Coherent (COHR) 16 Aug 232023 Q4 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Coherent Corp. FY '23 Fourth Quarter Earnings Call. [Operator Instructions] Please be advised, today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Paul Silverstein. ahead. go Please

Mattera, and segment, our Kevin, on everyone. you segment and Mark Dr. Thank call, Raymond; Dr. Mary Thank Strategy President, Giovanni Chief quarter good Barbarossa; fiscal joining Officer Chuck CEO, and fourth have of Today Financial XXXX for Officer, we Jane Materials you, President Chair morning, Chief Dr. earnings Sobey. the Laser call. and

updated website. letter investor after yesterday market Coherent along the be with shareholder in section an They As Investor a reminder, found presentation. posted closed, both can Relations a the of our

Before outlook. to operating attention that shareholder the traditional key remarks, to forth opening previously our the press this change I everyone's letter letter I contains releases, set with along shareholder of turn The accompanying color and call Chuck for additional were around in call. and statements our call financial our in over want earnings to performance, format his morning's trends

in feedback. plan undertaken this Given to of the We our We've community. additional quarterly this clarity to financial and answering with your questions earnings letter, the call insight of bulk disclosures welcome providing change goal morning's the for the from devote the greater release. we

performance, the of Coherent which any obligation differ I quarterly filed results forward-looking these strategy will dates. the statements results actual statements, operating update speak statements. those call letter including forth future to the and to differ respective company its and that Risk trends everyone forward-looking all only market from materially reports and may will and that also and set growth want refer contemplated on and this actual financial statements SEC. remind in outlook, to we assumes as to forward-looking cause the materially could make are by their about shareholder with no factors that annual

is call be included this stated, information reconciliation GAAP Unless letter. in non-GAAP and measures otherwise during in to financial the discuss all may will call, this of non-GAAP. addition, measures. A non-GAAP shareholder In we financial both GAAP referenced

those are section measures for X call that discussion be our in in Relations year. Investor website will to shareholder limited Our Today's will for the non-GAAP conference the be of available webcast letter. financial replay reconciled

is With the please go Chuck. it my pleasure that, over to turn call to ahead. Chuck,

Thank you, Paul. our those read listening the new to you I shareholder letter. hope have in of opportunity had

a fourth team a the good executing quarter, In the of job Coherent challenging environment. in the did macroeconomic midst

end $X.XX high was equipment, $X.XXX toward $XXX the of invested and in the high guidance. improvement. million revenue We which Operating we and cash was marked guidance flow was billion of of Our year-over-year EPS sequential capital debt. of $XX our million non-GAAP end million, our of above retired and $XXX

business to resilient model. look Coherent year back 'XX, legacy fiscal I contributed our When on

we some order legacy slower-than-forecasted solutions, of In in X 'XX instrumentation of generating We Finisar. addition, experienced thereby while and acquisition These our platforms market are in to for drove some in businesses, macroeconomic surge China uncertainty record the from integrated breakthrough and are of a deceleration were And nearly the Communications industrial unique of Two in X which of quarter and speaks good patterns again AI, conservative XX% our the acquisitions, once like strategic in to in customers, of a to QX our major post-COVID in Finisar and just the we markets, customers' our seeing affected in create sudden the our FY recovery demonstrated ability following demand in products. acquisition 'XX enable our that while for increases X Communications fourth scale AI. strength and Communications meet revenues to a in scale vertically examples value. differentiated orders now that those fiscal track ability highlights year of to our related affect our our successfully shareholder Electronics.

of taken Recently, on reality. CapEx. slowing demand at planned We align some as the demand inventory our slowdown managing our strengthen remain to investments so We future have of reducing foundations. in customers This got products bullish levels in their reducing because face costs in and customers in with the their scale. through actions, ability retooling during temporary also about our and and those accelerating their are resetting setup investments innovations challenge our fiscal in including opportunity 'XX, manufacture orders to while products that legacy presents a their we ongoing of of to lower many market depend view our an largest the QX of and busy strategies this new

The fiscal help in and in hyperscale data machine 'XX are in opportunity for for Datacom center customers is traditional declines and build-outs. FY the demand communications should offset XXXG addressing 'XX. that planned That intelligence our in demand transceivers largest from data we learning artificial anticipated

In see recovery addition, of 'XX. from alternatives strategic for positioned X we Thanks our to the in though improvement any of silicon of the fiscal major end opportunities. we carbide strategy another outlook review business, believe that we our meaningful our to diversification, we that benefit continue assumes macroeconomic signs growth well of will before environment, of our not our are

and interruption we short, temporary we a year reset powerful challenges otherwise consider a of as these in prepared So secular are for trends.

