Coherent Corp. · NYSE:COHR
Coherent — Q4 2023 Earnings Presentation
41 slides from Coherent's earnings presentation, Aug 16, 2023
Slide 1: Investor Presentation
INVESTOR PRESENTATION August 2023 Copyright 2023, Coherent. All rights reserved. 1
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
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 26,000+ Employees(2) $5.2 B FY23 Revenue 2,400+ Research & Development(1) $64 B Available Market(1) 3,000+ Patents(1) 126 Locations VERTICAL Materials, Components, INTEGRATI
Slide 4: Building Momentum for 50 Years
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
Slide 5: Half a Billion Dollars in Annual R&D Investment
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 be
Slide 6: 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
Slide 7: Corporate Social Responsibility
CORPORATE SOCIAL RESPONSIBILITY CARBON FOOTPRINT REDUCTION IS A PRIORITY PRODUCTS AND TECHNOLOGY ▪ Electricity consumption from renewal sources is expected to reach 50% of all ▪ Investing to help the world transition to cleaner energy solutions, including: electricity consumption in FY23. ▪ Silicon
Slide 8: $5.2 Billion of Revenue in FY23
$5.2 BILLION OF REVENUE IN FY23 Communications North Materials America Europe Industrial 19% Lasers 29% 26% 34% BY REPORTING 45% BY MARKET BY REGION(1) 11% China SEGMENT 53% 14% 9% 45% 12% 3% Korea & Japan Instrumentation Other Networking Electronics (1) Revenue by region is based on customer headqu
Slide 9: Three Reporting Segments
THREE REPORTING SEGMENTS MATERIALS NETWORKING LASERS Copyright 2023, Coherent. All rights reserved. 9
Slide 10: Growing Markets Served: Aggregate $64B TAM
4 GROWING MARKETS SERVED: AGGREGATE $64B TAM INDUSTRIAL COMMUNICATIONS ELECTRONICS INSTRUMENTATION TAM: $22B TAM: $23B TAM: $14B TAM: $5B CAGR: 9% CAGR: 14% CAGR: 20% CAGR: 8% Sources: Optech Consulting, TechInsight, Sources: LightCounting, Omdia, Cignal AI, Yole, Sources: IDC, Morgan Stanley, Resea
Slide 11: 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
Slide 12: 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
Slide 13: 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
Slide 14: Instrumentation
INSTRUMENTATION MEGATRENDS PRODUCTS VALUE PROPOSITION ▪ Smart healthcare evolution, largely based on ▪ Materials, optics, lasers, ▪ Life sciences (biotechnology, medical, and technology and thermoelectrics environmental) and scientific segment solutions ▪ Point-of-care diagnostics ▪ Components to su
Slide 15: Financial Highlights
FINANCIAL HIGHLIGHTS FISCAL YEAR 2023 – Q4 Copyright 2023, Coherent. All rights reserved. 15
Slide 16: Q4 FY23 Financial Highlights
Q4 FY23 FINANCIAL HIGHLIGHTS Communications 34% Industrial 47% REVENUE BY Revenue Backlog END MARKET $1.2B $2.7B 10% 9% Electronics Instrumentation Operating Income (Loss) Earnings (Loss) Per Share Europe North 21% ($155.2M) GAAP ($1.54) GAAP America REVENUE BY $185.1M Non-GAAP $0.41 Non-GAAP 52% Ko
Slide 17: Q4 FY23 Operating Margin
Q4 FY23 OPERATING MARGIN Lower Q4 FY23 primarily driven by lower revenue and short term capacity underutilization Transitory interruption of longer-term expansion trend Non-GAAP Gross and Operating Margins(1) 40.3% 39.8% 38.5% 37.3% 35.9% Non-GAAP Gross Margin Non-GAAP Operating Margin 21.3% 20.3% 1
Slide 18: Artificial Intelligence
ARTIFICIAL INTELLIGENCE Driving growth in the cloud and beyond Copyright 2023, Coherent. All rights reserved. 18
Slide 19: Datacom Transceiver Global Market
DATACOM TRANSCEIVER GLOBAL MARKET $M $1.3 billion in sales in datacom in FY23 $10,000 $8,000 3.2T 1.6T 800G 200G $6,000 and higher data-rate transceivers 400G 200G >65% of our revenue $4,000 100G 50G 40G $2,000 800G and higher data-rate $- transceivers > 50% of the total 2018 2019 2020 2021 2022 202
Slide 20: Datacom Transceiver Opportunity by Laser Type
DATACOM TRANSCEIVER OPPORTUNITY BY LASER TYPE CY23 Transceiver Opportunity ($B) CY28 Transceiver Opportunity ($B) VCSEL AI DML - Other $0.3 6% $0.6 6% VCSEL AI $1.6 14% EML - Other DML - Other $1.0 9% $1.6 29% VCSEL - Other DML $1.5 27% $0.6 VCSEL - Other DML VCSEL VCSEL $1.7 14% $1.6 $1.8 EML $3.3
Slide 21: Silicon Carbide
SILICON CARBIDE Electrification of transportation Sustainability of the planet Copyright 2023, Coherent. All rights reserved. 21
Slide 22: Power Electronics for Green and Clean Energy
POWER ELECTRONICS FOR GREEN AND CLEAN ENERGY ELECTRIC VEHICLES SOLAR & WIND ENERGY SMART GRID POWER SWITCHING Copyright 2023, Coherent. All rights reserved. 22
Slide 23: Now, Next, and Beyond Silicon Carbide Materials
