Lumentum (LITE) 9 May 232023 Q3 Earnings call transcript

Good day, everyone, and welcome to the Lumentum Holdings’ Third Quarter Year 2023 Earnings Call. All participants will be in a listen-only mode. Please 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,

welcome is fiscal President Kathy Relations. and earnings of quarter call. This Ta, to you third Lumentum’s XXXX Investor Thank Lumentum’s Vice

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

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

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

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

under on accompanying and our fiscal available release are with the the supplemental section. results press XXXX Lumentum’s Investors quarter website at www.lumentum.com slides third

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

everyone. Thank morning, good you, Kathy, and

I’m mid across believe risks supply inventories the inventories in competitiveness overall business. easy. range to our large and confident due pace end demand rate, constraints results commercial optical are continue we Customers increase concerns demand we market need and quarter favorable. in we a down that very data as and are communications long-term with to announced data Third relentless market each believe had supply currently at in year. about up will and capacity and keep networks who positions under trends will and our are centers built a grow shipping and traffic to share double-digit our are were to April, laser segments within bringing Data

more fiber to carrier the will both and ability in globe. photonics is a and customers enable division differentiator Lumentum’s functionally and up integrate for coming vertically lit across optical is and our more era as the spatial key multiplexing us

New automotive solid state applications LiDAR reliability, performance and scale. are where emerging photonics, in lead manufacturing and industrial for we

such business lasers manufacturing. commercial and electric traditional beyond solar cell, high semiconductor, growth as our Our applications display into is expanding vehicle areas advanced

synergies expense controls, cash and roadmaps we are prioritizing satisfaction. term, generation, nearer the attainment and of new In products to continue while we and technology acquisition accelerated deliver customer our

customer up declines provide Now, Datacom inventory our sequential major let during digestion. to lines product was & detail me the significantly some year-on-year limit down third see Telecom with not most quarter but our XX% sequentially, across results. quarter. did due I supply revenue on XX% revenue

recover While half of line, that second demand calendar the there’s customer product indicates Telecom outlook in and from among late & start visibility markets correction a current will mixed Datacom inventory to the our XXXX. this

expect turning a years. to the will over multi-hundred This MSO fiber XG modules is deep tunable out cable, which and to of that expand access year metro network play application. set growing a are and fronthaul our significant bandwidth us, access, in coming data dollar for wireless per market million customers wireless have opportunity We we

revenue doubled to revenue year-on-year and products a record. sequentially from new In quarterly these the XX% third quarter, grew

legacy fiber metro upgrading will module access generation access access Our leveraging tunable next networks new XXG nodes for distributed a in customers be enabler architecture. key

lumpiness. XXG transition may as XXG coming the in revenue see some quarters, we However, to customers we from

of Our share deployed, and advanced in enablers ROADMs us key that continued are next starting giving demand. just growth our are confidence future customers’ generation market architectures to be network

ROADM by revenue was sequentially is quarter customers customer another last IC for market digestion next supply. the the of significant was from was pluggable previously, to inventory it ROADMs adoption discussed third leading broader same us. adoption While down The improved of with along long-term network due generation quarter operators Year-over-year coherent growth year. modules up opportunity by by I driven

high vertically highly are form speed the We across factors. integrated electronic enable pluggable that components and photonics

XXX well lower being are well G power artificial our broader an customers. and highlighted we products capacity bodes learning or which intelligence for us consumption technology applications, support at enable as very higher Cloud OFC. OFC extend we demo ZR machine received to designed leadership even and to centers by our as was that of array product At data latency and

per gig terabit XXXX. X.X applications expect lane of XXX enter for half XXX and calendar XXXX in per second We throughout gig are ramp our to on EMLs track second the production calendar and with and

be in high positioned including Our where replacing computing due engines in to connections are connections Also, photonics for high-speed at we copper highlighted speed the laser as data to reach Lumentum is market. leaders power to communications with starting deployed short high-performance optical solutions, array VCSELs are develop OFC, requirements. uniquely coordination centers within new data

