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What changed in Lumentum Holdings Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Lumentum Holdings Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+581 added−586 removedSource: 10-K (2024-08-21) vs 10-K (2022-08-24)

Top changes in Lumentum Holdings Inc.'s 2024 10-K

581 paragraphs added · 586 removed · 322 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

45 edited+60 added−100 removed14 unchanged
Biggest changeDuring fiscal 2022, 2021, and 2020, net revenue generated from a single customer which represented 10% or more of our total net revenue of the applicable fiscal year is summarized in the table below: Years Ended July 2, 2022 July 3, 2021 June 27, 2020 Apple 28.7 % 30.2 % 26.0 % Ciena 12.6 % 10.1 % * Huawei * 10.8 % 13.2 % *Represents less than 10% of total net revenue.
Biggest changeCustomers During fiscal 2024, 2023, and 2022, net revenue generated from a single customer which represented 10% or more of our total net revenue of the applicable fiscal year is summarized in the table below: Years Ended June 29, 2024 July 1, 2023 July 2, 2022 Google 18.9 % * * Apple * 12.1 % 28.7 % Ciena 11.4 % 15.3 % 12.6 % Nokia * 10.5 % * *Represents less than 10% of total net revenue 5 Table of Contents Trends The convergence of cloud computing and artificial intelligence (AI) is driving rapid innovation and expansion in optical hardware for hyperscale cloud operators.
Global Trade As our business operates in many global jurisdictions, the import and export of our products and services are subject to laws and regulations including international treaties, U.S. export controls and sanctions laws, customs regulations, and local trade rules around the world which vary widely across different countries and may change from time to time.
Global Trade and Export Controls As our business operates in many global jurisdictions, the import and export of our products and services are subject to laws and regulations including international treaties, U.S. export controls and sanctions laws, customs regulations, and local trade rules around the world which vary widely across different countries and may change from time-to-time.
Such laws, rules and regulations may delay the introduction of some of our products or impact our competitiveness through restricting our ability to do business in certain places or with certain entities and individuals, or by requiring us to comply laws concerning transfer and disclosure of sensitive or controlled technology.
Such laws, rules and regulations may delay the introduction of some of our products or impact our competitiveness through restricting our ability to do business in certain places or with certain entities and individuals, or by requiring us to comply with laws concerning transfer and disclosure of sensitive or controlled technology.
We use a combination of compensation and other programs (which vary by region and salary grade) to attract, motivate and retain our employees, including semi-annual performance bonuses, stock awards, an employee stock purchase plan, health savings and flexible spending accounts, paid time off, family leave, tuition assistance programs, health and wellness benefits and programs, and on-site fitness centers.
We use a combination of compensation and other programs (which vary by region and salary grade) to attract, motivate and retain our employees, including semi-annual or annual performance bonuses, stock awards, an employee stock purchase plan, health savings and flexible spending accounts, paid time off, family leave, tuition assistance programs, health and wellness benefits and programs, and on-site fitness centers.
For example, the U.S. and other governments have imposed restrictions on the import and export of, among other things, certain telecommunications products and components. The consequences of any failure to comply with domestic and foreign trade regulations could limit our ability to conduct business in certain areas or with certain customers.
For example, the U.S. and other governments have imposed restrictions on the import and export of, among other things, certain telecommunications products and components. The consequences of any failure to comply with domestic and foreign trade regulations and export controls could limit our ability to conduct business in certain areas or with certain customers.
Uniphase was originally a supplier of commercial lasers, and later, a leading supplier of optical transmission products. In 1999, JDS Fitel Inc., a pioneer in products for fiber optic networking which was formed in 1981, merged with Uniphase to become JDSU, a global leader in optical networking.
Uniphase was originally a supplier of commercial lasers, and later became a leading supplier of optical transmission products. In 1999, JDS Fitel Inc., a pioneer in products for fiber optic networking which was formed in 1981, merged with Uniphase to become JDSU, a global leader in optical networking.
Material Government Regulations Our business activities are international and subject us to various federal, state, local and foreign laws in the countries in which we operate, and our products and services are subject to laws and regulations affecting the sale of our products.
Material Government Regulations Our business activities are international and subject us to various federal, state, local and foreign laws in the countries in which we operate, and our products and services are subject to certain laws and regulations affecting the sale of our products.
Information in, or that can be accessed through, our website is not incorporated into this Form 10-K. 13
Information in, or that can be accessed through, our website is not incorporated into this Form 10-K.
A significant portion of our revenue arises from vendor-managed inventory (VMI) arrangements where the timing and volume of customer utilization is difficult to predict. Products that are shipped through VMI are not included our reported backlog amounts above.
A significant portion of our revenue arises from vendor-managed inventory (“VMI”) arrangements where the timing and volume of customer utilization is difficult to predict. Products that are shipped through VMI are not included in our reported backlog amounts above.
In August 2015, we were spun-off from JDSU and became an independent publicly-traded company through the distribution of our common stock by JDSU to its stockholders (the “Separation”). In 2015, JDSU was renamed Viavi Solutions Inc. (“Viavi”). Our business traces its origins to Uniphase Corporation, which was formed in 1979 and became publicly traded in 1992.
In August 2015, we were spun-off from JDSU and became an independent publicly traded company through the distribution of our common stock by JDSU to its stockholders. In 2015, the remaining parent company, JDSU was renamed Viavi Solutions Inc. (“Viavi”). Our business traces its origins to Uniphase Corporation, which was formed in 1979 and became publicly traded in 1992.
We strive to meet these objectives by offering competitive pay and benefits in a diverse, inclusive and safe workplace and by providing opportunities for our employees to grow and develop their careers. We believe that our employee relations are strong. Competitive Pay and Benefits We provide compensation and benefits packages that we believe are competitive within the applicable market.
We strive to meet these objectives by offering competitive pay and benefits in a diverse, inclusive and safe workplace and by providing opportunities for our employees to grow and develop their careers. Competitive Pay and Benefits We provide compensation and benefits packages that we believe are competitive within the applicable market.
We review our benefits packages annually, or more frequently as needed, to ensure we remain competitive with our peers and continue to attract and retain talent throughout our organization. Employee Recruitment, Retention and Development We are committed to recruiting, hiring, retaining, promoting and engaging a diverse workforce to best serve our global customers.
We review our benefits packages annually, or more frequently as needed, to ensure we remain competitive with our peers and continue to attract and retain talent throughout our organization. 9 Table of Contents Employee Recruitment, Retention and Development We are committed to recruiting, hiring, retaining, promoting and engaging a diverse workforce to best serve our global customers.
As part of our efforts continue to ensure Lumentum’s practices support a culture of diversity through our commitment to ensuring pay equity as a standard global practice, increasing the representation of underrepresented populations, increasing the percentage of women in senior leadership positions, and developing a pipeline of future leaders through our early career hire initiatives for new employees.
As part of our efforts to continue to ensure Lumentum’s practices support a culture of diversity we are committed to ensuring pay equity as a standard global practice, increasing the representation of underrepresented populations, increasing the percentage of women in all leadership positions, and developing a pipeline of future leaders through our early career hire initiatives for new employees.
Our significant contract manufacturing partners are located primarily in Thailand, Taiwan and Malaysia. We rely on the capabilities of our contract manufacturers to plan and procure components and manage the inventory in these locations. Sources and Availability of Raw Materials We use various suppliers and contract manufacturers to supply parts and components for manufacturing and support of multiple product lines.
We rely on the capabilities of our contract manufacturers to plan and procure components and manage the inventory in these locations. Sources and Availability of Raw Materials We use various suppliers and contract manufacturers to supply parts and components for manufacturing and support of multiple product lines.
Strategy In our OpComms segment, we are focused on technology leadership through innovation with our customers, cost leadership and functional integration.
Strategy In our Cloud & Networking segment, we are focused on technology leadership through innovation in close partnership with our customers, cost leadership and functional and vertical integration.
This acquisition strengthened our product portfolio, by adding Oclaro’s indium phosphide laser and photonic integrated circuit and coherent component and module capabilities which broadened our revenue mix and positions us strongly to meet the future needs of our customers.
This acquisition strengthened our product portfolio, by adding Oclaro’s indium phosphide laser and photonic integrated circuit and coherent component and module capabilities which broadened our revenue mix and helps position us well to meet the future needs of our customers. In August 2022, we completed the acquisition of NeoPhotonics Corporation (“NeoPhotonics”).
Operating Segments and Geographic Information” to the consolidated financial statements. For information regarding risks associated with our international operations, please refer to “Item 1A. Risk Factors.” 12 Table of Contents Available Information Our website is located at www.lumentum.com, and our investor relations website is located at www.investor.lumentum.com.
Operating Segments and Geographic Information” to the consolidated financial statements. For information regarding risks associated with our international operations, refer to Item 1A “Risk Factors” of this Annual Report. Available Information Our website is located at www.lumentum.com, and our investor relations website is located at www.investor.lumentum.com.
We may not be able to procure these components from alternate sources at acceptable prices and quality within a reasonable time, or at all, such as the current shortages in semiconductor components; therefore, the risk of loss or interruption of such supply could impact our ability to deliver certain products on a timely basis. 10 Table of Contents Intellectual Property Intellectual property rights that apply to our various products include patents, trade secrets and trademarks.
We may not be able to procure these components from alternate sources at acceptable prices and quality within a reasonable time, or at all, therefore, the risk of loss or interruption of such supply could impact our ability to deliver certain products on a timely basis.
Please refer to “Note 21. Subsequent Events” to the consolidated financial statements. Research and Development We devote substantial resources to research and development (“R&D”) for the development of new and enhanced products to serve our markets.
Refer to “Note 4. Business Combination” to the consolidated financial statements for additional information. Research and Development We devote substantial resources to research and development (“R&D”) for the development of new and enhanced products to serve our current markets and attractive new markets for our technology.
We do not intend to broadly license our intellectual property rights unless we can obtain adequate consideration or enter into acceptable patent cross-license agreements. As of July 2, 2022, we ow ned approximately 915 U.S. patents and 900 foreign patents with expiration dates ranging from July 2022 through August 2041, and had approximately 600 patent applications pending throughout the world.
We do not intend to broadly license our intellectual property rights unless we can obtain adequate consideration or enter into acceptable patent cross-license agreements. As of June 29, 2024, we owned approximately 1,025 U.S. patents and 1,100 foreign patents with expiration dates through 2044 and had approximately 790 patent applications pending throughout the world.
Our headquarters are located in San Jose, California, and we employed approximat ely 6,815 full -time employees around the world as of July 2, 2022. Lumentum was incorporated in Delaware as a wholly owned subsidiary of JDS Uniphase Corporation (“JDSU”) on February 10, 2015.
We have manufacturing capabilities and facilities in North America, South America, Asia-Pacific and Europe. Our headquarters are located in San Jose, California, and we employed approximat ely 7,257 full -time employees around the world as of June 29, 2024. Lumentum was incorporated in Delaware as a wholly owned subsidiary of JDS Uniphase Corporation (“JDSU”) on February 10, 2015.
Lumentum’s focus on diversity, inclusion, and belonging is felt across 11 Table of Contents the entire organization. We are committed to creating a diverse and welcoming workplace that includes employees with diverse backgrounds and experiences. Lumentum believes that employee and thought diversity delivers more innovation and ultimately better business results.
Diversity, Inclusion & Belonging Lumentum is committed to creating a diverse and inclusive workplace that includes employees with diverse backgrounds and experiences and believes employee and thought diversity delivers more innovation and ultimately better business results.
In certain circumstances customers may request shipment of our products to a contract manufacturer in one country, which may differ from the location of their end customers. Our net revenue is primarily denominated in U.S. dollars, including our net revenue from customers outside the United States based on customer shipment locations as presented above. Please refer to “Note 19.
Frequently, customers request shipment of our products to their factories, contract manufacturer factories, or other locations in countries that differ from their headquarter location. Our net revenue is primarily denominated in U.S. dollars, including our net revenue from customers outside the United States based on customer shipment locations as described above. Refer to “Note 17.
Once the design of a product is complete, our engineering efforts shift to enhancing both product performance and our ability to manufacture it in greater volume and at lower cost. In our OpComms segment , we are maintaining our capability to provide products throughout the network, while focusing on several important sub-segments.
We also expend significant engineering resources to enhance both product performance and our ability to manufacture products in greater volume and at lower cost. In our Cloud & Networking segment , we are maintaining our capability to provide leading products throughout the network, while focusing on several important sub-segments.
We believe we have strengthened our business model by expanding our addressable markets, customer base and expertise, diversifying our product portfolio and fortifying our core businesses from acquisitions as well as through organic initiatives. NeoPhotonics On November 4, 2021, we announced a merger agreement with NeoPhotonics.
We believe we have strengthened our business model by expanding our addressable markets, customer base and expertise, diversifying our product portfolio and fortifying our core businesses through acquisitions as well as through organic initiatives. On November 7, 2023, we completed the acquisition of Cloud Light (the “Cloud Light Closing Date”).
Our diversity work is also enhanced by employee resource groups supporting women in North America, Switzerland, Slovenia, UK, Italy, and Japan, early career hires in North America and EMEA, Black, Asian American and Pacific Islander, LatinX in North America, LGBTQIA+, Persons with Disabilities, Working Parents, and our Veteran employees.
Helping to advance some of these efforts, Lumentum’s Diversity, Inclusion, and Belonging Council is comprised of global representation from all of our business and functional organizations and our employee resource groups support women in North America, Switzerland, Slovenia, UK, Italy, and Japan, early career hires in North America and EMEA, Black, Asian American and Pacific Islander, LatinX in North America, LGBTQIA+, Persons with Disabilities, Working Parents, and our Veteran employees.
Of the 6,815 employees, 20% are represented by two national collective bargaining agreements with local chapters and one labor union. One of collective bargaining agreements will come up for renewal in December 2022. We believe that our relations with both our union and non-union employees are satisfactory.
One of the collective bargaining agreements will be subject to renewal in December 2025. We believe that our relations with both our union and non-union employees are in good standing.
The fundamental laser component technologies, which we acquired through these acquisitions, form the basis of optical networks today, and we believe will continue to do so for the foreseeable future. These technologies will enable us to develop highly integrated products to satisfy our communications customers’ ever-increasing needs for smaller, lower power and lower cost optical products.
These technologies will continue to enable us to develop highly integrated products to satisfy our customers’ ever-increasing needs for smaller, lower power and lower cost optical and photonic products. In December 2018, we completed the acquisition of Oclaro, Inc. (“Oclaro”).
We endeavor to align the latest technologies with industry leading, scalable manufacturing and operations to drive the next phase of optical communications technologies and products for Telecom and Datacom applications that are faster, more energy efficient, more agile and more reliable, making us a valuable business and technology partner for NEMs, network operators, consumer electronic companies, cloud service providers and data center operators.
We endeavor to align the latest technologies with industry leading, scalable manufacturing and operations to make us a valuable business and technology partner for cloud data center and network operators, AI/ML infrastructure providers, and NEMs.
Subsequent acquisitions by JDSU broadened the depth and breadth of the OpComms and Lasers businesses, as well as the intellectual property, technology and product offerings, of what is now Lumentum.
Subsequent acquisitions by JDSU broadened the depth and breadth of what is now Lumentum’s businesses, as well as the intellectual property, technology and product offerings of the company. The fundamental laser and photonic component technologies which we acquired through various acquisitions form the basis of cloud and communications optical network infrastructure today.
These products are targeted at serving customers engaging in biotechnology, graphics and imaging, remote sensing, and materials processing and precision micromachining markets. Manufacturing We use a combination of contract manufacturers and our own manufacturing facilities. Our significant manufacturing facilities are located in the United States, Thailand, China, the United Kingdom, Slovenia, and Japan.
Manufacturing We use a combination of our own wafer fabrication facilities, or wafer fabs, assembly and test facilities, as well as third-party contract manufacturers to produce our products. Our significant manufacturing facilities are located in the United States, Thailand, China, the United Kingdom, Slovenia, and Japan.
We have a global marketing and sales footprint that enables us to address global market opportunities for our products. We have manufacturing capabilities and facilities in North America, South America, Asia-Pacific, and Europe, with employees engaged in research and development (“R&D”), administration, manufacturing, support and sales and marketing activities.
In the automotive end-market, our lasers are used in our customers’ LiDAR and other optical sensor devices, which are being used in advanced driver assistance systems (“ADAS”) and in-cabin driver and occupant monitoring systems. 2 Table of Contents We have a global footprint that enables us to address global market opportunities for our products with employees engaged in research and development (“R&D”), administration, manufacturing, support and sales and marketing activities.
ITEM 1. BUSINESS General Overview Lumentum Holdings Inc. (“we,” “us,” “our”, “Lumentum” or the “Company”) is an industry-leading provider of optical and photonic products defined by revenue and market share addressing a range of end-market applications including Optical Communications (“OpComms”) and Commercial Lasers (“Lasers”) for manufacturing, inspection and life-science applications.
ITEM 1. BUSINESS General Overview Lumentum Holdings Inc. (“we,” “us,” “our”, “Lumentum” or the “Company”) is an industry-leading provider of optical and photonic products essential to a range of cloud, artificial intelligence and machine learning (“AI/ML”), telecommunications, consumer, and industrial end-market applications. We operate in two end-market focused reportable segments, Cloud & Networking and Industrial Tech.
International Operations During fiscal 2022, 2021 and 2020, net revenue from customers outside the United States based on the geographic region and country where our product is initially shipped, represented 89.8% , 92.3% and 91.1% of net revenue, respectively.
For additional information concerning regulatory compliance and a discussion of the risks associated with governmental regulations that may materially impact us, refer to Item 1A “Risk Factors” of this Annual Report. 10 Table of Contents International Operations During fiscal 2024, 2023 and 2022, net revenue from customers outside the United States based on the geographic region and country where our product is initially shipped represented 73.8%, 86.3% and 89.8% of net revenue, respectively.
We are also responding to our customers’ requests for higher levels of integration, including the integration of optics, electronics and software in our modules, subsystems and circuit packs. We are providing optical technology for 3D sensing systems that simplify the way that people interact with technology.
