LITE - Earnings call transcript Q1 2022

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Operator

Good morning, my name is Anna and I will be your conference Operator today. At this time, I’d like to welcome everyone to the Lumentum conference call to discuss its proposed acquisition of NeoPhotonics in addition to a review of Lumentum’s Q1 fiscal 2022 financial results. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. The call is scheduled for approximately one hour.

call recorded. today’s reminder, a is being As At over Associates. to I’d like the conference to turn Jim this time, Fanucchi of Darrow please go Sir, ahead.

Jim Fanucchi

announcement Darrow fiscal first Welcome to XXXX relations. earnings. agreement Operator. Lumentum’s Jim quarter Lumentum acquire of Fanucchi with is its investor from to its you an assisting entering and Thank NeoPhotonics This into Associates, to discuss call its

Financial from Alan Officer; call today and the and Chief Lowe, Wajid and the team, Strategy have Lumentum Senior Joining we Coldren, Executive President Chief Ali, of Vice Officer; Chris management President Development. Corporate

are October based X, particularly for XX-K be and XXXX XXXX, the ended our described are this the to filings guidance financial these financial regard, Lumentum’s factors as expectations cause and risk to or you considered undertakes a products and differ the results projections on on expectations except about the most risk first stated, the the available this website call recent statements actual time expected our no Lumentum and of materially on business superior forward-looking and We includes accordance accretion, GAAP operating our technology, financials releases Investors ended which markets discussed will those fiscal have the note company impact performance, include as of markets, the to the also our statements to financials strategies could margin results acquisition, customers current Please SEC, our statements with financial XX-Q President, with update announcement, of future of as our We and results. call today. the Form that in additional subject historical non-GAAP under our COVID-XX be expectations, uncertainties a press measures required in annual well prepared our Chairman the close, synergies, reconciliation uncertainty Non-GAAP beliefs not are trends financial particularly call in substitute model, results including law. This market and are on quarter SEC. for statements to and statements, benefits filed are to and to the all customers, on unless and risks the including as our opportunity, the regarding for our SEC supplemental our and and GAAP. otherwise for reasonable review and by Chief XXXX actions regarding statements from to at Lumentum’s continuing combined the and described Executive www.lumentum.com between market encourage report that with in regarding in a its and transaction Officer and forward-looking as with Today’s and July quarter this opportunity results provided call factors expectations we as our Jenks, section. Lumentum well in and operate, the year NeoPhotonics. expectations by its details of regarding X, to Tim applicable our also slides The and our expected including revenues, responsive non-GAAP These during targets. filings. obligation non-GAAP. and

to acquisition those posted announcement please the Lumentum’s X. following with For today’s Slide turn on along website, presentation on

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

Alan Lowe

to we Good Thank very morning cover. a day you exciting lot a have is Jim. Today everyone. and

better optical rapidly acquire announced are transaction, and even applicable partner to exposure silicon Lumentum’s XXXG team and an many toolkit we ultra that announced across above technologies the photonics customers, Lumentum NeoPhotonics with morning photonics, photonics and markets, for opportunity, start adding integrated RF this circuits. the morning, lasers, accelerate We networking line will we then our with a of transaction narrow earlier results. widely and Earlier expanding talented this to our will external this discuss scalability. tunable quarterly increasing optical cavity will speed and including we experts, our communication Through growing creating we width

turn I Before the strategy, will multiple with growing into benefits is this of this markets X. details a on his Tim the many turn leader getting to of thoughts then brief for how photonics. transaction to first Lumentum fits announcement. I over overview utilizing provide a today’s it transaction, our increasingly will of which in Please Slide and are

for markets, of there opportunities and and $XX each billion strong are manufacturing. photonics communications, sensing XD addressable LIDAR, secular In than for Lumentum. advanced market more trend growth Our these consists of creating

organically to and accelerate invest technologies is of to our in products differentiated each inorganically and strategy Our growth. in markets

capabilities in customers Lumentum and anticipation and our has their durable best stockholders. Over in fundamental by M&A to created and quality six grow products. we technology to which trends, we highest developing years and Consistent with public have company, the and in investing them a of executing win, creating to customer and performing relationships made great across grounded markets end value past manufacturing in long multiple strides enabling nurturing the needs as our had approach that technologies strategy markets, driven close strategic in with leveraging broad have our term and win a market-leading for this, and is then

Oclaro far for For late example, that we XXXX set objectives since closed we our exceeded then have transaction. the and acquisition the we in of