market pace technologies, existing photonics the market the fast will rapidly innovation photonics expect reaching of the and photonics the the grow, within we the increasing next years. demands Ethernet size of for on that AI five Given placed

to as QX market demand. Industrial and to year-over-year expected, was end down Turning & Consumer, and from due smartphone seasonality QX down

set and smartphone to we automotive customers. sensing continue applications expanding industrial of ramp the new for market, an Beyond

of automotive-related revenue applications. $X quarter million had Third approximately

our global automotive current Our LiDAR customers in confidence China. gives opportunities years, of revenue confidence well to as coming over contributions reflects automotive revenue Tier revenue significantly Recent ability in of from early grow set adopters us our this in a in significant engagements with as market. our the LiDAR X new

possibility will on year fiscal revenue opportunity XD additional around and of market an that certain sensing our in be socket to a fiscal expectations expect of lower demand, than XD ‘XX. competitor the ‘XX due fiscal end ‘XX our pricing sensing We

third revenue from down by In over XX% commercial the growth ultrafast X% fiber and lasers revenue, achieved which laser lower sequentially XX% same and year-on-year We laser the more last offset in was quarter, shipments. year. quarter than was solid-state down

manufacturing. in ultrafast Our cell being applications, new particularly solar growth lasers driven by is in

We gain expect that lasers. share laser in applications as will grow, new we further ultrafast these

customer quarters factors end impacting on to inventory demand we lasers the be over and expect customer to digestion. the the Based due several macro latest commercial next forecast, softer market

is integration product are pipeline near our term, I’m and In challenging in controls financial maintaining wins leading with our of be uniquely resilience demand Lumentum’s on focused our while maps, is structural prospects near expectations continue confident and unchanged. Lumentum business mid- and and about our vertical to crucial robust serve term, model. end we scale innovation. customers design and overall long-term the the forefront expect the fundamental functional of likely drive technology we road have we expense the capabilities, built into positioned to environment to are driving growth given to trends at market very Although to our R&D

our for employees Before around world turning our strategy. would that, Wajid, as it dedication to over to they focus With thank and their execute the I continue Wajid? like upon to

Alan. Thank you,

was and XX.X% quarter X% Net million, the down year-on-year. down $XXX.X for third which sequentially revenue was

During than both telecom no the customers there quarter, market. the in in two market, we had were consumer greater customers, XX% and the XX%

per net was GAAP loss and operating for GAAP share was third loss the gross GAAP XX.X% margin quarter diluted XX.X%, $X.XX. was

by product Third quarter the non-GAAP IC down margin gross year-on-year, purchases and primarily mix nominal lower revenue. XX.X%, at brokers which to third-party levels was in was sequentially declined driven quarter. and

product year-on-year and sequentially lower XX.X%, revenue. which Third to quarter margin mix non-GAAP due operating was decreased and

$XX.X quarter adjusted million. was non-GAAP was EBITDA million Third $XX operating income and

down tight controls was revenue. million. expenses $X.X expenses million expenses. quarter Third from with seasonal expense XX.X% R&D QX than in operating more of million, non-GAAP and or offset expense non-GAAP SG&A operating $XXX.X $XX.X Non-GAAP million that operating expense synergies QX non-GAAP increases totaled $XX.X were

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

Third $XX.X net net and was non-GAAP $X.XX. per million non-GAAP quarter diluted share income was income

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

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

ended balance period $X.XX investments. the and integration products quarter NeoPhotonics attain To of into customer to carry We plan synergies of without with impacting short-term billion accelerate our we sheet. deliveries, for and footprint in a cash to the inventories Moving the manufacturing global elevated time.

to over the However, $XX decline in Also, next we by as year a on exiting inventories continue focus few we generation. cash we calendar quarters. moderation spending expect CapEx approximately expect XXXX million to

Turning details. to segment

decreased already of segment sequentially quarter inventory $XXX.X lower sequentially, discussed. XX.X% dynamics revenue non-GAAP NeoPhotonics’ communications margin communications year-on-year, at product gross the XX.X% primarily Alan margins. impact Optical due at segment decreased primarily Third and revenue million driven to the and by optical that

sequentially down year-on-year. lasers Our third segment XX.X% and was quarter $XX.X down revenue X.X% at million

Third of a and quarter an transition lasers primarily due XX.X% laser gross was down lower to margin due fiber and year-on-year, volumes. reserve inventory to product sequentially

platform recover shifted lasers volumes product to manufacturing margins after in fully new the expect shipments and We to laser return.

