Lumentum Holdings Inc. (NASDAQ:LITE)

The financial ratios presented demonstrate notable shifts over the six-year period. Generally, asset utilization metrics decreased while leverage ratios increased, accompanied by significant volatility in profitability and returns. Adjustments to the reported ratios generally resulted in minor numerical differences, but did not alter the overall observed trends.

Asset Turnover

Both the reported and adjusted total asset turnover ratios exhibit a consistent downward trend from 0.51 in 2020 to 0.35 in 2023. A slight recovery to 0.39 and 0.41 is observed in the final two years, but remains below the initial value. This suggests a declining efficiency in utilizing assets to generate revenue.

Liquidity

The reported and adjusted current ratios show considerable fluctuation. The reported ratio decreased sharply from 7.24 in 2020 to 3.67 in 2021, then stabilized around 4.38 for two years before increasing to 5.90 in 2024 and decreasing again to 4.37 in 2025. The adjusted ratios follow a similar pattern. While generally strong, the initial decline and subsequent volatility indicate potential shifts in short-term liquidity management.

Leverage

Debt to equity, debt to capital, and financial leverage ratios all demonstrate a clear increasing trend. Reported debt to equity rose from 0.64 in 2020 to 2.61 in 2024, before decreasing slightly to 2.27 in 2025. Adjusted ratios show a similar pattern, with a rise to 2.74 in 2025. This indicates a growing reliance on debt financing. The financial leverage ratio nearly doubled from 1.88 to 4.11 between 2020 and 2024, further confirming increased financial risk.

Profitability & Returns

The reported net profit margin experienced significant volatility, peaking at 22.80% in 2021 before plummeting to -40.21% in 2024 and recovering slightly to 1.57% in 2025. The adjusted net profit margin mirrors this trend, though with less extreme values. Consequently, both reported and adjusted return on equity (ROE) and return on assets (ROA) followed a similar trajectory, transitioning from positive values in the earlier years to substantial negative figures in 2024, with limited recovery in 2025. This suggests a substantial deterioration in profitability and the ability to generate returns for shareholders and from assets.

In summary, the period under review is characterized by decreasing asset efficiency, increasing financial leverage, and a marked decline in profitability and returns, particularly evident in 2024. While some metrics show slight improvements in the final year, the overall trend suggests increasing financial risk and reduced operational performance.

The adjusted total asset turnover ratio for the observed period demonstrates a fluctuating pattern. Initially, the ratio held relatively steady before exhibiting a decline, followed by a slight recovery in the most recent period.

Overall Trend

From June 27, 2020, to June 29, 2024, the adjusted total asset turnover ratio generally decreased. The ratio began at 0.52, decreased to a low of 0.35 in June 2024, and then increased to 0.41 in June 2025. This suggests a diminishing efficiency in generating net revenue from its asset base over the majority of the period, with a potential stabilization or slight improvement in the latest year.

Year-over-Year Changes

A slight decrease was observed from 2020 to 2021, moving from 0.52 to 0.50. The period from 2021 to 2022 saw a more pronounced decline, with the ratio falling from 0.50 to 0.41. A further decrease occurred between 2022 and 2023, from 0.41 to 0.39. The most significant year-over-year change was a decrease from 0.39 in 2023 to 0.35 in 2024. Finally, a recovery is noted from 2024 to 2025, with the ratio increasing to 0.41.

Comparison to Reported Total Asset Turnover

The adjusted total asset turnover ratio consistently remains slightly higher than the reported total asset turnover ratio across all observed periods. The difference between the two ratios is minimal, ranging from 0.01 to 0.02. This indicates that the adjustments made to net revenue and total assets have a small but consistent impact on the calculated turnover ratio.

The fluctuations in the adjusted total asset turnover ratio warrant further investigation to determine the underlying drivers. Factors such as changes in sales strategies, asset utilization, and the composition of assets could contribute to these observed trends.

The adjusted current ratio exhibited fluctuations over the observed period, generally indicating a healthy short-term liquidity position. Initial values were strong, followed by a period of relative stability, and then a notable shift in later years. A detailed examination of the trend reveals specific patterns.

