Slide 1: Investor Presentation
INVESTOR PRESENTATION November 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 (1) $5.2 B FY23 Revenue 2,400+ Research & Development (1) $64 B Available Market (1) 3,000+ Patents (1) 126 Locations VERTICAL Materials, Components, INTEG
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: ESG Is a Priority
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) IS A PRIORITY SUSTAINABLE. INCLUSIVE. PRINCIPLED. INNOVATIVE. CARBON FOOTPRINT REDUCTION ENGAGED EMPLOYEES MANAGED TO ESG STANDARDS PRODUCTS AND TECHNOLOGY ▪ >50% of all energy requirements ▪ Expanded our diversity, equity, and ▪ Committed to comply with t
Slide 8: $5.2 Billion of Revenue in FY23, Well Diversified
$5.2 BILLION OF REVENUE IN FY23 WELL DIVERSIFIED ACROSS TECHNOLOGY, PRODUCTS, AND GEOGRAPHIC MARKETS 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 Net
Slide 9: Three Reporting Segments
THREE REPORTING SEGMENTS MATERIALS NETWORKING LASERS Copyright 2023, Coherent. All rights reserved. 9
Slide 10: 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
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 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
Slide 15: Artificial Intelligence
ARTIFICIAL INTELLIGENCE Driving growth in the cloud and beyond Copyright 2023, Coherent. All rights reserved. 15
Slide 16: 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 $- transceivers > 50% of the total 2018 2019 2020 2021 2022 202
Slide 17: Datacom Transceiver Opportunity by Laser Type
DATACOM TRANSCEIVER OPPORTUNITY BY LASER TYPE CY23 Transceiver Opportunity ($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 18: Silicon Carbide
SILICON CARBIDE Electrification of transportation Sustainability of the planet Copyright 2023, Coherent. All rights reserved. 18
Slide 19: 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. 19
Slide 20: Accelerating Time-to-Market: Vertical Integration
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 21: 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% Revenue Growth Large addressable market estimated to grow from $3 billion in 2022 to $21 billion i
Slide 22: Silicon Carbide Investment Transaction to Separate Business
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
Slide 23: Silicon Carbide Investment Transaction Details
SILICON CARBIDE INVESTMENT TRANSACTION DETAILS Transaction Structure ▪ Coherent to separate and contribute SiC business (the “Business”) to newly-formed subsidiary ▪ Denso and Mitsubishi Electric to each invest $500 million into new subsidiary in exchange for combined 25% non-controlling interest in
Slide 24: 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 Denso and Mitsub
Slide 25: Financial Highlights
FINANCIAL HIGHLIGHTS Copyright 2023, Coherent. All rights reserved. 25
Slide 26: FY24 Q1 Highlights
FY24 Q1 HIGHLIGHTS REVENUE $1.053 billion, slightly above the midpoint of our $1.0 – 1.1 billion guidance. $0.16, above the midpoint of our $0.05 - $0.20 guidance. Excluding an extraordinary $0.03 Non-GAAP EPS benefit from a lower than expected tax rate and an adverse $0.01 impact from foreign excha
Slide 27: Financial Highlights
FINANCIAL HIGHLIGHTS Sep 30, 2023 Jun 30, 2023 Sep 30, 2022 Revenue (M) $1,053 $1,205 $1,345 Non-GAAP Gross Margin 34.8% 35.9% 40.3% Non-GAAP Operating Expense (M) $234 $248 $256 Non-GAAP Operating Margin 12.6% 15.4% 21.3% Adjusted EBITDA (M) 200 $200 257 $257 351 $351 Non-GAAP Diluted EPS $0.16 $0.