NOW, NEXT, AND BEYOND SILICON CARBIDE MATERIALS Two decades of innovation Wafer Size 2 inch 2000 Manufactured 3 inch 2002 2004 Demonstrated Manufactured 2005 Demonstrated 100 mm 2007 High Quality Wafer 2009 Manufactured 150 mm 2012 2013 Demonstrated Manufactured 200 mm 2015 2019 World’s First 200 mm
Slide 24: Vertical Integration: Accelerating Time-to-Market
ACCELERATING TIME-TO-MARKET 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. Ver
Slide 25: Acquisition of Coherent
ACQUISITION OF COHERENT Copyright 2023, Coherent. All rights reserved. 25
Slide 26: Leader in Technology for Display Manufacturing
LEADER IN TECHNOLOGY FOR DISPLAY MANUFACTURING ▪ Market trends: • OLED display manufacturing technology in the process of moving from Gen 6 to Gen 8 for improved economies of scale • Deployments in Korea and China • Revenue for Micro-LED display manufacturing will become material around FY25 • Micro
Slide 27: Focusing on Growth Applications as Lasers Penetrate Addressable Markets
FOCUSING ON GROWTH APPLICATIONS AS LASERS PENETRATE RAPIDLY GROWING ADDRESSABLE MARKETS PRECISION SEMICONDUCTOR CAPITAL LIFE SCIENCES MANUFACTURING EQUIPMENT & RESEARCH TAM: $9B, CAGR: 8% TAM: $4B, CAGR: 7% TAM: $5B, CAGR: 8% • EV battery welding • Enabling mobile communications, • Personalized medi
Slide 28: Significant Value Creation Potential from Coherent Cost Synergies
SIGNIFICANT VALUE CREATION POTENTIAL FROM COHERENT COST SYNERGIES EXPECTED YEAR 1 SYNERGIES SYNERGIES WITHIN ACHIEVED 3 YEARS ▪ Supply chain management – procurement Cost of ▪ Infeed – Internal supply of enabling materials and components $40M $150M Goods Sold ▪ Operational efficiencies at scale ▪ Mo
Slide 29: Well Capitalized for Future Growth
WELL CAPITALIZED FOR FUTURE GROWTH1 External Financing Sources Leverage ▪ $3.4B secured term loans Total Debt $4.4 billion 2.9x(1) Debt ▪ $990M high yield bonds Cash $0.8 billion ▪ $348M revolver availability Net Debt $3.6 billion 2.4x(1) ▪ $2.15B series B investment from Bain PF Combined $1,508 mil
Slide 30: Debt Exposed to Floating Rates Decreases During FY24
DEBT EXPOSED TO FLOATING RATES DECREASES DURING FY24 Debt exposed to floating rates makes up 43% 58% 47% 43% 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 2023,
Slide 31: Financial Appendix
FINANCIAL APPENDIX Copyright 2023, Coherent. All rights reserved. 31
Slide 32: Significant Cost Reductions from Restructuring Announced May 10, 2023
SIGNIFICANT COST REDUCTIONS FROM RESTRUCTURING ANNOUNCED ON MAY 10, 2023 Cumulative savings for the period of FY23 to FY25 $200M to $300M Annual savings by FY25 $100-125M Cost to achieve savings $150M to $200M Copyright 2023, Coherent. All rights reserved. 32
Slide 33: Mapping into Four Markets
MAPPING INTO FOUR MARKETS II-VI COHERENT INDUSTRIAL Industrial Precision Manufacturing Precision Manufacturing Semiconductor Semiconductor Capital Equipment Microelectronics Capital Equipment Display Capital Equipment Aerospace & Defense Aerospace & Defense Aerospace & Defense Communications COMMUNI
Slide 34: FY22 Revenue by FY23 Market Segments
FY22 REVENUE BY FY23 MARKET SEGMENTS End Market Distribution of Full Year FY22 Revenue FY22 Companies Communications Industrial Electronics Instrumentation Revenue II-VI Incorporated $3,317M 65% 23% 9% 3% Coherent, Inc.(1) $1,520M(1) 0% 75% 0% 25% Proforma Combined(2) $4,837M(2) 45% 39% 6% 10% (1) C
Slide 35: Segment Revenue by End Markets for Q4 FY23
SEGMENT REVENUE BY END MARKETS FOR Q4FY23 QTD End Market Distribution of Q4FY23 QTD Revenue Q4FY23/ Q4FY23 Op Reported Q4FY22 Q4FY23 Q4FY22 Margin – Industrial Communications Electronics Instrumentation Segments Revenue(1) Revenue Revenue GAAP / Non- Growth GAAP Materials $297M $288M (3)% (23%) / 24
Slide 36: Segment Revenue by End Markets for Full Year FY23
SEGMENT REVENUE BY END MARKETS FOR FULL YEAR FY23 End Market Distribution of Full Year FY23 FY23/ FY23 Op Reported FY22 FY23 FY22 Margin – Industrial Communications Electronics Instrumentation Segments Revenue(1) Revenue Revenue GAAP / Non- Growth GAAP Materials $1,119M $1,350M 21% 12% / 26% 45% 5%
Slide 37: Cash Flow for Acquisitions
CASH FLOW FOR ACQUISITIONS • Operating Cash Flow • Operating cash flow should only include the movement in the original assets/liabilities and amortization of purchase price accounting from the date of acquisition to the close of the period. It does not include the value of of the original assets/li
Slide 38: 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
Slide 39: Reconciliation of GAAP Measures to Non-GAAP Measures
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES Copyright 2023, Coherent. All rights reserved. 39
Slide 40: Reconciliation of GAAP Measures to Non-GAAP Measures
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES Copyright 2023, Coherent. All rights reserved. 40
Slide 41: Coherent
COHERENT