Q1 2024 Coherent Corp Earnings Call

November 7, 2023

Operator: Good day and thank you for standing by. Welcome to the Coherent Corp. FY ‘24 First Quarter Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. To ask a question during the session, you need to press Star One One on your telephone. You'll then hear an automated message advising your hand is raised. To withdrawl your question, please press Star One One 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 walking through the coherent Corp. At 424 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.

Or is it in your hands 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 Speaker today, Paul Silverstein. Please go ahead.

Paul Jonas Silverstein: 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 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 8-K. This morning we filed their 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.

Today on the call we have Sharon.

Dr. Chuck Mattera, and a number of executives or 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 8-K. 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.

Paul Jonas Silverstein: This morning we filed their 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.

Our second market overview webinar focused on our industrial market to be held on December 14th.

Paul Jonas Silverstein: 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 do both of this morning's call to answering 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. Factors that could cause actual results to differ materially are set forth in the first quarter 2024 shareholder letter and in our SEC reports.

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>.

Paul Jonas Silverstein: 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. Factors that could cause actual results to differ materially are set forth in the first quarter 2024 shareholder letter and in our SEC reports.

SEC reports coherent assumes no obligation to update any forward looking statements, which speak only as of their respective dates.

SEC reports

Paul Jonas Silverstein: 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, 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 Coherent Chair and CEO, Dr. Chuck Mattera. Chuck, please go ahead.

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 you 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 coherent as chair and CEO Dr. Chuck Mattera.

Please go ahead.

Chuck Mattera: Thank you, Paul. Leadership development is among the most important jobs of the CEO. Given how extensive our disclosures are in the shareholder letter, I have the following senior leaders with me on the call today. They are Interim Chief Financial Officer, Rich Martucci; Chief Strategy Officer and President of the Materials Segment, Dr. Giovanni Barbarossa; EVP of Lasers, Dr. Chris Dorman, who came to us through the Coherent acquisition; Sohail Khan, EVP of our Wide-Bandgap Technologies Silicon Carbide business; our Chief Commercial Officer, Magnus Bengtsson, who leads our global sales and service org and who also came to us through the Coherent acquisition; Chief Marketing Officer, Dr. Sanjai Parthasarathi, and 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.

Leadership development is among the most important jobs of a CEO.

Given how extensive our disclosures are in the shareholder letter.

I have the following senior leaders with me on the call today.

They are interim Chief financial Officer Rich <unk>.

Chief strategy Officer, and President of the materials segment, Dr. Giovanni Barbarossa.

EVP of lasers that could Chris Gorman, who came to us through the coherent acquisition.

So he'll con.

VP of our wide bandgap 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.

Chief Marketing officer, Dr. Sanjay Parthasarathy.

And the EVP of our telecommunications business Dr vaccination.

<unk> market higher and one of the industry's top leaders, who chose to come to coherent as a place to grow.

Chuck Mattera: 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. And I'm sure you'll 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. We posted revenue of US$1.053 billion, which was slightly above the midpoint of our guidance, and non-GAAP EPS of US$0.16, which was above the midpoint of our guidance. Operating cash flow was US$199 million, which marked sequential and year-over-year improvement. We invested US$62 million in capital equipment and we retired US$19 million of debt. Macroeconomic headwinds and uncertainty continue to affect many of our end markets and will continue to constrain our near-term growth and visibility.

And especially our leadership talent.

And I'm sure you will enjoy interacting with him today.

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.

Which was slightly 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 marked a sequential and year over year improvement.

Chuck Mattera: Operating cash flow was US$199 million, which marked sequential and year-over-year improvement. We invested US$62 million in capital equipment and we retired US$19 million of debt. Macroeconomic headwinds and uncertainty continue to affect many of our end markets and will continue to constrain our near-term growth and visibility.

We invested $62 million in capital equipment, and we retired $19 million.

Deb.

Macro economic headwinds and uncertainty continue to affect many of our end markets and.

And we will continue to constrain our near term growth and visibility.

Chuck Mattera: Our first quarter results, however, demonstrate the success of our diversification strategy. While some of our markets remain challenged, our silicon carbide business, in which we recently announced US$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. Both of these are indicative of the breadth and differentiation we offer the market leaders for disrupting the status quo and underpinning the irreversible market megatrends that we enable. In addition to continuing to invest in our core assets, we are taking substantive actions to ensure that we improve our operating performance, 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.

While some of our markets remain challenged.

Silicon carbide business in which we recently announced $1 billion of investments by Mitsubishi Electric and Denso and.

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.

Both of these are indicative of the breadth and differentiation we offer the market leaders for disrupting the status quo.

