10-QPeriod: Q3 FY2019

Lumentum Holdings Inc. Quarterly Report for Q3 Ended Mar 30, 2019

Filed May 7, 2019For Securities:LITE

Summary

Lumentum Holdings Inc. (LITE) reported a significant revenue increase in the third quarter of fiscal year 2019, driven by strong performance in its Optical Communications (OpComms) segment, largely due to the acquisition of Oclaro. Total net revenue grew by 44.9% year-over-year, reaching $432.9 million, with OpComms contributing $377.9 million. The company experienced a substantial net loss of $74.3 million for the quarter, a notable decline from the $2.7 million net income in the prior year's same quarter. This loss was primarily attributed to significant restructuring and impairment charges, including $21.1 million in restructuring costs and a $30.7 million impairment charge related to the discontinuation of certain Datacom transceiver product lines. These factors, combined with increased operating expenses and amortization from the Oclaro acquisition, impacted profitability. Despite the quarterly loss, the nine-month performance showed growth in revenue, though net loss widened compared to the prior year period. The company continues to invest in R&D for future growth opportunities.

Financial Highlights

51 data points
Beta

Revenue

$432.90M

20.4% Gross Margin

Net Income

-$74.30M

-17.2% Net Margin

EPS (Diluted)

$-0.98

Total Assets

$2.77B

Cash & Equivalents

$358.30M

Free Cash Flow

$16.20M

Financial Statements
Beta
Revenue$432.90M
Cost of Revenue$316.50M
Gross Profit$88.30M
R&D Expenses$57.70M
SG&A Expenses$55.20M
Operating Expenses$164.70M
Operating Income-$76.40M
Interest Expense$11.30M
Net Income-$74.30M
EPS (Basic)$-0.98
EPS (Diluted)$-0.98
Shares Outstanding (Basic)76.20M
Shares Outstanding (Diluted)76.20M

Key Highlights

  • 1Net revenue increased by 44.9% to $432.9 million in Q3 FY19 compared to Q3 FY18, primarily driven by the Oclaro acquisition and growth in the Telecom sector.
  • 2The Optical Communications (OpComms) segment saw a revenue increase of 53.4% to $377.9 million, largely due to the Oclaro acquisition and strong sales in ROADM products.
  • 3The company reported a net loss of $74.3 million ($0.98 per share) for Q3 FY19, a significant decrease from a net income of $2.7 million ($0.04 per share) in Q3 FY18.
  • 4Gross margin decreased significantly to 20.4% in Q3 FY19 from 32.5% in Q3 FY18, impacted by amortization related to the Oclaro acquisition and inventory write-downs.
  • 5Restructuring and related charges totaled $21.1 million for the quarter, largely due to severance and employee benefits related to discontinuing certain product lines.
  • 6An impairment charge of $30.7 million was recorded due to the discontinuation of Datacom transceiver products.
  • 7The company maintained a strong cash position, with cash and cash equivalents of $358.3 million as of March 30, 2019.

Frequently Asked Questions

The substantial increase in net revenue was primarily driven by the completion of the Oclaro acquisition in December 2018, which significantly boosted the Optical Communications segment, and by organic growth in the company's Telecom business.

The net loss was primarily due to significant one-time expenses, including $21.1 million in restructuring and related charges, and a $30.7 million impairment charge related to the discontinuation of certain product lines. Increased operating expenses and amortization related to the Oclaro acquisition also contributed to the loss.

The Oclaro acquisition significantly boosted revenue and expanded the company's product portfolio, particularly in Optical Communications. However, it also resulted in higher operating expenses, amortization costs, and restructuring charges, which negatively impacted the company's profitability in the short term.

The gross margin saw a significant decline in the current quarter due to amortization costs associated with the Oclaro acquisition and inventory write-downs related to exiting certain product lines. Management expects continued variability in gross margin due to market conditions, competition, and product mix.