Good day, everyone, and welcome to the Lumentum Holdings Fourth Quarter and Fiscal Year 2021 Earnings Call. All participants will be in a listen-only mode. Please also note today's event is being recorded for replay purposes through August 25, 2021. [Operator Instructions] At this time, I'd like to turn the conference call over to Jim Fanucchi of Darrow Associates. Sir, please go ahead.

Thank you, operator. Welcome to Lumentum's fourth quarter and fiscal year 2021 earnings call. This is Jim Fanucchi from Darrow Associates, assisting Lumentum with its Investor Relations. Joining the call today from the Company's management team, we have Alan Lowe, President and Chief Executive Officer; Wajid Ali, Chief Financial Officer; and Chris Coldren, Senior Vice President of Strategy and Corporate Development. Today's call will include forward-looking statements, including statements regarding the impact of COVID-19 and the responsive actions on our business and continuing uncertainty in this regard; trends and expectations for our products and technology; our markets, market opportunity and customers; and our expected financial performance, including our guidance, as well as statements regarding our future revenue, our financial model and our margin targets. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations, particularly the risk factors described in our SEC filings, including the Company's quarterly report on Form 10-Q for the fiscal quarter ended April 3, 2021, and in the Company’s Annual Report on Form 10-K for the fiscal year ended July 3rd, 2021, which the Company expects to file within 60 days of its fiscal year end. The forward-looking statements provided during this call are based on Lumentum's 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 discussed in this call are non-GAAP. Non-GAAP financials are not to be considered as a substitute for or superior to financials prepared in accordance with GAAP. Lumentum’s press release with the fourth quarter and the fiscal year 2021 results and accompanying supplemental slides are available on its website at www.lumentum.com under the Investors section. This includes additional details about our non-GAAP financial measures and a reconciliation between our historical GAAP and non-GAAP results. Now I will turn the call over to Alan for his comments.

Thank you, Jim. Good morning, everyone. The fourth quarter capped off a fiscal 2021 that, by all financial measures, was our best year ever with record revenue, margins, and earnings per share. This was despite the tough macro environment and impact of COVID-19, which caused our Lasers segment to be down more than 25% in fiscal 2021. Growing demand from new customer opportunities grow Optical Communications segment revenue up 7% and total revenue to a new record level in fiscal 2021. We are focused on end-markets that are driven by durable multi-year trends. We have been successful in developing differentiated new products and designed them into market-leading customers for their next-generation solutions, many of which are just starting to ramp. Our demand mix is increasingly shifting towards these products, which we believe could be signaling the start of a new accelerated growth phase in our markets. Supporting this belief were robust demand trends in the fourth quarter. We had very strong bookings resulting in a book-to-bill of 1.2. Telecom transport component revenue in the fourth quarter was higher than it has been in several years. I’ll provide more details on this later, but increased shipments of telecom transport components is typically a leading indicator of higher future telecom demand. Year-on-year, revenue from EML chips for datacenters was up more than 50%. During the fourth quarter, we had record Datacom chip backlog as cloud datacenters are transitioning to higher speeds where we have differentiated market-leading products. In 3D sensing, fourth quarter revenue was up 39% year-on-year. This was the highest fourth quarter 3D sensing revenue we have ever had and demand has been strengthening in the first quarter as well. The recovery in our Commercial Lasers business continued and resulted in a 17% sequential increase in revenue and a lasers book-to-bill…

