LITE - Earnings call transcript Q1 2018

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Operator

Good morning. My name is Dan and I'll be your conference operator today. At this time I would like to welcome everyone to Lumentum's Fiscal First Quarter 2018 Financial Results. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator President, Corporate Vice ahead. please Strategy Coldren, Development, and go Chris

Chris Coldren

Strategy you, first Chris This of Lumentum's Welcome Coldren, Corporate fiscal President Thank to call. quarter Dan. XXXX earnings Vice and Development. is

ended on reasonable today. undertakes XXXX, statements Officer; performance, projections filing expectations in first uncertainties financial forward-looking are XX, could this for expectations. differ in call, call on performance, we position the to today's expected that for for expenses, later today. operate, of as in to cause subject particularly trends, SEC with and in September Officer. the stated, to our including with Lowe, are filings Chief you from Chief on me be also SEC, products statements purchasing as to law. except future be no note, a described statements and will our regarding and Lumentum's are accordance quarter review Tachibana, include these the substitute and as are Joining These markets. will Aaron The call provide which our recent factors our non-GAAP. expectations results with considered during based risks current and fiscal that our including President technology, to and encourage results materially trends Alan and and beliefs most we Executive XX-Q statements, Lumentum required forward-looking This applicable prepared We unless markets Financial actual GAAP. the risk superior by update obligations Non-GAAP financials statements financials not otherwise file all projections Please should or for

details site, our available our XXXX non-GAAP measures additional our a release non-GAAP press our Investors and the financial results. GAAP and section, Web under first with Our includes and reconciliation results www.lumentum.com, between about fiscal is quarter on

slides and relating also release. to you we our to SEC today's supplementary which latest encourage Our Web filings, earnings has site review,

recording our of call be today's available morning AM will site. on by Web a XX.XX this Finally, Pacific Time,

Now, his quarter to highlights. the I over call first and Alan for would business turn like to comments

Alan Lowe

Chris made lasers. call This we ramped on goals. our in sensing good our revenue, returned at growth. progress with Lumentum. for rapidly really our significant a on last have products design-ins edge-emitting Despite datacom customers we generation Since first at morning quarter, received progress new strong the and Thank our excellent the markets you, strategic is sequential to made and and exciting telecom numerous in the everyone. headwinds We revenue these excellent orders next and VCSEL XD time

We received have first of shipments new electronics are readiness types notable XD from continued factory milestones TrueFlex and Lumentum. area. customer next-generation at This the include an since order also central our this is more of consumer customer. shows on Twin lasers in Asian-based April time in ship began of These our past we production months. surpassing to network units level XX,XXX XXXG in earnest which orders, for achieving to million this received over the Since sensing than an edge-emitting year $XXX volume high few of we introduction. their transceivers our shipped of and our exciting ROADMs architectures ROADMs leadership indeed Other Thailand

resolved. sensing XD first equipment revenue. since approximately was then Revenue We the sensing more shipped revenue capacity During in then October quarter. did during million XD have we by fiscal first shipped which quarter of the in limited we $XX entire bottlenecks

only consistent second our one believe in the first levels similar time, Like been quarters Noting in the industries, sensing to customer XD feedback to headwinds we a based for increase shipments many had of quarter in now. provide inventory to several quarter. that with when March expectations. compared has date datacom quarter end demand could telecom order at guidance we the remain due and on the our monthly calendar Yields China we strong revenue throughout to year and rates. upcoming reducing expect been quarter for our products. levels We our have our at

inventories demand increase. decline As to levels, targeted should

the recovery is of uncertain. However, timing this

We lines, our are datacom seeing from coherent lines. These product notably customers muted. increased other for and demand on ROADMs remains transceivers. Chinese CFPX certain include Demand components product

these telecom increase customers quarter however, inventory as from In customers in to North telecom demand reduce demand worked quarter first levels are expect anticipated, was to inventory North down we down. levels. America the also As sequentially second the look as American

by XXXG on weaker datacom due $X declined revenue sequentially to products. demand million Our than expected

