Coherent (COHR) 12 Nov 192019 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the II-VI Incorporated FY 2020 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] Thank you.

hand over to speaker your like Ms. today I'd the to conference first Now Chief Financial Raymond, Jane Mary Officer. may you Ma'am begin.

II-VI being our Thank you, fiscal call Chief at the Mary year Jane Welcome Paul and today good Financial November Chuck morning. XXXX. With Officer Dr. Chief Executive Semiconductor Officer XXXX. the and Chief on This Strategy call quarter earnings the segment. Dr. first Compound I'm me Tuesday, and is Officer; our recorded call is Raymond, President XX, Incorporated. Mattera, for to our Giovanni the here on of Barbarossa,

Just statements forward-looking in today the a reflect today. to to obligation do we given during today of may any only. We events subsequent as make reminder, any context not are these this update teleconference undertake statements to

me With over it Chuck to Mattera. turn that, let Chuck? Dr.

Mary who Good everyone Thanks, are joining and to morning, today. Jane. thanks us

minute veterans defense the Before take II-VI's to we all a long-haul and the in dedication us strategic of thank I remind and position our the would begin, importance determination over they aerospace to market. of and of like as

II-VI. largest we September the times in the of started another we past XX, As acquisition the new in chapter have our Finisar the evolution years, transaction, we closed in XX many have On history.

only of companies. both as has a the platforms manufacturing result increased one excitement since day of Our and of the technology complementarity

is lifting will are pauses quo. market in we disrupt that heavy some commensurate time Despite needed status normal immediately case with the conservative we an the the our that confident acquisition, after and

we Semiconductors. of global company and optics Solutions each and us with we circuit optical larger largest position The end of customized well leader in new the the markets. miniaturization laser, Compound portion the along expand Photonic subsystem in of to and our a of combination automation platforms into semiconductor technologies the integrated believe result acquisition, undisputed the component a the of the As communications market and and supplier are

fully rapid hyperscale we electronics our markets laser to phosphide science enable communications, example, automotive, a to center applications For diagnostics consumer data few. capabilities life multiple across optical expect growth communications, indium name industry-leading including; and

believe of more quality increased competitiveness yield ultimately in adoption ubiquitous and greater scale that Moreover, result scale. we will lower and costs,

seeing we fact, our in already are coherent tremendous indium growth In phosphide-based products.

innovations integrated recent components XXXG, highly and the latest integrated leading coherent laser for us Our have analog into in propelled XXXG phosphide indium pluggable and position of transceivers. generation XXXG circuits a

design and to and position. committed and In before multiple establish the market us are engagements coherent fact, strong intersect we the number a we've order in resources already opportunities one had for significant

Our investment focus is being broad active guided engagements. design we customer base over XX whom by our with have

Datacom see both platform We differentiated and for of is the low FY offset for profit part and the XXXX. space help fact meaningful revenue expect a that coherent Web the technology XXXX in This cycle the off-site prepare as will players products to in X.X change.

more detail. in through coherent with our will our XXXG, discuss from XXXG high-speed growth innovations, in cycle and which Combined in centers data know-how help next the spur transceiver will XXXG VCSEL upgrade Giovanni transceiver

that address to the expanding can XD are opportunities from continuing We of work business. new VCSEL at number Sensing our we

the the I Texas plant. in fabs weeks world's of Sherman and facility the the have newest known readiness time Compound six communicating good at largest personal capability deal operations with to last my Semiconductor and the spent the us. employees a customers of to understand That of is and

growth capacity, development sufficient visits, I wafer infrastructure currently During MOCVD cycle substantial fab generation designing for market-leading epitaxial a world-class in-house team my well-positioned and well-equipped and the a underway. found and next

a shipments in quarter, required that attention well-positioned delay. begin September some buying quarter the is a technical was to causing work additional in qualified was fab the December and issue the Although and

customers to that Sensing in We that largest are will our March we working view been to the today and begin implement closely qualify of conservative the have quarter. is as improvements and XD shipping identified, our with

We to quickly actively the are sharing accrue. best synergy of the that practices expect fabs between and benefits

accelerating stages is to process. Warren, approval final and of the the Houston, have been Pennsylvania from the well. meanwhile, our the we up improvements extremely through forecast above ramp are over fabs We our shipments and the asked Jersey New capacity and In that and going

start to With very a the good bat. got respect synergies, of at off to cost the crack we

chain running portion of supply us underway the over three At process allowed the company. identified day goods ground of first the years. for pre-closing cost the point, very to hit Our our this we largest integration of combined robust of on work sold million synergies, a planning the have $XX synergies

also Officer which identify Chief goods is synergy new OpEx. sold Sales our revenue with million working to three-year both his $XXX to will cost from total team be Our and accretive the of projections cost synergies,

