LITE - Earnings call transcript Q3 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, everyone, and welcome to the Lumentum Holdings Third Quarter Fiscal Year 2021 Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] Please also note today's event is being recorded. At this time, I'd like to turn the conference over to Jim Fanucchi of Darrow Associates. Sir, please go ahead.

Jim Fanucchi

operator. you, Thank Third Lumentum's Year Earnings XXXX Welcome Quarter Call. to Fiscal Fanucchi This assisting from Lumentum Jim with Associates, Darrow is Relations. its Investor

as includes reconciliation available financial about in otherwise website as details Joining and Officer; forward-looking applicable statements non-GAAP in and historical our discussed and all measures Corporate materially quarter are could www.lumentum.com Company's to of projections XXXX, Lumentum the responsive on including statements, actions report the products Please Coldren, our based and from Senior Lowe, The today. undertakes revenues, the including Executive during and thereto today subject Company results no that Today's non-GAAP our market obligation unless our our impact call are Form of Lumentum's GAAP to cause section our and provided we we such the guidance statements quarterly Chris Wajid this this current the the statements, Investors COVID-XX in which risk call expectations, and differ Strategy are X, statements regard; at today. President this required model our Officer; financial on factors Financial uncertainties SEC update well Alan performance, technology; and markets; on results. Chief to described President Company's stated, markets results its actual call a beliefs on opportunity margin to and our under for file regarding in call business later law. as for management Chief XX-Q between regarding filings, Ali, additional our ended financial Development. of position these targets. continuing also the Vice particularly expectations April note, in have fiscal except the operate by customers; and These and and our expected uncertainty future our our expectations the team, from and expects and which and will forward-looking include statements risks our markets, trends including and and reasonable as

turn the for I Alan his will comments. over call to Now

Alan Lowe

want Jim. Good are our the first morning, say you, Thank COVID-XX everyone. with I and pandemic. to affected prayers thoughts continuing by everyone

our declining everyone While situation in is the in is India and are affected. the with few States What Again, in good. vaccinations is a case and are other places United rates happening around thoughts the not many countries, heartbreaking. absolutely world,

Turning business. to our

devices quarter Revenue increasingly XD aligned and Our processing key a highlight well is portfolio that virtual manufacturing transition and days, critical expand for multiyear third and in transformation delivery data by XD results to frictionless product include of rich work from of applications, market multiple long-term digital approaches continuous Laser-based machine and multiyear wide mix. in contactless favorable world's to that is and These aspects our of The lines we capabilities biometric virtual transition discussions storage. improvements and trends. and me position next-generation us digital product and networks life energy the new technology and EMLs and the components vehicle by access the security applications. enable market-leading the differentiated with long-term electric vehicle their machine new staggering the applications driving sensing product accelerating term. in and positions, many driven operations in and all over and LiDAR to and optimism. reality, cloud expect and networks with core control edge customers in bottlenecks markets. cloud will communicated XG industrial proliferation the centers. data and of and augmented early automotive for to bandwidth well highly wireless data and bandwidth the even The of material trends, our vision in The vision remove where centers. revolutions more products. growing are drive at combined XXX These will design that points long in with us network leadership computer modules, the growth Recent phosphide-based a were solutions These double-digit have contentionless include wins indium of they and for percentages Customers each are seeing coherent and range product lasers. year-on-year. basis and sensing gross year-on-year differentiated gives MxN bode Non-GAAP and ROADMs, XD wireless XG for their end demand more high-speed by up margin expanded with have we market next-generation products amounts

supply Now like These believe others, about tight of revenue. and in point, market near-term a that critical growing more that headwinds this this are components end COVID-XX. by inventory market translating it the and demand we geographies by and We customer the for market 'XX. anticipation growth On telecom end in remainder moderate shipments year. will customers views on, reaccelerate strong combination through is this seeing of and impacted in potential fiscal components delays XG-related and may market the we certain calendar midway driven in year XG of are into depend our build demand semiconductors our of deployments telecom

middle in market to we by believe sensing, the XD recovery XD the of global design for return net 'XX. lasers sensing to lasers of and reduce 'XX to business approximately by will In continue to overall decisions our customer market certain the pre-pandemic fiscal fiscal XX%. the levels XX% We expect impact

setting 'XX in and of 'XX. market markets sensing expect growth fiscal and applications, reacceleration laser-based We to fiscal more expand for to 'XX, the stage customers in

maps sensing product further integrate to time, help fiscal fiscal we reduce These 'XX first external near-term market be of to approximately first to do headwinds our my content designs of market functionality constraints include time. forecasts and At around optimism X% revenue half our not more incorporating future this half market trends, road additional and where putting for for customer supply to long-term multiyear capture we customers cost relative well, capabilities new our us outlook. the expect allowing As together, their down diminish 'XX. while size over these dollar XD of the the

Our in wins our product years. I the over the continues the and be very several industry changes design believe model at to business portfolio future and past positive the and bright Lumentum.

