Good day, everyone, and welcome to the Lumentum Holdings Special Conference Call for Investors. All participants will be in a listen-only mode. Please also note today's event is being recorded for replay purposes. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. At this time, I would like to turn the conference call over to Kathy Ta, Vice President of Investor Relations. Ms. Ta, please go ahead. Thank you, and welcome to Lumentum's special conference call to discuss its announcement of entering into an agreement to acquire Cloud Light. This is Kathy Ta, Lumentum's Vice President of Investor Relations. Joining me today are Alan Lowe, President and Chief Executive Officer; Wajid Ali, Chief Financial Officer; and Chris Coldren, Senior Vice President and Chief Strategy and Corporate Development Officer. Today's call will include forward-looking statements, including statements regarding our expectations regarding the acquisition, including market opportunity, macroeconomic trends, trends and expectations for our products and technology, and markets, market opportunities and customers, and our expected financial performance, including statements regarding our future revenues, financial model and margin targets, and statements regarding our expected Q1 operating results. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. We encourage you to review the risk factors described in our most recent filings with the SEC, including Lumentum's 10-K for the fiscal year ended July 1, 2023. The forward-looking statements provided during this call are based on Lumentum's current expectations. Lumentum undertakes no obligation to update these statements or any other forward-looking statement. Please also note that unless otherwise stated, all financial projections discussed in this call are non-GAAP. We have not provided a reconciliation of these projections, as one is not available without unreasonable effort due to the variability and unpredictability of excluded items. Non-GAAP financials are not to be considered as a substitute for or superior to financials prepared in accordance with GAAP. On today's call, we will reference a presentation on today's acquisition announcement, which you will find posted on Lumentum's Investor Relations website. Please turn to page 4 of this presentation. With that, I'll turn the call over to Alan for his comments. Thank you, Kathy, and good morning, everyone. Today is a very exciting day, and we have a lot to cover. Earlier this morning, we announced that Lumentum will acquire CloudLight, a leading provider of high-speed fiber optic transceivers and active optical cable products to hyperscale cloud customers. This acquisition is expected to accelerate Lumentum's growth in the coming years and will be immediately accretive to our EPS. It squarely positions Lumentum as a leader in providing photonics to cloud operators at a time when artificial intelligence is strongly accelerating. The addition of CloudLight is expected to result in a more than fivefold expansion in our served opportunity inside of cloud data centers. This is also expected to more than double our revenue from cloud operators over the next 12 months after close. Light provides the highest speed optical transceivers in the market, which is where photonics to cloud operators is growing rapidly. Nearly all of Cloud Light's more than $200 million of revenue in the last 12 months was derived from 400G or higher speed transceiver sales. In the most recent quarter, over half of Cloud Light's optical transceiver revenue was derived from 800G modules. The combination of our companies enhances security of supply for their customers with a broader, combined global manufacturing footprint and enhanced opportunity for component-level vertical integration. In addition to immediately and significantly expanding our participation in the fastest growing portion of the data center opportunity, this transaction positions us to address future customer challenges around network bottlenecks that impact AI data center workload scaling. It combines Lumentum's advanced, vertically integrated chip scale, photonic integration, RF electronics, and data transmission technologies with Cloud Light's in-house, highly automated, high-volume, optical assembly production platform, along with an excellent transceiver design team. Along with Lumentum's optical switching capabilities, these are all essential ingredients to create the innovative optical interconnect and network solutions essential for data center workload growth. We believe we can rapidly scale to even higher volumes of these advanced transceivers needed by hyperscale cloud and AI infrastructure customers. The combination is also expected to have broader benefits for Lumentum. It increases our direct relationship with and relevance to cloud customers, who are increasingly driving product roadmaps, volumes, and new consumption models for our telecom products. In addition, at the network edge, our tunable DWDM transceivers are increasingly becoming cost-effective solutions for next generation, wireless and distributed access architecture networks. With CloudLight's low cost, high volume transceiver manufacturing platform, we expect we can further expand the application of our DWDM transceiver products. Please turn to page 5. To better illustrate our strategic rationale for this transaction, let me first provide some context. AI models are driving an exponential increase in compute requirements, where performance is now doubling every 3-4 months, compared to the historical doubling every 2 years, according to Moore's Law. The number of parameters in a typical AI model has grown over 100,000 times in the past decade. This rise in complexity requires more and more compute power to train and deploy these AI