for $X non-GAAP XXX quarter million $X.X of EPS the approximately $X.XX of 'XX $X.XX on billion shares. to revenue billion Our fiscal is and to first approximately of guidance

$X.XX approximately non-GAAP full Regarding fiscal billion $X.X revenue $X billion EPS 'XX of approximately of million year guidance, and shares. to XXX on $X.X to

over I'll Paul. back turn call the to With that,

for it you. up questions. Kevin, could open you Thank if

from Chatterjee Samik with JPMorgan. [Operator question Our Instructions] first comes

the shareholder Very all letter. details. of get to details in for those the Thanks all useful

those the of guidance just putting I through, that walk not if sort the AI/ML, a sort can of of Maybe on any you're are the put you visibility the guide the to relation what we and deciding to do not hurdles, sort have the can of is it particularly, of capacity fiscal And of orders capacity, in you maybe in for guide? in clarification us in in AI/ML interpret 'XX? to if you of of I think, it as of start in sort shareholder letter mention ramp question 'XX. or fiscal the X related more amount there guide inclusion Or to some sort with the sort around?

you through include I see follow-up. quick forward? So you have can milestones sort maybe of that And us in guide seeing of are if walk What in to going challenges? terms capacity a to you of the terms in need what

helpful. Maybe X are Okay. Thank you, Samik. I'll take that. points

the the transceivers we our That's to billion. a In all had we is especially number but that of that inside second half will reported, amount X deliver, substantial have that of QX, what's scale revenue managing year. the is meaningful two, front that have surge our see the in that will what synchronizations, QX quite first we it guidance see in more opportunity will Number year, supply we for started. surge our revenue above $X.X of the first of was half a including and be in supply we billion XXXG And over contemplated one. a $X.X require managing and chain, bookings in for we to we QX for of The about delivery the will ramp There's already have from that our few revenue the XXXG opportunity chain. a so in plan. AI. But the Those and the transceivers.

opportunity we'll months quarter, the our have As next as the first may that set this and we second to a few inside work greater our fiscal through way we come work through for in eyes year. compete

it. Got Okay.

And X the terms [ did then success terms well right you're DFS likelihood orders separate relative in as and in? ] most shareholder broader most in your these in is of Any of you in those see are bucket in X to where opportunities coming that buckets, EMLs, where VCSEL seeing? laser presentation letter, of that the VCSELs. outline sort coming AI/ML In now the of thoughts -- which like, as you within

I'll then to it Okay. Giovanni ask off, finish Well, Samik. out I'll start and

for able As that, merchant market. ability supplier our to we're said supplier in to selling a a continue going and addition performance and also volume VCSEL-based and you quality high and application, ship. scale high are EML-based we're ramp and to having high new win And the this know, this be meet is vertically which to transceivers both at integrated to to both to orders both basis we able on the to be partly to

elaborate. please Giovanni,

because will with light we Samik, of wavelength long is reach, -- short volume same of support I see roughly AI be that XXXG, of different X/X future, which the we So price et kind -- can ratio devices. probably wavelength, volumes here, kind different, the X/X would maybe our reach, being obviously, about short say terms in and internal the would the be that XX-XX. So long talking years, for and And that next so the both X X.XT, cetera. like even the probably be right? I'm will the in And specifically ratio

in few of kind that So too. the ratio will next remain years,

Our next question from James. Raymond of Simon Leopold

us all I last Great. night. this. to try question bit the of and taking detail a providing digest the to Gave time you appreciate little

the in above millions, do you market for have out around we So business, of and estimates, AI-related XXX what in follow-up you maybe backing Just our described Could on EPS? question, do think gig include of if us guidance. rationale help the be quick assumption understand aspects very, impact us you the a of the worth very wanted what the AI-related you guidance? of several the this help as to own from share as as of Datacom exclusion which to this hundred a well, would transceivers? the terms couple understand And the your

let in Samik's what Simon, let and I clarify Simon. Okay, question. said me response repeat me to