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

in anticipate decline the in forecast, Datacom range QX Within We be million. Industrial in & be to fiscal quarter $XXX by $XXX expect a & revenue fourth of we to for of net this million XXXX the revenue offset to growth Telecom Consumer. modest

to share project We on of and expect third range revenue be operating we lasers per quarter to in be to of to quarter. in approximately the X.X% fourth fourth with net to the income XX.X% quarter range this, Based diluted $X.XX be the $X.XX. flat margin

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

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

Thank you, Wajid.

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

Now, the session. let’s begin Q&A

Simon first [Operator Leopold question James. from And our Instructions] Raymond from comes

that. chain looking what couldn’t for [Technical during of constrained the Datacom ROADMs Telecom particularly Difficulty] were me the in because here Thanks. FPGA. let I’m I And XXXX, recall & get much I supply appreciate you we explain is segment. I’m

Is within get your us holding. it mixture? inventory? inventory guess of can I’m And segment understand sense I how all of better Help much to a that. customers plugables, composition trying So that what’s the the Thanks. be

broad the second our what indicated in we ship the think perspective Yes. of half the to customers with from to and what quarter June by to respect the forecast be inventory at going year. as in our calendar Simon, shipping we it’s we’re

wouldn’t one line. I any product particular say So, it’s

to in year, I and the inventory March to revenue and ROADM indicated lot past heavily the we and revenue built quarter, the expect card Although say as we up. point, line script And in your line in ROADMs therefore, of that’s the I over that, and into our June reduction, a would quarter a constrained ROADM were where cards ROADM think that beyond. continue was

As sell-through reflect the supply product, the comfortable been and constraints know levels now have inventory lowering to their customers they think their very they’re can relieved get I actual customers. to

as quarters to or so, are under-shipping And said happens customers’ market so, we’ll our as to again And we next where as believe that inventories we we’ll market demand dramatically normalize. get equilibrium, also, of over we the an start end shipping end demand. couple

had follow than decline, I that had much [Technical looked lighter but you my and Difficulty] nonetheless, as just sequential a up. then know that been preannouncement, this some expected. market is guided holding we And

if see long what’s commercial could there? to in your does And like I’d talk last view? So, relative how in weakness lasers this you changed about

the as came I’d growth year-on-year markets. XX% we say very Simon, we areas, get as the new in overall laser we transition semiconductor the as business semiconductor. supply slowness lasers one in we Yes. from going also laser in industry, semiconductor the ultrafast the a so headwinds of is is into about couple well, the talked processing highlighted, but also solid-state into fiber demand industry which of the

some well. softening that that’s as we see So,

comes from Morgan. question next from JP Our Samik

Thank your of you. And have much under-shipping of Is that wanted maybe a sort under And essentially how to how that in do you? the even the extending will telling that you’re around do you’re response How the terms of you’re your of half and sort prepared you’re demand. doing run is demand in mentioned get second that, shipping level saying of right you’re I what that? you you’re are now? is you What how shipping to a you sort think in thoughts math rate. gets right your I to about that inventory that And Alan, guess, remarks recovery. believe believe just you customers you digesting half last sort the follow-up. second right or and recovery, to much related much under have of I

Sure.

under-shipping. it’s I think to say much we’re hard how

tells earnings in their clearly, in inventory under-shipping demand. end reduction the are revenue And in come our as Although customer that to announce relative their expect us over we the the March will down quarter levels coming quarters, customers time. we

that’s market And demand. so, indicator an under-shipping end of

not calendar back shipments in perfectly say that year. shipping out, that shipping the this customers of we through levels, is of our more to us, normalized -- the gives confidence a and believe level those year, they’re the a towards we’re us -- that that the of visibility what Although inventory end of getting I’d calendar what that’s of to more then clear quarters under-shipping for exit so should alleviate elevated as we couple

