Q3 FY25 Conference Call May 6, 2025 Forward Looking Statements and Financial Presentation This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These include statements regarding: our belief and expectations with respect to our markets, including the cloud end market and the broader networking market, customers and industry, any anticipation or guidance as to demand for our products and te ...

Company Overview - Kellanova is a leader in global snacking, international cereal and noodles, and North America frozen foods, with a legacy of over 100 years [4] - The company aims to become the world's best-performing snacks-led powerhouse, leveraging its differentiated brands and passionate workforce [4] - Kellanova reported net sales of approximately $13 billion for 2024 [4] Product Innovation - Pringles has launched new limited-edition flavors inspired by beer-infused backyard barbecue favorites in collaboration with Miller Lite [1][2] - The new flavors include Pringles x Miller Lite Beer Can Chicken and Pringles x Miller Lite Grilled Beer Brat, designed to capture the essence of summer cookouts [2][3] - These flavors combine the taste of grilled foods with the hoppy, malt beer aroma of Miller Lite, appealing to consumers looking for unique snacking experiences [2][6] Marketing Strategy - The collaboration between Pringles and Miller Lite aims to surprise and satisfy consumer cravings for innovative flavors during the grilling season [3] - The marketing approach emphasizes the seamless fit of beer flavors into snack products, targeting fans of both brands for summer barbecues [3][6] - The new products will be available at retailers nationwide starting in May, while supplies last, encouraging consumers to engage with the brands through social media [3]

Core Viewpoint - Lumentum Holdings experienced a significant stock price increase of over 5% due to positive analyst recommendations, contrasting with a slight decline in the S&P 500 index [1] Analyst Recommendations - Northland analyst Tim Savageaux upgraded Lumentum's recommendation from market perform to outperform, setting a price target of $70 per share, which represents a 34% upside from the current stock level [2] - Stifel's research highlighted positive insights from the recent Optica Executive Forum, indicating strong demand for effective, low-latency data transmission in the optical field [3] Industry Dynamics - The Stifel team emphasized that optical transceivers are not obsolete but are essential for meeting the increasing bandwidth requirements in the industry [4] - Lumentum is well-positioned to capitalize on the growing demand for optical solutions, as indicated by recent trading activity and investor sentiment [5]

Core Viewpoint - Lumentum Holdings has achieved a new speed benchmark in optical technology, leading to a significant increase in stock price and positive business outlook [1][4]. Group 1: Technological Advancements - Lumentum and Keysight Technologies demonstrated optical technology achieving a speed of 448 gigabytes per second at the Optical Fiber Communications Conference [2]. - The collaboration addresses the increasing bandwidth demands of artificial intelligence (AI) and machine learning (ML) applications, which require substantial computing resources [3]. Group 2: Business Performance and Outlook - Lumentum's management updated its guidance, projecting quarterly revenue of $750 million with an operating margin of 20% [4]. - The company has a range of next-generation optical and laser products set to launch in the short- to mid-term, expected to drive future sales [4]. Group 3: Market Sentiment - Despite some skepticism regarding AI's potential, a significant portion of the market remains optimistic about its impact on company fundamentals, supporting a positive outlook for innovative companies like Lumentum [5].

