Lumentum (LITE) 18 Aug 212021 Q4 Earnings call transcript

Good day, everyone, and welcome to the Lumentum Holdings Fourth Quarter and Fiscal Year 2021 Earnings Call. All participants will be in a listen-only mode. Please also note today's event is being recorded for replay purposes through August 25, 2021. [Operator Instructions] At this time, I'd like to turn the conference call over to Jim Fanucchi of Darrow Associates. Sir, please go ahead.

operator. you, Thank Fourth Lumentum's Fiscal XXXX Year Welcome Quarter Call. Earnings to and Associates, Fanucchi with Jim is assisting from This Darrow Lumentum Relations. its Investor

and a Joining Officer; and expectations, that and our our Corporate as financial including Company's the cause to could Coldren, Senior Lowe, Executive today Today's to These guidance, of revenue, we statements Chris our forward-looking in and Wajid as Please are call except Strategy all note, President subject today. margin . April targets. Officer; Financial Alan stated, Chief of President Lumentum's ended Report actual provided XX-K call management results this for Chief Ali, Company’s expected Development. Vice on well required results have release regard; within be The financial the unless the as expectations to from on and fourth fiscal no the performance, non-GAAP team, the during for business model quarterly and about from Xrd, on statements the the responsive based discussed Company's include future Non-GAAP file uncertainties financial particularly law. Form its between the regarding reconciliation products risk including and and this and factors are to reasonable measures non-GAAP SEC includes and fiscal uncertainty non-GAAP July considered statements our supplemental our section. expects or the press are forward-looking its which our these XXXX, opportunity at and additional under report accordance COVID-XX continuing XXXX our ended undertakes the and in X, statements, end. also quarter projections risks materially year markets, and our our and expectations impact call results and historical including slides and to Annual year of our substitute Investors call trends are in Company XXXX, www.lumentum.com XX fiscal and the as of beliefs technology; customers; superior This are days obligation available described financials filings, update fiscal with this statements by in applicable Lumentum our differ with GAAP. accompanying statements, otherwise on quarter the our GAAP a the and Lumentum’s regarding website on to for market actions details results. for not prepared Form year will financials XX-Q current as in

call I his will over comments. Now the turn for to Alan

tough which caused total that impact The XXXX. segment the was level you, new of Optical be with record environment Growing Thank our grow despite and capped XXXX. to all per a our record COVID-XX, down Jim. X% than Communications demand from in to customer revenue up more Lasers segment new share. fiscal revenue, fiscal XX% morning, earnings measures This a revenue Good in opportunities fiscal off was best XXXX year by quarter and everyone. ever fourth margins, and financial macro

durable We are trends. driven focused are on by end-markets that multi-year

successful been to in market-leading have solutions, which are of next-generation new them designed products for just customers We into their developing ramp. differentiated many and starting

more transport chips this in components of our a X.X. robust shipments future of trends towards be shifting quarter of mix transport than the more these were leading growth demand revenue a belief Supporting EML higher book-to-bill was Our revenue start telecom the than of accelerated we has had We strong a new bookings demand provide it markets. higher is increasingly years. typically resulting on fourth Year-on-year increased demand. up could later, Telecom telecom from in fourth been component quarter. is in was indicator the which believe several XX%. signaling I’ll in but in per this details very datacenters products phase

record sensing in XX% During revenue in and and up sensing, we had quarter sequential the was a products. quarter and demand had fourth differentiated revenue we Commercial well. in Lasers XX% increase we are business In transitioning The backlog in higher our have was ever to fourth lasers XD first Datacom quarter, market-leading year-on-year. of revenue highest has have book-to-bill as a chip continued X.X. as XD datacenters This the speeds fourth where quarter, strengthening been the recovery cloud resulted

seeing and virtual end-market these more a LiDAR processing We and is should communicated surprise work and powerful transformation and to to that expect digital next-generation our will to create devices, networks need trends. cloud for transition transition Laser-based XD XG capacity the vehicles, by accelerated of are enabling bottlenecks and are throughout many more computer long-term machine markets. remove expand their and capabilities electric accelerating data applications and in multiple material world's cloud approaches of as is networks solutions. proliferation storage. in critical all will and resolutions the for have of a will driving and as vision favorable the The their expect in manufacturing datacenters. we And aspects markets in staggering even the The demand fiscal as networks, core the bandwidth amounts the of energy XXXX. wireless to datacenters. and days, XG at demand sensing in life they this be Customers wireless, environment The are driven of edge not metro in digital the well early

additional to product turning line Now details.

