10-KPeriod: FY2017

Lumentum Holdings Inc. Annual Report, Year Ended Jul 1, 2017

Filed August 29, 2017For Securities:LITE

Summary

Lumentum Holdings Inc. (LITE) reported strong revenue growth in fiscal year 2017, reaching $1,001.6 million, a 10.9% increase from the previous year. This growth was primarily driven by the Optical Communications (OpComms) segment, which saw a 12.7% increase in revenue, fueled by demand in Telecom and 100G Datacom products. The Commercial Lasers segment experienced a slight increase in revenue. The company continues to invest in research and development, highlighting its commitment to innovation in areas like 3D sensing and high-speed optical components. Financially, Lumentum reported a net loss of $102.5 million for fiscal year 2017, impacted by a significant unrealized loss on derivative liabilities ($104.2 million) related to its convertible notes and preferred stock. Despite the net loss, the company's cash position strengthened, ending the year with $272.9 million in cash and cash equivalents, boosted by proceeds from the issuance of convertible senior notes. The company's backlog also saw a healthy increase, indicating strong future demand.

Financial Highlights

53 data points
Beta

Revenue

$1.00B

31.8% Gross Margin

Net Income

-$102.50M

-10.2% Net Margin

EPS (Diluted)

$-1.71

Total Assets

$1.23B

Cash & Equivalents

$272.90M

Free Cash Flow

-$53.10M

Financial Statements
Beta
Revenue$1.00B
Cost of Revenue$677.00M
Gross Profit$318.10M
R&D Expenses$148.30M
SG&A Expenses$110.20M
Operating Expenses$270.50M
Operating Income$47.60M
Interest Expense$5.50M
Net Income-$102.50M
EPS (Basic)$-1.71
EPS (Diluted)$-1.71
Shares Outstanding (Basic)60.60M
Shares Outstanding (Diluted)60.60M

Key Highlights

  • 1Net revenue grew by 10.9% year-over-year to $1,001.6 million in fiscal year 2017.
  • 2The Optical Communications (OpComms) segment was the primary growth driver, up 12.7%, with strong performance in Telecom and 100G Datacom products.
  • 3The company issued $450 million in Convertible Senior Notes due 2024, strengthening its cash position to $272.9 million.
  • 4R&D expenses increased by 5.1% to $148.3 million, reflecting continued investment in product development.
  • 5Backlog increased to $218.4 million as of July 1, 2017, up from $168.5 million in the prior year.
  • 6Gross margin improved to 31.8% in fiscal year 2017 from 30.7% in fiscal year 2016.
  • 7The company reported a net loss of $102.5 million, largely due to significant unrealized losses on derivative liabilities.

Frequently Asked Questions

Lumentum's revenue growth in fiscal year 2017 was primarily driven by its Optical Communications (OpComms) segment, which saw increased demand for its Telecom and 100G Datacom products. The Commercial Lasers segment also contributed, albeit with a smaller increase.

As of July 1, 2017, Lumentum had a solid cash position of $272.9 million. The company also raised $450 million through the issuance of Convertible Senior Notes. While reporting a net loss for the year, largely due to accounting for derivative liabilities, the operational cash flow and cash reserves suggest adequate liquidity for its near-term needs.

Key risks identified include intense competition and rapid technological change in its markets, requiring continuous innovation and cost management. The company also faces risks related to pricing pressures, reliance on a few key customers for a significant portion of sales, potential supply chain disruptions due to limited suppliers or contract manufacturers, and the complexities and risks associated with international operations.

Lumentum became an independent publicly-traded company in August 2015 following its separation from JDSU. Prior to the separation, financial statements were prepared on a stand-alone basis derived from JDSU's records, including allocated expenses. Post-separation, Lumentum operates as an independent entity, impacting its cost structure and financial reporting.