We are also responding to market needs for higher levels of integration, including the integration of optics, electronics and software in our modules, subsystems and circuit packs. In our Industrial Tech segment, we continue to develop new solid-state, fiber, and ultrafast short pulse lasers, that leverage our technologies.
In the Consumer and Industrial market, our OpComms diode laser products include vertical cavity surface emitting lasers (“VCSELs”) and edge emitting lasers. In the Consumer end-market, our laser light sources are integrated into 3D sensing cameras which are used in applications in mobile devices, gaming, payment kiosks, computers, and other consumer electronics devices.
Demand for our products in the industrial end-market is driven by end-customer investments in manufacturing capacity. In the consumer end-market, our laser light sources are integrated into our customers’ 3D sensing cameras, which are used in mobile devices and other consumer electronics devices to enable applications including biometric identification, computational photography and virtual and augmented reality.
For the geographic identification of these assets and for further information regarding our operating segments, please refer to “Note 19. Operating Segments and Geographic Information” to the consolidated financial statements.
The change in our operating segments had no impact on our previously reported consolidated results of operations, financial condition, or cash flows. We do not track all of our property, plant and equipment by operating segments. For the geographic identification of these assets and for further information regarding our operating segments, refer to “Note 17.
For more information on risks associated with the COVID-19 outbreak and regulatory actions, please refer to the section titled “Risk Factors” in Item 1A of Part I of this report.
For more information on risks associated with the change in geopolitical landscape and regulatory actions, refer to Item 1A “Risk Factors” of this Annual Report. 4 Table of Contents Reportable Segments Prior to fiscal year 2024, we operated in two reportable segments consisting of Optical Communications (“OpComms”) and Commercial Lasers (“Lasers”).
As of July 2, 2022 and July 3, 2021, our backlog was $594.0 million and $521.1 million, respectively.
As of June 29, 2024 and July 1, 2023, our backlog was $420.7 million and $389.9 million, respectively.
OpComms Markets Our OpComms products address the following markets: telecommunications (“Telecom”), data communications (“Datacom”) and consumer and industrial (“Consumer and Industrial”). 5 Table of Contents Our OpComms products include a wide range of components, modules and subsystems to support customers including carrier networks for access (local), metro (intracity), long-haul (city-to-city and worldwide) and submarine (undersea) applications.
Our Cloud & Networking products include a comprehensive portfolio of optical and photonic components, modules, and subsystems supplied to cloud and communications network operators and network equipment manufacturers building cloud data center infrastructure, including products for AI/ML and data center interconnect (“DCI”) applications, and communications service provider networks, including products for access (local), metro (intracity), long-haul (city-to-city and worldwide), and submarine (undersea) network infrastructure.
On August 3, 2022, we completed our merger (“the Merger”) with NeoPhotonics Corporation (“NeoPhotonics”), which we expect to expand our opportunities in the market for optical components used in cloud and telecom network infrastructure.
The addition of NeoPhotonics expanded our opportunities in optical components used in cloud and telecom network infrastructure.
We continue to maintain strong investments in Telecom components and modules such as ROADMs and tunable devices needed for long-haul and metro markets, as well as high performance DML, EML, and VCSEL chips for Datacom transceivers.
We continue to invest in research and development to develop innovative components and modules for telecommunications networks, such as higher capacity ROADMs and tunable laser and coherent components and transceiver modules needed for long-haul and metro applications.
Human Capital Resources As of July 2, 2022, we employed approximately 6,815 full-time employees, including approximately 5,169 employees in manufacturing, 897 employees in R&D and 749 employees in SG&A. As of July 2, 2022, we employed approximately 6,815 full-time employees, including approximately 5,169 employees in manufacturing, 897 employees in R&D and 749 employees in SG&A.
Human Capital Resources As of June 29, 2024, we employed approximately 7,257 full-time employees, including approximately 5,248 employees in manufacturing, 1,256 employees in R&D and 753 employees in SG&A. Of the 7,257 employees, approximately 3.5% are represented by three national collective bargaining agreements with local chapters in Slovenia, Italy and Brazil and three labor unions in China.
This acquisition will enable us to expand our business in our OpComms segment. Industry Trends and Business Risks Our business is driven by end-market applications which benefit from the performance advantages of optical and photonics solutions. The OpComms markets we serve are experiencing continually increasing needs for higher data transmission speeds, fiber optic network capacity and network agility.
Industry Trends and Business Risks Our business is driven by end-market applications leveraging the performance advantages of advanced optical and photonic solutions. We operate within global markets characterized by robust, long-term growth trends that are increasing demand for our products and technologies.
Applications include biometric identification, computational photography, virtual and augmented reality, and natural user interfaces. Emerging applications for our lasers include automotive safety systems, LiDAR for advanced driver assistance systems in automobiles and autonomous vehicles, self-navigating robotics and drones in industrial applications, and 3D capture of objects coupled with 3D imaging or printing.
This technology enables real-time depth perception, transforming image capture and granting devices the ability to perceive the world in three dimensions. Applications span biometric identification, computational photography, virtual and augmented reality, and natural user interfaces. Furthermore, 3D sensing continues to find evolving applications in automotive autonomy and safety systems, industrial robotics, drones, and 3D object capture for imaging and printing.
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We seek to use our core optical and photonic technology, and our volume manufacturing capability, to expand into attractive emerging markets that benefit from advantages that optical or photonics-based solutions provide, including 3D sensing for consumer electronics and diode light sources for a variety of automotive, consumer and industrial applications.
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Our Cloud & Networking products also support network equipment manufacturers building enterprise network infrastructure. Demand for our Cloud & Networking products is driven by the rapid growth in cloud and network capacity required for expanding cloud computing and services, including for AI/ML, streaming video and video conferencing, gaming, wireless and mobile devices, and internet of things (“IoT”).
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The majority of our customers tend to be original equipment manufacturers (“OEMs”) that incorporate our products into their products which then address end-market applications. For example, we sell fiber optic components that network equipment manufacturers (“NEMs”) assemble into communications networking systems, which they sell to communication service providers, hyperscale cloud operators and enterprises with their own networks.
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Our Industrial Tech products include solid-state lasers, kilowatt-class fiber lasers, diode lasers, ultrafast lasers, and gas lasers, which address applications in numerous end-markets.
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Similarly, many of our customers for our Lasers products incorporate our products into tools they produce, which are used for manufacturing processes by their customers.
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In the industrial manufacturing end-market, our lasers are incorporated into our customers’ manufacturing machine tools used for the precision processing of materials in a range of industries including semiconductor device and microelectronics fabrication, electric vehicle and battery production, metal cutting and welding, and advanced manufacturing. Our lasers also address certain semiconductor inspection and life-science applications.
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For 3D sensing, we sell diode lasers to manufacturers of consumer electronics products for mobile, personal computing, gaming, and other applications, including to the automotive industry, who then integrate our devices within their products, for eventual resale to consumers and also into other industrial applications. 2 Table of Contents We believe the global markets in which Lumentum participates have fundamentally robust, long-term trends that increase the need for our photonics products and technologies.
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Our products can also be used in the industrial end-market in imaging and sensing systems for process feedback and control, quality assurance, and waste reduction.
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W e believe the world is becoming more reliant on ever-increasing amounts of data flowing through optical networks and data centers. Lumentum’s products and technology enable the scaling of these optical networks and data centers to higher capacities.
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Adoption of our products in the industrial end-market is driven by the needs of customers to advance semiconductor and microelectronics industry roadmaps, including those that support cloud data center and AI/ML infrastructure, and by Industry 4.0/5.0 trends, including increasing manufacturing precision and flexibility and reducing waste and environmental impact.
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We expect the accelerating shift to digital and virtual approaches to all aspects of work and life that is driving staggering amounts of data in the world’s networks and cloud datacenters will continue into the future.
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In August 2022, we completed a transaction to acquire IPG Photonics’ telecom transmission product lines (“IPG telecom transmission product lines”) that develop and market products for use in telecommunications and datacenter infrastructure, including coherent Digital Signal Processors (“DSPs”), application-specific integrated circuits (“ASICs”) and optical transceivers. In November 2023, we completed the acquisition of Cloud Light Technology Limited (“Cloud Light”).
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Virtual meetings, video calls, and hybrid in-person and virtual environments for work and other aspects of life will continue to drive strong needs for bandwidth growth and present dynamic new challenges that our technology addresses.
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Cloud Light designs, markets, and manufactures advanced optical modules for data center interconnect applications. The acquisition enables us to be well-positioned to serve the growing needs of cloud and networking customers, particularly those customers focused on optimizing their data center infrastructure for the demands of AI/ML.
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As manufacturers demand higher levels of precision, new materials, and factory and energy efficiency, suppliers of manufacturing tools globally are turning to laser-based approaches, including the types of lasers Lumentum supplies. Laser-based 3D sensing and LiDAR for security, industrial and automotive applications are rapidly developing markets.
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The convergence of factors including the growing reliance on data transmission, the rapid adoption of AI/ML, and the increasing digitalization of society is driving expansion in cloud data centers and the demand for higher-bandwidth network solutions.
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The technology enables computer vision applications that enhance security, safety, and new functionality in the electronic devices that people rely on every day. The use of LiDAR and in-cabin 3D sensing in automobile and delivery vehicles over time significantly adds to our long-term market opportunity.
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Lumentum's products and technologies are at the forefront of these trends, engineered to support increased data volumes and computational loads while meeting the industry's need for advanced network capabilities. Additionally, the manufacturing industry's pursuit of higher precision, innovative materials, and improved efficiency fuels demand for industrial laser-based solutions.
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Frictionless and contactless biometric security and access control is of increasing focus globally given the world’s experience with the COVID-19 pandemic. Additionally, we expect 3D-enabled machine vision solutions to expand significantly in industrial applications in the coming years. We operate in two reportable segments: OpComms and Lasers.
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Lumentum is well-positioned to capitalize on this trend through the provision of ultrafast lasers for micromachining and advanced material processing, as well as laser-based 3D sensing and LiDAR technologies for applications across various sectors. Our optical and photonic solutions, developed in close partnership with OEMs and end users, are well-positioned to capitalize on these emerging market opportunities.
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Notable amongst these acquisitions in the OpComms business were Agility Communications, Inc. in 2005 and Picolight, Inc. in 2007, which respectively brought widely tunable, long wavelength laser technology for metro and long haul networking applications and short wavelength vertical-cavity surface-emitting lasers (“VCSELs”) for enterprise, datacenter networking, and 3D sensing applications.
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While we maintain a positive outlook on the long-term prospects for our products and technologies, we acknowledge the presence of industry and market risks and uncertainties.
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Notable acquisitions in the Lasers business were Lightwave Electronics Corporation in 2005 and Time-Bandwidth Products Inc. (“Time-Bandwidth”) in 2014. Both of these Lasers acquisitions brought high power pulsed solid-state laser products and technology to our business, which address the micro machining laser market and expanded our addressable market. In December 2018, we completed the acquisition of Oclaro, Inc.
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Fluctuations in supply and demand, exacerbated by the COVID-19 pandemic and subsequent inventory adjustments, coupled with evolving export regulations, have led to volatility in our financial performance and created uncertainty regarding future customer demand. 3 Table of Contents Industry Inventory Correction In response to supply shortages caused by the COVID-19 pandemic, certain customers accumulated higher-than-normal inventory levels, including our products, as a precautionary measure.
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(“Oclaro”), a provider of optical components and modules for the long-haul, metro and data center markets. Oclaro’s products provide differentiated solutions for optical networks and high-speed interconnects driving the next wave of streaming video, cloud computing, application virtualization and other bandwidth-intensive and high-speed applications.
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As supply constraints started easing, towards the latter half of fiscal year 2023, customers began reducing purchases of our products to align their inventory levels with more normalized levels of end-market demand. This inventory correction was amplified by similar actions subsequently taken by our customers' customers, who also sought to reduce their excess inventory by decreasing purchases.
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Internet, cloud, mobile, and broadband access network capacity requirements continue to grow at an unrelenting pace driven by the digital transformation of work and life, high-bandwidth video, gaming, and other applications.
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Consequently, our business has experienced a prolonged period of lower revenue, leading to significant underutilization of manufacturing capacity and reduced profit margins in fiscal year 2024. While we anticipate an eventual normalization of inventory levels across the supply chain, the timing and pace of this recovery remain uncertain and could be influenced by macroeconomic and financial market conditions.
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After the Merger, Lumentum has a broader portfolio of next generation products and technologies positioned to address the market opportunity created by this strong growth in network capacity requirements, including NeoPhotonics ultra-pure light tunable lasers and photonics technologies for speed over distance applications. 3 Table of Contents On August 15, 2022, we completed a transaction to acquire a business that develops and markets products for use in telecommunications and datacenter infrastructure, including Digital Signal Processors (DSP’s), ASICs and optical transceivers.
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For more information on risks associated with supply chain constraints and customer inventory, refer to Item 1A “Risk Factors” of this Annual Report. Geopolitical Landscape Developments As a global business with operations spanning diverse geographic regions, we are exposed to geopolitical risks.
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This is driven by rapid growth in both the number of higher bandwidth broadband applications such as high-definition video, online gaming, cloud computing and the number and scale of datacenters that require fiber optic links to enable the higher speeds and increased scale necessary to deliver high bandwidth video and other services.
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Fluctuations in the geopolitical landscape, including war, military conflicts, changes in export regulations, and shifts in national priorities and foreign relations policies, can significantly impact our business. For instance, modifications to trade restrictions and export regulations can adversely affect both product demand and our ability to supply customers, which would harm revenue and profit margins.
Removed
Our technology, which was originally developed for communications applications, is also finding use in other emerging market opportunities including 3D sensing applications that employ our laser technology in mobile devices, computers, augmented and virtual reality and other consumer electronics devices. Additionally, our products have been and are continuing to be designed into emerging automotive, industrial, security, safety and surveillance applications.
Added
Recent and continuing changes in export regulations pertaining to specific Chinese customers have resulted in substantial revenue losses from the Chinese market and inventory write-offs. Moreover, disruptions in our customers' supply chains due to geopolitical events could reduce or delay their demand for our products, ultimately impacting our revenue.
Removed
In the Lasers markets, customer demand is driven by the need to enable faster, higher precision volume manufacturing techniques with lower power consumption, more environmentally friendly, reduced manufacturing footprint and increased productivity. These capabilities are critical as industries develop products that are smaller and lighter, increasing productivity and yield and lowering their energy consumption.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisk Factor Summary Our business operations are subject to numerous risks, factors and uncertainties, including those outside of our control, that could cause our actual results to be harmed, including risks regarding the following: General Economic Factors • the impact of the ongoing COVID-19 pandemic and responsive measures; and • challenges relating to supply chain constraints Operational Factors • changes in technology and intense competition; • our reliance on a limited number of customers; • our ability to sell to a significant customer; • our reliance on a limited number of suppliers; • our ability to timely procure components needed to manufacture our products; • our ability to manufacture our products; • our leverage in negotiations with large customers; • order cancellations, reductions or delays in delivery schedules by our customers or distributors; • any delay in collecting or failure to collect accounts receivable; • defects in our products; • our international operations; • our strategic transactions; • our level of success in accessing new markets and obtaining new customers; • our implementation strategy for our acquisitions; • changes in spending levels, demand and customer requirements for our products; • our international structure; • restructure charges; • fluctuations in foreign currency; • our ability to hire and retain key personnel; • the effects of immigration policy on our ability to hire and retain employees; • our ability to protect our product and proprietary rights; • our reliance on licensed third-party technology; 14 • the unpredictability of our results of operations; • actual or perceived security or privacy breaches or incidents, as well as defects, errors or vulnerabilities in our technology and that of third-party providers; • factors relating to our intellectual property rights as well as the intellectual property rights of others; and • merger and acquisition related risks Regulatory and Legal Factors • our ability to obtain government authorization to export our products; • our ability to obtain antitrust approvals in connection with certain strategic transactions; • the threat of tariffs; • changes in tax laws; • litigation risks, including intellectual property litigation; • changes in social and environmental responsibility regulations, policies and provisions, as well as customer and investor demands; • changes in laws and the adoption and interpretation of administrative rules and regulations, including U.S. and international customs and export regulations; and • our ability to maintain an effective system of disclosure controls and internal control over financial reporting Financing and Transactional Risks • our future capital requirements; and • our ability to service our current and future debt Risk Related to Our Merger with NeoPhotonics • failure to successfully integrate NeoPhotonics to our business; • failure to realize the benefits expected from the Merger; and • litigation in connection with the Merger Governance Risks and Risks Related to Ownership of Our Capital Stock • dilution related to our 2024 Notes, 2026 Notes and 2028 Notes (each as defined below); • provisions of Delaware law and our certificate of incorporation and bylaws that may make a merger, tender offer or proxy contest difficult; • exclusive forum provisions in our bylaws; • the volatility of the trading price of our common stock; and • our intention not to pay dividends for the foreseeable future 15 Risks Related to Our Business Our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives has been affected, and may be materially and adversely affected by the ongoing COVID-19 pandemic.
