Lumentum (LITE) 8 Feb 242024 Q2 Earnings call transcript

Good day, everyone, and welcome to the Lumentum Holdings Second Quarter Fiscal Year 2024 Earnings Call. [Operator Instructions] Please also note that today's event is being recorded for replay purposes.

[Operator Instructions] At this time, I would like to turn the call over to Kathy Ta, Vice President of Investor Relations. Ms. Ta, please go ahead.

Lumentum's of Ta, Relations. Kathy is Vice Investor President This

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

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

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

The as forward-looking undertakes today. this statements by required obligation on are except applicable no statements, update as of to these Lumentum and beliefs law. provided Lumentum's reasonable based during expectations call

in as otherwise substitute projections all are considered to, and not for, also call note Please or that unless with in a prepared discussed are financials be stated, accordance to this financial results non-GAAP. financials superior GAAP. Non-GAAP

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

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

good and Kathy, you, Thank everyone. morning,

unlock data photonics. them. and enable customers performance Photonics most and from enabling and our of with We high-speed the transmitters Photonics the them the innovation, pluggable efficiency, networks leading future the with customers stands to industry-leading to connect enabling Lumentum to portfolio, optimized partnering comprehensive transceivers customers AI unparalleled industry's equip architectures that edge centers of with

needs. centers' forefront of We at data are the

Together transmission and our efficient future such cloud of data as scale with shaping data at automated and photonics well highly are scale. advanced protocols, technologies the pioneering chip through transmission customers, manufacturing we as as

we been us that we many lie brief X the customers thrilled have Light, the traction had opportunities growth opportunities, as drive with complete Cloud team joined additional which new ahead. has on with expect qualifications. are months period, just meaningful development It center products the and In has new data that acquired and of significant since we this the receive customer we and we will

accelerating, of is these broader XXXG qualifications adoption as and expect The we customer market technology finalize. opportunity

of we a ramp-up vertical integration early to initial the adopters from creating technology and Additionally, from X.X expect customers, pull of our and advantage first-to-market given by a terabit results have products labs. our test lot is

December the shipments quarter, the strong transceiver X after Light acquisition. the in approximately $XX.X very during million were weeks Cloud contributing

stronger expect our March the We shipments will be quarter. in even

of the Given September year product the to into customer, through then as this the our we 'XX transition year quarters, revenue largest mid-calendar year in and data and grow start data and end a programs from transceivers June other dip by center expect to new temporarily and transition significantly ramp. customer planned completes calendar center

capacity. transceiver demand on data are our traction of manufacturing leading-edge data opportunities, centers our strong AI transceiver in expanding surge the and new strategically Given we

in our state-of-the-art in manufacturing key production Thailand. part lines expansion, facility at we of a As this investing are

terabit come site. capacity at transceivers customers accolades, and first capabilities confidence photonics factory multiple manufacturing Our ramp we wave rapidly. has expect online our for lead customer This of received and will in Thai ability to this summer, this us to the numerous proven has giving X.X

history of believe capacity Lumentum's in We the Light components our leveraging partnership, transceiver In be new will expansion Cloud customer addition established Thailand, designs. to new in this combination we of this manufacturing differentiated and growth unrivaled cloud market. accelerate of margins excellent top line leadership, in an us revenue growing position and to component proven puts capabilities rapidly photonic at breadth transceiver

cloud spending 'XX, discussions, on we navigating our the are recovery this double-digit the inventory other extend data market customer customer now 'XX. fiscal our digestion market balance business. sluggish through conditions of business. in growth centers Nevertheless, our Based growth CapEx position we highly carrier confident parts and and challenging While in are of to we are expect ultimate of in calendar forecasting and CapEx latest

network As value recognize continued like that increasingly this our the confidence business. ours scaling, fiber in capacity, transmission reaches enable providers long-term its of network physical technologies reinforcing

