Coherent (COHR) 9 Feb 222022 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome for the II-VI Incorporated FY 2022 Second Quarter Earnings Call. At this time all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to your host Mary Jane Raymond, you may begin.

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

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

They These are found our events do remarks ended filings to law. to to our possibly of with risk together of today remarks XX, statements. in reflect except as are XX-K reminder, forward-looking context be change, given XXXX, subsequent these material subsequent for a update factors As today not the risk contain only. our A the June with subject various Form year to obligation list the required by and the our in may statements undertake subject known to can any SEC. We today, materially. factors

Our any meeting do buy XX they of except perspective remarks solicitation means to of sell, requirements States of to a offer as constitute nor not by of an of XXXX No shall today the amended. be constitute offering a securities Act made offer Section United Securities the securities. an do of

Chuck? document turn reconciliations Mattera. Dr. respect or that, let those Finally, includes release the found over presentation. call, the GAAP With to some the of that call to to we as to forward are each today's the non-GAAP investor with will also me measures Chuck measures present the press at such end

for Mary Jane. thanks joining. Good Thanks, everyone morning and

those growth done. today enable the delivered the again once the drivers look intersected additions other beyond Among and the solid communications, while a through multiple infrastructures. our with at availability interact and automotive sustained connected revolutionizing we at intelligent that and underpinning conversions resulted the of electric Internet the subsystem and devices. materials, work, for features we well-known These and our the consumer how remarks. more say job accelerate of global as my learning leisure vital challenges of application-specific computing I their we and of metaverse. customers Things We drivers, are of During the new and our second underpinning a and well momentum. to helped as how mobile, components later shortages to perfectly technologies will as quarter, able market quarter capacity got the from the about a to Clearly, are of have demand contributions we transportation electrification enabling IC strong we of resolution in are were

we provide the on orders. further for over in $X time in the booked Now, color our first to quarter, history, billion

in $XXX million this Our today's to and with planned up backlog will double-digit to billion million year-over-year call. that year-over-year. was our us $X.X launches record is sequentially products backlog refer growth XX% fiscal new and $XXX in our gives both additions, confidence segments. supported along the from year This of by projections This beyond we a grew capacity

and drivers line Our of high-end guidance cleared million, revenue that but and the ROADMs $XXX The increased our from throughout revenues guidance. for constraints transceivers. have the we gaps were supply two accelerated would and the quarter, within our largest revenue were COVID-related of

our strong extended and to continuous lead the on in systems of times This our face vertically experienced chain. of required of large the non-GAAP and by serving guidance. focus as customers control related output. communications, demand a controlling In the supply open of our our factory points by Our the enterprise driven was and in transceivers on we for ratcheting in of was cost again turn integrated increases of $X.XX at the datacom other quarter, top-end This cloud focus in supply increased supply chain, increasing strategic optimization and our building resulted customers. a and and the This EPS enabled continued line including disruptions utilization cost COVID on inventories at from levels the impact inventory chain. we mitigate the along

for make hyperscalers large continue into a output to customers. We growing our inroads our exceptional on early very XXXG the and XXXG and serving progress with strategic and for ramps XXXG

along with upgrade also The major of our infrastructure the clear long-term start for that a beginning among a customers that we exciting contract closely in this multi-year a accelerate strong fiber-deep a initiatives from TV ICs we demand cable legacy qualification. large of ROADM of the lines collaborating growth and in increase are U.S. of U.S. and demand XXXX customers will sign with also as the a drivers the expect accelerate broadband improve provided and saw the on equipment access from telecom to availability calendar rural increased based our We materializes supply to year and ramp ones of during new

the across expertise the to other part scale. still of we footprint broad that all the early Turning of believe our our large at and and resilient markets, and too. our our end rest solutions, are We our are multi-year in customers breakthrough Increasingly, business. of manufacturing leveraging adoption cycles

of equipment long-term on focus execution. tying our investments nature relentless our ongoing our facilities and strategy expansions confidence R&D our capital and our reflect in opportunity together in with the Our

is Our for Semiconductor aspirations to heavily segment, this capital our XXXX. year given of CapEx the allocation growth weighted XXXX Compound and FY and more R&D

Now, laser explosive cap X suppliers. semi experienced for Industrial, in and We orders quarter, and OEMs lasers demand Tier this their in lasers. fiber in from from equipment we our including ecosystem, the including increases experienced increases equipment sustained COX again, orders and components, for

year with fab are up calendar XXXX. expansions ecosystem, throughout in Our chain. investments the our down intimate companies where differentiated helping will capacity components, accelerated laser-based increases vital returns unique position met as spurred equipment further capacity chain maintain are inspection leading from and lithography the this platforms. front-end We in current IC partnerships already cap have These large their OEMs for these II-VI, much IC which and from demand wafer the expand have and back-end and supply manufacturing accelerate producers including semi and the is especially sourced the solely clear needed shortages. This order in on and we confidence tool they to investments in the EUV eventually providing the supply leading

also applications Let GE. that the to important deepen success our an on new in we substrates agreement licensed a and GE schedule. me carbide entered adoption milestone met I X,XXX-volt am about ahead qualifying order I with in a aggressive recent minute silicon automotive spend device that of into this our technology for MOSFETs from we silicon accelerate our the relationship excited technology to using products. carbide am pleased our we of

We with will leader. platform continue it. a our capacity substantially position of to focus help contribute electrification sustainability underpinning the zero to part And The proudly world's responsibility, market contribute this are diameter our social our as goals. to substantially net expansions to on positioning company ourselves will of to shortening to market and time and we as transportation corporate

