Lumentum (LITE) 17 Aug 232023 Q4 Earnings call transcript

Good day, everyone, and welcome to the Lumentum Holdings Fiscal Fourth Quarter and Fiscal Year 2023 Earnings Call. [Operator Instructions] Please also, note today’s event is being recorded for replay purposes. [Operator Instructions] At this time, I would like to turn the conference call over to Kathy Ta, Vice President of Investor Relations. Ms. Ta, please go ahead.

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

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

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

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

under Lumentum’s accompanying are year Investors prepared quarter for section. be provided in that, also and in a and this results these XXXX this the statements, fiscal Please full as stated, www.lumentum.com The financials expectations forward-looking except fourth discussed undertakes law. or the available website to are statements results on obligation press otherwise financials non-GAAP. with beliefs not based note update to call substitute to during by all as call as projections at our Lumentum Lumentum’s reasonable slides and release are no Non-GAAP of accordance today. on supplemental unless required with GAAP. are financial applicable and superior considered

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

good morning, and Kathy, you, everyone. Thank

We the long-term we secular demand are in lead. the extremely drivers which in and markets optimistic about participate

our and and our for investments will are efforts markets benefit in share generating to existing come. Additionally, to markets our years grow positive traction us that adjacent

on focus our now the and in needs and will differentiation future. and growth our ensure of Our customers’ technology into support leadership product

we to believe significant to as and that correction In the near-term, levels. headwinds work inventory our through continue end We cycle customer direct current facing their are both the actively elevated year, reduce of will well customers believe calendar market. the inventory the of and we demand. will these end-market Even we balance are shipments grow below continuing at levels, market our our share be depressed shipment outside consumer therefore, the

the compared Datacom as midpoints customers ‘XX seeing Also, customers. levels Despite hyperscale at as from guidance second were our meaningful revenue calendar last quarter. demand calendar both prepare capacity. will our we to believe be that half return revenue announced of fourth more inventory strengthening fiscal up ramp are experienced in our We their we X% should levels our our Telecom chips quarter and in AI Datacom above and and ‘XX, year for fiscal up customers headwind full of ‘XX, to revenue We to was ‘XX. the EPS inventory ranges appropriate the

well. And we running on company-wide is our are consolidation integration acquisition ERP system. now completed and very Our going in one fact, have ERP

continue to our an of product same to on customers time, new plans, satisfaction. while we our and level partnership stronger deliver At announced on ahead to tracking are we focus and drive technology the road maps. our previously of even continue a We synergy differentiated

solar Also, all in our and product business new of the lasers with categories. sequential QX across market. ROADM increased ROADM ultrafast particularly applications grew for revenue was especially lasers strong commercial in shipments sequentially cell

photonics for architectures continue backbone trends upgrades earlier, products underway networks C are As extended for C+ extended of be in as demand extremely and our differentiated enabling are to and customers. as to our where L-band well Generational favorable. and products I transport highly the L-band indicated long-term transmission

products roadmaps, gigabaud which Photonics next designing the use generation gigabaud of for XXX rate our are and technologies. We customers’ XXX coherent data will

as integrated are at We in new in both discrete products and high-speed these developing way long-haul applications factors, performance the metro of network. edge for the and paving the form enhanced as applications well

capabilities and addition vertically integrated the we NeoPhotonics the cost teams industry. believe product RFICs, acquisitions that will to to of give the the our us approach these DSPs With IPG and lowest from the transmission in products and our develop high-speed

ZR In extended coherent provide with metropolitan reach within addition, industry’s which interconnect center for is first the believe our we areas. we will year, connectivity data high-speed XXXG demonstrated technology this earlier which

to Turning centers. cloud data

indicated increased increased and transceivers. for I of are customer earlier, center this As translate to shipments in AI we chip to data activity seeing expect level products XXX-gig the for our

that with applications QX, photonic server Datacom and wave while lasers clusters, our CW rates portfolio power. fiscal less require continuous data We in for have Starting expect revenue. to a product return AI in broadened or growth our connect higher which consuming we racks Datacom silicon sequential

and traffic center is component customers employ bandwidth to associated higher market interconnects within with racks the optical X projected data racks X years servers accommodate to between over to The storage. the ever AI in sharply grow next between increased as

links. meaningful believe copper that also the be by optical VCSEL multimode years replaced growth is Datacom will several in next short-reach as We

is calendar market we and be reduce inventory sync customers up Datacom shipment products ‘XX As in and revenue in from their to levels Telecom of our calendar demand. stated earlier, ‘XX within as rate expect more our

the fourth I on to germanium. and detail like of gallium I would results, topic China’s export the additional address on placed controls quarter Before provide

existing supply sufficient expect manufacturing will is output. impact we no We on medium-term, the these that to determined our therefore, little have have and for controls that our

controls. will outside these with of suppliers our of situation work China source long-term monitor to the any mitigate continue We impacts to to and material

the X% year-on-year. turn up but X% and Telecom was to me let results. down fourth Datacom year sequentially full revenue quarter Now and

expected, shipments lower saw tunable in the of quarter. sequentially access modules As we

return As expect we this base near-term reduce complete business inventory in our and customer levels, ‘XX. we current to to product fiscal expand growth and customers transitions

existing The tunable line fiscal lower sequential narrow with partially was new avoiding across metro and ROADM while applications. record customers. to revenues, growing XX% cost and improve access In cable our shipments revenue year-over-year ‘XX, modules network enabled network of tunable module strength product access fiber-deep leading tunable lasers MSOs and operators offset with by in products access achieved increases performance These replacing in infrastructure. the several in line wireless

and our doubled our tunable anticipated for our factories capacity fiscal modules wafer back-end in address the in test to to these we assembly In customers. access our shipments growth manufacturing fab ‘XX, and

