Q1 2024 Coherent Corp Earnings Call
Speaker 1: you
Yeah.
Speaker 2: Good day and thank you for standing by. Welcome to the Coherent Corp FY24 First Quarter Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Paul Silverstein. Please go ahead.
Good day, and thank you for standing by and welcome to the call here.
FY 'twenty four first quarter earnings call at this time, all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session need to press star one on your telephone you will then hear an automated message.
Hans is raised to withdraw your question. Please press star one again, please be advised today's conference is being recorded I would now like to hand, the conference over your speaker today, Paul Silverstein. Please go ahead.
Speaker 3: Thank you, Kevin. And good morning, everyone. Thank you for joining our first quarter fiscal 2024 earnings call. Today on the call, we have Chair and CEO , Dr. Chuck Matera, and a number of executives who Chuck will introduce in a moment. Yesterday, after the market closed, Coherent issued a news release and posted a shareholder letter along with an updated investor presentation in the investor relations section of our website. Both of these documents were furnished on a Form 8K.
Thank you Kevin and good morning, everyone. Thank you for joining our first quarter fiscal 2024 earnings call.
Today on the call, we have chairman and CEO, Dr. Chuck Mattera, and a number of executives here Chuck will introduce in a moment.
Yesterday after the market closed coherent issued a news release and posted a shareholder letter along with an updated investor presentation and the <unk>.
Bester relations section of our website.
Both of these documents were furnished on a form 8-K.
Speaker 3: This morning we filed our 10-Q. Today's conference call will be available for webcast replay in the Investor Relations section of our website. Before I turn the call over to Chuck for his opening remarks, please note that following our September overview webinar on our communications market, we plan on hosting our second market overview webinar focused on our industrial market to be held on December 14th.
Morning, We filed our 10-Q today's conference call will be available for webcast replay in the Investor Relations section of our website before I turn the call over to Chuck for his opening remarks. Please note that following our September overview webinar on our communications market. We plan on hosting our second market overview webinar focused on our industrial market.
<unk> to be held on December 14th.
Speaker 3: I want to call everyone's attention to our shareholder's letter, which contains our traditional financial statements that were previously set forth in our earnings press release, along with detailed information around our operating performance, key trends, and outlook. We plan to use the bulk of this morning's call to answer questions from analysts in the investment community. I also want to remind everyone on this call we will refer to forward-looking statements, including all statements the company will make about its future performance and market outlook, and actual results may differ materially from these forward-looking statements.
I want to call everyone's attention to our shareholders' letter, which contains our traditional financial statements that were previously set forth in our earnings press release, along with detailed information around our operating performance key trends and outlook.
Plantings in both bulk of this morning's call to answer your questions from analysts and the investment community.
Also want to remind everyone on this call we will refer to forward looking statements, including all statements. The company will make about future performance and market outlook and actual results may differ materially from these forward looking statements factors that could cause actual results to differ materially are set forth in the first quarter 2024 shareholder letter and in our <unk>.
Speaker 3: Factors that could cause actual results in different materially are set forth in the first quarter 2024 shareholder letter and in our SEC report.
SEC reports coherent assumes no obligation to update any forward looking statements, which speak only as of their respective dates also during this call. We will discuss both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures is included in the shareholder letter with respect to historical non-GAAP financial measures.
Speaker 3: No parent assumes no obligation to update any forward-looking statements which speak only as to their respective...
Speaker 3: Also during this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in the shareholder letter. With respect to historical non-GAAP financial measures, we will limit our discussion to those that are reconciled in the shareholder letter. With that, it is my pleasure to turn the call over to Coherence Chair and CEO , Dr. Chuck Matera. Doctor, please go ahead.
Limit our discussion to those that are reconciled to Mr. Whole letter with that it is my pleasure to turn the call over to coherent as chair and CEO Dr. Chuck Mattera Chuck. Please go ahead.
Thank you Paul.
Speaker 4: Thank you, Paul. Leadership development is among the most important jobs of the CEO .
Leadership development is among the most important jobs of a CEO.
Given how extensive our disclosures are in the shareholder letter.
Speaker 4: Given how extensive our disclosures are in the shareholder letter, I have the following senior leaders with me.
I have the following senior leaders with me on the call today.
Speaker 4: They are Interim Chief Financial Officer Rich Martucci.
They are interim Chief financial Officer Rich <unk>.
Speaker 4: Chief Strategy Officer and President of the Materials Segment, Dr. Giovanni Barbarossa.
Chief strategy Officer, and President of the materials segment, Dr. Giovanni Barbarossa.
EVP of lasers.
Speaker 4: EVP of lasers dr. Chris Dorman who came to us through the coherent acquisition
Chris Gorman, who came to us through the coherent acquisition.
Speaker 4: Sohil Khan, EVP of our Wideband Gap Technologies Silicon Carbide business.
So he'll Kahn EVP of our wideband gap technologies Silicon carbide business.
Our Chief commercial Officer, Magnus Bankston, who leads our global sales and service work and who also came to us through the coherent acquisition.
Speaker 4: Our Chief Commercial Officer, Magnus Bengtsson, who leads our global sales and service org, and who also came to us through the coherent acquisition.
Speaker 4: Chief Marketing Officer Dr. Sanjay Pathasarathy.
Chief Marketing officer, Dr. Sanjay Parthasarathy.
Speaker 4: and the EVP of our telecommunications business, Dr. Beck Mason, a recent market hire and one of the industry's top leaders who chose to come to Coherent as a place to grow.
And the EVP of our telecommunications business Dr. Vaccination, a recent market higher and one of the industry's top leaders, who chose to come to coherent as a place to grow.
Speaker 4: They will participate in the Q&A fireside today to provide investors a rich source of information about the depth and breadth of our markets, technologies, operations, and overall business, and especially our leadership talent.
They will participate in the Q&A fireside today to provide investors a rich source of information about the depth and breadth of our markets technologies operations, and overall business and especially our leadership talent.
Speaker 4: and I'm sure you'll enjoy interacting with them today.
And I'm sure you will enjoy interacting with them today.
In the first quarter the coherent team did a good job executing in the midst of a challenging macroeconomic environment.
Speaker 4: In the first quarter, the coherent team did a good job executing in the midst of a challenging macroeconomic environment.
We posted revenue of 1.053 billion.
Speaker 4: We posted revenue of $1.053 billion, which was slightly above the mid-
Which was slightly above the midpoint of our guidance.
Speaker 4: And non-GAAP EPS of 16 cents, which was above the midpoint of our guidance.
And non-GAAP EPS of <unk> 16.
Which was above the midpoint of our guidance.
Operating cash flow was $199 million, which mark sequential and year over year improvement.
