10-QPeriod: Q2 FY2017

Lumentum Holdings Inc. Quarterly Report for Q2 Ended Oct 1, 2016

Filed October 27, 2016For Securities:LITE

Summary

Lumentum Holdings Inc. (LITE) reported its quarterly performance for the period ending October 1, 2016. As an 'emerging growth company,' Lumentum benefits from certain reduced reporting requirements, which may influence how investors perceive its disclosures compared to larger, more established companies. Investors should note the company's intention to utilize these exemptions, which could lead to a less active trading market for its stock and increased volatility. Significant risks to shareholders are highlighted, including potential stock price volatility stemming from various factors such as operating results, analyst estimates, competitor performance, and the substantial potential for share sales by major stockholders like Viavi. The company currently does not anticipate paying dividends, emphasizing its reinvestment strategy or other capital allocation priorities. Additionally, the existence of Series A Preferred Stock with conversion rights and redemption features presents a potential dilutive effect and financial obligation that investors should monitor.

Financial Highlights

47 data points
Beta

Revenue

$258.10M

31.7% Gross Margin

Net Income

-$3.40M

-1.3% Net Margin

EPS (Diluted)

$-0.06

Total Assets

$796.70M

Cash & Equivalents

$155.90M

Free Cash Flow

$7.40M

Financial Statements
Beta
Revenue$258.10M
Cost of Revenue$174.70M
Gross Profit$81.70M
R&D Expenses$36.90M
SG&A Expenses$25.10M
Operating Expenses$64.90M
Operating Income$16.80M
Net Income-$3.40M
EPS (Basic)$-0.06
EPS (Diluted)$-0.06
Shares Outstanding (Basic)59.90M
Shares Outstanding (Diluted)59.90M

Key Highlights

  • 1Lumentum is operating as an 'emerging growth company' and is leveraging exemptions from certain reporting requirements, which could impact investor perception and stock liquidity.
  • 2The company acknowledges significant risks to its stock price volatility, influenced by operational performance, analyst sentiment, industry peers, and potential large block sales from existing shareholders.
  • 3Viavi, a significant former stakeholder, still held 3.4 million shares as of September 30, 2016, and is required to dispose of its remaining shares within three years, posing a risk of market price pressure.
  • 4Lumentum does not currently expect to pay dividends on its common stock, signaling a focus on growth or other uses of capital.
  • 5The Series A Preferred Stock, held by Amada, has conversion rights into common stock at $24.63 per share, representing a potential future dilution for common stockholders.
  • 6The company is subject to extensive reporting and internal control requirements under the Exchange Act and Sarbanes-Oxley Act, with potential consequences for non-compliance including regulatory actions and loss of investor confidence.
  • 7Lumentum's ability to pay dividends is contingent on its financial health, subsidiary performance, and adherence to debt covenants, alongside Delaware law limitations.

Frequently Asked Questions

As an 'emerging growth company,' Lumentum can take advantage of exemptions from certain reporting and compliance requirements applicable to larger public companies. This may include fewer executive compensation disclosures and no requirement for an auditor's attestation on internal controls. While this can reduce costs for the company, investors should be aware that the information provided may differ from that of other public companies, potentially leading to less transparency and a more volatile stock price.

Viavi, a significant stockholder, held 3.4 million shares as of September 30, 2016, and is obligated to dispose of its remaining Lumentum shares within three years of the separation. Any substantial sale of these shares by Viavi, or even the perception that such sales might occur, could significantly increase stock price volatility and potentially drive down the market price of Lumentum's common stock.

No, Lumentum does not currently expect to pay dividends on its common stock. The decision to pay dividends, if any, will be at the discretion of the board of directors and will depend on various factors including the company's financial condition, earnings, capital requirements, and any restrictive covenants in debt agreements.

Lumentum's subsidiary issued Series A Preferred Stock that can be converted into shares of Lumentum's common stock at a price of $24.63 per share. This conversion represents a potential future dilution for existing common stockholders. Furthermore, the preferred stock has redemption features, which could create future financial obligations for the company.