Lumentum (LITE) 9 Feb 232023 Q2 Earnings call transcript

Good day, everyone, and welcome to the Lumentum Holdings' Second Quarter Fiscal Year 2023 Earnings Call. All participants will be in listen-only mode. Please also note, today's event is being recorded for replay purposes. [Operator Instructions]

At this time, I'd like to turn the conference call over to Kathy Ta, Vice President of Investor Relations. Ms. ahead. go please Ta,

fiscal Lumentum's XXXX Relations. Vice Lumentum's is call. Kathy Ta, President second to earnings quarter This Welcome of Investor

me Officer; Lowe, Wajid Alan Strategy and Vice today Chief Officer. Chief Joining Officer; Development Executive President President and Ali, Chris and and Financial Corporate Coldren, Senior Chief are

and markets, and forward-looking opportunity our including operating regarding our NeoPhotonics, synergies, and financial and our guidance, as call performance, such well financial technology, regarding our and future regarding Today's expected expected and products model, our statements, market as will expectations, macroeconomic expectations customers, trends, our trends results, include margin financial including statements for recent acquisitions, revenues, including targets. our our as our statements and

uncertainties differ risk results most cause review and These SEC recent that including in risk could materially XX, quarterly the to XXXX, with our the particularly December X, statements for in We to in be are Form and factors expectations, ended XX-Q the the on described filings. our filings those report ended current the our actual the to for you quarter from subject encourage XXXX. July year to XX-K SEC, filed the fiscal factors described risks

call Non-GAAP are in substitute unless projections are all for this call prepared to Please in non-GAAP. to also financials superior to GAAP. note, beliefs Lumentum undertakes during required law. accordance financials applicable update as provided stated, by based be otherwise financial and as no these statements of forward-looking on Lumentum's reasonable as or obligation are expectations results The not this with considered and today. statements, a except discussed

XXXX available section. our financial measures with at under GAAP Web on slides, accompanying our Investors and results. details release supplemental historical and and the non-GAAP results Lumentum's the between our reconciliation a fiscal non-GAAP additional site www.lumentum.com second includes about This quarter press are

turn With Alan. that, the I'll call to over

and morning, everyone. Kathy, good you, Thank

above demand robust cover with led per in Lasers the end detail and more performance revenue section. the guidance from financial and high next Commercial was and will both by Our midpoint. very customers. operational second our Operating were Wajid this our of quarter earnings strong the margin Telecom in above share range,

and the the sequentially in customers customers unit higher due due revenue quarter from Lasers inventory at consumer Commercial offset certain in revenue to anticipated a smartphone from customer As Telecom to reduced reduction digestion and production. major expected, cloud

data, is durable, differentiated to As compute, Lumentum market. consumption discussed the we this business, share trends several standpoint. past highly over products communications the markets to and enables the derived are now carrier, The driven which optical by most consumer revenue and of infrastructure technology has years, XG our performance, Nearly globe. occurred and scale fiber we cyclical advanced our in exposure up normalization provide from XX% mobile lights total serve which a from in our networks with secular cloud, lessening the across technologies. of infrastructure cost, submarine, and power long-term

lasers of in new type solutions, energy higher-precision to electric vehicles, supply cells. energy-efficient we industry. processes We and enable more key microelectronics materials of be and solar used the manufacturing are to cleaner and The storage

two ever Our new as successful closed position developing products to stronger acquisitions technology August. and as in due past is investments well leadership technologies, this the than we

realizing our our these above being and per share profitability contributed overall acquisitions of are earnings cost integrating tracking ranges. now and into ahead to synergies, months six in We which guidance plan results

customers. choice Our for and innovation the our partner capabilities of manufacturing Lumentum scale technology makes

XXXG RF-integrated well amplification coherent circuits, broadest cloud have including communication industry's indium ultra-narrow-linewidth our DSPs silicon and customers, solutions, deployment the lasers, We enabled and tunable optical network modules, direct-to-tech coherent XXX, we and cord the photonic with latest as of components partnerships as close and high-bandwidth the optical and solutions. capabilities, and circuits. industry's and In advanced integrated high-capacity phosphide ROADM photonic XXX,

the network, traffic edge to the due core data of edge is a the edge addition, networking Revenue part second for up the quarter, escalated component year-on-year business. applications of customers network. or are products the and of access products network from In XX% in Telecom major at at was originally deploying developed now the our our

and a confident technology that are compute, tailwind to growth. will provide for our data, and advanced Lumentum's We position continue leadership solutions infrastructure communication long-term for

and growth certain our and cloud substantially on be from Telecom growth organic revenue was driven Now, from let by Revenue of limited customers. Telecom. higher XX% offset Within supply continues quarter growth third shortages parties. customers second but me partially inventory by Telecom ICs this, up was datacom provide to some by detail results. inorganic year-on-year at in digestion

