Coherent (COHR) 31 Jan 192019 Q2 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the II-VI Incorporated Fiscal Year 2019 Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today’s conference is being recorded. I would now like to turn the call over to Mary Jane Raymond, Chief Financial Officer of II-VI Incorporated. begin. please Ma’am

XXXX. on and our the Mark, Chief Welcome I Mary fiscal am our call on is the Thank President Dr. is Financial Segment; Laser and good Officer Barbarossa, Raymond, Chuck year for call Chief quarter Incorporated. me and Officer; January Operating and here call Officer Jane today second the you, Thursday, Gary earnings morning. With Dr. at to Executive our Technology recorded the our Officer. XXXX. Solutions being This Mattera, Giovanni Kapusta, Chief Chief XX, President of II-VI

obligation as this update reflect to subsequent forward-looking teleconference Chuck? Just of to these statements to during in events that, let Mattera. Chuck today. given over make any the it context today do any me to reminder, are Dr. We turn today statements we a only. With may undertake not

Mary really you the am have our joining have to everyone very Jane. II-VI. chance I opportunity and pleased Thank very morning performance and around exciting strong of for our the thank for world quarter. extremely update to deliver a people and who was tirelessly worked the to all thanks Good quarter you, It on to today. to the us busy

me start remarks with on some our Let first pending Finisar transaction.

To-date, required All transaction. applications and U.S. the completed. competition and Germany of have been filings the our have regulators cleared regulatory

to statement, S-X date X, proxy be joint change. although our the may on expect effective that We XXXX, February

earnest. and at efforts began integration integration both teams II-VI During in Finisar the our quarter, global and planning M&A the

prospects. I'm facilities Finisar that as against companies broad months three-year pleased to last positive I I CEO, million the independently and major to the support real meeting have cultures. based between Finisar’s with Michael of to the before our even and period. our investors. impressed been Hurlston about are the of employees. see making strong We traveling are during with I synergies technologies. cost the around $XXX our progress excited detailing than time over more have plans say the Finisar plans, never I I a Thanks the communicated of good Board the more deliver a both spent am that believe few differentiated world Directors. overlap and to their to

In addition to reception and forward portfolios. warm Finisar appreciate who of around world to complementarity merged. the once the of our together both II-VI the enthusiastically employees are I looking working

sensing positive. enabled increasing our short, feedback drivers drivers overall internet-of-things are major from machine growth growth of across creation During the increasing overwhelmingly depth emergence breadth pleased the views the cycle of from in requirements ROADMs, power virtual the bandwidth are aligned they hyperscale of great the increasing infrastructure, increasing two optical of combination. well that XD These value the of been adoption augmented the see companies. time adoption deployment the In as our with XG the many of wireless communications, deployments customers long-term about the the centers, and as of the include the transformative by and They markets and our long-term thesis and our has our combining our of data reality, of and worldwide the learning.

to scalable large We for will laser scale the indium which markets creation believe capabilities of the perform along a applications in growth. allow and devices monolithic our platform, also of platform the and manufacturing that and optoelectronic basis based the automated phosphide enable Finisar new design this with

Finisar’s effective indium will phosphide markets. in example, the by autonomous enable combination Amplifier of LiDAR For two platforms, cost of transceiver driving our the of II-VI Fiber world innovators the class adoption product based and

analysts and communicating and During time of industry valuable spent with broad also shareholders. the to listening we base quarter a

As believe the of gaining transaction. increasingly that are a understanding we appreciation the and result, value strategic an investors of

we predict the of or by filing both consider jurisdiction. are or undertaking do the process timeline long China we with companies, be the from on the shareholders ultimate we and regulators authorities in tent. decision the experienced closing U.S. each advisors to the cannot the in-country pole We in While are approvals regulatory engaged

we However, a successful that optimistic hopeful timeframe. remain be and we reasonable in will

in want led the cash of bookings revenues record revenues The record delivered flow ahead acknowledge quarter, communications its strong and customers Now performance. team from and sudden new-year. turning VCSEL to operations that extraordinary backlog quarter. our the Sunny materialized very I demand to drove Photonics during we were softness a who record XD President, the Chinese by in accelerating that shipments sensing optical quarter despite the with delivered Sun,

revenues Our grew quarter million XX% $XXX a over last X.XX. year, same we had of book-to-bill and of the ratio

generated the non-GAAP was per last EPS the which $XX from operations, cash year GAAP in per XX% Our quarterly to for cash operations first share to $X.XX record was EPS XX% was $X.XX half flow of We fiscal grew II-VI. same quarter and share million another our compared compared Year-to-date flow year. growing from XXXX.

to from grew XX%. market QX communications revenues FYXX, Now the compared

grew represent. grew we especially us the capture at manufacturing expand wireless term were our to Our to military sensing and XD than more stations than longer position investments our carbide business opportunities markets ecosystem scale steady and more overall. and of in substrates the Sales base electric vehicle XX% silicon continue industrial to XX%, and

unique long haul such growth high coherent bit the communications deployment transmission beginning was interconnects. product and of rate, metro and of driven Our XG out The by the the build in ROADMs platform for in infrastructure as pump of center and data optical China. optical the micro outstanding in growth our

example lasers good saw of another M&A pivotal from selective switch leading our II-VI This for industry strong WSS from submarine our division team also submarine strategies. CoAdna bookings pump platform. the our demand for was a OEMs to accelerated. from performance record due system our We as The of success integration leading products where and is wavelength

