Lumentum Holdings Inc.

Everyone, and welcome to the Lamentum Holdings fourth quarter and fiscal year 2021 earnings call. All participants will be in the listen-only mode. Please also note today's event is being recorded for replay purposes through August 25th, 2021. If you require assistance, please press star then zero. At this time, I'd like to turn the conference call over to Jim Finucchi of Darrell Associates. Sir, please go ahead.

Thank you, operator. Welcome to Lumentum's fourth quarter and fiscal year 2021 earnings call. This is Jim Finucchi from Darrow Associates, assisting Lumentum with its investor relations. Joining the call today from the company's management team, we have Alan Lowe, President and Chief Executive Officer, Wajid Ali, Chief Financial Officer, and Chris Coldren, Senior Vice President of Strategy and Corporate Development. Today's call will include forward-looking statements, including statements regarding the impact of COVID-19 and the responsive actions on our business and continuing uncertainty in this regard, trends and expectations for our products and technology, our markets, market opportunity and customers, and our expected financial performance, including our guidance as well as statements regarding our future revenue, our financial model, and our margin targets. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations, particularly the risk factors described in our SEC filings, including the company's quarterly report on Form 10-Q for the fiscal quarter ended April 3, 2021, and in the company's annual report on Form 10-K for the fiscal year ended July 3, 2021, which the company expects to file within 60 days of its fiscal year end. The forward-looking statements provided during this call are based on Lumentum's reasonable beliefs and expectations as of today. Lumentum undertakes no obligation to update these statements except as required by applicable law. Please also note, unless otherwise stated, all results and projections discussed in this call are non-GAAP. Non-GAAP financials are not to be considered as a substitute for or superior to financials prepared in accordance with GAAP. Lumentum's press release with the fourth quarter and fiscal year 2021 results and accompanying supplemental slides are available on its website at www.lumentum.com under the investor section. This includes additional details about our non-GAAP financial measures and a reconciliation between our historical GAAP and non-GAAP results. Now, I will turn the call over to Alan for his comments.

