Coherent (COHR) 10 Feb 202020 Q2 Earnings call transcript

Good afternoon, ladies and gentlemen, and welcome to the II-VI Incorporated FY '20 Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Ms. Mary Jane Raymond, Chief Financial Officer.

Thank you, Kyle, and good afternoon. the Officer Raymond, Incorporated. at Jane Mary Chief here Financial II-VI I'm to call earnings second fiscal Welcome quarter for our year XXXX.

on California Mattera, President of With regional our Chief and today the Compound and our Barbarossa, from me the Officer Silicon Dr. headquarters Giovanni in Chief Semiconductors is our Chuck the Strategy Dr. Executive Officer; call Valley segment.

Monday, This call XXXX. is February being XX, recorded on

available XX-Q the on our presentations the website, Relations release, updated and press are Our of Investor tab ii-vi.com. investor

any we required. in of They materially. context are may reminder, be and during forward-looking in update found factors the obligation teleconference can Form are the A our the risk change, today be We that a in this in these risk undertake XX-Q. any of to to as Just except possibly quarterly statements not list subject to current factors events statements contain our make factors found do given reflect and subsequent only. XX-K new today to can arising period as risks today,

will or measures. such for the typically release measures are uses presentation. investor end The at document as non-GAAP also the share these found them, of press reconciliations each We the some that

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

Thanks, for and Mary Jane. thank today. Good everyone joining us afternoon you to

to continued to customer track compound those performance our global the innovations operate devices over long right our partners of seek mindshare and strong photonic with it growing market-leading products stability have trust technology to quarter deepen for seize demand a the deliver performance our in who We the markets semiconductor strategic success and customer delivering of like on in and financial a efforts. was II-VI with of customers, term. the result record our footprint solutions, and second key who increase high-value is priority Our many fronts. opportunities M&A the This first made across integration end

expertise manufacturing acquisition, who built optical that industry. are leaning people in broadest scalable and we on portfolio, broad on on experienced the can result emerge a applications is seeing with of Customers us the take our differentiated technology products. increasingly platforms and toughest enabling now the the capabilities business possess portfolio, we of As challenges IP that and customers realize communications product

optical communications Our was strong. end market very

transceivers growth Our components, our the by of primarily ROADM increased strength in emergence overall combined for and gains of continued was factors, with market demand XG. driven three components share the the related

rearchitect the is XG to ramp products a new transition that carriers networks to as subscribers multi-year unfolding. opportunity XG X believe today for XX as II-VI Our of from handle We to for XG. XG over their and mobile migrate and begin has large accelerated billion

quarter, $XX the was for and XX% robust this by datacom to The During market driving transceivers recover, our saw organic expectations year-over-year performance XX% of growth million. revenue quarter, begin we the beating Datacom VCSELs sequentially.

only are not but they strategy. results, These our and module components validate great

leveraging channels to strategy existing world-class technology and indium also laser platforms. our this our by expect revenue component We sales phosphide drive

organic XX% sequential experienced Sales applications. and XXX demand, all also strong experienced of including record line and which wavelength and undersea subsystems amplifiers, for growth. extremely optics, cards to which with components, nanometer switches, very components strong passive continue selective were ROADM's pumps, be strong demand enabling

sold for In most manufacturing out. accounting XG, of demand accelerating the these fact, were for when lines

significantly we In improved products. a these of are selective count, port our our wavelength for success addition, excellence acquisitions consumption seeing and in early edge low margins of the low are network, in success enabling adoption. where lot of at power the earlier operational interest the Moreover, switches our advancements has

grew year-over-year. XX% business and Our XX% silicon carbide sequentially

to in are both electronics. and RF contracts long-term We gain power continuing base and customer diversify our

on track. well is capacity Our also expansion

Warren, more the and New of Warren quality in For XD resulted than and The our reliability. operational both in volumes sequentially doubled sensing, at and we yield high sustained Jersey. have had initiatives manufacture year-over-year. excellence from arrays Growth improvement VCSEL fab record high ongoing with high shipments at

We doing on position all launch our at compound Sherman. products the bear are work They I'm of line we our to way are device a on qualify VCSEL the as Warren and Sherman at experience new fab. semiconductor of bringing about and world-class manufacturing to their well excited are to

it about in we've sustained investment to We scale. at compound semiconductor progress most achieve the remains competitive believe to long-term for target industry made. that X-inch this establish I quarter, platform am the will to an viable complete qualification and Our given us vertically enable inside the and manufacturing devices integrated optimistic the structure the in-house cost advanced

