed: O-Net,] and ZTE.

[removed: We expect our Indium Phosphide photonic integrated circuits will continue to replace Lithium Niobate modulators over time and] [added: Our strategy of] focusing on the development and sale of Datacom chips has enabled us to participate in the growth of the Datacom and 5G wireless markets.

Our Lasers customers include Amada, ASML Holding, Beckman Coulter, DISCO, Electro Scientific Industries [removed: (recently acquired] [added: (acquired] by MKS [removed: Instruments, a competitor of ours),] [added: Instruments in February 2019),] Han’s Laser Technology, KLA-Tencor, Lasertec, Life Technologies, and NR Electric.

The [removed: spread of] COVID-19 [added: pandemic] has caused public health officials to recommend, and governments to enact, precautions to mitigate the spread of the virus, including travel restrictions and bans, extensive social distancing [removed: guidelines] [added: guidelines, closure or restrictions on business] and [removed: issuing a] [added: quarantine or other types of] “shelter-in-place” [removed: order] [added: orders] in many regions of the world.

The pandemic and these related responses have caused, and are expected to continue to cause a global slowdown of economic activity (including [removed: the] [added: a] decrease in demand for a broad variety of goods and services), disruptions in global supply chains and significant volatility and [added: potential] disruption of financial markets.

In the geographies we have operations, we [removed: have] [added: have,] in [removed: general] [added: general,] been deemed an essential business and been permitted to continue manufacturing and [added: providing] new product development operations in a more limited capacity during the pandemic.

Given the [removed: rapidly] [added: continually] evolving situation, it is difficult to predict [removed: precisely when our ability to supply our products will improve or] the magnitude and duration of the impact of the COVID-19 pandemic to our [removed: markets.][added: markets or precisely when our ability to supply our products will return to full capacity.]

We [removed: will continue] [added: are continuing] to actively monitor the situation and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, communities, business partners, suppliers, and stockholders, or as required by federal, state, or local authorities.

[added: It is not clear what the potential effects any such] alterations or modifications may have on our business, including the effects on our customers, employees, and prospects, or on our financial results for fiscal year [removed: 2021.][added: 2022.]

The extent to which our operations will [added: continue to] be impacted by the outbreak will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak and [added: additional variants, the speed, efficacy, and acceptance of vaccine distributions, variant strains of the virus,] actions by government authorities and private businesses to contain the [added: severity of the] outbreak [removed: or recover] [added: and emerging variants in various geographies and the speed and trajectory of any recovery] from [removed: its impact,] [added: the impact of the pandemic,] among other things.

We believe there [removed: may be] [added: are] long-term opportunities, as the world’s experience with COVID-19 [removed: could drive] [added: is driving] an increasingly digital and virtual world touching all aspects of life and work that increasingly emphasizes communications systems, cloud services, augmented and virtual reality, and enhanced security.

For more information on risks associated with the COVID-19 [removed: outbreak,] [added: outbreak and regulatory actions,] see the section titled “Risk Factors” in Item 1A of Part I.

[removed: The accounting policies that] reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

[removed: Except for the adoption of ASU 2016-02, Leases (Topic 842) and the resulting changes in our accounting policies and disclosures for lease accounting, there] [added: There] have been no significant changes to our significant accounting policies as of and for the year ended [removed: June 27, 2020.][added: July 3, 2021.]

Inventory is [removed: valued] [added: recorded] at standard cost, which approximates actual cost computed on a first-in, first-out basis, not in excess of net realizable value.

| | [added: | | Total | | | | | |] Less than 1 year | [removed: 1-2] [added: | | | | | 1 - 3] years | [removed: Greater] [added: | | | | | 3 - 5 years | | | | | | More] than [removed: 2] [added: 5] years | [removed: Total] | [added: |]

The following table reflects the changes in contract balances as of [removed: June 27, 2020] [added: July 3, 2021] (*in millions, except percentages*):

| Contract balances | [added: | |] Balance sheet location | [added: | | July 3, 2021 | | | | | |] June 27, 2020 | | [removed: June 29, 2019] | | [added: | |] Change | | [added: | | | |] Percentage Change | [added: | |]

| Accounts receivable, net | [added: | |] Accounts receivable, net | [added: | | $212.8 | | | | | |] $233.5 | | [removed: $238.0] | | [removed: $(4.5)] | | [removed: (1.9)%] [added: $(20.7)] | [added: | | | | | (8.9)% | | |]

| Deferred revenue and customer deposits | [added: | |] Other current liabilities | [added: | | $0.6 | | | | | |] $1.9 | | [removed: $2.9] | | [removed: $(1.0)] | | [removed: (34.5)%] [added: $(1.3)] | [added: | | | | | (68.4)% | | |]

This approach requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our consolidated financial [removed: statements]

[added: statements] or tax returns.

| | [added: | |] Years Ended | | | | | | | | [added: | | | | | | |]

| | [added: | | July 3, 2021 | | | | | |] June 27, 2020 | | | [removed: June 29, 2019] | | | June [removed: 30, 2018] [added: 29, 2019] | | [added: |]

| Segment net revenue: | | | | | | | | | [added: | | | | | | | | |]

| OpComms | [removed: 90.3] | [added: | 93.0 | |] % | | [removed: 87.5] | [added: | 90.3 | |] % | | [removed: 84.9] | [added: | 87.5 | |] % |

| Lasers | [added: | | 7.0 | | | | | |] 9.7 | | | [removed: 12.5] | | | [removed: 15.1] [added: 12.5] | | [added: |]

| Net revenue | [added: | |] 100.0 | | | [added: | | |] 100.0 | | | [added: | | |] 100.0 | | [added: |]

| Cost of sales | [added: | | 51.5 | | | | | |] 58.1 | | | [removed: 69.8] | | | [removed: 65.1] [added: 69.8] | | [added: |]

| Amortization of acquired developed intangibles | [added: | | 3.5 | | | | | |] 3.2 | | | [removed: 3.0] | | | [removed: 0.3] [added: 3.0] | | [added: |]

| Gross profit | [added: | | 44.9 | | | | | |] 38.7 | | | [removed: 27.2] | | | [removed: 34.6] [added: 27.2] | | [added: |]

| Operating expenses: | | | | | | | | | [added: | | | | | | | | |]

| Research and development | [removed: 11.8] | | [added: 12.3] | [added: | | | | |] 11.8 | | | [removed: 12.6] | | [added: | 11.8 | | |]

| Selling, general and administrative | [added: | | 13.9 | | | | | |] 14.0 | | | [removed: 12.8] | | | [removed: 10.3] [added: 12.8] | | [added: |]

Lumentum’s products and technology enable the scaling of these optical networks and data centers to higher capacities.

We expect the accelerating shift to digital and virtual approaches to all aspects of work and life that is driving staggering amounts of data in the world’s networks and cloud datacenters will continue into the future.

Virtual meetings, video calls, and hybrid in-person and virtual environments for work and other aspects of life will continue to drive strong needs for bandwidth growth and present dynamic new technology challenges that our technology addresses.

Laser-based 3D sensing and LiDAR for security, industrial and automotive applications are rapidly developing markets.

The use of LiDAR and in-cabin 3D sensing in automobile and delivery vehicles over time significantly adds to our long-term market opportunity.

Frictionless and contactless biometric security and access control is of increasing focus globally given the world’s experience with the COVID-19 pandemic.

Additionally, we expect 3D-enabled machine vision solutions to expand significantly in industrial applications in the coming years.

To maintain and grow our market and technology leadership positions, we are continually investing in new and differentiated products and technologies and customer programs that address both nearer-term and longer-term growth opportunities, as well as continually improving and optimizing our operations.

Over many years, we have developed close relationships with market leading customers.

We also sell laser chips for use in manufacturing of high-speed Datacom transceivers.In the Consumer and Industrial market, our OpComms products include laser light sources, which are integrated into 3D sensing

Termination of Coherent Merger Agreement

On January 18, 2021, we entered into a merger agreement with Coherent, under which we would acquire all outstanding shares of Coherent common stock.