Tech Moving segment. to our Industrial

new traction of our expect in lower consumer about levels demand coming industrial of in excited a are driven our These are diversification customer and serving over macro market and our softness Industrial the typical the we our and up for period very customers. our That laser segment. on products, along by our large particularly adding do one new in are by quarters business applications, said, Tech We ramping with ultrafast lasers. elevated inventory seasonality at customer market, to

the corrected seasonal recovery consumer expect next the an industrial in second same around lead should Industrial This, combined at business. time with new during uptick year. the laser inventory X to our Tech frame months, calendar half the We customers markets to over the new our of be in segment wins as the

to results. quarter on fiscal second Moving

with address above of companies that had contribution were acquisition results our the technology the capability quarter EPS Cloud and our market. of future, growing revenue very rapidly to in the given and AI ML of about and photonics I'm of and $X.XX. combined ranges, the on the the guidance midpoint Light million have revenue the $XXX.X will excited quarter EPS and Second

and the synergies The acquisition result fiscal provide shortly. down fixed expansion Wajid will on our to color margins an drive costs during this to continued 'XX. more our of in have lower rebound fixed drive will these revenue We combination in costs, in accelerated and

most year-on-year, the networking telecom contribution due equipment but product Light Cloud the XX% and networking at continued driven center was of correction inventory by across acquisition, to sequentially, our from revenue Cloud lines up our network down data customers. demand softness broad-based the XX% cloud and strong given

the map. half XXXG technologies. 'XX, the of that gig our In XXX The lanes photonics expect technology traffic future transceivers power-efficient calendar is by qualify second bright first silicon using employ to industry's X for road of cloud we

bandwidth bottlenecks as for to expect These transceivers lower XXX capacity mentioned multiple earlier, of wave data workloads ultra while at alleviating gig latency high-speed also additional the this for customers facility. campus we to needed first I to lane consumption our with power terabit this summer and and ramp transceivers As technology. Thailand per in provide AI lead expect customers in X.X move

optics once also our [indiscernible] photonics only leading per lasers, at workhorse but new integrated are qualified will of EML cloud next customers. XXX the technology, that gig the using hyperscale expect cloud lane and products centers these of not data generation vertically We be infrastructure

applications, We about production VCSEL data have short center start feedback calendar the gig in ramping positive for XXX our performance second expect been distance receiving 'XX. and to customer of half

our VCSELs optical qualify platforms Light's quarters. transceiver will and Cloud coming in active cables the in We

essential for that working novel capabilities cloud for new We enable also density and optical inference are interconnects our hardware modules closely low-latency AI power on future to with bandwidth, training and leverage lower applications. higher architectures infrastructure components technology unique providers and

continue becoming centers, ML in ZR in interconnects that those of grew we even AI end, data important. we have business, high gig rapid our power to over To and with centers connecting XX% QX, more speed, XXX data and module the success build-out is With cost-efficient sequentially. where

extended with receiving market are to on samples rapidly pace customer are be to These will data on reach we to ZR year. with track Additionally, [indiscernible], positive interconnects center customer the infrastructure. XXX enable modules help expanding first higher data our center gig speed, feedback and even we keep this

high-speed traction customer our gigabaud receiving next-generation enable data data XXX Our enhanced at and long-haul and technologies XXXG, center performance next-generation and integrated X.XT factors both coherent X.XT. coherent discrete of transmission on next-generation and feedback are to in metro applications. products outside products in rate form the available enable applications and that are positive These XXX

we we with move XXX and the are we technology first-to-market forefront believe 'XX, first-to-volume through As our products. gigabaud of optical calendar at

one X% as in was XD customers. Fiscal expected, QX by Tech. at lasers Industrial driven business our industrial to sensing down consumption of Turning our and inventory sequentially seasonality large

down on that we a discussed to overall socket XD previously macroeconomic was and due Tech Industrial sensing primarily have softness. market certain year-over-year, share for increased competition XX%

less revenue of expect We company revenue fiscal to or QX contribute of sensing in 'XX. and XD QX of X% approximately for consumer applications

I With automation precise mentioned parameters, ultrafast As greater will control partially in the we shift positioned for needs. across seeing solid-state pulse semiconductor, demand and to new to address our are our solar in and batteries, Industry X.X well and and applications PCBs to growing near-term EV applications offset the precision headwinds and micromachining X.X key and help products industrial evolving lasers are cell Growth stability, manufacturing. quality beam laser displays, micromachining earlier. drives opportunities for manufacturing,

we production an portfolio product accelerating To summarize, manufacturing high-speed development customer growth, of this data and center demand skyrocketing, and are photonic to industry-leading advanced and with unmatched partnerships, armed long-standing components. capture is

cloud to growth Lumentum. driving significant surging We are the and market transceiver for share line market, in margin positioned top capture

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

Thank you, Alan.

