Lumentum(LITE) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Third quarter revenue was $366.5 million, approximately flat sequentially and down 4.4% year-on-year [24] - Non-GAAP EPS for the third quarter was$ 0.29, with non-GAAP net income of $19.6 million [25][22] - GAAP gross margin for the third quarter was 16.2%, with a GAAP operating loss of 31.3% [24] - Non-GAAP gross margin was 32.6%, flat sequentially and down year-on-year [67] Business Line Data and Key Metrics Changes - Cloud & Networking segment revenue was$ 313.8 million, increasing 9.5% sequentially and 7.1% year-on-year, driven by strong data center demand and the Cloud Light acquisition [45] - Industrial Tech segment revenue was $52.7 million, down 34.2% sequentially and 41.7% year-on-year, impacted by seasonality and increased competition [39] Market Data and Key Metrics Changes - Demand for 400ZR and ZR+ modules for data center interconnect (DCI) is increasing, with a notable uptick in demand for tunable lasers in Q3 [18] - The telecom sector is experiencing an extended inventory correction, with slower spending from telco carriers impacting revenue [38] Company Strategy and Development Direction - The company is pursuing a three-pronged strategy to drive growth in cloud data center revenue, including expanding manufacturing capacity and focusing on innovative solutions for cloud and AI infrastructure [15][35] - The cloud photonics opportunity is projected to reach approximately$ 16 billion by 2028, with expectations to expand cloud revenue to multibillions in the coming years [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in significant growth for calendar 2025, driven by investments in new data center products and a recovery in the telecom industry [20] - The company anticipates a revenue range of $290 million to$ 315 million for the fourth quarter of fiscal '24, with expectations of a decline in Cloud & Networking due to telecom demand softness [26] Other Important Information - The company achieved a $51 million sequential reduction in overall inventory levels during Q3 [66] - The integration of the Cloud Light acquisition is expected to enhance capabilities in the rapidly-growing AI and ML photonics market [22] Q&A Session Summary Question: Clarification on the$ 40 million reduction in Cloud & Networking - The $40 million reduction is incremental to the previously discussed$ 30 million decline due to a product transition, reflecting a change in outlook for telecom spending [50] Question: Revenue generation through ZR and ZR-related sales - The narrow linewidth tunable lasers have seen a significant increase, with ZR and ZR+ still in single digits of overall revenue but expected to grow [52] Question: Manufacturing expansions in Thailand - The company is expanding manufacturing capacity in Thailand to meet customer demand, with a qualification line being set up [58] Question: Impact of the Cloud Light acquisition - The Cloud Light acquisition contributed positively to the quarter, with a full quarter of production compared to the prior partial quarter [22][113] Question: Timing of 200G laser shipments - The company expects to ramp up shipments of 200G lasers in the December quarter, with meaningful increases anticipated in calendar 2025 [92][106]