Slide 28: Operating Metrics
OPERATING METRICS Sep 30, 2023 Jun 30, 2023 Sep 30, 2022 Cash (M) $941 $833 $899 Cash from Operations (M) $199 $182 $80 Capital Expenditures (M) $62 $93 $139 DSO (days) 73 68 65 Inventory Turns 2.3 2.6 2.7 Gross Leverage 4.0 3.6 3.8 Net Debt (M) $3,438 $3,565 $3,831 Copyright 2023, Coherent. All rig
Slide 29: Revenue and Non-GAAP Margin Trends
REVENUE AND NON-GAAP MARGIN(1) TRENDS Lower Q1 FY24 primarily driven by lower revenue and short term capacity underutilization Transitory interruption of longer-term expansion trend $1,600 45% 40.3% 39.8% $1,400 37.3% 40% 35.9% 34.8% $1,345 $1,370 35% $1,200 $1,240 $1,205 Revenue ($M) 30% $1,000 $1,
Slide 30: Margin Structure
MARGIN STRUCTURE Current Ongoing weak end market demand due to macroeconomic downtrend conditions has played a significant role in our current margin downtrend. Non-GAAP Gross ▪ Second Quarter Fiscal 2024: 35 – 37% and 13 – 15% and Operating ▪ Full Year Fiscal 2024: 36 – 38% and 14 – 16% Margin Targ
Slide 31: Revenue by Segment
REVENUE BY SEGMENT Quarterly Revenue Trend Revenue Distribution 1,600 1,400 1,200 Lasers Materials Revenue ($M) 23% 1,000 32% 800 600 FY24 Q1 400 200 0 FY23 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY24 Q1 45% Lasers 392 379 365 333 336 Networking 597 609 551 585 473 Materials 356 382 324 288 245 Networking (1) A
Slide 32: Backlog by Segment
BACKLOG BY SEGMENT Quarterly Backlog Trend Backlog Distribution 3,500 3,000 Lasers Materials 2,500 Backlog ($M) 28% 23% 2,000 1,500 1,000 FY24 Q1 500 0 FY23 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY24 Q1 49% Lasers 900 932 867 878 821 Networking 1,407 1,218 1,075 1,217 1,404 Materials 745 714 667 650 668 Networ
Slide 33: Revenue by Market
REVENUE BY MARKET Quarterly Revenue Trend Revenue Distribution 1,600 1,400 Instrumentation 1,200 9% Industrial Revenue ($M) 1,000 Electronics 9% 800 38% 600 400 FY24 Q1 200 0 FY23 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY24 Q1 Instrumentation 118 120 125 117 99 44% Electronics 180 200 139 106 90 Communications
Slide 34: Revenue by Region
REVENUE BY REGION Quarterly Revenue Trend Revenue Distribution 1,600 Other 1,400 China North 1,200 Revenue ($M) 3% America 1,000 13% 800 Japan & 600 Korea 400 14% 48% 200 FY24 Q1 0 FY23 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY24 Q1 Other 45 36 37 31 27 China 152 153 135 137 132 23% Japan & Korea 195 178 171 16
Slide 35: FY24 Q2 Outlook
FY24 Q2 OUTLOOK Revenue $1.075 – 1.175 billion Non-GAAP Gross Margin 35 – 37% Non-GAAP Operating Expenses $238 – 252 million Non-GAAP Operating Margin 13 – 15% Non-GAAP Adjusted EBITDA 19 – 21% Interest Expense $73 – 77 million Non-GAAP Tax Rate 20 – 23% Series B Preferred P.I.K. Dividend Approximat
Slide 36: FY24 Full Year Outlook
FY24 FULL YEAR OUTLOOK Revenue $4.5 – 4.7 billion Non-GAAP Gross Margin 36 – 38% Non-GAAP Operating Expenses $995 million – 1.025 billion Non-GAAP Operating Margin 14 – 16% Non-GAAP Adjusted EBITDA 20 – 22% Interest Expense $284 – 294 million Non-GAAP Tax Rate 18 – 20% Series B Preferred P.I.K. Divi
Slide 37: GAAP to Non-GAAP Reconciliation
GAAP TO NON-GAAP RECONCILIATION Copyright 2023, Coherent. All rights reserved. 37
Slide 38: Gross Profit Reconciliation
GROSS PROFIT RECONCILIATION $ Millions (Unaudited) Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Gross profit on GAAP basis 307 343 420 411 444 Share-based compensation 7 5 7 6 5 Amortization of acquired intangibles 31 39 31 15 47 Fair value adjustment on acquired inventory — — —