Thank you, Alan. Good morning, everyone. As Alan highlighted, fiscal 2021 sets a new bar for us financially with record revenue, margins, and earnings per share. On margins, we achieved our previously announced target model a year earlier than originally projected. Based on our confidence in our long-term financial performance, we started aggressively executing on the $700 million share buyback program we announced last quarter, purchasing 3.1 million shares or 4% of our outstanding shares for $241 million. Before jumping into the results, I'd like to highlight some changes we decided to make on how we calculate our non-GAAP tax provision. In order to give a more meaningful perspective of our tax burden over a longer term period, reduced quarter-to-quarter variability in our non-GAAP tax rate and in light of our growing profitability and utilization of our historical tax attributes, beginning in our fiscal fourth quarter, we are changing our method of calculating our non-GAAP income tax provision. For this quarter only, to help with comparisons, we are providing our non-GAAP tax provision using both the prior method and our new method. On our Investor Relations website, we have provided additional data to help with historical comparisons. To be clear, this change in methodology does not affect our non-GAAP operating profit, annual cash tax payments or cash flows. But it should result in more consistent, but higher reported non-GAAP tax provisions going forward, and it will have no effect on any of our GAAP results. Based on our analysis, we expect our non-GAAP long-term tax rate under the new method of calculation to be in the range of 13% to 16%. Now turning to the fourth quarter's numbers. Net revenue for the fourth quarter was $392.1 million, which was in the upper half of our guidance range, down 7% sequentially…

Thank you. Before we start the question-and-answer session I would like to ask everyone to keep to one question and one follow-up. This should help us get to everyone before the end of our allotted time. Operator, let's begin the question-and-answer session.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Tom O'Malley with Barclays. Please go ahead.

Hey, guys. Thanks for taking my question and good morning. It sounds like in the telecom business, trends are really strong on the pump laser side. Can you talk about what you're seeing in terms of transport deployments into the back half of this year? And then, with what you just reported in June, it kind of implies some weaker transmission. Can you talk about - is that COVID-related? Or is that some slowing demand in the transmission side?

Yes. Hi, Tom. This is Alan. As we said in the script, the transport component growth usually is a leading indicator for future other growth. And that's what we're seeing play out. What we think is going to play out in the first half of fiscal 2022. And so, we are seeing broad demand of ROADMs, ROADM line cards that usually go along with these transport components that really build out the initial either greenfield or their expansion of existing networks. And so, I think outlook for transport is extremely strong. I need to get some semiconductor chips into really be able to satisfy customer demand when they want it. As far as transmission is concerned, we are seeing strength in transmission outlook. In coherent components, on our tunable lasers, on our tunable – on our modulators, high-bandwidth modulators, as well as surprisingly enough on 10 gig tunables. And so, across the board, ACOs are continuing to go strong while down from peak levels. But there is a lot of chassis out in the market in networks that are waiting for ACOs. And so, I think we are in pretty good position there. And as we start to get qualified on our 400 gig DCO modules, I think we're going to see a pickup in our transmission business throughout the year.

That’s helpful. And then my follow-up is on the Commercial Lasers business. If you look at your peers, there has been just calls for weakness kind of across the board. You obviously have a different customer concentration than some of your peers. Can you talk about your success there? Is that more related to the geography? Or are you really seeing a balance off the bottom that's related to some weakness over the past year? Can you just walk through the puts and takes of what's driving that strength versus others who are seeing some weakness?

Sure. I think twofold. You're right. Our customer base is different. We have limited exposure into China, especially with our kilowatt fiber laser customer. And from that perspective, we are seeing a good bounce back in overall demand on our kilowatt fiber lasers that typically go outside of China end markets. We are seeing certainly, as everyone has seen, a pickup in semiconductor demand and that's why we commented on our service – our Laser Service business picking up, which is usually a good indicator of usage of our lasers in the field. And then we are seeing also our micro machine business pick that typically goes with semiconductor upswings, both be it on the dealing of semiconductors or the components that they go on in PCBs and things like that. So, I do think it's a different customer base and a different end market that we address compared to some of our peers.

The next question comes from Rod Hall with Goldman Sachs. Please go ahead.

Yes. Good morning, guys. Thanks for the question. I guess, I wanted to kickoff with 3D sensing share. I know last quarter you guys had talked about - you talked pretty cautiously about share and now the numbers look pretty good. So, I'm just curious how share is tracking for you now and on into the back-end of the year relative to what you were thinking last quarter? And then I have a follow-up.