Overall Trend

The adjusted current ratio began at 7.57 in 2020 and decreased to 3.73 in 2021. It then experienced a slight increase to 4.44 in 2022 and 4.48 in 2023. A significant increase to 6.51 was observed in 2024, followed by a slight decrease to 4.59 in 2025. This suggests a period of initial decline followed by stabilization and a recent improvement in the company’s ability to cover short-term liabilities with short-term assets.

Year-over-Year Changes

The largest year-over-year decrease occurred between 2020 and 2021, with a decline of 3.84. Subsequent changes were less dramatic. The most substantial increase occurred between 2023 and 2024, with a rise of 2.03. The change between 2024 and 2025 was a decrease of 1.92, indicating a potential shift in the short-term liquidity position.

Comparison to Reported Current Ratio

The adjusted current ratio consistently exceeded the reported current ratio across all observed periods. The difference between the two ratios remained relatively stable, suggesting that the adjustments made to current assets and liabilities had a consistent, positive impact on the liquidity assessment. The adjustments appear to be increasing the reported liquidity position.

Recent Performance

The adjusted current ratio in 2025 stands at 4.59. While lower than the peak of 6.51 in 2024, it remains above the levels observed in 2021, 2022, and 2023. This suggests that, despite the recent decrease, the company maintains a reasonably strong short-term liquidity position.

In conclusion, the adjusted current ratio demonstrates a dynamic pattern over the analyzed timeframe. While fluctuations exist, the ratio generally indicates a healthy capacity to meet short-term obligations, with a recent peak followed by a moderate decline.

The adjusted debt to equity ratio exhibits a clear upward trend over the observed period. Initially, the ratio stood at 0.69 in June 2020 and progressively increased to 2.74 by June 2025. This indicates a growing reliance on debt financing relative to equity.

Overall Trend

From June 2020 to June 2025, the adjusted debt to equity ratio increased from 0.69 to 2.74. The most significant increase occurred between July 2022 and June 2024, rising from 1.03 to 2.49. The rate of increase slowed slightly between June 2024 and June 2025, moving from 2.49 to 2.74.

Year-over-Year Changes

The period between July 2020 and July 2021 saw a decrease in the adjusted debt to equity ratio, moving from 0.69 to 0.64. Subsequent years demonstrate consistent increases: from 0.64 to 1.03 (July 2021 to July 2022), 1.03 to 2.29 (July 2022 to July 2023), 2.29 to 2.49 (July 2023 to June 2024), and finally 2.49 to 2.74 (June 2024 to June 2025).

Comparison to Reported Debt to Equity

The adjusted debt to equity ratio consistently exceeds the reported debt to equity ratio across all observed dates. The difference between the two ratios remains relatively stable in the earlier years, but widens considerably from July 2023 onwards. This suggests that the adjustments made to total debt and stockholders’ equity have a growing impact on the overall leverage picture.

The increasing adjusted debt to equity ratio suggests a potential increase in financial risk. While a certain level of debt can be beneficial, a consistently rising ratio warrants further investigation into the company’s ability to service its debt obligations and maintain financial flexibility.

The adjusted debt to capital ratio exhibits an increasing trend over the observed period. Initially, the ratio stood at 0.41 in June 2020 and progressively rose to 0.73 by June 2025. This indicates a growing reliance on debt financing relative to equity and other capital sources.

Overall Trend

From June 2020 to June 2025, the adjusted debt to capital ratio increased from 0.41 to 0.73. The most significant increase occurred between July 2022 and July 2023, moving from 0.51 to 0.70. The rate of increase appears to be moderating in the most recent periods, with a rise from 0.70 to 0.71 between July 2023 and June 2024, and then to 0.73 between June 2024 and June 2025.

Adjusted Total Debt

Adjusted total debt increased from US$1,189.3 million in June 2020 to US$2,608.2 million in June 2025. While there was consistent growth, the pace of increase slowed considerably after July 2023. The largest single-year increase in adjusted total debt was observed between July 2022 and July 2023, rising by US$937.7 million.

Adjusted Total Capital

Adjusted total capital also increased over the period, moving from US$2,917.7 million in June 2020 to US$3,560.9 million in June 2025. However, the growth in adjusted total capital was less pronounced than the growth in adjusted total debt. A decrease in adjusted total capital is observed between July 2023 and June 2024, falling from US$4,130.8 million to US$3,587.0 million, which contributed to the increase in the ratio during that period.

