Summary of Lumentum (LITE) FY Conference Call - May 13, 2025 Company Overview - **Company**: Lumentum (LITE) - **Industry**: Optical components and networking solutions Key Points Demand and Market Outlook - No observed slowdown in ordering patterns; book-to-bill remains positive [3][4] - Customer feedback indicates continued strong demand, with no anticipated slowdown in the next four to five quarters [3][4] - CapEx spending from cloud companies is expected to remain stable or improve in 2026 compared to 2025 [6][7] Tariff Impact and Mitigation Strategies - Tariffs have impacted margins by approximately 100 basis points, primarily due to reverse tariffs on imports from the U.S. to China [8][9] - Lumentum has manufacturing facilities in both China and Thailand, allowing for flexible supply chain management to mitigate tariff impacts [9][10] - Plans to scale up manufacturing in Thailand as a primary strategy to navigate potential tariff challenges [12][13] Industry Dynamics and Competitive Landscape - The optical industry has changed significantly since the sale of Finisar; Lumentum now has a higher component mix and a strong laser footprint [16][17] - Increased demand from U.S. hyperscalers for domestic suppliers due to security concerns is driving market dynamics [20] - The rate of change in the market is accelerating, favoring companies that invest in innovation [21] Business Strategy and Growth Areas - Near-term growth is expected from the transceiver market, where Lumentum currently holds a low single-digit market share [22] - Long-term strategy aims to shift focus towards higher-margin components, particularly co-packaged optics [23][24] - Vertical integration is seen as beneficial but not essential for improving margins in the transceiver business [25][28] Revenue Opportunities and Product Development - Optical Communication Systems (OCS) are expected to generate early revenue by the end of the calendar year, with material revenue anticipated in Q2 FY 2026 [55] - OCS offers advantages in cost, power consumption, and latency, making it a strong alternative to electrical solutions in data centers [54] - The company is exploring opportunities in industrial applications, particularly in semiconductor packaging, to improve profitability [63] Financial Performance and Margin Expectations - Current gross margins for transceivers are below desired levels, with expectations to reach low to mid-30s percentage [49][52] - Overall business margins are targeted to exceed 40% as the company shifts focus towards components [52][53] Conclusion - Lumentum is positioned to capitalize on strong demand in the optical components market, with strategic plans to navigate tariff impacts and enhance profitability through innovation and vertical integration. The company aims to leverage its manufacturing capabilities and market dynamics to achieve sustainable growth in the coming years.

Company Performance - Lumentum reported quarterly earnings of $0.57 per share, exceeding the Zacks Consensus Estimate of $0.50 per share, and up from $0.29 per share a year ago, representing an earnings surprise of 14% [1] - The company achieved revenues of $425.2 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 1.45%, and an increase from $366.5 million year-over-year [2] - Over the last four quarters, Lumentum has consistently surpassed consensus EPS and revenue estimates [2] Stock Outlook - Lumentum shares have declined approximately 24.8% since the beginning of the year, compared to a 3.9% decline in the S&P 500 [3] - The company's earnings outlook will be crucial for future stock performance, with current consensus EPS estimates at $0.65 for the coming quarter and $1.76 for the current fiscal year [4][7] Industry Context - The Lasers Systems and Components industry, to which Lumentum belongs, is currently ranked in the top 37% of over 250 Zacks industries, indicating a favorable industry outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Lumentum's stock performance [5]