opportunities we are mentioned, served Alan growth our position and about across market our markets. As confident

so will operating that expand than on focused recovers, cost are We faster dollars fixed base revenue. lowering our as margin revenue

those progress on significant synergies our hitting X production on will NeoPhotonics manufacturing The China to we as accrue key this closing most facility. benefit ramp of this we've by To our made position December. factories past Thailand end, milestones in of at products financial

consolidation and in we additional are the third of half by expenses beginning of 'XX, this fiscal Additionally, allowing first both plans fab synergies our to to progressing and significant plan quarter XXXX. attain us in Japan the execute wafer manufacturing fiscal operating well, expect

continue our prior attainment we synergy million, Consequently, within expenses. $XXX we are up the incremental from efficiency of to $XX well, to increasing million. our As expectations and target opportunities operating see synergy

achieved million have savings, approximately To expect annual and as $XX in remaining against the our $XX plan. achieve date, execute we we run to million rate

further provide you will critical we achieve We with updates as milestones.

products we to inventory In NeoPhotonics of previously, factory we approximately Light. levels QX, mentioned Cloud have million I $XX excluding by Lumentum's increase inventory As these reduced prebuilt transitions. in inventory enable related the to overall sequentially, had

expenses down operational despite tight In recent of drove Cloud by acquisition on basis. $X company-wide a discipline the expenses operating our QX, Light in million our of year-over-year financial incorporating addition,

on We're and cost continued efficiency, margins operating gross confident that combined our improvements inventory and grow. recovers revenue cloud telecom the continues way pave to efforts as control for and management manufacturing in our will revenue

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

million this revenue of Light. majority XXXG the a quarter partial we shipments. The mentioned, Alan Cloud revenue came in from $XX.X As during recognized from quarter, of transceiver

diluted GAAP was and second GAAP gross the and due GAAP large the a net of amortization. operating quarter with loss XX.X%, loss portion for per GAAP charges XX.X%, net share margin acquisition-related was was loss to $X.XX,

down was quarter Second non-GAAP and product was underutilization. factory margin which and down gross by mix year-on-year, driven XX.X%, sequentially

Second was quarter which non-GAAP operating up year-on-year. margin and sequentially down was X.X%,

Second quarter $XX non-GAAP income adjusted EBITDA operating and million. $XX was million, was

$XXX.X XX.X% due Second up due or totaled synergy of in continued to quarter from quarter million the million controls attainment. the million acquisition and QX expense Cloud $X.X non-GAAP revenue, down part ago operating to Light, tight and expenses $X.X from year of

interest million non-GAAP our million. Non-GAAP due investments. $XX.X was and cash and expense to basis $XX.X on QX a expense was other non-GAAP on was $XX.X SG&A million. R&D income Interest earned

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

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

Our cash purchase to in position the million was $XXX $XXX billion. used the due This Cloud cash primarily quarter million the $X.XX of during Light. for to by decreased

transaction. $X incurred normal million we approximately with addition, the course expenses of In associated

segment details. to Turning

revenue and was XX.X% XX.X% $XXX.X segment at decreased Cloud and and non-GAAP year-on-year. and Networking year-on-year. profit at XX.X% million quarter down Second segment Networking sequentially, reporting sequentially Cloud increased

X.X% at Industrial down $XX.X and year-on-year. XX.X% down sequentially, second revenue Our quarter segment Tech was million

Industrial quarter XX.X% was Tech reporting Second year-on-year. of sequentially non-GAAP profit and down

like to guidance, Before I to impact move related export regulations. to our would revenue some add an to I our context to

the December, products do the were suppliers to in service by we industry we comply broadly, largest [ critical export with that manufacturer equipment stopped notified year, China. of Consequently, networking the regulations. latest our not last their the ] IC majority certain product in Late shipments that

regulations revenue our year in export and these that an in $XX 'XX reduction expectations. is assumption million to million indefinitely, result continue approximate $XX from calendar will prior Our

who gainers could a share term, our opportunity, end larger we factors other over pose believe customers revenue footprint geopolitical our to benefit time. Longer be given product expected to within are market

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

third the revenue by following of $XXX from This than Alan be to to Light Industrial share of XD QX includes nearly just a and regulations mentioned Cloud in midpoint due dynamics $XXX Networking forecast for million more strong Cloud assumptions: up, $XX of We despite Tech $XX to to and 'XX range expect net well quarter demand, revenue and inventory the mentioned, the be fiscal a quarter to the million. earlier. be cloud sensing million laser full as the million that sequentially as and industrial seasonality digestion impact down export customer driven at

Based in to net $X.XX. to X%, range we of $X.XX the operating per project and non-GAAP on margin this, income the to be third diluted quarter X% range be of share to in