Speaker 4: Operating cash flow was $199 million, which marked sequential and year-over-year improvements.
Speaker 4: We invested $62 million in capital equipment, and we've retired $19 million of debt.
We invested $62 million in capital equipment, and we retired $19 million of debt.
Macro economic headwinds and uncertainty continue to affect many of our end markets and we will continue to constrain our near term growth and visibility.
Speaker 4: macroeconomic headwinds and uncertainty continue to affect many of our end markets and will continue to constrain our near-term growth and visibility.
Speaker 4: Our first quarter results, however, demonstrate the success of our diversification strategy.
Our first quarter results, however, demonstrate the success of our diversification strategy.
Speaker 4: While some of our markets remain challenged, our silicon carbide business, in which we recently announced $1 billion of investments by Mitsubishi Electric and Benzo, enjoyed another quarter
While some of our markets remain challenged our silicon carbide business in which we recently announced $1 billion of investments by Mitsubishi Electric and Denso.
Enjoyed another quarter of strong demand.
We also enjoyed a second straight quarter of extremely strong demand for our AI related datacom transceivers and components.
Speaker 4: We also enjoyed a second straight quarter of extremely strong demand for our AI-related Datacom transceivers and components.
Both of these are indicative of the breadth and differentiation we offer the market leaders for disrupting the status quo.
Speaker 4: Both of these are indicative of the breadth and differentiation we offer the market leaders for disrupting the status quo.
Speaker 4: and underpinning the irreversible market megatrends that we enable.
And underpinning the irreversible market Mega trends that we enable.
In addition to continuing to invest in our core assets, we're taking substantive actions to ensure that we improve our operating performance.
Speaker 4: In addition to continuing to invest in our core assets, we are taking substantive actions to ensure that we improve our operating performance.
Speaker 4: especially to drive recovery in our margin structure, including through global integration and transformation and the realization of our Synergy Plan from the Coherent Acquisition, as well as our previously announced restructuring activities. Turning now to our guidance for the next few days.
Especially to drive recovering in our margin structure.
Including through global integration and transformation.
And the realization of our synergy plan from the coherent acquisition as well as our previously announced restructuring activities.
Turning now to our guidance for the second quarter of fiscal 'twenty for.
Speaker 4: Revenue of approximately 1.05 to 1.175 billion
Revenue of approximately 1.05 to $1 175 billion.
Speaker 4: and non-GAAP earnings per share of approximately 14 cents to 32 cents.
And non-GAAP earnings per share of approximately 14 to 32.
Our guidance for fiscal year 'twenty four is revenue of approximately four five to $4 7 billion, which is unchanged from our previous guidance.
Speaker 4: Our guidance for fiscal year 24 is revenue of approximately $4.5 to $4.7 billion, which is unchanged from our previous guidance.
Speaker 4: and non-GAAP earnings per share of approximately $1 to $1.50, which is also unchanged from our previous guidance.
And non-GAAP earnings per share of approximately $1 to $1 50, which is also unchanged from our previous guidance.
And while our annual guidance remains unchanged.
Speaker 4: And while our annual guidance remains unchanged, this simply reflects the confidence we have in that guidance.
Simply reflects the confidence we have in that guidance.
And we continue to believe that we still have very real opportunities to exceed those results by several hundred million dollars as we discussed last quarter.
Speaker 4: And we continue to believe that we still have very real opportunities to exceed those results by several hundred million dollars as we discussed last quarter.
Speaker 4: We will not hesitate to increase our outlook as we gain improved visibility regarding our ability to capitalize on these opportunities within fiscal year 24.
We will not hesitate to increase our outlook as we gain improved visibility regarding our ability to capitalize on these opportunities within fiscal year 'twenty four.
Speaker 4: Now before I, before we turn to your questions, I would like to say how appreciative and proud I am of our employees whose tireless dedication for setting the stage for now, next, and beyond.
Now before I.
Before we turn to your questions I would like to say, how appreciative and proud I am of our employees, whose tireless dedication.
Setting the stage for now next and beyond.
Coherent is well positioned with differentiated technology exceptional talent and high quality efficient manufacturing platforms capable of delivering products to the market that are growing at high single digits to double digits.
Speaker 4: Coherent is well-positioned with differentiated technology, exceptional talent, and high-quality, efficient manufacturing platforms capable of delivering products to the market that are growing at high single digits to double digits.
Speaker 4: And I believe that we are better positioned than others to take full advantage of our existing market positions and to grow deeper into these markets because of our growing scale and customer intimacy and trust.
And I believe that we are better positioned than others to take full advantage of our existing market positions and to grow deeper into these markets because of our growing scale and customer intimacy and trust.
We are.
Speaker 4: trusted and value partner with the industry leaders and that trust and intimacy creates stability in our core business and it also creates a flywheel effect of growth opportunities that many other companies simply don't have.
Trusted and valued partner with the industry leaders in that trust and intimacy creates stability in our core business and it also creates a flywheel effect of growth opportunities that many other companies simply don't have.
Speaker 4: We have tremendous upside in platform cost optimization from the ongoing integration, special restructuring, and transformation projects over the next few years.
We have tremendous upside and platform cost optimization from the ongoing integration special restructuring and transformation projects over the next few years.
Speaker 4: And we have a track record to prove our likelihood of success.
And we have a track record to prove our likelihood of success.
We have a good plan and roadmap to take advantage of all of these assets and the opportunity the markets are offering today and to take advantage of the recovery and anticipated growth in our markets.
Speaker 4: We have a good plan and roadmap to take advantage of all of these assets and the opportunity the markets are offering today and to take advantage of the recovery and anticipated growth in our markets.
We have a team of world class technologist industry pioneers and executives with a demonstrated capability for identifying and capitalizing on market Mega trends.
Speaker 4: We have a team of world class technologists, industry pioneers, and executives with a demonstrated capability for identifying and capitalizing on market megatrends.
Speaker 3: And with that, I'll turn the call back over to Paul. Paul? Thanks, Chuck. We will now open the call to analyst questions. Please limit yourself to one question and one follow-up. Feel free to get back into the queue, and if time permits, we'll circle back around
With that I'll turn the call back over to Paul Paul. Thanks, Chuck We will now open the call to analyst questions. Please limit yourself to one question and one follow up feel free to get back into the queue and if time permits we'll circle back around to this call is scheduled for full hour because we have almost 20 hours that cover the company. We ask that each of you limit yourself to that one question.
Speaker 5: This call is scheduled for a full hour. As we have almost 20 hours to cover the company, we ask that each of you limit yourself to that one question and follow-up. Please direct your questions to Chuck, who will decide who's best to respond. Kevin, please go ahead. Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered and you wish to remove yourself from the queue, please press star 11 again. We'll pause for a moment while we compile our Q&A roster. Thank you.
