Coherent Corp. · NYSE:COHR

Coherent — Investor Presentation (February 2024)

41 slides from Coherent's investor presentation, February 2024

  1. Slide 1: Investor Presentation February 2024

    INVESTOR PRESENTATION February 2024 Copyright 2024, Coherent. All rights reserved. 1

  2. Slide 2: Forward-Looking Statements

    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

  3. Slide 3: Coherent at a Glance

    FROM A FOUNDATION OF MATERIALS AND IMAGINATION, COHERENT AT WE ENABLE EXCITING MEGATRENDS A GLANCE 1971 Year Founded COHR NYSE FY23 26,000+ Employees (1) $5.2 B Revenue Available 2,400+ Research & Development (1) $64 B Market (1) 3,000+ Patents (1) 126 Locations Materials, Components, VERTICAL INTEG

  4. Slide 4: Insightful Targeting and Integration of Strategic Acquisitions

    INSIGHTFUL TARGETING AND INTEGRATION OF STRATEGIC ACQUISITIONS 5 Transformative Acquisitions 5.2 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 ma

  5. Slide 5: $5.2 Billion of Revenue in FY23 Well Diversified

    $5.2 BILLION OF REVENUE IN FY23 WELL DIVERSIFIED ACROSS TECHNOLOGY, PRODUCTS, AND GEOGRAPHIC MARKETS Segments Markets Regions Communications North Materials America Europe Industrial Lasers 19% 29% 26% 34% BY REPORTING 45% China BY MARKET 53% BY REGION(1) 11% SEGMENT 14% 9% 45% 3% Korea & Japan 12%

  6. Slide 6: Four Attractive Growth Markets, Aggregate $64B TAM

    FOUR ATTRACTIVE GROWTH MARKETS AGGREGATE $64B TAM 14% FIVE-YEAR CAGR (2023-28) INDUSTRIAL COMMUNICATIONS ELECTRONICS INSTRUMENTATION TAM: $22B TAM: $23B TAM: $14B TAM: $5B CAGR: 9% CAGR: 14% CAGR: 20% CAGR: 8% Sources: Optech Consulting, Sources: LightCounting, Omdia, Sources: IDC, Morgan Stanley, S

  7. Slide 7: Industrial

    INDUSTRIAL MARKET VERTICALS AND MEGATRENDS PRODUCTS VALUE PROPOSITION Precision manufacturing § Fiber lasers for laser welding of batteries § 50 years of experience in laser technology § Giga factories for EV battery processing § UV lasers for OLED manufacturing § Long term technology partner across

  8. Slide 8: Communications

    COMMUNICATIONS MARKET VERTICALS AND MEGATRENDS PRODUCTS VALUE PROPOSITION Datacom § 100 to 800 Gbps datacom transceivers § Largest supplier of optical communications § Increasing spend on cloud infrastructure components § Pluggable coherent transceivers § Artificial Intelligence/Machine Learning § V

  9. Slide 9: Electronics

    ELECTRONICS MARKET VERTICALS AND MEGATRENDS PRODUCTS VALUE PROPOSITION Consumer electronics § GaAs and InP optoelectronics § Broadest portfolio of optoelectronics, optics, § Advanced sensing and electronics § VCSELs and edge emitting lasers § AR/VR § High-volume consumer electronics § Laser illumina

  10. Slide 10: Instrumentation

    INSTRUMENTATION MARKET VERTICALS AND MEGATRENDS PRODUCTS VALUE PROPOSITION Life Sciences § Materials, optics, lasers, § Life sciences (biotechnology, medical, and and thermoelectrics environmental) and scientific segment § Smart healthcare evolution, largely based on solutions technology § Component

  11. Slide 11: Artificial Intelligence: A Revolution

    ARTIFICIAL INTELLIGENCE: A REVOLUTION Driving growth in the cloud and beyond Copyright 2024, Coherent. All rights reserved. 11

  12. Slide 12: Datacom Transceiver Global Market

    DATACOM TRANSCEIVER GLOBAL MARKET $M $16,000 $1.3 billion in sales in datacom in FY23 $14,000 $12,000 3.2T $10,000 1.6T 800G 200G 400G and higher data-rate transceivers $8,000 200G >65% of our revenue $6,000 100G 50G $4,000 40G $2,000 800G and higher data-rate $- transceivers > 65% of the total 2018

  13. Slide 13: Datacom Transceiver Opportunity by Laser Type

    DATACOM TRANSCEIVER OPPORTUNITY BY LASER TYPE CY23 Transceiver Opportunity ($B) CY28 Transceiver Opportunity ($B) VCSEL AI $0.3 6% DML - Other VCSEL AI $0.7 5% $0.4 2% DML AI $0 0% VCSEL - Other DML - Other $1.5 10% $1.6 29% VCSEL - Other $1.5 27% DML $.7 VCSEL SiPho AI DML VCSEL $1.2 8% $1.9 $1.6 $

