PA PA false 0000820318 0000820318 2023-11-06 2023-11-06
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 6, 2023
Coherent Corp.
(Exact name of registrant as specified in its charter)
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PENNSYLVANIA |
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001-39375 |
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25-1214948 |
(State or Other Jurisdiction of Incorporation) |
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(Commission File Number) |
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(I.R.S. Employer Identification No.) |
375 Saxonburg Boulevard
Saxonburg, PENNSYLVANIA 16056
(Address of Principal Executive Offices) (Zip Code)
(724) 352-4455
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
Common Stock, no par value |
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COHR |
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New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. |
Results of Operations and Financial Condition. |
On November 6, 2023 Coherent Corp. (the “Company”) issued a press release (“Press Release”) announcing it will publicly disseminate a shareholder letter (the “Shareholder Letter”) with its financial results for the quarter ended September 30, 2023 (the “financial results”) and that it will be holding an earnings call webcast (the “Earnings Call”) on November 7, 2023 at 8:00 a.m. Eastern Time to discuss the financial results. The Company is making reference to non-GAAP financial information in the Shareholder Letter and on the Earnings Call. A reconciliation of GAAP to non-GAAP financial measures is provided in the Shareholder Letter.
A copy of the Press Release and the Shareholder Letter are furnished as Exhibits 99.1 and 99.2, respectively, and are incorporated herein by reference.
Item 7.01. |
Regulation FD Disclosure. |
A slide presentation to be used by senior management of the Company in connection its discussions with investors and others regarding the financial results is furnished as Exhibit 99.3.
The information in this Current Report on Form 8-K, including the exhibits furnished pursuant to Item 9.01, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities under that Section. Furthermore, the information in this Item 2.02 of this Current Report on Form 8-K, including the exhibits furnished pursuant to Item 9.01, shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933.
Item 9.01 |
Financial Statements and Exhibits. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Coherent Corp. |
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Date: November 6, 2023 |
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By: |
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/s/ Richard Martucci |
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Richard Martucci |
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Interim Chief Financial Officer and Treasurer |
Exhibit 99.1
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Coherent Corp.
375 Saxonburg Blvd.
Saxonburg, PA 16056-9499 |
PRESS RELEASE
COHERENT CORP. RELEASES FIRST QUARTER FISCAL YEAR 2024 FINANCIAL RESULTS
PITTSBURGH, Nov. 6, 2023 (GLOBE NEWSWIRE) Coherent Corp. (NYSE: COHR), a global leader in materials, networking, and lasers, announced today the
financial results for its first quarter fiscal year 2024. These have been posted as a letter to shareholders to the investor relations section of its website.
A conference call to discuss these results with Chair and CEO Dr. Vincent D. (Chuck) Mattera, Jr., and members of the management team will be held
on November 7, 2023, at 8:00 a.m. ET.
The letter to shareholders sets forth detailed financial information and disclosures for the company and is
designed to provide greater insight into the companys operating performance and outlook in advance. This format allows more time for questions and answers on the earnings call.
Please visit the Coherent investor relations website at coherent.com/company/investor-relations to view the letter to shareholders, along with
accompanying supplemental financial information. Individuals wishing to listen to the live webcast of the call can access the event at the companys website by visiting coherent.com/company/investor-relations. The call will be recorded,
and a replay will be available to interested parties for a limited time.
About Coherent
Coherent empowers market innovators to define the future through breakthrough technologies, from materials to systems. We deliver innovations that resonate
with our customers in diversified applications for the industrial, communications, electronics, and instrumentation markets. Headquartered in Saxonburg, Pennsylvania, Coherent has research and development, manufacturing, sales, service, and
distribution facilities worldwide. For more information, please visit us at coherent.com.
Contact
Paul Silverstein
Vice President, Investor Relations &
Corporate Communications
investor.relations@coherent.com
# # #
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coherent.com | T. 724 352 4455 |
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1 |
Exhibit 99.2
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Coherent Corp.
375 Saxonburg Blvd.
Saxonburg, PA 16056-9499
USA |
SHAREHOLDER LETTER NOVEMBER 6, 2023
Related Information. Representing managements current views of the Companys financial and operational performance and outlook, the following
commentary is provided to give investors and analysts further insight into the Companys performance in advance of the earnings call webcast. Please note the Forward-Looking Statements information in the back of this letter.
Fellow Coherent Shareholders,
We are pleased to present
our Coherent Corp. Shareholder Letter setting forth an overview of our First Quarter Fiscal Year 2024 results.
Table 1
Financial Metrics
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THREE MONTHS ENDED |
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Sep 30 |
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Jun 30 |
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Sep 30 |
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$ Millions, except per share and percentage amounts (unaudited) |
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2023 |
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2023 |
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2022 |
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Revenues |
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$ |
1,053.1 |
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$ |
1,205.1 |
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$ |
1,344.6 |
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GAAP Gross Profit |
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$ |
306.9 |
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$ |
343.4 |
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$ |
443.6 |
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Non-GAAP Gross Profit(1) |
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$ |
366.4 |
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$ |
432.8 |
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$ |
542.2 |
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GAAP Operating Income
(Loss)(2) |
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$ |
(21.3 |
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$ |
(155.2 |
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$ |
42.5 |
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Non-GAAP Operating Income(1) |
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$ |
132.4 |
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$ |
185.1 |
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$ |
286.4 |
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GAAP Net Loss |
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$ |
(67.5 |
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$ |
(178.2 |
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$ |
(38.7 |
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Non-GAAP Net Earnings(1) |
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$ |
55.0 |
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$ |
94.9 |
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$ |
183.6 |
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GAAP Diluted Loss Per Share |
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$ |
(0.65 |
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$ |
(1.54 |
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$ |
(0.56 |
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Non-GAAP Diluted Earnings Per Share(1) |
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$ |
0.16 |
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$ |
0.41 |
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$ |
1.04 |
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Other Selected Financial Metrics |
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GAAP gross margin |
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29.1 |
% |
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28.5 |
% |
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33.0 |
% |
Non-GAAP gross margin(1) |
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34.8 |
% |
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35.9 |
% |
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40.3 |
% |
GAAP operating margin |
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(2.0 |
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(12.9 |
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3.2 |
% |
Non-GAAP operating margin(1) |
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12.6 |
% |
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15.4 |
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21.3 |
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GAAP return on sales |
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(6.4 |
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(14.8 |
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(2.9 |
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Non-GAAP return on sales(1) |
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5.2 |
% |
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7.9 |
% |
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13.7 |
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(1) |
The Company has disclosed financial measurements in this letter to shareholders that present financial
information considered to be non-GAAP financial measures. These measurements are not a substitute for GAAP measurements, although the Companys management uses these measurements as an aid in monitoring
the Companys on-going financial performance. The non-GAAP net earnings, the non-GAAP earnings per share, the non-GAAP operating income, the non-GAAP gross profit, the non-GAAP internal research and development, the non-GAAP selling, general and administration, the non-GAAP interest and other (income) expense, and the non-GAAP income tax (benefit),
measure earnings and operating income (loss), respectively, excluding non-recurring or unusual items that are considered by management to be outside the Companys standard operation and excluding certain non-cash items. EBITDA is an adjusted non-GAAP financial measurement that is considered by management to be useful in measuring the profitability between companies within the
industry by reflecting operating results of the Company excluding non-operating factors. There are limitations associated with the use of non-GAAP financial measures,
including that such measures may not be entirely comparable to similarly titled measures used by other companies, due to potential differences among calculation methodologies. Thus, there can be no assurance whether (i) items excluded from the non-GAAP financial measures will occur in the future or (ii) there will be cash costs associated with items excluded from the non-GAAP financial measures. The Company
compensates for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by providing the reconciliations of the
non-GAAP financial measures to their most comparable GAAP financial measures. Investors should consider adjusted measures in addition to, and not as a substitute for, or superior to, financial performance
measures prepared in accordance with GAAP. All non-GAAP amounts exclude certain adjustments for share-based compensation, acquired intangible amortization expense, restructuring charges, integration and site
consolidation expenses, integration transaction expenses, start-up costs related to the start-up of new devices for new customer applications, and various one-time adjustments. See Table 8 for the Reconciliation of GAAP measures to non-GAAP measures. |
(2) |
GAAP Operating income is defined as earnings before income taxes, interest expense, and other expense or
income, net. |
2
EXECUTIVE SUMMARY
Revenue. $1.053 billion, slightly above the midpoint of our $1.0 1.1 billion guidance.
Non-GAAP EPS. $0.16, above the midpoint of our $0.05 - $0.20 guidance. Excluding an extraordinary $0.03 benefit
from a lower-than-expected tax rate and an adverse $0.01 impact from foreign exchange, Non-GAAP EPS would still have been $0.14.
Operating Cash Flow. $199 million, compared to $80 million in the year-ago quarter and
$182 million in the preceding quarter.
Debt Reduction. We paid down $19 million of our outstanding debt.
Visibility. Macroeconomic uncertainty continues to impact our near-term growth and visibility; however, we expect sequential improvement in revenue
growth throughout the remainder of fiscal 2024.
AI/ML. In the wake of the initial surge, we saw at the end of our fourth quarter of fiscal 2023,
we have seen strong follow-on orders for our AI/ML-related Datacom transceivers which has driven a significant increase in our backlog for 800G Datacom transceivers.
Strategic Transactions Enhance Outlook for Silicon Carbide Business. Our recently announced silicon carbide transactions resulting from our
strategic review process announced in May 2023 significantly enhance our silicon carbide business and free up future cash flow for debt repayment and other growth initiatives. As we announced on October 10, 2023, DENSO CORPORATION and
Mitsubishi Electric Corporation have agreed to invest an aggregate $1 billion in our silicon carbide business and to enter into long-term supply agreements that support their demand for 150 mm and 200 mm silicon carbide substrates and epitaxial
wafers.
3
PART I - OUTLOOK, VISIBILITY, KEY TRENDS, AND DEVELOPMENTS
OUTLOOK
These metrics are provided on a non-GAAP basis, except for revenue and share count. Non-GAAP earnings per share is on a fully diluted basis. The outlook assumes that the exchange rate of the U.S. dollar to
other currencies will remain relatively stable at current levels.
SECOND QUARTER FISCAL 2024
Our guidance for our second quarter of fiscal 2024 ending December 31, 2023 is as follows:
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Revenue of approximately $1.075 1.175 billion. |
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Non-GAAP gross margin of approximately 35 - 37%. |
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Non-GAAP operating expense of approximately $238 - 252 million.
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Non-GAAP operating margin of approximately 13 15%
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Non-GAAP Adjusted EBITDA of approximately 19 - 21%.
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Interest expense of approximately $73 77 million |
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Non-GAAP tax rate of approximately 20 - 23%. |
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Series B Preferred P.I.K. Dividend of approximately $30 million. |
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Non-GAAP earnings per share of approximately $0.14 - 0.32.1 |
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Share count for the entire guidance range is 153 million. |
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Capital Expenditures of approximately $95 - 125 million. |
Pretax amounts of non-GAAP adjustments in the second quarter of fiscal 2024 include:
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Stock compensation of approximately $35 43 million. |
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Amortization of approximately $72 million. |
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Restructuring, synergies, and consolidation expenses of approximately $45 55 million.
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FULL YEAR FISCAL 2024
Our
guidance for fiscal 2024 ending June 30, 2024 is as follows:
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Revenue of approximately $4.5 4.7 billion, unchanged from our previous guidance.
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Non-GAAP gross margin of approximately 36 - 38%. |
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Non-GAAP operating expense of approximately $995 million -
1.025 billion. |
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Non-GAAP operating margin of approximately 14 16%.
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Non-GAAP Adjusted EBITDA of approximately 20 - 22%.
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Interest expense of approximately $284 294 million. |
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Non-GAAP tax rate of approximately 18 - 20%. |
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Series B Preferred P.I.K. Dividend of approximately $123 million. |
1 |
The Company does not provide reconciliations of forward-looking
Non-GAAP EPS. The Company is unable, without unreasonable efforts, to forecast certain items required to develop a meaningful GAAP financial measure that is comparable to this forward-looking figure.
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Non-GAAP earnings per share of approximately $1.00 - 1.50, unchanged from
our previous guidance.2 |
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Share count for the entire guidance range is 153 million. |
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Capital Expenditures of approximately $350 - 400 million. |
Pretax amounts of Non-GAAP adjustments for full year fiscal 2024 include:
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Stock compensation of approximately $140 158 million. |
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Amortization of approximately $290 million. |
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Restructuring, synergies, and consolidation expenses of approximately $165 185 million.
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VISIBILITY, KEY TRENDS AND DEVELOPMENTS
MARGIN STRUCTURE
The first quarter of fiscal 2024
extended the recent downward trend in our Non-GAAP gross and operating margin, however, we expect that the quarter will mark the low point for both. Driving a rebound and long-term secular improvement in
margin structure is a key strategic priority for the Company. We are working to drive sequential operational improvement in our gross and operating margin starting in the second quarter of fiscal 2024 and extending throughout the balance of fiscal
2024 followed by additional secular improvement in fiscal 2025 and beyond.
Ongoing weak end market demand due to macroeconomic conditions has played a
significant role in our current margin downtrend. Higher revenue volume driven by improved end market demand similarly will contribute to a rebound in our margin structure; however, we are not waiting for such a rebound to drive enhanced operating
efficiency. We have already implemented actions across virtually all of our businesses in a drive for enhanced operating efficiency as measured by return on sales. We also expect these actions to enhance our competitive position and thereby revenue
growth across our end markets.
First Quarter of Fiscal 2024. Our near-term margin challenges continued in the first quarter of fiscal 2024. Non-GAAP gross margin of 34.8% declined from 35.9% in the preceding quarter and from 40.3% in the prior year period. Non-GAAP operating margin of 12.6% declined from 15.4% in
the preceding quarter and from 21.3% in the year ago quarter. As previously noted, lower revenue, which resulted in lower fixed cost absorption, and unfavorable product mix were the primary drivers of both the sequential and year-over-year gross
margin declines, which, together with the rate of revenue decline partially offset by our reduced operating expenses, were the primary drivers of both the sequential and year-over-year operating margin declines.
Second Quarter of Fiscal 2024. We expect to drive sequential improvement to 35 - 37% Non-GAAP gross margin and
13 - 15% Non-GAAP operating margin in our second quarter of fiscal 2024.
2 |
The Company does not provide reconciliations of forward-looking
Non-GAAP EPS. The Company is unable, without unreasonable efforts, to forecast certain items required to develop a meaningful GAAP financial measure that is comparable to this forward-looking figure.