We which the a unsatisfied second last modest quarter, of in made improvement from customer enabled is the significant supply million last This have approximately date. supply year on progress of At demand. resulted the shortages gap $XX has closing articulated million over in $XX to our growth our the end call. gaps, IC remaining

transition Revenue network in the play transceivers which to ROADMs. applications, high-speed modules, edge was coherent as key our record industry's modules, strong next-generation lasers, XXX in coherent networks, for speeds gig especially and tunable including latest revenue well ZR latest gig and tunable a all XXXG-and-above into systems. solutions, narrow-linewidth our components customers' products in achieved as XXX and of gig narrow-linewidth XXX lasers transmission are We enablers new including transmission ZR+ and quarterly tunable which

to use components achieved XXX fiber of applications record from the network a revenue quarterly set XG applications. bandwidth wireless our data also revenue for coming quarterly in serving tunable a where highest revenue XXXG-and-above our Coherent We components with growing of applications and data coherent also set modules metro record approximately operator and wireless rate and the gig. transceivers fronthaul half applications cable, access, XXX MSO, deep, expand edge with in network at customers

and demand ROADMs port with and to ROADMs count broader access improved critical these ROADMs of XX% over year, same strong next-generation grew XX% revenue last quarter ICs. ROADM continued from grew market-leading quarter grew year same quarter customers. representing a last Shipments Second adoption in the to the high XX%, of due MxN

digestion inventory at customers Datacom's sequential and manufacturers decline resulted their anticipated, revenue. in module laser a As chip in cloud certain

on the highlighted continue chips last of call, our quarter. laser most of And hyperscale now, 'XX. throughout second will during to inventories expected our expect their this the customers we reduce As we calendar that

us roadmap, applications technology extend Looking ahead the learning speed will artificial leadership we well for our intelligence to as machine laser even technology on bodes cloud be designed datacenters which for very higher and chips.

we enter for per are We our fiscal EMLs lane X.X and production second per exit track 'XX. as on gig applications, XXX terabit expect with to

diversifying center intra-data high-power differentiated silicon with and VCSELs, broadening also product receiver our solutions. high-speed CW are and for portfolio photonic for We lasers photodiodes applications and DMLs,

to addresses transition of optical during copper artificial per those our expect we us, the shorter-reach fiscal For learning from applications, is a This for production new gig to fiber example, lane accelerating intelligence. opportunity XXX 'XX. and major especially and ramp datacenter VCSELs in machine new for

to Turning from QX expected. QX and down as consumer, was industrial

During overall consumer demand the incrementally weaker saw we quarter, for VCSELs.

including the we CES across $X we IoT revenue At in of significantly numerous this years new customer engagement strong Show, applications the We opportunities continue second applications, had ramping quarter, from and coming in automotive approximately year's applications automotive grow XD and technology. to as customers. all LiDAR our and expect revenue these ramp. sensing for to and focus million on this industrial we sensing In recognized from automotive

We solicit automotive wide with have customers design a a of a approaches. who with approach range LiDAR broad multi-prong wins pursuing to in and variety market-leading of are LiDAR in-cabin

and X% commercial from second sequentially revenue XX% quarter, the up quarter same lasers was In last year. the

largest our more expanded While for to last the Underscoring coming vehicle to products increase And revenue laser the lasers the metal in mix application in line, fiber same high display, becoming them from are our lasers growth welding due cutting be quarters. emerging solar, more this, commercial and year electric continue quarter use for in meaningful. cases. product period and expect now ultrafast than doubled in to we manufacturing

displays, Laser Our with design semiconductor Innovator's faster recognized LED at to innovated boards, XXXX time for World all solar printed our ICs, cells. machine FemtoBlade in due enables micro which laser processing and Focus applications circuit was Award the

in given and about We and are product about and the of will of cloud, product significant innovative foundation market markets. am roadmap excited growth coming opportunities for very networking, very future portfolio advanced strong our further the addressable property, intellectual differentiated expand I our confident Lumentum's in our technologies, lasers manufacturing which years. long-term

I long am product over in very extend adjacent our confident also ability grow market, to profitability leadership, expand term. into and the

responsibility towards second In been recognition by have goals including a tremendous carbon made consecutive Newsweek achievements addition, to ESG. has America's in corporate of for most in also drive our responsible net our footprints of as one companies Lumentum named our XXXX. achieving by zero a year, we progress

continue resilience of all around hard thank for our to execute to Finally, strategy. upon world and I would they their work like employees the our all as

turn I'll it Wajid. that, With over to

restructuring revenue quarter operating sequentially XX.X%. acquisitions share of a up second and for margin was net was Thank was X.X% million range. you, XX.X% negative the net primarily flat was and Alan. $XXX GAAP was charges second diluted our to the quarter GAAP onetime activities. driven related the per of $X.XX revenue year-on-year. above margin midpoint and was GAAP Net guidance loss for gross income Net which by

NeoPhotonics year-on-year gross by margin revenue. non-GAAP primarily quarter and including expected down sequentially mix XX.X%, as was which driven Second was product

satisfy to customer acquire in IC our During These incremental demand. excluded the non-GAAP charges quarter, to components we from filings. from as million gross incurred brokers charges were various disclosed in $XX.X margin extraordinary

but which our operating mix of non-GAAP recent acquisitions, including decreased high sequentially to was from quarter guidance was due year-on-year XX.X% above the range. our quarter product end Second second margin and

income $XXX.X Second operating And million. quarter EBITDA million. non-GAAP was was adjusted $XXX.X

of was $XXX.X operating $XX.X Second million expense totaled expense quarter expenses $XX.X million. revenue. SG&A million. was R&D XX.X% or non-GAAP

was rates income cash a on $X.X our Interest interest non-GAAP investments. and on higher due other to and million basis

was share was range Second late share quarter for acquisition end Both performance per high income million. call. attainment, of on driven guidance net synergy of in our non-GAAP taken part action on cash higher our were non-GAAP the investments. last net savings $X.XX. above interest income provided $XXX.X diluted was income cost Net and And which income QX by a and our in accelerated