at Customer the engagements we've with OpEx to level, just that a good with fees already the of a personnel, C-suite synergies have At remained the duplicated accounts. is in momentum building our audit name sense associated key costs, including directors' of positive examples. elimination and part very and insurance, few them, discussions the corporate achieved we fees

of separately that Regarding the and operated Finisar, regulators held to China's competition. they leading preserve caused separate business, to rule hold be the to and WSS believe combination we of that Finisar, the WSS order the potential market II-VI

the been of submitted plan both revenue WSS for as thriving already our approval has and we look market to grows. teams Our forward

the and electric in I computing, communications, cloud some summary than XD together. in long-term our confident Sensing vehicles. to would enable comments to all like markets I Now, our megatrends wireless, driven optical tie our XG to ability it ever am including more make growth, by

a and roadmaps as our future. optimistic along increase customers leverage broad complementary XXXXX many with the with fast technology positions are scale, growing will the customers have Our why innovation our leadership us and calls expanded now through We we our larger reasons and existing strategic value creation over significant much largest and markets. customer plan product which shifts advantages, about in for insights outreach, unique global markets into long-term to drive

In billion are top of potential $X.X platform. which account serve, of being fact, their with sales for to excellent look customers our the great future over of our the plans. growth reminders whom us power that annualized this partners We are confidence to we in forward expected

enabling expand markets the our on Finisar Looking the more integration close today filling as technology planning back and we the up our addressable platforms mobile of that intelligent, electric. world becomes our of number acquisition change is increase details September. objective worked this strategic and the acquired broad and the leading years of two We to for it in to experiencing while connected,

to note slowing announced by acquisition conditions the year the a we associated global step ago, a adoption require down the efforts especially up protracted will important of cycles changes our in a to that effects over This achieve trade us technologies is market us economy, market trajectory new a industrial side and of since some with a dispute, headwinds. It brought on projections. to our to near-term onto challenges operational created get have long-range

and that to continue market structure we with the quarters simultaneously further it Therefore, to increase top the for line will in take to cost realities. the to and structure will assess define to its steps we one business gaps operating new our two our align after

on, we quickly. have step-by-step, With our while all cover up executing clearly going operating are remain the working focused and gaps our meanwhile, In leverage. the closing on the leveraging to is that we technology, sleeves working our and ground improve strategy, to rolled will identifying

each and looking We that have some quarter. work I'm we to capable steady are get you yet level forward of ourselves of able to report being performance do to to the to extraordinary progress to

I'll Giovanni. Giovanni? turn that, over With it to

Thank you, morning. and Chuck, good

As the market. be combination in ranked and of a optical one communications the to result II-VI Finisar, expect of we component number

which micro growth value from core demand vertically communication world the subsea integrated the our expands of and we to XG, are infrastructure across seeing the With networks, chain. increased tower

a in submarine out demands $XX are sold accounts million backlog. alone, we the and pumps example, for position over pumps in for now of For

XG also increased demand coherent is transmission. driving for

roadmap and exciting communications from subsystems. for modules an to coherent have components We

we times generation revenue already integrated As leadership for year-over-year. are this anticipated are Chuck next to XX growth meaningful forecast seeing fiscal with we a mentioned, a the highly modules in the of and generate position year

We work ICs within integrated excited about detectors, phosphide and Finisar, including indium are on lasers, previously customers were that offerings subassemblies. with captive optical component our also very

is Finisar of for by will previously enable billion of XXXX. laser quarters $X.X already communications device alone to The us designing unserved market addressable work serve are though The shipping total a now. by number a samples we take will

QX FY of begin expect XXXX. revenue We materialize to in to

of calendar -- multiple about for from XX% ethernet but of XXXX. produce recover customer been the has we it to revenue we those underway centers, down XXXX users in transceivers, -- second half market calendar as the data expect For XXXX, have depositions in the

new products While data for the will XXXG, upgrade products in and mainstay centers. XXXG XXXG, cycles XXXG remain fuel

the Our modules development increased with driver us has positioned data empower highest and market the debt wireless stations. to nitride silicon speed is for to to carbide also XG Datacom for centers. in electronics gallium base well hyperscale go

semi-insulating in we surge for for The conducting in conditions. demand demand even us pharmacies the retool to silicon carbide wireless demand silicon electronics our for to QX, the to required saw rise proprietary due portion a temporarily microeconomic power During in applications, wireless shift demand. carbide as a of diminished address

the being market stations the worldwide, in and XG XG largest introduction of rapidly base handsets in will XXXX accelerate three next years. expect that further growing We deployments China of with the

recently ago. millimeters complementing four millimeters carbide We years amplifiers our introduced XG world's use semi-insulating substrates, base XXX power for in silicon carbide conducting silicon stations, RF for first the substrate introduced XXX