XXXX, gains the contribute across and Compound and to of of and growth totality Looking a combination to in of FY photonic sustained investments XXXX company's in double-digit Semiconductors target growth the in ahead, continued our significantly market share the our XXXX both organic growth drive and we solutions we expect customers. to by expect

continue management while will ourselves our work the objectives. short-term to additions, balance mitigate We tirelessly differentiate to customers maintain a with impact cash good to and capacity our we with

our continue partial across chain to supply We a to stress effect Therefore, the costs. will prices have initiative as a constrain least some on company at expect of our increasing the the have output and to major offset. increase we our of

we jurisdiction, has approval which out for we our authorities, part acquisition anticipate of from the to a a ago, with that of three I approves gear our it Coherent we a approval innovations and broader work acquisition to the remaining of that scale, details to access is Giovanni synergies. closing constructively proceeded pointed the It second great continuing a start drivers, With long-term the in of for envisioned received in we have and was lie year our to go Coherent on our This nearly indication captured successful quarter pending gains of Administration part acquisition Finally, that nicely This one profitable rewards us, are the and are responsibility the growth. integration. the or of to II-VI I antitrust announced or of of necessary sustain to our a now strategy over global SAMR, and ready XXXX. closing value In the Giovanni? Regulation, penetration combined into of imminent anticipation pending as State markets for Coherent, as the calendar by Market of complementary revenue turn of analysis will new planning going Barbarossa. China, company believe would has We a regulatory time to that, Pre-closing we and working set and the transaction. and middle of acquiring endowment is to forward and Dr. Coherent. engines. conditions The productivity up ahead. the growth accelerate are only final efficiency the four

Thank you, Chuck.

lasers. in for growth our were the recognition in silicon Coherent. fiber XXXX saw applications, particularly receive drive output in Supplier which power power laser and industrial X% over and fiber QX setting across utilization we pump will and to fiber sequentially. grew growth, FY XXX about new a In continue applications, lasers, quarterly the our revenue record XXXX the shipped our We megawatts quarter, world-class strong with XX% the platform. industrial excited Our particularly merger We electronics after Han's wafer products carbide to market all Award for Laser from laser of X-inch for of

and grew of with transceivers. data our Our from more X% rate communications the from specifically, datacom revenue year-over-year growth high most

our experienced data our XXX, sequentially second year high transceivers. per ago, now business datacom represents from X% share at about transceivers XX% exceptional across gigabits a all a revenue XXX and of X% XXX grew rate sequentially clear gain growth and XX% and of and datacom sign Our

to which five we be very in to particularly data best the to are AI and at we recovery grow continue in three able a years. digital by pleased captive last networks, Wholesale. quarter regard transport projecting as for made we our and to of integration hyperscalers clear to this are the of XX% market to our win technology. design our the quarter, higher we of shipments In In are ZR+ initial the platform, indium customers a first another QSFP-DD to clusters excited our output least its kind differentiated power analysts to are thanks data with With industry IC DWDM, double-digit XXXX, sign of their available of its dBm first which of super of by announced to the merchant rates, support revenue pleased report form Windstream our from our market, same experience phosphide report We calendar to over IC, in with part competitiveness build-out XXXG component and factor, market we the optics our Coherent clock performed growth X our to IP in engagement enable Finisar.

grew quarter million by sequentially. market third parts team our of report VCSEL revenue we performance competitiveness quality per consecutive are the market in XX% in Our our factor to Sherman, platform a a of defect pleased Texas. achieved be The continues to world-class and X winning shipped, consumer the

fabs. are commitments of phosphide engagements emphasized phosphide always reality And indium over market sensing electronics optoelectronics platforms. the have we and to in the up date On the we significant the gallium augmented are for consumer applications, gaining In indium leading our metaverse arsenide exciting believe broad investment application-specific advantages spectrum products. and development for automotive opportunities customer virtual momentum, and front, emerging with our opening we of some technology customer technology

products, the a Specifically, very AR/VR report range with and of $XX to new optics Several our that to defective and million value customer maps. pleased portfolio breadth production us provide a to of the for applications beginning promise materials. we lasers, including of we broad for new of customers about committed are fund development the shop and road realize with offering has our one-stop long-range depth are the the of advanced strategic unique and

relies advanced massive and products materials, for strongly ceramics, Our in as packaging components, UV revenue and composite reaction fabs differentiated is worldwide. The specialty semiconductor highly and for matrix year-over-year. industry capital in well wafer metal including grew wafer management enabling thermal market the bonded and fab strengthening stages polycrystalline XX% equipment of extreme new lithography for diamond, because expected front-end deep and testing as chucks our the as demand underway UV semiconductor capabilities. our we investments equipment on The

saw demand year-over-year increasing for quarter XX%, order with sequentially. by Our FY compared silicon applications, power very We carbide an grew the and electronics same doubling and XXXX. magnitude both to revenue sequentially in revenue strong of

earlier, As Chuck our of encompass markets. applications in and silicon variety investments a and carbide mentioned are vertical underway end

With to We carbide applications end world-leading crystal our of sell. see that to Raymond. will we silicon pleased our gallium to Mary off not expect Element continue capability proud to let but full subset with kicked with we are with fab, turn the of least, over planned grow, able recently to started Jersey broaden advanced complement be diamond I'm Six in report on our by that preproduction an that, we to have considerably it have New our partnership Warren, single amplifiers XX a Last and Jane? business Jane nitride me Mary on exciting substrates the we to of March. polycrystalline production platform range

Thank $XXX you, revenue page investor million Giovanni, of The of the and of market end be on good the and found fourth can our geographic morning. presentation. breakdown

total XX.X% for segment non-GAAP excluded XX.X%. was non-GAAP a level, Photonics arrive operating At Compound margin and QX operating of non-GAAP non-GAAP Semiconductors. margin chain and and at COVID the Supply not gross results. the for Our XX.X% are margins costs to $X.X was XX.X% were million the costs,

$XXX for of Semiconductors. million of backlog $X.X Photonics consists record $X.XX Our Compound for billion and billion

