Good day. My name is Jack, and I'll be your conference operator today. At this time I would love to welcome everyone to Lumentum's Fiscal Fourth Quarter and Full Year Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Chris Coldren, Vice President of Strategy and Corporate Development, you may begin your conference.

Thank you, Jack. Welcome to Lumentum's fourth quarter and full-year fiscal 2017 earnings call. This is Chris Coldren, Vice President of Strategy and Corporate Development. Joining me on today's call are Alan Lowe, President and Chief Executive Officer; and Aaron Tachibana, Chief Financial Officer. This call will include forward-looking statements, including statements regarding the markets in which we operate, trends and expectations for products and technology, purchasing trends, Lumentum's expected financial performance, expenses, and position in our markets. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations. We encourage you to review our most recent filings with the SEC, particularly the risk factors described in our 10-Q filing for our fiscal third quarter ended April 1st, 2017. The forward-looking statements we provide during this call, including projections for future performance, are based on our reasonable beliefs and expectations as of today. Lumentum undertakes no obligation to update these statements except as required by applicable law. Please also note, unless otherwise stated, all results and projections are non-GAAP. Non-GAAP financials should not be considered as a substitute for, or superior to, financials prepared in accordance with GAAP. Our press release with our fourth quarter and full-year fiscal 2017 results is available on our Web site, www.lumentum.com, under the Investors section, and includes additional details about our non-GAAP financial measures, and a reconciliation between our GAAP and non-GAAP results. Our Web site also has our latest SEC filings, which we encourage you to review, and supplementary slides relating to today's earnings release. Finally, a recording of today's call will be available by 11.30 AM Pacific Time this morning on our Web site. Now, I would like to turn the call over to Alan for his comments and business highlights.

Thank you, Chris. Good morning everyone. This is an exciting time at Lumentum. We just concluded our second fiscal year as a standalone public company, and exceeded the $1 billion revenue mark for the first time. Relative to the prior year, we grew our revenue by 11% and net earnings by more than 50%. We capitalized on our investments in 100G Datacom, with FY '17 Datacom revenues being up 125% from FY '16 levels. Also, we put ourselves into the leadership position for the ramp of 3D sensing with more than $200 million of orders from customers, since April. Our strong results came from both the introduction and ramp of our differentiated new products, and our focus on operating leverage. I'm very proud of the Lumentum team for these achievements, and thank them for their continued hard work. Since our last call, we've made excellent progress on our strategic goals. Our revenue from 100G QSFP28 transceivers nearly doubled sequentially in the fourth quarter. 100G products represented approximately 80% of our overall Datacom revenue; growth in our 100G more than offset declines in lower speed transceivers. Additionally, during the fourth quarter we shipped approximately $5 million of 3D sensing revenue. On our last call we indicated that we had several million dollars of 3D sensing orders. Since then orders have been very strong for multiple applications. We have a lot of work to do to translate these orders into shipped revenue, but we expect 3d sensing to be a material contributor to our business in the coming quarters as well as the coming years. Our near-term focus in 3D sensing is to ramp production to higher levels than anticipated just three months ago. We expect monthly volumes to increase throughout the end of the calendar year to meet our strong customer…

Thank you, Alan. We recently concluded fiscal year 2017, and achieved new record highs for Lumentum. Net revenue for the full fiscal year surpassed $1 billion, and was a new record high as we grew 10.9% compared with last year. GAAP gross margin was 31.8%, and GAAP operating margin was 4.8% for the year. We achieved non-GAAP gross margin of 34.7%, increasing 170 basis points from last year as we are shifting the mixture of products to those with a richer margin profile. Non-GAAP operating margin was 12.4%, a new record high for Lumentum and increased 320 basis points over last year driven by the gross margin expansion and favorable operating leverage from higher volume. Now for the fourth quarter results, net revenue for the fourth quarter was $222.7 million, which decreased 12.9% sequentially and 7.9% compared with the same period last year due to softer telecom demand. GAAP gross margin for the fourth quarter was 30.2%. GAAP operating margins was 1.8% and GAAP diluted net loss per share was $0.90. The GAAP diluted net loss per share includes the impact of a $1.06 loss per share from a non-cash unrealized loss on the derivative liabilities for both the series A preferred stock and convertible note. The non-cash effective interest on the convertible note as well as a non-cash write-down of deferred tax assets. Our fourth quarter non-GAAP gross margin was 32.9%, which decreased 150 basis points sequentially and 120 basis points compared with the same period last year. The sequential decrease was driven by a 200 basis points decline in optical communication gross margin partially offset by an 80 basis points increase in commercial laser gross margin. Non-GAAP operating margin for the fourth quarter was 9.2% and declined 340 basis points sequentially. The decline in operating margin was primarily…

