Coherent (COHR) 7 Nov 232024 Q1 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Coherent Corp. FY '24 First Quarter Earnings Call. [Operator Instructions] Please be advised today's conference is being recorded.

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

Thank you, call. good Dr. who first call, Kevin, Chuck and have Chuck quarter joining you we in number fiscal our Mattera, for will and XXXX of and introduce earnings Chair Today a the morning, on CEO, everyone. executives Thank moment. a

Relations the updated a closed, Relations of in website. Yesterday, a posted Form a along issued we for conference our section Today's market of were Both Investor our will morning, filed and Coherent these shareholder our after investor webcast be with website. an the Investor release news letter available X-K. documents in This replay call XX-Q. presentation on section of furnished the

letter, call focused our Before to webinar September our to I on hosting market I that December everyone's on his our market, plan want Chuck to overview note please XX. to our shareholders' opening attention we on the along call second over industrial investment this webinar turn market remarks, be following held press on communications contains our our for and trends detailed that overview the community. financial plan performance, call the outlook. morning's with answering operating around key earnings information our release the to from forth analysts set The our were previously of from statements is which in traditional bulk questions

XXXX forward-looking the and materially forth which in shareholder our any outlook, results I speak reports. differ statements refer company its update as no forward-looking the obligation on to these and future about also to are results forward-looking that and call, SEC Factors respective may statements to differ want will their remind dates. including actual all first from everyone market actual assumes cause Coherent letter only statements, of this materially could statements. to in set will quarter make we performance

shareholder respect both that financial GAAP we GAAP measures. historical is With letter. discuss A letter. are we'll call, this the those and shareholder will reconciliation discussion in financial the reconciled of non-GAAP measures to to non-GAAP in to during Also our non-GAAP limit measures, included

is and over Dr. to the Chuck call that, Mattera. CEO, turn it go Chair ahead. Coherent's Chuck, to pleasure my please With

Dr. interacting I'm and to Q&A our grow. They with rich top leaders a and a org, us and overall Thank depth Wideband Officer, Commercial the who carbide through acquisition; you, And to and provide telecommunications the Paul. markets, of Chief hire I Giovanni and most jobs the will as EVP a the you in the our Technologies among Barbarossa; of us today. Coherent Magnus letter, of Financial leads EVP information Khan, our service are given of Leadership a global sure Officer Beck Coherent place who through how the source who Bengtsson, Martucci, important development Chris Strategy are have will recent our to breadth participate Lasers, leaders sales and CEO, to senior Dr. is fireside them the call Interim especially today Chief technologies, chose in EVP market and disclosures Officer, to industry's of Dr. business, Gap of talent. the leadership Marketing Officer, about They Parthasarathi; the President and me Sanjai investors of Materials acquisition; segment, today. our operations Chief who Dorman, business, Mason, following on business; our shareholder silicon the one Coherent with also Dr. extensive of came our to Sohail the Chief come came Rich enjoy

cash million revenue million, $XX posted guidance. billion, of midst of quarter, a slightly non-GAAP executing above was and midpoint our job environment. of good team a capital was Coherent flow first the the We and our we in We the which of EPS the $XXX $XX midpoint in $X.XXX guidance, invested did of challenging $X.XX, was which the million In above equipment, and debt. marked of retired which Operating year-over-year a improvement. sequential macroeconomic

and many headwinds uncertainty Macroeconomic and constrain will affect growth our continue end and near-term to markets of to our visibility. continue

however, strategy. diversification of results, quarter our first Our demonstrate success the

by in Mitsubishi While we some our carbide $X billion silicon remain of DENSO, strong challenged, markets another announced quarter demand. enjoyed which of Electric business, of our and recently investments

of breadth transceivers market second We leaders Datacom enable. are the of differentiation a enjoyed are underpinning the components. who indicative megatrends that offer for Both these of and irreversible AI-related market disrupting we our status and and also straight the we quarter demand quo extremely strong the

In the recovery from the continuing realization synergy our invest core our as to well restructuring are to substantive and of we and our structure, improve as performance, to our to plan drive in taking assets, Coherent in ensure especially we integration including previously through actions addition global transformation our acquisition announced operating that activities. margin

fiscal second share approximately our $X.XX to approximately now earnings quarter for of Turning guidance $X.XX 'XX, and billion per of to non-GAAP to revenue of the $X.XXX $X.XX. billion,