And underpinning the irreversible market Mega trends that we enable.

Chuck Mattera: In addition to continuing to invest in our core assets, we are taking substantive actions to ensure that we improve our operating performance, 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.

Yes.

In addition to continuing to invest in our core assets, we're taking substantive actions to ensure that we improve our operating performance, 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.

Chuck Mattera: Turning now to our guidance for the second quarter of fiscal ‘24, revenue of approximately US$1.05 billion to US$1.175 billion and non-GAAP earnings per share of approximately US$0.14 to US$0.32. Our guidance for fiscal year ‘24 is revenue of approximately US$4.5 billion to US$4.7 billion, which is unchanged from our previous guidance, and non-GAAP earnings per share of approximately US$1 to US$1.50, which is also unchanged from our previous guidance. And while our annual guidance remains unchanged, this 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. 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.

Revenue of approximately 1.05 to $1 175 billion.

And non-GAAP earnings per share of approximately 14 to 32.

Our guidance for fiscal year 'twenty four is revenue of approximately $4 five to $4 7 billion, which is 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.

Chuck Mattera: And while our annual guidance remains unchanged, this 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. 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.

And while our annual guidance remains unchanged.

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.

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.

Chuck Mattera: Now 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. 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. 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 a trusted and valued 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.

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.

Chuck Mattera: 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 a trusted and valued 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.

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.

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

Chuck Mattera: We have tremendous upside and platform cost optimization from the ongoing integration, special restructuring, and transformation projects over the next few years. 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. We have a team of world-class technologists, industry pioneers, and executives with a demonstrated capability for identifying and capitalizing on market megatrends. With that, I'll turn the call back over to Paul. Paul?

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 the 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.

Chuck Mattera: We have a team of world-class technologists, industry pioneers, and executives with a demonstrated capability for identifying and capitalizing on market megatrends. With that, I'll turn the call back over to Paul. Paul?

That I will turn the call back over to Paul Paul.

Paul Jonas Silverstein: 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 to the queue [inaudible] will circle back around to you. This call's scheduled for a full hour, as we have almost 20 analysts to cover the company, we ask to each of you limit yourself to that one question and follow up. Please direct your questions to Chuck who will decide who is best to respond. Kevin, please go ahead.

We'll decide who's best respond Kevin. Please go ahead. Thank.

Operator: Thank you, ladies and gentlemen, if you have a question or comment at this time, please press Star One One on your telephone. If your question has been answered and you wish to remove yourself from the queue, please press Star One One again. We will pause for a moment while we compile the Q&A roster. Our first question comes from Samik Chatterjee with JPMorgan. Your line is open.

Yes.

Our first question comes from semi Chatterji with Jpmorgan. Your line is open.

Chuck Mattera: Hey, good morning, Samik.

Operator: If your phone line is muted, could you please unmute the line?

Samik Chatterjee: Hi. Can you hear me now, Chuck? Yes, I can hear you.

Chuck Mattera: Good morning, Samik.

Samik Chatterjee: Yes, good morning, Chuck. Thank you for the comments. And if I can just start, last quarter you did talk about, and you referenced this in the shareholder letter as well, the capacity increase or the capacity ramp that you’re planning and the incremental orders that you can get from the customers, if your capacity ramp goes full plan or exceeds your current base case. If you can share your thoughts around the ability to sort of exceed that capacity ramp. What are you seeing as bottlenecks and the ability to go to customers and get incremental orders for the AI - from the AI use cases and the 800G Transceivers in relation to sort of executing on that capacity ramp, and I have a follow-up after that. Thanks.

Thank you for the debate.

If I can just.

Last quarter, you talked about.

Thank you reference shareholders.

Thank you Bethany.

We are planning.

The incremental auto.

Get some basketball.

Thank you Bob.

Core lab.

Got it.

If you can share your thoughts at all of the regions.

What are you seeing are walking back then.

Yes.

Thanks.

Chuck Mattera: Okay, thank you, Samik. Samik, 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?

That capacity ramp up.

Okay. Thank you Zac and everyone asked 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.

Giovanni Barbarossa: So, hey Samik, thanks for the question. So, I would say, generally speaking, we’re doing better than our expectations, but it’s very much a moving target, in terms of the opportunity here, in the sense that the target’s getting higher and higher, as particular as we said in the shareholders’ letter, as the engagement with new, significant AI players are increasing, 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 the all hands on deck and the entire team is focused on several of the needs to ramp. Which are not only related to the supply chain, because as new products, and this is a, as you know, 800G is a very much new product, there are all these MPI-related challenges to bring up to speed, you know, the manufacturing lines, the test equipment, the, 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 replacing us to ramp.