revenue fiscal Telecom X%. up Datacom XXXX, and was For year

the margin over more Datacom or and from were lines by we up the XX% two Telecom exited each low fiscal past years, in XXXX. Excluding product revenue

quarter-on-quarter supply In being constrained very growth of ROADMs have Telecom, customer revenue year-on-year. components. by we and much strong, the temporarily is by Revenue is critical in consumed growth of higher our stocks. products being buffer recently supply flat module as which While Telecom is and revenue including demand fourth Datacom was semiconductor muted constraints, approximately increased quarter have level

this customer focused by however, are again, But are million. intensely than semiconductor time, is impact supply impacting more on $XX outlook At our improve on of to first this upon these working We minimizing situation. revenue shortages our team shortages the quarter deliveries. diligently negatively our

in earlier, transport our mentioned not several lines, we fourth I component quarter than have higher product shortages, As had telecom semiconductor years. we which by seen in are revenues impacted

historically the undersea used applications highest revenue cable a is at reliability level high years revenue, pump primarily fourth example, more was three which decade. highest level quarterly submarine last laser also the For quarterly second components and the in highest terrestrial from was than in the quarter at Fourth in pump lasers of quarter in happened have as and several new indicator early deployments are critical lasers a expansions. both Greenfield been pump products. points of to in are years. data shipments typically These leading up of amplifiers, Because this, pump telecom particularly other which lighting future optical network important elevated deployments has lasers

expect continue to fiscal Datacom is this for cloud We increase Demand demand comp datacenters for to telecom strong also chips XXXX. strong. in very

to differentiated Gig Our highly datacenters for products speeds. transition XXX and to XXX enabling cloud

delivered quarters, we than are Datacom will multiple high Datacom EML up during earlier, As I chip XX% fourth which more mentioned quarter, because be backlog revenue, capacity chips. was we production over record had high This constrained and record year-on-year. the backlog on

second in long-term increased significant expansion making of and will Due production output Datacom those beyond the fiscal highlighted result tracking to capacity we we growth, additional previously well is half previously in are capacity production demand starting Our XXXX. expected increases discussed.

quarter, demand continuing first to grow. is the to Datacom Telecom, Looking

increasingly down sequentially, impactful quarter quarter-on-quarter to to have revenue expect shortages customer XX% spoke to consumer Fourth as highest be our quarter we our we XX% to industrial and year-on-year I up ability the earlier about However, near-term the down but the delivered. meet was have become growing ever fourth level semiconductor revenue demand. in

quarter, We continues In in expect continued we the LiDAR design customer to systems. with monitoring to junction with in-cabin high the be VCSEL up our products. as industrial space ramp but revenue five for and increase first power fourth VCSEL in major sequentially traction for technology especially our automotive quarter, applications, driver from production new consumer also and to the

to our utilization increase major most in our to Turning also Lasers, The increase. in was growth the increases in The most field revenue in lasers in laser. lines. of business notable quarter, our meaningful, as Commercial fiber we Service significant had kilowatt continues Laser was fourth product the

now XXXX. segment fiscal is a be original Our ahead of in recovering expectations will Lasers and to growth our contributor

design growth leading wins towards differentiated customer solutions the key over driven expect We again mix our shift our products my We differentiated demand quarter trends a be continuing believe and long-term quarter-on-quarter. well-positioned customers. up next-generation that for strong indicator remarks, enable first coming products by highlighted with the in years. is market-leading Lasers Throughout that are I've and with are we markets new revenue that to

over all of it to Wajid contributions acknowledge to I want our the their times. around review numbers, world for challenging and during employees to Before and hard again work these the thank handing once

are record for With that, would continued The our at support like a in and such Our growth and suppliers, us truly great Wajid. fiscal our XXXXresults I Lumentum. and partnership. over shareholders putting the They and are I'll it for employees also responsible company's future customers, for outstanding their greatest to the ones absolutely the is in years. asset. thank bright for to hand position coming

morning, Good Thank you, Alan. everyone.

revenue, sets achieved performance, million margins, X.X on bar purchasing on shares program Based year we for our earnings confidence than in our million. long-term XXXX buyback As Alan executing a shares projected. originally or share our previously record started and the fiscal earlier for last per share. $XXX aggressively X% target we we highlighted, our margins, announced quarter, million of $XXX with outstanding us announced financial financially model a On new

perspective tax and changing we I'd tax results, tax give non-GAAP in method of make variability our term attributes, in how light beginning non-GAAP reduced a changes quarter, In jumping longer profitability utilization Before fourth our fiscal rate we period, growing over the our of and our provision. quarter-to-quarter of decided highlight provision. tax to our tax on in more calculate of calculating are non-GAAP into to meaningful our a some historical income order our burden our like we to

reported cash our calculation and should to consistent, in analysis, flows. non-GAAP no have be under more of expect of our it tax higher going forward, results. comparisons. XX%. our any only, on to GAAP the result tax method To in On comparisons, provisions on Based of our XX% effect affect For rate the help this non-GAAP both in Relations with our data with profit, we method. the to and new this cash tax our payments historical change to provision our Investor operating we not help methodology website, does clear, prior be additional providing provided long-term annual quarter tax we or will non-GAAP are using method but But have new it non-GAAP range

