LITE - Earnings call transcript Q4 2018

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Operator

Good morning. My name is Marcella and I will be your conference operator today. At this time, I would like to welcome everyone to the Q4 and Fourth Fiscal Year 2018 Lumentum Earnings Conference Call. 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 Chief you Interim conference. begin Financial Coldren, may Officer, your Chris

Chris Coldren

and of you, fourth Coldren, is Officer Lumentum's Welcome Interim Vice XXXX Financial Thank to This quarter Marcella. Development. and Strategy Corporate earnings call. Chief Senior President Chris

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

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

latest encourage review, Our slides release. which A Web our a.m. SEC Pacific morning to you of filings, by will on to our today's Web and relating be we XX:XX has also recording supplementary today's this call Time site site. available earnings

some the turning Before Oclaro. have additional over acquisition to pending Alan, the call relating of to we comments

pending X approval pending about approval. closing is The contain other entered process mentioned today entirety We call statement approval transaction, carefully important Phase China. security including an encourage today’s prospectus with we the Antitrust July. they read discussed by First, the in information qualified SEC proposed Further as the securities. merger conditions Mid we’ve regulatory statement and the subject certain in that of previously joint filed Oclaro on on to prospectus holders information not connection the its is SX the SEC I The is proxy documents transaction. with the offering of with transaction. in received this other in HSR proxy to file

Additionally, Oclaro their transaction meeting stockholders in July. approved the at

pending on work this Oclaro We transaction. continue with to completing

call the prepared the be sharing is Q&A status not information of keep the of that beyond please Oclaro will remarks. and we to acquisition focus mind guidance pending During of session, the earnings our in this and our incremental report related

business fourth the to Alan would call and comments Now, his full-year I highlights. quarter for like over to turn and

Alan Lowe

that row third be Record record in revenues here week for year XXXX, results. than Good third Chris. quarter industrial profitability. morning, XXXX. commercial earnings $X.XX excited lasers, a a ROADMs, Thank revenue over non-GAAP saw double XX% a growth diode discussing a These more net lasers being build fourth of everyone. was TrueFlex Today anniversary strong kept fiscal I'm and billion very you, Lumentum's standalone revenues fiscal in to company. a new Last off public and to and

robust our multiple on of our strategy growing which investing differentiated underscore fiscal critically amounts Our data markets succeeding. dependent addressing need Lumentum have long-term networks reliant trends the markets data centers. products fundamentally in end results photonic global The technologies. The and of our participates optical XXXX that that on in -- becoming increase is photonics and is through on for more products world ever flowing ever-increasing

a equipment, and deploying technology supplying Lumentum factory data and of precision to and be computer demand efficiency that the enables the materials every turning and built trends, XD to and approaches types essential. supplies that day. laser-based networks for optical devices enhance new functionality rapidly The who important and who market. satisfy rely centers world. To of electronic security, are address new suppliers data. these the all insatiable tools increasingly lasers the network, on need globally is are manufacturing manufacturers vision High energy is the this around to of to safety more the is New are or people network Lumentum regardless and Globally, products technology supplies. developing based more Laser and applications sensing level in of

fourth to Now I'd like highlights. to quarter turn

processing both grew record by macro Laser the quarter new strong fiber in Growth Our from lasers. revenues We and new demand and segment driven from customers revenues. our achieved prior material record markets. class micro kilowatt achieved the was X% over

year, base. be are laser broaden system products meet in our and expansion we year. investments to customer We fiber the continue newest demand our a ramp to customer made will fiber this earlier introducing turnkey in laser strong capacity benefiting full from to Later calendar

with growth. along the further in will products other laser be introduced future this even new accelerate expect to We

own newly diode laser revenues. customers enabled efficiency lasers industrial capacity by Our and driven primarily lines, which improvements. Growth product delivered also was record by is expanded building fiber their

our fiber to in these with and quarter. internal external ability outstripped the combination our supply use demand lasers even the in fourth However, of demand customer for own

own capacity revenue in sensing our which declined in be shipping will products, part As shipping the cycles. product we industrial Thailand we started noted quarter, fourth due on the to VCSEL of fourth factory generation are Even next believe products additions last seasonality. diode the started customer Early quarter. qualified XD in quarter in these used in fourth our in call,

with who ramp expect through We In multiple modest fourth have volume the new We’ve spread with we more also to quarter of XD earlier to the design customers. purchase these received from customers orders peak compared ramp customers products contributions devices. in have revenue quarter year's from sensing result quarters or first additional of multiple our this new profile. This products production the last had on be continue and numerous quarter across in XXXX. and customer. second new volumes been into We're will engaged high-end android announcing will several lead fiscal

a XD We time high-end to expect to broaden proliferates mobile mix product customer devices that sensing range products our from points. and over base price of broader and

expect and be this well scalability, field choice -- we to world we fiscal around also over be We the XXXX long the XXXX and the are sensing believe customers on driver of reliability to new a run. we proven pipeline, XD and partner sensing for also in our in product applications for work positioned to expect XD and growth Lidar automobile manufacturing proven With continue beyond.