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Fiscal 2024. With the benefit of additional sequential improvement in both measures in the third and
fourth quarters of fiscal 2024, we expect to drive 36 - 38% Non-GAAP gross margin and 14 - 16% Non-GAAP operating margin for all of fiscal 2024.
Longer-Term. We are driving to sustainably achieve 40% Non-GAAP gross margin and 20% Non-GAAP operating margin by the end of the first-half of fiscal 2026. Our longer-term goal is to drive greater than 40% Non-GAAP gross margin and greater than 20% Non-GAAP operating margin.
Key Drivers. Underlying our view, key drivers of operational excellence to attain
each of the above targets are broadly focused on pricing, procurement, and productivity, and include:
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continuous rationalization and refreshing of the portfolio; |
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continuous rationalization of the supply base for cost and resiliency; |
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implementation of a streamlined Asia Pacific manufacturing center of excellence; |
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moving up the value chain; |
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operating cost reductions based on a rationalized manufacturing footprint; |
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increased capacity utilization; |
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favorable product mix, driven by increasingly efficient new product introductions; |
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productivity improvements through improvements in yields and quality; |
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implementation of a digital transformation and the adoption of AI technology; |
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leveraging our service organization into new markets offering new services. |
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Operating Margin: in addition to the above drivers of gross margin improvement, we expect to
drive future operating margin improvement from operating leverage by both increasing revenue and ongoing operating expense reduction, with the latter driven by the execution of: |
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our Synergy and Site Consolidation Plan; |
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our Restructuring Plan; |
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additional cost and expense actions underway. |
Synergy and Site Consolidation. Our stated goal for our Synergy and Site Consolidation Plan for the Coherent, Inc. acquisition (the Synergy and
Site Consolidation Plan) was to achieve $250 million in annual synergies over three years, with $250 million of costs to achieve these synergies. We have accelerated some of the actions planned as part of our post-three-year synergy
and site consolidation efforts. These relocations and other actions are expected to help offset our lower-than-expected supply chain cost savings that result from lower revenue and allow us to achieve our targeted $250 million in annual
synergies. At the end of the first year, we reached $73 million of synergies for fiscal 2023. In the first quarter of fiscal 2024, we achieved another $37 million in synergies, an annualized run rate of $147 million. To date,
synergies have been nearly evenly split between the cost of sales and operating expenses.
6
Restructuring. In the fourth quarter of fiscal 2023, we implemented a restructuring plan (the
Restructuring Plan) that includes site consolidations and closures as well as the relocation and requalification of certain manufacturing facilities. The following restructuring actions are intended to realign our cost structure as part
of a transformation to a simpler, more streamlined, resilient and sustainable footprint and business model:
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China and Rest of Asia Site Consolidation. Consolidation of sites in China and the rest of Asia, including
the closure of certain manufacturing facilities and sales offices and the establishment of new regional design centers closer to our customers in the Global South. The intent of these actions is to optimize our footprint in Asia. In addition,
through these actions, we will replicate the state-of-the-art manufacturing lines we have in China to other parts of Asia to
increase resiliency to our internal and external supply chain by taking advantage of the best practices of operational excellence, new product introductions, a smarter and shorter supply chain, and redundancy for sustainability.
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Compound Semiconductor Site Consolidation. Consolidation of compound semiconductor wafer fab and device
manufacturing facilities, including the closure of half of these facilities is a multi-year and cross-cutting initiative. We will consolidate into our most modern facilities with a stable baseline of operational excellence and will drive better
utilization of our assets while reducing our costs and improving our new product introduction (NPI) cycle times. |
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Savings. We expect total savings for fiscal 2023 - 2025 to be $200 - 300 million, with annual savings
of $110 - 140 million by fiscal 2025. We forecast savings associated with the Plan to be approximately $90 - 100 million for full fiscal year 2024. |
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Costs to Achieve. We expect total costs to achieve these savings over the fiscal 2023 - 2025 period to be
$175 - 200 million, including severance, retention, facility moves, short-term duplicate costs, lease termination costs, and IT consolidation costs. In the first quarter of fiscal 2024, we recorded restructuring charges of $3 million,
consisting primarily of employment termination costs. |
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Restructuring Charges. We expect restructuring charges to be in the $35 - 45 million range for full
fiscal year 2024 mainly comprised of employment termination, facility move costs and accelerated depreciation. We expect restructuring charges to be in the $25 - 35 million range for full fiscal year 2025, consisting primarily of employment
termination, facility move costs and accelerated depreciation, and savings associated with the Plan to be $110 - 140 million for full fiscal year 2025, as noted above. In fiscal 2023, restructuring charges were $119 million, primarily for
workforce reduction and the write-off of property and equipment, net of $65 million from reimbursement arrangements. |
VISIBILITY
AI-Driven Datacom Demand Offsetting Macro-Driven Weakness in Industrial and Instrumentation Markets
Underlying our unchanged $4.5 4.7 billion revenue guidance for full year fiscal 2024, the first quarter reinforced our confidence and outlook for
our Datacom transceiver business driven by AI-related data center builds by Webscale, other Cloud Internet Content Providers, and companies that supply them; at the same time, we saw unchanged soft end market
demand for most of our other markets, including most prominently in our Industrial, Electronics and Instrumentation markets, driven primarily by ongoing macroeconomic weakness that has resulted in lower industrial manufacturing output, telecom
inventory digestion, weaker demand in the consumer electronics market vertical and related post-Covid inventory digestion in our
7
Life Sciences vertical. We are forecasting 11% second half over first half improvement in revenue in the second-half of our fiscal 2024 (at the midpoint of guidance) driven primarily by the
strength in our AI-related Datacom transceiver market and successful 800G NPI ramps along with modest recovery in some of our market verticals including Telecom and all of our Industrial verticals . Our
longer-term outlook for strong secular growth in all of our markets remains unchanged, driven by both an eventual recovery in end market demand and the impact of AI along with other significant drivers discussed at greater length below.
While we believe we are well positioned to benefit from any improvement in the macroeconomic environment, we are not assuming we will see signs of a
meaningful rebound across all market verticals in fiscal 2024. We are prosecuting a reset year with these external challenges which will persist in the second quarter of fiscal 2024 as our customers continue to take proactive measures to manage
inventory and cash to address limited visibility, and to reduce their orders to us as the lead times in the market continue to contract.
Backlog and
Orders
In the first quarter, both orders and backlog declined year-over-year driven by ongoing macroeconomic uncertainty. Orders, however exceeded our
internal forecast driven by strength in Networking, which more than offset weakness in our Materials and Lasers segments.
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Backlog. We ended the quarter with almost $2.9 billion of backlog, approximately a $150 million
or 5% sequential increase but a greater than (5%) year-over-year decline. |
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Orders. Orders decreased year-over-year by over (10%) and sequentially by over (5%). Relative to our
internal expectations, ongoing significant order strength in Networking driven by AI-related Datacom transceivers more than offset ongoing weak order trends in our Materials and Lasers segments, whose combined
backlogs decreased by $39 million sequentially. The sequential decline was due to the over 30% sequential order growth in the preceding quarter, which was driven by the extraordinary surge in AI-related
Datacom transceiver orders received at the end of June, earlier than expected. |
Networking
We continue to enjoy strong momentum in our Networking segment. Our Datacom order strength more than offset ongoing weakness in our Telecom business to drive
overall orders for our Networking segment almost 80% above our internal forecast and a well over 20% increase year-over-year. Following the extraordinary surge in AI-related Datacom transceiver orders in the
preceding quarter, the sequential decline in Networking segment orders was far less than we had expected.
AI-Related Datacom Transceivers: Strong Follow-On Order Book. Strong follow-on AI/ML-related orders for our 800G Datacom transceivers in the first quarter from Webscale, Cloud Internet Content Providers (ICP), and other companies in the
Webscale and Cloud ICP ecosystem along with significant new engagements with a number of leading Webscale and networking equipment companies reinforced our longer-term outlook for our Datacom transceiver business and enabling active and passive
components business. We are excited as to the role these businesses will play in enabling the broad ecosystem to meet the challenges of scaling NPI into high volume production required by the rapid growth of AI/ML, especially generative AI.
8
While fully recognizing the evolution of different protocols for AI connectivity including Infiniband,
Ethernet and some proprietary protocols such as NVLink, our transceivers are designed to be compatible and interoperable with all of the protocols and standards that are currently used for AI connectivity. We believe that we are equally
well-positionedin terms of technology, products and customer relationshipsto address anticipated evolutions of AI connectivity architectures. We also are excited by the strong interest we are seeing from key customers for 1.6T
transceivers and components. The retooling of datacenter architectures and integration of AI clusters by Webscale and other cloud companies represent an immediate and direct growth opportunity for our Datacom business both our transceivers
and our enabling active and passive components, especially leading-edge high-speed lasers.
800G Demand. Driven by
AI-related data center builds, 800G Datacom transceiver backlog significantly increased from the already substantial level of the preceding quarter. Increased orders for 800G Datacom transceivers in the first
quarter drove a more than a 200% increase in our 800G backlog for the first quarter of fiscal 2024, enhancing the depth and breadth of our AI-related 800G Datacom business. During the quarter we enjoyed both
expanding AI-related product engagements with existing customers and a number of new significant AI-related customer engagements including with some of the largest
Webscale and networking equipment manufacturer (NEM) companies.
Lasers Segment: We Continue to Expect Improvement in FY2H24
We saw largely unchanged market conditions in our Lasers segment with the macroeconomic environment continuing to impact demand; however, we expect to see
improvement in the second-half of fiscal 2024. Orders in our Lasers segment decreased sequentially by over 5% and year-over-year by approximately 25% and were modestly below our internal forecast. Revenue increased slightly (by 1%) on a sequential
basis driven by semiconductor front-end, especially wafer inspection lasers, and strong recovery in the OLED Excimer service revenue, with the latter driven by increased OLED fab utilization, inventory
depletion and emerging green shoots in the consumer market. Underlying our expectation for the start of recovery in the second-half of fiscal 2024, we expect both of these trends to continue for the rest of fiscal 2024, driven by the build-out of new fabs and the required laser-based Wafer Fab Inspection equipment investments that precede them in leading edge nodes driven by such applications as AI, by OLED growth driven by increasing adoption
into tablet and laptop computers, and by a rebound in Android smartphone sales volumes from the lowest levels in a decade. We also expect these trends to more than offset any overall slowdown in other markets and continued weakness in our
Instrumentation market while the Life Sciences inventory is worked off, which we expect will continue at least through the second-half of fiscal 2024. As discussed at greater length below, we remain excited as to our longer-term outlook for both our
Industrial and Instrumentation markets.
9
Materials Segment Ongoing Challenges and SiC Opportunities
Orders in our Materials segment were essentially flat on a sequential basis but decreased by approximately 40% year-over-year. We now expect this weakness to
continue into the second half of fiscal 2024, as previously disclosed reduced demand in our Consumer Electronics business, along with a temporary slowdown in EUV demand, more than offsets AI-related Datacom
OEM sales strength and the increased fab utilization due to the increased output to support our Datacom transceiver demand. Demand for lasers for our internal Datacom transceiver ramp combined with the substantial increase in demand from transceiver
manufacturers is requiring a substantial increase in investment and a strong focus on product development and NPI ramps in four of our wafer fabs as we invest to expand capacity to support not only 800G and 1.6T for the next few years, but also the
development of 3.2T technologies.
Recently Announced Transactions Significantly Enhance Long-Term Outlook
Near-term demand for the silicon carbide (SiC) business remains robust. Demand continues to outstrip our ability to supply our silicon carbide substrates and
epitaxial wafers, with SiC revenue growth currently only constrained by our ability to ramp production capacity.
Our long-term outlook and confidence in
both our SiC and our overall business has been significantly enhanced by our recently announced transactions in our silicon carbide business resulting from our strategic review process announced in May 2023.
As we announced on October 10, 2023, DENSO CORPORATION and Mitsubishi Electric Corporation have agreed to invest an aggregate $1 billion in our
silicon carbide business (the SiC Business). Under the terms of the transactions, DENSO and Mitsubishi Electric will each invest $500 million in exchange for a 12.5% non-controlling ownership
interest in the SiC Business, with Coherent owning the remaining 75%. Prior to the completion of the transaction, Coherent will separate and contribute the SiC Business to a new subsidiary. Coherent will control and operate the SiC Business, which
will continue to be led by Sohail Khan, Coherents Executive Vice President, Wide-Bandgap Electronics Technologies. In connection with the transaction, the SiC Business will enter into long-term supply arrangements with DENSO and Mitsubishi
Electric that support their demand for 150 mm and 200 mm silicon carbide substrates and epitaxial wafers. We expect these transactions to close by the end of the first quarter of calendar 2024.
These transactions are expected to allow Coherent to increase its available free cash flow to provide greater financial and operational flexibility to execute
its capital allocation priorities including debt reduction.
Expected Benefits. More specifically, these transactions confer a number of
significant benefits including the following:
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Outstanding Partners. DENSO and Mitsubishi Electric represent two outstanding partners. DENSO is a leading
Tier-1 supplier to the automotive market and Mitsubishi Electric is a leading supplier of industrial and automotive power systems. |
10
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Expanded Capacity and R&D. The aggregate $1B investment will help to accelerate 150 mm and 200 mm
silicon carbide substrates and epitaxial wafer capacity expansion and our R&D plans for the silicon carbide business. |
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Growth Outlook and Visibility. The transactions further enhance the SiC revenue growth outlook and
visibility by virtue of the long-term supply agreements to support DENSO and Mitsubishi Electrics demand for 150 mm and 200 mm silicon carbide substrates and epitaxial wafers. |
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Operating and Financial Flexibility. The investments provide Coherent with greater operating and financial
flexibility. While dedicated to the silicon substrate business, the investments will allow us to free up future cash that otherwise would have been used for capital and operating expenditures for the silicon carbide business for other purposes
including debt reduction. As a reminder, Coherent had previously announced in August 2021 that it planned to invest $1 billion over the next 10 years in its silicon carbide business. |
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Significant Retained Ownership Interest and Operating Control. Coherent maintains 75% ownership and
strategic and operating control of the silicon carbide business. |
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Valuation. The transactions placed a $3 billion value on the silicon carbide business prior to the
investmentsapproximately 10x our projected fiscal 2024 revenue for the silicon carbide business. |
Networking Segment:
AI Transceiver NPI Launch and Ramp in Sight: Strong Longer-Term Outlook
Certain qualification milestones for some products as part of our NPI ramp are expected to be completed during the second quarter and allow us to continue to
expand our output materially in the second-half of fiscal 2024. Previously disclosed supply chain constraints impacted our first quarter shipments and revenue as expected; at the same time, we are seeing meaningful improvement in some of these
constraints and our ability to ramp production as reflected in an over 200% sequential increase in our 800G revenue in the first quarter. The primary supply chain issue remains shortages of certain components such as ICs.