Thank you, Aaron. I would like to ask everyone to limit discussion to one question and one follow-up. Jack; let's begin the question-and-answer session.

[Operator Instructions] Your first question comes from the line of Simon Leopold with Raymond James. Your line is now open.

Great, thank you very much for taking the question. So I wanted to see if we could get a little bit more understanding on the trajectory of the 3D sensing. So you indicated up materially in September, but listening to others in the supply chain it's really impression that there should also be a multiplicative effect in the December quarter. And then, just in terms of rounding up the 3D comments you talked about $200 million in orders, what time period does that represented? That one year worth of orders or is that over a longer period? Thank you, and I have a follow-up.

Thanks, Simon. Yes, the trajectory on 3D sensing, yes, we are focused very hard on ramping as fast as we possibly can. And that's what we put in our guidance from with respect to our expectations for this quarter, December quarter will be up materially from the September quarter, although we are not going to give guidance. The orders that we receive to-date and these are from multiple customers -- are primarily for deliveries or requested deliveries in this calendar quarter -- this calendar year, sorry.

So in calendar '17?

Yes.

Wow, okay. And just my follow-up is an easy one, the QSFP28 strength, there are many, many flavors of those kind of products CWDM or LR4, can you give us a little bit more detail of where the strength is coming from in terms of flavors of QSFP28?

Yes, Simon. In terms of the fourth quarter basically path was LR4 or CWDM or QSFP28 flavor.

Great. Thank you.

You bet.

Your next question comes from the line of Patrick Newton with Stifel. Your line is now open.

Yes, good. Thank you. Good morning Alan, and Aaron. I guess to put a final point on 3D sensing, given the $200 million in orders, given that you hope to be recognize I mean in this calendar year? Can you just level fed us on how much 3D sensing revenue has been recognized through the June quarter and what you have embedded explicitly in the September quarter guidance?

Yes, we said in the prepared remarks we had $5 million in the June quarter and that was from multiple customers to give them while we flexi customers as well as new customers in that $5 million. Embedded in the September quarter as we said, we expect telecom and lasers to be down slightly from the current levels and datacom flat to up slightly so that you can do the math on our expectations with respect to the 3D sensing on the September quarter time.

Great. And then, I guess just on the gross margin side Aaron you gave some reasons why the gross margin declined sequentially given the factory move inventory build and that able to slowdown as fast but can you comment at all on the pricing environment. And then, as we look forward given that 3D sensing will become a bigger portion of mix, can you help us understand the delta between optical and 3D sensing gross margin and how to think about that over the next several quarters?

Sure. Thanks, Patrick. In terms of gross margin for the fourth quarter, so we were down about 150 basis points sequentially. Two-thirds of that decline, so about a point was tied to the volume decline and the rest was mix related, so the margin decline had very little to do with the pricing environment and our cost reduction have been able to keep up the price erosion. So we didn't see a lot of effect on the gross margin in the fourth quarter from the price standpoint. As we go forward, your question about up come margins in 3D sensing, so looking at the aggregate first in totality our margins are going to accrete or expand as we go forward as 3D sensing does have a higher gross margins than our corporate average today. And we are not going to specifically call out where the 3D sensing margins are but they are hired in the corporate gross margin average. So optical communication for the 3D sensing resides today from the segment perspective will continue to increase. When you look out, let's say quarters, there is no reason why we can't get our gross margins up into the high 30% range. Today we are in the 34% range. There is no reason why we can't expand our margins 200 to 300 basis points over the next six to eight quarters.

That's a corporate average, correct?

