LITE - Earnings call transcript Q3 2022

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Operator

Good day, everyone, and welcome to the Lumentum Holdings Third Quarter Fiscal Year 2022 Earnings Call. All participants will be in a listen-only mode. Please also note, today's event is being recorded for replay purposes. At this time, I'd like to hand the conference call over to Kathy Ta, Vice President of Investor Relations. Ms. ahead. go please Ta,

Kathryn Ta

Welcome is fiscal President Kathy Relations. operator. earnings of quarter call. This Ta, to you, third Lumentum's XXXX Investor Thank Lumentum's Vice

XX-Q me model accretion, this including Today's Senior our business Vice and operating NeoPhotonics, are the the our Chief statements as by markets; be market ended and those Form regarding our XXXX, X, risk report January and trends quarter our and are are XX-Q XXXX our Chief quarter in at and ended our to subject our We statements that to of our our factors expected factors President the filed substitute these Chief Joining filings market otherwise to regarding all filings. for, press Investors Corporate These in results about expectations slides described Officer; include or quarter reasonable our President expectations, Alan non-GAAP. Development for future performance, forward-looking to as customers; Lumentum's today. non-GAAP with to revenues, projections and April uncertainty continuing results the and the and you With expected particularly with update technology; and additional the and risks statements our as regard; forward-looking materially www.lumentum.com in on current the of Wajid including regarding in products website markets results on note, and customers no I'll in available with benefits over and GAAP the financial differ X, on results acquisition including Officer. unless and in pending guidance accompanying which by opportunity Please This expectations historical XXXX a as Lumentum Financial fiscal synergies, Coldren, Non-GAAP combined described that, call are and quarterly cause expectations SEC, actual for of uncertainties the our impact our includes particularly with GAAP. to be the to financial financial the supplemental today. between Officer; beliefs Lumentum's section. could we are considered opportunity, and will release in SEC call under Ali, for and expectations third not the as and most this risk during on stated, targets. obligation provided Chris recent Alan. turn financials non-GAAP Lumentum COVID-XX time encourage well and and financials review Strategy our margin from to our are the and today details call except applicable regarding strategies Executive call to close, the law. operate, reconciliation Lowe, financial statements, company accordance measures as statements, also as well in superior undertakes prepared SEC of this based required to, The discussed the a results. statements

Alan Lowe

end And Kathy. being and our demand resulted third quarter all world morning, good you, Thank the around financial team everyone. solid the execution at by in high range. our Strong metrics guidance of

markets Unrelenting and growth are tailwinds we and in continued believe already revenue and we beyond we in Long-term XXXX. our strong cloud for generation and driving data QX demand will are in is the revenue see growing. in XXXX. position consumption differentiated excellent products markets and our fiscal is growth to grow We address. an networking driving And

a handsets. leading-edge infrastructure sensing for mobile design for we And and lasers LiDAR and expanding multi-year require XD automation. that upgrades announced photonics. beginning are cases our just beyond building reference performance Use our new in are customers QX, Our high

New applications. and to factories are we outpacing and their lasers commercial and extended for telecom components, Near-term, engaged customers more with fabs the upgrade that our we lasers to our our customers and reality utilize many we notably of leading edge are semiconductor supply customer demand on the increasingly supply. industrial and grow semiconductors automotive Demand most microelectronics capabilities as expand LiDAR, for of also third-party is lasers build need turning continues to products.

will drive is quarter. telecom in Our component growth progress excellent in which we making team supply alleviate revenues the strong chain shortages, fourth to sequential expect

offset QX. capacity, telecom this datacom XD expect with our in more syncing combined than normal seasonality growth, increased will the recently commissioned We output from

and We expect increase revenue will sequentially QX year-over-year.

is Our new a QX a component for is high quarter. revenue outlook growing supply demand even increasing, in company would faster. fourth Though result

million We gap a impact a when million the an as in $XXX is than third result approximate expect more and demand supply in quarter. saw up QX. with the we between $XX revenue compared of This gap significantly

to shortages supply calendar and the previously with diligent of timeline closing accelerating XXXX. team material the see to second work suppliers, into the continue our of While will given environment, demand of The announced remains calendar NeoPhotonics we acquisition demand for our we track these third-party outpacing improve in supply XXXX. likely the half expect customer on

strong key with China, our approval our We with comprehensive customers, antitrust create and gives diligently the automotive conviction well are transaction. more planning NeoPhotonics the for Integration that as working of me meaningful our condition team for being final with the as closing synergies. for their in authorities cost products will customers, portfolio suppliers combination and our shareholders cloud, a networking differentiated the value to