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

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

you, Wajid. Thank

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

Now let's session. Q&A begin the

[Operator today from Simon question go Raymond James. Instructions] Please first Leopold ahead. comes from Our

keep to that try one. to will I

if just longer mix, concentration XX% both quick customer wonder maybe or term? wondering And could got that concentration customer in little particular you you changing talk And a I how quarter. sequentially So new your about see I've then a this and bit customer? did then you evolving a follow-up. have if I'm

gig diversification infrastructure and towards with customer to have customer. And the are Light talked of as AI X.XT grow rapidly a will I'd XXX Yes. that, XX% primarily and calendar that Simon. Cloud well qualified revenue our we companies. say into around this products Yes, about Thanks, script, the we business we that other on transceiver to to expect the as end as addition hyperscalers as due did year 'XX new new

excited of about and customers the that we're So around our diversification very business. the transceiver

one or business. place less talk the our think I business. our that with consumer -- gave I And the on that's be of less in next healthy did consumer quarters. things we to we X% would the X a why our that's say dependency around about was And of specifics revenue

that Does Simon? question, answer your

of And then follow-up -- my it up sort does. And that. nicely you teed in

adjusting And of this said less is just wondering implies, X% deck, you out the the million Tech to X new $XX than still than essentially sort whether footnote know to adjustment, angle million And is that there's also this of your is In mentions less $XX lasers. I or X. I'm of Industrial segmentation. product X%, that sequentially. a XD expected that decline to inventory I'm on of approximately cycle dropping significant coming whether portion industrial

how So help just looking for $XX a to split more little that million. bit

confident consumer would percent in for I pretty that Yes. say that we're in X-ish QX.

would balance one the efforts the the we what on by So come reduction inventory mentioned of from largest call customers. laser our around

$XX of how million. kind that split that's you up So could

from Alex from comes question Henderson next Our Needham.

into dynamics some chip But in Great. business also little companies wanted whether there. Light the a at changed has Light's understand Cloud dynamics I transceivers to around of Cloud technology to wanted transceiver the bit, to selling understand all. sales and I other the your dig

they're would a VCSEL because for Fabrinet aware expecting because their in anybody First the down InfiniBand VCSELs. assume And really product pipe product X.X talking I'm that segment. of that, of products the much gig question AOC to on coming I in XXX a terabit don't business from do some the they gig a transition. segment having just ramp. the that is that is not there we XXX heard in Because about you're that? impact ramping Is product

that on whether there that's your about that's -- whether something you out So AOC can you cards side? technology and the is in talk

say, your Let customers first businesses really but me there's our our around those being which wall chip transceiver sales. team, very development us would no address certainly, concerns. assured treat and and them we concern And partners, team dynamics their we X with a question the or cross-contamination a separately that our our of chip are so between we first, is had chip around some I competitor,

And next business I we're bringing CW our I chips quarter, and to capacity demands EML laser adding sold a think to today those we've in datacom point the a up of and meet the concerns am through of out on lot alleviated where business way. our rapid and

more through transceiver. On the year. talked being be we final that half would gig the XXX of VCSELs, about XXX released VCSEL an gig results, SR, just the And multi-mode XXX going second gig this in AOC or positive Very of qualifications.

think a for I VCSELs, industry. As the and that's far gig as little for bit XXX us out

be would X.XT more of EML-based or photonics So silicon transceiver. a

But bit XXX about more VCSELs Chris? or his little Chris a thoughts let talk gig T. I'll on X.XX

to, of silicon developing will map VCSELs be you gig are mean, industry however, I X.X -- developing, VCSELs. is, products initial Yes. road Alan, third-party gig as based. alluded The XXX suppliers photonic terabit developing we our focused XXX other on

So Cloud single-mode those multimode feather transceivers, transceivers. platform in Light has transceiver time well. And as the will over

So we're participate positioned opportunities. to well both in

of that that then and there the So June X.X an June in by I would to understand, have just there's not terabit that down implication coming the clearly it there other of in I pike Because true? mean, product quarter sort is something XXX? the if that coming of people's is be XX commentary. quarter, Is a lanes

I photonics-based silicon are, on approaches. what can our comment plans involve which

also alluded over be call to horizon, will year. I per think the out the is that and have XXX say, on gig we on also coming technology let's lane next the

those can facts together. I So you think put

to qualified XXX have clear, level I gig just the silicon But come labs our gig customers' for we EMLs we year. and ready our have EMLs photonics today, that qualification and as using qualification well think will waiting transceivers at to both later XXX internally be transceiver internal as that in we out terabit go X.X Yes. are that have this

would . AOCs, clarification, an then for Just be that related not product, InfiniBand right?

