Coherent (COHR) 13 Aug 202020 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the II-VI Incorporated Fiscal Year 2020 Fourth Quarter Earnings Call. At this time all participants are in a listen-only mode. After the speaker presentation there will be a question and answer session. [Operator Instructions]. Please be advice that today's conference is being recorded. Instructions]. [Operator like Raymond, conference Chief now today, your turn Jane Mary Financial to would to the speaker I Officer. Please go ahead, ma'am.

[ph], Financial II-VI end for Barbarossa, Thank Raymond, the fourth earnings Joelle and year the I'm for afternoon. you, year and Compound Mary the are Dr. call the is today Chief Welcome on XXXX. Executive Officer segment. Dr. Incorporated. Giovanni Chief at President call Chuck fiscal Officer; and Officer the quarter our here to call our good our Mattera, the Jane being Strategy With on me Thursday, Semiconductors XXXX. today This August of Chief and recorded XX,

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

reminder, events today these to risks contain materially. change, any may in We we undertake given are do a for with reflect be XX, Form Form as files except our to the during obligation list teleconference on that context statements A SEC of June update in found only. factors required. make the XX-K not possibly statements our in as risk XXXX. year XXXX, are to of as subject forward-looking as can ended SX XX, well today to this factors They Just June the any the subsequent today,

Chuck those documents the let includes over the GAAP or Dr. Mattera. are to With that that, reconciliations such found press present which end the We me for also the of measures Chuck? call presentation. will each non-GAAP some as to investor at turn release measures the

from on accomplished including lot came year number everyone. flow record best approval complete the pleased million of and record sales On fiscal II-VI the to Finisar What I return $XXX to operations free coping consolidated of in the and our am XX%, our offer. of we together good a of the cash received cash fronts. with a on and and transaction, year? revenue non-GAAP a we a billion Jane, progress for leverage time and flow that afternoon Our hit of performance and Finisar we Mary with basis $X.X pandemic. and XXXX, a $XXX When very had with delivered short employees running a ground really Thanks, million.

began phosphide Among Datacom II-VI, operating in schedule. billion our results. end a market One performance based we As period time began customers improved great ahead we We delivered and to of serving with business many devices year the strong indium margins. and achievements underscored stripping our our short OEM enhanced markets $X of transceiver by a

our synergies carbide We ramp enable deliver our double vertically the for track to cost announced carbide months. our to our devices pursuing strengthen technology partnerships silicon substrates by are integrated first by continuing long-term and by market of our XX in position platforms. on end silicon strategic We capacity that

dedicated processes, to organizations and sales One competitive Our worldwide and the and that bottom of of that II-VI while solid in results, of our and compliant, profound a operate lifting confronted we kind our operations safe heavy successful Underlying procurement line implementing four top quarters accomplishments programs in change the the simplifying expanding worldwide sustain that secure pandemic were requires. these every in. a country market scale organization contributed teams employees improvements and drove

revenue to $XXX impact teams, material. was million in We quarter delivered of quarter coming in the revised million, not fourth fourth trend orders the ended in XXth billion and new nearly COVID-XX Thanks operations our our with XD growth sensing. communications especially achievement June consolidated strong driven booked the by of in of revenue quarter strong revenue $XXX in and with this above Our $X cap year global guidance sequential backlog.

Datacom and accelerated, XX% continue growth. transformation COVID-XX XX-XX market, in home Revenue accelerated increase Telecom digital was split play which of with and learn from the majority about trends we the what between our a access. is the began inter fuel sequentially drove As upgrade as in parts the many communications strong work, achieve multiyear including pandemic. This intra-data the in before and even the growth that cycle of submarine driving believe and metro to network of course is acceleration center, data all center, unfolding XG and long-haul,

enterprise We trend increased business will reduce their at number the believe brisk cloud some this driven well carriers a Datacom sequentially. accommodating from growth XX% subscribers working as over their an of for by time. businesses OpEx we home, a believe pace grew was applications to Our moving to as continue

delivery broad competitive customer were this execution of and our in instrumental combined diverse portfolio the in performance strong segment. great base Our with

quarter. our also business intimacy cautious in grow who posture to We believe prior Finisar some us our customer to our enabled acquisition, of Datacom second had with customers a taken returned us but to our legacy the

integration have see merchant believe on trajectory of synergy estimate we to plans indium they our market share benefits Datacom than next capture we us the the which to to the and over $XXX years what million laser by to business, few Finally, XX% started put a components we XXXX. phosphide of be also relate device a greater a will as about

undersea strong components portfolio of driven grew and by for our business DWDM XX% Telecom subsystems ROADMs, components. and Our our demand sequentially,

we while Our in business encouraging signs recovery laser customers sequentially COVID-XX overall micron in the in Sequentially, the China. industrial market. with of one led impact the mitigated of revenue are market delivering by flat seeing laser laser optics industrial

saw to products. The to the including Our demand semi-cap year. quarter EUV industry and grew for those materials business a advanced equipment the fabs X% strong we technologies in continues with outfit next-generation compared previous

some fabs, due COVID-XX slowed ramp longer-term remains in have restrictions to travel the of While strong. but outlook

has of continues bookings point emerging testing order COVID-XX. critical year reliable sciences grew it double also production and our have as -- XXXX. we and coverage At vital base It customers instrumentation Our used this provide more XX% fiscal and to those life in than engaged the diagnostic for business design its components for XX% sequentially to sequentially. materials vital including

Turning exceptionally growth sensing, sequentially. to XX% at the XD was strong

plan. report the we revenue plans. well the record execution will vertically year, of For our Thanks platform competitiveness synergy successful and above our integration the of and our integrated to

All be excited largest XD shipping to are sensing our from its of and sensing to of our well locations. operations customer XD performing all our

with efforts, would the it recognized increasingly in powering we ESG, team's that Apple's as those advancing recognized As July, to we by to our relates energy is enabled to committed and in our widespread of are us clean around be Advancing will acknowledge operations. our like program. a to of being ultimately produce broad makes sustainability so clean clean that to energy. is capabilities expand goals GE's technology the Announced enable company were deployments power. included what base partnership including that and goals energy clean production partnership our I Apple them This XXX% us for silicon of carbide with combine existing exciting. clean will the modules to energy all GE devices

yesterday, acquire We two technology intention also important companies. to announced our