Yes. Rod, thanks for the question. Our commentary last quarter was around the market size and in our expectation for average selling prices due to the smaller chips in the next-generation of our leading customer products. And so, I'd say, given the Q4 revenue, our biggest Q4 ever in 3D sensing, I think, we bode pretty well with respect to share. I do think that the product is in – it has not even been announced yet. So it's really in the early stages with respect to how share is going to play out over the long-term, but I would say that we are positioned very, very competitively. And as we've proven into our lead customer, we are there for them with high-quality, meeting their production outputs and their expectation. So, I feel really good about our share.

Okay. Great, Alan. That's good. Thank you. And then my follow-up with on the $30 million. I know you commented ROADM was supply constrained, Datacom is capacity constrained. I am just curious like how that $30 million kind of breaks down across the business. Is it mostly ROADM? Is it - could you give us any color on what's in the $30 million? What particular lines are affected there?

Yes. In the $30 million, we did not include our internal capacity constraints, like, to your point on Datacom. This is our product that our customers want that we can't deliver because we can't get the semiconductors. And that is mainly around our transport products ROADMs, ROADM line cards, a little bit on our transmission products, but most of the $30 million really comes from our telecom transport area.

Right. And you guys do have plenty of capacity on 3D if that were to flex up upwards in terms of demand right, Alan?

Yes, absolutely. I mean, we have contractual obligations to have inventory there in case there is an uptick in demand or share shifts. And so, we’re ready for our customer and they know it and we're going to continue to be there for them. So, you're right. We have plenty of 3D sensing capacity. And in our foundry model, we really have worked well with our supply chain to make sure that they are ready if and when upticks do occur.

The next question comes from Alex Henderson with Needham. Please go ahead.

Thanks. So, going back on to the 3D sensing for a second, clearly, the supply conditions broadly are causing everybody to be very anxious about supply. And so, it seems like the 3D sensing production probably is anticipating potential risks to supply as the products get launched. So, are we pulling forward some of that demand into the June quarter that might have been something that was produced later in the year? Does it change your outlook for the overall FY 2022 outlook to have pulled that much volume into the - to the June quarter?

Hey, Alex, this is Chris. I would say, it's a little early to tell exactly what's going on overall. But we don't believe this is necessarily a significant pull forward. You got to remember last year, there was a delay, if you will, in the customers’ product cycles due to COVID-19. And so, kind of if we look back in years before, in more normal seasonal trends and then considering the additional dollar content and volume relative to, say, two years ago, three years ago, things look relatively normal that - but again with that caveat that it's very early to tell what's going on in this product cycle.

So, have you changed your thought on the full year FY 2022, kind of growth potential?

Yes. I would say, we have not changed our view necessarily on the market outlook. But I think as Alan indicated earlier that market outlook has a lot of variables like what, overall market pricing and what volumes and mix are going to be. And those - we only - only have guesstimates to one quarter’s worth of the product cycle so far. So, our previous views on the aggregate opportunity are not changed materially at this point.

The next question comes from Meta Marshall with Morgan Stanley. Please go ahead.

Great. Thanks. Maybe wanted to ask a question. In the last quarter, you had noted not expecting kind of a tick up in transport until kind of early 2022. Just trying to get a sense of, is this - some of those projects you got one hit until calendar 2022 hitting today? Or just any commentary about how it's tracking to kind of previous expectations? And then, the second just being China has clearly had a build of some inventory that you were expecting to clear later on in year, just any update there? Thanks.

Yes. Hi, Meta. Yes. I would say that we have seen a bit of a demand change from expectations of three months ago in that the demand for transport. And I think it's real demand. I don't think it's a bunch of double ordering. But it's hard to say. And I can usually gauge that by how many CEOs call me and ask for deliveries and I can tell you it's brisk. So, I would say that the transport demand is real. It's picked up more than we had expected. And if we were able to get the semiconductor chips that we need, I think we would be able to really, really ramp up our transport revenue. But we're continuing to work on that. So don't get me wrong. I think the challenge we had is, we built up some semiconductor inventories that - for flex demand and more demand came in than we had expected. And therefore, we're unable to satisfy all of that demand. I would say that the longer term demand trends from our perspective are very solid as we talked about the transport components and some marine cables going in throughout the world really are leading indicators for future demand and our product positioning for our end-by-end where now it's starting to proliferate significantly outside of China is very, very strong. Your question about - excuse me - your question about China inventory, is that specific to 5G and our Datacom comp chips, Meta, or more general?