Tim? company compelling. tell so into I’m over about who NeoPhotonics’ Lumentum. is of We he the our building call combination upon our enhanced here NeoPhotonics with and Chairman towards exceeded timeline as the through to happy value than strategic on M&A another delivering and Tim integrate We significantly earlier objectives. why more and also when combination to successfully the the CEO an transaction. proven track the President, we record to turn now our this you targets and forward Jenks, NeoPhotonics to announced believes step we is is look synergy Board, achieving Today

Tim Jenks

Thank of this and I’m you and everyone. and cloud to combination. with for a of share you high NeoPhotonics pleased solutions is today. Good developer companies I be here speed, our telecom and manufacturer Alan, morning leading the optoelectronic carrier lasers global your enthusiasm networks. Alan. for future

innovator module high lasers, We a on optical and and ultra speed XXXG tunable our focused solution being photonics, in distance. technology and silicon light over above are for speed leading their component technologies for pure

beneficial all customer breadth our and growth Lumentum through right the high of of customers We for us on stakeholders. to maps cash The significantly combining The help scale. for with financial strength will road immediate us and for combination is are the speed for our confident business to position business. scale, our our further delivers accelerate believe serve can the NeoPhotonics’ that success. phase and I combination next product This that larger of Lumentum our partner our accelerate technologies leading to is and transaction our substantial consideration. continue value stockholders a to of

will committed and customers more having talented the with thank career breadth XX work, years. continuing exciting result is their determination committed our long a want Our much like and of growing a stable run. broader of over and NeoPhotonics, a combined personally solutions company, benefit NeoPhotonics of the set innovation, persistent opportunities from new supplier I all of and enhanced employees global and hard advancing will as benefit from and employees over to of financially the scale to who, capabilities photonics capable the for

has reinvented grown, new and company times. developed scaled Our technologies, multiple itself

this I exciting spirit driving to bring to that invite chapter. new Now you dedication and

capture his great combined Alan that opportunities that they to the going the Alan company. the recognize ahead Lastly, closely I passions over for would to forward, have organization we turn and to Alan the success further priorities and forward have working many to the share for our for team want I of in achieved look Lumentum am I team I to call same confident like and the with and that comments. the industry.

Alan Lowe

to us complement creates solid company will generation better of combines the have the broad now everyone a this optical optical products Thank even Adding transaction of combined that day. customers. X the investing you XXXG leadership our and for Lumentum to existing expands and financial in growing to more presentation. for portfolio Tim combination. capabilities in communications rapidly an your turn market. next networks. is and Please products The with and differentiated added comprehensive above of appreciate like Slide The a North technologies customers the market-leading optical organization world. company’s portfolio pool opportunities remarks portfolio kind to Asia, better getting our the It to benefits the desire partner customers addressing committed on in the how beyond closes. leverage manufacturing around innovation and globally, our Europe. I’d combined relevance strongly This compelling the new product needs for they walk R&D our this through the applications be NeoPhotonics benefit for customers It collaboration the our global partner Feedback will with very will positioned positive. accelerate of transaction been from allows get and deliver pursue attractive They extends combined transaction customers’ a well in combination talent today future. a to to growth the this when has broad including company allows will us also America communications. closer on from The manufacturing markets. and of to and and innovation. logic into The combined capabilities capabilities in The position.

be and combination we creates scale. will share earnings continued the benefit substantial to efficiency non-GAAP closing, performance. contributing to best-in-class following rate from accretive to and financial will the to economies deliver increase Combining of Finally, immediately opportunities synergies Lumentum’s per run

We these term to deliver stockholders. value compelling significant will are strategic long confident our that merits

essential gaming, many Slide are a other enabling X, digital network Internet, shaping applications I create continue at as change. and the unrelenting billion addressable requirements requirements These cloud, critical critical and vehicles, a Photonics requirements applications. total to safety, is high broadband driven capacity earlier. as earlier. access are photonics are more growing manufacturing, of applications in bandwidth role today, Photonics These sensing, Lumentum and security, scaling of increasing telecom becoming as delivery as XG new than $XX that healthcare, industrial know, to addressing for by technology you playing grow data market life, life sciences, and I are capacity video, an center and future. to approaches increasingly and bandwidth-intensive automobiles, network our for of meeting Turning mentioned well a the technology work pace. and increasingly trends to mentioned climate also the the transformation

for optical the XX%. Now annual internet in than transmission for turning growth above some optical The next rate bandwidth market $XX is growing Shown ports data of of of fastest rapid compound billion applications. speed an in expected growth telecom NeoPhotonics of adding X, speeds components over growth portions to robust accelerates increasing is on Lumentum’s ports this anticipated staggering to networks. exposure and communication the is XXXG slide very Slide rate more number XX% Gross more annual growth than years. compound and in the of high the with the five driving

opportunity growth of addition accelerate significant with All to NeoPhotonics. highlights the this a of