As We believe factory transceivers. to and certain cost help for will our datacom Thailand competitiveness, now new is our ready capacity XXXG time our highlighted earlier, factory volume. with own production

will XXXG which second further quarter opportunity. be products qualification We completing datacom also our will short our of reach the in transceiver XXXG expand

by with offset increase an lasers. in Our lasers kilowatt commercial was quarter down being on fiber in slightly lasers declines other revenue quarter

significant We in previously of in fiber the our progress have made laser. production X highlighted Gen rectifying challenges

be lasers quarter. secured laser some new orders significant than on the we trajectory coming which has business, bill ratio to our more over X.X:X our a for quarters. to to recently business to growth expect book helped We fiber the drive In our

and for and enablers world's increasingly grow photonics leading applications. bandwidth Our the networks. continues critical are to edge consumer of industrial, datacenters communication across communication, Demand technologies

addition XXXG. networks continue operators traditional In Hyper communication are datacenters cables. new to scale service and to deployments optical transition submarine increasingly cloud to of driving providers,

We leadership time. progress continue to further with ROADMs globally our we product over believe new excellent and our our will make position pipeline

large In in longer network new positions China's in the We this advanced China. addition of in sampling next for generation networks. of well year extremely choice supplier the now well believe are share ROADMs as specifically China, near-term both deployments this we capturing term for designed as us ROADM the initial as a to

and Leaders to enable and laser-based new around years. increasingly world and precision virtual a coming next-generation advanced will Lumentum well new to expect laser-based are China applications. We are as productivity ROADM Manufacturers augmented be in the the growth using capabilities for processes. as industry growth and electronics, increase to automotive driver enhance consumer the meaningful in XD enable looking to reality, sensing techniques

investments products technologies trends. our Our well are all position Lumentum, these next-generation speed with us and manufacturing, on XD we for and future the of accelerating networking, focused in At and sensing very of applications advanced new photonics technologies. scale cloud

close results our our markets, and bright over for more is turn the Our to quarter to the second the market-leading invest technologies it at products in will customers best for develop strategy foster fiscal succeeding XXXX. with now to and growing future guidance Aaron and makes I and relationships Lumentum. of financial details on to

Aaron Tachibana

X.X% the compared XX.X%. you, fiscal last $XXX.X Thank the Alan. margin increased and operating quarter million GAAP to was was the income Net was first per due revenue first diluted year softer sequentially period for demand. was same X.X% net X.X% with quarter and GAAP GAAP telecom margin for which $X.XX. gross declined share

on gross the XXX quarter margin basis and non-GAAP declined the quarter and the was and compared increased due was improved basis sequentially. operating XX%, to sequentially million XX the with from of $X.X increase also income a from margin diluted year. XXX operating points and earnings interest first expense. increased point included margin Non-GAAP points mix gross XX.X tax in count XX.X% XXX Increase basis per in in same fully and volume. increase for points of $X.XX first $XXX,XXX basis was leverage Non-GAAP last margin share share favorable Our primarily a based was operating period million

period million, an was additional $XXX.X some revenue decline Optical year. last X% a and increase the communications same detail. for with Now sequentially XX% of compared

During declined XX% Datacom and which telecom datacom same million period and with over declined $XX.X the X% and sensing our year. XXX% last sequentially the same and sequentially our sequentially, at sequential we compared ramped industrial favorable sensing of for $XX.X and at sequentially revenue compared includes with last for year. year. compared margins the XX% the XX.X% due period period year. declined consumer The our same increased mobile Commercial a basis the $XX.X sensing industrial million primarily mainly gross Optical period X% was ramp and consumer industrial mix Telecom products and applications. from at million, revenue XD Consumer XXX% of with significantly sequentially. revenue XXX last increased last and million $XXX.X XD quarter increased laser was while growth the revenue XD products. the both and points increase communications to significant for came a X.X% decrease as same in with volume as of decrease revenue well compared consumer sequentially XX%

fiber to on made and our As progress $XX.X production revenue laser kilowatt the Alan X laser new fiber Gen highlighted, grew XX% sequentially by of million. we

to satisfy customer laser to fiber quarter, materials therefore and we unable due was During constrained the were demand. production our

writing XX% from quarter to gross primarily obsolete excess down decreased older inventory product. and lasers percentage points First commercial and generations was margin of due

expect QX, $XX.X last with to expense we returning revenue. revenue quarter of million. R&D $XX.X revenue forward of or Looking margins commercial Operating with was $XX.X XX.X% XX% range of expenses or was mid-XX. low to SG&A compared of to totaled to $XX.X million the gross XX.X% expense increase million lasers million approximately and

investments first of the first additions quarter. and in short-term Capital million cash were with approximately exiting $XX strong quarter $XXX.X remains sheet million. balance Our the equipment