Many as its the reconnaissance on and from programs quarter and XX systems. the surveillance of these capabilities, continued future programs this we business that trajectory over benefit optical to be won ramps continue are military months. the we early from multiple new of in to our last growth benefits the pleased with from expected such they receive product our including as on continue intelligent those unique focused roadmaps customers Our

SEDI, wide-bandgap agreement bookings Regarding silicon recorded Innovations booking been and we from Electric the first Device drove with our longstanding our Products carbide which electronics, strategic annual this quarter customer or Performance of a long-term the who've Sumitomo substrates.

the During quarter.

two SEDI manufacturing device silicon We on to GaN also capability partnership a began carbide develop with the strategic next over years.

investments at in Warren, end to believe to this to step-up excited utilize our all R&D strategic relationship taking our accelerate orders increase SEDI coming long-term power fab the to GaN silicon device optoelectronic relationship from demand this we level of further our is in since us electronics our market that fully to device bold carbide reported in To to assets. move deepen New really an the also our RF will this and begin position will Jersey. We our The that market. customers be in are core silicon carbide devices. during our more leader next We on and widely quarters better development process included

grow. of the that the activity to market in continues As segment

that As uncertainties market are continue. we half of second and turn the volatilities to the year, aware may we

plan delivering focused the game quarter We time, requires service realize to be to at one to that priorities value setting stick our us on employees, long-term in will our world. customers, to to shareholder our a the our and

QX most to make Gary? to our We FYXX. finish on the delivering of very turn operational of our do and for sense to to act Gary and Company will I'll our best some continue a initiatives positioning With great and that, discuss to the over with a of achievements. urgency it strong opportunities

Thank you morning. good Chuck, and

Military including As accounted quarter's XD nearly a were EUV the Capital X%. was X% of and was including and Industrial Equipment revenue, function was results XX%, or X% XX% Semiconductor of sensing consumer automotive for XX%, Communications

Our X% QX in and in the distributed for X% in Geographically, the markets revenues of in Japan XX% China, revenue. America, all XX% XX% end of accounted business silicon carbide Europe, in world. were substrates XX% North rest across

place future across in the the anticipate explosion capital capacity will this of We as to major automation operations have XG several $XXX ahead This will we cost-efficient include this $XXX A to part expect into of demand expansion. that and of million markets, investment the necessary in and now in driven facilities that of assure vehicles. and end year. invest see megatrends our and go to million such we electric key significant by

our their silicon We materials, have long-term customer on as Notably, long-term agreements well segments, strategic place requirements in are along chains. supply expansion customers vertically deepening chains. lasers have terrestrial invest elements discussions EUV capacity across consistent three with our substrates pump and their plans with integrated as all with we we to the secured, position continuing expansion projects of and supply in and their submarine carbide in

Our cost and management to track. of improvements. across cost fully savings on services our are and expect quality the And and achieve expense we procure company and materials initiatives planned

We’ve quality time. Our cash first from half the operational improvement realize CoAdna successfully acquisition unrelenting efforts are the of year in fiscal in and year-over-year operations. excellence our record to the helping on over flow XX% focus the of completed integration us

two million the million Our expense M&A work to quarters Finisar and over on for regulatory of turn integration of financing. I'll on to $X that, integration, to matters the the well Giovanni. expect acquisition underway, With each efforts for planned and next our planning we team has $X and the between it to legal

strength several millimeters leverage at carbide. and chemical aimed yet four-year millimeters technology core and believe scandium week, reach program. ion to manufacturing streams materials facility to next participation funded cost refines Early broad We power platform the XX% of XXX $X industrial the by drive engineered exciting the techniques establishing on recovery the market which you, likely supplier and electronics product for to this down of Thank aluminum substance our of waste we technologies We expected address Horizon are additive November, that announced be called to applications. European for Scaling aerospace Gary and the pilot a adoption, morning. scandium world's economical our production in XXXX, competencies laser ultrahigh XXX and the recently for by selective from growing within proud billion platforms, at and based Last to announced silicon environment. sources the the markets. driven XX into alloys years, we extracted to program XXX and good new automotive the to spur we of that first with proprietary conventional silicon process the cost is announced Commission millimeters large benefits carbide

can that Optics cars be integrated in new Electronics micro we the at complement industry or driver for Infrared infrared leader sulfide Consumer Show, our visibility zinc driver an advanced cameras in lens improve seamlessly assistance As to miniature announced systems.