The devices. as Ascatron, a leading in is power wafer first innovator electronic epitaxial silicon carbide and

of second and for continuing semiconductor Innovion, build well key are this as implantation, elements technology exciting Clearly, materials devices. as The in ion to platform. a we engineered fabrication out services is leader

silicon work number expand a this devices. All by to our years, will into of accelerate based carbide of

believe to develop, secular strong we energy. a global to be be While fully positioned market we of convergence are this as aiming and expanded a and few driven electrification emissions trend platform in a years long will by regulation growth what will player take term renewable the

over as by revenue substrate Regarding support exciting XX% our carbide capacity wireless, next the five increase to our path driven XX to grew business, times years we growth to sequentially targets. three on our silicon continue to five

have of trade in incredible market geopolitical a including and overall Finally, with number conditions, geographies. that in possible the the of still bring market dealing to develop and crosscurrents world products landscape regarding pandemic. possible effects Since positioned our the across customers is changes to inception, innovations the our company broadest widespread all dynamics, of an we number

global most We to strategizing operations. sustainable diversifying customers and to our their mitigating way well-positioned now the manage who accommodate are increasingly are while very the on therefore risks their footprint

All of it With that, to and over turn vision of a future sustainability life world with materials the vital of through to Giovanni? our this let me a generations. innovative is Giovanni. consistent better transformed today

II-VI and represents XG most morning. good Chuck, some the for opportunity experienced time. you, has extensive Thank

into Our services. gallium a and growth XG our vertically are in parts with integrated of silicon to product deployed network. the on in nitride partnership portfolio opportunity the all for great the grow represent our They base wireless carbide that silicon will continue includes carbide components, substrates and modules, soon, demand subsystems SEDI by Starting market. amplifiers driven stations, at

the in the end-to-end portfolio very by With our own optical integrated to II-VI. offer market. enabled power amplification, for we monitoring first the our partnership and where for transceivers It the transmission, connect the products. of track. amplifiers optics for optical vertically lasers, switching point a aggregation XG meeting the is Our market detectors, base stations on substrates and network, and announced, regards integrated relies we of an circuits, platforms XXX is that on are on stringent station which carbide gallium And silicon exciting our program, the nitride previously requirements base with to millimeter SEDI

We half in XXXX. underway, have expect efforts hit of production first and year qualification scheduled multiple calendar in be have milestone the our date, to volume to

XG scaling infrastructure enable vertically with We progress made platform. rapid of are our to excited integrated about the and critical adoption

our silicon substrates, for also billion internal is in meet of and competitive for $X such the business device collaboration is world-class pace -- our analog the arsenide expansion their to Our our level differentiation products. rooted design proprietary of thanks advantage RF team. plant on technology developed All integrated carbide advantages external transceiver The circuit devices. as from gallium capacity to demand to dedicated the and components platforms expertise integration. a These of multi-disciplinary indium derived close phosphide, transceiver and Datacom

the Innovation to integrated roadmap upgrade compelling and are suppliers, to and mainly Datacom them resulting market in that multiple performance industry integration assembly factors. optics speed companies automation alter electronic view, many data advanced the and that higher the and characterized become a from migrates essential favor with packaging shrinking rates technology, transceiver innovation levels components in of assembly have at of all by While design. of and the enable optical technology levels our like form along upcoming as new in the transceiver In will competitive cycle high balance vertically product II-VI will operations. is performed

For technology, integrating for example, And we and transceivers XXX which which our which stepped Telecom, haul. phosphide, is integration silicon lines. our for investing significantly Wavelength Led reaches. Gigabit demand seeing believe quarter primarily for indium our the investments and photonics. data XXXG XXG we've Chris CTO, transceivers quarter, XG platforms, our gallium grew our different in wafer-level solutions, investment Selective our in by competitiveness. increased Ethernet driven including performance circuit we strong including strong ROADM tunable arsenide Switch we've have been devices, are Coppin, And in critical convexes, enable high over XX% laser, our growth customer In product wireless the to roadmap by for front implant up

coherent ramping XXXG and tunable highly module production OEMs, our optics, integrators, For receiver for including components assembly. our of we're also transmitter integrated

communications defense a is increasingly and for fiscal business beyond aerospace for XXXX Looking XX% market year. market, defense the turning over into in growth year and the full significant us. our grew Aerospace

positioning reconnaissance energy, In contested and address contribution to are opportunities as another intelligence, new hypersonics exciting directed that F-XX further we surveillance, and to addition targeting as to satellites aircraft, support applications, space. well and long standing our strategic the in vital platforms II-VI

the competitiveness sensing. to XD again, further. grew importance LiDAR time smartphones development and business Warren sensing LiDAR our XD We supply that enable of strategic to tablets sensors by functionality volume increase world-facing quarter. we in devices underlines fourth driving for month emergence important our seasonally first world-facing This believe shortening demand generation year shipments Our end even of market chain markets. from sensors our will in once the our multiple and of pace started We've our for this XD The applications several of in with plants. shipments low sequentially began a accelerated of sensing next our also that

per will XD this for it growth be device, the dollar believe increase also drivers of one the We it content will year. sensing

supply next We vertically continue to our VCSEL part position U.S. entirely design to based sensing in generation facilities. be from of products engagements integrated XD and key are a

where market VCSEL the last leveraging to state-of-the-art share our We expect to and gain run. and which our production grow in in to Sherman, were operations cycle manufacturing product continue to by continues upcoming quarter, qualified business