third our provide some me Now, let on quarter results. detail

supply and to telecom despite revenue quarter-on-quarter demand. due very down strong As constraints expected, datacom was

year. access mobile transmission networking XXG fronthaul is calendar the deep and accelerating. end wireless starting and fiber revenue cable be products for deployed is tunable fronthaul and deliver MSO applications our meaningful expected applications These as application for the as networking include are wireless well The New customers, customers. metro of to to just by for

released end more assembly to our year. back are our and factories fab our test of the robust this XX% the We our same last adoption from enabling technology. than rapid capacity sales Pump and manufacturing and XXG soon-to-be laser grew wafer increasing products address are quarter and XXG differentiated in and for tunable

we have of previously, been mentioned pump indicator frequently a leading telecom future As have shipments elevated demand.

deploying cable by addition, at robust In demand indicator suppliers record center cables of levels, submarine from driven subsea are is demand. data the leading another This future operators. telecom hyperscale

speed investments for reached center infrastructure these XXXX propel revenue. growth expect a data serving double-digit applications new cloud starting fiscal record We will years. momentum into help multiple high EMLs in in

to shipments our fulfill increase EML New capacity manufacturing Accordingly, us expect more EML help even strong fourth products. third quarter to better to from ramp the we our demand datacom for significantly revenue us will differentiated allow quarter. customer

quarter-on-quarter to due the telecom we supply, fourth the ahead improvements up still be expect Looking but to IC significantly revenue component demand. the datacom to quarter, below level customer and in of strongly

to with suppliers of work alternative shortages. supply alleviate continue We on diligently and our sources to

Turning to industrial and consumer.

last revenue due was down to expected quarter Third quarter seasonality. from as XD sensing

a new automotive, to We with together occupancy space. sensors accuracy we LiDAR with and development sensor Lumentum's long applications entered management, pleased of we development activities market. chip expanded with customers customer-supported market leader space into enabling are intelligent LiDAR our for range local retail. application in have and very a agreement processing ADAS the LiDAR and small In for have time monitoring, announced are industrial The quarter, XD a of expanding into smart the the sensing, for with sensing uses flood high In design illuminator occupancy with building we systems. third on platforms XD our module automation a the in Ambarella AI design and system new Ambarella's flight for reference

Hesai. for and In VCSEL addition, we our customer driver have serving for is production ramp our begun arrays products The systems also our growing. of pipeline monitoring multi-junction in-cab

customers have we in developing will reality we XXXX. come to addition, traction who extended which expect with solutions, In early are product multiple market

We seasonality. quarter typical sequentially, revenue industrial be to expect and fourth product down with consumer consumer

as by lasers, grew Our expected, up lasers serving near-record industrial for also automotive semiconductors revenue electronics of achieving commercial was and primarily levels, lasers consumer Ultrafast sequentially. driven fiber quarter-on-quarter applications. and manufacturing again

Looking we the laser and to expect grow the driven quarter-on-quarter, by quarter, new revenue fourth overall products to ahead market. again

record to over revenue expect We as quarters. grows this previous coming our business surpass quarterly laser the

Before our to practices. our site renewable implement to emissions Ottawa to installed transitioned it net holds carbon have zero Wajid like and numbers, to acknowledge site I'd January, Since a meet of our commitment energy renewable we sustainable the energy. more sites in we to goal turning XXXX, run over companywide in by in To certificate through panels Slovenia. employees' our solar

performance Jose of achieved net procuring has headquarters in for the Silver Lumentum's zero the sites to San Our step achieved in proud EcoVadis very XXX% May and emissions. United LEED the certification, renewable advanced sustainability. We're forward goal in also have rating our in our another Kingdom Gold electricity started

such our to thank their progress employees work all the our challenging that, hard sustainability in resilience turn to and Wajid. I'll would addition I times. world over initiatives, it to like during With for of around In

Wajid Ali

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

year-on-year, supplier costs. was margin XX.X%, sequentially down was non-GAAP and quarter primarily by Third lower and which gross higher revenue driven

revenue. decreased due operating which quarter lower non-GAAP year-over-year Third margin and to XX.X%, was sequentially

margin end guidance the above range. However, non-GAAP high operating was our of

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

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

top guidance non-GAAP our range was income net Third income non-GAAP call. the diluted million provided at share per our and was $XX.X of on net $X.XX was last and quarter

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

Our XX.X%. non-GAAP tax at remains rate

driven the note $X.X million convertible by sequentially sheet, investments billion, primarily cash $XXX short-term and On to our increased offering. balance

shares with X.X issuance During generated operations for includes which XXXX our convertible concurrent notes. $XX.X in from of purchased and cash the $XXX X shares million repurchased million million we third million, quarter, the

shares, end support NeoPhotonics buyback our billion funded the revenue the to loan growth. In of which also purchased a of total for agreement. we million $X million of our under This loan X.X QX, million QX, were of shares X.X million their purchased $XX $XXX terms consistent we is share with program. have a As of to merger