InfiniBand, customers to would or of really use them. -- be we Ethernet It's or our InfiniBand Well, However, don't either whether it otherwise. up care it's really And we're datacom chips. kind

any you other have do comments Chris, So InfiniBand? on

Nothing to add. we certainly, in That development. and capabilities [indiscernible] have both

Our next comes from JPMorgan. Samik from Chatterjee question today

datacom, keep confused. just -- I'm make of Maybe but on to not sure not going just sort to

the your with in that color bit customer the hear or Cloud you undergoing. out for is that talked can following your whether thoughts terms to And of share changes words, You transition? have own product what's market any Light primary transition your market in more the I that relation And Any expect customer Maybe you curious about follow-up. share? what's flesh visibility there then a a quick any on to transition? in

factor Yes, I'll there is lane. per you be subsequent that gig comment customer whether imagine generations as or transitioning are on XXX XXX Certainly, careful, be from different that gig product little form a XXX to gig can I'd a launched, transition. XXX sensitivity, but of gig,

further a as are of changes, challenges technology power density there consumption maturity, in So power your range and to you reduce systems. into get

with of and very lots in prepared that believe so market opportunity into remarks, to our this expanding can and calendar that later we're as significantly we excited have growth I we and share, year and accelerate think we're why, capacity calendar we about very 'XX. to out regard gain really come that's talked that share,

just And follow-up. for my maybe

trade because your of the assuming in I'm to not in segment, China, capitalize calling demand on regulations. the recovery a companies your which you're primary competitor, On out telecom able

really around to of chain in customer? with recovery just curious option through try still sort you that a some an this a Or and product rework and demand capitalize is and the get to is go this of of if situation different would market address on market? go reorganization the where where just supply China to area the don't But sort have that an you

one share in China equipment that's in a Yes. we're way, manufacturers. part happen strength. Samik, of network non-Huawei through part in there fact, And of are deployments China of of meaningful customers. of about in And very we're, strong the to the that large areas non-Huawei a

point I from that network We be follow the to down we wallet believe, where regulations, the we think stopped shift share over And higher will have us. of shipping trickle that share eventually long will equipment a term, due obviously. tailwind to to on for will a the need that manufacturers

SIG. Our next from Christopher today from Rolland question comes

Mine Cloud is about Light.

dip maybe of first So end about the and of program June September. in you all, talked a a and

why ends have and If program you into kind of isn't AI why what fluid that the something of or could describe next there just segment you?

new into large you And customer? customers. primary are how they thinking? your then you may talked about you many be And do versus broadening think How

Yes, as to, in the a mean, of Cloud do, we have alluding degree I business. you're customer concentration Chris. Light

takes past products. gig to next So XXX generation driven ramp several that's time of generation the customer over of there's of ramp a time the quarters, of to growth product a the lot down up current the and

product So not while and are are to growing, customers other other sufficient will. you there they're if transition, that customers offset

And sockets transitions, as will as expanding magnitude expansions the more have out of product Alan such time, alluded in and of grows as number opportunities. other occur customer of base to, we do well are, through multiple revenue the activities, product customers smoothed diversifies be to terms that the so new time the with which that as capacity we

a the I about mean, very this announced Light, Certainly, talked of Cloud is as market. we when large acquisition we

multiples the and to very possibilities, what of years by well positioned certainly are capabilities, and to is opportunity add with add to the Lumentum current working bring us, of are over closely coming very to encouraged so table. the reality Cloud years. brings the And us Customers a that the well revenue with coming the you then both date in Light we're to ahead

few have quarters. little time. a it ramp it does bit you to We That a of develop -- a product, take qualify and can't in

we're and this that's calendar having later about additions year. And significant so talking capacity growth why revenue

to can well. add I Yes. that Maybe as

add to that. to Just

infrastructure as U.S. heavily the a that well outside attractive I companies. cloud alternative now company and very think the to we're investing given partner headquartered customers China, of cloud a as U.S. all is

Thailand, the that's customers we'll traction in so the strongly customers, needs we that they I'd And demands the of to want when investing of the to say have make got for, capacity place. and one every sure with, in that's why asking continue because our go, to and they are say, invest really we're meet what's our

confidence And investing so that's and strongly. what gives why us so we're

Maybe as a follow-up.