GAAP a particularly the demand, from stated, function were in R&D, market. expenses, the and market $XXX QX. backlog of have As across industrial end end is SG&A this in operating we million plus communications increase

OpEx the start-up reached synergies acquisition, million revenue. Finisar and of in of amortization, GAAP after-tax M&A $XX costs the adjustments for $XX million includes and increase EPS million stretch at over GAAP cost the of and $X.XX the are in placement of million integration contributed originally our Excluding the was to non-GAAP was EPS the diluted non-GAAP XXX have non-GAAP transaction. costs, The share the last $XX in $XXX with press results the non-GAAP compared of delivery count this of and six EPS sales XX% Cost adjustments so share Coherent the $XXX initial $X.XX largely The and contributed $XX was count million, debt quarter of of now Quarterly, nearly the or shares. was months non-GAAP $XX million in year for early. shares completion GAAP million comp, stock XXX million OpEx million for million and $XXX tables both non-GAAP total. to to for The costs in calculations of far. targeted financing target Savings the margins the release. was ending to and related

Pre-tax expect quarter, $XX the $XXX support of first we quarter, expense CapEx normal of still and the $X the expense $X expense the fees non-operating the $XXX transaction. flow including company due the This our million $XX of interest underlying be half this cash in million operations This a write-off the $XXX and on million flow XXXX. million. $XX million, our million quarter half million of build in fiscal and million fiscal income largely free income non-operating the for disposed second year was For was million forward. from a was year non-operating expense, or in to strategic inventory debt of Cash for has beginning the or million the growth includes to $X income million of rate, interest $XX equipment. $X going of interest of and non-operating of to run

year R&D million credits communications now position and rate fiscal by to at be XXXX, in in billion. $XX expect retired company's to credits. the million, The growth to carbide We effective is down XX in was net $X.X the consumer our CapEx expansion our XXXX $XXX of of investment notes applications. $XXX our benefits was million devices, and Finisar silicon due largely address For to cash million. and The driven phosphide of quarter the we and paid tax the debt $XXX ongoing power December QX, other of XX% remainder tax indium liquidity

We year for and between XX% tax expect be XX% fiscal the to rate XXXX.

for XXXX. the QX Turning to outlook FY

third for March $X.XX. is count Our The outlook and low ending and and for rate the tax EPS treatment for an for non-GAAP the XX, on to high-end. estimated release mid This dividend exchange share revenue million is to the for today's midpoint The quarter of million X million XXXX, $XXX $XXX points guidance. the the be the press million $X.XX Table both rate $XXX fiscal basis the calculation, is expected of at a earnings at and including is $XXX detailed the per of end share to high on XX%. and low,

as the we stock and earnings share, $XX expected non-GAAP transaction million integration back to are amount and counts the be startup amortization, we in the million per to Finisar, compensation million $XX other the our rates The accelerate planning GAAP For non-GAAP exchange for in tax rate, to dollar pre-tax synergies The subject share are items, and of to for the $XX the in the add $XX million costs. amounts earnings costs year including Coherent, change. higher, related all complete three of transaction, costs. actual final

to reminder, to, questions your end XX:XX supply of changes, regulations, call, to expect and changes competition, and than limited upstream from which later protocols a.m. COVID-XX due changes just but welcome today go actual answers in We mix, economic variety not not shortages, and customer this conditions. chain the our forecasts downstream, general in both to differ a may contain as we our Before a Q&A, results may including, factors,

questions. the open may line You for

Ananda comes first from question Instructions] with [Operator Loop Baruah Our Capital.

commentary, guys. – and new growth kind morning if good clearly, of does quick the apples. taking structure, thanks Thanks. but have rate, Does of that it's of, could I Hey, but it's organic guide, to current is a long-term your for if the include, that post I let's the then, don't I And it, first questions. Happy organic include for sort year that. know I closing – Chuck, Coherent, one, quite guess call its a thanks follow-up. double-digit provision. also the

on the to based to like you to thanks commentary morning Mary your reference as growth is Jane? for today. add Ananda, it's II-VI rate Good configured Would is My question. and that, of organic

my Cool. goal the midyear good still And transceiver really greater believe revenue was that of spite is, it one-third to really get on sounds of than by progress question then follow-up on XXXG, revenue as your in well. business, is of year. getting constrained like here's you're that and one-third But this to to I the there

I So had tracking guys, is XXXG? you Because some mentioned to are place, we market? you're than it just goal? than have might would is taking greater also accurate then the that kind like hearing on you any XXXG you're be your And market love what that just thought share so And you're been also, of previously, where more seeing there. that stronger accurate gains, get constraints concept, context around And industry-wide. kind the of of over-achieving it

context So would offset? Thanks. on any love XXXG

is Thanks question. this for Ananda, Giovanni. your

design and our for has ability this get to any higher-speed transceivers. So new impaired, let's supply by get traction wins rate higher say means, the not data that chain

definitely that offer the transceivers. rate so way power and for in all the we this to ultimately the higher-data on are two customer advantages depends consumption, that a decoupled So the far, performance, differentiation

a supply on the even So I very see that most to broader see still market-wide can, II-VI clearly they think is ability a and of offering valuable. than constraint customers there if the provide chain,

other – of you substantially ability So affected that get definitely reason the is higher of total as mean, XXXG still the really one-third transceiver know, explains as chain, speed And but rate by for data XXXG any market our then, faster the the plans. is I dominant. ahead to for supply the to our is

I I share But clearly, said, larger of a is perspective, demonstrating standpoint, the a dollar the in complex impact ability such supply comes there. a is so chain situation, gain a there good long a think to our way, And news platforms. from I strength the from that, proportionally think, as

Thanks That’s guys. really helpful Giovanni.