We expect increased revenue from further significant supply chain improvement throughout fiscal 2024. 800G supply constraints are expected to ease and our
qualification and NPI ramp to proceed with full resolution of supply chain constraints by the end of fiscal 2024 based on our current view of future 800G demand.
Telecom: Recovery in Sight: Strong Longer-Term Outlook
We believe that the first quarter of fiscal 2024 will mark the bottom for our Telecom business as measured by our backlog and revenue; we now expect
significant increases in revenue both for the second-half over the first-half of fiscal 2024 and for full year fiscal 2025 over fiscal 2024.
As we
expected, in the first quarter, the overall Telecom market for our optical components remained muted as our NEM and communications service provider (CSP) customers continued to work down their inventory levels, while CSPs delayed projects and
spending. We expect modest sequential improvement in our Telecom revenue starting in the second quarter and extending throughout the remainder of fiscal 2024 with more pronounced improvements in fiscal
11
2025 and beyond. We expect to see meaningful reduction in our customers inventory levels in the second-half of fiscal 2024, which should contribute to a return to normal ordering patterns
in our fiscal 2025 and to year-over-year revenue growth beginning in early fiscal 2025. Underlying our view, near-term, some of our largest customers have indicated modest improvement in end demand. Longer-term, we expect to meaningfully benefit
from ongoing market recovery; strong customer traction for a number of new products that expand our addressable market; and a number of key emerging opportunities at new prospective direct customers. We are especially excited about the number and
quality of customer design wins for our new 100G ZR and high power 400G ZR/ZR+ pluggable transceivers including at large OEMs who are new customers. The 100G ZR transceivers are based on our own internally developed Steelerton DSP, which represents
a disruptive element in our portfolio. We currently are qualified and shipping our 400G ZR/ZR+ transceiver and expect to commence ramping production and commercial shipments of the new 100G ZR transceivers in the first-half of calendar 2024.
Trade Compliance Update on U.S. Restrictions:
New
Semiconductor-Related Export Controls-No Meaningful Impact Expected
At present, we do not expect a meaningful
adverse impact from the new round of export control restrictions announced by the U.S. Department of Commerce on October 17th. These newest restrictions target exports of certain integrated
circuits and semiconductor manufacturing equipment to China and impose new end use and end user controls to constrain certain cutting-edge technology development in China. As with others in the industry, we continue to assess these new rules and to
update our compliance controls to account for them.
PART II - FINANCIAL OVERVIEW
FIRST-QUARTER FISCAL 2024
Revenue. We generated
$1.053 billion in revenue, slightly above the midpoint of our $1.0 - $1.1 billion guidance range, but a 13% sequential decrease and a 22% year-over-year decrease. Networking orders exceeded our internal forecast by almost 80%, which is
offsetting ongoing weak demand trends in our Materials and Lasers segments and underpins our confidence that we will achieve our unchanged $4.5 4.7 billion revenue guidance range for full year fiscal 2024.
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Materials. Revenue of $245 million for our Materials segment decreased by 15% sequentially and 31%
year-over-year, primarily due to the previously disclosed expected reduction in our Consumer Electronics market revenue partially offset by an increase in the Automotive vertical revenue. |
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Networking. Revenue of $473 million for our Networking segment decreased by 19% sequentially and 21%
year-over-year primarily due to the expected decrease in revenue, which in turn was primarily due to inventory digestion, from a Webscale customer that accounted for 10% of our fiscal 2023 revenue along with ongoing inventory digestion by other
Webscale and CSP customers along with project delays specific to some CSPs. |
12
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Lasers. Revenue of $336 million for our Lasers segment was
in-line with our internal forecast, increased slightly from the preceding quarter but decreased by 14% year-over-year primarily driven by ongoing macroeconomic uncertainty. Within the Lasers segment, we are
seeing largely flat demand across virtually all of our Industrial and Instrumentation markets. Encouragingly, we are starting to see improvement in our Laser services revenue, primarily driven by increasing fab utilization and depleted inventory in
our Display Capital Equipment market segment. |
Non-GAAP EPS. Non-GAAP diluted earnings per share was $0.16, above the midpoint of our $0.05 - 0.20 guidance range driven by the slight revenue upside, lower than expected operating expense, and a favorable tax rate. These more
than offset disappointing gross margin relative to our internal forecast. Excluding $0.03 contributed by a lower-than-expected tax rate and a $0.01 adverse impact from foreign exchange, non-GAAP EPS would have
been $0.14.
Non-GAAP Gross Margin. 34.8%, which decreased on both a sequential and year-over-year basis.
The primary drivers of the sequential and year-over-year declines were lower revenue, which resulted in lower fixed cost absorption, and unfavorable product mix.
Non-GAAP Operating Expenses. $234 million or 22.2% of revenue, a sequential decrease of $14 million
and a year-over-year decrease of $22 million. Operating expenses as a percentage of revenue increased on both a sequential and year-over-year basis due to the greater rate of decline in revenue. The reduced level of absolute operating expense
on both a sequential and year-over-year basis was driven by strong cost control discipline across the Company and our Synergy and Site Consolidation Plan and our Restructuring Plan.
Non-GAAP Operating Margin. 12.6%, a sequential and year-over-year decrease driven by lower revenue and gross
margin partially offset by reduced operating expenses.
Operating Cash Flow. $199 million, which increased from the preceding quarter and year-ago levels.
Capital Expenditures. $62 million, almost 50% of which was for the Wide-Bandgap
Technologies to expand manufacturing infrastructure of 200 mm platforms for silicon carbide substrates and epitaxial wafers and related devices. Capital expenditures for our SiC Business between the signing and the closing of the DENSO and
Mitsubishi investment agreements will be reimbursed to Coherent.
Debt Reduction. In the quarter, we paid down $19 million of our outstanding
debt.
Debt. Gross debt was approximately $4.4 billion and net debt was approximately $3.4 billion at the end of the quarter, compared to
$4.4 billion and $3.6 billion, respectively, at the end of the preceding quarter.
Leverage. Gross leverage was 4.0x and net leverage was
3.2x at the end of the quarter on a calculated basis, using the trailing 12 months of adjusted EBITDA at September 30, 2023 compared to 3.6x and 2.9x, respectively, at the end of the preceding quarter. Including the cost savings and synergy
credit of $406 million allowed in the credit facility, gross leverage was 2.9x and net leverage was 2.3x at the end of the quarter compared to 2.9x and 2.4x, respectively, at the end of the preceding quarter. The Companys credit agreement
allows for customary add backs to Adjusted Consolidated EBITDA including cost savings, operating expense reductions, and synergies in connection with any restructuring, cost saving initiative or other initiatives.
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Target: Our long-term leverage target is 2.5x synergized gross leverage. |
13
Table 2
Other Financial Statistics
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|
|
|
|
|
|
|
|
$ Millions, except per share and percentage amounts (unaudited) |
|
Q1 FY24 |
|
|
Q4 FY23 |
|
|
Q1 FY23 |
|
Inventory |
|
|
1,281 |
|
|
|
1,272 |
|
|
|
1,347 |
|
Cash |
|
|
941 |
|
|
|
833 |
|
|
|
899 |
|
Gross Debt |
|
|
4,380 |
|
|
|
4,399 |
|
|
|
4,730 |
|
Net Debt |
|
|
3,438 |
|
|
|
3,565 |
|
|
|
3,831 |
|
Calculated - Gross/Net leverage |
|
|
4.0x / 3.2x |
|
|
|
3.6x / 2.9x |
|
|
|
3.8x / 3.1x |
|
Credit Facility - Gross/Net Leverage |
|
|
2.9x / 2.3x |
|
|
|
2.9x / 2.4x |
|
|
|
3.2x / 2.6x |
|
Debt Payments |
|
|
19 |
|
|
|
121 |
|
|
|
996 |
|
Operating Cash Flow |
|
|
199 |
|
|
|
182 |
|
|
|
80 |
|
Capital expenditures |
|
|
62 |
|
|
|
93 |
|
|
|
139 |
|
Depreciation |
|
|
66 |
|
|
|
70 |
|
|
|
65 |
|
Amortization |
|
|
73 |
|
|
|
134 |
|
|
|
83 |
|
Fully diluted shares for NG EPS |
|
|
152 |
|
|
|
141 |
|
|
|
149 |
|
As previously noted, the Company has responded to the macroeconomic-driven impact on revenue growth that started in the second
half of fiscal 2023 with a major restructuring plan for fiscal 2023 - 2025, an acceleration of the site consolidation portion of our Synergy and Site Consolidation Plan, and other targeted strategic actions.
14
PART III
NEAR & LONG-TERM TRENDS BY MARKETS & REGIONS
MARKETS
We report in four major end markets which
are comprised of ten verticals to provide transparency to investors.
INDUSTRIAL
Revenue. First quarter revenue for our Industrial market decreased by 2% sequentially and 12% year-over-year to $404 million driven by ongoing
macroeconomic driven weakness across most of our Industrial verticals including, most notably, Display Capital Equipment (Display), Precision Manufacturing and back-end Semiconductor Capital Equipment
(SemiCap) verticals with the front-end SemiCap vertical being the exception.
Notice of Industrial Market
Overview Webcast
We plan to discuss our Industrial market at greater length in December 2023 as the second installment of our Market
Overview webcast series available on our website at coherent.com/company/investor-relations/financial-webcasts.
Demand Trends. While
the near-term outlook for our Industrial business remains challenged by the macroeconomic backdrop, we continue to expect improvement in the second-half of fiscal 2024 and are excited by a number of longer-term trends. These trends include:
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1. |
Semiconductor Capital Equipment Vertical: We see favorable long-term demand trends for our SemiCap
business augmented by government policy-driven fab investments (i.e., government subsidies for expanding production capacity) and, most importantly, our increasing serviceable addressable market (SAM) because of portfolio expansion over the
longer-term. We enjoy a strong NRE-funded design win pipeline from existing and new customers across both front-end wafer inspection and new applications.
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Front-End. We enjoy a particularly strong competitive position in front-end SemiCap, which accounts for most of our SemiCap vertical revenue. We have a number of new programs and design wins on track to drive future incremental revenue. |
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Semiconductor Wafer Inspection. We have a strong pipeline of design wins and NRE and record shipments in
the first quarter of lasers for Semiconductor Wafer Inspection. |
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Additional Growth Opportunities. We are excited by significant growth opportunities in the SemiCap
vertical for our ceramic, diamond and silicon carbide materials. The trend to increase wafer throughput is driving the need for more advanced materials that are stiffer and lighter and that have higher resonance frequency and better thermal
properties. We expect our ceramics revenue to ramp throughout fiscal 2024. We also expect eventual incremental revenue contribution from new product introduction wins in the SemiCap market such as next-generation ceramics parts and assembly for next
generation lithography machines. |
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AI. Our positioning should be favorably impacted by AI, in particular for our engineered materials and
lasers, which enable equipment for fabricating next-gen nodes. |
15
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2. |
Display Capital Equipment Vertical: We continue to expect an eventual rebound in the Display Capital
Equipment (Display) segment of the Industrial market, where we are a leading supplier to virtually all of the leading companies in the Display vertical and where we enjoy a broad technology platform to address virtually all Display companies
future roadmaps. We are especially strong in the Excimer laser annealing market, which accounts for the largest portion of our Display SAM. |
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OLED. The long-term outlook for our Display Excimer laser annealing business remains robust. We are
excited by investments in new Gen 8 OLED fabs for capacity expansion for larger substrates for tablet and notebook computers and by OLED adoption in the automotive market. The move to larger OLED formats and new OLED display types will require new
Excimer laser annealing systems along with new lasers for cutting. We are well positioned for both cutting and larger format annealing. We have also started receiving sizable purchase orders in connection with new fab investments in China. We expect
the IT display market to increase from approximately $6B in calendar 2023 to almost $14 billion in calendar 2026 with OLED displays growing by well over 100% from approximately $3 billion to approximately $8 billion. Our Display
business also should benefit from increasing adoption of OLEDs in smartphones and an eventual rebound in smartphone sales. |
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New DPSS Laser. We expect our new Python DPSS laser and the associated line-beam system to enhance our
leading position in the OLED annealing market for larger IT displays. Customer evaluation has commenced after our successful first system installation at a systems integrator. |
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MicroLED. Long-term Display Capital Equipment demand is also augmented by the emergence of the MicroLED
market and the adoption of laser lift-off and mass transfer processes. We have seen increasing MicroLED interest and customer engagement based on recent announcements from tier one smartphone manufacturers on
their future MicroLED display roadmaps. As we previously disclosed, in the preceding fourth quarter, we received multiple orders from customers in China, Taiwan, and Korea for such systems. |
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Service. Encouragingly, we are starting to see improvement in our Display services revenue. While
smartphone sales are near the lowest level in a decade, several OLED fabs in Korea are seeing increased fab utilization, which combined with depleted inventory of service spare parts, has driven a meaningful sequential increase in our service
business. We expect both increasing fab utilization and new Excimer system laser installations to drive longer-term recovery in our Laser service revenue. While still below the year ago level, our Display service revenue increased by over 20%
sequentially in the first quarter of fiscal 2024. |
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3. |
Precision Manufacturing Vertical: While revenue from our Precision Manufacturing market segment suffered
a significant sequential and year-over-year decrease, a second straight quarter of order growth suggests some stabilization. We continue to see a strong long-term outlook for this market driven by new product offerings that enhance our SAM and
competitive position. An eventual macroeconomic rebound will especially affect Precision Manufacturing demand, our most macro-impacted vertical in the Industrial market. Encouragingly, some customers that have been pushing out shipments over
the last 18 months have now requested shipments on short notice. |
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Electric Vehicles, EV Battery Assembly, and Medical Devices: Our key target markets of Electric Vehicles
(EV) and Medical Device Manufacturing continue to provide healthy long-term market growth outlooks of > 15% and > 5%, respectively. We are especially excited by our positive order trend and strengthening market trend in Europe and the Americas
for EV battery weldingand the revenue growth potential attending the pace of our cost reductions and performance improvements in our new ARM Laser and Beam Delivery Systems. The process monitoring and control technology that we pioneered,
which is a significant differentiator in this system, is gaining increasing traction in the marketplace. We expect to ship this system in volume into the EV battery manufacturing market for precision copper welding. |
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65 W Diode Pump Chip: We are especially excited regarding the revenue growth prospect for our 65W diode
pump chip, which we believe is the highest power single emitter pump laser in the market, with ongoing strong customer interest in the first quarter. We expect this chip to enable growth for fiber laser pumping in China, driven by continued
expansion in China of the handheld laser welding market. We launched the first commercially available such product in the fourth quarter of fiscal 2023 and have provided samples of the product to all major fiber laser customers. The customer
reception for this groundbreaking product has been exceptional. |
COMMUNICATIONS
Revenue. For the quarter, Communications revenue decreased by 19% sequentially and 22% year-over-year to $460 million. The decrease was primarily
due to our previously disclosed expected decrease in Datacom revenue, which in turn was primarily due to inventory digestion by Webscale customers and CSP customers in the Datacom vertical as well as project and shipment delays by CSP customers in
the Telecom vertical. Revenue for our Communications market was split 71% for Datacom and 29% for Telecom across our Networking and Materials segments.