Communications Now $X.XX. year-on-year GAAP of sequentially products, manufacturing and points income gross or range, $XXX.X per non-GAAP the revenue. quarter Fourth XXX up net growth revenue was a million margin $XXX.X points quarter the volumes, R&D for $X.X quarter a in which fourth down totaled our Fourth and was driven was and decline decline sequentially and The seasonal Net expected million quarter's the was $XX.X primarily $XX.X turning GAAP GAAP by expenses quarter-on-quarter. XX Other up by as million quarter points a decline expenses. sequential down decreased mix but expenses gross basis the margin Fourth margin and while was to lower upper and Fourth sequentially decline product relative basis million. gross income The $XX.X XX.X% adjusted expense year-on-year. operating the operating expense operating was XX.X%, non-GAAP in and was points XXX was XX.X%, year-on-year This and quarter X% half SG&A sequential X% quarter increased mix year-on-year. fourth on net expense $XX.X basis in improved the income numbers. gross operating year-on-year basis. Optical million. margin was the with costs. EBITDA driven which was was XX.X% expected, relates XX basis was to million, change non-GAAP better was which of guidance was for was in diluted non-GAAP operating share of by margin the increase margins driven fourth million, XX.X%, was non-GAAP of segment. operating expense

net $XX.X income income was XX.X Our our fully calculation, $X.XX. quarter per method Under calculation, and diluted was prior non-GAAP per non-GAAP of share fourth million quarter share tax the fourth fourth was our shares. was net million and diluted $X.XX. new net income share non-GAAP income for tax million method Under quarter non-GAAP of net count $XX.X diluted was

are cost Our procuring we measures additional components of incurring our semiconductor the that COVID-XX non-GAAP to sites. the are prevent we globally results spread related to the and short include taking supply goods in sold in of are

revenue results. the which fiscal X% to year billion, XXXX. full Turning from up Fiscal was was XXXX net $X.XX

margin points Excluding increases the driven year increased was adjusted product per up years, relative to by was over X% R&D due we mix Full fiscal which non-GAAP operating better diluted two GAAP margin model XXXX XXX up net was margin costs. non-GAAP $XXX improving gross margin exited XXXX our GAAP margin in XX.X%, XX.X% XXXX. and Fiscal XXXX margin points was fiscal that $X.XX. gross income XX.X%, lines was expansion lower revenue fiscal to manufacturing in over the offsetting and year non-GAAP low operating of share was the at fiscal a XXX basis basis past for from fiscal year-over-year. GAAP relative EBITDA was XXXX XXXX, was and of XX.X% Fiscal with million income products $XXX.X gross million. fiscal spending XXXX operating XXXX

XXXX, non-GAAP non-GAAP prior of per the $XXX income diluted fiscal method net net share of Under $X.XX. million method tax fiscal XXXX was calculation, our was non-GAAP non-GAAP XX.X income Using new net $XXX.X per fiscal income million XXXX our share diluted million was calculation, and fully share and income For $X.XX. count net was shares. diluted was tax

in approximately balance investments. cash the we quarter ended On sheet, billion short-term with and the $X.XX

operations million net convertible term of Cash no termination. debt. have notes it in year, $XXX.X for fourth in operations was The aggregate flow and to year full $XXX.X We the flow from was from from principal million the includes $X.X million. and continue $XXX.X full quarter the a billion cash Coherent

and X% basis XXXX revenue consumer gross industrial details. seasonally Turning efficiency up in fiscal components due and in Fiscal decreased and Optical higher Fiscal cost Communications margin Communications XXX Optical XXXX worldwide at to of mix lower footprints. XXXX was shortages. revenue Fourth gross sequentially consumer. quarter decreased lower $XXX.X margin higher certain and a XXX the points Communications X% XX.X% product segment due margin of and over mix revenues by segment to sequentially Communications revenue XXXX. operational points to relative XX.X% due fiscal increased due procuring at segment lines million impacted Optical to improvements industrial to segment up basis Optical at in segment to was

COVID-XX-related points gross at slowdowns Our to revenue was XX% sequentially fourth margin up quarter Fiscal million quarter Lasers relative XXXX segment XXXX Lasers of was the $XX.X from was fiscal fiscal points revenue XX XXX at relative Lasers segment Lasers impact Fiscal end-market XX% increased due the basis ongoing demand. up gross sequentially and down to XXXX recovery due to to XX.X%. basis XXXX. Fourth margin COVID-XX.

as of today. Now of assumptions our is our and XXXX, on the non-GAAP fiscal for quarter first is on to guidance basis on a based which fiscal

We fiscal $XXX $XXX to of in million. expect be of net million revenue for to XXXX the the range first quarter