Stanley. Our next Meta Marshall comes Morgan of question from

you expect mentioned applied kind you of Great. increases. whether that were on costs backing the a and those Jane, could start-up that One, add-back give and related putting guys sense should for out pricing the and Thank and what of of give for some you you see kind you context are And just the price couple of second, of or quarter. we of some A some place congrats are Could the of rationale non-GAAP? board just across being when just to into then questions. those Mary if increases that kind where had impact? of to Thanks. that

Sure.

first. So let's take part the second

So couple a probably of price have increases different flavors.

As equipment Giovanni said, market, quarter semi quarter and very for both components our obviously in high last the cap that this demand. in are

to demand so designs of in we And the many there. pricing acceleration the our industrial more due market, many, then space, of that's some end end area had years. ability industrial of markets have one and for the in And rapid

and the is is able in to pricing some a there doing company of so. exercise is ability typical So cases, sort that

is actually of doing to really for we components get incurring In are is customers. actually to our value flavor purposes say, I is to communications that second with what related customers' The where trying the additional achieve in meet case, best to company that more needs. would trying costs

whole So through those in not passing other words, cost we price increases. are

along a in customers wallet working are working rather some than today. increase individually and customer We price for to cases, their share with more each actually get business of pass of with

short I for has for trying that and up had during incurred the prices taking matter mean. really It's the that's over ever therefore, much. we're to customers so being be company secure the is up Giovanni being we we a achieve the With efforts of creation to UK And very somewhere because now products start-up year respect customers, that looking to so on fab. our to all served costs, those say this best starting because to much, well non-GAAP, think the the they're in products I parts. are excluded time to question expect the with simple a the from value non-GAAP not new start mentioned the short we've in when excluded achieve expected us of we year. they're those this middle that to I this So term. what to also ship actually are And

So that's the rationale on that.

Great. Thank you.

comes Our with Samik from next question Chatterjee JPMorgan.

open. is line Your

You to can ahead ask your to question. on Do question? you next move go and want me the

Sure. to having you you're are Samik, problem. ask, we'll on Otherwise, circle can Joe's Joe. is Samik's a analysts come if back ask? also to Joe wanting you Joe back little we'll technical you. If to name

comes with Paul Cowen. Our next Silverstein from question

I apologize. Jane, Mary

you look future the with as during repeat can more on thoughts margins And both think of it more was but of you share the I you the said can revenue us any can impact into margins in you what call, forward importantly, chain? go? supply terms on distantly and where

with to guidance. the the we of would actually, we clear the respect that So been top quarter we able We it had had the chain, Chuck. revenue chain supply did the in have of the was on effect think end supply constraints to not

in that mid-XX%. the the our of the back into respect secure additional at what margin, to margin just still can With pretty last that look the parts quarter guidance, well, to was much you but have XX%, roughly been end margin if lost cost supply million. the the that on the certainly, same shortages, volume, having for top cost sitting chain $X.X So number would you in we are

the in that and looking forward, points answer we and question seeing chain either question just can probably because segment XX numbers. and supply go, of me all three-fourth, XD which Giovanni's carbide. where margins about it's company the already achieving is Let can to what then largely about Giovanni do respect effect the for with strength chain Chuck and silicon That going margins generally. with expect constrained the see? So to you talk But and of supply to is COVID their round respect adjust, can of XX%. basis With that, the see, sensing, ongoing at really segment, then out margin

said which for very a markets, are carry in infancy, as those now, nice margins. really So they we've while their

also discount margin So the accretive those don't growth I'd we industrial. margin. said very we've in to a very, to – end be Industrial strong also us is is year, for well. in addition, market contributing last say, very markets tends and

those make early higher as continue we those well products Photonics, think, probably transceiver I of inside the more benefit higher there. the the to highest have the group content, speed of as have transceivers is ROADMs, as our we component on up lessen of come which margins also margin And back. of shortages

then going we're still big XX% to and there. while up So the before, looking company's from said I've margin range is sustainably XX% to XX%, forward as

forgotten the we've think that I XX% ever in company highest and company soul that. ultimately, all was the this this there gross past, about probably is not So margin a talked ever in the reported has

those XX% not that to and why the clear, drive currently contributing quarters, have what products at for Mary Jane, just fact today much wouldn't and upside the but young are articulated will once that future, that several you that been to in XX%? past higher-margin given just contribute you're be very the more early

Yes.

on is to the silicon carbide a that's really are in. there Photonics. still in I do that sorry, of XX%. we a that So and XX%, nice what I the side I'm exactly think will the short from that inning. land are quarter And think in margin exactly first the getting upside point view, that pressure and parts I do do XD carry ROADM notwithstanding And the achieving already parts just that ROADM sure the I'm think not only sensing in

come think is months I margins. over would or their into good just think do say, yes, sustaining but probably positive markets an quarter-on-quarter-on-quarter, say not oh, the a there will improvement our its see in movement next, as a indeed. do So I XX we upward those own. that I that

you supply I and what's appreciate the Giovanni, of that telecom us business? there? going share lack Is with on your insight follow-up, going there on simply something One any in on is Chuck for else Or growth? that. could constraints

morning. Good health dynamics. Paul products, the for desire very the the of we more what And of supply new question. by of chain business it's thanks for exactly launch all Paul, clear. make, your dominated and the is the

dashboard the lit demand, Our board and they we're to is constraints chain. supply as up our…. is working That relate the across on the

it. the Chuck. given expecting, strong in you’re what That’s Appreciate demand market. the Thanks

with Mark Our The from Miller next Benchmark Company. comes question

You flattish increase it backlog, how is yet guidance your shipping, in end is terms of posted your is back I'm in of it a December. with quarter very sales terms midpoint in wondering backlog, shipments your backlog? on more that March just for the impressive of kind is – of for

is think bookings billion it, think way I want to this for the $X this quarter. especially about the you Mark, given