models. Additionally, the sheer number of AI models being trained and deployed is expanding dramatically. For example, according to Google's public comment, the number of AI models trained on Google Cloud TPU v4 pods has increased by over a hundredfold in just the past year alone. Finally, the speed at which these complex AI models can be trained and deployed has become a critical issue as more companies and user activity embrace AI to make real-time decisions. The relentless demand for compute power to train and deploy AI models is straining traditional compute resources. As a result, many companies are turning to cloud computing platforms to meet their AI compute needs. Cloud platforms offer scalability, elasticity, and on-demand access to compute resources, making them ideal for AI workloads. Now, please turn to page 6. AI workloads are both enormously data and compute intensive. This drives new AI supercomputer architectures, with computation distributed across thousands of parallel networked processors, which are specialized GPUs, TPUs, or CPUs. These processors exchange data with each other and high bandwidth memory with a large number of high-speed data links across numerous compute cycles. The time communicating across these links and networks is frequently a significant fraction of the overall job completion time. A public study from Meta estimates that 5-10 times more network bandwidth is needed in data centers that are architected for AI workloads. All of this drives the need for very large numbers of the highest data rate data links within data centers and AI clusters. Please turn to page 7. This growth of AI computing in data centers is, in turn, driving an explosion in demand for leading-edge photonics products, in particular, the strong demand for 800G optical transceivers. 800G transceivers offer today's highest data link capacity, making them essential for supporting growing heavy AI workloads. Recent third-party research indicates that unit shipments of 800G transceivers will soon surpass those of 400G transceivers. By 2028, industry forecasts predict that cloud data centers will require 26 million 800G units, with another 5 million 1.6 terabit units on top of that. This surge in high speed transceiver demand is almost entirely due to the proliferation of AI computing in hyperscale cloud data centers. Now please turn to page 8. Third-party research also estimates that total revenue from sales of high-speed transceivers utilized within data centers will grow from $2.4 billion in 2023 to more than $10 billion in 2028, a 5-year compound annual growth rate of more than 30%. This rapidly growing demand is focused on the highest speed portions of the cloud intra-data center transceiver opportunity, including 400G, 800G, and 1.6T transceivers, as well as active optical cable, or AOCs, for short reach intra-data center applications. CloudLight's product portfolio aligns very well with these trends. With this transaction, our addressable opportunity within cloud data centers also expands significantly. Historically, we have focused on providing industry-leading laser transmitter chips, such as EMLs, which comprise approximately 10%-20% of the total transceiver revenue opportunity. By acquiring CloudLight, we expect a fivefold expansion in Lumentum's cloud intra-data center served opportunity. Now, please turn to page 9. CloudLight has a strong track record of manufacturing leadership and delivering innovative products quickly, as evidenced by a strong position in 800G transceivers. Nearly all of Cloud Light's more than $200 million of revenue in the last 12 months was derived from 400G or higher speed transceiver sales. In the most recent quarter, over half of Cloud Light's optical transceiver revenue was derived from 800G modules. Cloud Light has achieved and consistently maintained its leading time to market and volume scaling capability through high levels of automation in its optical module and transceiver manufacturing processes. Their products have been qualified by a number of top hyperscale cloud customers. Please turn to page 10. With this transaction, we become a clear supplier of choice for intra-data center applications with a broad and expanding product portfolio. For intra-data center applications, we will supply the full suite of required laser solutions and high-speed transceivers and AOCs.... The breadth of our combined product portfolio also creates vertical integration opportunities that will provide customers with higher performance and lower cost solutions. As we mentioned in our March investor event at OFC, we anticipate a new and rapidly emerging opportunity for optical circuit switches, or OCSs, within data centers. Lumentum is well positioned to provide OCS solutions to leading hyperscale customers, given our core capabilities in optical switching, amplification, and monitoring developed for longer reach networks. Serving the complex switching fabric within hyperscale data centers is another exciting opportunity beyond what we have already covered today. Outside of the data center, we serve cloud customers with our full set of ROADM-related products for metro and long-haul networks. Following our FY 2023 acquisition of NeoPhotonics, we now have a leadership position in coherent components for pluggable ZR and ZR plus modules that are used in data center interconnect applications and a growing ZR module business. All our cloud data center products and product roadmaps reflect Lumentum's continued commitment to investing in fundamental technologies that anticipate customer needs and deliver the highest performing, highest quality, and highest reliability products. Now, please turn to page 11. As you have seen, we believe we are extremely well positioned to address the growing needs of our