Okay, quarter? have fiscal at about Is more guidance digestion this of primary sequential the this this -- a sort probably fourth the that years. even implying lowest you’ve most at -- follow-up from inventory going that’s you of in Consumer. for in of the a in you’re got that a is on reflection customer just your sell-through and on sort -- done you’re again, you. segment coming would weaker, in midpoint -- impacting few revenue thinking for That And again that comes the in or of the quite of revenues Industrial back the & it. you put quarter quarter, fourth your in customer Thank one that you segment. at Based decline being

on you’re reduction years is driver a is and at in think would of normalization really on year-over-year most this Samik, pricing the or when and comment relative to top obviously, else the On I that this looking I previously. bit. market that, at significant anything mind obviously very -- of highlighted Chris. important Hi past. a say to what’s can That’s time. around don’t quantifying market end XD keep share we prior there’s we’ve in end that sensing particulars

Henderson Our Needham. next Alex question from from comes

spots to copper So, delve that pressures able bright the you that market. business to side, scope one compete of into Obviously, Are InfiniBand able the grow I the just into in commentary Is it? that’s products offset in compete how try that? you part of commentary. Ethernet traditional the think you have allow do the made. replacement to of you to or wanted are side will understand the of to that also compete And AI the And VCSEL datacom? any you the in into rapidly that that to you

This Thanks, Alex. is Yes. Chris.

or you and term, say that. really this -- tackle of frames think in products time volumes, the next I me in would Let got existing you the nearer that, launched. of quarters, our to to it’s be new if driving products will,

mass production to lane will that per copper as well highlighted, products and be as that’s of per already accelerate in replacement so VCSELs that’s here the inventory that built, EMLs will be lane a of already XXX-gig are XXX-gig -- helping our out soon. you VCSELs there. -- digestion As That

So couple quarters. that’s next of the

As we that or look there’s optical that are with launch customers, new you’re years, are next architectures. to what referencing new to few let’s seeking the new intensive architectures say, is customers

of let’s data things we some but presentation in side leading say, this compute through more centers. at where I traditionally side, went co-developing are the and think traditionally not solutions for are AI networking with, we next-generation in OFC of maybe that our players

us. of waves kind product couple intersects there’s So, for of of a

primary in of as to do that that original calendar millions lot really a the of tens or So, think in half you that of Is it this back a ramp? question. dollars longer is something kicks of the just to back revenue driver? When going takes year, the

products. think calendar really I existing still will of half digestion of the phase year on the inventory back a be in

about existing in But talking the time. is a new point to really we’ll ‘XX, back get the burned years reacceleration one stuff at given we two then the products, existing into products, in to as should that off see be the I think inventory I think we’re going more out. calendar

inventory mentioned, just of what you If the one insert that was the The that could reserve non-GAAP was I numbers, size last that? in question.

was million. approximately Alex, Hi it $X

Marshall Our next Stanley. question comes from Morgan from Meta

for just on well for to the I supply done only may have maybe you, part. of also system the of kind to a kind chain to over-ordered you wanted Alan, their of sense get guys from customers Samik’s about coming back question kind issues over-ordering build kind vendors their as inventory, but not seeing just of we’re

kind just digestion of is, that inventory given or just so I seen over-ordering much might just how are systems -- the there this there And guess, of could well? how given demand that duration end you some the vendors judging of have the period as

there I Meta, when it’s our continuing the where where enough Yes. strong supply of seeing. what wasn’t we’re hard needed end is build-up and for through are inventory coming on where was we’re chains seeing that down is levels demand and inventory. we’re demand products comment comment inability we to But get believe seeing can on there and to their there was, have product for think to that there our of customers me customers, since are where from what those this that of eased under-shipping I a customers it, now ship fear is. deployments, what

I would our new with share very funnel though, design customers. our product So say new that however, in we’re beyond product and our wins that, to our it’s position, hard say. in confident

use the be and revenue beyond. products market over market new demand, into believe will that off So, that to still that ship few ‘XX we inventory to we’ll gives fundamental to as and a position and there this that end drivers us as continue that in next us gets demand end at we get burned these growth for drive are confidence calendar quarters drive

effect Got I is been follow-up noted it. just than in on commentary estimate would there market And ‘XX and fiscal of just normalization question. sensing? Are just lead end general kind in of to just XD -- fiscal kind ‘XX what ‘XX about demand there and had lower pricing a as ‘XX over of your XD fiscal the fiscal cumulative of share a sensing.