the new was and line strength customer notable to be growth. sales. achieved revenue demand. strong increasing drove more We in capacity to in the new X% meet Turning had ROADMs quarter-on-quarter We're communications production ROADM systems quarter. limited continue our telecom quarter which modules product TrueFlex to by card demand record lines. Fourth adding and capacity

exacerbates Telecom Our internal strong ROADM customers including demand to limitations. challenged. laser Therefore, expanding remain in which were strong, quarter-on-quarter we're increasingly margins to need continue for limited sales, expect meet X% our pump laser around demand ROADM China. remain by we strong from the also world capacity strong. and is be pump customers multiple pumps down capacity. remain but Datacom customer With capacity further sales from to revenues pump

in highlighted growing I’ve scale introduce year, calendar rapidly center significantly calls, this XXXG markets. prior competitiveness transceiver and margins cost a increase reduced this As the on to targeting planning end we're market hyper our data later to

the continue from XXXG, customers. range closing progress Phase X core Lumentum's to progress transceiver trends clearance. our We're participate of but us we still Earlier Oclaro the towards dependent receiving XXXG of markets significant transaction. Since in to a subject which we predict stockholders are solutions. positions I In highlighted acquisition. and lot on significant also moving the Chinese and technology increasingly as receive we in leads of We of technologies on photonic when Datacom interest approval our are we’ve approved last Oclaro are to broad upon in my cannot well. a mentioned required the process make antitrust made remarks, long-term And Chris our make China, will of which regulatory earlier, to the XXXG the good programs, from call, July,

customer good record laser made ROADM We globally, product major key for we including sales new that developed We new expansion This and ramp levels. lines devices achieve time and deployments, will ramp engage XD same our XXXX, We the network expansion. fiber to in fiscal margin platform in progress positions future globally, future. next-generation sales and accelerated future key well products future. that and at in us globally for basis customers This market ROADM and and China seed levels. platform the customer for new a end During very enable new diversification. to while expect sales product we'd expansion the sensing customer fiber growth, mobile numerous strategic planting the ramp on laser be record for objectives laser launched the

in We going very employees would time thank our of will their excellent the on it Chris I to details which our for their and long-term first put exciting XXXX. more now financial work, an and to call the for hard on our fiscal dedicated partnership is for and customers us have for at guidance hand a position growth. quarter a for I here. over like lot has Lumentum results

Chris Coldren

Alan. you, Thank

each segment, I'd and compared down XXXX. our with million, year, increase. year. down XXXX. Growth the up were Laser XX% revenues XX% like revenues the XXXX fiscal both were to Within and fourth substantially while segment segment were to Optical segments were results. was our relative for this fiscal Datacom Laser full-year Optical prior up Net and revenues XX%, run compared Communications our XXXX contributed Before our our results, to Fiscal to revenue in in Communications XXXX jumping consumer fiscal revenue and up Communications $X.XX up revenues our into Optical telecom industrial fiscal prior quarter

gross fixed expanded by fiscal and points to basis XXXX driven and industrial full-year, higher-margin GAAP non-GAAP was margin our for margin levels over costs. leverage XXX Operating expense. increased overall XX.X%, points diluted XX.X%. margin larger $X.XX. margin basis as strong GAAP Non-GAAP XXX income well margin was net to and as operating over manufacturing per the due XX.X% of consumer operating to margin mix the revenue than our operating gross laser GAAP full-year. leverage share was For Full-year XX.X% was in products gross expanded expansion higher expansion

bringing expenses $XXX.X to cash relative X%, cash factory diluted related XX% non-GAAP XXXX year. throughout operating We million year while full-year $X.XX. relating top capacity levels despite at to expenses million to year the flow $XXX.X increased of Our net year manufacturing driven ended the expansion, share free strong investment and investments grew and XXX% the year non-GAAP per million, line income prior Thailand. to of $XXX.X capital an prior in to with our the relative also in of short-term our more elevated net only new income grew the of non-GAAP prior the new increase than by resulting up Fiscal products relative

as gross which last turning million, operating fourth non-GAAP Fourth was sequentially net X.X% fourth quarter the quarter Now XX% and diluted revenue quarter was with fourth year. XX.X%, $XXX.X totaled share GAAP includes margin expansion the was $X.XX basis the and period with operating was GAAP for the for GAAP increased diluted in share for Operating or expense same was was fully of and year. to period SG&A $XX.X for fourth benefit income compared well XXX the compared $XX.X XX.X%, to per million gross fourth increased quarter. Non-GAAP $X.XX. per expenses. for the quarter. income $XX.X expansion and Net was revenue the the margin X% $XX which the margin communications increased the margin on million gross points quarter. compared and $XX.X diluted compared lasers Gross optical net basis over margin driven prior other XX a XXX of due Operating quarter to with prior period increased expenses of same revenue sequentially points a million. income XX.X% basis and and combined by R&D was as XXX tax Non-GAAP operating last $X.X basis million. share by and overall expense same million expense the gross quarter million margin million and with volumes. leverage higher points increased improved million margin year. increased or was XX.X% Non-GAAP margin recognized count points of net was was sequentially $XX.X in of based XX.X% income $X.X