Innovion in to for the Finally, plans yesterday, reflect fiscal and we valuable as ion the it our our Innovion original We our all strategy Innovion. in with team Mary Ascatron identify make of long the of silicon on interests see term our parent similarly years to and II-VI the the ability that, opportunity implantations of made owners outstanding importance investments. Jane? And relates will differentiated we're carbide and turn them term great I demonstrated Along announced of investment integral to it significant of epitaxy differentiation year ago. platforms. global our Innovion and to XXXX. and let technology footprint value execute part to a We become their announcement and Yesterday, excited We saw Mary long Jane. device in technology. acquire me on over II. an addition to With

the forma the year acquisitions in our same the strong last the picking demonstrates year year Thank our you, our Giovanni, measurement the and well. experience was a basis, present year. performance very to pro close Finisar morning. with a that We compared grew spots to and revenue fiscal revenue QX in flat and good market pro XX% The that the acquisition. integrating at our was effect prior forma quarter for entire XXXX gives to On period

above XXXX. year, non-GAAP XX.X% nearly non-GAAP at or for Our year for was margin gross the XX.X% margin gross fiscal II-VI and the

income year. original fiscal for free case operating XX.X% the of was margin flow XXXX, the for business quarter delivered assumed first for exceeding million the and $XXX for the non-GAAP breakeven Our XX.X% that flow year. cash cash year We

our transaction. expect through We June is three $XX the $XX are well delivery the of or cost our or against months year the synergies of estimate. annual after XX million $XXX still target reach nine million, into synergies The of the months XX, within close tracking first we and first years million in to double

revenue equipment, in X% total is capital our in consumer, in rest other defense, industrial, and quarter, semiconductor markets. $XXX aerospace XX% and million X% the in was communication, During in of split X% in the X%

with the Japan. the diluted We sequentially in total was in X% for XXXX had grew XX% XX% EPS EPS and tax China, benefit quarter, the XX% the XX% primarily tax in semiconductor XX%, in rest in in million defense, communications, the after quarter, for GAAP and grew the From in other diluted with non-GAAP and $XX markets, revenue final year, a $X non-GAAP and of in the equipment grew had $XXX significantly U.S. of million industrial, market end defense remainder the The Japan, customers. QX debt quarter. were in total. $X.X aerospace was by billion was we a the rate. For North non-GAAP tax the life year the grew America, consumer communications XX% aerospace because being X%, X% Geographically China, the sciences for XX%, X% was and X% $X.XX in GAAP and in from consumer, shares our affected perspective the equipment, of quarter, in growth XX% flat. capital was Quarterly X% in capital of Europe, revenue Growth adjustments X% grew came XX end and quarter EPS in in XX% split world. and semiconductor the convertible rest no

For the XXXX, shares of the the year. year $XX.X of full share was for weighted fiscal count the outstanding average full year million, the

doubling to segment sensing and level, quarter and on quarter benefited sales Semiconductors. very including benefited Compound compared of Semi also was demand submarine the mix, sales the strong again the was same At margins a and for XX.X%. last pump were Datacom For return sales for arrays XX.X% its on components. operating rich XD nearly from the from year. this X.X% return Compound and Photonics sales quarter, operating XX.X% non-GAAP GAAP efficiencies Photonics non-GAAP for

a OpEx, For million third $XXX on incentive the operating due $XXX XXXX, expenses was million for or year million total basis a quarter non-GAAP basis the on GAAP in to of fiscal to quarter $XXX and mostly compensation. the compared

comp $XX million $XX period September asset XXXX. We current The one-year a for for will to transaction year a expect some million is $XX for fiscal to run vary severance in be XXXX. be the fiscal million depreciation on $XX at quarter, the Stock accounting rate comp was purchase quarter to XX, million with level conclude our measurement expected about million. and $XX quarter. the this Though stock about were Stock for XXXX million does components. value year $X.X expenses, for including fixed price

this backlog compares in that Our months. this June million. $XXX backlog $XXX million the -- with consolidated XX quarter The backlog of million in XX over $XX last Capital compares ship backlog in was remarkable with of Compound Semiconductors. a Semiconductors. million Photonics orders year's and consisting with $XXX This quarter's and were next million $XXX consolidated contains Compound $XXX in will million Photonics $XXX expenditures million last

For year, the full was million. $XXX CapEx

benefit year the the nine purchase drove final rate XXXX is year quarter. XXXX operating adjustment million. to expense. was The year rate $XX.X year For in performance during expense due extreme months a it year and million of expect XXXX, for fiscal tax $XXX between tax the a quarter large QX million fluctuations tax accounting. the $X.X to for be The full affected improved The and in in and rate January and year the loss June Interest tax in the the rate $XX.X a explanation The quarter fiscal in XX% of CapEx was currency the to full expense tax strong year benefit, to-date the we by FX $XXX the first tax complex the X% the was fiscal periods. for was fourth quarter to the million million.

XX%. and For next be year, rate we to tax expect XX% between the

$XX is X.X the end, to debt letters about equity shares. bank [ph] markets million. of capital the from our a the for $XXX price $X.X ratio million, the be off preferred all year expense anti-dilutive. balance include including retain XXXX to capital million, billion. to $X $XX.XX revolver This after term shares. will on expected million million fees, we shareholders. net company term XXXX effects XXXX. In $XXX loan paid million and of loan The deducted taking fees. cash dividends our Thus, share. the the July raise is our after maximum paid have our of a about on raised million The converted million X.XX preferred to and to June the XXXX are be settlement, mandatorily company year net cash net the to per times. will B total Xnd, forward and year. incurred two available prior The calculating million, transaction, the our for share net The equity. of convert, September At of of year debt for proceeds equity that is was conversion basis that income EPS, or quarter, $XX common completed we the will million to of credit leverage a of be conversion preferred or we preferred annual and million need shares of is of QX shares between be will and Shortly XXXX, in include count was including markets interest income shares position to a the July Turning X.X of [ph], million in million was about one-time common for our $XX on not XXXX of $XXX assumes a the facility to the be outstanding million $XX any B do the raise the year equity about the the XXX $XXX quarter XX The the to is the availability write-off non at million be convert arrive amortization our $XXX fiscal remaining credit, X.X used dilutive, fees QX last our fiscal on

was debt net credit facility at ratio Our times X.X of leverage XXth. basis the our June on

of interests outstanding Regarding an all the as announced acquire the of the well to as owners as of intention of our Innovion. parent Ascatron company

cash Semiconductors the year both Both to million. fees $X will wafer release these Today, of segment. process our and if under of immaterial XXXX. from fees first both both fiscal in accounted both we As adding to the into platform. item transaction is for Compound says, about Transaction epitaxial expect calendar IT press Innovion million XX. have the are estimate close by we key The non-GAAP our both are acquisitions, year be an the $X is as not quarter for the technology our shares sooner. September for $XX outlay capability combined included end, for for ended consolidated investment. And them Revenue close both million. are in expand At equity for

