10-QPeriod: Q2 FY2022

Lumentum Holdings Inc. Quarterly Report for Q2 Ended Oct 2, 2021

Filed November 4, 2021For Securities:LITE

Summary

Lumentum Holdings Inc. (LITE) reported its financial results for the fiscal quarter ended October 2, 2021. The company experienced a slight decrease in net revenue, down 0.9% year-over-year to $448.4 million. This was primarily driven by a decline in Optical Communications (OpComms) revenue, which fell 5.3%, impacted by component shortages and slower 5G deployments. However, the Commercial Lasers segment saw significant growth, with revenue increasing by 77.4% due to recovering customer demand. Despite the revenue dip, Lumentum demonstrated strong profitability, with gross margin improving to 51.8% from 45.5% in the prior year, benefiting from a more favorable product mix and operational improvements. Net income increased to $81.5 million ($1.08 per diluted share) compared to $67.1 million ($0.86 per diluted share) in the same period last year. The company highlighted its strategic focus on technology and product leadership, continuing R&D investments, and ongoing efforts to optimize operations. Lumentum also repurchased approximately $91.7 million of its common stock during the quarter under its $700 million share buyback program, indicating a commitment to returning value to shareholders. The company noted that while COVID-19 did not materially impact the current quarter's results, ongoing semiconductor component shortages present a risk to future supply and revenue.

Financial Statements
Beta
Revenue$448.40M
Gross Profit$232.20M
R&D Expenses$54.10M
SG&A Expenses$63.30M
Operating Expenses$116.30M
Operating Income$115.90M
Interest Expense$16.90M
Net Income$81.50M
EPS (Basic)$1.12
EPS (Diluted)$1.08
Shares Outstanding (Basic)72.70M
Shares Outstanding (Diluted)75.40M

Key Highlights

  • 1Net revenue decreased slightly by 0.9% to $448.4 million, driven by a 5.3% decline in OpComms revenue, partially offset by a 77.4% surge in Commercial Lasers revenue.
  • 2Gross margin significantly improved to 51.8% from 45.5% year-over-year, attributed to a more profitable product mix (including 3D sensing products) and operational efficiencies.
  • 3Net income rose to $81.5 million from $67.1 million, with diluted EPS increasing to $1.08 from $0.86.
  • 4R&D expenses increased by 7.3% to $54.1 million, reflecting continued investment in innovation and headcount growth.
  • 5SG&A expenses increased by 12.4% to $63.3 million, mainly due to higher payroll costs and tax structure optimization.
  • 6The company repurchased $91.7 million of its common stock in the quarter as part of its $700 million buyback program.
  • 7Lumentum experienced significant customer concentration, with one customer accounting for 41% of total net revenue in the quarter.

Frequently Asked Questions

The primary driver for the decrease in net revenue was a 5.3% decline in the Optical Communications (OpComms) segment. This was attributed to material and component shortages, as well as lower demand related to delays in 5G deployments.

Lumentum's profitability improved significantly. The gross margin increased to 51.8% from 45.5% in the prior year, driven by a more favorable product mix, including higher-margin 3D sensing products, and benefits from ongoing operational improvements. Net income also rose to $81.5 million from $67.1 million.

The company noted that semiconductor component shortages have impacted its ability to generate revenue and could continue to do so if supply does not improve. These shortages are identified as a key risk factor that could affect future revenue and profit margins.

Lumentum has a strong liquidity position with $611.0 million in cash and cash equivalents and $1,273.6 million in short-term investments as of October 2, 2021. The company also actively repurchased $91.7 million of its common stock during the quarter under its authorized $700 million share buyback program.