A follow up please direct your questions Chuck who will decide who's best respond Kevin. Please go ahead.
Ladies and gentlemen, if you have a question or a comment at this time. Please press star one on your telephone. If your question has been answered it was seen with yourself from the queue. Please press star one again, we will pause for a moment, while we compile the Q&A roster.
Yes.
Our first question comes from semi Chatterji with Jpmorgan. Your line is open.
Hey, good morning, Eric.
If your phone line is muted could you please mute the line.
Hi can you hear me now.
Speaker 6: Hi, can you hear me now? Chuck, can you hear me now? Yes. Good morning, Sean. Yes.
Good morning Shannon.
Great. Good morning, Thank you.
Speaker 6: Great. Good morning Chuck. Thank you. Thank you for the comments. And if I can just start, I mean, last photo, you do talk about and you referenced it in the shareholder letter as well. The capacity increase of the capacity ramp that you're planning and the incremental order that you can get from the customers if your capacity ramp goes down.
The debate.
If I can just basketball.
About.
Thank you shareholders.
You bet.
Yes.
Thank you for that.
And implementing auto.
Get some basketball.
You bet.
Speaker 6: core plan or exceed your current base space.
Core lab.
Got it.
Got it.
Speaker 6: If you can share your thoughts around the ability to sort of exceed that capacity ramp. What are you seeing as bottlenecks and be able to go to customers and get incremental orders for the AI, from the AI use cases and be able to control the computers.
If you can share your thoughts at all of the regions.
Thank you Bob.
Are you seeing as blocking bag.
Best of luck.
Yes.
All right.
You bet.
In munitions.
Speaker 7: in relation to sort of executing on that capacity map, and I have a follow-up after that. Thank you. OK. Thank you, Sami. Tim, I'm going to ask Giovanni to take that, because he's got a view all the way from the laser through the transceiver. Giovanni? So Sami, thanks for the question.
You can go back capacity.
Okay. Thank you Zack.
If you wanted to take that because he's got a view all the way from the laser through their transceiver, joining so sammy thanks for the question. So.
Speaker 7: I would say, generally speaking, we're doing better than our expectations, but it's very much a moving target in terms of the...
I would say generally speaking, we're doing better than our expectations, but.
He is very much a moving target in terms of the opportunity here.
Speaker 7: sense that the target is getting higher and higher as particular as we said in the shareholders letter as the engagement with new significant AI players
That the Dod is getting higher and higher as particular as we said in the shareholders letter.
Engagement with new senior begun AI players is increasing particularly those players that we have not been historically strong AD. So we think that that the overall.
Speaker 7: particularly those players that we have not been historically strong at. So we think that the overall opportunity is getting larger. And our ability to meet this larger and larger opportunity obviously gets more complex, more challenging. But I think we have all hands on deck, and the entire team is focused.
<unk> opportunity is getting larger and our ability to meet this larger large opportunity obviously it gets more complex and more challenging but I think we have all hands on deck.
<unk> team is focused on several of the need to do that but which are not only related to the supply chain because as new products in this.
Speaker 7: several of the need to ramp, which are not only related to the supply chain, because as new products, and this is a, as you know, is a 800G is a very much new product. There were all these MPI-related challenges to bring up to speed, you know, the manufacturing lines, the, you know, test equipment.
800, <unk> are very much new product.
They will all of these NPI related.
Challenges to bring up to speed.
Manufacturing lines.
Test equipment.
Of course supply chain as we said, but most important to make sure that we deliver high quality deposits our customer volumes.
Speaker 7: You know, of course, supply chain, as we said, but most important to make sure that we deliver high quality products to our customers, the volumes that are facing us to have.
Question to us to have to.
Okay.
Great. Thank you.
Speaker 6: Thank you. And so for my follow up, if I can just ask about the long term guidance that you gave in the shareholder letter about
My follow up if I can just about the long term guidance that you gave and Miss you haven't been to go to market.
Speaker 6: 40% gross margin and 20% operating margin that you're looking at, can you share some thoughts about sort of how you're thinking about getting, making progress to that in relation to cost versus what you need in terms of top line recovery to get to those margin levels? Any thoughts around how much of that we get from cost-saves that you're outlining versus any level of volume recovery that you think?
People are some gross margin, 20% operating margin that you're looking at can you share some thoughts about that.
How are you thinking about getting.
Rob risks that we mentioned before.
Just in terms of top line recovery to get to.
Mark.
Any thoughts about how much of that can we get some thoughts that you've outlined.
And even if the volume picks up.
Yes.
Okay. Thank you rich thank you.
Speaker 8: Okay, thank you, Rich. Thank you. Um, we're gonna we will.
We're going to we will.
Benefit from our ongoing cost reductions, which.
Speaker 8: benefit from our ongoing cost reductions, which include our restructuring and synergy plans, higher volume, as noted in our guidance, better mix of product on higher margin products, and long-term continued love to leverage our NPI, as well as vertical integration where we can drive margin improvement.
Which include our restructuring and synergy plans are higher volume as noted in our guidance.
Better mix of product on higher margin products and long term continued to leverage our NPI as well as vertical integration, where we can drive margin improvement.
Speaker 2: OK. Thank you. Thanks for taking the call. Thank you, Senator. One moment for our next question.
Okay. Thank you thanks for taking it.
Thank you Jack will restore next question.
Our next question comes from Ruben Roy with Stifel. Your line is open.
Thank you for letting me ask some questions I wanted to follow up on <unk> question, Chuck and talk about just sort of the AI.
Speaker 9: Yes, thank you for letting me ask some questions. I want to follow up on Samik's question, Chuck, and talk about just sort of the AI transceiver, NPI launches, the delta between sort of your guidance and sort of what you're holding back.
<unk> transceiver and launches the delta between sort of your full year guidance and sort of what you are holding back.
Speaker 9: I'd love to hear some details outside of the supply constraints. It sounds like there's some qualification milestones needed. Is that product-specific, customer-specific? If you could give us some details on how you expect those qualifications to ramp near term and what's left to be done before you actually start kind of seeing some results.
Love to hear some details outside of the supply constraints. It sounds like you have some qualification milestones needed is that product specific customer specific you can give some details on how you expect those qualifications too.
Ramp near term and what's left to be done before you actually start seeing some revenues.
Yes. Thank you.
Speaker 7: Thank you, Johnny. Thanks for the question. I mean the, as we said, as I said earlier,
Jonathan Thanks for the question.
As we said as I said earlier.
New products.
Speaker 7: New products generally require an incubation period in the manufacturing line to reach the quality that they use.
Generally.
Hi.