I the remarks. on more section of will guidance provide in cost structural prepared improvements color our my

Our fully on for non-GAAP was basis. quarter diluted million second count a share XX.X the

XX.X%. rate at tax non-GAAP remains Our

million and was Moving from $XX.X to quarter the with investments, $X.XX short-term QX. cash we which up sheet, billion balance the in ended

During acquisition had costs some the of restructuring cost structural one-time synergies as accelerated the some we and quarter, drove we reductions. attainment

details, and decreased decreased mix and year-on-year, and by Optical margin sequentially, segment primarily by the XX.X% X% at driven growth revenue Telecom Datacom. is million segment Communication at in offset segment and primarily gross industrial impact to $XXX.X product quarter NeoPhotonics acquisition. sequentially of non-GAAP to mostly a in which decline Turning second due Optical Communication consumer the

up and sequentially, quarter Our year-on-year. segment XX% $XX.X million Laser was X.X% second at revenue up

XX.X% Second of quarter sequentially. Lasers gross margin approximately was flat

let of our 'XX, me for to third a move guidance of the assumptions non-GAAP basis quarter and today. based our as Now, fiscal on is which on is

in already synergies on exceeded operating reduction exceed confident over sales acquired synergies synergy target expense we activity, six NeoPhotonics, and the million we well fiscal last operating within and we we plans, opportunities expense we million the executed we highlighted targets. expense annual will cost then $XX million another $XX of initial million synergy in are have the our $XX our with cost annual When integration savings in our first operating year second of year, fiscal opportunities as exit have $XX months

these the company. for will of took improve diluted operating QX. are The actions reflected per actions In structurally in share income that additional guidance we the December, of our costs benefits net long-term

we integration provide will I our quarters. in more As plans, on synergy future and execute details

and Our Telecom cloud reduce products a our our end decline guidance few reflects revenue. on consumer revenue. QX constraints in market lasers million Supply dollar and sequential expectation,

of to We $XXX expect the quarter the third for range fiscal million to net be in $XXX revenue million. of 'XX

revenue incorporates and share shortages the approximately per guidance be by XX% components. impact diluted of we continued to margin QX $X of in to income the in to be third-party this, of Our Based driven net XX% quarter $XX range $X.XX. on operating project third to of million range

is quarter an assume share also annual third rate shares. These the on projections effective a for non-GAAP of XX.X%. guidance of XX.X based EPS non-GAAP Our tax million count approximate

fiscal and share tight per Turning our expenses new range annual we of our $X.XX operating controls, $X.XX previous outlook, to to 'XX $X.XX of share. to substantial EPS outlook anticipate fiscal the a per improvements midpoint $X.XX 'XX due structural be to to of cost above will in our

our given fiscal previously growth Telecom lower our will and low at implies our that expect articulated our QX, the We by to of in assumption $X.XX will approximately revenue. outlook offset be 'XX of annual $X.X of be billion. seasonally from revenue billion Datacom QX end flat consumer This revenue business

constrained still We supply. expect be by will IC QX that

are the attainment savings exceed with progress and an target. extremely $XX synergy now our made has in I'm excellent synergy we to in team position our million pleased

Kathy turn With Q&A the the I'll that, call Kathy? session. to back to start

Wajid. you, Thank

Before session, to Q&A ask as we time. possible of and start before keep to should to our follow-up. This I'd to one question us everyone the as the get end many like allotted participants one help

Q&A session. the begin let's Now,

Thank James. of your open. comes Raymond Simon you. from Leopold is [Operator Instructions] Our ahead. question line Please first go Simon,

a some just bit the Thanks for wanted supply got I to down the Datacom the March home. maybe wondering there's from build just in baked as going you're drivers. the issues bridge Thank the chain looking or seasonal outlook could I'm in from understand workers taking weakness can if I'm more a better are you've attribute we the to know quarter, you but Year, I the that question. for you. more to the factory New the slowing seeing or of whether handful unpack Telecom incremental see simply there decline factors, little Chinese want to if in I maybe hyperscale, segment a things contemplating and unpack guess being because

we our thanks cloud the slowing supply Yes, Simon. that guidance million the continuing mostly really still third in unsatisfied QX in end the for that primarily customer into cloud. chain the as coming Yes, exit goes challenges are question, we down anticipate we still Telecom and we Telecom of demand because as has have $XX and the And quarter. Datacom script, indicated the semiconductors with to for of

easy just Thanks. follow-up quick, a as And --

And, you a follow-up? Simon, have did

Yes, simple. and it's pretty

where for exceeded And guidance I'm mention on You own did forecast you wondering million-$XX what about when OpEx synergies make I by, $XX you acquisition. you were the sure original baked exceeded and, earnings. I'm out much it's and earlier below million them you from? cross-synergies the and provided in how understand coming from roughly, just had our your assumptions, coming the just you to trying