to allocation. Turning capital

the turn We initially as out transactions are disappointed Coherent hoped. didn't we had

believe run. strategic continue long be for to creator Lumentum the We M&A a value will over

alternatives, said, opportunity. We we and our our very From our organic will for strongly be own capital analyzing timing. stock believe in investing a best value our That thoughtful in after opportunities currently believe allocation we is standpoint, in creation. approach

Directors share program next buyback to up a $XXX Board Lumentum's million over of has for such, the authorized As two years.

sales. These or several last than growth are are as the the MxN or contentionless our The West. coherent more to Within in third We third shipments our XX% revenue are MxN components On customers' of adjusting mix designed about This incorporation to record average ROADMs, to systems, details third we count NEM ROADM from on their customer. count largest our to for with selling strong our with ROADMs which are every quarter, started and we coming Western the extra week call, the quarter. highlighted products just customer production revenue modules in our high of next years. price already major ramp. accelerate quarter. had new network In largest year-on-year NEM revenue MxN and they Datacom, us devices. port increase due into the of deployments production up we equipment recent to NEM was our China, And Now after help shipments lower revenue indium will our starting these port manufacturer increasing the higher significantly phosphide-based ROADMs Telecom latest in in over network advanced

in ROADMs. in was customers our highly recent designed are in center higher to is quarter. transitioning the again week XXX We are market, data qualification up gig our products increasingly and more with year-on-year, products third At final differentiated. XX% These chips many speeds. speeds, adjusting XXX stages Revenue for than extra which these advanced the from or serve latest cloud the with other EML

expect transceiver vertically We differentiation drive and will integrated integrated share this gains non-vertically with market suppliers.

to operators this, constrained primarily secure quarter, from million them. EMLs. the transitions will seeking multiple web-scale accelerate during third output. EMLs for customers are cloud over operators delivered capacity as cloud to our orders our speeds. on backlog We $XX of their This quarters as growth Underscoring expect will received serving we we continue production higher and be

and expect levels fourth this this to well drive China, could we products more will once middle for quarter half up year-on-year. DML and of Our $XX increased capacity million DML towards later output online increased our would year sales 'XX. our are significantly come year the delays down timing XG fronthaul inventory. below expansion by be 'XX revenue through this deployments ramp and in quarter second starting previously XG burn the resume for expected At was continued demand deployments existing than calendar Due fronthaul to customers in of significant is ago fiscal highlighted fiscal in summer. This third time, tracking production

revenue to up Telecom quarter-on-quarter. the to fourth be we and Looking quarter, expect Datacom

up to consumer the to as sequentially expect double-digit percentage by higher and and sensing revenue and consumer year-on-year. was fourth due due In seasonality volumes we Third industrial and XD to quarter, normal year-on-year down quarter-on-quarter but quarter content seasonality. increased up dollar due declined expected, industrial to be

customer Additionally, a Android large features and Android sensing of to This with laser lasers. much this of proliferate our by camera new customer new had we We manufacturers. and enabled have time-of-flight a capabilities an a mass customer products. recently chip components, notable win designs mobile higher-volume phone important major leading is upcoming begun frequently design production as for supplier is XD launch their camera

well the announced that applications and industrial industry-leading in technology us position VCSEL During in automotive future for advancements markets. we quarter, the third

LiDAR including autonomous who high-efficiency industry-leading high-power, traction of rays, These leveraging delivery announced and of interest markets. VCSEL we the are retailers fleets particular example, the major to multi-junction and looking for are design. have strong For junction vehicles. in arrays six vehicles, to autonomous automotive solutions They five deploy

receive continue orders As control auto and we initial access other to from production LiDAR and customers. well, design-ins

are Turning segment. lasers. Historically, now had the of and segments that impact market have third laser downturns, we we COVID-XX material after was a slowest of amongst this four decline. cautiously In we fiber during recover, quarters of in worst to seen the the optimistic quarter, increase commercial sales to in significant processing the macro kilowatt

highlighted fourth invested wins quarter-on-quarter. I've Throughout and driven technologies We be trends long-term are we revenue have and design programs. customer are latest up my lasers in customers. products, we market-leading heavily have quarter expect on differentiated new remarks, more with our track products, that our and that markets With key to strong secured by for

customers as starting shipments of products product mix to new are is richer Our solutions. becoming in these their next-generation ramp

We outlook. the are that nearer-term moderate but some factors growth will these don't industry diminish long-term external seeing for quarters few next market our

to again handing the world Before want review I for acknowledge and Wajid and the thank all employees numbers, to work to around once of it hard our contributions. their over

our also for Wajid. I'll are would that, absolutely hand during I Company's it support like continued times. partnership challenging asset. the to employees and Our to With and their suppliers greatest shareholders thank these customers, over

Wajid Ali

Good morning, Alan. you, Thank everyone.