Our $X.XX, our guidance from billion from is approximately also guidance, of non-GAAP which guidance. share previous revenue to previous earnings is for $X unchanged approximately fiscal to unchanged billion, of our $X.X which per 'XX year $X.X and is

believe remains that unchanged, our still have opportunities in while real and million exceed this several to results to those continue guidance very guidance, simply annual hundred discussed reflects quarter. we the confidence that have dollars we as by we And we last

we regarding within increase to We on fiscal to 'XX. opportunities these visibility will improved year gain not as ability our capitalize hesitate outlook our

proud better setting I like to next technology, would am capable to growing tireless is how to efficient our customer -- positioned and others advantage before single with beyond. growing questions, scale to and take dedication these differentiated into at positions and high turn that appreciative I I are high-quality and exceptional I digits market say our positioned and whose to platforms we we the Now than And now, employees that full existing digits. for the market and of your of before markets to stage of trust. well talent Coherent products of deeper because manufacturing double for delivering are intimacy grow our believe

partner other flywheel a our with industry trusted intimacy and and that are it don't that opportunities in many of companies We and have. business, leaders, valued core a growth stability the trust also and creates simply creates effect

a platform our the cost We likelihood have of the record to restructuring transformation tremendous special few have and projects next from ongoing integration, we and optimization years, track prove and success. over upside

plan our advantage assets these and offering are recovery the opportunity take all the of good a have today to and advantage roadmap of anticipated take the We markets. in the and growth and of markets to

We a with industry technologists, and megatrends. team for identifying have market executives demonstrated a world-class on pioneers and of capability capitalizing

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

Thanks, Chuck.

to will analyst now to will to call call direct your who's decide respond. scheduled the open This [Operator questions. is full Kevin, Instructions] Chuck, a questions We for please Instructions] ahead. best who [Operator hour. Please go

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

you me Can now? hear

Yes.

plan capacity and case. if that your base capacity and the last I shareholder just talk letter or well increase capacity can And per order planning exceed the current ramp quarter, get on -- the goes you're about if did I that your referenced in the ramp you the incremental you customers you mean, this start, as can from

can of and of around executing cases orders ramp. [ capacity those use seeing incremental share bottlenecks AI are If to the a to that get be after the from I and exceed the ramp, that. that -- on and you thoughts AI capacity through done you ] to the will for relation able And sort have XXX your follow-up in ability customers go as what be sort the

Giovanni? you, want because to way laser a take to through Okay. the view Samik, the Samik. all I Thank Giovanni from ask got the he's that transceiver.

thanks for Samik, the question. So

players as we're doing the expectations, higher. So I say, larger significant larger our it's have is letter, to more shareholders complex, a the much been higher the target said challenging. getting but in we the of more than meet very sense new particularly opportunity obviously, that opportunity, in are and the that larger increasing, this with players strong historically those in and we AI think generally gets would the ability that overall Particularly, getting moving our engagement is target here terms and at, better so as not we speaking, opportunity

But chain I on are we XXXG product, all think deck as several is ramp equipment, new to. course, related we products But is the have -- you most NPI-related and these as to on manufacturing the there focused sure the is products, customers, because supply very make that to hands as of we have to much chain, new refreshing our said. and needs are bring test a -- deliver entire challenges the know, is were to of supply lines, us up to not to all volumes only team the important this high-quality to that speed, which the the

And any thinking you're margin sort gave so XX% how thoughts you're you some in XX% the about about long-term about that my -- much I and shareholder if cost cost you that that to relation making just Can follow-up, recovery guidance through margin share about levels? saves ask get of the getting can of of we gross letter you volume Any looking operating at. in versus need. what those you're you get of to terms margin in level from versus that line how to around progress top outlining that need thoughts recovery that

you, Thank Okay. Samik. Rich?

higher as noted We're a and where in include cost of going product well Thank to from mix plans, improvement. leverage vertical our to will our synergy which continued as reduction, products as benefit higher-margin on -- we integration volume, guidance, can ongoing margin we NPI our long-term our and drive better restructuring you.

from Ruben Stifel. with comes question Roy Next

us qualification customer how ramp up the I'd Is sort those you between Chuck, transceiver full done I details. qualifications could sort you on that product before your AI Samik's year and it start NPI to of sounds And expect the there's details like guidance milestones to talk and what the constraints, some on revenues. needed. just you're be love specific? launches, you what's near-term, back. of wanted if to holding question, of Outside sort specific, of of to some left about and some seeing follow give kind supply some hear actually delta

Giovanni? Thanks, Ruben.