In aerospace we into some to and grow with market defense, quarter. defense the large turning signed for nicely during contracts and businesses this growth increasingly continue a sequential quarter. growth II-VI our last Aerospace as new XX% is

with in we to semiconductor strategy are high-value the growth electro-optic our central enable end win. to our advanced with to and combined platforms, them market this Our laser our capabilities components customers materials, as align subsystems

and major of market capabilities the and satellites energy. that F-XX, are the four we four and complement allocating market of most our segments have to are We to contested space, recent acquisitions. directed segments our capital hypersonics, Those

cost excellent long-term cost not for only deliver align market anticipated integration us. start. a but Our performance. an with priority operating our reductions and are realities is to We to synergies, need off major The improved

efficient and of improved Our sustained new commitment returns. long-term allocation our cash to capital, drive flow values underscore

organizations are right accelerated Our sales on synergies procurement global track. delivering quickly in and

to and to date. cost the creating Our segment delivering the operating at have led and around top and performance by leaders achieved tone synergies corporate have all tempo example and the contributed

outbreak. a evolving on Finally, I'll spend minute coronavirus the

needs all the customers. of to a who plan, and of the carefully and our are First, outset health safety to have while for of leaders the from our proud continuity protecting committed provide to and of are collaborated we am our emergency our worldwide business employees, employees. delivering who I tending management

a governments with knowledgeable the today, sure be workforce fully We third employees are the to our China operate about to daily where with have communications been of fully and landscape in the our changing we work. requirements. local of we and China-based returned Beginning compliant

model for that next back operating the weeks. the several will Our contemplates they to all within work be quarter

As March the Mary to short-term provide will in additional the on quarter is release, today's reported as color has for later we Jane guidance. outlook affected current reflected expected financial our press relates and be it impact. our to been in some this

remind business China. footprint Regarding we to everyone have also Asia manufacturing a would outside I in planning, that major continuity like

our some any and are working we their our lines. to So, factories demand in to Malaysia strategic customers supply to to shift mitigate in closely impact with Vietnam

over position thank to employees the our us, as customers, partners in them their for turn in it to Giovanni, I around work they advance Before as to for business aligning like I'd strategy we II-VI I tremendous return. enthusiastically work our our our thank and, for of of ahead growth all China our particular, we while wish hard employees health opportunities good and

Giovanni?

and afternoon. good Thank you, Chuck,

underscore The solutions entry. components of enduring engineered growth relies strategy, this integrated which our provide to of excellence customers high quarter multiple drivers logic vertically the market our to with differentiated and barriers our on operational materials,

our The today business just Prior up which well for merchant to XX% XX% to be business. market production strong transceivers, previously business components and pre-Finisar to XX% the a organic communications Finisar timed in year-over-year. II-VI since of saw the components sequentially of represents we captive pick acquisition, our organic established seems datacom

In within acquisition, of fact, are the process based months for multiple a in of phosphide the closing indium already we engagements few qualification components.

for manufacturing market Additionally, an platform just wafer industry-first announced X-inch anticipated to we Datacom support growth, the VCSELs.

EMLs We calendar second are continuing of year invest differentiation what, XXXX. of get be DMLs believe, the for a in the in market and strong datacom technology the lasers, to we to including part uptick will half in ready in

business, part very the of the addressable market, of The quarter currently, and transceiver largest XXXG total expectations. strong in ahead the was

which hyperscale continue market. to XXXG from customers was leaf-to-spine from upgrade is this of Strong growth in indication to interconnections by continued XXXG. Our XXG momentum driven major their in our centers, feedback an data

and in are Regarding we datacom market currently transceivers, XXXG, leader the XXXG XXXG XXXG.

And XXXG modules qualifications lasers, design will shipping been and that XXXG we have in for other design-in and expect be We leaderships XXXG integrated have circuits design. several also for our expertise with in We time XXXG, vital. particularly under some way. optics products

It's is clear from that multi-disciplinary of because especially competitors recent in excellence buy. and our actions winning electronics a to money that components lead to can company continue the This merits very and same critical deliver time-to-market we market. the by multi-disciplinary within is competitive to to the the in lasers, transceivers, modules a optics and accelerate believe is performing best strategy competence

our in subassemblies especially coherent We in pleased transmitters as modules. have and are investments the as in significantly with and R&D, in transceiver increased receivers, tunable including progress well optics,

secured recently design wins. eight have We

business. of have XX we represents have production way. started optics XX% qualifications shipping and transceiver now about Coherent volumes We design-in under our

silicon and additional the we coming was growth process infrastructure of physical capacity of a in quarter The the manufacturing are trend RF, to largely is carbide, that's this online schedule. In according in in started June the quarter. expanding our footprint

up vehicles quarter. we like since for electric doubling power is applications year-over-year, nice a demand down sequentially, While saw pick last

global last by a though year. in were including flat was beginning Components strength high semiconductor laser logic of still recovery equipment sequentially, in Industrial China, market. quarter, indicating it semiconductor overall, continuing prior Asia sequentially demand, utilization. reported likely We resumption is the for the saw the we the driven the of capital below

and year-over-year about X% months. growing flat is the expect Our continue demand XX next EUV which sequentially, over experiencing in grew we assumption to business, this was now and

We programs design-in new new Aerospace to a and defense is really end taking have both but we and significant growth and differentiate pipeline the in have had very healthy of solution. opportunities a existing ability off.

