Lumentum Holdings Inc (LITE)

Short-term

Turnover ratios

The activity ratios of Lumentum Holdings Inc. over the period from June 30, 2021, to June 30, 2025, exhibit notable trends and shifts in operational efficiency concerning inventory management, receivables collection, payables management, and overall working capital utilization.

Inventory Turnover:
The inventory turnover ratio shows a declining trend, decreasing from 4.89 in June 2021 to 2.52 in June 2025. This gradual decline suggests that the company has been holding inventory for longer periods, indicating a possible slowdown in inventory sales or an intentional increase in inventory levels. The reduction in turnover efficiency could reflect challenges in product demand, changes in product mix, or strategic inventory management decisions.

Receivables Turnover:
The receivables turnover ratio remained relatively stable, with a slight decline from 8.19 in June 2021 to 6.58 in June 2025. The ratio's fluctuations, including a peak of 7.18 in June 2023, imply a moderate but consistent collection period for receivables. This stability suggests that the company’s credit policies and collection efforts have maintained a relatively consistent performance, although the slightly decreasing trend indicates a marginal extension in the receivables collection period over time.

Payables Turnover:
The payables turnover ratio exhibits variability. It started at 8.21 in June 2021, decreasing to 5.90 in 2022, then increasing to 7.07 in 2023, reaching a high of 8.77 in 2024 before declining sharply to 5.26 in 2025. The fluctuations reflect periods of extended payment periods followed by periods of faster payments. The significant drop in 2025 suggests a potential shortening of payables period, possibly driven by changes in payment terms, supplier relationships, or liquidity management strategies.

Working Capital Turnover:
The working capital turnover ratio demonstrates an upward trend, increasing from 0.98 in June 2021 to 1.24 in June 2025. This progression indicates improved efficiency in utilizing working capital to generate sales, with the company becoming more effective in managing its short-term assets and liabilities relative to sales levels over this period.

In summary, Lumentum’s activity ratios reveal a trend toward decreasing inventory efficiency, stable receivables collection periods, variable payables management with a recent shift towards shorter payables periods, and improvements in overall working capital utilization. These patterns may reflect evolving operational strategies, market conditions, or shifts in operational focus.

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Average number of days

The analysis of Lumentum Holdings Inc.'s activity ratios over the period from June 30, 2021, to June 30, 2025, reveals notable trends in inventory management, receivables collection, and payable practices.

Days of Inventory on Hand (DOH):
There has been a consistent increase in the number of days inventory remains on hand. Specifically, DOH has risen from approximately 74.7 days in 2021 to approximately 144.8 days in 2025. This indicates a significant shift towards holding inventory for a longer duration, which could suggest reduced inventory turnover or a strategic decision to maintain higher inventory levels, potentially to meet anticipated demand or mitigate supply chain disruptions.

Days of Sales Outstanding (DSO):
The DSO experienced some variability but remained relatively stable over the period. It increased from about 44.6 days in 2021 to approximately 55.5 days in 2025. The moderate rise suggests a slight elongation in the collection period for receivables, which may reflect changes in credit terms or collection efficiency.

Number of Days of Payables:
The days payable metric shows more fluctuation. It increased from about 44.5 days in 2021 to roughly 69.4 days in 2025, with some reductions along the way. The trend indicates an extension of the time the company takes to pay its suppliers, especially notable in 2025, possibly reflecting a strategic effort to optimize cash flow or negotiate longer payment terms.

Overall Interpretation:
The combined analysis suggests a scenario where Lumentum Holdings Inc. appears to be elongating its working capital cycle. The increasing inventory holdings and receivables collection period, coupled with extended payables, point toward a deliberate strategy to manage cash flows and working capital. However, the lengthening of inventory and receivable days could also denote potential inefficiencies or a response to market conditions requiring higher inventory buffers and longer receivables collection periods. If these trends are not part of intentional strategic adjustments, they might warrant further scrutiny for their impact on liquidity and operational efficiency.

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Long-term

The analysis of Lumentum Holdings Inc.'s long-term activity ratios over the period from June 30, 2021, to June 30, 2024, reveals notable trends in asset utilization efficiency.

The fixed asset turnover ratio, which measures the company's efficiency in generating sales from its fixed assets, has exhibited a declining trend. Specifically, it decreased from 4.07 in 2021 to 3.95 in 2022, and further to 3.12 in 2023. The absence of data beyond June 2023 suggests the ratio has yet to be reported or finalized for subsequent periods. The consistent decline indicates a reduction in the company's ability to generate sales from its fixed assets, potentially reflecting increased capital investments or decreased sales productivity related to fixed assets during this period.

Similarly, the total asset turnover ratio demonstrates a downward trajectory, declining from 0.49 in 2021 to 0.41 in 2022, and further to 0.38 in 2023. A slight recovery is observed in 2025, with the ratio increasing marginally to 0.39. This overall pattern implies a gradual decrease in the company's efficiency in utilizing its total assets to generate sales over time, despite the slight uptick projected for 2025.

The concurrent decline in both ratios suggests a potential shift in the company's asset base or operational focus, which may include increased investments in assets that have yet to translate into proportional sales, or challenges in asset utilization efficiency. The stabilization or slight improvement in 2025 could indicate efforts to optimize asset use or a natural correction following prior investments.

In summary, the long-term activity ratios point toward a trend of decreasing asset utilization efficiency over the analyzed period, with a tentative sign of stabilization or improvement anticipated in 2025. The overall picture underscores the importance of monitoring asset management strategies to sustain or enhance sales productivity relative to asset investments.