Lumentum Holdings Inc. (LITE) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Lumentum Annual Meeting. I would now like to hand the conference over to your speaker today, Alan Lowe. Please go ahead.

Thank you. Good morning, ladies and gentlemen. I'm Alan Lowe, President and Chief Executive Officer of Lumentum. It is my pleasure to welcome you to our 2021 Annual Meeting. Before proceeding further, let me introduce the other directors who are present today, each of whom is a director nominee. In addition to myself, our directors here online today are Penny Herscher, our Board Chair; along with Hal Covert, Julie Johnson, Brian Lillie, Ian Small, Janet Wong and Isaac Harris. I'd like to welcome our most recent addition to our Board, Mr. Isaac, Ike, Harris, who joined our Board in June of this year. Ike brings an impressive track record of successfully managing supply chains, expanding global operations and creating a positive impact on business performance and operational excellence for industry-leading organizations. I would also like to introduce the corporate officers in attendance: Wajid Ali, Executive Vice President, Chief Financial Officer; Chris Coldren, Senior Vice President, Strategy and Corporate Development; and Judy Hamel, Senior Vice President, General Counsel and Secretary. Also with us today is Justin Yahr representing Deloitte. I will act as Chairperson of this meeting, and I've asked Judy Hamel to facilitate and record the minutes of this meeting. She has also been appointed to act as inspector of election and has signed an oath of office, which will be filed with the minutes of this meeting.

Thank you, Alan. This annual meeting is being held in accordance with Lumentum's bylaws and Delaware law. I will briefly describe the 4 items of business that were included in the proxy statement to this meeting. We will then complete the balloting process and announce the preliminary voting results, at which time, the official portion of this meeting will be adjourned. After that, Alan will provide some brief comments, after which we will answer questions submitted online during the meeting. The online portal has been opened to you to submit questions, and we will do our best to answer questions at the end of Alan's comments. An affidavit that notice of this meeting has been duly given and that the notice and proxy materials were mailed on or about September 30, 2021 to all stockholders of record at the close of business on the record date of September 21, 2021. And copies of the notice, proxy statement and proxy will be filed with the minutes of this meeting. Based on the review of the proxy cards submitted prior to this meeting, as inspector of election, I have determined that out of an aggregate of 72,546,612 shares issued and outstanding as of the record date, the holders of at least 63,570,108 shares of common stock are present or represented at the meeting, which represents approximately 88% of all outstanding shares. That constitutes the majority of all issued and outstanding shares of our common stock entitled to vote at this annual meeting. A quorum is therefore present, the meeting is duly constituted and the business of the meeting may proceed. As you know, this is a virtual annual meeting. If you were a stockholder as of the record date, you may vote during the meeting today by online ballot. If you are a beneficial holder, you may only vote if you have received a legal proxy from your broker, bank or nominee. If you have previously submitted your proxy, whether by proxy card, telephone or Internet, and you do not intend to change your vote, it is not necessary that you submit another proxy or vote online, your vote will be counted. If you are eligible to vote and have not submitted your proxy or if you want to change your vote, please vote online during this meeting. I will announce the preliminary results of the voting at the end of the meeting. It is now 8:04 a.m. on November 19, 2021, and the polls for each matter to be voted on at this meeting are now open. The first item of business is the election of directors. At the time of this meeting, our Board of Directors has 8 members, each with a 1-year term. All 8 directors are nominated for election at today's meeting. As indicated in Lumentum's proxy statement, the following 8 individuals have been nominated by our Board to serve as directors: Hal Covert, Isaac Harris, Penny Herscher, Julie Johnson, Brian Lillie, Alan Lowe, Ian Small and Janet Wong. All of these nominees are currently serving as directors of the company. Directors elected at today's meeting will hold office until the 2022 Annual Meeting of Stockholders or until the successors are duly elected and qualified. This item is discussed on Pages 19 through 24 in the proxy statement. The second item of business is an advisory vote to approve the compensation of our named executive officers. This item is discussed on Page 25 in the proxy statement. The next item of business is the approval of the amended and restated 2015 equity incentive plan. This item is discussed on Pages 26 through 33 in the proxy statement. The final item of business is to ratify the appointment of Deloitte & Touche LLP, or Deloitte, as the independent registered public accounting firm for the company for the fiscal year ending July 2, 2022. This item is discussed on Pages 34 and 35 in the proxy statement. If you have not yet voted and intend to vote, please do so now online. You must submit your votes in order for them to be counted as the polls will close momentarily. As inspector of election, I will not accept ballots, proxies or votes or any changes or revocations submitted after the closing of the polls. [Voting]