Revenue and Profitability - Cloud & Networking segment accounted for 85.9% of net revenue for the three months ended March 29, 2025, compared to 85.6% for the same period in 2024[207]. - Net revenue increased by $58.7 million, or 16.0%, for the three months ended March 29, 2025, driven by a $51.4 million increase in Cloud & Networking revenue and a $7.3 million increase in Industrial Tech revenue[209]. - For the nine months ended March 29, 2025, net revenue increased by $113.4 million, or 10.8%, primarily due to a $156.5 million increase in Cloud & Networking revenue, offset by a $43.1 million decrease in Industrial Tech revenue[210]. - Gross profit for the three months ended March 29, 2025, was $122.5 million, representing a 105.9% increase compared to the prior year, with a gross margin of 28.8%[218]. - Gross margin for the nine months ended March 29, 2025, increased to 25.8% from 19.1% for the same period last year, driven by a reduction in excess and obsolete inventory charges[220]. - Cloud & Networking segment profit increased by $27.2 million, or 59.3%, during the three months ended March 29, 2025, primarily due to higher sales of products for cloud and AI/ML applications[222]. - Industrial Tech segment profit increased by $5.3 million, or 196.3%, during the three months ended March 29, 2025, primarily due to higher revenue from laser products[222]. Expenses and Losses - Gross profit margin improved to 28.8% for the three months ended March 29, 2025, up from 16.2% in the same period last year[207]. - Operating expenses decreased to 37.7% of net revenue for the three months ended March 29, 2025, down from 47.5% in the same period last year[207]. - Net loss narrowed to 10.4% of net revenue for the three months ended March 29, 2025, compared to a loss of 34.7% in the same period last year[207]. - Research and development expenses were 17.9% of net revenue for the three months ended March 29, 2025, down from 21.1% in the same period last year[207]. - SG&A expense increased by $34.3 million, or 44.1%, during the three months ended March 29, 2025, driven by a $29.1 million increase in stock-based compensation[227]. - Restructuring and related charges recorded were $7.2 million and $17.6 million for the three and nine months ended March 29, 2025, respectively, mainly due to integration efforts and cost reduction initiatives[231]. Acquisitions and Investments - The company completed the acquisition of Cloud Light for a total cash consideration of $705.0 million on November 7, 2023, enhancing its capabilities in advanced optical modules[197]. - The acquisition-related costs incurred for the Cloud Light acquisition totaled $9.6 million, recorded as general and administrative expenses[197]. - The company plans to continue investing in R&D and new products to differentiate itself in the marketplace[226]. Customer and Market Focus - For the three months ended March 29, 2025, two customers accounted for 17% and 15% of total revenue, indicating a high customer concentration[211]. - Net revenue from customers outside the United States represented 83.4% of total net revenue for the three months ended March 29, 2025, an increase from 64.7% in the prior year[215][216]. - The company expects revenue from customers outside the United States to continue to be a significant focus for growth opportunities despite potential regulatory impacts[217]. Cash and Financial Position - Cash and cash equivalents as of March 29, 2025, were $516.4 million, an increase from $436.7 million as of June 29, 2024[244]. - As of March 29, 2025, the company had cash, cash equivalents, and short-term investments totaling $866.7 million[268]. - The company reported a net loss of $187.4 million during the nine months ended March 29, 2025, with cash from operating activities reflecting non-cash items of $309.4 million[258]. - Total contractual obligations as of March 29, 2025, amount to $3,339.0 million, with $639.4 million due within one year and $2,699.6 million due beyond one year[248]. - The company has a share buyback program with an authorization of up to $1.2 billion, of which $630.4 million has been utilized to repurchase 7.7 million shares at an average price of $81.66 per share[254]. Risks and Challenges - The company experienced ongoing supply chain challenges but noted signs of inventory normalization among network equipment manufacturers since the first fiscal quarter of 2025[200]. - Potential risks include the impact of domestic and international financial institution failures on the company's ability to fund operations[270]. - The value of the investment portfolio could be affected by holding debt instruments from failing or illiquid institutions[270]. - The company's supply chain and cash collections may be impacted if vendors or customers experience liquidity issues[270].