company’s combined span technology incorporate market product access, for future combined opportunity. Customers to NeoPhotonics on a road and product Turning to count also of will and Lumentum are wider and a portfolio plans. haul well be comprehensive and they XXXG like maps complementary Customers product will positioned looking term a broad and applications. are will long data product can have product the products. centers, for looking that Slide providers long metro XX, to above generation developed serve their the and technology next the to company Lumentum’s, has offerings offer into range portfolio compelling and

company’s proposition. gives the also term start combined level. fabrication, wafer of customer material, vertical the high integration the a cost start value low Turning and the most allows to fundamental which technologies Slide differentiation provides physics scalable, combination degree This from and level, at and to device XX, innovation manufacturing. long It

breadth focused photonics resources. the of to talented addition and on which technical increases team new technologies, our NeoPhotonics In of engineers depth a also brings

photonics spans packaging other to a our into numerous and important relevance these increasingly earlier breadth Turning as utilizing XX, devices, and photonics. range markets is combination’s of that The An advanced capabilities optical well and highlighted RF of strategy the integration new and are and wide software. and of electronic extends beyond capabilities to technology design, semiconductor as I materials applications. electronics of leverage communications. element Lumentum’s applications vertical Slide

hand now this opportunities on commercial Wajid? this benefits over employed of provide will as it sensing The successfully new growth I more that, have laser compelling solutions We the attractive shown With on developing terms well in for XD strategy additional creating transaction. solutions customers, our be new markets. pursue this to will to financial in Wajid details as and to combined well positioned slide. organization

Wajid Ali

approved This morning NeoPhotonics $XX Thank sentiment turn benefits by been about transaction. Alan transaction Slide companies, Tim’s of the Good this would approximately of equates you Alan. the echo stockholders I and both which total Please unanimously like has XX. transaction, significant own. to terms Board will everyone. to Directors value Under the of each in $XXX per cash of of they share NeoPhotonics a million. share for to receive the

sheet. to capital consideration As increase we help associated their with combined will be to a transaction, part up fund the $XX loan million working be NeoPhotonics The of from funded company’s growth term balance cash transaction to the and will providing capex plans.

for financial expected upon closing. earnings The to We deliver accretive our value be expect share this to stockholders. to immediately enhanced benefits non-GAAP and is drive transaction per transaction significant

complementary closing will process close currently We similar the be aligning subject a the Operating by synergies annual organizational driven we by of base. the closing to be to in driven closing XX NeoPhotonics expect $XX regulatory months half expected to XXXX infrastructure million other transaction synergies serving stockholders, of business synergies and the integrating are by than goods efficiencies approval chain more and manufacturing businesses, supply related this our total, of expense rate approvals, and to of Cost the efficiencies. nature to and run second of year sold more the calendar XX% customer than Given generate of within expect of conditions. transaction. customary post

Now Alan. I’ll the call turn back to

Alan Lowe

turn excited Slide this Thanks reiterate how to Please Wajid. to benefits transaction I the about want we are our XX. of for stakeholders.

will company combined products the a best-in-class broader customers, portfolio and For have of technologies.

to on today in We their and committed innovation needs capabilities investing to into manufacturing the future. are strongly and deliver

on exciting opportunities existing expect a both new company set markets. the transaction in and larger for employees, this growing We and new will combined of focused as be career will create we in

Lastly, as to The transaction significant will our create opportunities. even we’ve growth transaction stockholders. discussed, we term this believe for value stronger long contributes

that, in to discuss our prepared second morning meaningful guidance plans close. to quickly are results as We for have very execute like our we With we following highlights prior the strong the synergies similar transactions attain the and quarter. quickly we would first done quarter of this to announced

metrics. our all results quarter First above on were guidance ranges

Their lines in segment Our anticipated will industrial telecom that and offset favorable consumer are our of datacom revenues performance a continue the larger product near lines we and strong our were more than fiscal we our impact XXXX. ahead environment commercial expectations. prior term supply product laser demand Despite challenges, than of semiconductor throughout expect shortages seeing and

have are powerful customers markets demand generation next seeing and driven by communicated market Our they their that term solutions. for long trends accelerating end are