<unk> periods and the manufacturing lines to reach the quality the yields the performance that we promise. So those are generally true for any part of this <unk>, so definitely more challenging than any other part as we had before and they tend to kind of this same type of market. So I think.
Speaker 7: promise. So those are generally true for any product. This 800G is significantly more challenging than any other products we had before that came to this same type of market.
Speaker 7: So I think the complexity comes from the fact that while we are ramping.
The complexity comes from the fact that while we are ramping.
Speaker 7: for the orders that we already have. We're also engaging, as I said, new players in a meaningful way.
For the orders that we already have we also engaged as I said, new players in a meaningful way to further extend our opportunity in the near future and therefore eventually.
Speaker 7: to further extend our opportunity in the near future. And therefore, eventually, see, as Chuck mentioned in his remarks, to see an upside for the overall market that we can address. So it's a combination of serving needs that we have short-term versus the needs to continue to increase the pipeline, the funnel of new opportunities for 800G with additional customers beyond those that were
<unk>.
Chuck mentioned in his remarks, we see an upside.
For the overall market that we can we cannot right. So it's a combination of serving needs that we have shutdown versus the needs to continue to increase the pipeline the funnel of new opportunities for its oncology with additional customers beyond those that where we are engaged with.
Speaker 9: Thanks for the detail for my follow up on telecom data points remain pretty negative and nice to hear you guys talk about bottom.
Thanks, Dave Thanks for the detail.
For my follow up.
Telecom data points remain pretty negative.
Nice to hear you guys talk about bottomed here.
Speaker 9: here coming out of the September quarter. Can you give us some details on what you're thinking in terms of, it sounds like inventory's driving some of your view for the rest of the year, but starting in the December quarter, if you can give us any detail on kind of how you're thinking about that business, whether it's market share or kind of what's driving your view on a recovery starting here near term, however gradual that might be.
As of September quarter can you give us some details on what youre thinking in terms of it sounds like inventory is driving some of your view for the rest of the year, but starting.
In the December quarter, if you can give us any detail on kind of how youre thinking about that business, whether it's market share kind of what's driving your view on kind of recovery starting here near term hybrid gradual that might be.
Okay.
Speaker 10: Yeah, sure. I think in the telecom softness, you know, it's a combination of end market softness and inventory digestion at our customers. And we've been staying very, very close with our customers.
Yes, sure I think.
Telecom softness, it's a combination of end market softness and inventory digestion at our customers.
We've been staying very very close with our customer base on this and we see progress.
Speaker 11: progress, you know, modestly coming through FY24 and the rest of the quarters on their inventory digestion. And then we see gradual improvement in the end market demand, really progressing through into FY25. Okay.
Modestly coming through FY, 'twenty, four and the rest of.
The quarters on their inventory digestion, and then we see gradual improvement in the end market demand really progressing through the FY 'twenty five.
Okay. Thank you.
One moment for our next question.
Our next question comes from meta Marshall with Morgan Stanley. Your line is open.
Speaker 12: Great, thanks. Maybe just on growth margins.
Great. Thanks.
Just on gross margins.
Was the weakness kind of versus expectations on the mix of categories or it does.
Speaker 12: Was the weakness kind of versus expectations on a mix of categories, or just, you know, are there any higher costs that are needing to be paid to kind of clear some of the 800 gig transceiver bottlenecks to be mindful of? And then maybe just as a second question, just any more clarity on how you guys are thinking about debt repayment in specific?
Are there any higher costs that are needed to be paid to kind of clear some of the 800 gig transceiver bottlenecks to be mindful of.
Then maybe just the second question just any more clarity on how you guys are thinking about debt repayment in fiscal 'twenty four.
Okay.
Speaker 8: Okay, uh, Mayor Rich? Yep, so, um, you know, the margin we
Rich.
<unk>.
Margin weakness as a result of several factors.
Speaker 13: all to separate factors. One is the lower volume.
One was the lower volume that we incurred in the quarter.
Speaker 13: occurred in the quarter. Unfavorable mix are the main key drivers. However, as well, we did experience prior period underutilization.
Favorable mix.
Are the main key drivers however.
As well, we did experience a prior period underutilization.
Speaker 13: That hit the P&L as well. For debt reduction, right now we're anticipating $200 million of pay down for the year.
That hit the P&L as well.
For debt reduction.
Now, we are anticipating $200 million of pay down for the year.
Okay. Thank you.
Our next question.
Speaker 14: Our next question comes from Simon Leopold of Raymond James, your line is open.
Our next question comes from Simon Leopold of Raymond James Your line is open.
Great. Thanks for taking the question I wanted to get a bit of a clarification type question here in that unlike last quarter's shareholder letter and by the way we like the way Youre doing this.
Speaker 11: Great, thanks for taking the question. I wanted to get a bit of a clarification type question here in that.
Speaker 11: unlike last quarter's shareholder letter, and by the way, we like the way you're doing this, it's helpful. This one did not mention explicitly several hundred million of AI-related Datacom sales in the outlook.
That's helpful.
This one did not mention explicitly several hundred million dollars of AI related datacom sales in.
In the outlook and I'm, just wondering how you'd like us to incorporate that exclusion versus the prior quarter as ladder and then I've got a quick follow up alright, Simon. Thanks for your question I would like to get us back to basics. We have had the guidance. The guidance is the guidance I made some additional.
Speaker 11: And I'm just wondering how you'd like us to interpret that exclusion versus the prior quarters letter and then I've got a quick follow up. All right, Simon, thanks for your question.
Speaker 4: I'd like to get us back to basics. We have the guidance, the guidance, the guidance.
Speaker 4: I made some additional comments this morning to give a sense that we're still aiming to do more.
Our comments this morning to give a sense.
We are still aiming to do more.
But I.
Speaker 4: But I don't want to get us into a mode where we're going to have guidance and then guidance on top of the guidance. So I just want to get us back to the basics. That's what we're doing. And as I indicated today, we might have some upside to it that we can achieve. For sure we have upside as an opportunity.
I don't want to get us into a mode, where we're going to have guidance and that guidance on top of the guidance. So I was.
Just wanted to get us back to the basics, that's what we're doing and as I indicated today.
We might have some upside to it that we can achieve for sure and we have upside there is an opportunity.
Hey.
Speaker 11: That's very helpful, thank you. And then in terms of this AI pipeline of business, I'm just wondering if you could help us bracket how much of this is hyperscale exposure and how much of it is non-hyperscale. And what I'm getting at is trying to understand a little bit about the customer mix and concentration of the pipeline. Thank you.
That's very helpful. Thank you and then in terms of this AI pipeline of business I'm. Just wondering if you could help us bracket how much of this is hyperscale exposure and how much of it is non hyperscale.