these gig, VCSELs XXX XXX have have cut Just going be for product be gig you then as dynamics. road like gig moving you'll VCSELs, And will that for XXX EMLs meaningful you When in hard ] and of map to of a a or Did some SIFO well. terms sounds I will transition revenue? understand don't for [ into correct? Cloud Light products that get it

second Sort a of XXX will of. would positive multi-mode say transceiver. year, an be as AOC start a I today, as of have VCSELs lot from both revenue calendar in our the SR feedback, 'XX, meaningful the standpoint will calendar in gig well half

have on do our gig We XXX road map.

at that us year confidence doing time We have right will gig XXX and lot and gives probably of over work. XXX are last progress end gig development we 'XX into 'XX. made the of And on a that the we a the that's

very runway strong. in 'XX. think road So map XXX I XXX And have a through VCSELs is very gig our our gig confidence nice

line, and will that EMLs per them. will after ] Silicon gig at we hit gig XXX the silicon around as XXX come both tons well first. have same the photonics then VCSELs, will So time [ first,

Our from Meta Stanley. next question comes from Marshall Morgan

kind portfolio. timeline lasers the of wanted your or of kind but couple a just into bringing of questions, process Great. down into to touched the been of on Cloud narrow Light It's

kind of Just the vertical integration would what timing that of be?

more customer. then new of And devices a are just there side maybe, second your XD on out kind the of from question, as the major sensing portfolio,

how Just could or terms contextualizing contribute big in kind either anything to of the opportunity is year? that of

Yes.

So the portfolio both been lab, EMLs. of as company, X certainly, there XXX short gig Light's period they're we've on VCSELs lasers in that into well as the our Cloud already timing in the

it's a just customers want changes product. then don't do matter in to existing So of

customers qualifications and as opportunities. come in product get new new And it so new will we up

I into so fast a 'XX say upon calendar that would really XX second in all But And is of how be happen. way. that those would meaningful that, and half dependent qualifications say would a more I

secretive. small they're We new volumes their the of devices, very to frankly, quite those relative But we new sensing, devices. devices believe are XD in very of are handsets. some

So the should in any contribution model short I don't meaningful on those think you term. new devices

from Karl next BNP is ]. Our today question Paribas from Ackerman [

for I have and one for question Wajid. Alan a

and eventually, Wajid, XXX your and growth would telecom, to XXX optics coherent drivers you. DSPs within gigabaud appear [indiscernible] own for be

But you digesting area your have customers But about are think in may September it on we indicated in business? think color book-to-bill trough know seen until where you you of do helpful recovery recover Any not telco. quarter. on be that would as I inventory? that the

Yes.

own of DSP solution a as products ZR of the constrained well demand high XXX and by XXX on the is gigabaud ability meet combination metro So those the needs and are real winning you're to next-generation long-haul our products, our gigabaud the customer to today. And right, meet as products. gigabaud, think I

applications, VR gigabaud time into and products reduce XXX are going more form into our and smaller long-haul today, as they over gigabaud a products. into factor prior generations, and just XXX So as and cost prior get then metro

like often I And is when suppliers old they that So number the it us to work product to to get up races. it. with and of the times, need to faster the them e-mails ramp from asking get feels our executives

strong that's So a very, positive. very

supply, customers the ordered concerned, in As or during short that digestion in say we're we of anticipation. where source that lot far source single primary products I'd have a pandemic, is as

came it over demand ZR our very the customers is horizon. For those example, the of our workhorse there's of NeoPhotonics so turbo less very, of products at that became many is as from laser the of the inventory industry, and strong, anticipation and

so [ a up. that inventory and products to and we quarter [indiscernible] and back needs half believe that will digested, that those or take ramp tunable lasers like So ] goes be will when away,

So I very think on is strong. product we're very products and putting on aside existing products new new the the short-term demand inventory, well positioned

market -- our share very from think So in and confident that I today forward. we're going position, share the perspective, and

Maybe a follow-up.

capacity strong how indicated to you At components. customers for in a laser that. time, accept seems quite production same You your to high-speed Thailand the expanding there by be are willingness

for So willingness across a and for some demand? very that AI the really networks are co-invest of clusters ready for you products AI to your these chain next-generation your capable customers capacity as they high supply ready seeing as in they