$XX Our both our for spending. facility the in facility to Thailand million up equipment bring manufacturing approximately and improvements investments accounted in of

that for all quarter of are guidance Now on the again projections our on a to basis. noting fiscal XXXX, non-GAAP second

commercial telecom and to sequentially. revenue expect We laser increase

million margins materially XD to quarter. be of in range project $X.XX. $XXX the quarter operating for the to We to to share net in to earnings in the our range $X.XX in per revenue will Additionally, of revenue million of and $XXX with be XX% sensing second XX% the increase range the

to session. call will Q&A back I to Chris Now, the the over turn begin

Chris Coldren

Thank and you, limit let's session. to follow-up. to Aaron. question Dan, one everyone like to discussion begin one the ask Q&A I would

Operator

line question Marshall the Meta, first Your Instructions] open. comes from is from your Stanley. [Operator Morgan line Meta of

Meta Marshall

as out mentioned ROADM wanted the kind timelines in into or getting read market I be very that are and out are having calendar any, get of of guys is you direction of what expecting helpful. just you I XXXX, that any there but kind of year little kind to just you visits of for from China would latest kind know of visibility maybe head any what just you deployments

Alan Lowe

products delivery notes the for the and inventory mainly I of fact speed would personal certain I love instance. of still China think being been components I in say ROADMs in our pre-comments, products ROADMs. Other in up getting in are is in coherent to some for expedited, as have of from us. general there said we customers

calendar be I are they XXXX think to the So doing when or inventory that inventories recovery hard reducing full I will everything from totally good I up the a burned the when of do XXXX. be think But say would of it's to and off. expect job

Meta Marshall

And believe sense And XD of breakage to There just has those a assembly question. breakage follow then a sensing or of obviously that in to not that kind of into Okay. at issues components over-ship you just of, kind will kind get in of modules. time. a been of have make up this about of or cycle lot this builders for you module do up correct to are kind reports the reports

Alan Lowe

comment or our can't we volumes. production Meta, just Yes. appropriate. It's yield's not customer's on

So I time. at to prefer this not comment

Operator

line is next open. of Partners. question Genovese your Michael the MKM line from Your Michael, from comes

Michael Genovese

I had a few questions.

itself. all quarter on the of First

little optical quarter? the you a was bit it into quarter, was what were the there the coming of it Just it both going where things Was out sensing in or expected specifically than lighter in across XD just or coms business.

Aaron Tachibana

Aaron, is This Michael. Yes.

In customers, again our from the on indicated so especially been on there prepared terms had inventory some of the we have side. as telecom management softness, remarks,

softness, the lot the in was it a of terms in so communications of space. And

Alan Lowe

as call Yes. be But we the to we have about, more been did resolved. some our went earnings to expected I last produce into sensing bottlenecks as XD and that able we have think had I talked on quarter,

the we more shipped are I pretty quarter, we the the And so that had I think we get to the what production so And through those in first we bottlenecks product our that XD first able certainly we fiscal month than said expected. the October, of also, was ongoing and had demand weren't are to quarter with shape as resolved out entire but in of products. respect stronger good produced in

Michael Genovese

in little about more? So was bit a the sensing million little less, quarter, bit $XX XD

Alan Lowe

million. $XX was It

Michael Genovese

better you going can gross trajectory start next margin about quarter beyond. And get lower they there. I did mean the Okay. quarter the and talk the into and

Aaron Tachibana

industrial, Michael, terms the margins So, related of corporate consumer our average. in gross to it's and above

hasn’t terms would in expectations So higher, expect. basically the in been what low, yields terms we there of ending so anything noteworthy it's of at than production starting our there

Michael Genovese

me. Okay. Last question for

revenue with but June. You your we level December. said a in about in think June? will Asian sensing got in be edge-emitting customer about consistent initial have that, What I down this in You XD customer assume in should March I coming guess, primary,

So just taking sort guidance, we that -- think swaps not broad should business? at how about of it, big since June it's for

Aaron Tachibana

Yes.