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

you, and good afternoon. Thank Giovanni,

revenue result. markets, pro distribution results to is Finisar last measure including XXX% better similar was of all X the the nearly periods from to using growth The growth by prior not Company's the use was in First, year's summarize reported since Note forma, XX-Q. year-over-year total and Company end Finisar's

the reported forma estimated - pre-Finisar, total growth pro was year-over-year X%. the growth Finisar was year-over-year revenue communications growth the in XXX%, year, on Year-over-year, same Company's reason, communications X%. Company's of but down basis, in Apples-to-apples, growth flat. was last wasn't year-over-year Organically, an

Organically, year-over-year X%. grew communications

XX%; for semiconductor consumer equipment and defense grew and end on declined reported markets XX%. basis, a the capital other As components and year-over-year; doubled grew to organic industrial X%; aerospace

estimated an and grew the total X%. Sequentially, on a forma pro XX% grew Company communications basis,

well; other doubled as and industrial and For equipment semiconductor sequentially were flat. finally, markets, the capital end defense grew aerospace and XX%; consumer

the $XXX X% X% revenue During industrial, other capital the quarter, equipment, the is profile China and world. million X% of Japan, in America, North of the with in of semiconductor and and communications, rest well end-market XX% to X% XX% markets. in our defense, diversified was XX% of XX% end each the continues in XX% in in Europe, in in and consumer, the aerospace split Geographically, rest be X% total in rest in the Asia, in

margin gross million non-GAAP cost to were quarter. one-time due of The $XX Operating an cost acquired a in the elimination from on Sherman, start-up back yield $XX Sherman for was the margin of was of XX%, including inventory. non-GAAP operating X.X%, basis margin the would XX.X%. the the the added mostly step-up which expense million

So we are to looking forward putting those costs work. to

with need return pre-tax was items. close on tax to $X.XX, are X%. estimated such was very Non-GAAP in that EPS though Non-GAAP these attributes our million, effect adjustments to we coming now non-GAAP $XXX million the our sales of tax $XXX

volume results Semi more the level, the were transceiver segment operating including million Semiconductors. Sherman, submarine Compound and Photonics pump for organically. of from the X accounts for Photonics segment the costs the At for from Compound in margin. for Their and its margins strong richer include mix, doubling pick-up X% than benefited sales. XX% operating benefited points VCSEL the arrays start-up $XX adjusted also of which

$XXX million million $XXX Our totaled million quarter-end to last ship $XXX in and Semiconductors. million, backlog quarter and Semiconductors. over was Photonics million, of contains that million This $XXX Photonics in orders XX in Compound months. in of Compound $XXX next consisting compares will $XXX backlog The with the

quarter million. this Capital $XX were expenditures

Debt million during quarter $XX we are range. repayments revolver on expecting in the million company the and million year, to $XX quarter. $XXX the $XXX with loans. million decreased Interest the expense For the the the for term combined was CapEx for

and $XX expected total interest debt required in in service for The the prepayments. are payments quarter million $XX million

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

basis is credit leverage ratio the X.X net our debt times. of Our facility on

to XX% Company, We this that rate range year are the time XXXX. the of but position still will believe the X% fiscal assessing tax at from tax for

we cost these common and Regarding tracking of against $XXX capital terms services. years purchased working our have for transaction. progress target of and cost our our the all standardizing streamline identified customers with opportunities synergies in this defining close we on point, well million target synergies, we including At also on the Along reductions, within annual synergies. of to suppliers, are the efforts have of turned payment up improvements, three

agreement trade on a and have specific progress the the welcome to restrictions been from Regarding favorably was we in hope tensions, at heightened that to customers, stayed regard December, there. this actions time. further change discussions that With

compliance We the serve within continue trade the allowable guidelines. to all bounds customers of

Turning guidance, chain. in effects a Year are also broad on coronavirus employees our are effects to of effects there supply included potentially dealing potential factories the outlook. overall Consideration only the holiday, our many are reaching. of New with and Not our longer Chinese the the

back strength to expect to be moving We several next the weeks. full over

conditions. minimum $XX revenue a million our of included therefore, these to in reduction have, guidance for account We

the of ending and $X.XX. This including is is of $X.XX, exchange in subject integration. count EPS an to in used shares. XX% rate items The third then be tax compensation, is million stock today's tax are exchange million facilitate at fiscal XX and a $XXX revenue at a in EPS The rate. Guidance to totaled the the amortization $XX million to non-GAAP rate $XX and on share is March basis and XX, million XXXX pre-tax non-GAAP costs $XXX The the $XX in million $X.XX for estimated million quarter to change. to rates amount

pleased March Photonics our you X:XX meeting see and to Time. at West, We at of were some will at be Pacific OFC Tuesday, XX investor

and factors, employee call, actual health may our results remember to changes turn to, of but to forecasts these in customer Now, in that this competition, orders, issues as due differ trade variety from general Q&A and not tariff for mix, including, the product limited a economic regulations, we changes conditions.

