Finisar — Merger or Acquisition (May 2019)
35 slides from Finisar's merger presentation, May 21, 2019
Slide 1: II-VI Investor Presentation May 2019
IIVI INVESTOR PRESENTATION May 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: Update Since the May 1, 2019 Earnings Call
Update Since the May 1, 2019 Earnings Call The U.S. Commerce Department placed Huawei and its affiliates on the Entity List effective May 16, restricting trade from the U.S. This directive affects certain sales of U.S. origin into the Huawei supply chain or that of its affiliates. Following detailed
Slide 4: II-VI At a Glance
II-VI At a Glance
Slide 5: II-VI Overview
Regions 42% 21% 8% Europe North America China Japan ROW Q3 FY2019 Revenue 8% 21% Segments 28% 49% 23% II-VI Photonics II-VI Laser solutions II-VI Performance Products Q3 FY2019 Revenue Semi. Equip. Life Science Other Military 47% 25% 10% Markets Industrial Optical Communications Q3 FY2019 Revenue 14
Slide 6: 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 7: 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 8: 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 9: Acquisition of Finisar
Acquisition of Finisar
Slide 10: 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 $22B 24K+ Note: Pro forma Revenue and EBITDA represents LTM 09/30/2018 for II-VI and LTM 07/29/2018 for
Slide 11: Strategic Window of Opportunity
Proliferation of Cloud Services Strategic Window of Opportunity Now Right Technology + Right Team + Right Time Inflection Point CAGR 16% CAGR 20% TAM ($B) Combined broad base of talent, technology and manufacturing enhances our ability to hit market windows today Window of Opportunity1 Electric & Au
Slide 12: 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 13: 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 14: 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 15: 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 16: GaN/SiC RF Electronics for 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 17: 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 18: 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 19: Significant 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 20: Strong Deleveraging Profile
II-VI and Finisar have combined EBITDA generation today of $570mm1,2 including $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 ongoing abili
Slide 21: Antitrust and Competition Clearance Overview
Country Current Status Expected Completion Date Germany German Federal Cartel Office (FCO) cleared the transaction on January 17, 2019 ü Completed United States HSR waiting period expired on January 28, 2019 with no second request ü Completed Romania The filing is under review by the Romanian Compet
Slide 22: 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 February 20, 2019 SAMR registers the filing Phase I Registration Date + 30 days SAMR conducts preliminary review and contacts third
Slide 23: II-VI Additional Markets
II-VI Additional Markets
Slide 24: 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 25: 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 26: 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 27: II-VI Financial Summary
II-VI Financial Summary
Slide 28: II-VI Segment Revenue by End Markets for Full Year FY18
End Market Distribution of Full Year FY18 Revenue Reported Segments FY18 Revenue FYY18 Op Margin – GAAP FY18/FY17 Revenue Growth Industrial (Automotive) Fiber Optic & Wireless Comm. Military Semi Cap Life Science, Consumer, Other Laser Solutions ** $406M 9.5% 28% 67% (1%) 12% 3%* 7% 11% Photonics **
Slide 29: II-VI Segment Revenue by End Markets for Q3FY19
End Market Distribution of Q3FY19 Revenue Reported Segments Q3FY18 Revenue Q3FY19 Revenue Q3FY19 Op Margin – GAAP Q3FY19/ Q3FY18 Revenue Growth Industrial (Automotive) Fiber Optic & Wireless Comm. Military Semi Cap Life Science, Consumer, Other Laser Solutions $105M $97M 6% (6%) 62% (1%) 12% 5% 12%
Slide 30: II-VI Financial Trends
Expectations 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 9M FY19 $221M $114M $509M $1,114M FY18 FY19 Gross Margin 39.8% 38.5%
Slide 31: Appendix
Appendix
Slide 32: 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 33: 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 34: 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 II-VI Consolidated Summary of Typical Industry Non-GAAP Adjustments Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 Q1
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