Lumentum Holdings Inc (LITE)

Short-term

Turnover ratios

The analysis of Lumentum Holdings Inc.'s activity ratios over the specified period reveals several trends in operational efficiency and working capital management.

Inventory Turnover:
The company's inventory turnover ratio exhibits a declining trend from a high of approximately 4.89 times in June 2021 to a low of 2.28 times in December 2024, with some recovery thereafter. A decreasing inventory turnover indicates that inventory is being held longer on average, suggesting potential stockpiling or slowing sales activity. Prior to this decline, the ratios were relatively stable, implying consistent inventory management. The recent stabilization around 2.7-2.9 times suggests some effort toward efficiency, yet the ratio remains below early 2021 levels, indicating room for improvement in inventory management.

Receivables Turnover:
The receivables turnover ratio demonstrates fluctuations with an overall upward trend from approximately 6.38 times in September 2020 to a peak of around 7.18 times in June 2023, before declining slightly to 5.76 times in March 2025. An increasing receivables turnover indicates that the company is collecting receivables more quickly, enhancing liquidity and reducing credit risk. The recent decline from about 7.18 to 5.76 times signals a slowdown in collection efficiency, which could stem from changing credit terms or customer payment behaviors. Nevertheless, the ratio remains higher than the initial period, reflecting generally efficient receivables management.

Payables Turnover:
The payables turnover ratio reveals notable variability, rising from approximately 6.80 times in September 2020 to a high of 9.06 in June 2024, and then declining slightly toward early 2025. An increased payables turnover signifies that the company is paying suppliers more frequently, possibly indicating tighter payment policies or improved cash flow. The recent decrease in the payables turnover ratio suggests a potential relaxation in payment timing or cash management strategies. The high ratios in recent periods imply active management of payables to optimize working capital.

Working Capital Turnover:
This ratio remains relatively stable, with minor fluctuations, predominantly within the range of about 0.69 to 1.24 over the analyzed period. An increase toward the latter part of the period from below 0.80 to over 1.20 indicates improved utilization of working capital to generate sales. The consistency and modest upward trend suggest efficient management of short-term assets and liabilities, with periods of marginally better efficiency in recent years.

Summary:
Overall, the activity ratios indicate a trend toward more efficient receivables collection and payables management over the period, with some deterioration in inventory turnover efficiency. The decline in inventory turnover ratios suggests that inventory management could be a potential area for improvement, whereas improvements in receivables and payables efficiency reflect effective working capital management strategies. The stability in working capital turnover further supports the notion of consistent operational efficiency, with slight positive trends suggesting enhanced utilization of short-term assets in recent periods.

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Average number of days

The activity ratios for Lumentum Holdings Inc., specifically days of inventory on hand (DOH), days sales outstanding (DSO), and days of payables, exhibit notable trends over the analyzed period from September 2020 through June 2025.

Inventory Turnover (DOH):
The data indicates a substantial increase in inventory holding periods over time. Starting at approximately 78.15 days in September 2020, the DOH remained relatively stable through 2021, fluctuating between approximately 77.66 to 82.63 days. However, from March 2022 onward, a pronounced upward trend emerges: reaching nearly 90 days by March 2022, and escalating sharply to approximately 131.90 days in September 2022. This upward momentum continued, peaking at about 159.77 days by December 2023. Although there is some reduction afterwards, with DOH decreasing to about 127 days by June 2024, it remains elevated relative to earlier years, maintaining levels above 126 days through the subsequent periods. This progression suggests a significant buildup of inventory, potentially indicating overstocking, slower inventory turnover, or strategic stockpiling.

Accounts Receivable Collection Period (DSO):
The DSO shows variable but generally moderate fluctuation over time. Starting at approximately 57.23 days in September 2020, it slightly increased to 59.34 days by December 2020, then decreased markedly to around 44.57 days in June 2021. Throughout 2021 and early 2022, DSO oscillated largely between 47.74 and 55.80 days. A notable rise occurs in September 2022, reaching approximately 70.18 days—highlighting a slowdown in receivables collection. Subsequently, DSO decreased to values around 50 to 63 days into 2023 and 2024. The recent figures indicate some stabilization with an increase again towards 63.38 days in March 2025. Overall, the DSO trend reflects periods of stronger and weaker collection efficiency, with a pronounced peak in late 2022, possibly hinting at changes in credit policies, customer payment behaviors, or collection efforts.

Payables Period:
The days of payables demonstrate variability, with the shortest durations observed in early 2021, around 39.69 to 41.73 days, and increasing towards later periods. Notably, the payables period lengthened significantly after June 2022, reaching a high of about 74.09 days in September 2022, and remaining relatively elevated in subsequent quarters (around 55 to 69 days). This pattern indicates an extension of the company's payment terms to suppliers over time. The increase in payables days coupled with elevated inventory levels could suggest attempts to optimize working capital by delaying payables, though it should be monitored for potential supplier relationship impacts.

Overall Implications:
The observed increase in days of inventory implies that the company has been holding more stock for longer periods, which could be driven by excess supply, declining demand, or strategic stocking. Concurrent fluctuations in DSO reflect inconsistent accounts receivable collections, with periods of slower collection potentially contributing to increased working capital needs. The extension of payables periods indicates a tendency to prolong supplier payments, possibly to offset the impact of higher inventory levels or strained cash flow.

In summary, the activity ratios reveal a trend toward longer inventory holding and receivables collection periods, accompanied by extended payables. These dynamics point to a shift in operational efficiency that warrants close internal management review to sustain liquidity and supply chain health.

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Long-term

The analysis of Lumentum Holdings Inc.'s long-term activity ratios reveals notable trends over the period from September 2020 through June 2023, based on available data.

The Fixed Asset Turnover ratio demonstrates an overall increasing trajectory, starting at 3.59 in September 2020 and gradually rising to a peak of 4.07 in June 2021. This indicates improved efficiency in utilizing fixed assets to generate sales during this period. However, post-peak, the ratio exhibits slight fluctuations, with values remaining close to the 3.12 to 3.95 range through September 2022, before data discontinuation post-March 2023.

Similarly, the Total Asset Turnover ratio reflects a slight decreasing trend from approximately 0.50 in September 2020, reaching a low of 0.35 in September 2023. Despite this decline, the ratio remains relatively stable within the 0.31 to 0.42 range across the analyzed timeframe. The gradual decrease suggests a modest reduction in overall asset efficiency in generating sales over time, possibly attributable to increased asset base not proportionally matched by revenue growth.

Overall, the data indicates that in the earlier period, Lumentum effectively optimized its fixed assets, as reflected by rising Fixed Asset Turnover ratios. Conversely, the total asset turnover exhibited a gradual decline, hinting at potential challenges in maintaining asset efficiency at the broader level. The cessation of data after March 2023 limits further analysis of long-term trends beyond this point.