Net of of fronthaul the to an in in $XX.X delays caution, numbers. Out quarter's $XXX.X million and abundance up to quarter XX% revenue China. for deployments was Turning down was due deferred the XG X% million, third year-on-year. sequentially which we revenue third of

approximately our and strong the of the the achieved GAAP include However, XX.X% margin our $X.XX. was margin due strength Coherent the the were of third XX.X%. operating diluted $XXX.X and for the revenue, despite which GAAP was received within GAAP impact GAAP margin income financial transaction. both million model, connection operating was non-GAAP EPS, with share and we gross results we per lower of ranges. net in guidance the and margin non-GAAP termination quarter XX% to gross

mix year-on-year Third but improving as quarter basis a XX.X%, was non-GAAP due sequentially our margin was model gross better mix and lower Communications the manufacturing relative products product in while relates of the change up year-on-year sequential growth gross points the down The improved with to volumes, margins XXX XXX costs. expected which points was seasonal driven basis by to decline and segment. in Optical

margin XX.X% expected by was improvement and in margin points expenses at operating non-GAAP increased year-on-year but quarter gross the increase quarter-on-quarter. increase decline basis margin operating The driven points by year-on-year. sequential was basis sequentially XXX XXX gross decline driven The decreased and Third year-on-year. the

quarter the Third driven XX% quarter rates that by in year. was The totaled revenue. expenses the the $XX.X of of the payroll occurs expense was of calendar operating the benefits beginning primarily was million. SG&A $XX.X at expense of non-GAAP million operating expenses XX-week extra and week $XX.X R&D sequential or reset million. increase annual tax and

million. our to expense. of non-GAAP net levels rates and our $X.X million count XX.X due $X.X on than income was based short-term was interest as net a income per $XXX.X and quarter of diluted Third expense fully cash lower Other share diluted expense tax million of declined includes income interest was a income and This lower net of million $X interest net investments. expense Non-GAAP million. share $X.XX to expense on

the sheet, and $XXX paid transaction billion the quarter-on-quarter, we million including to On short-term $X.X us. ended $XXX the balance million cash investments, with approximately up termination quarter Coherent in fee

aggregate notes We $X.X principal billion in have debt. term no convertible and

next over Board has years. a Lumentum's authorized program Directors of the As million up buyback share Alan of $XXX to two mentioned,

balance million, more has we are by our in our Over increased and outlook. cash the confident XX future $XXX past than months, long-term

in Given use good believe this growing the industry, of we cash. relative a is our valuations

to segment turning Now details.

more Communications devices. revenue XXX due content points due the increased was Communications seasonally to revenue the segment revenues in with XX% profitable Third year-on-year extra due in but benefits margin XG-related in and sequentially at the at the quarter revenue earlier. segment revenue consumer to and industrial industrial lower consumer a discussed from year-on-year XD consumer to and week deferred XXX newer revenue of million the revenues lower and and due gross to and mix and XX.X% $XXX.X quarter I the and X% Optical favorable and sensing consumer sequentially Optical increased points due and dollar improvements. industrial and segment primarily Optical higher Datacom to up operational electronic more increased adoption mix basis products decreased basis Communications Telecom

revenue the ongoing the million Our recovery as X% recovery segment is increased from isn't complete. XX% due year-on-year $XX.X to of sequentially COVID-XX but Lasers at down impact the

points Third significantly quarter and XX.X% down lasers gross to basis was sequentially at XX levels. XXX revenue lower down margin basis points due year-on-year

non-GAAP guidance Now based our 'XX, as basis today. and onto which for fourth fiscal a on of quarter the is our assumptions is of on

Despite normalizing revenue the four fourth for is about expect of the $XXX fiscal guidance We from for and quarter the we years, 'XX over recent net quarter. seasonality be the this third to historical million. past industry of the the million with the to consistent mean when XX-week fiscal range $XXX quarter revenue headwinds, in seasonal fourth been our revenue X%. deferred I'd decline note, to has revenue

assumes I'll commercial $X and range driven Our XX $X the to and and revenue turn declining Jim range projection diluted per Telecom start industrial projections of approximate Jim? $X.XX. seasonality These expense Based and to to that, fourth consumer other margin normal share an in recovery the estimated due to an increasing quarter-on-quarter to session. Q&A project $X.XX back With be XX% expense in this, we of of count operating also by share market of to assume quarter Datacom of tax increasing the COVID-XX. be the net million. on lasers million and million quarter-on-quarter, further estimated income to and from XX.X% call

Jim Fanucchi

you, Thank Wajid.

question-and-answer our session. we would let's to to Before of help follow-up. the the question-and-answer to to start a time. everyone like everyone question and Operator, one with This session, get end ask keep begin should allotted us I before one

Operator

Samik session. Chatterjee now will go We Our comes first of begin Please Instructions] ahead. question [Operator the question-and-answer Morgan. from JP

Joe Cardoso

for is wanted This starting with half you first touch Telecom here the to and fiscal 'XX for on guide Sam My Cardoso Joe one Datacom. on Chatterjee. first provided just

half year. before growth in moderate the for the calling of second reaccelerating You're

expecting order in greatest recovery is then in the of can we rank if that And the a bit? into giving terms you half, kind confidence you are out you to there wondering, the Where are see much Where see you trend? drivers of second How the second the that half? kind that's the details to expecting of see recovery can weakness? greatest the parcel you Just supply-related?