Simon. there, hi Yes,

fiscal a quarter in the better that six total we From quarter. ourselves had $X for coming $X were expenses to in basically the about is targets probably impact by standpoint, gotten year the million than we quarter So, we first to months. first synergy incrementally that into happening the operating QX, thought able to million set had for synergy have what's the pulled

not able to of a QX, revenue. got And announced we've of that the we've in in but so, the end and only fiscal at we're and our level in provided, outlook fiscal being previously lower given benefit outlook or -- QX see our we're the that revenue on fiscal low QX

what's that's a happening synergy So, standpoint. really from

Thanks, Simon.

you. Thank

O'Malley comes is question line go your open, please Tom Our next from Barclays. of ahead. Tom,

that ask particularly get of to in When view wanted a Good stands because, split away; on equally terms is at or share I of there have do about additional while you update there, I two comments you, a just if guys. wanted what between moved side, the consumer, that the share where a me for numbers just normalization today? an December. on looks as in share now. of for look -- you morning, just or you Thanks market, share and But at that you. do see yourselves and question you normalization industrial the letting XD to sensing look a you normalization market of here. Thank talked losing ask it like the any has just

and finally and years you about my is it We've thoughts talking can coming. now, well. as Chris give in normalization share it, I'll chime Yes, for been on

cut revenue at we're year-on-year, reduction half. about in If XD in sensing our look you

so, on expected. is saying we we can't have or would expected. doing, as competitor our in I that's what And everything what coming comment but is

Chris, you have additional comments on that?

And sensing it's echo price-downs, but Yes, and into expect around just in as than sell like I that. than sensing just things would that's application in compare competitors, and more the baked And normal VCSELs certainly XD well year, universe. first-half to highlighted, in and this share, to expectations sell difficult it what's Alan more we that happened. as of as down other year-over-year XX% our the they

the work saw just into balance coming backlog inventory supply the And customers? beat you down out Got beating Do Could talking quite then on Obviously, you're talk side, business looks it. you just quarter, the called estimates about end but quarter. on you March through end some see the as supply December throughs. customers of they're about Can Telecom down. -- like with And they're actually robustly. a they that their your follow-up, chain talk about guiding sheets? your what you revenue chain

update perspective. any given health then ecosystem seeing the fact company and of flattish a indicating there from the March total on that June you're down, just Just you're that

Thank So, there you. any would comments be helpful.

network network are continuing to robust. Yes, sure, our say Tom. I'd equipment backlog that be equipment -- very manufacturing customers'

inventory Of soft is demand is balance you the growing, I'd it extremely can where but see customer we we part sheet, say, course is us the that see end market the given the carriers huge is are their service strong. our their on on cloud growth their the and as the of ongoing to continuing as meet continued backlog customers, as see provider. a don't to over But that demands. the invest concern in to have bandwidth I long-term the say at

going level, the there's and fourth suggestion flat, I the your that, may company Obviously, would remarks. we at into in prepared as only quarter said Yes, be, Tom, in sensing. XD well, add seasonality that revenue the to, additional

up expect And quarter Datacom go aggregate the and Telecom into to in the we fourth or Telecom so, impact.

Tom. Thanks,

Thank you.

your go line Christopher, Christopher is comes ahead. question Rolland next SIG. open, of Our from please

guys. my question, around question guess margin. the is first for I Thanks gross

recovering a Optical mid-XXs little guys be look about mid-XXs I north this particular, were to ago, when kind the Can XX Is you trajectory now. now that a look we at kind get year margin forward? in over Comms like, and as trough, the we if able business? that is of talk for what and of gross of might you look So, again

off Yes, Yes, hi so that. on right. there, start it's I'll Wajid. absolutely you're

have because historically businesses than telecom Datacom chip rest and our and had our Our transmission of sensing gross gross higher our our businesses, have primarily the margins come lines. margins down year-over-year product XD both

that mix shift NeoPhotonics a as we seen shift, on with standpoint. see a highlighted very a we've so, acquisition gross would we And margin early had the from

of our synergy able we've been that through actions. offset started we've Now, to going as some

as the it, with through actually that all, of gross But backend had highlighted that we will go already come that of benefit 'XX, that on consolidations we in OpComm see actions actually we've factory that, consolidations on we the of at come execute most, through. not benefit of if million And and through see the and -- acquisition, begun throughout in happening the most executing $XX planning margins the after on synergy we onset we expect the that, highlighted of recall, on we'll we've the fiscal and it. our that as

As increase inventory the about we digestion well couple see levels next happening of impact lines. that our recovers, as And talked favorable well. should the over revenue well, Datacom we've as you've as a noted that as product within quarters

in path our to business. our So, gross OpComm that's our really increasing margins

your I That's of of fantastic. on just up wanted questioning, follow following well, two as on Datacom. And all, then first other OpComms up to lines

OpComms, wondering out And you you pushed did of get to from view at know like to from as point? pushed also, out? perhaps does on your with full-year. this the this cloud why believe that finally ROADM, just you then the at weakness I'd a to that the So, into this market, then talk would that I if amount well? fresh about and And Was anything supply was inventory that on believe migration customers; play first-half you could normalized XXX in demand XXX,

Yes, that's quite a follow-on.