XX.X% quarter first due $X.XX. be in impact we range XX.X% net $XX income assumes increasing due seasonality consumer million of decreasing supply and Alan our COVID-XX. to outlook range share Based in is of Industrial the projection to more strong, revenue market increasing Commercial shortages. again, noted the on diluted in operating further but negative very project demand this, revenue a driven portions the to be quarter-on-quarter, quarter-on-quarter, to to per and semiconductor And $X.XX than earlier, from by Datacom recovery normal Consumer component and margin to Lasers of Our includes as and Telecom

rate the that, of approximate XX EPS Q&A a expense include also non-GAAP related procuring the approximately quarter shares midpoint. expense measures. components of on income expenses is Jim are for protective and or other at an and These effective I'll a XX.X% of million. we the annual With assume tax incurring million session. count the COVID-XX turn is based projections projections These to to net Jim? to start $X non-GAAP share back semiconductor $XX.X call an first Our guidance and that million additional

you. Thank

the the like our This ask end get session. Operator, time. allotted the I and start session to keep help should us follow-up. question question-and-answer begin of we let's question-and-answer everyone one before to one to would Before to everyone

Tom The [Operator go Instructions] ahead. O'Malley from with comes first Please question Barclays.

it transport my and what for of in in terms Thanks guys. you're talk Hey, laser are some Can COVID-related? that on the in implies back - deployments some taking question Can this that the sounds transmission talk side? into morning. about demand good you trends like It telecom about Or And reported half June, of transmission. business the seeing with really what the strong pump just year? side. slowing is weaker then, you of you kind is in

Hi, This Yes. is Tom. Alan.

indicator transport what in out. said growth. half out is What the we usually growth is in we're XXXX. component going for a fiscal play of other that's script, the the first play As to future leading And we think seeing

ROADMs, are demand build either along transport usually ROADM initial their of And seeing so, with of cards these that line networks. or we expansion existing Greenfield broad that out the really components go

And it. to to semiconductor need so, when want transport outlook I they be extremely to I some satisfy strong. think customer chips is able in demand really for get

lasers, as bandwidth modulators, transmission we as on tunable seeing concerned, in tunables. on strength transmission our XXGig on Coherent far are on enough modulators, components, outlook. as our is our surprisingly – As In well tunable high

lot are in levels. continuing in while ACOs. But to peak go that And is market so, down there strong networks across a for out of are waiting the the board, from ACOs chassis

I on qualified in our our see throughout I we think we're to XXX pretty business there Gig good in are year. we transmission position so, pickup to modules, the get going DCO And think start as a and

on then, my is And business. the Lasers That’s Commercial follow-up helpful.

has weakness peers, across board. the your there at look just you calls been kind If for of

success obviously off the of seeing Is you related a what's driving the customer Or You the the of Can a bottom that's through to you that versus your some just related talk weakness? balance walk Can that others weakness year? takes past peers. have different really your over some geography? puts and you are strength some about more seeing than concentration there? are to who

Sure.

I think twofold.

You're right.

base customer different. Our is

fiber demand end-markets. limited in China, And our perspective, that especially seeing bounce of typically We laser our on that with kilowatt exposure from customer. go good outside overall China have kilowatt we are into a fiber back lasers

seen we pickup on then, we semiconductor our that's business our in of of that certainly on and things are which they the go components with or it pick as has PCBs upswings, our that. our in are a everyone semiconductors And lasers – a We picking machine seeing on Service in usually demand service up, both of seeing is usage field. good indicator the why micro the commented business be typically goes also that semiconductor like dealing and Laser

that our think a a compared do customer peers. and to address I different base some it's So, different of we end-market

Hall ahead. question comes Sachs. Rod Goldman with go from next The Please

guys. wanted now I - talked Yes. guess, numbers to share. pretty sensing share. you good. kickoff look about I the quarter I XD with had Good Thanks guys you morning, pretty And about question. the for last talked cautiously know

tracking I is have back-end And then it's So, how of you I'm just now year share and a what follow-up. the last you relative quarter? thinking to were the curious for

question. for thanks the Rod, Yes.

due the size smaller for leading quarter market last chips products. in our next-generation commentary Our to prices in the average of selling the our and around customer was expectation

bode in think I'd well say, think been pretty the the even I it XD biggest share. to And do not QX is QX has in – announced sensing, yet. respect I product ever with we that so, our revenue, given

high-quality play lead very long respect how and really we outputs And in our with are say stages So are the production as to going competitively. into the to very, their share but it's meeting we've term, their out is expectation. for would there that we I over them early positioned with proven customer,

share. So, I really good feel about our

of supply just you. good. That's commented curious Is mostly What $XX you And breaks business. what's on my comment color Thank million. know you million? Okay. on particular then, in could are kind with ROADM across lines - $XX that affected down capacity Great, constrained. like constrained, was million it am Is there? us I $XX they the the how ROADM? it I give any the follow-up Alan.