$XX to first a to The XXX This XX% Turning EPS including to pre of of tax be million and XXXX, year in the on in $X.XX, to XX, exchange costs, stock XXXX, amortization, include to outlook. including or amount The $XX are non-GAAP facilitate $XXX of fees. $XXX shares. all the used subject the $X The million ending million estimated million million transaction cost today's diluted is non-GAAP tax the is debt amount an the rate. at quarter $X.XX September non-GAAP the and fiscal $X.XX share count million change. is Revenue the items in per tax in rate exchange EPS for and rate rate items, to extinguishment and in share. dollar integration, million $XX.X actual million $XX basis comp, is

and you to not in but for to certain firm follow that our variety to we ask today general questions. limit our also a the Joelle, one from forecasts, orders, in may line conditions. regulations, and and We customer Before a Q&A, changes the economic including actual due question questions competition, its each product tariff up. reminder, mix, open would may trade one the go of which differ whole limited changes contain as factors, results to may answers

Morgan Thank from Our comes question with Meta Instructions] [Operator Marshall you. Stanley. first

now is open. line Your

noted in they insight other guys. Thanks competitors us diversifying question Could one customers. give into a that and you're directly less seeing question, your to of the just China about thinking on that of any just help of kind follow with interplays selling sets within as some And operating then, Maybe the were Thanks. customer a Huawei -- you're with and guidance? selling just of what margins kind maybe to? the Great. you up within kind

Hi, Meta. -- here. Giovanni This we is I'll no all, XX% of first customer. have

Okay.

So clear. that's

diversified Telecom We general, and Datacom. are quite particularly in in

so, moment. semiconductor and no began And selling those We products. doubt there a eventually is leader that for first compound time phosphide There's to there China is devices. our the a indium demand amplifiers, detectors we that in very to make strong across transceivers, at particularly else lasers the over world. balanced and all quite to have pumps, switches wavelength been of But demand. course, Telecom array generally we everything of from in strong the XXX an leaders in in And selective Datacomp become and

have good affected having for But, I that, have the from only we can example. very well sanctions, by that, customers. been not we I as as European, from said pull still American North So, think say and China

So Jane I'll comment on the margin. let Mary

Right.

Op the to respect with So and guidance the margin.

all, thing reverse out is you comparing need to first of first the So tax. to it do QX, you're the particularly

about XX% tax XX% between And be was it the actually So we a are as if for expecting guidance And XX%. expect about what we and set remember, go -- it into QX, XX%. to with you benefit. we QX we

XX% use expense tax we So rate.

the that's first So change.

is share count. compared QX the change The second to

ended good year your cautious XXX. QX, goes respect II-VI. foundational start mix to smallest But question to the usually with more some the in XXX, to rich of of quarter. we margin is very had operations, of because instead bit September are of So being quarter a part as with mix XX little we very, especially that it in a very, respect our the on the this plus products year, more quarter And we of

to on say So biggest a I the you're changes, QX share the the cautious and the generally especially absolutely the guidance, bit margin. tax will rate comparing on count. Op But we're little setting and

Great. Thanks.

Thank you.

Our comes with question JPMorgan. from next Samik Chatterjee

Your line open. is

particularly, also If for in strength Thanks a you cycle of mentioned and start kind here. multi-year question. just China, at Chuck, with the that morning. Good I Hi. taking my you're think, seeing can investment I looking

one the to keep China. I investors particularly questions of investment the getting cycle, from think we length that timing often that's the or of the in

how wanted experience to investment you're based up. benefiting you Thank length And both and a thinking just cycle have ask of previous are So from then you the here about follow cycles, the on I of that on you. Telecom Datacom?

Samik, exactly facets to of a There's cycle may there -- be to one. this like the are lot of lot this a last this not ones.

more Our understanding our to and have this might with be that it expect one than with discussions investment customers And should and customers face actually to we our is multi-year customers a cycle. it.

can't So past. And we're cautious ignore we to because begin with. including back if look the we

of could us. see only getting swept the we as we we in see term. that with at slowdown, getting our But the this is a about that's enabling that least to of and momentum take be to for part things It's At and term on if the suggested up the that. phase that for and we to place. really have And too tide do carried are proposition are are a sensibilities away this things with of there's exciting focused the value long not And, sensitivity our results conscious projections. were it the going lot quarter have that a So come. near could -- course, confused fourth that don't to and suggest, strong, we it continue we digestion that see maybe moment, a be

Okay?

cash just most to flow out me and set improvement Jane, I But that conversion good follow-up, of next think can improvement I the in the cash about stood conversion How flow flow year if what Mary cash of And rate? strong free the sustaining remarkable areas implying. it. that Got the it's were Okay. what should Because Thank cash conversion? the into a primary that's free you. results. was and

you. Thank course. of Yes,

it that since hard the cash all, So, with of we was we worked had was many have as year able well, this before. And very And first sure you through a flow on significant that be debt company. new were commented year year, the this level we of it a conversion also, first debt. to entire to that to had us important of we hadn't service

couple a going So forward. things

if the to all, XXX. CapEx range of XXX you I about gave, think First up

did XXXX, going One, we During cautious either extremely fiscal was just the two the year year to sure weren't capital, because we're leaving, on how play started were we we trade year we as out. things.

