10-KPeriod: FY2018

Lumentum Holdings Inc. Annual Report, Year Ended Jun 30, 2018

Filed August 28, 2018For Securities:LITE

Summary

Lumentum Holdings Inc. (LITE) reported strong performance in its fiscal year ending June 30, 2018, driven by significant growth in its Optical Communications (OpComms) segment, particularly in 3D sensing applications, and continued strength in its Commercial Lasers segment. Net revenue saw a substantial increase of 24.6%, reaching $1.25 billion, supported by record revenues in key product areas. The company also highlighted progress on strategic objectives aimed at accelerating growth, improving margins, and diversifying its customer and end-market base. A major development during the year was the announcement of the acquisition of Oclaro, Inc. for approximately $1.8 billion, a strategic move expected to enhance Lumentum's position in the optical communications market. The company is actively managing its business in a dynamic market environment, facing competition and pricing pressures, but is investing in R&D to maintain technological leadership and is focused on adapting to evolving customer needs and industry trends.

Financial Highlights

54 data points
Beta

Revenue

$1.25B

34.6% Gross Margin

Net Income

$248.10M

19.9% Net Margin

EPS (Diluted)

$3.82

Total Assets

$1.58B

Cash & Equivalents

$397.30M

Free Cash Flow

$154.30M

Financial Statements
Beta
Revenue$1.25B
Cost of Revenue$812.40M
Gross Profit$432.10M
R&D Expenses$156.80M
SG&A Expenses$128.20M
Operating Expenses$292.20M
Operating Income$139.90M
Interest Expense$18.20M
Net Income$248.10M
EPS (Basic)$3.88
EPS (Diluted)$3.82
Shares Outstanding (Basic)62.30M
Shares Outstanding (Diluted)63.30M

Key Highlights

  • 1Net revenue increased by 24.6% to $1.25 billion in fiscal year 2018, driven by strong performance in 3D sensing, ROADMs, and commercial lasers.
  • 2The Optical Communications (OpComms) segment saw revenue growth of 23.5% to $1.06 billion, with Consumer and Industrial products (primarily 3D sensing) being a major contributor.
  • 3The Commercial Lasers segment revenue grew by 31.1% to $188.5 million, led by increased sales of kilowatt-class fiber lasers.
  • 4Lumentum announced a significant $1.8 billion agreement to acquire Oclaro, Inc., a move expected to strengthen its market position.
  • 5Gross margin improved to 34.6% in fiscal 2018, up from 31.8% in fiscal 2017, attributed to higher-margin 3D sensing and laser products.
  • 6The company is focused on technology leadership, investing heavily in R&D ($156.8 million in fiscal 2018) to drive innovation in optical communications and laser technologies.
  • 7Customer concentration remains a factor, with Apple representing 30% of net revenue in fiscal 2018.

Frequently Asked Questions

Lumentum's revenue growth in fiscal year 2018 was primarily driven by strong performance in its Optical Communications segment, particularly the Consumer and Industrial market driven by 3D sensing applications for mobile devices. The Commercial Lasers segment also contributed significantly with increased sales of kilowatt-class fiber lasers. Record revenues in specific product lines like TrueFlex® ROADMs also played a role.

The announced acquisition of Oclaro, Inc. for approximately $1.8 billion is a key strategic move for Lumentum. It is expected to significantly enhance the company's portfolio and market position in the optical communications industry, likely leading to greater scale, expanded product offerings, and potential cost synergies.

Lumentum acknowledges intense competition and pricing pressures, particularly in the optical communications market. To counter this, the company is focusing on technology leadership through collaborative innovation with customers, aiming for cost leadership, and increasing functional integration in its products. They are also developing more advanced, differentiated products that can command a premium while continuing to optimize costs for more mature products.

Lumentum views R&D investment as critical to its strategic objectives. The company invested $156.8 million in R&D in fiscal year 2018 and plans to continue increasing its investment in absolute dollars to develop new products and technologies that differentiate it in the marketplace, particularly in the rapidly evolving 3D sensing and advanced optical communications sectors.