In March 2021, Coherent terminated the merger agreement and paid us a termination fee of $217.6 million in accordance with the merger agreement.

This gain was offset by $10.1 million of acquisition related expenses and the net amount is presented as “merger termination fee and related costs, net” in our Consolidated Statement of Operations for the year ended July 3, 2021.

We are actively monitoring the evolving impact of the coronavirus outbreak.

COVID-19 has also created dynamics in the semiconductor component supply chains that have led to shortages of the types of components we and our customers require in our products.

These shortages are expected to impact our ability to generate revenue from certain products in early fiscal 2022 and, if our ability to procure needed semiconductor components does not improve, this will impact our ability to supply our products to our customers and may reduce our revenue and profit margin.

In addition, if our customers are unable to procure needed semiconductor components, this could reduce their demand for our products and reduce our revenue.

The impact of semiconductor component shortages may increase in the near term as supplier and customer buffer inventories and safety stocks are exhausted.

The accounting policies that

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| Merger termination fee and related costs, net | | | (11.9) | | | | | | — | | | | | | — | | |

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| Merger termination fee and related costs, net | | | $ | (207.5) | | | | | $ | — | | | | | $ | (207.5) | | | | | 100.0 | | % | | | | $ | — | | | | | $ | — | | | | | 0 | | | | | | — | | % |

| Percentage of net revenue | | | (11.9) | | % | | | | — | | % | | | | | | | | | | | | | | | | — | | % | | | | — | | % | | | | | | | | | | | | |

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This increase was primarily due to $105.6 million higher OpComms net revenue, offset by of $41.4 million lower sales of Lasers.

OpComms net revenue increased by $105.6 million, or 7.0%, during fiscal 2021 compared to fiscal 2020.

Within OpComms, sales of Industrial and Consumer increased $67.7 million and Telecom and Datacom products increased by $37.9 million.

The Industrial and Consumer increase was primarily driven by an expansion of the available market due to an increased dollar content of 3D sensing lasers and higher adoption rates of 3D sensing in consumer electronic devices compared with the prior year.

Telecom and Datacom increased by $37.9 million primarily due to market growth and recovery from the impact of COVID-19 supply constraints.

Laser based 3D sensing is a rapidly developing market.

We also sell laser chips for use in the manufacture of high-speed Datacom transceivers.

For further information regarding this transaction, refer to “Note 4.

Business Combinations” in the notes to consolidated financial statements.

The outbreak of the COVID-19 has been declared a pandemic by the World Health Organization and continues to spread globally.

It is not clear what the potential effects any such

While the recent outbreak of the COVID-19 did not have a material adverse effect on our reported results for our third and fourth quarters, we are actively monitoring the impact of the coronavirus outbreak.

Refer to “Note 1.

Description of Business and Summary of Significant Accounting Policies” for the details of ASU 2016-02 (Topic 842) adoption.

Adoption of Topic 606

The following table includes estimated revenue expected to be recognized in the future for backlog related performance obligations that are unsatisfied as of June 27, 2020 (*in millions*):

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| Performance Obligations | $525.5 | $32.3 | $— | $557.8 |

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This increase was primarily due to the acquisition of Oclaro, which closed in December 2018, and organic growth in our Telecom business.

OpComms net revenue increased by $311.0 million, or 29.4%, during fiscal 2019 compared to fiscal 2018, primarily driven by increased sales of Telecom Products of $310.2 million, specifically ROADM products.

OpComms net revenue in fiscal 2019 includes $250.1 million from the acquisition of Oclaro from the date of closing.

Lasers net revenue increased by $6.6 million, or 3.5%, during fiscal 2019 compared to fiscal 2018, primarily due to increased sales of our kilowatt class fiber lasers, offset by lower sales of our solid state lasers products.

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| Other Asia-Pacific | 346.0 | | | | 20.6 | | | 356.1 | | | | 22.7 | | | 354.2 | | | | 28.3 | |

| Expenses related to COVID-19 outbreak | (6.6 | | ) | | — | | | | — | | | | | | | | | | | |

In addition, there were net expenses of $6.6 million related to COVID-19 outbreak during the year ended June 27, 2020, which include incremental costs for payroll expense such as overtime pay, pay for employees who are not working, facilities costs such as gloves, masks and temperature gauges, and under-utilized capacity at certain facilities, in which manufacturing output was impacted.

These COVID-19 related costs are offset by benefits realized from government credits for employers’ payroll tax.

Gross margin in fiscal 2019 decreased to 27.2% from 34.6% in fiscal 2018.

The decrease was primarily due to amortization of intangibles and amortization of inventory step up related to the acquisition of Oclaro of $54.6 million, as well as inventory write down charges of $20.8 million due to our exit of Datacom module and Lithium Niobate product lines.

This increase was primarily due to increased sales of our ROADM products, which have higher gross margins than the average for the segment as well as increased sales of our transmission products due to the acquisition of Oclaro which have higher gross margins than legacy transmission products.

This was partially offset by decreased sales of our 3D sensing products which have higher gross margins than the average for this segment.

Lasers gross margin in fiscal 2019 decreased to 43.3% from 43.9% in fiscal 2018.

This decrease was primarily due to decreased sales of our solid state products which have higher gross margins than the average for the segment.

This was partially offset by increased revenue and manufacturing utilization for our kilowatt class fiber products.

R&D expense increased by $27.8 million, or 17.7%, in fiscal 2019 compared to fiscal 2018.

The increase in R&D expense was primarily due to the increase in investments in key product lines and R&D materials.

In addition, we had an increase in payroll related expense of $10.1 million as a result of our acquisition of Oclaro.

SG&A expense increased by $72.1 million, or 56.2%, in fiscal 2019 compared to fiscal 2018.

The increase was primarily attributable to additional costs from our acquisition of Oclaro, including $14.6 million of payroll related expense, $2.4 million of facility related expense, $13.3 million in charges related to the acceleration of equity awards under certain Oclaro executive severance and retention agreements, $9.0 million related to the success fee on the closing of the Oclaro transaction, $8.0 million related to the amortization of acquired intangibles, and $3.1 million related to the incremental stock-based compensation expense of Oclaro awards.

The remainder of the increase was primarily driven by higher payroll related expense and stock-based compensation.

We continue to actively evaluate these risks, and have taken reserves and financial positions as of [removed: June 27, 2020] [added: July 3, 2021] that we believe are reasonable based on the information currently available.

However, the COVID-19 pandemic and [added: related] regional [removed: shelters-in-place is an] [added: shelter-in-place orders are] unprecedented [removed: phenomenon] [added: events] that [removed: is] [added: are] continually evolving, and there could be significant changes and/or charges resulting in the future.

[removed: | • |] [added: -] Accounts receivable collectability - there could be significant bad debt expenses incurred if our customers experience financial difficulties. [removed: |]

[removed: | • |] [added: -] Accounts receivable collections timing - our working capital and cash flows could be impacted if we start to agree to longer payment terms for our customers. [removed: Although we have not done so, a broader market move to longer payment terms could delay our collection timing as well. |]

[removed: | • |] [added: -] Inventory (excess and obsolete) - our customers may not be able to purchase inventory that we have built for them, or their demand may slow down to a point where inventory becomes aged. [removed: |]

[removed: | • |] [added: -] Short-term investment values - as seen in past economic slowdowns, there may be credit losses and defaults [added: or a withdrawal of government support programs] which cause losses and/or liquidity issues in our investment portfolio. [removed: |]

[removed: | • |] [added: -] Long-term assets such as fixed assets, goodwill, and intangibles - a market slowdown could impair the value of these assets. [removed: |]

[removed: | • |] [added: -] Tax valuation - we have significant NOL’s (Net Operating losses) in the United States which have associated deferred tax assets on our balance sheet, and these could be deemed unrecoverable in the future. [removed: |]

Due to the impact of changes in foreign currency exchange rates between the U.S. Dollar and foreign currencies, for the fiscal years ended [added: July 3, 2021,] June 27, 2020, [added: and] June 29, 2019, [removed: and June 30, 2018,] we recorded foreign exchange losses, net of [removed: $1.4] [added: $4.4] million, [removed: $0.6] [added: $1.4] million, and [removed: $0.3] [added: $0.6] million, respectively, in the other income (expense), net in the [removed: consolidated statements] [added: Consolidated Statements] of [removed: operations.][added: Operations.]