That's correct, corporate average. Then I did also mention the way for flat closure from Bloomfield Connecticut and moving it into San Jose as we have been mentioning on previous calls we expect to get a 70 to 80 basis points improvement from that reduction. We will start to see that benefit in the next couple of quarters.

Thank you for taking my questions. Good luck.

Thank you.

Your next question comes from the line of Rod Hall with JP Morgan. Your line is open.

Yes, hi guys, thanks for the questions. So I wanted to start off in North America if you guys could maybe give us a little bit more color on what's going on and particularly I know you called out that inventory management and funding the deployments or the two regions, can you give us some kind of a ranking of those two things. Do you think its more inventory management or is it more deployment timing that's driving the weakness this quarter and next? And just any further color on what's going on in North America? And then, I have a follow-up. Thanks.

Yes, I think the challenge we have with the North America deployments specifically metro and that's not just one customer or one carrier, its' the deployments are very lumpy and our customers need to be prepared as so carriers decide to deploy and so I would say that the primary driver for this lower telecom revenue in North America was inventory management and is inventory management going forward? But as I said, that could change overnight and we could be expedited next week as a result of decisions being made at carriers or MSOs. So I think it's primarily inventory-related.

And Alan, did you just say on, what's your expectation for now to the end of the year, you are kind of thinking the way that North American deployment goes or the deployment goes is roughly the same by the end of the year even it's a little bit lower or how do you think we end up with the end of the calendar year?

That's a really good question and I wondered I think it's probably better answered by our customers. I will say that we are still in the first quarter of deployments in North America for metro. So I think we got multiple years to go and though we ran out quite in my mind is how many series get down each quarter and that is -- that's really a function of when the carriers decide to pull the trigger on capital.

Okay. And then, I wanted just one of my follow-up, I just wanted to ask you on 3D sensing capacity, what are guys doing, it sounds like the orders have moved up quite a bit more than maybe you expect what you said three months ago, what are you guys doing with regards to capacity, are you laying more capacity on or putting in place more capacity by the end of the year or what are you doing with respect to that?

Yes, I mean we are even three months ago we were adding capacity through this calendar year to meet the demand, so what we thought were at that time and as you said the expectations and demands that I actually increased since our April earnings call. So we've been expediting capacity increase with our foundry partners and helping them with their suppliers of capital equipment to bring that on earlier. In addition to that, though we've also been working on again how do we accelerate the productivity improvements of the capital that we have to get more out of the existing assets and so lead times for some of the best equipment and processing equipment they are long and so a combination of trying to pull those deliveries in as well as getting more out of the existing assets that are at our foundry partners is what we are focused on.

Can you, is there any way you can quantify the capacity increase relative to what you originally thought like are you increasing capacity by the end of the year 50% over what you thought you would have to deliver three or four months ago or any kind of quantification you can give us on that?

It's hard to say I think back of the envelope it's probably not 50% but its 25% to 30% would be kind of like that. I think if we could do more, we would -- our customer would probably take it.

Okay. Great. Thank you very much.

The next question comes from Alex Henderson with Needham. Your line is now open.

Yes, so the first question I have probably is on this $200 million in orders deliverable in 2017 timeframe. I mean, do you think you can actually obtain that or is that something that they would like to have but you are going to be forced to slide some of that into the first quarter next year? And then, the second question along the same lines is as we look out calendar '18, do you have any sense of scaling of that business into following year? I mean, is it -- would you expect that if you are doing $200 million in a half but that it would be somewhere in the $300 million to $400 million from the full year '18?

Okay. First question, are we going to be able to deliver at all? I think certainly that's our customer's expectation and again this is multiple customers but our expectations are assuming that we execute to our plan is that that we do satisfy those orders in this calendar year as a balance of the calendar year. As far as 2018 demand is concerned, I think a lot of will depend on how well we execute this year and how much business we earned from our customers with respect to how much they can count on us as far as so it's all about how we execute this year. And then, how successful our customer's products are in the market and so it's hard for me to give you a number but I'd say that our expectations are that we are going to execute and earn our customers for us and run their business.

So again is it likely that magnitude of full year '18 would be a reasonable way to think about it or am I just off mark or I mean can -- we have no basis to forecast on so it would be very helpful if you could give us at least some sort of general indicator on it?

