10-KPeriod: FY2016

Lumentum Holdings Inc. Annual Report, Year Ended Jul 2, 2016

Filed September 2, 2016For Securities:LITE

Summary

Lumentum Holdings Inc. (LITE) has filed its 2016 Form 10-K, detailing its financial performance and operational overview as an independent entity following its separation from JDS Uniphase (now Viavi) in August 2015. The company operates two primary segments: Optical Communications (OpComms) and Commercial Lasers. Fiscal year 2016 saw a notable increase in net revenue, primarily driven by the OpComms segment, fueled by demand in Telecom and 100G Datacom products. Despite revenue growth, the company faces ongoing challenges including managing inventory, potential price sensitivity in competitive markets, and the need for continued investment in Research and Development to maintain its competitive edge. Lumentum is also navigating its status as an "emerging growth company," leveraging certain exemptions from regulatory requirements while diligently working to establish and refine its internal controls over financial reporting. The company's financial strategy indicates a focus on reinvesting earnings for business development, with no current plans for dividend payments. Investors should monitor the company's ability to manage its product mix, competitive pressures, and ongoing strategic investments.

Financial Highlights

50 data points
Beta

Revenue

$903.00M

30.7% Gross Margin

Net Income

$9.30M

1.0% Net Margin

EPS (Diluted)

$-0.05

Total Assets

$726.30M

Cash & Equivalents

$157.10M

Free Cash Flow

$4.60M

Financial Statements
Beta
Revenue$903.00M
Cost of Revenue$458.40M
Gross Profit$277.30M
R&D Expenses$141.10M
SG&A Expenses$117.30M
Operating Expenses$265.80M
Operating Income$11.50M
Interest Expense$100K
Net Income$9.30M
EPS (Basic)$-0.05
EPS (Diluted)$-0.05
Shares Outstanding (Basic)59.10M
Shares Outstanding (Diluted)59.10M

Key Highlights

  • 1Net revenue increased by 7.9% to $903.0 million in fiscal year 2016, primarily driven by the Optical Communications (OpComms) segment.
  • 2The OpComms segment revenue grew 9.7% due to increased demand for Telecom and 100G Datacom products.
  • 3Lumentum reported a net income of $9.3 million for fiscal year 2016, a significant turnaround from a net loss of $3.4 million in fiscal year 2015.
  • 4The company is operating as an "emerging growth company" and is taking advantage of exemptions from certain SEC reporting requirements.
  • 5Lumentum has not paid any dividends and currently intends to retain future earnings for business development and growth.
  • 6The company has a significant portion of its revenue ($82% in FY16) generated from customers outside the United States, with Asia-Pacific being the largest region.
  • 7The Series A Preferred Stock issued to Viavi has potential future implications on common stockholders due to conversion options and dividend accrual.

Frequently Asked Questions

Lumentum operates two main segments: Optical Communications (OpComms) and Commercial Lasers. In fiscal year 2016, net revenue increased by 7.9% to $903.0 million. The OpComms segment was the primary driver of this growth, with revenue increasing by 9.7% due to strong demand for Telecom and 100G Datacom products. The Commercial Lasers segment saw a slight decrease in revenue.

Lumentum currently does not expect to pay any cash dividends on its common stock. The company intends to retain future income to fund the development and growth of its business and does not anticipate paying dividends in the foreseeable future.

Lumentum is an 'emerging growth company' under the JOBS Act. This status allows the company to take advantage of exemptions from certain reporting requirements, such as not being required to provide an auditor's attestation on internal controls over financial reporting or comply with certain executive compensation disclosure rules. While this can reduce compliance costs, it may result in Lumentum's filings providing less information than those of larger public companies, which could affect investor perception and market liquidity.

Lumentum Inc. issued Series A Preferred Stock which can be converted into shares of common stock at a price of $24.63 per share, starting two years after issuance. This conversion option is accounted for as a derivative liability and is marked to market, impacting net income. Additionally, the preferred stock accrues a 2.5% annual dividend. The payment of these dividends, or the conversion of the stock, could dilute existing common stockholders or reduce the cash available for other corporate purposes, including common stock dividends.