Coherent Corp. · NYSE:COHR
Coherent — II-VI — Investor Presentation (May 2021)
44 slides from Coherent's investor presentation, May 14, 2021
Slide 1: May 2021 Investor Presentation
May 2021 Investor Presentation Exhibit 99.1
Slide 2: Forward-looking Statements
Forward-looking Statements This presentation contains forward-looking statements relating to future events and expectations that are based on certain assumptions and contingencies. The forward-looking statements are made pursuant to the safe harbor provisions of the U.S. Private Securities Litigatio
Slide 3: Company Overview
Company Overview
Slide 4: II-VI at a Glance
II-VI at a Glance As of 6/30/2020 FY20 Revenue(1) $2.6B Cash & Equivalents $493M FY20 Free Cash Flow(2) $160M Vertically Integrated Model “TWO SIX” Refers to groups II and VI of the Periodic Table of Elements 18 Countries 75 Locations 22,000+ Employees Core Competency Engineered Materials 1971 Year
Slide 5: Megatrends
Megatrends A world transformed through innovative materials vital to a better life today and the sustainability of future generations Adoption of 3D Sensing Increased Data and Video Consumption Deployment of 5G Wireless Growth in Electric & Autonomous Vehicles Intelligent Mobile Electric Proliferati
Slide 6: A Leader in engineered materials and optoelectronic devices
Diversified per Platform Capital Intensive Markets A Leader in engineered materials and optoelectronic devices Differentiated lasers, optics, and integrated circuits Enabling the convergence of communications, computing, and sensing Infrastructure Core Competency Innovation Strategy Engineered Mater
Slide 7: History of Insightful Targeting and Successful Integration of Strategic Acquisitions
10 Years of continuous revenue growth(1) 4 Transformative Acquisitions Optical Network & China Market InP Technology Platform Epitaxial Wafer and SiC Electronic Device Platform GaAs Technology Platform 2010 2013 2016 2019 History of Insightful Targeting and Successful Integration of Strategic Acquis
Slide 8: Thousands of Market Leading Customers Across Diverse Markets
Sampling of representative customers based on approvals for public release Thousands of Market Leading Customers Across Diverse Markets
Slide 9: Q3 FY21 Overview
Communications Industrial Q3 FY21 Overview EL: Estimated – Low end of range EH: Estimated – High end of range Revenue by Quarter ($M) Revenue by End Market 4% Semiconductor Capital Equipment 3% Life Sciences 7% Aerospace & Defense 9% Consumer Electronics Japan Other North America Europe China Q3 FY2
Slide 10: Rapid Revenue Growth at Scale
Rapid Revenue Growth at Scale Strong Revenue Growth(1) (Pre-Finisar Acquisition) Q3FY21 Increased Efficiencies 11% 18% 19% 18% Note: Dollars in millions. Figures prior to FY2019 do not reflect the adoption of ASC 606. Prepared in accordance to ASC 805. Pro Forma includes the revenue of Finisar in Q1
Slide 11: Addressing Multiple and Strong Growing Markets
Addressing Multiple and Strong Growing Markets Aerospace & Defense RF and Power Electronics Optical Communications 3D Sensing & LiDAR $7.5B CY25 Market For 3D sensing in consumer electronics & LiDAR in automotive For terrestrial, undersea, wireless optical infrastructure and datacenters 14% CY20-25
Slide 12: Enabling Mobility & Electrification
Remote Radio Head Beam-forming Antenna 5G WIRELESS 4G WIRELESS Bi-Directional Converter/ Inverter/ Electric Motor DC-DC Converter Electric Charger / HV Battery EV/HEV GREEN ENERGY Solar & Wind Energy Smart Grid Power Switching Enabling Mobility & Electrification Ramping silicon carbide substrate cap
Slide 13: Advantages of Large Diameter Substrates
Advantages of Large Diameter Substrates Large diameter substrate fabrication cost (per unit area) is reduced significantly Large diameter wafer availability has helped move SiC-based devices from niche to mainstream Existing 200 mm silicon wafer fab lines can be used for SiC devices manufacturing 2’
Slide 14: New Ventures & Wide-Bandgap Electronics Technology