our We also for XXX secured source substrates. a million contract millimeters sole $XXX

silicon for in to three in our capacity the Northeast three are process scale the market-leading a years large in times times substrates. next expansion our the for projected We of securing five carbide facility

industrial about decline a XX% from most the the coming and to Europe. decline year-over-year Turning with of We market. China saw

conditions geographic Given believe demand such XXXX, overall and in only solutions laser powers system enable This that the processing we increased calendar the China, of our experiencing we of new of materials as most for for to but sales, not higher in GDPs industrial laser will adoption key drop seeing long-term processing automation. that level of that into affect customers. we are return and especially persist growth markets, innovative are that may an though

invest continue platforms. a technology we in our As result, to

received XD laser for XX battery automotive In vision welding the and fact, a laser enabled machine recently certified for welding software safety first unassisted high-power our for of platform over kilowatts for order remote by hub released automated we and applications, our tracking. proprietary, ultra seam light line cables

on first-to-market in be XX FY for positioned We this powers. XD to based announced a share market, well positioned than after in for our years we fab Sensing, very growth record to With revenue convention and X-inch 'XX our are vertically power the lenses world's year. We at respect the also aspheric Sherman in capacity shift VCSEL array. focal power lasers, of believe well both months conventional Warren that are high efficiency award providing less lens ever-growing agreements, we and sapphire for market-leading following our laser integrated

a seeing moving a We the for Android cameras vendors in and offer to in XD technology, VCSELs testing mobile are in mobile the benefits lot multiple number market [indiscernible] across for time-of-flight, phones the in activity technology of as enhancement. input standard, model new next we're leading especially engaged for are in consumers technology see opportunities XD platforms, devices select of and high-end applications. and of year The for interest

we of Sensing some shipment need Sensing the to gain beginning We address to share that forward the XD Android pleased look of XD to in our of market too. segment fully-integrated are module, report and the first customers developed to

also automotive, sensing in automation imaging are technology XD and industrial strong a for seeing We in our VCSEL and interest IOT.

years. the range interest Safety standards car one out with partners, automotive adoption to five proximity and driving vehicles XD XD and in-car technology sensors be an for for active external rolling high-resolution are will in XD and driver We multiple we over shipping of are automotive detection. and short large in the who supply internal in-cabin control multiple and passenger discussions camera customers customer in across monitoring, qualified are chain next the to

modules automotive our capabilities our automation market. certified with believe for standards will combined to the also Vietnam we factory for competitiveness the that the our contribute in quarter, subassemblies, this Last and and for we subassemblies capability optical for

are leader applications. In XD line announced address nitride partnership our Device part as Sumitomo previously out Warren reporting gallium Sherman can our nitride building Warren, and RF markets Sensing, X-inch addition a we a fabs Electric Innovations, with gallium other In to devices. in

XXXG PAM-X is first the Sherman, serve and XXXG and Datacom team's plan to XXXG VCSELs VCSEL, we produce for the demonstrating to continue In proud are accomplishment market. in of can market high-speed the which our the

We component sales to will capability Datacom, leverage the VCSELs and market. the former our integrated Finisar, in increase

in over of the grew and our Defense XX% period and represents quarter. business Aerospace revenue prior year Our XX% the

making existing and are programs customers' great new our several We programs. strategic strides remain into to

engaged a high precisely energy XX are leading-edge to laser We target. deliver portfolio in the now at new beams with of programs, technologies

also in cumulative a We products for government design revenue. million $XXX sensor secured in two two contracts wins worth key multiyear

that, With Jane. me Mary over turn it let to

Thank you, Giovanni, good and morning.

a going few things morning. to do So I'm this

you First, the of minutes I'll press few a navigation give release.

the Next, review I'll a quarter the on levels and the of discussion highlights the expenses, financing our the close updated outlook. of and key of with synergies, the progress

for those six the one numbers, for II-VI, Table second will report page we the third results, the press see the legacy time Table walks operating through GAAP on starting result of two release, page, you of last will of the the on including So II-VI. results you legacy with buildup the days Finisar.

across are for and six a the column costs top of severance II-VI, far legacy four. GAAP The items the shows three results. related the Finisar special and columns costs, So right two, the and subtotal consolidated comps all column acquisition-related then days, of

to them not of right Finisar's into to II-VI's see dynamic indicate of be. the operations line because called on in segment, Finisar to full segment related Finisar we and Other. the structure, its merge six that be own six once shows results Table is the a days nature page The will in our treatment of three This will a Finisar it results. quarter. The operations being are not

you get on seven four page we We non-GAAP shows on any the format by when margin Q&A. questions segment. can results answer the have table this Finally to

growth an a are Non-GAAP after-tax positive on $X.XX close. non-GAAP. adjustments organic growth triggered and million The GAAP $XX a X% X%, the and Revenue adjustments by $XX revenue for was basis of was including quarter, was basis. $XXX loss million million EPS These Finisar. in on at to with the last $XX compared from pre-tax $X.XX for were QX. million the