Biggest changeRisk Factor Summary Our business operations are subject to numerous risks, factors and uncertainties, including those outside of our control, which could cause our actual results to be harmed, including risks regarding the following: Risks Related to our Business • unfavorable economic and market conditions; • our reliance on a limited number of suppliers and customers; • order cancellations, reductions or delays in delivery schedules by our customers or distributors; • failure of banking institutions and liquidity concerns at other financial institutions; • our backlog may not be an accurate indicator of our level and timing of future revenue; • our gross margins and operating margins may vary overtime; • challenges relating to supply chain constraints; • changes in technology and intense competition; • our ability to sell to a significant customer, as well as tariffs and other trade and export restrictions between the U.S. and China; • the impact of a widespread health crisis; • our international operations structure; 11 • volatility and maintenance of our real property portfolio; • our ability to timely procure components needed to manufacture our products; • our ability to manufacture our products; • our leverage in negotiations with large customers; • design and manufacturing defects or quality issues in our products; • changes in laws and the adoption and interpretation of administrative rules and regulations, including U.S. and international customs and export regulations; • our strategic transactions and implementation strategy for our acquisitions, including the recently completed acquisition of Cloud Light; • restructuring and related charges; • changes in spending levels, demand and customer requirements for our products; • changes in tax laws; • fluctuations in foreign currency; • our future capital requirements; • actual or perceived security or privacy breaches or incidents, as well as defects, errors or vulnerabilities in our technology and that of third-party providers; • the unpredictability of our results of operations; • our ability to protect our product and proprietary rights; • factors relating to our intellectual property rights as well as the intellectual property rights of others; and • litigation risks, including intellectual property litigation; • our reliance on licensed third-party technology; and • our ability to maintain an effective system of disclosure controls and internal control over financial reporting Risks Related to Human Capital • our ability to hire and retain key personnel • the effects of immigration policy on our ability to hire and retain employees; and • employment related disputes and claims Risks Related to Legal, Regulatory and Compliance • our ability to obtain government authorization to export our products; and • changes in social and environmental responsibility regulations, policies and provisions, as well as customer and investor demands Risks Related to Our Common Stock • the volatility of the trading price of our common stock; • our ability to service our current and future debt; • dilution related to our convertible notes; • our intention not to pay dividends for the foreseeable future; • provisions of Delaware law and our certificate of incorporation and bylaws that may make a merger, tender offer or proxy contest difficult; and 12 • exclusive forum provisions in our bylaws Risks Related to Our Business Our operating results may be adversely affected by unfavorable changes in macroeconomics and market conditions and the uncertain geopolitical environment.
There is no assurance that we will be issued these licenses or be granted exceptions, and failure to obtain such licenses or exceptions could limit our ability to sell our products into certain countries and negatively impact our business, financial condition and operating results.
There is no assurance that we will be issued these licenses or be granted exceptions, and failure to obtain such licenses or exceptions could limit our ability to sell our products into certain countries and negatively impact our business, financial condition and/or operating results.
Additionally, changes in our or our suppliers' manufacturing processes or the inadvertent use of defective materials by us or our suppliers could result in a material adverse effect on our ability to achieve acceptable manufacturing yields and product reliability.
Additionally, changes in our or our suppliers' manufacturing processes or the inadvertent use of defective materials by us or our suppliers could result in a material and adverse effect on our ability to achieve acceptable manufacturing yields and product reliability.
Even if we do identify acquisitions or enter into agreements with respect to such acquisitions, we may not be able to complete the acquisition due to competition, regulatory requirements or restrictions or other reasons, as occurred with the termination of our Merger Agreement with Coherent in March 2021.
Even if we do identify acquisitions or enter into agreements with respect to such acquisitions, we may not be able to complete the acquisition due to regulatory requirements or restrictions, competition, or other reasons, as occurred with the termination of our merger agreement with Coherent in March 2021.
If substantial modifications to the international structure or the way we operate our business are made, such as if future acquisitions or divestitures occur, if changes in domestic and international tax laws negatively impact the structure, if we do not operate our business consistent with the structure and applicable tax provisions, if we fail to achieve our revenue and profit goals, or if the international structure or our application of arm’s-length principles to intercompany arrangements is successfully challenged by the U.S. or foreign tax authorities, our effective tax rate may increase, which could have a material adverse effect on our operating and financial results.
If substantial modifications to our international structure or the way we operate our business are made, such as if future acquisitions or divestitures occur, if changes in domestic and international tax laws negatively impact the structure, if we do not operate our business consistent with the structure and applicable tax provisions, if we fail to achieve our revenue and profit goals, or if the international structure or our application of arm’s-length principles to intercompany arrangements is successfully challenged by the U.S. or foreign tax authorities, our effective tax rate may increase, which could have a material adverse effect on our operating and financial results.
The litigation or settlement of these matters, regardless of the merit of the claims, could result in significant expense and divert the efforts of our technical and management personnel, regardless of whether or not we are successful.
The litigation or settlement of these matters, regardless of the merit of the claims, could result in significant expense and divert the efforts of our technical and management personnel, regardless of whether or not we are successful.
We are now, and in the future we may become, subject to various legal proceedings and claims that arise in or outside the ordinary course of business. The results of legal proceedings are difficult to predict.
We are now, and in the future, may become subject to various legal proceedings and claims that arise in or outside the ordinary course of business. The results of legal proceedings are difficult to predict.
We do not expect to pay dividends on our common stock. We do not currently expect to pay dividends on our common stock. The payment of any dividends to our stockholders in the future, and the timing and amount thereof, if any, is within the discretion of our board of directors.
We do not currently expect to pay dividends on our common stock. The payment of any dividends to our stockholders in the future, and the timing and amount thereof, if any, is within the discretion of our board of directors.
Like other companies, we are subject to ongoing attempts by malicious actors, including through hacking, malware, ransomware, denial-of-service attacks, social engineering, exploitation of internet-connected devices, and other attacks, to obtain unauthorized access to or acquisition or other authorized processing of confidential information or otherwise affect service reliability and threaten the confidentiality, integrity and availability of our systems and information stored or otherwise processed on our systems.
Like other companies, we are subject to ongoing attempts by malicious actors, including through hacking, malware, ransomware, denial-of-service attacks, social engineering, exploitation of internet-connected devices, and other attacks, to obtain unauthorized access to, or acquisition or other processing of confidential or other information or otherwise affect service reliability and threaten the confidentiality, integrity and availability of our systems and information stored or otherwise processed on our systems.
We are subject to the provisions of Section 203 of the Delaware General Corporate Law which prohibits us, under some circumstances, from engaging in business combinations with some stockholders for a specified period of time 38 without the approval of the holders of substantially all of our outstanding voting stock.
We are subject to the provisions of Section 203 of the Delaware General Corporate Law which prohibits us, under some circumstances, from engaging in business combinations with some stockholders for a specified period of time without the approval of the holders of substantially all of our outstanding voting stock.
We may be unable to obtain, or we may experience delays in obtaining, customer qualification of our manufacturing lines. If we introduce new contract manufacturing partners and move any production lines from existing internal or external facilities, the new production lines will likely need to be re-qualified with our customers.
We may 21 be unable to obtain, or we may experience delays in obtaining, customer qualification of our manufacturing lines. If we introduce new contract manufacturing partners and move any production lines from existing internal or external facilities, the new production lines will likely need to be re-qualified with our customers.
Further, our third-party service providers may have been and may be in the future subject to such attacks or otherwise may suffer security breaches or incidents. In addition, actions by our employees, service providers, partners, contractors, or others, whether malicious or in error, could affect the security of our systems and confidential information.
Further, our third-party service providers may have been and may be in the future subject to such attacks or otherwise may suffer security breaches or incidents. In addition, actions by our employees, service providers, partners, contractors, or others, whether malicious or in error, could affect the security of our systems and information.
These regulations include, for example, the Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”), the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive (“RoHS”) and the Waste Electrical and Electronic Equipment Directive (“WEEE”) enacted in the European Union which regulate the use of certain hazardous substances in, and require the collection, reuse and recycling of waste from, certain products we manufacture.
These regulations include, for example, the Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”), the 33 Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive (“RoHS”) and the Waste Electrical and Electronic Equipment Directive (“WEEE”) enacted in the European Union which regulate the use of certain hazardous substances in, and require the collection, reuse and recycling of waste from, certain products we manufacture.
In addition, these systems may also contain personal data or other confidential or otherwise protected information about our employees, our customers’ employees, or other business partners. We must continue to expand and update this infrastructure in response to our changing requirements as well as evolving security standards and risks.
In addition, these systems may contain personal data or other confidential or otherwise protected information about our employees, our customers’ employees, or other business partners. We must continue to expand and update this infrastructure in response to our changing requirements as well as evolving security standards and risks.
Any such developments could have a material impact on our ability to meet our customers’ expectations and may materially impact our operating results and financial condition. 23 If our customers do not qualify our manufacturing lines or the manufacturing lines of our subcontractors for volume shipments, our operating results could suffer.
Any such developments could have a material impact on our ability to meet our customers’ expectations and may materially impact our operating results and financial condition. If our customers do not qualify our manufacturing lines or the manufacturing lines of our subcontractors for volume shipments, our operating results could suffer.
We cannot predict what additional actions the U.S. government may take with respect to Huawei beyond what is described above or to other of our customers, including modifications to or interpretations of Entity List restrictions, export restrictions, tariffs, or other trade limitations or barriers.
Further, we cannot predict what additional actions the U.S. government may take with respect to Huawei beyond what is described above or to other of our customers, including modifications to or interpretations of Entity List restrictions, export restrictions, tariffs, or other trade limitations or barriers.
Furthermore, the legal and regulatory requirements that are applicable to our business are subject to change from time to time, which increases our monitoring and compliance costs and the risk that we may fall out of compliance. Additionally, we may be required to ensure that our suppliers comply with applicable laws and regulations.
Furthermore, the legal and regulatory requirements 34 that are applicable to our business are subject to change from time-to-time, which increases our monitoring and compliance costs and the risk that we may fall out of compliance. Additionally, we may be required to ensure that our suppliers comply with applicable laws and regulations.
Our ability to pay cash dividends may also be subject to covenants and financial ratios related to existing or future indebtedness, and other agreements with third parties. Certain provisions in our charter and Delaware corporate law could hinder a takeover attempt.
Our ability to pay cash dividends may also be subject to covenants and financial ratios related to existing or future indebtedness, and other agreements with third parties. 36 Certain provisions in our charter and Delaware corporate law could hinder a takeover attempt.
In many foreign countries, particularly in those with developing economies, it is common for others to engage in business practices that are prohibited by our internal policies and procedures or U.S. 21 regulations applicable to us.
In many foreign countries, particularly in those with developing economies, it is common for others to engage in business practices that are prohibited by our internal policies and procedures or U.S. regulations applicable to us.
Any failure to successfully integrate acquired businesses may disrupt our business and adversely impact our business, financial condition and results of operations. 26 Changes in demand and customer requirements for our products may reduce manufacturing yields, which could negatively impact our profitability.
Any failure to successfully integrate acquired businesses may disrupt our business and adversely impact our business, financial condition and results of operations. Changes in demand and customer requirements for our products may reduce manufacturing yields, which could negatively impact our profitability.
Additional charges may also occur with respect to customized products that we manufacture for other customers in the event that such customers were to be added to the Entity List or otherwise if our ability to sell to such customers were restricted.
Additional charges may also occur with respect to customized products that we manufacture for other customers in the event that such customers were to be added to the Entity List or otherwise if our ability to sell to such 14 customers were restricted.
Legal, Regulatory and Compliance Risks Our sales may decline if we are unable to obtain government authorization to export certain of our products, and we may be subject to legal and regulatory consequences if we do not comply with applicable export control laws and regulations.
Risks Related to Legal, Regulatory and Compliance Our sales may decline if we are unable to obtain government authorization to export certain of our products, and we may be subject to legal and regulatory consequences if we do not comply with applicable export control laws and regulations.
Recently, our exposure to foreign currencies has increased as our non-U.S. manufacturing footprint has expanded. We continue to look for opportunities to leverage the lower cost of non-U.S. manufacturing, including the United Kingdom, Thailand, and Japan.
Recently, our exposure to foreign currencies has increased as our non-U.S. manufacturing footprint has expanded. We continue to look for opportunities to leverage the lower cost of non-U.S. manufacturing, including the United Kingdom, China, Thailand, and Japan.
In addition, if we experience problems with our manufacturing facilities or are unable to continue operations at any of these sites, including as a result of social, geopolitical, environmental or health factors, damage caused by natural disasters, or other problems or events beyond our control, including pandemics or widespread health epidemics such as COVID-19, it would be costly and require a long period of time to move the manufacture of these components and finished good products to a different facility or contract manufacturer which could then result in interruptions in supply, and would likely materially impact our financial condition and results of operations.
In addition, if we experience problems with our manufacturing facilities or are unable to continue operations at any of these sites, including as a result of social, geopolitical, environmental or health factors, damage caused by natural disasters, or other problems or events beyond our control, including pandemics or widespread health epidemics, it would be costly and require a long period of time to move the manufacture of these components and finished good products to a different facility or contract manufacturer which could then result in interruptions in supply, and would likely materially impact our financial condition and results of operations.
To preserve our revenues and product margin structures, we remain reliant on an integrated customer and market approach that anticipates end customer needs as Telecom and Datacom requirements evolve. We also must continue to develop more advanced, differentiated products that command a premium with customers, while conversely continuing to focus on streamlining product costs for established legacy products.
To preserve our revenues and product margin structures, we remain reliant on an integrated customer and market approach that anticipates end customer needs as requirements evolve. We also must continue to develop more advanced, differentiated products that command a premium with customers, while conversely continuing to focus on streamlining product costs for established legacy products.
Our ability to successfully offer our products and implement our business plan in evolving markets requires an effective planning and management process. In economic downturns, we must effectively manage our spending and operations to ensure our competitive position during the downturn, as well as our future opportunities when the economy improves, remain intact.
Our ability to successfully offer our products and implement our business plan in evolving markets requires an effective planning and management process. In economic downturns, we must effectively manage our spending and operations to ensure our competitive position during the downturn, as well as our future opportunities when the economy improves, remains intact.
Commitments and Contingencies” to the consolidated financial statements. 32 Our products incorporate and rely upon licensed third-party technology, and if licenses of third-party technology do not continue to be available to us or are not available on terms acceptable to us, our revenues and ability to develop and introduce new products could be adversely affected.
Commitments and Contingencies” to the consolidated financial statements. 30 Our products incorporate and rely upon licensed third-party technology, and if licenses of third-party technology do not continue to be available to us or are not available on terms acceptable to us, our revenues and ability to develop and introduce new products could be adversely affected.
The U.S. government has added other customers of ours to the Entity List, such as FiberHome Technologies Group in May 2020, and may continue to do so or otherwise restrict our ability to ship products which may harm our business, financial condition and results of operations.
The U.S. government also added other customers of ours to the Entity List, such as FiberHome Technologies Group in May 2020, and may continue to do so or otherwise restrict our ability to ship products which may harm our business, financial condition and results of operations.
Department of Commerce, additional regulatory restrictions were imposed in May and August 2020 to the Foreign-Produced Direct Product Rule, which impose limitations on the supply of certain U.S. items and product support to Huawei, and FiberHome Technologies was added to the Entity List on May 22, 2020.
Department of Commerce, additional regulatory restrictions were imposed in May and August 2020 and in October 2022 to the Foreign-Produced Direct Product Rule, which impose limitations on the supply of certain U.S. items and product support to Huawei, and FiberHome Technologies was added to the Entity List on May 22, 2020.
We also face risks that third parties may assert trademark infringement claims against us in one or more jurisdictions throughout the world related to our Lumentum and Oclaro brands and/or other trademarks and our exposure to these risks may increase as a result of acquisitions.
We also face risks that third parties may assert trademark infringement claims against us in one or more jurisdictions throughout the world related to our brands and/or other trademarks and our exposure to these risks may increase as a result of acquisitions.
Alternatively, if a court outside of Delaware were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations. 39 ITEM 1B.
Alternatively, if a court outside of Delaware were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.
We have consistently relied on a small number of customers for a significant portion of our sales, and in certain of our markets, such as 3D sensing and commercial lasers, this customer concentration is particularly acute.
We have consistently relied on a small number of customers for a significant portion of our sales, and in certain of our markets, such as imaging and sensing and commercial lasers, this customer concentration is particularly acute.
Our future success depends upon our ability to recruit and retain the services of executive, engineering, sales and marketing, and support personnel. The supply of highly qualified individuals, in particular engineers in very specialized technical areas, or sales people specializing in the service provider, enterprise and commercial laser markets, is limited and competition for such individuals is intense.
Our future success depends upon our ability to recruit and retain the services of executive, engineering, manufacturing, sales and marketing, and support personnel. The supply of highly qualified individuals, in particular engineers in very specialized technical areas, or salespeople specializing in the service provider, enterprise and commercial laser markets, is limited and competition for such individuals is intense.
The defense of these lawsuits could also result in continued diversion of our management’s time and attention away from business operations, which could harm our business. For additional discussion regarding litigation, please refer to “Part I, Item 3. Legal Proceedings,” and “Note 18.
The defense of these lawsuits could also result in continued diversion of our management’s time and attention away from business operations, which could harm our business. For additional discussion regarding litigation, refer to “Part I, Item 3. Legal Proceedings,” and “Note 16.
In addition, for a variety of reasons, including changes in circumstances at our contract manufacturers, restrictions or inability to operate due to COVID-19, or regarding our own business strategies, we may choose or be required to transfer the manufacturing of certain products to other manufacturing sites, including to our own manufacturing facilities.
In addition, for a variety of reasons, including changes in circumstances at our contract manufacturers, restrictions or inability to operate, or regarding our own business strategies, we may choose or be required to transfer the manufacturing of certain products to other manufacturing sites, including to our own manufacturing facilities.
In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant time and operational resources, including accounting-related costs and significant management oversight.
In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, and to integrate our acquisitions into our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant time and operational resources, including accounting-related costs and significant management oversight.
While we work to safeguard our internal network systems and validate the security of our third-party providers to mitigate these potential risks, including through information security policies and employee awareness and training, there is no assurance that such actions will be sufficient to prevent future cyber-attacks or security breaches or incidents.
While we work to safeguard our internal network systems and validate the security of our third-party service providers to mitigate these potential risks, including through information security policies and employee awareness and training, there is no assurance that such actions have been or will be sufficient to prevent cyber-attacks or security breaches or incidents.
The loss of the services of any of our key employees, the inability to attract or retain personnel in the future, particularly during the integration of NeoPhotonics and with respect to key employees of NeoPhotonics, or delays in hiring required personnel and the complexity and time involved in replacing or training new employees, could delay the development and introduction of new products, and negatively impact our ability to market, sell, or support our products.
The loss of the services of any of our key employees, the inability to attract or retain personnel in the future, particularly during the integration of acquisitions, or delays in hiring required personnel and the complexity and time involved in replacing or training new employees, could delay the development and introduction of new products, and negatively impact our ability to market, sell, or support our products.
If forecasted orders do not materialize, we may need to reduce investment in R&D activities, we may fail to optimize our manufacturing capacity, we may incur liabilities with our suppliers for reimbursement of capital expenditures, or we may have excess inventory.