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Core Viewpoint - Lumentum Holdings is experiencing significant growth driven by the increasing demand for its optical components in AI applications, particularly in the cloud and networking sectors, which is expected to continue into 2025 [1][3]. Financial Performance - Lumentum reported a 10% year-over-year increase in fiscal Q2 revenue to $402 million, primarily due to AI-driven demand in the cloud and networking business, which saw an 18% revenue increase [4][10]. - The industrial business, however, faced a 21% revenue decline, highlighting a shift in demand dynamics [4]. - The company is projected to achieve an 18% revenue increase for the year, reaching $1.6 billion, with further growth anticipated in the following years [7]. Business Segments - The cloud and networking segment now constitutes 84% of Lumentum's total revenue, indicating its critical role in the company's growth trajectory [5]. - Demand from hyperscale cloud customers is robust, with increased orders from existing customers and new customer engagements expected to contribute to future growth [6][8]. Market Opportunities - The data center interconnect (DCI) market, which Lumentum is targeting, is projected to grow by 71% over the next four years, with AI playing a central role in this expansion [9]. - Lumentum's externally modulated lasers (EMLs) shipments reached record levels, driven by AI-related demand, suggesting a strong market position [8]. Profitability and Margins - The company's non-GAAP operating margin improved by six percentage points year-over-year, contributing to a 75% increase in earnings per share to $0.42 [10]. - Consensus estimates predict a 73% increase in earnings per share to $1.75 this year, with continued strong growth expected in subsequent years [11]. Stock Price Potential - If Lumentum achieves projected earnings of $4.74 per share by fiscal 2027 and maintains a forward earnings multiple of 27.6, the stock price could reach $131, representing a 60% increase from current levels [12].

Following my coverage of Lumentum Holdings (NASDAQ: LITE ) a few weeks ago, where I reiterated a buy rating due to my expectation that LITE remains well positioned to benefit from major secular trends, this post is to provide an updateI take a fundamentals-based approach to value investing.I disagree with the common misconception held by many investors that low multiple stocks must be cheap. I look for companies that offer the best long-term durability at the most affordable prices. Consequently, I have a p ...

Financial Data and Key Metrics Changes - In Q2, the company reported revenue of $402.2 million and non-GAAP EPS of $0.42, exceeding the high end of guidance ranges [30] - GAAP gross margin for Q2 was 24.8%, with a GAAP operating loss of 12.8% and a GAAP net loss per share of $0.88 [30] - Non-GAAP gross margin was 32.3%, slightly down sequentially but up year-on-year due to product mix [31] - Non-GAAP operating margin was 7.9%, up 490 basis points sequentially and 600 basis points year-on-year [32] Business Line Data and Key Metrics Changes - Cloud and Networking segment revenue grew 20% sequentially and 18% year-over-year, driven by strong demand from cloud hyperscale customers [17] - Industrial Tech segment revenue increased 15% sequentially but decreased 21% year-over-year, reflecting challenges in the industrial end market [24][36] Market Data and Key Metrics Changes - Demand for components and subsystems for data center interconnect is strengthening, with production ramping to meet this demand [14] - The company anticipates strong sequential growth in Cloud and Networking revenue in Q3, driven by capacity additions and improving demand from network equipment manufacturers [23] Company Strategy and Development Direction - The company is focusing on expanding its customer base in the cloud and AI markets, scaling capacity for laser transmitter chips, and partnering with cloud operators to develop innovative optical solutions [15] - The strategy includes a three-pronged approach to drive growth in the rapidly accelerating AI cloud era [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the goal of reaching $500 million in quarterly revenue by the end of calendar 2025, supported by a robust pipeline of cloud customer engagements [28] - The leadership transition is seen as timely, with the new CEO expected to build upon the company's momentum [9] Other Important Information - The company is experiencing supply chain shortages on critical components, which is impacting growth potential [46][118] - Significant progress has been made in ramping cloud transceiver volumes and achieving record EML shipments [27] Q&A Session Summary Question: Sequential revenue increase drivers in Cloud and Networking - The Datacom business is driving growth, with new products ramping up, but supply chain shortages are limiting potential growth [46] Question: Capacity expectations for 200G EML lasers - The company expects 40% growth from June 2024 to June 2025, with additional capacity expansion planned [55] Question: Details on proprietary interconnect customer - The product being shipped is an ultra-high power laser, with positive feedback expected to lead to higher volumes in 2026 [65] Question: Prospects for Co-Package Optics (CPO) - CPO is seen as an opportunity for scaling short-distance electrical links, and the company believes it will not cannibalize transceiver volumes [80] Question: Telecom demand recovery - The company sees strong demand in data center interconnects and networks, with inventory levels normalizing [86] Question: Transceiver business transition - The transition is ongoing, with new products being introduced and revenue expected to grow as new products ramp up [94] Question: Supply chain commentary - Supply chain issues are primarily related to telecom products, with efforts underway to qualify alternative suppliers [118] Question: Expectations for tariffs - Minimal impact from tariffs is expected due to the company's limited footprint in China and strong production capabilities in Thailand [141]

Lumentum (LITE) came out with quarterly earnings of $0.42 per share, beating the Zacks Consensus Estimate of $0.37 per share. This compares to earnings of $0.32 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 13.51%. A quarter ago, it was expected that this optical networking products maker would post earnings of $0.13 per share when it actually produced earnings of $0.18, delivering a surprise of 38.46%.Over the last four qua ...

