| Operating Segments and Geographic Information | Note 15. Operating Segments and Geographic Information Our chief executive officer is our Chief Operating Decision Maker (“CODM”). The CODM allocates resources to the segments based on their business prospects, competitive factors, net revenue and gross margin. We do not track all of our property, plant and equipment by operating segments. The geographic identification of these assets is set forth below. We are an industry leading provider of optical and photonic products defined by revenue and market share addressing a range of end-market applications including optical communications and commercial lasers. We have two operating segments, Optical Communications, which we refer to as OpComms, and Commercial Lasers, which we refer to as Lasers. Our OpComms products address the following markets: telecommunications and data communications (“Telecom and Datacom”), and consumer and industrial (“Consumer and Industrial”), and include product lines from the acquisition of Oclaro. The two operating segments were primarily determined based on how the CODM views and evaluates our operations. Operating results are regularly reviewed by the CODM to make decisions about resources to be allocated to the segments and to assess their performance. Other factors, including market separation and customer specific applications, go-to-market channels, products and manufacturing, are considered in determining the formation of these operating segments. OpComms Our OpComms products include a wide range of components, modules and subsystems to support customers including carrier networks for access (local), metro (intracity), long-haul (city-to-city and worldwide) and submarine (undersea) applications. Additionally, our products address enterprise, cloud, and data center applications, including storage-access networks (“SANs”), local-area networks (“LANs”) and wide-area networks (“WANs”). These products enable the transmission and transport of video, audio and data over high-capacity fiber-optic cables. We maintain leading positions in these fast growing OpComms markets through our extensive product portfolio, including reconfigurable optical add/drop multiplexers (“ROADMs”), coherent dense wavelength division multiplexing (“DWDM”) pluggable transceivers, and tunable small form-factor pluggable transceivers. We also sell laser chips for use in the manufacture of high-speed Datacom transceivers. In the Consumer and Industrial market, our OpComms diode laser products include vertical cavity surface emitting lasers (“VCSELs”) and edge emitting lasers. In the Consumer end-market, our laser light sources are integrated into 3D sensing cameras which are used in applications in mobile devices, gaming, payment kiosks, computers, and other consumer electronics devices. Applications include biometric identification, computational photography, virtual and augmented reality, and natural user interfaces. Emerging applications for our lasers include automotive safety systems, LiDAR for advanced driver assistance systems in automobiles and autonomous vehicles, self-navigating robotics and drones in industrial applications, and 3D capture of objects coupled with 3D imaging or printing. In the Industrial end-market, our diode lasers are used primarily as pump sources for pulsed and kilowatt class fiber lasers. Lasers Our Lasers products serve our customers in markets and applications such as sheet metal processing, general manufacturing, biotechnology, graphics and imaging, remote sensing, and precision machining such as drilling in printed circuit boards, wafer singulation, glass cutting and solar cell scribing. Our Lasers products are used in a variety of OEM applications including diode-pumped solid-state, fiber, diode, direct-diode and gas lasers such as argon-ion and helium-neon lasers. Fiber lasers provide kW-class output powers combined with excellent beam quality and are used in sheet metal processing and metal welding applications. Diode-pumped solid-state lasers provide excellent beam quality, low noise and exceptional reliability and are used in biotechnology, graphics and imaging, remote sensing, materials processing and precision machining applications. Diode and direct-diode lasers address a wide variety of applications, including laser pumping, thermal exposure, illumination, ophthalmology, image recording, printing, plastic welding and selective soldering. Gas lasers such as argon-ion and helium-neon lasers provide a stable, low-cost and reliable solution over a wide range of operating conditions, making them well-suited for complex, high-resolution OEM applications such as flow cytometry, DNA sequencing, graphics and imaging and semiconductor inspection. We also provide high-powered and ultrafast lasers for the industrial and scientific markets. Manufacturers use high-power, ultrafast lasers to create micro parts for consumer electronics and to process