single laser that next such We also show hardware pass integration we the to XXX products. as At a the sensing blue filter a enables in in These which flow a and new accuracy laser zero Such and life alternative and our include cytometers angle photography enabling shift dual-band announced West pixel measuring announced advanced power which shift sensitivity Photonics product newest improves laser module, recognition. In product XD precise the digital control functions is sciences market. portfolio, several low filter filter, enables our into measurements. work-based certain process include camera. for cell complementary and red for enables faster high alignment facial will our our of laser week, which the module, semiconductor the fluorescence greater microscopy systems. high-performance These we nanometer

diodes output fiber of with announced laser for micro diode lasers we modules higher beam laser lasers. and to of power, enabling addition, materials designs shaper the capability In optics And processing. cost-effective the and advance innovative industrial pump

introduced our laser that, generations. we to me and is market advanced GXX which With chip, Mary on energy-efficient submarine the pump laser a Finally, turn than Jane. previous let to more based powerful new over module it

was was was margin operating a The margin XX.X% transaction-related in more the XX.X%, XX.X%, gross reflecting towards EBITDA and good expenses quarter's acquisition-related on communications costs. shift adjusted acquisition and flow. CoAdna the XX.X% Finisar. acquisition a and advantageous overall The excluding mix revenue. the basis for The was the quarter to for XX.X% company's or QX in profitability margin for growth GAAP pending the cash morning. Good quarter of Hello. The

this silicon an $XX effects Laser XX.X% the XX.X% saw Solutions the efficiencies, in their due and $XXX combination in QX Products carbide. Products Performance in Performance sequentially. of remained last of million tariffs compared military advanced million operating million The to quarter. million performance to of backlog favorable in benefit with XX.X%. consists and and of XX.X% higher FYXXXX to The mix in backlog Photonics, costs operating orders $XXX quarter relatively The same record of was and immaterial end one-time year contains months. XX%, tax The steady of Regarding for CoAdna, will the XX tax the compares FYXXXX and Photonics operating segment Solutions. margin particularly $XXX for margin Laser to $XXX XX.X%, adjusted XX% to year. were the this prior XX% QX in operating a QX XX.X%, quarter markets million. ship over of of rate margins, rate of across that excluding operating we margin year's Capital next a expenditures X% expect The from margin the of

$X.XX on basis. $X.X million in $X.X one-time including quarter million in EPS and those acquisition-related in in and a a amortization adjustments for reported comp, of Our acquisition The share $X include share million $X.XX adjusted a planned an the share-based Finisar. was costs, the

on year-to-date is net flow a cash debt $XXX the million our cash to Our million cash at $XXX remaining The $XX million good million. operations repaid and this hand. have from operating and the from is not million, $XX repurchase We million shares on and the combination still this quarter on any acquired the of management. and of reflects and $XX outstanding $XX debt capital work cash quarter position did working authorization. our on work both efficiency generate We

including the $X.XX the outlook ended at to per prevailing of $X.XX, $X.XX diluted is million The $XXX – fiscal million million basis, revenues which $X.XX $XXX is $X.XX share exchange adjusted March activities. for share outlook. rates. million per quarter to This include weighted $XXX The share of share million for third for $X.XX, to the planned integration amortization to at and XX.X of $X.XX XXXX, per earnings $X.XX to count is XX, share-based Turning diluted $XXX to estimated costs. comp, all and $X.XX an earnings $X.XX expense for average to integration shares. is On

the not This X.X million anti-dilutive, remains back shares. we slightly the add quarter, so need convert

may today to answers forward-looking Q&A, vary product the on conditions. that competition orders, contain turn we also that certain as our Now to general results based your you and mix, remember economic our actual questions may I'll customer statements. remind

on and materially. best based today differ actual them results the answer our will may We basis of knowledge

during the by addition, abide to Q&A, customers’ confidentiality. the we open our obligations line In our for will protect Mark, you may questions.

first of question [Operator Jaffray. you. our of line Jensen Thank And comes from Troy Instructions] Piper the

Your line is now open.

Hey, congrats team. your a off, really execution on of solid first

Troy. you, morning. Good Thank

about XD impressive. and on XX% It wasn't year-over-year morning. like growth Good first sounds sequential how pretty XX% by Hey, so aided the Photonics, growth sensing. is it quick

the CoAdna talk organically? know sustainability just the to So be how contributed of just of you Photonics quarter and business? can I'd curious much kind the in

the that for a what year-over-year. the So seeing market. looking as book-to-bill their And can ratio at I in we about the of beginnings added are of be neighborhood CoAdna sustainability, looks strong you to million see $XX probably very think

uniquely the and product business gaining very we've Yes, Jane. China Thanks, I'll not also seen business we're it's it. I derived with market have say it. offerings are was but add Troy, to ROADM it Mary differentiated. share in from we strongest was the Coherent, U.S. our would Europe. that our that and ever only in strong

Our communications access in board the market grew, every we basically across on the market. grew cylinder optical

