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Lumentum Overview Chris Coldren VP Strategy and Corporate Development
May 2016
© 2016 Lumentum Operations LLC 2
Forward Looking Statement and Financial Presentation
This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include any anticipation or guidance as to future financial performance, including future revenue, operating margin, and earnings per share, anticipated sales trends and growth opportunities for our products, trends in and size of the markets in which we operate, as well as our strategies and financial performance. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. All forward-looking statements involve risks and uncertainties that could cause actual events and terms to differ materially from those set forth herein, including those related to our business and growth opportunities. For more information on these risks, please refer to the "Risk Factors" section included in the Company’s Quarterly Report on Form 10-Q for the third fiscal quarter ended April 2, 2016. In addition, the results contained in this presentation are valid only as of today’s date except where otherwise noted. The forward-looking statements contained in this presentation are made as of the date hereof and the Company assumes no obligation to update such statements, except as required by applicable law. Unless otherwise stated, all financial results and projections are on a non-GAAP basis. Our GAAP results, details about our non-GAAP financial measures, and a reconciliation between GAAP and non-GAAP results can be found in our fiscal third quarter 2016 earnings press release which is available on our web site, www.lumentum.com, under the investors section. Financial guidance for fiscal fourth quarter 2016 is provided per our earnings call on May 4, 2016 and is not being updated or confirmed as of any other date.
Photonics accelerating the scale and speed of cloud, networking, and advanced manufacturing
spin-off from JDSU 8/1/2015
employees ~2,000
FQ3 revenue (+16% Y/Y) $230.4M
patents >1,000
FQ3 operating margin 8.8%
By the Numbers
© 2016 Lumentum Operations LLC 5
Broad portfolio Leading the 100G transition
High-growth applications
Emerging volume applications
TELECOM DATACOM COMMERCIAL LASERS
3D SENSING
Market Focus
MARKET SIZE $4B $2B $3B $0.1B
REVENUE MIX 62% 18% 19%* 1%
KEY STRENGTHS
• #1 market position, • 100G and ROADMs • Customer intimacy
• 100G technology • Scale & technology
from telecom
• Materials processing • Scale & technology
from telecom
• Quality, reliability • Scale & technology
from telecom
Source: Ovum, Strategies Unlimited , Lumentum CY15 results * Includes industrial diodes which are not part of Lasers segment reporting. Segments results can be found in Lumentum’s SEC filings.
© 2016 Lumentum Operations LLC 6
Common Operation for All Product Lines
Lithium Niobate (LiNbO3) Silica/Silicon (SiO2/Si) Indium Phosphide (InP)
Leveraging technology advances and volume across all markets/products – more rapid innovation and higher efficiency
Modules and Subsystems
Sub-Assemblies and Components
Internal Wafer Fabrication
Gallium Arsenide (GaAs)
Optical Transceivers ROADM Module Super Transport Blade Solid State Laser Fiber Laser Engine
Industrial Diode Lasers Optical Communications Components
© 2016 Lumentum Operations LLC 7
Rapid emergence of 100G in long haul and metro
Optical Communications Market Trends
CDC
FLEX SPECTRUM
NG Metro
Internet and cloud datacenters driving enormous traffic
Hyperscale datacenters poised for 100G transition
Next generation network architectures have high ROADM content
WEB 2.0
Web 2.0 providers build their own data centers
Sourcing direct from optical component vendors
Source: Cisco VNI and Cloud Index
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
2014 2015 2016 2017 2018 2019 2020
100G
Por
ts
Long HaulMetro
CAGR ≥30%
Source: Ovum
-
50
100
150
200
2014 2015 2016 2017 2018 2019
EB
of d
ata
Fixed Internet Managed IP Mobile data
Mobile + Internet Traffic
0
2000
4000
6000
8000
10000
12000
2014 2015 2016 2017 2018 2019
EB
of d
ata
Cloud data center Traditional data center
Datacenter Traffic
© 2016 Lumentum Operations LLC 8
Telecom Growth Catalysts
Next gen ROADM upgrade cycle poised to start
In Volume Production Emerging
Thousands of N.A. metro nodes to upgrade over coming years – more in China as well.