If forecasted orders do not materialize, we may need to reduce investment in R&D activities, we may fail to optimize our manufacturing capacity and incur charges for such underutilization, we may incur liabilities with our suppliers for reimbursement of capital expenditures, or we may have excess inventory.
The COVID-19 pandemic has had a significant impact on the exchange markets, which heightened this risk, and we expect this higher level of volatility in foreign exchange markets will likely continue. We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.
Global economic volatility has had a significant impact on the exchange markets, which heightened this risk, and we expect the higher level of volatility in foreign exchange markets will likely continue. We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.
Our manufacturing operations and those of our contract manufacturers may be affected by natural disasters such as earthquakes, typhoons, tsunamis, fires and public health crises, including a global pandemic such as COVID-19, changes in legal requirements, labor strikes and other labor unrest and economic, political or other forces that are beyond our control.
Our manufacturing operations and those of our contract manufacturers may be affected by natural disasters such as earthquakes, typhoons, tsunamis, fires and public health crises, including global pandemics, changes in legal requirements, labor strikes and other labor unrest and economic, political or other forces that are beyond our control.
We cannot fully predict how the Data Protection Act, the UK GDPR, and other United Kingdom data protection laws or regulations may develop in the medium to longer term nor the effects of divergent laws and guidance regarding how data transfers to and from the United Kingdom will be regulated.
We cannot fully predict how the Data Protection Act, the UK GDPR, and other United Kingdom data protection laws or regulations may develop in the medium to longer term nor the effects of divergent laws and guidance regarding data transfers.
Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the 2024 Notes, 2026 Notes and 2028 Notes, or to make cash payments in connection with any conversion of the 2024 Notes, 2026 Notes, 2028 Notes or upon any fundamental change if holders of the applicable series of Notes require us to repurchase their Notes for cash, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.
Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness under the convertible notes , or to make cash payments in connection with any conversion of the convertible notes or upon any fundamental change if holders of the applicable series of the convertible notes require us to repurchase their convertible notes for cash, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.
We manufacture some of our finished good products as well as some of the components that we provide to our contract manufacturers in our China, Japan, Thailand, U.K., and San Jose, California manufacturing facilities. For some of the components and finished good products, we are the sole manufacturer.
We manufacture some of our finished good products as well as some of the components that we provide to our contract manufacturers in our China, Japan, Thailand, United Kingdom, and San Jose, California manufacturing facilities. For some of the components and finished good products, we are the sole manufacturer.
If the 2024 Notes, 2026 Notes or the 2028 Notes are converted by holders of such series, we have the ability under the applicable indenture to deliver cash, common stock, or any combination of cash or common stock, at our election upon conversion of the applicable series of Notes.
If the convertible notes are converted by holders of such series, we have the ability under the applicable indenture to deliver cash, common stock, or any combination of cash or common stock, at our election upon conversion of the applicable series of the convertible notes.
If we elect to deliver common stock upon conversion of the 2024 Notes, 2026 Notes or the 2028 Notes, it would dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.
If we elect to deliver common stock upon conversion of the convertible notes, it would dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.
The markets for our products are characterized by rapid technological change, frequent new product introductions and enhancements, substantial capital investment, changes in customer requirements, continued price pressures and a constantly evolving industry. Historically, these pricing pressures have led to a continued decline of average selling prices across our business.
The markets for our products are characterized by rapid technological change, frequent new product introductions and enhancements, substantial capital investment, changes in customer requirements, continued price pressures and a constantly evolving industry. Historically, these pricing pressures have led to a continued decline of average selling prices across our business and we expect that these historical trends will continue.
Future demand for our products is uncertain and will depend to a great degree on continued technological development and the introduction of new or enhanced products. If this does not continue, sales of our products may decline which could adversely impact our business, results of operations and financial condition.
Future demand for our products is uncertain and will primarily depend on continued technological development and the introduction of new or enhanced products. 16 If this does not continue, sales of our products may decline which could adversely impact our business, results of operations and financial condition.
We may in the future engage in additional equity or debt financings to secure additional funds. If we raise additional funds through future issuances of equity, equity-linked or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.
If we raise additional funds through future issuances of equity, equity-linked or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.
Further, a breach of our information technology infrastructure or those of our third-party service providers could result in the misappropriation of intellectual property, business plans or trade secrets.
Further, a breach or compromise of our information technology infrastructure or that of our third-party service providers could result in the misappropriation of intellectual property, business plans, trade secrets or other information.
We are unable to predict the duration of the restrictions enacted in May 2019 through August 2020, including the restrictions on Huawei’s access to foreign-made chips made using U.S. technology which could have a long-term adverse effect on our business.
We are unable to predict the duration and scope of the restrictions enacted in May 2019 and thereafter, including the restrictions on Huawei’s access to foreign-made chips made using U.S. technology which could have a long-term adverse effect on our business.
For example, sanctions on sales to certain parties of U.S. semiconductors and semiconductor equipment has caused a delay in 5G deployment in China while the affected companies seek alternative solutions, which has reduced the demand for our products from some of our Chinese customers; • varying and potentially conflicting laws and regulations; • overlapping, differing or more burdensome tax structure and laws; • potential global or regional recession as a result of the COVID-19 pandemic and related responses of individuals, governments and private industry; • markets for 5G infrastructure not developing in the manner or in the time periods we anticipate, including as a result of unfavorable developments with evolving laws and regulations worldwide; • inflationary pressures that may occur as a result of economic recovery following the COVID-19 pandemic; • wage inflation or a tightening of the labor market; • the impact of recessions and other economic conditions in economies outside the United States, including, for example, dips in the manufacturing Purchasing Managers Index as well as the Institute for Supply Management data in the Eurozone; • tax and customs changes that adversely impact our global sourcing strategy, manufacturing practices, transfer-pricing, or competitiveness of our products for global sales; • volatility in oil prices and increased costs, or limited supply of other natural resources; • political developments, geopolitical unrest or other conflicts in foreign nations, including Brexit, the war in Ukraine and political developments in Hong Kong and the potential impact such developments or further actions could have on our customers in the markets in which we operate; and • the impact of the following on service provider and government spending patterns as well as our contract and internal manufacturing: political considerations, unfavorable changes in tax treaties or laws, unfavorable events that affect foreign currencies on an absolute or relative basis, natural disasters, epidemic disease, labor unrest, earnings expatriation restrictions, misappropriation of intellectual property, military actions, acts of terrorism, political and social unrest and difficulties in staffing and managing international operations Additionally, our business is impacted by fluctuations in local economies and currencies.
For example, sanctions on sales to certain parties of U.S. semiconductors and semiconductor equipment has caused a delay in 5G deployment in China while the affected companies seek alternative solutions, which has reduced the demand for our products from some of our Chinese 18 customers; • varying and potentially conflicting laws and regulations; • overlapping, differing or more burdensome tax structure and laws; • markets for 5G infrastructure not developing in the manner or in the time periods we anticipate, including as a result of unfavorable developments with evolving laws and regulations worldwide; • wage inflation or a tightening of the labor market; • the impact of recessions and other economic conditions in economies outside the United States, including, for example, dips in the manufacturing Purchasing Managers Index as well as the Institute for Supply Management data in the Eurozone; • tax and customs changes that adversely impact our global sourcing strategy, manufacturing practices, transfer-pricing, or competitiveness of our products for global sales; • volatility in oil prices and increased costs, or limited supply of other natural resources; • political developments, geopolitical unrest or other conflicts in foreign nations, including Brexit, the Russia-Ukraine war, the Israel-Hamas war and political developments in Hong Kong and Taiwan and the potential impact such developments or further actions could have on our customers in the markets in which we operate; and • the impact of the following on service provider and government spending patterns as well as our contract and internal manufacturing: political considerations, changes in or delays in government budgeting processes, unfavorable changes in tax treaties or laws, unfavorable events that affect foreign currencies on an absolute or relative basis, natural disasters, epidemic disease, labor unrest, earnings expatriation restrictions, misappropriation of intellectual property, military actions, acts of terrorism, political and social unrest and difficulties in staffing and managing international operations.
In addition, we may be required to incur significant costs to protect against or mitigate damage caused by these disruptions or security breaches or incidents in the future.
In addition, we may be required to incur significant costs to protect against or mitigate damage caused by 28 disruptions or security breaches or incidents.
Furthermore, imposition of tariffs or new or revised export, import or doing-business regulations, including trade sanctions, could cause a decrease in the demand for, or sales of our products to customers located in China or other customers selling to Chinese end users or increase the cost for our products, which would directly impact our business and results of operations. 24 We face a number of risks related to our strategic transactions.
Furthermore, imposition of tariffs or new or revised export, import or doing-business regulations, including trade sanctions, could cause a decrease in the demand for, or sales of our 22 products to customers located in China or other customers selling to Chinese end users or increase the cost for our products, which would directly impact our business and results of operations.
Any failure or compromise of our systems or those of our third-party service providers could result in unauthorized access to, or unauthorized use, acquisition, disclosure, or other processing of such information, and any actual or perceived security breach or incident could cause significant damage to our reputation and adversely impact our relationships with our customers.
Any failure of our systems or those of our third-party service providers could result in unauthorized access or acquisition of such proprietary information, and any actual or perceived security breach could cause significant damage to our reputation and adversely impact our relationships with our customers.
The challenges involved integrating businesses and acquisitions include: • difficulty preserving relationship with customers, suppliers or partners; • potential difficulties in completing projects associated with in-process R&D; • unanticipated liabilities or our exposure for known contingencies and liabilities may exceed our estimates; • insufficient net revenue or unexpected expenses that negatively impact our margins and profitability; • unexpected losses of key employees of the acquired company, or inability to maintain our company culture; • unexpected expenses for cost of litigation against us or our directors and officers, or against the acquired company, in connection with an acquisition; • potential adverse effects on our ability to attract, recruit, retain, and motivate current and prospective employees; • conforming the acquired company’s standards, processes, procedures and controls with our operations, including integrating Enterprise Resource Planning (“ERP”) systems and other key business applications; • coordinating new product and process development; • increasing complexity from combining operations, including administrative functions, finance and human resources; • increasing the scope, geographic diversity and complexity of our operations; • difficulties in integrating operations across different cultures and languages and to address the particular economic, currency, political, and regulatory risks associated with specific countries; • difficulties in integrating acquired technology; • difficulties in coordinating and integrating geographically separated personnel, organizations, systems and facilities; • difficulty managing customer transitions or entering into new markets; • difficulties in consolidating facilities and transferring processes and know-how; • diversion of management’s attention from other business concerns; • temporary loss of productivity or operational efficiency; • dilution of our current stockholders as a result of any issuance of equity securities as acquisition consideration; • adverse tax or accounting impact; • expenditure of cash that would otherwise be available to operate our business; and • indebtedness on terms that are unfavorable to us, limit our operational flexibility or that we are unable to repay In addition, following an acquisition, we may have difficulty forecasting the financial results of the combined company and the market price of our common stock could be adversely affected if the effect of any acquisitions on our consolidated financial results is dilutive or is below the market's or financial analysts' expectations, or if there are unanticipated changes in the business or financial performance of the target company or the combined company.
Some of the challenges involved integrating businesses and acquisitions include: • difficulty preserving relationships with customers, suppliers or partners; • potential difficulties in completing projects associated with in-process R&D; • unanticipated liabilities or our exposure for known contingencies and liabilities may exceed our estimates; • insufficient net revenue or unexpected expenses that negatively impact our margins and profitability; • unexpected losses of key employees of the acquired company, inability to attract, recruit, retain, and motivate current and prospective employees or inability to maintain our company culture; 23 • unexpected expenses for cost of litigation against us or our directors and officers, or against the acquired company; • conforming the acquired company’s standards, processes, procedures and controls with our operations, including integrating Enterprise Resource Planning (“ERP”) systems and other key business applications; • coordinating new product and process development; • increasing complexity from combining operations, including administrative functions, finance and human resources; • increasing the scope, geographic diversity and complexity of our operations; • difficulties in integrating operations across different cultures and languages and to address the particular economic, currency, political, and regulatory risks associated with specific countries; • difficulties in integrating acquired technology; • difficulties in coordinating and integrating geographically separated personnel, organizations, systems and facilities; • difficulty managing customer transitions or entering into new markets; • difficulties in consolidating facilities and transferring processes and know-how; • diversion of management’s attention from other business concerns; • temporary loss of productivity or operational efficiency; • dilution of our current stockholders as a result of any issuance of equity securities as acquisition consideration; • adverse tax or accounting impact; • expenditure of cash that would otherwise be available to operate our business; and • indebtedness on terms that are unfavorable to us, limit our operational flexibility or that we are unable to repay.
Limits on manufacturing availability or capacity or delays in production or delivery of components or raw materials due to COVID-related restrictions or otherwise could further delay or inhibit our ability to obtain supply of components and produce finished goods inventory. There can be no assurance that the current supply chain impacts will not continue, or worsen, in the future.
Limits on manufacturing availability or capacity or delays in production or delivery of components or raw materials could delay or inhibit our ability to obtain supply of components and produce finished goods inventory, and there can be no assurance that the supply chain impacts will not reoccur in the future.
The costs to us to prevent, detect or alleviate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be successful.
Our costs incurred in efforts to prevent, detect, alleviate or otherwise address cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant and such efforts may not be successful.
Any system failure, disruption, accident or security breach or incident affecting us or our third-party providers could result in disruptions to our operations and loss of, or unauthorized access or damage to, our data or inappropriate access to, or use, disclosure or otherwise processing of confidential information.
Any system failure, disruption, accident or security breach or incident affecting us or our third-party service providers could result in disruptions to our operations and loss or unavailability of, or unauthorized access or damage to, inappropriate access to, or use, disclosure or other processing of confidential information and other information maintained or otherwise processed by us on our behalf.
Servicing our 2024 Notes, 2026 Notes and 2028 Notes may require a significant amount of cash, and we may not have sufficient cash flow or the ability to raise the funds necessary to satisfy our obligations under the 2024 Notes, 2026 Notes or 2028 Notes and our current and future indebtedness may limit our operating flexibility or otherwise affect our business.
Servicing our existing and future indebtedness, including the 2026 Notes, 2028 Notes and 2029 Notes (collectively referred to as the “convertible notes”) may require a significant amount of cash, and we may not have sufficient cash flow or the ability to raise the funds necessary to satisfy our obligations under the convertible notes and our current and future indebtedness may limit our operating flexibility or otherwise affect our business.
The institution of trade tariffs both globally and between the United States and China specifically carries the risk of negatively impacting overall economic conditions, which could have negative repercussions on our industry and our business.
Adverse regulatory activity, such as export controls, economic sanctions and the institution of trade tariffs both globally and between the United States and China specifically carries the risk of negatively impacting overall economic conditions, which could have negative repercussions on our industry and our business.
Growth in sales, combined with the challenges of managing geographically dispersed operations, can place a significant strain on our management systems and resources, and our anticipated growth in future operations could continue to place such a strain. The failure to effectively manage our growth could disrupt our business and harm our operating results.
Growth in sales, combined with the challenges of managing geographically dispersed operations, can place a significant strain on our management systems and resources, and our anticipated growth in future operations could continue to place such a strain.
Some customers provide us with their expected forecasts for our products several months in advance, but these customers may decrease, cancel or delay purchase orders already in place, including on short notice, or may experience financial difficulty which affects their ability to pay for products, particularly in light of the impacts of COVID-19 on their businesses and markets, and the impact of any such actions may be intensified given our dependence on a limited number of large customers.
In addition, customers provide us with their expected forecasts for our products several months in advance, but these customers may decrease, cancel or delay purchase orders already in place, including on short notice, or may experience financial difficulty which affects their ability to pay for products, particularly in light of the global macroeconomic uncertainty, and have done so from time-to-time, and the impact of any such actions may be intensified given our dependence on a limited number of large customers.
Any actual or alleged disruption to, or security breach or incident affecting, our systems or those of our third-party partners could cause significant damage to our reputation, lead to theft or misappropriation of our protected intellectual property and trade secrets, result in claims, investigations, regulatory proceedings, claims, demands and litigation, legal obligations or liability, affect our relationships with our customers, require us to bear significant costs in connection with remediating and otherwise responding to any disruption, breach, or incident, and ultimately harm our business.
Any actual or alleged disruption to, or security breach or incident affecting, our systems or those of our third-party partners could cause significant damage to our reputation, lead to theft or misappropriation of our intellectual property and trade secrets, result in claims, investigations, and other proceedings by or before regulators, and claims, demands and litigation, legal obligations or liability, affect our relationships with our customers, require us to bear significant remediation and other costs and ultimately harm our business, financial condition and operating results.
In addition, the global economic volatility has significantly impacted the foreign exchange markets, and the currencies of various countries in which we operate and in which we have significant volume of local-currency denominated expenses have seen significant volatility.
Additionally, our business is impacted by fluctuations in local economies and currencies. Global economic volatility has significantly impacted the foreign exchange markets, and the currencies of various countries in which we operate and have significant volume of local-currency denominated expenses have seen significant volatility.
Our ability to control the quality of products produced by contract manufacturers has and may in the future be impaired due to COVID-19 disruptions, and quality issues might not be resolved in a timely manner.
Our ability to control the quality of products produced by contract manufacturers has and may in the future be impaired by pandemics or widespread health epidemics disruptions, and quality issues might not be resolved in a timely manner.
Virtually all exports of products subject to the International Traffic in Arms Regulations (“ITAR”) administered by the Department of State’s Directorate of Defense Trade Controls, require a license.
Virtually all exports of products subject to the International Traffic in Arms Regulations (“ITAR”) administered by the Department of State’s Directorate of Defense Trade Controls, require a license. Certain of our fiber optics products are subject to EAR and ITAR.
If we are unable to successfully manage any of these risks in relation to any future acquisitions or divestitures, our business, financial condition and results of operations could be adversely impacted.
If we are unable to successfully manage any of these risks in relation to any future acquisitions or divestitures, our business, financial condition and results of operations could be adversely impacted. We may be unable to successfully implement our acquisitions strategy or integrate acquired companies and personnel with existing operations.