I small optics curious. you just for know All you, the for it's Chuck, same within datacom right, say the business pretty in would you? but

soft datacom we datacom And XX% was what the quarter. this prior down this, for soft I'll say was bit year. experience little Okay. excluding was prior lower to datacom us to demand. than the – It – a softness overall and due of to compared DCI did is the compared more the

understand because any especially But give here follow-up stronger then here. the in sequentially of or in how be on with here going mix were would March to Mary And price – a segment margins. of going about gross a the kind margins business. Can sense Okay. in just us down that of negotiations. just forward QX the you, They kind how you trend quarter I gross was Photonics for March quarter? on Jane, a it's

as all, But forecast So speaking, remain said before, we to first of don't generally margins I've margin. in we the continue the on the company. focused

in and the context. think of the continue operating Because forward. even is nonetheless, gross the what's to remains look margin at gross I but in important the it gross but important going to margin sometimes, the here management forecast I'm not gross cost the margin more underneath our than the margin is margin sights to

then floor. And I'll and Chuck last the one my understood. Okay, see for here

to been just when telling Finisar violent drop I the they're I a Sorry ask, acquisition, but stock what to out odds kind to, this of curious I'd what the lot a to think be is of transaction? pretty you you, had announced want and you the shareholders. of know approval just you've shareholder know talking for

of first better shareholders we've think from are. questions they shareholders what good about some done discussions telling job their about very what have the about they they us now, had them good understand the with all, honestly. following Well, response think transaction, And what I a understand

from of surface speaking, right things think is on in the getting away. shareholders. I a we're immediate this say increasingly, like understanding not generally II-VI, But actually I'd maybe lot its the good

this what the that as combination certainly be, very a is have vote shareholders there to what are shareholder understand going is hopeful good to that a certainly the come is the We to growing are going very not combination. predict we understanding is very, but

for optimistic it, Troy, remain sure. I about And

the work. good Okay, perfect. up All right, keep

you. Thank

B. next Kang the FBR. question line of of comes from our Dave Riley And

now is line open. Your

quarter. congrats great Yes, on a good morning,

on mean, the is be from sequentially. a In quarter, question be on past, down has And Can midpoint trend based exception? your been it of outlook, it stronger is quarter. of quarter? this over go which December down sequentially First will or But will seasonality. segments March more segment just the this I the you or

I XD bit think the would for here, in be. a the what company talked the of world pattern the we that the changes now seasonality a sensing of little into introduction while

in for typically been the lowest So for example, that quarter. X/XX industrial, has the

the we've be will could whether stronger particularly lower working not QX So working year, a revenue pattern while that over across for the years. the quite not quarter, than necessarily sensing January we've the I a driver is that had stronger, same Year the QX say, Chinese the fact about a factors. necessarily also strong one, the remain over or that in number of probably think the across one the Number past opposite, lot of for the XD Christmas Christmas New and driver talked March in a not is XX is but quarter, – five

is So as that new say of well. into I'd and entrant a it that's the actually mix part

to from we’re to where and that look million think what here a have. in on really landing the necessarily seasonality difference want between about the think not the end that's $X at you markets coming on I really we in upset big of quarter So guidance is natural kind QX the and

consumer about how March about stuff? quarter in should in And XD talked for quarter? excluding on some the or you December it softness we sequentially mean think S. XD other I was S, it the Chuck, up down And

just I X/XX to XX/XX itself normally, think quarter the quarter. is said, X/XX the lower stronger than tends than quarter I as be which the

quarter. that's answer. X/XX I on up total little think was the X/XX sum was the it So And a bit strong. particularly a of

Is give XD that X%. they other bigger about how a than break you consumer S consumer said was down? XD S you flavor us or? No, plus Can

get speaking to I to if of that but going going S bigger level see obviously, smallness. into consumer XD the probably generally you give. fortunately that. most get color of We're that not we're that's But than

XX% between you split Can China, revenue. rough lasers? then was And versus split on it. – it industrial of about give a optical us Got

of half of portion more be it Well, to than more a before, three than quarters said I little as industrial. it the bit optical tends than

on timeframe shipment what's year. is it. know what lastly, Got silicon one But then the And orders? wondering I just carbide bookings? carbide, the backlog the And timeframe you typical were for mentioned for shipments? that you silicon the said

equal First and we the silicon divisions. carbide, say book-to-bill the only speaking, of strongest possibly very that the bookings silicon by in I all, we only strong second for remain military. bookings the carbide probably or have give to the But don't very, to generally product will have that we

OpEx. I Got one on it. have question more

You investing I in how OpEx R&D. in silicon mean, terms should we think said forward? about carbide going you're of

QX. tick I important. So the that a you the the is about for with respect QX very, silicon required certainly up on continue investment. against should up But that from least Finisar. to R&D hard second to for the cost at little the down integration – probably going against Chuck's That's devices, work think company do carbide R&D, start G&A. in we tick comment The Absent, the investment quarter, to I bit see should very – for to of course, acquisition of think pending see

you. Got it, thank

Thank you, Dave.

And question Marshall line from of our next Morgan of Stanley. the Meta comes

now open. is line Your

thanks. Great,

make with to relationship? kind and of that customers came kind change customer that widely seen orders just First change the was in of was on due just the XD during kind kind intra-quarter, wanted what any sensing, large not that smartphone of sure to in quarter of

is comment around due was we announced on mid-quarter everybody the change the the the order that – right the the would customer. Finisar No mid-quarter But information exactly in yes, I acquisition. on say saw time

sensing in with our customers. And XD we remain good standing

the customers on just as far in given of just And lasers or got doing seeing customers? kind China it. weaker any China China well still are industrial guys change industrial kind you what points, very But Okay, industrial are business. clearly, data then of you as

we're grow. laser continue to compared laser Meta, grew customers to continue is Our that expecting to and both same for the we industrial China the again, quarter business serve to – direct year. last going and business mean, in quarter fiber I

of of – of growing that is terms just same sorry. Or just quarter-on-quarter? still from of or ahead, laser kind still new and that growth, down in is combination go I starting? – addition from a new customers breaking customers – companies maybe that mean, it kind of And is

don't don't would First is of notwithstanding the all about say not generally run, would industrial the Laser – customer are But customer speaking, what's we the by that all, think see I of give Power we the not to adoption I that say going continue breakdown I think is – customers. to discussion, application we customer. our of base, this I new diminishing. our including entrance that in lives into across long