we twofold. change in the duration is of there. inventory in the say was digestion I'd the knew inventory; So, Datacom outlook One was

lessens. growth and as interconnections cloud those the their need and datacenters growth cloud their slows of is of datacenters more deploy CapEx Secondly, the spending to providers, the

take for cloud a I'd that through why that right inventory. is few wanted the set quarters that's to do XXX so, migration get just thing it's we those that providers. to gig to expectations going And to economically to say the

happen as they're ramp that very fiscal excited so, will And and through fiscal to transition. that said, make year, late we've And 'XX. this transition

that's we're And we impacted where most primary to ROADM the with in the ICs then the on area, ROADM supply ROADMs line chain that cards, and supply, I'd being respect challenges say have.

on good growth MxN growth as is the high-end we expect leading So, are continued pretty new that are with I'd say the market. XX% in that And networks contention products a deployed. indicator year-over-year get that those market and

ROADMs really in ROADMs we're on that and in the So, expect to come next-generation we out 'XX. progress excited about fiscal

Chris, you topics? anything have of any on to add those

opportunity opportunity. the EML, certain we've XXX say that to participating In transition that today. gig gig -- the -- grow the think Yes, we to the the more it just architectures gig I is XXX enabled hit the cost-effective some an added, that's over introduce gig because years, call is us I XXX we're add to mean I And gig exciting next even as of beginning architecture. the in as XXX transition, still an or I that would XXX as gig, market, number script, of wouldn't that and XXX highlighted only going but adds N are for

us, that's great new, brand a not a opportunity for be lot that's that there's of incremental of right? given inventory growth. so, So, that something And and should

you, Thank Chris.

you. Thank

from Samik, comes go J.P. of open. question Samik Chatterjee next is line ahead. Our your Morgan. Please

is the the a more Thanks if from my supply seen have environment the around problems, indicated March Yes, And that though Maybe quarter. broader modestly you industry curious; than be backlog of look suppliers broadening particularly the before. feedback improving for on I'm improving, as you taking The supply. start at you hi. can supply is couple. to the questions, might sort even we've that ICs, I

across similar your received, other that is you that others it -- this be the we've Are broadening follow-up. supply what are Thank of consistent base what you. seeing to problems wondering improvement feedback And seeing? across might generally you more the Just have suppliers? I a or sort

we say, things said as need general, in to a ship to of parts along, we've all the I'd Yes, all be are able But better. product.

as become factory of decommitments at a passives see have even decommitment, just analogue you. seen -- minute a or last we so, ICs to COVID issues issues, or due more or And problem we've and surprisingly what

So, it's not means. behind us any by

exactly surprises And say seeing you we're improvement have Samik, is that problems and but incorporated working into I'd so, which said, we've through, we're what that generally still our guidance.

Got it.

Okay, helpful. have And well just to seems think And that the other that follow-up on modules have on still. are indicated some ramp reported be a that XXX Datacom, customers front. of plus with I the gig there module to doing makers cloud

of another module we as with see sort the revenues if of down you makers of sort these you in terms with differently guidance maker is seeing And of could of you seeing think or Thank be Datacom year? there do about sort the with also Are indicated inventory us your step-downs Datacom draws from sort terms of what end module wondering should you customers you when sort customer? with. thinking are in you additional -- you. being leg more risk business of that positioned sort about given levels are of the Just there the that give we work of some through out

and the there also inventory. but customers, have levels Samik, that we our remarks is transceiver buying I is of high that in inventory manufacturers prepared are that the our as operator is cloud alluded think, makers so, this think clarify view as the Chris. I transceiver Yes, digestion the To to both our that are well customers at direct module

at that we have scenario leveraging they chips provided. a ship can are to you So, imagine or continuing already where using

In for this in terms the low highlighted March think, is Datacom see chip and the quarter we've where business. the down, us we of a I point timeframe leg previously that

latest industry that is on a based up participants. the gradual ramp back going with the to discussions probably is the think I little from new development point that just more be

Samik. you, Thank

Thank you.

Our question line from Alex, of go next Henderson your Please Alex is comes Needham. open. ahead.

dynamics seeing could talk has traditional. around I heard Pricing we pricing that? And any thanks. price of of on what to that the is Great, type hoping on have than quarter much seeing year supply Are flatter in declines was XX% that the Typically, similarly, March the side? XX% you are or through $XX do you it. the chain the this the pricing June flipside is you guidance pricing. talked Can pricing constraints, into chain are you supply side Thanks. about the as some looking out impact the you expect some of about obviously on in And the us changes? resultant but million on what equation? have and non-seasonal piece the this correction, that? -- you give you margin of quarter, inventory the I

prices are the overall, going are between right. XX%. some I XX% term Alex, In actually say pricing with than that Yes, our in for our with But up. customers. environment cases, you The would different this -- we us long and customers are to very is

take And have in short-term so, customers. the them win with market on of we supply us agreements try our advantage helping with not the really to helping focusing and long-term

right, much say it's a the to flatter too year pricing would dynamics different, our are with you from ago. price very, as than I traditionally. increases suppliers the very or moderated and price So, respect we are so saw has

to That impact we pay to need when And significantly. market spot premiums said, buy are we customer out having satisfy are for we still cash the going our broker demand. to that

in June of We or And are then, question your still period in that digestion is some of else? is But that time. for around frankly the Datacom are recently. more quarter, inventory game seeing less we something that that

