Lumentum Holdings Inc at Barclays Global Technology Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Tom O'Malley - Barclays Capital Inc - Analyst : It's been a good day so far. We'll have one more tomorrow. But let's just start off with the recent acquisition you did. It's about a year ago now. You did Cloud Light. You kind of talked about intersecting a market that was really taking off in the data center interconnect space. Can you talk about what's happened since that acquisition and maybe kind of the trajectory of that business going forward because you obviously had a lot of positive things to say at the last earnings.

Question: Tom O'Malley - Barclays Capital Inc - Analyst : So before I get into the different customer details, let's talk about the larger market. So you've heard a lot of different forecasts from individuals in the market, some as high as kind of like the 20 million port count number into 2025. Do you guys have a rough approximation of kind of where things set out this year and where things are going this year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 12, 2024 / 12:15AM, LITE.OQ - Lumentum Holdings Inc at Barclays Global Technology Conference

Question: Tom O'Malley - Barclays Capital Inc - Analyst : Okay. So I think like the debate when you guys acquired Cloud Light was that it was primarily a Google provider, right? And they had Sipho technology and you guys are like, look, we can take this technology, we can take these transceivers and we can expand them to other customer bases. Let's start with that Google customer first. So when you did the acquisition, you had talked about a product transition that occurred pretty soon after you did the deal. Was there -- was that a speed transition, a technology transition? Can you give me your best -- well, tell me understand what happened there?

Question: Tom O'Malley - Barclays Capital Inc - Analyst : Got you. And I think that the trajectory from a revenue perspective that you kind of talked about was like a $80 million to $90 million run rate kind of bottoming at that $50 million run rate in the back half of this fiscal year really stepping back up. If you look about 12 months down the road, obviously, all these hyper scales are expanding. We just talked about how you may see a 40 million port count year. Like what is the right way to think about the trajectory for that specific customer? Can that be double the size of where you acquired the business?

Question: Tom O'Malley - Barclays Capital Inc - Analyst : Okay. And then to the customer expansion side, you had mentioned two new customers. One customer, you said that you had gotten, you had an award qualification early next year, shipments middle of calendar year '25. And then on this most recent call, you talked about a second customer, which had been in the qualification process, which you actually shipped to in the December quarter. So maybe talk about your ability to get those design wins. Is that something you were approached on? Anything on speed or architecture type that you can share? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 12, 2024 / 12:15AM, LITE.OQ - Lumentum Holdings Inc at Barclays Global Technology Conference

Question: Tom O'Malley - Barclays Capital Inc - Analyst : So US domestic based vertical integration, leading edge versus potentially MIS1, MIS2. The one area I wanted to dig in a little bit more on is the technology side. So almost I mean, I don't think it's coincidence that Sipho was what the predominant technology was at Google, right? And if you're looking at the market today, you're seeing more Sipho deployments because of a constraint in the EML market, right? How much of your ability to transfer that technology is the driving factor versus that you're a domestic supplier? Like could you rank order like where people are coming to you from? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 12, 2024 / 12:15AM, LITE.OQ - Lumentum Holdings Inc at Barclays Global Technology Conference

Question: Tom O'Malley - Barclays Capital Inc - Analyst : Yeah, I want to dig into that a little bit. You're always one question ahead of me. I have to catch up. So EML versus Sipho, you've chosen right now, and you talked about this on the last call about selling the EML product externally. There are gross margin benefits to that. The market is in shortage. In terms of the customer diversification there, are you selling that across a broad range of customers or are you really selling to a certain few that are kind of at the leading bleeding edge, just given the product type?