Hi Meta. Yes.

guide sensing to the a XD I little think premature full this on year point. it’s at

think remarks demand, prices the as potential we year-over-year. I of or down we’ve market go here the new prepared the that is, the a will past, key highlighted that be down year-over-year. on it all suggest sockets on in end for point in one the And likelihood that competitor led

question from from comes next Our Barclays. Tom O’Malley

that widely pretty taking ability be see of to why does you still specific tired of your to there’s this you would do that it, out of little you losing case. competitors and about your answer talk but going from why the reported be share, it side, sensing. and do share entrant I about or world-facing kind Can losing of best talked it’s equally I’m matter reason to in you today, technology there of you? fiscal not share think your this the the And know that just share when at end I would look the move walk a the story, in both best with on to bit get sensor, year. can your through that the little of you you’re a split numbers a just pocket into that but you new is a entrant and the hopefully, share XD coming

equally think impact they into if potential answer it’s new that happen bringing We know the will on and a that to our us think be socket -- it going on to phones. your is difference don’t competitor respect would And generation shift ramp, to wanted highlight be in one I next Did with premature share what’s in on third that the I Tom? Yes. could new that question, supplier. there to supplier. supplier. If they’re or to It’s any think I there exactly able that of be come

under could it. Is on the rolling on telecom in margin weakness? out legacy the products just guidance. seems the or datacom you’re are still Lumentum what’s guys are gross you margin gross synergies in then the at on then Neo implied, continue -- break gross gross Got it the you in? it down seeing seeing break did. pressure like And that to looking you And you of don’t core pressure. I where Neo have for side, margins on be the But it margins, know those products, the synergies come waiting to acquired just that some but the and

one. Yes. Hi I’ll that Yes. Tom, take

you synergies on from synergy mean, our Difficulty] of fiscal taken I So well quarter-to-quarter into date seen and expenses quite as significantly quarters there. come most the been the operating QX the as saw side, down have QX during in that actions to we’ve as we’ve prior appropriate [Technical as year

of ‘XX. of to of calendar sold the in our a half synergies the the calendar do We’ll first in consolidation back to the half activities lot of synergy, some cost we’re first of those see goods ‘XX. of the hoping the flow start through this in see fiscal year of On back part most and -- that

to calendar And in the in see in we over the as some the particular, will we’re this keep ‘XX. quarter absorb within manufacturing we remaining early continue that, as can infrastructure a that the we we on Now, we margin planning that so made facilities part place inventory under-absorption rebound note reducing do a of gross for levels on our year. our

you’ll the So, our be margins that, gross some that impacting next of will over see few quarters. and

So, you’re utilization of your to you’re -- facilities? clear, just further reducing inside be own

mostly to a it’s quarters. us like And for of Yes. depreciation Yes. that couple things impact continue will right. that’s Yes, Yes.

Rolland question next Christopher from comes Our from SIG.

rate? that what quarter industrial we of we do is, of portion this a be for you sense you next so see kind actually a for this -- new thinking And see is first about XDS? my it get question guess trough I So then, can versus of is how from consumer? Like, Thanks. should run a how ramping Do here?

quarter that this really model production quarter Typically, quarter quarter Yes. low in -- main customer down given inventory come devices. new starts is the the of as the does September and as they of the June the prior last is seasonality-wise, our the

So, main this cycle our customer. for sensing XD is the any in trough typical

X pick end what that think fruition quarter, demand don’t user customer years I about quarterly the far now XX% most is And million. last for on fiscal X consumer impacting that And will outlook up the or talked low digits the shifting normalized. low is single indicated, for that’s a as and coming typically. Wajid is industrial, in So, a September single December does the industrial we’re more seeing of share we and of And our it basis ‘XX has been coming digits it’s now to as have as as we in anymore.