We seek to protect our products and product roadmaps in part by developing and/or securing proprietary rights relating to those products, including patents, trade secrets, know-how and continuing technological innovation.
If we have insufficient proprietary rights or if we fail to protect our rights, our business would be materially harmed. We seek to protect our products and product roadmaps in part by developing and/or securing proprietary rights relating to those products, including patents, trade secrets, know-how and continuing technological innovation.
Lawsuits and allegations of patent infringement and violation of other intellectual property rights occur regularly in our industry. We have in the past received, and anticipate that we will receive in the future, notices from third parties claiming that our products infringe upon their proprietary rights, with two distinct sources of such claims becoming increasingly prevalent.
We have in the past received, and anticipate that we will receive in the future, notices from third parties claiming that our products infringe upon their proprietary rights, with two distinct sources of such claims becoming increasingly prevalent.
We expect increased worldwide regulatory activity relating to climate change in the future. Future compliance with these laws and regulations, as well as meeting related customer and investor expectations, may adversely affect our business and results of operations.
We expect increased worldwide regulatory activity relating to climate change in the future. Future compliance with these laws and regulations, as well as meeting related customer and investor expectations, may adversely affect our business and results of operations. Our reputation and/or business could be negatively impacted by ESG matters and/or our reporting of such matters.
Our failure or perceived failure to comply with any of the foregoing legal and regulatory requirements could result in increased costs for our products, monetary penalties, damage to our reputation, government inquiries and investigations, legal claims, demands and litigation, and other liabilities.
Our failure or perceived failure to comply with any of the foregoing legal and regulatory requirements, or other actual or asserted obligations relating to privacy, data protection or information security could result in increased costs for our products, monetary penalties, damage to our reputation, government inquiries, subpoenas, investigations and other legal proceedings, legal claims, demands and litigation and other obligations and liabilities.
It can be difficult to predict the degree to which end-customer demand and the seasonality and uneven sales patterns of our OEM partners or other customers will affect our business in the future, particularly as we or they release new or enhanced products. While our fourth fiscal quarters are typically strongest, future buying patterns may differ from historical seasonality.
It can be difficult to predict the degree to which end-customer demand and the seasonality and uneven sales patterns of our OEM partners or other customers will affect our business in the future, particularly as we or they release new or enhanced products.
If operations at these contract manufacturers is adversely impacted, such as by natural disasters, or restrictions due to COVID-19 or any resulting economic impact to their business, this would likely materially impact our financial condition and results of operations.
Additionally, if operations at these contract manufacturers are adversely impacted, such as by natural disasters, or restrictions due to the impact of a widespread health crisis disruptions or any resulting economic impact to their business, this would likely materially impact our financial condition and results of operations.
In addition, many of our products are sourced from suppliers based outside of the United States, primarily in Asia. Uncertainty with respect to our suppliers’ abilities due to COVID-19 impacts, tax and trade policies, tariffs and government regulations affecting trade between the United States and other countries has recently increased.
In addition, many of our products are sourced from suppliers based outside of the United States, primarily in Asia. We may continue to face uncertainty with respect to our suppliers’ abilities to supply products due to supply chain and inventory impacts, tax and trade policies, tariffs and government regulations affecting trade between the United States and other countries.
If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business, results of operations, financial condition and cash flows.
In the past, stockholders 35 have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business, results of operations, financial condition and cash flows.
Competition is particularly intense in certain jurisdictions where we have research and development centers, including Silicon Valley, and for engineering talent generally. Also, as a result of COVID-19, employees in our industries are increasingly able to work remotely, which has increased employee mobility and turnover, making it difficult for us to retain or hire employees.
Competition is particularly intense in certain jurisdictions where we have research and development centers, including Silicon Valley, and for engineering talent generally. Also, the increase of remote work among employees in our industries has increased employee mobility and turnover, making it difficult for us to retain or hire employees.
In addition, changes in the business requirements, vendor selection, project prioritization, financial prospects, capital resources, and expenditures, or purchasing behavior (including product mix purchased or timing of purchases) of our key customers, or any real or perceived quality issues related to the products that we sell to such customers, could significantly decrease our sales to such customers or could lead to delays or cancellations of planned purchases of our products or services, which increases the risk of quarterly fluctuations in our revenues and operating results.
In addition, changes in the business requirements, vendor selection, project prioritization, financial prospects, capital resources, and expenditures, or purchasing behavior (including product mix purchased or timing of purchases) of our key customers, or any real or perceived quality issues related to the products that we sell to such customers, have led to decreased sales to such customers or delays or cancellations of planned purchases of our products or services, which has unfavorably impacted our revenues and operating results, and may continue to impact our business and results of operations.
Social and environmental responsibility regulations, policies and provisions, as well as customer and investor demands, may make our supply chain more complex and may adversely affect our relationships with customers and investors. There is an increasing focus on corporate social and environmental responsibility in the semiconductor industry, particularly with OEMs.
Social and environmental responsibility regulations, policies and provisions, as well as customer and investor demands, may make our supply chain more complex and may adversely affect our relationships with customers and investors. There is an increasing focus on environmental, social, and governance (“ESG”) matters both in the United States and globally.
For example, it could: 37 • make it more difficult for us to satisfy our debt obligations, including the 2024 Notes, the 2026 Notes and the 2028 Notes; • increase our vulnerability to general adverse economic and industry conditions; • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital and other general corporate purposes; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • restrict us from exploiting business opportunities; • place us at a competitive disadvantage compared to our competitors that have less indebtedness; and • limit our availability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other general purposes The accounting method for our 2024 Notes, 2026 Notes and 2028 Notes could adversely affect our financial condition and operating results.
For example, it could: • make it more difficult for us to satisfy our debt obligations under the convertible notes ; • increase our vulnerability to general adverse economic and industry conditions; • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital and other general corporate purposes; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • restrict us from exploiting business opportunities; • place us at a competitive disadvantage compared to our competitors that have less indebtedness; and • limit our availability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other general purposes Transactions relating to our convertible notes may dilute the ownership interest of existing stockholders, or may otherwise depress the price of our common stock.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of July 2, 2022, our leased and owned properties in total are approximately 2.5 million square feet, of which we own approximately 1,447,000 square feet, including the 1,173,000 square feet manufacturing site in Thailand, the 238,000 square feet on the San Jose campus, and the 36,000 square feet manufacturing in Slovenia.
Biggest changeAs of June 29, 2024, our leased and owned properties in total are approximately 3,350,000 square feet, of which we own approximately 2,147,000 square feet, including the 1,173,000 square feet manufacturing sites in Thailand, the 183,000 square feet manufacturing site in the United Kingdom, the 250,000 square feet manufacturing sites in China, the 238,000 square feet on the San Jose campus, the 130,000 square feet manufacturing and R&D site in Japan, and the 36,000 square feet manufacturing and R&D sites in Slovenia.
ITEM 2. PROPERTIES We own and lease various properties in the United States and eleven other countries around the world. We use the properties for executive and administrative offices, data centers, product development offices, customer service offices and manufacturing facilities. Our current corporate headquarters is approximately 238,000 square feet and located in San Jose, California which we own.
ITEM 2. PROPERTIES We own and lease various properties in the United States and eleven other countries around the world. We use the properties for executive and administrative offices, data centers, product development offices, customer service offices and manufacturing facilities. Our current corporate headquarters, which we own, is approximately 238,000 square feet and located in San Jose, California.
Larger leased sites include properties located in Canada, China, Italy, Japan, Switzerland, Taiwan, the United Kingdom and the United States. We believe our existing properties, including both owned and leased sites, are in good condition and suitable for the conduct of our business. From time to time we consider various alternatives related to our long-term facilities’ needs.
Leased sites include properties located in Canada, China, Italy, Japan, Switzerland, Taiwan, the United Kingdom, the United States, Brazil and South Korea. We believe our existing properties, including both owned and leased sites, are in good condition and suitable for the conduct of our business. From time-to-time we consider various alternatives related to our long-term facilities’ needs.
While we believe our existing facilities are adequate to meet our immediate needs, it may become necessary to lease, acquire, or sell additional or alternative space to accommodate future business needs.
While we believe our existing facilities are adequate to meet our immediate needs, it may become necessary to lease, acquire, or sell additional or alternative space to accommodate future business needs. In July 2024, we completed a transaction to purchase the land and building of our wafer fabrication facility located in Sagamihara, Japan.
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Our lease of the building at the premises was terminated as a result of the purchase.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeShould we experience an unfavorable final outcome, there exists the possibility of a material adverse impact on our financial position, results of operations or cash flows for the period in which the effect becomes reasonably estimable. Please refer to “Note 18. Commitments and Contingencies” to the consolidated financial statements. ITEM 4. MINE SAFETY DISCLOSURES None. 41 PART II ITEM 5.
Biggest changeShould we experience an unfavorable final outcome, there exists the possibility of a material adverse impact on our financial position, results of operations or cash flows for the period in which the effect becomes reasonably estimable. For a description of our material pending legal proceedings, refer to “Note 16. Commitments and Contingencies” to the consolidated financial statements. ITEM 4.
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MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock trades on the NASDAQ Stock Market under the symbol “LITE”. According to records of our transfer agent, we had 2,389 stockholders of record as of August 17, 2022 and we believe there is a substantially greater number of beneficial holders.
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We do not expect to pay cash dividends on our common stock in the foreseeable future.
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Stock Performance Graph This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or incorporated by reference into any filing of Lumentum Holdings Inc. under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
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The following graph compares the cumulative total return of our common stock with the total return for the NASDAQ Composite Index (the “IXIC”) and the NASDAQ 100 Technology Sector Index (the “NDXT”) from July 3, 2016 through July 2, 2022.
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The stock price performance on the following graph is not necessarily indicative of future stock price performance. 42 Recent Sale of Unregistered Equity Securities None.
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Issuer Purchases of Equity Securities The following table sets forth issuer purchases of equity securities for the fourth quarter of fiscal 2022 ( in millions, except share and per share amounts ): Period Total number of shares purchased (1) Average price paid per share (2) Total number of shares purchased as part of publicly announced plans or programs Maximum number (or approximation dollar value) of shares that may yet be purchased under the plans or programs April 3, 2022 to April 30, 2022 — $ — — $ 513.5 May 1, 2022 to May 28, 2022 304,000 $ 86.34 304,000 $ 487.2 May 29, 2022 to July 2, 2022 961,200 $ 80.13 961,200 $ 410.2 Total 1,265,200 $ 81.62 1,265,200 $ 410.2 (1) On May 7, 2021, our board of directors approved the 2021 share buyback program, which authorizes us to use up to $700.0 million to purchase our own shares of common stock.
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The buyback program was authorized for 2 years. On March 3, 2022, our board of directors approved an increase in our share buyback program, which authorizes us to use up to an aggregate amount of $1.0 billion (an increase from $700.0 million) to purchase our own shares of common stock through May 2024.
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The share buyback program may be suspended or terminated by the board of directors at any time. (2) Average price paid per share includes costs associated with the repurchases.
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Separate from the 2021 share buyback program and concurrent with the issuance of the 2028 Notes, we repurchased 2.0 million shares of our common stock in privately negotiated transactions in the third quarter of fiscal 2022. The average price paid was $99.00 per share for an aggregate purchase price of $200.0 million. These shares were retired immediately.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 42 ITEM 6 . RESERVED 43 ITEM 7 . MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 44 ITEM 7 A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 64 ITEM 8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 66 ITEM 9 .
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ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock trades on the NASDAQ Stock Market under the symbol “LITE”. According to records of our transfer agent, we had 2,044 stockholders of record as of August 14, 2024, and we believe there is a substantially greater number of beneficial holders.
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 122 ITEM 9 A. CONTROLS AND PROCEDURES 122 ITEM 9 B. OTHER INFORMATION 124 ITEM 9 C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 124 PART III ITEM 10 . DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 125 ITEM 1 1 . EXECUTIVE COMPENSATION 125 ITEM 1 2 .
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We do not expect to pay cash dividends on our common stock in the foreseeable future.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 125 ITEM 1 3 . CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE 125 ITEM 1 4 . PRINCIPAL ACCOUNTING FEES AND SERVICES 125 PART IV ITEM 1 5 . EXHIBITS, FINANCIAL STATEMENTS SCHEDULES 126 ITEM 1 6 .
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Stock Performance Graph This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or incorporated by reference into any filing of Lumentum Holdings Inc. under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
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FORM 10-K SUMMARY 130 SIGNATURES 131 1 Table of Contents FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K (this “Annual Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”).
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The following graph compares the cumulative total return of our common stock with the total return for the NASDAQ Composite Index (the “IXIC”) and the NASDAQ 100 Technology Sector Index (the “NDXT”) from market close on June 29, 2018 (the last trading day before the beginning of our fifth preceding fiscal year) through June 29, 2024.
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These statements relate to, among other things, our markets and industry, products and strategy, the impact of export regulation changes, the impact of the COVID-19 pandemic and related responses of business and governments to the pandemic on our business and results of operations, sales, gross margins, operating expenses, capital expenditures and requirements, liquidity, product development and R&D efforts, manufacturing plans, litigation, effective tax rates and tax reserves, our corporate and financial reporting structure, our plans for growth and innovation, our expectations regarding U.S.-China relations, market and regulatory conditions, trends and uncertainties in our business and financial results, and our merger with NeoPhotonics and the successful integration of NeoPhotonics’s business (including personnel), and are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” “contemplate,” “believe,” “predict,” “potential” and similar expressions or variations intended to identify forward-looking statements.
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The stock price performance on the following graph is not necessarily indicative of future stock price performance.
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These statements are based on the beliefs and assumptions of our management, which are in turn based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements.
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Recent Sale of Unregistered Equity Securities None. 40 Issuer Purchases of Equity Securities The following table sets forth issuer purchases of equity securities for the fourth quarter of fiscal 2024 ( in millions, except share and per share amounts ): Period Total number of shares purchased Average price paid per share (1) Total number of shares purchased as part of publicly announced plans or programs Maximum number (or approximation dollar value) of shares that may yet be purchased under the plans or programs (2) March 31, 2024 to April 27, 2024 $ 569.6 April 28, 2024 to June 1, 2024 $ 569.6 June 2, 2024 to June 29, 2024 $ 569.6 Total — $ — — $ 569.6 (1) Average price paid per share includes costs associated with the repurchases.
Removed
Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “ Risk Factors ” included under Part I, Item 1A below. Furthermore, such forward-looking statements speak only as of the date of this report.
Added
(2) On May 7, 2021, our board of directors approved the 2021 share buyback program, which authorizes us to use up to $700.0 million to purchase our own shares of common stock.
Removed
Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. PART I
Added
On March 3, 2022, our board of directors approved an increase in our share buyback program, which authorizes us to use up to an aggregate amount of $1.0 billion (an increase from $700.0 million) to purchase our own shares of common stock through May 2024.
Added
On April 5, 2023, our board of directors approved a further increase in our share buyback program, which authorizes us to use up to an aggregate amount of $1.2 billion (an increase from $1.0 billion) to purchase our own shares of common stock through May 2025, but may be suspended or terminated at any time . ITEM 6. [RESERVED] 41

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

100 edited+92 added−90 removed30 unchanged
Biggest changeThe following table summarizes selected consolidated statements of operations items as a percentage of net revenue: Years Ended July 2, 2022 July 3, 2021 June 27, 2020 Segment net revenue: OpComms 88.7 % 93.0 % 90.3 % Lasers 11.3 7.0 9.7 Net revenue 100.0 100.0 100.0 Cost of sales 50.3 51.5 58.1 Amortization of acquired developed intangibles 3.7 3.5 3.2 Gross profit 46.0 44.9 38.7 Operating expenses: Research and development 12.9 12.3 11.8 Selling, general and administrative 15.5 13.9 14.0 Restructuring and related charges (0.1) 0.4 0.5 Merger termination fee and related costs, net — (11.9) — Impairment charges — — 0.3 Total operating expenses 28.3 14.7 26.6 Income from operations 17.7 30.2 12.2 Interest expense (4.7) (3.8) (3.6) Other income (expense), net 0.7 0.2 1.9 Income before income taxes 13.7 26.6 10.4 Provision for income taxes 2.1 3.8 2.3 Net income 11.6 % 22.8 % 8.1 % 52 Financial Data for Fiscal 2022, 2021, and 2020 The following table summarizes selected consolidated statements of operations items ( in millions, except for percentages ): 2022 2021 Change Percentage Change 2021 2020 Change Percentage Change Segment net revenue: OpComms $ 1,518.5 $ 1,620.7 $ (102.2) (6.3) % $ 1,620.7 $ 1,515.1 $ 105.6 7.0 % Lasers 194.1 122.1 72.0 59.0 122.1 163.5 (41.4) (25.3) Net revenue $ 1,712.6 $ 1,742.8 $ (30.2) (1.7) % $ 1,742.8 $ 1,678.6 $ 64.2 3.8 % Gross profit $ 788.6 $ 783.1 $ 5.5 0.7 % $ 783.1 $ 650.2 $ 132.9 20.4 % Gross margin 46.0 % 44.9 % 44.9 % 38.7 % Research and development $ 220.7 $ 214.5 $ 6.2 2.9 % $ 214.5 $ 198.6 $ 15.9 8.0 % Percentage of net revenue 12.9 % 12.3 % 12.3 % 11.8 % Selling, general and administrative $ 265.7 $ 241.4 $ 24.3 10.1 % $ 241.4 $ 235.2 $ 6.2 2.6 % Percentage of net revenue 15.5 % 13.9 % 13.9 % 14.0 % Restructuring and related charges $ (1.1) $ 7.7 $ (8.8) (114.3) % $ 7.7 $ 8.0 $ (0.3) (3.8) % Percentage of net revenue (0.1) % 0.4 % 0.4 % 0.5 % Merger termination fee and related costs, net $ — $ (207.5) $ 207.5 (100.0) % $ (207.5) $ — $ (207.5) N/A Percentage of net revenue — % (11.9) % (11.9) % — % Impairment charges $ — $ — $ — — % $ — $ 4.3 $ (4.3) (100.0) % Percentage of net revenue — % — % — % 0.3 % Net Revenue Net revenue decreased by $30.2 million, or 1.7%, during fiscal 2022 as compared to fiscal 2021, due to a $102.2 million decrease in OpComms revenue, partially offset by a $72.0 million increase in Lasers revenue.