Yes, list. it's that bit ecosystem customer grow little the other will the a it's the breadth commented the we're and a addressing. we those mix ecosystem. and large past faster a market But than and large terms a of have in demand significant a for – times. it's basically in depth products of It's we've us And a sometimes significant

I’ll on. thanks. Great, it. Got it pass

Thank you.

Jim next our from of Company. Ricchiuti Needham of & the And question line comes

line Your is now open.

Thank you.

want on follow of again Just industrial. the tone business up in to

that mean, about because China, sensing. you particularly that been Solutions so I look year-over-year Laser much and XD included in Just bookings your there's and I down talk at if in

just about to how a concerns bookings is for were demand? year-ago of versus or QX the So I'm light quarter the as some that's But overall quarter in softening you sense a give impact there the to have well. industrial us people had the presuming in as way either

numbers give data North Giovanni. a just aftermarket this say about point. the a we for company for I'll in would – Jim, bookings America, record ever. and have received I the is We the

would that the bit lasers, months. a kind explain but in majority's the little next Of two the laser what utilization to due course, of that's can be

If an aftermarket it's for month you have comp in I one mean, the I bookings significant. record in think January,

in Now the North growing also world. see but of we America, it's the rest only that

So tendency quarter. the we change versus previous – our maybe the

market growth I is strong, there that last on no XX. still which share China, doubt be as strong China relying but of they're we’re quarter our than more is the are XX. customers So we not will as than think maybe still more believe in

and material applications, So so to diversified, micro goes is goes from so very that through many – macro it's it it processing, diversified.

that's China sales. picking the seen So today what also North we've and and Europe on America up between aftermarket

things can just bookings sometimes point systems to if needed. or referred the go when up. replacement One the bit ship. usage Giovanni book of in of little the installed of bit that as pausing the for not to little down, maybe laser newer a a And the industrial what a for in the do little as are aftermarket, sales newer inside tend with says, out in the They come in year. base is bit necessarily a sometimes the well come orders we to That's as systems, and

we consider a book-to-bill to high. I would to that's that be this in not So cause it to be rather normal. necessarily going give rise slots say than good to the bookings – would that particularly

– or me question in implications any from on – Okay, or any the that’s of is quarter? of current this the last And parts – if any aware I'm helpful. be of government, for really you Or the see business impact is business the at it to I'll that for all we U.S. if wondering not an But which shutdown issue past. obviously just need the there any in you is quarter guys?

particularly material announce operations it's the the that HSR – of not as has to able company. lapsed. Chuck for period would the to was We I actual say the

much. speaking of move, but see generally effective really when the but of on have there the the the that the Chuck result timing that not mentioned on something may S-X not we operations we of company, shutdown the some could So date activity a as

in delays minor Yes, in business. military business our material. activity our Nothing proposal

you. thank Okay,

next Silverstein from line of our comes question of Cowen. And the Paul

open. line is Your now

guys. Thanks

more review you questions. one know got than geopolitical the the First I sides two to I've and China question and because relative I risk Thanks. U.S. one can but occasion, on in equation? been off, Both and or on China including asked apologize you've more the myself, both in this of

of on ever China first that of others because I've saying all, are the I been Well, aspects predict almost We have I'd very in the that fact and have China there certainly call five have market love remain just – that. here, of China. watchful only heads there But large forward. in not every kind hearing really the we footprint China I economy is obviously, large talked going a less tried is world we we since a focus we've normally, start Chinese business that about the usual off at So That probably of by time that business for running serves tensions all footprint than also around. while the outside right? all – the market mean, which let me least but years, normally to have we we about us and we easy say don't about that had, market. trade are serves down, to the of think as

very a others. it's So fact, us, interdependent ecosystem for in

point, are certainly can it, to keeping had ground are always economy. manage ears are to So this about while of would it turn in there's me Chuck say that at very it's more let I we sure we U.S. it differently over we watchful – to an the our that watchful run on than we about economy the but past, how the making than

material to that have QX on material, QX, With customers by didn't the in to Okay. still unless we people of And that's regard company, an action we the have impact view don't XX% and forward, any government. have one tariffs remind any U.S. being going any there is our we fact. I business. the them would don't

comment of the on a and informed a the managing we the is focused this do is as bounds risk, that, said of a our between negotiations governance, we're outside in are to forward. approach stay – that that's outside and But taken and I risk having can make company have to where aware the path systematic we it. prepared, the well it all to and cognizant that just the we perimeter control. it, relates business Now and it responsibility enterprise-wide would general executive inside We're – team we a like that operations of of bounds very