you considerably on That’s ramp Okay. when do XXX-gig you update this very your CW if you when per expect XXX, we any helpful. EML, secondly, X.XT, And to lane that talk contribute? for your about And think could then, and then could guys? lasers

for couple of different but -- applications, of I shipping mean use today flavors for both photonic now to year is and year, lasers that ready a and calendar calendar this silicon them ‘XX. customers in I into Yes. are later the more would the CW significantly with Thanks, working again products folks are in customers Those say timing we heading Chris. to for ramp. calendar be next sampling

from Our from Stifel. Ruben comes Roy next question

you of to or would still opportunities a you’d of IoT, wonder be or us characterize industrial, Chris, looking say, the get how Either if this ramps the helpful. XX and what that you’re it’s of pricing XX, auto, how kind you’re ramp? into happen, over XD would testing? you sensing through If Is at early around meaningful about Obviously, I walk question days. et cetera. Alan more But the more months, thinking needs next to some can

in-cabin. well Yes. long-term the I mean LiDAR really opportunity, as on think is largest ADAS, automotive space, least a as basis, at I the very

we’ve So, types -- LiDAR it’s solutions focus but the measured ensure in with while, with the the long those with that made for cycles numerous long automotive ways. are by very various seeds up they a that some -- we been increments customers -- customers just we quite architecture to in in development in And five-year on the pick. engaged as planting ultimate end decisions that end really industry,

going see automotive much the still you’re applications. to next and years these two modest industrial being in more for growth I think

As years, we highlighted out, three then and XX% the five the grow years tens chip modules. to million that, about significant, is being of LiDAR for chips maybe so of it’s call, And $X LiDAR will. next then, market, if say, will. which of talking at you will will, XX multibillion-dollar that, we’re XX% billions that or on you after years shipping quarter, to, expect dollars if over you the if modules level, do let’s market, a a We LiDAR the five

we’re game it that markets. which a fortunately, But something technology, leverages that it’s we end So, can chip long leverage across playing. multiple is

Wajid, of to perspective? sort But a longer-term about running with you as for around a understood rest about from on different like -- maybe margin, run I seems you potentially this rate follow-up gross a How gross quick way the telecom. margins it talked be bit. going we’re topic. year that competitive appreciate Wajid you’re to the And the next as that. dynamics the and of impacting year is on consumer dynamic a think changing that thinking

Ruben. Hi Yes. Yes.

decline chips reductions targets obviously, margin overall this mix the come utilization in came saw as and shipments. from generally higher of levels. really A the changed. margins between have lot of gross So, But gross factories margin longer-term module a I lot mean, haven’t did quarter business, we a from our of just chips and

see overall our And we to operating that into datacom and margins calendar the lasers as margins in ‘XX, right see should as so, delivering telecom, rebound business levels rebound year improvements start well from as we our gross now. we’re

And so, our off talked target about at what OFC around come model. haven’t we we midterm really

uptick synergies the in the whole model. calendar impact P&L and would operating first I comment part a where the will that on activity we’ll real be synergy through overall have well favorable sorry, flowing around And our the of year in as our see missing

Our next from of Bank question from Vivek America. comes Arya

Blake Vivek. is Thank Friedman taking you for for on This my question.

just is environment the how environment. if aggressively more you’re that if I in price risk First, how discuss current you in and And the in you up view touching seeing any on this competitors wondering general. holding side, was can pricing datacom and telecom

Yes.