Financial Data and Key Metrics Changes - Third quarter revenue was $425.2 million, exceeding the high end of guidance, with non-GAAP EPS of $0.57 [21] - Non-GAAP gross margin for Q3 was 35.2%, up 290 basis points sequentially and 650 basis points year-over-year [21] - Non-GAAP operating margin was 10.8%, an increase of 290 basis points sequentially and 1,100 basis points year-over-year [21] - Cash and short-term investments decreased by $30 million to $867 million [23] Business Line Data and Key Metrics Changes - Cloud and Networking segment revenue was $365.2 million, up 8% sequentially and 16% year-over-year [23] - Industrial Tech segment revenue decreased by 5% sequentially but increased by 14% year-over-year, with a profit margin of 4.3% [24] - Cloud and Networking segment profit increased to 20%, up 380 basis points sequentially and 540 basis points year-over-year [24] Market Data and Key Metrics Changes - The overall market is expected to grow at a compound annual growth rate of over 25% over the next five years, driven by the convergence of optics and electronics [9] - Demand from hyperscale cloud customers continues to be a significant driver of revenue growth [11] Company Strategy and Development Direction - The company aims to achieve quarterly revenue of $750 million, gross margins above 40%, and operating margins greater than 20% [8] - Focus on expanding capabilities in the optical components market, particularly in transceivers and co-packaged optics [10][13] - Strategic investments are being made in high-growth areas, particularly cloud and AI applications [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving medium and long-term financial targets despite macroeconomic uncertainties and tariff impacts [19] - The company is focused on pricing, disciplined spending, and execution to navigate challenges [19] - Anticipated strong sequential growth in the Cloud and Networking segment for Q4, driven by new capacity and demand from network equipment manufacturers [16] Other Important Information - The company is ramping production in CW lasers for silicon photonics transceiver applications [12] - The company has taken actions to rationalize the Industrial Tech portfolio, closing two R&D sites [17] Q&A Session Summary Question: How is the company tracking towards the $500 million revenue target? - Management confirmed they are still on track for the $500 million target by the end of the year, guiding quarter by quarter [31] Question: Update on datacom chip business performance? - The company is outperforming initial expectations in terms of volume and ASP, with a focus on EMLs [32][34] Question: Clarification on tariff headwinds? - The company quantified a 100 basis point headwind to gross margins due to increased component costs and tariffs [41][43] Question: Contributions from co-packaged optics? - Co-packaged optics are expected to take time to ramp, with a focus on laser components in the near term [48] Question: Telecom performance and supply constraints? - Telecom performance met expectations, with improvements anticipated in supply for pumps and tunables moving into Q4 [99][100] Question: Guidance caution related to macro or tariffs? - Management acknowledged macro uncertainty but expressed confidence in the guidance provided, with an overall positive trend in demand [105]

Financial Data and Key Metrics Changes - In Q3, the company reported revenue of $425.2 million and non-GAAP EPS of $0.57, both exceeding the high end of guidance [20] - Non-GAAP gross margin was 35.2%, up 290 basis points sequentially and 650 basis points year on year, attributed to better manufacturing utilization and a favorable product mix [20][21] - Non-GAAP operating margin improved to 10.8%, up 290 basis points sequentially and 1,100 basis points year on year [20][21] Business Line Data and Key Metrics Changes - Cloud and Networking segment revenue reached $365.2 million, increasing 8% sequentially and 16% year on year, driven by strong demand from hyperscale cloud customers [9][22] - Industrial Tech segment revenue was $60 million, down 5% sequentially but up 14% year on year, with ultrafast laser shipments remaining steady [14][15][22] Market Data and Key Metrics Changes - The company anticipates strong sequential growth in the Cloud and Networking segment in Q4, driven by new capacity and increasing demand from network equipment manufacturers [14] - The Industrial Tech segment is expected to see a sequential decline in revenue due to ongoing macroeconomic headwinds and typical seasonal trends [16] Company Strategy and Development Direction - The company aims to achieve quarterly revenue of $750 million, gross margins above 40%, and operating margins greater than 20% [6][18] - Focus on high-growth areas such as cloud and AI, with investments directed towards expanding manufacturing capacity and product offerings [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving medium and long-term financial targets despite macroeconomic uncertainties and tariff impacts [18] - The company is building resilience through a diversified manufacturing footprint and flexible supply chain [18] Other Important Information - The company is ramping production of CW lasers and EMLs, with expectations to double EML shipments by the end of calendar 2025 [10][11] - The company is also focusing on co-packaged optics (CPO) as a future growth area, although significant adoption is expected to take several years [118] Q&A Session Summary Question: How is the company tracking towards the $500 million revenue target? - Management confirmed they are still on track for the $500 million target by the end of the year, emphasizing confidence in current performance [30] Question: Update on datacom chip business performance? - The company is outperforming initial expectations in terms of volume and ASP, with a focus on increasing capacity for EMLs and CW lasers [32][34] Question: Clarification on tariff headwinds? - The company quantified a 100 basis point headwind to gross margins due to increased component costs and tariffs, with plans to move more production to Thailand to mitigate this [41][42] Question: Contributions from co-packaged optics? - Management indicated that while CPO is a long-term prospect, they are looking to add components to the CPO ecosystem over the coming years [48][118] Question: Insights on telecom performance and supply issues? - Telecom performance met expectations, with improvements anticipated in supply for pumps and tunables moving into Q4 [97][99] Question: Guidance caution related to macro or tariffs? - Management acknowledged macro uncertainty but expressed confidence in the guidance provided, highlighting strong demand across product lines [100][102]