up relative in revenue Turning to declined our period million in the XX% $XXX.X prior line XX% and telecom Within details, and at up was the year. the sequentially was Optical by our revenue prior X% Optical up at year. segment X% and same relative million less to the segment product than same Communications segment, to $XXX.X Communications sequentially period

the products telecom with the sequentially, XX% higher-margin ROADMs in increased transport were and in year $XX.X but large revenue. million associated average Industrial with relative X% period at to telecom margin sequentially and the were up with consumer highlighted, XD at revenue including year. the and mobile down XXX% Datacom significant to higher into sensing in applications. the prior telecom less drivers products higher gross due costs manufacturing Optical same revenue of sensing period gross of due the contributors points to the more prior to industrial Communications of $XX.X to XX% basis million the XD revenue XX.X% to lower and despite and down Alan transport XXX mix at due growth. was As same The sequentially seasonality, in telecom improvements consumer degradation the mix to segment volumes. associated margin margins expanded growth Consumer down both introduction relative was

gross and driven by and the at lasers used have margins lasers lasers was segment both Fourth and in relative margin declined revenue was space. on strong lasers lasers -- other electronics Fiber sequentially to XX% in demand million for $XX.X up our lasers up points Our Laser revenue in period points other and basis increase in quarter due grew gross X% average XX products. same to prior the year the the relative XX.X% mix. consumer the relative in XX fiber basis fiber manufacturing lower

growth, cannot the be projections Noting predict a net $XXX for first Oclaro take our effects the on not XXXX. closing. up for range $XXX timing transport account revenues $X.XX. in the industrial per of by of non-GAAP project to share to basis. diluted the up sensing in quarter product line of though customer guidance XX% currently margin fiscal changes on the Now the or to and XX% earnings any to range the into lasers Do net Notable XD being of cycles, continue operating from to again, all with being income acquisition lasers quarter the to due our expect in in revenue to of and seasonality product driven include that in consumer and are the quarter. in continued product million being as to first telecom of ramp fiber $X.XX We in million be we to to range down due we first ongoing projections grow the quarter-on-quarter

to to would session, begin to follow-up. question limit Marcella Q&A over I call Before one please the one to Marcella, session. and ask like let's everyone turning starting to the question-and-answer discussion

Operator

JP of the Samik [Operator Instructions] Morgan. Chatterjee first question Your line from comes from

Your line is open.

Samik Chatterjee

share for the sensing seen your competitive how with what time start taking have changes going you’ve think to generation and ramp the more kind we sort basis, and for primary compared about go-forward or landscape of given a should last market for your question. -- sensing in on last generation XD to my the I Thanks morning. in much to prepare customer up? Lumentum had on of competitors off Good see wanted just how XD

Alan Lowe

the level to of bit little hard for a to It's thanks know Yes, down the question. share.

obligations commitments, customers. contractual with getting have we're we than but the we significantly have higher share contractual that We share our believe

I don't if excuse think point customer focused the what buy over fact at from our exacerbated to give anyone we we making tens shipped any by in of that sure we’re not to else and hundreds of that's time, units is on want failures. really this millions no of millions, with

those of can kind exceeded so the share. reliability And to statistics field of -- position we and really gives data us that leadership point

continue to next-generation we're other products a in well introduced as very working strong as customer XXXX. lead XXXX customers products, be will as share on as that hand-in-hand to position So existing we on well where expect not with have only products but for our the

So we’re today. we're feeling very comfortable with where

Samik Chatterjee

you or will in to spread saw kind out a XD And FYXX. still quarterly relative it. sorry. be revenues sort your XD to in cadence FYXX But of in Got we sequential said in second expect the just second the be of clarification, of highest the quarter quarter a expect still terms more sensing do do up in in the you revenue you quarter peak the -- FYXX sensing more what the revenues, for of ramp

Alan Lowe

but peaked December the quarter this year nothing But the quarter product Yes, products in a to that September reminding in September, peak be larger expect quarter our for now, ending we continue that nearly June $XXX XD in and the of and product everybody would million associated million the December of December very quarter, our in June to with only not we $XX ramp. in saw September sensing than expect to be with quarter dramatic of we quarter, that low guided that year. shipping that second larger revenue were quarter fall we more it the quarter, up and customer the was said, but we than June effectively the as as fourth believe quite last quarter last levels in be the we in where

Samik Chatterjee

Thanks. you. Thank Okay.