you which, certain which answers remind forward-looking for your actual also materially. best to statements results may knowledge today and our may based questions on our I'll that today, are contain differ

you open Kyle, questions. may the line for

Meta first Stanley. Marshall the from comes of line Your [Operator question Instructions] from Morgan

is Your open. line now

two for me. Maybe questions

then On in Can you of a of sense to stronger datacom generation supplier on were share give seemed of Does was kind And evaluated on strong. maybe thought speed that general of that gains side you production it, coronavirus number demand transceiver currently. just kind any kind just a change second, the was demand business, or that and help or of drove how is that? the of exceptionally as in whether that just you impact, Thanks. that those the triangulated ability demand? market whether

Meta, this is Chuck. Thanks for your question.

ourselves business, On this the are we think we demand. market demand for - Datacom is positioning around side was we gains, think of it that share but and time

we our coronavirus, XX/XX simply that chain. to quarter by order strong, here have and holes the to any the our third want extremely and is in to back tell for our you we get book I and measured care On as close supply ability that assess may people to fully the carefulness was

can that we we feel even not able what quarter? And orders. scheduled we could more are we'd based the that enthusiasm we'll everything, by we if have ship limited think for on that everything we And we that be take guarantee do to the on I with business but fourth I can have,

Your next Jim, question Needham line line Jim from the Ricchiuti & of Your comes is from open. Company.

of optical about a that portion sounds that that is more are some anticipating impact So, in it communications bucket industrial. $XX million it's XX% business? as should XX% think seeing like that shortfall looking at result the and mainly we in of the coronavirus you're you again It that's

but right. we is, it's processed got Semi would that say generally that have I very exactly that you've some Comp China, speaking it likely from are very, It products in

where you pop - the some a harder tell I look look out you obviously you of some far it or supply to could there that's early identify at too chain supply that as if chain may the the are to guess Now in of so this. where result as issues be issues surface seeing there up? is What

would revenue but our our time maximize full to I this be stream customers. pay all our maximize to close to and especially time we inventory to that our attention given shipments yes at able which the say

immediately So, goods. within materials we'll turn or the both raw the there to finished

here that, have especially one New even procurement observe our Year that things said we our - Having throughout been - afterwards, working of teams is Chinese teams are great and the international the from home. that

we make shipments to They have don't view a to is that to We're view customer. to need XX% have simply that little have people inside part with to chain is I of command our and good say real pretty going the how bit the done the of we're would the chain of with and What mitigate supply collaboration going going it. a to overall a of do supply that we align than risks. that that total and about close that balance we prioritize. have good less yet in China we've in good and our how we're

I on have a it Jim. think good grip So, we

last… Okay

as As best can. we

Mary $XXX Jane, just you still last headwinds from at target a Are in And the on reiterated given cost that I from coronavirus one? to guys guess, savings question $XX the year million you million.

it. we I be fact, in well Yes. didn't on if we exceeded, but wouldn't Yes surprised are

next line your comes line is Troy open. Sandler. of from Piper from Your now Troy, question Jensen the

on congrats here. all, Nice job. the of First upside ROADM

Thanks

full say weeks? Chuck he And, China. the a third have capacity to Mary a within of returned - expect work I that you think at you did I Jane, heard say couple of to in employees be

to - by believe to the what we're the at plant expect now. increase each in strength right latest thinking in that the is least And - mid-March increase we probably we the come certainly week. Yes at -

sequentially a be or that any I’m gross you Jane about you would assuming has could for basis you're margins synergies about, the in an decline think talking give OpEx just, on great? help kind where Mary help but absolute us you, given of How any go

the the say we're here everybody on for achievement bit shipments because setting through again, gross could is margin able of to an fall really and synergies looking So not a keep the annualized for up is are does heavier coronavirus. call. I It what the point party enough guidance, mind little people to in the that From having we very simply of what in view, a onto we a the with have assumed dressed that on not of factory. would in tough at depend basis. respect ship the that to EPS

But priority as the And that also gross specific see margin numbers steady about but the I don't. is an would say a us. to as important But We to OFC. actually giving for give - we will more talk that, we typically guidance item this the forward. don't go for on would I to contribution at OpEx expect one synergy I

for speaking, synergies to that additions. us together leading has though I and say very very, both been drive Generally would cash, a restriction preserve priority one tight of on which is quite both a the it - which headcount the to of

question from Chatterjee of JPMorgan. is now Samik open. Samik, your line Your comes next the line from

you Chuck, customer independent with? this of with I for a process just wanted can plant the on with [ph] involves? of does customers the particular or to qualification to how Is bit qualified and the see terms certain plant qualification if Sherman qualification a win in that plays me what metrics give business you background the

qualification of certain with aspect every customers all overall qualification our We consistent have equipment, - in is And of basically in materials, One qualification characterization conjunction that plan cases line manufacturing both. control. time. then own processes, this the manufacturing our involves levels our process with and two is

to to qualifying overall Giovanni, And and that what our is working of and through something so, Giovanni’s we would doing job. exactly record great need we segment we’re like really do qualification, say about it you have is a else it a track

