Finisar — Merger or Acquisition (August 2019)
36 slides from Finisar's merger presentation, Aug 15, 2019
Slide 1: II-VI Investor Presentation
IIVI INVESTOR PRESENTATION August 15, 2019 Exhibit 99.1
Slide 2: Safe Harbor
This communication contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements often address expected future business and financial perf
Slide 3: II-VI At a Glance
II-VI At a Glance
Slide 4: II-VI Overview
Regions 41% 24% 10% Europe North America China Japan ROW Q4 FY2019 Revenue 6% 19% Segments 24% 49% 27% II-VI Photonics II-VI Laser solutions II-VI Performance Products Q4 FY2019 Revenue Semi. Equip. Life Science Other Military 47% 23% 13% Markets Industrial Optical Communications Q4 FY2019 Revenue 1
Slide 5: Our Core & Growth Markets
New Growth Markets EUV Lithography SiC for Wireless SiC for EV 3D Sensing Core Markets Optical Communications Industrial Lasers Military Our Core & Growth Markets
Slide 6: II-VI Acquisition History
IPO 1987 NASDAQ S&P 500 Micro-optics VIrgo Optics Micro-optics Lighting Optical ZnSe Growth Laser Power Corp Silicon Carbide Litton SIC Group UV Filters Laser Power Corp Thermo-electric Coolers Marlow Industries Selenium Refinery Pacific Rare Metals Laser Processing Heads Highyag Micro-optics Photop
Slide 7: Proven Integration Playbook
Proven Integration Playbook Focused on Operational Improvements and Investing for Growth Oclaro Semiconductor Laser Business Case Study Semiconductor Laser business Target had a high unit cost structure With vertical integration and wide applicability in optical and industrial markets, II-VI drove m
Slide 8: Acquisition of Finisar
Acquisition of Finisar
Slide 9: A Powerful Combination
A Powerful Combination Pro Forma Revenue1 $2.5B Pro Forma EBITDA1 $570M Locations Worldwide Diversified Global Footprint 70 7 Target End Markets Addressable Market Size2 Total Employees Worldwide $22B 24K+ Note: Pro forma Revenue and EBITDA represents LTM 09/30/2018 for II-VI and LTM 07/29/2018 for
Slide 10: Strategic Window of Opportunity
Proliferation of Cloud Services Strategic Window of Opportunity Now Right Technology + Right Team + Right Time Inflection Point CAGR 16% CAGR 20% TAM ($B) Combined broad base of talent, technology and manufacturing enhances our ability to hit market windows today Window of Opportunity1 Electric & Au
Slide 11: Irreversible Megatrends
Irreversible Megatrends I Addressing Multiple Strong and Growing Markets Optical Communications 3D Sensing & LiDAR RF Electronics in Wireless Power Electronics For Green Energy $12.1B 2022 Market For 3D sensing in consumer electronics & LiDAR in automotive For terrestrial, submarine & wireless optic
Slide 12: Finisar Brings Significant Next-Generation Technologies
Finisar Brings Significant Next-Generation Technologies For Communications, 3D Sensing, and LiDAR Enabling New Market Growth LCoS Diffraction Gratings Coherent Tx+Rx Assemblies Coherent Tunable Laser Tunable Laser + InP Modulator High-Speed InP DML I-Temp Tunable DBR Laser + MZ Mod High-Speed GaAs V
Slide 13: GaAs and InP Platforms for 3D Sensing and LiDAR
II-VI’s GaAs Platform + Finisar’s InP Platform = Enhanced competency in 3D Sensing and LiDAR Optimization of R&D, Capital and Asset Utilization = Faster Time to Market Vertically integrated 6 inch GaAs compound semiconductor platform, one of the largest in the world = RF Devices and advanced optoele
Slide 14: Growth Opportunities in 5G Mobile Infrastructure
Growth Opportunities in 5G Mobile Infrastructure Backbone Network Front- & Backhaul Network Base Stations Handsets GaAs RF GaN/SiC RF $2.4B 13% 2022 TAM: 2018-22 CAGR: $1.4B 124% $1.1B 63% Line Cards Amplifiers OCM/OTDR LPC WSS Subsystems 2017 2018 2019 2020 Global backbone buildouts in anticipation
Slide 15: GaAs & SiC for RF Electronics in Wireless
II-VI’s GaAs & SiC on 6” platform + Finisar’s microelectronics design expertise = Access to larger & growing markets Collaboration with SEDI for GaN/SiC RF electronics For wireless: efficient, high power RF amplification with GaN/SiC HEMT Thin-film diamond on silicon for next generation high speed w
Slide 16: SiC for Power Electronics for Green Energy
II-VI’s SiC on 6” platform + Finisar’s microelectronics design expertise = Access to larger & growing markets High efficiency voltage and power conversion = SiC MOSFETs for Green Energy SiC for High Power Electronics Market CAGR (’18-’22): 27% Source: Yole A world leading supplier of SiC substrates
Slide 17: Positioned for Near Term Margin Expansion
II-VI and Finisar Both Positioned for Near Term Margin Expansion, with Added Benefits from Combination Key Drivers of Margin Improvement Significant traction for 100G CWDM4 Gen3 platform Large upside potential for 200G and 400G CDWM4 from Hyperscale customers Developing a complete portfolio of 400G
Slide 18: Value Creation Potential from Synergies
Cost of Goods Sold Supply chain management - Procurement Infeed - Internal supply of enabling materials and components ~$85 million Sales & Marketing Savings from scale General & Administration Consolidation of overlapping corporate costs Optimization of operating model Annual Estimated Synergies Ac