I reach the require as the mean I yields, -- we the in -- the generally new promised. manufacturing question. line the quality, an incubation as we earlier, period for performance said that said Thanks the products to

we So This market. significantly the product. of product those challenging more are kind type for any other before same had of generally the true than any XXXG is

extend further the that from players the think are see, while can also already way have, market we that complexity as our address. orders an therefore, to engaging, future, in in for in we I the said, opportunity comes So a Chuck remarks, and eventually the meaningful for the to see we new we're I fact ramping upside his mentioned as overall near

of So increase serving customers additional it's opportunities need needs engaged that beyond for a the of that already short-term we to with combination funnel pipeline, with. the those continue we're versus have XXXG, new to the

Thanks detail. for the

telecom, business, how of you're you of view near-term, your of on can recovery coming driving inventory But out of any us you starting sounds in it's the my nice your might thinking December quarter. terms however quarter, data pretty hear some for points like give of and about that be? or you on guys that For on it follow-up, in the some driving if -- here the detail give what the gradual market a you're share here Can about starting to is the kind what's details year. talk on thinking September kind remain us view whether negative, of bottom rest

sure. Yes,

progressing the think our of with inventory see softness, on very of and FY market progress it's And FY at through very, 'XX on customer I end really we've digestion. 'XX. gradual rest improvement then quarters through coming demand customers. the end softness see in in inventory into been and this And and modestly the their the we base a market we our digestion staying combination telecom close

next comes Our Stanley. Meta of question from Morgan Marshall

that margins. just versus kind of weakness are the on categories paid or gross fiscal clarity Was clear be of as 'XX? Great. -- on to costs just more you maybe are needing be about debt of to to the Maybe second of expectations in higher there And just mix kind XXX-gig thinking a transceiver then any of? guys some bottlenecks mindful question, how are just on the any repayment

Okay. Maybe Rich.

Yes.

Unfavorable So mix incurred several weakness the a key margin quarter. it's as volume was factors. are of a main result One drivers. the the that in lower we

prior a experience did we period well, underutilization as that as However, P&L well. hit the

right year. we're of down For debt the now, for reduction, $XXX million anticipating pay

of Raymond Simon question comes from next James. Our Leopold

hundred I mention quarter's versus of in the a explicitly And the question shareholder unlike doing a one by way how not million then here And did sales to outlook. get quick and letter like us AI-related clarification-type I'm you'd wanted it's wondering that the that you're a in I've letter. like This -- helpful. several way, of exclusion got prior to Datacom follow-up. we bit the last quarter's just interpret this,

thanks Simon, I'd like to question. basics. back for get us to your

guidance We guidance morning where of have do that the mode want guidance top to don't sense is I more. we us a additional But a we're guidance. guidance. still I into this are to going and made the aiming the to The guidance. the have on give comments some to get

us doing. to the get indicated have we some can we I that it to to as today, want back what just would And That's I achieve. upside we're basics. might So

For as sure, an have upside we opportunity.

Okay?

And helpful. is is what is just pipeline. non-hyperscale? if pipeline in at understand business, you exposure? little bit terms to about And of And of trying and mix wondering much a hyperscale this of the much of very how getting bracket concentration of then AI the this how help That's it customer us I'm I'm could

will It's grows that, tell you, I every Sanjai day. it take Sanjai. -- a can Simon.