Financial Performance - Cloud & Networking segment net revenue increased to 84.3% in Q1 2025 from 78.2% in Q1 2024, while Industrial Tech segment decreased to 15.7% from 21.8%[208] - Gross profit margin improved to 24.8% in Q1 2025 compared to 17.4% in Q1 2024, driven by a reduction in cost of sales to 69.9% from 76.7%[208] - Net loss narrowed to 15.1% of net revenue in Q1 2025 from 27.0% in Q1 2024, reflecting better cost management and revenue growth[208] - Net revenue increased by $35.4 million, or 9.7%, during the three months ended December 28, 2024, driven by a $52.5 million increase in Cloud & Networking revenue[211] - For the six months ended December 28, 2024, net revenue increased by $54.7 million, or 8.0%, primarily due to a $105.1 million increase in Cloud & Networking revenue[212] Cost Management - Research and development expenses decreased to 18.4% of net revenue in Q1 2025 from 21.3% in Q1 2024, indicating improved operational efficiency[208] - Operating expenses as a percentage of net revenue decreased to 37.6% in Q1 2025 from 46.1% in Q1 2024, indicating improved cost control[208] - Research and development expenses decreased by $4.1 million, or 5.2%, during the three months ended December 28, 2024[220] - Selling, general and administrative expenses decreased by $8.8 million, or 10.3%, during the three months ended December 28, 2024[220] - SG&A expense decreased by $8.8 million, or 10.3%, during the three months ended December 28, 2024, driven by lower acquisition costs and payroll-related expenses[229] Acquisition and Investments - The company completed the acquisition of Cloud Light for a total cash consideration of $705.0 million, enhancing its capabilities in advanced optical modules for data center interconnect applications[199] - The company incurred $9.6 million in acquisition-related costs for the Cloud Light acquisition, recorded as general and administrative expenses[199] - The company plans to continue investing in R&D and new products to differentiate itself in the marketplace[228] Market and Demand - The company anticipates continued demand growth for its products driven by the increasing reliance on data in cloud and AI/ML applications[194] - Supply chain constraints have improved, with signs of inventory normalization observed in network equipment manufacturers since Q1 2025[202] - The company is focused on expanding into emerging markets and enhancing its product portfolio through both organic growth and acquisitions[195] - The company expects revenue from customers outside the United States to continue to be an important part of overall net revenue growth opportunities[219] Financial Position and Liquidity - Cash and cash equivalents as of December 28, 2024, were $479.7 million, an increase from $436.7 million as of June 29, 2024[245] - Total short-term investments were $417.0 million as of December 28, 2024, down from $450.3 million as of June 29, 2024[245] - The company believes its cash and cash equivalents will be sufficient to meet liquidity and capital spending requirements for at least the next 12 months[248] - As of December 28, 2024, total contractual obligations amount to $3,322.7 million, with $621.5 million due within one year and $2,701.2 million due beyond one year[249] - Cash from operating activities for the six months ended December 28, 2024, was $63.9 million, reflecting a net loss of $143.3 million, offset by non-cash items of $209.1 million[260] Risks and Uncertainties - The cash balances are held with domestic and international financial institutions, which could become inaccessible if those institutions fail[273] - Potential failures of financial institutions could impact the company's ability to fund operations in the short term[273] - The value of the company's investment portfolio may be affected by holding debt instruments from failing institutions[273] - The company's supply chain could be adversely impacted if vendors or customers experience liquidity issues[273]