Operator

Your comes Kisner the of next Loop question from Markets. from line Capital James

open. line Your is

James Kisner

you. Thank

on Just a last that follow-up question.

a and to -- obviously very I’m the QX margin just separately be bit help [indiscernible], June, that a In XX%, but then XXX%, want almost for XD, big leverage? a there will conservative at be given September, reason just more in like improving For us why guidance estimates operating in of there's up out are and [indiscernible] you of that volumes you’re not the XX% XX, could just wondering but and sequentially just discretion even understand XXX%, glad Thank hear delivered revenues out QX. improving just just to I’m XX, will if XX%, qualitatively mix I better. was all? up, are a just wide there's is seems not kind QX, any And texture pretty guide not wondering that you. how be just much you’ve getting it the a guiding you could

Chris Coldren

with start With we say about margin conservative, a with volumes, strong ROADM with the mix at talking would be guidance costs resulted brought favorable will only latter December increase an guidance. quarter try to improvements regards in time. strength that to continued in during first that one well down beyond lasers in quarter guidance we and provide also question our -- did a sales with I but the cost manufacturing that quite we first. certainly Maybe yield It's I and in

between our to I are estimates of if fact and quarter have guidance spread folks use I provide off are will, December at to that the think most that September a size stuff market than take we’ve the -- the we year on but December. and are kind a for multiple so you quarters things a there, be analysts shipped generally looking out the the able the of that view June how entire in expected, don't at stronger pie street out think we amount, estimate of of hoping of street and and when this fixed demands will range there's is we look

Alan Lowe

I margin add the on quarter. September the And maybe if can for operating

fiber our gross the in be than lower lasers said will our which growth margin. As overall we have down revenue lasers in highlighted in Chris script, basis despite margin

business So gave into that the lasers play is high guidance. we margin to our when comes going decline and

James Kisner

gentlemen. It's you, very helpful. Thank

Operator

Your the Wolf next of question Joseph comes Barclays. from from line

Your open. line is

Joseph Wolf

XD question. another Thank you. I guess sensing

of Just you in of think if applications, you the of terms business? applications, range be a in of could timing, perhaps to about now of other a guess terms little from about can thinking months ecosystem, that XX the the range ASPs about we sort commentary mix on I overall the and XX talk and for a android some

Alan Lowe

will for as be as with sensing secretive XD customers the on what are you tell. it's world or aware we the as believe are so respect to they're working probably the to I facing front hard application Yes, android very what that well facing -- we using applications. customers say to

that other to of side expecting which the we're in use applications see is So 'XX new calendar mobile exciting. pretty device, a

far expect your hard those good mean, phones mine say. ranges market to is very mid-range as respect well fast And the on products as the we devices. as have as well As to on to we mobile that as price as initially. lower seen proliferates for end with as announcements is mix, guess the be high-end android the said to how I it's announcements as script in

expect all on the to sure I and margin high-end what And the be on and ASP making is standpoint them had android improve delivery. our than on So market. our look customers any cost ASP, in there on we're the we forward the I focus track record on don't last past different reliability think for question we as your or

Joseph Wolf

changing that at kind or you’re of from worth is after going perspective? been right. trends some Pricing recover in that sector of as on business Datacom the side in year just and the versus All And product not you. declines your later segment the new there's the just all volume seeing the just in is Thank launch sequentially. a sales follow-up the of the then some competitiveness where

Alan Lowe

had be to part it's past haven't product for the after and go a market. the part to has very cost of market years couple of that we competitive think hyperscale the the been of able right a I the

except to client side when haven't we the hyperscale XXXG reliability had in I needs introduced is were we product that the that really able first in and been On very have initially the a continued address a we very we’ve transceivers but able market. say those telecom line, customers, would anything compression later were to year to play, even first the compete networks, meet Datacom we effectively will the with of ASP. good high hyperscale transceivers that this be will when product a meaningful way, on of

a So are wouldn't in count volume I but initial first really lot the that of with of growing we in where -- with we volume half calendar the 'XX. pretty the for in a whole ramp quarter pleased are. quarter, that December on

Joseph Wolf

Thank you.

Operator

question Simon next comes Your from the Leopold line Raymond of James. from

is line open. Your

Simon Leopold

topics. wanted into two for Thanks I question. my delve Great. to taking

your In smoothing reflecting is sorry quarter sources want than fiscal from second is expectations. or it at delta is better from the the it words, had what to anticipated android. historical a upside is share this you our that the incremental demand June be your other -- orders to I customer, one fourth better sensing first least the of strength. the appear versus on XD of of get The understanding

So the And that June what upside quarter? got then to was a driver I’ve follow-up.

Alan Lowe

Yes.

in range, certainly. few kind part million, dollar The that. [indiscernible] well upside, of of sub $XX were say million of revenues I would that the So android the

think starting that you're So late would upside per it's lead. revenues it's of primarily quite say lead in year last was guidance. than I the year, is Last smoothing ramp. I that this still earlier ramp seeing consists that the year the because not September a our customer. And that’s the

Simon Leopold

missing I sensing. give for XD And quarter. comments you to you I September a at operating I'm XXXX the telecom, follow-up the margin the operating what sort with I impression And or I bit I'm some and then us forecast? should something with I wanted was conservatism of the on that some where to we or quarter guidance aspects if it you. of at look appreciation Great. kind around where be operating margin regarding this commercial this directional you did XX-ish XX%. your should know guess in question is just left get margin operating little a outlook XX% want comparison one-time-ish see in level. September's that puts look to quarter intuitively, higher for I landed Thank the with the better help and mix this margin of lasers, a struggling is December I'm

Chris Coldren

Simon. I going of on. things guess, Yes, Thanks. couple

conservatism. our impactful obviously, lasers lasers operating business lasers, nicely with processing commercial business gross as is of materials down the a that highlighted bit Alan profitable margins particularly which that above First, is micro to the and turning average that And level a are overall margin. there's a

Alan Lowe

some of weren't there's the And as away that the last bring somewhat added over that hope next we a drag costs our quarters. up that facility are go other there Yes, we is Thailand year. thing two to

Simon Leopold

questions. for Thanks my Great. taking

Alan Lowe

Simon. Thanks,

Operator

from comes from the next question Henderson Your Needham. Alex line of

Your line is open.

