Lumentum(US:LITE)2021-02-26 04:59Financial Data and Key Metrics Changes - NeoPhotonics reported revenue of $371 million for 2020, an increase of 4% year-over-year despite restrictions on Huawei [10][36] - The company achieved a non-GAAP gross margin of 31%, up 4 percentage points from 2019, and a GAAP gross margin of 28%, a 3 percentage point increase year-over-year [36] - Non-GAAP profit for the year was $16.7 million, a significant increase from $0.4 million in the previous year, while GAAP losses decreased from $17 million in 2019 to $4 million in 2020 [37] - Free cash flow increased to $41 million from $25 million, with net cash nearly doubling from $47 million to $90 million [37] Business Line Data and Key Metrics Changes - Products for 400-gigabit and above applications grew 35% sequentially and accounted for 46% of revenue in Q4 2020, with a year-over-year growth of 92% [13][14] - The company expects 400-gig and faster revenues to more than double compared to the first quarter of the previous year [15] Market Data and Key Metrics Changes - Demand for high-speed products is strong, particularly in cloud and data center applications, which are driving growth and profitability [12][22] - The company has seen some softness in the North American cloud market due to bandwidth deployments being pulled into 2020 as a response to the pandemic [19][51] Company Strategy and Development Direction - NeoPhotonics aims to grow by focusing on high-speed over distance solutions at 400-gig and above for telecom equipment providers [15] - The company is ramping up production of 400ZR and 400ZR+ coherent modules, which are expected to significantly expand its addressable market [26][29] - The company is positioned to benefit from long-term trends in global bandwidth demand driven by cloud services, remote working, and 5G rollouts [33] Management's Comments on Operating Environment and Future Outlook - Management anticipates some ups and downs in deployment rates typical in data center interconnect build-outs, exacerbated by share shifts among network equipment manufacturers [20] - The company expects to return to operating profit in Q3 2021 and projects full-year revenue growth of 25% to 35%, excluding Huawei [52][53] - Management noted that Q1 is typically the lowest quarter for revenue and margins due to seasonal factors [54] Other Important Information - The company finished Q4 with $123 million in cash, investments, and restricted cash, the highest in its history [48] - Non-GAAP operating expenses for Q4 were $23.7 million, down from Q3, reflecting faster execution of spending reductions [41] Q&A Session Summary Question: Clarification on 10% customers - NeoPhotonics had four customers contributing 10% or more to revenue in Q4, totaling 67% of revenue [60] Question: Diversification and 400ZR revenue expectations - 400ZR could potentially reach 10% of annual revenue after qualifications, with production ramping primarily in the second half of the year [62] Question: Cash usage in the first half of 2021 - CapEx is expected to run at 4% to 6% of revenue, with inventory levels being managed due to prior orders [69] Question: Price adjustments and supply chain issues - Price reductions historically range from 10% to 15%, with current adjustments expected to be at the lower end of that range; no significant supply chain impacts have been reported yet [70][71] Question: First quarter outlook and high-speed optics - High-speed products, particularly 400-gig and above, are expected to continue growing, with 46% of revenue in Q4 coming from these products [76] Question: Demand softness and deployment timing - Demand is expected to be back-half loaded due to logistical issues related to COVID-19, affecting deployment rates [84][86] Question: Competitive landscape for 400ZR - NeoPhotonics is one of the few companies capable of meeting 400ZR specifications, with Acacia and Inphi as notable competitors [118]