In addition, the we anticipated about million of including non-GAAP legacy $XX costs II-VI non-GAAP were adjustments million $X.X guidance. in

So items. table all these seven the you release press gives of the of breakdown

in the Regionally, XXXX regional from XX% XX% not actually in XX% II-VI in revenue North materially Europe, our was China, split America of was and world. in was The breakdown in FY the different this. QX remainder X% legacy the a rest Japan for

America, a Taiwan QX Asia, actually and of XX.X% growth regional Japan in XX.X% The China. XX% down about strongest basis. gross rest company's was but in the very was good namely Korea in North on overall and non-GAAP and The for margin and

margin The down of XX% period the margin year. XX costs GAAP on in from non-GAAP partial negative the was non-GAAP points inventory step including basis, gross up same operating and excludes deal last all million. $X.X The the the X.X%, basis quarter a

down was out XXX basis advancement XXX margins key year. operating Semiconductor period basis capacity and mix basis Compound adjusted being the a of XX.X%, segment points of the largely due XX.X%, last and on to points Photonics to sequentially same products. sequentially, the Regarding for quarter, good was compared XXX points

was in from will backlog $XXX The Semiconductor $XXX Photonics ship million, XX $XXX year-end million million Compound with of about the in contains million backlog Our months. next and coming Finisar. that orders $XXX over consisting

expenses charge of It had shipment. during consisting long-term $X worth negative for that bookings $X with extinguishment for currency. of are credit The and share customers quarter of is million other of $X for the noting XD recorded a the our typically company arrangements sensing, million facility former million in the

million. quarter Capital expenditures $XX were this

II-VI's year, existing quarter, million the related of in the the for interest respect $XXX this CapEx $X.X to the is previously combined For With debt. largely for expenses are we range. to expecting company million

are million be to prepayments, interest and is repayments. run and year new will for which interest includes The service, quarter, $XX to XX% about principal debt million. interest and $XX is million they $XX million debt, a which mandatory mandatory which million $XX fiscal total to expected The of principal payments XXXX, XX% $XXX estimated to

million net is our billion. $XXX debt is cash and position Our $X.XX

facility debt times. the X.X the leverage the ratio, times is credit basis total net ratio of Our is and X.X debt

assessing XXXX. rate to time position both from We still at will range XX% believe the tax fiscal are XX% companies that this tax year the and the for of

Of assets, balance million for purchase was the $XXX $X.X tangible net allocated amortizing and to the billion price to or the to million intangible Finisar, goodwill we acquired less the $XXX assets assets liabilities assumed. total

of year average we Based finalize Because work be have period average approximately weighted will seven life numbers on a are and over the our today, weighted a subject the purchase to the accounting, time to these years. modification. intangibles expensed

target we're on after tracking cost annual our close years $XXX transaction. three of progress our the synergies, within of in against the well synergies Regarding million

have this synergies target our of equivalent year. far action We to so XX% about

to the For that largest us goods, global Procurement supplier chain, and close validate buy supplier work materials well we to that our the the being services for direct jointly; to as procurement organization, the indirect begin clear from to spend a Officer directed to established savings our supply that base Chief CapEx; a and we identify procurement, room synergies and define combined materials, COGS our define of suppliers part prior priorities sourcing roadmap. in help including as includes the this The management quality.

and companies operating action them. taking standardizing margins. the combined that We years, capital maximize have cash generate synergies significant cost costs both gross to are improving at work the over year thus the terms are to and expect aimed reducing three good this is the to that planning common plan next both synergy payment We a this portion of the achieve the synergies the to will Remember total of working we and don't those improvement suppliers. action a because defining streamline year aggressively of suppliers number to including amount opportunities for of

Turning the outlook. to

During of non-GAAP which underway and for million second a the XXXX QX EPS basis some are qualification $X.XX. the fiscal fiscal a with year this $XXX is to integration the At point, million respect could December $XXX XXXX, of affect activities to on to outlook number results. XX, ending of these revenue and of $X.XX quarter

$XX The up million comp, $XX non-GAAP one-time more rest the in facilitate to the $XX EPS is the costs amortization, Allen in to million from million less inventory Sherman. of in step in adjusted the and $XX move million or stock including integration for

The used is shares. $XX be to is interest rates. today's exchange at million. as noted XX.X million count share about The is I This expense

several conference we those sessions. are we December X, investor XXXX. that be required attending pro any Form are a and We financial on provide can or about December in issued to expected filed during statements will forma updates to The be under XX-K/A

competition, and Now turn factors call, as results but to product customer the forecasts the to remember for the orders, actual in today. may not and answers we trade conditions. vary are including, our variety tariff knowledge to which this results on mix, our a general you and remind from to regulations I'll best may contain your forward-looking our that Q&A also due as in certain differ statements changes that of these economic for may changes based today they limited questions

line may you the for open Paul, questions.