What I'm getting at is trying to understand a little bit about the customer mix and concentration.
Pipeline. Thank you.
Speaker 15: It's a... Sanjay will take that, Simon. I can tell you, it grows every day. Sanjay? Yeah. Thanks, Chuck. So, last quarter, Simon, we did 60% of our business came from hyperscalers. And this is both direct as well as indirect sales into hyperscalers.
Sorry, Jay I'll take that Simon, but I can tell you. It grows every day.
Yes, Thanks, Jeff.
So last last quarter Simon we.
We did.
60% of our business came from Hyperscale and this is both direct as well as indirect sales in Hyperscale.
Does that help yes. It does I guess I'm wondering about the pipeline more so than the most recent quarter.
Speaker 11: Does that help? Thank you. Yes, it does. I guess I'm wondering about the pipeline is more so than the most recent quarter.
So our pipeline is still pretty strong.
Speaker 15: So our pipeline is still pretty strong. We expect to, in fiscal 25, for example, we believe that 80% of our data transfer revenues will be from hyperscalers. A lot of it, majority of it, a vast majority of it, driven by AIM.
We expect to in fiscal 'twenty. Five for example, we believe that 80% of our Datacom transceiver revenues will be from Hyperscale is a lot of it majority of it is a vast majority of it driven by AI ml.
Thank you very much appreciate it thanks Simon.
Speaker 4: Thank you very much. Appreciate that. Simon, thank you for your feedback too on the letter. Thanks, Simon.
Simon Thank you for your feedback too on the winter. Thanks Aman.
One moment for our next question.
Our next question comes from tore Svanberg with Jed <unk> with William Blair. Your line is open.
Speaker 14: Our next question comes from Jed Dorsheimer with Jed Dorsheimer's William Blair line is open.
Hi, Thanks for taking my question here guys.
Speaker 16: Hi, thanks for taking my question here guys. Uh, I guess 1st question just want to shift from, you know, most of the others around the 800 G and just on some of your comments around the consolidation in compound semis.
I guess first question just wanted to ship from most of the others around that 800 Keene just on some of your comments around the consolidation.
In compound semis.
You mentioned that one if you could give a little bit more color on.
Speaker 16: You mentioned that one, if you could give a little bit more color on maybe metric that and then two on the new product introduction, you talked about reducing or improving cycle times. Could you talk about where they're at now and where you hope to get those two?
Maybe metric that and then two on the new product introduction, you talked about reducing <unk>.
Curbing cycle times could you talk about where they are at now and where you hope to get those two thanks.
Okay. This is giovanni here. So thanks for the question so we win.
Speaker 7: Okay, thanks. This is Giovanni here. So thanks for the question.
We acquired <unk>.
Speaker 7: We acquired a number of wafer fabs.
We.
One is the number of wafer fabs, which.
At this time, we'll pretty much fully utilized and thus we were able to.
Speaker 7: At that time, we were pretty much fully utilized, and as we were able to transfer part of the
Cost of goods.
Speaker 7: and so forth, we were able to identify ultimately what the best footprint for the compound semiconductor manufacturing for the company was going to be.
Manufacturing lines between sides and so forth we will.
Able to identify ultimately.
What are the best the footprint for the compound semiconductor manufacturing for the company was going to be so that's what we're basically doing now because we couldnt do it that fast and so now what we've been doing we are we have announced several.
Speaker 7: do it that fast. So now, what we're doing, we are, we've announced several
Shutdowns.
Speaker 7: shutdowns of smaller fabs and we intend to move and integrate those manufacturing lines.
Mulder Fabs.
We intend to.
The move and integrate.
And those manufacturing lines into our largest Bob which you've seen the Sherman, Texas. So there was the footprint we still have some some other fabs.
Speaker 7: It was a footprint. We still have some other fabs between Europe and...
Between Europe, and North America sales.
Steve.
Speaker 7: these standalone because the cost of moving those part of the lines.
Stand alone because the cost of moving those puzzle lines will be.
Speaker 7: And also, we were able to find a lot of quote-unquote
Hi.
Also we will define a lot of.
The qualifications that we cannot.
Speaker 7: We don't see it an advantage in moving those puddle lines. But at least for the...
We don't see an advantage of moving disposal lines, but at least for the fall.
Speaker 7: the gallium arsenide, particularly the gallium arsenide, Dixel-based type of products, and some of the indium phosphide-based products we
The gallium arsenide, particularly the gallium arsenide Bichsel base.
<unk>.
Some of the indium phosphide.
Based on all of those.
Ultimately decided that Sherman, Texas will be our center of excellence.
Speaker 7: that Sherman Dexter will be our center of action.
Uh huh.
I'll take the second part Chad Alright. Thanks for your question with regard to NPI cycle Times I would say one thing I think you know that we are built for speed.
This places and organize for a great sense of urgency about everything we do.
One of the benefits we have is with our global footprint.
You can do things 24 hours a day seven days a week.
That's not so easy for everybody else to say.
I would tell you that I can't give you a baseline.
Generically because we have so many platforms in so many products in the company, but I will point out.
That using AI.
And this last year, our teams have demonstrated a factory to reduction.
And the cycle time for launching new products from our fiber laser business.
And that is going to be a contagious example.
Around the company.
AI is going to be a great driver, but it's not the only thing that we need to do.
And so a factor of two everywhere as a starting point for the mindset of the management team Okay.
Got it thank you.
Just as a follow up on the Silicon carbide business, we are seeing greater.
Restrictions.
On raw materials from China, and I'm, just wondering graphite is an important component to both.
The furnaces as well as the input material.
Could you just update on supply chain exposure and if any.
In terms of how you see.
Specific to graphic.
Thanks, Jed Hey, so he'll be out there.
Yes, yes.
Thanks for your question.
But answer is no we don't have the approval yet.
Thanks, a lot.
Bob Mcgee.
Hey, guys a component.
And we have put in place long term.
<unk> agreements.
And none of our clarified.
Bye.
Have the basic stemming from China.
That's helpful. Thank you.
Thank you Jen.
Sure.
One moment for our next question.
Our next question comes from Richard Shannon with Craig Hallum. Your line is open.
Great. Thanks, guys for taking my questions and I'll also echo my.
Happiness with the shareholder letter I keep it up please.
I wanted to follow up on the topic of telecom.
I guess one of the questions I had looking at some reports here in earnings season, So far including last night, we're seeing some inventory burn still taking place at the equipment level here wondering why youre seeing some starting to pick up here.
To the degree to which you can describe it how much of this recovery is coming from transceiver type products like VR that you pointed out the shareholder letter versus.
Things like WNS that doesn't wrote ups.