this is Giovanni Samik here. Yes,

So we lined of course, there. have Datacom also VCSELs

of platform speed qualification And the of that’s another it’s So up the facility. overall bringing also the to plant. of part that shutdown the after Allen we’re

of of of top challenges qualified by I said, really Chuck the by on - that end this be the March. think and quarter believe we we we’ll there are end the as

and mentioned the that about - improvement it of on kind I in How be the it thinking can Coronavirus the market? year might end you’re from have still and seeing you can industrial declining. of just of that derail remainder here the are If although market, here year-over-year sequential the impact in follow-up does you or kind the - on, a basis, recovery

at Normally, of first this Well will of sometimes up. business. machine, decline. just it’s and/or is see And or we down remember, the new from for go you half aftermarket how - we industrial let growth a as demand me look all, goes when tend our a a the aftermarket about to

production, lower so like the was And the we a said driving sequential now us, quarter last seeing looks the What laser to return is utilization. had of falling utilization. in we’re lower pickup what we that, it in kind laser we’ve with GDPs, seen seen industrial of

making that that for to we when sales any not it be so, share and a will more. the of pick we to new on industrial see well And have larger would expect thoughts are may even up predictions see machines. while, Chuck some when to on market, here, nice may that But continue

just strongest. would be our to I quarter June among add Samik, our tends And

them, June bit running. been would year assuming supply chains and call, be the is - little the this quarter. here to quarter fiscal are The and also the for optimistic situations, I’ve are So some half harder Coronavirus of following have - a back March and effects behind about time. the up it talking we given been and second of the about in the us, We

Chinese and the we publish they the The publish X in announced February index good March once. not good China, Caixin they all January for fairly a is It’s will at us results January think proxy February a government until on manufacturing PMI fairly and index. when

$XX most is to there’s of in So, the even impact there have we’re factored going though expecting million some communications. impact the from we be in that

Okay?

Markets. Tim, open. your now Northland of line the from comes question line Tim Capital Savageaux next is from Your

went the a the is least at My pro forma impact and looks out the still down, on forma on like QX through ex-ing there. metrics a and just your pro be But you're pro - focused you kind growth in fiscal the of don't basis it kind generally puts X% guess, forma guide, coronavirus I of number datacom question on I know, and order year-over-year some on And of the takes the accurate? pro wondering flat positive of for kind that current mentioned something are? comments You pretty made growth communications, and both in year-over-year about X%, Is I'm forma. what of just You've quarter. telecom of here.

you return growing on a shrinking, So Company color to footing what's and some at basis? or to Thanks. might And on what's give address when a of if forma dynamics? pro growth expect can you the look kind us those you

first the to trying and total concerned corner, of that first I that's far for what it a as indicate the is are communications all, the think contribution to we is Company thing. be so So turning looks

that to first sequentially starting quarter. - have quarter the good we the again all, is this perhaps seen a turn of Second industrial also

talked a great a after Giovanni of a which, EUV, little pause, also bit little turning strides. to is bit about

to So see aspects all order that to growth its strong there up. is it really, XG a question book beginning And its of we're I beginning lot of excitement see to factors that think growth. us. of no front very customers, backlog, we necessarily are in of it are think pick looks the that as really there quarter I going as we're going looks predict at Company to But don't what the and, at

want So let Giovanni me Chuck see add if anything. and

great, your Tim. Thanks Jane. It's Mary questions, for

comes question D. Tom, the of Diffely line Davidson. A. Tom from next Your now your from open. line is

[Indiscernible]?

be little there right your be dial connection of really bad a for it. for sure, to If your the like on in possibly answer not to you but queue, hit it We'd hear take line. back when would couldn't to seems away. I you, you I'm a Tom, bit possible we'll question

the line your of Mark comes Your Company. is Miller next now from open. question line Mark, Benchmark The from

the you or Did for book-to-bill quarter? bookings disclose

was, it what say didn't X. it's We but

OK. X, was Book-to-bill

see shipments Warren for talk record just talked a about You in for wondering, do that the What I'm about in Is you? could - from a XD. spot also Android? you Android. strong little you

yet. Not Giovanni. is this Mark,

of And then as finally, percent what were a American total? shipments the North

as a was America total it North standing percent is, at... of

XX%.

XX%.

was what I'm sorry. Then Asia,

do a So, few Asia parts. we in

overall the was XX%, and rest Asia XX%. X%, So, of was China Japan was

comes Your of next Leopold your is the from open. Simon, from Simon line line now James. question Raymond

ask I wanted to two.

double-click was on New about aren't to that the $XX Year that already that trying is just the total is, - I and roughly week. we coronavirus one understand linear, million estimation. of X%, Chinese know necessarily midpoint the rough quarters that's but first of And of week. The one math extended delta kind X% revenue, holiday

a of So I'm it And Jane better doesn't up sort this. indicated a $XX to seem understanding what just that could get Thank for that you. you're sort mid-March. think what of just of that you be understand conservative to at fully to your in I'm thinking than I million be more worst month, case scenario given trying not suggest terms a how workers speed headwind. of arrived might trying that Mary