did And our because point Datacom. your our is Yes. capacity our really that but not on around we line This can't like, to the semiconductors. get a $XX our internal of transport customers products, that include In want ROADMs, deliver we $XX comes the million, from mainly area? most cards, on product our that can't the bit our transport constraints, little ROADM telecom million we transmission is products

have on in were demand And to terms plenty guys you if of up got – you XD Right. upwards of right, capacity flex that Alan?

we have mean, I in to there case demand contractual an in absolutely. is uptick shifts. obligations there have or inventory Yes, share

ready we know and them. our they so, customer for continue to And it for going there be to we're and

right. you're So,

supply We capacity. XD with sure they if do that upticks chain occur. and when are of sensing foundry our have make ready And worked plenty really model, to well we our in have

question Needham. comes Henderson go Please Alex next from The ahead. with

Thanks.

sensing supply So, the on the anxious conditions to about clearly, second, causing going be for to everybody are back broadly a supply. very XD

is potential products as the seems anticipating XD production to probably the it get supply so, risks sensing like And launched.

have that So, pulled into June that have to demand that are year? in been something June later XXXX outlook the into the of it to much overall was your that forward change the produced Does we quarter? FY might volume pulling some quarter for the outlook

this is But it's to a on don't early we a this tell necessarily forward. is what's believe significant Alex, Hey going say, pull exactly would overall. Chris. little I

the will, to you remember in customers’ due cycles got there a delay, Covid-XX. was last You product to if year,

tell look years in it's this - volume then again normal additional that years considering of and what's that to dollar in product three cycle. but that relative seasonal relatively in years kind say, we so, before, going caveat on normal to, and very if content early the more ago, back with things And ago, trends two look

changed potential? you kind thought full XXXX, So, on growth the year your of FY have

say, Yes. has I as quarter’s going are only I would have to of so be. think the that have to market one guesstimates what outlook worth Alan lot volumes - what, like only But changed earlier mix of those outlook. market the overall necessarily not pricing far. And our we and a market - view and product we on variables indicated cycle

So, changed opportunity our previous are this on the not point. views materially at aggregate

The next question comes Morgan go with from Marshall Please Stanley. Meta ahead.

Maybe the ask Thanks. Great. quarter, you had in last to up question. not tick a noted In XXXX. transport wanted expecting of kind early a of kind until

And to a got - hit kind commentary about get is calendar of Or expectations? one to XXXX previous projects on China how of, second hitting some you just trying Just any it's clear a just those of expecting build clearly had the sense just year, tracking any to some update being inventory were there? that Thanks. later you has this until today? of then, in

ordering. it's in and and the I seen change of demand of gauge to brisk. expectations for that think for I I say many Yes. don't tell ask you a CEOs that demand. by And of think say. a bit a double hard call Meta. have it's can me can bunch that how deliveries usually we months Hi, it's real But I it's I from demand ago would three Yes. And transport.

really, able I to revenue. were work would able So, we the semiconductor demand picked It's expected. be we up if I that. that need, we that to really think chips ramp transport we're had more the get is on than to continuing But would real. up transport our And we say

wrong. So don't get me

starting therefore, the in for are outside we transport came say marine of had and the now is, demand where demand demand challenge end-by-end unable - solid our strong. leading indicators demand built our I term our that are significantly very cables the think throughout for demand. satisfy to all product that proliferate we in future I flex it's that would for from had up of the than we we and very China semiconductor And more as expected. trends some components and is going inventories world longer really talked about positioning to perspective very, some we're

that excuse me about to question question Meta, is Datacom comp chips, XG Your general? inventory, more - China specific - and or about our your

thought And mentioned within of in that, clearing I you last calendar should that well, be QX had you may China there the some - quarter think inventory be kind period.

see any China if expectations. of seeing trying just so, you the were kind pickup is ahead in of to And of

say, inventory, for inventory a revenue in chip specifically we've in fact the had our I'd were Yes. about we talking quarters. that prior Datacom XG deferral

have We far. XG, so is inventory activity seen but slow that moving around

And over We start point, picking that next up to end expect of flushed by the to and into shipments that chips the the start laser system meaningful your several calendar months. the XXXX. hopefully be will through year DML calendar then

The next go question comes from Samik Chatterjee with JPMorgan. Please ahead.

and your like start bit a getting I does lowered. Hey. supply things Good are morning. if of tone conversation could sound Thanks Alan, with here the for the taking from my guess, constraints questions. I just it

procure supply from as up in that, on a million year? maybe So, about onwards, XQ part it's and XQ XQ. you. as And but I should ability and to to we've seasonally, you a and for just to constraints more inventory. wanted out thinking Datacom second to sense, fiscal margins $XX to headwinds go than some a material that seen know deliver headwinds this the bit or move limit get be early Does Thank we Telecom the your

life are to the Yes. we companies I that support to am at their these having times, critical discussions to ROADM further because orders us. – executives it's can semiconductor for chips progress say, And semiconductor long the we're long little continuing long, will we hopeful I with and to early work try consume, will line with and would out say, cards. that because, ROADMs a make our them in booked lead we tails, not long

say it's perspective, QX, in bottlenecks in one our because, with hard that big got chip brokers would say charges, costs semiconductors company I've good news get included later But the on QX. those others, our included fact, to from and or to think expediting of that of I that's happen today, a numbers. to that going non-GAAP paying I'm of front, I would call unlike so, And cost CEO what's semiconductor we've hopeful news. higher a impact the the we've margin only in

them And to performance, fees our so, also and impact to guidance QX saw I and to expedite higher those QX guide and our prices our it's pay QX be continue semiconductor companies that in expect in in well. as you in to

for Yes. Thank it. question. you. Got Thanks my taking

Thanks. Sure.