Yes. Chuck. Thanks,

And came indirect Simon, as did that quarter, last direct of So is from we into as our both hyperscalers. XX% Does business help? hyperscalers. sales well this

most I'm recent more than guess I quarter. as does. so about it the pipeline the Yes, wondering

is pretty pipeline still strong. our So

We -- believe is it hyperscalers fiscal majority it lot driven transceiver our revenues expect that of will a of majority by Datacom be for it, vast a to 'XX, we example, AI/ML. XX% from in of of --

that. Appreciate

thank too Simon. Thanks, you Simon, your for on feedback the letter.

comes Our Dorsheimer Blair. from Jed William with next question

from around some I want comments shift on XXXG, most to and the compound of others the guess your consolidation first in around the question, of just just semis.

could color reducing metric two, or about if get mentioned now at then you you give cycle a to ]. more hope where [ You little introduction, product bit about they're And those new talked the one, that, side and on improving talk maybe on X? you Could times. where you

Giovanni is Okay. here. This

thanks So question. for the

and so forth, we sites able going Finisar, best able much of lines fabs, between we So number ultimately pretty that a footprint compound utilized. for we semiconductor the we're be. were -- identify to at when the transfer the to as acquired we acquired which fully time, to products wafer were manufacturing manufacturing And what for and was we company

now that And because doing so we're it what that's we couldn't fast. actually do

are now So largest smaller fabs. into integrate in fab, we of doing, lines those we've manufacturing Sherman, move shutdowns what Texas. intend our to and is And been several we we've announced which

lot product because and requalifications. So of fabs there those will lines will was a and We footprint. also moving other too have a require we Europe there some between be be in North still stand-alone still will cost America, high of the

it So arsenide particularly products, for products, moving and VCSEL-based Sherman, in lines. -- of our we those center excellence, least cannot based gallium indium that be -- the Texas advantage -- the phosphide of gallium time. of will type ultimately consolidated an we arsenide, our we But at the some don't decided we see

We're that. take you thing, to I part, for urgency great times. about X Jed. a This place we I think question. NPI for speed. of say built know your I'll cycle organized Thanks would everything is regard the do. With sense second for

you will this a baseline And goes with [ so XX to many the I so I example the going that day, in do of have not a company. in things from point a everybody a new our week. last can't we around That's company. because products year, in would global teams One give that But contagious is for reduction ] for hours cycle the easy be laser that business. I we a II fiber many out using we benefits have products time demonstrated to X footprint generically you AI launching is platforms our tell say. factor our that and the else is so days can have

I to a think do. going driver, thing that it's be but the not to is need that great only AI we

factor II management of team. the point And the everywhere a a mindset so is starting for

Okay?

it. Got

material. carbide update a to materials Just raw wondering, greater on and important graphite? chain see how as on exposure restrictions you business, silicon component specific the from we the And terms supply as follow-up Could just of seeing on to I'm the as just is if both an are any, in input China. well furnaces you graphite

Thanks, Jed.

you Sohail, there? out

question. Jed, Yes. your for Yes. thanks

no, is the don't we exposure. answer have First

both components. basics have place for long-term multi-sourced coming other supplier our the we have material in graphite have agreements. base We from China. put None and of And the

Our next Richard question from with Craig Hallum. comes Shannon

place please. the the echo I I'll follow ROADMs? here last looking the guess just the letter my to why much out from it, describe or keep in at transceiver topic you start season degree night, shareholder still this seeing questions I it products a earnings telecom. of can here. in to so including we're like inventory recovery And you're on Wondering that also pointed some to with reports had pickup happy I want up, versus of ZR is shareholders to taking up like equipment things some type at far, coming one here. seeing which how you level of of some and WSS burn the

for the thanks question. So

pickup second different is little 'XX. double amplifier of think see and continue product as the that's lines on of to FY now, portion to for quarter, customers business. to now, the it's we're I half down and a And starting there more bit small side we going strength burning right that digits the our really seeing inventory So and a ROADM and right what think WSS are this we're the have

And of XXX especially activity our coming RFP and XXX-gig There's a lot transceiver for RFPs next in lot Coherent there's right activity design new an is of RFQs around in like based products, increase products, now. see our we which a ZR. happening gig, And technology year.

so we a to FY latter a And provide help going FY ramp the very half from early perspective. 'XX of be that's segment, think more and think we towards that color? but that delayed more positive 'XX Does little for that's

market. display follow-on on Yes, My that question does. the be will

visibility have if correctly, I I think that remember still XX% any if ago service a you I year think but below levels number, utilizations talked nice about even I here have increased you into wonder sequentially, here. back those just even levels. visibility ago to And give this you on imply utilizations get within perhaps the continuing to better improve further CapEx orders and unit? or display then year does

you Richard, much. Chris thank very Dorman?