Alan Lowe

Sure. the I'd different through product say going half areas. first

and we QX. we QX, As Datacom said, growth Telecom see in

QX. in of the exit to stages our rollout rate that from is of one China. continue is in revenue XG half, We inventory in hampered, expectations, to the to be moving moderately going perspective but quarter of first continue is expect the various the and Datacom Telecom from in grow deferral around And the had we the third very reasons deployment slowly. to

So pick million. we up. year-on-year said, to QX about is reduction that don't And we in $XX expect as the DML

Datacom EMLs. a on that in place Offsetting be expect to our that we the So is drag on to increased continue we're capacity business. putting

in in Commercial be Datacom fiscal from down we we modest half. middle And pandemic. first we And be a increases as so the to back said, levels. by see we the lasers continuing EMLs of year, the pre-pandemic recovery that to will, but should our will overall is see expect

we lasers, given the of smaller XD being content per we'll and smaller see customers in by to around growth have that So design some chips, mainly moderate said expectation, as XX%, our sensing decisions due and lead smaller then to to device. average made XX% market also, chips smaller our

so probably the bigger that's drag first expectations. on And the half

As we're product you rebound, I phenomenal. wins see and across are confident far that think second portfolio, if our as half our we'll design look why a

has a about our Those ROADMs. high designed new the contentionless port on fabulous talked done counted in are job West. designs Our and team in we

rebound. very And are from poised for so we a much our perspective,

in ago, that again, products. that about are year, half capacity that be of on sensing in our that quite that EML then Also that in that the that Now expectations I the in this orders is, and our XD quarters the for online market that highly well. second second XXX- our EMLs, business in one. on talked year the due differentiated going continued And our the again, two we of or then, lasers. and and think up. will before then talked XXX-gig products coming growth expect that's to we the to modest, our market we'll of end three expect is the capture all major the issue half We And QX, is we year, on and see motion, EMLs share the picks calendar and happen might but a our about fiscal

Operator

The Goldman Hall with from ahead. Please Rod comes go next question Sachs.

Rod Hall

I sensing. guess back my is question first XD to

pretty been have assuming is had has I higher but think the would you guys that also redesign. chip down, size as telegraphed that to I result it share well go been going a of

could just I Alan, position got on you how share see a And follow-up. then wonder if, So HX you in comment I've your that and going.

Alan Lowe

We're been Sure, confident question. of for the we've satisfy last highly choice. our Rod. ability to X.X for the customer. years, of And Thanks our the partner

to continue of deliver almost billion sensing. We execute, units XD X

And from I design very so our doing perspective, think very, We're the we're lead. well.

X.X of a for that needs that we see share market our we supply would customer shift, years we've saying we and -- year. saw Our and that been -- security last had

don't to years three and going frankly. we of expectations had that the our customer us, want quite back that last make the over to go because we're to So kinds that share for uncomfortable I was for

a us our having perspective. well our two competitor. think I customer of how very cost think continuing well thing we're to one that gives quality, a I good leading a So is and compared perform from delivery, to performed we And suppliers comparison in

to of end that especially we're launches. continue are expectations solid our product to front a at so the going have And share,

Rod Hall

Okay. then on check follow-up, my Great. for I ROADM additional there's summer. the I that just planned capacity know wanted for And to --

sounds still not that on just means capacity. it's expand be you like guess on you given whether well, on trajectory in to the still on we comment you that. what could Are still to short? for expecting ROADM on wanted as be market, capacity think track. track that probably guys supply still what's demand you going the online check revenue that balances that's now, -- It you Just I'd to bring post I are going maybe and curious are but on versus

Alan Lowe

Yes.

as ROADM have as added the a very the port well We end high MxN count high ROADMs. on for capacity, mostly

Western customers a going our added capacity be MxN our their product to mainstream as not so we have are And short from to standpoint. portfolio,

down So second that that source, in really business the we're dramatically from adding to we in perspective, let in of it that year, cannot the of ramping -- sole because first anticipation continuing half them but our we're them grow half. and the fiscal capacity

that's So I'd on the track. say shortages. some thing causing the semiconductor other angst that's is

more than be, And pressure end. our a on meet the so to keen high but I'd to some is on customer that semiconductors I demand been our have expediter like ability putting also of

Operator

The Please comes Needham. from Henderson next question ahead. go with Alex

Alex Henderson

You've clarification XD sensing made a to on. couple just wanted of some comments get I around that

competitor's So in There's clearly, shift there's some share. on. going an your share in been and a reduction share increase your

Can expect have you of solid Or about opposed terms that where about that you think descriptive? you've definitive in erosion? it's expect of solid, been think as whether not very comment talk shares not gotten simply whether trajectory change stabilized? rate very share's to share to just share you continue you Your to point to in altered. have is whether do we How -- should a to have solid's you share think

