Strong Optical orders, revenues impacted by semi constraints. Book-to-bill was 1.2x in 4QFY21, which is great for a company with a lot of VMI where pulls are counted as sales but not orders. Telecom & Datacom revenues missed slightly because of semiconductor (i.e., FPGAs) supply constraints for sub-systems like ROADMS. Transport products that don't require these chips, such as pump lasers, saw the highest revenues in years. Good pump laser sales suggest strong demand for new high speed network footprint. LITE had record EML revenue in 4QFY21 and exited with record Datacom chip backlog. Management guided 1QY22 Telecom & Datacom revenues down slightly q/q because Telecom supply constraints are expected to increase to ~$30mn.

3DS is trending better for LITE as it holds onto more share than expected. Consumer & Industrial (C&I) revenues, which are primarily 3DS, came in up 34% y/y in 4QFY21 to $99mn. This was $12mn ahead of our forecast. We are increasing our 1QFY22 C&I revenue forecast by $19mn to $148mn. Management did not change its view that the 3DS market will be down 20%-25% in FY22 because of a 50% ASP decline for the front facing parts. However, the company sounds meaningfully more confident in its ability to outgrow the market driven by potential unit upside. In addition, we think LITE is holding onto more 3DS share than previously expected since its main competitor appears to be struggling to get qualified on newer parts and to consistently produce older parts in volume.

Good margins outlook. The company guided 1QFY22 revenues to $430mn-$445mn, or in line with consensus of $438mn. The EPS outlook of $1.47-$1.61 was very strong compared to consensus at $1.45, especially considering the new higher tax rate. GMs look likely to be above 50% and OMs above 30% in FY22.

LITE

Lumentum Holdings, Inc.

Technology

Positive Despite ROADM Supply: 3DS Upside, Strong Optical Bookings & Margins