New Ventures & Wide-Bandgap Electronics Technology SiC Modules GE Technology SiC Epiwafers Ascatron SiC Chips GE Technology Ascatron INNOViON SiC Devices GE Technology Ascatron Vertical Integration SiC Substrates Legacy II-VI Significant SiC Market Opportunity(1) ($bn) 50%+ CAGR (1) Internal company
Slide 15: Growth Opportunities in 5G Mobile Infrastructure
5G RADIO ACCESS 5G OPTICAL ACCESS Backbone Network Front- & Backhaul Network Base Stations Handsets Photonic Solutions Segment Compound Semiconductors Segments GaAs RF GaN/SiC RF Line Cards Amplifiers OCM/OTDR LPC WSS Subsystems Bidi DWDM TRx 100G BH TRx 25G FH TRx HPC WSS Coherent TRx DWDM Filters
Slide 16: Indium Phosphide Devices: Upside to TAM and Gross Margins
Datacom Components Telecom Components 25G and 50G DFB Lasers 50G and 100G EML Lasers for Silicon Photonics Externally Modulated Laser (EML) Externally Modulated Tunable Laser 10G and 25G Tunable Lasers InP IQ Modulators Dual High-Speed Coherent Detectors Leveraging our existing sales channels in the
Slide 17: 3D Sensing & LiDAR
Market drivers Face biometrics, auto-focus, augmented reality, automotive in-cabin & LiDAR, machine vision GaAs compound semiconductors technology platform on 6-inch Warren, NJ: Shipped hundreds of millions of 3D sensing VSCEL arrays since 2017 Sherman, TX: Shipping 3D Sensing VCSEL arrays in high v
Slide 18: Lasers for Materials Processing & EUV
Lasers for Materials Processing & EUV Strong demand for laser processing heads and EUV lithography ELECTRIC VEHICLE BATTERY MANUFACTURING Remote laser welding heads assisted by machine vision software AUTOMATION Laser processes adapted to most joining tasks on the cell, module, pack, and frame level
Slide 19: Aerospace & Defense: Significant new opportunities ahead
Significant new opportunities ahead with strong channels to the market STRONG ABILITY TO DIFFERENTIATE THE END SOLUTION Advanced Materials Semiconductor Lasers Electro-Optic Subsystems MARKETS PRODUCTS DIFFERENTIATORS Intelligence Surveillance & Reconnaissance IR sensors Windows and lenses Sapphire
Slide 20: Life Sciences and Healthcare
Life Sciences and Healthcare Gene Sequencing and Testing Optical Coherence Tomography Next Generation Biosensors Photonics plays an important role in Polymerase Chain Reaction (PCR) Instruments that can determine the outcome of patient testing for COVID-19.
Slide 21: COVID-19 Has Accelerated II-VI's Secular Tailwinds
COVID-19 Has Accelerated II-VI’s Secular Tailwinds Driving Increasing Demand for Connectivity and High-Performance Infrastructure Video Conferencing Life Sciences / Diagnostics Content Streaming 5G Smart Power Energy Efficiency Work-From-Home II-VI is enabling the convergence of communications, comp
Slide 22: Financial Overview
Financial Overview
Slide 23: Attractive and Increasing Gross and Operating Margins
Attractive and Increasing Gross and Operating Margins 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 restructuri
Slide 24: Significant Value Creation Potential from Finisar Synergies
Significant Value Creation Potential from Finisar Synergies Annual Run Rate* Synergies on 3/31/2021 Original Est. Synergies Within 36 Months Current Est. Synergies Within 36 Months Cost of Goods Sold Supply chain management - Procurement Infeed - Internal supply of enabling materials and components
Slide 25: Key Takeaways
Key Takeaways One of the Largest Photonics and Compound Semiconductor Companies 1 Materials Expertise Drives Differentiation in Multiple Growing Markets 2 Vertically Integrated, Diverse Global Manufacturing Footprint 3 History of Insightful Targeting and Successful Integration of Strategic Acquisiti
Slide 26: II-VI to Acquire Coherent
II-VI to Acquire Coherent
Slide 27: Coherent Transaction Overview
Coherent Transaction Overview Transaction Details Coherent stockholders to receive $220.00 per share in cash and 0.91 of a II-VI common share for each Coherent share At closing, Coherent stockholders to own approximately 15% of the common shares of combined company Projected Synergies & Financial Im
Slide 28: Significant Value Creation Potential from Coherent Synergies