We us have increases build demand significant some to customers. from make to capital, frankly, the In for engineering. the order in and commitment out

of strategy. not increasingly asking only views are customers their We longer-term for

year, allowing quarter. timed you of in more that one longer-term say the in next than customer that is think see go that orders. as It's next quarter at what of that that them is it been across know. that it would to probably put have more in are your the what's answer the certainly That's not to the six were And case actually months, if is a for looking six backlog about months. us already to but are question year. still a from the to. us half And Consequently, immediately then that yes, you seeing being that the with context loaded And capital revenue we we you amount fair the than bookings I nontrivial CapEx, in latter need asking are that back-end assume the if that of kind are right, backing because We to our is is for in here. is, of to we the they ability we together, place. say

VCSEL question, in I if the transceiver pricing about and can wondering high-end second was My also, both the comment transceiver markets? you or

question. Giovanni. is this your Mark, Hi Thanks for

as you we it rates, of pretty legacy XXXG pressure and, transceivers. it difference, to data is ASP substantially all have you for unusual say, competitiveness pressure much The of the less in rates. products. was the speed higher data in any past. seen similar seen not have the as that major let's around course, I than go We is go the There up the the price mean,

So that's pretty much the we're environment in.

when over few past the actually we seen saying So you're have that years.

So time. the ASP changed. changes transceiver there not in constraints have chain The over be supply will outlook of

Thank you.

Our comes next Barclays. O'Malley with Tom question from

of cadence first Good taking half the the for morning CapEx question. the on Thanks is guys. of in my year. back My question

midpoint negative. in think, million free see million sticking acceleration of big your that I just the that? think that looks of I the to potentially so of And little of guidance the cash that Would give negative? Is a the cadence CapEx? how implies did, going with $XX a for, on of free quarter, where off entire the June that free December million $XXX cash $XXX flow spend You're with around year. believe, Can for us then it cadence margin half. of and the in you do in you across guidance fiscal terms back March, color that Or color like coming But CapEx you just evenly cash the flow, any given or quarter? flow on you spread

Right.

for. CapEx that's of cash all, flow first the So right? capital statement, the the already been It's in paid

itself place, in have in now. are equipment about if perceived probably So AP about bills on the a another we just being right probably million have we capital we $XX of talk – the where

through cash So flow. operating that the comes

that I'm be Is place. possible negative? it planned the XXXX, some XXXX, to – case. that day, hard to not be is forward could looking not of the mean, in to But capital we're the customers. of of be we bit we long last actually. to for of lead were out to getting year, looking it Potentially, there, quarter products we being way, back-end span get sure quarter fiscal the relatively shipping first little in go it the cash it shortly that could back but and could, loaded the technically quarter which those was the able have of that getting think one the delivered times end we middle the sure a I off – more year are I'm at this we’re that flow because pretty looking the in in pretty the free working I capacity would,

potential That's really we higher some I you map? that that to future mentioned Are in have additional some the you that on think transceivers, important is Thank call, speeds? helpful. pursuing in investment growth And digital in silicon digital for to as that you last at believe Giovanni. road need Obviously, Is you speeds? the And you higher silicon. high-speed you. something then guys this one still move is for the you, exciting

Tom, you was about thanks The go answer wanted question. the But to Absolutely. for ask there something No, it? is else ahead. Hi, yes. Tom, was

ahead. go No,

that investment continuing you're Just guess, if invest that there. was with so I continued in, to absolutely, something there's

are. right have absolutely they're exciting, on we And and we we're mileposts track. Tom, major some and very

Chuck. Thanks

comes question Simon Our Raymond with next from James. Leopold

for Thanks question. taking the

First, my then clarification and a question. quick

excluded the quarter, earnings this about the start-up pro wanted costs was talked the this the whether that to to on call. you related just forma expenses August back On from check I you

silicon $XX if in a $XX topic. clarification. million investment I mentioned want in You my see R&D related to the the was had to this primarily same carbide. million That's

the hyperscale given hyperscalers. could trending the one-third on elaborate your like the from biased a to transceivers to datacom heavily question, coming transceivers see of exposure, XXXG bit terms – you I'm really In XXXG. assuming towards of I'd numbers, impressive the that's if

and calendar you trending like hear assumption discuss confirm full how see you. the that. you year? to If that for Thank could that I'd

one. the answer I'll first So

all, related of it first it. No, is not to So

we is $XX the in to we it the talked function was able were roughly to first quarter, we $XX cover continue a of reporting time. in to were And guys But as much engineers, to $XX lot quarter how other we about do taking for carbide. million more manufacturability. design When actually do use could engineers they efficiently we pretty full estimating floor being June new those engineering, quarter, doing. quarter were jobs that, a do than manufacturability it that million So to but in the out and be cost, of use, closer the manufacturing we thought product. at actually off to of million they would that instead a on that we shop about manufacturing – $XX million, the design time able the in the turned out, time for X/XX the got of that for were use time manufacturing the to we By their their silicon

it's for inside like number rate, moderates silicon more XX, that is and something the carbide, XX that and the really OpEx, start-up excluded. the then Finisar, which indium is cost with that. Giovanni's line really is the other hyperscalers, one of expansion markets. for the run of exclusion The to So for still is the or phosphide of And got for synergies last that not the

of don't maybe And now, a – demand pay we're we think the data we I transceivers. large Yes. really I there over two those reasons, Hi, yet, for the are that had few number here. a the are this is products. to we the really working of in years, driving to want not is keep one or sure, And rate these Definitely, on have not past focused is didn't we and Giovanni higher share emphasize scales accounts that penetrate those these where and team to penetrating them. done for where for sense still the attention Simon, accounts, focus

data that's So see easily. say total to rates. mean, increasing the the to the going that trying total I can What percentage focus. of I'm of number beyond one-third we that be easily a is with higher

this data continue to we And other the substantial obviously, at from investments rates our of growth. course, side expect those higher represent, some requires point, to the because the hand, of portion largest On drive the then total.