Communications Market Overview Webcast. We discussed our Communications market in greater detail on our September 19, 2023 Communications Market
Overview webcast. A replay and investor presentation is available on our website at coherent.com/company/investor-relations/financial-webcasts.
Long-Term Demand Trends. We expect strong long-term growth in our Communications market driven by favorable secular trends in both our Datacom and
Telecom businesses. Underlying our outlook:
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1. |
Datacom Vertical. Starting in the second-half of fiscal 2024, we expect a return to year-over-year
Datacom revenue growth based on our order book together with strong customer engagements for AI-related data center buildouts and a return to revenue growth for our lower speed Datacom transceivers for non-AI deployments driven by inventory normalization. High speed (> 200G) transceivers now account for over 70% of our Datacom transceiver revenue. |
17
|
a. |
AI/ML. Strong follow-on orders in the first quarter for our
Datacom transceivers for AI-based data center buildouts in the wake of the surge in demand in the preceding quarter reinforced our excitement as to the impact on our Datacom business from the rapid growth of
AI/ML, especially generative AI. We also are excited by the strong interest we are seeing from key customers for 1.6T transceivers and components. Retooling of datacenter architectures and integration of AI clusters by Webscale and other Cloud ICP
companies represent an immediate and direct growth opportunity for our Datacom business both our transceivers and our enabling active and passive components, especially leading-edge high-speed lasers. |
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Expanded Engagements with Existing and New Customers. As previously noted, adding to our longer-term
visibility, during the quarter we continued to expand AI-related product engagements with existing customers and entered into engagements with a number of new AI-related
customers including some of the largest Webscale and networking equipment manufacturer companies. |
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Market Inflection; Long Duration. The strength of follow-on orders
and customer engagements in the first quarter reinforced our confidence as to an inflection point in the Datacom transceiver market with significant AI/ML-related revenue growth in our Datacom transceiver
business and thereby our overall revenue growth and profitability for many years to come. |
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More Than Just Datacom Transceivers. We see the longer-term benefit of AI/ML extending well beyond Datacom
transceivers to impact other product markets that we address and to enable significant operating efficiencies across our organization. |
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Webscale. These orders also reflect our strong technology platforms and competitive position relative to
Webscale and Cloud ICP AI/ML-driven datacenter deployments. For the quarter, Webscale customers and customers that incorporate our transceivers in solutions sold to Webscale customers accounted for virtually
all of our AI-driven 800G and the bulk of our overall Datacom transceiver revenue. Webscale customers directly and indirectly accounted for approximately 60% of our total Datacom transceiver revenue for the
quarter. |
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Competitive Positioning. Our investments in high-speed lasers over multiple decades have placed us in a
unique position to meaningfully participate in the AI connectivity market, including for the upcoming 200G per optical lane era, required for 1.6T and eventually 3.2T Datacom transceivers, with multiple leading-edge laser platforms including DFB-MZs, EMLs, and VCSELs. We are making great progress on our 1.6T program and we expect to be first to market with the platform, the building blocks of which we demonstrated at ECOC, including our DFB-MZ laser, which also won the 2023 ECOC Exhibition Industry Award for Most Innovative Product in the category of Innovative Photonics Components. |
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Silicon Photonics. This year, to address AI-driven Datacom
transceiver demand, we launched our Silicon Photonics-based 800G-DR8 Datacom transceiver. This transceiver is ideal for use in machine learning and training networks that need a link reach longer than 100
meters or where our customers prefer a single-mode over a multi-mode fiber cabling infrastructure in shorter reaches. At the ECOC tradeshow in October, we were pleased to demonstrate a linear pluggable optics (LPO) version of this product.
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18
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CPO. To meet the needs of the future CPO (co-packaged optics)
market, we are uniquely well-positioned to cover both single-mode and multi-mode infrastructure options for our customers. Our Silicon Photonics program, combined with our InP CW (continuous wave) high-power lasers, will enable single-mode CPO
applications or designs. In addition, given the successful track record of multi-mode pluggable transceivers in addressing short-reach applications such as AI/ML/HPC connectivity, we are also investigating a multi-mode CPO option, powered by our
VCSELs. We presented our thought leadership on this subject at the OpenCompute Global Summit recently. |
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Market Growth. We estimate the AI-market for 800G, and eventually
1.6T and 3.2T Datacom transceivers, will grow at a greater than 40% CAGR over the next five years to over $4.2 billion in calendar 2028 from what we estimate was $0.6 billion in calendar 2023;we expect this growth for 800G and future 1.6T
and 3.6T transceivers to drive a 20% CAGR for the entire Datacom transceiver market. We expect this growth to result in AI-related 800G and 1.6T Datacom transceiver shipments accounting for almost 60% of all
Datacom transceiver shipments by 2028 and possibly sooner. |
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Supply Chain. As noted above, previously disclosed supply chain constraints impacted our first quarter
shipments and revenue as expected; at the same time, we are seeing meaningful improvement in these constraints and our ability to ramp production as reflected in an approximately 200% sequential increase in our 800G revenue in the first quarter. The
shortages of certain components from external suppliers are still affecting us. We expect increased revenue from further significant supply chain improvement throughout fiscal 2024. 800G supply constraints are expected to ease and our qualification
and NPI ramp to proceed with full resolution of supply chain constraints by the end of fiscal 2024 based on our current view of future 800G demand. |
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Components. Our Datacom components enjoyed very strong revenue growth in the first quarter, 30%
sequentially and 27% year-over-year, largely driven by strength in VCSELs and passives for AI applications. |
|
2. |
Telecom Vertical. While the near-term outlook for the Telecom market remains challenged by inventory
digestion and project delays by CSPs, the first quarter reinforced our excitement regarding our longer-term Telecom growth outlook. Near-term, we believe the first quarter will mark the bottom for our Telecom business. Longer-term, we are excited by
the growth prospects offered by a number of new products that strengthen our competitive position in existing Telecom market segments across multiple levels of integration. These new products will enable us to expand our SAM by providing entree into
new segments of the Telecom market. |
|
a. |
First Quarter of Fiscal 2024. Telecom revenue and orders in the first quarter remained weak, consistent
with our expectations, due to ongoing inventory digestion together with project delays related to cautious capital expenditures by certain CSPs. We saw delivery pushouts late in the quarter from multiple customers. |
19
|
b. |
Balance of Fiscal 2024. We expect sequential growth in Telecom revenue in the second quarter and
accelerating sequential growth throughout the remainder of fiscal 2024 with a return to year-over-year growth recommencing in fiscal 2025 driven by customers inventory normalization, new orders placed by some customers at the end of the first
quarter, especially for our critical Telecom products, and revenue ramp of new product launches. |
|
c. |
Robust Design and Qualification Activity. We have enjoyed robust design activity in response to multiple
planned new projects, which points to a very strong long-term recovery. |
|
d. |
A Market Leader. In Telecom, we are a vertically integrated market leader in several core businesses
including our pump lasers, telemetry, ROADMs, amplifiers and WSS products along with our coherent transceivers and disaggregated solutions. We believe we are gaining share at many of our key customers on our current product set and our newer product
platforms are seeing strong uptake in the industry. |
|
e. |
Exposure to Fast Growth Segments. We are excited by our Telecom revenue growth outlook for fiscal 2025
and beyond as we are well positioned in key market segments and expect to benefit from the industry trend towards disaggregation, which benefits pluggable coherent transceivers and disaggregated systems, which are the fastest-growing segments of our
Telecom market. |
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Coherent Optical Modules. We are especially excited about the number and quality of customer design wins
for our new 100G ZR and 400G ZR/ZR+ pluggable transceivers. The former is based on our own internally developed Steelerton DSP. We currently are qualified and beginning to ramp shipments of our 400G ZR/ZR+ transceivers and expect to commence ramping
production and commercial shipments of our new 100G ZR transceivers in calendar 2024. |
|
|
|
Disaggregated Solutions. We are seeing increasing opportunities for disaggregated solutions at both
traditional CSPs and Webscale companies with an increasing number of new design-ins. |
ELECTRONICS
Revenue. Revenue for our
Electronics market decreased by 15% sequentially and by 50% year-over-year to $90 million for the first quarter driven by the previously disclosed design change at our largest Electronics customer that accounted for almost 10% of revenue
in fiscal 2023 along with expected seasonal trends.
Near-Term Demand Trends. As noted in our commentary for each of the past two quarters, we
expect a significant decline in revenue in our Consumer Electronics vertical over the next 12 - 18 months, to 3% or less of total revenue from approximately 10% in Fiscal 2023, driven by product design changes. We expect lower demand in Consumer
Electronics vertical to offset ongoing strength in our Wide-Bandgap (WBG)/SiC business, resulting in ongoing significant near-term revenue decline for our Electronics business following a strong fiscal 2023.
20
Longer-Term Demand Trends. We expect an eventual rebound and strong growth in our Electronics market
segment driven by ongoing strength in our WBG/SiC business driven by EVs along with a return to growth in the Consumer Electronics vertical. Underlying our view:
|
1. |
Wide-Bandgap (WBG)/Silicon Carbide (SiC). For our WBG business, demand for our SiC substrates continue
to exceed supply. We are rapidly expanding capacity as planned. Since we commenced investing in SiC over two decades ago, our product revenue has enjoyed a 35% CAGR. We estimate the market for SiC power electronics for EVs will grow at roughly a 40%
CAGR over the next five years. |
|
|
|
As discussed at greater length above, our recently announced transactions with DENSO and Mitsubishi
Electric enhances our confidence in our long-term revenue growth outlook for our silicon carbide business. |
|
2. |
Consumer Electronics Vertical. Our longer-term outlook for Consumer Electronics is driven by growth in
breadth and depth of sensing adoption well beyond 3D sensing for smartphones. AI applications are currently driving the need for the data provided by advanced sensors that serve as the eyes and ears of AI/ML systems. In addition, AIs emerging,
powerful capabilities are underpinning new use cases to more effectively employ sensing in a variety of markets and applications. This new market dynamic has triggered substantial activity to develop and deploy a variety of sensing solutions. These
include health monitoring and biosensing, metaverse AR/VR hardware and wearables, automotive LiDAR and in-cabin sensing, and other emerging applications. We are excited by our strategic engagements across all
of these applications, with the breadth and pace of our sensing design-in activities at record levels. Our broad semiconductor laser platform that spans from 850 nm to 2400 nm and three semiconductor material
platforms is a key competitive differentiator for this market. Notwithstanding a new market entrant, we are maintaining our overall market share leadership position in Consumer Electronics 3D sensing and rapidly expanding the offerings of our
platform, customer partnerships and growth trajectory. |
|
|
|
AR/VR. During the first quarter, we continued to strengthen our strategic engagements, particularly in the
AR/VR and wearables market segments. We initiated volume shipments of a new product designed for a sensing application in AR/VR. We are excited about recent new product announcements in the AR/VR space. As this technology gradually evolves, is more
widely adopted and integrates more advanced sensing features, we are well-positioned to serve the market with differentiated solutions based on our opto-semiconductor and optics material platforms. |
INSTRUMENTATION
Revenue. For the quarter,
Instrumentation revenue decreased by 15% sequentially and by 16% year-over-year to $99 million, primarily driven by customers delaying projects and purchase decisions due to ongoing macroeconomic uncertainty. Both Life Sciences vertical
and Scientific Instrumentation vertical contributed to the year-over-year decrease while Life Sciences drove the sequential decline.
21
Demand Trends. We expect relatively unchanged revenue for our Instrumentation market in fiscal 2024
due to macroeconomic uncertainty and inventory normalization. We remain excited regarding the long-term growth opportunity in this market. Underlying our outlook:
|
a. |
Life Sciences Vertical. Since the Coherent, Inc. acquisition, we have been showcasing our combined
bioinstrumentation portfolio and integrated subsystem capabilities to some of the largest customers in this market. These customers have been excited about the integration of our broad portfolio of lasers with our optics, filters, and thermoelectric
products to provide higher-level integrated solutions. The envelope of laser applications in therapeutics continues to expand and regulatory agencies worldwide continue to expand approvals. We have a variety of laser products to address therapeutic
applications, ranging from semiconductor lasers for dermatology applications to Excimer lasers for LASIK procedures. In ophthalmology, we are working with some of the largest companies in the industry to establish long-term supply agreements.
|
|
b. |
Scientific Instrumentation Vertical. We have seen a near-term slowdown in the market in part due to flat
National Institute of Health funding. Research in Life Sciences (neuroscience, cell biology, and disease studies) as well as exotic spectroscopy of materials and complex organic molecules drive most of the research expenditures in lasers.
|
REGIONAL TRENDS
The
Americas: 48% of revenue in the quarter; sequential 19% decrease; year-over-year 29% decrease. The primary drivers of the sequential and year-over-year decreases were in non-AI Datacom and Telecom
verticals due to ongoing inventory digestion, as well as a decrease in demand from our Consumer Electronics vertical. Customer engagements and design-in activity across all of our businesses in the region is
very strong. However, near term economic uncertainty continues to weigh on customer capital investment decisions.
Europe: 23% of revenue in the
quarter; sequential 3% decrease; year-over-year 1% increase. Demand in Europe continues to be challenged due to ongoing macroeconomic uncertainty with weakness in Germany having a particularly pronounced impact. During the quarter we saw strong
orders in our Networking segment and expect this trend to continue in the coming quarters.
China: 13% of revenue in the quarter; sequentially 4%
decrease; year-over-year 13% decrease. Our business in China continues to be impacted by the macroeconomic and geopolitical environment. However, as supported by the Purchasing Managers Index (PMI), which indicates a slow recovery in China, for full
year fiscal 2024 we expect double-digit revenue growth off of a record-low base with sequential improvement in the second quarter and more pronounced recovery in the second half of the year. Underlying our
view, we enjoyed relatively strong orders in the first quarter and expect a return to normalized inventory levels and concomitantly normal purchasing patterns in the second half of fiscal 2024. Key drivers of our outlook in the region include our
Precision Manufacturing, Display and Telecom verticals.