Our that key major and our be of ultra-narrow customers’ just ROADMs, advanced our network across saw high-port line lasers contentionless architectures including categories ROADMs MxN with We count deployed. and are sequential to next-generation tunable in low-port and all starting are count, of narrow growth with tunable lasers line enablers platforms.

of new transceivers to bandwidth bandwidth computing. XX% our These growth line. driven support EML transceivers centers workloads. Cloud this being fiscal orders a product the can from ROADM early ROADM The requirements at hardware adoption times than provide gig ‘XX, workloads fiscal advanced and our these return different ‘XX wavelengths data architectures. latency. per of the At more lane, traditional eight Also, the products driving also grew several to cloud by high utilized AI for require revenue deployment, are for AI XXXG XXX stage XXX-gig bandwidth EML reducing while of triggering redesigned

transceivers. generation build customers the we XXXG with silicon lasers next CW capacity Additionally, In X.X calendar lane demand per transceivers enable XXX-gig of for for strong photonics of utilizing EMLs seeing to are terabits. to our up ‘XX, our high-power will

customer and designs are of X.X-terabit expect well start products EML in qualifications XXXG We of underway. to transceiver ramping XXX-gig ‘XX, calendar shipments and

to We years come. workhorse optics XXXG of centers hyperscale expect be data our per lane to the for

we CW To machine these high for further short-reach calendar been high-speed optical between to connectivity for and systems, bandwidth, ramp even we for shipments inference expect longer-term, in for to and essential leading we switches VCSELs clusters, to and low-latency In to these AI requirements begin interconnects also the meaningfully connections AI supply expect servers architectures ‘XX. the provide developing have address applications. the and in hardware higher-power training lasers learning

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

our our assumption We to fiscal ‘XX revenue sensing a end-market around expect certain previously. ‘XX XD be continue to of pricing XD due fiscal will and pocket, discussed sensing demand, competitor lower that on than as additional an

sequentially We sequential semiconductor was growth achieved sequential laser the Overall, from fiscal quarter, revenue shipments partially revenue but X% applications. In for Commercial year. XX% fiscal growth laser was lasers last up and X% a in fiber from which Commercial lasers, revenue ultrafast primarily same down the by in lower solid-state XX% fourth ‘XX. quarter X% was offset over up sequentially, lasers ‘XX

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

for new latest and over softer markets. next forecast, inventory as these types on that we to quarters ultrafast be applications the we due We to Commercial demand our expect of share will gain Based end expect continue macro customer to customer overall lasers. lasers in demand grows, several factors digestion impacting

these our expect to We partially new ultrafast applications growth lasers near-term for in offset rapid continued headwinds.

serve expectations levels, be the the on with long-term expense business current we mid Lumentum’s technology and strong are the the driving is and primarily driven drive customers. are our unchanged, softness continue Lumentum very long-term structural of the maintaining scale our uniquely expect we Although and as with end into R&D and soft, to prospects growth is resilience controls near-term to I’m R&D is inventory to our while built partner investing drivers growth given high positioned shipments the our innovation trends to in financial capitalize about to confident fundamental crucial focused to and market we model. in near-term, our In at forefront upon customers by

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

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

level this was As digestion year. by to the not mentioned, expect seen the unexpected end of inventory calendar primarily and revenue have driven persist and the customer we Alan was through

was and GAAP Fourth sequentially was had market customers for GAAP telecom the diluted XX.X% was mix, fourth product we and no share all in driven customers, During quarter was XX.X%, in greater-than-XX% per and the primarily underutilization the three quarter by net GAAP factory XX.X%, year-on-year, loss $X.XX. market. margin non-GAAP margin revenue. was with gross quarter, which the operating Consumer gross lower down loss XX%

expenses margin QX were EBITDA Fourth from Interest million. non-GAAP was non-GAAP $XX.X operating share or non-GAAP Non-GAAP tight $XXX.X income million, quarter to and was basis non-GAAP due and million million, $XX.X SG&A to Fourth million. quarter was Fourth expenses decreased on sequentially diluted adjusted million expense on down which million. expense year-on-year. investments. income was was cash $X.XX. of and controls. per income $XX.X non-GAAP operating rates net operating Fourth totaled and million other quarter operating due $X.X revenue. X.X%, XX.X% QX $XX.X and non-GAAP quarter higher interest our was $XX.X expense was net was non-GAAP R&D $XX.X a Non-GAAP income