screens that the utilization utilization through lasers, multiplying of phones tools the it's the are of revenue. drives of the the it's And phone there's display, are remembering revenue, in worth utilization, to there factor X produced, continue number year. In Yes. using the the factors of service that service the the that the a of which and but terms an that led of OLED percentage uptick in terms Excimer will are has in screens. And OLED

comes Ho Sidney question next Deutsche from Our Bank. with

to market. want to the gears switch I Great. over industrials

half business the about you requesting manufacturing you're second a and of will than You quite in seeing comment short we semiconductor other between which notice, of aerospace? improve that's display, semi-cap that your in and are 'XX. Particularly companies. shipments are lead order precision from confident but broad-based some quite do interested recovery customers on different consecutive think the second manufacturing, fiscal what hearing precision will Can talk you seem subsegments the in growth,

angle have Okay. Sanjai. that or people we'll may this, start Sidney, have X we an this but on X is with Chuck. Sidney,

Chuck. Thanks, Yes.

of into market broken in our terms is group verticals. So up industrial

vertical, semi-cap So vertical, and we aerospace display precision manufacturing have defense. vertical our our and our

us We growing are for really steadily excited about semi-cap. has quarter-over-quarter, very That market been year-over-year.

And that is customers to to there continue of is of to new demand, a particular, macro. applications to we see lot both seem from more So continue lot manufacturing, envelope that customers. is -- a sensitive a and improve. On in precision market existing

strong very of areas vehicles. certain growth, electric have do as we such However,

CAGR. XX% So our fairly stock device is market well. around, turning growing that's growing The markets medical at a also

got some And manufacturing. we've display precision bright big earlier. So covered spots the think really within question I Chris

to . anything add Chris? to want that, you Do

semiconductor Yes. I that say also remains It growth. showing inspection strong. capital would equipment is

pull. And backlog Our customers a to continue strong there.

on question, Great. just follow-up helpful. Okay. My silicon to the That's carbide. I up want follow

that weeks, silicon give from But pretty bit. with out prices? us robust. others what business slowing points seeing EVs in Are terms pricing be for seeing little are to you the the And be of down more are industry see Can are. a doing interested better mixed seems call You how for you're carbide Is than sense recent you more things because near-term the in demand side demand? in you gaining the of share? competition to terms few remains a also of may demand data past you

you, Thank Sidney.

to look And at by next not Sidney, to grow growth years. to Okay. trajectory. on the continue close to the rate X that is you is a a at market, growth XX have X over this because compounded which it market is quarter basis XX% to going

one growth the natural announcement have there. there vendor and very is a many one see normal, the traction and with Overall, strength that And market. will a out any very It in, be we long-term market with in define pressure. price market, when agreements in good are is and players the strong large pushing you in coming not yes, customers and the but adoption growth growth market place. is does there, of So

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

Vivek. know is AI I your go enter of for one competitors This I your Blake space. to wanted opportunity. an Datacom made recently the Friedman acquisition transceiver back AI to to on

margin in AI-related the the think if products, and from also competition growing you this on clarity market. any risk transceiver creates any provide can generated you hoping was I First, higher-speed pricing

the question. for Thanks

years had the all, acquisition the of investment this -- validates we the Finisar of First thesis clearly, for ago.

reinforces endorsement. it see right, all we we one. you the witness the strength today that potential that So market that are upside had pretty see. -- an and vision, reinforces, It was the good now can we it's And of a then which is

have I still think the leaders, the why scale generally we the engagements vertical the we speaking, see where XXXG differentiation, been funnel believe that the hyperscalers, have market not increasing we daily to strong have penetrate -- technology are we that around we explains be. past we we opportunity that would integration, sense an have pipeline to and historically considered the from that not as in for new in and as maybe recent -- liked

speaking, landscape And competitiveness is there. so generally of the the

think with ago to the competition. continue I to deployed and years the driver And again, our growth X business. said, welcome which being I key which when and mentioned, demand for the of AI advantage the as we we think we compete grow as identified a positioned strategy, take attributes, -- we are very well I of on of I

then silicon carbide Got certainly the a as the I it. market. on know just side. supply-demand And there's follow-up a in imbalance

we market Just the the who relative bringing growth about around think materials of the trying the the device I vendors opportunities in on Coherent more your in-house. of kind in for How kind the device market guess, longer-term. and your thoughts of market are to thoughts kind materials there's as should versus production get growth

your Thanks question. Okay. for

Sohail.