22
Korea and Japan: 14% of revenue in the quarter; sequentially essentially flat; year-over-year 15%
decrease. Macroeconomic uncertainty continues to present near-term challenges in Korea and Japan including for the second quarter, with important verticals like Display and back-end SemiCap still relatively
weak. We expect some improvement in the second half of fiscal 2024 led by stronger Laser service demand. During the quarter, we recorded important design wins in the Semicap vertical. Longer-term, we expect to see a significant increase in demand in
Korea and Japan for our Industrial and Instrumentation businesses, especially from OLED Gen 8 fab and, eventually, MicroLED builds.
23
PART IV - ABOUT COHERENT
Coherent was founded in 1971 to manufacture high-quality materials and optics for industrial lasers. Today, Coherent is a global leader in materials,
networking, and lasers for the industrial, communications, electronics, and instrumentation markets operating in more than 20 countries around the world. We are market innovators defining the future through breakthrough technologies, from materials
to systems that fuel market megatrends while pursuing our mission of enabling the world to be safer, healthier, closer, and more efficient.
We remain focused on providing industry-leading foundational materials, networking, and laser solutions for the industrial, communications, electronics, and
instrumentation markets that enable better performance and greater efficiency of our customers solutions. Steadfast in pursuit of our mission, we are not waiting for macroeconomic recovery. We are leveraging our unique set of differentiated
assets to invest, manage, and position Coherent for continued growth while succeeding in the exciting markets we are targeting and those that we already serve including:
|
|
|
Unparalleled experience in materials, photonics, and lasers; |
|
|
|
A vertically integrated, geographically diverse organization with scalable manufacturing platforms;
|
|
|
|
A history of insightful targeting and successful integration of strategic acquisitions; |
|
|
|
A sustained and committed track record of targeted research and development and capital expenditures to prepare
for the opportunities that lie ahead; and |
|
|
|
Worldwide talented and experienced teams of engineers and technologists, including over 2,000 people employed in
R&D, as well as expert manufacturing teams, and experienced business leaders. |
In addition to continuing to invest in our core
assets, we are undertaking strategic moves to enhance our market opportunities and return on invested capital; at the same time, we are proactively executing on opportunities to enhance our operating performance.
We believe that the combination of our sustained efforts to transform the company while focusing relentlessly on targeted markets, customer intimacy, product
leadership, and operational excellence will lead to enhanced operating performance and will drive long-term shareholder value. We are taking the short-term challenges head-on and we have made some bold moves
that are characteristic of a sustainable market leader. When we look past the horizon, we remain excited and optimistic about our future.
24
PART V - FINANCIAL TABLES
Table 3
Coherent Corp. and Subsidiaries
Condensed Consolidated Statements of Earnings (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
$ Millions, except per share and percentage amounts (unaudited) |
|
Sep 30 2023 |
|
|
Jun 30 2023 |
|
|
Sep 30 2022 |
|
Revenues |
|
$ |
1,053,083 |
|
|
$ |
1,205,051 |
|
|
$ |
1,344,570 |
|
Costs, Expenses & Other Expense (Income) |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
746,188 |
|
|
|
861,686 |
|
|
|
900,996 |
|
Internal research and development |
|
|
113,488 |
|
|
|
123,346 |
|
|
|
121,084 |
|
Selling, general and administrative |
|
|
211,697 |
|
|
|
256,148 |
|
|
|
280,014 |
|
Restructuring charges |
|
|
3,018 |
|
|
|
119,101 |
|
|
|
|
|
Interest expense |
|
|
73,258 |
|
|
|
78,896 |
|
|
|
61,889 |
|
Other expense (income), net |
|
|
(6,269 |
) |
|
|
(687 |
) |
|
|
31,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Costs, Expenses, & Other Expense |
|
|
1,141,380 |
|
|
|
1,438,490 |
|
|
|
1,395,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss Before Income Taxes |
|
|
(88,297 |
) |
|
|
(233,439 |
) |
|
|
(51,018 |
) |
Income Taxes |
|
|
(20,763 |
) |
|
|
(55,205 |
) |
|
|
(12,320 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
$ |
(67,534 |
) |
|
$ |
(178,234 |
) |
|
$ |
(38,698 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Dividends on Preferred Stock |
|
|
30,173 |
|
|
|
36,673 |
|
|
|
35,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Available to the Common Shareholders |
|
$ |
(97,707 |
) |
|
$ |
(214,907 |
) |
|
$ |
(74,275 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Loss Per Share |
|
$ |
(0.65 |
) |
|
$ |
(1.54 |
) |
|
$ |
(0.56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Loss Per Share |
|
$ |
(0.65 |
) |
|
$ |
(1.54 |
) |
|
$ |
(0.56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Shares Outstanding Basic |
|
|
150,328 |
|
|
|
139,346 |
|
|
|
133,280 |
|
Average Shares Outstanding Diluted |
|
|
150,328 |
|
|
|
139,346 |
|
|
|
133,280 |
|
25
Table 4
Coherent Corp. and Subsidiaries
Condensed Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
$ Millions, except per share and percentage amounts (unaudited) |
|
September 30 2023 |
|
|
June 30 2023 |
|
Assets |
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash |
|
$ |
941,081 |
|
|
$ |
833,333 |
|
Accounts receivable |
|
|
795,730 |
|
|
|
901,531 |
|
Inventories |
|
|
1,280,755 |
|
|
|
1,272,333 |
|
Prepaid and refundable income taxes |
|
|
19,745 |
|
|
|
28,271 |
|
Prepaid and other current assets |
|
|
206,420 |
|
|
|
216,530 |
|
|
|
|
|
|
|
|
|
|
Total Current Assets |
|
|
3,243,731 |
|
|
|
3,251,998 |
|
Property, plant & equipment, net |
|
|
1,775,384 |
|
|
|
1,782,035 |
|
Goodwill |
|
|
4,460,144 |
|
|
|
4,512,700 |
|
Other intangible assets, net |
|
|
3,695,578 |
|
|
|
3,814,684 |
|
Deferred income taxes |
|
|
39,042 |
|
|
|
37,748 |
|
Other assets |
|
|
307,419 |
|
|
|
311,968 |
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
13,521,298 |
|
|
$ |
13,711,133 |
|
|
|
|
|
|
|
|
|
|
Liabilities, Mezzanine Equity and Shareholders Equity |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Current portion of long-term debt |
|
$ |
74,730 |
|
|
$ |
74,836 |
|
Accounts payable |
|
|
449,134 |
|
|
|
405,308 |
|
Operating lease current liabilities |
|
|
37,203 |
|
|
|
38,271 |
|
Accruals and other current liabilities |
|
|
522,069 |
|
|
|
560,333 |
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities |
|
|
1,083,136 |
|
|
|
1,078,748 |
|
Long-term debt |
|
|
4,219,366 |
|
|
|
4,234,962 |
|
Deferred income taxes |
|
|
742,514 |
|
|
|
780,307 |
|
Operating lease liabilities |
|
|
136,558 |
|
|
|
140,748 |
|
Other liabilities |
|
|
236,150 |
|
|
|
247,402 |
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
6,417,724 |
|
|
|
6,482,167 |
|
Total Mezzanine Equity |
|
|
2,271,588 |
|
|
|
2,241,415 |
|
Total Shareholders Equity |
|
|
4,831,986 |
|
|
|
4,987,551 |
|
|
|
|
|
|
|
|
|
|
Total Liabilities, Mezzanine Equity and Shareholders Equity |
|
$ |
13,521,298 |
|
|
$ |
13,711,133 |
|
|
|
|
|
|
|
|
|
|
26
Table 5
Coherent Corp. and Subsidiaries
Condensed Consolidated
Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
$ Millions, except per share and percentage amounts (unaudited) |
|
Sep 30 2023 |
|
|
Sep 30 2022 |
|
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
198,803 |
|
|
$ |
79,577 |
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
Additions to property, plant & equipment |
|
|
(62,197 |
) |
|
|
(138,990 |
) |
Purchases of businesses, net of cash acquired |
|
|
|
|
|
|
(5,488,556 |
) |
Other investing activities |
|
|
(1,978 |
) |
|
|
(711 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(64,175 |
) |
|
|
(5,628,257 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
Proceeds from borrowings of Term A Facility |
|
|
|
|
|
|
850,000 |
|
Proceeds from borrowings of Term B Facility |
|
|
|
|
|
|
2,800,000 |
|
Proceeds from borrowings of Revolving Credit Facility |
|
|
|
|
|
|
65,000 |
|
Proceeds from issuance of Series B preferred shares |
|
|
|
|
|
|
1,400,000 |
|
Equity issuance costs |
|
|
|
|
|
|
(42,000 |
) |
Payments on existing debt |
|
|
(18,683 |
) |
|
|
(996,429 |
) |
Payments on borrowings under Revolving Credit Facility |
|
|
|
|
|
|
|
|
Debt issuance costs |
|
|
|
|
|
|
(126,516 |
) |
Equity issuance costs |
|
|
|
|
|
|
|
|
Proceeds from exercises of stock options |
|
|
14,947 |
|
|
|
7,425 |
|
Payment on convertible notes |
|
|
|
|
|
|
(3,561 |
) |
Payments in satisfaction of employees minimum tax obligations |
|
|
(13,876 |
) |
|
|
(40,885 |
) |
Other financing activities |
|
|
(268 |
) |
|
|
(292 |
) |
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
(17,880 |
) |
|
|
3,912,742 |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
(9,458 |
) |
|
|
(42,273 |
) |
Net increase in cash and cash equivalents |
|
|
107,290 |
|
|
|
(1,678,211 |
) |
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period |
|
|
837,566 |
|
|
|
2,582,371 |
|
|
|
|
|
|
|
|
|
|
Cash, Cash Equivalents, and Restricted Cash at End of Period(1) |
|
$ |
944,856 |
|
|
$ |
904,160 |
|
|
|
|
|
|
|
|
|
|
(1) |
Restricted cash, non-current is included in the condensed consolidated
balance sheets under Other Assets. |
27
Table 6
Segment Revenues, GAAP Operating Income (Loss) & Margins and Non-GAAP Operating Income (Loss) & Margins*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
$ Millions, except percentage amounts (unaudited) |
|
Sep 30 2023 |
|
|
Jun 30 2023 |
|
|
Sep 30 2022 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Networking |
|
$ |
472.9 |
|
|
$ |
584.6 |
|
|
$ |
596.6 |
|
Materials |
|
|
244.6 |
|
|
|
288.0 |
|
|
|
355.6 |
|
Lasers |
|
|
335.6 |
|
|
|
332.5 |
|
|
|
392.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
1,053.1 |
|
|
$ |
1,205.1 |
|
|
$ |
1,344.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating Income (Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Networking |
|
$ |
16.3 |
|
|
$ |
(8.1 |
) |
|
$ |
91.0 |
|
Materials |
|
|
7.2 |
|
|
|
(65.0 |
) |
|
|
75.3 |
|
Lasers |
|
|
(44.8 |
) |
|
|
(82.1 |
) |
|
|
(123.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
(21.3 |
) |
|
$ |
(155.2 |
) |
|
$ |
42.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Operating Income: |
|
|
|
|
|
|
|
|
|
|
|
|
Networking |
|
$ |
49.7 |
|
|
$ |
78.9 |
|
|
$ |
117.7 |
|
Materials |
|
|
42.2 |
|
|
|
70.2 |
|
|
|
96.8 |
|
Lasers |
|
|
40.5 |
|
|
|
36.0 |
|
|
|
71.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
132.4 |
|
|
$ |
185.1 |
|
|
$ |
286.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating Margin (Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Networking |
|
|
3.4 |
% |
|
|
(1.4 |
)% |
|
|
15.3 |
% |
Materials |
|
|
2.9 |
% |
|
|
(22.6 |
)% |
|
|
21.2 |
% |
Lasers |
|
|
(13.3 |
)% |
|
|
(24.7 |
)% |
|
|
(31.5 |
)% |
Consolidated |
|
|
(2.0 |
)% |
|
|
(12.9 |
)% |
|
|
3.2 |
% |
Non-GAAP Operating Margin: |
|
|
|
|
|
|
|
|
|
|
|
|
Networking |
|
|
10.5 |
% |
|
|
13.5 |
% |
|
|
19.7 |
% |
Materials |
|
|
17.3 |
% |
|
|
24.4 |
% |
|
|
27.2 |
% |
Lasers |
|
|
12.1 |
% |
|
|
10.8 |
% |
|
|
18.3 |
% |
Consolidated |
|
|
12.6 |
% |
|
|
15.4 |
% |
|
|
21.3 |
% |
* |
Amounts may not recalculate due to rounding. |
28
Table 7
Reconciliation of GAAP Segment Operating Income (Loss) to Segment Non-GAAP Operating Income (Loss)*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
$ Millions (unaudited) |
|
Sep 30 2023 |
|
|
Jun 30 2023 |
|
|
Sep 30 2022 |
|
Networking GAAP Operating Income (Loss) |
|
$ |
16.3 |
|
|
$ |
(8.1 |
) |
|
$ |
91.0 |
|
Share-based compensation |
|
|
10.2 |
|
|
|
7.6 |
|
|
|
10.2 |
|
Amortization of acquired
intangibles(1) |
|
|
16.3 |
|
|
|
22.9 |
|
|
|
16.5 |
|
Restructuring charges(2) |
|
|
(2.0 |
) |
|
|
55.6 |
|
|
|
|
|
Integration, site consolidation and
other(3) |
|
|
8.9 |
|
|
|
0.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Networking Operating Income |
|
$ |
49.7 |
|
|
$ |
78.9 |
|
|
$ |
117.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Materials GAAP Operating Income (Loss) |
|
$ |
7.2 |
|
|
$ |
(65.0 |
) |
|
$ |
75.3 |
|
Share-based compensation |
|
|
16.4 |
|
|
|
10.4 |
|
|
|
17.2 |
|
Amortization of acquired
intangibles(1) |
|
|
2.6 |
|
|
|
35.1 |
|
|
|
3.2 |
|
Restructuring charges(2) |
|
|
5.0 |
|
|
|
60.4 |
|
|
|
|
|
Integration, site consolidation and
other(3) |
|
|
10.6 |
|
|
|
29.4 |
|
|
|
1.1 |
|
Start-up costs(5) |
|
|
0.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Materials Operating Income |
|
$ |
42.2 |
|
|
$ |
70.2 |
|
|
$ |
96.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lasers GAAP Operating Loss |
|
$ |
(44.8 |
) |
|
$ |
(82.1 |
) |
|
$ |
(123.8 |
) |
Share-based compensation |
|
|
17.9 |
|
|
|
8.4 |
|
|
|
25.8 |
|
Amortization of acquired
intangibles(1) |
|
|
53.8 |
|
|
|
75.6 |
|
|
|
62.8 |
|
Restructuring charges(2) |
|
|
|
|
|
|
3.1 |
|
|
|
|
|
Integration, site consolidation and
other(3) |
|
|
13.6 |
|
|
|
31.0 |
|
|
|
23.0 |
|
Transaction fees and financing(4) |
|
|
|
|
|
|
|
|
|
|
38.7 |
|
Fair value adjustment on acquired inventory |
|
|
|
|
|
|
|
|
|
|
45.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Lasers Operating Income |
|
$ |
40.5 |
|
|
$ |
36.0 |
|
|
$ |
71.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GAAP Operating Income (Loss) |
|
$ |
(21.3 |
) |
|
$ |
(155.2 |
) |
|
$ |
42.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Operating Income |
|
$ |
132.4 |
|
|
$ |
185.1 |
|
|
$ |
286.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Amounts may not recalculate due to rounding. |
(1) |
Amortization of acquired intangibles includes the write-off of certain