We them generation developing their leading have designing just in been starting new next to products customers for successful differentiated solutions, and of which are into many ramp. market

datacom again and were the few Terrestrial pump a from was laser up notable expected. highlights. quarter, while revenue more down details, some as telecom was to revenue there prior Turning quarter-on-quarter,

cloud last end have seeing year-on-year the our As pump shipments on Elevated our Also, EMO with been in telecom sequential of driven strong datacom future growth market revenue trends, are business, leading I sales highest had by indicator call, pump in many mentioned demand. a chip we consistent demand. years. prior we in strong frequently

revenue Looking to to however, increasing quarter, be telecom is up increasing even to second supply. we than demand and supply; due the expect faster datacom quarter-on-quarter

to $XX gap shortages quarter due and million. be second is to material than semiconductor more demand expected Our to

the first seasonality level year-on-year quarter was to consumer up delivered. industrial due ever we quarter up Revenue market. highest First revenue was and the quarter-on-quarter have in XX% strongly to consumer

sequentially to expectations is trends fiber fiscal recovering of that industrial be seasonality. programs to key laser kilowatt of demand COVID-XX second We more On since to we strong this ahead seasonality, down expect and sales. quarter consumer original Commercial lasers be expect ’XX year. due fiscal customer ’XX, of our year’s that delayed last with than like

through second With to will the numbers. We over be to turn expect that, Wajid? Wajid run revenues again lasers quarter sequentially. the call to up I

Wajid Ali

Thank up XX.X%, you and XX.X%, margin the the range. $X.XX. XX% was year-on-year. X% margin first was down end for Alan. $XXX.X Net quarter Net and guidance which gross GAAP GAAP first sequentially GAAP million, was top was for of our income the revenue exceeded was quarter net operating share diluted revenue per

of basis First XXX margins. and quarter laser up segment and with XX%, gross was mix XXX non-GAAP a sequentially points points in better gross margin communications optical up which was improvements basis products year-on-year, and

basis was sequential which higher XXX points The First margins. year-on-year. and primarily quarter operating was XX.X%, increased gross and increase X,XXX points by margin basis sequentially non-GAAP year-on-year driven

quarter million. and $XXX.X adjusted non-GAAP million, operating First EBITDA income was was $XXX.X

million expense operating on $XX.X expense of million. a was was non-GAAP basis. million quarter $XX.X was Other non-GAAP income of $XX expense SG&A totaled and or R&D First expenses expense million. XX.X% revenue. net $X.X a

income $XXX.X was diluted First quarter non-GAAP non-GAAP million, net per income net $X.XX. and was share

share quarter Our million. for count $XX.X fully fourth the was diluted

we reminder, calculation our changed a tax last non-GAAP quarter. As methodology

sheet, the billion term $X.X and we quarter with balance short On in approximately ended cash investments. the

first of $XXX buyback During a quarter, million we $XXX purchased announced of we X.X shares previously million million under million To share program. for date, our purchased shares $XX have of the our million. our total X.X for

XX% a quarter sequentially sequentially XX.X% at gross and revenue consumer. communication Turning mix. due points primarily to Optical to due higher revenues points richer $XXX industrial basis year-on-year, and was XXX details, first margin XXX segment segment optical to segment million increased increased communication and product in basis seasonally

sequentially at segment COVID-XX. $XX.X from impact increased XX% and the million XX% to due Our recovery the ongoing year-on-year first quarter laser of revenue

XX points XXX up points was higher volumes. lasers basis gross sequentially at to due First year-on-year XX.X% basis quarter margin and

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

materials. Based range net on second to net to range the in of of we other demand of diluted project expect of revenue ’XX in We unsatisfied income $XXX due margin quarter range and be guidance be more for $XX per to incorporates operating than XX% in million of this, $XXX million. $X.XX XX% the to million and the $X.XX. fiscal semiconductors to second to shortages of quarter be the This share to

the approximately second expense Our approximate non-GAAP and that is tax income a turn a effective share guidance Jim XX.X%, quarter an million expense the $XX net for With to count at Q&A of I’ll the annual is to $X non-GAAP of projections a other in These based and and rate of expense the assume million EPS approximately interest resulting on tax million. XX.X that, call midpoint. of start session. Jim? back

Jim Fanucchi

Thank you Wajid.

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

Operator

from first from [Operator instructions] comes Sachs. is Our open. Rod, today question your Rod line Goldman Hall

Rod Hall

Great, Alan, question, been there’s wanted I I cadence a start just--you guys. deals and the guess know, here. the of to with thanks for acquisition,

had the You Coherent one. happening; course this up now, deal, which end doing of didn’t you’re

the and are got this announcement, there Do how a portfolio then curious I’ve complete out there. how is this I’m you to see now? Obviously got for? there like landscape more consolidation think feel landscape. a other follow-up. you’ve you you curious given see just go fairly Just you assets Do

Alan Lowe

about we’re all, Thanks, the coming NeoPhotonics. with together the first excited Yes, really question. Rod, for of

we’re going in to but I our and think don’t acquisition it with as want we on in if we’re more, on do look making well growth think new now But strategy. fits to that for forward. there’s do today’s more as NeoPhotonics that the and as successful markets both it to organic invest and I right I results right think is continue gets talked markets, the we’ve call. I highly existing strategic focused in sure about speculate M&A