So thanks for the question. So right now I think what we're seeing is a little bit more strength on the WSI and <unk> side amplifier and that portion of the business.
It's really is our customers are burning down inventory right now and we're starting to see different product lines. There are.
Small pickup this quarter, and we think thats going to continue to double digits for the SEC.
Half of FY 'twenty for.
Our transceiver based products, we see a lot of designing activity happening right now there's a lot of rfps rfps, especially for new technology products like our 100 gig coherent ZR and <unk>.
Yes.
An increase in RFP activity around 800 gig, which is coming next year and so we think that's very positive for that segment, but we think thats going to be more delayed towards the latter half of FY 'twenty four in early FY 'twenty five from a ramp perspective.
I'll provide a little more color.
Yes. It does thank you. Thanks for that my follow on question would be in the display market. Thank.
Thank you talked about service Utilizations that are increased here sequentially I think even a nice 20% number if I remember correctly, but still below year ago levels. Here I'm wondering if you have any visibility into those utilization continuing to improve.
And perhaps even get back to year ago levels, and then does this imply or just give you a better visibility on further capex.
Within the display unit.
Good morning, Richard Thank you very much crystal.
Yes.
On this slide.
The utilization of the <unk>.
Other tools drives.
The service revenue and it's worth remembering that.
There are two factors in terms of the utilization. It's the number of phone screens that are produced but has a multiplying factor in terms of the percentage of phones, which which using OLED screens.
And that has led to uptick.
Uptick in the service.
Revenue utilization of the.
Excimer lasers and that will continue through the year.
Okay perfect. Thank you.
Sorry My question.
Our next question comes from Sidney Ho with Deutsche Bank. Your line is open.
Great. Thank you and good morning.
I wanted to switch gears over to the industrial market.
Market you seem quite confident in that.
To improve in the second half of fiscal 'twenty. Four can you talk about which sub segments. Do you think we'll need to recalibrate between semi cap display positioned manufacturing in aerospace, particularly interested in your comments and positioned manufacturing youre seeing second.
Okay.
And some customers requesting shipments on short notice, but that's quite different than what we are hearing from other broad based semiconductor companies.
Okay Sidney.
Hey, Good morning. This is Chuck Sydney, we may have two or three people.
<unk> an angle on this but we will start with Sanjay.
Thanks Chuck.
So in terms of our industrial market group is.
Broken up into verticals. So we have our position manufacturing vertical our semi cap vertical our display vertical and aerospace and defense.
We are really excited about semi cap that market for us has been growing very steadily quarter over quarter year over year.
So there is.
We continue to see a lot of demand both from existing customers and new customers.
Envelope of applications seem to continue to improve.
Precision manufacturing in particular that is a market that has a lot more sensitive to macro however.
We do have certain areas of very strong growth such as electric vehicles. So that market is growing at a 15% CAGR. The medical device market is turning around and that's growing also fairly well. So we've got some really big bright spots within position manufacturing and I think Chris covered the display quest.
<unk> earlier, you, one way or anything to that Chris Yeah, I would say that semi semiconductor capital equipment inspection is also showing.
Growth.
It remains strong.
<unk> continued to pull on our strong backlog there.
Great.
Okay, Okay great.
Helpful. My follow up question I, just wanted to follow up on the Silicon carbide.
Call it the near term demand for coal and copper business remains pretty robust, but recent data points from the industry seems to be more mixed in the past few weeks with demand for Evs may be slowing down a little bit can you give us a sense. What you are seeing in terms of demand is that you are doing better than others, because you're gaining share and also interested to see how the pricing.
Side of things.
Are you seeing more competition in terms of prices. Thank you.
Thank you Sydney.
Yes.
Okay.
Sidney.
You have to look at the market not by one quarter basis. Because this is a market which is on a growth trajectory and it is going to continue to grow.
At close to <unk>.
30%.
Our compounded growth rate over the next five to 10 years.
So.
Announcement.
<unk> been pushing and then out does not define the market.
Overall market sensitive data.
And the market adoption as debt.
Yes.
You have good growth in many.
And our plan coming in.
There will be pressure.
It is normal in any growth market.
We see strong growth.
Very good traction.
But the very large customer that the long term agreements in place.
Okay. Thank you thank.
One moment for our next question.
Yeah.
Our next question comes from Vivek Arya with Bank of America. Your line is open.
Hi, This is Blake for you, but on for Vivek. Thanks for taking my question wanted to go back to your AI opportunity I know one of your competitors recently made an acquisition position to enter the AI data cloud transceiver space.
First I was hoping you can provide any clarity on the margin generated from higher speed AI related transceiver products and if you think thats growing competition also creates any pricing risk in the market.
Thanks for the question first of all the clearly this.
Validates.
The invention of the investment thesis, we had for the acquisition of <unk>. Some years ago. So we had that vision, which is now you can see.
But a pretty good one.
And then reinforces.
It's an endorsement as enforces the.
<unk> of the market that we are witnessing today in the upside potential that we all see I think the <unk>.
Generally speaking from vertical integration and scale.
And.
Technology differentiation, we are still.
The the market leaders in that.
Explain.
We see the.
Funnel the pipeline for new.
A new engagement around eight <unk> increasing daily.
Daily in the sense that.
We believe that we have.
And opportunity.
Maybe we have not.
We have not consider them in the recent past.
To penetrate Hyperscale is where we have been historically not as strong as we would like to be and so generally speaking the.
The competitiveness of the of the landscape is there.
I think.
We welcome competition and I think we are.
We're well positioned.
The three attributes, which I mentioned to compete in.
To grow.
And take advantage of the again as I said that the strategy, which we will deploy two years ago. When we identified AI on demand as being a key driver for the growth of our business.
Got it and then just as a follow up on the Silicon carbide side I know there is certainly a supply demand imbalance in the market just trying to get your thoughts around kind of theres more device vendors in the market who are bringing.
Kind of materials production in house, how we should think about the growth opportunities.
For coherent and I guess your thoughts on the relative growth in the materials market versus the device market longer term.
Okay. Thanks for your question so yeah.
Yes.
The.
We see demand.
On both ends.
That.
When you say it that are locked up.
Supply in the device side people are still looking for a good mass spec.
Our MOSFET, which would it be.
Doug MOSFET, which will have higher liability and MOSFET, which can address the future needs.
More and more into <unk>.
And.
And Bob what are you can handle.
So we see very strong demand on the device side.
Our customer engagement.
And then on.
On the material side.
We see a very strong demand for 200 millimeter.
And 200 millimeter.
Ready if you limited choices.
And as you know we were at before.
Just one introduced a 200 product to the marketplace.
Pretty good about it yes, there is competition, but.
Competition.