  14. Slide 14: Silicon Carbide Power Semiconductors: Another Revolution

    SILICON CARBIDE POWER SEMICONDUCTORS: ANOTHER REVOLUTION Electrification of transportation Sustainability of the planet Copyright 2024, Coherent. All rights reserved. 14

  15. Slide 15: Silicon Carbide Business Overview

    SILICON CARBIDE BUSINESS OVERVIEW Business Overview FY24 Key Stats Leading global supplier of silicon carbide (SiC) substrates for power device and radio frequency end market applications ~$300M >50% — Large addressable market estimated to grow from $3 billion in 2022 to $21 billion in 2030 (28% CAG

  16. Slide 16: Silicon Carbide Investment Transaction

    SILICON CARBIDE INVESTMENT TRANSACTION TO SEPARATE SILICON CARBIDE BUSINESS WITH MARKET-LEADING PARTNERS Pioneer in silicon carbide power Global Tier-1 automotive supplier; Leader in materials, networking and devices; leading capabilities in electrification laser technologies leading capabilities in

  17. Slide 17: Silicon Carbide Investment Transaction Details

    SILICON CARBIDE INVESTMENT TRANSACTION DETAILS Transaction Structure § On December 4, 2023, Coherent separated and contributed its silicon carbide (SiC) business to newly formed subsidiary at a $4 billion valuation § Mitsubishi Electric and DENSO invested $1 billion into the new subsidiary in exchan

  18. Slide 18: Strategic Benefits of the Silicon Carbide Investment Transaction

    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 Mitsubishi Elect

  19. Slide 19: Financial Highlights

    FINANCIAL HIGHLIGHTS Copyright 2024, Coherent. All rights reserved. 19

  20. Slide 20: FY24 Q2 Highlights

    FY24 Q2 HIGHLIGHTS REVENUE $1.131 billion, above the midpoint of our $1.075 – $1.175 billion guidance. $0.36, above the high end of our $0.14 – $0.32 guidance and up from $0.16 in the preceding quarter driven Non-GAAP EPS primarily by the strong gross margin upside, favorable operating leverage, and

  21. Slide 21: FY24 Q2 Highlights - Continued

    FY24 Q2 HIGHLIGHTS - CONTINUED We enjoyed a third straight quarter of strong orders for our AI/ML-related Datacom transceivers. Our 800G revenue increased sequentially by over 100% to cross the $100 million quarterly threshold just over one year since initial shipments, which marks one of the fastes

  22. Slide 22: Revenue by Segment

    REVENUE BY SEGMENT Quarterly Revenue Trend Revenue Distribution (1) 1,600 1,400 1,200 Lasers Materials Revenue ($M) 22% 1,000 31% 800 600 FY24 Q2 400 200 0 FY23 Q2 FY23 Q3 FY23 Q4 FY24 Q1 FY24 Q2 46% Lasers 379 365 333 336 354 Networking 609 551 585 473 524 Materials 382 324 288 245 254 Networking (

  23. Slide 23: Backlog by Segment

    BACKLOG BY SEGMENT Quarterly Backlog Trend Backlog Distribution (1) 3,500 3,000 Lasers Materials 2,500 22% Backlog ($M) 28% 2,000 1,500 1,000 FY24 Q2 500 0 FY23 Q2 FY23 Q3 FY23 Q4 FY24 Q1 FY24 Q2 50% Lasers 932 867 878 821 812 Networking 1,218 1,075 1,217 1,404 1,446 Materials 714 667 650 668 625 Ne

  24. Slide 24: Revenue by Market

    REVENUE BY MARKET Quarterly Revenue Trend Revenue Distribution (1) 1,600 1,400 Instrumentation 1,200 9% Industrial Revenue ($M) 1,000 Electronics 8% 800 37% 600 400 FY24 Q2 200 0 FY23 Q2 FY23 Q3 FY23 Q4 FY24 Q1 FY24 Q2 Instrumentation 120 125 117 99 99 46% Electronics 200 139 106 90 89 Communication

  25. Slide 25: Revenue by Region

    REVENUE BY REGION Quarterly Revenue Trend (2) Revenue Distribution (1) 1,600 Other 1,400 China North 1,200 Revenue ($M) 2% America 1,000 14% 800 Japan & 600 Korea 400 14% 200 FY24 Q2 55% 0 FY23 Q2 FY23 Q3 FY23 Q4 FY24 Q1 FY24 Q2 Other 36 37 31 27 28 14% China 153 135 137 132 162 Japan & Korea 178 17

  26. Slide 26: FY24 Q3 Outlook

    FY24 Q3 OUTLOOK Revenue $1.12 – 1.20 billion Non-GAAP Gross Margin 36 – 38% Non-GAAP Operating Expenses $246 – 262 million Non-GAAP Operating Margin 14 – 16% Non-GAAP Adjusted EBITDA 21 – 23% Interest Expense $70 – 74 million Non-GAAP Tax Rate 16 – 19% Series B Preferred P.I.K. Dividend Approximatel