I mean, my expectations are that it continues to increase as especially as we add additional customers. So I don't think you number is crazy. Again, but it has to do with how well we execute and how we build our customer's price but given the pipeline of additional customers that we have my expectation is this is the growing business from this launch here.

Can you talk at all about the pricing environment as we go from '17 to '18 or can you talk about what's your expectations are relative to the number of cameras we will be looking it on an individual device or any metrics on those lines to give a some qualitative sense of how the design parameters are going to change over time?

Well, pricing environment is nearly a function of how well we execute and how well we do in the second half of calendar '18. I think we have agreements in place that allowed us to make commitments to our partners to buy a lot of capital equipment and so for the next year we are pretty well agreed upon in contract basis for pricing. As far as the number of devices for device, I'm not going to comment on that I think again we are working with multiple customers on different applications that have single devices as well as multiple devices and so I really can't comment on what our expectations are that they do with the investments.

Okay one last question and then I'll cede the floor – given your ramp and expectations have you changed either your yield expectations or your market share expectations I think you said your yield seemed to be coming in quite a bit better than you had initially expected and it sounds like vast majority of the market is still the right descriptive share. Are those two still accurate?

I think for the most part yeah I think we're pleased with our execution on yields we certainly could be better, but I think -- our expectations are being met with respect to yields at this stage of the game and then market share I think you know I think we're in a pretty good position and have very, very good market share of the business of our customers today.

Right, thanks.

Thanks, Alex.

Your next question comes from line of Joseph Wolf with Barclays. Your line is open.

Thank you, just a quick follow on there if you could give us any color in terms of competition. Do you see the competition right now and the related pricing as similar to yours meaning your competitors could also deliver as much as they can produce and you have a yield and capacity lead right now and that will change over the course of 2018 or there are other things that you see as being competitive advantages right now?

Well, I think our strategy to partner with high volume industry-leading foundry partners is paying off from our perspective and we've been working with these foundry partners for years. And so it's not a simple task to do, to do this kind of ramp. I can't really comment on where our competitors are specifically where competitor is pricing because I frankly don't know that pricing I will say that the data we have where we're expecting a certain number of units three months ago and that number has gone up as we were in pretty good position.

Thank you. And then just switching gears to the margin guidance if I look at -- it seems like similar levels to the market that you hit in the fiscal second quarter at the same revenue level, but if we look forward to the in the commentary on the gross margin can you just give us some of that color on where different line items will come out given the mix that you expect and the new opportunities should it be very different or is there big R&D expense we should be expecting in 2018 and you will ramp up with some of these opportunities?

Yes, so Joe thanks for the question in terms of that -- as we look at the fiscal year 2018 from an overall OpEx standpoint – with our base business being what is at today the OpEx percentage of revenue is actually a little bit higher than what we were when we were doing $260 million a quarter at this base business. So in terms of OpEx I would anticipate as being somewhere between the 21% to 22% range as we go through FY 18 and as we continue to ramp 3D sensing the incremental spend will not grow as fast as the top line but you can see us get down into the 21% range. And as we have mentioned before we're going to continue to invest heavily in areas where we believe markets are large and growing and as Alan had mentioned in his prepared remarks 3D sensing has multiple application beyond the initial consumable mobile here that they can order. We've been a leader in this market for some four or five years as we had been in the gaming console business many years back. And there is no reason again why are margins won't expand and from a targeting standpoint like I had mentioned the gross margins should get up into the high 30s 37% to 38% looking out six to eight quarters is not unreasonable. And a lot of that will flow through to operating margin.

Okay that's up and just finally and maybe it's early, but given the current market and the inventory comment on North America for telecom. As you exit the year do you sense that there is going to be any pricing issue on the core telecom components for 2018, the calendar 2018?

Yeah I mean I think there is always pricing concerns and cost concerns that we're focused on trying to drive our cost down to meet the expectations of our customers. So assuming this environment as we get into the annual price negotiation, one could expect that it would be a higher end of the 10%-15% range. But that hasn't started yet, and I'm hopeful that the inventory in China will burn off and North America will start to point more and we'll have a more supply-demand balance. I will say that for specific product like ROADMs and ROADM line cards, those prices have been agreed upon again into 2018 already. So that in my mind has already fixed and set for most of our pipeline customers, but the other coherent components and other products that may be under some pressure on the higher end of that 10-15% range.