needs, a good both we lots handle. future for A can and -- a said and looking people demand of high you even which current and amount MOSFET are have ends be will in of more which the still reliability. The that suppliers you see device which a getting power the there more MOSFET are address MOSFET. A can the MOSFET integration will rugged. on And side, Yes. are which

on demand So few materials that from And we XXX-millimeter, the are the know, choices. you we limited XXX on introduce customer device side to were X very in the very to we strong marketplace. a for see product side, first see there engagement. a very the demand And as strong our the then And XXX-millimeter.

pretty there it. competition, about it. is Yes, is strong there reaffirms but feel a we So that good demand for competition

Our next Christopher with Rolland from comes Susquehanna. question

quarters increased Is revenue grow so sign move are means think guess that each backlog, timing that's the X linear a question in pattern? decent we on can guidance. results this is fulfillment and disturb Does and this now we some next of around would the row. in backlog of Or Congrats a my you I there bottom? this here through kind year? that as issues guys quarter

Okay. I'm the just marketplace the the going sees ask demand, general and it see about as from follow-up. Chris. Chris, of overall Thanks point a to a of comment lot, he pulse from if the a view make we'll Magnus to there's

Chris, I appreciate question. the

really the let just about market. markets, the to really are we inventory little certainly customer mentioned but and a customer grow orders talk see robust, that say we with I today, continuing So digestion perhaps. would some issues me our is engagement bit engagement end customers on Customers across focused there's of innovation. the end

most outlook markets. so And the across of design robust very win funnel, the that we have our looks

expect continue. trend that to would we So

threatening get Jabil? follow-up Cloud these deal? the a opinion, take or guys any perhaps, in either? question, And did way look you Or in did you your to someone to look to as sale to Sipho a interesting Great. -- were Intel of at else's Light get the at interested Perhaps deals any guys

do want that? Chris. you to Okay, Giovanni, take

for need question. very don't engaged a Thanks we much Yes, to existing manufacturing No, -- sure. not we the be contract lines. were our added manufacturer to

this definitely that. believe But will also it's endorsement said I So be competition. larger to the serve this ago market be broadest in at for this years leader we and which a -- endorse as we an welcome think largest competitor, said strategy, -- strong market. earlier, it's we earlier, deployed to the we We the with our combination the scale -- subassemblies -- portfolio I be and to time, so of that components differentiated as

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

the I just one segments. on had

better within business And what the $X.X trying I'm and So for on feel business, what for expect movements to do? a Telecom more to and do? little because of year. the business, guys there's could expecting your then obviously us I the little Datacom some in year, big will the color just comm to specifically guide you're give business expect ask growth Datacom you comm more business you for you the but inside a what throughout what billion the the Telecom do get

I Okay. give business to Tom, unit just we're going can think And a Rich general guidance. not overall make comment.

Rich, the takes the compared puts it? think half. across want we're some anything say at XX% in second up to half you I and There's the segments. midpoint, else, Do first to the about

No, that's right. very

give Okay. of can take you question the any Telecom And but going -- he's market, about second year. to not have half you not if the it, specific Beck the guidance we're in

guess just trend the about -- of you growth. driver the looks said though Sure. comm have guys talk Datacom though within that it's Could historically, your you looks business high-speed big I transceiver particularly as the business gross the below XXXG, those products, corporate margins. products? In with new Or new business, still gross are you those margins is are these higher-speed seeing in gross corporate margin? accretive below as

launch good to Well, comment at is will a for that we're It's improve, say, all a with question. general today, take But we're it. Rich where driving have the on, the I just point Okay. things company. at going would the we

going because keeps Rich, FY about be is the challenge make it we if turning flywheels comment although we're that inside exciting. front-end much 'XX to company especially up, margins, capacity fabs, of adding a believe you because FY 'XX to general but be the going pace where that's a would. more lots all the to keep have not able with We way still demand, from

Sure.