Alan Lowe

All Alex. right,

record track speaks our think itself. for I

on. that's have a our been if As for solid, that to dependable we word you And the new want how products different are have describe it. customer announced, supplier counts I'd

has perspective is where up. we And release numbers last earnings. models our going equilibrium are in and our the But itself. think, comparison to the get long overall, pretty to our and quarter on with quarter numbers sensing is I we're we're in I for speak to term, my different and we new share reached are. the end I and products so is our built mean now And transparent our do every been versus the you think if XD where competitor. our the probably in where talk going based see competitors, I And be that over press that think,

Alex Henderson

in of stabilized conclusion statement said? just has your the fair couple what Is been So relative that recent quarters. where to it most you is of has a the share that

Alan Lowe

perspective, and comfortable we're us already make our share or mean toes, it. for have. And I I from extremely more all want that them any And we're think to to keeps any and -- customer I reason responsive our to excuse so. the we think move my to don't and needs. that on attentive I'm time, customers' sure give that we're And comfortable next from for with perspective, next I'm just think than to them. I there sure our they're they it. work with generation generation on make continuing

Operator

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

Simon Leopold

got want sort of ask more the I've that. complex and one I to two. first

values, sensing can't smaller about, on dimensions. the other that but about you've two get the that understanding talked I chip ASPs So us other on the with specific better is you XD fact the should on market you what's decline we how obviously going could a ASP. than the volume think help with of less? they're is and there's One be appreciate key

Alan Lowe

the size I'd Simon, as device that chip yield. with semiconductor, like well cost say just of that as any Yes, both scales

And think so I getting our think a we never with yields team get done job a to customers' we're on And our I and size, chip customer expectation great great and is competitor ASP has to. we've scales our done job and in yield. that our could working thought that

true price and price. size, therefore, and a that from they of and any x imagine customers smaller our can think should But or from chip that x our indicator be that it any very ASP, from -- we're market the think, you will in a our testing holds and wafer becomes good to I even ASPs percent it processing of perspective, for maintain margin around, that have confident, the the complexity given where a is yield perspective, continue discussions is been. with or lower hey, variation. in our And in therefore, different of smaller I the size margins given part, most we good perspective, And cost, percent price at indicator So dynamic. for

Simon Leopold

are lower profit gross dollars then? implies that But

Alan Lowe

Yes. I mean, absolutely.

think basis, to going a I percentage on are be margins the stable.

bottom With line dollars of top market coming the will the the lower. shrinkage, down because be at

Simon Leopold

trying It decent-sized, datacom bigger And China hopefully, EMLs, smaller. maybe is bit. than sounds the to maybe unpack was Okay. easy a that I had, probably then me bit to and exposure the a is I the question chips the little pretty DML just guessing XG and products little

So to about think on within help can give more think us Datacom? how proportions different about this from coming products little you us trending. a the So color

Alan Lowe

Sure. I'd year-on-year. say our EML that XX% business grew

So growth sell suppliers sell hyperscale from into to DMLs And XG well fronthaul. transceivers moving the transceiver transceivers. is is although Datacom soften that EMLs. centers, XXX to those XXX-gig are in that data coming starting XXX to we to sell DMLs from We the as as gig and hyperscalers

XXXG. in rapid in shift center XXX we're the so to to only the XXXG see And but from and a not going from reduction XG deployments also data shift the

on pressure respect think an straightforward capacity complexity and DML. do not to from we in and capacity it's is DMLs difference add there as to or really because a focus to the is of might how with our EMLs, So compared shift EML processing you

probably business, QX XX:XX-ish, model through around I'd that fiscal in look at and can first you business. pre-XG it's dramatically was the EML-heavy, to it Datacom the half think and the grow assume you think But year. of continue I that slowdown, you that I say can will if

Operator

Please Morgan comes Meta Stanley. ahead. Marshall question next from with go The

Meta Marshall

for Maybe Great. a Thanks. couple me. of questions

Coherent Just just and to repurchase. deciding share one deal do a the on

share given kind the partner for looking a Just Silver at you would potential particularly were been India to looking right by acquisition? your second term. slowdown a of M&A, an current you look Lake now? repurchase, at forecast the of be of had kind Coherent you is what we're then what what on to incorporated your incremental kind could the And opting when were less in you near forward, active telco kind in seem appetite for potentially be It just maybe question, of have as seeing if going due as

Alan Lowe

We and repurchase. I'll we're take looks let is for Meta. okay, strategic But us talked questions, share for still focused like doing Wajid that shareholders, value still the on Yes, believe create inorganic me have the our and will that M&A M&A. that. three about

of what we're I M&A, record for. we a have think looking and track successful that's

are and acquisition. went step believe and the opportunity value back management of to question. repurchase, time, disappointed way put to that I'll the for in creation although Board it and place and Wajid. cash Wajid Go the telecom I think the the generation we is is the had also to And at this on say, is point share to Coherent next the talk an come I'd I it back value say went, best that our us what can we've the about ahead, organic the cash. think decision the