And - well, I think you had mentioned last quarter that, you thought there may be some inventory within China that should be clearing kind of in the calendar Q4 period. And so, just trying to see if any of the pickup you were seeing in China is kind of ahead of expectations.

Yes. I'd say, for the inventory, we were specifically talking about our 5G Datacom chip inventory that in fact we've had a revenue deferral in prior quarters. We have seen activity around 5G, but that inventory is slow moving so far. We expect that to start picking up over the next several months. And to your point, hopefully that will be flushed through the system by the end of the calendar year and then start meaningful DML laser chips shipments into calendar 2022.

The next question comes from Samik Chatterjee with JPMorgan. Please go ahead.

Hey. Good morning. Thanks for taking my questions. I guess, Alan, if I could just start with the supply constraints here and from the tone of your conversation it does sound like things are getting a bit lowered. So, just wanted to get a sense, I know it's a bit early for fiscal 2Q and onwards, but should we be thinking about more material headwinds than the $30 million or maybe some headwinds on margins as you go out and procure inventory. And as a second part to that, seasonally, we've seen Telecom and Datacom move up from 1Q to 2Q. Does the supply constraints limit your ability to deliver to that in this year? Thank you.

Yes. I would say, it's a little early to say, because, I am having discussions with the executives at the semiconductor companies that are continuing to work to try to support us. And we're hopeful we can make further progress with them and we booked out long, long lead times, orders for these critical semiconductor chips that will not – we will consume, because their long tails, long life in our ROADMs and ROADM line cards. And so, I think from that perspective, it's hard to say what's going to happen in Q2, because, in fact, later today, I've got a call with the CEO of a semiconductor chip company that's one of our big bottlenecks and I'm hopeful to get good news. But that news would only impact Q2. I would say that on the margin front, unlike others, we've included the cost of expediting semiconductors or paying brokers higher charges, we've included those costs in our non-GAAP numbers. And so, you saw that impact in Q4 and it's in our guidance to continue to pay those higher prices and expedite fees to semiconductor companies in our Q1 guide and I expect them to also be in our Q2 performance, as well.

Yes. Got it. Thank you. Thanks for taking my question.

Sure. Thanks.

The next question comes from George Notter with Jefferies. Please go ahead.

Hi guys. Thanks very much. I guess, I wanted to dig into the - sort of Huawei discussion going back year, year-and-a-half ago. And if I look back, I think the narrative from you guys was really around as the Huawei business ramp down, given the U.S. Government controls, you would see opportunities to win more sockets, more market share in other traditional system suppliers if they take share from Huawei around the world. And I am kind of wondering like if you can revisit that narrative and what are you seeing in the marketplace in terms of share your traditional customers B2B Huawei? Thanks.

Yes, George. Thanks. This is Chris. And. I'll take first stab at it and let Alan come in and add to it. But certainly, on the Huawei fronts, right, we continue to have business with Huawei. It has significantly declined year-over-year. And that's really driven by the fact that they have opportunities to buy some of what we were supplying from non-U.S. suppliers, they are tending to buy from non- U.S. suppliers when they can do that. Fortunately for us, many of those situations are product lines that prior to the U.S. actions against Huawei. We decided to get out of, for example within high band modulator and Datacom modules. Countering that is some of our more bleeding edge technology, for example in ROADMs, there may not be a non U.S. supplier and there may not be another supplier in the world with our capabilities. And so, we've seen those product lines grow within Huawei and sort of push back a little bit on the headwind, the net headwind we have with them. That said, there certainly is activity around the world where service providers are looking to use western suppliers more extensively and that has resulted perhaps in some near-term increased sales for our western network equipment manufacturers. But to be clear, that's a long term opportunity for our customers and therefore us, given you can't switch network vendors overnight. That's a multiple quarters if not multiple year process to do that. And as we've highlighted in the past, our share of wallet with our western customers is significantly higher than with Huawei. And therefore, as that transition continues to unfold over the next few years, we should be a net beneficiary of that given that share of wallet.