Since the Notes bear interest at fixed rates, we have no financial statement risk associated with changes in [added: market] interest rates.

Interest Rate Fluctuation [removed: Risk][added: Risk]

As of [removed: June 27, 2020,] [added: July 3, 2021,] we had cash, cash equivalents, and short-term investments of [removed: $1,553.8] [added: $1,946.0] million.

Cash equivalents and short-term investments are primarily comprised of money market funds, treasuries, [removed: and highly liquid] [added: agencies, high quality] investment grade fixed income [removed: securities.][added: securities, certificates of deposit, and commercial paper.]

As of [removed: June 27, 2020,] [added: July 3, 2021,] the weighted-average life of our investment portfolio was [removed: less than six] [added: approximately eight] months.

Based on our investment portfolio balance as of [removed: June 27, 2020,] [added: July 3, 2021,] a hypothetical increase or decrease in interest rates of 1% (100 basis points) would have resulted in a decrease or an increase in the fair value of our portfolio of approximately [removed: $5.4] [added: $9.6] million, and a hypothetical increase or decrease of 0.50% (50 basis points) would have resulted in a decrease or an increase in the fair value of our portfolio of approximately [removed: $2.7] [added: $4.8] million.

As of [removed: June 27, 2020,] [added: July 3, 2021,] we had approximately [removed: $114.2] [added: $128.3] million of unrestricted cash (excluding [removed: money market funds and U.S. Treasury securities)] [added: cash equivalents)] in operating accounts that are held with domestic and international financial institutions.

Notwithstanding, [removed: to date,] we have not incurred any losses [added: to date] and have had full access to our operating accounts.

Although we have not done so, a broader market move to longer payment terms could delay our collection timing as well.

Since the closing price of our stock exceeded $78.80 per share for 20 of the last 30 trading days of the fourth quarter of fiscal 2021, the 2024 Notes have become convertible at the option of the holders.

If the closing price of our stock exceeds $129.08 per share for 20 of the last 30 trading days of any future quarter, our 2026 Notes would also become convertible at the option of the holders.

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For 3D sensing, we sell diode lasers to manufacturers of consumer electronics products for mobile, personal computing, gaming, and [removed: other] [added: to manufacturers of emerging automotive and industrial] applications who then integrate our devices within their [removed: products, for eventual resale to consumers and also into other industrial applications.][added: products.]

We believe the world is becoming more reliant on ever-increasing amounts of data flowing through optical networks and data [removed: centers, which require new networks and data centers to satisfy this demand.][added: centers.]

As manufacturers demand higher levels of precision, new materials, and factory and energy efficiency, suppliers of manufacturing tools globally are turning to [removed: laser based] [added: laser-based] approaches, including the types of lasers Lumentum supplies.

Our headquarters are located in San Jose, California, and we employed approximately [removed: 5,473 full-time] [added: 5,618 full\-time] employees around the world as of [removed: June 27, 2020.][added: July 3, 2021.]

These technologies will enable us to develop highly integrated products to satisfy our communications customers’ [removed: ever increasing] [added: ever-increasing] needs for smaller, lower power and lower cost optical products.

[removed: *Industry* *Trends] [added: *Industry Trends] and Business Risks*

Our business is driven by end-market applications which benefit from the performance advantages of optical [added: and photonics] solutions.

Additionally, our products are [removed: used in] [added: being designed into] emerging automotive, industrial, security, safety and surveillance applications.

For example, the demand environment [removed: in] [added: coupled with changing export regulations with] China [removed: has] [added: have] fluctuated significantly in recent years, and has created volatility and uncertainty in our future demand.

Our revenues, profitability and general financial performance may also be affected by: (i) pricing pressures, particularly within our OpComms markets, due to, among other things, a highly concentrated customer base, increasing competition, particularly from Asia-Pacific-based competitors, and a general commoditization trend for certain products; (ii) high product mix variability which affects revenue and gross margin; (iii) fluctuations in customer buying patterns, which cause volatility in demand, revenue and profitability; (iv) the current trend of communication industry consolidation and vertical integration, which is expected to continue, that directly affects our customer base and adds additional risk and uncertainty to our financial and business projections; [removed: and] (v) [added: China’s on-going transition to a more localized supply chain; and (vi)] ongoing risks related to the economic impact of the COVID-19 [removed: pandemic.][added: pandemic, including component shortages that may impact our ability to supply products.]

We maintain leading positions in these fast growing OpComms markets through our extensive product portfolio, including reconfigurable optical add/drop multiplexers (“ROADMs”), coherent [removed: DWDM] [added: dense wavelength division multiplexing (“DWDM”)] pluggable transceivers, and tunable small form-factor pluggable transceivers.

We also sell laser chips for use in [removed: the manufacture] [added: manufacturing] of high-speed Datacom transceivers.

In the Consumer [removed: and Industrial market,] [added: end-market,] our [removed: OpComms products include] laser light [removed: sources, which] [added: sources] are integrated into 3D sensing [removed: platforms being] [added: cameras which are] used in applications [removed: for] [added: in] mobile devices, gaming, payment kiosks, computers, and other consumer electronics devices.

[removed: Our] [added: In the Consumer and Industrial market, our OpComms diode laser] products include vertical cavity surface emitting lasers (“VCSELs”) and edge emitting [removed: lasers which are used in 3D sensing depth imaging systems.][added: lasers.]

Emerging applications for [removed: this technology] [added: our lasers] include [removed: various mobile device applications,] [added: automotive safety systems, LiDAR for advanced driver assistance systems in automobiles and] autonomous vehicles, self-navigating robotics and drones in industrial [removed: applications] [added: applications,] and 3D capture of objects coupled with 3D [added: imaging or] printing.

In [removed: addition, our] [added: the] industrial [added: end-market, our] diode lasers are used primarily as pump sources for pulsed and kilowatt class fiber lasers.

[removed: We expect our Indium Phosphide photonic integrated circuits will continue to replace Lithium Niobate modulators over time and] [added: Our strategy of] focusing on the development and sale of Datacom chips has enabled us to participate in the growth of the Datacom and 5G wireless markets.

Our OpComms customers include Alphabet, Apple, Ciena, Cisco Systems (which [removed: announced the acquisition of] [added: acquired] Acacia [removed: Communications,] [added: Communications on March 1, 2021,] another customer of ours), Huawei Technologies (including HiSilicon), Infinera, Innolight, [added: NEC,] Nokia Networks (including Alcatel-Lucent International), [removed: O-Net,] and ZTE.

During fiscal [added: 2021,] 2020, [removed: 2019,] and [removed: 2018,] [added: 2019,] net revenue generated from a single customer which represented 10% or more of our total net revenue of the applicable fiscal year is summarized in the table below:

| | [added: | |] Years Ended | | | | | | | | [added: | | | | | | |]

| | [added: | | July 3, 2021 | | | | | |] June 27, 2020 | | | [removed: June 29, 2019] | | | June [removed: 30, 2018] [added: 29, 2019] | | [added: |]

| Apple | [removed: 26.0] | [added: | 30.2 | |] % | | [removed: 21.0] | [added: | 26.0 | |] % | | [removed: 30.0] | [added: | 21.0 | |] % |

| Huawei | [removed: 13.2] | [added: | 10.8 | |] % | | [removed: 15.2] | [added: | 13.2 | |] % | | [removed: 11.0] | [added: | 15.2 | |] % |

| Ciena | [removed: *] | | [added: 10.1] | [removed: 13.7] | % | | [removed: 11.0] | [added: | * | | | | | | 13.7 | |] % |

| *Represents less than 10% of total net [removed: revenue] [added: revenue.] | | | | | | | | | [added: | | | | | | | | |]

The [removed: emerging] [added: cloud] data center [removed: and Web 2.0 markets are two] [added: market is one] of the fastest growing segments in optical [removed: communications,] [added: communications] both in terms of [removed: capital] network equipment [removed: investment] [added: investments] and [removed: growth] [added: increasing volumes] of [removed: high data rate] [added: higher speed] optical transceivers.