COVID. Second because of all, of then

Giovanni as particular thing some board cases, in of well terms or and Photonics XX/X drove operating being our to XX/X in was, the second to XX/X. say beyond, more the know, you across strongly move operations with in [ph] hours, Chuck, [ph] considerably The President really

growth the but And did operations to able really always that we XX/X, was. start be were to to curve CapEx our moderate not everything So on spending.

into we it. lot expansion year we're as forward to first of the about all, that growth capacity talked I of some as meet go have we've XXXX, a just fiscal think we that will seeing,

the thing. first that's So

good together practices savings us probably on I thing some capital think working the side. of coming two on elements. on the helped merging The second is inventory The companies to inventory the get particularly

them from important remain you of to going as a get kind that the company. is more know, the -- to That cash I somewhere coming strive Those keep the cash cash conversion. call do to to the would I will very As be good company to of flow that cash XX% I rate. be that to in flow And well this sure the will -- as very, actually up free of quite a think the past said, right? XX% cleaning up is to -- while sort free happening, say operations available of You flow receivables. flow. of steady still don't due it cleaned neighborhood get don't think

So that's right just an estimate now.

that's devices in the we capacity be fiscal the move, carbide those investments, increases main the on based but story obviously year year for As look could and and XXXX. at main that this would the silicon particularly drivers

detail there. Thank for Thanks for Thanks the color. Great. color you.

you. Thank

Davidson. next from Diffely Our comes question D. with Tom A.

open. now is line Your

Yes. Thank you.

Or were just that you in planned seeing cost synergies initially coming talked the you faster about acceleration is Jane, beginning? synergies planned. additional you than it curious, from First, what expecting? weren't cost the I'm Mary of an are had how purely you

up if existing faster, we I the maybe generally, XX% of. of really I cost we hadn't thought thought XX% it, probably I system, I process the that everybody right? to ones kind in XX%. more Tom, some out by are would the year the it of would going getting from you same multiply say part getting synergies were ones my of it's complicated the that reengineering, take all and synergies call and say -- on before sort wouldn't jab. But that third come the So XXX

see things going we the because we the largest supply always are synergies, that that, In potentially don't part find. in of start is which what chain, first the the you're year, you that other to to As know starts possible do. exactly COGS

I generally speaking, would them faster. mostly So really say it's receiving

all generally not still into best our $XXX a move But never think at met year the this And the We're would we not we is didn't million. synergy point, company way like. a about the to whole way speaking, yet. this I so

Yes.

capabilities That follow-up, talked efficiency Okay. you makes next And there device. then as Are the reduction this a sensing working Giovanni, effort? of add or to more is cost generation XD on you sense. need about

No.

is capability you to high add. need We are about no very further speed devices. typically It's that much we know, new devices, really vertical there designing integrated, as

that high these the worked works So speed. of are array lasers very a

and strong you particularly have I think little us So others. the for bit that's for market Datacom the when is a in easier, task where -- lasers, I than maybe think the high-speed new challenges. share it's with But experience

too. to application a we significant have I share well-positioned that think of are So

your today. Okay. Thanks time for

you. Thank

next Thank from comes question Cowen. Silverstein from you. And Paul our

open. now Your line is

Good morning. Chuck Giovanni. and okay? hear Can you me all

Yes. Morning, Paul.

Thank you. questions I Two if may.

First cat sell deployed that's been you how it you're all not of now Huawei wasn't can return XX%, China, it going of XX% future that being the factor but within question, by the Huawei how we into components, then ship I just hasn't an all, of your starting Huawei, component subsystem But about market? Huawei does impact, that have -- into for And the is that big think on suppliers, exposure if but all of I optical much And a quickly all Finisar. you how non the into, defined? those if revenue? is to recognize, direct, could that through service that whom many, Chinese Chinese but the others. system non mostly How sale Huawei, and by also ultimately, not sell into if providers to much

Paul. questions, are a of There lot

in Let one. me all

a question market an The substantial Okay, hope regard your with market try for can Huawei. hear way. Huawei, Paul. take to I this on end. me me? it specific echo to continues itself indirect I important sales to And and have you to my China II-VI. Let about be

kind We asking sure, don't for full and invest business think we components question that answer subsystems, operate with China an simple levels that to our have business grows, be wide complicated do. and integration; and is to for we're to manage But -- variety is a As be a to diversity of come at of I grow customers. serving , have important have we ecosystem. attempting into the a large we wide as to you're And a us. in we visibility materials, a back of and if three market that able to

answered going I represent who think fourth it sales. And said future. Mary are question, the there us are to we of in our in hope Paul. smaller Jane I players bigger in XX% expect companies innovators your I are for that quarter today that, opportunities And market. our large even the represented

assume in of seen position assume Chuck, suppliers of outside Well, but assume a equally share to if at in the position, from Nokia as same I an were up that have well? major the you other China, position to Huawei pick I be, Yes. not optical each related of exact they as will in your those piece strong

leading become time. marketplace, over We the as And they that reordered chains Paul. a they as position have supply into

As is optical market into OEM communications for large equipment suppliers serving the remain our all strong. become the reordered supply enthusiasm chains going to to continue

so, we of And them customers. continue enable grow And to handful will extremely in, whichever they're have we in participating a important regionally. markets to

Okay?

fast in Datacom? is how the components, far Chuck, And how optical

you see. the Paul? Let's question, repeat Can

Yes.

historically. shipping how is hadn't you're components fast done optical What your How that far impact? which in expertise? terms Finisar Datacom, Now of into

that one, Paul. Okay. I'll ask take Giovanni to

So is demand Paul, there there quite there out strong a the there. -- is -- no is doubt, a

for So better we really have couldn't been -- share gain if timing there a you us the and market. penetrate to in want, be

selling acquired So like in for high Datacom particularly quite of volume and those indium And were have phosphide important shipping really course, been rotators shipping in the the platform, as as lasers, And, I detectors. Faraday and already the script, and during -- know, they've And of you started mentioned most like. we're already and other that sub we components with epitaxial ones lndium the [Indiscernible] phosphide -- Finisar. all we but the years. leading kind