Biggest changeThe following table summarizes selected consolidated statements of operations items as a percentage of net revenue: Years Ended June 29, 2024 July 1, 2023 July 2, 2022 Segment net revenue: Cloud & Networking 79.8 % 74.8 % 58.9 % Industrial Tech 20.2 25.2 41.1 Net revenue 100.0 100.0 100.0 Cost of sales 75.3 63.0 50.3 Amortization of acquired developed intangibles 6.2 4.8 3.7 Gross profit 18.5 32.2 46.0 Operating expenses: Research and development 22.2 17.4 12.9 Selling, general and administrative 22.9 19.7 15.5 Restructuring and related charges 5.3 1.6 (0.1) Total operating expenses 50.4 38.7 28.3 Income (loss) from operations (31.9) (6.5) 17.7 Interest expense (2.5) (2.0) (4.7) Other income, net 4.6 2.8 0.7 Income (loss) before income taxes (29.8) (5.7) 13.7 Income tax provision 10.4 1.7 2.1 Net income (loss) (40.2) % (7.4) % 11.6 % Financial Data for Fiscal 2024, 2023, and 2022 The following table summarizes selected consolidated statements of operations items ( in millions, except for percentages ): 2024 2023 Change Percentage Change 2023 2022 Change Percentage Change Segment net revenue: Cloud & Networking $ 1,084.9 $ 1,322.5 $ (237.6) (18.0) % $ 1,322.5 $ 1,008.7 $ 313.8 31.1 % Industrial Tech 274.3 444.5 (170.2) (38.3) 444.5 703.9 (259.4) (36.9) Net revenue $ 1,359.2 $ 1,767.0 $ (407.8) (23.1) % $ 1,767.0 $ 1,712.6 $ 54.4 3.2 % Gross profit $ 251.5 $ 569.0 $ (317.5) (55.8) % $ 569.0 $ 788.6 $ (219.6) (27.8) % Gross margin 18.5 % 32.2 % 32.2 % 46.0 % Research and development $ 302.2 $ 307.8 $ (5.6) (1.8) % $ 307.8 $ 220.7 $ 87.1 39.5 % Percentage of net revenue 22.2 % 17.4 % 17.4 % 12.9 % Selling, general and administrative $ 310.7 $ 348.8 $ (38.1) (10.9) % $ 348.8 $ 265.7 $ 83.1 31.3 % Percentage of net revenue 22.9 % 19.7 % 19.7 % 15.5 % Restructuring and related charges $ 72.6 $ 28.1 $ 44.5 158.4 % $ 28.1 $ (1.1) $ 29.2 n/a Percentage of net revenue 5.3 % 1.6 % 1.6 % (0.1) % 49 Net Revenue Net revenue decreased by $407.8 million, or 23.1%, during fiscal 2024 as compared to fiscal 2023, due to a $237.6 million decrease in Cloud & Networking revenue and a $170.2 million decrease in Industrial Tech revenue.
If a customer pays consideration, or if we have a right to an amount of consideration that is unconditional before we transfer a good or service to the customer, those amounts are classified as deferred revenue or deposits received from customers which are included in other current liabilities or other long-term liabilities when the payment is made or when it is due, whichever is earlier.
If a customer pays consideration, or we have a right to an amount of consideration that is unconditional before we transfer a good or service to the customer, those amounts are classified as deferred revenue or deposits received from customers which are included in other current liabilities or other long-term liabilities when the payment is made or it is due, whichever is earlier.
Each business combination is then accounted for by applying the acquisition method. If the assets acquired are not a business, we account for the transaction or event as an asset acquisition. Under both methods, we recognize the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity.
Each business combination is then accounted for by applying the acquisition method. If the assets acquired are not a business, we account for the transaction or event as an asset acquisition. Under both methods, we recognize the identifiable assets acquired, the liabilities assumed, and noncontrolling interest, if any, in the acquired entity.
Cash provided by financing activities of $282.9 million during the year ended July 2, 2022, was primarily a result of proceeds from the issuance of the 2028 Notes, net of issuance costs of $854.1 million and proceeds from employee stock plans of $13.5 million, partially offset by the repurchase of shares of our common stock of $543.9 million, tax payments related to net share settlement of restricted stock of $39.0 million, and $1.8 million to settle conversion requests for the principal amount of the 2024 Notes.
Cash provided by financing activities of $282.9 million during the year ended July 2, 2022, was primarily a result of proceeds from the issuance of the 2028 Notes, net of issuance costs of $854.1 million and proceeds from employee stock plans of $13.5 million, partially offset by the repurchase of shares of our common stock of $543.9 million, tax payments related to the net share settlement of restricted stock of $39.0 million, and $1.8 million to settle conversion requests for the principal amount of the 2024 Notes. 59
Our revenue contracts generally include only one performance obligation. Revenues are recognized at a point in time when control of the promised goods or services are transferred to our customers upon shipment or delivery, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
Our revenue contracts generally include only one performance obligation. Revenues are recognized at a point in time when control of the promised goods or services are transferred to our customers upon shipment or delivery of goods or rendering of services, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
The matters discussed in these forward-looking statements are subject to risk, uncertainties and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. Please refer to “Risk Factors” and “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.
The matters discussed in these forward-looking statements are subject to risk, uncertainties and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. Refer to “Risk Factors” and “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.
The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer, adjusted for estimated variable consideration, if any. We typically estimate the impact on the transaction price for discounts offered to the customer for early payments on receivables or net of accruals for estimated sales returns.
The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer adjusted for estimated variable consideration, if any. We typically estimate the impact on the transaction price for discounts offered to the customers for early payments on receivables or net of accruals for estimated sales returns.
Repatriation could result in additional material taxes. These factors may cause us to have an overall tax rate higher than other companies or higher than our tax rates have been in the past. Additionally, if conditions warrant, we may seek to obtain additional financing through debt or equity sources.
Repatriation could result in additional material taxes. These factors may cause us to have an overall tax rate higher than other companies or higher than our tax rates in the past. Additionally, if conditions warrant, we may seek to obtain additional financing through debt or equity sources.
We assess the value of our inventory on a quarterly basis and write down those inventories which are obsolete or in excess of our forecasted demand to the lower of their cost or estimated net realizable value.
We assess the value of our inventories on a quarterly basis and write down those inventories which are obsolete or in excess of our forecasted demand to the lower of their cost or estimated net realizable value.
Cash used in investing activities of $226.3 million during the year ended July 2, 2022 was attributable to purchases of short-term investments, net of sales and maturities of $111.5 million, capital expenditures of $91.2 million, and a $30.0 million term loan provided to NeoPhotonics to support their on-going growth plans through the anticipated merger completion, partially offset by proceeds from the sales of property, plant and equipment of $6.4 million.
Cash used in investing activities of $226.3 million during the year ended July 2, 2022 was attributable to net proceeds from short-term investments of $111.5 million, capital expenditures of $91.2 million, and a $30.0 million term loan provided to NeoPhotonics to support their on-going growth plans through the anticipated merger completion, partially offset by proceeds from the sales of property, plant and equipment of $6.4 million.
Transaction Price Allocated to the Remaining Performance Obligations Remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. Unsatisfied and partially unsatisfied performance obligations consist of contract liabilities and non-cancellable backlog.
Transaction Price Allocated to the Remaining Performance Obligations Remaining performance obligations represent the transaction price allocated to performances obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. Unsatisfied and partially unsatisfied performance obligations consist of contract liabilities and non-cancellable backlog.
Revenue under VMI programs is recognized when control transfers to the customer, which is generally once the customer pulls the inventory from the hub. 48 Revenue from all sales types is recognized at the transaction price.
Revenue under VMI programs is recognized when control transfers to the customer, which is generally once the customer pulls the inventory from the hub . Revenue from all sales types is recognized at the transaction price.
Changes to these estimates or a change in judgment may have a material impact on our tax provision in a future period. 50 Business Combinations In accordance with the guidance for business combinations, we determine whether a transaction or event is a business combination, which requires that the assets acquired and liabilities assumed constitute a business.
Changes to these estimates or a change in judgment may have a material impact on our tax provision in a future period. 46 Business Combinations In accordance with the guidance for business combinations, we determine whether a transaction or event is a business combination, which requires that the assets acquired and liabilities assumed constitute a business.
Our net revenue is primarily denominated in U.S. dollars, including our net revenue from customers outside the United States as presented above. We expect revenue from customers outside of the United States to continue to be an important part of our overall net revenue and an increasing focus for net revenue growth opportunities.
Our net revenue is primarily denominated in U.S. dollars, including our net revenue from customers outside the United States as presented above. We expect revenue from customers outside of the United States to continue to be an important part of our overall net revenue and a focus for net revenue growth opportunities.
The increase in cash and cash equivalents was mainly due to cash provided by operating activities of $459.3 million and financing activities of $282.9 million, partially offset by cash used in investing activities of $226.3 million during the year ended July 2, 2022.
The increase in cash and cash equivalents was primarily due to cash provided by operating activities of $459.3 million and financing activities of $282.9 million, partially offset by cash used in investing activities of $226.3 million during the year ended July 2, 2022.
If actual market conditions are more favorable than anticipated, inventory previously written down may be sold, resulting in lower cost of sales and higher income from operations than expected in that period.
If actual market conditions are more favorable than anticipated, inventories previously written down may be sold, resulting in lower cost of sales and higher income from operations than expected in that period.
Any contributions for the following fiscal year and later will depend on the value of the plan assets in the future and thus are uncertain. As such, we have not included any amounts beyond one year in the table above. Please refer to “Note 17. Employee Retirement Plans” to the consolidated financial statements.
Any contributions for the following fiscal year and later will depend on the value of the plan assets in the future and thus are uncertain. As such, we have not included any amounts beyond one year in the table above. Refer to “Note 15. Employee Retirement Plans” to the consolidated financial statements.
We consider future growth, forecasted earnings, future taxable income, the mix of earnings in the jurisdictions in which we operate, historical earnings, taxable income in prior years, if carryback is permitted under the law, and prudent and feasible tax planning strategies in determining the need for a valuation allowance.
We consider future growth, forecasted earnings, future taxable income, the mix of earnings in the jurisdictions in which we operate, historical earnings, taxable income in prior years, if carry-back is permitted under the law, and prudent and feasible tax planning strategies in determining the need for a valuation allowance.
These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent there are differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected.
These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent there are differences between these estimates, judgments or assumptions and actual results, these difference will affect our financial statements.
Recently Issued Accounting Pronouncements” to the consolidated financial statements. 51 Results of Operations The results of operations for the periods presented are not necessarily indicative of results to be expected for future periods.
Recently Issued Accounting Pronouncements” to the consolidated financial statements. 48 Results of Operations The results of operations for the periods presented are not necessarily indicative of results to be expected for future periods.
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer and deposited with the relevant government authority, are excluded from revenue. Our revenue arrangements do not contain significant financing components as our standard payment terms are less than one year.
We exclude from revenue the taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, which are collected by us from a customer and deposited with the relevant government authority. Our revenue arrangements do not contain significant financing components as our standard payment terms are less than one year.
(3) Purchase obligations represent legally-binding commitments to purchase inventory and other commitments made in the normal course of business to meet operational requirements. Please refer to “Note 18. Commitments and Contingencies” to the consolidated financial statements.
(3) Purchase obligations represent legally binding commitments to purchase inventory and other commitments made in the normal course of business to meet operational requirements. Refer to “Note 16. Commitments and Contingencies” to the consolidated financial statements.
Although the cash currently held in the United States, as well as the cash generated in the United States from future operations, is expected to cover our normal operating requirements, a substantial amount of additional cash could be required for other purposes, such as capital expenditures to support our business and growth, including costs associated with increasing internal manufacturing capabilities, particularly in our Thailand facility, strategic transactions and partnerships, and future acquisitions.
Although cash currentl y held in the United States, as well as cash generated in the United States from future operations, is expected to cover our normal operating requirements, a substantial amount of additional cash could be required for other purposes, such as capital expenditures to support our business and growth, including costs associated with increasing internal manufacturing capabilities, strategic transactions and partnerships, and future acquisitions.
Supply Chain Constraints COVID-19 has also created dynamics in the semiconductor component supply chains that have led to shortages of the types of components we and our customers require in our products.
COVID-19 also created dynamics in the semiconductor component supply chains that have led to shortages of the types of components we and our customers require in our products.
We capitalize acquisition-related costs and fees associated with asset acquisitions and immediately expense acquisition-related costs and fees associated with business combinations. We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values.
We capitalize acquisition-related costs and fees associated with asset acquisitions and immediately expense acquisition-related costs and fees associated with business combinations. We allocate the fair value of purchase consideration to assets acquired and liabilities assumed based on their estimated fair values at the acquisition date.
Additionally, our provision for income taxes includes an income tax benefit from various tax credits, offset by an income tax expense from non-deductible stock-based compensation as well as change in valuation allowance because it is not more-likely-than-not that certain deferred tax assets will be realizable in the future.
Additionally, our provision for income taxes includes income tax benefits from various tax credits, offset by an income tax expense from non-deductible stock-based compensation and change in valuation allowance as it is not more-likely-than-not that certain deferred tax assets will be realizable in the future.
The 2024 Notes have a maturity date of March 15, 2024, the 2026 Notes have a maturity date of December 15, 2026, and the 2028 Notes have a maturity date of June 15, 2028. The principal balances of our Notes are reflected in the payment periods in the table above based on their respective contractual maturities assuming no conversions.
The 2026 Notes have a maturity date of December 15, 2026, the 2028 Notes have a maturity date of June 15, 2028, and the 2029 Notes have a maturity date of December 15, 2029. The principal balances of our convertible notes are reflected in the payment periods in the table above based on their respective contractual maturities assuming no conversions.
However, in certain circumstances depending upon the product, specific market, product line and geography in which we operate, and what is common in the industry, our warranties can vary and range from six months to five years.
However, in some instances depending upon the product, specific market, product line and geography in which we operate, and what is common in the industry, our warranties can vary and range from six months to five years.
Revenue Recognition Pursuant to Topic 606, our revenues are recognized upon the application of the following steps: • identification of the contract, or contracts, with a customer; • identification of the performance obligations in the contract; • determination of the transaction price; • allocation of the transaction price to the performance obligations in the contract; and • recognition of revenues when, or as, the contractual performance obligations are satisfied The majority of our revenue comes from product sales, consisting of sales of Lasers and OpComms hardware products to our customers.
Revenue Recognition Pursuant to Topic 606, we recognize our revenues upon the application of the following steps: • identification of the contract, or contracts, with a customer; • identification of the performance obligations in the contract; • determination of the transaction price; • allocation of the transaction price to the performance obligations in the contract; and • recognition of revenues when, or as, the contractual performance obligations are satisfied. 44 The majority of our revenue comes from product sales, consisting of sales of hardware products to our customers.
Our intent is to indefinitely reinvest funds held outside the United States and, except for the funds held in the Cayman Islands, the British Virgin Islands, Japan and Hong Kong, our current plans do not demonstrate a need to repatriate them to fund our domestic operations.
Our intent is to indefinitely reinvest funds held outside the United States and, except for the funds held in the Cayman Islands, the British Virgin Islands, and Hong Kong, as well as certain subsidiaries in China and Japan, our current plans do not demonstrate a need to repatriate them to fund our domestic operations.
To the extent we issue additional shares, our existing stockholders may be diluted. However, any such financing may not be available on terms favorable to us, or may not be available at all.
To the extent we issue additional shares, it may create dilution to our existing stockholders. However, any such financing may not be available on terms favorable to us or may not be available at all.
They were recorded in our consolidated balance sheets as other non-current liabilities and represent the total projected benefit obligation (“PBO”) less the fair value of plan assets. A key actuarial assumption in calculating the net periodic cost and the PBO is the discount rate.
They were recorded in our consolidated balance sheets as accrued payroll and related expenses for the current portion while other non-current liabilities for the non-current portion, and represent the total projected benefit obligation (“PBO”) less the fair value of plan assets. A key actuarial assumption in calculating the net periodic cost and the PBO is the discount rate.
W e believe the world is becoming more reliant on ever-increasing amounts of data flowing through optical networks and data centers. Lumentum’s products and technology enable the scaling of these optical networks and data centers to higher capacities.
We believe the world is becoming more reliant on ever-increasing amounts of data flowing through optical networks and data centers. Lumentum’s products and technology enable the scaling of cloud data centers and communications networks and to higher capacities.
Share Repurchases Repurchase Made in Connection with Convertible Note Offering In fiscal 2022, concurrent with the issuance of the 2028 Notes, we repurchased 2.0 million shares of our common stock in privately negotiated transactions at an average price of $99.0 per share for an aggregate purchase price of $200.0 million.
In fiscal 2022, concurrent with the issuance of the 2028 Notes, we repurchased 2.0 million shares of our common stock in privately negotiated transactions at an average price of $99.0 per share for an aggregate purchase price of approximately $200.0 million.
We sell products in certain markets that are consolidating, undergoing product, architectural and business model transitions, have high customer concentrations, are highly competitive, are price sensitive and/or are affected by customer seasonal and mix variant buying patterns.
The markets in which we sell products are undergoing product, architectural and business model transitions, have high customer concentrations, are highly competitive, are price sensitive and/or are affected by customer seasonal and have variant 51 buying patterns.
Our provision for income taxes for fiscal 2021 differs from the 21% U.S. statutory rate primarily due to the income tax benefit from earnings of our foreign subsidiaries being taxed at rates that differ from the U.S. statutory rate, which is offset by the tax expense from U.S. income inclusions from Subpart F and GILTI.
Our provision for income taxes for fiscal 2022 differs from the 21% U.S. statutory rate primarily due to the income tax benefit from earnings of our foreign subsidiaries being taxed at rates that differ from the U.S. statutory rate, offset by the tax expense from foreign income inclusions in the U.S.