go from ahead. comes George Please with Jefferies. Notter question next The

sockets, you And win system to customers around guys. take Huawei Hi the ago. you like guys Thanks. other year, given business in you I Government of Huawei more from revisit in the that they BXB see share Thanks narrative what And traditional think market controls, of discussion Huawei? back, world. ramp would sort around the you if year-and-a-half seeing if wondering share can much. Huawei wanted kind I to into suppliers traditional very was really in opportunities marketplace your down, share more I are I from going guess, U.S. narrative and the - am dig back of as if I terms the the look

buy were really tending certainly, they suppliers, and are non-U.S. business first what that's And But take non- opportunities when right, Huawei that at buy we Alan have come significantly to Yes, It to the from George. fact can that. they we have add some And. from fronts, stab I'll it. year-over-year. to on is do U.S. Huawei. it in the Thanks. of declined This let continue supplying suppliers and Chris. they has with driven to by

some modulator high against get within to of, of are Fortunately prior a non actions for in Countering Huawei. those there not bleeding situations for product We may ROADMs, is more our and lines supplier for the example to with be supplier example there be of us, many edge band may decided not Datacom that our modules. out another the U.S. that technology, capabilities. U.S. and world in

our headwind, a headwind activity term in world seen there some of them. near-term the back that to western we beneficiary customers if suppliers is certainly for transition multiple net that be bit continues as network given grow and where product increased net that for But said, we've around the in Huawei quarters a more with a That are wallet. that has and service with customers clear, that. as can't our highlighted year And perhaps And to a so, past, sort few the sales us, our given do That's have therefore that's and long little looking lines vendors of is process higher over wallet significantly with push And overnight. western should to within than western those to the providers share equipment you multiple we've not opportunity the extensively unfold manufacturers. next our we of resulted be use of on years, therefore, network switch Huawei. share

you Thank Great. very much.

Leopold go James. next from Simon Raymond Please ahead. with comes The question

in a XX% you opportunities. to little I the would Thanks commentary automotive wanted more for be today's fiscal the your on around the with taking bit optimism the down question. call XX% XXXX. XD market, on made maybe earnings when regarding I you market could call discern, us to you additional if the indicated the prior update you on see expected comments sensing the

could then just a you on how I've you follow-up. got If there and are thinking update us

Simon. Sure. XXXX next-generation a again, of sensing sizes. the commentary chips the around Alan. price would average down into selling of for smaller around is was our I really say This going die result that, question. our as XD going fiscal devices, Thanks market

things. And so, two

That's very One and a hard say going would on again, to is demand. clear. of still perspective QX feeling that. our to – good about going overall part position pretty of I we're what not through, not well. market, to is record is, which happen But share because announced it's be until unit comes the end-user to device say, that the end-customer traction gets really results

so, believe is going market unit we is demand XX% And around, down if commentary to XX%. to our the was hey, flat, be

it to look is respect Now you going be down like to assuming out? are numbers. does flat. Maybe sense - it that's But might playing with softening a with those units

could XXXX. Now, offset of that unit average chip lead our in volume customer price therefore, I per so. maybe, there gaining would fiscal be is And our think share? some sales higher that

better, a decline specifically in I sequential telecom the mid terms Telecom implies Appreciate the And Datacom, the supply this of plus probably telecom, issues chain supply necessarily expect thinking that. chain a it to high-teens gets spend. the you see discerning about sort when component, percent. not how in catch-up And am you once in really do not I'm but not, wondering does, when, are to of then,

and recovery So that at you. essentially backlog get Thank seasonal we better in sits than point? a it

expectation have to you do trends QX. in with telecom the respect Chris,

Chris. mute, on are You

Yes.

saying, growth but certainly am the – seriously constraints supply highlight am I I that the to you're Telecom as certain in the not magnitude handicapping we expect sequentially decline guidance. Simon, space. it's of are certainly that not in We

I'd Yes. ROADMs not cases in that we yes, other that lot about, to as source. leader And because, satisfy far are of most is and demand is the demand then, where cases, when are question sole say, high-end a there mostly it, able if as very all we your

to we bet let that's to so, need, certainly semiconductor don't get us them want And down. we're why and hard working on customers extremely the because we our

So, I'd able demand we say that are when satisfy. to there is

are pushed And we'll able to of But to us and we all will think the whether are in question get we for answer to so, is if not QX sure. satisfy will in satisfy able be on we next we it that satisfy that it able another QX out, don't call.