Alex Henderson

look sense you when your us what just one some I Well, and could of real in rates going to you think will tax like a Monday ask give -- FYXX?

Chris Coldren

assume in XX% modeling I something I think range. for purposes would

Alex Henderson

really But it's change primary around no XD and on XQ there. My sensing. is the XQ calendar question between the leveling

the kind in relative you $XX surprise to quarter, up or and June is quarter? $XX where that this expected pull in million relative September actually come in that of the that talking level from about relative -- are quarter had to of at So to we what the variance million to -- you experienced showed the you

Chris Coldren

strength between a and probably fixed December that December. earlier I in ramp with potentially more and had amount, amount pulling it's it September we an -- certainly so June, from mean, I came Yes. said, from September as the

Alex Henderson

though? that facility Is right the leveling

Alan Lowe

Let that. me just add to

the 'XX shipped learning just million the quarter a of customers and technology launch have of ability guiding end you the and I September we -- given product, we are that and our that that at If through. we the going challenges curve the think at newness recall we're end of XXXX we're September to $XX in the on huge ramp the

of an so where So a of of and type than that -- year long more normal the products I and was this ramp would type last new ramp normal prepared for think new getting is I abnormal by is shot. this more of a say

Alex Henderson

and the to number variance just to to the out reasonable million had you just question, back expected and going point I upside out normal you proxy that had trying get of earlier came in came for magnitude is throw in out what -- So -- the to of smooth? than delta to and I'm how clear, $XX expected that the that figure the pulled be I which therefore baseline June what the upside the are of expected you is the quarter? was much XD normality. to million what what the Yes, in was the relative between $XX a

Alan Lowe

mean, or But android tell think on originally guess ago lead it's that consumption and model from versus I existing than were to rate, versus -- hard shipment our was be to of it we more three orders guess hard rate speculation slightly to customer. product, million next stuff next I it demand so we and -- and would building tell. for it's so our year's model they’re if $XX expected more more their I had their I had months release

Alex Henderson

that expectations came correct? of where June is that the regardless is the for from, internal your variance quarter from prior it But

Alan Lowe

would we had production bit we that demand were we improvements lasers ROADMs expect better to than came in and do productivity plan. little and laser made fiber than on than a we say and than lasers I -- helped the to expected had stronger stronger were pretty with difficulty] so to not partners going that ROADMs not get get had broad worked based more million. able over up be outside, we our it's satisfy [technical $XXX demand in, to expected, we we us that

Alex Henderson

of of proxy -- just was to XD relative a million here, XD really Yes, with what I reason upside variance million the in $XX about my to to quarter a what regardless of is? The you sensing asking not the is a the was in expect for sensing. had bone in guess be reasonable what $XX dog but occurred only

Chris Coldren

sensing what the never I question Alex, is answering think quarter we’ve were. expectations our XD the shared challenge the for for in

I So … think

Alex Henderson

I understand.

Chris Coldren

.. but XX% that. in a ramping next know or X% hands future fraction XX% state than and We that in we XXX% into healthy be is. drive quarter or that going or the that in is out to it of is trying we products is is don't product used called by just this devices that believe we it think is, to we we're a going quarter or are this June started cycles to other what it

Alex Henderson

my I with go Okay. Thanks. now bone. will

Chris Coldren

Okay.

Operator

Your line next Hall the Sachs. question comes Rod Goldman from of from

Your line is open.

Roderick Hall

little. Thanks guys. on a -- the for business I but got Hi, question. Yes. wanted the lasers I wanted focus to actually I to two,

just You the prepared the you on just in the to your a curious that did what's September but -- then are in would it on just fourth is said, or ability going to demand and And are in you you're with expecting table you demand. was think quarter which able are down meeting demand next I’m of I’ve the then supply, demand quarter, seasonally. your I the quarter? supply lose you got I that question. above the into guys left whether Chris, that wonder, remarks demand meet follow-up be diode lasers some that flow to normal saying