we guidance the in that prepared So the Michael don’t typically mentioned provide orders Alan in had of terms long-term remarks. customer

So something with terms not comment at this have it's we we in look those of that the the time. received technology. that exciting quarter, what on in us will for exactly really are June edge-emitting volumes prepared to But

Michael Genovese

clarification Final here. actually Okay.

takes by well. coms and or think the flat base as XQ? Just and in versus terms in are change lasers entirely XD that sequential driven XQ guidance Should we for there any business of are and your that puts the optical base business, is

Alan Lowe

said remarks, recovery Yes, to lasers as and XX% expect sequentially up QX QX the approximately to expect gross where margins be be. in we corresponding a we from we to prepared to back lasers in

also be from We in expect telecom QX to to QX. up

it's growth from sensors. XD all So in coming not

Michael Genovese

to I the revenue pass Okay. the what the questions, attributable it it's after bottom this, Is the big or for and on at I I determine are am a promise. we guide. so the pretty of range sorry would range But many whether range? top will primarily XD

Alan Lowe

downside the is upside. on is to amount the of between I think well increase pinpointing big QX QX as and from is the there and as big on the growth range QX the uncertainty because QX

it to guidance our for America, have we variability of That’s ROADM all factor So North up or level produce XD and I revenue. in that. think deployments China there into ability sensing is picking of tried the why to

Operator

next ahead. line Stifel. go with question Your from comes of the Please Patrick Newton

Patrick Newton

all datacom. to the at fine point and takes sensing put XD given a Just on puts

minus lasers telecom revenue like and ballpark. that’s sensing December plus you quarter. Sounds $XXX the for to up, of midpoint it's in guidance, about down, make million, up, that am or to are I implying then getting wanted I XD sure

Alan Lowe

larger QX Well, to take sensing you going I there. think I product revenue extrapolate my to XD comment about from being think than are for giving we specific can lines the October of guidance and but the avoid entirety

Patrick Newton

Is Good. there any around And end there given March and guess quarter competitive concern similar on at your I quarter your the any inventory being the of commentary built then on December overbuilds is to levels. landscape. assumption

indicate you competitors. material You not are any that definitely of uptick to seem anticipating supply from

Alan Lowe

to we produce we and can I comment and prefer expecting not are our to about online concerned competitors but because pressure come I competitors help customers product. I that buildup that are short-term inventory the the tell that given think are not we more. under getting about some I you from produce to am constant

just the in think, So seems be in and like I the demand directionally, quarter standpoint. are it's from going we with March December to an output where quarter line

Patrick Newton

for is guess of margin profile I XD sensing. Okay. I just Aaron, may, And just if the more, one on

nicely. about talked yields progressing how are You

ago was publicly you two be you greater to quarters guys that anticipated had think stated XX%. margins I than it

think can assumptions? should throw So of would would the assume backing that is I fair in case I that all that the anticipate December those that still we one north quarter that then your in Are XX%. be margin gross and

Aaron Tachibana

on fair of our specifically terms for And our what's around the the So comment the range December midpoint Yes, here it terms of the margins is guidance. in never somewhere quarter XX% in we for corporate XD the in average. of implied applications, a assumptions. in of terms of terms in specific percentage, with sensing the Patrick, but terms about or amount is

Operator

Alex the and from go of Please ahead. line Needham Your next question Henderson Company. with comes

Alex Henderson

go you hoping of increase of quarter? expect XD Are backlog trajectory In ramp those we is your first the was faster you thoughts quarter? be faster down time of actually your work of come grow I couple the growing look of And of as orders a result backlog could on to as will that you sort into Do some we words, a the orders will backlog it production? to your possible first sensing. or products. your as than the other able be or you into out sustaining might

Alan Lowe

say I we is any don’t our ramping change would in a backlog. only and really I we expect start the customer The in variable the major mentioned where way on electronics when think consumer meaningful that we China-based pre-comments. in

Alex Henderson

would be that think of that be feather you in How So would any do the when should sense timeframe that? feathering something XQish beyond you that would or timing have you around of more is that? in,

Alan Lowe

proof want point have. that just customer add we the and base to think about engagements a we I Well, broad

one with. multiple our I the year our to are base you of the And that’s customers broaden I to XD that adding working of can calendar and portfolio. many by that think calendar continue through expect that we to think customer end sensing 'XX