They're growth would on encouraging qualify dime our [ engineering existing that's and I products short-term will our with say, and over resources us and term. customers and orders. ] on investing short to time us our reward their in capacity the capacity, are of R&D

would co-investment develop that development say to I unique to are getting transceivers. we alternatives projects on

long term, the datacom the optical investments around et next they're some to infrastructure cetera? interconnect I And turn does with companies into have we make of or So further that will look the revenue What of share it little generation bit AI a does out. or think GPUs, like? of help for mind those willing what us

they're they of see have. partnering that clearly But with and us we because the capabilities technology breadth

well that's on term Karl? as term. as Does that short kind the I'd So answer longer the question, say answer your of

it does. Yes

is Riley. next question from Our B. Dave King from

X the June we segment. on datacom September, and dip question more quarters? revenue should how those fall respective think datacom in With for the or about that Just

Yes, ahead. -- Dave it's go

-- Yes, like. we're looks that let looking dip. customer say to help what dip us clearly, smooth on it take is me that. working I'd Okay. still our that And

that through matter could working down again, I standpoint, modeling so still XX% transition be a through? period. from But a that's of would And think it

for new as make new that tremendous in products the the and products we new made progress September I that's the we quarter, And the quarter demand products, would can low. probably the June And think into are then those strong. pull on the case have that

you in the in June pickup little of kind I'd with the quarter, quarter model that's slight bit So a a a dynamic. say can dip September but

And Got it. then the question my telecom. on second is

wondering, Just about you tunable talked lasers.

on wondering business -- ROADM any is? that segment? can And Just how you big also, the update

was the those as and call are have criticality a are products point, question, a where That's break semiconductors I we and quite don't challenges Alan we where highlighted or inventory previous products to specifically, Dave, is out ones are an think there or supply so. around customers those out Yes, inventory of the area both given in ICs or there, the more key year built maybe the heavily. on ago our position but the

So as yet. for tunable our ZR lasers aren't are example, ourselves up, ramping modules

or lag be they to will given amount quarter start time a that's there the of two here So recover, inventory before a out there.

of the that of remaining situation a burn is historical major are the have high revenue there coming couple unfortunately, are ones that of our So that of driven we are to some product in levels inventory have, lines the quarters. off where that the lot

comes today Ruben Roy question next from Stifel. Our from

June just this a my in the hope question, bit. quick bit you, guys transceiver pause quite a previous think this is answer to is question an I because you about around a for I on technology. quarters a and Chris, first September of talked But this little the

to that just make think design related to XXX% kind change of elements. understood. product about network not the way I to your of right wanted sure other Is a it? and because I That's

a a different, then wants slightly make I well, maybe purchase we to product. that customer say the products new which to that would to is have different say,

a there the period new, is what ramp of presents ramping we down so dip. the And before old the and that's up

performance, product system different you or trying network design, is of to customer if through improve you sort will. The will, a if

you've of industrial of large a how is you've if about you Okay. obviously, curious you're consumption have And XX XD -- design of out inventory then there you sort seeing of -- wondering pickup at Are some new additive the either Just on that how fast got macro sensing, been, manufacturing over you customer in some any ongoing. I'm weakness the the it? Alan? with side the out macro the and or activity could otherwise? side, around kind to of activity sort you design Are I or months? next industrial thinking discussions lasers. know gotten products XX outside

around say, a Yes. cell. solar we said ramping our is gives primarily the manufacturing, and that a as I'd Good question. applications, are we and new the in of laser script, processing them solar efficiency of I'd the differentiated today lot one say

X% fraction you of a big even it's deal. or So solar can efficiency -- cells as efficiency for a imagine, is a percent

lot that space. our traction reason, laser a of our whatever ultrafast for unique in in so has And capability

to that of really on a into batteries those lot we'll design and EV and half of 'XX. second fruition, we 'XX And the we call displays are And about talked coming similarly, activity are around other around in seeing into turn business and PCBs applications. the and calendar

of lot a yes, with respect lasers. to So success activity and lot and a of our femtosecond picosecond