Rod Hall

than I’m back Wajid, margin on themselves, is dig Then a maybe in the earnings better Are than lot better, here the you drove lot curious gross sensing your you also, Okay, seeing XD share thought expected. spring? that. you you if even thanks I Alan. Then could have a would you into what think, comment.

said mix, I assume gross You that or pricing you opposed to us that and could into is on driven but by drill what’s help going a there? bit as understand little margins, Thanks. higher

Alan Lowe

XD on I’ll Yes, sensing. take the question

ship one cycle in As product remarks, there that we our we delays make us, much we quality, us our on customers, much want produce two can’t make the it ago, continuing can like the to with years customer. lead I comment for believe they possible to competitive what pricing. really focus and only on them, can that’s delivery was when in every for as they what from share, our comment on buy asked of effort of customers ramp as said to performance, this and I and was sure we’re to prepared no is products and

We’re sensing margin first sensing, our and very the Wajid, for for new in respect to and want new handle markets new gross products products to sensing. with to do XD quarter existing XD the in continue do opportunities the to as results expect XD as quite comment? you happy with well well and

Wajid Ali

sure. Yes,

in year-over-year. been sequential and As margins across also been segments, only seen gross it’s has gross you see, not we’ve but margin increasing that Rod, both increase

manufacturing As mix those it’s saw and doing as improvement gross gross I’d say played product both the that in been expenses, our well, in part the we noted which higher quite are business our really business is prepared helping we versus obviously overhead year-over-year and quarter of a margins by our what driven of the we lasers has volumes, things together. margin expected, big had comments, hand in this coming better well that so

Operator

comes Our open. line from Alex is from Alex, Needham. Henderson question your next

Alex Henderson

Thank very much. you

Neo to company. joining also and off, Lumentum acquisition, congratulations great for great First to on a a

guys earnings some as you here a their for think lines overlap know, the of reporting ZR this new little line is Oclaro that in it’s your what products, that Neo thinking as call, and the how their XXXG kind do Coherent reported between to I both those what the wanted Neo transaction also product obviously products part a get as old on and superb see headlines? bit call, important more extent conference companies. the to is are you on in was of the and what I success of ramp have, granularity the--you products, relative your to

Tim Jenks

this Alex, Jenks. Tim Thanks is

us First serve of all, we’re transaction. well, outlined all combination very very is that the situation overall The our remarks. for seen will this are strong results business that is excited our quite strong. in chain, it We reflect do The prepared current as but have right quarter, now and customers our does headwinds supply from we’ve about number trends our XXX the reasons supply ZR in for chain, we a and products. year. bodes products the are, all forward well in going positive. to industry that well, also theirs think of Again, using chain supply work are many started, we’re and quarter of all next next the deployments but as so Initial continuing our in the the for that customers as for with we have issues, others the

Alan Lowe

Thanks in the for complementary very, will very things, we’re and RF all endorsement. products drivers if complementary silicon could with those photonics, your you with fit where those about Lumentum all fit, cavity - so lasers, are narrow the I are technology products nicely very that the fundamentally question brings as portfolio, the I well. very, very combined external TIAs, excited things Alex, about think do answer the know, NeoPhotonics quite to line transaction and and

Alex Henderson

was in you could, what the mentioned the at I didn’t just sense I’m supply $XX you Lumentum hoping if of the was give in quarter question, the you for Thanks. impact us worth what say guide, second was but company. the in either at some Neo, constraint what The constraints numbers. constraint can supply the constraint million printed of current

Alan Lowe

demand had--it the it demand datacom than $XX and telecom and we that the $XX gap actually million what supply. our Yes, stronger of supply million increase, Even led QX. increased in semiconductors growing and so than business, increased QX went the we as to got in was more tougher, and between during output through is quarter, the us that’s and with

through got your with the and the I is to want current we’ve other some their work handle Tim, quarter? balance outlook do the to impact As semiconductors talk the to with year, given that very of materials. customers, to on up so situation September catch strong do demand you fiscal

Tim Jenks

obviously, ongoing million and not of an demand very Semiconductors situation That demand certainly definitely so we of challenge, is constrained. dollars important challenges thing, and range non-GAAP quarter, semiconductors. at we the same our end but of in we about for opportunity, of we magnitude. Sure. us we have but high The regained the good profitability the was similar, the that, quite is several strong supply were we’ve were had the to seen ongoing we not and felt of constrained, tune the

Operator

from line is your JP open. Our comes Morgan. Chatterjee Samik from next Samik, question