Alex Henderson

were So as continued that to course the time look growth stream sequential coming to 'XX, on it? the customers those of additional if way a think that right about Is the demand I over imply would in. new at feather over

Aaron Tachibana

Yes.

lumpiness peaks it. way have these at upward. being are Alex, imply coming will customer So, bode think do of be as we in that’s I seasonality 'XX. And some of and XXXX well with trajectory calendar The but 'XX It valleys the and away Alan outset initial and consumer take applications having could it edge-emitting the mention, terms for at well look could what this types orders, the in healthy as programs, of 'XX. good and a a these we could doing did in that so of of

Alex Henderson

pricing for the these side on just And products.

calendar correct? is locked that understand your pricing in 'XX, I that through of kind is As

Alan Lowe

the are orders a as 'XX of half commitments of 'XX the would back have, all 'XX. for and our well with certainly say for firm. many And say that certainly we in of price that of those into we are have I for midst negotiating part We the customers as

Alex Henderson

questions, you if again up could. you or in I quarter are ROADMs last down recent be and the just the whether quarter. ROADMs us whether flat Two Can in December to up were tell most expecting

Aaron Tachibana

They September quarter. in were down Yes. the

in pick expecting are December. up to them back We

Alex Henderson

volume? said And can of but it expected weakness had Can more little that give weaker I a us side. a it you you bit know little function sense where or then function datacom you you granularity Is on of give pricing is of us was what there? of happened a than the the some XXXG a metastasized?

Aaron Tachibana

I will combination, think it's Alex. a

certainly side Hyper think sell if more could we continued scale from so the tough. and datacom is we more client fine, of is think good. is rational. our XXXG I have I I telecom business our say, to pretty pricing are dropped as Margins pricing perspective,

need And until generation would lower so a not say that the have of prices ready scale will in and well be of we we telecom, I LRX, the us are giving pretty scale it's and combination are client our But 'XX CFPX, type calendar on hyper as LRX. we both to orders as as with comfortable QSFPXX side or on products choosing hyper next stuff. product customers

Operator

the with question next Barclays. ahead. from Please go Wolf line comes Your Joseph of

ahead. Troy comes the Jensen go Your next Please line question from Piper. of with

Troy Jensen

going think product be fixed XX% Just, XX% category? com. for what Alan, the near VCSELs erosion to And business than or of ASP I assume of, are pricing annual here term, in will them? but most the that for Do more going less for then you optical think kind that talk to forward, what you VCSEL we is the about be you can understand erosion the on us,

Alan Lowe

myriad at level point chip we Troy, because buying You different at to have or know, this a in customers level. of time sub-assembly it's the say hard

down there about a But it's is the a future plays expect. least supply short-term. by think fluctuate a one if come the you stronger pure And customer, and as average matter and as I supply I given talking of will selling ASPs demand would demand is for over So prices that are price then takedown how at for so customer. and out there won't therefore much foreseeable think

costs large customers come at prices are our the expect come come a do lot of down to go purchasing so power pre-negotiated as and have to the as these that I would expect we go our up we our our down some quarters our Although we down but to look that impact same out that up margins we I chain make volumes time so and in don’t supply sure years. as of with that volume, costs

Troy Jensen

Okay. Was the you I up. bill big a a to industrial all Was for lasers. that X.X bookings? made a just what follow that fiber book the drove comment and industrial about in lasers? lasers And just guess growth such

Alan Lowe

of It both our lasers well solid our as was state as lasers. combination a fiber

think up to laser believe are of meet that micro-machining be some and driving next of And we is lasers. we now trying next the why few demand fiber ramp get pent quarters. Aaron our couple through talked lasers I right that’s demand as in our going orders demand to strong business will laser the up inability overall about, it's semiconductor our industry our strong fiber quarters. has the But over the for trajectory

Operator

Raymond the next with comes question go Leopold Simon Your James. Please line of ahead. from

Simon Leopold

Trying when of something based Do ship how the a get wanted to us paid could earlier on or understanding in that actually you VCSEL based I in get you get a to XD an to a on better do help ultimately the you get maybe you you ask you assemblers paid what different understand? phone. on First, Is question way. business. module paid paid or up what ends get

Alan Lowe

Yes.

ship it to the certain their terms their customers, or but after country. it XD either receive after not specific have We or they board dock sensing of paid across get with that at we days amount we at our

with how our our in is different than customers. we this So no normal business transact

Simon Leopold

So to that. just clarify

on the of get yield not and down the that product. if falls Correct? because out chain it's somewhere paid So still the VCSEL supply you failing,

Alan Lowe

Yes.