[Operator Meta question will our Marshall of Instructions] come first Morgan Stanley. from And

Your line is open.

help And QX. products, Finisar a of second but any just it amount looking -- just in of sounds forward Finisar Compound kind II-VI Maybe is kind of then -- into just ramps much. starting legacy leverage from coming lower so on weakness kind QX. just Thanks question Semiconductors of some expectations of the to had looking Great. the between of tremendous -- QX perhaps some into operating just with and legacy

help leverage -- where seeing Thanks. that to helpful? there were would be anything Just any as you

then the of can I'll first second answer Giovanni answer question. part the the -- first for and and your you question Chuck question

Sensing for consumer qualification. So in the both of almost as go a of the is aspect the XD not you where it of businesses one for lot capacity know business needs if few companies all to of because the

leverage when very can but dis-leverage, in result, this as good. see Photonics is high a are the As volumes the operating you very, is even And volume if very lags good. cause where we shipping, it is when a well -- it

a Compound others particularly down, not helps So little the But in that's capital-intensive dramatically just not would that to not of XX% respect mix say company. what bit. and Sensing atypical are while some also I Semiconductor down, a industrial reporting because XD shipments with the that in margin in

Compound I the call actually Semiconductor said the would hosting New call repeat from from today I just that -- what Jersey XD maybe our add to Warren and where fab. we're Sensing

here job exciting going said well it's really done see. really team The extremely to I and fantastic a it's here. have

I to we're nice the along we've we all to would that's have these able that's utilization when -- get think real target and what So a fabs that said business we drilled be seeing.

rest our Each silicon tried whether For the give laser to question to in in our the your of carbide we and markets, experienced clear, very the we softness a quarter. I traditional view. of markets talk balanced transparent legacy regard one first industrial with the business about QX we II-VI our markets in think, or

legacy -- And transceivers were expected the Finisar of Finisar be quarter. what to business the we would than they in Web first the less X.X scale with purchases regard

business would or And so Meta. legacy would for what of were a bit expected mix say Finisar and have softer than that it's hoped little we a I both

much. so you Thank it. Got

Company. will Needham & question come from next from Ricchiuti Jim Your

Your line open. is

where Thank that is? very that you're you capacity tight areas out were mentioned that where may business? you. Good talk Can Is there morning. a I little Chuck even or some in bit that power think you capacity. amplifier the about of Mary be you experiencing Jane,

yes. would in places So say probably I a few

So the in for optimal is one communications. areas of

years, we beginning pick usually than seen quarter. have QX starting even quarter of in QX see be the to We usually the up the XG in are to why seems here lower and fact, see great we what

in quarter substrates the that RF. to for as semi-insulating comps. which out continuing is saw increase used silicon the as especially are we've are a Giovanni in on for this rise capacity in of many we With carbide, talked mentioned several of and capacity We products demand to key particular respect times

first and conversion -- of and in constrained we quarter. are furnaces the caused capacity That the some that

on now What that. those there we're So but other two ones. are say or there the Chuck? here places a And are with you main probably few probably

Yes.

Just in keep recapping demands. working are for the to optics our manufacturing silicon lines with legacy and anticipated substrates II-VI side, coherent pumps, pace aggressively the add to and we transceiver legacy Finisar carbide XXX semi-insulating on capacity coherent

Chuck with you respect you And that I some being resolved the Is in just not see color you to that but suggest seem of the Sherman, additional about -- if elaborate you could the that know don't talked to you March or on as provide issues. quarter. that? that Or should late occurring any can we quarter? technical on think that in about March

a a it go There's end March earlier longer. than the bit of could the take a quarter. little There's chance could that chance

With all your normal it This simply. laser in to as next things you two up way one These is I resolve the are This is issues semiconductor can that this or scene. these as or elaborate soon normal. our pop XX fab. on issues, five

a We've with with this possible. soon anybody heads we're history. I been a it collaboratively you possibly for way I any think as can at as earlier, it and through make it up. If and it I take be we'll us in it to there's it's our is this. top moment, we'll to guarantee for great priority customer. And it a doing suffice if say, the we that can our day happen We tell

get we as it. to we'll can soon on As

later far baking it's the as -- goes you're in quarter? as in But guidance

I'd That's quarter like March to the all say. Jim. In

Thank Okay. you.