Year. that. case on we handle through the had the They period. says at Chinese all, the This That's chain, employees were a of first allowed, II-VI what the Well, is New supply why government. could - did Chinese with significant have a worked local amount Chuck was Year registered good chain of we is, so we see because that working the we New supply during

So thing. that's the first

Chuck second as is, we to third work. back employees have, of The said, about thing our a

zero. the XXX%, other So it's not on one the not hand, hand, on it's

next and the how factories with over back factors, think in at million. several leaders looking $XX point, the the the at looking at all our produced, arrived come we that how China, we our So people looking of at this will discussions been in January at weeks, gradually that's what's

set basically But a that's - have Year. work significant is, on, there. was Well, of least is do And directives, in Chinese there if if case did change. all, was number amount keep could what some the the of were employees we II-VI timeline national so how through at extended to that got say we it we go Now, first other of $XX mind New yes, at million.

registered was handle They the the have a during says Chuck did with period. Chinese that. government, That's New good could the working we Year chain, local because this the we supply see supply on we allowed, why were that chain

So thing. that's the first

as back thing of is, to said our employees about Chuck have, second third a The work. we

on XXX the on So not hand, it's other not hand, one the it's zero.

with point, our the at China. So this with leaders our factories of discussions in

at several will looking at we the we what's factors, That's people how million. all how $XX arrived produced, weeks. gradually been and looking January are that We the come the think next over looking at at back

Now, do And yes, more did But say set some timeline $XX if there. basically go keep could mind. that how change. in least at other was got of on, was that's extended number national it we We there directives, to if the million.

And close I have and not it's in right? then that employees Could my the China, say, XX% locations, in I've rough just or got the estimate if would of to you not considered, most of headcount all, cities. whether validate of terms was, are your you coastal

cities... whether employees, more all, XX% number the of as of no. like second employees, all, XX% It's And are considered XX%. to they probably coastal first the to So of of

in in in our roughly are Fuzhou. Wuxi one facilities, province. of one None employees and in to of XX% our are Hubei them the two XX% of located mega XX% the

that. That's appreciate what different a I wanted to topic. I verify. on then just And

sounds drivers there. ROADM In business, the demand it good like of strength terms the of WSS

there how Chinese on of customers much be any have Just to that end-market might actually to some insight inventory is any much how way get to wondering and Thanks. ability demand. Is that? the by related stocking if assess you

for believe way. question. in end on have demand agreement if inventory. So that their change same three supply answer the belief years every their our that's time We've and orders the and indication, I ordinary plus inventory mean, great We or is change happening it's item the for any in a chain. place that outside production both our for we customers us don't it asked We any been now any anything there

the of virtually our all all ROADM see based with that as but the development components, we our in that we ones these increase not term, short only believe would today, the and XG like to customers, in do not I only well. and of but for output make it's term, have the components the us ones discussions longer in on they our

for questions… you Great. Thank the taking

is quarter Thanks, question, one not Yes, anyway, - Simon, I is hope we for Simon. just us, And, long we answered your this a a are this gain. gain not Simon.

Your Diffely from Tom Tom, question is follow-up D.A. now from your open. line Davidson.

you better me now. hear can Yes. Hopefully,

Perfect.

So, to the quickly on costs. Mary question another Sherman Jane, ask just start-up wanted

down sequentially. now, Semi were a Compound right the So margins quite bit

basis out points basis points, If from you the facility, XXX are they the sequentially. points X XXX down still Sherman's take

Just over wondering and go if you puts there. takes the could

to first of Well, respect had last in sequentially, not quarter, with all. at all, we would have Sherman

said of So that's - XX phosphide indium also we them Jarfalla for Semi so, days. two includes the in group Fremont. The fabs aspect both That one only had it. Compound and

tough see that's a in a And their a it's I industrial, I sequential then a industrial, EUV, job, is EUV a period same that in those bit think, up, we're to while to are start of doing a also the really rich I'd perfectly. after on market finally, starting thing but a down little it really, where great hold of up guys on pick to a would bit but margin, of say I holding business. little - true little mean, pause. very pick seeing it's are say flattening we margin probably a bit

the contribution positive So be start be we see would I those probably segment. then factories as think component are indium into those factors from to phosphide sold, able to the

you teens ramp margin in low good as nice is starting expect base as a see a well? ramp, the to volumes And So point.