We estimate a 100 basis point decrease or increase in the discount rate would cause a corresponding increase or decrease of $2.8 million or $2.4 million, respectively, in the PBO based upon data as of July 2, 2022. We expect to contribut e $1.4 million to our defined benefit pension plans in fiscal 2023.
We estimate a 100 basis point decrease or increase in the discount rate would cause a corresponding increase or decrease of $4.0 million or $3.1 million, respectively, in the PBO based upon data as of June 29, 2024. We expect to contribut e $1.6 million to our defined benefit pension plans in fiscal 2025.
There are a number of factors that could positively or negatively impact our liquidity position, including: • global economic conditions which affect demand for our products and services and impact the financial stability of our suppliers and customers, including the impact of COVID-19; 61 • fluctuations in demand for our products as a result of changes in regulations, tariffs or other trade barriers, and trade relations in general; • changes in accounts receivable, inventory or other operating assets and liabilities, which affect our working capital; • increase in capital expenditures to support our business and growth, including increases in manufacturing capacity; • the tendency of customers to delay payments or to negotiate favorable payment terms to manage their own liquidity positions; • timing of payments to our suppliers; • volatility in fixed income and credit, which impact the liquidity and valuation of our investment portfolios; • volatility in foreign exchange markets, which impacts our financial results; • possible investments or acquisitions of complementary businesses, products or technologies, or other strategic transactions or partnerships; • issuance of debt or equity securities, or other financing transactions, including bank debt; • potential funding of pension liabilities either voluntarily or as required by law or regulation; • other acquisitions or strategic transactions; • the settlement of any conversion or redemption of the 2024 Notes, the 2026 Notes, and the 2028 Notes in cash, and • common stock repurchases under 2021 share buyback program Fiscal 2022 As of July 2, 2022, our consolidated balance of cash and cash equivalents increased by $515.9 million, to $1,290.2 million from $774.3 million as of July 3, 2021.
There are a number of factors that could positively or negatively impact our liquidity position, including: • global economic conditions which affect demand for our products and services and impact the financial stability of our suppliers and customers, including the impact of uncertainty in the banking and financial services industries; • fluctuations in demand for our products as a result of changes in regulations, tariffs or other trade barriers, and trade relations in general; • changes in accounts receivable, inventory or other operating assets and liabilities, which affect our working capital; • increase in capital expenditures to support our business and growth, including increases in manufacturing capacity; • the tendency of customers to delay payments or to negotiate favorable payment terms to manage their own liquidity positions; • timing of payments to our suppliers; • volatility in fixed income and credit, which impact the liquidity and valuation of our investment portfolios; • cost and availability of credit, which may impact available financing for us, our customers or others with whom we do business; • volatility in foreign exchange markets, which impacts our financial results; • possible investments or acquisitions of complementary businesses, products or technologies, or other strategic transactions or partnerships; • issuance of debt or equity securities, or other financing transactions, including bank debt; • potential funding of pension liabilities either voluntarily or as required by law or regulation; • acquisitions or strategic transactions, in particular our recently completed acquisition of Cloud Light; • the settlement of any conversion or redemption of our convertible notes in cash; and • common stock repurchases under the share buyback program.
Critical estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from customer relationships and acquired developed technology and discount rates. Our estimates of fair value are based upon assumptions believed to be reasonable using best information available.
Critical estimates in valuing intangible assets include, but are not limited to, discount rates, the period required for customer revenues to mature, and future expected cash flows from customer relationships, acquired developed technology and acquired in-process research and development assets. Our estimates of fair value are based upon assumptions using the best information available.
GAAP, as set forth within the ASC, requires us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made.
We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that we make these estimates, judgments and assumptions.
Revenue by Region We operate in three geographic regions: Americas, Asia-Pacific and EMEA. Net revenue is assigned to the geographic region and country where our product is initially shipped. For example, certain customers may request shipment of our product to a contract manufacturer in one country; however, the location of the end customers may differ.
Net revenue is assigned to the geographic region and country where our product is initially shipped to. For example, certain customers may request shipment of our product to a contract manufacturer in one country, which may differ from the location of their end customers.
Since the share buyback program was approved by the board of directors, we have repurchased 7.1 million shares in aggregate at an average price of $83.12 per share for a total purchase price of $589.8 million. We recorded the $589.8 million aggregate purchase price as a reduction of retained earnings within our consolidated balance sheets.
Since the board of directors initially approved the share buyback program, we have repurchased 7.7 million shares in aggregate at an average price of $81.66 per share for a total purchase price of $630.4 million. We recorded the $630.4 million aggregate purchase price as a reduction of retained earnings within our condensed consolidated balance sheet.
Cash provided by operating activities was $459.3 million during the year ended July 2, 2022, which reflects net income of $198.9 million and non-cash items (such as depreciation, stock-based compensation, amortization of intangibles, amortization of debt discount and debt issuance costs on our Notes, and other non-cash charges) of $351.0 million, partially offset by $90.6 million of changes in our operating assets and liabilities.
Cash provided by operating activities was $459.3 million during the year ended July 2, 2022, which reflects net income of $198.9 million and non-cash items of $351.0 million, partially offset by $90.6 million of changes in our operating assets and liabilities.
The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, we make significant estimates and assumptions, especially with respect to intangible assets.
The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. We make significant estimates and assumptions to determine assets acquired and liabilities assumed, in particular intangible assets and pre-acquisition contingencies, as applicable.
We have the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. The qualitative factors we assess include long-term prospects of our performance, share price trends and market capitalization, and Company specific events. Unanticipated events and circumstances may occur that affect the accuracy of our assumptions, estimates and judgments.
The qualitative factors we assess include long-term prospects of our performance, share price trends and market capitalization, and Company specific events. Unanticipated events and circumstances may occur that affect the accuracy of our assumptions, estimates and judgments.
(4) The amounts related to convertible notes include principal and interest on our 0.25% Convertible Senior Notes due in 2024 (the “2024 Notes”), principal and interest on our 0.50% Convertible Senior Notes due in 2026 (the “2026 Notes”), and principal and interest on our 0.50% Convertible Notes due in 2028 (the “2028 Notes”, and together with the 2024 Notes and 2026 Notes, the “Notes”).
(4) The amounts related to convertible notes include principal and interest on our 0.50% Convertible Senior Notes due 2026 (the “2026 Notes”), principal and interest on our 0.50% Convertible Senior Notes due 2028 (the “2028 Notes”), and principal and interest on our 1.50% Convertible Senior Notes due 2029 (the “2029 Notes”).
If the closing price of our stock exceeds $129.08 for 20 of the last 30 trading days of any future quarter, our 2026 Notes would also become convertible at the option of the holders and the debt component would be reclassified to current liabilities in our condensed consolidated balance sheet.
I f the closing price of our stock exceeds $129.08 (130% of the conversion price of $99.29) for 20 of the last 30 trading days of any future fiscal quarter, our 2026 Notes would become convertible at the option of the holders during the subsequent fiscal quarter and the debt component would be reclassified to current liabilities.
If the closing price of our stock exceeds $170.34 for 20 of the last 30 trading days in any fiscal quarter commencing after July 2, 2022, our 2028 Notes would also become convertible at the option of the holders and the debt component would be reclassified to current liabilities in our condensed consolidated balance sheet.
If the closing price of our stock exceeds $170.34 (130% of the conversion price of $131.03) for 20 of the last 30 trading days of any future fiscal quarter, our 2028 Notes would become convertible at the option of the holders during the subsequent fiscal quarter and the debt component would be reclassified to current liabilities.
The total amount of cash outside the United States held by the non-U.S. entities as of July 2, 2022 was $216.1 million, which was primarily held by entities incorporated in the United Kingdom, the British Virgin Islands, Japan, Hong Kong, China, Canada, and Thailand.
The total amount of cash outside the United States held by the non-U.S. entities as of June 29, 2024 and July 1, 2023 was $306.9 million and $298.4 million, respe ctively, which was primarily held by entities incorporated in the United Kingdom, the British Virgin Islands, Japan, Hong Kong, China, Switzerland, the Cayman Islands, Thailand and Brazil.
The increase in cash and cash equivalents was mainly due to cash provided by operating activities of $738.7 million and investing activities of $1.0 million, offset by cash used in financing activities of $263.4 million during the year ended July 3, 2021. Cash provided by operating activities was $738.7 million during the year ended July 3, 2021.
The decrease in cash and cash equivalents was due to cash used in investing activities of $874.0 million, partially offset by cash provided by financing activities of $263.0 million and cash provided by operating activities of $179.8 million during the year ended July 1, 2023.
The decrease in cash and cash equivalents was mainly due to cash used in investing activities of $987.7 million, offset by cash provided by operating activities of $524.3 million and cash provided by financing activities of $328.8 million during the year ended June 27, 2020.
The decrease in cash and cash equivalents was due to cash used in financing activities of $332.7 million and cash used in investing activities of $114.3 million, partially offset by cash provided by operating activities of $24.7 million during the year ended June 29, 2024.
Defined Benefit Plans 58 The Company sponsors defined benefit pension plans covering employees in Japan, Switzerland, and Thailand. Pension plan benefits are based primarily on participants’ compensation and years of service credited as specified under the terms of each country’s plan. Employees are entitled to a lump sum benefit upon retirement or upon certain instances of termination.
Pension plan benefits are based primarily on participants’ compensation and years of service credited as specified under the terms of each country’s plan. Employees are entitled to a lump sum benefit upon retirement or upon certain instances of termination. The funding policy is consistent with the local requirements of each country.
For more information on risks associated with supply chain constraints, please refer to the section titled “Risk Factors” in Item 1A of Part I of this report. 47 Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as set forth in the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”), and we consider the various staff accounting bulletins and other applicable guidance issued by the United States Securities and Exchange Commission (“SEC”).
For more information on risks associated with supply chain constraints and customer inventory, refer to Item 1A “Risk Factors” of this Annual Report. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as set forth in the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”).
Our provision for income taxes for fiscal 2020 differs from the 21% U.S. statutory rate primarily due to the income tax benefit of the earnings of our foreign subsidiaries being taxed at rates that differ from the U.S. statutory rate and certain tax credits, which is offset by the tax expense from U.S. income inclusions from Subpart F and GILTI.
Our provision for income taxes for fiscal 2023 differs from the 21% U.S. statutory rate primarily due to the income tax expense from foreign income inclusions in the U.S., earnings of our foreign subsidiaries being taxed at rates that differ from the U.S. statutory rate and non-deductible stock-based compensation.
Please refer to “Note 20. Revenue Recognition” to the consolidated financial statements for a presentation of disaggregated revenue. We do not present other levels of disaggregation, such as by type of products, customer, markets, contracts, duration of contracts, timing of transfer of control and sales channels, as this information is not used by our CODM to manage the business.
We do not present other levels of disaggregation, such as by type of products, customer, markets, contracts, duration of contracts, timing of transfer of control and sales channels, as this information is not used by our Chief Operating Decision Maker (“CODM”) to manage the business.
These standard warranties are assurance type warranties and do not offer any services in addition to the assurance that the product will continue working as specified. Therefore, warranties are not considered separate performance obligations in the arrangement. Instead, the expected cost of the warranty is accrued as expense in accordance with authoritative guidance.
These standard warranties are assurance type warranties and do not offer any services in addition to the assurance that the product will continue working as specified. Therefore, warranties are not considered separate performance obligations in the arrangement. We provide reserves for the estimated costs of product warranties that we record as cost of sales at the time revenue is recognized.
We provide reserves for the estimated costs of product warranties at the time revenue is recognized. We estimate the costs of our warranty obligations based on our historical experience of known product failure rates, use of materials to repair or replace defective products and service delivery costs incurred in correcting product failures.
We estimate the costs of our warranty obligations based on our historical experience of known product failure rates, use of materials to repair or replace defective products and service delivery costs incurred in correcting product failures. In addition, from time-to-time, specific warranty accruals may be made if discrete technical problems arise.
During fiscal 2022 , we recorded a net reversal to our restructuring and related charges of $1.1 million , which was attributable to lower than anticipated employee severance charges primarily as a result of retaining and re-assigning certain employees. During fiscal 2021 , we recorded $7.7 million in restructuring and related charges in our consolidated statements of operations.
These agreements provided for payments and benefits upon an involuntary termination of employment under certain circumstances. During fiscal 2022, we recorded a net reversal to our restructuring and related charges of $1.1 million, which was attributable to lower than anticipated employee severance charges primarily as a result of retaining and re-assigning certain employees. Refer to “Note 12.
Fiscal 2021 As of July 3, 2021, our consolidated balance of cash and cash equivalents increased by $476.3 million, to $774.3 million from $298.0 million as of June 27, 2020.
Fiscal 2022 As of July 2, 2022, our consolidated balance of cash and cash equivalents increased by $515.9 million, to $1,290.2 million from $774.3 million as of July 3, 2021.
The funding policy is consistent with the local requirements of each country. As of July 2, 2022, a defined benefit plan in Switzerland was partially funded, while defined benefit plans in Japan and Thailand were unfunded. As of July 2, 2022, our projected benefit obligations, net, in Japan, Switzerland, and Thailand were $2.6 million, $1.7 million, and $3.4 million, respectively.
As of June 29, 2024, the defined benefit plans in Switzerland were partially funded, while defined benefit plans in Japan and Thailand were unfunded. As of June 29, 2024, our projected benefit obligations, net, in Japan, Switzerland, and Thailand were $3.6 million, $2.4 million and $3.6 million, respectively.
The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following: • Inventory Valuation • Revenue Recognition • Income Taxes • Business Combinations • Goodwill As a result of our Merger Agreement with NeoPhotonics, we added Business Combinations and Goodwill to our critical accounting policies and estimates in fiscal 2022.
The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following: • Inventory Valuation • Revenue Recognition • Income Taxes • Business Combinations • Goodwill and Intangible Assets - Impairment Assessment Inventory Valuation Our inventories are recorded at standard cost, which approximates actual cost computed on a first-in, first-out basis, not in excess of net realizable value.
The time between invoicing and when payment is due is not significant. 49 The following table reflects the changes in contract balances as of July 2, 2022 ( in millions, except percentages ): Contract balances Balance sheet location July 2, 2022 July 3, 2021 Change Percentage Change Accounts receivable, net Accounts receivable, net $ 262.0 $ 212.8 $ 49.2 23.1% Deferred revenue and customer deposits Other current liabilities $ — $ 0.6 $ (0.6) (100.0)% Disaggregation of Revenue We disaggregate revenue by geography and by product.
The following table reflects the changes in contract balances as of June 29, 2024 ( in millions, except percentages ): Contract balances Balance sheet location June 29, 2024 July 1, 2023 Change Percentage Change Accounts receivable, net Accounts receivable, net $ 194.7 $ 246.1 $ (51.4) (20.9) % Deferred revenue and customer deposits Other current liabilities $ 0.6 $ 2.1 $ (1.5) (71.4) % Disaggregation of Revenue We disaggregate revenue by geography and by product.
Financial Condition Liquidity and Capital Resources As of July 2, 2022 and July 3, 2021, our cash and cash equivalents of $1,290.2 million and $774.3 million, respectively, were largely held in the United States. As of July 2, 2022 and July 3, 2021, our short-term investments of $1,258.8 million and $1,171.7 million, respectively, were all held in the United States.
Financial Condition Liquidity and Capital Resources As of June 29, 2024 and July 1, 2023, our cash and cash equivalents were $436.7 million and $859.0 million, respectively. As of June 29, 2024 and July 1, 2023, our short-term investments of $450.3 million a nd $1,154.6 million, respectively, were all held in the United States.
The price, timing, amount, and method of such repurchases will be determined based on the valuation of market conditions and other factors, at prices determined to be attractive and in the best interests of both Lumentum and our stockholders. 60 Contractual Obligation s The following table summarizes our contractual obligations as of July 2, 2022, and the effect such obligations are expected to have on our liquidity and cash flow ( in millions ): Payments due Total Less than 1 year More than 1 year Contractual Obligations Asset retirement obligations $ 4.6 $ 0.5 $ 4.1 Operating lease liabilities, including imputed interest (1) 66.5 12.9 53.6 Pension plan contributions (2) 1.4 1.4 — Purchase obligations (3) 403.7 361.7 42.0 Convertible notes - principal (4) 2,359.1 — 2,359.1 Convertible notes - interest (4) 51.8 10.7 41.1 Total $ 2,887.1 $ 387.2 $ 2,499.9 (1) The amounts of operating lease liabilities do not include any sublease income amounts nor do they include payments for short-term leases or variable lease payments.
The stock buyback program may be suspended or terminated at any time. 56 Contractual Obligation s The following table summarizes our contractual obligations as of June 29, 2024, and the effect such obligations are expected to have on our liquidity and cash flow ( in millions ): Payments due Total Less than 1 year More than 1 year Contractual Obligations Asset retirement obligations $ 7.5 $ 0.3 $ 7.2 Operating lease liabilities, including imputed interest (1) 61.8 15.3 46.5 Pension plan contributions (2) 1.6 $ 1.6 — Purchase obligations (3) 475.1 418.0 57.1 Convertible notes - principal (4) 2,514.7 — 2,514.7 Convertible notes - interest (4) 80.1 18.7 61.4 Total $ 3,140.8 $ 453.9 $ 2,686.9 (1) The amounts of operating lease liabilities do not include any sublease income amounts nor do they include payments for short-term leases or variable lease payments.
Any change in facts and circumstances that existed as of the acquisition date and impacts to our preliminary estimates is recorded to goodwill if identified within the measurement period. Subsequent to the measurement period or our final determination of fair value of assets and liabilities, whichever is earlier, the adjustments will affect our earnings.
Subsequent to the measurement period or our final determination of fair value of assets and liabilities, whichever is earlier, the adjustments will affect our earnings.
Contract liabilities are classified as deferred revenue and customer deposits, and are included in other current liabilities within our consolidated balance sheet. Payment terms vary by customer.
Contract liabilities consist of advance payments and deferred revenue, where we have unsatisfied performance obligations. Contract liabilities are classified as deferred revenue and customer deposits and are included in other current liabilities within our consolidated balance sheet. Payment terms vary by customer. The time between invoicing and when payment is due is not significant.