That's very helpful. Thank you.

Your next question comes from line of James Kistner with Jefferies. Your line is open.

Thanks, guys. So I guess the first thing is you've been seeing that [indiscernible] for multiple customers. I guess it clarifies -- is it fair say that the vast majority of that is just really primarily one customer or is it more diversified than we're thinking?

It's primarily one customer. But I wanted to make sure that it was clear that we are working with other customers. Both legacy customers that we've had in the gaming and personal computing industry as well as additional customers that are going through qualification in anticipation of getting into volume in calendar 2018.

Okay, that helps. And then secondly, one of your competitors has been talking about -- I mean, it's very clear they're implying that there's a ramping -- high power version of this laser, not just a low-power version. Is it fair to say you're participating in that opportunity as well or both opportunities?

Yes.

That helps. Thank you for entering that. Could you also just talk more about less interesting topic, I guess, where some folks, the lasers business. I mean, it seems like this business has a problem. Like every one or two quarter, you're having trouble getting your arms around it given that the margins that's important for earnings. You talked about having trouble getting equipment. Is that something you didn't see a quarter ago, is there something that's not behind your control? Like what is it going to take to get that business sort of back to the $40 million level and stay there? Like what kind of trajectory you're expecting that business in next few quarters? Thanks.

That's a good question, James, and one that I've been frustrated with. So I'll say it is 100% in our control, not out of our control. We did some late design changes to optimize the product and the quality of the product or the liability of the product that then had us changing some of our suppliers and some of the equipment needed to build the product. So I'd say that that is well within our control. We should have anticipated it, we didn't. And we're addressing that from an execution standpoint. But we do have to fix it. We do have to be able to be predictable in our execution with our customers. And to date, it has been not satisfactory in my mind. So I'd say we're on track, we now have the design, equipment, materials coming in. But we are constrained to these changes that we should have anticipated well back.

It sounds like revenue-wise. This could get a little better than your terms. This could take a few quarters to improve. Is that fair?

My expectation is that, and we guided that lasers would be flat to down a little bit this quarter. I think that's continued. The Gen-2 was in the number and in the Q4 number. It's gone now. So with all Gen-3, so it's really a function of how fast we're going to ramp Gen-3. My expectations are that lasers increases in the fourth quarter, but we're not there yet. We're not giving guidance. I'd say though that the fiber laser demand, the Gen-3 is quite strong both in our main customers as well as additional customers. So it's really in our ballpark and our wheelhouse to execute and ramp that up as fast as we can.

Just one quick clarification here, you said that ROADM has inventory issue. Is it fair to say you don't think you're losing share or is there not a second source across North American? And then I'll pass it after that. Thank you.

I think that if you look at the major carriers in North America, I don't think the primary issue with the inventory and the timing of this deployment, I think we're in a very, very good position in China and the rest of the world is counting on our vote and current generation and future generation. So I would say that we're are not losing share per se I wouldn't say that ROADM market was down as much as ROADMs were last quarter but I think that's the specific customer inventory issue and not one of losing share.

Okay. Thank you.

Your next question comes from the line of Doug Clark with Goldman Sachs. Your line is open. Q – Doug Clark: Hey thanks for taking my question. My first one is on the balance sheet inventory, I know you mentioned three particular reasons why it increased, the one in terms of just on shipments to customers and kind of building inventory because of the excess supply and timing, how much of that $20 million sequential increases that particular factor versus the other two?

So that factor was probably half the increase, Doug, in terms of again, so we've been adding a lot of equipment capacity over the last six quarters as China was turned on in North America Metro as well having parts and equipment on hand that they sense to go and built some of this out and it's product that we're going to be selling over the coming few months and so we made the decision to go and build it out but roughly haven't built was tied to that. Q – Doug Clark: Okay. That makes sense and then a follow-up question on the QSFP28 revenues up about 50% sequentially, since pricing is kind of more regular and rolling continuously, can you talk about the pricing dynamics in that industry as you and kind of the rest of the industry ramp volumes and continue to see pretty nice increases in revenues there?