Simon Leopold

to ROADM business. for come Great. clarification. that I Thank back on just the want you

that commentary. capacity I recollection of XX that were sort running of was quarterly somewhat have the million a when bit business little constrained a in vague level. plus you provided You

you. what get for Just want terms your that business. of are of in to Thank thoughts understanding a capacity needs

Alan Lowe

Yes.

I think right. are you

recollection We plus XX were quarters was two back Your was good. it quarter, tight. and at a million

but [ph]. been improving I [blade] to have as our capacity adding well yield importantly think more our modules we both WSS the as

think are So up with ramps we as comfortable will capacity where we a up from think 'XX. are I a in in standpoint China meaningful ramp I it and way

So the quarter. I think have the far we $XX million to a capacity surpass

of indication looking I think there. that good a from it’s just that were is when matter demand pretty comes to China fruition every and things

Simon Leopold

just And last Great. one. one

You very Are for products are CWDM they talked new about towards you. basically products if or form the cost non-hermetic oriented introducing the Thank factor? PSMX so some datacom. market of platforms those QSFPXX, and part some the low opportunities, targeting other or

Alan Lowe

would reach I based our CWDMX, well this quarter Yes. of short as as low both as 'XX the platforms, introducing products in that cost VCSEL calendar say well SRX. non-hermetic are as we are both type

XXX data to VCSEL using meters parallel XXXG XXX the from for So center. within meters arrays

were products were we those So the the short-term. introducing in

reductions We LRXs. on cost have QSFPXX even

So all there. a have QSFP are portfolio we got new and broad based products

at are making there, working on progress probably a to with we very XXXG again that’s our we more revenues. and XXXX but We are same meaningful contribution are the the time of pleased

Operator

Please Kelleher D.A. go line next of Your with Davidson. ahead. the from question Mark comes

Mark Kelleher

Most answered. to wanted lasers go a of been second. and fiber back asked I to mine just for the have

issues of had have materials an some might give to us size of indication Can due issue? just that what that you constraints had that? some were been there you you Can kind there. not that said You

Aaron Tachibana

Yes.

constraints production so we we out materials, terms of sets fiber in that ago. our version And in issues So some we ramp of terms did of we trying have a Gen equivalent have didn’t the to brought had, laser specific few it, X have all on months materials.

In to remarks, of the bill what book to prepared Alan X.X X. our was had terms in said

did the just dollars So table. a million few left that than we more on have we

Operator

comes Your the of Clark Sachs. ahead. next Doug Goldman question Please with go from line

Doug Clark

the on much? economics kind extent by of for and ASPs to kind comment edge-emitter you above all or or seeing I of if today, versus sensing just in it's an was how below are of what curious, that you XD VCSELs the

Alan Lowe

a do, in at sub-assembly that we chip with and put onto burn and it edge-emitters Well, and it actually bare a small a test level. cases, carrier most

would level. corporate a I the we Margins say to little then higher should per still average. general, dye where today at same sell probably above got for bit in typically unit So be it's we bare VCSELs ASPs

Doug Clark

a Great. mentioned That $XXX was that it's then comments Thanks. make helpful. to coming is on Okay. the [com] large are majority today of that that from sure that in if of all that, of I new want current not products you not vast if the orders. to vast, And all Based other really kind million assume that customer just component is [ph]. if a or your there fair on

Alan Lowe

Yes. We prefer not that. to like answer specific customer things order rates and

Doug Clark

terms was I around in datacom. quarter in on large was quarter? believe of it revenues million? how comment on $XX the QSFPXX one Would then And you Okay. last

Aaron Tachibana

million million. quarter. bit around over That $XX was $XX last was tiny QX

Doug Clark

off. the And bit about more drop I ask guess to that, little a

there? certain demand there was discipline pricing the So participating in a not by hyper bases? you talked scale actually just because or you in pause price about Is of pricing are customer wins any of and it

