Lumentum Holdings Inc Q4 2024 Earnings Call Transcript

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

Question: Samik Chatterjee - JPMorgan Chase & Co - Analyst : Hey. Thanks for taking my questions and I'll ask both of my questions at the same go. So I guess the first one was in relation to the new customer announcement that you highlighted in your prepared remarks. Can you give us a bit more color in condition to the type of customer whether it's [Webstealer] or how should we think about the type of the customer? And how are you thinking about the magnitude of the opportunity relative to the run rate of your module business at this time? And for my follow-up, just in terms of Q4 to Q1, I think you mentioned sequential growth in telecom. Didn't really hear you talk about any guidance on the datacom side. So if you can just help us how to think about datacom between Q4 and Q1 because -- and also if it's not growing sequentially, then what is driving the sequential decline in revenue in the datacom business between Q4 and Q1? Thank you.

Question: Alex Henderson - Needham & Company, LLC - Analyst : So, I was hoping you could talk about the capacity, ramp timing on both the chips business and as well as the transceiver business at Cloud Light. My understanding is that coming out of the June quarter, you should be fairly flattish in that business in terms of available capacity and that new capacity should be coming on stream in the December quarter and ramping starting kind of to the first half of calendar year '25. Can you give us any sense of that cadence and what those plants might look like now versus what they look like, say, three months ago?

Question: Alex Henderson - Needham & Company, LLC - Analyst : Yeah, just to follow up on the telecom side. I'm a little surprised that telecom components spaces recovering in the September quarter, given the high level of capacities that is or the inventories that are out of the customers, the OEMs. Can you talk a little bit about where -- what product areas that you're seeing that? And how fast do you think that the inventories are going to come down based on the demand you're seeing? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 14, 2024 / 9:30PM, LITE.OQ - Q4 2024 Lumentum Holdings Inc Earnings Call

Question: Alex Henderson - Needham & Company, LLC - Analyst : Yeah, so new products as opposed to old products.

Question: Simon Leopold - Raymond James & Associates, Inc. - Analyst : Great. Thanks for taking the question. First, what I wanted to ask is maybe if you could give us a little bit more color on the products associated with the new datacom award. Specifically, I think these would be 800 gig and I'm guessing single-mode product, but wondering whether or not there is more to it than a single product line. Any color there? And as a follow-up, I also wanted to understand on your telecom business in the June quarter, you had originally talked about a $30 million sequential decline. So I'm trying to get a better understanding of did that occur. And when we think about the recovery sequential growth in September, are we -- how close are we getting back to sort of the prior run rates before the June quarter? Thank you.

Question: Simon Leopold - Raymond James & Associates, Inc. - Analyst : Yeah. I wanted to understand, if you go up $30 million and you go up $5 million, well, that's still a big difference from where you used to be?

Question: George Notter - Jefferies LLC - Analyst : Hi. Thanks very much. I'm just curious if you guys have an Nvidia qualification on this 800 gig single-mode transceiver?

Question: George Notter - Jefferies LLC - Analyst : Got it. Okay. And then, this transceiver customer, I guess I'm -- based on something you said, I was curious about whether or not this contractor relationship is just a framework arrangement or are there certain minimum volumes or minimum market share that you're being given by this customer? Anything you can say in terms of your first source, second source, third source. I'd love any more details you can provide. Thanks.

Question: Meta Marshall - Morgan Stanley & Co. LLC - Analyst : Great, thanks. Don't know if I'll get an answer here, but it's worth an ask. You've mentioned kind of the $500 million quarterly run rate exiting calendar '25, but just how should we think about kind of datacom capacity between chips and transceivers you would have exiting fiscal '25? And then maybe just the second question there, has anything changed with kind of the ramp patterns of kind of your lead customer today on transceivers and their design shift as we exit kind of calendar '24? Thanks

Question: Tom O'Malley - Barclays Bank PLC - Analyst : Hey, Alan. Thanks for taking my question. I just wanted to get a clarification on the new major transceiver award with a new customer. So can you just explain to me the difference with what you kind of define as an award versus a win versus a qualification? Because I just -- correct me if I'm wrong, I think you said that qualification would happen in Q1 and it would be out of the Taiwan facility. And I believe you said that also the Thailand facility wouldn't be ready until calendar Q1. So if the product is getting qualified in Q1. Can you talk about the timeframe that that would launch and what is an award versus what is a qualified product just because you would imagine that it's hard to have revenue from something until it's actually qualified. So am I making a mistake here in the timeframe that I'm laying out?