Chris Coldren

Rod. Yes,

I think some confusion. we maybe apologize,

lines, lasers products But and fab pump diode into as telecom wafer capacity laser, industrial set in So fiber both also we’ve share our of that laser got One of product are our diode lasers. semiconductor example same industrial for that pumps. for is chip the manufacturing capacity. lasers the go same two with lasers, the those different lasers case

through and side, they the add micro the summer already have then products. aren't have there fall capacity adding and part constrained pulled on consumer late impacted expect we continued lasers. equipment electronics quarter to situation and and diode that space materials in business by consumer-electronics or call both to strength in have which continue microelectronics the processing capacity fiber capacity into potentially that in typical laser therefore is going the is need industrial the The of late because to into the that the where September declining fiber We is summer is that into cycle manufacturers the laser produce what spring the that new

of to into expect So that -- calendar trajectory. materials lasers processing that our kind micro year the we do of growth business portion that new resume to

Roderick Hall

diodes, the or on those in just of course, few demand, you laser that quarters? think when you comment, next meets And it capacity could when industrial does

Alan Lowe

expect base capacity So, I pumps. our until introduce September turnkey totally will constrained broaden the as alleviate be as we’re diodes think those our to we that not there's will demand. a mean, the own that laser of more customers consume I and we’re couple that of play. fiber quarter, to facility and customer Thailand our of things and for adding laser that help will satisfy we are fiber coming in into say I constrained new products, and those more still our through today

And think adding I planning for additional so been in we've Thailand. capacity

But external try more what the online the in as going can grow in future doing to to is fiber pumps capacity lasers the and coming to laser those well We we we we’re the to continue fiber estimate demand to future. best have quarters. as manufacturers be to expect both

Roderick Hall

components you where think we're we have this Thanks get to you or that? then XD Whether is, low, broad And normal world back any the on curious of I question yields that. remain color a you so what I about to for see think just believe for just in abnormally sort living wanted I like give would do guys yields whether guess yields. just us Okay. you module if

Alan Lowe

visibility high very process. integrators very continued and ton for happy increasing our the with to our stable the Yes, respect and that are. productivity and yields structure we’re and can of you our to we cost don't module tell our with very part what are have yields their of a I yields

the a far android what's it's module that. address integrators of don't market, to at they now lot on as going shipping the that hard tell integrators on As additional module give and detail to us we’re to

that there's the If component we problem. more there's not progress think from good -- is sign perspective that’s our can't certainly And the in our that. so been comment a on I a problem really that but

Roderick Hall

calculations, of Do take you your kind yield come make assumptions module Alan, they as ...? orders you in guys the just or and own

Alan Lowe

the cross to to rates with figure to estimates share. try order out our try our We

it's only not speculations. And but so do, we what knowing actually they are,

Roderick Hall

it. Thanks appreciate a lot Okay. guys. I

Chris Coldren

[multiple our speakers] so keep away Yes, customers turning that’s orders. we're certainly not happy,

… So

Roderick Hall

Yes, I know. Obviously not.

Okay. Thank you.

Operator

Your next question comes Genovese from MKM the Michael line Partners. from of

is open. Your line

Michael Genovese

Thanks. but any year? good the looking forward them, XX flat the when bigger Hi. rest best Asia, over which about for the months, China, a the we have question pumps a very drivers there of are behind and the I and next optical market. Because which just you Europe, things U.S., in products, at have across optical ROADMs, other regions, decline are next risk think to about and the that aren't do for regions might be growth picture think

Alan Lowe

in would Yes, with pumps, strength that products so things seeing respect we’re amplifiers say across where strength like all have and I regions the to ROADMs, we that.

deploying ROADMs seeing based China now they’re So and products as I those to year-ago with think a deploy we’re ROADMs. broad in especially respect didn’t they strength

strong, robust hard we’re strong, ends India is say in higher-level, it's non-China to that. other where America to. and APAC but growth would expecting continue to continues So just shipped China Broader, up we're I ROADMs to to we’re that capacity strong, to be it's Europe hard really going say is address adding to actually anecdotally speculate than okay, is our North product be be where

Chris Coldren

certainly just global think, Mike, to I in customers to that, our nature. are add

selling remarks, So our pull maybe that or highlighted we entire when ROADMs. American versa well for we've customer from as India prepared Europe America. sell customer, as or North And Chinese customer selling Chinese may and as North Europe sell virtually we be customer, vice to broad-based base India next-generation our into if he into in to in we a got

believe it's global as anecdotally, geographies and [indiscernible]. and China Alan overall new nature highlighted, discussion to India because -- are relative the around certainly America of -- So them lot in between are I those North

Michael Genovese

closure. then deals, asking -- asking behind asking so much Great. for about And that asking is the the on about or just milestones Thanks strategy not deal. quickly this not I’m about for Oclaro the the color. the about

thought the the probably cycle the forever their your integration I strategically beyond market, that’s -- lasting receiver can going there's think product given call product that. But CS CFPQ-ACO that talk not pluggable their And announcing so forward? held updated and [indiscernible] since any products the is about to trends, deal? going how certain [ph] and technology just and you help portfolio you moving conference of the