Samik Chatterjee

technology and question. here acquisition where of look change the compared the Alan, a in more direction concentrating in seems messaging your the in at the I been guess to be Coherent vertical. there markets intent the itself, intent looks strategic surface has that of Coherent, the communication just on with Coherent looking of question communication at were revenues transaction terms diversifying very was into company newer you I what from in to surface more versus Are Coherent follow-up, have is end the and this the strategic if my didn’t broad go end which through, deal with different one it Hi, for the [indiscernible] the NeoPhotonics end to taking your or I like the thanks to take was markets about a base to looking more the a vertical implied were communication newer focus the with Then you on markets? M&A? please. on of

Alan Lowe

Thanks Samik.

portfolio fits broad markets the step we’re the efforts of bolstering market, accelerate what and right with needs can best in have customers’ as enabling together in both get capabilities talked into to to products at in our to at communications to our innovate market. think First a you new I our exciting I do of also giving to about, think think us look able together, going this be talked possible both the and strategy supplier outside we both as look and able we that resources I the those communications that markets. use one, be is get very teams but our it’s these also entrance new and but current communications photonics of enabling to teams incredible all, meet their to our customers, about that this accelerate I be and

known off. transaction, our the something--I’ve we was growth transmission, given Tim in where excited think and couldn’t and is and pretty This strength more It’s their right I ahead. exciting. I on on it this time the about over we’ve transport, for talked for in strength are XX years, this opportunities be

Samik Chatterjee

follow-up, Thank were here was the For know trying is just can a Were for or Just more this Coherent. was any this I don’t you, you. process, and there multiple there question to interested case? Tim but bidders, to if in the what ask, if my or or process I similar--? compare a bidding process this other parties

Tim Jenks

opportunities is of us landscape advised. of our platform be the proxy innovations the do strategic we our the NeoPhotonics. delivers a It this two you that, as course well scale and as that I’ve to value and this in of shortly. Tim. about is very shareholders. the industry Directors, path think that that for Board decades, we to I our published we tell industry we be well what for wanted for really scale to in is well, know What provides know the We our to well. brought business Thanks able wanted for right very market larger face, to can details of management was been in What to we product forward solutions, transaction the our will that we’ve immediate on and transpired course this the very as all is doing It

Operator

Our is Raymond Simon, Simon next from comes question yours. the from floor James. Leopold

Simon Leopold

exactly exit chips to operated there’s is the key businesses, taking to of margin NeoPhotonics focused and combined last the and low implications, for while some example and the help that we ZR over you selling particular Great, an just philosophy I contrary necessarily potential and and the about thanks example thinking companies to Lumentum’s know chips, I’m the on that certainly the how one understand get a datacom the question. has you’ve strategy company? may here. difference mission transceivers, don’t gross of whereas the apply the have seems for Could how how for see you’re specific understanding we’ve pursued seen margin followed but the decision logic talking plan I The so so it two includes couple terms it want to margin laser about improvement, that in Lumentum’s synergies, years. not us your

Alan Lowe

the Alan. thanks Simon. is for Sure, question, This

what will synergies, those that planning also but We kick gross integration how capture improve about going one, the number decisions off make look at to we will we the forward do to margins. do

fashion. get As in that Wajid truly talked of come about, will XX% more of which we’ll or from getting sold, believe rapid of synergies, $XX cost goods I million

of have. details the at they looked not all have that of the We products

the where a and together, it’s their different got external technology manufacturing towards NeoPhotonics that so narrow they’ve think are gross lasers, those got combined get with RFICs, and they’ve margins with think a will our more at model we I boxes, they’ve photonics, we cavity drive the with the can line today. than I bit that everything ZR, got because you silicon look if they’ve into got goes little

I think an it’s exciting just time.

planning, and going synergies we as to what well. teams idea you, are place needs well those be to integration extremely improved through and out and our tell positioned, take performance. I happy have As extremely concrete the of come get a But the this we’ll drive ready drive more customers think actually to we’ll of are I’ll

Simon Leopold

around sort follow-up, appears a Great, the in the comment you in of what more and better models. market share seasonality last terms year, of as on because XD sense, being newest did some makes just this a seeing get to it but gained you’re I share that product cycle wanted than moves, of which normal understanding you’ve

make that that Thank floats boats share Just want you’re to only, all shift but rising not some sure you. also a it’s experiencing. tide

Alan Lowe

Yes, thanks Simon.

anything, share product the tell for with then next we but new lead that get going can and as ramp, to the new there customer on this so get product new I get, don’t on we’re tell us more products share be introductions you means that introduced, They think them product for ramp, as what product ramps. be is if on it. we customer--our I counts and our that us