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

heard wanted September. so just about nail and we far to I have June what down

least levels, and recovers, to else I September, at June below below back And sure the just September equal. are confirm the we seems have if that. it get happens levels. just like March also make June maybe is levels, levels, then but all margins? it then March all gross dots both so heard call. And I wanted March wanted $XX below to that we on being to it doesn't that million but connect Are what they March far to So

you're I mute. think on Wajid,

try June. we some synergies in should and well, additional number quarter earlier. about Sorry. guide right. and given Vivek, to synergies about be probably of to the bit quarter, XX%, a of June see can We provided, million us But type the we were that's so on the that able and that I in gross the volatility going help math. Gross see. margins think and more are March in margins, time, information December customers of just September expecting we've do -- talked through probably sounds exiting at little the we we're our the operating $XX right based flowing achieved and about that a we over have that quarter We've one to

be of should we to the flowing so able through. benefit that see And

about be with flat improvement the And September so gross the at June probably least into into quarter. quarter, should some margin

Alan -- customers. of talked those new about the programs that hyperscale some expenses for So R&D some do require large incremental

won't off backing those. on we be so And

that's way about OpEx well. will so between June it. I modulate September right think the think to But as and And

XX% the company in down, down the -- of not clarification. sorry, just for just datacom But sort June quarter, right?

$XX So yes. million, $XX million, that's about

follow-up, now? about My kind sheet leverage it's higher right of think Net your peers. do how than you balance is

And how should generation now? to think any sheet to would do this the extraordinary we in so helpful. flow it balance how think just sheet just Do you show the And need cash think comment general, on year? about balance you you So anything do be track up? about

Yes.

December a So we the cash. quarter little with exited over $X.X billion in

cash continue generate operations expectation Our March quarter well. we'll is the in that flow as in the to and June quarter from both

Alan about. incremental making our are some facility capital in talked that in Thailand We investments

when June, will just CapEx that on and in so March between for when and the modulate depending pay comes And it. we

We middle have March. due a of in debt convertible the March, in

with level that And from so that is off that is, still expectation on sheet. And to balance our the comfortable cash payoff. that be us exiting that the we pay cash have able a we'll of leaves

comfortable of we're quite level gross both debt the and have kind on a So just with of a net we dynamics. those given basis,

So for we [ one think question. Drew have I time ], just more

Okay.

next Ananda Capital. comes from question Loop Our Baruah from

Just of the sort to going complex. back transceiver

business now? Chris, your how to would guess, big right in Gen December kind I the the overall Gen size about way good think what's you you Alan, for AI quarter? of AI-related

that, ZR can you what's guess, -- include there if that you to think about And a and belongs. think way I in good if

prior some belongs. it you, remarks, Alan, in like Sounds think you you think to degree, your

months? then rate new I AI-related kind good next size you of lot of to both guess, of, business and of be the How There are pretty XX over the growth like what's But for parts a questions probably any those? a stuff coming and sort think And way of to with those Gen Appreciate XX on. about that context customers us. it. like useful would that programs moving

significantly say, will here around on and of March in be the we quarter it. revenue call, as the a Sure. $XX with quarter I the million, full highlighted Light would Cloud at going up

vast I is vast vast, the going of into that majority XXX vast, AI platforms. is think that, of given gig, majority the

our If to is dollars you that, look got obviously, business, were which tens a then we've of quarter. several beyond of datacom chip millions

adding a some going point, of further the centers I think be is spread that's start purpose-built into would but revenue and and telecom that, telecom longer-term at data certainly, power data to well, as in start will drive day relevant, consumption this the the cautious out out As of I of -- in really more space. reasons for more centers that built are story to throwing

XX% quarters, chips, if the we've over but at I like back about going year out, smooth our next expecting highlighted revenue a to dip Light were the kind the look expect the years. is think CAGR datacom those I between talked pieces obviously, growing I I that Cloud -- a over or Now, coming transceivers over of and to we that X-plus something mean, industry at AI that to is that the here several the period

share, the if So opportunity faster, I as think ingredients to an we've to essential grow but least of given more our having got able gainer. at all that, share fast as be be a market modest not overall to

call to for going some over turn I now think remarks. we're And Alan back the closing to

you, Thank Kathy. Great.

call. the would wrap leave we a everybody up I as few like to thoughts with

confident stands and automated with and forefront hyperscale data Lumentum cloud infrastructure are pioneering new of chip-scale from environment. current revolution, agility photonics at manufacturing, We center partnerships in the and our to to providers. the and leadership to the market position navigate customers growing

a a propelling acquisition with Light meet to Our valuable be to transceiver our success, has production Cloud already insight demand. and high-speed surging proven team fantastic

you show the With Diego. meetings you. for look to upcoming that, investor meeting call, I and Thank would today's attending again we forward at San at and like thank to you conferences, in OFC

today's concludes That Conference Lumentum Earnings Call. XXXX

You now disconnect may your lines.