Thank you, Jim. Good morning, everyone. The fourth quarter capped off a fiscal 21 that, by all financial measures, was our best year ever, with record revenue, margins, and earnings per share. This was despite the tough macro environment and impact of COVID-19, which caused our lasers segment to be down more than 25% in fiscal 21. Growing demand from new customer opportunities drove optical communication segment revenue up 7% and total revenue to a new record level in fiscal 21. We are focused on end markets that are driven by durable multi-year trends. We have been successful in developing differentiated new products and designing them into market-leading customers for their next generation solutions, many of which are just starting to ramp. Our demand mix is increasingly shifting towards these products, which we believe could be signaling the start of a new accelerated growth phase in our markets. Supporting this belief were robust demand trends in the fourth quarter. We had very strong bookings resulting in a book to bill of 1.2. Telecom transport component revenue in the fourth quarter was higher than it has been in several years. I'll provide more details on this later, but increased shipments of telecom transport components is typically a leading indicator of higher future telecom demand. Year on year revenue from EML chips for data centers was up more than 50%. During the fourth quarter, we had record Datacom chip backlog as cloud data centers are transitioning to higher speeds where we have differentiated market leading products. In 3D sensing, fourth quarter revenue was up 39% year on year. This was the highest fourth quarter 3D sensing revenue we have ever had. And demand has been strengthening in the first quarter as well. The recovery in our commercial lasers business continued and resulted in a 17% sequential increase in revenue and a lasers book to bill of 1.2. We expect a favorable demand environment throughout fiscal 22. Customers have communicated that they are seeing accelerated in-market demand for their next generation solutions. And this should not be a surprise as our markets are driven by powerful long-term trends. The accelerating transition to digital and virtual approaches in all aspects of work and life is driving staggering amounts of data in the world's networks and cloud data centers. The proliferation of 5G wireless will remove bandwidth bottlenecks at the edge of the networks and will create the need for even more capacity in metro and core networks, as well as in cloud data centers. The computer and machine vision revolutions are in their early days, and we expect 3D sensing and LiDAR capabilities will expand to many more applications in multiple markets. Laser-based material processing is critical to the manufacturing of these devices, enabling the digital transformation and the transition to 5G wireless, electric vehicles, and energy storage. Now turning to additional product line details. For fiscal year 21, telecom and datacom revenue was up 4%. Excluding the low margin product lines we exited over the past two years, revenue from telecom and datacom each were up by 10% or more in fiscal 21. While customer demand is very strong, fourth quarter telecom and datacom revenue was approximately flat quarter on quarter and year on year. Revenue growth is being muted temporarily by supply constraints. which have increased recently as we have consumed much of our buffer stocks. In telecom, revenue growth in higher-level module products, including Rotems, is being constrained by the supply of critical semiconductor components. We are intensely focused on minimizing the impact of these shortages on our customer deliveries. At this time, however, semiconductor supply shortages are negatively impacting our first quarter revenue outlook by more than $30 million. But again, our team is working diligently to improve upon this situation. As I mentioned earlier, in our telecom transport component product lines, which are not impacted by semiconductor shortages, we had fourth quarter revenues higher than we have seen in several years. For example, Fourth quarter terrestrial pump laser revenue was at the highest quarterly level in the last three years and the second highest in more than a decade. Fourth quarter submarine components revenue, which is primarily from high reliability pump lasers used in undersea cable applications, was also at the highest quarterly level in several years. These data points are particularly important as pump lasers are critical to lighting up new optical amplifiers, which historically has happened early in both greenfield deployments and network expansions. Because of this, elevated pump laser shipments have typically been a leading indicator of future deployments of other telecom products. We expect the strong telecom demand to continue to increase in fiscal 22. Demand for Datacom chips for cloud data centers is also very strong. Our highly differentiated products are enabling cloud data centers to transition to 200 and 400 gig speeds. As I mentioned earlier, during the fourth quarter, we had record high Datacom chip backlog and record high EML revenue, which was up more than 50% year on year. This backlog will be delivered over multiple quarters because we are production capacity constrained on Datacom chips. Our previously highlighted Datacom production capacity expansion is tracking well and will result in significant increased output starting in the second half of fiscal 22. Due to expected long-term demand growth, we are making additional production capacity increases beyond those we previously discussed. Looking to the first quarter, telecom and datacom demand is continuing to grow. However, we expect revenue to be down quarter on quarter as the semiconductor shortages I spoke about earlier have in the near term become increasingly impactful to our ability to meet our growing customer demand. Fourth quarter industrial and consumer revenue was down 25% sequentially, but up 34% year-on-year to the highest fourth quarter level we have ever delivered. We continued to increase our design end and traction in the automotive space in the fourth quarter, especially with our high-power five-junction VIXL technology for LiDAR applications, but also with VIXLs for in-cabin driver monitoring systems. In the first quarter, we expect industrial and consumer revenue to be up sequentially as production continues to ramp for major customer new products. Turning to commercial lasers, in the fourth quarter, we had significant revenue increases in most major product lines. The most notable increase was in our kilowatt fiber laser. The growth in our laser service business was also meaningful as utilization of our lasers in the field continues to increase. Our laser segment is now recovering ahead of our original expectations and will be a contributor to growth in fiscal 22. We expect first quarter lasers revenue to be up again quarter on quarter. Throughout my remarks, I've highlighted that our markets are driven by strong long-term trends and that we are well positioned with differentiated new products and key design wins with market-leading customers. We believe the continuing shift in our demand mix toward differentiated products that enable next-generation customer solutions is a leading indicator for growth over the coming years. Before handing it over to Wajid to review the numbers, I want to once again thank and acknowledge all of our employees around the world for their hard work and contributions during these challenging times. Our employees are absolutely the company's greatest asset. They are the ones responsible for our outstanding and record fiscal 21 results and for putting us in such a great position for growth in the coming years. I would also like to thank our customers, suppliers, and shareholders for their continued support and partnership. The future is truly bright at Lumentum. With that, I'll hand it over to Wajid.