Yes.

of Your will Cowen. next from question come Najam Fahad

Your line is open.

questions separate the guys. lease. start my Can I'll process morning, you at for help Thank few requiring you to summer Good approval question. first. a the understand off you with with taking us

piece it's reiterating you million. still business a your of $XXX like Finisar Are So cost of us... synergy of years. Can you targets three for help

on on minute. a Hang minute. a Fahad hang

the was your hold the ruling So explain can we WSS separate? question to

My You switch what on cost seem that, $XXX period business that. wave keeping No. the have separate selective savings Is have impact is the I three assume would cost your to a more is million targets? of question reiterated targets. years would for impacted your synergy

a understand us put it's target? can and So help synergies of how your take impacting much

very Good answer or I If your switch saying your adjustment. an to system just -- or But Okay. on, hear think the you're I'm any going Fahad. whatever it's way for you it's get question could to morning, you're what very, that Fahad, to understand. headset difficult hear. to please either I make there's

millimeter this our that started will -- everything million whole able be more will delivering plan. of because schedule. objective in synergies everything where that that process have a on built not with We hit $XXX not XXX We culture. than want on just exactly know we be just to able our the to hit, to And our to faster have we deliver we run more. attitude. we we overall That's to get That's place. to be to That's and like our based

years that in businesses separate. have a estimate were of we our holding as we are mulligans we So promise there that they of will on estimate is that – so deal synergies. faster, not they to what even are. don't know, we exactly still the We're there's here costs anything. no to three plan And And cause over going but run can additional not deliver result with for of to these have an sure, the isn't us what

We have to deliver.

we we'll because mitigate we time, on. things take to to focused so all have but do cost We're to the the whatever it have right. to we're it take try going So on on

someplace on about possibility that figure working some And not cost go on some else at that. do and get to extra be have We discouraged out right the to the have how there'll revenue all costs. have fast. extra to we reduce We the We're things to know or and I'm it. we're going to

Okay?

guys better? now you me better? Can hear this Is Okay.

hear Yeah. Fahad? Did what I said you

you your Yes, I did. Thank response. for

wavelength business can the what head you switch that quantify additional keeping from If will helpful. be this the cost

to that do going Fahad. on not this We're call

Okay.

relates you also us you I about employee an quarters. as give key us update an help Finisar provide We your employee quite retention, us Can leaving. XD often can the it on Finisar, If on rates? Sensing. – the retention update people to hear three been has talent update beautiful just Can been on mean, it's retention especially

Fahad. to part match in go going our need to forward, will jobs we talent with we have the and have critical customers our to as a of assessment and It's no I a these Yeah. and own that where assessment need of a probably I in day work few the this to this. we've to to at, of the come in to heck we're that to corner to to fuel assessment attrition know very rate than people great right a of attract say can the but come exciting that, those. and of able people than conjunction some of an have where identified objective able we be higher tell the It's our worldwide There that spots top place the businesses, engagement work this that, normal. is am lot exciting in wanting we company, I would one our such the rate work of our in perfect, would It's running I we retain just excited roadmap and if at one that of of the top And with talent determined about additional normal. you I say company that we've us lower employees is an is to there's want to fill at work normal to to here. and – growth nothing company. experienced be very, interest attrition have people

Super. question ask I If – could a

we We'll someone have We from questions else sure. to chance, to pleased any but you. other a probably need be have take if for let time

short be question. to going is This a right. All

industrial you was in due was the and being you – just was the revenue to revenue, amount the On short that us help what disappointment of organic versus demand if can components?

your was industrial For organic. was how question much

All of it.

of – What the meant weakness say supplies? meant was how No. sorry, ask industrial and revenue of the being shortening of what the as of I result you was, a in I out to components – to much

has that in is aftermarket. an On I systems the some There effect answered a the question. reduction countries major industrial built in think revenue, industrial declines on as that we and GDP new

it. Got

So, take operator the let's on next the analyst call.

Samik will Chatterjee JPMorgan. question come next of from The

Your line is open.