Question: Tom O'Malley - Barclays Capital Inc - Analyst : Because I was going to say, I mean, like if you look at people who have actually announced 200 gig per lane 1.6T solutions, it's actually not that many. And so you have a defined customer set there because you're not using. Well, I guess, some guys could use 200 gig for 800 gig solutions, but I would assume you're probably targeting those of higher value. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 12, 2024 / 12:15AM, LITE.OQ - Lumentum Holdings Inc at Barclays Global Technology Conference So, I guess, competitive dynamic is the only other question there. If the market is really good and there are capacity constraints, you guys had a lead at 100 gig EML, you have a lead at 200 gig EML. How far ahead of you are you of the competition? When do you see increased competition in the market, we can talk on the supply side a little bit.

Question: Tom O'Malley - Barclays Capital Inc - Analyst : And then at 100 gig per lane, you saw VCSELs really get a lion's share of the market or at least a general size of the market, again, it's very difficult to kind of break down the actual share by laser. But at 200 gig, clearly, VCSELs are behind. So you made the comment you're two years behind could mean you're left behind. If there is a technology solution, and you guys have been wonderful VCSEL makers in the past as well, if there is a solution that gets to market, is that something that you think people will use or is there a real technology barrier to using it at that speed?

Question: Tom O'Malley - Barclays Capital Inc - Analyst : So, I guess, the other end of the question is like you've heard in the transceiver market, either from suppliers of system based AI architectures or from other earnings calls, constraints in the interconnect market that are prohibiting deployments. EMLs is certainly an area that's come up. I'm assuming that there are several areas, but we know that EMLs are a bottleneck. When you talk about your ability to scale capacity, I feel like every two years, and this is not your fault, the market is going one way or the other and you're scaling or you bring it down and you're scaling or bring it down. What's the right way to think about your capacity from a quarterly basis or a yearly basis or contextualize your ability to scale capacity from a dollars perspective? And how much are you willing to scale that with the knowledge that like, hey, maybe this is the direction the market actually is going, we can take a risk here and scale a bit more?

Question: Tom O'Malley - Barclays Capital Inc - Analyst : I wasn't going to go here, but I thought it was interesting that you mentioned it. So Sipho, obviously, handling multiple lanes potentially with a single light source. There is worry that when you move to 400 gig that you have such a density of light in a given transceiver would cause thermal issues. Is that something that you hear? I mean there's going to be issues with every type of light source, right? There's cost, yield, VCSELs are 2 years -- 1.5 years behind. How do you think about that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 12, 2024 / 12:15AM, LITE.OQ - Lumentum Holdings Inc at Barclays Global Technology Conference

Question: Tom O'Malley - Barclays Capital Inc - Analyst : Okay. Switching gears over to the telecom side really briefly. You used to define the market as transmission and transport, with the transmission side being more the transceiver business and the transport side being more ROADMs. When you look at like what you're seeing from a telecom recovery perspective, I think you used to make the comment like ROADM deployments are a good indicator for broader transmission health. But it seems like in the market today, we're hearing more about these transceiver sales. Could you maybe describe what you're seeing in your business? Where is that return to strength kind of coming from?

Question: Tom O'Malley - Barclays Capital Inc - Analyst : Is that in the traditional like I've lost track over the years here. Is that in the traditional long haul metro markets? Or have you really seen that market move more to like the ZR, ZR+ market where it's kind of the hybrid data center environment versus the real long distances. Like if you were to look REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 12, 2024 / 12:15AM, LITE.OQ - Lumentum Holdings Inc at Barclays Global Technology Conference at your business today, is it entirely modernized because you saw inventory get all the way worked down and new demand is kind of in this new metro long haul area?

Question: Tom O'Malley - Barclays Capital Inc - Analyst : All right. Last one for me. So we talked about your existing customer, the addition of one customer and then the second customer on the transceiver side, on the datacom side. We talked about a recovering telecom. We didn't really talk about industrial and consumer. We can leave that to the side because I'm pretty sure this is not the answer to this question. But when you look at the $500 million on a quarterly run rate and you build up from where you are today, what's responsible from getting you to point A to point B?

Question: Tom O'Malley - Barclays Capital Inc - Analyst : Well, exciting times. Thank you very much, Chris. It's a pleasure having you here.