XXXG for the Our for and of revenue contemplates a guidance repeat shipping revenue amount the to full wanted especially quarter, guidance for full that. year for meaningful our transceivers. year, I first -- but the

believe to that come anything to of $XXX to Our to to now, need substantial going for upside, But if million, manage have able and add that million. plan we'll sure the additional it. we're And to I be in we a may successful million it we're we plan, together the confidence say everything into our on additional go have to be have time upside be from up confidence to $XXX our focused much amount or ramp, that cannot us more there in might as as $XXX aspects to will. be contemplates but a of add days But shipments. it. for XX few I having be that quite we

of continue to in belief strengths the we're going regard that a basis market With to from leadership There 'XX in the bring, FY to on ramp substantial market. is that question, transceivers 'XX. to outlined position. in strengths a compete are rather strengths generation. evident a this I Those to with your It's have were that and we second our year-over-year in we competitive 'XX Datacom we're 'XX

components today and have exist have We to the the and coming. X.XT, the we that the for ability scale, are generations laser which

that to the sixth fifth inning inning. And in -- move very basis, to leadership to and so positioned further game. getting just the it's I the will well our what past market. be the the and this assessing aspirations we're our the able It's of first in think position be inning for score Everybody on even is started, difficult own be

That's helpful. very

beginning exclusion it's sure cycle. kind And is sort make of Correct? believe in capacity, the ramping pan just paraphrase shipping? because flash to onetime of crystal is project, the you because not clear, of of to this It of risk sort the is this production a of a that is the it

a Right. sure of and in This the there able of And if It's continue not update inning come on come, by more is revolution. it's the 'XX from lot way, you the a to we drive It's first is it's I the started, think operationalize possibility 'XX our just if believe. I'm a the And this we XX into may days it, to there's the to more of even we're now, additional beginning going cycle. can game. the guidance to of -- can that to revenue because be growth. add that to we rolling beginning getting

Our comes Morgan Stanley. Meta with next from question Marshall

now. transceiver just business outside the Great. Maybe for of

Datacom? then had at in increased You a second fiscal wanted whether are during recovery recover of quarter. of the you visibility transceivers? 'XX, half likely just into outside to the of the look year business just either get to that first And of of anywhere that sense the I what fiscal increased kind visibility late outside as of noted Datacom most segments just

Okay.

recovery both new believe of our of the be be Telecom beginning some that And that we to the next share of end year, the the new through see I and of with do itself the -- portfolio, new from first our and Telecom products in those base the better meaningfully with I'm orders will half Well, Signs position of strength year. year. to modules. those year than signs including the that expect second have second before on business -- half of the expect we'll will ramp commensurate given customers, products, the our consistent grow half pluggable of and of the of expecting our orders, DCO launch we followed the summary calendar be recovery we this can a that

one. be would Telecom So

industrial battery want believe welding the meaningful market the example. laser but just in activity, in including see I we're laser as that that think macroeconomic say to further of at the We're broad-based. it adoption I is increase service diversified. any both business we technology, EV to will And for utilization X begin do don't and do bottom, in I our

substrate I nicely, is Our into say, and would super is continue growing businesses to I'm expecting silicon carbide growing, 'XX. that

Maybe I'd like. the follow-up, if stop. Meta, you take

Yes. No.

to of mean, Just gating of you to Datacom recognition of there back transceivers. the item your of that? talk follow-up, million, When about I Or kind just capacity? this as is gating the additional a are to majority $XXX items other kind come

first a broken, second it, it's has the X when manufacturing there's And line behind constraint. right Every constraint.

the more. game in in therefore, being many on, of through line that and manage multiple by then of to Managing industry have line. going, mode caught components It's able it months time. job supply us And figure to to we the and is at constraints supply we're to we'd take going have surprise. do because more in line, that our manage wind-down with been -- up. And this on the more. first how for supply the do I we're to adoption inning last if expertise sudden the more, aiming want were have beginning Our out the to X that able aspects and or we rather but in do tide X be this faster, the critical dependent going a so the to believe capacity customers has the we certain

XX continue, And entire managing so the in we'll of couple give months, urgent the update next approach to our manufacturing in and capacity an days. will

Our next from Arya Bank with Vivek of America. question comes

Datacom. One more on

line. For fiscal it gig? XXX are in my was how 'XX, drawing And transceiver AI/ML? that first what question. And curious was that your how so much total sales? Is about And you I'm that's anything Datacom

Okay.

broad me it strokes Let it do you that give in that's because think to I you. -- will for

applications may XX% Our Datacom And were be AI, of rates sales there to some whereas are at revenues. than XXX. data approximately sort our relates less it sockets and of 'XX as in transceiver consolidated that

about 'XX, we when talking us X.X. We us, road substantially talk hear about 'XX. we're third and it, was not amount. and But for XXX, it talk rather a up the quarter, in map in began step For it's our to shipping going you'll about in material FY really