Turning to segment details.

communications quarter decreased expected segment Third in telecom revenue continued business. industrial seasonality sequentially the primarily $XXX.X and million due our due segment in year-on-year, Optical Communications shortages at consumer and XX% material sequentially component lower gross product and to to XX% at and margin Optical decreased mix. and revenue

segment quarter year-on-year. sequentially X% Laser revenue third million and at $XX.X increased XX% Our

margin but due gross sequentially, Lasers XX.X% flat volumes. quarter was to Third higher approximately at up year-on-year

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

of $XXX the in $XXX We be expect to XXXX of net revenue million. range for to the fiscal fourth quarter million

in sequentially million datacom revenue and QX. to grow telecom by $XX Our expected is approximately

indicated Alan due million over driven As demand, $XXX of third-party components. also reflects QX accelerating of the guidance earlier, shortages to to impact revenue, this by

to initial However, to be due of we this being midpoints operating network of the in per reflect be this, our of XX% believe share on margin the customers the XX.X% guidance Based these and diluted demand share durable net to their income upgrades. revenue, of for stages range quarter. ranges we to margin, $X.XX. of project to is operating fourth quarter per net our range and record fourth at The $X.XX in diluted income expectation

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

Kathryn Ta

Wajid. you, Thank

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

Operator

our And Raymond Simon question from Leopold first from [Operator comes now, Instructions]. James.

Simon Leopold

a clarification. just quick First, very

previously the exposure specific those the the China. sure value, of your my from or million to had question sourcing On operations shortages, reported in Are cumulative China. highlighted got you then the to and the quarter. and reduced of And is, quarter? you've China quarter million moved effect $XX the you've out numbers coming in some $XXX I'm

terms topic, on lockdowns. And competitors less you so, of a because in direct I'm looking of the this you from risk have from whether quantify and you China for China can little you gained have exposure? And insight share have your bit

Wajid Ali

it's demand to basically $XX Specific the quarter, the million, as the we quarter, do $XXX enter see and able million a and based we're to shortfall we on as what supply. what customer

moved by $XX in while QX in our has to meaning customer and say the telecom and datacom $XX the the quarter, from million $XXX QX So, I between to guess, QX, million demand you'd specific gap we're to it's revenue QX. from growing supply ability to million

today, million So, I answers demand. not Meaning, we we're your of to question. as hope customer able look at that satisfy $XXX

last Some your over rolled which that answer quarter, of that of Does from question? course.

Simon Leopold

Yeah.

So, it's basically $XX million $XX plus million. additional an

because hadn't building the incremental in met quarter and it's you you can't million? $XX an meet So March demand

Wajid Ali

Yeah.

time, the You of could look at from time our at same datacom growing away again. we're that QX given it some same it, QX. to Yeah, [indiscernible] we $XX at by approximately revenue million eating telecom and are

while So, that from growing what business faster than quarter-on-quarter, say we're even to grow we're able the that by is, demand to trying to QX. QX XX% is

Alan Lowe

end was the shut on of our for we during do China factory XX China have lockdowns it days. still March the in a business, for in and down As impact your sourcing

of impact have QX factored On in over more get our for having QX we to and dual revenue, the diligently standpoint, did ability and sourcing a assurance factories situations ability sources it component supply to our have of QX. our the we're into guidance So, and that's sole working importantly, that like to years and eliminate today. supply our other slightly in been impacted couple last into

our So, share by if lot we announcing really are without to hard far me satisfy be what impacted gains from as And minimal as to the suppliers shutdowns. we're at lockdowns of – because it's hard I looking demand, are. were as It's share. yeah, forward, the say concerned, think we say we to are look able gaining on know probably tell I'd competitors we'd to gaining if share. a But for impact

Operator

from from comes Samik question Morgan. Chatterjee next J.P. Our

Samik Chatterjee

the for I correctly, suggest related one, more IC numbers, see it expense my bit about in to to non-GAAP your if temporary. guess think you And reading quarter broker I parts which improving buying exclude sort of from million you decided a of that $X.X you I'm talked first it's does supplies. the

relative thinking really your a And be treating higher So, interpreting more may where you it's sort a that guide purchases? in quarter why if I'm you're brokers to what's quickly? buying just embedded to as wanted very fourth then. temporary? it from prices? see, are event right, And you're follow-up. broker moderating for Or bit That's a is temporary you have it I of of at