Yes, I think it's really two separate markets that the QSFP28 addresses, the LR4 which is really the client side of telecom and that kind of is stable to your competitors, it's very high reliable telecom kind of performance that is needed for those kinds of products and those products are stable and very solid from a pricing standpoint. The hyperscale QSFP28 CWEM4 PSM4 those kinds of products it's a tough business, I mean the margins are challenged, the pricing is challenge but we are still getting significant orders for the products and we're being told our prices are significantly higher than some competitors. So I think it's a question in my mind is will some of these competitors that are providing aggressive prices actually deliver or will we continue to be able to capture share with what we think is an appropriate price for the current generation products. Now that said, we've got a second generation product coming out this quarter and then we've got another generation coming out in early calendar 2018 with very differentiated technology and cost points but at least address the hyperscale market even if the pricing decline comes to the point where our customers are asking it to go. Q – Doug Clark: Okay, that's helpful and then one kind of follow up question just on China in particular, I'm curious if or if you can help quantify kind of what the decline in this June quarter was and kind of if you're expecting a further sequential decline in the September quarter for this holding at kind of stable low levels given the inventory reduction dynamics continuing to persist?

I think it's more stable levels, if you look at the first half of our fiscal year compared to our second half, it was down dramatically, the 100 Gig components were down, some places weren't down. So that's again still an indicator of future growth or tight supply and not over inventory situation. But I'd say our expectation is that stays at that level, plus or minus a little bit in the September quarter and then we'll see what happens with tenders and build outs and inventory as we look into the December quarter but I think at this point it's too early to tell whether it goes into the December quarter or we see a rebound in the December quarter. Q – Doug Clark: Got it, thanks for taking my questions.

You bet.

Your next question comes from Mark Kelleher, D.A. Davidson. Your line is open.

Great. Thanks for taking the questions, just as a follow up to that and I'm just curious as to the visibility you have into the inventory drawdown in China, can you see that inventory is there has there been an increase or decrease in the velocity of that being taken down or you just getting sort of the indirect commentary from your suppliers?

From our customers, I would say we have good visibility in the raw material and what they have that they haven't built yet, we have left visibility into what their finished goods are and I think that's the challenge we have, I do think that deployments are happening, there is discussion about tenders being awarded this week, which is a good sign and earlier than I had expected them to be awarded. So I do think that the drawdown is happening, we just don't have as good visibility as the finished goods, the systems with our components in it as opposed to their raw material.

Okay. And kind of the follow-up to that, can you just talk about your expectations for your ACO ramp?

Yes. So we continue to make progress, I think we're sampling more and more customers every week and every month market getting feedback and getting into the qualification stage, I'd say that in reality it's probably not material until the end of the calendar year probably more likely into calendar 2018 because it is -- it is a challenge when there is an incumbent there to be able to first look at the mind share of the customer and then to make our products look like their products and work well with their DSPs. So we're going through that right now and I think we're making good progress, it's really more for us it's calendar '18 thing.

Okay, great. Thanks.

Thanks Mark.

Your next question comes from the line of Troy Jensen with Piper Jaffrey. Your line is open. Q – Troy Jensen: Yes. Hey, thanks for the questions, and got a question for Alan and Alan made some comments in the prepared remarks about ROADM growth and the next generation ROADM, I'm just curious to know if you think your thoughts on the market in China if you think it's kind of been delayed, and the reason I'm asking is estimated to know that you recently talking about a new generation of WSS or ROADMs and I think it's MXN and I think it's the multicast switches integrated in around there something so. Could you just touch a little bit about what this next generation ROADM is our competitors are going to have it and the timeline you think China really does turn on for ROADMs?

