Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lumentum Holdings Inc (LITE, Financial) exceeded the midpoint of their guidance for both revenue and EPS for the fourth quarter.
- The company booked record orders for datacom chips used in data center applications.
- Significant progress was made in executing their strategy to grow their cloud business and broaden their customer base.
- Lumentum Holdings Inc (LITE) is emerging as a leading provider of photonic solutions for cloud data center operators and AI infrastructure providers.
- The company achieved record volume shipments of EMLs and secured substantial bookings for fiscal 2025.
Negative Points
- Fourth-quarter revenue of $308.3 million and non-GAAP EPS of $0.06 were above the midpoint of guidance ranges but still reflect a challenging market environment.
- GAAP gross margin for the fourth quarter was only 16.6%, and GAAP operating loss was 43.3%.
- The company recorded a GAAP diluted net loss per share of $3.72, driven by restructuring charges, amortization of acquired intangibles, and a valuation allowance related to certain tax assets.
- The industrial tech segment revenue declined 36% year over year, reflecting weak end-market demand and high levels of customer inventory.
- The company faces a broad shortage of indium phosphide lasers, with production output expected to remain on allocation through at least the end of calendar 2025.
Q & A Highlights
Q: Can you give us more color on the new customer announcement and the magnitude of the opportunity relative to your module business?
A: We can't comment too much on the type of customer, but it's a major one. The run rate will depend on our execution. Our first production line in Thailand is ready this quarter, with qualifications happening and ramp beginning early 2025. The opportunity could be as big, if not bigger, than our current run rate.
Q: Can you discuss the capacity ramp timing for both the chips and transceiver business at Cloud Light?
A: We invested $43 million in our fab capacity, with incremental capacity expected in the first half of 2025. On the transceiver side, the initial line in Thailand is operational this quarter, with volume shipments expected in early 2025. We plan to achieve $500 million per quarter by the end of 2025.
Q: Are you seeing a recovery in the telecom components space in the September quarter?
A: Yes, we are seeing strength in new products like 130 gigabaud coherent components and narrow linewidth tunable lasers. The data center interconnect business has firmed up, and we expect some improvement in telecom throughout 2025.
Q: Can you give more details on the products associated with the new datacom award?
A: The new award involves leading-edge 800 gig single-mode transceivers. We are confident in our ability to develop and ship these products. The telecom business saw a decline in the June quarter, but we expect a bounce back in the September quarter.
Q: Do you have an Nvidia qualification on the 800 gig single-mode transceiver?
A: We won't comment on specific customers, but we are designing 1.6 terabit transceivers and plan to sample customers this quarter. We are confident in our ability to execute and capture significant market share.
Q: How should we think about datacom capacity between chips and transceivers exiting fiscal 2025?
A: We are adding capacity and expect significant growth in chip output over the next 12 months. On the transceiver side, we are putting infrastructure in place to support well over $500 million per quarter in overall revenue.
Q: Can you explain the difference between an award, a win, and a qualification for the new major transceiver customer?
A: An award means the customer has chosen us to work with, but we still need to earn the business through performance and quality. We are staging material and capital to support the volumes they are talking about.
Q: How are you thinking about the timing for 1.6 terabit transceivers?
A: We are focused on providing customer samples this quarter and working with multiple customers. We expect meaningful revenue in 2025, with significant growth in 2026.
Q: Why are you stopping in-house development of coherent DSPs?
A: We are reallocating R&D spending towards higher growth markets like datacom transceivers. We believe we can meet customer needs using third-party ASICs while focusing on new cloud and AI customer programs.
Q: Are you tracking ahead on the data center qualification activities?
A: We are tracking right on schedule. We have equipped our Taiwan facility and are ready to start building qualification units, with production ramping into early 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