Alan Lowe

that temporary for us. temporarily standard that'll in and words. year. calendar that these that us think your But, are because specific think to specific I some like show, continue impact products, the that. customer will And pulling because Alan this a QX. do are where month opportunities that We we one. some buy But, not we're non-GAAP of specific we the meet we're yes, we month continue that of buys Where being to from us I'll hey, call of opportunities that purchases impact number spot our what products, to this including for opportunities us there. buy a we're we at for what throughout QX. mentioned some start some of meet out and And products, seeing use seeing we to look expecting in numbers order we're fiscal do components shortages off in earlier, taking see we some the price to components we're don't standpoint, regular exception with would spot seeing seeing there very is are continue supply to April, the a demand increases are to – On demand I demand on where customer in go in our May. to we have temporary, out normal our are kind in meet customer we help that impacting continuing yes, is specific continuing

Samik Chatterjee

talked capacity follow-up, my about you the telecom a Alan, you to EML revenue. million guided $XX and For in And, quarter-on-quarter increase. datacom

in you datacom? sort much further. increase EML bit this of capacity $XX that Just is terms Maybe How see And from step wanted of if the we million one the benefit and can to full is if think get of a out coming use? Just of XQ there next or rate sort quarter? in EML of run of leg terms wanted the in revenue this the terms new of another up sort in capacity? of in is is to for this split

Alan Lowe

Well, perhaps telecom the of I basis, a the are faster growing the million, maybe should on EMLs than $XX say, percentage growth business.

whole, QX. look million XX% as going if it represents QX, about the at a of $XX into business you that so, in And

to and We full really than really more This get impact talking implementation than million. last online So, pretty $XX what much to do coming XX% the EMLs the calendar EML force of We over faster are is do additional telecom have year-and-a-half in that that QX. online. been in about growing growing online XX% slower have XXXX. capacity we've coming will

get so, we've is the through about XX that incremental And last improvements we efficiencies talking and but productivity, we've added, much capacity been of pretty will incremental months. for the capacity this

Operator

next Henderson Our Alex comes from from Needham. question

Alex Henderson

last in you said calendar Just QX. Did clarify. fiscal incremental QX you on QX? capacity question, Just to that mean or

Alan Lowe

Alex? EMLs, the For

Alex Henderson

whether QX, coming talking meant calendar? you additionally fiscal capacity wasn't Yeah, clear you were about in EML or on but

Alan Lowe

meant fiscal. I

of QX in quarter, our very in a we're to EMLs capacity. capacity that the as of online. And we quarter. of June in full improvement So, quarter coming this the a step seeing result why And ability coming saw have we in large that's some that a ramp up QX,

Alex Henderson

additional the capacity half year? the there Is calendar back coming on of in

Alan Lowe

now in capacity being that in back opposed it'll calendar ability XXXX, will I step that productivity between function the like QX of to say QX. and in saw year really things calendar improvements, is that, our calendar capacity XXXX. the fiscal EML half and and would to now as that more installed But grow fiscal incremental it'll this come we our in yield be all improvements, through impact

Alex Henderson

that? wanted Can little that and to XXXX beyond, the you years talked some to bit My as to telling embedded the the fiscal up opposed previous kind as Is on and XD in XXXX talked about beyond? XXXX address, question in on one, and in kind granularity You was flat, growth flattish X, us I give double-digit growth you last more of in guidance? the business X, about assumptions conversations. double-digit that the assumption down that in of sensing embedded beyond, in

Chris Coldren

Chris. is This

in share XD years. Let to do that into the – first And up by We've outsized I OFC reason the XXXX, but industrial, if new the say three crack you and fiscal this market. reality detailed at me markets, extended to normalization X% listening very we industrial highlighted, would as term you industrial a X% in that highlighted reference for the X%, a I of we and we there the and take the expect normalization. consumer consumer nearer at share assumptions nearer same telecom folks the X% where next minus had is share on and to plus that. maybe double evolving digits minus is in presentation will. over offset applications lasers. being with an that's datacom term, automotive, would in sensing, But the plus our being possibility

we at and probably we'll end X% or OFC and be had in more probably presentation. that datacom XXXX will reciprocally, the that So, the consumer, estimated the the high CAGRs in telecom highlighted but than above fiscal see minus lasers industrial

revenue well current fiscal consumer XXXX our in assumption of So, is in sensing or industrial situation XD and growth. incorporated

Alex Henderson

mention situation at the ability ROADMs not feels I market to it's a much talk to little you how then, a and in by the call, there like, constraints, about customer of in question bit no ROADM the so the demand that install being and Can As in sell relative systems? least impacted underlying far what supply products heard. was follow-up those your