Financial Performance - Net revenue for Q3 FY 2025 was $425.2 million, representing a 5.7% increase quarter-over-quarter and a 16.0% increase year-over-year[4]. - GAAP net loss for Q3 FY 2025 was $44.1 million, or $0.64 per diluted share, an improvement from a net loss of $127.0 million, or $1.88 per diluted share in Q3 FY 2024[4][16]. - Non-GAAP net income for Q3 FY 2025 was $40.9 million, or $0.57 per diluted share, compared to $30.0 million, or $0.42 per diluted share in Q2 FY 2025[5]. - GAAP gross margin for Q3 FY 2025 was 28.8%, up from 24.8% in Q2 FY 2025, while non-GAAP gross margin was 35.2%, up from 32.3%[6][7]. - The company expects Q4 FY 2025 net revenue to be in the range of $440 million to $470 million, with non-GAAP operating margin projected at 13.0% to 14.0%[12]. - Gross profit on a GAAP basis for the three months ended March 29, 2025, was $122.5 million, up from $99.6 million in the previous quarter, reflecting a 22.9% increase[25]. - Non-GAAP gross profit for the same period was $149.5 million, compared to $130.0 million, indicating a 15% increase[25]. - Adjusted EBITDA for the three months ended March 29, 2025, was $71.0 million, an increase from $57.6 million in the previous quarter[31]. - GAAP net loss for the three months ended March 29, 2025, was $44.1 million, compared to a loss of $60.9 million for the previous quarter[31]. - Non-GAAP net income for the same period was $40.9 million, with a net income per share of $0.57, up from $30.0 million and $0.42 per share in the prior quarter[31]. Operational Efficiency - Lumentum's operating loss improved to 8.9% in Q3 FY 2025 from 12.8% in Q2 FY 2025, indicating better operational efficiency[6][7]. - Loss from operations on a GAAP basis was $37.7 million, an improvement from a loss of $51.6 million in the previous quarter[25]. - Non-GAAP income from operations was $46.1 million, compared to $31.7 million in the previous quarter, showing a 45.8% increase[25]. Cash and Assets - Total cash, cash equivalents, and short-term investments at the end of Q3 FY 2025 were $866.7 million, a decrease of $30.0 million from Q2 FY 2025[5]. - Total assets increased to $3,975.0 million as of March 29, 2025, up from $3,931.9 million on June 29, 2024, representing a growth of 1.1%[18]. - Total current assets rose to $1,667.3 million, compared to $1,590.1 million, marking a 4.9% increase[18]. - Total liabilities increased to $3,095.5 million from $2,974.6 million, reflecting a rise of 4.1%[18]. Expenses and Charges - Research and development expenses on a GAAP basis were $75.9 million for the quarter, slightly up from $74.2 million[25]. - Selling, general and administrative expenses on a GAAP basis totaled $112.0 million, compared to $76.3 million in the previous quarter, a significant increase of 46.7%[25]. - Stock-based compensation for the three months ended March 29, 2025, included $62.8 million, reflecting expenses from equity award modifications for the former CEO[27]. - Restructuring charges for the three months ended March 29, 2025, amounted to $7.2 million, primarily related to asset write-offs and site closures[27]. - Other charges, net for the three months ended March 29, 2025, totaled $11.6 million, including executive transition costs and bad debt reserves[28]. - Integration related costs for the three months ended March 29, 2025, were $1.4 million, consistent with ongoing integration efforts[31]. Future Outlook - The company anticipates continued financial momentum driven by AI-driven cloud growth despite macroeconomic volatility[3]. - The company’s long-term projected non-GAAP tax rate for fiscal 2025 is set at 16.5%[21]. - The company is focused on innovations in optics and electronics to support AI data center scaling and cloud growth[2][3]. Methodology and Reporting - The company refined its methodology for reporting non-GAAP measures, with no impact on financial position or cash flows[31]. - Shares used in per share calculation - diluted on GAAP basis were 69.3 million for the three months ended March 29, 2025[31].