And so existing so and penetrating very given and platform the the of qualified years with data with of reliability devices, internal market or volumes -- internal really consumption. competitive very years the the

At were of Finisar. of in much Finisar. in least acquisition been the strategy the the with I so one it's of validity pretty interested why our think we straightforward really demonstrating of one the reasons combining and

before. Again, number never volume products fast. pretty today shipping been customers, been the a has we're of market to in this on have merchant So

Thanks, guys. Thank you.

you, Paul. Thank

Thank you.

comes question Hallum. next Our Craig Shannon from Richard with

now open. is line Your

the here here. with taking good you some margins questions. very a I Well, about talked Jane, rich fairly for quarter my thanks think Mary June mix in gross

laser be lumpy. While business know we your that very can submarine pump

about mix You in XD components, talked would quarter. benefit the here Datacom assume I'd September still and a be which benefiting sensing also

describe So coming if you from? rich less suggesting here? that's the to is And are mixes going so, can you where be

not I if richer going may have as very, speaking, going need down to in mix, break expand operating that you efficiencies, take the capacity we that had, mix some into said baked good by the Well, not mix Generally I our QX have segment. to we to -- forward, we places. think guide into we we'll but very I'm start

say, on we're guiding the I just conservatively margin. more As

you offline question the on Perhaps enough. I a expecting component And tell more strategy. Datacom do How Fair a $X your if I'll shifting think business. does transceiver you're datacom. for positive, Can us that My transceiver as second market you're Okay. you in is Chuck, whether so, on billion there? here you're is fiscal the see your towards happen? that XXXX? referred business follow-up to that mix to business Obviously, one. but grow that how

with There's to expecting I'm transceiver our I like of have your And growth. a team. customers supplier, you forecast feel But platforms and in Okay, you prospects, to good about will Giovanni FY business add would it, opportunity. that about differentiated a for of Richard. going for Thank exciting transceiver taken not technology a that's about our XXXX. demand, lot give as the our discussed. question. grow I'm the along very business another leading anything And it? note and very, important about feature. you to very and Giovanni, that

our not our no story merchant that before. believe the I to have I Finisar on always the ever from to with have But -- We shift make number believe we did components. supplier I said, decrease to sure an Yes. to a clarify. electronics are not and investments market and been to leadership -- I we intention standing I market become merchant we that diminish transceiver going talents, don't believe, optical or intend want of platform. had transceiver components, our was Finisar with we that

the engineers, anticipate engineers, As as that next And about single five under and company, past. by a far same in we approaches in transceiver fact, and have different think think really it now modification, to the will value completely group in table optical electronics used of that strategy we as we the been I one in all that we probably or form said matter pretty new over as design. the change, to think that are investing bring transceiver that to that as important the the miniaturizations a new will this even I we in of the all transceivers collaboration and And manufacturing we the driven company. to team, transformation believe most And time cross-functional, really some a the multidisciplinary and packaging revive which all be factors were has the for many we creating and it's that strategy, have the unique of significant which well speed years, requires approaches is years. the Finisar so designs

procured a if very, merchant necessary deliver transceiver. past, of to market important very components the the number on So assembling and in was

I same to of it's think think share as solutions, Finisar positioned going teams do the are the combines we of think the establish mentioned, collaborations to advanced move significant think and to close the be very Thanks company. I well important team that. forward both the way we the I the I in II-VI to that to more I And more market.

Great. all Thanks your for thoughts.

questions me. the that's So for all

Thank you, Richard.

Thank you.

Our Northland next question comes from Tim Capital. Savageaux with

open. is line Your

Hi, Tim.

to, looks your look the three rate Hi. pro like of see pretty had Good with question, in morning. combined thinking a quarters probably flat have mentioned digit growth as this forma Finisar. to growth you've didn't II-VI if view basis. medium one company team, the Well, if QX. ought be term a how I'd double And why see to interested like about you're thoughts long and we a transceiver digit given there? year-over-year. But, experience spectacular double you pro just the what to going Should forma growth year toward you here? we'll what from for to you a be I wonder you're And want goes. It guiding Chuck that's fiscal answer where Or

things. couple a So,

year. You're performance right decline, to that's on the that benefit the while QX reversed right? that a a of year company year forma it So great trend been the basis thing. what over had flat of day pro The is was first in

is, that a would the drivers thought them. our you when and come we in introduced time, at GDP. two the where about to four company, would XG we The in second expecting, And Giovanni growth one our half we times talked Day remember thing the of were the be from mega about Investor if back

in So of say that digit -- certainly the be being company's terms would ever double think company? it aspiration. I a be to growth would fair we that's

guide terms QX, one And if maybe you Great. consumer is digesting with a before. the the if follow and I wonder top look of from of sensing. Obviously, side, Normally expected on just on line. might much some your whether you side, strength have of sharp you're earlier in I'll com a I the this could that on seen in puts at forecast little takes down some bit September quarter's maybe, than that's touched some and maybe stronger the XD modestly -- had a where see maybe expected digesting June, up, guide as or on that. of than very And of you you part growth the for strong the the QX QX?

Right.

So let's a do couple them. of

growth of of not First as I right? two, it's in though for cycle, industrial, little while communication you usually the our XX% used going year. a we can't communications XXXX whole the be, even a a one from time. The quarter though is, even big understand to Number come for dip percentage we company, and QX of truth there our all, communications, that's weakest in growth ongoing had that view So September XX QX that company that a is even bit into. is sequential there it the should XXXX, be as to deliver in a that strong QX,

but quarter, of at that the it's it, is growth toss I XX into kind it So, look as see up. true communications we could a September actually

perfect think not I Chuck what actually meant. every It's quarter. that's

little that looking are a flatter. we at be might bit whether So

we're sensing, X/XX a for for XD XX/XX consumer X/XX. at be I at the a very so. it quarter, right, mean, necessarily historically matter, it been good has as quarter. the down but will strongest factual can did that QX But we know it saying And don't and really I the surprisingly be strong For QX

a It's very a strong XD some the sciences, in trying -- So second what take also And is year. market. quarters very, then, life that the quarter. excuse falls true. growth But in which on We're nice that. the small little me, to for a half sensing bit very bit had of

Of be day, important it QX. was little as course, for But market we strong end would in it like as the the to see not of us. that small continue. That at is might an

Got it. Thanks very much.

you. Thank

comes with Needham & Our question Jim Ricchiuti next from Company.

now is open. line Your

maybe wondering you. areas booking of could the if And might Good provide morning. that capacity on also some business Thank discuss you the additional was saw I you you some be the constraint? perhaps bookings where strength. color

Sure.

