Coherent Corp. · NYSE:COHR
Coherent — II-VI — Investor Day (November 2017)
46 slides from Coherent's investor day presentation, Nov 8, 2017
Slide 1: Investor Day
INVESTOR DAY November 8th, 2017 IIVI 1
Slide 2: Agenda
Agenda INVESTOR DAY November 8th, 2017 Welcome Mark Lourie, Director of Corporate Communications Introduction Fran Kramer, Chairman of the Board Strategic Overview Dr. Chuck Mattera, President & Chief Executive Officer Innovation Dr. Giovanni Barbarossa, Chief Technology Officer and President, Laser
Slide 3: Safe Harbor Statement
Safe Harbor Statement Matters discussed in this presentation may contain forward-looking statements that are subject to risks and uncertainties. These risks and uncertainties could cause the forward-looking statements and II-VI Incorporated’s (the “Company’s”) actual results to differ materially. In
Slide 4: Introduction
INVESTOR DAY November 8th, 2017 Introduction Fran Kramer, Chairman of the Board 4
Slide 5: Origins of Our Company Name
Origins of Our Company Name Refers to groups II and VI of “TWO SIX” the Periodic Table of Elements. S Sulfur Zn Se Zinc Selenium Cd Te Cadmium Tellurium 5
Slide 6: Since 1971
Since 1971 INVESTOR DAY November 8th, 2017 1971 We Started In Saxonburg, PA 1987 2017 IPO 30th Anniversary since the IPO Saxonburg Pittsburgh Francis J. Kramer(Left) and Saxonburg Campus Dr. Carl J. Johnson(Right) in 1997 6
Slide 7: II-VI Worldwide Values
II-VI Worldwide Values Customers First Honesty and Integrity Open Worldwide Communications Values Teamwork Continuous Improvement A Safe, Clean, and Orderly and Learning Workplace Manage by the Facts 7
Slide 8: Strategic Overview
INVESTOR DAY November 8th, 2017 Strategic Overview Dr. Chuck Mattera, President & Chief Executive Officer 8
Slide 9: Our Company Structure
Our Company Structure Laser Solutions Photonics Performance Products 9
Slide 10: Vertically Integrated Manufacturing Platforms
Vertically Integrated Manufacturing Platforms Industrial Materials Processing Optical & Wireless Communications Advanced Materials & Military 3D Sensing & IoT Emerging Technologies 10
Slide 11: Our Footprint
Our Footprint North America Asia Europe 2,000+ 500+ 7,500+ World Headquarters Manufacturing and R&D Facilities 10,000+ 44 14 Global Sales Offices Worldwide employee Worldwide Locations Countries 11
Slide 12: Our Strategic House
Our Strategic House Q Business Results Quality Driven Exceptional Fully Engaged Fully Satisfied Manufacturing Customers Employees Stakeholders’ Demands Excellence Innovation Strategic Areas of Focus that Drive Long-Term Thinking and Actions Collective Outcomes Long-Term Focus 12
Slide 13: Over 4 Decades of Continuous Growth
Over 4 Decades of Continuous Growth Over Average Organic Revenue Growth 7% over the last 10 years $972 $1B* FY1987-FY2017Cumulative $827 $742 $683 Revenue $7.4B PAT $0.8B $551 Cash Flow from Ops $1.2B $516 $487 R&D $0.4B Cap Ex $0.6B $316 $333 $292 $224 $225 $187 $123 $128 $143 $114 $53 $61 $62 $74
Slide 14: Diversified Customer Base Across 7 End Markets
Diversified Customer Base Across 7 End Markets Serving Over 1000 Customers Communications Automotive Consumer Materials Military Electronics Processing Semiconductor Life Equipment Science *Sampling of representative customers based on approvals for public release 14
Slide 15: Megatrends
Megatrends Internet of Things Consumer Ubiquitous Electronics Connectivity Big Data Industry 4.0 Renewable Energy Next Generation Robotics Defense Low Emission Systems Vehicles 15
Slide 16: SiC Substrates for Wireless Communications
SiC Substrates for Wireless Communications Share of the Projected Annual $200 Billion Investment In 5G by Country Starting Around Year 2020 US 28% China 23% Japan 11% Germany 4% U.K. 3% SiC for High Frequency GaN Electronics Market Source: Bloomberg Business Week CAGR (‘17-’22): +15% Source: Yole 16
Slide 17: SiC Substrates for Power Electronics