Alan Lowe

evolution look and deal are about and of announced scale Yes, leader will we technologies as statement modules and to we photonic what that them It's something to going larger next, gives as Oclaro technology transport well on the differentiated investments different. I better very leadership position whether make and directly, think combining we is technology customers in components refinement the generation to that's would relevance as that of buy that’s next not and customers we our Oclaro set at going in whether in going be of light it's about a the what into to things integrated a same to in in better of Kind a be talked that's or two technologies or DCO those be to a I a leader that has ACO are the circuit well into to chose transmission R&D. implementation what's product put world ACOs that modules. your radically opening just longer-term what evolves module reiterate one those that the us lifecycle, will

first these think leadership I of naturally XXX gig and translate leadership into generation. subsequent in the integrated into will generation modules above

Michael Genovese

Alan. Chris. Great. Thanks, Thanks,

Operator

from next line question Marshall the from comes of Stanley. Your Meta Morgan

open. is line Your

Meta Marshall

percentage at China's assuming they -- just anybody now, kind in overall second to that Mike's kind Thanks. maybe general. looking question, about CFO point of what update market of would optical potentially China is following of of Oclaro question, just that on ROADM of Are acquisition quickly Maybe your And of maybe, XX% Thanks. that the an kind ROADM if prior then the demand identified you closing? have to to yet? hope the and demand, search

Chris Coldren

first, leave second. Okay. Alan I the on will handle the

from deployments. sell put don't we in sales to China, between think our up first roughly going know, presume we the our China what are China or elsewhere. exact so what are We So be customers how question, would ends generally selling into of know we to answer customers. the on to of don't ROADMs the But who in in ROADM ones being so that a split Chinese them, question, to just up what China Chinese the exported ends XX% ballpark I

probably It your think Chinese to of underestimate the point in be I of an could share. is customers what market a the have market XX% being higher. as major little

think I with to lot opportunity a that those of So that Chinese there's grow customers. highlights underscores or

Alan Lowe

to on doing and going when know Chris bad sure in to question we've bringing relative and no CFO very problem we’re And a search, say candidates. to hard have when I It's going going experienced capable on would time publicly, a that get right not our had job not but because take I complement somebody don't himself. to board person happen. closure your CFO the of Oclaro say he the board is make to to we to that's we're and on

may take not person But very right excellent I would that somebody be as So opposed with met person. well-qualified. candidates would the find to make to rush I that rather I’ve many the the time we right are and say find sure that

is just So Oclaro. The uncertain timing I have don't we doubt very a any relative very, that CFO. will find capable to

Meta Marshall

Got Thanks. it.

Operator

next line Banavathi. question of Thejeswi comes from the Your

open. is line Your

Thejeswi Venkatesh

you're X. X When adopt X, you. of the already you sensing? Tier assume most what expect seeing of handset makers I do XD sort to Thank android Hi. Tier is Tier

Chris Coldren

I when. that dyed tend we what just well, with least their how of But now design larger information. be at say has X. into than virtually and and/or have really the launch the and or manufacturer We're little sure some that X, devices. I android engaged comment -- large smaller Tier think every consider are them all when product, the to would of to next this their designed months, X. that Tier is, [Indiscernible] plans not We the on were the can't to smaller XX define say be points you you’re X, publicly their over alluding I’m of on vendors launched least android a ones that handset at exactly but processes. the disclosing would will launches, timing every confidential high-end one can't But comment that I would

Thejeswi Venkatesh

customer, for pricing And lead 'XX device the Understood. the per with cycle to sensing what does like the in to cycle? respect look now XD $X previous your fiscal relative

Chris Coldren

year-over-year supply other prices of we’re prices year-over-year. have be The than analogous a chain. say Yes, up, going and if a and kind consistent not come that product. to comment price other little bit you may go to the down are come pricing on is volumes This with down nothing similar high-performance semiconductor semiconductor will, downs in unusual, devices

Thejeswi Venkatesh

the And one concerns about excess there inventory supply seeing Understood. just last question, were chain, it in that. VCSEL but sound quite doesn't you’re like

on was hoping comment could that? So you I

Alan Lowe

do in inventory calendar our hot a were larger year we question with we the VCSEL I And meet to chips given been running calendar this of last were or lengthy Certainly, supply chain. demand some materialized started manufacturing therefore think key year those quite in than ultimately this the wafers cycle. where manufacturing into year. is have early

hit can't You brakes immediately. just the

more to And suggest. so level say of projections revenue some generate of have our would enables us inventory than some that suppliers we

Thejeswi Venkatesh

you. Thank

Operator

next Your Rosenblatt from the line Zhang question from comes of Securities. Jun

Your line is open.