Alan Lowe

demand. customers. our been impacted we've to customers extremely and say critically have the ROADMs. strong not IC ROADMs and forgetting line that cards to seen We're shortages significantly I'd their are important ROADMs ROADMs to and by us where

XX-some-percent. you back look ROADMs of and if go the constraints, year-on-year our of and not really pump that's at up demand. are direction other So, because shipments, because

extremely QX, a And we're improve So, it strong. seeing demand result will is the as ROADMs and in of as that. increase IC shortages

of of in our generation And So, it's durable sourced a advanced pent cases, a on for customers ROADMs. critically these these rely up ROADMs. sole think why we're Wajid's because, for in next That's we technology prepared and demand lot networks. remarks, products in lot of

wish be I strong. ICs more very I ship very, lot in to and able are whole QX because ROADMs a beyond. more had So I'd

Alex Henderson

that result in accelerates the and future period, volume amps into sucking in ROADMs? into So, pump your pumps the growth at a the does in amps some then because ROADMs you're reduction the

Wajid Ali

so we've in could to supply kind that the think there I lot But of pump reduction revenue. several some goes internally capacity our pumps. Yes, history. of a back in over added years past be we into ROADMs,

sure that not impact will I'm So, be of that to an significant revenue.

Alan Lowe

we're And we speak. as pump add to continuing capacity

added as those more with adding the quarters. over capacity next defer of internal our we we're few pumps pretty So, probably consumption, that well that our to ties

Operator

comes next from Notter Jefferies. question from Our George

George Notter

Maybe the on ROADMs. just conversation extending

to your when you supply us process guys tell were suppliers into alleviate your qualification help constraints? where think ROADMs qualify might in Can that some of alternate products. that you are and componentry on you I working

Alan Lowe

alternative than that lot those certainly a require have been at that board Across smoother sources looking we've compatible the board, gone are respin. and plug ones a

challenging, and And these But alleviate our shortages. some have say to so, we've progress XXXX. some going progress can they're component the just and more you than complex so to made to that But But come fiscal some expect early that's of for require more next common that these well see respins more imagine. that, really as get firmware we concerns that continue those changes. PCB parts, on we'll board some to taking time. to months, closure over been confident parts we're of the I'd a complex the that ability spin, as as ICs both And few of

George Notter

DMLs. on I was had The other one

were if some in few inventory update think to off get the last back an there. guys quarters, love China. I I'd you go I working over

Alan Lowe

We ago go. their have consumed or we been or if customers. our by of But that deferred revenue. be that seen a to the some as over That movement. I'd say so, those customers DMLS some it's recall, year encouraging recognized revenue there's some we, slowly you Still being some DMLs are starting to reversed has and inventory

So, that you I China, sign that being but guess, future. to deployed they nearly were being years pace not certainly a the in can again is two a they XG deployed, into translate good the ago, that are signal base stations which think I for

Operator

question Marshall from Meta next Our from Morgan comes Stanley.

Meta Marshall

me. A questions couple for of

Just kind noted actually that size would is how you wireless as how supply and to as the be forward equipment one demand, just much opportunity ordering you look large of year. think how in sense a of wanted fronthaul of guys to $XXX kind kind on kind of kind million that are then the could versus it progress you they And you just opportunity of next and just second, quarter? for ramps have much between wanted how difference thinking about that is get

Alan Lowe

tackle and lead that time second that customers answer either have the is that million. quarter. We $XXX quarter the this don't said in orders in for tunable they for orders want ask requests we existing or outside from stuff. prior quarters. Chris have This question of the customers I'll the to Well, and XXG I'd say purchase fronthaul and then XXG long first the count

real. where outs. ICS all And demand customers ever want that I the we so, our think of supplies immediately, they're the we suppliers is those to satisfy got perspective, not reliant If all them imagine on probably build because network from tomorrow, other that and other could

real. it's So, I think

off the question? I alleviated durable. semiconductor wireless situation And better, think XXXX. don't want to but the think bleed worldwide that you being calendar it's pick see as we gets fronthaul time it'll I over until Chris,