Slide 19: Strong Deleveraging Profile
II-VI and Finisar have combined EBITDA generation today of $570mm1,2 including estimated $150mm run-rate synergies Combined company has a strong deleveraging profile, with significant deleveraging expected from 4.1x at announcement to under 2.5x in two years post close II-VI expected to maintain ong
Slide 20: China SAMR Process Overview
Phase Timing SAMR Activity Submission 12/29/2018 ----- Pre-Registration Period No maximum length of time SAMR requests additional information from parties Registration Feb. 20, 2019 SAMR registers the filing Phase I, II, & III Registration Date + 180 days, ending August 17, 2019 SAMR contacts third
Slide 21: II-VI Additional Markets
II-VI Additional Markets
Slide 22: Industrial Laser Materials Processing
High Power Semiconductor Lasers & Laser Optics A full suite of components for multiple laser modalities Strong CO2 deployed base in active use and strong secondary market Industrial laser components: 25-35% of worldwide revenue FIBER LASER OPTICS CO2 LASER OPTICS LASER BARS CUTTING HEADS DIRECT DIOD
Slide 23: Military
Military-Aerospace business serves four strategic areas Intelligence surveillance & reconnaissance (ISR) Missiles and ordnance EMI & survivability Highly differentiated core capabilities & products Materials engineered in-house Complex electro-optics sub-assemblies with high value add Emerging strat
Slide 24: EUV Lithography
Structural Ceramic Subsystems EUV Source System: Focusing Optics Beam Transport System CO2 System: Seed Laser, Power Amplifiers EUV Lithography System EUV Lithography already started for 7 nm node production Multiple II-VI products used in each EUV system, ~1-2% of total value Products leverage II-V
Slide 25: II-VI Financial Summary
II-VI Financial Summary
Slide 26: Segment Revenue by End Markets for Full Year FY18
End Market Distribution of Full Year FY18 Revenue Reported Segments FY18 Revenue FY18 Op Margin – GAAP / Non-GAAP FY18/FY17 Revenue Growth Industrial (Automotive) Fiber Optic & Wireless Comm. Military Semi Cap Life Science, Consumer, Other Laser Solutions ** $406M 10% / 12% 28% 67% (1%) 12% 3%* 7% 1
Slide 27: Segment Revenue by End Markets for Q4FY19
End Market Distribution of Q4FY19 Revenue Reported Segments Q4FY18 Revenue Q4FY19 Revenue Q4FY19 Op Margin – GAAP / Non-GAAP Q4FY19/ Q4FY18 Revenue Growth Industrial (Automotive) Fiber Optic & Wireless Comm. Military Semi Cap Life Science, Consumer, Other Laser Solutions $108M $87M 11% / 13% (19%) 6
Slide 28: Segment Revenue by End Markets for Full Year FY19
End Market Distribution of Full Year FY19 Revenue Reported Segments FY19 Revenue FYY19 Op Margin – GAAP / Non-GAAP FY19/FY18 Revenue Growth Industrial (Automotive) Fiber Optic & Wireless Comm. Military Semi Cap Life Science, Consumer, Other Laser Solutions $397M 10% / 12% (2%) 62% (1%) 12% 5% 9% 12%
Slide 29: II-VI Financial Trends
GAAP Expectations II-VI Only Cash and Equivalents Cash Flow from Operations Long-Term Debt (Including current portion) FY18 FY16 FY17 Shareholder’s Equity $247M $218M $271M $161M $123M $118M $439M $235M $342M $1,024M $782M $900M Cash and Liquidity FY19 $205M $178M $467M $1,133M FY19 (Actual) FY20 (F
Slide 30: Appendix
Appendix
Slide 31: Transaction Consideration
Transaction Consideration Approximately $3 billion of total equity value Finisar shareholders to own approximately 31% of the combined company Per Share Consideration $15.60 in cash and 0.2218x shares of II-VI common stock Exchange ratio set at announcement based on total consideration to Finisar sh
Slide 32: Finisar Transaction Financing
Transaction Financing $2.0 billion new funded debt, fully committed financing $450 million unfunded revolver at close Pro-forma Capitalization Statistics ($ in billion) x LTM EBITDA (w/ synergies)1 Gross Debt $2.4 4.0x Cash $0.3 0.5x Net Debt $2.1 3.5x Deleveraging and Capital Allocation Combined co
Slide 33: II-VI Historical GAAP EPS and Adjusted EPS Equivalent
II-VI Historical GAAP EPS and Adjusted EPS Equivalent To calculate EPS comparable to some peers, below are the values of typical adjustments used by other companies * Average Shares Outstanding – Diluted for the Three Months Ended March 31, 2018 was calculated under the If-Converted method to accoun
Slide 34: II-VI Segment Revenue, Operating Income and Adjusted Operating Income
II-VI Segment Revenue, Operating Income and Adjusted Operating Income Amounts may not recalculate due to rounding. 2019 Diff 2018 Diff Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 FY19 FY19 FY19 FY19 FY18 FY18 FY18 FY18 FY19 FY18 Revenues: II-VI Laser Solutions $ 87.4 $ 97.4 $ 105.6 $ 106.2 $ 108.4 $ 104.5 $ 105 $ 88 $
Slide 35: Segment Reconciliation: Operating Income to Adjusted Operating Income
II-VI Segment Reconciliation: Operating Income to Adjusted Operating Income Amounts may not recalculate due to rounding.
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