10-QPeriod: Q3 FY2022

Lumentum Holdings Inc. Quarterly Report for Q3 Ended Jan 1, 2022

Filed February 3, 2022For Securities:LITE

Summary

Lumentum Holdings Inc. reported a decrease in net revenue for the three months ended January 1, 2022, compared to the same period in the prior year, primarily driven by a decline in the Optical Communications (OpComms) segment, despite growth in the Commercial Lasers segment. The decrease in OpComms was attributed to material and component shortages impacting Telecom and Datacom products, as well as timing-related shifts in Industrial and Consumer product releases. Despite the revenue dip, the company managed to improve its gross margin for the six-month period, largely due to a strong performance in the Lasers segment and a recovery in industrial demand. The company also highlighted ongoing investments in Research and Development and increased Selling, General, and Administrative expenses, largely due to acquisition-related fees for the pending NeoPhotonics merger. Lumentum continues to emphasize its strategy of technology leadership and customer relationships in growing markets, while navigating supply chain challenges and the evolving market landscape.

Financial Highlights

48 data points
Beta

Revenue

$446.70M

46.5% Gross Margin

Net Income

$56.70M

12.7% Net Margin

EPS (Diluted)

$0.75

Total Assets

$3.62B

Cash & Equivalents

$552.00M

Free Cash Flow

$180.40M

Financial Statements
Beta
Revenue$446.70M
Gross Profit$207.50M
R&D Expenses$53.20M
SG&A Expenses$69.00M
Operating Expenses$122.30M
Operating Income$85.20M
Interest Expense$17.10M
Net Income$56.70M
EPS (Basic)$0.78
EPS (Diluted)$0.75
Shares Outstanding (Basic)72.30M
Shares Outstanding (Diluted)75.30M

Key Highlights

  • 1Net revenue for the three months ended January 1, 2022, decreased by 6.7% to $446.7 million compared to the prior year period.
  • 2The Optical Communications (OpComms) segment saw a 11.5% revenue decrease year-over-year for the quarter, impacted by component shortages and delayed 5G deployments.
  • 3The Commercial Lasers segment experienced a significant 66.0% revenue increase for the quarter, driven by recovering industrial demand.
  • 4Gross margin for the six months ended January 1, 2022, improved to 49.1% from 46.7% in the prior year period.
  • 5Selling, General, and Administrative (SG&A) expenses increased by 12.6% for the quarter, primarily due to acquisition-related legal and advisory fees for the NeoPhotonics merger.
  • 6The company is proceeding with the acquisition of NeoPhotonics Corporation, with an expected closing in the second half of calendar year 2022.
  • 7Cash and cash equivalents decreased to $552.0 million as of January 1, 2022, from $774.3 million as of July 3, 2021.

Frequently Asked Questions

The primary driver for the revenue decline in the three months ended January 1, 2022, was a decrease in the Optical Communications (OpComms) segment. This was primarily attributed to continued material and component shortages affecting Telecom and Datacom products, as well as timing of customer product releases impacting the Industrial and Consumer sub-segment.

Lumentum announced a merger agreement to acquire NeoPhotonics on November 4, 2021. The transaction has been approved by NeoPhotonics stockholders and is expected to close in the second half of calendar year 2022, subject to customary closing conditions and regulatory approvals. Legal and advisory fees related to this transaction contributed to increased SG&A expenses.

The company continues to experience global supply chain constraints, particularly in semiconductor components, which have led to incremental supply and procurement costs. These costs increased inventory balances and are expected to decrease gross margin in the near term. Management anticipates these supply challenges to persist at least through the third quarter of fiscal 2022.

The Commercial Lasers segment showed strong performance, with revenue increasing by 66.0% for the three months ended January 1, 2022, compared to the prior year period. This growth was primarily driven by a return in customer demand for kilowatt-class fiber lasers, following a recovery in industrial production.