Lumentum(LITE) - 2025 Q2 - Earnings Call Transcript

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]