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

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

XX.X%, was adjusted year ‘XX at fiscal net full Full $XXX.X fiscal GAAP operating income GAAP from Turning to for was gross and down which EBITDA ‘XX share was revenue X.X% ‘XX. margin million. and fiscal loss $XXX.X diluted operating ‘XX. was which fiscal from Fiscal down was fiscal margin million, ‘XX was operating $X.XX. XX.X%, ‘XX XX.X%, ‘XX to loss GAAP margin was year net non-GAAP gross ‘XX. was year non-GAAP per was $X.XX Fiscal results. non-GAAP the Fiscal X.X% up billion, was relative

million For count $XXX.X diluted non-GAAP income share And was income $X.XX. fiscal non-GAAP a million ‘XX, per was net diluted on XX.X and net non-GAAP shares. our fully share basis was

and offering. On to driven note sequentially the to sheet. our increased million balance investments $X short-term by convertible Cash primarily $XXX billion,

in cash fiscal from of million we in million was $XX.X fiscal generated QX. $XXX.X During which ‘XX, operations, generated

shares million XXXX our notes. of X.XX for repurchased the During million, issuance million which the includes concurrent with quarter, $XXX.X X.XX purchased we shares convertible

customer As deliveries, products into we the short-term. of manufacturing elevated plan make our footprint over progress and to the global on carry attain without impacting integration we inventories NeoPhotonics synergies

generation. million as cash year by inventories we continue approximately focus we However, calendar on to $XX exiting decline to ‘XX expect

XX.X% Turning year-on-year. Communications Optical segment X.X% year-on-year. segment million non-GAAP XX.X% revenue down decreased sequentially $XXX.X at to sequentially segment details. Communications quarter and margin at and Fourth decreased Optical gross

but sequentially, gross revenue was lasers Our non-GAAP was quarter $XX.X up margin fourth year-on-year. X.X% up Fourth quarter and year-on-year. segment lasers X.X% at down million XX.X% of sequentially down

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

quarter million. net QX inventory Datacom to ‘XX down for the the Commercial discussed. revenue we by first be of expect be We range Within customer Telecom $XXX million and fiscal this lasers forecast, dynamics to of anticipate to primarily have sequentially, we and $XXX in driven revenue

expect be net $X.XX. X% margin flat project to We range on approximately share to and Industrial X% per income non-GAAP Consumer we and the first operating $X.XX be the in quarter of Based sequentially. of to diluted be in to to range this,

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

calendar shipments and Alan as we and our more to calendar QX, beyond with demand. In a terms inventory shipment end-market reduced compared customer of rate in sync are levels Datacom mentioned, Telecom to expect do ‘XX, ‘XX as return in growth in is expectations

plan ahead OFC investor terms reductions. operating schedule we at in that event proceeding synergy expense of is Our March our communicated of at

will to will facilities cost of that subsequent we deliver track synergy end quarters. on of total We savings and in significant half over previously, the fiscal the the exit plan achieved year which year, goods savings ‘XX. synergies have $XX certain million Overall, of sold the of in this manufacturing calendar remain articulated we over we annualized at

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

let’s you, Q&A Thank Now the [Operator Instructions] session. Wajid. begin

comes go Instructions] Again, from Meta line Meta from from Thank Your ahead. of Marshall Marshall Please you, madam. Stanley. Stanley. question Morgan Morgan [Operator first the

is line now Please live. go Your ahead.

Thank you so much. Sorry.

buttons the day. having Just

of certain Telecom that of being step the platforms, on of Just of kind not how evaluating you share how the much and kind how first in guys for as kind or involved given versus just evaluating correction business, more inventory terms you potential maybe are of this downs are just maybe is in repeated loss particularly question.

Thanks, Yes. Meta.

not the especially hold third in other gain ability our where I’d losing not products. new space, we that earlier, in remarks we the to if we’re than in as we’re to believe share, confident said As share, about and the Telecom, very continue talking consumer been we in normalization any share we’ve competitor. share say introduce

I the believe that has in nothing mostly inventory really So correction with firmly really is slowdown and revenue do share. to

are that telling that kind period positions open again? follow-up, a of just it what or budgets up how in belief customers – as of think in when get conversations Or that get revenue you backed to kind with customers? you expecting. resume just the equipment on and the of want Or a they’re matter mean expectation? guess will the that of that’s I your you is kind they do when is an to people the examine sense is resume of kind what just is start by I having you’re that would would from And Great. calendar inventory are? based a ‘XX of the revenue growth

wouldn’t to I say do budgets. it the has releasing with Yes,

the due their us inventory primarily lower and to and those, to to levels sheets availability their availability components the on it’s balance of the of desire think given I supply.

to some that signs of say I’d next absorption as would than some calendar is we’re be through faster where I we the say quarters, that expected at balance at to few look take So expected Telecom of seeing And hyperscalers tough of going year. we the inventory that the the longer.

as So the as helping both center that, data the is in I data interconnect AI space. think inside with center well

locations customer that of at to really why higher that’s about inventory that’s from that get of why So I executives ‘XX ‘XX. to manufacturers. are contract viewing confident those couple conversations being our and than next and really And take in inventory. their calendar we perspective, with the that going And believe think their calendar quarters in-depth we’re rid are

I Great. pass Thank will it you. on.

