Yahoo Finance Lumentum Holdings Inc (LITE) (Q3 2024) Earnings Call Transcript Highlights: Navigating ...
Revenue: $366.5 million in Q3, flat sequentially and down 4.4% year-over-year.
Net Income: Non-GAAP net income of $19.6 million in Q3.
Earnings Per Share (EPS): Non-GAAP EPS of $0.29 in Q3.
Gross Margin: Non-GAAP gross margin of 32.6% in Q3, flat sequentially and down year-over-year.
Operating Margin: Non-GAAP operating margin of 4.1% in Q3, up 60 basis points sequentially.
Free Cash Flow: Cash and short-term investments decreased by $353.1 million due to debt repayment and other charges.
Cloud & Networking Revenue: Grew 9% sequentially and 7% year-over-year, driven by strong data center demand and Cloud Light acquisition.
Industrial Tech Revenue: Down 34% sequentially and 42% year-over-year, impacted by seasonality and competition in 3D sensing.
Release Date: May 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Lumentum Holdings Inc (NASDAQ:LITE) reported a 9% sequential and 7% year-over-year growth in Cloud & Networking revenue, driven by strong data center demand and contributions from the Cloud Light acquisition.
The company is expanding its product offerings with multiple waves of product releases planned, including new 1.6 terabit intra data center optical transceivers and 800G coherent pluggables, which are expected to drive significant growth.
Lumentum Holdings Inc (NASDAQ:LITE) is increasing its manufacturing capacity to meet strong demand from cloud customers, with plans well underway for expansion in Thailand to support volume production.
The company has begun product sampling with key customers for its 800ZR and 800ZR+ coherent transceivers, which offer differentiated performance and power consumption, critical for data center applications.
Lumentum Holdings Inc (NASDAQ:LITE) is actively engaging with multiple cloud and AI infrastructure customers on innovative solutions to scale data center infrastructure, which is expected to drive future revenue growth.
Negative Points
Revenue from the Industrial Tech segment was down 34% sequentially and 42% year-over-year, primarily due to increased competition in the 3D sensing business and inventory consumption at a major industrial laser customer.
The company faces challenges from telecom customer inventory issues, with a slower pace of telco carrier spending than anticipated, which is expected to continue affecting revenue in the coming quarters.
Lumentum Holdings Inc (NASDAQ:LITE) is experiencing a transition period with the Cloud Light business, which has led to a temporary reduction in datacom module revenue.
The company reported a GAAP operating loss of 31.3% and a GAAP diluted net loss per share of $1.88 for the third quarter, influenced by acquisition-related charges and restructuring costs.
There are uncertainties related to the supply chain, particularly third-party suppliers of DSPs and other components, which could impact the timing and success of new product ramps.
Q & A Highlights
Q: Could you clarify the commentary on the Cloud & Networking incremental $40 million reduction? A: Alan S. Lowe (President, CEO & Director): This $40 million is incremental to the previously discussed $30 million decline due to a product transition in the Cloud Light business. It reflects a change in the outlook for telecom spending over the last three months, impacting our ability to burn off inventory in the channel and at our customers.
Q: How much revenue are you generating through ZR and ZR-related sales, and where do you see that going over the next 2 to 4 quarters? A: Alan S. Lowe (President, CEO & Director): ZR and ZR+ revenue is still in the single digits of overall revenue. However, we expect growth as we are getting a lot of traction on the 800 gig ZR and ZR+.
Q: Can you provide more details on the manufacturing expansions, particularly in Thailand? A: Alan S. Lowe (President, CEO & Director): We are setting up a qualification line in Thailand and constructing a new building to phase in additional capacity over time. This expansion is driven by increased customer demand from cloud and AI infrastructure customers.
Q: Are you adding the additional floor space in Thailand based on new customer wins? A: Alan S. Lowe (President, CEO & Director): The incremental capacity is for new and diversified customers in both the cloud space and AI infrastructure space. We are working closely with our customers to ensure timely capacity expansion.
Q: Could you clarify if the $40 million headwind from telco reflects any broadening impact from the chip supply ban beyond the initial telecom products outlined last quarter? A: Alan S. Lowe (President, CEO & Director): The $40 million headwind is primarily due to a slowdown in carrier spending and longer duration of inventory burn-off, with a minor impact from U.S. restrictions on selling to a large customer in China.
Q: What are the expected milestones for the datacom business to become a multibillion business in the future? A: Alan S. Lowe (President, CEO & Director): Key milestones include qualification samples in the summer, qualification in the December quarter, and ramp starting in the December quarter into calendar 2025. We expect significant growth in datacom revenues by the end of calendar 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