Baruah go The with Capital. Please from next question comes Ananda Loop ahead.

a the thanks going what have context sensing the pricing for guys. two, Congrats XD great. taking XX Questions I quick Is first fiscal to any and ago. through is execution strong if opportunity follow-up. Any morning could? days - thinking get And one I were the than there you sensing. on Good XXXX to originally guess, Thanks. on Hi. back XD favorable then question. would there be I more

Yes. be up, ended we're I put mean, with our I'll discussions we very tend up we're say where those about for it that negotiations that, do agreements and not customers. I we sign multi-year talk intense price would happy to our going to specifically with that way.

and just to they going displacement that months way of a of Could the that give given to but cadence right August are today? I the back That's going And are is very you process? sense? am it about make were as like helpful. context you and happened a last sort sort been XG whatever think China where the in where telecom off the with what's last the process, and Whatever just requalification of in Huawei, to requalification September they were for specifically. sort And sort the through? sort seeing you pickup of nine, right - any of of the ten calling carriers it terminology and does guys they are is us,

if where of by that a additional has lot are to this summer, element think chips, would once base around mobiles, few in would inventory next tracking, happen On base I those awarded the product the we year XG to a resumption activity, that it’s China which tender growth - see And expected other should works I us good say an say will what Chris. as the the for and there tenders released tender Alan - for is chain over hand, expect, the the we would well been requalification down wasn't China customers that our sources telecoms the chips the you tenders middle folks moderate. there obtain get There activities base in and were is alternate highlighted to to their fiscal that needed of have calendar I for as would earlier, China, This is, activity of but that the a we awards new stations. way we've Sorry. that into equipment year then some of or it already products. those of designs. in manufacturers And quarters probably of tender uplift, that is huge see station on the provided, deploy But our stations. supply semiconductor I was overall there network for volumes worlds into awarded.

I is lot good but others Yes. The customer, well. could as with And not if news transport in large of deployment. activity China maybe a our with just is, just add, on there

gets that there that's in the network So, long believe deployments area. the indicator of you we're a haul bottleneck the make edge commitment out because once metro an usually that, metro you out networks, a have really the lot alleviated that continuing. do to is you activity networks core built and And then the at to seeing and and build need are and sure I the XG of

ahead. from comes question Please go of next Rolland The Christopher Susquehanna.

questions the for Thanks guys.

for back-end? the changing is and internal external shortages guys front-end see that one capacity out there, desire is your first you versus The this both

I I to in are No, manufacturing be that these we most I in ourselves not any Yes. cases mean, chips are think than don't so. going see. can unique situation semiconductor

allocate in is and So, we our the small. chips to bigger are chips things, semiconductor increase the partners their us our reliant on relatively and suppliers to wafer foundry semiconductor output some consumption of of scheme

that example, need get to are us so, chips for And them need. thousands of rely the going to no and we chips. the then, ships, for to into or of these from to with tens thousands continue them FPGA perspective, of millions of sense what And the business need we on get it we don't we would make partner

maybe know that but I lot demand transport, And click sure. of next kind about we've level a For on we're double of that seeing talked can you there.

I that ultimately here? other pre-build status going inventory be mix applications parts moving the on look about, of what used here. and than it China You What this Is any And this are their China for geographically, are did talk to does think that? like? transport

and global transport our component semiconductor talk we we our that as And both shortages ROADMs, on that output are what there I to about think no a respect pickup we've demand. output. are the that is, seen it's transport did Oh, growing components a result transport, And cards. component submarine ROADM with components. line demand of yes, And

of And as outside so, in of well use cable components as China, ocean, the as as that the bottom high – the under we lasers strength at well deployments a see reliability. of of our pump China, that our lot in submarine

components, cards the Chris, else those last you for of in as since the the to earnings our world. last as do as months that, increase line anything – well of it's well rest demand both well call, as a even So, on as ROADM inside I'd in say as that? have three add broad China, the