Meta. Thanks,

Thank you.

next of Please from Vogt go line from comes Your the question David UBS. ahead.

undershipping industry for question. help it’s Consumer time. that the can it a just back gross demand should lot in you’re you kind me. operating more And question, margin us as through to get in a When margin made And think ‘XX. that guess, that’s taking Obviously, kind in your as time year. as view move for Thank fiscal question, ‘XX. about from of today? very next a How to Great. relatively get that balance much demand unlikely last the think move XXs gross this of period that business sort Datacom I at four of but back maybe a is high of And the I recovering demand, just in leverage through and both think my how trajectory you ‘XX colors challenging then this you calendar comment two Alan, you the than quarters we back Industrial might of going the you’re see same going ‘XX you give That for perspective? to maybe of you. understand, One, calendar be into And to business. you inventory where progressing a you presumably, margin, about Telecom of the recovers smaller we gross to obviously, ‘XX? sort we about maybe longer-term today, a margin – better was Thank growth to I’ll sense mix strong into and growth want the

last was at shipping David. shipping few our say would levels years that really that be available. today, that’s than think components I’d they’ve the there I the we’re are Thanks, over built customers we’re in. revenue And on up due fear fact having I’d question, the the under-shipping to that clearly, not Yes. inventory say that when more out

North believe are that case. but carriers their lowering had do CapEx, not that’s significantly. said, talked That some that, the about I there America So

So going demand I’d a we’re do see over carrier that shipped on hyperscaler the years. signs to hyperscalers. I’d last up inventory could the the probably take of And question? to continues for premature the that’s starting side, robust, ‘XX. to now consuming year But of calendar that’s say of would I that, the say there’s to nothing the had that slow be lot Wajid, we things space, couple want bandwidth again, end in that normal in the really you down. that is pick the until before and leverage AI operating say the

Yes, sure.

leverage the level. levels and seeing this back currently the our a the operating inventory you on down underutilization we’re revenue that lower more company bring levels to desire our can revenue appreciate at normalized year, lot having within So for of due of charges to internal factories calendar half to a our we’re

done with the the on, fiscal that we’ve really expecting on in to P&L have show that As to back year we’ve date should our start through the this calendar NeoPhotonics. half well in to things consolidation continue executed half And we’ll calendar One expectation moves us. the our is, synergy of on the is ‘XX. that quite year factories plans working is back three of for the that we’re of

is, thing second a is The chip business business. Datacom that our is

the And so demand and this calendar through see of that business ‘XX as actually calendar we’re part well. year in improved in the expecting to half of back even

underutilization themselves, reverse And like see we business telecom that improvement. Alan some give the should about, the normalized, charges And us more and talked so becomes should once uplift. then should

this tailwinds that the of three So time point those can in us. are help from kind

Great. will get the I in Thanks, queue. Wajid. back

David. you, Thank

question next Needham. go from of Henderson from Please ahead. the Your Alex comes line

quarter between, June quarter? comment a seasonally the percent start parse I of December if are decline truly the the on seasonally flat up start decline be off would it numbers that And some because Great. year-over-year. into production quarters indicate? XD September therefore, fourth late a of as think little Wanted a XD as issues? stronger. the XX-some-odd with would is sequentially, bit sensing bit business the we September steep you versus a little in to is quarter a is make the that’s it’s flat sensing Can Or and softer the Historically, quarter. that

it’s pretty steep So number. a

Chris. things couple question. outlook. Hey, for the Alex, Thanks I a our think this is Yes, go into of

I of prior we that think as additional the impact the an in we’ve having alluded anticipated competitor mix. calls to on

about. guidance, demand and And that’s you’re and so factored were our what’s both sequential that current and environment year-over-year the impacting into comps asking

Yes.

extent, December? new is, the and a the the again, So little September Is a September a the that level a actually stronger has is strong of little more bit we quarter? seasonally there December using be December than this some should therefore, Or start and late between shift in been a question as period? quarter. Historically, to

quarters. that that I guide flattish a should timeframe, it’s to would say line between I about would think it but you product the little for early think being two

as it structure the and in business the demand of steepened that there? September second of had What’s service the cutbacks June started question gave Has of it quarter about for Datacom that the least start in of going later to on At correction context but be And quarter demand, point, it providers? relative on Did decline. But from result at summer, Can this may fall Datacom. the thought it than of little into to end to towards the talk linearity started think a the had as it little expectations quarter fourth the in the going of within end excess holding, out the we you calendar. you at Telecom you recover. the then that’s Telecom a to that Then saying of bit looking sounds this that. would the pushed the expectations the steeper that an end the into initially the we like and I back you last trajectory bit off well? inventory you trajectory end timeframe a Great. at initial quarter obviously I quarter? broader what’s the is, shipments were of you gave by

it, Datacom are that, a much so market, are our on better September, of back talked you we I said, our in the about let in we chips. as in more in time. to Datacom now on seeing we we me accelerate have getting full summer, seeing capacity probably output them and should than would take in at it have ratcheted Datacom. force I say lot. That’s would And the that fact that we a say the one Well,

that And so why in that’s inventory inventory well the to component expect I as balance quarter, they think and up talked our QX anticipated. have On the ability it, I that produce our right growth live less what levels. I Datacom customers than that year originally the when business they have this we that being think we the see chip want so to to think as suppliers, semiconductors then and to telling Telecom, gives Datacom, including on bring about even would through trajectory. confidence of they in sequential need last from they into to calendar I And that say ‘XX, they need them going be us is when they down normal with can are there confidence our the need it are

would take that other to really out shipping which the customers into need turn further. And get we less there they nothing are therefore, as inventory of than changed care So, come are normalize to I into and should levels our more we down problem that, say than ‘XX. in calendar carriers, shipping

Good. Thank you.