Wajid Ali

I allocation No, think capital struck we've in our a terms balance strategy. Yes. of perfect

know, than choose a to M&A of the of months, in transactions it our as a go you as selective that transactions. we've well authorized growth we've to. is heavily little support and firepower do just And leaves amount cash in ahead Board our historically buyback the the has us still M&A the million bit invested beauty CapEx to As over as with and of larger we generated that lot it's $XXX last share XX

forward allows moving flexibility gives as optionality, So I to us think it it and well. us maintain

be at So some able to cash forward order work levels. in to buy back especially shares, looking we're to to putting some current

Alan Lowe

what's hard third things And your in and like say. going question on India, to then of forecast telecom incremental on on it's impact

seen we've that continued is telecom this ramp-up perspective time. even our a think of slow through I

in that, Our go it are and -- still in talking continues. today. doesn't India to to And India that if they're deploying our customers, I think expectations

today, so not much to an been imagine, could had deploying impacted. if worse, the it's or And not would be cases. far still -- to it which But otherwise so but hard of there rate if believe hard at get things influx that such I

Operator

next from The Marchetti Please John question comes ahead. Stifel. go from

John Marchetti

or quarter first on the vendors, Maybe up do comment. maybe some guess, that year for I have And western were new to just With following for you Alan, your ago? sort that minute, of the with continue slowed you telecom relative of your on to so for ramp? MxN deployments fiscal outlook, a a the sorts where the has those of of half to ramp expectation some you expect wins

Alan Lowe

I'd with tracking mean we during talked the I for expected we're very, muted cycle in are product be of NEMs, of we of that about would Chinese say in say NEMs systems there I also the our much happy the no. growth had we pandemic. script. of design that next-generation a challenges I'd Western to very we as where expected. the progress But deploying think pretty just the not but result

and from if or so think we'll poised perspective, ready. by indium modules, coherent phosphide, our the we're I be as and components accelerate, MxN, deployments So

John Marchetti

to of the And then some risks on it's couple just we way as of move a efforts tenders? a maybe got and in Or think wait themselves some of some now. side, associated deliver. And of this you out to some expected ahead your hamper these XG to what still are all deferral that a actually And administration's new prior those quarters if inventory if that just of curious the where delays follow-up, tenders growth is see the that is because sense of of result levels have inventory right the or levels it with of those there? maybe

Alan Lowe

stations in to if been I look base million like you go for in was I and those there'd or X be mean there in of 'XX, There if a year, million similar think calendar of they're million that number that. kind to base lot I deployed. half. But like you was think the last in XX% will, going time, that not was kind Same first approximately expectation deployed XXX be have outlook China disappointment, back stations of Yes. some deployed. XXX

that until belief picking this meaningful summertime have up so year. won't middle that, starts but of the business impact our on And the is our part fiscal

So that I where the their radio the or deploying get start think their meaningful inventory we in ability transceiver our supplier there's before solely it any inventory WIP, And stations. customer that's throughout, that whether to we for think chips I'd that's station needs or ramp supplier I to much and the see base where due at deployment. it's at needs issues the mean say to the to U.S.-China base geopolitical and up

up start the And expectation year. is that in redesign that calendar of will happening. that, our the half is so second And picking

Operator

Loop with Capital. Baruah Ananda from comes Please question ahead. next The go

Ananda Baruah

for if the one. well. two me, clarification is Yes, I Really, could first as

you then How then pressure? quick you I being pricing sensing, And there component. are XD also, both of on design? And and have smaller about the price down pressure, the then talked follow-up. guys a -- much and pricing it versus down market mix You the call market seeing component then a the guidance on is pricing pricing the

Chris Coldren

Good This is Chris. morning.

not et about other since But with market dollar additional -- we're than seeing the the and which impact higher of normal the well erosion. chip for coming lower the that normal. price chip help with question no we've dollar some more other around they price-downs -- of that. maybe dollar then will content going you and the launched. That applications. are major be is those is price cost, is We've those with gone capture down have prepared we year normal the aligned case, prices And packaging costs, as this package a cetera. say We've if come in when designs performance, every map think will. the that about provided customers mix product I sizes includes that a normalizing said, there's us integrate price have I erosion sizes, opining and market, just enable functionality, normal reduces road got mentioned other or, That customers you smaller. the this reduces optical if redesign price down volumes or also for sort capabilities, integrate lower chip lower will. to customers of made there's unusual we're Alan markets normal to fiscal purely erosion. over the the market the well, online customers on enough offset seen at is not as content business. clear, come anything we and content, price the would other in time size, But and Pricing and content fast in back 'XX, in within There's think remarks, online dollar up erosion factors, This products increases our into won't our environment I dollar smaller this pressure, to combination right?