Multiple Super Transport Blades per node for next gen architectures
Receiver
Modulator
Laser CFP2-ACO
+ Integration
Super Transport Blades In Volume Production
100G upgrade cycle driving components and eventually modules
$0$200$400$600$800
$1,000$1,200$1,400$1,600$1,800$2,000
2014 2015 2016 2017 2018 2019 2020Source: Ovum
100G Telecom Components and Modules Market ($M)
CAGR ≥15%
© 2016 Lumentum Operations LLC 9
Datacom Growth Catalyst
Datacom 100G upgrade cycle drives growth, and in particular longer reach 500m -10km in QSFP28 form factor transceivers
40G QSFP+
In Production
Now
100G QSFP28
Datacenter longer reach transceiver market ($M)
Source: LightCounting
$-
$250
$500
$750
$1,000
2014 2015 2016 2017 2018 2019 2020 2021
40G QSFP+
100G QSFP28
© 2016 Lumentum Operations LLC 10
Macro-machining – conversion of CO2 to fiber lasers
Commercial Lasers Growth Catalysts
Source: Strategies Unlimited
Applications:
Cutting ~78% Welding ~14%
Other ~8%
Source: Strategies Unlimited
15% CAGR >1B Smartphones
and Tablets in 2014
13% CAGR (Gartner)
Fiber Laser Market
Micro-machining – new applications
Macro Materials Processing is ~$1.5B
market today
Micro Materials Processing is ~$0.6B
market today
© 2016 Lumentum Operations LLC 11
3D Sensing Growth Catalysts
Gaming Mobile Computing Virtual reality, Automotive Mobile Devices
Gaming was the early adopter of 3D sensing
Applications include facial recognition, 3D scanning, 3D printing, depth measurement and eye tracking
Embedding 3D sensing in mobile computing products has begun with all major manufacturers
New applications emerging for hand and body tracking
© 2016 Lumentum Operations LLC 12
Telecom market – 100G in the core 100G metro expansion – 100G component leadership cost-effective CFP2- ACO – TrueFlex® ROADMs winning in next generation networks
Datacom market
– Hyperscale data centers – leadership in 100G transition – Enterprise and client side – 100G continues to grow
Lasers market – Fiber laser strength driven by continued conversion from CO2
– Ultrafast emerging opportunity driven by new applications
Next-generation 3D sensing – Moving to PC and mobile applications
Opportunity Summary
A technology and market leader enabling Cloud, Networking, and advanced manufacturing Growth catalysts across
major product lines Profitable business
model with operating leverage
Appendix – Q3 Supplementary Earnings Slides
© 2016 Lumentum Operations LLC 15
Q3 FY16 Results (GAAP)
$ millions except for EPS, % of revenue
Part of Viavi – carveout financials
Lumentum 13 weeks Lumentum 14 weeks
Q3 FY15 Q2 FY16 Q3 FY16
Revenue $198.7 $218.3 $230.4
Gross Margin 57.1 28.7% 68.1 31.2% 62.8 27.3%
Operating Expenses 67.9 34.2% 61.9 28.4% 65.1 28.3%
Operating income (10.8) (5.4)% 6.2 2.8% (2.3) (1)%
EPS (diluted) $0.21 $0.05 $(0.13)
Shares-M (diluted) 58.8 59.2 59.2
© 2016 Lumentum Operations LLC 16
Q3 FY16 Results (Non-GAAP)
$ millions except for EPS, % of revenue
Part of Viavi – carveout financials
Lumentum 13 weeks Lumentum 14 weeks
Q3 FY15 Q2 FY16 Q3 FY16
Revenue $198.7 $218.3 $230.4
Gross Margin 60.7 30.5% 71.3 32.7% 74.2 32.2%
Operating Expenses 55.4 27.9% 51.7 23.7% 53.9 23.4%
Operating income 5.3 2.7% 19.6 9.0% 20.3 8.8%
EPS (diluted) $0.11 $0.31 $0.32
Shares-M (diluted) 58.8 60.7 61.5
© 2016 Lumentum Operations LLC 17
Q3 FY16 Highlights
Revenue was $230.4M up approximately 6% sequentially and 16% year over year – Telecom was up approximately 2% Q/Q and 17% Y/Y – Datacom was up approximately 30% Q/Q and 19% Y/Y – Laser revenue up approximately 2% Q/Q and 5% Y/Y – Industrial & Consumer down approximately 9% Q/Q and up 27% Y/Y
Datacom achieved a record revenue of $45.5M and growth was driven by 100G products which were up approximately 140% sequentially
Continued strength on TrueFlex ROADMs, which were up 30% sequentially
Gross Margin down 50bps due to typical third quarter seasonally higher ASP erosion
(~6%) in Optical Communications products
Lasers Gross Margin expanded to 46.7%
Cash position of $157M compared with $162M last quarter, and down primarily due to timing certain cash disbursements
Debt-free
(Non-GAAP - except balance sheet items)
© 2016 Lumentum Operations LLC 18
Q3 FY16 Segment Results (Non-GAAP)
$ millions, % of revenue
Part of Viavi – carveout financials Lumentum 13 weeks Lumentum 14 weeks
Q3 FY15 Q2 FY16 Q3 FY16
Revenue $198.7 $218.3 $230.4
Optical Communications 167.2 185.8 197.2 Telecom 119.7 137.9 140.0
Datacom 38.3 35.0 45.5
Industrial & Consumer1 9.2 12.9 11.7
Commercial Lasers 31.5 32.5 33.2
Gross Margin 30.5% 32.7% 32.2%
Optical Communications 28.2% 30.7% 29.8%
Commercial Lasers 43.2% 43.7% 46.7%
1. Industrial & Consumer contains 3D sensing revenues as well as diode lasers sold into industrial applications.
© 2016 Lumentum Operations LLC 19
Balance Sheet
Selected Items - $ millions Q2 FY16
Q3 FY16
Cash and Cash Equivalents $161.9 $157.2
Working Capital(1) 159.4 157.1
Property, Plant & Equipment, net 151.4 168.1
Total Assets 682.0 704.9
Total Liabilities 175.3 192.4
Shareholder’s Equity(2) 506.7 512.5
(1) Current assets excluding cash minus current liabilities (2) Includes convertible preferred stock of $35.8M
© 2016 Lumentum Operations LLC 20
Q4 FY16 Guidance (Non-GAAP)
$ millions except for EPS, % of revenue
14 weeks
Q3 FY16 Actual
13 weeks
Q4 FY16 Estimate
Revenue $230.4M $232M - $242M
Operating Margin 8.8% 8.5 – 10.0%
EPS (diluted) $0.32 $0.32 – $0.38
Financial guidance for fiscal fourth quarter 2016 is provided per our earnings call on May 4, 2016 and is not being updated or confirmed as of any other date.
© 2016 Lumentum Operations LLC 21
Investor Relations Calendar
Event Dates
J.P. Morgan Technology, Media and Telecom Conference May 23, 2016
B. Riley & Co. Investor Conference May 26, 2016
Stifel Technology, Internet & Media Conference June 7, 2016