impaired intangible assets in the fourth quarter of fiscal 2023. |
(2) |
Restructuring charges include severance, non-cash impairment charges
for production assets and improvements on leased facilities and other costs related to the 2023 Restructuring Plan. |
(3) |
Integration, site consolidation and other includes one-time retention
and severance payments, expenses not included in restructuring charges related to site closures as well as other integration costs related to the Coherent transaction. |
(4) |
Transaction fees and financing includes debt extinguishment costs and various fees related to closing the
Coherent transaction. |
(5) |
Start-up costs in operating expenses were related to the start-up of new devices for new customer applications. |
29
Table 8
Reconciliation of GAAP Measures to Non-GAAP Measures*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
$ Millions, except per share amounts (unaudited) |
|
Sep 30 2023 |
|
|
Jun 30 2023 |
|
|
Sep 30 2022 |
|
Gross profit on GAAP basis |
|
$ |
306.9 |
|
|
$ |
343.4 |
|
|
$ |
443.6 |
|
Share-based compensation |
|
|
7.4 |
|
|
|
4.9 |
|
|
|
5.3 |
|
Amortization of acquired
intangibles(1) |
|
|
30.8 |
|
|
|
38.7 |
|
|
|
47.4 |
|
Fair value adjustment on acquired inventory |
|
|
|
|
|
|
|
|
|
|
45.5 |
|
Integration, site consolidation and
other(3) |
|
|
21.3 |
|
|
|
45.8 |
|
|
|
0.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit on non-GAAP basis |
|
$ |
366.4 |
|
|
$ |
432.8 |
|
|
$ |
542.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal research and development on GAAP basis |
|
$ |
113.5 |
|
|
$ |
123.3 |
|
|
$ |
121.1 |
|
Share-based compensation |
|
|
(8.0 |
) |
|
|
(5.0 |
) |
|
|
(5.4 |
) |
Amortization of acquired
intangibles(1) |
|
|
(0.6 |
) |
|
|
(0.6 |
) |
|
|
|
|
Integration, site consolidation and
other(3) |
|
|
(1.4 |
) |
|
|
(2.7 |
) |
|
|
|
|
Start-up costs(5) |
|
|
(0.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal research and development on non-GAAP
basis |
|
$ |
103.1 |
|
|
$ |
115.0 |
|
|
$ |
115.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative on GAAP basis |
|
$ |
211.7 |
|
|
$ |
256.1 |
|
|
$ |
280.0 |
|
Share-based compensation |
|
|
(29.1 |
) |
|
|
(16.5 |
) |
|
|
(42.5 |
) |
Amortization of acquired
intangibles(1) |
|
|
(41.3 |
) |
|
|
(94.2 |
) |
|
|
(35.1 |
) |
Integration, site consolidation and
other(3) |
|
|
(10.4 |
) |
|
|
(12.8 |
) |
|
|
(23.7 |
) |
Transaction fees and financing
(4) |
|
|
|
|
|
|
|
|
|
|
(38.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative on non-GAAP
basis |
|
$ |
130.9 |
|
|
$ |
132.6 |
|
|
$ |
140.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges on GAAP basis |
|
$ |
3.0 |
|
|
$ |
119.1 |
|
|
$ |
|
|
Restructuring charges(2) |
|
|
(3.0 |
) |
|
|
(119.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges on non-GAAP basis |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) on GAAP basis |
|
$ |
(21.3 |
) |
|
$ |
(155.2 |
) |
|
$ |
42.5 |
|
Share-based compensation |
|
|
44.5 |
|
|
|
26.4 |
|
|
|
53.2 |
|
Amortization of acquired
intangibles(1) |
|
|
72.7 |
|
|
|
133.5 |
|
|
|
82.5 |
|
Fair value adjustment on acquired inventory |
|
|
|
|
|
|
|
|
|
|
45.5 |
|
Restructuring charges(2) |
|
|
3.0 |
|
|
|
119.1 |
|
|
|
|
|
Integration, site consolidation and
other(3) |
|
|
33.1 |
|
|
|
61.3 |
|
|
|
24.1 |
|
Transaction fees and financing(4) |
|
|
|
|
|
|
|
|
|
|
38.7 |
|
Start-up costs(5) |
|
|
0.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income on non-GAAP basis |
|
$ |
132.4 |
|
|
$ |
185.1 |
|
|
$ |
286.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
Table 8
Reconciliation of GAAP Measures to Non-GAAP Measures*
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
$ Millions, except per share amounts (unaudited) |
|
Sep 30 2023 |
|
|
Jun 30 2023 |
|
|
Sep 30 2022 |
|
Interest and other (income) expense, net on GAAP basis |
|
$ |
67.0 |
|
|
$ |
78.2 |
|
|
$ |
93.5 |
|
Foreign currency exchange gains (losses), net |
|
|
0.7 |
|
|
|
(5.6 |
) |
|
|
3.0 |
|
Transaction fees and financing(4) |
|
|
|
|
|
|
|
|
|
|
(34.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other (income) expense, net on non-GAAP
basis |
|
$ |
67.7 |
|
|
$ |
72.6 |
|
|
$ |
61.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes on GAAP basis |
|
$ |
(20.8 |
) |
|
$ |
(55.2 |
) |
|
$ |
(12.3 |
) |
Tax impact of non-GAAP measures |
|
|
30.5 |
|
|
|
72.8 |
|
|
|
53.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes on non-GAAP basis |
|
$ |
9.7 |
|
|
$ |
17.6 |
|
|
$ |
41.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) on GAAP basis |
|
$ |
(67.5 |
) |
|
$ |
(178.2 |
) |
|
$ |
(38.7 |
) |
Share-based compensation |
|
|
44.5 |
|
|
|
26.4 |
|
|
|
53.2 |
|
Amortization of acquired
intangibles(1) |
|
|
72.7 |
|
|
|
133.5 |
|
|
|
82.5 |
|
Fair value adjustment on acquired inventory |
|
|
|
|
|
|
|
|
|
|
45.5 |
|
Foreign currency exchange (gains) losses |
|
|
(0.7 |
) |
|
|
5.6 |
|
|
|
(3.0 |
) |
Restructuring charges(2) |
|
|
3.0 |
|
|
|
119.1 |
|
|
|
|
|
Integration, site consolidation and
other(3) |
|
|
33.1 |
|
|
|
61.3 |
|
|
|
24.1 |
|
Transaction fees and financing(4) |
|
|
|
|
|
|
|
|
|
|
73.5 |
|
Start-up costs(5) |
|
|
0.4 |
|
|
|
|
|
|
|
|
|
Tax impact of non-GAAP measures |
|
|
(30.5 |
) |
|
|
(72.8 |
) |
|
|
(53.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings on non-GAAP basis |
|
$ |
55.0 |
|
|
$ |
94.9 |
|
|
$ |
183.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss on GAAP basis |
|
|
|
|
|
|
|
|
|
|
|
|
Basic Loss Per Share |
|
$ |
(0.65 |
) |
|
$ |
(1.54 |
) |
|
$ |
(0.56 |
) |
Diluted Loss Per Share |
|
$ |
(0.65 |
) |
|
$ |
(1.54 |
) |
|
$ |
(0.56 |
) |
Net earnings on non-GAAP basis |
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share |
|
$ |
0.16 |
|
|
$ |
0.42 |
|
|
$ |
1.11 |
|
Diluted Earnings Per Share |
|
$ |
0.16 |
|
|
$ |
0.41 |
|
|
$ |
1.04 |
|
* |
Amounts may not recalculate due to rounding. |
(1) |
Amortization of acquired intangibles includes the write-off of certain
impaired intangible assets in the fourth quarter of fiscal 2023. |
(2) |
Restructuring charges include severance, non-cash impairment charges
for production assets and improvements on leased facilities and other costs related to the 2023 Restructuring Plan. |
(3) |
Integration, site consolidation and other includes one-time retention
and severance payments, expenses not included in restructuring charges related to site closures as well as other integration costs related to the Coherent transaction. |
(4) |
Transaction fees and financing includes debt extinguishment costs and various fees related to closing the
Coherent transaction. |
(5) |
Start-up costs in operating expenses were related to the start-up of new devices for new customer applications. |
31
Table 9
Reconciliation of GAAP Net Income (Loss), EBITDA and Adjusted EBITDA*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
$ Millions, except percentage amounts (unaudited) |
|
Sep 30 2023 |
|
|
Jun 30 2023 |
|
|
Sep 30 2022 |
|
Net earnings (loss) on GAAP basis |
|
$ |
(67.5 |
) |
|
$ |
(178.2 |
) |
|
$ |
(38.7 |
) |
Income taxes |
|
|
(20.8 |
) |
|
|
(55.2 |
) |
|
|
(12.3 |
) |
Depreciation and amortization |
|
|
138.4 |
|
|
|
203.6 |
|
|
|
147.3 |
|
Interest expense |
|
|
73.3 |
|
|
|
78.9 |
|
|
|
61.9 |
|
Interest income |
|
|
(3.7 |
) |
|
|
(4.1 |
) |
|
|
(0.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA (1) |
|
$ |
119.7 |
|
|
$ |
45.0 |
|
|
$ |
157.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA margin |
|
|
11.4 |
% |
|
|
3.7 |
% |
|
|
11.7 |
% |
Fair value adjustment on acquired inventory |
|
|
|
|
|
|
|
|
|
|
45.5 |
|
Share-based compensation |
|
|
44.5 |
|
|
|
26.4 |
|
|
|
53.2 |
|
Foreign currency exchange (gains) losses |
|
|
(0.7 |
) |
|
|
5.6 |
|
|
|
(3.0 |
) |
Start-up costs(6) |
|
|
0.4 |
|
|
|
|
|
|
|
|
|
Restructuring charges(3) |
|
|
3.0 |
|
|
|
119.1 |
|
|
|
|
|
Integration, site consolidation and
other(4) |
|
|
33.1 |
|
|
|
61.3 |
|
|
|
24.1 |
|
Transaction fees and financing(5) |
|
|
|
|
|
|
|
|
|
|
73.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (2) |
|
$ |
200.0 |
|
|
$ |
257.4 |
|
|
$ |
350.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin |
|
|
19.0 |
% |
|
|
21.4 |
% |
|
|
26.1 |
% |
* |
Amounts may not recalculate due to rounding. |
(1) |
EBITDA is defined as earnings before interest expense, interest income, income taxes, depreciation and
amortization. |
(2) |
Adjusted EBITDA excludes non-GAAP adjustments for share-based
compensation, certain one-time restructuring, integration, and transaction expenses, debt extinguishment charges, start-up costs, and the impact of foreign currency
exchange gains and losses. |
(3) |
Restructuring charges include severance, non-cash impairment charges
for production assets and improvements on leased facilities and other costs related to the 2023 Restructuring Plan. |
(4) |
Integration, site consolidation and other includes one-time retention
and severance payments, expenses not included in restructuring charges related to site closures as well as other integration costs related to the Coherent transaction. |
(5) |
Transaction fees and financing includes debt extinguishment costs and various fees related to closing the
Coherent transaction. |
(6) |
Start-up costs in operating expenses were related to the start-up of new devices for new customer applications. |
32
Table 10
GAAP Earnings (Loss) Per Share Calculation*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
$ Millions, except per share amounts (unaudited) |
|
Sep 30 2023 |
|
|
Jun 30 2023 |
|
|
Sep 30 2022 |
|
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(67.5 |
) |
|
$ |
(178.2 |
) |
|
$ |
(38.7 |
) |
Deduct Series A preferred stock dividends |
|
|
|
|
|
|
(6.9 |
) |
|
|
(6.9 |
) |
Deduct Series B redeemable preferred dividends |
|
|
(30.2 |
) |
|
|
(29.8 |
) |
|
|
(28.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss available to common shareholders |
|
$ |
(97.7 |
) |
|
$ |
(214.9 |
) |
|
$ |
(74.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss available to common shareholders |
|
$ |
(97.7 |
) |
|
$ |
(214.9 |
) |
|
$ |
(74.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares |
|
|
150.3 |
|
|
|
139.3 |
|
|
|
133.3 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares |
|
|
150.3 |
|
|
|
139.3 |
|
|
|
133.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per common share |
|
$ |
(0.65 |
) |
|
$ |
(1.54 |
) |
|
$ |
(0.56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per common share |
|
$ |
(0.65 |
) |
|
$ |
(1.54 |
) |
|
$ |
(0.56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Amounts may not recalculate due to rounding. |
33
Table 11
Non-GAAP Earnings Per Share Calculation*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
$ Millions, except per share amounts (unaudited) |
|
Sep 30 2023 |
|
|
Jun 30 2023 |
|
|
Sep 30 2022 |
|
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings on non-GAAP basis |
|
$ |
55.0 |
|
|
$ |
94.9 |
|
|
$ |
183.6 |
|
Deduct Series A preferred stock dividends |
|
|
|
|
|
|
(6.9 |
) |
|
|
(6.9 |
) |
Deduct Series B redeemable preferred dividends |
|
|
(30.2 |
) |
|
|
(29.8 |
) |
|
|
(28.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings available to common shareholders |
|
$ |
24.8 |
|
|
$ |
58.2 |
|
|
$ |
148.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
|
|
|
Add back interest on convertible notes |
|
$ |
|
|
|
$ |
|
|
|
$ |
0.4 |
|
Add back Series A preferred stock dividends |
|
|
|
|
|
|
|
|
|
|
6.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings available to common shareholders |
|
$ |
24.8 |
|
|
$ |
58.2 |
|
|
$ |
155.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares |
|
|
150.3 |
|
|
|
139.3 |
|
|
|
133.3 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock equivalents |
|
|
1.9 |
|
|
|
1.8 |
|
|
|
1.5 |
|
Convertible notes |
|
|
|
|
|
|
|
|
|
|
4.5 |
|
Series A Mandatory Convertible Preferred Stock |
|
|
|
|
|
|
|
|
|
|
9.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares |
|
|
152.2 |
|
|
|
141.1 |
|
|
|
148.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share on non-GAAP
basis |
|
$ |
0.16 |
|
|
$ |
0.42 |
|
|
$ |
1.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share on non-GAAP
basis |
|
$ |
0.16 |
|
|
$ |
0.41 |
|
|
$ |
1.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Amounts may not recalculate due to rounding |
34
FORWARD-LOOKING STATEMENTS
The statements contained in this letter to shareholders include forward-looking statements relating to future events and expectations, including our
expectations (i) for our future financial and operational results (including expectations for further growth); (ii) regarding our competitive and strategic positioning; (iii) regarding outlook, visibility, key trends, and developments for
the second fiscal quarter of 2024, the 2024 fiscal year, and longer term; (iv) regarding growth and demand trends in the markets we serve including industrial, communications, electronics and instrumentation; (v) regarding artificial
intelligence and the growth of the datacom transceiver business; (vi) regarding our Synergy and Site Consolidate Plan; (vii) regarding our Restructuring Plan including, without limitation, projected savings, costs to achieve and
restructuring charges; and (viii) the silicon carbide transactions (theSIC Investment Transaction) and the benefits thereof, each of which, is based on certain assumptions and contingencies. The forward-looking statements are made
pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 and relate to the Companys performance on a going-forward basis. The forward-looking statements contained herein involve risks and
uncertainties, which could cause actual results, performance, or trends to differ materially from those expressed in the forward-looking statements herein or in previous disclosures.