'XX, reaccelerate. come online we they into then as believe 'XX fiscal fiscal the but will market through -- and So

Alan Lowe

maybe the other earnings sensing. recently, one customer Sorry, to in we this not where they on And have different outlook incorporate last was expectation were a than thing XD do it Android call, just to to which add market of on decision made the is major our product. generation the that's

And so puts incorporate pressure sensing. not XD also the that Android when major on market decided around to the expectations customer

pressure so on that market the for puts some fiscal outlook And in 'XX. our

Ananda Baruah

do that, -- that my other actually end, was in was the vendor in sort that ago? follow-up. you process could to Do that of days thought That be opportunities aside still what Android just see one think XX included you space your from

Chris Coldren

customers. has, But it for Yes. I year like continue COVID-XX been compared -- expected. the and to Android we to than been slower everybody about seems think impacted them adoption. has excited expected mean our overall, I been we've this given It's sure I really be obviously has largest very rough Android suppliers think, I'm

components, a approach the across data on AR/VR smartphone I think barriers world, if we point strong capabilities great designs the This harder of Alan in customer masse, focused of Android and with to well, what a their LiDAR-based sells proliferates there's low-cost that of script therefore, that's applications. the very or sensors really technology. Alan And then to will, Android the kind you help been the time-of-flight-based this world-facing And en technical positive is think that customer others photography, who photography. for approaches highlighted much some with and the need and a a we board is more world-facing is manufacturers larger -- for image a Android their Android frequently interest manufacturers. technologies had or technology, launch for also universe really is one the

a technology, of So leading a technology it's a manufacturer bit volume phones proliferate that further. it great adopt so that, see maybe will leading to not

Operator

Jefferies. comes ahead. next The from question Please with George Notter go

George Notter

here. discussion XD the natural guess the front-facing, out marketplace in through on characteristics I sort of I of ASP going the to in of wanted or sensing changes of the either Or a size and changes? chip evolution this you're is Any market? keep that driving that kind performance is more world-facing seeing the

Alan Lowe

two these of a with that customer it's that we've our to think chips I provide and ago. talked years more jointly, capability been George, to and three are we've Yes. able customer, our about

parties that at talked of then And our that as the needs types I to combined, now from so size. go more improves, we game and product And develop different to customer of our go about Chris capability smaller ability functionality to adding the chip functionality a on can think technology to a has more that stage add and third our components.

will at of As are we more roll a cost, chip we those lower content. the capture functionalities types in out dollar embedded that

and features. different this say I'd lower-cost of the than So higher no just evolution functionality at solutions driving is

Chris Coldren

thing be than not still of may one as the a many fact, chips lost in that lasers, smaller, more, And lasers add got past. to to in there's that, I if lot as think maybe

said, why So to But a folks that. that with us that, and challenges for presents it's of the taken also it working provides The market. in chip. a the years accomplish on as lot highlight barrier to level other of density that level that's entry the achieve of customers technical in reason several Alan to I differentiation

the like not dumber. more it's smaller It's smaller chip's you getting and So will. complex, getting and if

Operator

with comes Michael question Capital. go next ahead. WestPark The from Genovese Please

Michael Genovese

want market to to XX% correctly I the lot going feel are like remarks. be because And that make revenues but is the and X%. year, going of prepared be call better your sure you're calendar saying of in handles you to XX% share, I the So to the I down understand on the about this half market a answered in it there's down second

rolled as switch smaller some you chip bringing the out? share? So chip new us share this to suggest that back doesn't that this of Doesn't as you're tell is math gaining just new

Alan Lowe

portion in business. mind, of keep is Well, XD sensing a our

is pressure. Datacom to going to different grow. at look grow. be we businesses, is Telecom to as Lasers going going so is And other our under

commentary down And size lack the just to year, was in around the fiscal XX%. the market being the customer XX% down be will fiscal and Android not the due first the itself XX% half fiscal a market the chip adoption XX% belief of and so the to our by in to that our year, market major

And then turns model. great. that's a you to into expectations how we that translates is can Now that today. bunch assuming on And our revenue, half out have count our going But our don't the I and have our that. on your into guidance share, think first share say, gain it a hard impact that maintain what to of revenue model we negative we but it's

Michael Genovese

it. Got

ask Okay. Great. indium for phosphide then to news wanted your perspective. I And good just the is I mean news.

interest we pluggables lot and ZR As XXXZR and there's in of market, track a that plus.

any general momentum what's indium commentary market? so be inhibit Does there? your that to the perspective forward? it appreciated. to Is there of phosphide or need And rate going on growth Just play going drive would

Chris Coldren

about our mean, I phosphide Yes. Mike. very our for excited opportunities Thanks, indium very Yes. we're certainly, differentiated capabilities. platform,

them. XXX already pluggable metro gig whole There's We're We performance example. requirements haul all very long from modules. a all applications and performance type of as focused components of phosphide an the then way working to range gig down also XXX supplying DCI on into modules, are high ZR indium on

are our them investments customer our size products our and of the the we're ability and based prioritizing sampling of And feedback. phase. differentiate in Others Some to kind production. are in opportunity on

have. So platform given it's the unique we a great phosphide opportunity for us indium

Operator

The go next Please Christopher Rolland from question Susquehanna. with comes ahead.