Thanks Alex.

Samik Please ahead. from of line JPMorgan. Chatterjee comes go next question from Your the

first the you set the EML? can you the what there, from demand you of a bit to hyperscalers other to that is questions. that coming expect ask useful, also of demand newer about if for I have AI-related my Thank in a engagement like into in much seeing? companies years follow-up. the thoughts that when and couple just guess delve sort you interest of And VCSEL terms I be on – the I Thank look much of are in versus more Any you. are you one, would customer you versus How of think how side ecosystem? Hi. into seeing taking terms of a

Yes.

I to Let beyond will would me I address that, it’s ask the are you Chris right, and on. hyperscalers. add say

of laser, in have are laser customize And satisfy the a of in or out how future figuring a laser a us the the lot high-power for leading with collaborated then do unique way external customers needs so way. that we AI product new source AI we to and

products where So, of situations just those meet data bandwidths the unique to needs of we are our the huge. doing are customization

going products driven that through. the would bandwidth come XXX-gig that’s that so that transceiver, seeing for CW are the those transceivers more the photonics silicon stage. ‘XX, work satisfy because EML-based products impact our that now. been going – that, market needs calendar EMLs as that say will I high-power we say of And hyperscalers are well would ‘XX is available really I that lasers are both but an as for those use in on in has eight to calendar use that each And are today today can what more can that

So, are that’s we seeing. what

way work I the to revenue As are calendar going qualification contribute we far meaningful talked concerned, ‘XX. VCSELs as really in on that we about, our through and VCSELs in see to a XXX-gig are starting those

also ramping, that just and power photonic VCSELs, CW are would we And EMLs, addition market in Yes. which I the silicon that are also add leader. solutions. certain are to – And a lasers we there

coming prior chip to going to of kind be the in for center. you different to percent the at And the center commented portfolio next CAGRs tens the believe being XX have – different – relative approaches really so we as supplier deployments on that parts And is that of over for the in data we talking very year. multiyear that parts phenomenon Datacom the months last we a be the a data in years, address to we of to are same broadening opportunity anticipate of have of we and obviously, year focused, few the significant over definitely down the AI-related this us. our able uptick do Datacom have call, in So, product market exciting

are sustained my obviously the sensing just or seasonality and a sort for a this the XD beyond think at guide I the step-up see past, impacted, is year. about you lower digestion inventory fiscal depressed certain rotating your year? it’s digestion. the first thinking of follow-up, XQ, into second you demand comments expect, the calendar to And as for to of fiscal normalized think inventory to you being rate sort what is how where year? you through the do or run this And I have of But of thoughts more it. I all of get the increasing, earnings a you year? Any of quarter, given with business some power of sequential am coming to we terms back really Got get the what in the results run in see OpEx your year seasonality to about business, to sort the Should the for in as business rate understand because the through, of trying the business savings exit of investors to growth revenue the want the the half of had

And is fiber about by in tough. flat our down say XD have is QX short-term, being of think going but in from quarters, can you can sequentially down normalized, Lasers to think offset sensing, to of going I that lasers. QX, said, the ultrafast with going and QX, would be in as as it’s lasers be being – flat. the Telecom we Well, hard couple you next say. being to

between So, by meet QX Datacom going that QX to that gated that supply demand, then, to our demand. I that’s think real and and really is mover ability – the the be

in the are they some I million, then months, we should say what think demand see start the first over uptick up is that leverage is is confident that with calendar in And the levels I small we pickup in $XXX think immense. doable into have I $XXX bounce of are we pretty in to past. had exactly can normalized of And that model, then in we future. get the the then ‘XX. QX. inventory operating happens we we taken our the next would are $XXX some not-too-distant million then of significant care revenue. shipping And seeing five when million shipping to customers get it there that’s assuming back should when to so – is And even the And half out. back our revenue And we And

Okay. Thank my you. Thanks questions. for taking

Samik. you, Thank

Your ahead. next go question comes from Notter Please from of the line Jefferies. George

lower very there Thanks I number. that similar I down? XXX if is the else guess the XD that quarter, and certainly, I wanted in drove suppose. step about on there there am or big charges roughly guys. But sensing sequentially I pretty of performance points margin much. wondering an obsolete sequential down, I gosh, wondering is revenue if the gross to is ask element that, am a – basis anything excess some inventory Thanks. Hi

Yes.

So, you are right.