The Company believes that all forward-looking statements made by it herein have a reasonable basis, but there can be no assurance that managements
expectations, beliefs, or projections as expressed in the forward-looking statements will actually occur or prove to be correct. In addition to general industry and global economic conditions, factors that could cause actual results to differ
materially from those discussed in the forward-looking statements herein include but are not limited to: (i) the failure of any one or more of the assumptions stated herein to prove to be correct; (ii) the risks relating to forward-looking
statements and other Risk Factors discussed in (x) the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023 related to the SIC Investment
Transaction and (y) the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2022, and additional risk factors that may be identified from time to time in filings of the
Company; (iii) the substantial indebtedness the Company incurred in connection with its acquisition of Coherent, Inc. (the Transaction), the need to generate sufficient cash flows to service and repay such debt, and the
Companys ability to generate sufficient funds to meet its anticipated debt reduction goals; (iv) the possibility that the Company may not be able to continue its integration progress and/or take other restructuring actions, or otherwise
be able to achieve expected synergies, operating efficiencies including greater scale, focus, resiliency, and lower operating costs, and other benefits within the expected time frames or at all and ultimately to successfully fully integrate the
operations of Coherent, Inc. (Coherent) with those of the Company; (v) the possibility that such integration and/or the restructuring actions may be more difficult, time-consuming, or costly than expected or that operating costs and
business disruption (including, without limitation, disruptions in relationships with employees, customers, or suppliers) may be greater than expected in connection with the Transaction and/or the restructuring actions; (vi) any unexpected
costs, charges, or expenses resulting from the Transaction and/or the restructuring actions; (vii) the risk that disruption from the Transaction and/or the restructuring actions materially and adversely affects the respective businesses and
operations of the Company and Coherent; (viii) potential adverse reactions or changes to business relationships resulting from the completion of the Transaction and/or the restructuring actions; (ix) the ability of the Company to retain
and hire key employees; (x) the purchasing patterns of customers and end users; (xi) the timely release of new products and acceptance of
35
such new products by the market; (xii) the introduction of new products by competitors and other competitive responses; (xiii) the Companys ability to assimilate other recently
acquired businesses, and realize synergies, cost savings, and opportunities for growth in connection therewith, together with the risks, costs, and uncertainties associated with such acquisitions; (xiv) the Companys ability to devise and
execute strategies to respond to market conditions; (xv) the risks to realizing the benefits of investments in R&D and commercialization of innovations; (xvi) the risks that the Companys stock price will not trade in line with
industrial technology leaders; and/or (xvii) the risks of business and economic disruption related to worldwide health epidemics or outbreaks that may arise. The Company disclaims any obligation to update information contained in these
forward-looking statements, whether as a result of new information, future events or developments, or otherwise.
36
November 2023 Investor Presentation
Exhibit 99.3
Forward-Looking Statements This
presentation contains forward-looking statements relating to future events and expectations, including our expectations (i) for our future financial and operational results (including expectations for future growth); (ii) regarding capital
expenditures and the results of investments in research and design; (iii) regarding electricity consumption from renewable sources; (iv) regarding growth in the markets we serve including industrial, communications, electronics, and instrumentation;
(v) regarding artificial intelligence and the growth in the datacom transceiver global market and opportunity by laser type; (vi) regarding silicon carbide including, without limitation, our ability to demonstrate the world’s first 300mm
silicon carbide wafer, our ability to continue accelerating time-to-market, our capacity to expand; the silicon carbide investment transaction (the “SIC Investment Transaction”) and the benefits thereof; (vii) regarding the acquisition
of Coherent, Inc. including, without limitation, market trends for display manufacturing, our ability to leverage our industrial service model in other markets and value creation potential from cost synergies; (viii) regarding our capitalization for
future growth; and (ix) regarding floating rate debt exposure reduction, each of which, is based on certain assumptions and contingencies. The forward-looking statements are made pursuant to the safe harbor provisions of the U.S. Private Securities
Litigation Reform Act of 1995 and relate to the Company’s performance on a going-forward basis. The forward-looking statements in this investor presentation involve risks and uncertainties, which could cause actual results, performance or
trends to differ materially from those expressed in the forward-looking statements herein or in previous disclosures. The Company believes that all forward-looking statements made by it in this presentation have a reasonable basis, but there can be
no assurance that management’s expectations, beliefs, or projections as expressed in the forward-looking statements will actually occur or prove to be correct. In addition to general industry and global economic conditions, factors that could
cause actual results to differ materially from those discussed in the forward-looking statements in this presentation include but are not limited to: (i) the failure of any one or more of the assumptions stated herein to prove to be correct; (ii)
the risks relating to forward-looking statements and other “Risk Factors” discussed in (x) the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023 related to the SIC Investment Transaction and
(y) in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023 and additional risk factors that may be identified from time to time in filings of the Company; (iii) the substantial indebtedness the Company incurred in
connection with its acquisition of Coherent, Inc. (the “Transaction”), the need to generate sufficient cash flows to service and repay such debt and the Company’s ability to generate sufficient funds to meet its anticipated debt
reduction goals; (iv) the possibility that the Company may not be able to continue its integration progress on and/or take other restructuring actions, or otherwise be able to achieve expected synergies, operating efficiencies, including greater
scale, focus, resiliency, and lower operating costs, and other benefits within the expected time-frames or at all and ultimately to successfully fully integrate the operations of Coherent, Inc. (“Coherent”) with those of the Company; (v)
the possibility that such integration and/or the restructuring actions may be more difficult, time-consuming or costly than expected or that operating costs and business disruption (including, without limitation, disruptions in relationships with
employees, customers or suppliers) may be greater than expected in connection with the Transaction and/or the restructuring actions; (vi) any unexpected costs, charges or expenses resulting from the Transaction and/or the restructuring actions;
(vii) the risk that disruption from the Transaction and/or the restructuring actions materially and adversely affects the respective businesses and operations of the Company and Coherent; (viii) potential adverse reactions or changes to business
relationships resulting from the completion of the Transaction and/or the restructuring actions; (ix) the ability of the Company to retain and hire key employees; (x) the purchasing patterns of customers and end users; (xi) the timely release of new
products, and acceptance of such new products by the market; (xii) the introduction of new products by competitors and other competitive responses; (xiii) the Company’s ability to assimilate other recently acquired businesses, and realize
synergies, cost savings, and opportunities for growth in connection therewith, together with the risks, costs, and uncertainties associated with such acquisitions; (xiv) the Company’s ability to devise and execute strategies to respond to
market conditions; (xv) the risks to realizing the benefits of investments in R&D and commercialization of innovations; (xvi) the risks that the Company’s stock price will not trade in line with industrial technology leaders; (xvii) the
risks of business and economic disruption related to worldwide health epidemics or outbreaks that may arise and/or (xviii) the risk that the investments by DENSO and Mitsubishi in our Silicon Carbide business are not completed. The Company disclaims
any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events or developments, or otherwise. Unless otherwise indicated in this presentation, all information in this
presentation is as of November 6, 2023. This presentation contains non-GAAP financial measures and key metrics relating to the Company’s past performance. These non-GAAP financial measures are in addition to, and not as a substitute for or
superior to, measures of financial performance prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. For example, other companies may
calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. As required by Regulation G, we have
provided reconciliations of those measures to the most directly comparable GAAP measures in the section captioned “GAAP to NON-GAAP RECONCILIATION.”
Patents (1) COHERENT at a Glance From
a Foundation of Materials and Imagination, We Enable Exciting Megatrends 1971 Year Founded COHR NYSE 126 Locations 3,000+ 26,000+ Employees (1) FY23 Revenue $5.2 B 24 Countries VERTICAL INTEGRATION Materials, Components, Subsystems, Systems and
Service 2,400+ Research & Development (1) Available Market (1) $64 B As of June 20, 2023
Building Momentum for 50 Years One of
the largest photonics and compound semiconductor companies Materials expertise drives differentiation in multiple growing markets Vertically integrated, diverse global manufacturing footprint History of insightful targeting and successful
integration of strategic acquisitions Experienced management team with a successful track record Strong execution and resilient growth
Half a billion dollars in annual
R&D Investment Combined R&D and capex spend expected to be highest in industry and to accelerate breakthroughs, time-to-market and time-to-scale advantages Increased scale improves competitiveness and drives more strategic dialogue with
customers Will enable better alignment of organic and inorganic investments to market demand Drives profitability and targeted returns “We are mainly constrained by the quality of our materials and the limits of our imaginations.” Dr.
Carl J. Johnson Co-founder and first CEO of the Company
Figures prior to FY2019 do not reflect
the adoption of ASC 606. Prepared in accordance to ASC 805. Includes the revenue of Finisar in Q1FY20 prior to the acquisition date of 9/24/20. Not calculated in accordance with Article 11 of SEC regulation S-X. Insightful Targeting and Integration
of Strategic Acquisitions Revenue(1) ($B) CAGR 25% 10 Years of Continuous Revenue Growth 2022 - Laser sources & systems 2019 - Indium phosphide technology platform 2016 - Epitaxial wafer and SiC electronic devices 2013 - Gallium arsenide
technology platform 2010 - Optical networks & China market 5 Transformative Acquisitions
Environmental, social, and governance
(ESG) IS A PRIORITY PRODUCTS AND TECHNOLOGY Investing to help the world reduce energy use and transition to cleaner energy solutions, including: Silicon Carbide for power electronics Battery manufacturing for e-mobility and energy storage at scale
Advanced materials for battery production and recycling MANAGED TO ESG STANDARDS Committed to comply with the Responsible Business Alliance Code of Conduct Over two dozen ESG related policies updated and standardized globally BOARD OVERSIGHT 13 of
14 (93%) of Board members are independent All of our Board committees are independent 10 of 14 (71%) of Board members joined within past 5 years 4 of 14 (29%) are female 8 of 14 (57%) of Board members are female and/or ethnically diverse CARBON
FOOTPRINT REDUCTION >50% of all energy requirements worldwide are procured from renewable sources 100% renewable electricity for all sites in Europe Numerous energy efficiency projects completed, saving over 26 million kWh of energy per year
SUSTAINABLE. ENGAGED EMPLOYEES Expanded our diversity, equity, and inclusion efforts Streamlined talent management processes to improve the experience for both managers and employees Multiple philanthropic projects in communities where Coherent
operates around the globe PRINCIPLED. INNOVATIVE. INCLUSIVE.