Great. Thank you very much.

The next question comes from Simon Leopold with Raymond James. Please go ahead.

Thanks for taking the question. I wanted to see if you could update us regarding the comments you made on the prior earnings call on the 3D sensing market, when you indicated you expected the market would be down 20% to 25% in your fiscal 2022. I discern, maybe a little bit more optimism on today's call with the additional commentary around the automotive opportunities. If you could just update us on how you are thinking there and then I've got a follow-up.

Sure. Simon. This is Alan. Thanks for the question. I would say that, again, our commentary around our fiscal 2022 3D sensing market was really around the average selling price of chips going into next-generation devices, going down as a result of smaller die sizes. And so, two things. One of which is, again, record Q4 results position very well. That's not part of our perspective on market, because share is still not clear. But we're feeling pretty good about that. I would say, until a device gets announced and the traction that the end-user – end-customer really comes through, it's going to be hard to say what is going to happen to overall unit demand. And so, our commentary was around, hey, if unit demand is flat, we believe the market is going to be down 20% to 25%. Now does it look like that's playing out? Maybe you might sense a softening with respect to - with those numbers. But it is going to be down assuming units are flat. Now, is our lead customer gaining share? I think so. And therefore, maybe, there could be higher unit volume that would offset some of that average sales price per chip in our fiscal 2022.

Appreciate that. And then, in terms of the supply chain issues in the telecom component, specifically telecom, not Telecom plus Datacom, I am sort of discerning this implies a sequential decline probably in the mid to high-teens percent. And I'm wondering how you are thinking about once the supply chain gets better, not, not necessarily when, but when it does, do you expect to see really a catch-up spend. So essentially it sits in backlog and we get a better than seasonal recovery at that point? Thank you.

Chris, do you have the expectation with respect to trends in telecom Q1. You are on mute, Chris.

Yes. We expect Telecom to certainly decline sequentially as we highlight in the guidance. I am not – I am not certain it's of the magnitude that you're saying, Simon, but certainly the supply constraints are seriously handicapping growth in that space.

Yes. And then, as far as your other question about, is that demand there when we are able to satisfy it, I'd say, yes, mostly because, a lot of that demand is very high-end ROADMs where we are the leader and in most cases, if not all cases sole source. And so, that's why we're working extremely hard to get the semiconductor we need, because our customers bet on us and we certainly don't want to let them down. So, I'd say that demand is there when we are able to satisfy. And so, it will get pushed out, if we are not able to satisfy and we don't think we will be able to satisfy all of it in Q1 for sure. But whether we are able to satisfy us that in Q2 is another question that we'll answer on the next call.

The next question comes from Ananda Baruah with Loop Capital. Please go ahead.

Hi. Good morning guys. Congrats on the strong execution and thanks for taking the question. Questions two, if I could? I guess, the first one is on 3D sensing - going back to 3D sensing. Is there any opportunity to get more favorable pricing through fiscal 2022 than what you were originally thinking 90 days ago. Any context there would be great. And then I have a quick follow-up. Thanks.

Yes. I mean, we're not going to talk specifically about our price discussions with our customers. I would say that, we do sign up for multi-year agreements and those tend to be intense negotiations that we're very happy with where we ended up, I'll put it that way.

That's very helpful. And just going back to telecom in China 5G specifically. Could you just give us, like the context as to where they are in the requalification process? Whatever the right way to think about it is sort of given the displacement that happened with Huawei, sort of last August and September and that they were - sort of the carriers were going through? I am calling it a requalification process, but whatever the right terminology is and where they are today? And are you seeing a pickup off of sort of what's been the last sort of nine, ten months cadence for you guys and does make any sense?