Chris Coldren

I'd the to tag million piece. $XXX like to also on

of it's year-over-year, up right, Product $XXX are there's the on million think percent important are other every the constrained they reflects product million not network are that ROADMs direction. across integral something bit whereas, and lo question I to lines earlier as present they not other time. behold, as that be Alan are rates little – the a not ROADMs, on tens product comparable systems, that highlight, highlighted at expect the are lines $XXX running the should at But we of that. And kind constrained and line. as to

hypothetically of all to product back lines guidance, If in add basis. you year-over-year that similar were existing a are to of tens of all then sudden or percent sort the up kind of

lasers several tens XX Turning about fronthaul, it's we per wireless supplying participate application, millions is, of data the kind it going run earlier, today. back the a time, has of has to in that. the we into talked we prior analogous to in ways, specifically two about calls, of what would we it can that, dollars get very XX supply lasers talked we as at fronthaul in call wireless lasers but hyperscale even believe One centers. to we've in quarter. business DML our over That telecom or as And but been gig to datacom, back gig depressed, though

quarter tens of opportunity. So, of per dollars millions several

ramp we wireless penetrate stages, tunable way to, the fronthaul expect alluded as other very year well XX gig to be Collectively, a as those MSO early up cable start to and as lasers The approaches Alan but XX gig market dollar multi-hundred fiber starting as we to is, opportunity. in million are deep play architectures. WDM

large reserved, you access XG And years, with technology. will, unique volumes in very to coherence of quite deep That's transmission very So, our number the the our been we are applications. that adoption applications fronthaul, laser and WDM metro, high. architectures of now, the if to of tunable opens edge in or has And n telecom more kind market past leg where up. our a a to fiber very haul, over story, in long exciting haven't participated

Operator

comes question Tom next O'Malley. from Our

Thomas O'Malley

My quarter. first the one reported just current is on

you If sequentially. look and datacom, at telecom it's about down X%

split breadcrumbs between X% gave just could but quarter as component the us having is December constraints, a to how ROADM from little you give lasers get pump datacom on that you some You minus being the the and you more better. to March on some telecom look and color overall.

Wajid Ali

think into get want datacom, can revenue extra highlighted, I been, the on Well, in think capacity but got the quarter. March don't you I a levels, capacity what little and of we is in constrained exact specifics to we've as bit assume, Alan

December So, of entirely. the the to was flattish datacom assume due telecom driven, that unique almost and was relatively in any in decline quarter-over-quarter, this COVID-XX supply by in you that constraints, hitting driven surge surge somewhat can January the case timeframe

Thomas O'Malley

just one other datacom the is on My side.

EML giving of And set of how are part help about you year-over-year now? You how looks Could nicely. we running of business that how are peak, a level quite kind were Any help is out the talked of stats dollars business tens now. big datacom they're there EMLs just it you're like than big those with that. that just split getting? just have growing feel at So so but DMLs lower millions some for

Wajid Ali

I business EMLs the way total of is to it at datacom of in range that our think is. best it's XX% XX%, present, the say

Operator

Hall from Our Goldman next question comes Sachs. from Rod

Rod Hall

least Maybe market? that dive content I a down share said come think I related? kind and wanted the end it market you you I industrial to back then of that a I of end bit that be kind view, of that and in to a will could into at you'd have the little And to to a than due normalization qualitative X% it and wanted think little fiscal understand, more related? XXXX. bit? follow-up. dig Is of do this into consumer comment point Is it's mainly from

Alan Lowe

will normalize. This Not at more And growth to the with numbers specifically. and our market customer. large expect And expectations – regard in or very, for of Rod, edge a past X% why we've than look customer. it our a some time, point we leading I this could setting expectations half with five five had is the at be really XXXX share over that's to we're that share anything normalization as at device years, equalization share do or our that, share is from to or think we fiscal very XXXX. more down end

Rod Hall

I content up just to that like. of then, it wanted expecting follow change you're say, and a much on sounds Alan, not

otherwise of kind content in change. pricing, much about normal maybe Just but declines not

Alan Lowe

as it models And working to say price day types. different they until on as it's upside, been that with And an content much, shipping increased say, a Huawei for of that things we revenue we've We're in offset there say that when as that. could handsets. it not different but say, business. into go counting to but reductions But Android at they years. of We're in think and go meaningful could leading had how product, some the many in customer, I the I'd like be our And what be guidance coming over hard lasers on time. content, years. by, be their working you on may I'd far its were will some Android into

Rod Hall

little on bit Is a little misinterpreted little wins, XR could are you've closer, just more My sensing automotive. that more automotive, follow-up on new thought that. timing talk external I there. I getting these part little if on wonder, comments was don't a applications, visibility then year? calendar I early a automotive, is I about it roughly the you know you commentary of maybe coming or for application but got sensing? bit And on a your right XR just your suggested external visibility, and