We recorded the $200.0 million aggregate purchase price as a reduction of retained earnings within our condensed consolidated balance sheet. These shares were retired immediately. Share Buyback Program On May 7, 2021, our board of directors approved the 2021 share buyback program, which authorizes us to use up to $700.0 million to purchase our own shares of common stock.
We recorded the aggregate purchase price as a reduction of retained earnings within our consolidated balance sheet and retired these shares immediately. Share Buyback Program We have a share buyback program that authorizes us to utilize up to an aggregate amount of $1.2 billion to purchase shares of our common stock through May 2025.
The following table presents net revenue by the three geographic regions we operate in and net revenue from countries within those regions that generally represented 10% or more of our total net revenue ( in millions, except for percentages ): Years Ended July 2, 2022 July 3, 2021 June 27, 2020 Net revenue: Americas: United States $ 173.9 10.2 % $ 133.4 7.7 % $ 149.8 8.9 % Other Americas 173.0 10.1 146.9 8.4 128.3 7.6 Total Americas $ 346.9 20.3 % $ 280.3 16.1 % $ 278.1 16.5 % Asia-Pacific: Hong Kong $ 458.2 26.7 % $ 546.3 31.3 % $ 532.0 31.8 % South Korea 265.2 15.5 240.0 13.8 260.9 15.5 Japan 181.2 10.6 114.7 6.6 137.9 8.2 Other Asia-Pacific 344.7 20.1 421.3 24.2 346.0 20.6 Total Asia-Pacific $ 1,249.3 72.9 % $ 1,322.3 75.9 % $ 1,276.8 76.1 % EMEA $ 116.4 6.8 % $ 140.2 8.0 % $ 123.7 7.4 % Total net revenue $ 1,712.6 $ 1,742.8 $ 1,678.6 During fiscal 2022, 2021 and 2020, net revenue from customers outside the United States, based on customer shipping location, represented 89.8% , 92.3% and 91.1% of net revenue, respectively.
The following table presents net revenue by the three geographic regions we operate in and net revenue from countries that represented 10% or more of our total net revenue (in millions, except percentage data): 50 Years Ended June 29, 2024 July 1, 2023 July 2, 2022 Net revenue: Americas: United States $ 356.1 26.2 % $ 241.3 13.7 % $ 173.9 10.2 % Mexico 91.7 6.7 180.0 10.2 160.9 9.4 Other Americas 3.4 0.3 9.3 0.5 12.1 0.7 Total Americas $ 451.2 33.2 % $ 430.6 24.4 % $ 346.9 20.3 % Asia-Pacific: Thailand $ 183.8 13.5 % $ 269.0 15.2 % $ 102.3 5.9 % Hong Kong 261.9 19.3 246.7 14.0 458.2 26.7 South Korea 75.2 5.5 170.2 9.6 265.2 15.5 Japan 84.6 6.2 179.5 10.2 181.2 10.6 Other Asia-Pacific 174.3 12.9 276.3 15.6 242.4 14.2 Total Asia-Pacific $ 779.8 57.4 % $ 1,141.7 64.6 % $ 1,249.3 72.9 % EMEA $ 128.2 9.4 % $ 194.7 11.0 % $ 116.4 6.8 % Total net revenue $ 1,359.2 100.0% $ 1,767.0 100.0% $ 1,712.6 100.0% During fiscal 2024, 2023 and 2022, net revenue from customers outside the United States, based on customer shipping location, represented 73.8%, 86.3% and 89.8% of net revenue, respectively.
Goodwill Goodwill represents the excess of the purchase price of an acquired business over the fair value of the identifiable assets acquired and liabilities assumed. We test goodwill impairment on an annual basis in the fiscal fourth quarter and at any other time when events occur or circumstances indicate that the carrying amount of goodwill may not be recoverable.
We test goodwill impairment on an annual basis in the fiscal fourth quarter and at any other time when events occur or circumstances indicate that the carrying amount of goodwill may not be recoverable. We have the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test.
Interest Expense The components of interest expense are as follows for the years presented ( in millions ): Years Ended July 2, 2022 July 3, 2021 June 27, 2020 Interest expense $ 80.2 $ 66.7 $ 61.2 For fiscal 2022, we recorde d interest expense of $80.2 million, driven by the amortization of the debt discount and issuance costs of our Notes.
Interest Expense Our interest expense is as follows for the years presented ( in millions ): Years Ended June 29, 2024 July 1, 2023 July 2, 2022 Interest expense $ 33.8 $ 35.5 $ 80.2 Interest expense is driven by the amortization of the debt discount and issuance costs of our convertible notes.
The recognition and measurement of current taxes payable or refundable and deferred tax assets and liabilities requires that we make certain estimates and judgments.
Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation, and the evolution of regulations and court rulings and tax audits. The recognition and measurement of current taxes payable or refundable and deferred tax assets and liabilities requires that we make certain estimates and judgments.
During our fiscal 2022, 2021 and 2020, net revenue generated from a single customer which represented 10% or greater of total net revenue is summarized as follows: Years Ended July 2, 2022 July 3, 2021 June 27, 2020 Apple 28.7 % 30.2 % 26.0 % Ciena 12.6 % 10.1 % * Huawei * 10.8 % 13.2 % *Represents less than 10% of total net revenue.
During our fiscal 2024, 2023 and 2022, net revenue generated from a single customer which represented 10% or greater of total net revenue is summarized as follows: Years Ended June 29, 2024 July 1, 2023 July 2, 2022 Google 18.9 % * * Apple * 12.1 % 28.7 % Ciena 11.4 % 15.3 % 12.6 % Nokia * 10.5 % * *Represents less than 10% of total net revenue Revenue by Region We operate in three geographic regions: Americas, Asia-Pacific, and EMEA (Europe, Middle East, and Africa).
Liquidity and Capital Resources Requirements We believe that our cash and cash equivalents as of July 2, 2022, and cash flows from our operating activities will be sufficient to meet our liquidity and capital spending requirements for at least the next 12 months. However, if market conditions are favorable, we may evaluate alternatives to opportunistically pursue additional financing.
We are unable to reliably estimate the timing of future payments related to uncertain tax positions. 57 Liquidity and Capital Resources Requirements We believe that our cash and cash equivalents as of June 29, 2024, and cash flows from our operating activities will be sufficient to meet our liquidity and capital spending requirements for at least the next 12 months.
These assumptions are inherently uncertain and unpredictable and, as a result, actual results may differ materially from estimates. Certain estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed.
These assumptions are inherently uncertain and unpredictable and, as a result, actual results may differ materially from these estimates.
Cash used in financing activities of $263.4 million during the year ended July 3, 2021, was primarily resulted from the repurchase of shares of our common stock of $236.0 million and tax payments related to restricted stock of $39.7 million, offset by the proceeds from employee stock plans of $12.6 million.
Cash provided by financing activities of $263.0 million during the year ended July 1, 2023, was primarily a result of proceeds from the issuance of the 2029 Notes, net of issuance costs of $599.4 million, partially offset by the repurchase of shares of our common stock of $175.6 million, repurchase of our 2024 Notes of $132.8 million and tax payments related to the net share settlement of restricted stock of $37.2 million.
Fiscal 2020 As of June 27, 2020, our consolidated balance of cash and cash equivalents decreased by $134.6 million, to $298.0 million from $432.6 million as of June 29, 2019.
Cash Flows Fiscal 2024 As of June 29, 2024, our consolidated balance of cash and cash equivalents decreased by $422.3 million, to $436.7 million from $859.0 million as of July 1, 2023.
Provision for Income Taxes : Years Ended (in millions) July 2, 2022 July 3, 2021 June 27, 2020 Provision for income taxes $ 36.2 $ 65.8 $ 38.8 Our tax provision for fiscal 2022 differs from the 21% U.S. statutory rate primarily due to the income tax benefit from earnings of our foreign subsidiaries being taxed at rates that differ from the U.S. statutory rate, offset by the tax expense from U.S. income inclusions from Subpart F and GILTI.
Provision for Income Taxes Years Ended (in millions) June 29, 2024 July 1, 2023 July 2, 2022 Income tax provision $ 140.8 $ 29.2 $ 36.2 Our provision for income taxes for fiscal 2024 differs from the 21% U.S. statutory rate primarily due to the income tax expense from current valuation allowance change as it is not more-likely-than-not that certain deferred tax assets will be realizable in the future, earnings of our foreign subsidiaries being taxed at rates that differ from the U.S. statutory rate and non-deductible stock-based compensation.
Contract Costs We recognize the incremental direct costs of obtaining a contract, which consist of sales commissions, when control over the products they relate to transfers to the customer. Applying the practical expedient, we recognize commissions as expense when incurred, as the amortization period of the commission asset we would have otherwise recognized is less than one year.
Shipping and Handling Costs We record shipping and handling costs related to revenue transactions within cost of sales as a period cost. Contract Costs We recognize the incremental direct costs of obtaining a contract, which consist of sales commissions, when control over the products they relate to transfers to the customer.
As of July 2, 2022, we expect to receive sublease income of approximately $2.4 million over the next year. Please refer to “Note 9. Leases” to the consolidated financial statements. (2) The amount of pension plan contributions represents planned contributions to our defined benefit plans.
As of June 29, 2024, we expect to receive sublease income of approximately $0.8 million over the next year. Refer to “Note 8. Leases” to the consolidated financial statements.
During fiscal 2021, we repurchased 3.1 million shares of our common stock at an average price of $77.84 per share for an aggregate purchase price of $241.0 million.
During fiscal 2024, we did not repurchase any of our common stock. During fiscal 2023, we repurchased 0.7 million shares of our common stock as part of the share buyback program at an average price of $65.03 per share for an aggregate purchase price of $40.5 million .

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeDollar and foreign currencies, for the fiscal years ended July 2, 2022, July 3, 2021, and June 27, 2020, we recorded foreign exchange gains of $6.1 million, foreign exchange losses of $4.4 million, and foreign exchange losses of $1.4 million, respectively, in the other income (expense), net in the consolidated statements of operations. Although we sell primarily in the U.S.
Biggest changeDollar and foreign currencies, we recorded foreign exchange gains of $0.8 million in fiscal 2024, foreign exchange gains of $7.0 million in fiscal 2023 and foreign exchange losses of $6.1 million in fiscal 2022 in the consolidated statements of operations. Although we sell primarily in the U.S.
Notwithstanding, we have not incurred any losses to date and have had full access to our operating accounts. We believe any failures of domestic and international financial institutions could impact our ability to fund our operations in the short term. 65
Notwithstanding, we have not incurred any losses to date and have had full access to our operating accounts. We believe any failures of domestic and international financial institutions could impact our ability to fund our operations in the short term.
Dollar, we have foreign currency exchange risks related to our expenses denominated in currencies other than the U.S. Dollar, principally the Chinese Yuan, Canadian Dollar, Thai Baht, Japanese Yen, UK Pound, Swiss Franc and Euro. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy.
Dollar, we have foreign currency exchange risks related to our expenses denominated in currencies other than the U.S. Dollar, principally the Chinese Yuan, Canadian Dollar, Thai Baht, Japanese Yen, UK Pound, Swiss Franc, Euro and Brazilian Real. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy.
However, the potential value of the shares to be distributed to the holders of our Notes changes when the market price of our stock fluctuates.
However, the potential value of the shares to be distributed to the holders of our convertible notes changes when the market price of our stock fluctuates.
The 2028 Notes, 2026 Notes and the 2024 Notes bear interest at a rate of 0.50%, 0.50% and 0.25% per year, respectively. Since the Notes bear interest at fixed rates, we have no financial statement risk associated with changes in market interest rates.
The 2029 Notes, 2028 Notes and 2026 Notes bear interest at a rate of 1.50%, 0.50% and 0.50% per year, respectively. Since the convertible notes bear interest at fixed rates, we have no financial statement risk associated with changes in market interest rates.
The 2028 Notes, the 2026 Notes and the 2024 Notes will mature on June 15, 2028, December 15, 2026 and March 15, 2024 , respectively, unless earlier repurchased by us or converted pursuant to their terms, at a conversion price of approximately $131.03 per share for the 2028 Notes, approximately $99.29 per share for the 2026 Notes, and approximately $60.62 per share for the 2024 Notes.
The 2029 Notes, 2028 Notes and 2026 Notes will mature on December 15, 2029, June 15, 2028 and December 15, 2026, respectively, unless earlier repurchased by us or converted pursuant to their terms, at a conversion price of approximately $69.54 per share for the 2029 Notes, $131.03 per share for the 2028 Notes and $99.29 per share for the 2026 Notes.
Interest Rate Fluctuation Risk As of July 2, 2022, we had cash, cash equivalents, and short-term investments of $2,549.0 million. Cash equivalents and short-term investments are primarily comprised of money market funds, treasuries, agencies, high quality investment grade fixed income securities, certificates of deposit, and commercial paper.
Interest Rate Fluctuation Risk As of June 29, 2024, we had cash, cash equivalents, and short-term investments of $887.0 million . Cash equivalents and short-term investments are primarily comprised of money market funds, treasuries, agencies, high quality investment grade fixed income securities, certificates of deposit, and commercial paper.
Based on our investment portfolio balance as of July 2, 2022, a hypothetical increase or decrease in interest rates of 1% (100 basis points) would have resulted in a decrease or an increase in the fair value of our portfolio of approximately $6.3 million , and a hypothetical increase or decrease of 0.50% (50 basis points) would have resulted in a decrease or an increase in the fair value of our portfolio of approximately $3.1 million .
Based on our investment portfolio balance as of June 29, 2024, a hypothetical increase or decrease in interest rates of 1% (100 basis points) would have resulted in a decrease or an increase in the fair value of our portfolio of approximately $2.4 million, and a hypothetical increase or decrease of 0.50% (50 basis points) would have resulted in a decrease or an increase in the fair value of our portfolio of approximately $1.2 million .
Bank Liquidity Risk As of July 2, 2022, we had approximately $235.9 million of unrestricted cash (excluding cash equivalents) in operating accounts that are held with domestic and international financial institutions.
Bank Liquidity Risk As of June 29, 2024, we had approximately $196.9 million of unrestricted cash (excluding cash equivalents) in operating accounts that are held with domestic and international financial institutions.
We issued the 2028 Notes in March 2022, the 2026 Notes in December 2019 and the 2024 Notes in March 2017 with an aggregate principal amount of $861.0 million , $1,050.0 million and $450.0 million, respectively. The 2028 Notes, 2026 Notes and the 2024 Notes are carried at face value less amortized discount on the condensed consolidated balance sheet.
We issued the 2029 Notes in June 2023, the 2028 Notes in March 2022 and the 2026 Notes in December 2019 with an aggregate principal amount of $603.7 million, $861.0 million and $1,050.0 million , respectively. The 2029 Notes, 2028 Notes and 2026 Notes are carried at face value less issuance costs on the condensed consolidated balance sheet.
Our investment policy and strategy is focused on the preservation of capital and supporting our liquidity requirements. We do not enter into investme nts for trading or speculative purposes. As of July 2, 2022, the weighted-average life of our investment portfolio was approximately four months.
Our investment policy and strategy is focused on the preservation of capital and supporting our liquid ity requirements. We do not enter into investments for trading or speculative purposes. As of June 29, 2024, the weighted-average life of our investment portfolio was approximately six months.
In the event our foreign currency denominated monetary assets and liabilities, sales or expenses increase, our operating results may be more greatly affected by fluctuations in the exchange rates of the currencies in which we do business as compared with the U.S. dollar. 64 Equity Price Risk We are exposed to equity price risk related to the conversion options embedded in our 2028 Notes, 2026 Notes and 2024 Notes.
In the event our foreign currency denominated monetary assets and liabilities, sales or expenses increase, our operating results may be affected to a greater extent by fluctuations in the exchange rates of the currencies in which we do business as compared with the U.S. dollar.
Due to the impact of changes in foreign currency exchange rates between the U.S.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Foreign Exchange Risk We conduct our business and sell our products to customers primarily in Asia, Europe, and North America. Due to the impact of changes in foreign currency exchange rates between the U.S.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK COVID-19 Risk There are a number of market risk factors related to the COVID-19 pandemic and associated global economic impacts. We continue to actively evaluate these risks, and have taken reserves and financial positions as of July 2, 2022 that we believe are reasonable based on the information currently available.
Added
Equity Price Risk We are exposed to equity price risk related to the conversion options embedded in our 2029 Notes, 2028 Notes and 2026 Notes.
Removed
However, the COVID-19 pandemic and related regional shelter-in-place orders are unprecedented events that are continually evolving, and there could be significant changes and/or charges resulting in the future.
Added
The value of our investment portfolio could also be impacted if we hold debt instruments which were issued by any institutions that fail or become illiquid. Our ability to obtain raw materials for our supply chain and collections of cash from sales may be unduly impacted if any of our vendors or customers are affected by illiquidity events. 60
Removed
These market risks include, for example: • Accounts receivable collectability - there could be significant bad debt expenses incurred if our customers experience financial difficulties. • Accounts receivable collections timing - our working capital and cash flows could be impacted if we start to agree to longer payment terms for our customers.
Removed
Although we have not done so, a broader market move to longer payment terms could delay our collection timing as well. • Inventory (excess and obsolete) - our customers may not be able to purchase inventory that we have built for them, or their demand may slow down to a point where inventory becomes aged. • Short-term investment values - as seen in past economic slowdowns, there may be credit losses and defaults or a withdrawal of government support programs which cause losses and/or liquidity issues in our investment portfolio. • Long-term assets such as fixed assets, goodwill, and intangibles - a market slowdown could impair the value of these assets. • Tax valuation - we have significant NOL’s (Net Operating losses) in the United States which have associated deferred tax assets on our balance sheet, and these could be deemed unrecoverable in the future.
Removed
In addition, all of the below market risks are heightened in light of the current market situation. Foreign exchange markets could be impacted and cause significant fluctuations in our future expenses. The price of our common stock has fluctuated significantly in the past and global equity markets are experiencing significant volatility following the COVID-19 outbreak.
Removed
Interest rates have already reduced dramatically since the onset of the outbreak, and our future income from these investments likely will be negatively impacted in the future. Foreign Exchange Risk We conduct our business and sell our products to customers primarily in Asia, Europe, and North America.

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