Sorry. This is Chris. On 5G chips, in China, what I would say is, it’s - I would - well there is probably an element of requalification where our customers have needed to obtain alternate sources of semiconductor chips for their base station designs. But I think the way that a lot of folks are tracking, it is around tender activities and tender awards for base stations. And this summer, there has been some tender activity, tenders awarded to network equipment manufacturers by the China mobiles, China telecoms of the worlds to deploy additional base stations. I would say the activity there was moderate. There wasn't a huge uplift, if you will in expected volumes but on the other hand, good to see that that those tenders were released and awarded. And we expect, as Alan highlighted earlier, that once the overall supply chain works down the inventory of product that we've already provided, which should happen over the next few quarters that as we get into the middle of our fiscal year or into the new calendar year that we would then see a resumption in growth for us for those products.

Yes. And maybe if I could just add, as well. The good news is, there is a lot of activity in China not with just our large customer, but with others on transport deployment. So, metro and long haul deployments are continuing. And I believe that's usually an indicator that there is a commitment to build out the 5G networks, because once you do that, then the bottleneck at the edge of the network really gets alleviated and you need to make sure you have the metro and the core networks built out and we're seeing a lot of activity in that area.

The next question comes from Christopher Rolland of Susquehanna. Please go ahead.

Thanks for the questions guys. The first one is the shortages that you guys see out there, is this changing your desire for external versus internal capacity both front-end and back-end?

Yes. No, I don't think so. I mean, these are unique semiconductor chips in most cases that we are not going to be manufacturing ourselves in any situation than I can see. So, we are reliant on our semiconductor suppliers and their foundry partners to increase the wafer output and allocate some chips to us in the bigger scheme of things, our consumption of semiconductor chips is relatively small. And so, we don't need millions of these ships, we need thousands of the chips or tens of thousands of the chips. And then, from that perspective, it would make no sense for us to get into the FPGA business for example, we are going to continue to rely on them and partner with them to get what we need.

For sure. And I know we've talked a lot about transport, but maybe you can double click on that kind of next level of demand that we're seeing there. You did talk about, I think that this pre-build of China inventory and any status on that? What are the transport applications ultimately going to be used for here. And geographically, what does this mix look like? Is it are their moving parts other than China here?

Oh, yes, that I think it's a global demand pickup that we've seen on transport, both ROADMs, ROADM line cards. And what we did talk about is, our transport components and submarine components. And we are growing that output as a result of the demand. And there are no semiconductor component shortages with respect to our transport component output. And so, we see strength of that in our pump lasers in China, as well as outside of China, as well as submarine cable deployments that use a lot of our components under the – at the bottom of the ocean, high reliability. So, I'd say that, it's a broad increase in demand even in the last three months since our last earnings call, for those components, as well as the ROADM line cards both inside of China, as well as – as well as the rest of the world. Chris, do you have anything else to add on that?

No, Alan. I think the key point is, that it is global in nature and if anything, I mean, China is growing on the telecom transport and transmission side, but it's really the western world that is picking up so significantly at present. And this is, as I think if you go back on prior calls, we've highlighted that that China has kind of led a little bit on some next-generation architectures. And we fully expect that the west to come on strong and that's only been delayed by COVID-19. And how unfortunately, COVID-19 continues to be a problem, I think the world is moving on at least in telecom deployments and figuring out how to get going and deploy that bandwidth, because at the end of the day with Internet bandwidth growing 30% per year, you can't skip a lot of years of expanded deployments or else you run into a big problem very quickly. And as Alan highlighted, 5G opening up the edge of the network, you need to put in that core capacity and that's what's happening.

The next question comes from Michael Genovese with WestPark Capital. Please go ahead.

Okay. Thanks. Thanks a lot. My first question, I want to understand the margins a little bit better. It seems like in the quarter you reported, the gross margins were a little bit weak, which I assume had to do with the supply chains and the ROADM constraints. But then the outlook, it seems like the constraints are getting worse, but the operating margin guidance is very, very strong. So just - can you just help me reconcile margins for these two quarters and what's going on?