XD the So, obsolescence and QX. pretty into It under a really rate sensing was from normal did number Excess utilization. was run standpoint. come down

our our back want QX of through into the working pretty we that underutilization, of where the that some both been half fiscal to pre-builds hit we a of consolidation with calendar year. we outside inventory strategy, pretty flow lasers our as have of seeing really our within doing significantly. we be we our part had that and really OpComm are And through as the business impact hefty are So,

it. Got

quarters? shipped fair read to product the good of then it portion quarter you June way So, a to that in the that that Is say was manufactured in the that? is prior

right. that’s fair. Yes, Yes. That’s

the is strategy kind then at a hit the of, in underutilization June And I that you here margin to – all guess there Take gross produce and it some of can into know, is in don’t strategy kind some once going up effect then, quarter, terms of quarter? Okay. is September then softer other there how run or that you clean I utilization? your

Yes. I do so is the – or produce to facilities. way and only to consolidate it mean really more,

will So, that we start probably facilities in November-December are be consolidating will facilities, year. because January out we in see of and the this the timeframe to we benefit timeframe the the of

in So, our the of fiscal impact we to will start that see QX.

level. be all production coming facilities more up it’s normalized then a of pretty will And sizable. to that So, really our back at

two that So, that. kind you of can those that’s the really – improve ways are only

Yes.

those would utilization have back that that in and lot. that, produced add fabs to ramps and was we Datacom chips. absorption below chips the that to I Datacom, say see on Just And absorb up, quarter the as we a a June that fabs are though should making Datacom better Japan, our of in

Yes. That’s fair.

Got it.

Okay. And say… is that – I to was going

ahead. go Please

inventory – that Is Wajid. thanks

in then manufacturing September heading is here. that perspective you that the into that from inventory inventory follow-on March period? quarter, the consumed built me Is Let a up

because take Well, at it look it turn our fast. you that all no, inventory turns, if doesn’t not of a

through QX, of dependent. QX. of level then A that some yes, already it fiscal our So, into through very of will lot it through flowed will – our is flow product it flow and some

So, where is are Datacom said, chips our very in turning produced, fast. like that Alan inventory Sagamihara

But for and goods our wafer little coming So, as being shipped. that’s as Orchard have moving as facility, what more well internal that’s the as finished at in got a up built we lasers are it’s have out, slowly where fabrication, Rose well. we Thailand, bit

So, it costs turns. when at a it at dependent. on bit by BU consolidated as show chips, well lower Datacom are And impact does level the because as up is inventory take you a look little BOM a doesn’t

Got very it. Thank you much.

George. Thanks

Rosenblatt. comes Your the next ahead. question Please from go line Michael of from Genovese

as question My and for comments year-over-year? Hi, Datacom – way first in great. will be also be for well my up, ‘XX. or I Datacom in dig that year, Thanks. to the up want on fiscal up of this I is Telecom we a guidance Telecom are to seeing more be will that that Datacom is, guess

what that next end I given ‘XX are that reductions are be the calendar the customers. depressed believe Michael, inventory think be the we of ‘XX two calendar and was would quarters at said up going given we that customers Telecom shipments Yes, to our from happening at

be is Datacom calendar calendar to now So, That grow going say year-over-year, calendar the say I fiscal confident would Telecom ‘XX. would that ‘XX. between pretty year, we end again, of in I ‘XX said, from up are will and calendar not quarter sequentially each

at That above guys question in and look and Okay. That’s EMLs you calendar the comment Datacom clarrification. a when is, for my XXXG are guess I opportunity, AI And I that thanks makes there sense. like guess I as am market now looks the it trying question I well, with improvement? they to any and not other VCSELs this are are Datacom is, [Technical parts prioritizing of my Difficulty] other

your question. Michael, Sorry, hear we couldn’t last

parts demand or though question Is are that have the of there your other and you? signs think we VCSELs question, lost was I showing other EMLs any growth? that are than around

sorry, is hope this bad. am here. Yes. I I

has Genovese it Mr. okay proceed Is question? next to disconnected. to the

such, CW Yes. it the can and Maybe we will different right, and kinds of question try lasers, answer we Chris? understood to if lasers we talk about

Yes. we Certainly, our end into serving on to focus a our enterprise the certainly hyperscale also primarily markets. to that transceiver market, supply cloud supply customers is

So, based as we coming to now as photonic ramping again, gig. We also either the transceivers and have XXX-gig and into product well that’s ‘XX the the to eventual product silicon next VCSELs transition have lane transition intersect a then EMLs the will And that and supplying CW and per XXX-gig second. of X.X that’s XXX-gig calendar lasers in generation so primarily per up broader approaches. highlighted portfolio terabits EMLs as X.X-terabit to playing the XXX largest line, we a for ramping,

Yes.

the lasers is antenna providing of different as other only thing Just of address we a types the to well. band series are

Okay.

We take will the next question.