Christopher Rolland

of pretty the do you have, ball of what in various the I next best kind Maybe guess guys revenue back kind about the guess year, it segments as the this your itself looking how for maybe looks half. talked about you manifests like, I secondly, thing then grow talk first well. And you my broad. out expect year-over-year? to crystal is into with reacceleration

Alan Lowe

could or Chris I and maybe comment in. Christopher, Wajid can Yes. chime

focus Our year know what changed. half the and we fiscal we give know is to the first when it, you of for outlook our

year. I as not you that's made half half we about knew. gave And that first why you the to why we so that's guidance so and knew We're exception guidance. going first And think soon gave the for talk as the we

to too or happen quarters think opposed I let four alone to to out. quarters what's hard five it's as going predict, out two

So wins we that's products, going comment design extremely customers, with can what on think and progress our on new new well. I is

in And said, we we'll so those capabilities what be focused talked coherent making market as be for or deployments them as the on for we picks our customers. get our as there well indium ROADMs, sure need. products. pick capacity up, key we'll both really in up we about. are phosphide And they wafer investing We're components. investing for as in fabs, our Datacom That

anticipation of in investing are for we that picking we'll ready So be and our up, customers.

Operator

comes Fahad Partners. question next from ahead. Najam The with MKM Please go

Fahad Najam

that a your dollars. XQ? your out for I Is accounted have is of that revenue guidance? a clarification is first. from into guidance million DML few Or The deferred completely

Wajid Ali

here. It's Wajid Yes, Fahad.

the see that was whether in or fiscal QX. million guidance half of has QX of whether the in type of it's it's impact we any the our already in recovery been first we on that, So of incorporated $XX 'XX fiscal provided. And

Fahad Najam

And Okay. question. to now my

So that were coming surprising ASPs it's Alan, not down.

pass could also, as share about by come more there will is XXXX? down gains? more assumption checks is more Or Android, SKUs sensing across in if this based on and that XD ASPs customer generally you Our speaking adoption fiscal comment indicated reacceleration that that an primarily had of with proliferation broader that

Alan Lowe

or happening and now in say we security, intended for Android 'XX. reacceleration comes think Sure. to 'XX. what Well, different was that fiscal like message through industries, for many of to 'XX. more We're what close record wins lot things. without accelerate of record, going far really expected automotive, had around things the be But what's working are fiscal of to plan knowing access on lead I different online in a happening had added and what devices things as many design whether control be markets. hopeful until I think the really to our should And biometrics many, that fiscal XXXX, actually on plan we they that working now get that still is outlook we're deciding for as generation we're different many, is next customers, added of And our from customers, fiscal

sure so of leave And design just designs making whether we're will the that's new them continuation they choose designs and a them, when or put we're source for in. them existing to we

Operator

for comes question ahead. our We go in time. Diffely from question Davidson. Tom one D.A. have allotted from time more Please The next

Tom Diffely

of expansion Or the extending on a I in basis? some nice reduction benefit good margin year-over-year most now on forward the margin there had a out, Thanks on the for runway on me rolling new the a Yes, this, here. basis. been that has morning. cost products expansion is Based and going of the question you're realized? squeezing a for

Wajid Ali

Yes, I'll start off. It's here. Wajid

out a our across we've Communications the on lot our improvement products. So to margins, of that Optical year-over-year point gross you're right had

noted relates Lasers throughout Our on Lasers. Alan our but impact our fiscal to Lasers 'XX. primarily positive volume levels That year-over-year improve to lower. to continue as the corresponding margins remarks business should session, only come have down margins because and in it as have been expecting QX his But have not even in Q&A gross the in we're a

it we're about margin forecasting product of margin our fiscal with put gross current 'XX, you north end continuing actual within of We expectation of and our couple of there. gross puts for model despite hold we'll quarters mix as benefits margins model seeing we're And primarily out QX, that call. the as year-to-date, Now we've 'XX talked up well we're ago takes results Communications, talked margins XX% to as can expect targeting XX%. well see, a fiscal QX year quite as the board. comes to some during for with a capacity some Optical as that fiscal start is what we XX% And we'll well as about the our of EML even because on

that, seeing be that target our our So and we're product support I that. and that our to deployments think continues customer

Operator

This the for closing remarks. concludes over like our question-and-answer any Jim would turn to to back session. I Fanucchi conference

Jim Fanucchi

and we the talking to do 'XX everyone Have today. results. with to quarter fourth for Thank you. a We report call would you forward good attending, thank day. when like fiscal again look This for we concludes our

Operator

The conference concluded. has you now Thank attending today's for presentation.

You may now disconnect.

Lumentum (LITE) 12 May 212021 Q3 Earnings call transcript