Okay.

sales guidance assuming could 'XX hoping rate in if and OpEx the the between fiscal earnings are bridge guidance? for And for was the and I you 'XX? Jane margins or you provide follow-up, in the What Mary my exit fiscal then gross

Thank Vivek. you, Jane? Okay. Mary

importance margin year, not respect we're of what given margins every with to revenues our similar may the quarter, that's And the so XX% XX% lower first volume, have to guidance, I be XX%. gross to the at the in at range think we the to widening whole So thing.

the the thing the revenue up value second of level OpEx going OpEx was that the of little dollar for higher The full same tends is, we're revenue the be lower. the to year similarly, not is sales, of at a because talking but guidance, about because bit percentage

to of probably of is XX%. XX%, in neighborhood about range it's XX% of end So which XX% our the high or the

do up, we're X some the quarters X between looking especially probably starts we somewhere outlook the of have to way of the goes it. the on, at will that improve think that's that the we if margins that half the as So see as we I in picks think year. year the to recover covers back next volume the

reconcile think, and the down I Mary But XX% about at Jane, how midpoint midpoint. we I down, guiding you're sales mean, earnings XX% almost at the do -- what,

where getting are about fiscal So more? from in I'm gross 'XX, a are sort be lot to wrong. suggesting, margins, what declines they what seem of you Because that unless

So Like, much earnings decline are that driving? what pieces so is faster? missing count? those share what Is are it making

to of the -- instead mean, is Comparing 'XX, revenue I just alone comparing the $X.X to billion, revenue alone sorry, the $X.XX.

a on make then and So though they're the A, go earnings, the dividends revenue because is the somewhat. significant Series converting capitalized. the count Even the have a we share dividends to The declining difference. in-kind the changed impact start from on there, up also taxes

probably but below are major the primary things, driver. the is revenue those So being the 'XX

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

being was quarter? total to continued silicon I a supply also June you percentage it prepared able for the grew see just remarks, nicely. it of revenue Could constraints in give just June wanted talked quarter. carbide but about just you the In what the to said from you as scale, not the

Yes.

give second. Yes. us a Just

was The whole about product X% of line revenue. of Wide-Bandgap the

Okay.

is wanted Giovanni's question, just this camp. then technical And to in I a maybe ask just

in growing biggest and connections thought interesting is between you're slide AI photonics in Where opportunity And period silicon $XXX why $X.X in have your so today, growing the it like was that it you you fast silicon the of playing I is terms you in of time? billion. guys million 'XX showed photonics? from seeing that to are So where portion deck, that going that 'XX

or split. Silicon a speaking, consumption let's for -- generally between we see ,you photonics and And is [indiscernible] solutions. call performance split the standpoint, it silicon a long is it's are better still those It's a say need long for in solutions reach, are Well, would photonics we there there laser not reach. slide, and short [indiscernible] I that power from say, reach labeling, reach, not identified. short not what suited

still reach, talked is we that X/X that long are to say related would them about. AI I split short both ramp the X/X reach, of So and

we what that's So seeing. are

photonics there -- that's all of very the growth but So silicon -- VCSEL silicon with a but it. fast, that's and and of split X/X course, short it's reach, also it's X/X, between -- no let's AI, photonics, still which is part. also growing of, not the to But growing long That's reach. all to unrelated is respect there's fast, say, the the split just part, that''s -- a

with Our next from comes question William Jed Dorsheimer Blair.

as carbide, or that in business? previous and of of Just business? to out looking I strip is silicon the look need XX% am aware I indium at silicon that on a if phosphide, And Wide-Bandgap the there be roughly carbide's -- else follow-up I correctly I the this that at to anything that

of of can Which repeat your you [indiscernible]. Jed, questions set

relatively so that, of to was phosphide, silicon component understand get be I'm silicon carbide? to -- I anything X% carbide, the growth to at small would of of business. the majority back is else What to what that is to Within removed Because X%. to XX%, vast year-over-year that is of be that about trying think trying other carbide. get indium is growth Wide-Bandgap, I'm would Is be need in major total is silicon the XX% but now, that a to Wide-Bandgap that that there you've sales. And seems previously, the said

Okay, Jed.

have Wide-Bandgap are But our nothing business, for any there services customers no the services semiconductors. Jed, -- carbide to indium indium plantation sales or operating silicon compound carbide platform, majority fabs. in which for of electronics who our other That's indium silicon the we There's plant phosphide substrates. includes providing arsenide. gallium do are were of

it and the of the Wide-Bandgap growth carbide-based, And of that's is so our is outpacing focus growing. platform, is and silicon It company. the it electronics

X% But to Jed. quarters, the been for it's last X% several

Got it.