right, if All more may. I one

business. months top You about? next are obviously most three again, both know a you over excited excited different drivers, And standpoint? what have concerned profitability XX what are from concerns? most are a variables, you a very I about? lot greatest you And most Thank are what about of or What there revenue, nicely two are but the the Your you. diversified

optical I going is in momentum to we have communications think the continue. that

out in I the constraining of continue it lines. carbide that simply our to by we're our going add. the capacity is We're at to of some think amount can we business sold moment grow, silicon

serve so worry how we customers. a capacity And fast that's add can and about

and on second of business to here EUV, kind And incremental may Our the semiconductor adding into half semi grow. sustained military feels expecting, to We're at I'm the supply of remain cap business, it's for impact that XD will the capital our steady, continue. be in quarter, business that like will kind continue believe it the going of industrial December the the on of the EUV, chain. and equipment our in the year I I'm business capacity request we solid. be to look sensing that just rest the of growth seeing thinking

be thinking well. we to that that a notch we'll So as as up can, take we're soon as able

it. guys. Appreciate Thanks

Paul. you, Thank

Yes, thank you.

line comes Diffely our And of of Davidson. next question Tom from the D.A.

is line now open. Your

handsets? carbide couple ever stations obviously, nice momentum some on EUV. and A the of silicon morning. good questions, base technology get into this Does Yes, the

Which asking about, technology are you Tom?

carbide… silicon The

silicon On carbide?

format, yes. either In

base inside proposition is knowledge, value To my infrastructure. the the for station focus the

– near-term, there screen the talking the about radar knowledge. my thinking our it and on and But radar our about to people screen of that's or in partners, not So may it. not be

a carbide. constraint lead ago, the is capacity for there’s What mentioned now right silicon on had Okay. moment And capacity little a space? meaningfully in time to that you you add

you to that? Gary, want take

in and to it a Tom. Yes, probably time doing with installing on and Lead equipment bringing based sure manner. in the customers able in XX-month range very is and a we're we're long-term capacity agreements to new on organized of nine rational secure terms the

previously Okay. well. about Mary the businesses you That mature Jane, then makes And some sense. old, of talked finally, doing

of COX that revenue kind comment recurring have the of that streams? you more for the just Just is laser mature the more curious, general a business health

is businesses, as we – I of the doing very first the all count business, some communications on core so very, business optical solid. and also had is yes the industrial lot whole in which in core think, core saw growth of frankly market, a of market Well, nice the also military very the which very, quarter the a The there's growth in tremendous some quarter.

very were look kind solid we it's a base. very, So yes, of underneath, fundamentally if product-by-product, to even

you Thank very Okay. much.

question next of of Benchmark. comes The the from Mark line our Miller And

is line Your open. now

How in you add for my bit wondering is carbide. silicon in down of business out breakout break great is or electric greater a Let silicon could vehicles your I vehicles if of XG. little more congratulations carbide exceeding part me a does XG that electric another quarter. was to terms sales

Okay. Mark, comments. I'll be to thanks that. happy take for your

the have than place business and for electric sheer over X% Is for And for ago the power for our for silicon our growing. factor electronics. itself time, one going on RF GaN power drives, actually electronics for power this we motor and the of where of for it. revenues whole sure But of semi-insulating half the XX% are two vehicle size of the to were I the quarter think the may biggest revenue substrates inverters the news is and that even now stay The product-line. it carbide like, generation also is mentioned or proposition were market in that and fair? to power good industrial quarter basically given of their more revenues silicon infrastructure product the of part the for and value carbide than we and see crossover, the that a the growing electronics carbide, be of the correction more going surpass so is our portfolio the substrate silicon market. is the

significant of had very just I'm strong indicated the Lumentum diode most their saw which been business, you. year. last quarter weakening wondering, which Thank in for they we're seeing diodes. in

diodes at used Well, are the end markets. a variety laser

markets, XD Yes, I sensing… which for know industrial, don’t

was They just said significantly. it down

just might more that they it not think semiconductor. it didn't but be from significantly. weakened said I'm sure they give I color, much coming

steady We as submarine, whether with applications seen said it No, have these, pretty is we the the industrial fab. board, or it demand I the for for think so high for the power said pumps. again, earlier, lasers same telecom across I introduction from will come

seen we’ve pretty that strong think a I demand. pretty,

very steady same it's nice over growth at Yes, year. period been the last QX,

sales. missed if of I'm it. industrial – Did out sales as out give you sorry break percentage total Finally. I

we Yes did.

under Yes, XX. just is it

you. Thank

Sure.

Thank you Mark.

next our from And the of comes Deutsche of line question Sidney Ho Bank.

Your line open. is now

good and Thanks A morning. of Thanks silicon questions. on for questions my couple taking carbide.

rate about I have talked for silicon carbide potential think the the in growth bare you that substrates. your past

also silicon Now TAM there you going talk on similar have kind that also of you represent substrate can out can dynamics guys? kind talk what does of that – GaN And carbide the you incremental bare for competitive about is side? that about to to you

the as from of what TAM for about TAM the devices point the it's for as TAM is a think large we So substrate. three view, about I talked that times

competitive wireless one. dynamic, between and true to that's RF. I’ll and respect So, Chuck With that let take the

substrate question GaN that as It's carbide versus on the silicon the Sidney? question. your your really Well, between device understood Is difference about growth. I the

Correct. Right.