cloud customers as they scale to meet the demands of AI computing. This transaction combines CloudLight's strong track record of manufacturing and first-to-market product leadership, with Lumentum's commitment to lead in R&D innovation over the long term. We will lead the industry's transition to 800G and 1.6 terabit transceivers, including high speed, short reach, active optical cables, and we will provide solutions for both Ethernet and InfiniBand applications. Our cloud customers are responding very positively to this transaction, and they appreciate the rationale for the combination. They are looking forward to benefiting from having a broader, more strategic supplier and product development partner once the transaction closes. Please turn to page 12. To summarize, acquiring CloudLight expands our cloud intra-data center served opportunity over fivefold, as we will serve not only our existing laser transmitter customers, but now the optical transceiver opportunity as well. This large served opportunity is expected to grow at a CAGR of over 30%, driven by AI workloads requiring deployment of an escalating number of the highest speed transceivers, such as 800G and 1.6 terabit products. We expect the opportunity for these high-speed modules to exceed $10 billion in 2028. This transaction will be immediately accretive to our earnings per share and accelerate our revenue growth. We also expect our cloud intra-data center revenue to more than double in the 12 months following the deal close. With that, I will now hand it over to Wajid to provide more details on the financial terms and benefits of this transaction. Wajid? Thank you, Alan. Good morning, everyone. I would like to echo Alan's sentiment about the significant benefits of this transaction. This combination accelerates Lumentum's top line growth, creates opportunities to benefit from economies of scale, and to become a broad solutions provider for our data center customers. Please turn to slide 13. Under the terms of the transaction, which has been unanimously approved by Lumentum's board of directors, the total transaction value is approximately $750 million, subject to certain adjustments, and will be paid in cash, and the assumption of substitution of Cloud Light outstanding unvested options at the time of closing. This combination is expected to be immediately accretive to Lumentum's non-GAAP earnings per share, and is expected to more than double our cloud intra-data center revenue in the 12-month period following the close. During our due diligence, CloudLight showed us their impressive growth, where they delivered more than $200 million in revenue in the last 12 months at low teens non-GAAP operating margin, and high teens EBITDA margin. We expect CloudLight revenue to grow at a greater than 30% CAGR over the next 3-5 years, and even faster in the nearer term. We also expect that CloudLight's non-GAAP operating margin percent will improve to the high teens within 24 months of the close, through synergies derived from increased manufacturing, utilization, and efficiency, increased leverage of Lumentum components in CloudLight transceivers, and the leverage of our combined global manufacturing and engineering teams. Because the anticipated synergies scale with the high expected revenue growth, we are providing margin expansion expectations versus a specific dollar figure for these synergies. We currently expect the transaction to close by the end of calendar 2023, subject to required regulatory approvals... and other customary closing conditions. I would also like to provide a brief comment regarding Lumentum's soon to be announced Q1 financial results. We expect our Q1 results for revenue to be approximately $317 million, which is above the midpoint of our guidance range, and EPS to be above the midpoint of our guidance range as well, which we provided during our August earnings call. As Kathy mentioned at the start of this call, we will defer further comments about Q1 results and our Q2 guidance until our upcoming earnings call, which is scheduled to take place on November 8. With that, I'll turn the call back to Kathy to start the Q&A session. Kathy? Thank you, Wajid. Before we start the Q&A session, I would like to remind everyone that during today's call, we will be addressing questions that relate to this acquisition announcement, and we will not be making further comments on our Q1 results or Q2 outlook. I would also like to ask everyone to keep to one question and one follow-up. This should help us get to as many participants as possible before the end of our allotted time. Now, let's begin the Q&A session. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be polled in the order they are received. Should you wish to decline from the polling process, please press star followed by the number two. If you're using a speakerphone, please lift your handset before pressing any keys. Your first question comes from the line of Simon Leopold from Raymond James. Please go ahead. Great. Thanks for taking a question during this call. Could you give us a little bit of background in terms of Cloud Light's essentially business model? I'm presuming that they are basically a manufacturer and not vertically integrated and wondering, have they been a historic Lumentum customer? Just a little bit background, maybe including sort of where are their factories, how—what's sort of the square footage? I'm just not that familiar with them. Thanks. Yeah. Thanks, Simon. Let me try to tackle as much as I can. Cloud Light has been a small customer of Lumentum, and that's one of the avenues by which we started learning about how impressive they were, especially at the very highest speed transceiver design and manufacturing capabilities. The primary manufacturing site is in