Samik. Hi,

Chuck. hi, Hi, Mary and

dig just to in particularly into couple Datacom. So, and a optical if telecom of deeper communications bit markets see wanted can you a end

this seeing mentioned you're in You related telecom XG. trend to

seeing market? plans to seeing there? so switching there any all – your or some what you're it's would to of And point you. want Or thoughts are then on out geographies stabilization end in be on just to understand, competitors you in Datacom, from is chips, weakness business this there that a be of Thank terms a if China? able So, terms modules Finisar any in in if at across visibility

working Hi, our to optical are world Samik. and XG. would is and with strong, on increases I associated say telecom I turn orders, business in a the around real driver demand our a factories XG. pace communications in keep feverishly I mean to increases mean, business is our in with

report been China, So Every That's too. strong. key I rest then in geography highlight. geographies. America, we of and across Japan all that's It's U.S., the world North a that's China. the say just would

So real that's driver. a

I think continue. that's to going

probably go On that our best will maybe. quarters market another two the the through view side, Datacom is

And so transceiver is a our the base we'll the in amount lift business. Datacom in as I see said is of meanwhile, the interest indium optics of earlier, coherent today begin our the year, In tremendous model in second phosphide the anticipates interest coherent to business the component the sales. and half laser that experiencing calendar

deal fit products. And be day already to a both People lasers seminars be the design number and great beginning waiting X, around with enthusiasm -- dedicate resources world of able qualification have already an a get are for. at to customers had right our We've of the there's excitement. and of in to strategy seems been element function that our and people their on that into fit to form

it. Jane may. if I quick Got follow-up Mary a

is You're that you year? reiterating on and first from through something understand of XX% the macro the headwinds targets Are on Or synergy accretion reiterating the have synergies in kind are full deliver you see to your the perspective. how also I a year? of lot here based the you EPS

Right.

for if not to ramps your at latter in would of least X answered remarks example I major end think really ramps -- XD Sensing some mean end of the at the it Chuck two for think the have than causing of probably as that anticipated. your we are for lower for seen changes I his part markets, I the question we've be yourself. summarized

Having said that, well base as affecting business end the obviously II-VI the markets. that would been have changes in

You that can see in from the organic quarter. growth the

looking of how that least be time the we to it, think how what in -- the efficiently not year. like see to but a to through we'll cases on can doing the to line, more due pro is and to seeing able we really we result I to put have work forma is I'd also some full top together that, about only also the here, time what Chuck was at take the in accelerated of month a company at month's as can one but growth and do end as how do we're support think So the is,

So have I about exactly as Samik. think that's you really already the best it way think to

you. Okay. Great. Thank

Samik. Thank you,

Simon question next will The of come from James. Leopold Raymond

Your open. line is

taking we little wanted -- for bit see a transreceiver in to used the the to question. the deeply Finisar's what if be business. trends on dig Thanks could you're seeing more I

second indicated expected improvement half in XXXX. think the I of he Giovanni

driving of Just sure products get understanding or want make the something to business? better that of that's a demand that? trajectory you this what's like Is calendar new is particular I'd side? but that fiscal, the within to that about see understand

it's obviously it's an bit bandwidth design that XXX, of capacities of quite is these we we to you. on going through team new expects little will the and customer XXX, opportunity we all as Thank bounce see require it's can't. this of the XXX, without it wins list, a Samik, whether We a gears that pipeline over as back today. the I said that busy business Hey and whether is new so where whether think

strength very lot. the a very, vertical the of is the confident helps we're integration there, team So that

very that coherent are the solutions internally Chuck sourced of mentioned Some competitive.

So it's very an standpoint. a That's array promising of made activities going on that we why we narrated and very, they our from comment. are

How down just know that particular you've do this you heard for some Or Will And of one I think we've vertically compete A talked about on products? on about from and about do maybe number own? silicon you photonics. your area. Finisar year a got of kinds are don't so have with much OEMs Thank against topic, those other your been players we it's photonics that? quiet. have integrating costs How drill silicon to you. better?

Yes. Simon. thanks Okay,

many silicon Photonics. team years. activities been that replace the same I few platforms the on for applications. some of to the phosphide it's have that on working over one have will here photonics the has say, Obviously to at It's We many believe past indium hard time,

some applications a advantage applications you has an I amplifier creates which is in think an in. be as so, know complemented if amplifier silicon some in even by our And demanding probably for photonics – to opportunity to we designed it great team there be

application something an in some In as team on working maybe we amplifier need you don't and a are that's II-VI.

to have platforms So that us. again, of the we available many it's one

the and indium high that developed years. well as partners number well right the We to that platforms deliver team for working have the complement of we chips the the phosphide, has over they the applications with rest as IC of the a with

just of there activity but it's I -- think So one is going just many. on, some

on one your that to platforms the We you at need many products can to silicon photonics make best more disposal power money not are working of deliver our buy. just to attractive. It's have

believe And I agnostic what the I doesn't have. that's that's the technology is. -- still and all officer case. Chief know you Technology It I matter that's that was

would You about photonics. only talk silicon

have you about talk also don't photonics. only If you silicon that

that that Finisar the think and been platform. II-VI I has towards attitude specific

for Great. question. Thank the taking you

Sure.

welcome. You’re

next question The Instructions] [Operator is from Savageaux. Tim

open. is line Your

Tim. Hi,

Hi.