Yes. Hi, Michael it's Wajid. I'll take a crack at it and then Chris and Alan can jump in, as well. Yes, so margins in fiscal Q4, you are quite correct. They were impacted negatively by some of this increased costs that we had both because of some of the site measures we've been taking for COVID-19 and also because of some the expedite fees that Alan talked about that we're incurring and some of the brokerage fees that we're incurring having to do with getting in some semiconductor products. Moving into Q1, again our operating margins of 30.5% to 32.5%, we are quite pleased with those margins where we're expecting to continue to have the same type of costs that we had in Q4 into Q1, as well and we’ve reflected that in the operating margins that we've communicated from a guidance standpoint. What's really benefiting us is a really good product mix. Our Lasers businesses is increasing quarter-over-quarter and that's helping us quite a bit as well. And even looking forward, you heard from the prepared remarks, Alan commented on the backlog that we've got for EML chips is at a record And so when you have that type of favorable product mix, that's going to flow down to our operating margins as well. So, those improvements in product mix are combating some of the headwinds we're seeing from a supply chain cost standpoint.

Great. Okay. Thanks for that. And then my second question is, I guess, we're expecting to transport, I mean, transport seems okay, but we're expecting to get – sorry, transmission, strength in transmission to get better at some point given what we're seeing in transport. My question is, is 400 ZR relevant to that conversation, is that an important market as transmission demand increases at some point in the future? And is it something that you guys need to play more in? Thanks.

At least in the near term, I mean the ZR market is certainly an important market. It's only a small portion of the overall 400Gig and above a market. And as Alan highlighted earlier are currently and what we expect will be ramping up earlier is more of the Coherent component. So a high-speed, for example, high-speed modulator at 600 Gig, 800 Gig narrow line with tunable lasers that made up with those modulators. Those are in production and ramping at present as well as other components that go into folks that are building 400 Gig, 600 Gig, and 800 Gig modules or line cards. And again as we mentioned earlier, our 400 Gig DCO modules, which are either DCOs, ZR plus, however you want to think about the sort of format or standard they adhere to, ZR is certainly something where we're targeting on our roadmap, but it's not the be all end all for us because it's a pretty small portion of the market relative to how big the pie is going to be in the fastest growing portions of it? It's just a new portion. It’s probably why there is a lot of focus on it. But it's certainly not the largest just opportunity ahead of us in our top focus.

And we have time for one more question in our allotted of time and that comes from Fahad Najam with MKM Partners. Please go ahead.

Thank you for taking my questions. I know it will come out in the 10-K. But can you tell us your 10% customers in the year?

Hi, Fahad. This is Chris. Yes, as you said, it will come out in the 10-K. So, I don't want to get too quantitative, if you will, but maybe perhaps the easiest way to answer that question is to say we had three folks in our 10% customer list over the past several years from time-to-time not, all three of them on that list in any particular year. And same folks are in the mix. There should not be anything surprising in the greater than 10% customer as we've highlighted. Our top western customers are growing significantly by double-digit percentages year-over-year and our largest customer in China, Huawei is declining by double-digit percentage year-over-year where they are exactly landing in that 10% customer list, we’ll have to wait and see in the K.

Okay. So, can you - I was trying to get an answer around Huawei. And so, how material Huawei is to your revenue and to your outlook? Can you provide some insights there?

Yes. As think, as I said, Huawei is hanging around in - is around a 10% customer. That's why we want to wait and comment on the specific number on when the K comes out. They have been much larger and are declining year-over-year and we expect to continue to decline over time, as well given our reduction. And being in a limited set of SKUs, if you will, primarily high-end ROADMs with them, as well as western service providers moving away from Huawei and moving to western network equipment manufacturers where we have larger footprint. So, we don't see as a reduction in our overall global market share despite a reduction within Huawei?

Yes. Just to add to that, Chris, I think, the other thing we've seen is a pickup in demand from other network equipment manufacturers in China that perhaps are gaining share in domestic China deployments. And so, I think overall, we are in pretty good position with the China market.

This concludes our question-and-answer session. I would like to turn the conference back over to Jim Fanucchi for any closing remarks.

Great. Thank you, Drew. This does conclude our call for today. We would like to thank everyone for attending. And we look forward to talking with you all again when we report the first quarter fiscal 2022 results in early November. Thank you, and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.