flatness downward to non-seasonal that the cyclical pressure does pricing equation to start is last of as a Well, a the start years, pricing maybe normalize ultimately on but basis the rather back question on a given over two into things creep basis? as

satisfy prices with set our working we that needs with And win-win have try the year working extend to okay. a set are reductions but on in agreements Yes, ensure we're have share with their agreements a our see, also that's short-term needs then two. place earlier beyond with I that for our or price them. that extend customers I like solution would said to we longer-term to short-term. them And we customers what that have

available, that So or make inventory house quarter, need be get we to the as happening continued I'd or satisfied. in April June the will semiconductors in as that see million that But for becomes we in million see June. $XX of challenges, order as don't to supply we say shipments the by unsatisfied $XX backlog

the the year. -- it's so think And challenges early we're and going go into to into half calendar seeing second of still the

on technology couple front, is of question moving the hoping follow-up pieces that address. you was there Second could I a are

those, off new this that third address for network So, from off missed a on architecture relation first most a we've the the then an question. new sensing Telecom Cloud there's impacting if key in AI module is new a I'm that that design that So, And talked technology of And impact on of going is of primary wondering second, assuming changed getting of the customers, about in that those the else's? customer can XD pieces? the the of prior-module. windows broader heard the into a is And from in delays up. Datacom. meaningfully pretty is that one is the to not the is AI somebody changing ramp taking then Thanks. I'm side real you and Datacom, the or your your function additions any that products timing you the business? the there

Alex, circle Yes, with the start of so and around question. back Datacom to the kind thanks, sensing. then XD Maybe great

product driven it side perceived economic things, Datacom the customers. by period probably, driven customers and CapEx cloud in trends is missing not by of of any just end think window, outlook any generally or digestion extended the I by is So

offering what our we had, module on In and but Lumentum remarks, And it's innovation for of the partner dense being or only to over CPO specific into to diode, a live I highlighted architecture, very within think tremendous volumes. acceleration and we and optical, expect the comment like customer product proven but terms we're at silicon really yes, been because that's as talking opportunity broader partner don't technology, not the rapidly you're we we of DMLs rich broadening AI a expanding we've for in But of remain to going very and not product a on supply best And appropriate transitioning axial it's we on or lasers Datacom the the to year, the XD AI when it's architecture. around And out offering, about being the program focused our interconnect customers. folks move years, we high of sure what that or an next a power very as higher business, photo architecture. and sensing, got architectures referenced. Circling therefore, in happen EMLs portion past our focused expanding that remain think this the what's copper speculate Telecom and Datacom or rich interconnect I space. business, plays photonics is dense prepared couple for Lumentum, to speeds, looking in or competitive

Alex. you, Thank

you. Thank

Stanley. comes your question of ahead. Meta open, line go Morgan is next please Our from Marshall Meta,

I of I we've pretty around quarter Great, thanks. quarters. guess kind see to the But couple just surprised I past it. the broker was increase from of of this kind know fees meaningfully circled

step of you're so just, And of maybe being little just Thanks. And me increase made the quarter, to like, more the fees step the if up when to sense back of fees to this pieces that China acute, a paid. of less follow-up they'll then reopening but of go a of what towards down, wanted expect dramatic as the as to question dramatic was some of some just view more led kind broker on get just it acute that some kind is your of, in or the seems environment kind and end bit get normalized development that pretty update for back then we to efforts? DSP we saying the just kind any just

flushed can Alan will DSP saw the off the charges the was the then of it. fees. you And about higher. happening talk broker increased were supply, what side out is, little Basically, I inventory as start bit Meta, a with being with broker

lead lower, because it it last product. And the was the is purchases they that our of final components lower quarter offsets rest order were just to through time in time to the manufacturing took the reason the our go needed up were it but the so pick really for that not were in process, ship

into ability And in sales. fiscal saw our in that simply a our so, to with the QX you customers, improvements increase swing in of of we to actually because cost deliver from a would see inventory corresponding charge

than issue. rather an of a business more matter it's accounting So

it's now a We our in suppliers we components inventory purchases as broker Alan have with for to DSP. we it decreased decrease on of coming are expect demand, quarters as fulfill the our well just to bought that couple and seen struggling actually

on DSP, get done focused continuing for that But Very acquisitions acquisition, us we're focus primarily the Yes, but and on there. on also the our RFIC's the roadmap, module. from about we'll our what what ZR+ from DSP done, question. on on DSPs, IPG from and thanks the the out getting And see bring excited NeoPhotonics the ZR silicon front, product brought both but and only tape team companies, primary not first out the our we is photonics. happens for tape then into to get drive both to

the Our primary to the focus cost to type piece last really the lowest the needed. point. consumption, was we of ZR internal DSP down drive for the is possible cost the module DSP that And

components. of we all the other So have

DSP, ZR, the the RFICs look at modulator, the you the the receiver, got it laser, If we've tunable all. and

range, broadest broadest vertically the are provider on we those or So integrated modules.

than on filling able market very, DSPs. more to, next competitive And merchant work a and we're to our a have up going team But we DSP, we'll roadmap so one are up time. going to exciting very to so And at a XXXG. do generation to building continue with offering out very, be time, then we I the DSP as we're at finish very that think