SiC Substrates for Power Electronics Electric Car Announcements GM 20 all electric cars by 2023 Ford 13 models by 2023 Toyota & Mazda U.S.-based plant by 2021 Daimler /Mercedes-Benz Electrify entire portfolio by 2022 Renault/Nissan/Mitsubishi 12 All-Electric cars by 2022 Jaguar Land Rover Electrify
Slide 18: Laser & Micro-optics for 3D Sensing
Laser & Micro-optics for 3D Sensing VCSEL Market CAGR (’15-’22): +19% * VCSEL: Vertical Cavity Surface Emitting Lasers Source: Markets & Markets 18
Slide 19: Opto-Electronics for LiDAR
Opto-Electronics for LiDAR Self-driving car availability by car manufacturer Tesla 2017 Volvo 2020 GM 2018 Daimler 2020 Hyundai 2020 BMW 2021 Renault-Nissan 2020 Ford 2021 Toyota 2020 Honda 2025 Source: AXIOS Laser Diodes for LiDAR Market (’17-’22): +20% Source: Strategies Unlimited 19
Slide 20: Laser Optics & Precision Ceramics for EUV Lithography
Laser Optics & Precision Ceramics for Extreme Ultraviolet (EUV) Lithography Front/Back End Processing System EUV Source System Beam Transport System CO2 System EUV Lithography System EUV Lithography Systems Market CAGR (‘16-‘22): 9% Source: Allied Market Research 20
Slide 21: Differentiated Product Portfolio for Industrial Lasers
Differentiated Product Portfolio for Industrial Lasers Laser Remote Welding Head Direct Diode Laser Engine Fiber Lasers Direct diode Lasers Broad portfolio of components including: pump lasers, high power combiners, acousto-optic modulators, high power isolators, gratings and micro-optics. Fiber
Slide 22: Optics & Optoelectronics for Datacenters
Optics & Optoelectronics for Datacenters Z-Block Datacom Optical Components Market CAGR (’17-‘22): +25% 22
Slide 23: Leading Edge Subsystems for Intelligent Communications Networks
Leading Edge Subsystems for Intelligent Communications Networks Optical Amplifier Laser Chip-on-Carrier Assembly Thermoelectric Cooler Optics Passive Components OTDR Optical channel monitor Optical Communications Market CAGR (’15-’21): +12% Source: Ovum 23
Slide 24: Engineered Materials, High Energy Laser and Optics for Military & Aerospace
Engineered Materials, High Energy Laser and Optics for Military & Aerospace World leader in large sapphire panel output 24,000 sf dedicated facility Infrared Countermeasure Systems Market CAGR (’17-’22): +8% F-35 Electro-Optical Targeting System (EOTS) Source: Strategies Unlimited 24
Slide 25: Strategy for Growth by Acquisition
INVESTOR DAY November 8th, 2017 Strategy for Growth by Acquisition Dr. Chuck Mattera, President & Chief Executive Officer 25
Slide 26: Recent Platform Acquisitions
Recent Platform Acquisitions COMPOUND SEMICONDUCTOR DEVICES: AIMING BEYOND LASERS VERTICAL INTEGRATION & SCALE COMPOUND SEMICONDUCTOR LASERS OPTICAL COMMUNICATIONS & ACCESS TO CHINA MARKET 2010 2013 2016 2017 26
Slide 27: Optical Communications & Access to China Market
Optical Communications & Access to China Market Jan. 2017: “China unveils $170 billion telecoms investment” 30% 35% 41% FY2017 FY2017 44% Revenue by Revenue by China Markets Segments 8% 7% 24% Life Science, 11% Consumer, Other Chinese government plans to lay 90,000km of fiber cables and deploy aroun
Slide 28: Compound Semiconductor Lasers
Compound Semiconductor Lasers Life Sciences Automotive Military Material Processing Communications Consumer Electronics 28
Slide 29: Vertical Integration & Scale
Vertical Integration & Scale Scaling up to 6 Inch Wafers 150mm epi wafers 150mm VCSEL wafers 29
Slide 30: Compound Semiconductors: Aiming Beyond Lasers
Compound Semiconductors: Aiming Beyond Lasers “I skate to where the puck is going, not where it has been” Wayne Gretzky G4 MOCVD Reactor Newton Aycliffe, U.K. Part of a broader strategic move to provide a versatile 6” wafer fab for GaAs, SiC and InP-based devices. 30
Slide 31: Innovation
INVESTOR DAY November 8th, 2017 Innovation Dr. Giovanni Barbarossa, Chief Technology Officer and President, Laser Solutions Segment 31
Slide 32: Innovation Strategy