  27. Slide 27: FY24 Full Year Outlook

    FY24 FULL YEAR OUTLOOK Revenue $4.55 – 4.7 billion Non-GAAP Gross Margin 36 – 38% Non-GAAP Operating Expenses $990 million – 1.015 billion Non-GAAP Operating Margin 14 – 16% Non-GAAP Adjusted EBITDA 20 – 22% Interest Expense $284 – 294 million Non-GAAP Tax Rate 20 – 22% Series B Preferred P.I.K. Div

  28. Slide 28: GAAP to Non-GAAP Reconciliation

    GAAP TO NON-GAAP RECONCILIATION Copyright 2024, Coherent. All rights reserved. 28

  29. Slide 29: Gross Profit Reconciliation

    GROSS PROFIT RECONCILIATION $ Millions (Unaudited) Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Gross profit on GAAP basis 351 307 343 420 411 Share-based compensation 5 7 5 7 6 Amortization of acquired intangibles 30 31 39 31 15 Fair value adjustment on acquired inventory — — —

  30. Slide 30: Operating Expense Reconciliation

    OPERATING EXPENSE RECONCILIATION $ Millions (Unaudited) Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Internal R&D on GAAP basis 111 114 123 126 129 Share-based compensation (5) (8) (5) (6) (6) Amortization of acquired intangibles (1) (1) (1) (0) — Start-up costs (1) (0) — — — Int

  31. Slide 31: Income from Operations Reconciliation

    INCOME FROM OPERATIONS RECONCILIATION $ Millions (Unaudited) Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Op. income (loss) on GAAP basis 32 (21) (155) 67 8 Share-based compensation 27 45 26 35 35 Fair value adjustment on acquired inventory — — — — 112 Amortization of acquired in

  32. Slide 32: Net Earnings Reconciliation

    NET EARNINGS RECONCILIATION $ Millions (Unaudited) Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Net earnings (loss) attributable to Coherent (27) (68) (178) 3 (45) Corp. on GAAP basis Share-based compensation 27 45 26 35 35 Amortization of acquired intangibles 72 73 134 93 105 Fa

  33. Slide 33: Net Earnings per Common Share

    NET EARNINGS PER COMMON SHARE $ (Unaudited) Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Net earnings (loss) attributable to Coherent Corp., GAAP Basic Earnings (Loss) Per Share (0.38) (0.65) (1.54) (0.24) (0.58) Diluted Earnings (Loss) Per Share (0.38) (0.65) (1.54) (0.24) (0.58

  34. Slide 34: Net Earnings, GAAP, and Adjusted EBITDA Reconciliation

    NET EARNINGS, GAAP, AND ADJUSTED EBITDA RECONCILIATION Copyright 2024, Coherent. All rights reserved. 34

  35. Slide 35: Reconciliation of GAAP Measures to Non-GAAP Measures

    Reconciliation of GAAP Segment Operating Income (Loss) to RECONCILIATION OF GAAP MEASURES Segment Non-GAAP Operating Income (Loss)* $ Millions TO NON-GAAP MEASURES (Unaudited) Three Months Ended Year Ended Jun 30, Mar 31, Jun 30, Jun 30, Jun 30, 2023 2023 2022 2023 2022 Networking GAAP Operating Inc

  36. Slide 36: Financial Appendix

    FINANCIAL APPENDIX Copyright 2024, Coherent. All rights reserved. 36

  37. Slide 37: Well Capitalized for Future Growth

    WELL CAPITALIZED FOR FUTURE GROWTH (1) External Financing Sources Leverage § $3.3B secured term loans Total Debt $4.29 billion 3.2x(1) Debt § $990M high yield bonds Cash (3) $0.86 billion § $345M revolver availability Net Debt $3.44 billion 2.5x(1) § $2.4B series B investment from Bain PF Combined $

  38. Slide 38: Debt Exposed to Floating Rates Decreases During FY24

    DEBT EXPOSED TO FLOATING RATES DECREASES DURING FY24 58% 46% Debt exposed to floating rates makes up 44% 44% of capital structure by June 30, 2024 1.92% Interest Rate Cap 1.42% Interest Rate Swap 5.0% High Yield Bonds Jun-23 Sep-23 Dec-23 Mar-24 Jun-24 Fixed Rate Hedged Floating Rate Copyright 2024,

  39. Slide 39: Significant Cost Reductions from Restructuring Announced May 10, 2023

    SIGNIFICANT COST REDUCTIONS FROM RESTRUCTURING ANNOUNCED ON MAY 10, 2023 Previous Outlook Current Outlook (as of Q1 FY24) Cumulative savings for the period of $200 – 250M $200 – 300M FY23 to FY25 Annual savings by FY25 $110 – 140M $110 – 140M Cost to achieve savings $175 – 200M $175 – 200M Copyright

  40. Slide 40: ESG - Global Diversity, Equity, and Inclusion Strategy

    ESG - GLOBAL DIVERSITY, EQUITY, AND INCLUSION STRATEGY Cultivate diverse teams that drive innovation, uphold our core values and achieve better business results by: Strategic Objectives Areas of Focus Fostering Inclusion and Belonging Community An environment that embraces and respects Connecting in

  41. Slide 41: Coherent

    COHERENT

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