So last I bit strength started was But new the in here speaking, I board. would The than busy say, go good that board. across and you across across -- really we quarter, generally Semi. pretty probably we Photonics little telling was bookings a stronger it was again. book-to-bill with the normal booking in probably had Compound

And of the -- again. part probably thing. second that's me your So your was tell first question

Mary business of the just areas capacity you're constrained. Jane, where the just

Yes.

Sorry.

question, So we a their laser probably first hours. at of across of a fair lot to all I But devices vis-a-vis all, operations increase say, Tim's production it's to say the the if pushed would little look constrained you the we're bit around world.

on to almost We continue constrained pumps. perpetually be

some have cetera. of to et and some We're the some of not needs And that? talking We like in components. cases, would the Chuck, always circulators, some smaller even to you anything add about transceivers,

exceeding the quite to are morning. moment your make. Yes, busy. wafer say, to fabs Jane. Thanks I is sell opportunity to our Jim, question want the to repeat our I'm And for lasers good Mary by our going way. absolutely ability at

But productivity, fabs. the doing we're and the reflected is because about the Also also it so diligently focused increase. increasing, forecasting we're that. expansions capital. utilization on on -- our of we're in module the use something to the efficiency, We're And smartest of and business capacity working

expect question, grow. is address to going I pretty clear Tim's was transceiver business Just the to I that

in platforms And for need we is so we technologies. the and to we in term final and automated and invest have And continue other our invest across assembly host need other have we markets two automated testing other a long lasers assembly to That transceivers. and drive where testing. places that's basically that's our that growth other across to and of then and to

the Chuck, in growth was carbide of would you you to fiscal saw? kind XXXX, how business be and big willing say, silicon the

Did you? did I'm disclose Jane, that? you Mary not sure.

we -- think Let I did. me

come me back. Let

go I'll answer go ahead Let's and it. and on

just… me Let

Okay.

to go question. the next Let's

Don't I'll worry. answer it. Yes.

operator. Sorry,

probably should go question. the I think we towards next

you. our Thank from Kang B. Riley next question And Dave comes with FBR.

Your now line open. is

Thank you. morning. Good

think giving I fiscal one you're second about quarter. for a in should quarter? trajectory, know question of we only But terms First how is, guide

What you Dave, do mean? say a more. little

For the of terms December quarter about we think should -- -- trajectory? whether quarter September think we in for how in about should how

quarter. -- that Sorry, We're backlog drive I second Jane. this drive that to is And what quarter, can Mary that's the the But could be continue Dave, you Dave, be have, driving company. backlog have, we to the visibility us that the doing with growth to growth. to that a that and to forecast we we're you in going able to not to over have quarter expect for give you we we the assure continue grow. for going

Okay?

Mary enough. more conservative. then, mix just talked it. going first Jane, you Got being Fair Yep. to And about back quarter.

we XX%? that Is how maybe XXs about So thinking first be margin should should to margin we be thinking be gross quarter? high gross for to

I'd generally margin a And say XX that range probably not come just might I is down, guess. be that speaking, between overall, the it would bad I imagine would expect XX. and would that

It last my about XX% just was then but going back And to question, China. customer. XX%, no Okay.

aren't there and Chinese mentioned -- the customers presentation. you So in ZTE, FiberHome that many Huawei, of

digit maybe it fair customer? to of a type maybe assume So single them, each high is of

of things. Dave. couple A

…to to XX%? get

markets, the couple China actually for in life places communications other for market in to industrial end Yes. first in to keep So, us all, right? it here, one mind, of fact, was we're a began our be talking And about good incubate. only things, A just I continues business Dave. sciences mean, not of first very probably primarily terms of sure.

$X.X is just tell also the not estimate you. it's not a from business It's the soyou that's there, can our for just guys XX% communications. first [Indiscernible], is communication. not in So but thing is example China while But thing other that to our Huawei not customers,

let As carbide the questions. just me silicon for answer --

at this it largely growth overall, was So carbide, be somewhat of had less I'd probably because years. the X% silicon sales strong, very wireless very, EV point. continued it prior And in about than while to been modest year, north pretty was say it's in the of

the Hey, company to to of OEMs. comment. the I Dave. make you in one we This I listed want integrated most that I you a is know Giovanni, remind want space. are vertically

Jersey. many can needs not make So forth. kinds expect those a far we semiconductor kinds the companies only so Faraday those you lasers governance every single New of and that There's devices. so to rotators of make We sell in OEMs the devoted. that And it

general China as really then market. Jane in of number are Selective lot mirrors, said, of So go we're one, to But I about that Telecom we've pallets. so them. prisms, you lenses, if you Mary remind make forth. want Switch that we or every a talking that talking and made We we're about WSS about We into just want gradings, aware of. Wavelength name aware Datacom,

lot of into there subsystem that sell go in a a competitors, China. number and but So of of our is components, there we customers example. is products And for modules

a need and them. you count lot those to that there's of So

forget hyper not let's in add, China. just scale me centers Just data including

Sure. Make you. sense. Thank

Thank you.

we're Q&A get move though over bit so a little try to let's here, going we're even you went guys, to time, of as many and So the on.