Additionally, the increased bandwidth needs [removed: for] [added: of] 5G wireless applications will drive growth in [added: the volumes of] high speed optical [removed: modules.][added: transceivers.]

The immediate applications include full body imaging for gaming, 3D scanning for space [removed: mapping] [added: mapping, computational photography] and facial recognition for security.

We endeavor to align the latest technologies with industry leading, scalable manufacturing and operations to drive the next phase of optical communications technologies and products for Telecom and Datacom applications that are faster, more [added: energy efficient, more] agile and more reliable, making us a valuable business and technology partner for NEMs, consumer electronic companies, cloud service providers and data center operators.

We compete against various companies in the markets we serve, including II-VI, Acacia [removed: Communications,] [added: Communications (which was acquired by Cisco in March 2021),] Accelink, ams AG, Broadcom Inc., Furukawa Electric, Mitsubishi Electric, Neophotonics, and Sumitomo Electric Industries, as well as, private companies and subsidiaries of public companies providing optical communications components such as Fujitsu Optical Components - a subsidiary of Fujitsu, Nistica - a subsidiary of Molex, and O-Net.

Our Lasers customers include Amada, ASML Holding, Beckman Coulter, DISCO, Electro Scientific Industries [removed: (recently acquired] [added: (acquired] by MKS [removed: Instruments, a competitor of ours),] [added: Instruments in February 2019),] Han’s Laser Technology, KLA-Tencor, Lasertec, Life Technologies, and NR Electric.

During fiscal [added: 2021,] 2020, [removed: 2019,] and [removed: 2018,] [added: 2019,] we did not have any single customer attributable to our Lasers segment that generated net revenue of 10% or more of our total net revenue for the applicable fiscal year.

At the scale and processing speed needed, lasers are replacing mature mechanical tools such as drills for minute holes, or “vias,” in printed circuit boards and saws and scribes for [removed: singulating] [added: singulation of] silicon wafers, resulting in greater precision and productivity.

[removed: As these trends continue, we] believe that manufacturers and other industries will increase their reliance on lasers in order to maintain or increase their competitiveness.

We continue to develop our laser portfolio to offer [removed: smaller] [added: smaller, more energy efficient] and more cost-effective products designed specifically for the performance, integration, reliability and support needs of our OEM customers.

We compete against various public and private companies in the commercial laser markets we serve including [removed: Coherent,] [added: Coherent (which has entered into a merger agreement with II-VI), IPG Photonics,] MKS [removed: Instruments] [added: Instruments,] and [removed: IPG Photonics.][added: TRUMPF Group.]

We devote substantial resources to [removed: R&D] [added: research and development (“R&D”)] for the development of new and enhanced products to serve our markets.

Our significant manufacturing facilities are located in the United States, Thailand, China, the United Kingdom, Slovenia, [removed: Japan,] and [removed: Switzerland.][added: Japan.]

In fiscal [removed: 2019,] [added: 2020,] we [removed: also announced our plan to discontinue] [added: discontinued] the development and manufacturing of future Datacom transceiver modules which impacted the California and China based Datacom module teams.

We rely on the capabilities of our contract [removed: manufactures] [added: manufacturers] to procure components and manage the inventory in these locations.

Lumentum’s products and technology enable the scaling of these optical networks and data centers to higher capacities.

We expect the accelerating shift to digital and virtual approaches to all aspects of work and life that is driving staggering amounts of data in the world’s networks and cloud datacenters will continue into the future.

Virtual meetings, video calls, and hybrid in-person and virtual environments for work and other aspects of life will continue to drive strong needs for bandwidth growth and present dynamic new technology challenges that our technology addresses.

Laser-based 3D sensing and LiDAR for security, industrial and automotive applications are rapidly developing markets.

The use of LiDAR and in-cabin 3D sensing in automobile and delivery vehicles over time significantly adds to our long-term market opportunity.

Frictionless and contactless biometric security and access control is of increasing focus globally given the world’s experience with the COVID-19 pandemic.

Additionally, we expect 3D-enabled machine vision solutions to expand significantly in industrial applications in the coming years.

*Impact of COVID-19 to our Business*

The COVID-19 pandemic has caused public health officials to recommend, and governments to enact, precautions to mitigate the spread of the virus, including travel restrictions and bans, extensive social distancing guidelines, closure or restrictions on business and quarantine or other types of “shelter-in-place” orders in many regions of the world.

The pandemic and these related responses have caused, and may continue to cause a global slowdown of economic activity (including a decrease in demand for a broad variety of goods and services), disruptions in global supply chains and significant volatility and potential disruption of financial markets.

We have adopted several measures in response to the COVID-19 outbreak including complying with local, state or federal orders that require employees to work from home, instructing employees to work from home in certain jurisdictions, limiting the number of employees onsite which slowed our manufacturing operations in certain countries, enhanced use of personal protective equipment and restricting non-critical business travel by our employees.

In the geographies we have operations, we have, in general, been deemed an essential business and been permitted to continue manufacturing and new product development operations in a more limited capacity during the pandemic.

This stems from our critical role in global supply chains for the world’s communications and health-care systems.

Given the continually evolving situation, it is difficult to predict the magnitude and duration of the impact of the COVID-19 pandemic to our markets or precisely when our ability to supply our products will return to full capacity.

We are continuing to actively monitor the situation and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, communities, business partners, suppliers, and stockholders, or as required by federal, state, or local authorities.

It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our customers, employees, and prospects, or on our financial results going forward.

We are actively monitoring the evolving impact of the pandemic.

The extent to which our operations will continue to be impacted by the outbreak will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak and additional variants, the speed, efficacy, and acceptance of vaccine distributions, variant strains of the virus, actions by government authorities and private businesses to contain the severity of the outbreak and emerging variants in various geographies and the speed and trajectory of any recovery from the impact of the pandemic, among other things.

COVID-19 has also created dynamics in the semiconductor component supply chains that have led to shortages of the types of components we and our customers require in our products.

These shortages are expected to impact our ability to generate revenue from certain products in early fiscal 2022 and, if our ability to procure needed semiconductor components does not improve, this will impact our ability to supply our products to our customers and may reduce our revenue and profit margin.

In addition, if our customers are unable to procure needed semiconductor components, this could reduce their demand for our products and reduce our revenue.

The impact of semiconductor component shortages may increase in the near term as supplier and customer buffer inventories and safety stocks are exhausted.

Our primary strategic focus for several years has been technology and product leadership combined with close customer relationships in long-term healthy and growing markets.

We believe this strategy is even more apt, and our long-term opportunity is not diminished, with COVID-19.

We believe there are be long-term opportunities, as the world’s experience with COVID-19 is driving an increasingly digital and virtual world touching all aspects of life and work that increasingly emphasizes communications systems, cloud services, augmented and virtual reality, and enhanced security.

Additionally, ever-advancing electronic devices are needed to consume, produce, and communicate digital and virtual content.

All these trends could drive the need for higher volumes of higher performing optical devices that we could supply.

As such, we expect to continue to invest strongly in new products, technology, and customer programs.

*Termination of Coherent Merger Agreement*

On January 18, 2021, Lumentum and Coherent, Inc. (“Coherent”) entered into a merger agreement (the “merger agreement”), under which Lumentum would acquire all outstanding shares of Coherent common stock.

As of the date of the merger agreement, the total transaction consideration was approximately $5.7 billion.

In March 2021, Coherent terminated the merger agreement and paid Lumentum a termination fee of $217.6 million in accordance with the merger agreement.

This gain was offset by $10.1 million of acquisition related expenses and the net amount is presented as “merger termination fee and related costs, net” in our Consolidated Statement of Operations for the year ended July 3, 2021.

