10-KPeriod: FY2019

Lumentum Holdings Inc. Annual Report, Year Ended Jun 29, 2019

Filed August 27, 2019For Securities:LITE

Summary

Lumentum Holdings Inc. reported strong revenue growth of 25.5% in fiscal year 2019, reaching $1.57 billion, primarily driven by the acquisition of Oclaro and organic growth in its Telecom business. The company operates in two segments: Optical Communications (OpComms) and Commercial Lasers. OpComms, which represents the majority of revenue, saw significant growth in Telecom products, particularly ROADMs, and continued strength in the Consumer and Industrial segment driven by 3D sensing applications. Despite revenue growth, the company experienced a net loss of $36.4 million in fiscal year 2019, largely impacted by significant restructuring charges and impairment charges related to exiting certain product lines, as well as amortization of intangibles from the Oclaro acquisition. The company is actively managing its product portfolio and operational efficiencies to improve profitability going forward. Key customers include major tech players like Apple, Huawei, and Cisco, highlighting the company's critical role in the supply chain for high-demand technology sectors.

Financial Highlights

51 data points
Beta

Revenue

$1.57B

27.2% Gross Margin

Net Income

-$36.40M

-2.3% Net Margin

EPS (Diluted)

$-0.54

Total Assets

$2.72B

Cash & Equivalents

$432.60M

Free Cash Flow

$164.10M

Financial Statements
Beta
Revenue$1.57B
Cost of Revenue$1.09B
Gross Profit$425.90M
R&D Expenses$184.60M
SG&A Expenses$200.30M
Operating Expenses$447.50M
Operating Income-$21.60M
Interest Expense$36.30M
Net Income-$36.40M
EPS (Basic)$-0.54
EPS (Diluted)$-0.54
Shares Outstanding (Basic)70.70M
Shares Outstanding (Diluted)70.70M

Key Highlights

  • 1Lumentum Holdings Inc. reported a 25.5% increase in net revenue for fiscal year 2019, reaching $1.57 billion, driven by the Oclaro acquisition and organic growth in Telecom products.
  • 2The Optical Communications (OpComms) segment, representing 87.5% of total revenue, saw a significant 29.4% increase, boosted by strong demand for ROADM products and contributions from the Oclaro acquisition.
  • 3The company incurred a net loss of $36.4 million in fiscal year 2019, a substantial decrease from the $248.1 million net income in fiscal year 2018, mainly due to $31.9 million in restructuring charges and $30.7 million in impairment charges related to product line exits.
  • 4Apple, Huawei, and Ciena were significant customers, each representing over 10% of net revenue in fiscal year 2019, indicating a concentration of revenue among key clients.
  • 5The company is strategically repositioning its OpComms business by discontinuing certain Telecom product lines and winding down Lithium Niobate modulator operations, while investing in new Datacom chip development.
  • 6Gross margin declined to 27.2% in fiscal year 2019 from 34.6% in fiscal year 2018, primarily due to acquisition-related amortization and inventory write-downs associated with product line exits.

Frequently Asked Questions

In fiscal year 2019, Lumentum Holdings Inc. reported a net revenue of $1.57 billion, a significant increase of 25.5% compared to the previous year. However, the company experienced a net loss of $36.4 million, largely attributed to substantial restructuring and impairment charges associated with product line exits and the Oclaro acquisition's amortization expenses.

The Optical Communications (OpComms) segment was the primary revenue driver, accounting for 87.5% of total net revenue. This segment experienced strong growth, particularly in Telecom products like ROADMs, and benefited from the acquisition of Oclaro. The Consumer and Industrial market within OpComms also contributed positively, driven by 3D sensing applications.

The acquisition of Oclaro, completed in December 2018 for $1.4 billion, significantly boosted Lumentum's revenue and strengthened its product portfolio, particularly in indium phosphide lasers and photonic integrated circuits. However, it also contributed to increased operating expenses, including amortization of acquired intangibles and integration-related costs, impacting overall profitability in fiscal year 2019. Strategically, the acquisition is expected to position Lumentum strongly to meet future customer demands in high-speed interconnects and optical networks.

Lumentum highlighted several key risks, including intense competition and rapid technological change in its markets, which necessitate continuous innovation and cost control. The company also noted its reliance on a limited number of major customers, with no contractual purchase commitments, which can lead to revenue volatility. Additionally, the risk factors mention the impact of geopolitical tensions and trade policies, particularly concerning sales to Chinese customers like Huawei, and the complexities of integrating acquired businesses.