He is very much a moving target in terms of the opportunity here.

That the Dod is getting higher and higher as particular as we said in the shareholders letter.

Engagement with new significant AI players increase increasing particularly those players that we have not been historically strong at so we think that the.

<unk> opportunity is getting larger and our ability to meet this larger and larger opportunity, obviously gets more complex and more challenging but I think we have all hands on deck and the entire team is focused on several of the need to do that but which are not only related to the supply chain because as a new part.

Giovanni Barbarossa: Which are not only related to the supply chain, because as new products, and this is a, as you know, 800G is a very much new product, there are all these MPI-related challenges to bring up to speed, you know, the manufacturing lines, the test equipment, the, 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 replacing us to ramp.

And this is as you.

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 part of the solar customer volumes.

Industrial Hampton.

Samik Chatterjee: 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 40% gross margin and 20% operating margin that you’re looking at. Can you share some thoughts about, how you’re thinking about getting, make 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 need? Thank you. Okay. Thank you, Samik. Rich?

Okay. Thank you.

And so Paulo.

Follow up if I can just.

About the long term guidance that you gave and just you haven't been to go to market.

Reported gross margin in 2000, gross and operating margins that you're looking at can you share some thoughts about.

How are you thinking about getting.

Rob risks that we mentioned thoughts.

In terms of top line recovery.

Those.

On March 11th and thoughts about how much of that can we get some thoughts.

Thanks.

And even if the volume picks up.

Chuck Mattera: Okay. Thank you, Samik. Rich?

Rich Martucci: Thank you. We will benefit from ongoing class 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 to leverage our NPI, as well as vertical integration where we can drive margin improvement.

We're going to we will.

Benefit from our ongoing cost reductions, which include our restructuring and synergy plans are higher volume as noted in our guidance.

A 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.

Samik Chatterjee: Okay. Thank you. Thanks for taking the call.

Chuck Mattera: Thank you, Samik.

Operator: One moment for our next question. Our next question comes from Ruben Roy with Stifel. Your line is open.

Ruben Roy: Yes, thank you for letting me ask some questions. I wanted 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 full-year guidance and sort of what you’re holding back? Love to hear some details outside of the supply constraints. 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 revenues?

Follow up on <unk> question, Chuck and talk about just sort of that yes.

<unk> transceiver.

Is the delta between sort of your full year guidance.

Sort of what you are holding back.

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.

Chuck Mattera: Yes. Thank you, Ruben. Giovanni?

Giovanni Barbarossa: Thanks for the question. I mean, as we said earlier, new products generally require an incubation period in the manufacturing line to reach the quality, the yields, the performance that we promised. So, those are generally true for any product. This 800G is significantly more challenging than any other product we had before that came to the, kind of, this same type of market. So, I think the complexity comes from the fact that while we are ramping for the orders that we already have, we’re also engaging, as I said, new players in a meaningful way to further extend our opportunity in the near future. And therefore, eventually CEO as Chuck mentioned in his remarks, to see an upside for the overall market that we can address.

<unk>.

As we said as I said earlier new products.

That generally require an <unk>.

Incubation period within the manufacturing lines to reach the quality that 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.

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

I think.

<unk> comes from the fact that while we are ramping.

The orders that we already have we're also engaging as I said, new players in a meaningful way to further extend our opportunity.

The near future and therefore eventually see.

As Chuck mentioned in his remarks, we see an upside.

For the overall market that we can we cannot today. So it's a combination of serving needs that we have shutdown versus the needs to continue to increase the pipeline.

For the overall market that we can we cannot today.

Giovanni Barbarossa: 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 we’re already engaged with.

Bundle of new opportunities for its oncology with additional customers beyond those that where we are engaged with.

Ruben Roy: Thanks, Giovanni, for the detail. For my follow-up, on telecom, data points remain pretty negative. And nice to hear you guys talk about bottom here coming out of 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 how you’re thinking about that business, whether it’s market share or what’s driving your view on a recovery, starting here near-term, however gradual that might be?

For my follow up on telecom data points remain pretty negative and nice to hear you guys talk about bottom here coming out of September quarter can you give us some details on what youre thinking in terms of.

Sounds like inventories 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.

Chuck Mattera: Beck?

Beck Mason: Yes, sure. I think in the telecom softness, it’s a combination of end market softness and inventory digestion at our customers. And we’ve been staying very, very close to our customer base on this. And we see progress modestly coming through FY ‘24 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 ‘25.

