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

Aug 11, 2020 • 08:30 am ET

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

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Presentation
Executive
Alan Lowe

to every telecom and datacom communication network, and perhaps over time, increasingly in 3D sensing and LIDAR applications.

Two, expanding gallium arsenide device production capacity for our 3D sensing, automotive, industrial laser and telecom and datacom products as application for these products are expanding rapidly. And three, expanding capacity for next generation, high port count and MxN ROADMs as customers globally are designing their new networks based on these technologies.

Now on to the fourth quarter comments and trends. Fourth quarter results exceeded our guidance range across all metrics. We executed well in our recovery from the COVID-19 related shutdowns and supply challenges and returned to pre-pandemic output exiting the quarter. Our manufacturing operations have implemented worker protective measures, including enhanced use of PPE and social distancing, and in many of our sites our workforce that can perform their job functions while working from home continue to do so.

Telecom and datacom demand is very strong, especially in our datacom chips, coherent components and modules and high-end ROADMs. Supply of these products limited fourth quarter revenue. Telecom transmission was the most impacted by COVID-19 supply challenges and as a result, declined a few million dollars sequentially. Telecom transport grew sequentially due to strong pump laser sales and increased sales of wavelength management and ROADM products.

Prior quarter trends continued in datacom with strong chip demand, driving revenue growth. Chip sales became more than 95% of our datacom revenue but growth is still limited by wafer fab capacity. Current datacom chip backlog is nearly $150 million.

Looking to the first quarter, we expect telecom and datacom revenue to be higher than any time in more than a year. As I stated earlier, we are increasing production capacity in our fabs and our back-end assembly and test facilities. As additional capacity and new production staff have been coming online, we have been increasing our wafer starts to satisfy our very strong company backlog.

As expected, industrial and consumer revenue declined due to customer seasonality and the timing of new customer programs. Revenue was higher than in our guidance assumption due to stronger-than-projected demand. We expect first quarter industrial and consumer revenue to be up strongly quarter-on-quarter as we are already supplying high volumes of our new products for future customer product launches.

These new product shipments include our latest chips for user and world-facing applications. This seasonal ramp started later than last year. And as a result, we expect our second quarter shipments to be higher than our first quarter shipments, which is different than last year.

While we continue to make very good progress on new Android opportunities, we are taking a conservative approach to Android revenue in our first quarter projections due to COVID-19 and geopolitical factors.

Commercial lasers revenue was down approximately 13% quarter-on-quarter. This is a smaller decline than we had assumed in our guidance. Strength in lasers supporting the semiconductor end market partially offset the anticipated softness in fiber lasers. Lasers book-to-bill was substantially below 1. We