Alan. No,

it you run and very continues edge that's prior and how nature least is to some as bandwidth you side, lot we've to telecom on point COVID-XX COVID-XX. mean, highlighted on need highlighted, transport going led in at and And expect that key China into and is big west this been telecom I happening. that is think opening transmission to significantly of of at that Internet to but or bit the strong come only deployments delayed And present. architectures. a problem, is, world problem years calls, unfortunately, capacity picking per next-generation I and on be on expanded that in what's you of the the is, I a really the how go that skip end Alan moving And network, And growing bandwidth, core by think because has is the if the growing little global I can't western in if figuring as so it's of you up the quickly. deploy put deployments else on get back fully anything, kind that that's a at the think of and the we that a year, China with out XX% up XG day world

question from next Capital. The comes Michael Please with WestPark ahead. Genovese go

guidance had the margin My Thanks getting But better. quarter weak, seems little then the which were margins Okay. first like are seems the little to want supply operating the gross bit strong. is worse, like question, a a reported, the constraints I constraints. It the bit I outlook, very, it margins very ROADM chains assume with understand and Thanks. to the in do you lot. the but a

quarters you margins reconcile me can help So on? just just for going what's these - two and

that I'll so costs margins Michael Hi, quite Alan this of by the that increased brokerage we're expedite impacted incurring well. having QX, talked because of you of been to crack at site take we Yes, fees were products. with Wajid. some that a fiscal Chris COVID-XX They for correct. some semiconductor that some in the taking fees and of and as also we're jump and the we've incurring Alan in, getting negatively measures because then can in it's of Yes. are about it both and some some had do

benefiting as are Moving standpoint. costs QX, we're into quite mix. the in XX.X% is well and from continue XX.X%, that the we've had QX into What's a of QX, those a we that us again have our of margins guidance to reflected type where with really margins operating we’ve pleased that really margins communicated to same expecting we in operating good product to

record quarter-over-quarter that's a on favorable heard a Lasers flow going at for and is we've so to Alan as margins that the our that prepared chips product that's backlog type And Our increasing even you well. mix, helping operating you well. got EML businesses of from remarks, when commented is looking us to quite have bit down the forward, as And

a seeing improvements of chain those we're in standpoint. are from some headwinds product So, cost mix the combating supply

Great.

to it we're increases I seems what as transport get expecting we're to market is conversation, but that is Thanks future? we're that then to transmission second given in better My question more at Thanks. important at – in? play need question seeing And that mean, the is Okay. point guys transport. transmission, transport, is, XXX to relevant okay, something I point in my some you an And ZR get to demand transmission expecting guess, that. for is, sorry, strength some in

up At mean small will as Coherent is only earlier the highlighted I It's be term, an above what a important market. of XXXGig And the the the market. currently and portion component. overall we a more market in are ZR expect Alan earlier certainly near and least ramping of is

certainly DCO as production XXX Those Gig with at and other in lasers a a modulator end it? of ahead Gig, but market not at roadmap, for on up it's those DCOs, format why not modulators. fastest components Gig, new modules, certainly which pie go adhere to, in they just think there portion. where So It's big folks want focus or relative and pretty opportunity narrow largest ZR Gig, going we XXX of probably the it's that all with sort Gig be tunable our And because something plus, cards. ZR to the the to you are lot as made it's focus. however to ramping a into line mentioned again that building line well present us targeting on as But is for of either top growing the XXX about just earlier, is or our all be are portion is we're us standard XXX XXX in high-speed, of that It’s the the small example, XXX high-speed Gig a portions our it. of are modules how

our MKM And of in and ahead. we that go have allotted time for Please one more question Najam time Fahad comes from with Partners.

for you in Thank will it customers know in your the come can tell you us my XX% questions. I taking the But out XX-K. year?

it Hi, Fahad. in the This Yes, you said, will Chris. is come XX-K. as out

you greater not be in three three had perhaps should mix. And several too So, folks year. folks list say all to question customer we not, particular surprising want in from to are anything XX% the list on XX% them There customer to but years quantitative, easiest the we've past way is any our highlighted. answer in get over maybe don't if in the time-to-time than that will, as that I the of same

is our to wait western landing double-digit and in by growing percentages in customer significantly customer we’ll China, top percentage that where year-over-year largest exactly and list, year-over-year have by declining the K. customers Our double-digit are are in Huawei they see XX%

Okay.

- to can around trying answer was get an So, I you Huawei.

to is you outlook? there? Huawei material provide insights your Can and to how your some so, revenue And

Yes.

given and As as limited equipment continue as think, high-end a providers want with network larger are ROADMs customer. number is if in as set reduction. them, western That's larger have being and out. our we to on where I specific been wait to well time, to we a over have the comment - well of to is comes expect around you in K will, as hanging why around the and XX% They And said, year-over-year footprint. declining moving manufacturers Huawei western on primarily SKUs, from away service we decline and Huawei much moving when

don't reduction within reduction market share see a Huawei? we as So, a overall despite global our in

Yes.

Chris, is I domestic add in the from think, we've to other Just network seen pickup other manufacturers demand in thing to China equipment share that, are China perhaps a that gaining in deployments.

market. so, And pretty the we overall, in good with I think China position are

question-and-answer our Jim closing any I conference would session. Fanucchi the concludes to remarks. over like for back turn This to

Drew. fiscal Great. with thank quarter like everyone We when does great call look you, report our you have Thank Thank This you, And day. for talking would we again to all forward early results first attending. the we today. XXXX November. conclude a in for to and

The attending presentation. today's for conference has Thank now you concluded.

You may now disconnect.