Yes, exactly. I -

is, selling I products, some one margin. in to the want we added talk point on So the to about at of we well costs start-up the which us when being back, also mind be these as margin too need thing think those the keep helps right? operating costs, we

EPS then did finally, impact the million hit? $XX you revenue disclose And the of

a all fall pretty as would to probably work. and go that then that heavy through We ready on we took you didn't. XX% it But can't the tell we way because could to find come as much people we're estimate is, to I

your Your Riley next open. of B. Dave the comes FBR. Kang is line from from now question line Dave,

I revenue? you wondering you was believe out if doubled XDS I break XDS. sequentially. can Warren on said, Questions And

customers? forma a basis? between Just pro wondering mix do Android And did the on Sherman America how versus what's North

is Dave, as qualified not Sherman yet. said, facility the we

need sensing you that Warren revenue to all facility, So Eastern for is the XD from assume correct. coming

from And the mix what's North the between Warren, - then what's America Android? versus

Well, as had we Mark, from no I told, Android revenue yet Warren.

the the are disruptions supply XDS? any And assuming your impact, kind then million of $XX for on you

the on have actually. least to $XX XDS not respect with million would least effect, of we necessarily - a at at corona to effect expect that the So

in you of two As all growing of outside laser growing actually They're mainly China. outside exception the of with of are China. and our growing know, II-VI materials diodes

guess, more few delayed couple But XDS impact going business? Foxconn I doesn't a weeks. your for be now. they're cannot I that weeks, produce mean, to then maybe

comment can't on We that.

And carbide. was then lastly quarter. I silicon last just X% on guess it

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yes, and second. X%. X% So, The which carbide, was over about just hang a last was growing on quarter silicon in quarter, the

of comes question next Jed, open. from now Genuity. Canaccord Your your Dorsheimer the is line line Jed from

majeure I guess follow-up. help the umbrella were there mid-March of to it might for any clauses I we $XX I'm Thanks. policies million force that curious, that first, in and aware extend have just are be to with production. respect policies If then And the or offset? a your target of full longer, insurance should to sort

our need cooperative the of we companies to financial Obviously, policies I'm balance the within to incurred have. at interruption were insurance And be actually far, if would looked our policies. we've so we our insurance be losses. that to So, show find business would we case, sure

that? think potential or sure Is of actually way gauge your constitute there about a to virus should I got how would something I'm control. mean, we out that's offset

curious we just about how I'm So should be thinking that?

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So can proceeds think for I insurance we you. don't estimate

the what is in I the not and likely manage Company actually think meantime. do expenses would try than more

happening me, it Jed. I running, a and fortunate be who have great people, a our question, beat. focused not That's to It find of appeal a to just also first to factories that in up a priority around and the that's to to care is way kind as that customers very harbor skip that, our good take and help our It's of to bases. while question. a get great should, our I'm is the we're top want sure are But asking it. all And the question say team we've backdrop a of on covered

question, fairly my in I'm expansion? to seems just then It thinking around tight. And follow-up with allocation that capital just commentary carbide, And capacity industry any silicon business particular? about curious how around that the respect remains you're

years with significant Jed, the very be said I'll times inside as XX and us people, us days said runway, we a five electricity it. capacity our expand We us and market. and that into it three as to for to to - take the facility to scale. to allow current times provide right our close well we we'll a characteristics could three secured have low And ago, new subject allow will faster, cost it should we've

so to We increases to substrates. short one we want in the the forecasted expansion quickly improvements to, is high-quality accelerate make have to get capacity be of as the millimeter we for two as the initiatives for under to and that possible can demand respond to of ready generation way, one one, allow that XXX technology that - pace us second know is

line Richard comes open. is of now Shannon the from line question next from Your your Craig-Hallum. Richard,

on apologize saw pick of But XXX-gig up if sort when fiscal we prepared those expect a the XXX do third XXX? I you on modules modules? XXX expecting quarter? And up if the us bigger kind remarks higher that detail from of and and components to any the of a missed mainstream And up see and the how not, from Maybe any you datacom here. much give question XXX of space if are sense pick the can pick versus you a was in and speed

Giovanni. is this Richard, Hi,

So as total the said - addressable including, represents in of market - market. largest XXXG shareholder course, the we still self and the addressable of the our script, the

largest percentage of a group. the was - there So the

or is Anyway, today? XXX, the size total of Giovanni, XXX overall - more can Datacom there, you I it’s the more it characterize XX% and that mean is business

as know We don't you alone lines, let or filter report by numbers speed.

to is And we as XXXG I they're XXXG - fast XXXG that said, concept bulk also the think as and on fast but and They're demand I of for in on coming worked and are think growing. think leader XXXG. we are I said, And the as the we growing designs I still ready. we is ready be - the well.

wondering you of kind area, contracts category energy contracts you of that's is key signed? within characterize the the market, aerospace Thanks lasers - said a a Chuck, the few for to that about I'm - and of think talked of or identify mentioned the this question you of signed a you returning and large high you on think follow-on more In you as if I growth wondering defense. past, any any those. you fitting large if

is latest energy with early two combination systems our directed well extremely the laser adopters today that I nature of of we see, just directed semiconductor components. and believe will the not large energy in or of areas chains platform Let's four the acquisitions of outlined I positioning technology contracts And major in investment, and the for us supply beginning our customer the disclose application. the is

making At making these programs the expansion So that’s really at we exciting business. moment. moment, are area our an in largest is in aerospace for people we’re the defense invested in the investment and growth the

the Mary built for follow-on question Jane, your quarter? Jane. the fab start-up do guidance into have any cost I have Sherman Mary current from quick a you for

Yes.

much? Can how quantify you

right in range sort seeing of the we're probably It’s that XX now, range. same the

Paul question comes Paul, Silverstein now Cowen. the is from of next Your line your open. from line

I dropped little bit. apologize, those a

revenue… regard So get you came trust this some to up Well, from still need I qualified to if I apologize your Sherman, earlier. commentary, with

Paul. hey, Hey, Paul

Yes.

know this afternoon Chuck. for receiving really you, a it’s sound and for I decide good But you. saying everything muffled your saying. is can’t interrupting we’re Paul, you’re hey you’re afternoon, pardon we beg but what Good we as

over start just you Could please?

thing My wife says same the Chuck.