Aaron Tachibana

bit both. So there of is tiny

And can quarters you we recall the because as So that’s built lines over we backlog. production last a same and share that backlog products CFPX our all LRX both or of were CWDM the fulfilling couple had of lot facilities. up of

tied what was QX, to here In saw in dynamics off both. drop the the terms of of we

different and to [indiscernible]. lot a we of and go tiny drop volume price to some there in the that of did business was go unwillingness fulfill. take then a bit One also Our of the erosion was price

Alan Lowe

mix, the great as even the especially would it advertised be that that and say tougher. makes I But demand Yes. is as the scale, pricing dynamics not was to in hyper

hyper was say would scale and we from the price. the I down ago six didn’t months of chase down So QSFPXX in consumption expectation

Operator

question Your comes next of Richard from the line ahead. go Shannon Please Craig-Hallum. with

Richard Shannon

customers needs Maybe going XD say Alan, be sensing. quarter for a can able your the ship ones to you whether or all quick you not? December couple to of first are on to

Alan Lowe

No.

Richard Shannon

clarify, of in of That’s to further or that orders, is helpful. end just that the Also Okay. is sensing, quarter go $XXX million the does December through XD the out?

Alan Lowe

out. further It's

Richard Shannon

out. Further

Okay. are XD far orders going sensing state how for you your Can currently?

Alan Lowe

I have for it's in think [indiscernible] now most of the is, product a March those request quarter. quarter. almost the time early between orders and dates

So that out. we are you are we quarter a end -- the that would imagine get of getting January, orders within of the as those

Richard Shannon

it. Got of more for you Couple Thank questions. that.

to see I any prior imply of of do or that couldn’t deployments On here, to a the timing current topic we generation about. guess the but excited you questions China, ROADMs are you trying next the to are ROADMs some expectations in answers ROADMs whether I large see as in something of, you when your have

Alan Lowe

Yes.

are we are substantial even China number a are I expectations that China of up deploying a in out revenue China into to but say ROADMs they I 'XX? think It's as our go would say shipped China. ROADMs part our for are calendar we growth of meaningful that in would They outside massive not winning customers of be sell but I today. today. gearing still it business of

Richard Shannon

expectation specific an have don’t timing you on more But or that? Okay.

Alan Lowe

you that, tell were I making up. something I to would If be

Richard Shannon

potential the can you can fair. of unit us me, for be? volumes is Can it's about from might Obviously, other you of applications mobile lower applications. but that’s than -- of the don’t talking sensing what Last quick us us sense give give sense that a Then that, on the scale, you Okay. for here? a lasers questions so the earlier do XD help question ASPs edge-emitter

Alan Lowe

just clarification. Well, for

mobile customer about devices So in mobile we was Asia. edge-emitters script what did in the for a talk and

similar these large consumer other be So customers. of electronics could to scale

Operator

of line comes question from ahead. Market. Northland Tim Your Please go Savageaux Capital the with next

Tim Savageaux

approach. will a I have a up. question I consciousness the follow stream eschew and

of is the First consolidation question on communications the optical sector. subject within

Given And, a sector. time. across a One, obviously December like the interest of wonder board couple concentration bit kind over going as fair have datacom, strong. XX% your kind have be two, on on the to managing update reference your That’s towards a a got viewpoint and wonder especially competition and consolidation kind relatively here Lumentum's within looks that’s views a if optical the you quarter. I of of customer pricing views I that in able communications you of things. are of in to XXX-gig on, currency you you might

Alan Lowe

Sure.

Let your me comment about address concentration. customer

I base technology, lead have as as a with both I customer where well are you space and very any ARVR time you but years broadening that very autonomous sensing, customer feel vehicles. a few mobile the application launch in comfortable think in a XD new for

are comfortable am I with to with So we regard that. very where

good as thing. far in along, the industry, a I As said consolidation all is consolidation as have

how also I what But a have a don’t to time and comment that to is seller willing when right than the right go out we we the when and think really good. about anything have we we buyer will the things target. all and time you determine on see would talk time it willing have other this is at in point say consolidation to be and