semiconductor, LED, and other types of chips. Use of ultrafast lasers for micromachining applications is being driven primarily by the increasing use of consumer electronics and connected devices globally. We do not allocate research and development, sales and marketing, or general and administrative expenses to our segments because management does not include the information in its measurement of the performance of the operating segments. In addition, we do not allocate amortization and impairment of acquisition-related intangible assets, stock-based compensation and certain other charges impacting the gross margin of each segment because management does not include this information in its measurement of the performance of the operating segments. Information on reportable segments utilized by our CODM is as follows ( in millions) : Three Months Ended October 2, 2021 September 26, 2020 Net revenue: OpComms $ 406.0 $ 428.5 Lasers 42.4 23.9 Net revenue $ 448.4 $ 452.4 Gross profit: OpComms $ 225.9 $ 224.8 Lasers 20.8 10.4 Total segment gross profit 246.7 235.2 Unallocated corporate items: Stock-based compensation (4.6) (3.7) Amortization of acquired intangibles (15.8) (15.0) Inventory and fixed asset write down due to product line exits — (0.3) Other (charges) gains (1) 5.9 (10.5) Gross profit $ 232.2 $ 205.7 (1) “Other (charges) gains” of unallocated corporate items for the three months ended October 2, 2021 primarily relate to $5.9 million gain as a result of selling equipment that was no longer needed after we transferred certain product lines to new production facilities in fiscal 2021. “Other (charges) gains” of unallocated corporate items for the three months ended September 26, 2020 primarily include costs of $2.1 million of transferring certain product lines to new production facilities and excess and obsolete inventory charges of $5.9 million driven by U.S. trade restrictions and the related decline in demand from Huawei. We operate in three geographic regions: Americas, Asia-Pacific, and EMEA (Europe, Middle East, and Africa). Net revenue is assigned to the geographic region and country where our product is initially shipped. For example, certain customers may request shipment of our product to a contract manufacturer in one country, which may differ from the location of their end customers. The following table presents net revenue by the three geographic regions we operate in and net revenue from countries that represented 10% or more of our total net revenue (in millions, except percentage data): Three Months Ended October 2, 2021 September 26, 2020 Amount % of Total Amount % of Total Net revenue: Americas: United States $ 28.1 6.3 % $ 20.3 4.5 % Mexico 33.0 7.4 39.8 8.8 Other Americas 2.0 0.4 2.8 0.6 Total Americas $ 63.1 14.1 % $ 62.9 13.9 % Asia-Pacific: Hong Kong $ 142.3 31.7 % $ 144.4 31.9 % Philippines 9.1 2.0 62.8 13.9 South Korea 105.1 23.4 56.0 12.4 Other Asia-Pacific 103.0 23.0 91.6 20.2 Total Asia-Pacific $ 359.5 80.1 % $ 354.8 78.4 % EMEA $ 25.8 5.8 % $ 34.7 7.7 % Total net revenue $ 448.4 $ 452.4 During the three months ended October 2, 2021, n et revenue from South Korea increased by $49.1 million and net revenue from Philippines decreased by $53.7 million from the three months ended September 26, 2020 due to changes in our customers’ chosen module integrator for specific new products. During the three months ended October 2, 2021, our net revenue from a single customer, which represented 10% or greater of total net revenue was concentrated with one customer, who accounted for 41% of our total net revenue. During the three months ended September 26, 2020, our net revenue from a single customer, which represented 10% or greater of total net revenue was concentrated with one customer, who accounted for 35% of our total net revenue. Our accounts receivable was concentrated with three customers as of October 2, 2021, which individually represented 22%, 19%, and 10% of gross accounts receivable, respectively, compared with two customers as of July 3, 2021, who represented 17% and 14% of gross accounts receivable, respectively. Long-lived assets, namely property, plant and equipment, net, were identified based on the physical location of the assets in the corresponding geographic areas as of the periods indicated (in millions) : October 2, 2021 July 3, 2021 Property, plant and equipment, net United States $ 110.9 $ 116.7 Thailand 97.8 103.9 China 39.3 41.3 Japan 36.2 36.4 Other countries 69.0 62.8 Total property, plant and equipment, net $ 353.2 $ 361.1 We purchase a substantial portion of our inventory from contract manufacturers and vendors located primarily in Taiwan, Thailand and Malaysia. During the three months ended October 2, 2021 and September 26, 2020, our net inventory purchases from a single contract manufacturer, which represented 10% or greater of total net purchases, were concentrated with two contract manufacturers, who collectively accounted fo r 64% and 65% |