Applications include biometric identification, computational photography, virtual and augmented reality, and natural user interfaces.

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As these trends continue, we

We use a combination of contract manufacturers and our own manufacturing facilities.

In fiscal 2021, we transitioned manufacturing of our backend wafer and test products from San Jose, California to our other manufacturing operations.

Further, we have begun shipping prototype units of diode lasers and optical devices to automotive customers for sensing and LiDAR applications.

Laser based 3D sensing is a rapidly developing market.

New emerging applications include virtual and augmented reality, as well as automotive and industrial segments.

These systems simplify the way people interact with technology by enabling the use of natural user interfaces.

Systems are used for biometric identification, surveillance, and process efficiency, among numerous other application spaces.

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Additionally, Cisco has announced its plan to acquire Acacia Communications.

Development and manufacturing will also be discontinued in our San Jose, California manufacturing locations within the next few quarters in order to facilitate our customers’ transition to new products.

We expect our Indium Phosphide photonic integrated circuits will replace Lithium Niobate modulators over time.

Employees

Outside of the United States, our business is subject to labor laws that differ from those in the United States.

We follow the statutory requirements of those countries where we operate.

Environmental

Oclaro, Inc., et al., No. 1:18-cv-00817-GMS, in the United States District Court for the District of Delaware (filed June 9, 2018) (the “Franchi [removed: Lawsuit).][added: Lawsuit”).]

Both the [removed: Neinast] [added: Neinstat] Lawsuit and the Franchi Lawsuit were voluntarily dismissed with prejudice.

A motion to dismiss the amended complaint was granted in part and denied in part by the court on October 8, 2020.

On December 1, 2020, defendants answered the amended complaint.

On December 23, 2020, defendants filed a motion for leave to file a motion for reconsideration of the Court’s October 8 order on the motion to dismiss, which was denied on January 29, 2021.

The Karri Lawsuit remains pending with the parties currently in discovery.

Defendants intend to defend the Karri Lawsuit vigorously.

A motion to dismiss the amended complaint has been fully briefed and is currently pending, and defendants intend to defend the Karri Lawsuit vigorously.

[removed: Form 10-K][added: Form 10-K]

For the fiscal year [removed: ended June 27, 2020][added: ended July 3, 2021]

Commission File [removed: Number 001-36861][added: Number 001-36861]

| Delaware | | [added: | | | |] 47-3108385 | [added: | |]

| (State or other jurisdiction of incorporation or organization) | | [added: | | | |] (I.R.S. Employer Identification Number) | [added: | |]

1001 Ridder Park [removed: Drive, San Jose, California 95131][added: Drive, San Jose, California 95131]

[removed: (408) 546-5483][added: (408) 546-5483]

| Title of each class | | [added: | | | |] Trading Symbol(s) | | [added: | | | |] Name of exchange on which registered | [added: | |]

| Common Stock, par value of $0.001 per share | | [added: | | | |] LITE | | [added: | | | |] Nasdaq Global Select Market | [added: | |]

Yes [removed: o No] x [added: No o]

| Large accelerated filer | [added: | |] x | [added: | |] Accelerated filer | [added: | |] o | [added: | |] Non-accelerated filer | [added: | |] o | [added: | |] Smaller reporting company | [added: | |] ☐ | [added: | |]

| | | | | | | [added: | | | | | | | | | | | |] Emerging Growth company | [added: | |] ☐ | [added: | |]

As of December [removed: 28, 2019,] [added: 26, 2020,] the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately [removed: $3,735] [added: $5,246] million based on the closing sales price of the registrant’s common stock as reported on the NASDAQ Stock Market on December [removed: 27, 2019] [added: 24, 2020] of [removed: $79.01] [added: $98.30] per share.

As of August [removed: 18, 2020,] [added: 23, 2021,] the Registrant had [removed: 75.2] [added: 72.7] million shares of common stock outstanding.

Portions of the information called for by Part III of this Annual Report on Form 10-K is hereby incorporated by reference from the definitive proxy statement for the Registrant’s annual meeting of stockholders, which will be filed with the Securities and Exchange Commission not later than 120 days after the Registrant’s fiscal year ended [removed: June 27, 2020.][added: July 3, 2021.]

| TABLE OF CONTENTS | | | | [added: | | | | | | | |]

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| | [added: | |] [ITEM [removed: 1.](#s67965270DBFC567ABAB4BA6F25CE5601)] [added: 1.](#i7d608ae81db74f1a978cd0b52288213c_16)] | [removed: [BUSINESS](#s67965270DBFC567ABAB4BA6F25CE5601)] | [removed: [2](#s67965270DBFC567ABAB4BA6F25CE5601)] | [added: [BUSINESS](#i7d608ae81db74f1a978cd0b52288213c_16) | | | [2](#i7d608ae81db74f1a978cd0b52288213c_16) | | |]

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| [PART [removed: III](#sC92D6F78834D5E4D8605D8E104C06980)] [added: III](#i7d608ae81db74f1a978cd0b52288213c_289)] | | | | [added: | | | | | | | |]

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These statements relate to, among other things, our markets and industry, products and strategy, the impact of [added: export regulation changes,] the [added: impact of the] COVID-19 pandemic and related responses of business and governments to the pandemic on our business and results of operations, sales, gross margins, operating expenses, capital expenditures and requirements, liquidity, product development and R&D efforts, manufacturing plans, litigation, effective tax rates and tax reserves, our corporate and financial reporting structure, our plans for growth and innovation, [removed: our plans to discontinue certain operations and product lines,] [added: ,] our expectations regarding US-China relations, market and regulatory conditions, [removed: the successful integration of Oclaro’s business (including personnel),] and [added: trends and uncertainties in] our [removed: expected synergies] [added: business] and [removed: non-GAAP earnings accretion from the acquisition of Oclaro,] [added: financial results, markets] and [added: industry] are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” “contemplate,” “believe,” “predict,” “potential” and similar expressions or variations intended to identify forward-looking statements.

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| [PART I](#i7d608ae81db74f1a978cd0b52288213c_13) | | | | | | | | | | | |

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| [PART II](#i7d608ae81db74f1a978cd0b52288213c_67) | | | | | | | | | | | |

| | | | [ITEM 9](#i7d608ae81db74f1a978cd0b52288213c_2688)[C](#i7d608ae81db74f1a978cd0b52288213c_2688)[.](#i7d608ae81db74f1a978cd0b52288213c_2688) | | | [DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS](#i7d608ae81db74f1a978cd0b52288213c_2688) | | | [115](#i7d608ae81db74f1a978cd0b52288213c_2688) | | |

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| [PART IV](#i7d608ae81db74f1a978cd0b52288213c_307) | | | | | | | | | | | |

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| [SIGNATURES](#i7d608ae81db74f1a978cd0b52288213c_316) | | | | | | | | | [122](#i7d608ae81db74f1a978cd0b52288213c_316) | | |

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| [PART I](#sA8627598C5C5539CB5E7E98CCA63848E) | | | |

| [PART II](#sB44C7FCC8A4C59BF90876E25C48A2312) | | | |

| [PART IV](#s77D2093E63295661BE032262EBEAE4F0) | | | |

| [SIGNATURES](#s04F2E216398D552591ADB2D17B295966) | | | [118](#s04F2E216398D552591ADB2D17B295966) |

As of [removed: June 27, 2020,] [added: July 3, 2021,] our leased and owned properties in total are approximately [removed: 2,100,000] [added: 1,800,000] square feet, of which we own approximately [removed: 900,000] [added: 825,000] square feet, including the 560,000 square feet manufacturing site in Thailand, the 238,000 square feet on the San Jose campus, and the [removed: 80,000] [added: 25,000] square feet manufacturing [removed: facility] in [removed: San Jose.][added: Slovenia.]

Larger leased sites include properties located in Canada, China, Japan, [added: Italy,] the United Kingdom and the United States.