The consistent increase in the adjusted debt to capital ratio suggests a shift in the company’s capital structure towards greater leverage. The recent moderation in the rate of increase, coupled with a slight decrease in adjusted total capital in the most recent period, warrants further investigation to understand the underlying drivers and potential implications for financial risk.

The financial leverage metrics demonstrate a clear increasing trend over the observed period. Both reported and adjusted financial leverage ratios exhibit similar patterns, suggesting the adjustments applied do not fundamentally alter the overall leverage picture. A consistent rise is noted from 2020 through 2025, with some moderation in the final year.

Reported Financial Leverage

Reported financial leverage begins at 1.88 in 2020 and decreases slightly to 1.80 in 2021. A subsequent increase is observed, reaching 2.22 in 2022, then accelerating to 3.42 in 2023 and peaking at 4.11 in 2024. The ratio experiences a modest decline to 3.72 in 2025, though it remains significantly higher than the initial value.

Adjusted Financial Leverage

Adjusted financial leverage mirrors the trend of the reported ratio. Starting at 1.86 in 2020, it dips to 1.79 in 2021 before rising to 2.21 in 2022. The ratio then increases substantially to 3.59 in 2023 and reaches 3.82 in 2024. A further increase to 4.21 is observed in 2025, representing the highest value in the series.

Total Assets & Stockholders’ Equity

Total assets generally increased from 2020 to 2023, peaking at US$4,632,100 thousand, before decreasing to US$3,931,900 thousand in 2024 and showing a slight recovery to US$4,218,700 thousand in 2025. Stockholders’ equity consistently declined from 2020 to 2025, falling from US$1,749,200 thousand to US$1,134,700 thousand. This decrease in equity, coupled with the initial increase in assets, likely contributes to the observed rise in financial leverage.

Adjustments Impact

The difference between reported and adjusted financial leverage is minimal throughout the period. The adjustments to total assets and stockholders’ equity are relatively small in magnitude, resulting in only slight variations in the calculated leverage ratios. This suggests the adjustments are not materially impacting the overall assessment of the company’s financial risk.

The consistent increase in financial leverage, driven by decreasing stockholders’ equity and fluctuating total assets, warrants further investigation. While the adjustments do not significantly alter the leverage ratios, the overall trend indicates a growing reliance on debt financing, which could potentially increase financial risk.

The adjusted net profit margin exhibited considerable fluctuation over the observed period. Initial values were strong, followed by a period of decline and negative margins, with a projected continuation of negative margins into the future.

Overall Trend

From June 27, 2020, to July 2, 2022, the adjusted net profit margin demonstrated a generally positive trend, although with some volatility. Starting at 7.93%, it increased to a peak of 22.54% in July 2021 before decreasing to 9.65% in July 2022. However, a significant downturn began in July 2022, culminating in negative margins for the subsequent periods.

Period of Decline (July 2022 - June 2025)

The period from July 2022 through June 2025 witnessed a substantial decline in the adjusted net profit margin. The margin decreased from 9.65% to -9.26% in July 2023, and further deteriorated to -31.83% in June 2024. The projection for June 2025 indicates a continued negative margin of -13.70%, suggesting the downward trend is persisting.

Relationship to Adjusted Net Income and Revenue

The decline in the adjusted net profit margin correlates with fluctuations in both adjusted net income and adjusted net revenue. While adjusted net revenue remained relatively stable between June 2020 and July 2022, it decreased significantly in June 2024. The adjusted net income followed a similar pattern, moving from positive values to substantial losses beginning in July 2023. The combination of decreasing revenue and increasing losses contributed to the observed decline in the adjusted net profit margin.

Comparison to Reported Net Profit Margin

The adjusted net profit margin generally tracked the reported net profit margin, but with some differences in magnitude. The adjusted figures were consistently lower than the reported figures, indicating that adjustments were made that reduced reported profitability. The most significant divergence occurred in June 2024, where the adjusted net profit margin (-31.83%) was considerably lower than the reported net profit margin (-40.21%).

In summary, the adjusted net profit margin experienced a period of initial strength followed by a marked and sustained decline, with projections indicating continued negative profitability. This trend appears linked to both revenue fluctuations and decreasing adjusted net income.