Tim Savageaux

trends side. tend as mentioned back consistent is and look us new you sensing customers But half with of XD is pricing of devices. level, those and web your combine do and competitors opportunity other from worse and you the trends to current your be coming XD say, in to as for you hear kind regard even view mixing customer factors you pricing Is you which and XD moves is your up your expectations increases to kind follow that point to that XXX% on considering tell of is to to of unit when year. the significant better? your mentioned my we increases which potential Which pricing forward. volumes at And what pricing maybe main could to well, manage of to I your really going you to as sensing business pricing for you in, datacom relate scale volume hope as we share expect lead market How impact increased grow and the from expect able competition. do kind competition in volumes or factor unit Okay. with content

Alan Lowe

very high that customers going and comment as today are customers have confidence we and and be we and new that to very to both that’s both me additional expectations designing XXX% as solid are electronic for I China And will to expectations types we to the and therefore is strong. talked that this very our healthy on am be competitors customers one the not customer. address demand. in to and the with share with have what as consumer more manufacturer, able buy have product I given of whether industry well more then it seen based market will out existing pipeline gives continue mobile some say as and the I long-term Well, in you about, well short-term demand or with that’s think going we of that products have But the I go capacity making our drive our any think

to that So have for we our drive for I margins confident we XD in are good expect down of continue that pretty focused the look and on continuing perspective, think this at are from sensing point we our costs to that investments pretty kinds made time. that to and we things have

Operator

next the from line comes Please Joseph question with of ahead. go Wolf Your Barclays.

Your comes Co. with final the Please Riley of Dave & line from go ahead. Kang question B

Dave Kang

of A questions. couple

the that they are edge second out or ASP First, you with, customers did give question regarding are is, or emitters? VCSELs you And for of edge, other both? working

Alan Lowe

Sorry, Dave.

what? The question first was

Dave Kang

of edge-emitters? ASP

Alan Lowe

Yes.

in a selling lot But edge-emitter general bare [sub-mount] I therefore. an lower a size probably both to think of and to the in chip, ASP is said right. the we a cases dye goes with so going [ph] what that on has do terms

we large the ones have ASP smaller lower. chips that higher customers and are where is and edge-emitter chips that have have we prices their So have

function power what a edge-emitter really edge-emitter the for are the the it's looking kind that of So size ASP. of drives from they and of and the

So also to next we of customer. say sub-assembly chip, the that level similar but ASPs, be priced it's the for at I edge-emitters provide would higher going a to a in will be be of then general slightly sized range but

Dave Kang

just it So [indiscernible] that sounds like necessarily there the are is correct? multiple applications, not

Alan Lowe

working Yes. but would We applications on say the applications. we I can't on many that different comment are

that pretty the say working capability and we based of it and that expectations on customers about implies is, reach of are customer can power are some different quite but I devices the on. Our what on confidential

types of applications. We are working different on many

Dave Kang

So other about on once customers. my again second question

as sounds you like both it edge-emitters? VCSEL are on as well So working the Is that correct?

Alan Lowe

Several yes. of each,

Dave Kang

the question what's on it. Got last And ACOs? the latest is, status your

Alan Lowe

Good question.

to to months a first was to to ago to late those get samples coherent that that and working been resources came that ahead. redirect actually We product. market have components conclusion were the and XXX-gig best XXX-gig, couple from We the we redirect of generation it them generation had customers with on, ACO, next

with fine it, that’s were right me customers tells we decision the Our made. which

it's we generation the we DCO therefore whether gobbled they so really behind to time. the were some for are ACO the guy stuff really and components, share all And there or competition lead had leapfrog next or significantly on market quite and working the up where

So we made a touch decision.

it's are the components of decision. and coherent really generation next I right think on But focused we modules.

Operator

Officer call like Lowe, closing would this at the President I to And questions time. we back his to Chief now Mr. no for Executive remarks. Alan turn have further and over

Alan Lowe

us employees business in for hard our and in thank Thank you, our the growing business work into to excellent market. their Dan. again an our putting customers their thank and for want I position

to high future volume events. a events applications, Photonics We in XD the sensing becoming of of business increasingly are are critical to regularly bright expansion relations discuss our generation middle the These We Lumentum. bandwidth. worldwide at at next manufacturers and investor making listed are in you. Thank our attending We and investor months. look three to forward to updated. This concludes relations site in Web call regularly we and like talking our you with would the are for for thank everyone section on today. another again

Operator

today's This you may for conclude everyone today. now to Thank disconnect. will and call you attending

Lumentum (LITE) 1 Nov 172018 Q1 Earnings call transcript