According to records of our transfer agent, we had [removed: 2,708] [added: 2,519] stockholders of record as of August [removed: 18, 2020] [added: 23, 2021] and we believe there is a substantially greater number of beneficial holders.

The following graph compares the cumulative total return of our common stock with the total return for the NASDAQ Composite Index (the “IXIC”) and the NASDAQ 100 Technology Sector Index (the “NDXT”) from August 4, 2015 through [removed: June 27, 2020.][added: July 3, 2021.]

[removed: ][added: ]

In December 2019, we purchased approximately [removed: $200] [added: $200.0] million or 2.9 million shares of our common stock concurrently with the pricing of the 2026 Notes in privately negotiated transactions effected through the initial purchaser of the 2026 Notes or its affiliates as its agent.

On May 7, 2021, our board of directors approved the 2021 share buyback program, which authorizes us to use up to $700.0 million to purchase our own shares of common stock in open market or in privately negotiated transactions.

The buyback program is authorized for 2 years but may be suspended or terminated by the board of directors at any time.

The following table sets forth the repurchase activity for the 2021 share buyback program (*in millions, except share and per share amounts*):

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| Period | | | Total number of shares purchased | | | Average price paid per share | | | Total number of shares purchased as part of publicly announced plans or programs | | | Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs | | |

| May 7, 2021 to May 29, 2021 | | | 2,104,427 | | | $76.01 | | | 2,104,427 | | | $540.0 | | |

| May 30, 2021 to July 3, 2021 | | | 992,000 | | | $81.72 | | | 992,000 | | | $459.0 | | |

| | [added: | |] Years Ended | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | |]

| | [added: | | July 3, 2021 (1) | | | | | |] June 27, 2020 [removed: (1)] [added: (2)] | | | | [added: | |] June 29, 2019 [removed: (2)] [added: (3)] | | | | [added: | |] June 30, 2018 [removed: (3)] [added: (4)] | | | | [added: | |] July 1, 2017 [removed: (4) |] [added: (5)] | | | [removed: July 2, 2016] | | |

| Consolidated Statements of Operations Data: | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | |]

| Net revenue | [added: | |] $ | [added: 1,742.8 | | | | | $ |] 1,678.6 | | | [added: | |] $ | 1,565.3 | | | [added: | |] $ | 1,247.7 | | | [added: | |] $ | 1,001.6 | | | [removed: $] | [removed: 903.0] | [removed: |]

| Gross profit | [added: | | 783.1 | | | | | |] 650.2 | | | | [added: | |] 425.9 | | | | [added: | |] 432.1 | | | | [removed: 318.1] | | [added: 318.1] | | [removed: 277.3] | | | [added: |]

| Income (loss) from operations | [added: | | 527.0 | | | | | |] 204.1 | | | | [removed: (21.6] | | [removed: )] [added: (21.6)] | | [added: | | | |] 139.9 | | | | [removed: 47.6] | | [added: 47.6] | | [removed: 11.5] | | | [added: |]

| Net income (loss) | [added: | | 397.3 | | | | | |] 135.5 | | | | [removed: (36.4] | | [removed: )] [added: (36.4)] | | [added: | | | |] 248.1 | | | | [removed: (102.5] | | [removed: )] [added: (102.5)] | | [removed: 9.3] | | | [added: |]

| Cumulative dividends on Series A Preferred Stock | [added: | |] — | | | | [removed: (0.3] | | [removed: )] [added: —] | | [removed: (0.9] | | [removed: )] | | [removed: (0.9] [added: (0.3)] | | [removed: )] | | [removed: (0.8] | | [removed: )] [added: (0.9)] | [added: | | | | | (0.9) | | | | | |]

| Earnings allocated to Series A Preferred Stock | [added: | |] — | | | | [removed: (1.2] | | [removed: )] [added: —] | | [removed: (5.7] | | [removed: )] | | [removed: —] [added: (1.2)] | | | | [added: | | (5.7) | | | | | |] — | | | [added: | | |]

| Net income (loss) attributable to common stockholders | [added: | |] $ | [removed: 135.5] [added: 397.3] | | | [added: | |] $ | [removed: (37.9] [added: 135.5] | [removed: )] | | [added: | |] $ | [removed: 241.5] [added: (37.9)] | | | [added: | |] $ | [removed: (103.4] [added: 241.5] | [removed: )] | | [added: | |] $ | [removed: (3.2] [added: (103.4)] | [removed: )] | [added: | | |]

| Net income (loss) per share attributable to common stockholders: | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | |]

| Basic | [added: | |] $ | [removed: 1.79] [added: 5.27] | | | [added: | |] $ | [removed: (0.54] [added: 1.79] | [removed: )] | | [added: | |] $ | [removed: 3.88] [added: (0.54)] | | | [added: | |] $ | [removed: (1.71] [added: 3.88] | [removed: )] | | [added: | |] $ | [removed: (0.05] [added: (1.71)] | [removed: )] | [added: | | |]

| Diluted | [added: | |] $ | [removed: 1.75] [added: 5.07] | | | [added: | |] $ | [removed: (0.54] [added: 1.75] | [removed: )] | | [added: | |] $ | [removed: 3.82] [added: (0.54)] | | | [added: | |] $ | [removed: (1.71] [added: 3.82] | [removed: )] | | [added: | |] $ | [removed: (0.05] [added: (1.71)] | [removed: )] | [added: | | |]

| Shares used to compute net income (loss) per share attributable to common stockholders: | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | |]

| Basic | [added: | | 75.4 | | | | | |] 75.9 | | | | [added: | |] 70.7 | | | | [added: | |] 62.3 | | | | [removed: 60.6] | | [added: 60.6] | | [removed: 59.1] | | | [added: |]

| Diluted | [added: | | 78.4 | | | | | |] 77.6 | | | | [added: | |] 70.7 | | | | [added: | |] 63.3 | | | | [removed: 60.6] | | [added: 60.6] | | [removed: 59.1] | | | [added: |]

| | [added: | |] Balance as of | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | |]

| Consolidated Balance Sheet Data: | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| Cash and cash equivalents | [added: | |] $ | [added: 774.3 | | | | | $ |] 298.0 | | | [added: | |] $ | 432.6 | | | [added: | |] $ | 397.3 | | | [added: | |] $ | 272.9 | | | [removed: $] | [removed: 157.1] | | [added: | | | | | | | | | | | | | |]

| Short-term investments | [added: | | 1,171.7 | | | | | |] 1,255.8 | | | | [added: | |] 335.9 | | | | [added: | |] 314.2 | | | | [added: | |] 282.4 | | | | [removed: —] | | | [added: | | | | | | | | | | | | | |]

| Total assets | [added: | | 3,551.6 | | | | | |] 3,292.6 | | | | [added: | |] 2,716.6 | | | | [added: | |] 1,581.5 | | | | [added: | |] 1,232.9 | | | | [removed: 726.3] | | | [added: | | | | | | | | | | | | | |]

| Convertible notes | [added: | | 1,180.5 | | | | | |] 1,120.3 | | | | [added: | |] 351.9 | | | | [added: | |] 334.2 | | | | [added: | |] 317.5 | | | | [removed: —] | | | [added: | | | | | | | | | | | | | |]

| Term loan, non-current | [added: | |] — | | | | [added: | | — | | | | | |] 484.0 | | | | [added: | |] — | | | | [added: | |] — | | | | [removed: —] | | | [added: | | | | | | | | | | | | | |]

| Derivative liability | [added: | |] — | | | | [added: | |] — | | | | [added: | | — | | | | | |] 52.4 | | | | [added: | |] 51.6 | | | | [removed: 10.3] | | | [added: | | | | | | | | | | | | | |]

| Other non-current liabilities | [added: | | 40.9 | | | | | |] 36.0 | | | | [added: | |] 33.7 | | | | [added: | |] 19.0 | | | | [added: | |] 25.0 | | | | [removed: 9.1] | | | [added: | | | | | | | | | | | | | |]

| Total redeemable convertible preferred stock | [added: | |] — | | | | [added: | |] — | | | | [removed: 35.8] | | [added: —] | | [added: | | | |] 35.8 | | | | [added: | |] 35.8 | | | [added: | | | | | | | | | | | | | | | | | |]

| Total stockholders’ equity | [added: | | 1,972.8 | | | | | |] 1,749.2 | | | | [added: | |] 1,497.1 | | | | [added: | |] 926.1 | | | | [added: | |] 618.8 | | | | [removed: 497.4] | | | [added: | | | | | | | | | | | | | |]