we average -- the a fully but as the margins at about we expect, margins, learning through that we as the on the curve, going is forward. will increase And go where company. are So

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

more. looks in going little you're a forward. guidance, improvements From pursue it to like projecting wanted Just margins your

to about that being of terms letter margins, they especially concern several revenues? I seeing your driven things to the you're overall by I strong Is guess have transceivers listed accretive similar a being in in shareholders. there. -- higher when growth You

sales So the it mix? expectations I'm driving just margins. for just Is what's wondering higher or higher

This I'll is Mark, Rich. you. that. Thank take

our from NPI. synergy can So as as and volume, drive our on as we'll mix throughout products forward we integration leverage well. continued in higher-margin Anything reductions, and that cost margin vertical products we noted before, will move our improvement, 'XX, of restructuring higher that I our implementing guidance, mentioned long-term get better including be as our and also our of ongoing plans

finally is center of the again, firms wondering I'm couple which with a Western center of the question -- Digital, tunnel they're seeing you're light data their what the in seeing are terms Last like just data saying end customers. data centers, at of business.

do Sanjai, want you to just...

Sure.

within the XX% today which one biggest Datacom are drivers, business, is So CAGR. growing a our AI X at there is

a is CAGR slower still Our long-term. market traditional a -- business, But it's grow continuing at you the to growing if non-AI will, still is XX% together, clip. as

So that are excited we about market. pretty

Our comes with Ananda from next Baruah Capital. question Loop

from gain on sticking the positioned share just and you're you're have if transceivers, do guess perspective I I guess, how Chuck, sense a higher speeds, forward? positioned -- you any any Would maintain have expectations going Any then you expect guess, I on there to context helpful. share a view would follow-up. I share -- going to forward? quick forward, going And be

beyond through XXXG, even have that able that believe maintain coming not in to only we believe position. you portfolio funnel, look counting a position, to if but continue that that growing to on that we're we're given be it. going the I the of products great we're I

guys actually to line, are time of with you any from are Industry just given lot engagement you sort regards calendar all urgency greater given seeing And around X.XT? in You've of a great adoption. X.XT your AI, this the activity seeing -- year context

And that's You to any made regards AI? around positioning think, your slide kind urgency that given And market in reference, today any -- going me. with what's in it I X.XT. Any there that? for the greater context urgent on to of

Sanjai? Okay. Thanks, Ananda.

for Yes, Ananda, the Thanks, question.

speeds, is clear. happen it thing we needs need earlier. to and we to AI, very and go higher one With -- need higher So

a around to be progress to XXXG at We We the And out be Mach-Zehnder the think ones at which is we our that -- especially X.XT. trying And one that are believe fiscal the inflect of we'll great in towards all making in DFB 'XX. demonstrated will we're got just I we've looking ECOC. want the market laser X.XT of enabling timing, terms laser say, blocks, first there. we key

there. making So we're good progress

Next comes Riley. Kang question Dave from B. with

by gig, XXX regarding Datacom was the if you gig, provide what XXX XXX Just can I gig? between mix, mix wondering your was

I? Should

Sanjai. please Yes,

we XXXG above high and revenues speed, quarter. the as which XX% last of So was the define

XXX we first pending And they And gig is? is -- should I XX% of what we remaining about the eventually? think do how are and all, [indiscernible] think growing? assume How I So mean, below. think their you about runway should

Yes. those continue I mean believe still non-AI-related, grow, kind speeds the are so moves XXXG towards of going the as networks. of still today of as slower speeds and we some edge parts XXXG. But -- to as to especially are typically the they're not long-term, fast it even growing

your investments then should Got 'XX follow-up off investments? about for carbide How that is And Japanese drop get 'XX after billion you year? it. regarding how to -- And from fiscal CapEx will silicon CapEx. think this in we companies, $X after that my fiscal

great questions, take Two will you those? Okay. Rich, Dave.

Yes.

to $XXX So full FY $XXX million as gave for that previously of year we holding still to right million the of guidance now, we're 'XX.