All Okay. right.

with making the we silicon Innovations. will a on Device and based carbide GaN which months announced said the we’ve have to Electric be about for substrate the regard that device, on we think on in devices I couple we Sumitomo back, carbide lot agreement silicon GaN a

drive market growth stations. are to ability relates is they penetration basically GaN for on growth, terrestrial and carbide the their as including continue market to overall our the our TAM into silicon ability and to going market control the base to the in So execute leader to their today it timely wireless

have can follow-up And And with release XXXX, cost regards first press advantage My millimeter program guys us do XXX. excellent. is you to the timing millimeters. cost millimeter with in crossover Horizon the when substrates millimeters XXX wafers? XXX of using on cost a of the remind that XXX XXX you with question the you is Okay, terms maybe the versus expect the announced

Hi Giovanni here. this is

we XXX first about the well we capability that first And ago. XXXX the to So, as were – carbide I yes I think silicon for millimeters the with size. think announced come as quite some a of size the time quality kind out substrates

be we the the I in think we the first probably a world program. the program and surprise it is pilot only the supplier community right, financed that the we in are will that European believe know you're be by will that

attempt the millimeters. to from it's to said, XXX we've As millimeters scale first XXX

And will cost of course, substrate eventually for of we the the of of they applications. cost terms square down will is in as cost, too. per the said the come Now script, in that down idea the course drive millimeter

the quite it what the we're future, the but to elasticity So obviously going on an not or substrate price be is say that of demand the will a expectation in today, market. the will near create is in

drive happens it focus and that level get equal that's to with and XXX on to when It'll at one to inch the and going a cost to to XXX fabs be and This the the or the access happen at more able it millimeter in any in take we going have time makers that I or over XXX which device to to and for for to that devices eight marketplace innovators be for think both on and better, And this intimate be elect, program the very we're then find the to is of is XXX. device have the valuable will us it to players the fabricated and demand. millimeter, differential time technology. customers but quality reliability the yield to

the The operating switching for very last income record just great. me, That's non-GAAP to one back on Performance good margin segment. a May a Products have by be operating basis.

I also think it's margin. record

the by about Will profitable Performance forward, most the margin, segment? If we be fastest also operating and segment? you segment how should think be consistently Products look growing

really said speak, areas question of a think this lot to growth. operating XX resting think Performance So margin seen all, maybe that I that but have now so before do for it, There's I've they probably for Products I every race, XX, and between XX probably first don't the assume think I delivered quarter. for and that to we've it XX that about take is margin of the be fastest you magically segment and should being six, time. seen of where, Military I with the know don't eight I every we've growing the segment, Giovanni probably it even particularly will lumpy necessarily quarters. XXXX program for Horizon part steady if But and respect program, the always to in the not that be not with more revenue. said single even that programs mean, the demand like can from are they just that the periods no

see kind absolutely light worked has So, Products its really really, where But sought own, may increasing see growth they’ve hard that growth will we well for develop that we've very as segment being you see to of as at we're and into we communications. should see rate. Performance into is here good much come very of in year example every I that product pretty customers just coming think, after or about an last good by very periods in seen, optical industrial but to if of the we the day is

also I other XD pickup important the down period, in job think the is talked something to think margins for about I sensing the like the Performance a the the working solutions low-to-mid-teens nine. laser respect to operating for high-teens really to segments, probably seven photonics them have Product in team saw though margins – the think in a getting I with their and margins to we've if they their margin done just really masterful goes even keep the to

helpful. you That's super Thank Okay. much. very

Thank you Sidney.

comes Craig-Hallum. line of the Richard next our And Shannon question from of

is line now Your open.

programs taking type my had for follow Products the in associated December Performance To contributors? well. on that highlighting silicon Maybe carbide topic of was up other what quarter. margins the you Military with Thanks or guys. degree as Hi versus again excellent your I'll questions

given military contracted actually the is a work a that’s margin to, say of margin that actually I'd some that the speaking operating it's bit margins stronger. the programs but that’s the can how honestly gross the was sometimes margin – certainly military be business, I little good operating

them. the on revenue certainly their So helping yes, pickup hand, is in the one

I does area, carbide Precision business think true their very, with team. a is very thermal same margins as I the Ceramics the silicon thing like management to but would hard keep is say our

Okay, that's helpful.

quarter. expecting over jump you're very Optical to to help year if March. didn't it note if a what you I split forward, can the you a of Obviously Maybe view. from while you going March me at doing for in calendar that specifically business well, between good had point maybe about Let you us the could rest business ROADM bookings end that called optical ROADMs you I guess, trend the know specifically the us look of communications. directly, and

would we I'm – Photonics but say, it's all, saw noting wouldn't kind people bookings then now and lower Honestly, while. but business some Optical and at start little me into a revenue something nice bit backlog what that's the at product, more moved point, first because company, don't taking not materialized give the communications of really right, surprise let it for So of I from a really segment them that the quarters. we Go last strong whole worth few That very strong alone by bookings forecast we of products, beginning and market. the Chuck. very, and optical we're is Then like we've the for sure by bookings very, some as think I in a looks saying can’t for very sure for said, if ahead is communications. have seen we the really

the hope Yes. are the and out. report just to was us to spoke we We sold build. really we're to going pleased. to capacity do it to continuing We're the and asking add our People continue is in will customers. best can we're to service momentum us an morning. we this a I He happy indicator for booking – that and month had X:XX that would of to morning add the it's this January record to Sunny that I

the future be going your great to me. with next in and One year. give the us you more android on sense Okay, customers Sensing. otherwise, you're any kind engagements looking there, overall hear. over just may the out questions XD doing just how a of on ecosystem Chuck for both could A if couple of thoughts