We’re of in change dynamic the not seeing any pricing.

what long-term our has and that from to product, that provide product I particular their together. to are when a starts usually price it five of ago customers share years the partner decided changed in today spend to and agreements with develop tied we we dynamic think that is where

of as so, And as months of there’s agreements ago. several those varying annual type a done degree agreements well were long-term that types

So, telecom I was change dynamic as pricing datacom. at look any say there we in wouldn’t and

follow-up of Got a you as it. XD back the discussed gross margin know utilization. to well kind I as side position managing to go as And then current things. of just your sensing

the of at levels, we decline quarter, or just recovery, a a could out be look kind gross through a in at more maybe beyond from the progresses level, high kind can June So, there would high June of it demand curious, how we view -- I’m just of kind margins any great. as color as detail that the level, year

we’ll on impact closer of sold ‘XX, then, get back about, end to normalized first it demand. us, our That within down say remarks lines. in noted it and the mix of calendar are the calendar an half planning Yes. comes especially What in moving of $XX at synergies talked that mix exiting our is our as to overall of have market number the I tailwind Alan we to inventory gross us is that telecom that the as back we there’s going part And as prepared pieces which approximately will to least of year. is as really million by we levels various year. well calendar on to is bringing margins, I more in what comes levels, could cost a mean, what as product the even impact on goods shipping have

both favorable of those should have so, tailwind. And a

our inventory So a uptick in desire then reminiscent see with we demand have shipments we yes, to of will what first being our the should bring synergies end headwind, market around especially is. and But fiscal an part levels. year, more down of

. should two those So, us. help

think So to right that’s that’s think how it. you want we I we’re about and may way, it, thinking the about think

question next Our from comes George from Jefferies. Notter

build. the normalized back, I’m run million revenue shipped look predicated guys Obviously, what trying rate quarters. I under $XXX you get for on the right scenario. a to Company sense is a If those inventory were couple for a

to there. to revenue for understanding guiding quarter. here here we’re try huge in think, it’s And it get the run hard to, terms million what gap of confess $XXX the there’s normalized in Obviously, a -- normalizes an the June rate inventory in really I I $XXX Now to as million is digest. just of have market

guys what shakes do have on line? business out about you where this comments So, ultimately top

that’s That that. going think I in the we’re end demand, crystal in from reflects three market what quarters to for said, George, think at that. the level low quarter going we much I to up through Yes. very, is times we ‘XX think very demand guidance ball lower around now, a a market a lasers. pick have in we’re under-shipping difficult to the and is we expect calendar and would transition, XD -- expect Lasers, we and How June normal quarter as as product it under-shipping we than June. is are said, sensing, again,

there’s market had we telecom originally in as I then basis think high on machine be for then we more between are catalysts CAGR grows even think that of So, guided I And probably and where growth a to market of AI drive datacom, digits center support to that, data than end digits centers single going what of quarter, March that’s low lot learning. rapid the in we’re a data seeing double reflective should demand. inside the and more the rate given and

$XXX at any we get back of get those whatever environment digestion to given we as reason there’s the we’re going macro think can’t to the and inventory calendar happens back So, look when million XXXX. matter a levels. I don’t those in levels It’s to

Loop Baruah Our Capital. from from comes next question Ananda

it AI where chip question clarification. of contribute One would well your that? photonics certainly really sort as across center data quick way I could. about and of sort you Just lasers remarks I if does interpreted I guess to your portfolio. I sort your also the And then, were other NeoPhotonics, two like business and will also think, yes. -- prior areas is on heard some remarks build-out, be of is a Chris, I ones, guys contributing the to

early useful. could clarify I And way it’s there -- quick exposure, that’s is context any a that’s accurate? for to you way portfolio have of overall what follow-up. of has then there And just So is in days, kind the but super any us portion some any that

I has Yes, photonic higher known you transitioning data would high-speed that VCSELs the also what and silicon but go thanks. chip for nearer we’ve back of architectures. EMLs center of used been alluded which term, for, CW high-power business, to both high-speed it’s in the speed, as to the Yes, addition growth lasers to, the

what are those as quarters. referenced XX So I in more term, next the nearer as

general switching, to transmission brought is in we As couple custom-designed our standard equipment, will with in center the next sense, capabilities application-specific will our have, addition using, of and Ethernet-type years, a some maybe interconnects, bear. and application-specific to to cases, we you that equipment a well if around in as look to that’s the taking proprietary links. optical more data where photonics transmission engagement connects, will the all lasers And important, really architectures the in evolve will, leaders broader space be more as in anticipate

piece today or more of So, that business the it company center primary datacom is broad a our the than impact data driver. does just