The adjusted return on equity (ROE) exhibited considerable fluctuation over the observed period. Initially, the adjusted ROE mirrored the reported ROE, beginning at 7.70% in June 2020 and peaking at 20.15% in July 2021. Subsequent years demonstrate a marked decline, culminating in negative adjusted ROE values in July 2023 and June 2024, before a partial recovery is indicated in the June 2025 projection.

Overall Trend

From 2020 to 2025, the adjusted ROE demonstrates a volatile pattern. A strong initial increase is followed by a substantial and sustained decrease, resulting in significant losses before a projected, though limited, improvement. The overall trend suggests increasing challenges in generating profits relative to shareholder equity.

Profitability Component

The adjusted net income (loss) figures directly influence the adjusted ROE. Positive adjusted net income is observed through 2022, contributing to the higher ROE values during those years. However, adjusted net income transitions to losses in 2023 and 2024, and remains negative in the 2025 projection, driving the adjusted ROE into negative territory. The magnitude of the losses in 2024 and 2025 is considerably larger than the losses in 2023.

Equity Component

Adjusted stockholders’ equity generally decreased over the period. While a slight increase is seen between 2020 and 2021, equity consistently declines from 2021 through 2025. This decreasing equity base, combined with declining or negative adjusted net income, exacerbates the downward pressure on the adjusted ROE. The rate of equity decline appears to accelerate in the later years of the period.

Comparison to Reported ROE

The adjusted ROE closely tracks the reported ROE throughout the period. Differences between the two metrics are minimal, suggesting that adjustments to net income and equity are not substantially altering the overall profitability picture. However, the adjusted ROE provides a potentially more refined view of underlying performance by excluding certain items.

The projected adjusted ROE for June 2025, at -23.65%, indicates continued financial challenges. While representing an improvement from the -42.06% observed in June 2024, it remains significantly negative and suggests that substantial improvements in profitability or equity management are necessary to restore positive returns for shareholders.

The adjusted return on assets (ROA) exhibited considerable fluctuation over the observed period. Initially, the adjusted ROA demonstrated a period of growth followed by significant declines. A review of the underlying figures reveals a complex pattern of profitability and asset management.

Overall Trend

From Jun 27, 2020, to Jun 29, 2024, the adjusted ROA generally decreased. While a slight increase is projected for Jun 28, 2025, it remains significantly below the levels observed in the earlier years of the period. The adjusted ROA moved from 4.14% in 2020 to -11.02% in 2024, before a projected -5.62% in 2025.

Initial Growth (2020-2021)

The adjusted ROA experienced substantial growth between 2020 and 2021, increasing from 4.14% to 11.28%. This improvement coincided with an increase in adjusted net income and adjusted total assets. The growth in adjusted net income outpaced the growth in adjusted total assets, driving the ROA increase.

Subsequent Decline (2021-2024)

Following the peak in 2021, the adjusted ROA began a consistent decline. While adjusted total assets continued to increase through 2023, adjusted net income decreased, and then became negative in 2023 and 2024. The negative adjusted net income in 2024 significantly impacted the adjusted ROA, resulting in a substantial decrease to -11.02%. The decline in adjusted ROA is more pronounced than the decline in reported ROA, suggesting the adjustments made to net income and/or total assets have a material impact.

Asset and Income Relationship

A comparison of adjusted net income and adjusted total assets reveals a weakening relationship between profitability and asset utilization. The increasing asset base, coupled with declining and ultimately negative adjusted net income, contributed to the decreasing adjusted ROA. The projected negative adjusted net income for 2025 suggests this trend may continue, resulting in a further decline in adjusted ROA.

Comparison to Reported ROA

The adjusted ROA consistently differs from the reported ROA, though the trends are similar. The magnitude of the difference varies year to year, but the adjustments generally result in a slightly lower ROA figure. This indicates that the adjustments made to net income and total assets have a consistent, though not always substantial, downward effect on the calculated return.

In summary, the adjusted ROA demonstrates a period of initial growth followed by a sustained decline, driven primarily by decreasing adjusted net income and increasing adjusted total assets. The projected figures for 2025 suggest this downward trend may persist.