Significant Value Creation Potential from Coherent Synergies Expected Synergies within 3 years Cost of Goods Sold Supply chain management – procurement Infeed – Internal supply of enabling materials and components Global supply chain function savings $150M Operating Expenses More efficient R&D with
Slide 29: Well Capitalized for Future Growth
Well Capitalized for Future Growth Rapid deleveraging post-closing from strong EBITDA and cash flow generation External Financing Sources Debt $5.125 billion total commitment, including unfunded revolving credit facility Convertible Preferred Equity $1.8 billion commitment from Bain Capital Potentia
Slide 30: Summary of Strategic Rationale
Summary of Strategic Rationale Greater exposure to megatrends from larger operational scale Sustained growth from increased diversification Higher growth and margins through complementary technology platforms Improved competitiveness from greater scale across the value chain Sales synergies by utili
Slide 31: Appendix
Appendix
Slide 32: End Market Distribution of Q3FY21 QTD Revenue
End Market Distribution of Q3FY21 QTD Revenue Reported Segments Q3FY20 Revenue Q3FY21 Revenue Q3FY21 Op Margin – GAAP / Non-GAAP Q3FY21/ Q3FY20 Revenue Growth Industrial (Automotive) Communica-tions Aerospace & Defense Semi Cap Life Science, Consumer, Other Photonic Solutions $418M $508M 10% / 15% 2
Slide 33: End Market Distribution of Nine Months Ended March 31, 2021
End Market Distribution of 9 Month Ended March 31, 2021 Reported Segments 9M FY20 Revenue 9M FY21 Revenue 9M FY21 Op Margin – GAAP / Non-GAAP 9 MO FY21/ 9 MO FY20 Revenue Growth Pro Forma* Revenue Change FY21 9 MO/ FY20 9 MO Industrial (Automotive) Communica-tions Aerospace & Defense Semi Cap Life S
Slide 34: End Market Distribution of Full Year FY20 Revenue
End Market Distribution of Full Year FY20 Revenue Reported Segments FY20 Revenue FYY20 Op Margin – GAAP / Non-GAAP FY20/FY19 Revenue Growth Industrial (Automotive) Fiber Optic & Wireless Comm. Aerospace & Defense Semi Cap Life Science, Consumer, Other Photonic Solutions $1,537M 3% / 15% 141% 3% 94%
Slide 35: Hypothetical Illustration of EPS Calculation
Note: Dollars in millions. Q1 FY20 represents quarter ending October July 28, 2019. Summary: Hypothetical Illustration of EPS Calculation The following calculations are based on hypothetical amounts of GAAP net income and should not be construed as an estimate or expectation of the Company’s actual
Slide 36: Hypothetical Illustration of EPS Calculation at $47M GAAP Net Income
Hypothetical Illustration of EPS Calculation at $47M GAAP Net Income GAAP Non-GAAP Numerator Q4 QTD Q4 QTD Input Net earnings on a GAAP basis $47 $47 NI Level 47 Add back non-GAAP adjustments N/A 41.5 Net earnings on a GAAP basis N/A $88.5 Deduct Series A preferred stock dividends -6.9 -6.9 Deduct S
Slide 37: Hypothetical Illustration of EPS Calculation at $59M GAAP Net Income
Hypothetical Illustration of EPS Calculation at $59M GAAP Net Income
Slide 38: Hypothetical Illustration of EPS Calculation at $71M GAAP Net Income
Hypothetical Illustration of EPS Calculation at $71M GAAP Net Income GAAP Non-GAAP Numerator Q4 QTD Q4 QTD Input Net earnings on a GAAP basis $71 $71 NI Level 71 Add back non-GAAP adjustments N/A 41.5 Net earnings on a GAAP basis N/A $112.5 Deduct Series A preferred stock dividends -6.9 -6.9 Deduct
Slide 39: Hypothetical Illustration of EPS Calculation at $150M GAAP Net Income
Hypothetical Illustration of EPS Calculation at $150M GAAP Net Income
Slide 40: Reconciliation of GAAP Measures to Non-GAAP Measures
Note: Dollars in millions. Q1 FY20 represents quarter ending October July 28, 2019. Reconciliation of GAAP Measures to Non-GAAP Measures Three Months Ended 7/28/19 (Last Finisar Stand Alone Report)
Slide 41: Reconciliation of GAAP Measures to Non-GAAP Measures
Reconciliation of GAAP Measures to Non-GAAP Measures
Slide 42: Reconciliation of GAAP Measures to Non-GAAP Measures
Reconciliation of GAAP Measures to Non-GAAP Measures
Slide 43: Reconciliation of GAAP Measures to Non-GAAP Measures
Note: Dollars in millions. Reconciliation of GAAP Measures to Non-GAAP Measures
Slide 44: II-VI: Materials That Matter
IVI MATERIALS THAT MATTER