Well, his Okay. ask business. Giovanni. I'll That's

off? it take please Giovanni So

Yes.

consider our would that continues it's over engagement products, first new quarter. The a chips, can – for long, customers, XX new consider growing as the, process in to – six inch wins. be interaction, in that say us other these We customers know level can when new have quite applications, And the from believe platform believe time I months as of go cost with the the design quite new somewhere been on designing engagements. we intensity several that new have quantification it's So of don't off a chips, international slightly strongly that we process else competitive we let's well qualification, we the capacity to which this of to the the with those will ability say and some interaction, remain, obviously lasts perspective. considered than XX, our basically you

So we for think of going the very good opportunity future it's to be a growth product platform.

be possibly big with I that'd have think I of well Okay, standalone that's and I you Chuck, if of people is get recent the – long me. that given a help wanted us last here. if Finisar helpful. for One to great. you out here you've quick XX% can and you us in think to a any sense combination if is know don't Huawei Huawei Obviously both question been of time last trying are sense for interest topic well, news of customers. very there, how days a The of can a give that clear

I all consider Well, is that going no have customers. to we that important. of We the about our think say XX% most we're this customers

continue innocence. generally guidelines abide think that us, customers other to are are of key customers important them with we XX% and, all obviously any but we will people entitled obviously that to along by I but have And I serve presumption no We to the we Huawei speaking, are given, have

or optical Richard will to Giovanni. single sell every need OEM communication And We gears. out there. modules is world this components The

we'll So, in components demand. gain we’ll gain share, everybody. someone may sell lose what from kind will else share, happen They overall will to may is independent share, the of opinion to lose Huawei share, market they my

for Thanks good the work the up all keep guys. Congratulations perfect. Okay, answers.

Thank you Richard.

more. to time do have ahead. one we think I Go

All right.

Our final Capital. come Savageaux will from of Tim question Northland

Your line is now open.

didn't optical a ROADMs big on you photonics was and telecom photonics you growth contributors mentioned if we make quarter How A strength. kind XXXX? now that, EMEA China a I and following China characterize what of if can What can was of of orders in follow of year-over-year. Great, as of Were demand either in predominant there. And question up driver, characterize the double-digit China the and, think had up you're was to you optical sequentially a try XX% over relative in can there business, to will. communications or elsewhere saw ex-China it up as the wanted, in kind going ex-China communications area. to driver. ROADMs terms you peaks I some in seeing terms China other if you optical the

was it both substantially. grew It in us, demand Europe that I growth it strongest in and and seen Well, the on comments Okay. in clarified our my came ROADM from we've U.S. in and customers China. that

saw deployments. So I seen that the the we we it's think was a China pickup ROADM level deployments based to broad had a are quarter before. first we seeing that But what not

and came the increasing have of probably we these you way out the subsystem of now revenue clearly that's comp, and their switch the And can and from deployments level the But we not be momentum component say we're able the the to core a at even selected So best there. weren't to here level. that key is going tell at low because we are supplier addition, when I Tim, how to saw capability. around much

We about as are roadmap in the well. discussions now

I we're to the don't going was to continue it think think see I just one quarter. So this.

it's like to feels it fact, continue. In going

a optical, to would center Great. data center, If the I the and in data continue? could follow mentioned that interconnect. up and kind you Is you the of that data expect a quickly, think outside bipartisan I trends center within case

question. on a of just part hang your first repeat second, Tim the

think I said, said, you You

the between a And I in center that versus transceiver is happening center versus data data talked in trends outside. interconnect. optical bifurcation what's inside side about

that add little make Just asking a sure that I right. wanted heard to bit. And to to

year. including tried product of We the so to And the very, and how transponder, it flagship, had we interconnect, to and as compared and of prior growth is, strong this coherent is incoherent explain our we has drove in the includes increase increase to unmatched and quarter leading the basically the in compared the size its data a a pump share transceivers which a these the basis substantial transport, center quarter especially micro market. And to very the segment enabling it, described gaining in relates last this same market, demand. the

the we the and that data quarter, consider tick a down experience compared On center client datacom we prior not to including intra enterprise much. did by slight

congrats on a quarter. Great. Thanks and great

Thank Jane? for Thanks you. questions. Mary

joining you call the morning. X, May FYXX for updating the to all for and X:XX this forward at and on call on us a of your think to with today. morning. day. this thank our joining that us I XXXX quarter excellence on We We our ends See in soon. great So engagement scheduled of third for the fiscal want you look also Wednesday, now you Thanks is results have

in the Ladies disconnect. have you does all and day. gentlemen, participating program for thank you and may a conclude today's great This conference. Everyone