Telecom softness combination.

End market softness and inventory digestion at our customers.

<unk> been staying very very close with our customer base on this and we see progress.

Modestly coming through FY, 'twenty, four and the rest of it.

<unk> on their inventory digestion, and then we see gradual improvement in the end market demand really progressing through the FY 'twenty five.

Ruben Roy: Okay. Thank you.

Operator: One moment for our next question. Our next question comes from Meta Marshall with Morgan Stanley. Your line is open.

Yeah.

Our next question comes from meta Marshall with Morgan Stanley. Your line is open.

Meta A. Marshall: Great. Thanks. Maybe just on growth margins, was the weakness 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 fiscal ‘24? Thanks.

No.

Was the weakness kind of versus expectations on the mix of categories or it does.

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.

And then maybe just the second question just any more clarity on how you guys are thinking about debt repayment in fiscal 'twenty four.

Chuck Mattera: Okay, Meta. Rich?

Rich Martucci: Yes. So, the margin of weakness is a result of separate factors. One is the lower volume that we incurred in the quarter. Unfavorable mix are the main key drivers. However, as well, we did experience prior period underutilization that hit the P&L as well. For debt reduction, right now we’re anticipating US$200 million of pay down for the year.

The margin weakness.

Also separate factors.

One was the lower volume that we incurred in the quarter.

<unk> mix.

Are the main key drivers however.

As well, we did experience a prior period underutilization.

So that hit the P&L as well.

For debt reduction right now, we're anticipating $200 million of pay down for the year.

Meta A. Marshall: Great. Thank you.

Operator: One moment for our next question. 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.

Simon Matthew Leopold: Great. Thanks for taking the question I wanted to get a bit of a clarification take question here in that unlike last quarter's shareholder letter and by the way we like the way Youre doing this. That's helpful. This one did not mention explicitly several hundred million dollars of AI related data com 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.

Simon Matthew Leopold: 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 you’re doing this, it’s helpful. This one did not mention explicitly several hundred million of AI-related datacom sales in the outlook. And I’m just wondering how you’d like us to interpret that exclusion versus the prior quarter’s letter? And then I’ve got a quick follow-up.

That's helpful.

This one did not mention explicitly several hundred million dollars of AI related data com 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.

Chuck Mattera: All right. Simon, thanks for your question. I’d like to get us back to basics. We have the guidance. The guidance is the guidance. I made some additional comments this morning to give a sense that we’re still aiming to do more. 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, we 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. Okay?

Our comments this morning to give a sense that we have.

Still aiming to do more.

But I.

I don't want to get us into a mode, where we're going to have guidance and our 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.

Simon Matthew Leopold: 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.

Pipeline. Thank you.

Chuck Mattera: It’s a - Sanjai will take that, Simon. I can tell you, it grows every day. Sanjai?

Sanjai Parthasarathi: Yes, 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. Does that help?

So last last quarter Simon.

We did 60% of our business came from Hyperscale and this is both direct as well as indirect sales.

Scanners.

Does that helps thank you.

Simon Matthew Leopold: Thank you. Yes it does. I guess I’m wondering about the pipeline is more so than the most recent quarter.

Sanjai Parthasarathi: So, our pipeline is still pretty strong. We expect to - in fiscal ‘25, for example, we believe that 80% of our datacom transceiver revenues will be from hyperscalers. A lot of it, majority of it is - vast majority of it driven by AI/ML.

We expect to in fiscal 'twenty. Five for example, we believe that 80% of our Datacom transceiver revenues will be from Hyperscale.

Lot of it majority of it is a vast majority of it driven by email.

Simon Matthew Leopold: Thank you very much. Appreciate that.

Chuck Mattera: Simon, thank you for your feedback too on the letter. Thanks Aman.

Chuck Mattera: Simon, thank you for your feedback too on the letter.

Sanjai Parthasarathi: Thanks, Simon.

Operator: One moment for our next question. Our next question comes from Jed Dorsheimer with William Blair. Your line is open.

Our next question comes from Doug <unk> with Jed <unk> with William Blair. Your line is open.

Jed Dorsheimer: Hi. Thanks for taking my question here, guys. I guess, first question, just want to shift from, most of the others around the 800G and just on some of your comments around the consolidation in compound semis, you mentioned this, one if you could give a little bit more color on maybe metric fab. 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 to? Thanks.

I guess first question just wanted to shift 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.

Maybe metric that and then two on the new product introduction, you talked about reducing.

Curbing cycle times could you talk about where they are at now and where you hope to get those two thanks.