Eddie.
That is there is a strong demand for it.
Great. Thank you.
One moment for our next question.
Okay.
Our next question comes from Christopher Roland with Susquehanna. Your line is open.
Hey, guys congrats on the results and guidance.
Thanks for the question.
I guess my question is around backlog. So that's now increased two quarters in a row.
Is this is this a sign you guys think of the bottoms. This meaning we can grow revenue.
Each quarter as we move through next year or are there some.
Decent timing and fulfillment issues here in this backlog that would disturb that kind of linear pattern.
Okay. Thanks, a lot Chris good morning.
Chris I'm going to ask Magnus just to make a general comment about the.
Overall pulse from our marketplace as he sees it from our point of view of the demand.
And we will see if there is a follow up.
Good morning, Chris I. Appreciate the question. So let me just talk a little bit.
The customer engagement, perhaps I would say that customer engagement is really robust.
And we see orders continuing to grow across the end market.
Customers today.
Certainly the inventory digestion issues, we mentioned with some of our end markets, but customers are really focused on innovation.
The design win funnel the outlook that we have looks very robust across most of our markets. So so we would expect that trend to continue.
Great. Thank you, perhaps as a follow up to someone else's question.
Did you guys get to take a look at the cloud light deal.
Or did you guys get to look at the Intel FIFO sale to Jabal and where any of these deals interested interesting or.
Perhaps in your opinion threatening in any way either thank you.
Okay Chris.
Was wondering if I take that yeah sure. Thanks for the question no.
We were not engaged.
Yeah.
We don't.
Knee, though.
Pretty much a contract manufacturer.
The two hour hour.
Existing manufacturing lines, so we believe that.
As I said earlier, we welcome the competition, we think it's.
The combination.
We will definitely be strong competitor, so we have lost that but.
As I said earlier, it's also an endorsement to our side dish, which we deploy that years ago to be in this market at this time.
Larger scale in the largest.
All of this portfolio of differentiated.
<unk> and sub assemblies for this market.
Thanks, Good morning, it looks like it might okay. Thanks, Giovanni Thanks, Chris Thank you Chris.
Our next question.
<unk>.
Okay.
Our next question comes from Tom O'malley with Barclays. Your line is open.
Hey, guys. Thanks for taking my question.
I had one on the segments. So in your $4 $6 billion guide for the year could you give us a little more color on what you expect that business to do and then more specifically within the com business, what youre expecting the telecom business to do and what the Datacom business will do I ask because theres, obviously, some big movements inside of the telecom and Datacom business.
I'm, just trying to get a little better feel for what you guys expect for growth roughly okay. Tom Good morning, we're not going to give business unit guidance.
I think rich rich can just make a general overall comment I think at the midpoint, we're up 11% in the second half compared to the first half there is some puts and takes across the segments.
Anything else Richard.
That's great Okay.
And do you have any specific question about the telecom market that can take it.
Not going to give you guidance in the second half of the year.
Sure I guess, just the trend looks as though the high speed Datacom business looks as though it's the big driver of growth could you talk about historically you guys have said that within your comm business. The transceiver business is below corporate gross margins.
In these new products, particularly in 800 G are you seeing accretive gross margins with those new higher <unk> products or are those still below corporate gross thank you. Okay. It's a good question.
Rich will take it but I would say at the launch point with all the things that we have going on.
We're at today, we're driving to improve.
It's just a general comment further for the company.
We have lots of Flywheels turning inside the company all the way from the front end Fabs, where we're still adding capacity to be able to keep pace.
With FY 'twenty for demand, although that's a challenge because it keeps going up.
But especially because we believe FY 'twenty five there's going to be that much more exciting.
Appreciate it make a general comment about the margins if you would so.
On the margins.
The average is about where we are at as a company, but we fully expect as we go through the learning curve that the margins will increase going forward.
Okay.
Yes.
Well remember for our next question.
Yes.
Yes.
Our next question comes from Mark Miller with the Benchmark Company. Your line is open.
Thank you for the question I'm, just wondering what to pursue.
I'm going to decline.
Good morning.
Just wanted to pursue a little more.
From your guidance it looks like Youre projecting improvements in margins going forward you listed several things in your letter to shareholders.
Is that being driven by higher revenues I guess I have a similar.
Concerned about transceivers in terms of the.
<unk> being accretive to overall margins, especially when youre seeing strong growth there I'm just wondering what's driving the expectations for higher margins. This is just higher sales.
Mix.
I'll take that this is rich thank you.
So as I mentioned before our ongoing cost reduction.
<unk> our synergy.
And restructuring plan.
And higher volume.
<unk> noted in our guidance.
Better mix of product on higher margin products as we move forward.
Throughout 'twenty, four and our long term continued leverage of our NPI.
Anything that we can also get from our vertical integration.
We're driving margin improvement will be implementing that as well.
Last question is data centers, a couple of firms like <unk> and western digital or Farley, saying Theyre seeing light at the end of the tunnel with.
With their data center customers I'm, just wondering what youre seeing in terms of data center business.
So I didn't want to go answers, yes sure sure.
So within.
Our our Datacom business.
Two two drivers the biggest one today is.
Which is growing at a 47%.
Traditional non AI business, if you will.
It is growing at a slower slower clip.
But together, it's still the market is still continuing to grow.
At a 20% CAGR long term.
So we're pretty excited about that market.
Thank you.
Thank you Mark.
One moment for our next question.
Our next question comes from Ananda Baruah with loop capital Your line is open.
Hey, good morning, guys. Thanks for taking the questions really appreciate it.
Chuck.
Just sticking on Transceivers.
And the higher speed do you have any sense, if your position I guess, how youre positioned.
From a share perspective going forward would you expect to get any view on.
On expectations to maintain care going forward.
CA going forward any context, there would be would be helpful and I have a quick follow up thanks.
I believe that we're in a great position.
I believe that.
If you look even beyond 800 G. Given the portfolio that we have products coming through the funnel.
Going to be able to continue.
Not only maintain our position, but we are counting on growing.
And.
Guys seeing just given all the activity in AIA seeing any greater urgency from your engagement around one six key.
You've been you've given a lot of great content actually this calendar year with your guide.
<unk> sort of timelines industry, one six key adoption you Matt you made reference I think in the slide deck today exactly.
Any any any greater urgency there given what's going on.
And any context around your market positioning with regards to that and that's it for me.
Okay. Thanks, Andrew Sanjay.
Thanks for the question.
So one thing is very clear with AI, we need to go higher and higher speeds.
It needs to happen.
Earlier.
Great progress towards our 160.
We believe that will be one of the first ones out there.
And in terms of timing.
We're looking at.
The market will be trained in fact in one point 60 around fiscal 'twenty five.