Jun Zhang

Thanks guys. taking morning, Good questions. for my

sensing XD topic. the still So,

could you you and And colors say let's VCSEL just the give your one talk QX, the in product level consumption if your inventory -- between I’m VCSEL also some about Taiwan using shipment, some or wafer be suppliers level? shipping? So on of gap for the my provided might could for inventory wafer second of [indiscernible] Thanks. -- That’s of the on wondering to wafer or new coming some alteration the [ph] half second question. chipsets able the existing wafer VCSEL there for VCSEL think in I you requirements the half? because existing continue are And newer us

Alan Lowe

shut I you think supply a just off. Sure, Yes, VCSELs echo said, multiple of that chain just supply Jun. to the chain Chris can't month is for what

used comment that on I inventory chain we’re say that can't production will I our be being able say that with in the So really have they’re I to supply at. levels market. the would and we very the comfortable

of have in we’re [indiscernible] we or have going expecting any line not that chips any goods the And so through up today. we that finished

Jun Zhang

do that also and on you potentially consume the And the less also right. could gross Okay, margin think potentially wafer side rate them Thanks. your help yield improving side? at

Chris Coldren

I Yes, upside to increase to as that continue gross at utilization, leaves increase shorten certainly well in mean as so we [technical yields us or thrive times least difficulty] cycle margin. the

expect early -- market, annual run stages by forward wafers basis branch. the very consuming an to so in a any that a very think we’re that moving on I be of rate expect don't of we fewer We sort large

Jun Zhang

side? And potential the cost on Okay. any further reduction VCSEL also laser production

Alan Lowe

continue with work to throughout drive Well, work chain cost I together so that mean, our can we drive continue them down. down, to we supply our to their cost to

the say would we that we I ongoing partners make an sure that process continue that to in So our we’re competitive with have up market to it's work as volume. ramp being to

semiconductor Chris that that's volume as over and working achieve. to So and down higher a with is and what cost process time come to said, we're our it's expected with partners

Jun Zhang

Okay. Thanks.

the those what's is front back margin android guys camera? you you I from to camera between difference And in question color Thanks. that, the sensing the about the back market. XD and So from two ASP last module also difference get camera facing some XD And in mentioned the some from opportunity just between my sensing the what's wanted there's chipsets?

Alan Lowe

side, deal chip is facing, we it's the necessarily or over But side able power module tend able what more details the and a it order and either off turned rapidly. a sections our can't comment the has on accomplish chips In meaning just to to higher image infer has that front be or produce different multiple chips on to how complex, So or back that we with. and I often on addressable profile or larger potentially modulated be to distances. and be that's our presumably beam to the customers longer

to for customer different. that of is generally next little higher asking a All a ASP, every something

chip but it's same rule Really So functionality [ph] again, -- process, the going front semiconductor to on the it's higher be priced be less probably than twice significantly so I is that can the side. don't ASP, other it's big, as used the as really think just thumb it of there's how chip for of twice a much great higher much.

Jun Zhang

my all great. Thanks questions. That’s a lot. Okay,

Alan Lowe

Jun. you, Thank

Operator

the from Savageaux question line Northland comes The Tim next from Capital. of

Your line is open.

Tim Savageaux

I I on follow-up morning. think and sensing. Good was start it. XD to on with a going Question then make Didn’t to telecom

in growth well think case quarter telecom You telecom on on acceleration I’m low of growth pretty on be of may the on looking and what the assumptions until we're XD -- to your across looking mid reports side for growth, seeing made even I what saw solid guide? what of are assuming in X% the there's peer in I side. up that a how on based June wonder teens, in be rate number, the sequential depending may terms sequential quarter sequential is we’re rates the informing space, be September sort at and

Alan Lowe

capacity constrained. our position, leadership strong have we where products the said I as Yes,

how higher fast as get on factories capacity reflects bringing guidance in well our how So fast we the of capacity. that as capacity we're our productivity can and existing ramp

we’re question products really can don't customers of is but to sequential in that those I'd satisfy that on. capacity growth say So my on The we how demand percentages what guide rate. mind demand higher working than certainly double-digit increase, for fast to bring specific we is, that's and the that

Tim Savageaux

look is, chain, uptick well, a and there's follow-up to real seen precisely from more assumed, this in want side, front as communications the And a at golden sort my on quarter perspective, gross up or looking that that’s analysis you really doubling echo I the of number a over perspective on in like optical year pretty popping you’ve XD, side try there's the higher but and which -- of quicker XD margin Right. supply the is here that at entire decent to XX% broader keeps and 'XX year kind system. increase this across in revenue calendar there's the really year-over-year ratio in doing calendar 'XX really nature a

trajectory revenue reminder, you? looking over sense Just it calendar does to long that or kind you $XXX what quarters year doubling that cycles overall standpoint, have years way period fiscal as million. multiple or calendar revenue, 'XX makes in From at that we’re various your versus was a of of a

Chris Coldren

of of I if year just -- last only year year, the XD having screwy I sensing calendar because calendar your is will. year guess, get half calendar and with calendar you the logical little a

Tim Savageaux

the And doubling, here go Chris.

Chris Coldren

Yes, yes.

of So that’s doubling change, that’s not my point. much right. It's a

Tim Savageaux

Thanks. enough. Fair

Chris Coldren

Okay.

Operator

are the Alan There will now to I no turn over further call questions. Lowe.

Alan Lowe

Relations are regularly discuss and Investor This We These business would our our on investor you, listed Thank thank our section you. are in look operator. concludes attending events in regularly again call We everyone for forward Thank like with to updated. relations Web for talking at and we another months. today. site to few events. you the

Operator

This call. concludes today's conference

may You now disconnect.

Lumentum (LITE) 8 Aug 182018 Q4 Earnings call transcript