AI continue And that than But is maybe the challenge growth that other a like. so architectures would well rates But chain fit that definitely, somehow will those are hyperscalers, invest. to to next really supply that to hand, the for we on focused your there very just super centers. we'll more particularly that data generation will summarize, be challenging know in make we on higher answer question, these clusters, building data

put would my total I'm excess Is that it if And of that revenue, right? of doing math correct. XX% in

see. Let's

think – I Yes.

XX%, actually. About Yes. second. a Just

was guess. Thank That you. my

Okay, Simon. Thank you.

JPMorgan. Chatterjee Our Samik with next question comes from

can the you product? how of you. and follow-up. different qualified, you you I also, getting about out So can And of I if it Thank this a partners five-years in seeing a ask to for maybe like you're get GE? platform. do a the Thank earlier, product for about And get me looking Great. a to with terms you about to vehicle? takes the design silicon just and carbide have you the – a revenue from eventually quick terms and material the of walk me road, is to outside of road are go sorry this on guess this vehicle Okay. to map, I bit X,XXX-volt now, I how now just if like but typical meet on more this? sort Or through wanted – know now map looks it road that actually out product in customers getting lay MOSFET we customers Is I here catalyst for from

your Okay. Thank for you, Samik, question.

the automotive in We be, I’m the as of have increase we to we’ll the the on that that engineering basis expecting GE, shake qualification table – end achieving work doing we’ve be second into proposition the will launch applications a longer-term up we as the and the and we And additional to design-ins ratcheted second a of we entering that those a time, will a the applications whereas helps this good part calendar high-reliability expecting I this out half milestone, the of the the market, the resource revenues half in of real be on, be getting we of point we’ll that early fully address the you. a the customer, the brings with application real effort little that sigmas have based we go in that our the design now really I’m ability, XXXX as also but know for to just that to should to automotive one, we’re tied that wins down approach fab as high-voltage, us of the announced required. us into that to in result capability we will take marketplace. to on surely, accrue there the places starts, a our be as we well to devices. fully agreement to begin other target year. the control, have to of the more number ready them year, number is that will be a hope for calendar process will value overall need XXXX, the where, the and head by process early position where And have, will we targeting

a just Yes. follow-up. quick No. you. And Great. Thank

for what terms are of pipeline think the we on about Thank do point sort business to can side? stronger a be higher use recent industrial Particularly, And to wanted get see growth how just in how laser a been? given across much this of Just materially seeing equipment of trends you. have how the where what long optical you the you’re in the – how cycle is you manufacturing? thinking, lasers, are industrial

Thanks Giovanni. is the this Samik, for Hi questions.

fiber we participate the all, of substantial pumps and or for beam welding sales with customers. delivery directly is that we industrial whether laser our participate driver demand, indirectly a for welding – our battery to optics market our of other the first So with systems

going the is market it’s So in of that to demand. see XX, driving know, the it’s see trends next a the be you monotonically as those lot really And strong demand We in batteries a beginning, years, XX applications very going. we really, for considering to be now. right really just

record, year to leaders the reached a to typically and that of customers. I of With like across that’s the they pump the And we laser XXX consume that’s would applications regard that in go pump perspective. very – right? normal And put a a to would And of think of set the in market And XXX one. kind lasers We fiber so this in broad that’s than of laser power. all fiber megawatt. megawatts really, for ship, really

So extremely to pump that of of that globally, order which which supply scale fiber us. customers in good gives of our required support of the is actually of for really is you market an most are magnitude tens so laser China,

deriving the six-inch, from emphasize the of are while one, we As scale, platform. our the Laser, Han’s most believe four. are the supply only supplier award of the competitiveness only of demonstration sizes, the from Deriving to from wafer they we

fact [indiscernible] competitive us Some fabs dollar the – at that per telecom well the most works fab perspective. utilized course, of from makes very works is and watt also then, And are four-inch. three, a on parts some utilize that data incredibly we are a other on pumps

are demand. and trends strong incredibly the cutting battle So welding

of of several we ahead have Go waiting. we we the try you close. We’ll all for know We right. question. next get and before can if you All see

next from Shannon Craig-Hallum. question with Our comes Richard

guys Thanks guess taking I questions. the two for here. ones quick

way effect characterize maybe line, December the was asked the you so for the to sales I relative March supply sales the the apologize, got of you here, here already you question Any could and the First maybe, characterize just I to trying that of affecting quarter in here. guidance dropped But constraints off can that... all, quarter. characterize the saw amount

It’s high million. pretty it’s consistent. actually as $XX Maybe as

at the probably the in mid-XXs two quarters, as as as is which least as So and last it’s XX. high high

Okay. Perfect. Thanks Mary Jane.

you as the down EBIT and business? of maybe we here, flat a business of in the the Photonics is can the constraints, been margin of cetera, expedite, teens last been think this it in have fair EBIT to kind term, margin higher nonsupply-constrained here. the or a of impact group, et environment? bit longer to looking to Kind from Is quarters. XX% even little Photonics question then get your supply actually slightly in And a look a two-part it’s at most is couple assume question the Second that you’re

earlier, those their margin. all, of we enduring and adjusted to out getting most issues. who And of we are said Well, first yes, taking they supply are are the not as ones the

that’s are that people. carrying for that then say they of portion the is probably X.X%. reason, also more I So four the I larger they other have If would know COVID.

we net In have terms or held would to XXs. actually Photonics in getting the we thought that the of be XXs,

has think possible. so as speak, middle ability chain the them some I the demand of to and of points do more XXX really ROADMs it’s and I got you But be correctly, it in margin upper have schemes, have about the the most of to the and before. for be that again, supply generally, most But costs, been which are than think teens, in it they the COVID be affected. to hit effects could

margin. to we’re So the also losing row

Jane. Mary Thanks Perfect.