Q3 FY25 Conference Call May 6, 2025 Forward Looking Statements and Financial Presentation This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These include statements regarding: our belief and expectations with respect to our markets, including the cloud end market and the broader networking market, customers and industry, any anticipation or guidance as to demand for our products and te ...

Company Overview - Kellanova is a leader in global snacking, international cereal and noodles, and North America frozen foods, with a legacy of over 100 years [4] - The company aims to become the world's best-performing snacks-led powerhouse, leveraging its differentiated brands and passionate workforce [4] - Kellanova reported net sales of approximately $13 billion for 2024 [4] Product Innovation - Pringles has launched new limited-edition flavors inspired by beer-infused backyard barbecue favorites in collaboration with Miller Lite [1][2] - The new flavors include Pringles x Miller Lite Beer Can Chicken and Pringles x Miller Lite Grilled Beer Brat, designed to capture the essence of summer cookouts [2][3] - These flavors combine the taste of grilled foods with the hoppy, malt beer aroma of Miller Lite, appealing to consumers looking for unique snacking experiences [2][6] Marketing Strategy - The collaboration between Pringles and Miller Lite aims to surprise and satisfy consumer cravings for innovative flavors during the grilling season [3] - The marketing approach emphasizes the seamless fit of beer flavors into snack products, targeting fans of both brands for summer barbecues [3][6] - The new products will be available at retailers nationwide starting in May, while supplies last, encouraging consumers to engage with the brands through social media [3]

Core Viewpoint - Lumentum Holdings experienced a significant stock price increase of over 5% due to positive analyst recommendations, contrasting with a slight decline in the S&P 500 index [1] Analyst Recommendations - Northland analyst Tim Savageaux upgraded Lumentum's recommendation from market perform to outperform, setting a price target of $70 per share, which represents a 34% upside from the current stock level [2] - Stifel's research highlighted positive insights from the recent Optica Executive Forum, indicating strong demand for effective, low-latency data transmission in the optical field [3] Industry Dynamics - The Stifel team emphasized that optical transceivers are not obsolete but are essential for meeting the increasing bandwidth requirements in the industry [4] - Lumentum is well-positioned to capitalize on the growing demand for optical solutions, as indicated by recent trading activity and investor sentiment [5]

Core Viewpoint - Lumentum Holdings has achieved a new speed benchmark in optical technology, leading to a significant increase in stock price and positive business outlook [1][4]. Group 1: Technological Advancements - Lumentum and Keysight Technologies demonstrated optical technology achieving a speed of 448 gigabytes per second at the Optical Fiber Communications Conference [2]. - The collaboration addresses the increasing bandwidth demands of artificial intelligence (AI) and machine learning (ML) applications, which require substantial computing resources [3]. Group 2: Business Performance and Outlook - Lumentum's management updated its guidance, projecting quarterly revenue of $750 million with an operating margin of 20% [4]. - The company has a range of next-generation optical and laser products set to launch in the short- to mid-term, expected to drive future sales [4]. Group 3: Market Sentiment - Despite some skepticism regarding AI's potential, a significant portion of the market remains optimistic about its impact on company fundamentals, supporting a positive outlook for innovative companies like Lumentum [5].