Dongguan, China, and have some operations in the Philippines. Main design teams are in Hong Kong and in Taiwan. I don't have the square footage, but I just would say, you know, as we said in our prepared remarks, the team is extremely impressive. Their manufacturing automation is very impressive, and I think the combination between Lumentum and Cloud Light really provide an opportunity for further component vertical integration, as well as driving to the best possible cost for our customers. Great. And then just maybe a quick follow-up. You did mention that they've got sales into multiple hyperscalers. Maybe if you could give us a little bit of insight in terms of any degree of customer concentration. Have they had, you know, greater than 10% customers, and do they have any customers that are meaningful but not hyperscalers? So somebody perhaps manufacturing an element of an AI cluster or something like that. I don't want to really comment on their customers per se, but given that there are only a handful of hyperscalers, and to your point, the customer partner that does do a lot of the GPU cluster work, I think we'll save that for when we become a little bit more familiar with how they perform. But I would say that the combination does enable us to broaden the sales to further customer opportunities, and I think that's why I'm very excited about the combination. You know, given that there are only a handful of customers, of course, there's 10% customers at their revenue, but we'll see as we combine the company, you know, will it be a 10% overall customer? That's, you know, we'll let you know as we further integrate the two companies. Thank you. Post-close. Post-close, that is, Simon. Thank you, Simon. Your next question comes from the line of Samik Chatterjee from JP Morgan. Please go ahead. Hi. Thanks for taking my question. Maybe if I can just ask you to clarify something first, and I'm sure you went through this, and I didn't understand this completely, is, does CloudLight do the full transceiver module or the transmitter IC, which you're sort of highlighting as 10%-20% of the revenue opportunity of a transceiver? And the reason I ask is I believe you were in the transceiver module business and decided to pare back that business over time. And so how is this sort of opportunity different from the datacom module business that you were in earlier? And I have a quick follow-up. Thank you. Yeah, sure, Samik, this is Chris. ... good morning. So yes, Cloud Light does produce or design, develop, produce full optical transceivers as well as the optical subassemblies that go into those transceivers. And then, you know, kind of turning back to our history, yeah, we previously had a datacom module business, but it was much more oriented towards, let's say, the enterprise world of the past. So therefore, less cost competitive, fast moving relative to the needs of today's hyperscalers. Cloud Light is very different. They're at the leading edge of cost and speed and agility, very well regarded by the hyperscalers. As well, Lumentum has changed quite a bit since we were last in the datacom module space, with regard to having a much larger and innovative transmission business from which lots of technology is being developed. We've revamped our datacom chip capabilities, and we've brought online our large in-house factory in Southeast Asia from, you know, being essentially a startup at the time we got out of the datacom module business, to being a, you know, preeminent photonics factory, you know, across the industry. So a lot of things have changed in the industry world, and ourselves, since we exited the datacom module business. Okay. And my, sorry, for my follow-up, if I can just ask when I, when I think about the competition for this, are the typical competitors, the ones we think of like the InnoLight and Coherent of the world, and if that's the case, how are you thinking about sort of differentiation in that market? Is the lowest cost producer, is that the differentiation? And to enable that, is it really more automation and capital investment, or is it more going down the path of contract manufacturing? What's the sort of way you sustain that differentiation? Thank you. Yes, Samik, this is Alan. I'd say, you know, twofold, one of which is first to market design and technology that CloudLight has shown really does enable them to capture the most leading-edge requirements from customers. And so we were super impressed with their capabilities there. And, you know, as we said in the script, over half of their transceiver revenue in the last quarter was 800 gig, and I would hesitate to think anybody has that type of mix from our competitors. I'd say, you know, we're still very committed to supporting our other transceiver customers with datacom chips, and that's gonna continue to be a major growth engine for us as well. But that's no different than how we treat our telecom customers. Well, we'll support them with low level components, subassemblies, as well as entire products. So I'd say, you know, the competitive advantage is really first to market technology in manufacturing that is super impressive, that'll drive low cost. And then you combine the two companies, where we will have a lot more product in-feed to drive vertical integration and cost reduction. I think that, and then what Chris talked about, having our own manufacturing expertise in Thailand for potential growth areas, as you know, they, they're outgrowing their existing footprint and will need to expand dramatically post-close. Thank you. Thanks for taking my question. Thank you, Samik. Your next question comes from the line of David Vogt from UBS. Please go ahead. Great. Thank you. I just want to follow up on the comment that Alan and Chris made regarding your datacom laser