[removed: | (1) | In fiscal 2020, we repaid, in full, all amounts outstanding under our Term Loan Facility. In December 2019, we issued $1,050.0 million of the 2026 Notes in a private offering.] We used approximately $196 million of the net proceeds of the offering to repay in full all amounts outstanding under our term loan facility, and a portion of the net proceeds of the offering to purchase approximately $200 million of our common stock concurrently with the pricing of the offering in privately negotiated transactions. [removed: |]

[removed: | (2) | On] [added: (3)On] December 10, 2018, we completed the acquisition of Oclaro, a provider of optical components and modules for the long-haul, metro and data center markets, for $1.4 billion, which was funded through the issuance of Lumentum common stock, new debt, and cash balances of the combined company. [removed: Refer to “Note 4. Business Combinations” in the notes to consolidated financial statements for further discussion of the merger. Results of operations and financial position of the business acquired have been included in our consolidated financial statements subsequent to the date of acquisition. |]

[removed: | (3) | During] [added: (4)During] the second quarter of fiscal 2018, we had a credit of $207.0 million primarily related to a release of a U.S. valuation allowance, which was offset by a write-down of deferred tax assets in the amount of $83.0 million due to the lower corporate tax rate enacted under the 2017 “Tax Cuts and Jobs Act” reform. [removed: |]

[removed: | (4) | During the third quarter of fiscal 2017, we completed the acquisition of a privately held company.] Results of operations and financial position of the business acquired have been included in our consolidated financial statements subsequent to the date of acquisition. [removed: |]

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| | | | July 3, 2021 (1) | | | | | | June 27, 2020 (2) | | | | | | June 29, 2019 (3) | | | | | | June 30, 2018 (4) | | | | | | July 1, 2017 (5) | | | | | | | | | | | | | | | | | | | | |

(1)On January 18, 2021, we entered into a merger agreement with Coherent, under which we would acquire all outstanding shares of Coherent common stock.

In March 2021, Coherent terminated the merger agreement and paid us a termination fee of $217.6 million in accordance with the merger agreement.

This gain was offset by $10.1 million of acquisition related expenses and the net amount is presented as “Merger termination fee and related costs, net” in our Consolidated Statement of Operations for the year ended July 3, 2021.

On May 7, 2021, our board of directors approved the 2021 share buyback program, which authorizes us to use up to $700.0 million to purchase our own shares of common stock.

The buyback program is authorized for 2 years but may be suspended or terminated by the board of directors at any time.

In the fiscal fourth quarter of 2021, we repurchased 3.1 million shares of our common stock at an average price of $77.84 per share for an aggregate purchase price of $241.0 million.

These shares were retired immediately.

(2)In fiscal 2020, we repaid, in full, all amounts outstanding under our Term Loan Facility.

In December 2019, we issued $1,050.0 million of the 2026 Notes in a private offering.

Refer to “Note 4.

Business Combinations” in the notes to consolidated financial statements for further discussion of the merger.

(5)During the third quarter of fiscal 2017, we completed the acquisition of a privately held company.

Results of operations and financial position of the business acquired have been included in our consolidated financial statements subsequent to the date of acquisition.

Our historical consolidated financial statements for the fiscal year ended July 2, 2016 include allocations of expenses arising from shared services and infrastructure provided by Viavi to us, including costs of information technology, human resources, accounting, legal, real estate and facilities, corporate marketing, insurance, treasury and other corporate and infrastructure services.

The financial information included here may not necessarily reflect our financial position and results of operations or what our financial position and results of operations would have been had we been an independent, publicly-traded company during the entirety of the periods presented or be indicative of our future performance as an independent company.

There were no allocations of expenses from Viavi for the other fiscal years presented below.

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| Accretion of Series A Preferred Stock | — | | | | — | | | | — | | | | — | | | | (11.7 | | ) |

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We have audited the accompanying consolidated balance sheets of Lumentum Holdings Inc. and subsidiaries (the “Company”) as of [removed: June 27, 2020] [added: July 3, 2021] and June [removed: 29, 2019,] [added: 27, 2020,] the related consolidated statements of operations, comprehensive income (loss), cash flows, and redeemable convertible preferred stock and stockholders’ equity for each of the three years in the period ended [removed: June 27, 2020,] [added: July 3, 2021,] and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of [removed: June 27, 2020] [added: July 3, 2021] and June [removed: 29, 2019,] [added: 27, 2020,] and the results of its operations and its cash flows for each of the three years in the period ended [removed: June 27, 2020,] [added: July 3, 2021,] in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of [removed: June 27, 2020,] [added: July 3, 2021,] based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August [removed: 25, 2020,] [added: 30, 2021,] expressed an unqualified opinion on the Company's internal control over financial reporting.

As discussed in Notes 1 and [removed: 2] [added: 9] to the financial statements, the Company has changed its method of accounting for leases in the year ended June 27, 2020 due to the adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842).

[removed: | • |] [added: -] We tested the effectiveness of controls over the review and approval of the valuation of inventory for excess and obsolete write downs, including controls designed to review and approve forecasted demand and the underlying assumptions regarding expected product lifecycles, product development plans and historical usage by product. [removed: |]

[removed: | • |] [added: -] To understand the assumptions behind the inventory excess and obsolete write downs, including the related forecasted demand, we made inquiries of business unit managers as well as executives, sales, and operations personnel about the expected product lifecycles and product development plans and historical usage by product. [removed: |]

[removed: | • |] [added: -] We selected a sample of inventory products and tested the forecasted demand by comparing internal and external information (e.g. historical usage, contracts, communications with customers, expected product lifecycles, product development plans, and macroeconomic conditions) with the Company’s forecasted demand. [removed: |]

[removed: | • |] [added: -] We selected a sample of inventory products and evaluated management's ability to accurately estimate forecasted demand by comparing [removed: historical] usage by product [added: in the current year] to estimates made in prior years. [removed: |]

[removed: | • |] [added: -] We considered the existence of contradictory evidence based on reading of internal communications to management and the board of directors, Company press releases, and analysts' reports, as well as our observations and inquires as to changes within the business. [removed: |]

| | [added: | | | | | | | |] Years Ended | | | | | | | | | | | [added: | | | | | | | | | |]

| | [removed: June 27, 2020] | | | | [added: | | | | | | | | | | July 3, 2021 | | | | | |] June [removed: 29, 2019] [added: 27, 2020] | | | | [added: | |] June [removed: 30, 2018] [added: 29, 2019] | | |

| Net revenue | [added: | | | | | | | | | | | | | |] $ | [removed: 1,678.6] [added: 1,742.8] | | | [added: | |] $ | [removed: 1,565.3] [added: 1,678.6] | | | [added: | |] $ | [removed: 1,247.7] [added: 1,565.3] | |

| Cost of sales | [removed: 974.6] | | | | [removed: 1,092.9] | | | | [removed: 812.4] | | | [added: | | | 898.0 | | | | | | 974.6 | | | | | | 1,092.9 | | |]

| Amortization of acquired developed intangibles | [removed: 53.8] | | | | [removed: 46.5] | | | | [removed: 3.2] | | | [added: | | | 61.7 | | | | | | 53.8 | | | | | | 46.5 | | |]

| Gross profit | [removed: 650.2] | | | | [removed: 425.9] | | | | [removed: 432.1] | | | [added: | | | 783.1 | | | | | | 650.2 | | | | | | 425.9 | | |]

| Operating expenses: | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | |]

| Research and development | [removed: 198.6] | | | | [removed: 184.6] | | | | [removed: 156.8] | | | [added: | | | 214.5 | | | | | | 198.6 | | | | | | 184.6 | | |]