'XX, the will 'XX. to invest offset we were On silicon in FY investment we obviously, for the carbide our thought what -- going

we -- we quarter for give when next we the guidance. reporting when and our the that after strong in 'XX, at for Dave, quarter run we glimpse give sense what update to see we'll -- close, revisions both 'XX closed, will in least the and okay? in And of a a quarter through

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

math of couple A questions here.

maybe. I significant think with some implications

going declining But anecdotal a is it that's versus one think cloud and how the of from the weakness Telecom if like And on sequentially look in was Datacom. XX% XX% to in results is commentary telecom, number. the I proceeding, you kind inventory of at First side. on about digestion seems most guide

a or sequential growth, bouncing telecom those versus Or when that at about So guide, to And $XX look would of in back? that? million, is book some or is that And we comments, AI characterize talk we how order starting follow-up. in is that I talking comps? And ship am have at that we're right? as looking most I about the you revenues

there's will and Rich X think Beck really take related will questions. I finance. the Well, Okay. take the one . that's market

this side, year on to revenue second our ratio, the the we mean on fiscal can we and comment for that quarter this I of half the growing Sure. in I recovery right? growth double-digit revenues, telecom see that was telecom last see And quarter. relative the modestly

Exactly.

repeat second you for the your Rich? of Okay. part Tim, question would

I'm AI the But the is to -- absolute I'm this third the part. it's But you There's is And quarter in going history is get That try there's ask I'm the a coming that going on the rich going and of networking XXX%. to up despite to saying seems on down go question size an of me AI a of order call. like about with and entirely couple what million. course, numbers -- of $XXX there here commentary parts, XX%. is talked about the call last Let -- multipart which was increase overall on orders backlog? some your questions driven, here that backlog

So to a I'm what give whether for number not? all that's you AI, consider XXX a got you going that chance give or would here to in just us you gig backlog

not meaningfully you What give we you But think is substantial tell it's on that. don't to can give number. material I I'm going the us. you can a I and Yes.

with Ricchiuti Jim Company. from Needham comes question next Our

fiscal in suggesting the the what's we So to laser second the on OLED your business. recovery deployment The going the sight of as line utilization half Excimer your and OLED 'XX, What's of up. in happening tools half? be on new in of improvement the the think seem line half . the side side both sight second service with WFE second understand in WFE of side, you well I of as terms some of

Yes.

business laptops, technology service mentioned, to the the you and In which solid-state incremental work the line around challenges technology long-term, long-term, principal to X with in in in panels. we're investments customers display LED on for As the the movements display the And 'XX. tablets, micro expansion customers for a heavily our current with market, level be OLED in which in Gen And early engaging cost utilization we'll market will IT those business. We've larger of of OLED And calendar capacity the we sensible Excimer uptick the with in near-term. panels. in migration adoption be a the X investing tools on for those The timing clear the for developed into positioned investments. developing of be we're well for OLED Gen year maintaining be TVs in tablets would of our for. should laptops, in new see

second Jim, did you have a one...

Yes. Yes.

good at going positive of to I'll business. part group assuming maybe the this The It continue to characterize other portion recovery the one that balance the beyond question precision you question semi, WFE that feeling still Back-end to like be are about looking is way and business? relatively -- as last current that the that into this sounds was of And the is industrial quarter and there fairly weak? of the uncertain. the manufacturing laser relatively Is business. just just outlook a you're for -- on

for long-term Front-end for relationship is roadmap. developing We with market reasons roadmap. semi years service front-end long-term it's terms remains the The are our The in in relationship particular of laser a The customers more technology. than significant. Yes. specifically semi-cap the the business sale. And that we that of in XX strong. our terms a lasts lasers partners of that develop semi customer one area. We partner in engage very for that -- is component

this which know a of inspection we certainty more so journey, long-term gives business of us semi-cap the emergence the service And market. the in

visibility get we So that. on our to of great a customers deal

In PMI, inspection. of the in the the of by the in manufacturing, all year. that, Magnus terms precision And see around the in manufacturing there. mentioned fiscal wafer as the before, The the is the display offset recovery the -- in and equipment But is capital back-end semi precision end of end, it Potentially semiconductor strength longer. any softer. recovery back end change taking is of there's year to is strength

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

analysts to on thank you. want the all questions. I for call thank Kevin, the your And thoughtful

you. if Thank I always, reach joining for And could the a help everybody please out. free morning. us this As quarter, video throughout want to thank to be we feel

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

now day. disconnect, and have may You wonderful a