business, your chip business. So post-transaction, are we to assume that there's no change in your relationship with, say, like InnoLight going forward, and that you have enough capacity to meet the demands of obviously your internal growth projections as well as your customers? And then I'll just give you the follow-up while I have you. You mentioned obviously you're excited about having manufacturing capacity in Thailand and other parts of Southeast Asia. Is there an opportunity to rationalize the footprint, to maybe extract more profitability and/or synergies out of the disparate footprints that you currently have from a manufacturing capacity? Thanks. Sure. Let me address the first question. You know, the vast majority of the laser chips we provide to InnoLight and Coherent and others is really based on our EML technology. And the capabilities that we have in providing them with the leading edge EMLs for 400- and 800-gig today, as well as VCSEL and VCSEL arrays for those shorter reach applications. And we're gonna continue to support those customers with those products and technology. The majority of the... Well, I'd say all of the transceivers and active optical cables that CloudLight manufactures today are based on silicon photonics, as well as VCSELs and VCSEL arrays for those shorter reach applications. So it's not really a competitive offering per se. It's more of a complementary ability that we can provide VCSELs and high power CW lasers for the CloudLight transceivers, and then we can continue to provide EMLs and DMLs for the rest of the market. Chris, you have anything to add on that? ... No, I think I, I think the rest of the question around manufacturing footprint, I would just highlight that, our focus is on growing the business right now and, post-closing of the transaction, we will, you know, support the growth in existing footprint and as Alan highlighted, then expand perhaps in other existing Lumentum footprints to handle the rapidly growing demand. Great. Thank you, guys. Thank you, David. Your next question comes from the line of Meta Marshall from Morgan Stanley. Please go ahead. Great, thanks. Maybe first question, just is there any increase in capital requirements, just as you guys look to kind of expand our capacity, over the next year, that we should think of as being a part of the model? And then second, noted that you guys were hoping to close this by the end of the calendar year. Can you just kind of give a sense of what China approvals would be necessary as part of this? Thanks. Sure. Let me address the capital. As we've talked about the rapid growth, CloudLight has made significant capital investments over the past 12 months to position for that rapid growth that we see. You know, as Wajid talked about 30% comp CAGR, but in the short term, even faster than that. So capital has been deployed. I'd say that, as we look forward and as we get more close to closing and the integration planning, we'll have a better picture of capital requirements and how we might be able to continue to drive more efficiencies there. So I wouldn't say that it's more capital intensive per revenue dollar than typical. But we'll learn more as we get a little closer. As for the regulatory requirements, the vast majority of the revenue for Cloud Light is outside of China, so the main regulatory requirement is with U.S. HSR, and that's why we think we'll be able to close before the end of the calendar year. Great. Thanks. Your next question comes from the line of Alex Henderson from Needham. Please go ahead. Thanks. So I was hoping you could talk a little bit about the percentage of their revenues coming from active optical cables versus the percentage coming from longer reach. Understanding that in AI environments there's a higher percentage of AOCs in that environment. Within that context, can you talk a little bit about what sub-assembly components they manufacture that are how to say it specific to them, i.e., internal content, or is it just simply a matter of the vertical integration of these components that they're supplying from other people? Yeah, Alex, this is Chris. So today, I would say, the majority of the revenue is coming from silicon photonics-based transceivers. So you can think of it as sort of the intermediate or longer reach distances at least, you know, relative to inside data center distances. I think the shorter reach transceivers and AOCs are more of a longer term growth, as you said, as AI architectures starts to increase the utilization of optical cables versus electrical cables. So CloudLight's well positioned in both from a product standpoint and a capability standpoint, but the mix today is leaning more towards the intermediate to longer reach silicon photonics modules. From a standpoint of, you know, I think as you mentioned, sub-assembly components versus vertical integration, I would say, you know, the primary driver of the cost synergies between the two of us is driven by the vertical in-feed opportunity we have, given the nature or sort of the BOM cost, how it breaks down, so the optical components that we will be able to provide into their transceivers. I'm a little confused by the answer on the first part. I thought you were saying that virtually everything they're selling is inside the data center datacom product. Sure. your answers seem to imply that some of that was for longer reach outside of the data center. Am I correct? Can you clarify that, please? Yes. Sorry, Alex. What I meant by longer reach was not the short reach, you know, tens of meters, type applications. So longer reach inside the data center is hundreds of meters to a kilometer or so. Right. That was the implication. Okay. I got it. I understand. Thanks. And then one last question, if I could. Yeah, one of our companies