Lumentum Holdings Inc. (NASDAQ:LITE) Q4 2020 Earnings Conference Call - Final Transcript

Aug 11, 2020 • 08:30 am ET


Lumentum Holdings Inc. (NASDAQ:LITE) Q4 2020 Earnings Conference Call - Final Transcript


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Alan Lowe

margin expanded from 33% to nearly 47%, and our operating margins expanded from 5% to nearly 27%.

Our balance sheet is healthy with ample cash to fund further organic and inorganic growth. This has all been accomplished by focusing on markets with long-term growth trends, repeatedly introducing highly innovative, market-leading products, continuously improving our operations, establishing a clear leadership position in the new and rapidly expanding 3D sensing market, executing highly accretive M&A and wisely managing our capital structure and allocation.

Fiscal '20 was a record year for revenue, margins and earnings. Our record results were driven by a product mix-rich and differentiated high-margin products and the attainment of significant acquisition synergies.

Illustrating the improvements we've made in our financial model is our fourth quarter gross margin performance, which was only 20 basis points below the record level attained in our second quarter despite the fourth quarter revenue being impacted by COVID-19. As pleased as I am with our accomplishments to-date, I am as excited as ever about the opportunities ahead. I believe the future is truly bright at Lumentum.

Long-term market trends and industry dynamics are more favorable now than when we became a public company five years ago. The world is accelerating its shift to increasingly digital and virtual approaches to work, entertainment, education, health care, social interaction and commerce. This is stressing the world's communication and cloud networks and driving the need for higher volumes of higher performance optical devices.

In order to produce, communicate and consume increasingly digital content and participate in virtual and augmented experiences, the world needs more capable and secure devices that benefit from our 3D sensing and laser technologies. We are well positioned to capitalize on these trends. We are armed with a product portfolio, of rich and differentiated new products that are indispensable to customers and end markets globally.

These include: optical communication products, such as high port count and MxN ROADMs and high bandwidth coherent components and DCO modules. These are all essential to enabling the world's communication networks to scale to the bandwidths needed for our increasing digital and virtual way of life and work.

Lasers devices for 3D sensing and LIDAR, which enable contactless entry and control systems, biometric security, computational photography, automotive safety and autonomous operation and augmented and virtual reality. And our commercial lasers enable more precise and efficient processing of a variety of materials, including the consumer electronics, semiconductor products and a broad range of durable goods.

Based on our view of the long-term opportunities ahead of us, we are strongly investing in R&D to further accelerate our leadership positions and enter new markets that benefit from our capabilities.

Additionally, we are also investing strongly in increased manufacturing capacity and capabilities. Notable manufacturing capacity increases include the following major three investments. One, doubling of our indium phosphide wafer fab capacity over the next 18 months, as we believe the performance and capabilities provided by our indium phosphide laser chips and photonic-integrated circuits will be central