Viavi Solutions Inc (VIAV)

Interest coverage

		Jun 30, 2025	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021
Earnings before interest and tax (EBIT)	US$ in thousands	68,600	42,500	84,600	88,400	145,500
Interest expense	US$ in thousands	30,000	30,900	27,100	23,300	14,700
Interest coverage		2.29	1.38	3.12	3.79	9.90

June 30, 2025 calculation

Interest coverage = EBIT ÷ Interest expense
= $68,600K ÷ $30,000K
= 2.29

The interest coverage ratio for Viavi Solutions Inc. has exhibited notable fluctuations over the examined period from June 30, 2021, to June 30, 2025. As of June 30, 2021, the ratio stood at 9.90, indicating that the company's earnings before interest and taxes (EBIT) were nearly ten times its interest expenses, reflecting an adequate capacity to meet interest obligations and a strong financial position.

By June 30, 2022, the ratio decreased significantly to 3.79, suggesting a considerable decline in earnings relative to interest costs, though it still maintained a healthy cushion to cover interest expenses. The downward trend continued into June 30, 2023, with the ratio further declining to 3.12; this indicates an ongoing deterioration in the company's ability to meet interest obligations solely from operating earnings, raising potential concerns about increased financial risk.

The situation became more pronounced by June 30, 2024, when the interest coverage ratio diminished sharply to 1.38. This indicates that the company's EBIT was only marginally above interest expenses, implying considerable strain on the financial stability and an increased likelihood of difficulty in servicing interest payments without additional operational improvements or capital restructuring.

However, the ratio improved somewhat by June 30, 2025, rising to 2.29. Although this indicates a modest recovery in earnings relative to interest expenses, the ratio remains below the generally accepted threshold of 3.0 for stable coverage, suggesting ongoing concerns about the company's ability to comfortably cover interest costs in the near term.

Overall, the trend demonstrates a significant deterioration in interest coverage from 2021 through 2024, with a partial improvement thereafter. This pattern warrants ongoing monitoring of operating profitability and debt management strategies, as the declining ratios highlight increasing financial leverage and potentially elevated risk associated with interest obligations.