well, to Maybe think… I can that add as I

That’s Yes. context, Chris. helpful

we’ve to components one seen amplify the to we for at that signal deployment Just thing cable of commentary Chris’ provide is the the bottom other add very ocean. strong our subsea demand where

as to that for centers. area the those lot big demand. an that’s a Whether large more demand data take seen deploy. year a it of we’ve or precursor or machine hyperscalers learning connect from they seeing these we’re So subsea a the investments And to not, coming are expectations that strong on is or AI

area we’re for is So, I us an seeing of some growth that as well. this indicators think leading

to quarter, me. just it And your up, clarification picks the flat kind I kind Are here, the Thanks. telco/datacom is the given essentially telco/datacom through we year until guess, quick slightly And demand quarter up? of for guidance business in should the June calling of think flattish remainder of up the Thanks. That’s combined? you for Q-over-Q. of slightly the June bottom

Yes.

We’re reluctant quarter more at than to guide one time. a

some high-speed hard September December and are strength We seeing quarter, say. whether coherent And modules. coherent quarter the June it’s on in for into components continues the that to

inventory in -- are and kind level September quarter of say, certainly continued digestion quarter. I the partially expecting into then and We or revenue of a should the December

say, that we’ll So it’s, our I kind have outlook, when next call. on but flattish of input give you would in August more we

it we think then time question, have for I one more and Bruno, over final remarks. for Alan we’ll turn some to

question from Genovese next Rosenblatt Mike from Our comes Securities.

of correction that datacom? on couple think started Just color I can quarters inventory get a we specific ago.

to some can correction So is, business us sort on in you order be over, helpful. the is there’s the Thank but color cloud, the inventory datacom give or would of pushouts any you. specific question the now

you to cloud perspective, it slowdown XXXX, off inventory Yes, were significantly shortages takes originally maybe been it at than inventory they XX% calendar talking we’ve them burn and that, several in providers, give that quarters than in in in as has they’ve announced an some or Mike. certain of in. grow datacom, would expectation build were a -- And range. an their rate that because the rates were my growth at quarters past ordering ordering been at to ordering the I’ll XX% where then can few of Yes, advance they expected. the the they lower Chris as are longer a hyperscalers, chime about time

consumption. their some expectations It’s still of customers AI or are burn machine manufacturers, by start and So, of inventory like and the But will calendar the we’re shipping And end there. there. interim, help some demand off. market our end of of seeing the the market learning quarter more the inventory, for consumption the so that the inventory more inventory into there’s a still channel we’ll that in this the in -- our module still year, datacom

great. industrial a And question my kind lasers. separate then, or of on Okay commercial follow-up

-- year about that business? so year we at should think had this next pretty run into some how in of half But first a ‘XX in tough lower The going compares, you rate. do year-over-year so -- how

that well given would the I end as bit, if Alan to, it’s as come lasers say, to little as markets see, we’re Mike. down manufacturing, as macro we remarks highlighted prepared Thanks, going will semiconductor tied you will. Yes. in highlighted, a

So, the this kind was down at we look up the it believe that through at will directionally. we forecasts ramping that in come it that lasers several be the than in will was point, next -- lower suspect Obviously, FYXX year. of for net, quarters. we to as commercial FYXX customer But least

the dead horse want Thanks. great. the don’t beat I to Okay, on XDS.

So, I appreciate Thank the the color other segments. you. on

Mike. you, Thank

the to some Alan closing we’ll now over remarks. think turn back call I for

serve like we to thoughts learning, as you mobile, few artificial cloud machine Kathy. network in intact long-term wrap with fundamentals and as in for this our we I remain exponential would call. intelligence, computing the leave growth you, Thank business up a carrier markets. to Mid- bandwidth,

New committed We our deeply in our innovation automotive applications commercial beyond to and new lasers sensing industrial traditional in for and imaging expanding and future. for markets. the customer investing into needs on products applications are deliver emerging and today are applications to remain

and would day. coming Thank again conferences investor and a have look you the I great that, attending, and at we with forward weeks. for thank everyone With meetings talking you, upcoming to like to in

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

you. disconnect You your may now Thank lines.