Lumentum’s QQ3 2024 results show a revenue base of $366.5 million with meaningful margin compression and a material net loss, underscoring a transition period in a cyclical photonics market. Revenue declined marginally YoY by 1.16% and QoQ by 0.08%, while gross profit fell to $41.4 million for a gross margin of 11.3%. The company posted an operating loss of $114.6 million and a net loss of $127.0 million, or -1.88 per share, driven by higher operating expenses and a negative EBITDA of $29.3 million. With cash and short-term investments totaling $870.9 million against total debt of $2.5635 billion, Lumentum carries a substantial net leverage burden, resulting in a negative near-term free cash flow of $23.6 million and a cash burn of $7.0 million from operations.
Net Income: -$127.0 million; Net Margin: -34.65%; YoY: -110.96%; QoQ: -28.15%.
EPS: -$1.88; YoY: -113.64%; QoQ: -27.89%.
Financial Highlights
Overview of QQ3 2024 performance and context:
- Revenue: $366.5 million; YoY change: -1.16%; QoQ change: -0.08%.
- Gross Profit: $41.4 million; Gross Margin: 11.3%; YoY gross profit change: -53.79%; QoQ change: -53.43%.
- Operating Income: -$114.6 million; Operating Margin: -31.27%; YoY margin change: -105.01%; QoQ: -8.94%.
- Net Income: -$127.0 million; Net Margin: -34.65%; YoY: -110.96%; QoQ: -28.15%.
- EPS: -$1.88; YoY: -113.64%; QoQ: -27.89%.
- EBITDA: -$29.3 million; EBITDA Margin: -7.99% (approximate given margin).
- Cash Flow: Operating cash flow of -$7.0 million; Free cash flow: -$23.6 million; Capital expenditures: -$16.6 million.
- Balance Sheet (select): Cash & equivalents $425.0m; Short-term investments $445.9m; Total cash & investments $870.9m; Total debt $2,563.5m; Net debt $2,138.5m; Total assets $4,204.5m; Total liabilities $3,027.8m; Total stockholders’ equity $1,176.7m.
- Liquidity & leverage: Current ratio 5.20; Quick ratio 3.87; Debt-to-capitalization 0.685; Debt-to-equity 2.18; Net debt-to-EBITDA not meaningful due to negative EBITDA. Cash balance supports near-term liquidity but leverage remains a material stress point.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
366.50M
-1.16%
-0.08%
Gross Profit
41.40M
-53.79%
-53.43%
Operating Income
-114.60M
-105.01%
-8.94%
Net Income
-127.00M
-110.96%
-28.15%
EPS
-1.88
-113.64%
-27.89%
Key Financial Ratios
currentRatio
5.2
grossProfitMargin
11.3%
operatingProfitMargin
-25.5%
netProfitMargin
-34.7%
returnOnAssets
-3.02%
returnOnEquity
-10.8%
debtEquityRatio
2.18
operatingCashFlowPerShare
$-0.1
freeCashFlowPerShare
$-0.35
priceToBookRatio
2.73
priceEarningsRatio
-6.33
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Transcript insights not provided in the data set. No earnings-call transcript content was supplied for extraction of management commentary or quotes.
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Forward Guidance
Forward guidance is not present in the provided data. Given the quarterly metrics, investors should monitor (i) whether resiliency in OpComms and Lasers demand stabilizes revenue and improves gross margins, (ii) ongoing cost discipline and SG&A reduction to offset gross-margin compression, (iii) progress on inventory and working capital management, and (iv) any announcements related to capital allocation, debt reduction, or potential buybacks/capital management. Absent explicit guidance, the achievability of medium-term targets will hinge on a recovery in telecom capex, hyperscale data-center demand, and successful product mix shifts toward higher-margin offerings.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0JVV.L Focus
11.30%
-25.50%
-10.80%
-6.33%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
The QQ3 2024 results underscore a challenging near-term profitability and balance-sheet trajectory for Lumentum. The business generated revenue modestly lower YoY with severe gross-margin compression, resulting in a substantial operating and net loss despite a healthy current ratio. The near-term investment thesis hinges on a likely recovery in telecom capex and hyperscale data-center spending, coupled with ongoing cost controls and potential product mix optimization toward higher-margin offerings. However, the substantial debt load and negative free cash flow create meaningful downside risk if demand softness persists or if mix improvements lag. Investors should monitor liquidity management, potential deleveraging catalysts, and any management commentary on long-term margin restoration and capital allocation priorities.
Key Investment Factors
Growth Potential
Potential growth lever exists in Lumentum’s Optical Communications and Commercial Lasers segments, including modules and subsystems for high-capacity fiber networks and 3D sensing applications. Growth drivers could include hyperscale data-center network upgrades, 5G/6G backhaul expansion, and continued adoption of integrated photonics (e.g., Super Transport Blade scope). However, near-term revenue and margin visibility remains constrained by cyclical telecom capex and macro demand softness.
Profitability Risk
Key risks include sustained margin compression from product mix and pricing pressure, high leverage with a total debt load of $2.56B, negative free cash flow requiring liquidity management, potential order variability in telecom equipment, reliance on cyclical capex cycles, and potential FX impacts given a USD reporting framework and multi-region exposure.
Financial Position
Balance sheet shows $870.9m in cash and investments versus $2.563B in debt, yielding a net debt of approximately $2.139B. Leverage metrics are elevated (Debt/Capitalization ~0.685; Debt/Equity ~2.18). While liquidity ratios are robust in the near term (Current 5.20x, Quick 3.87x), the company faces a challenging solvency trajectory if profitability and cash generation do not improve. Near-term free cash flow is negative (-$23.6m), signaling ongoing cash burn absent a material correction in the revenue mix or costs.
SWOT Analysis
Strengths
Global manufacturing footprint and diversified geographic exposure (Americas, APAC, EMEA) supporting broad customer access.
Two-segment portfolio (Optical Communications and Commercial Lasers) with exposure to fiber networks and 3D sensing applications.
Liquidity cushion evident from $870.9m in cash and short-term investments, providing near-term flexibility.
Established product lines in photonics components, transceivers, and laser technologies with potential for incremental mix improvements.
Weaknesses
Material operating losses and negative net income in QQ3 2024; gross margin compressed to 11.3%.
High leverage (total debt $2.56B) and negative free cash flow, creating balance-sheet risk in downturn scenarios.
Significant inventory and working capital implications (DIO ~116 days; CCC ~137 days) indicating slower turnover and capital intensity.
Past profitability weakness reduces confidence in earnings durability without a revenue/operating-margin turnaround.
Opportunities
Growth in optical networks and data-center interconnects could drive demand for OpComms components and transceivers.
Lumentum’s laser technology portfolio may benefit from industrial, biotechnology, and precision manufacturing applications.
Product simplification and higher-value module offerings (e.g., integrated photonics solutions) could lift margins if pricing power improves.
Potential for cost-reduction programs and portfolio optimization to restore profitability.
Threats
Cyclicality of telecom capex and network upgrade cycles impacting top-line stability.
Competitive intensity and pricing pressure in optical components and lasers.
Macroeconomic headwinds and FX exposures across multi-region operations.
Sustained high debt burden that constrains strategic flexibility and deleveraging timelines.