Okay.

that albeit unit. Well of in were I strategic -- and mentioned you you It's think then letter the -- this CapEx that's And of directed for shareholder something review growing. XX% -- the I you guess that looking business business to a a small, was the this just updated CapEx at quarter, then that unit. lot last maybe of saying relatively

in in expect Or that just terms think we intensity this should of guide? would with expecting 'XX you that, growth? percentage that how capital are expansion So a you Do linear of be nonlinear? the

to expecting invested the planning I'm and XX% that above No, that to our capital will XX% of be silicon 'XX fuel FY carbide growth. in in

Sure.

that's Chuck, in is lot What business putting so that's that you're you're other that at in Is to I what different into was -- at right of growth forms, justify looking nonlinear review, to words, getting -- is in at So expecting in that business. business strategic could a it CapEx expected CapEx X% a I'm that though, that if a the take you that unit. which now, you're segment? forecast, double? that Are in

you like to? Mary would Jane,

third I it growth think seen to mainline have and was car quarters, the that we're mainline point probably think from to move prior of beginning only Well, market expect kind strong start certainly, inflection The I upwards, we about seeing think very quarter, that. this was in as electric, we vehicles to I suppliers fourth of as in absolutely strong an talked expect the continue. and have do just and that quarter, the in will we the

than a it's lines, for it's half to able there more rational over not commit parts customers to car it's our people entire be business. for -- -- important their this is also capacity to to other Obviously, the change somewhat business -- of fortunately, of if more than being that. But

add? to [As you i said], would it's Giovanni's like Giovanni, segment.

we XX%, So number. X-X, okay? at 'XX, least give -- FY Jed, 'XX, of I'll FY growth a just expect you

with Christopher comes Our next from Susquehanna. question Rolland

on Sorry, mute.

you engagements? might things you if to wondering lasers talk AI if bit et margins what of your like could compare more about be AI just cetera? for business, Have about cards? to are talk OpEx perhaps or transceiver or needs business, engagements the a any able for broadly guys support to nontraditional And was economics kind into servers corporate had little or in I any optical that how guys you Yes. systems the

Chris, could repeat the part nonfinancial question? of you part? your first The

Yes.

your about just So for engaged into in are custom AI systems, transceivers. example, designs wondering talk designs? competitor, AI-specific to is starting custom I was you going And not have have you, that engaged any if companies any hyperscalers

Giovanni, would you take that?

our with device the me should let internally. use start we that sell technology. So more the in -- strength We currently actually devices

as most So too, competitors our you know. customers actually we are probably -- our

because the reach, we and long laser reach. wavelength, broad-based short long both that So receivables wavelength, have platforms short in technology of

will at say, are have even some, be interoperability, nonstandard of in of to they point. customers. the terms with guaranteeing designs standardized we So engaged at day, some let's the on some But end those customizations end

both. in And terms the so of difference we've XX past standardization of I don't process in believe from is data the of seen years there any that

so cetera, cost Of all want people ways course, that lanes, all optical are end trying all comes customize are down to anyway. improve remind performance, of to xXXXGs you the XXXG at these of I to ownership, solution to XXXG the day, as the of internally. et the there

and electrical even the multiplex at that's level, end the XXXG forth. where soon are. in lane if in day, all there optical some lanes so soon. course, parallel, future, coming lanes of so But we are of of different optical the some them them XXXG And may it's approaches, of the be are coming today, types XXXG But of

design -- I to level most still -- competitors again, say, think earlier, customization would is it don't integrated transceiver of demand there, vertically I are the better we and saying as compete run doesn't as at there you support to differentiate the is of but most ability because we also know, ability we substantially to, than, level. the our only to So changes that see, improve our which that the internal the ability some we were out our

perspective. So we are that engaged from

Some of players. it, these of some customer, customized solution call for AI the super

[indiscernible]. you Mary Jane, would address

to respect With the margins.

communications more average have margins So you'll entire within extent. rate decent pretty market, the generally end that the a deliver communications data to remember technologically margins value typically tend to higher average. that, the said be greater a that complex below the are speaking, to the products Having that and corporate above tend

Great.

then plays think For you customers? shipped I been What figure demand? is? this of my a shipping thoughts few to And burn dynamic have with you're in on have and out? second normalization to of perhaps more on it's would any if that? quarters would your you inventory here, at your How any take Any to and thoughts much I what inventory it's line linearity hard the this how quantify way is inventory going through. question there at this know out kind here to know But work customers, more

Okay, Chris.