Our comes Jim... next from question

try all before the questions we we’ll finish Operator, ahead. Go call. the end and

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

Did the a morning. provide a from follow-up. revenue you percent have quarter silicon And good Yes, of quick carbide? generated you it. in that I just may missed

Ask here. the in question, number your I’ll give you a second second

you growth, commentary Okay. fiscal fiscal drivers Thanks. being see those would, one Chuck, to rates? Talk carbide about, you growth to organic silicon about double-digit thanks for getting XXXX. what as of them. XXXX, biggest Presumably, the that if

Good Yes. morning.

Good morning.

X% just first between answer that was to and the your question range. X% in Jim,

Okay? Yes.

communications. segments, of in is by both lot have segment, driven As Solutions we opportunities in interesting the far go, we Photonics as the the drivers well, have which of a –

about that we’re and with R&D Giovanni In exciting the other comment a a Semiconductor his drive. great just turn think overall provided headed. which and segment, to for opportunities Compound broad-based there, capital the has are give I with really – both Giovanni year he which an to this morning make dialogue him sense let it you for sees I’ll here to color where investing we’re analysts this

for Yes. Thanks, question. Jim, the

carbide, to to silicon years for be as the definitely, is a driver you So going mentioned, come.

We capital, make as devices, with for AP devices both substrate up our eventually. making the the as ability starting are to well investing to

investing, I growth. and this we So are think drive will

which for applications about have and And it’s driver. sensing, last another substantial last one talked for whether one, that industrial. and indium year very really important world. is for is a times sure, in platform essentially sensing represent automotive, for in The very increase semi-cap one many communications both phosphide sensing that’s consumer, a number it’s We our of belief versus the a equipment strong

parts. to to parts capital demand for we over we those which needed the of keeps the the a are – mean, support the tools talked XXX So And And we lot very [indiscernible] EUV I sole-source also management the tools, it investment, tool. that explain increasing. have make about. happy those

gear fabrication, transceivers And of sub it’s whether a for very get very least, segment. But lot Sunny And are supplier. really, healthy in growth is photodiodes and we as it’s so growth the to My my I continue demand, Photonics is also forth. increases a semi-cap us. very, equipment, general to primarily sold as go broad sell the component for last healthy Customers very and business. a telecom around tools, There with parts It’s Sunny, environment. whether really think the a price a inspection, it’s and not communication, communications that the with for healthy system optics also offer the parts That’s whether so to packaging. as into friend it’s larger products us but for global customer we leading world. suppliers drive still we Lasers, out.

you. Thank

comes question from Kumar Harsh next Sandler. with The Piper

two had I questions. Chuck, Hey

I that the you’re end by mentioned you carbide. year production the commentary, hoping to us could in explain March. getting silicon commercialization by basically versus, First, you think, was end on the to of of I

a I I then what had the So understand to I guess wanted difference was follow-up. and

have sure Okay. that not what may I’m the misunderstood. Harsh, been part commentary of

designed, in said. been, to have we our let what I me now earlier was repeat what comments was, number just So one, own I press with release, my referring

process prototypes and engaging our the is down quality, will the are in the by right that – and the to shake our customers that with doing them year that be second customers design in huge have available now confidence with well, expecting I’m of the line, reliability, in as the already We’re this as work going be high and measured the models build going our all final half on and of in directly in so and to calendar details manufacturing manufacturing activities. a we can of can that to win beginning we increase designing effort now. in

an can That’s generate forth process of begin half and think the We’ll take but the year us us, will to and I so the ongoing generate knowing have will I the has the for started go that year. discussion, and It’s enthusiasm on. to to we half the can, that in to enough process. already second sufficient the models should back think we going be we be that in the to of go prototypes begin first calendar as year try as orders but shipping fast next that’s to plan. that by

you’re increases? selectively And be and able the price like is my to you beyond that the above Chuck, second At the costs just can you to cost pass you, thank then that prices on in Hey, that clarifies you situation. think help guys to plan this was increases. on Or point, raise question seeing – margins?

That’s and In that it. past. today. to probably not new answered think had are that I exercising do have I pricing We’ve we some the markets, before. Well, power in

of that looking we we question supply which, in pass-through the share. cases cases trading outcome relating are costs, for is achieve best where with – some greater is so be the in could across these end excess markets. In and off that’s case, chain to question cases, customers, the to a in relating price are increase our probably where And the to

you much. it. so Got Thank

Sure.

Harsh. you, Thank

Deutsche with Next question Ho Bank. Sidney from comes

the follow-up about over time thinking talk modules? time is profile we design Thanks fixed three the want just production the with revenue target frame a for the in maybe on versus – squeezing to years substrates whatnot. earlier. times about? in. revenue I questions the next What over remand understand two A be realistic of should or how to and me question going on And is couple silicon to terms carbide of in change you whatever

the to question. speaking Well, larger

we’ve what over silicon most business think percentage silicon the as next these I said the has probably ability would five is years, include revenue. we four, products, investments say, to that the a carbide, in carbide-based our is make substrates, as the change in, of which

for four XX% discussion, revenue, today, exceed, that. like about it’s if the to possibly let’s probably of would So start just the it say, second something

move depends how develops. your market the So between split It really And a as and percentage revenue. the it on will of part the what then substrates devices. second was, question is of

prediction right is substrate that’s the essential clear so very, a And substrate. are not very But being could I’m give this and for the sure at we that, good minute. we good, quite the device

keep make So we that. the do making words, we not intend other not substrate. will to always In

to heels in begin of to us electronic to addition be that, it then the or on I year more for facilities increasing fiscal our can XX% our adding in power next epitaxial add, to right allow would on capacity focused growth relates we just in fabrication. business, to the adding in for XXXX Sidney, substrate our FY this wafers devices. so And MOCVD portfolio capital they capability the as that investments are that and

Okay.