Meta. Thanks,

comes line proceed. is from Next George, open. George Please Jefferies. question of your Notter

very thanks much. guys, Hi,

I What great. reductions costs, organic out? segments that business. cost made of cost tell you would you in be types some anything mentioned the can You business us guess I'm of what just you're taking the about curious

bit from were see on the the the a a savings But reinvesting standpoint, it's George, that, during quarter G&A primarily, saw G&A little well. we're reductions from SG&A. side, that little we're on doing on as product a any that But side, where mostly the into bit getting opportunities we of rationalization we R&D. that we're

the So way about it. to that's really think

it. Got

Okay, And impact? guys revenue the in last the you terms thank of for you know us contribution gave very for quarter. number NeoPhotonics I a was quarter then any what sense in much.

two I think it like over now? was $XX curious what but million just months, that looks

together, beginning not plans, breaking Hey, this Chris. be or Well one NeoPhotonics going out teams The contribution. George, along is be are we're working any rationalized. our to of in separate products many integration to team

So say this all what Lumentum. it's is NeoPhotonics, to little difficult a is point at for what Lumentum

Thanks so much, George.

you. Thank

Our Ruben, proceed. of next question line comes from is Roy open. Stifel. Ruben Please your

you think the understood talk you've kind being a share for you. the for was wanted believe and me had I where said Chris, of normal. pricing downtick I about drivers just when sensing. this XD talked you pricing And about which sure Thank Thanks did you've correctly, is you to overall you going it demand, commentary of about couple I of the kind the got in business, Chris, I pricing, letting to around questions be. here. you environment thought share got ask a follow-up on make in of the

Do helpful. for level? consumer you. you is to for to Any similar detail with off would is XX% the way so you revenue, I down or look next pricing there to think going the of grow year? think we're environment going that be you So be demand, Thank But fiscal think guess, now as ahead this do obviously of around lower. year about

highlighted talked will, had an the we're Pricing, for say, really largely normal, come year-over-year was architecture, this that years, if is an prices come how performance us. about, primarily that question in steep that that normalized, position in you general, reduction on you I driven indicated share there normalizations, we've bigger have it and now the where years behind gets so nothing we've share that by of would chip and as as there's over more a in is would just there's I unusual or price. outsized a Yes, many when adjustment going of past the is unless change causes five a you down think smaller,

out can up. and we we we've offers. the longer the do more extended in that as customers will broader where of quarter, is and more normal forward, markets, obviously, other supply that obviously industrial an automotive, leveraging one, subsystems, Lumentum much exciting consumer get and broadening got over year in our think focus a there point like space, factories, impact to ahead, base IC the downs, tends got not choice we to technologies applications, of the consumer perhaps innovation timeframe This but near-term, going with that new technologies from manufacturing I and even then can modules from the well last warehouses, be our only And price more continuing and go regards on suppliers, volumes past year-over-year perhaps there's where area partner and lasers, demand. to then that's and supply sensing as in but customer what's very chain well are ahead, a there into supply reality, lower on look we've looking disruptions we is But as

I in reality more sensors a there's use add a So, of like tailwinds think when tend example, extended talking lot about headsets device. these dollar start per expanded more broadly, content, of to higher perhaps these we given automobiles new applications, and applications, as an new even things or cases,

question? that per opportunity Does that unit. So your dollar answer amplifies the

for of et Chris. IoT, cetera. Thanks If follow-up all I hope does. could just recognized a of of I those revenues, are initial is, detail, a line being very, their quick I'm in get to non-consumer really characterize out guess some of terms those would an sort revenues what is auto, It those ask at still proof-of-concept I XD? revenues, to sight for in inflection of you How the markets that trying

is China, reality. proof-of-concept a say in as, the adoption I'd it's than of becoming more especially LiDAR

the very but the are short-term that road. say isn't point say are in into I'd that that these going out respect so to vehicles with I'd that inflection And ramping, on going

I'd been about excited wins And say broad we the the so fiscal, customer in we've pickup that the of and fiscal we business. of design end 'XX, And a awarded. range that that meaningful we're see by should that have engagements

in So, investment it's long-term more and of that the to make we've meaningful. should continued years, be it more a coming

you, Thank Ruben.

you. Thank

line comes Ananda next open. ahead. question Our of go is your Loop Capital. Ananda, from Please Baruah

ones, three, two Hey and mentioned it sensing than softer regards question. that thanks with I quick for the demand was in the guess taking thanks you XD the I anticipated. was if had guys. Good deck with to slide Chris, morning mentioned could.

demand production component market as thanks. well, was a and component well follow-up, just a and to there as then that that So to a quick and

thought, disruptions through they the slightly of year. originally being our began the focused if end, earnings there us, you will, remainder supply recall, bit these customer don't factors we think quarter our generally the chain And think was below little impacted Yes, disruptions, a highlighted was before on second customer maybe the production limiting if that I where really that on it any demand. around I had but continued, you call, component last we've

transceiver Got sort impact inventory seeing and and from And it guys for would right me, how demand I business the you're end it, transceiver at characterize of And customers, end that's you is the transceivers now? into thanks. helpful. that customers guess