And I speculate days will could as sure and complex where to that it at the able it, I longer, by engaged that in we primary we relates and Telecom I hopeful as am -- it to a affected of a kind are -- the and XX call a think. But it's looking it least we a said X I function to ago, and great have to It's were as market any remarks it some turn and up earlier. until before of by I half, have customers. won't possible I uncertainty, then. thought won't believe what this too been. be on second believe bit and the begin year still maybe of end than calendar a we that made moderation see not better persist would I signs the discussions with see I for

Baruah Our with Capital. Loop next Ananda question comes from

guess I if I could. X,

AI I In and more of about is passive drill just Any if of on made could that? And transceivers. a this you lasers, you're talk guys would love there And think some well, get active also think have and context at you thinking the to AI OFC high-speed being about on I shareholder exposures sort but wondering that? than updated that? gave follow-up. letter, components, AI mention was on I quick context as then down you way

Okay. just And talk and VCSELs, EMLs optics. Giovanni, maybe about

Yes.

it mean, So wondering if were was unexpected surge surprise. revenue way, in a have we and at was to caught because Ananda, some year size the which fortunately, going know -- upside platform it the market the surge the the do And due come but a because was I terms you unexpected not demand, but the for timing, vast point, obviously, that I in had in a it -- bit the we we larger was, we by see necessarily by XXXG the -- of guess to share there's little ready. of trend us

logistics up, So it's that's chain a ramping and small X [indiscernible]. question of so and supply

But the of it, split, and devices, ICs. let's in say, is lasers, XX% and let's total. terms follow the Obviously, modules even let's transceiver transceivers some [indiscernible], between call say, the of the in cases,

the year, split we next months So in that's 'XX. the that see say, in kind let's fiscal XX fiscal of the, the in the

revenue-wise. of like roughly kind ratio that's So

That's helpful, that. I Giovanni. appreciate

sort various to you're would them well? think context way Any like, mean sit go-forward gain transceiver picture. the lot going as on helpful. share-wise deck guess follow-up, And you ultimately a for detail forward as you've view. the slide that laid -- just on a TAM buckets, out? position share and I be I in the the around opinion the the very what bigger -- And in where Any you thanks the of do AI in

starting win. to relates plan come, be in largest the our we us is this in It's that already of on to and marketplace. early, even 'XX, are AI, early more there as and maker it believe a the though millions, a our I be is believe possible ability to generations is critical baked half And market, market as hundreds the 'XX. what of XXXG back point, including that to be to And in to in a super upside it's busy. exciting to the the the be scale gotten and market the several address for the believe but transceiver our market, broadly even going goal have I I we've opportunity, of to that that, in leader. ramp, able we serve will to into And 'XX,

Our goal leader. market is to be the

could there cetera, how portfolio in you to have [indiscernible] with sort you XXXG, where with technology think is of already as you today you're leader? about going your that Chuck, increase market sort the And that are the X.XT, to market et advantage of anything the relative

absolutely. Yes,

repeat. me Let

the marketplace Our to both further us wavelength, And company that vertically XXX we we are laser for only well that especially technology, on in the present to because for but strong I from separate other beyond laser-based demands the value the a technology, X.X, very including support integrated even a XXXG. that among customer. and wavelength map believe has road are propositions and will short players those that long this

next Our Roy with Stifel. question comes from Ruben

Ethernet? sense cycles least at going for and Ethernet clusters the training timing finer strength then relative can a do would into Chuck, on transceiver of if trying if be versus you X.XT bit and optics AI/ML you can really, what a AI ask helpful. get much qualification deployments, say, characterize I to I'm give put of you're to today, gig sort XXX you How a the in to little is us point And momentum InfiniBand of eventually seeing.

to Okay. Ruben, I'll ask both. Giovanni address

-- switch is customers, market and the a maybe than right? a hardware the -- agnostic to you the rest, -- from makes the where is to standpoint, demand Ethernet the the InfiniBand difference higher absolutely demand So architecture there of So about maybe no just is, the there it if I us. but So ultimately, absolutely talk we for right? are

Okay, Giovanni.

some cetera. you in switches, qualified -- terabit, providers X.X the moving cloud like as for service Ethernet some the talking are are XXXX? of about to switches I et Are at think move then So point out some qualified you those

Yes, absolutely.