we follow has gone from essentially zero to $140 million in quarterly reported AI related revenues in the span of about a year. And that trajectory is expected to roughly double, you know, over the next year. And clearly, that trajectory is tied to the spectacular growth rates in AI that has been reported by people like NVIDIA. Is that the type of trajectory that we're talking about here? Are they tied into those order flows and therefore, it's really not a function of demand, but rather a function of capacity availability? To that extent, if that's the case, has the orders been put in place to build out the capacity to produce these products 3, 4, 6, 8 quarters in advance, which is the lead times for the systems that require to manufacture them? Yeah, Alex, I hesitate to think that we're gonna go from zero to 140 in a period of four quarters. But I would say that, as Wajid indicated, the short term CAGR is very steep, so you're spot on with respect to capacity being the gating item, not demand. And so, you know, CloudLight has been running the business very effectively, being able to ramp significantly over the last few quarters and do have orders for future capital needs to satisfy the order intake that they have and expected forecasts from new customer qualifications that are in the works. So, I wouldn't say that there's any concern on our part with respect to them having the capacity to meet the needs of, or try to meet the needs of the very, very strong demand that they're seeing in their business. I would say that they're gonna run out of factory footprint before they run out of demand. So, that's why I think the combination really does lead to a 1 + 1 equaling more than 2. So the orders for the equipment has been put in place, is what you're saying? Absolutely. Okay, thanks. Thank you, Alex. Your next question comes from the line of Ruben Roy from Stifel. Please go ahead. Yes, hi. Thank you. Chris, I want to follow up on the last discussion you had, the last question. And what I'm wondering is, it sounds like CloudLight has engagements directly with the hyperscalers, so I wanted to make sure I had that right. And, you know, there's some proprietary, you know, pluggables that they're building for the cloud service providers. And so I guess the question I would have is who has the IP? Is it the hyperscaler? And do they create a reference design that then, you know, goes out to CloudLight and, you know, just, essentially has the best-in-class components going into the transceiver? Or does CloudLight own some of the IP, you know, in terms of the build? Yes. So, yes, as you started with, revenue is with hyperscaler and cloud infrastructure providers. CloudLight designs its own transceivers, so has its own IP. That said, you know, they may just like Lumentum does frequently have partnerships with customers where there may be customized designs and potentially in those customized designs contain customer IP. But in general, they're a standalone designer and manufacturer of transceivers. Okay. Thank you. And then as a follow-up, it sounded like, Alan, when you talked about the coherent stuff, from Neo, longer term, it sounds like there might be an opportunity to improve, you know, with synergies and, and the automation, that, that you get from CloudLight to improve the overall margin structure for some of the other parts of your portfolio. Did I hear that right? Yeah, I think it's two things, Ruben. One of which is what you mentioned there, the capabilities for further learning from CloudLight and their manufacturing capabilities, and applying that to things like our, you know, 400 and soon to be 800 gig ZR. And secondly, is really the relevance we become with respect to the cloud customers. And, you know, as a chip supplier to their suppliers, we're not as relevant as we are as a combination with CloudLight. Meaning we are now positioned to be a critically important supplier to the cloud customers, more so than we were as a chip supplier. And that will also give us the capability of looking at other opportunities like intra-data center connections like the ZR. But as well, we mentioned is the optical circuit switching capability, utilizing our current expertise in ROADMs, but also using that inside a data center for driving power consumption down as well as cost down of these major, major AI clusters. And so I think it's a twofold benefit with respect to the combination. Appreciate the detail, Alan. Sure. Thanks, Ruben. ... Thank you. And your next question comes from the line of Tim Savageaux from Northland Capital Markets. Please go ahead. Hey, good morning. Savageaux. Okay. Can you hear me? Yeah. Hi, Tim. We can hear you. Yes. Okay, great. Thanks. Sorry about that. Well, one quick question, and I'll put the follow-up along with it, which is, you know, can you talk about the gross margin profile of the company? And the broader question is how you would describe kind of the process leading to this transaction. Namely, is this, you know, kind of an assessment of the opportunity here in a pretty broad-based process or something that's, you know, more opportunistic stemming from this customer relationship with... I guess the real question being did you look at other assets here? Maybe even assets based in the U.S., possibly even based in Houston. But if you can just describe your approach to the process overall, that would be helpful, in addition to just a quick comment on gross margins. Sure, sure. Wajid, why don't you take the gross margin question, and then I'll, I'll talk about the process. Yeah, sure. Yeah. So, Tim, you know, obviously, just given the amount of BOM that's in a transceiver, the gross margin model is a little bit lower than our combined company operations. As we mentioned, as part of the prepared