10-KPeriod: FY2023

Lumentum Holdings Inc. Annual Report, Year Ended Jul 1, 2023

Filed August 23, 2023For Securities:LITE

Summary

Lumentum Holdings Inc. (LITE) reported its fiscal year 2023 results, showcasing a 3.2% increase in net revenue year-over-year, reaching $1.77 billion. This growth was primarily driven by the Optical Communications (OpComms) segment, bolstered by the acquisition of NeoPhotonics and improved supply chain conditions compared to the previous year. The Lasers segment also saw a healthy increase in revenue. However, the company experienced a significant decline in gross margin to 32.2% from 46.0% in the prior year. This was largely attributed to a less favorable product mix within OpComms, higher amortization expenses following recent acquisitions, increased component procurement costs, and inventory adjustments. Despite revenue growth, the company reported a net loss of $131.6 million for fiscal year 2023, a substantial decrease from a net income of $198.9 million in fiscal year 2022, impacted by integration costs, increased R&D, and SG&A expenses, along with the aforementioned gross margin pressures. Lumentum's strategic focus remains on technology leadership and market expansion, with ongoing investments in R&D. The company completed two key acquisitions in fiscal 2023: NeoPhotonics Corporation and IPG Photonics' telecom transmission product lines, aimed at strengthening its position in high-growth markets like cloud and telecom network infrastructure. Despite the profitability challenges in the current year, Lumentum is positioned to benefit from long-term trends in data growth and digitalization.

Financial Highlights

50 data points
Beta

Revenue

$1.77B

32.2% Gross Margin

Net Income

-$131.60M

-7.4% Net Margin

EPS (Diluted)

$-1.93

Total Assets

$4.63B

Cash & Equivalents

$859.00M

Free Cash Flow

$51.30M

Financial Statements
Beta
Revenue$1.77B
Gross Profit$569.00M
R&D Expenses$307.80M
SG&A Expenses$348.80M
Operating Expenses$684.70M
Operating Income-$115.70M
Interest Expense$26.10M
Net Income-$131.60M
EPS (Basic)$-1.93
EPS (Diluted)$-1.93
Shares Outstanding (Basic)68.30M
Shares Outstanding (Diluted)68.30M

Key Highlights

  • 1Net revenue increased by 3.2% to $1.77 billion in fiscal 2023, driven by acquisitions and improved supply chain.
  • 2Gross margin significantly declined to 32.2% in fiscal 2023 from 46.0% in fiscal 2022, due to unfavorable product mix, higher acquisition-related costs, and inventory adjustments.
  • 3Reported a net loss of $131.6 million in fiscal 2023, compared to a net income of $198.9 million in fiscal 2022.
  • 4Completed two significant acquisitions in fiscal 2023: NeoPhotonics Corporation and IPG Photonics' telecom transmission product lines, expanding market opportunities.
  • 5R&D and SG&A expenses increased significantly in fiscal 2023 due to these acquisitions and integration efforts.
  • 6The company ended the fiscal year with $859.0 million in cash and cash equivalents.
  • 7Apple and Ciena represented significant portions of revenue, with Apple's contribution decreasing notably year-over-year.

Frequently Asked Questions

Lumentum's revenue growth in fiscal year 2023 was primarily driven by the acquisition of NeoPhotonics Corporation and IPG Photonics' telecom transmission product lines. These acquisitions expanded the company's reach in high-growth markets. Additionally, an easing of supply chain constraints compared to the previous year allowed Lumentum to better meet customer demand.

The gross margin decreased significantly due to several factors. These included a less profitable product mix within the OpComms segment, with lower sales of higher-margin imaging and sensing products and higher sales of lower-margin telecom products post-acquisition. Higher amortization expenses from recent acquisitions, increased costs for procuring components (especially from brokers to satisfy demand), inventory fair value adjustments, and higher excess/obsolete inventory charges also contributed. Furthermore, factory underutilization due to customer inventory management impacted margins.

These acquisitions significantly boosted revenue by expanding Lumentum's product portfolio and market presence, particularly in cloud and telecom network infrastructure. However, they also led to increased R&D and SG&A expenses due to integration efforts, additional headcount, and acquisition-related costs. The acquisitions also contributed to higher amortization expenses and impacted the overall gross margin due to the integration of potentially lower-margin products and the amortization of acquired intangibles.

Lumentum expects that some level of inventory management by its customers, who accumulated inventory during periods of supply chain tightness, will continue to impact the business in fiscal year 2024. This customer inventory reduction has led to decreased ordering patterns and makes future order visibility more challenging.