Okay.

Paul. Hey, thanks

Yes.

out, respect revenue I is much With and about much - to have to you stream, prospective the as above days enough already comes do say revenue trust I for question revenue or out revenue and June facility, to hard doing? But from incremental range The that as how your on possible finalize me. of you’re it’s appreciate the not to a commentary, what March to need or yes beyond qualification out incremental guidance. XX Sherman, that Sherman its it look in you you give of Okay still forecast is to

question. first the That’s

your heard focus as The previous was for can combined second with not II-VI for the question II-VI a by China? And the the plus inventory say, respect any with question, in big the given past even is, to proper? well to Huawei as that Chuck, did to How you you’re buildup company you I customers. concerned XX%, response year connection concern over it or and all have that, XX% if two Huawei. wasn’t about And

what to well, your am if that wondering say extends you any can or share of to you’re - you - type assume terms customers Huawei us as if can up you the insight have you of specifically were on you but have willing? with I I - in

June in a think for to the we're not for of quarter. we be for your the one, quarter revenue able Number on lot outcome is questions. likely Paul. discuss fourth sensing, there, Thanks There’s questions to XD the what in going

line. product any By

What That today. or any customers? so that - whether say after of discussions, can't will not had really was be XX% that about we subject we a commercial came

not. the assess the revenue. far, we’ll June any have did The that for XX% last combined the company customer. the not year, XX revenue that does - with do But the did, check Yes in not. as Obviously we company when we so finalizes

- sorry ahead Yes Paul, ahead. regard with go please go

know, You Huawei?

to in sales that total XX% company. China me a revenues regard let from say came as that our - of With reported in we also

because to in the was to direct customers, is the - another to I that's point. to and market Chinese asked sales gave the China And So regarding consistent was sales with our knowledge, order was the my data I answer regard that direct pattern customers our with thought I demands. question

for the regard And normal is what make to about China. us story Huawei, consumed be of customers Paul. our pattern to it's and we've And about of any we understand to other our customers for extent both for I sales inventory. that being China, with our to sales directly it different to to come And buying and in on in and production that's of all that's it's what to comments harder China, in of an believe have, ordinary We was our just judge able it. my just think discussion course a was not customers

meaningful the your last one, markets. a been it of squeeze of sounds board, of especially across commentary face most the products your the there's and customer And board across is like from kind numbers, very your commentary good. Just in or improvement one in

quarter? you it's a again question know It but the ask visibility. about forecast to appreciate I and is me you're beyond Let not guiding sounds general I visibility like hard better,

at, points That's quarter improvement two. nature that like seeing you're you're all is the more question? sounds data little to suggests it But long-tailed the or looking that opposed a just a as secular,

Well…

for us, reiterate, little and a for a it's to going have is of path. We us think along interrupt walks And bit virus that's to take now. that very everybody same time virus the book And going honestly And quarter. we quite had, third XX/XX that I out, before that order that our came, to we sort want that came the for coverage a had strong that, before I think to Paul. beyond

of stronger than would that, quarter, and guidance. the the say how them uptick just we and drivers not just had actually to did are limited that does that I we starting. the that on The but quarter seem few given the - we to a especially this there reported, have be anticipated analysis we Yes set in were maybe

really we on in a we does a to one-time. I a - Let's it trend, see sure it's of it not. was some be industrial. say resumption take spend to of growth easier one for sequential an of to saw, What not couple but quarters the time would lot like

Yes.

Could we presume?

Go ahead. Paul. Sorry,

All right, and event black a talk. so I on, presume transitory Coronavirus sorry? plague, will but pass, - recognize that your too I'm be is I shall so unless go is - that guidance the

Thanks a lot, Paul.

do. situation company, work interested lay of have whole back customers this information in I for enthusiasm of we today. think and we we're the and keep to we host And to tried can, way. the the do And power best as out to our out all work the hand have people to harness and them for is quarter fast get of to get all can task that what with that the here we that them the safely, and it as a that's back of in are we

like conference showing now turn I'm further this Jane to no Financial questions at back I time. the Chief would to Officer. Mary Raymond,

fiscal much, look This joining on at forward to you we the forward report May. in also updating very Kyle. We today. Thank and you to quarter Have we ends our us. you that for early when look for you good third call Thank a day. our seeing OFC, results

Okay.

you call. Thank this concludes and conference wonderful today's for and Ladies your have participation gentlemen, day. a

may You all disconnect.