remarks, our expectation is that we'll be able to improve that through our supply chain as well as our overall manufacturing footprint and opportunities for vertical integration of our own components into those products. What I think is more important is really the operating margin profile. The operating margin profile and the EBITDA profile that I spoke about in our prepared remarks isn't expected to be that far off of our midterm model, and actually, in the short term, is accretive to how we're currently operating, just given some of the inventory corrections that are happening in our current business. And so, we believe that there's a lot of opportunity to improve on the operating margin profile that CloudLight has, especially with the very steep revenue growth that's expected from this business over the next few quarters, as well as the more mid to long term. And I'll pass it over to Alan and Chris to talk about the process. Yeah, I'd say that, you know, obviously, we have a funnel of things we're looking at all the time. I mean, when we started getting closer to understanding what Cloud Light had to offer in the technology roadmap and the process roadmap in manufacturing, as well as the mix of, you know, very, very high speed capabilities, you know, that was the sweet spot for what got our attention around, you know, being a major supplier to the hyperscalers. I think that said, the combination of the companies really was complimentary, and I think the, again, the one plus one equaling significantly more than two really drew us to Cloud Light over anyone else. Once we started getting to know the management team and the capabilities and the development team, it was pretty clear that that was the partner we wanted, and that's what we've been working on for the last bit of time. I would say it was certainly we looked at everything, but when we learned about what CloudLight could bring to Lumentum, that was where we focused our efforts and, you know, led to today's announcement. Okay, thank you. Thank you, Tim. Your next question comes from the line of Alex Henderson from Needham. Please go ahead. Hold on for a second. Yeah, thanks. Yeah, so I was wondering if you could talk a little bit about what their thought process was in merging with you. It sounds like they have incredibly good demand characteristics. They're sitting at the cusp of a huge ramp in AI. And is it a function that they just didn't have enough capital to supply the equipment, and therefore they were, you know, capital constrained, and that was, you know, what they were looking for in the merger? What was their thinking as you see it in this merger? What are they getting out of their relationship with you, or is it more an improved supply of chips? What's the thought process there from their perspective? Sure. Hey, Alex, this is Chris. You know, they started as a, you know, smaller private company, so, you know, good sized revenue, et cetera, but still in many ways, a smaller company. And so they looked at us as, you know, for all the above that you mentioned. I wouldn't say capital constrained, but more from the standpoint of the needs to ramp up their company to a much larger scale. And either they can go do that on their own or do that in partnership with somebody like Lumentum, that already has the scale and geographic customer reach, broader manufacturing footprint. And then, as you alluded to, the product in feed to become a more comprehensive, vertically integrated supplier. I think it just goes back to a sort of-... Private company life cycle that they, they chose, joining forces, as opposed to, to reinvesting to take the company to the next level. Great, thanks. Thank you, Alex. Your next question comes from the line of Tom O'Malley from Barclays. Please go ahead. Hey, guys. Thanks for taking my question. Just hopping back and forth between two calls here, so forgive me if I'm asking something that's already been asked, but I just wanna understand just the, the ability to improve a gross margin profile of this business. Historically, you guys obviously operated a transceiver business in the Datacom world, and got out of that to improve profitability, right? You know, how realistic is the ability to, to get this gross margin profile up in a short period of time? Obviously, times are very good right now, given the, the rise of AI. If you look at a more, you know, normalized time, you know, is it possible to get the kind of expansion that you need to make this deal worth it long term? Thank you. Yeah, good question, Tom. You know, I would say that we're confident in the sustainability of improved gross margins with the combination for a couple of reasons. One of which is, they do have a very unique manufacturing capability that I think provides lowest cost manufacturing. I think when you combine that with product end feeds, as we're a very small supplier to Cloud Light today, that can change over time as customers qualify new products or qualify products with our laser chips or VCSEL chips in them. I think that then continues to drive gross margin improvements over time, and I think it's sustainable. I think, you know, it'll give us really the best vertically integrated capability in the industry. And you combine that with their manufacturing process know-how and capability and our footprint in Thailand, and expertise. I think it's really a winner, not just on the short term, as ramping capacity is going quite rapidly, as you indicated, but it's, I think, sustainable for the long term. You know, and I think going from $2.4 billion to $10 billion of available market, I think the growth is gonna be there for us. I think the combination really is a winner. Thanks. That's all I had in mind. I appreciate it, guys. Yeah. Thanks, Tom. Your next question