I any anywhere focused what when think them what of quality extremely need, the seen on them being that’s they need know to done. probably need no we’re they at and again choice it, haven’t the but don’t that want and competitors they have I would because levels move to case we getting here, business don’t us, partner say tell our else. excuses they the giving and

be and new also years, our the I our That think talking it’s the starting is going become we’re opportunities we’ve but to to real coming market about. lead a significant with positioned to into the contribution extremely now been over and with well that future overall think customers, business. I

Operator

WestPark open. Michael from Capital. comes Genovese question Michael, from next is Our your line

Michael Genovese

datacom, much. Great, rest understanding that telecom, why and a a to wondering rodems very you of pushed the I’m percentage been the if please? get all that that Can rodem the for better thanks the industry. so comment and I’m out. being wanted that builds the have and very low, constrained those the must of about talking high vendors shipments keep on that’s questions, system of footprint just very assuming implications In were I products was

Alan Lowe

to so those you able parts--you of on more all getting and them, as impacted. so unit, or and are concentration cards impact they those different rodems all a being surmised, be to know, shortages have rodems, than and Sure. therefore one of The not suppliers, just just the ship we them two are do but certainly need semiconductors line heaviest

of are is our of escape products, rodem cards. more products the also say transmission some I’d transmission to in so the line half some not been of but than and impacted able we’ve it Our rodems shortages well, on as

Michael Genovese

Are datacom? in any shortages

Alan Lowe

and a processing, business our wafer from is so much testing the business. would pretty buying say mind datacom chip back in is We keep substrate Well, end control is chips. but and ability hyperscalers fast That’s by demand for our as chain the our I the want chain no, impacted to speeds datacom the EMLs processing, not doing datacom the to a semiconductor that business. supply entire our what’s greatest as by latest ramp supply EML in our constraining impacted

Michael Genovese

want Tim That’s Alan. ask Then great color, specifically-- just to I

Alan Lowe

of But to over approximately ask talked through add and to expect those that second so your that from we will capacity the five calendar again--sorry, just we’re was question. to are has business first that, ahead, the year, benefit I year online a our EML EML half the the quarters about over last and that additions coming ago, now. continuing Go and doubled, add going business Michael,

Michael Genovese

wanted since to since want modules, I little talked directly chance, if your this issues Thanks there. the report my that. you for update but just I is Tim, an ask for to just for to chance these anything a a bit qualifications ask on there’s there’s very hyperscale ZR around

Tim Jenks

These happy ongoing, multiple to. are Sure, customers.

source track. think still their and in not on in volumes, those We’re volumes, high shipping The beyond hyperscalers on I are in selections source. their initial generally are units small process major

Michael Genovese

of all deal Perfect. you. to on the Congratulations

to and a think it’s it. Thanks. following great combination looking forward I

Tim Jenks

Michael. Thanks

Alan Lowe

Michael. Thanks

Operator

press any now. one followed you a star would to please questions, ask your keypad like by reminder, As if telephone further on

Najam please question Partners. Fahad ahead. next go MKM from comes Our Fahad, from

Fahad Najam

little mentioned, on for your well NeoPhotonics, integrated for going my utilize especially significantly question Then than as more very the your infrastructure $XX visit your follow-up lasers. exposure and is are, to suppliers? assuming forward? you there? you strategy developed third million, having your is gross a question. bit fab a Thank to vertical as When earnings. fab Can you’re have What on integration, EML I taking manufacturing contract because of you strategy margin reduce you going are to your Alan, savings highlight more NeoPhotonics you you vertically that party I and a wanted elaborate

Alan Lowe

EML really we about, to vertically integrated first well is, the I a of Sure. within our in add set again, we’ve that are and us. NeoPhotonics Well fit all, that’s and complementary as brings business, what on of capacity, control think, products our talked with well,

making be Oclaro, are very not have with sure very capture earlier, teams planning, to our coming with great accelerating that synergies integration capitalize We innovation. also, do, I we those we’re and to respect supporting we’re going and the sure that integration as customers, as to thoughtful started we what and did said two together on but to thoughtful make we planning in

into XD our to Tim, to integration and but gotten business, the add? I think we say, Our figure fab, XD sensing that but would do have to you think something sensing Tim’s is to not that is mostly don’t datacom haven’t I so how business from fit stage do large, outsourced, perspective it as that you planning. out

Tim Jenks

become a complementary it’s as devices. are I there is very Yes, used lasers, broad base then I to I think do, these lasers, very that where for also overlap. very EML have There transceivers, of that kinds modulators, are silicon very lasers there Again, now. silicon and think with of such respect in we think are photonics situation photonics little with enhance competitive drivers these DFB all DFB and a there laser are strength a broad we devices this portfolio the diodes, capability very, are to

Fahad Najam

Appreciate the answer.

