10-KPeriod: FY2024

Lumentum Holdings Inc. Annual Report, Year Ended Jun 29, 2024

Filed August 21, 2024For Securities:LITE

Summary

Lumentum Holdings Inc. (LITE) reported a significant revenue decline of 23.1% to $1.36 billion for the fiscal year ended June 29, 2024, largely driven by a substantial drop in its Cloud & Networking segment (down 18.0%) and Industrial Tech segment (down 38.3%). This decline is attributed to a prolonged customer inventory correction following pandemic-related supply chain shortages and, for the Cloud & Networking segment, the impact of U.S. export restrictions. The company experienced a significant gross margin contraction from 32.2% to 18.5% due to lower revenue, manufacturing underutilization, and integration costs, resulting in a net loss of $546.5 million for the year. Despite the challenging fiscal year, Lumentum completed the acquisition of Cloud Light Technology Limited in November 2023, which contributed $199.5 million in revenue. The company is strategically focused on its Cloud & Networking segment, which now represents nearly 80% of total revenue, driven by AI/ML and cloud data center demands. While the current fiscal year presented significant headwinds, Lumentum's long-term strategy remains focused on innovation and growth in high-demand areas, supported by its strong market positions in optical and photonic technologies.

Financial Highlights

49 data points
Beta

Revenue

$1.36B

18.5% Gross Margin

Net Income

-$546.50M

-40.2% Net Margin

EPS (Diluted)

$-8.12

Total Assets

$3.93B

Cash & Equivalents

$436.70M

Free Cash Flow

-$108.30M

Financial Statements
Beta
Revenue$1.36B
Gross Profit$251.50M
R&D Expenses$302.20M
SG&A Expenses$310.70M
Operating Expenses$685.50M
Operating Income-$434.00M
Net Income-$546.50M
EPS (Basic)$-8.12
EPS (Diluted)$-8.12
Shares Outstanding (Basic)67.30M
Shares Outstanding (Diluted)67.30M

Key Highlights

  • 1Net revenue decreased by 23.1% to $1.36 billion in fiscal year 2024, primarily impacted by customer inventory management and export restrictions.
  • 2Gross margin significantly declined to 18.5% in fiscal year 2024 from 32.2% in fiscal year 2023, reflecting lower volumes and increased costs.
  • 3The Cloud & Networking segment, representing 79.8% of revenue, saw a 18.0% decrease in net revenue, largely due to demand normalization and export controls.
  • 4The Industrial Tech segment experienced a steeper revenue decline of 38.3%, attributed to market competition and inventory adjustments.
  • 5The company reported a net loss of $546.5 million for fiscal year 2024, a significant deterioration from a net loss of $131.6 million in the prior year.
  • 6Lumentum completed the acquisition of Cloud Light Technology Limited in November 2023 for $705.0 million in cash, adding advanced optical modules for data center applications.
  • 7Restructuring and related charges increased significantly to $72.6 million in fiscal year 2024, primarily related to discontinuing coherent DSPs/RFICs development and manufacturing site consolidation.

Frequently Asked Questions

The primary drivers for the 23.1% revenue decline were a prolonged inventory correction by customers following pandemic-related supply chain shortages and, specifically for the Cloud & Networking segment, the impact of U.S. export restrictions on sales to certain Chinese customers. These factors led to reduced customer orders and decreased demand across both the Cloud & Networking and Industrial Tech segments.

The acquisition of Cloud Light, completed in November 2023 for $705.0 million, contributed $199.5 million in revenue during fiscal year 2024. While it added to the top line, the integration of Cloud Light, along with other acquisitions, contributed to increased amortization of intangibles and other costs, impacting overall profitability. Goodwill from the acquisition was approximately $360.7 million.

Lumentum's Cloud & Networking segment is central to its strategy, driven by the increasing demand for high-speed optical components for cloud data centers, AI/ML, and telecommunications infrastructure. The company aims to capitalize on the shift to higher-speed photonics for AI model training and the expansion of data center interconnects. Despite the recent inventory correction and geopolitical challenges, the underlying long-term trends supporting this segment, such as increased data traffic and AI adoption, remain robust.

As of June 29, 2024, Lumentum had cash and cash equivalents of $436.7 million and short-term investments of $450.3 million. The company has significant convertible notes outstanding, totaling approximately $2.5 billion in principal. While management believes current cash and cash flows from operations are sufficient for the next 12 months, future liquidity needs for capital expenditures, strategic transactions, and debt obligations will be closely monitored, with potential for additional financing. The company repaid $323.1 million of its 2024 Notes upon maturity in March 2024.