Lumentum(US:LITE)2022-02-03 14:31Merger and Acquisition - Lumentum's merger with NeoPhotonics is valued at approximately $918.0 million, with NeoPhotonics stockholders receiving $16.00 per share in cash[143]. - The company expects to complete the merger in the second half of calendar year 2022, pending customary closing conditions and regulatory approvals[146]. - The company has established a credit agreement with NeoPhotonics for up to $50.0 million to support its growth plans[144]. - The merger agreement includes termination fees of $27.5 million and $55.1 million under specific circumstances, ensuring both parties are incentivized to complete the transaction[145]. Revenue Performance - Net revenue decreased by $32.1 million, or 6.7%, during the three months ended January 1, 2022, compared to the same period in 2020, primarily due to a $51.7 million decrease in OpComms revenue[164]. - OpComms net revenue decreased by $51.7 million, or 11.5%, during the three months ended January 1, 2022, attributed to material shortages and lower demand due to delays in 5G deployments[165]. - Lasers net revenue increased by $19.6 million, or 66.0%, during the three months ended January 1, 2022, driven by a recovery in customer demand for kilowatt class fiber lasers[166]. - For the six months ended January 1, 2022, net revenue decreased by $36.1 million, or 3.9%, due to a $74.2 million decrease in OpComms revenue, offset by a $38.1 million increase in Lasers revenue[167]. - OpComms net revenue decreased by $74.2 million, or 8.5%, during the six months ended January 1, 2022, primarily due to material shortages and lower demand from delays in 5G deployments[168]. - Lasers net revenue increased by $38.1 million, or 71.1%, during the six months ended January 1, 2022, due to a return in customer demand following COVID-19 disruptions[169]. - Total net revenue for the three months ended January 1, 2022, was $446.7 million, compared to $478.8 million for the same period in 2020[172]. - Net revenue from a single customer represented 10.0% or greater of total net revenue, with two customers accounting for 41% and 46% of total net revenue for the three and six months ended January 1, 2022, respectively[170]. - Net revenue from customers outside the United States represented 88.6% and 91.2% of total net revenue for the three and six months ended January 1, 2022, respectively[172]. - The company expects revenue from customers outside the United States to continue to be a significant part of overall net revenue, despite potential impacts from regulatory actions and changes in trade policies[173]. Gross Margin and Expenses - Gross margin for the three months ended January 1, 2022 decreased to 46.5% from 48.0% for the three months ended December 26, 2020, primarily due to lower sales of higher margin products and increased warranty costs of $4.1 million[178]. - Gross margin for the six months ended January 1, 2022 increased to 49.1% from 46.7% for the six months ended December 26, 2020, driven by higher manufacturing levels and lower excess inventory charges[179]. - OpComms gross margin for the three months ended January 1, 2022 decreased to 50.8% from 53.8% for the three months ended December 26, 2020, due to a less profitable product mix[182]. - Lasers gross margin for the three months ended January 1, 2022 increased to 53.1% from 47.5% for the three months ended December 26, 2020, attributed to higher customer demand for kilowatt class fiber products[184]. - R&D expense increased by $0.4 million, or 0.8%, for the three months ended January 1, 2022 compared to the same period in 2020, and increased by $4.1 million, or 4.0%, for the six months ended January 1, 2022[185]. - SG&A expense increased by $7.7 million, or 12.6%, during the three months ended January 1, 2022, primarily due to legal and advisory fees related to the pending NeoPhotonics acquisition[187]. - Interest expense for the three months ended January 1, 2022 was $17.1 million, compared to $16.3 million for the same period in 2020, driven by debt amortization[192]. Cash and Financial Position - Cash and cash equivalents as of January 1, 2022 were $552.0 million, down from $774.3 million as of July 3, 2021[196]. - Cash provided by operating activities was $268.4 million for the six months ended January 1, 2022, reflecting a net income of $138.2 million[209]. - Cash used in investing activities totaled $345.8 million during the six months ended January 1, 2022, primarily due to purchases of short-term investments and capital expenditures[211]. - Cash used in financing activities was $144.9 million during the six months ended January 1, 2022, mainly from share repurchases of $126.6 million[213]. - The company has a total of $1,924.9 million in contractual obligations as of January 1, 2022, with $313.1 million due within one year[202]. - The company repurchased 1.4 million shares at an average price of $84.31 per share for a total of $121.6 million during the six months ended January 1, 2022[205]. - The company has $25.9 million in unrecognized tax benefits for uncertain tax positions as of January 1, 2022[207]. - The company recorded foreign exchange gains of $0.6 million for the six months ended January 1, 2022, compared to losses of $5.1 million for the same period in 2020[217]. - The company’s investment portfolio had a balance of $2,022.4 million as of January 1, 2022, with a weighted-average life of about eight months[221]. - A hypothetical 1% increase in interest rates would decrease the fair value of the company's investment portfolio by approximately $10.0 million[222]. - As of January 1, 2022, the company had approximately $212.3 million of unrestricted cash in operating accounts[223]. - The cash balances are held with domestic and international financial institutions, which could pose a risk if these institutions fail[223]. - The company has not incurred any losses to date and has had full access to its operating accounts[223]. - Potential failures of financial institutions could impact the company's ability to fund operations in the short term[223]. Supply Chain and Market Conditions - Lumentum has faced semiconductor component shortages impacting revenue generation, with expectations that supply challenges will persist at least through the third quarter of fiscal 2022[149]. - The company has incurred incremental supply and procurement costs due to global supply chain constraints, affecting inventory balances and gross margins[149]. - The COVID-19 pandemic has led to increased demand for optical devices due to a shift towards digital and virtual environments, enhancing long-term growth opportunities[150]. - Lumentum's strategy emphasizes technology and product leadership, aiming to leverage close customer relationships in healthy, growing markets[150]. - Lumentum's operating segments include Optical Communications and Commercial Lasers, which are regularly reviewed for performance and resource allocation[140].