comes from the line of Michael Genovese from Rosenblatt. Please go ahead. Great. Thanks, thanks for the question, and please bear with me as I try to articulate it. You know, 'cause I guess we weren't that familiar with Cloud Light, and it's -- I'm a little bit surprised by the description of the company, given how much 800G revenue they already have, and that you're saying it's in the sort of hundreds of meters up to a kilometer range, and that they're also using VCSEL-based technology. I imagine low-end VCSELs that are available on the merchant market. You know, that -- to me, that sounds like a very surprising that this company has this much revenue at that distance using VCSELs. You know, what's the secret sauce here? Why, why are they so successful? And then secondly, you know, do you, over time, do you think that their mix will have more EMLs and more CW lasers, or should they stick with VCSELs in this distance range? And you know, how does that affect the economics and the opportunity? Thank you. Yeah, yeah, Michael, I'll give it a shot and then have Chris add on. I'd say that the majority of the revenue today is silicon photonics based using CW lasers. There are many qualifications and production on VCSEL arrays at very high speeds, including at 800 gig for AOCs. I think that's a big growth engine, as you know, the hyperscale data center has moved from copper interconnects to optical interconnects, and I think that's a very big growth driver over the next five years. I'd say it's a combination. Now, whether we design EML-based transceivers, I think it's too early in the process of integration to determine whether that's the right strategy or to continue to drive further, you know, in the 1.6 terabits using silicon photonics. I think that's the current roadmap. You know, as we get closer to close and as we close, we'll figure out the product roadmap, moving forward. I'd say that, you know, the vast majority, again, is within, inside the data center, longer than several meters, using silicon photonics. You know, why so successful? I'd say, you know, it's really because they can provide the products that the customers need today. 800G is the product for growth, and that's why they had more than half of their revenue, transceiver revenue last quarter at eight hundred gigs. That's expected to continue to grow. Chris, do you have anything to add? Yeah, I think the only thing I would add is, you know, the VCSELs that are leveraged in cables or, or shorter reach transceivers, they're, they're not low-end VCSELs. These are high-performance, 400 G, 800 gig, and eventually 1.6 terabit solutions. These are at the highest end of the market mix, if you will, whether they're VCSEL-based or silicon photonic-based transceivers. Perfect. Great. Thanks for the color, guys. Thanks, Michael. Your next question comes from the line of Dave Kang from B. Riley. Please go ahead. Good morning. Thank you. Just wondering, just in the 800 gig market, how many competitors are out there? I wasn't aware of Cloud Light. So are there several Cloud Lights out there? I would say the competitors are the usual suspects and maybe CloudLight as a private company is probably less on folks' radar screens, at least from investors and analysts. But on the other hand, customers, cloud operators in the world, cloud infrastructure providers are very familiar with CloudLight. They're a known quantity, you know, if you will, and very highly regarded. So I would say, I don't think there's another CloudLight out there lurking, if you will. The space is relatively well known. You don't think this market is gonna get overcrowded, just like 100 G, after you've left, you know, several years ago? Well, I think if you look today, you know, over the many years since 100 G the industry has really revolved around several key suppliers, if you will, or in this case, competitors. So I would say that the industry has more stabilized since the 100 G timeframe with a few larger players really more successfully meeting customer needs. So a different industry landscape than it was five years ago or so when we got out of this business. My follow-up is on their optical sensors. Looks like it's a LIDAR product. Can you talk about the pipeline, you know, number of customers you guys are engaged or they're engaged with? Sure. That's a much smaller percentage of their business. So they do sell some optical sensors that go into the automotive industry, but again, very small percentage of their business today compared to the optical transceivers. And also as somebody who has tremendous optoelectronic packaging technology, as well as the manufacturing technology, they have had engagements with folks in other end markets, LIDAR included. Today, small percentage of the business as well. But again, reiterating, I think, Alan, something Alan brought up about, you know, the broad utility of the technology and manufacturing platforms across a range of products, whether they be in the datacom space or our telecom pluggable modules or ultimately other end markets over time. Got it. Thank you. Thanks, Dave. There are no further questions at this time. I'd now like to turn the call back over to Mr. Alan Lowe, CEO, for any closing remarks. Thank you, Laura. I'd like to leave you with a few thoughts as we wrap up this call. We look forward to welcoming the impressive Cloud Light team to Lumentum, and I'm very excited about the strategic benefits of this transaction. I'm eager to see the creativity and innovation the combined companies will bring to our customers. With that, I would like to thank everyone for attending, and we look forward to talking with you again at our upcoming earnings call on Wednesday, November 8th. Thank you. Thank you, sir. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day.