Giovanni Barbarossa: Okay, thanks. This is Giovanni here, so thanks for the question. When we acquired Finisar, we acquired a number of wafer fabs, which at that time were pretty much fully utilized and as we were able to transfer products and manufacturing lines between sites 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. So, that’s what we are basically doing now because we couldn’t do it that fast. So, now what we’re doing, we have announced several shutdowns of smaller fabs, and we intend to move and integrate those manufacturing lines into our largest fab, which is in Sherman, Texas. So, there was a footprint.

<unk>.

<unk> finished.

We wanted.

One is the number of wafer fabs, which.

At this time, we are pretty much fully utilized and thus we were able to.

Cost of goods.

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 and 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.

Giovanni Barbarossa: So, that’s what we are basically doing now because we couldn’t do it that fast. So, now what we’re doing, we have announced several shutdowns of smaller fabs, and we intend to move and integrate those manufacturing lines into our largest fab, which is in Sherman, Texas. So, there was a footprint.

Shutdowns.

<unk>.

And we intend to.

Moving integrate.

And those manufacturing lines into our largest spot, which you've seen the Sherman, Texas. So there was the footprint we have still have some some other fabs.

And those manufacturing lines into our largest spot, which you've seen the Sherman, Texas. So there was the footprint

Giovanni Barbarossa: We still have some other fabs between Europe and North America there will still stay with the standalone, because the cost of moving those product lines will be too high. And also, we’ll require a lot of e-qualifications that we cannot, we don’t see it advantage in moving those product lines. But at least for the gallium arsenide, particularly the gallium arsenide, VCSEL-based type of powders, in some of the indium phosphide-based products, we ultimately decided that Sherman, Texas would be our center of excellence. Our consolidated [inaudible].

Between Europe, and North America.

You will see with.

Stand alone <unk>.

Cause the cost of moving those product lines will be.

Hi.

And also we will define a lot of.

Corporately qualifications that we cannot.

We don't see it as an advantage and move into disposal lines, but at least for the fall.

The gallium arsenide, particularly the gallium arsenide VIX, though based type of partners.

Some of the indium phosphide.

Based on all of those.

Ultimately decided that Sherman, Texas will be our center of excellence.

Chuck Mattera: I’ll take the second part, Jed. Thanks for your question with regard to MPI cycle times. I would say one thing I think you know that we’re built for speed. This place is organized for a great sense of urgency about everything we do. One of the benefits we have with our global footprint is we 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 and so many products in the company, but I will point out that using AI in this last year, our teams have demonstrated a factor of two reduction in the cycle time for launching new products from our fiber laser business. And that is going to be a contagious example that goes around the company.

I'll take the second part Chad.

Thanks for your question with regard to NPI cycle times.

I'd 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. We can do things 24 hours a day seven days a week.

So easy for everybody else to say.

I would tell you that I can't give you a baseline.

Chuck Mattera: I would tell you that I can’t give you a baseline generically, because we have so many platforms and so many products in the company, but I will point out that using AI in this last year, our teams have demonstrated a factor of two reduction in the cycle time for launching new products from our fiber laser business. And that is going to be a contagious example that goes around the company. I think that 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 is a starting point for the mindset of the management team. Okay?

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 that goes around the company.

Chuck Mattera: I think that 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 is a starting point for the mindset of the management team. Okay?

And so a factor of two everywhere as a starting point for the mindset of the management team Okay.

Jed Dorsheimer: 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 graphite? Thanks.

Just as a follow up on the Silicon carbide business, we are seeing greater.

Restrictions.

On raw materials from.

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.

Chuck Mattera: Thanks, Jed. Hey, Sohail, are you out there?

Sohail Khan: Yes, yes. Jed, thanks for your question. First answer is no, we don’t have the exposure. We have multi-sourced for both this material and the other components. And we have put in place long-term agreements. And none of our graphite suppliers have the basics coming from China.

Thanks for your question.

But that is no we don't have the full year.

We have mark Thanks, a lot.

Bob.

Hey, guys a component.

And we have put in place long term.

Agreements.

And none of our graphite.

Appliance.

Have the basic stemming from China.

Jed Dorsheimer: That’s helpful. Thank you, Sohail.

Chuck Mattera: Thank you, Jed.

Operator: One moment for our next question. Our next question comes from Richard Shannon with Craig-Hallum. Your line is open.

Okay.

Our next question comes from Richard Shannon with Craig Hallum. Your line is open.