Innovation Strategy BEST PRODUCT Markets Differentiation Performance Products Infrastructure Business Model 32
Slide 33: Wavelength Breadth
3D Sensing Breadth of Applications Wavelength Breadth Power Breadth Technology Breadth 33
Slide 34: Innovative Optical Connectivity
Innovative Optical Connectivity Inter Data Center 100G Switch 100G Switch 4TB/S over 20 km Intra Data Center TX RX Transceiver e.g. 300m Links Transceiver RX TX TX RX Transceiver Transceiver RX TX Mux/Demux 34
Slide 35: Enabling Through Miniaturization
Enabling Through Miniaturization CFP2 CFP4 35
Slide 36: Silicon Carbide Compound Semiconductor
Silicon Carbide Compound Semiconductor Innovating in substrate and Innovating compound in substrate and semiconductor compound semiconductor epitaxial growth epitaxial growth Current Market World First 200mm SiC Wafer In 2015 1.3” 2” 3” 100mm 150mm 200mm 300mm (In development) 36
Slide 37: Financial Outlook
INVESTOR DAY November 8th, 2017 Financial Outlook Over Mary Jane Raymond, Chief Financial Officer $1B* $972 $827 $742 $683 $551 $516 $487 $316 $333 $292 $224 $225 $187 $123 $128 $143 $114 $53 $61 $62 $74 $28 $38 IPO 1987 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Slide 38: Capital Allocation Goals For II-VI
Capital Allocation Goals For II-VI Deliver Superior Shareholder Returns Be One Of The Best Managed Growth Companies Over $1B* Select investments and acquisitions to Accelerate Growth $972 $827 $742 $683 $551 $516 $487 $316 $333 $292 $224 $225 $187 $123 $128 $143 $114 $53 $61 $62 $74 $28 $38 IPO 1987
Slide 39: Investment Parameters
Investment Parameters Strict Investment Returns Required Above 20% Over $1B* $972 Engineered Materials $827 $742 Diversified Multiple $683 Growth Applications $551 $516 Markets $487 $316 $333 $292 $224 $225 $187 $123 $128 $143 $114 $53 $61 $62 $74 $28 $38 IPO 1987 1995 1996 1997 1998 1999 2000 2001
Slide 40: Our Capital Allocation Priorities Align to our Strategy
Our Capital Allocation Priorities Align to our Strategy Going Forward DELIVERED INVESTMENT GROWTH 30 Years through FY17 SOURCES OF CASH R&D 16% 30Yr. CAGR on Revenue Earnings $972 16% 30Yr. CAGR on Net Income Over $827 $742 CAP EX $1B* Cash from $551 Operations $683 23% ROIC - Last 10 Year Average*
Slide 41: Returns to the Shareholders
Returns to the Shareholders Accelerating Growth Targeting Revenue Growth $972 2.5-4.0X GDP Across the Cycle $827 $742 $683 EPS Growth 1.5-2.0X Revenue Growth Rate $516 $551 Including Platform Investments $487 ROIC 18-25% $316 $333 7-11% of Sales $292 R&D CAP EX 10-15% of Sales 2008 2009 2010 2011 20
Slide 42: Materials That Matter
jf MATERIALS THAT MATTER® IVE |) wwwaii-vi.com 42
Slide 43: Reconciliation Tables
Reconciliation Tables Three Months Ended Year Ended Sept 30, June 30, Sept 30, June 30, June 30, 2017 2017 2016 2017 2016 Adjusted operating income $ 31.8 $ 35.7 $ 23.7 $ 115.5 $ 91.8 Acquired business's one-time expenses (2.0) - - - - Operating income $ 29.8 $ 35.7 $ 23.7 $ 115.5 $ 91.8 Interest ex
Slide 44: II-VI Reports GAAP EPS
II-VI Reports GAAP EPS To calculate EPS comparable to some peers, below are the values of typical adjustments used by other companies II-VI Consolidated Summary of Typical Industy Non-GAAP Adjustments Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Amoritization 3.2 3.2 3.2 3.2 3.6 3.8 Share Based C
Slide 45: Biographies
Biographies Francis J. Kramer. Mr. Kramer joined the Company in 1983 and served as its President from 1985 to 2014, its Chief Executive Officer from 2007, and its Chairman and CEO from 2014 to 2016. He now serves as the Company’s Chairman of the Board of Directors. Mr. Kramer holds a B.S. degree in
Slide 46: Biographies
Biographies Giovanni Barbarossa Giovanni Barbarossa joined II-VI in 2012 and has been the President, Laser Solutions Segment, since 2014, and the Chief Technology Officer since 2012. Dr. Barbarossa was employed at Avanex Corporation from 2000 through 2009, serving in various executive positions in p