Lumentum(US:LITE)2021-08-04 03:00Financial Data and Key Metrics Changes - Revenue for Q2 2021 was $65 million, with both revenue and gross margin at the upper end of guidance range [7] - Non-GAAP gross margin was 21.7%, above the expected range due to favorable product mix [22] - Non-GAAP net loss was $11.4 million, translating to a loss per share of $0.22, which was $0.03 better than the midpoint estimate [22][24] Business Line Data and Key Metrics Changes - Products for 400 gig and above applications grew 100% year-over-year, accounting for 46% of total revenue [7][27] - Product margin was 37.6%, impacted by excess capacity charges, which are expected to decrease as volume ramps up [22] Market Data and Key Metrics Changes - The cloud and hyperscale interconnect market is anticipated to rival the telecom market in high-speed internet connectivity [10] - Demand for 400 gig and above products is expected to continue growing, with significant opportunities in cloud data centers and telecom carriers [9][10] Company Strategy and Development Direction - The company is focusing on high-speed coherent components and modules, particularly 400ZR and 400ZR+ products, to capture market share in the growing demand for high-speed internet [9][10] - The addition of experienced executives to the team is aimed at enhancing sales and governance capabilities [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving non-GAAP breakeven in Q3, despite supply chain challenges impacting revenue [25][27] - The company expects revenue growth of 25% to 35% excluding Huawei, driven by high demand for 400 gig and above products [26][27] Other Important Information - The company has restarted shipments to Huawei, generating $14 million in Q2, but does not expect Huawei to be a 10% customer for the year [22][32] - The company is facing a new chip shortage that could adversely impact Q3 revenue by $8 million [25][44] Q&A Session Summary Question: What is the expected growth for non-Huawei business? - Management indicated that non-Huawei business is expected to grow around 40% year-over-year, but this may be slightly high [29][31] Question: Can you provide insight on shipments to Huawei? - Shipments to Huawei are for a limited set of products, and the company does not rely on Huawei for significant revenue [32][34] Question: What is the outlook for the China market? - There are reports of additional tenders related to 5G in China, but the overall impact on the company's business is limited [35] Question: What is the timing for 400 gig product ramp? - The company is producing 400ZR modules, with deployment levels expected to begin in Q4 [48] Question: What is the visibility on 5G demand in China? - The company sees modest demand for 5G components, with Metro and long-haul deployments remaining muted [51][53] Question: What is the contribution of ZR modules to revenue? - ZR modules have not turned on in a major way yet, but the company is capable of producing at that level [72]