Richard Cutts Shannon: Great. Thanks, guys, for taking my questions. I’ll also echo my happiness with the shareholder. Keep it up, please. I’m going to follow-up on the topic of telecom. I guess one of the questions I had, looking at some reports here in earning season so far, including last night, we were seeing some inventory burns still taking place at the equipment level here. I’m wondering why you’re seeing some start of a pickup here. And to the degree to which you can describe it, how much of this recovery is coming from transceiver type products like ZR that you point out to shareholder with the letter versus things like WSSs and ROADMs?

Happiness with the shareholder vote or keep it up please.

I wanted to follow up on the topic of telecom.

I guess like one of the questions I had looking at some reports here and earning season, so far including last night, we're seeing some inventory burn is 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.

Chuck Mattera: So, thanks for the question. So right now, I think what we’re seeing is a little bit more strength on the WSS and the ROADM, the amplifier and that portion of the business. And it’s really as our customers are burning down inventory right now, we’re starting to see different product lines there, have a small pickup this quarter and we think that’s going to continue to double-digits for the second-half of FY ‘24. Our transceiver-based products, we see a lot of design and activity happening right now. There’s a lot of RFQs and RFPs, especially for new technology products like our 100 gig Coherent ZR and there’s 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 that’s going to be more delayed towards the latter half of FY ‘24 and early FY ‘25 from a ramp perspective. Does that help provide a little more color?

It's really is our customers are burning down inventory right now and we're starting to see.

Different product lines there.

Small pickup this quarter and we think that's 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>.

Chuck Mattera: There’s a lot of RFQs and RFPs, especially for new technology products like our 100 gig Coherent ZR and there’s 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 that’s going to be more delayed towards the latter half of FY ‘24 and early FY ‘25 from a ramp perspective. Does that help provide a little more color?

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.

Richard Cutts Shannon: Yes, that does. Thanks for that. My follow-on question will be in the display market. I think you talked about service utilization that have increased here sequentially, I think even a nice 20% number if I remember correctly, but still below your year ago levels here. Wonder if you have any visibility into those utilizations continuing to improve and perhaps even get back to year ago levels and then does this imply or just give you better visibility on further CapEx orders within the display unit?

I think 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 organic within the display unit.

Chuck Mattera: Good morning Richard, thank you very much. Chris Dorman?

Christopher Dorman: Yes, in display the utilization of the OLED 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 there’s a multiplying factor in terms of the percentage of phones, which are using OLED screens and that is led to an uptick in the service revenue, the utilization of the Excimer lasers and that will continue through the year.

The utilization of the OLED 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 there's a multiplying factor in terms of the percentage of phones, which which are using OLED screens.

And that has led to uptake.

In the service.

Revenue utilization.

The excimer lasers and that will continue through the year.

Richard Cutts Shannon: Okay, perfect. Thank you.

Operator: One moment for our next question. Our next question comes from Sidney Ho with Deutsche Bank. Your line is open.

Our next question comes from Sidney Ho with Deutsche Bank. Your line is open.

Sidney Ho: Great, thank you. Good morning. I want to switch gears over to the industrials market. You seem quite confident that the business will improve in the second-half of fiscal ‘24. Can you talk about which subsegments do you think will lead to recovery between semi-cap display, precision, manufacturing, and aerospace? Particularly interested in your comments in Precision Manufacturing, you’re seeing second conservative order of growth, and some customers are requesting shipments on short notice, but that’s quite different than what we are hearing from other broad-based semiconductor companies?

I want to switch gears over to the industrials market you seem quite confident that this will improve in the second half of fiscal 'twenty. Four can you talk about which sub segments. Do you think we will need to recalibrate between semi cap display position manufacturing in aerospace, particularly interested in your comments and precision manufacturing youre seeing.

Second.

Got it.

Some customers requesting shipments on short notice, but that's quite different than what we are hearing from other broad based semiconductor companies. Okay.

Chuck Mattera: Okay, Sidney, good morning. This is Chuck. Sidney, we may have two or three people that have an angle on this, but we’ll start with Sanjai.

Hey, Good morning. This is Chuck Sydney, we may have two or three people.

Have an angle on this but we'll start with Sanjay.

Sanjai Parthasarathi: Yes, thanks, Chuck. So, in terms of our industrial market group is broken up into verticals, so, we have our precision 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, we continue to see a lot of demand both from existing customers and new customers and the envelope of applications seem to continue to improve. On precision manufacturing in particular, that is a market that is a lot more sensitive to macro. However, we do have certain areas of very strong growth, such as electric vehicles, so our stock market’s growing at a 15% CAGR, the medical device market is turning around, that’s growing also fairly well. So, we’ve got some really big bright spots within precision manufacturing. And I think Chris covered the display question earlier.