Capital. comes Baruah from Please from Ananda Your next of ahead. Loop line the question go

thank and Yes. you for guys morning question. Good taking Yes. the

XX%, if hyperscales inventory, the level with as I of rates run could sticking sort I your you wrong. been annually, ago still lasers. part I you were kind a rev, this business. before let’s and prior how which down occur believe of their then, sort suggest if got if Is I meaningful I on the think think months trying guess sort started if really back run – started it you to well. have things the say, would of Datacom Just guess am the I mean company, thinking that a I And more chips could to XXX, those, of could primary the at XXX, have work achieved, this, I as are and really of before – XXX frame would believe just for the to tailwinds company’s you sort think of to myself which see become could – rates, of clarify achieve just of me the begin could I EMLs. those I XX% XX correct on couple you once current beyond the

follow-up CTs are were what’s new you say, And where well. down laser in have some CW situation laser about that. AI Gen a talking Datacom the of you like work but related? as Could work. bunch in quarters after a I the related, Now, of InfiniBand eight know company Gen have we laser is doing chip And be AI let’s going I on XX% VCSEL just quick the

Let me get your thoughts there. Thanks.

the down unit think standpoint, revenue Datacom are business far your of significantly are would we this we get within say could from have of way year that. I certainly midst we annually, shipments prices of XXX have so quarters, I Good I are a to think in both fast putting average of think off. down are parts question, on it XXX growing not that gone the next place capacity past grows. that Yes. our to and And absolutely. kind gone numbers from other eight But the standpoint we year, in back too say the the depends how that. yes, over I in to do I the last down, would

capacity. have We

you to have continuing ago, X As years remember, capacity. been we add

have going we the to wafers seen We long-term. of in demand the to are midst address the larger in

are from So, we that certainly significant where a driver today. could growth be

at that’s follow-up And it helpful. guess And view on of really ZR like Thanks. AI is, that’s role data what’s Alan, for NeoPhotonics your Yes, technologies’ related center me. longer all? term, the quick I for in sort

Yes.

modules of technology acquisition the NeoPhotonics team say would that. with along and certain was and inventory of happy hyperscalers. a very the I with ZR the very, are at and came there of buildup that We ZR that

ZR hyperscalers think I consumed, are signs to and life, we is of that, more that needing being frankly, see starting modules. of

ZR market. components of also go are the into to a world’s providing the We lot

AI-driven whole center But data there the with center, happy are data lot data center we of going between perspective, that demand. bandwidth a also to is from so them. And

thoughts? other any Chris, know, don’t I So,

I stronger of is of a bearing if inventory. Yes. as the that of at to that acquisition confidence. thesis Unfortunately, company, the with certainly point customers I out. think will, we of mean about they the acquisition had closed they where ZR realized also lot a to you was sort that highlighted, one that Alan would And provide regard give the

evolve, products of about then that now clear very the the vertical as solutions our expect as level also at excited are from be with because do recovers Telecom current given a one able standpoint cost our but have, beyond both to XXX-gig obviously, volume to a being follow ZR us view we And products. that beginning and they So, XXX-gig integration next-generation is on in the integration, inventory to of and us supplier lead that to the vertical customers transition portfolio. we hyperscalers, earlier

That’s great context. guys. a Thanks lot

Thanks Ananda.

ahead. the from of O’Malley Tom line comes go next Your Barclays. question from Please

and wanted I the morning you taking Good to question. made. comments just Hey. couple thanks have just square for a of

not $XXX capacity and about you fact run the in as you Datacom have – in in on talked in year down Ananda’s that to about you a a much. back million the moderate rate just I maybe taken just said, we sequential then But response would December, QX that greater the talked about business. don’t a getting increase have to retrospect, question given capacity in fiscal than question, So, hey, the you think

‘XX? kind two or something be really to, of at that is back $XX fiscal Is back be in you think this calendar year are year to able So, to half the guys you year perspective, would Thank will to back around you year put going to get you able hold until look get which be capacity you. million. saw the of the started ‘XX? I your those to if ‘XX, in you fiscal fiscal levels to just coming year, that you going

I say, demand certainly get would Yes. a not of there. us that it’s would lack

ASPs is that are question that are $XX there can down? lot rate. But we actually on say run still given that chips demand. that to So, would capacity margin million I the to produce ‘XX, is, gross whole up, very, those to certainly very So, The get said, chips calendar get solid. the a in enough back more we have

four we the have. we output. grow try you the at time it doesn’t underutilization. that But really starting cycle today, And say cycle chips would team down a the months, So, than drive I to to on was the to right, capacity Datacom such driving next impact the more thing that the should it time, But long the are it wafers took we is so anxiously right is are time.

we December that’s working on well. the December the are in in rapid that are And as quarter. to of why an expectations trying We Datacom quarter see to expecting Datacom, growth uptick dampen we in for the but are

question, that then color between used that there missing on technology EML? you. this the more I other porting Thank AI, and if is look be just ramp maybe that split some broader that VCSEL, some of EML. I early and how product. just just for the helpful drivers the pointing in are of clearly, days just are early Got do question side, way if a guys being more lasers And any lasers looking helpful. or it. that and at the you out given take there you market of is, there. some would AI But just hear lot is may look you at you today on, that would that are of you your here, be here, wanted That’s are but the there you to towards the a percentage if VCSEL And obviously that around, think is more are out are guess to opportunity, towards drivers VCSELs CW it’s on

that talking opportunity end-market and and different standpoint. from we not a and basically VCSEL short reach, quantities, arrays what I the Yes, the are reach long are would really from that’s volume unit about, say

to so indicates us is a for and So good grow in that growth in a opportunity therefore, just EML, – the share. to that’s such addition to leader being grow why VCSEL that market