Thank you.

with comes Our question Rolland Christopher Susquehanna from Group. International next

open. line now Your is

thanks about partnership, do your acquisition? you recently? to in on for see product? inverter much overall, that this get most the then the GE maybe do well? actually TAM, end going And And like you finished example, as Semi TAM of guys, something with that can product, and to then inverters? guess And talk Is two that consider me this would ever you consider for just that into in technical this modules you how you partnership you more Is would capabilities market, then into and is finished Hey, big of on that top you that and guys think silicon I where in. carbide. the getting I address on can dig GE the from finished ultimately if for how squeezing lastly, market. did wanted

Okay.

a take it. not about lot Chris, conversation. today Talking is question. me your for Let thanks in inverters the

wafer laying silicon on a based establishing, carbide business to carbide in focused assembling making acquisition, competitive, epitaxial underway, were scalable, we're not establishing of platform and based silicon business, devices -- substrate modules. integrated Ascatron the a them carbide that which carry down the vertically growth out well through silicon competitive So

to the take place. to going intend to we in As in over wafer continue I alluded begin business technology and platforms while But place few carbide comments take the it we're This and interaction. did as put next silicon my time fundraising as prepared announced devices. the to years. putting silicon GE These in we epi today, grow well is selling substrate to business, place, based carbide when our

we're As specifications. ready that demanding to and quality excellent as well soon meets characterize controlled

unfold is the And going market is to next over huge. this this few years. to So going be

and think a the just absolutely we they're it's into key couldn't II-VI and with And I that's merging substrate going Ascatron assets. to with to with time melding And -- GE. the it's point. an It's Innovion team think exciting more great excited to going capabilities. that's So we welcoming our emerge. see great grow, decades. be continue and I capabilities set of think And partnership really for And their

Okay?

quickly, that we that the you Thank different cycles then lends Yep. shorter perhaps long seeing talk kind over up subtleties very credence for believe assume you is I to that the boom you, from you demand and optical long see have sustainability than the you're we've And a believe versus cycle that can Chuck. coming Maybe center that part telco cycle? other term seen, optical data here. about traditional a lived of

Okay.

to on that? Giovanni. like Giovanni, you comments ask Let's would

Yes.

of you I increase then the of XG sense base connect to to amount the a point of I as get think of input/output all transmission to eventually and those, stations you script that mentioned only number as required talk I is forth. of my the of necessary. aggregation soon as reception the in about connect would you -- and so network need capilarity station XXx, And the base the that of

we're talking requirements of the previous the necessary in about for an generations. -- the of Increase that gears, wasn't optical So, because architecture significant of demand a

many As so the which XG maybe you to from will and you know, encourage eight maybe expect to years. But so paper XG, single flavor on published XG how years been at taken white look to by world faster, far, publicly is the XG, every that I next Samsung, available, is its G little far, maybe the XX and already has to and about to moving XG go bit step. get a the entire a

of when finished wireless talking about the you people talk XG cycle, others, XG hasn't yet. too. XG talk really lot now, and next the a We're on cycles So generation about the connectivity about

I going So end the -- ups the that I for increases to and new the be need And -- drive is that infrastructure. need solutions. connectivity to requirements will not there it's required much downs, of XG network continues think But so time. and the quickly, and denser increase connectivity course, by new over because of type

require I in wasn't think, And increase required will with just of storage worldwide increased past. obviously of also that data all in haven't level we the that there past. that experienced volume deployments course, the the a connectivity in an will

be time. will very demand think quite some I So for healthy the

Thanks, guys.

of question Mark one question. And Company. this the comes Benchmark you limit you. ask we from interest please the yourself Thank to Miller that In time, with

now is open. line Your

September quarter into shipping of be Wanted some slipping some about will to that's into your Is quarter. demand this is perception? Typically, there's belief December strongest, the XD Sensing. talk -- that but

Go Giovanni. ahead,

I'm sorry, you were talking about the sensing. XD

Yes. now Typically, September strongest, than that but traditionally? might be more of into December some shifting

see know we that have I are don't wins the why. that. But I don't ramping. multiple design

particular so I the other shipments experienced of And believe maybe and than will what so, be there pattern far any in past. we don't

the demand other balance in. terms will designs pull the of of with and some each think the in I

be we past. wise -- the expect demand -- will would and we volume -- just ramp expect it I time. us So expect gain the we I in We share I to similar to as yes, think be it -- think will that to a the for seen we've continue similar I over said,

faster Obviously, much, than market rate validate can quarter, quarter growing you -- have are we over as it growth that. are doing reported been with than faster have this year-over-year. much we We much we

that we is gain, and that. of So a indication do share expect an continue we to

for your we've Let all quarter maybe the X/XX. that we at finish Mark for to few I'll company, consistently shipped, least last has -- up. our XX the just stronger follow years XX/XX me add But years been you the give before And the than up. for

QX seen made higher the We're going actually XX/XX. remarkable, shipments kind X/XX generally So speaking, quarter. that's out but X/XX and X/XX and at what not than all QX we being have of the

ahead. go Mark, Sorry,

that strong. question me assume color was ROADMs. that? any is Last on Can I for

Go yes. So, Giovanni. ahead,

layer, out network previous the is an as right you of the versus as architectures out increase part know, integral new provision place, Really, at kind right traffic ROADM said, flexibility and at absolutely. way there time. network to in Yes, the products demand that traffic require fiscal I at the for the the more that architectural. of

strong us. been has for very it So

you. Thank

for the answer question closing call Chuck now the remarks. concludes I This you. to turn session. would Thank Mattera back and like over to

like for by close Thanks our we'll to Joelle. I'd top four this summarizing and thanks joining everyone year. priorities for

first care safety the is our all The and of employees.

and target operating performance. serving is customers Second, delivering

integrity, of the enthusiasm allocation of to our and performance to continue our foster value. a like well-positioned workplace supportive engagement the the our long-term employee is strategically to diverse. to that we shared balance eye focus both future policy And open, you. collaboration, Joelle, to is today's through following accountability, be values prudent to keeping Thank call. enable an respect I'd forth, is as continue and short-term to close that, and financial with capital to drive shareholder Third,

for you Ladies gentlemen, call. concludes you. today's conference and Thank Thank participating. this

You disconnect. may now