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're really excited about semi cap that market for us has been growing very steadily quarter over quarter year over year.

So that as we.

We continue to see a lot of demand both from existing customers and new customers.

Envelope of applications seem to continue to improve.

On 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.

Sanjai Parthasarathi: However, we do have certain areas of very strong growth, such as electric vehicles, so our stock market’s growing at a 15% CAGR, the medical device market is turning around, that’s growing also fairly well. So, we’ve got some really big bright spots within precision manufacturing. And I think Chris covered the display question earlier.

So fairly well so we've got some really big bright spots within position manufacturing and I think Chris covered the display question earlier do you want to add anything to that Chris I would say that.

So fairly well so we've got some really big bright spots within position manufacturing and I think Chris covered the display question earlier

do you want to add anything to that Chris I would say that.

Chuck Mattera: Do you want to add anything to that, Chris?

Christopher Dorman: Yes, I would say that semiconductor, capital equipment inspection is also showing growth. It remains strong. Our customers continue to pull on a strong backlog there.

Semi semiconductor capital equipment inspection is also showing.

Growth at <unk>.

<unk> remained strong.

Customers continue to pull on our strong backlog there.

Chuck Mattera: Great. Okay, Sidney.

Sidney Ho: Okay, great. That’s helpful. My follow-up question, though, I just want to follow-up on the silicon carbide. You called the near-term demand for the silicon carbide 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 maybe 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? Are you seeing more competition in terms of prices? Thank you.

Follow up question I, just wanted to follow up on the Silicon carbide.

We call it the near term demand fulfillment 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.

Chuck Mattera: Thank you Sidney. Hi Sohail.

Sohail Khan: Okay. Sidney, that - we 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 30% compounded growth rate over next five to 10 years. So, one announcement of one vendor pushing in and out does not define the market. Overall market strength is there and the market adoption is there. And yes, when you have the growth and many players are coming in, that there will be price pressure. It is normal, natural in any growth market. But we see a strong growth and a very good traction with very large customers with the long-term agreements in place.

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%.

Compounded growth rate over the next five to 10 years.

So low.

Announcement.

One vendor pushing in and out.

Define the market.

Overall market sensitive data.

And the market adoption as debt.

Yes.

The growth and many players.

<unk> coming in.

That there will be price pressure.

It is normal in any growth market.

But we see strong growth.

And a very good traction.

It's a very large customer that the long term agreements in place.

Sidney Ho: Okay. Thank you.

Chuck Mattera: Thank you, Sydney.

Operator: One moment for our next question. Our next question comes from Vivek Arya with Bank of America. Your line is open.

Our next question comes from Vivek Arya with Bank of America. Your line is open.

Unknown: Hi, this is Blake Freeman 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 to enter the AI data cloud transceiver space. First, was hoping you can provide any clarity on the margin generator from higher speed AI-related transceiver products? And if you think this growing competition also creates any pricing risk in the market?

So the Datacom transceiver space.

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

Chuck Mattera: Thanks for the question first of all clearly. This validates. Validates. The invention of the investment thesis we had for the acquisition of finished saw years ago. So we had that vision, which is now you can see. But a pretty good one and and then. Forces. 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. Generally speaking from vertical integration and scale. And the <unk>. Technology differentiation where steel. The market leaders and. Explain. We'd see. Funnel the pipeline full. New engagement around eight <unk> increasing. Daily in the sense that. We believe that we have. An opportunity. Maybe we have not. We have not consider them in the recent past. Penetrate hyperscale is where we have been historically not as strong as we would like to be and so generally speaking.

Chuck Mattera: Thanks for the question. First of all, the - clearly this validates the investment thesis we had for the acquisition of Finisar years ago, so, we had that vision, which is now you can see was a pretty good one. And then it enforces, it’s an endorsement, it reinforces the strength of the market that we are witnessing today and the upside potential that we all see. I think the, generally speaking, from vertical integration, scale, and technology differentiation, we are still the market leaders and that’s explained why we see the funnel, the pipeline for new engagement around 800G increasing daily in the sense that we believe that we have an opportunity, that maybe we have not considered in the recent past to penetrate hyperscalers where we have been historically not as strong as we would have liked to be.

This validates.

Validates.

The invention of the investment thesis we had for the acquisition of finished saw years ago. So we had that vision, which is now you can see.

But a pretty good one and and then.

Forces.

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.

Generally speaking from vertical integration and scale.

Chuck Mattera: see. I think the, generally speaking, from vertical integration, scale, and technology differentiation, we are still the market leaders and that’s explained why we see the funnel, the pipeline for new engagement around 800G increasing daily in the sense that we believe that we have an opportunity, that maybe we have not considered in the recent past to penetrate hyperscalers where we have been historically not as strong as we would have liked to be.