Slide 39: Operating Expense Reconciliation
OPERATING EXPENSE RECONCILIATION $ Millions (Unaudited) Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Internal R&D on GAAP basis 114 123 126 129 121 Share-based compensation (8) (5) (6) (6) (5) Amortization of acquired intangibles (1) (1) — — — Integration, site consolidation and
Slide 40: Income from Operations Reconciliation
INCOME FROM OPERATIONS RECONCILIATION $ Millions (Unaudited) Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Op. income (loss) on GAAP basis (21) (155) 67 8 43 Share-based compensation 45 26 35 35 53 Fair value adjustment on acquired inventory — — — 112 46 Amortization of acquired i
Slide 41: Net Earnings Reconciliation
NET EARNINGS RECONCILIATION $ Millions (Unaudited) Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Net earnings (loss) on GAAP basis (68) (178) 3 (45) (39) Share-based compensation 45 26 35 35 53 Amortization of acquired intangibles 73 134 93 105 83 Fair value adjustment on acquired
Slide 42: Net Earnings per Common Share
NET EARNINGS PER COMMON SHARE $ (Unaudited) Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Net earnings (loss), GAAP Basic Earnings (Loss) Per Share (0.65) (1.54) (0.24) (0.58) (0.56) Diluted Earnings (Loss) Per Share (0.65) (1.54) (0.24) (0.58) (0.56) Net earnings (loss), non-GAAP
Slide 43: EBITDA and Adjusted EBITDA Reconciliation
EBIDTA AND ADJUSTED EBITDA RECONCILIATION $ Millions (Unaudited) Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Net earnings (loss) on GAAP basis (68) (178) 3 (45) (39) Income taxes (benefit) (21) (55) (7) (21) (12) Depreciation and amortization 138 204 161 170 147 Interest expense
Slide 44: 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 45: Financial Appendix
FINANCIAL APPENDIX Copyright 2023, Coherent. All rights reserved. 45
Slide 46: Well Capitalized for Future Growth
WELL CAPITALIZED FOR FUTURE GROWTH (1) External Financing Sources Leverage ▪ $3.4B secured term loans Total Debt $4.38 billion 2.9x(1) Debt ▪ $990M high yield bonds Cash $0.94 billion ▪ $346M revolver availability Net Debt $3.44 billion 2.3x(1) ▪ $2.15B series B investment from Bain PF Combined $1,4
Slide 47: 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 48: Significant Cost Reductions from Restructuring
SIGNIFICANT COST REDUCTIONS FROM RESTRUCTURING ANNOUNCED ON MAY 10, 2023 Current Outlook Previous Outlook Cumulative savings for the period of $200 – 300M $200 – 300M FY23 to FY25 Annual savings by FY25 $110 – 140M $100 – 125M Cost to achieve savings $175 – 200M $150 – 200M Copyright 2023, Coherent.
Slide 49: End Markets and Market Verticals
END MARKETS AND MARKET VERTICALS END MARKETS MARKET VERTICALS ▪ Precision Manufacturing ▪ Semiconductor Capital Equipment INDUSTRIAL ▪ Display Capital Equipment ▪ Aerospace & Defense ▪ Datacom COMMUNICATIONS ▪ Telecom ▪ Consumer Electronics ELECTRONICS ▪ Automotive ▪ Life Sciences INSTRUMENTATION ▪
Slide 50: 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 51: Segment Revenue by End Markets for Q1FY24 QTD
SEGMENT REVENUE BY END MARKETS FOR Q1FY24 QTD End Market Distribution of Q1FY24 QTD Revenue Q1FY24/ Q1FY24 Op Reported Q1FY23 Q1FY24 Q1FY23 Margin – Industrial Communications Electronics Instrumentation Segments Revenue(1) Revenue Revenue GAAP / Non- Growth GAAP Materials $356M $245M (31)% 3% / 17%
Slide 52: Coherent
COHERENT