Telecom you Datacom referencing transceivers? Are transceivers,

to It lost be ahead. Please Ananda. Well, we clear. like go sounds

I trying NeoPhotonics specifically. yes, back, it am I was to get

a business to good wins. bulk leveraging other highlighted, us ZR is Yes, our years will coming the to Gig combined well a so ZR, going things be the to tremendous and referencing. probably costs market to Yes, anticipate and down I ZR, bring the that's that for Alan markets, with as more XXX participate that But ZR+ long-term especially multibillion today. the DC the would as ZR+ that are dollar and design have in of going say be market out drive And capabilities participating We on that focus acquisition, And over that that, NeoPhotonics front. both and transceiver own of tailwinds. given the a supplying opportunity company's we you're big of wins. our today transition transceivers And couple transceiver we market, growth vendors. design next revenue by modules

Ananda. Thanks,

Thank you.

of Please Vivek, next Arya line Our your question Bank Merrill Lynch. open. go from comes is America of Vivek ahead.

across taking Datacom your it demand softer the or product, for I'm single my being Datacom Thanks is question. to commentary on board single think, broad soft, as being industry is year? that the or about an I whether understand demand specific for customer trying Lumentum a most commentary of

I cloud market would say more the in softness providers. it's that end

Lumentum, to Datacom as data for to as slow providers the sell manufacturers. And module of consumption And as of centers, cloud the the Datacom modules. we so chips cloud, well both the as cloud they the the deployment providers slow deployment

customers of end to stronger. depleted, has that basically seeing is, but those very we're what thought was the from public been slows inventory cloud what so, be that growth slower originally much the being consumption is And of

address machine it's our the is very so and temporary we'll about that that excited this view as a broadening and of issue AI get on we through learning. products, And

that's So, temporary. seen I of market more Lumentum end wouldn't specific, change say it's that we've it's

you. you this basis half Thank a see, at go your does there shift that point, any to a has happening? realistically, share year? of the should follow-up, prevent seasonal XD any get sensing half shares is normal they business onwards? to that could sure from pattern my more better grow to looking September sequential to for we make start the sequential and I or Understood with second be as for normalize out from want on still Or what from that just calendar

business if will. Yes, that mean continue be that think you I will I seasonal, to

into grow. fourth would decline, going the we expect first would into then going fourth quarter quarter from So third quarter the quarter and

the will factors the So become yes, where in unfolded. they we would expect that process have has than of last seasonal couple more normalization quarters significant

you, Thank Vivek.

question comes proceed. Mike, open. from next your Genovese Rosenblatt. Please line of is Mike Our

get term else asked for for the Can $XX lasers? lasers record, the to all-time last, ask business. Best up eventually than medium this, million it sequentially into commercial what's has It to about bigger somebody can want commercial Okay, outlook was XXs, down. fantastic. get I guiding the it

year-on-year, Yes, trailing months. we're growth laser XX% grew very XX lasers. And our the in excited business about the

markets And so getting. innovation we talked the new product we're gaining introduction, we're new really that share in lasers. as that's given And about the and

to to by markets. I the would our is these expect long-term lasers, adoption continue so great And especially in to be which fully over grow new getting new introduce products, able this we as ultra-fast

excited about we're long-term of in our organic business. outlook yes, growth the lasers So

is just And great. Telecom. another Okay, question on

a the years? double-digit outlook still term of or market again, that is this couple Telecom, think for about year a year, two, growth you As confidence three there is for sustainable medium multiple

comments. Yes, I'll give you my

changed? that Has

year, Well, I'd XX%. and have I growth thinking think say macro look you grows at that over every not And uncertainty to requirements. if long-term going of we're us headwinds be bandwidth time, certainly XX%, it every year,

And think be economy, the in in happens add? anything so I have setting or aside to rate what to over the XX% midterm the your growth point, Telecom. Chris, you trend should rate, the

had of the first I'd will, the first Yes, is a year in half add we and plus the our in and half business you earlier, compared of base, up if Lumentum forma Datacom fiscal Telecom certainly thing that, on only the pro Neo fiscal I the teens been 'XX percent, 'XX. a is together think the to

from inventory softening has growth cloud supply the and or chain digestion coming despite the been there, market. challenges the of the end So,

encouraging. that's customers is having our tremendous also demonstrated think I So and backlog very

obviously, So, out I that out, think out there's very we as at year impact anybody macro our customer difficult point, as seen you at next opportunity pointed two I but or has years. is that look next think this there don't Michael. But that yes, handicap loom factors, there. level the Thanks, to

you, Thank Mike.

Unfortunately, have session the we today. for this is Q&A the all time

to hand Alan I'll remarks. So over closing any Lowe that for

markets. Charlie. with us scale tremendous the cloud learning, computing carrier the very excited we we call. machine thoughts growth like the would serve wrap our you, network the intelligence, you thank leave to Great, mobile, opportunities about as up in as artificial to and bandwidth I in a I'm of few ahead business exponential

playbook to products deeply best-in-class technologies and in today and investing markets. to We're leverage needs deliver proven our committed with a other have customer in win with technologies I March We future. OFC our to these again capabilities innovation manufacturing Tradeshow. Investor and to at With to you thank we Technology like X for to LITE look the that, talking and XXXX everyone Lumentum's attending, into at event on forward the and would on

other registration find much this Web attending. events event for information site. our will You investor upcoming and Thank you very on about

and call. this Thank Ladies today's you concludes gentlemen, for joining.

You now disconnect may your lines.