Okay.

Okay.

big the portion Do hangs you legacy sort going ramp stuff related in plays than or are That And of transceivers, sort legacy AI/ML even last falls and you maybe off what guess Giovanni, considering AI/ML. XX% that then you think pretty 'XX would revenue lower. of the consider in I then that? leaves is of consider how How XXX you there? How gig, out? X think to legacy do of question Chuck for consolidated a would to I mentioned fiscal you faster

Datacom 'XX let about Ruben, comment clarify. sales was in me Okay. our transceivers. consolidated were My earlier XX% of FY

add have me on let ask me -- let if that. any you about So question

up, messed I that No. then.

I'm glad we're talking.

demand customer letter, is 'XX legacy I demand -- plan. As a products those for remarks, to in we for prepared the that going XX% declining That to alluded products was is in had roll the from the we shareholder the in market that legacy indicated our in certain off. my customers. That our the communications demand And communications data in FY market.

able a clear? I'm rolls it off, we're As more than AI it fiscal rolls minimum, 'XX are transceivers it faster off, at aiming that. than that we inside with and do that year that to replace to the even XXXG Is expecting

One before moment question. our next

from Our with Kang Dave Riley. next question comes B.

last What this now, mix between question the and between was think differential XXX gig with gig? transceiver XXX speed different XXX My first what XXX like that year? regarding be And do your will margin XXX fiscal year? is split gig you the revenues. versus And gig, ramping, what's XXX-gig

you if Giovanni, want to?

would gig would below. rest say the maybe, I was XX% about total, and was gig that of the I and XXX above and XXX the say,

the However, you let tell i'll the other sorry, X split the between me answer. --

Sorry, I [indiscernible].

gig to XXX so Giovanni, So was Just above XX%? wanted and clear. make

Yes. Yes.

Okay.

Okay.

in then say, been and that of let's of the the So rest. revenue in X/X hyperscalers, facility, has if our we rest X/X, the past, the you major recall XX in and top was said change enterprise X/X now terms -- cloud distribution the

some to that what in a and changed. AI result did the we actually of the as over shift inventory ratio FY result 'XX, of has So

around FY at is X/X it above. -- and of and to that's least be and Now XXXG for XXXG most 'XX, will AI,

XXXG. including course, is Of And then the players enterprise. say, smaller cloud rest let's and

X/X, providers X/X the X/X enterprise. like X/X, between is the is and So then that the cloud split remaining other X/X, and ratio,

much FY hyperscalers in 'XX. the of So total be than share will larger a

the that impact that the shift transition how does And margins?

So as products I higher a than noted tend earlier, in the margins on the group. higher the average data rate, complex more be to given technologically

case of certainly So in these the transceivers, would above than XXXG greater and XXXG average. the be

are, that and at become Having very, parts some for point, those. say, very good making below, said very, XXXG we [indiscernible] at those that,

to -- goes hold So that actually we're or the also, because products X almost only lower margin on, tend makes margin lower-margin the as the to them. time tends average products

So generally speaking, that's how you should think about there. the margin structure

it. Got

is you've X And question -- can you And if get divisions. backlog, those operating also, I maybe, Mary your for was three? wondering between last can my we I provide billion. Jane, for I'm X on split you margins can if just if provided margins know divisions? provide the your $X.X wondering gross

about in balance $X.X the segment, with be the So billion, respect the million, it's Of $X.X for to it's the $XXX about Networking segment, of would the million. backlog Materials Lasers. and

With the know. below communications the the laser that along the we somewhat margins margins average, the and and it products. corporate segments, to laser diodes gross But industrial materials I you imagine our tend can in be are with the in basically highest the systems to above have -- give as of the the think average. The don't typically remembering slightly to typically corporate grown typically margin margin, that respect you that, operating that goes parallel company

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

targets follow-up. be wonder any Mary the full how Then be guidance, about you maybe, share if reduction? of 'XX, should I midpoint fiscal that? Jane, have you'd at say, year thinking for -- could debt a willing to your In I we