Yes, I think there is the ROADMs that are being deployed today and those are the ROADMs we make today for North American Metro and that we introduce last year or year before. As said in the prepared remarks we have shipped next generation stuff and it's really the end by end type of ROADM that is very custom for the China applications. We have many of those engagements going with our Chinese customers and that's why we think that we're really positioned well for the longer term next generation of deployments in China as well as the near term deployments. I'd say that the near term deployments have been kind of lumpy with respect to, with the China Telecom deploying a few hundred ROADMs and try it out I think we're not expecting a lot in our guidance for this quarter from the deployment standpoint but I think we're going to ship start. But it's really more of into the calendar year and into 2018 when the next generation and by and starts coming out in a meaningful way. Q – Troy Jensen: Thank you. You just explain the difference in the next generation is it the multicast switch integrated in.

I wouldn't characterize it as the multicast switch be integrated and I will say to alternative architecture. Q – Troy Jensen: Need a multicast switch.

Yes, we may not need a multicast switch to achieve further functionality in advance ROADM architectures Q – Troy Jensen: Okay and as far as shipping these were just for samples are shipped for revenues.

Through our samples and in its part of our development, joint development agreements we have with some of our customers. Q – Troy Jensen: Yes. All right guys, keep up the good work.

Thanks.

Your next question comes from the line of Richard Shannon with Craig-Hallum. Your line is open.

Hi guys. Thanks for taking my questions. As well maybe I'll dive into the QSFP28 topic you talked about. A little bit about growth portion LR4 and CWDM4 in the June quarter curious if you can lay out sort of how you expect the growth for your business to go in the next couple of quarters, mention some that maybe some differ pricing although you expecting some lower cost as CWDM4 but wondering where you're focusing your attention.

Well, our expectations, my expectations are that both will grow I think unit growth and CWDM4 will far outstrip the unit growth in LR4 but we do expect growth in both. I think one of the things that we said in the prepared remarks but that we're starting to see this CFP2 contribute to our growth and so I think there's a long tail in CFP2 in China. We have a good market share there, I'd say that our expectations are growth in both LR4 at both CWDM4 especially as we introduce these new generations in CWDM4.

Okay I follow specifically on the CFP2 topic, CFP2 topic there and like one of your competitors to suggest to be kind of the slow fade over time your sounds like you're expecting some level of growth there can you differentiate that or help us understand why you think there are at least, at least you going to be some growth beyond this quarter.

Well, I think it primarily China I'd say most of the North America deployments are QSFP28 today or have transitioned or in the process of transitioning. I'd say that the client side of the China deployment is going to be CFP2, LR4 for quite some time so, there's I think a long tail just like we saw on the long tail on CFP. They're still being deployed although they're finally starting to go down in a meaningful way. I think there's going to be a multi quarter it's not multi-year deployments of CFP2 because there's chatters out in networks that have slots that need CFP2 so, I think that there's first of all the inventory looks like it's kind of taken care of itself on CFP2 in China so that's why we saw pickup and we expect to see continue pick-up as the deployments happen in China.

Okay, perfect. That's great. That's all the questions for me. Thanks you guys.

Thanks, Richard.

Your next question comes from Meta Marshall with Morgan Stanley. Your line is open.

Great thanks. I just wanted to kind of see this is a good summary of areas where you were still kind of adding capacity and then being kind of companies as ROADM 3D Sensing and QSFP28 are there any areas else that we should think that you are adding capacity.

Yes, I think that's a pretty good summary.

Okay. Okay and then I might have just miss heard kind of in your prepared remarks but you mentioned write-down of a deferred tax asset was I correct over there more explanation of that are just kind of normal course.

That's correct yes, so the write down the per tax assets roughly $30 million or so where from a likelihood standpoint we would not using those assets going forward.

Okay. Most of the questions have been asked so, I will pass, pass on. Thanks.

Thank you.

I would now like to turn the call back over to Alan Lowe, President and Chief Operating Officer for closing remarks.

Thank you, Operator. And I thank our customers for their business and again thank our employees for their hard work and growing our business and putting us into an excellent position in the markets. We are in the middle of a worldwide expansion of bandwidth photonics are increasingly becoming critical to manufacturing and to the next generation high volume 3D sensing applications making the future bright at Lumentum. We regularly discuss our business at investor relations events, these events are listed on our website in the Investor Relations section and are regularly updated. This concludes our call for today. We would like to thank everyone for attending. And we look forward to talking with you again in another three months. Thank you.

This concludes today's conference call all participants may now disconnect.