Really helpful. That’s quick one.

business, give of it in ago. a quarter, not impacting also Was On supply couple a quarters? about constrained? Can on little the year much that business sequentially more us consumer grown December Thanks. think how you but the as should seasonality has that? color And as the we next

Yes.

So, that’s look because of – calendar the to. sensing a like the of products and typically the linked is the hi question. where we say consumer, Sidney, the year of – The the portion sensing. Giovanni. to this is sensing XD greatest is we at vast Thanks when your cycle – for consumer the Actually, the portion

by go we So year. calendar

kind due we in of size. XD we ASP an which in of sensing, die – shrinkage to had Our discussed the decline past

calendar sensing XD couple XXXX actually, year flat. we to XXXX when the with was However, sensing,

actually So actually you of and flat in decline, considering said, We – saw was because only for actually XXXX. we’re we saw able demand our of the But XXXX sensing were it’s what calendar the the QX ASP was know, I and totally as calendar dollar-wise, terms decline, calendar, the – revenue last quarter in – of my XX% then actually the general, which terms QX fiscal is to units. very in And in others remarkable, as opinion, is expecting. a maybe flat. of

words, majority The calendar the considering as due other to said, consumer. to again if we which, So was is calendar had in no of actually vast XD die to shrinkage. sensing sensing the I remarkable, which fat, and is ASP decline

Okay. Thank you.

Sure.

Arya Bank Next question comes from of with Vivek America.

taking two for well. my questions. Thanks had as I

will of there’s inventory Mary half $XXX year? build growth So days mentioned the did and strategic million about I Importantly, the back several you to next growth support back half, mean Jane, where much of over in calendar the believe the go you quarters? inventory How in

I over inventory customers will generally decide speak that But what parts. We effectively really prepared short be is other to other that do products, speaking, can say come But speaking, of these to on know for reasons, company, the to to quarters. ship are I start we it very really inventory. our and over build generally So would parts we strategic waiting integrated that circuits But several inventory build ship inventory very, trying to next quarters. some short when would in. these see may on expect is this few about out that don’t the

some calendar you – example, the at there thought Like, mean this growth in at of calendar the potentially back heard I see alluded year? you to? the exiting could coming in II-VI kind I half Chuck, we But double-digit of back was for that Did growth the year half? rate

We But year from – will year think are of see inventory. the are goes or to not double will accelerate we as the do that whether the sure achieve but and expecting not digit back just not good this generally speaking, I to expecting see growth we entire I’m growth, year. I’m some half for in the that growth on.

you. Okay. Thank

next Our from comes Susquehanna. question with Rolland Christopher

me squeezing guys. for Thanks Hey, in.

mentioned First had $X.XX Mary release, March high press end on a clarification but the you of is the as call. In the Jane, the you $X.XX EPS, question. on

the you a $XX So million perhaps timing I mentioned and for million exactly $XX launch if know was. either an just preorder. the or or think it don’t that what it’s I call, prepayment time opportunity you great, And architecture mentioned on I too. what’s flight, that it a that VCSELs be different would secondly, NRE – or would know I’m NRE some a there. the any require was clarification VR/AR the an talk of also then also, don’t assuming and can for about on product in you

question. the for Chris, This here. Thanks, Giovanni is

say in that rate, the So we didn’t way. by

my well materials goes to But sure So as think it’s is I for – and and in number the want so unique we that’s to recognizing several it’s customers includes probably a beyond product about I in lasers, forth. prepared customers, that goes remarks optics application. optics, said AR/VR as make prepared – it’s of about in I portfolio of right? emphasize, So not and the how offer. I it’s just it not are an million said funds the And just laser, time that want just $XX beyond is I defective includes well a the a offer, what we that factory way it breadth the remarks,

go the it’s it’s together very same I but up applications. the exciting. a of details, And materialize, some AR/VR it’s new but large take very So large with to our future us. have. it’s customer, time we a offerings can’t that come revenue because for competitors we think type exciting put to customer into for for going very to opportunity It’s it’s and the need several to it’s you a of in

way. And the in XX pointing the the to in XX It’s Chris. for is same back table the thanks typo, out

fix we’ll that. So

that the opportunity you Thank this And this before. you about Semtech big compete a heard with, do a you the CDR we I guys? that product When be? new talk comments, for Or let’s you. type think for is then And this is to of CDR say, how on could haven’t come that might example? market?

No.

to – clear, what the market in now be Just – is it. Chris selling we we it’s said are just

Finisar, Finisar of market selling recognizing the time. a the ICs, make for revenue. had the the as a entire we selling it’s kept a We’re portfolio metro product integration long for The and part to it’s were we new strategically lifespan and I with captive with platform that very of we’re of available one on Finisar. Correct. design, decided And Finisar. a our are which it’s sorry, mean, is market to and part metro of

– product So a there. it’s that’s we already

selling it. are We

are the because design list win we long over We we of recognizing TIAs. also have first drivers, hopefully, revenue. low have a It’s

are around even, ICs trying transceivers that and design complex world. sensing have in we to the We XD globe for in example, with the

to drive detected trying a to So the to is I those had so And much need we’re market. signals lasers forth, mentioned. yes, the and IT amplify anywhere there are penetrate for pretty competitors

you. Thank Awesome.

And the to this I’m over to time. any any showing not questions host like at for further our I’d call turn remarks. closing

you for good there See Thanks all in minutes a All you have for hope hanging day. so right. soon. joining us extra we Thank you and much a all today. for few

today’s gentlemen, presentation. and conclude does this Ladies

a have and day. disconnect, wonderful now may You