And I just wanted to say, we've got all the key enabling blocks, especially the dnb Monsanto laser which is a 200 G laser that we demonstrated at <unk>. So.
We're making good progress there.
That's great I appreciate it guys yes.
I appreciate it thanks. Thank you. Thank you.
Our next question.
Our next question comes from Dave Kang with B Riley Your line is open.
Good morning, good morning.
Good morning, Thank you.
Just regarding your Datacom mix I was wondering if you can provide by.
What the mix was between 100 gig 400 gig 800 gig.
Sure yes so.
The high speed, which we define as 200 G and about 70.
70% of the Rev.
Last quarter.
So.
Tim.
The remaining 30% is 100 gigabit, though how should we think about.
First of all are they growing and what do you think the runway is and how should we think about pending decay.
Eventually yes.
The slower speeds.
Typically today non AI related so theyre not growing as fast as 800 G and even some parts of for energy.
But long term, we still believe those fees are still going to continue to grow.
Especially scotty.
It was towards the edge of the Jo mill.
That works.
Got it and my follow up is regarding your Capex, how should we think about capex for this fiscal year and then fiscal 'twenty five after you get the 1 billion dollar investments from two Japanese companies.
How will that.
That drop off.
In 2005 after silica carbide investments okay.
Questions, Dave Richard when you take those yes.
So.
As of right now, we're still holding to the full year guidance that we previously gave of 350 to 400 million for FY 'twenty four.
On the on the.
Silicon carbide for FY 'twenty five.
The investment will.
Offset.
Sure.
What we thought we were going to invest.
Invest.
25.
David.
When when we close.
We will we will.
Run through in that next quarter revisions to our guidance.
And in.
In the corner.
Reporting quarter after the close we'll update.
To give you a strong sense for what we what we see for 2004 and give us give it.
At least a glimpse of 25 okay.
Got it thank you Jeff Thank you Dave.
Kevin can we go on to the next speaker.
Our next question comes from Tim Saturday with Northland Capital markets. Your line is open.
Good morning, Tim.
Tim.
Good morning, sorry about that.
Good morning.
Couple of math questions here, I think with them.
Significant implications maybe.
First one.
Is on kind of results and guide telecom versus Datacom I think the anecdotal commentary is about.
Inventory digestion on the cloud side, but if you look at how thats proceeding it seems like.
Most of the weakness sequentially was in telecom.
Going from 40% to 29 on a declining number.
Sorry.
And order book versus revenues.
Talking about those comments or am I looking at that right.
As you look at the guide.
Is most of that sequential growth at 75 million Bucks is that in comms and is that.
AI is starting to shape, our telecom bouncing back or how would you characterize that and I have a follow up.
Okay, I think I think there's really two questions back will take take the.
One is market related and original take the finance.
Sure.
On the telecom side, we see that growing modestly this quarter and then we see.
Double digit growth recovery in the second half of this fiscal year for our telecom revenues right.
I can comment on the ratio that was relative to the revenue last quarter exactly okay.
Tim would you repeat the second part of your question for rich.
Let me go onto the third part and of course, there's a rich history of multi part questions here with numbers.
Correct.
<unk>.
And that is the overall question I'm, saying I'm going to ask is what is the absolute size of your AI backlog, but I'm going to try and get there in a couple of parts, which is you talked about an order increase last quarter. There was entirely networking driven 30% that seems like it's 300 million Bucks.
There is some commentary here on the call about despite orders coming down the AI backlog going up 200%.
So I'm going to give you a chance here just to give us a number for what you got in backlog that you would consider AI, whether that's all 800 gig or not yes.
Yes.
I don't think we can give you that but I can tell you is it's a.
Substantial.
And.
Meaningfully material or not.
Yes.
But I'm not I'm not going to give you the number.
Okay. Thanks, Okay.
Okay. Thank you Tim one moment for our next question.
Yeah.
Our next question comes from Jim Ricchiuti with Needham <unk> Company. Your line is open.
Thanks, Scott Good morning, so you seem to be suggesting.
Some recovery in the second half.
On both the OLED side, and the WSI side of the business.
On the OLED side, I think we understand what's happening with service utilization going up what's your line of sight in terms of deployment.
Of new.
Excellent laser tools in the second half of fiscal 'twenty, four as well as your line of sight on the WSI.
Proven in the second half.
Yes.
As you mentioned service utilization uptick.
The excellent business full display in the near term.
In the long term.
The principal movements in the display market will be around the adoption of OLED technology in laptops and tablets.
Panels.
We're engaging with customers on Gen eight investments the timing of those generics investments should be clear.
Early calendar year 'twenty five.
And we'll be well positioned to.
Work with our customers on the expansion of OLED capacity for tablets, and laptops, which would be incremental to our current business develops.
Solid state technology in line with the challenges of.
Maintaining a.
Sensible cost level for those larger OLED panels and in the long term, we see migration.
But tvs into the micro OLED market, which we are.
<unk> heavily and developing new tools.
Jim did you have a second day one yes.
Yes.
Question was just in.
Maybe I'll just group.
Group. This into one last question is on the balance of that.
Laser and industrial business it sounds like Youre feeling.
Relatively.
Positive about the <unk> portion of the business backend semi is that going to continue to be relatively weak and are you assuming looking at precision manufacturing.
Beyond the current quarter that the recovery there is still fairly uncertain is that a good way to characterize the outlook for this part of the business.
Yes <unk>.
Semi remains strong.
The reasons for that.
That's the customer relationship.
Front end semi market is a long term roadmap we engage.
We partner with our customers in terms of developing that long term roadmap.
We developed specifically for our partners in that in that area.
And it's more than a sale.
The relationship lasts for 20 years in terms of one particular laser technology.
The service component of the semi cap business is very significant and so we go into long term journey, which gives us more certainty in the service business.
The emergence of the semi inspection.
Market. So we get a great deal of visibility to our customers on that in terms of backend.
It is softer recovery.
Recovery is taking longer.
Essentially.
The end of the fiscal year to see any change there.
And.
Added in precision manufacturing PMI.
PMI as Magnus mentioned before there is.
The recovery is around the end of the year.
But all of that the precision manufacturing the backend semi is offset by the strength in display and the strength in semiconductor.
Couple of equipment wafer inspection.
Thank you Chris.
Thank you.
Tim Thanks for your question, yes, okay. Thanks.
And I'm not showing any further questions at this time I turn the call back over to our host for any closing remarks.
Kevin Thank you and I want to thank all the analysts on the call for your thoughtful questions as always if we can be a very help throughout the quarter. Please feel free to reach out and I want to thank everybody for joining us. This morning. Thank you.
Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
Okay.
Yes.
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