| Selling, general and administrative | [removed: 235.2] | | | | [removed: 200.3] | | | | [removed: 128.2] | | | [added: | | | 241.4 | | | | | | 235.2 | | | | | | 200.3 | | |]

| Restructuring and related charges | [removed: 8.0] | | | | [removed: 31.9] | | | | [removed: 7.2] | | | [added: | | | 7.7 | | | | | | 8.0 | | | | | | 31.9 | | |]

| Impairment charges | [removed: 4.3] | | | | [removed: 30.7] | | | | [added: | | | | | |] — | | | [added: | | | 4.3 | | | | | | 30.7 | | |]

| Total operating expenses | [removed: 446.1] | | | | [removed: 447.5] | | | | [removed: 292.2] | | | [added: | | | 256.1 | | | | | | 446.1 | | | | | | 447.5 | | |]

| Income (loss) from operations | [removed: 204.1] | | | | [removed: (21.6] | | [removed: )] | | [removed: 139.9] | | | [added: | | | 527.0 | | | | | | 204.1 | | | | | | (21.6) | | |]

| Unrealized gain [removed: (loss)] on derivative liability | [added: | | | | | | | | | | | | | |] — | | | | [removed: 8.8] | | [added: —] | | [removed: (0.8] | | [removed: )] | [added: | 8.8 | | |]

| Interest expense | [removed: (61.2] | | [removed: )] | | [removed: (36.3] | | [removed: )] | | [removed: (18.2] | | [removed: )] | [added: | | | (66.7) | | | | | | (61.2) | | | | | | (36.3) | | |]

| Other income (expense), net | [removed: 31.4] | | | | [removed: 15.8] | | | | [removed: 8.5] | | | [added: | | | 2.8 | | | | | | 31.4 | | | | | | 15.8 | | |]

| Income (loss) before income taxes | [removed: 174.3] | | | | [removed: (33.3] | | [removed: )] | | [removed: 129.4] | | | [added: | | | 463.1 | | | | | | 174.3 | | | | | | (33.3) | | |]

| Provision for [removed: (benefit from)] income taxes | [removed: 38.8] | | | | [removed: 3.1] | | | | [removed: (118.7] | | [removed: )] | [added: | | | 65.8 | | | | | | 38.8 | | | | | | 3.1 | | |]

| Net income (loss) | [added: | | | | | | | | | | | | | |] $ | [removed: 135.5] [added: 397.3] | | | [added: | |] $ | [removed: (36.4] [added: 135.5] | [removed: )] | | [added: | |] $ | [removed: 248.1] [added: (36.4)] | |

| Items reconciling net income (loss) to net income (loss) attributable to common stockholders: | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | |]

| Less: Cumulative dividends on Series A Preferred Stock | [added: | | | | | | | | | | | | | |] — | | | | [removed: (0.3] | | [removed: )] [added: —] | | [removed: (0.9] | | [removed: )] | [added: | (0.3) | | |]

| Less: Earnings allocated to Series A Preferred Stock | [added: | | | | | | | | | | | | | |] — | | | | [removed: (1.2] | | [removed: )] [added: —] | | [removed: (5.7] | | [removed: )] | [added: | (1.2) | | |]

| Net income (loss) attributable to common stockholders - Basic and Diluted | [added: | | | | | | | | | | | | | |] $ | [removed: 135.5] [added: 397.3] | | | [added: | |] $ | [removed: (37.9] [added: 135.5] | [removed: )] | | [added: | |] $ | [removed: 241.5] [added: (37.9)] | |

| Net income (loss) per share attributable to common stockholders: | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | |]

| Basic | [added: | | | | | | | | | | | | | |] $ | [removed: 1.79] [added: 5.27] | | | [added: | |] $ | [removed: (0.54] [added: 1.79] | [removed: )] | | [added: | |] $ | [removed: 3.88] [added: (0.54)] | |

| Diluted | [added: | | | | | | | | | | | | | |] $ | [removed: 1.75] [added: 5.07] | | | [added: | |] $ | [removed: (0.54] [added: 1.75] | [removed: )] | | [added: | |] $ | [removed: 3.82] [added: (0.54)] | |

| Shares used to compute net income (loss) per share attributable to common stockholders: | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | |]

| Basic | [removed: 75.9] | | | | [removed: 70.7] | | | | [removed: 62.3] | | | [added: | | | 75.4 | | | | | | 75.9 | | | | | | 70.7 | | |]

| Diluted | [removed: 77.6] | | | | [removed: 70.7] | | | | [removed: 63.3] | | | [added: | | | 78.4 | | | | | | 77.6 | | | | | | 70.7 | | |]

| Other comprehensive [removed: income (loss),] [added: income,] net of tax: | | | | | | | | | | | | [added: | | | | | | | | | | | |]

| Net change in cumulative translation adjustment | [added: | |] — | | | | [removed: (0.6] | | [removed: )] [added: —] | | [removed: (0.2] | | [removed: )] | [added: | | | | | | | (0.6) | | |]

August 30, 2021

| Merger termination fee and related costs, net | | | | | | | | | | | | | | | (207.5) | | | | | | — | | | | | | — | | |

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| Deferred tax asset | | | 72.9 | | | | | | 81.2 | | |

| Convertible notes, current | | | 390.7 | | | | | | — | | |

| Net income (loss) | | | $ | 397.3 | | | | | $ | 135.5 | | | | | $ | (36.4) | |

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| Proceeds from the sales of property and equipment | | | 23.3 | | | | | | — | | | | | | — | | |

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| Repurchase of common stock pending settlement | | | 5.0 | | | | | | — | | | | | | — | | |

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August 25, 2020

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| Deferred income taxes | 81.2 | | | | 169.6 | | |

| Term loan, non-current | — | | | | 484.0 | | |

| Redeemable convertible preferred stock: | | | | | | | |

| Release of valuation allowance, net | — | | | | — | | | | (124.0 | | ) |

| Equipment acquired under finance lease | — | | | | — | | | | 15.6 | | |

| Balance as of July 1, 2017 | — | | | $ | 35.8 | | | 61.5 | | | $ | 0.1 | | | $ | 694.5 | | | $ | (83.2 | ) | | $ | 7.4 | | | $ | 618.8 | |

| Other comprehensive loss | — | | | — | | | | — | | | — | | | | — | | | | — | | | | (1.0 | | ) | | (1.0 | | ) |

| Cumulative effect of stock compensation accounting change | — | | | — | | | | — | | | — | | | | 0.2 | | | | 2.4 | | | | — | | | | 2.6 | | |

| Declared dividend for preferred stock | — | | | — | | | | — | | | — | | | | — | | | | (0.3 | | ) | | — | | | | (0.3 | | ) |

Management bases its estimates on historical experience and various other assumptions believed to be reasonable.

Although these estimates are based on management’s best knowledge of current events and actions that may impact the Company in the future, actual results may be different from the estimates.

The preparation of the consolidated financial statements in accordance with GAAP in the United States requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes.

Certain prior period amounts have been reclassified to conform to the current period presentation, including the reclassification of capital lease obligations that existed as of June 29, 2019 to finance lease liabilities within other current liabilities and other non-current liabilities in our consolidated balance sheets, as a result of the adoption of the new accounting guidance for leases.

Recently Issued Accounting Pronouncements” for details.

The reclassification of the prior period amounts did not impact previously reported consolidated financial statements.

Recently Issued Accounting Pronouncements” regarding the impact of adoption.

As of fiscal year ended June 27, 2020, our cash and cash equivalents did not include any investments with original maturities of three months or less.

Under the treasury stock method, the amount the employee

Adoption of Topic 606

The following table includes estimated revenue expected to be recognized in the future for backlog related performance obligations that are unsatisfied as of June 27, 2020 (*in millions*):

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| | Less than 1 year | 1-2 years | Greater than 2 years | Total |

| Performance Obligations | $525.5 | $32.3 | $— | $557.8 |

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