Chris Coldren

will, applications. I is automotive win we're Chris. and that highlighting this what is the design a say in of Rod, both reality the activity, if lot would you extended

multiple up racking wins been a Design From we've more very traction. in is standpoint, importantly, think customer as and, I automotive strong timing market. long-term spaces. those customers clear very customers meaningful a So, with

customer but customers don't probably be has the So and to XXXX I small steadily. this nearer said we still opportunities think we increment in – products more what around but term, us start to product expectation, per probably we timeframe launched timing think Extended in would prepared reality exact and share it'll upwards that launches with they're their remarks be be, going se. calendar our expect

imagine, know are what would As expectations shipped you very number that these space in I customers have say been calendar more in can growth into XXXX XXXX. this they're of in we XXXX meaningful doing. and secretive growth certain But and about

Operator

Christopher question Rolland comes Susquehanna. from Our from next

Christopher Rolland

there's I parts to around comps. and demand. here, the a couple question equation My is guess supply

was of TC surprise the conversely, you shortfall, are if up kind between supply and demand of For biggest wondering expectation? demand of picture, seeing And $XXX DC? in the from I could your million that ROADMs, you break those which that three kind versus

Alan Lowe

would the shortfall say I is primarily telecom.

have products impacted it So, been telecom. March pretty some if of The the split telecom and June and impacted seeing the most ROADMs past. is is relief XX% the in in In where on say quarter, you or quarter. significantly say, we're between close. I'd in it's all transmission was it ROADMs

to job. product as amplifiers, team. we're the products say chain biggest I done you So, goes and They've But well. wanted a – the then blades supply into I ROADMs it hit as fantastic semiconductors, line. we diligently I'd the transmission individual to think are as say and thank get just an But working

Christopher Rolland

around your we're kind year, modestly at just significantly down down there the fall the get situation being we in how to is be as Or just a and which more I sensing more much that? my look right, you something If put Could in X% up side, the almost next view, quarter. like for we we're it. head numbers year-on-year looking this know XX% out base But the June. odds year-on-year? small in XX% here? best On doing XD follow down a would June are to or than into there I'm of

Chris Coldren

ago we've was down fact, we've what more model that. markets year, for number we size not or But, imagine And is XXXX, as or B if next the offset alluded plus is the standpoint, hence, sensing, our happening you're you Alan that the for we're at our basis, overall sensing that U-shaped, in to, new look to individual in being first a in X% that. like next what applications in happens, guess, what a XXXX fiscal why say that then year-over-year revenue and said. an it X% were at seen the normalization, say you providing And XD providing can June something and share certainly, I would guidance give XXXX, it or least specifically a What to timeframe. reductions color XX%, market a assume little going the the is, year that's that XX%, if XXXX that seeing quarter quarter. year didn't come to be decline in it exactly due example, much June in three-year guide. I we said on so, I more we're from XD XXXX would minus CAGR, it to specific chip beyond be that, and would

somewhere three-year how get X%. to want of a specifics a But than don't I decline, but being much down aggregate. just in slightly slightly up, the into So, more certainly basis, of on flattish,

Operator

Our Rosenblatt next question Securities. comes from Michael from Genovese

Michael Genovese

asked. of been lot have good questions A

So, I'll just ask quick a question. one

million You've looking this sequential the pretty at and and margin a coming it quarter, gross at just and datacom got in margin. $XX telecom guidance, is that revenues like operating actually your increase EPS seems decent

chain, avoiding supply how amount? this margins about that in And talk environment? solid Are please? you just expedite have gross you about this on this did in incremental you even can how So, talk fees

Wajid Ali

quarters, you've And we've been basis, think seen in from company a of row, or achieving model. our on exceeding take fairly an number about year-over-year. years drivers And midpoint And overall year a talking improve two margin our for been in consistent gross actually, our the one QX, we've a for biggest from a really both fiscal leverage. operating for you and fiscal I look standpoint us operating standpoint. a of will is at of margins margin we the margin gross actually model, if

and our manufacturing that's covering growing of drop helping overhead us business more sequentially, it lasers as the And a to line. so, has lot bottom is and when year-over-year that's for us,

of our transmission to lot addition for our the we're and in both to seeing are we've quite those business, historically products that, relative growth, what good telecom In a margins seen.

products Our quite of in the the transmission, that XXG to line. doing fall are and well benefit tunable bottom seeing we're

consistent, R&D. operating Our fairly continued to as we've invest expenses have stayed in

help overall goal is have to meet our we're that's main satisfaction. And the helping our the end how When to we're customer And Yeah, a so, only company some expectations. customer driving way expedite and fees left to customer do our expecting continue to component us to we're well. been get buy, and or how we And exceed running that's that. that's spot financial our model think one it'll too. And is we as to we'll do product happen. the the

and out Chris lasers the our our us well as helping some business really earlier, telecom as numbers, seeing improving We and datacom it's leverage that's yeah, So, we're business, our popped EML just really quarter-over-quarter. did on well. as

So, things. it's those really

Operator

from comes Loop Baruah Capital. Ananda question next Our from

Ananda Baruah

Congrats on the results. strong

follow-up. share ones, I And of first us guess a clarification. positive pace it just ago, about half quick two And how were to have faster continuing ago? seasonality? any with demand a Just you could. I days the if is, calendar been XX then, quick concept impacts days as year you today it you can XX guys I Is have it accelerating might thought then, accelerate, a than quite at with second well.