Question: Tom O'Malley - Barclays Bank PLC - Analyst : So I guess the follow-up is what would be different from an award versus the -- yeah, thank you, Kathy. Yeah, what would be the difference between an award and what you're doing with other hyperscale or potential customers like are you committing more capital to them? Because it sounds like if you're not qualified, isn't this just kind of R&D work on a potential future customer, which all other kind of development would kind of fall under.

Question: Ruben Roy - Stifel, Nicolaus & Company, Inc. - Analyst : Thank you, Alan. I was wondering if you could comment a little bit on how you're thinking about 1.6 terabit timing. 90 days ago, we talked about, in back half of this year, perhaps into next year. But any changes on sort of on the timing of ramps? I think there's something that's dependent on switch availability and a limited number of customers potentially ramping in 2025. So any detail on how you're thinking about that would be helpful you.

Question: Ruben Roy - Stifel, Nicolaus & Company, Inc. - Analyst : Yeah, just a quick follow-up for Wajid on the gross margin comment and just around anything through record shipments of EML lasers and sort of expectations for that ramp to continue into year end. If you can give us any more detail on how you're thinking about the gross margin progression as you get into fiscal '25?

Question: Vivek Arya - BofA Securities, Inc. - Analyst : Thanks for taking my question. So Alan, in this path towards getting to $500 million, what is your telco business need to be as part of that $500 million, i.e., what assumptions are you making for the recovery in telco to get to that landmark by the end of next calendar year?

Question: Samik Chatterjee - JPMorgan Chase & Co - Analyst : For my follow-up on the transceiver side, how substitutable do you think are products from the different suppliers? Like how do you think the customer will allocate share, right? What's going to be the level of visibility that -- are your products better suited for some specific accelerator or switch combination? How would you know what your share could be potentially next year?

Question: Karl Ackerman - BNP Paribas Exane - Analyst : Yes, thank you. First off, could you discuss why you are stopping in-house development of coherent DSPs? Is that related to limited uptake for 100 gig coherent in the Asics market? Or are there other factors you consider? As you address that question, are you seeing any pause in coherent optics demand, probably, at least for DCI applications? Thank you.

Question: Ananda Baruah - Loop Capital Markets LLC - Analyst : Yeah, thanks, guys. Congrats on the progress. Thanks for taking the questions. I just have just one here and then maybe a follow-up as a clarification category, but you're Alan, with the new win in the way that you're talking about, you've been shipping this quarter, are you guys tracking ahead on the data center call [stood] a dynamic that you began to talk about, I think, (inaudible) I guess just as I recall it, it was mostly quals to going to take place kind of around the beginning of the year. And I know, as Tom talked about, there's some there's some language here. But just let me just ask it that way. Are you tracking ahead of some recall activity. That'd be helpful. Thanks a lot, guys. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 14, 2024 / 9:30PM, LITE.OQ - Q4 2024 Lumentum Holdings Inc Earnings Call

Question: Tim Savageaux - Northland Capital Markets - Analyst : Hey, good afternoon. I'm going to focus back on capacity from a couple of different perspectives. Maybe relative to what you've got now, you've mentioned you're at capacity in indium phosphide or EMLs. I mean, can you quantify us the extent of the planned capacity addition there over, I don't know, the next year? Are you doubling, tripling capacity, what have you? And really same question relative to your current run rate on the module side. I think that was expected to come down this quarter with the product transition. What sort of capacity are you looking to add in Thailand there relative to that. And it sounds like it's a fluid situation, but over what timeframe, I guess.

Question: Tim Savageaux - Northland Capital Markets - Analyst : Got it. Understood. And for a quick follow-up on, would that capacity in Thailand be entirely incremental or are you moving capacity over from China effectively or shutting that down at all or you maintaining that as a base and I'll leave it there. Don't want to get greedy here.