Good pun it try intended. coherent to keep that. here, about somewhat I'll morning. Sorry no

for couple of look guide you $XXX about guess your questions a QX strength total A, pretty you've million I in mid-range. at the fiscal telecom mentioned that. If revenue about consistently.

at If follow-up. you that came side QX I is And from your give I will the that Finisar as grow much assume you How of you as that business, telecom what well expect both and guide? over coherent And look telecom? sense overall us year-over-year. a of to and can ROADM

the resolving in do in for break hard pretty the call, normally as downdrafts this by growth XD some mean, But we that things, industrial that market. don't area. be Chuck into see think great we We to about some of from just view from shipping Sherman. they would the there So, I end the it's say some down expect of I whether from us. things or went we're other would some some are discussed as a dealing with point detail I

could it headed. where was Got it. said, be the kind and or of XX% so, team XX%, I Well, like that's

II-VI II-VI? wonder XX% in color datacom move And in the out you and If I maybe Do decline? looks there last Finisar you're going from appreciated. is guide first to or Any comparable high to legacy at that single-digit high be quarter away the legacy be would the down businesses? characterize look of that year, kind and almost of you industrial quickly this like be and is wanting see across that can to concentrated expect II-VI you given if comparable it the rather nearly at Finisar box, would single-digits. Finisar Or XX% to realizing concepts that

of the still be I'd think think wide, first in, about would Well, to underneath. datacom to if lot all, size the of I say some of not and unreasonable it There's a Sure. -- But of not the that's most you would that would really business right? Okay. side it it. guide's that get say if coming

kind bit revenue at on -- than say one I be would it for before your synergies, will all basis to dis-synergies think quarter. of a I that more judge little aggregated opportunities us, the of we as important benefit look

that But really decline. Giovanni as the Because side. right to Datacom on continue I seen we from market still of think, the is are track, that you probably have most it said,

As Giovanni talked I a have fiscal. XXXX, calendar than well. think, of guys, recovery you about more more it's And

if and missed very Compound repeat you Semiconductors question. Great more total backlog Photonics one just the ex-Finisar. and I backlog numbers, could I have And quickly, that

me Let start the asking. with ones you're

which based most Photonics. the Finisar its their you'd structured million is for then, of in to the about $XXX semi, $XXX over years, that just been backlog, of brought on have that assume, $XXX for million right, how Photonics. it's So, has And million business compound

it guide, bottom-line look QX question, and at final Got if the you …

Yeah.

without would interest gather obviously hitting too running. the …you're talk -- although, synergy by impact, ground I much any impacted you did expense. about

adding looks So, run kind of we're like, expense up rate. the it respective

assume synergy in some there. I impact there's

mentioned, side, at But you expense think, I guide, a the QX? for your a expectations XX%. contemplated, the your for metric if the OpEx high reflected either level, bottom or line synergy I'm on how in or sure quarter. not year is much that COGS of in

forward been think speaking, the at the why Right, continuing business about, talking to first model so at is the But increasing. was would you is I look you synergies. as revenue have if expenses think how of all, Chuck kind this -- right done, look okay, of so, generally the about

And so, well as have obviously movement some revenue. OpEx had the to would the accommodate increasing

curve trying is. do that we're thing what moderate increase first to an severely The is,

the the about trade, year. million, necessarily of don't it have in your Again, whole million to than, to buy we we'd we have overall, first because estimated question But synergies. originally $XX million that had $XX $XXX year, say for less

longer think, synergies among item every identify quarter hard. one on an no well I elsewhere. executive point now us try I after mean might very be and suite yes from to doing view, people pretty of single So, line those are

for comes fee the in year. audit on the the audit example, fee But across

it the first quarter. in materialize So all doesn't

through actually the So it in of it'll realizing, realized year. be terms

they Some in of the actions ones hit we're full counting the doesn't and have quarter, second been mean It having actually amount. agreed. the

some will seen in year. line on the with profile the for to in I that getting somewhere of Chuck that, given very in million generally the we as top already. quickly, we're say $XX that this be But very, also year least we've million looking said, the $XX of at changes would speaking, neighborhood And company for at,

add? to want You

Thanks.

Sure.

our the hand to closing Ms. like now concludes I session. would that remarks. back to, Q&A Raymond, for conference And

much, all our results -- fiscal you February. in year you out the to on Thank fiscal for sure, we'll report quarter of when like update for We XXXX, very you we of joining second us. early

we're have we'll any is we we after indicated, investor if you updates, as conference And then. Thanksgiving. be seeing sharing And we'll have four

joining us. you for So thank soon. talk we'll to Bye-bye. And you very much

does this conclude gentlemen, teleconference. and Ladies today's

may your And You disconnect your thank now participation. for you lines.