Alan Lowe

XXXG, on we new coming. expected, XXXG the leading been network it's given technology. say we've as signaling our XXXG, the And edge would ROADM accelerating focused I to transition architectures

other into the demand play coming on as the say supply, tougher. The is is I'd expected. So, hand,

And quarters. demand. second the what think not look year, the in going QX say, QX. so, dictate of the we're semiconductor lacking And like half of lacking a I It's fiscal fiscal in the be several our and matter does that demand we're really like telecom I'd will revenue and don't calendar to what looks for situation

to improve not is the So, we're continue to But that. to diligently situation totally yet. solved try working

happen going semiconductors. at to And QX is for bit a QX. so, and And to the only challenge we're tough a visibility guide horizon quarter beyond going that's the what's time with because one a on little short-term

Ananda Baruah

to the the that recent expect should on follow-up putting up quick have you're As been Is you've a going just say that leverage mentioned, Wajid, quarter operating margin June we in in previous and quarters. leverage good good you question. forward?

So, that well should expect something be as forward? going we should

Alan Lowe

we're Certainly, as move we to have XXXX. expecting leverage continued fiscal into year

continues with with we're any to going as shortages costs about, caution model, that changes is are are happen, going not component the of XXXX, we're communicate to target one talked our impacting the that continue but fiscal think in seeing it. And year supply I us. Alan to increased to we that point

expectation to transitional some from do of impact that as And you. work lot of on And to as reminder, all second closes as just In that comes board, the a our some we've calendar the on addition a going year. of our to NeoPhotonics to margin our that well. overall going on synergies have is commitments have to model that's that, we're gross made in of half

I that make all keep just to we of us. want front in that So, sure

Operator

from Kang comes B. from final question Our Riley. Dave

Dave Kang

My questions. two

with supply running one it first What's million. generate? situation How revenue much or was factory? follow-up China. is the XXX% impact. chain does regarding The is the It And And Shenzhen partially? regarding is $XX it my

do quarter, be you When it'll million. This $XXX think inflect? it'll

Alan Lowe

sub-assemblies into our other China, is factories. it for because and generates it's And running components force. how revenue full And it primarily back So, hard go that business. telecom produces transmission Shenzhen components to say much makes it

numbers, the in QX inflect? the flowed March. in QX. down a other that's revenue factories guidance. So, that shut impacted in we into I the through And components our The XX question our goes our earlier, were when days as into it chain, on that well That factored as as factory. telecom supply large percentage And in said for transmission of business does

Dave Kang

Yeah.

think up. come going been do will start it's down? to When it So, you

Alan Lowe

hard to say. It's

tell in and over gives XXXX transmission I we it high-speed for why XXXX the I'd that's answer continue in could double-digit is the it's And shortages our demand that when end, and say leading me you products and to robust, and fiscal can beyond. be telecom extremely to ROADMs confidence But If to robust. the growth semiconductor believe tell you the our going edge that. us products

that through XXXX. away demand answer. is the to calendar problem of I'd I is, say hard it's to in continue be does demand our problem think little We're a going term. And is go our again, to into don't strong. But I'd fiscal going that a XXXX. challenges question have not When So, bit short say component to

Kathryn Ta

over the call pass Now, to closing just back like remarks. to I'd Alan for some

Alan Lowe

and challenging our you a Kathy. you, wrap call. partnership to to strength. Thank I do am we like work suppliers excited in for in our team as I'd ICs these I about increase this leave our the supply third-party capacity datacom up thoughts very and the to to to accelerating ongoing manufacturing thank this few customer demand Great. continues customers lasers, times. telecom, want and our their also and demand improve with support of to

industrial and and we drive have and opportunities will emerging are automotive, growth. diversification which reality Lumentum sensing applications, the Additionally, capabilities LiDAR leverage extended in increasingly and XD at

to Our find with you market-leading opportunities ahead. you like our would technologies look attending. I that, products will you forward which With thank and website. on we posted us for positions to and for well talking everyone for Thank during investor attending, these again upcoming events,

Operator

call. today's concludes This you. Thank

You may lines. now disconnect your

Lumentum (LITE) 4 May 222022 Q3 Earnings call transcript