It is now 8:06 a.m. on November 19, 2021, and the polls for each matter to be voted on at this meeting are now closed. No additional ballots, proxies or votes and no changes or revocations will be accepted. I have tabulated the proxies and ballots in my capacity as inspector of election. Here is a preliminary report on the voting results. With regard to Proposal 1, the 8 nominees, Hal Covert, Isaac Harris, Penny Herscher, Julie Johnson, Brian Lillie, Alan Lowe, Ian Small and Janet Wong, were each elected by a majority of the votes cast and will hold office until the 2022 Annual Meeting of Stockholders or until his or her successor is duly elected and qualitied. With regard to Proposal 2, the advisory vote to approve the compensation of our named executive officers has been approved. With regard to Proposal 3, the approval of the amended and restated 2015 equity incentive plan has been approved. And with regard to Proposal 4, the appointment of Deloitte to act as the company's independent registered public accounting firm for the fiscal year ending July 2, 2022, has been approved. The final results of voting, including any ballots and proxies recorded during this meeting, will be set forth in the report of the inspector of election and will be included in the minutes of this meeting. The final results will also be reported in a Form 8-K to be filed with the SEC no later than 4 business days from today. This annual meeting of stockholders is now adjourned. Thank you for your attendance. We will now proceed with our company update and address stockholder questions. Please note that we may not be able to answer to address all questions given our time constraints. Questions that may either be repetitive or inappropriate may also not be addressed. Before we go any further, I would like to note that during the course of the company update and question-and-answer period, we may make forward-looking statements regarding future events or the future financial performance of the company, which involve risks and uncertainties. Such statements are only predictions, and actual events or results could differ materially from these predictions due to a number of risks and uncertainties. I refer you to the documents we file with the Securities and Exchange Commission, specifically the company's recent quarterly report on Form 10-Q filed on November 4, 2021. These documents identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. In addition, we will disclose various non-GAAP financial measures. Reconciliations of all of these measures to the nearest GAAP equivalent is available on the Investor Relations portion of our website, in particular with our full year fiscal '21 and first quarter of fiscal '22 earnings releases. With the formal business of the meeting now over, I will turn the meeting back to Alan for his remarks.

Thank you, Judy. I'd like to take this opportunity to thank all of our stockholders. We had a record fiscal 2021 by all financial metrics despite the difficulties COVID-19 brought to the world. Fiscal 2021 net revenue was $1.74 billion, was a new high and was more than double that of fiscal 2020 -- 2015 revenue. For the first time, full year non-GAAP gross margin exceeded 50% and non-GAAP operating margin exceeded 30%. A few weeks ago, we reported our first quarter fiscal 2022 results, which included a new record for non-GAAP gross margin at 55%. These great results are the outcome of successfully executing our strategy of investing in growing markets, developing the best products and technologies and fostering the closest relationships with market-leading customers. During fiscal 2021, we made significant progress towards our long-term strategic and financial goals. We believe we have added to or extended our market and technology leadership positions in each of our markets by introducing many highly-differentiated, new products and winning new design-ins with market-leading customers. We believe we are well positioned in global markets that increasingly rely on our photonics products and technologies and benefit from durable, long-term growth drivers. Continued strong growth in the amount of data flowing through the world's optical networks and data centers drives increasing needs for our communications products. The market for our products used in 3D sensing and LiDAR will continue to expand in the coming years as these enable improved security and safety as well as other new functionalities in next-generation consumer electronic devices and automobiles. Higher required levels of precision, new materials, and factory and energy efficiency needs are causing manufacturers around the world to increasingly turn to laser-based approaches and the type of industrial lasers we supply. The accomplishments I outlined, along with the growth catalyst we see in each of our major product lines, makes it a very exciting time at Lumentum for all stakeholders. Based on confidence in our long-term outlook, during the fourth quarter of fiscal 2021, we initiated a $700 million stock buyback. Between then and the end of the first quarter of fiscal 2022, we have purchased more than $333 million of our shares. In August, we also released our first corporate social responsibility report, which included our commitment to reduce the impact to the planet, a diverse and inclusive workplace and human rights for the workers around the world to support the production of our products. At Lumentum, we are truly releasing the power of light to create a brighter future. We now have a few remaining minutes to take questions. If you have questions, please type them into the portal you would see on your screen. Chris Coldren will now facilitate the Q&A portion.

Alan, we have no questions in the queue.

Thank you, Chris. Seeing no questions, we will move to close the meeting. I want to thank you all for attending today's meeting and for the interest you've shown in Lumentum. We very much appreciate your attendance. And as always, thank you for your support.

This concludes the meeting. You may now disconnect.