$5.2 Billion of Revenue in FY23 Well
diversified across technology, Products, and Geographic Markets Revenue by region is based on customer headquarter addresses. Amounts may not recalculate due to rounding. Industrial Communications Electronics Instrumentation North America Europe
China Other Materials Lasers Networking Korea & Japan
Three REPORTING Segments MATERIALS
NETWORKING LASERS
Four Attractive Growth MARKETS
Aggregate $64B TAM 14% Five-Year CAGR (2023-28) INDUSTRIAL COMMUNICATIONS ELECTRONICS INSTRUMENTATION TAM: $22B CAGR: 9% TAM: $23B CAGR: 14% TAM: $14B CAGR: 20% TAM: $5B CAGR: 8% Note: TAM based on CY2023 Sources: LightCounting, Omdia, Cignal AI,
Yole, Dell’Oro Internal Estimates Sources: Optech Consulting, TechInsight, Strategies Unlimited, SEMI, Internal Estimates, DSCC Sources: Strategies Unlimited, Markets & Markets, SDI (Strategic Directions), Internal Estimates Sources: IDC,
Morgan Stanley, Research & Markets, Forbes, Yole, Strategy Analytics, IdTechEx, Internal Estimates
Industrial Precision manufacturing
Giga factories for EV battery processing Advanced medical devices Additive manufacturing Semiconductor & display capital equipment Increasing laser content from ingot to packaged ICs OLED for mobile and micro-LED for high-end TV and large
displays Aerospace and Defense PRODUCTS Fiber lasers for laser welding of batteries UV lasers for OLED manufacturing Laser systems, subsystems, and processing heads Laser components, optics, crystals Ceramics, metal matrix composites, and diamond
VALUE PROPOSITION 50 years of experience in laser technology Long term technology partner across all laser architectures Broadest spectrum of laser and systems technologies One stop shop for processing equipment Productivity enhancement through
innovation and knowhow MARKET VERTICALS AND MEGATRENDS
Communications Datacom Increasing
spend on cloud infrastructure Artificial Intelligence/Machine Learning Telecom Open disaggregated systems Pluggable coherent transceivers 100 to 800 Gbps datacom transceivers Pluggable coherent transceivers Wavelength selective switches (WSS)
Pluggable optical line subsystems (POLS) Terrestrial and submarine pump lasers InP edge emitting lasers and GaAs VCSELs Largest supplier of optical communications components Vertically integrated from material through subsystems, including coherent
DSPs Industry pioneer in broad range of technology platforms Industry leading investments in R&D Global and flexible manufacturing footprint PRODUCTS VALUE PROPOSITION MARKET VERTICALS AND MEGATRENDS
Electronics Consumer electronics
Advanced sensing AR/VR Wearables as health monitors Automotive Increasing SiC electronics content in EVs Automotive sensing: in-cabin and LiDAR GaAs and InP optoelectronics VCSELs and edge emitting lasers Laser illumination modules Wafer level
optics and subassemblies Waveguide materials, diffractive optics Silicon carbide substrates and epiwafers SiC MOSFET devices and modules Broadest portfolio of optoelectronics, optics, and electronics High-volume consumer electronics experience
Differentiated, proprietary compound semiconductor platforms 150 mm gallium arsenide platform 200 mm silicon carbide platform Leading indium phosphide platform Decades of investment in high quality silicon carbide substrates Cross-functional
engineering and integration expertise PRODUCTS VALUE PROPOSITION MARKET VERTICALS AND MEGATRENDS
instrumentation Materials, optics,
lasers, and thermoelectrics Components to subassemblies and subsystems Optical, mechanical, electrical and software integration ISO 9001 & 13485 Life sciences (biotechnology, medical, and environmental) and scientific segment solutions
Custom solutions from proof-of-concept to manufacturing at scale Rapid time to market of complete turnkey subassemblies and systems Broadest product portfolio to support a wide range of applications Extensive technology innovation for
next-generation capabilities Global manufacturing footprint and flexible supply chain partners Life Sciences Smart healthcare evolution, largely based on technology Point-of-care diagnostics Personalized medicine Scientific Instrumentation
Environmental sustainability Advanced instrumentation PRODUCTS VALUE PROPOSITION MARKET VERTICALS AND MEGATRENDS
Artificial Intelligence Driving
growth in the cloud and beyond
DATACOM Transceiver Global Market
$M Source: LightCounting, Internal Estimates 200G and higher data-rate transceivers >65% of our revenue $1.3 billion in sales in datacom in FY23 800G and higher data-rate transceivers > 50% of the total available market by 2027
Datacom transceiver opportunity by
laser type CY23 Total $5.1 B CY28 Total $11.4 B Datacom Transceivers for AI growing at a 44% CAGR (‘23 – 28) Source: LightCounting, Internal Estimates
Silicon Carbide Electrification of
transportation Sustainability of the planet
Power Electronics for Green and
clean Energy ELECTRIC VEHICLES SOLAR & WIND ENERGY SMART GRID POWER SWITCHING
SiC Modules SiC Devices SiC Chips
SiC Epiwafers SiC Substrates Accelerating Time-to-Market II-VI and GE Technology II-VI and GE Technology II-VI and GE Technology II-VI (3DSiC®) II-VI JUNE 2020 - Licensed technology from GE to manufacture silicon carbide devices and
modules for power electronics. APRIL 2021 - Expanded SiC wafer finishing manufacturing footprint in China. FEBRUARY 2022 - Qualified 1200 V SiC MOSFET and expanded relationship with GE. Vertical Integration
Business Overview Leading global
supplier of silicon carbide (SiC) substrates for power device and radio frequency end market applications Large addressable market estimated to grow from $3 billion in 2022 to $21 billion in 2030 (28% CAGR) Two decades of innovation in SiC materials
Proprietary, in-house designed and built growth furnaces, control hardware and software Industry’s first 200 mm substrate, with volume manufacturing scheduled for 2024 Vertical integration strategy from substrates to modules Key technologies
and development of SiC MOSFETs Global footprint with capacity to expand 8 sites across 3 continents to support global customers State-of-the-art 300,000 sq ft growth facility in Easton, PA with capacity to reach 1 million+ (150 mm equiv.) annual
wafers Silicon Carbide Business Overview FY24 Key Stats Global Footprint Substrate Epitaxial Wafer Ion Implantation ~$300M Revenue >50% Growth Profitable 625 Employees
Silicon Carbide Investment
Transaction To Separate Silicon Carbide Business With Market-leading Partners 75% 12.5% 12.5% Pro Forma Ownership Leader in materials, networking and laser technologies Pioneer in silicon carbide power devices; leading capabilities in high-voltage
industrial and transportation Global Tier-1 automotive supplier; leading capabilities in electrification and power semiconductors Silicon Carbide Business
SILICON CARBIDE Investment
Transaction details Transaction Structure Coherent to separate and contribute SiC business (the “Business”) to newly-formed subsidiary Denso and Mitsubishi Electric to each invest $500 million into new subsidiary in exchange for combined
25% non-controlling interest in the Business (no proceeds to Coherent) Coherent to retain 75% controlling interest in the Business at closing Total Investment $1.0 billion Investment to fund future capital expansion and operations of the Silicon
Carbide business Valuation $3.0 billion pre-money valuation for the Silicon Carbide Business; represents ~10x FY24E revenues Governance and Business Leadership Coherent entitled to appoint 100% of Board of the Business The Business will continue to
operate under the Coherent brand with current leadership team Long-term Supply Agreements Concurrently with closing, the Business to enter into long-term supply agreements with Denso and Mitsubishi Electric that support the expansion of its 150 mm
and 200 mm substrate and epitaxial wafer shipments Expected Closing Timeline Expected to close by March 31, 2024, subject to regulatory approvals and satisfaction of other closing conditions
Strategic Benefits of the Silicon
Carbide Investment Transaction Silicon Carbide Business $1.0 billion capital to fund and accelerate growth plans Long-term supply agreements with market-leading partners to support expansion of wafer shipments Deepen strategic partnership with Denso
and Mitsubishi Electric with leadership in end markets Coherent Values Coherent interest in Silicon Carbide business at $3.0 billion Recognizes value of unique material technologies and investments to date Represents ~10x FY2024E revenue New
investment to fund capital and operations of Silicon Carbide business Provides greater financial and operating flexibility for Coherent by freeing up capital Coherent had planned for Silicon Carbide business Retains 75% ownership in the Business
with continued operating and governance controls Expanded growth prospects of pro forma entity
Financial Highlights
FY24 Q1 Highlights REVENUE $1.053
billion, slightly above the midpoint of our $1.0 – 1.1 billion guidance. Non-GAAP EPS $0.16, above the midpoint of our $0.05 - $0.20 guidance. Excluding an extraordinary $0.03 benefit from a lower than expected tax rate and an adverse $0.01
impact from foreign exchange, Non-GAAP EPS would still have been $0.14. OPERATING CASH FLOW $199 million, compared to $80 million in the year-ago quarter and $182 million in the preceding quarter. DEBT REDUCTION We paid down $19 million of our
outstanding debt. VISIBILITY Macroeconomic uncertainty continues to impact our near-term growth and visibility; however, we expect sequential improvement in revenue growth throughout the remainder of fiscal 2024. AI/ML In the wake of the initial
surge we saw at the end of our fourth quarter of fiscal 2023, we have seen strong follow-on orders for our AI/ML-related Datacom transceivers which has driven a significant increase in our backlog for 800G Datacom transceivers. As required by
Regulation G, we have provided reconciliations of those measures to the most directly comparable GAAP measures in the section captioned “GAAP to NON-GAAP RECONCILIATION.”
Financial Highlights As required by
Regulation G, we have provided reconciliations of those measures to the most directly comparable GAAP measures in the section captioned “GAAP to NON-GAAP RECONCILIATION.”
Operating Metrics
All non-GAAP amounts exclude
certain adjustments for share-based compensation, acquired intangible amortization expense, certain one-time transaction expenses, debt extinguishment expense, fair value measurement period adjustments and restructuring and related items. As
required by Regulation G, we have provided reconciliations of those measures to the most directly comparable GAAP measures in the section captioned “GAAP to NON-GAAP RECONCILIATION.” Lower Q1 FY24 primarily driven by lower revenue and
short term capacity underutilization Transitory interruption of longer-term expansion trend Revenue and Non-GAAP Margin(1) Trends
Margin Structure Current downtrend
Ongoing weak end market demand due to macroeconomic conditions has played a significant role in our current margin downtrend. Non-GAAP Gross and Operating Margin Targets Second Quarter Fiscal 2024: 35 – 37% and 13 – 15% Full Year Fiscal
2024: 36 – 38% and 14 – 16% By the end of the first-half of fiscal 2026: 40% and 20% Longer-Term: Low-40s and low-20s As required by Regulation G, we have provided reconciliations of those measures to the most directly comparable GAAP
measures in the section captioned “GAAP to NON-GAAP RECONCILIATION.”
Revenue by SEGMENT FY24 Q1
Materials Networking Lasers Amounts may not recalculate due to rounding.
Backlog by SEGMENT FY24 Q1
Materials Networking Lasers Amounts may not recalculate due to rounding.
Revenue by MARKET Industrial
Communications Electronics Instrumentation FY24 Q1 Amounts may not recalculate due to rounding.
Revenue by Region North America
Europe Japan & Korea China Other FY24 Q1 Amounts may not recalculate due to rounding.
FY24 Q2 Outlook Revenue $1.075
– 1.175 billion Non-GAAP Gross Margin 35 – 37% Non-GAAP Operating Expenses $238 – 252 million Non-GAAP Operating Margin 13 – 15% Non-GAAP Adjusted EBITDA 19 – 21% Interest Expense $73 – 77 million Non-GAAP Tax
Rate 20 – 23% Series B Preferred P.I.K. Dividend Approximately $30 million Non-GAAP Earnings Per Share $0.14 – 0.32(1) Share Count 153 million for the entire guidance range Capital Expenditures $95 – 125 million Pretax amounts of
Non-GAAP adjustments Stock compensation $35 – 43 million Amortization Approximately $72 million Restructuring, synergies, and consolidation expenses $45 – 55 million (1) The Company does not provide reconciliations of forward-looking
Non-GAAP EPS. The Company is unable, without unreasonable efforts, to forecast certain items required to develop a meaningful GAAP financial measure that is comparable to this forward-looking figure.
FY24 Full Year Outlook Revenue $4.5
– 4.7 billion Non-GAAP Gross Margin 36 – 38% Non-GAAP Operating Expenses $995 million – 1.025 billion Non-GAAP Operating Margin 14 – 16% Non-GAAP Adjusted EBITDA 20 – 22% Interest Expense $284 – 294 million
Non-GAAP Tax Rate 18 – 20% Series B Preferred P.I.K. Dividend Approximately $123 million Non-GAAP Earnings Per Share $1.00 - 1.50 (1) Share Count 153 million for the entire guidance range Capital Expenditures $350 – 400 million Pretax
amounts of Non-GAAP adjustments Stock compensation $140 – 158 million Amortization Approximately $290 million Restructuring, synergies, and consolidation expenses $165 – 185 million (1) The Company does not provide reconciliations of
forward-looking Non-GAAP EPS. The Company is unable, without unreasonable efforts, to forecast certain items required to develop a meaningful GAAP financial measure that is comparable to this forward-looking figure.
Gaap to Non-Gaap Reconciliation
Gross Profit Reconciliation
Operating Expense Reconciliation
Income from Operations
Reconciliation
Net Earnings Reconciliation
NET Earnings per Common Share
EBIDTA AND ADJUSTED EBITDA
RECONCILIATION
Reconciliation of GAAP Measures to
Non-GAAP Measures
Financial Appendix
Well Capitalized for Future Growth
(1) External Financing Sources Debt $3.4B secured term loans $990M high yield bonds $346M revolver availability Convertible Preferred Equity $2.15B series B investment from Bain Capital Coupon: 5%, 4-year payable-in-kind, cash pay option thereafter
Conversion price of $85.00 per share Leverage Total Debt $4.38 billion2.9x(1) Cash $0.94 billion Net Debt $3.44 billion2.3x(1) PF Combined TTM Adj EBITDA(1) $1,494 million (incl. $143M synergies +$263M additional cost savings) Reflects, as of
9/30/2023, using pro forma TTM combined adj EBITDA at 9/30/23, including $406 million of future expected cost savings within 36 months. Not calculated in accordance with Article 11 of SEC regulation S-X. Balances assuming all securities are dilutive
as of 9/30/23. Not calculated in accordance with Article 11 of SEC regulation S-X. Fully-Diluted Shares Outstanding (2) COHR basic shares 152M Series B preferred 27M Pro forma FDSO 179M
Debt exposed to Floating Rates
Decreases during FY24 Debt exposed to floating rates makes up 43% of capital structure by June 30, 2024 58% 47% 43% 1.92% Interest Rate Cap 1.42% Interest Rate Swap 5.0% High Yield Bonds
Significant Cost Reductions from
Restructuring Announced on May 10, 2023 Current Outlook Previous Outlook Cumulative savings for the period of FY23 to FY25 $200 – 300M $200 – 300M Annual savings by FY25 $110 – 140M $100 – 125M Cost to achieve savings $175
– 200M $150 – 200M
End Markets and Market Verticals
END MARKETS MARKET VERTICALS INDUSTRIAL Precision Manufacturing Semiconductor Capital Equipment Display Capital Equipment Aerospace & Defense COMMUNICATIONS Datacom Telecom ELECTRONICS Consumer Electronics Automotive INSTRUMENTATION Life
Sciences Scientific Instrumentation
Segment Revenue by End Markets for
FULL YEAR FY23 End Market Distribution of Full Year FY23 Reported Segments FY22 Revenue(1) FY23 Revenue FY23/ FY22 Revenue Growth FY23 Op Margin – GAAP / Non-GAAP Industrial Communications Electronics Instrumentation Materials Segment $1,119M
$1,350M 21% 12% / 26% 45% 5% 46% 4% Networking Segment $2,198M $2,341M 7% 10% / 17% 3% 95% 0% 2% Lasers Segment $1,521M(2) $1,469M (3)% (29%) / 15% 74% 0% 0% 26% Proforma Combined $4,838M(1) $5,160M 7% (1%) / 19% 34% 44% 13% 9% Proforma non-GAAP
revenue combines II-VI FY22 and Coherent 12 months ending 6/30/22. Not calculated in accordance with Article 11 of SEC regulation S-X. Coherent revenue 12 months ending 6/30/22.
Segment Revenue by End Markets for
Q1FY24 QTD End Market Distribution of Q1FY24 QTD Revenue Reported Segments Q1FY23 Revenue(1) Q1FY24 Revenue Q1FY24/ Q1FY23 Revenue Growth Q1FY24 Op Margin – GAAP / Non-GAAP Industrial Communications Electronics Instrumentation Materials
Segment $356M $245M (31)% 3% / 17% 54% 5% 36% 4% Networking Segment $597M $473M (21)% 3% / 11% 3% 94% 0% 2% Lasers Segment $392M $336M (14)% (13)% / 12% 76% 0% 0% 24% Consolidated $1,345M $1,053M (22%) (2%) / 13% 38% 44% 9% 9% Amounts may not
recalculate due to rounding.
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