one, about prices you On your and very and comment obviously more you can gross the contributed higher disciplined as The margin you there, and you Wajid, product Alan are earnings, is out environment? seeing increasing pricing the are relatively also pricing impressive but products to incur mix costs? that, on environment

Alan Lowe

I’d over say Well, like our our down to time. over prices - time, this customers down and come do come prices

you our led continue gross reductions and drive and the costs to engineering see. manufacturing down, our cost reductions margins, have operations as combined price team Our to and team

because that the that this long think our and recognize next for the have passed we’re this customers, we’ve with in buys customers. not the in partnership, and semiconductors I We we’ve haul seen had they not or we’re make the on to increases spot to our for value on quarter,

we are they’ll get. we’ll I think them our NeoPhotonics growth for them, recognized for customers here the to the partners us a the we with signal is are and combination as more the give and more business more that

area. choice of give business customers’ and more our our they up focus the be partner want more in the that to so supply think us frees is to I semiconductor as

we’re great great, to a come position. think of going I in this out

Operator

comes please Mehta, Marshall Stanley. question ahead. from next Our from Morgan Mehta go

Mehta Marshall

given much of XD the given following that versus orders the--sorry, are telling inventory about to just along spoke like sensing just just chain, the than or it getting a those or delays relationships more you having whole XXXX customer pause get new they’re Appreciate would the part? of the the have feel with of any or their customer with possible, some their Then combination, as the wanted and they like you with just sense of pattern, a but you they do I going NeoPhotonics as take accumulate question, lot about some XXXX with into delays Great, today pattern thanks. sense a supply markets of would commentary to [indiscernible] products? just those on the second XXXX relationships you to Thanks.

Chris Coldren

chime in. I’ll Chris. started that, on get is will yes. Okay, then This and Alan

think not In that terms of being I to seasonality, XD we’re told down. sensing slow

seeing seeing anything to that order customers, We’re we’re from be from like trend contradict the and ago again two years would and order an very expect seasonality we that. regular flow not

new In new attacking got ways terms markets, we’ve couple a we’re markets. of

of LIDAR big being and existing have will, quarters need designed example and technologies with solar to our us, from diverse ray been customers so continue several talking design chips. in wins more if industrial We sensing, that you in for win for and we’ve about

our in view where as markets, so time view value customer a and win-win of in Overall, to pursue applicable very look we when only much that the puzzle, we as we be have a well tunable opportunity technology have meet this we The communications together. well, a the add technology new as both as As it when take compelling in toolkits for walk relationships, it at existing well markets, as proposition LIDAR, like toolkit it’s to some as the can of new and that from markets. areas as do very together, existing also can very in space. to a us customer unique coming cavity certainly satellite more the is first the other a part used in technology well acquisition say, external and enables you being what to we laser

Mehta Marshall

Great, thank you.

Operator

more which time Hallum. from Shannon go comes have for please ahead. Richard, We Richard Craig one question, from

Richard Shannon

take Alan lasers? My questions. position for want on is first any my Tim deal issues, I market, taking on a for Both you potential oligopolistic that both refer Do a the to to your see and have Coherent one get thanks companies of so antitrust specifically one here. and Great, I in first. fairly

Alan Lowe

Sure Richard, in. I’ll give chime Tim perspective you and my can

agreement complementary. are that, we the from photonics merger the Tim, laser As to have we advice said, from products believe if a lot anything think Their and things this do like do, external and and you we this be had as silicon you would all is get weren’t into going wouldn’t very, we getting very, advisors line We’ve complementary. very differentiated cavity anything very add? I’ve regulatory and time narrow with in tunable RF and through go approvals. through to point up I drivers confident of very TIAs we

Tim Jenks

Richard, I question. the appreciate

actually NeoPhotonics I products there the buy, what to comes offers, when amount overlap. deep actually that of a or of that think Lumentum it direct down customers technology offers all is surprisingly small

we well. types each that think I different as lasers applies that of to provide the

going Alan it. we’ve about competitor forward, we actually I of purposes hard think good that strong at looked said, and Thanks. will a being quite serve us well pretty as this feel for the very but

Operator

conclude we no time for hand today’s any afraid to further I’m Lowe call. conference back Alan questions. to now have I’ll

Alan Lowe

like this I to are today. I eager you. the look market. all to the concludes we see for the companies morning about to for of will this how innovation combined this and excited for of to forward I’m NeoPhotonics to we creativity Lumentum. attending, and reiterate you Emily. to would stakeholders, the the announced Thank want everyone our bring call I thank Thank welcoming and transaction team benefits our

Operator

you Thank today. for everyone joining

conference concludes now a your Have lovely Please As lines. day, now everyone. our said, this disconnect call. Alan

Lumentum (LITE) 4 Nov 212022 Q1 Earnings call transcript