Lumentum Holdings Inc at JPMorgan Global Technology, Media and Communications Conference Transcript

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

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Michael, I'll start you off with a few questions we're getting mostly on the macro from investors. And I think this is based on sort of overall hesitation or concerns we see from investors more around the macro than anything else at this point. You obviously get a lot of feedback from your customers in terms of how they're thinking. So how would you characterize sort of the likelihood that we see a significant slowdown in demand later in the year or see a potentially a recession? How are you thinking about those sort of risks to the overall business?

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : And I'm going to sort of hit some of these macro topics first. There's also -- and I'm sure you get questions on this all the time, there's a lot of concern whether the cloud companies continue to invest in AI to the same extent that they have in 2024, for example, or in the first half of 2025. How do you sort of -- when you look at your pipeline of engagement with the hyperscalers, how do you get comfort around that magnitude or even sort of a robust spend continuing, which entails then you to sort of be focusing more resources on that front as well.

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Okay. And then talk about tariffs specifically and things keep changing every day. But maybe talk about, one, sort of how you're navigating the unpredictability here of tariffs. And then overall, how you plan to mitigate the impact?

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Okay. Some investors asked us after the investor -- after your earnings call itself about how to think about Plan B for Lumentum? I know you're talking about moving capacity to Thailand more and more. And you also said in most of those cases, you're not the importer of record. So you're not the one paying the tariff as such. But if there is a tariff on Thailand as well, that's in play eventually after some of this 90 days sort of pause goes away. Is there Plan B in terms of capacity that you need to then address? Or would you just more than focus on contract manufacturers that are not impacted by the same?

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Got it. Okay. Okay. Great. So now going back to more sort of company-specific drivers, but maybe we'll start with your sort of experience at the new seat. You were in the optical industry before going to Synaptics and you've come back to the optical industry. Most investor talk to are always concerned about the historical trends of the optics industry where if you take the industry in aggregate, like finding a period of revenue growth and revenue growth at healthy margins -- few. You don't really find that over multiple time periods that the optical industry has delivered 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. MAY 13, 2025 / 3:30PM, LITE.OQ - Lumentum Holdings Inc at JPMorgan Global Technology, Media and Communications Conference So one, do you see the industry as something that's changed from the -- what the historical trends were in the prior years? And what drove -- what's the motivation for you to then come back to the optical industry and try to chase that overall that do you see a period of healthy growth and healthy margins at the same time?

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Okay. Fair. What's your early assessment of the Datacom assets that Lumentum has. Even Cloud Light is a relatively newer acquisition. If you were to sort of think about allocating capital today -- is the focus going to be more on the transceiver side with Cloud Light? Or is the focus going to be more on the chip business or the component business as you thought?

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Okay. And on the transceiver side of the business, how do you think about how critical vertical integration is? I mean particularly given that you have capabilities on both ends in terms of the transceiver assembly as well as components of your own. Do you see that as a prerequisite to sort of drive the integration and deliver shareholder return? Or do you think shareholder returns are independent of driving new integration on the transceiver business?

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : On transceiver side, you've been pretty busy. Lumentum has been pretty busy even before we joined in terms of announcing new wins with hyperscalers, should we largely take that as a reflection of already some of the move from the Chinese suppliers starting to materialize in your wins? Or how would you encourage us to interpret the amount of wins that you've announced recently in relation to Cloud Light with hyperscalers?

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Okay. Got it. Let's talk CPO and to focus on that transition. How should we think about sort of the drivers in terms of how to think about revenue versus margin, what that impact on momentum looked like if the industry were to hypothetically go to CPO sort of very quickly?

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : I know we had this discussion last night, but wanted to get this -- have this discussion at this forum as well. Primarily when you discuss share in transceivers being low and then the offset being the high share you have on the laser side. Maybe just flesh that out a bit more, where is your market share today? Or what are your aspirations in terms of market share when it comes to the lasers that support the CPO solution?

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Good. You outlined at your long-term road map is to move more towards components. I mean if technologies like CPO become more relevant, that's moving more revenue dollars to components. I mean, in 10 years' time, or even five years' time, how does Lumentum -- to a semiconductor company that is vertically integrated from the design to the fab level?

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Okay. Got it. Looking back to sort of the technology level on the component side, you have either design capabilities or even fab capacity when it comes to VCSELs, EMLs, CW lasers. I know you'll be sort of -- it doesn't matter to you where the industry goes because you have capabilities across all 3. But do you have a view on where the overall sort of optical landscape when it comes to inside data center, which technology sort of gets more adopted relative to the other? What are you hearing from your customers on that front?

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Okay. Got it. Let me take a pause there and see if there are any questions in the room. We have -- Unidentified Participant That could be a good opportunity for you, but also competition if you're making your own. How do you think that evolve over time? Do you think that will eventually design most of their own and not use third parties and do it with a contract manufacturer and you can sell components? Or do you think that will be a small part because there's a lot of innovation that you guys can bring to the table as we move on these speeds moving up.

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Any other questions in the audience? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 13, 2025 / 3:30PM, LITE.OQ - Lumentum Holdings Inc at JPMorgan Global Technology, Media and Communications Conference Unidentified Participant You mentioned on the gross margins, I think, did you say mid-30s for transceivers is probably the right place to be thinking about because that's where the guys like -- are and then you're going to bring in some of your own vertical integration, but even with that, like that's probably in the right level to think about.

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Okay. So if I continue, we haven't discussed OCS yet. So maybe help us think about the revenue opportunity that you're sort of envisioning around OCS. And you've mentioned product shipping later this year, I think. But when do we start to see that become material where it sort of is more noticeable to the P&L?

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Okay. Margins on OCS? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 13, 2025 / 3:30PM, LITE.OQ - Lumentum Holdings Inc at JPMorgan Global Technology, Media and Communications Conference

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Telecom, seeing quite a bit of revival recently. How much of that is traditional telecom equipment versus what is more purpose for ZR or DCI applications?

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Okay. Any views on what the sort of the underlying telco spend is on their own network because that obviously used to be a big driver of revenue for Lumentum in the past. Like is that starting to continue to moderate? Or is that not just stable at this point?

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : Okay. Got it. Maybe lastly, just on industrial tech, outline sort of what -- where do you see opportunities in both industrial applications, but also vis-a-vis that like the traditional face ID business that you had, do you see opportunities on either of those, that would be material in terms of incremental opportunity?

Question: Samik Chatterjee - J.P. Morgan Securities LLC - Analyst : I will wrap it up there before we run out of time. So thank you, everyone, for coming to the conference. Thank you, Michael.