-- $XXX for that extent, CapEx of structure, naturally reduction. lower first Paying about the CapEx the to moderates remains haven't the on down the be in lower Well, managing Obviously, have talked so debt revenue. very in have CapEx million is A point on very, very, strived that north targets some while very, a about of very we debt aggressive the high that. to priority, priority. the would high we call -- we periods capital the been very because, previously to

materials at of in expecting comments of on the in in I'm any half? OLED suppliers of market? in the out side, to handset that's side shareholder And up just then of 'XX? you business utilization in to what you deliveries hearing then alluded part from X are orders -- of first the light letter seasonal the And the the if that pick looking going business. pickup the of wondering drive fiscal 'XX for or fiscal of the bulk some into of the China. you Is on kind we're that made And you the display of those in systems

will both? Mark, you Jim. address Great questions,

Jim. Chuck. Thanks,

fiscal utilization our next over months. definitely half so in of X expect pick Yes, we up year, first service the the

those releases the our fiscal you got we manufacturers period. in certainly the we that FY that visibility And are September, As of batch And bookings service OLED within new smartphone on October new drive our the a revenue. in expectations various 'XX, we've know, typically capital the mentioned having get shipments would so from are shipments equipment, into year.

Okay.

part with But cycles Mark, how of business? this that the in past compare seen does you've investment

a That's question. great

with major we've to number split limited a be fab similar. Korea. X more pretty be between it's mean, between customers X love pretty associated we've -- I as it's this customers, and think to today, split It to tends -- not. got It's linear. we business much of I know, build-outs you and China

X we phase to in it's Each X So to expect similar. systems, think calls, tends were that phases well an the collected built of prior can that we times as I And to go imagine is in Generation fab out be sort you mentioned additional phases. orders as recently build-outs, many X especially typically of pretty range. in expectation China. would It so we've that in

So yes, typical. we see reasonably this as

comes Savageaux Northland with question next Markets. Capital from Our Tim

business the sequential to look you on can of we kind some tell something order and which related the September going million, well. from what kind happening and to at across your terms and there standpoint? questions of of drivers inventory as there? if in related maybe takes the in on segments, down that, puts end if main And guide $XXX look you of what's are from quarter you the But a what specifically, trends through demand, look there have probably is, standpoint, to issues a A about as Telecom couple focus I here demand wanted us you they're of

Tim. We the a communications strong had quarter. in fourth very Okay, in shipments

will that down think be the first quarter. I into

spread QX. That other or rest half I of think from driver across than X/X segments. in the accounts other it across #X the or change for to variation, markets. the maybe and that's more of markets the is End the QX the

of second What part your was question? the

. you. with I'm

Datacom -- So about talking there? to the to to point was get extent of the X/X half to being a the comps Telecom you're sense I I guess versus trying of decline,

that and least persisted combination, Telecom it. into March well. saw quarter QX and of a leak QX in in moderation meaningful It's leak a at we the It's market, into the as that in part the will -- it

from Genovese comes Rosenblatt with next question Our Securities. Mike

just clarifications at of couple first. a

just that was to like ask second about a the want almost is, clarify when And you the I to customer. that. I Datacom transceivers X talk then customer, the also public. and sounds XX% second and you're The that just wanted hyperscalers, clarification

the in nomenclature to in fact, also guys you make as I transceivers. are it? You to cables, that including active just sure cables optical check that cables electrical talked and are, way cables transceivers want about

Giovanni, why don't this? take you

thanks for the Mike, question.

our Yes, have portfolio. absolutely. We electrical just we include to clear, no but cables always be cables, in Yes.

include absolutely. all do optical, we but it's cables, So

hyperscalers. first think but your referring -- hear I very to you well, yes, couldn't I to And believe we the X/X. -- X/X, you was mentioned When probably wanted was question I I

I that question. your think was

So we saw --

clarify to question. want that Just

X expected said that the the customers to consumer check electronics Datacom hyperscaler? customer. wanted were go down customer I you where second orders just is, the fact, had is, X that, large to You in obviously, a and one,

customer well, the communication large the [indiscernible] -- X Datacom. for It where was Well, us. and a electronics consumer was was

Okay.

to my XXXG my to within transceivers customers? the expect then those external lasers, just It's question. just be or revenue And do when your question, shipping we quick other next [indiscernible]

we customer competitors, our for of internal Well, right wins -- we some have are XXXG. design And but anything prioritizing now, transceiver our competitors. with

second meaningful will that fiscal the of half year. in so And be -- the only we'll

we're call. to Kevin, the going wrap

Okay.

Ladies you and gentlemen, your thank conclude presentation. does this We for today's participation.

You may have day. now a disconnect, wonderful and

you. Thank

Thank you.