CW to CW, each end with that the little or of lower sort silicon other of are the do that bit terms certain EML architectures at In photonic reach in EMLs able do. compete distance and a needed

cannibalization bit sum of there a those why that’s both have So, but introduced between for two, sets is and zero products. we little of

the said, XXX Now lane. to gig transition EMLs that will lead the per

reach the AI of the links. the And workhorse to expect be so we EMLs really longer

than priced that note to these that are same, the lower significantly the about EMLs. costs units just are the while VCSEL And are

Yes.

reach is the larger EMLs. So, market for the longer much

Thank you, Tom.

you. Thank

ahead. Your of Arya BofA from comes Please next line from Securities. Vivek question go the

segment? your Just what for do I could AI-related was all you Thanks Were how in quarter? where And my to large questions. hoping help they were of up? or sales related sales taking the Telecom, show Datacom AI? us lasers were quantify QX the they in percentage

be We But going company highlighted, a the EML we or whether Alan growth seeing this I expect, are what and forward is enterprise that obviously Datacom That to when ship Yes, the has going customer know going out, AI-driven. our think we primarily an sub-XX% primary products don’t that’s revenue. AI customer, to business. it’s point. a would said, we don’t an break of customer into that as cloud at we AI do but

just AI or related? Datacom to… your of wanted sub-XX% is segment EML So, I

the percentage just say the it’s EML-related. very Datacom business I a of Datacom high is that a our smaller chip-based would It’s overall revenue a business. of percentage No, company given revenue is

lower margin, high but ASP, lower ASP. So,

QX for my could back to it past overall be in probably QX the company, – QX the to And whether the I It right? seems but headwinds, about mix for different. range seasonal I growth, follow-up, seems don’t has just tended as now the will trying think know same in Alright. have to is am path the like and

it do out year? and is you this growth, is about sequential seasonality fair to be think or the really thinking should mix think that QX differently So, earliest meaningful play we could

shipping just into today I than our it much less past. we you Yes, are out. say as would play the the March shipping customers seasonality are as they at quarter, in much probably look when how doesn’t given has And

the new that And we that down it when going think said, inventory So, levels. that equalization happen, to see products. until comes in we they other, And the to well of have should does as they inventories I demand it’s new going in ROADMs inventory XXX-gigabaud But I for are as demand strength December. their in products XXX-gigabaud, that regardless in situation products, to growth products we are talked exist QX, about some and and today. least don’t type new think because some all take at drive

would say just So, it I depends.

you. Thank

time one have for more please. I Thanks Lara, Vivek. think we question,

Thank you, Ma’am.

question last Please James. Koche from will of Raymond go the ahead. Jeff from line come Our

guys. Thanks Simon. James Yes. with Jeff for Raymond in

for you just your think are guess from to through business So, roughly the billion reasonable? X that targeting Datacom one I I want and that thoughts market what big a for milestones transceiver out for forecast be would your basically put And do forecast competitors on know increase your of strategy your XXXX that’s calling helpful. that XXXX. you are,

Sure.

I it around not I but the not datacom overall inconsistent with think AI. our referenced, exact – that’s assumptions market, numbers not you in the is driven by am familiar with particularly growth

follow-up? a Go have you do Simon, ahead.

December in majority played right that – And inventory going digestion NeoPhotonics that wondering the safe is guess – Neo the that ZR going quarter? is is sequentially or say downtick I of fair Telecom that it I more, say? And out, Yes. did to in with is up September if I am be business? the to and more got in so the legacy do the the this is that that say – to is you just to down was

after and between products delineation a the gone. products pretty Jeff, Yes. year much Neo legacy has

said I through But narrow going it’s June we the seeing we move think burn talked we line narrow lasers, whether acquisition, down, for Neo and as still down products line the we with previous, board. in tunable those other quarter ZR strength, So, got about tunable we to expect would across as are as growth the lasers the expectations with again see we of that I I were products or in have are say that we in the are growth forward. from seeing as inventory

at So, to versus an it’s take of. issue I wouldn’t trying Neo we it’s legacy are our products, to customers that inventory care say anything specific

Okay. Thanks.

Thanks Jeff.

to call Lara, remarks. think you. closing the Alan Thank over some I we for back turn will

as Thanks like everyone up you thoughts everyone. Kathy. wrap call. leave Thank with a we the to I would few

artificial solid cloud As long-term to computing as growth I bandwidth our we the have mobile, machine in exponential fundamentals said before, the network markets. intelligence, are business carrier mid and serve learning, in for

products, industrial are New our lasers applications into high-growth sensing and commercial applications expanding markets. and beyond for emerging are our our imaging traditional

to are investing We like and at the with committed attending, the in forward in again customers’ to and deeply I today and for needs deliver everyone to coming our future. on upcoming for look you talking attending. the all conferences in Thank that, weeks. to would investor we With thank you meetings innovation

that concludes lovely call your your and gentlemen, Have Ladies for participating a disconnect We today. Thank you you ask day. and you, this lines. conference for sir. thank please