Chuck Mattera: see.

Chuck Mattera: I think the, generally speaking, from vertical integration, scale, and technology differentiation, we are still the market leaders and that’s explained why we see the funnel, the pipeline for new engagement around 800G increasing daily in the sense that we believe that we have an opportunity, that maybe we have not considered in the recent past to penetrate hyperscalers where we have been historically not as strong as we would have liked to be.

And the <unk>.

Technology differentiation where steel.

The market leaders and.

Explain.

We'd see.

Funnel the pipeline full.

New engagement around eight <unk> increasing.

Daily in the sense that.

We believe that we have.

An opportunity.

Maybe we have not.

We have not consider them in the recent past.

Penetrate hyperscale is where we have been historically not as strong as we would like to be and so generally speaking.

Chuck Mattera: And so, generally speaking, the competitiveness of the landscape is there. I think we welcome competition and I think we are very well positioned with the three attributes, which I mentioned to compete and continue to grow and take advantage of the, again, as I said, of the strategy which we deployed years ago when we identified AI on demand as being a key driver for the growth of our business.

The competitiveness of the of the landscape is there.

I think.

We welcome competition and I think we are very.

Well position.

The three attributes, which I mentioned to compete in.

Do you want to go.

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.

Unknown: Got it, and then just as a follow-up on the silicon carbide side, I know there’s certainly a supply demand imbalance in the market. Just trying to get your thoughts around as there’s more device vendors in the market, who are kind of bringing 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?

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.

Chuck Mattera: Okay, thanks for your question. So, Sohail?

Sohail Khan: Yes. We see a demand on both ends that even, you say there are lots of suppliers in the Dubai site, people are still looking for a good MOSFET, a MOSFET which will be rugged, MOSFET which will have high reliability and MOSFET, which can address the future needs, which are getting more and more integration and the amount of current and power you can handle. So, we see a very strong demand on the device side from our customer engagements. And then, on the material side that we see a very strong demand for 200 millimeter and in 200 millimeter there are very few limited choices and, as you know, we were the first one to introduce the 200 product to the marketplace. So, we feel pretty good about it. Yes, there is competition, but competition reaffirms that there is a strong demand for it.

The.

We see demand.

On both ends.

That.

When you say at Devon are locked up.

Supply of <unk>.

<unk> site people are still looking for a good mass spec.

Our MOSFET, which will be Doug MOSFET, which will have hydro liability and MOSFET, which can address the future needs with John.

More and more <unk>.

And the amount of pattern and Bob where you can handle.

Sohail Khan: So, we see a very strong demand on the device side from our customer engagements. And then, on the material side that we see a very strong demand for 200 millimeter and in 200 millimeter there are very few limited choices and, as you know, we were the first one to introduce the 200 product to the marketplace. So, we feel pretty good about it. Yes, there is competition, but competition reaffirms that there is a strong demand for it.

Well, we see very strong demand on the device side.

Our customer engagement.

And then.

On the material side.

That we see a very strong demand for our 200 millimeter.

And 200 millimeter that already if you limited choices.

And as you know we were the first one to introduce a 200 product to the marketplace.

So feel pretty good about it yes, there is competition, but competition.

<unk>.

That is it is a strong demand for it.

Unknown: Great. Thank you.

Operator: One moment for our next question. Our next question comes from Christopher Rolland with Susquehanna. Your line is open.

Yeah.

Our next question comes from Christopher Roland with Susquehanna. Your line is open.

Christopher Adam Jackson Rolland: Hey guys, congrats on the results and guidance and thanks for the question. I guess my question is around backlogs. So, that’s now increased two quarters in a row. Is this a sign, you guys think of the bottoms, does this mean 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?

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.

Chuck Mattera: 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 the marketplace as he sees it from the point of view of the demand. And we’ll see if there’s a follow-up.

Chris I'm going to ask Magnus just to make a general comment about the.

Overall pulse from the marketplace as he sees it from our point of view of the demand.

And we'll see if there's a follow up.

Magnus Bengtsson: Good morning, Chris. Appreciate the question. So, let me just talk a little bit about 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, there’s certainly the inventory digestion issues we mentioned with some of our end markets, but customers are really focused on innovation. And so, the design wind funnel, the outlook that we have looks very robust across most of our markets. So, we would expect that trend to continue.

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 and so 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.

Christopher Adam Jackson Rolland: 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 Cifo sale to [inaudible], and were any of these deals interesting or perhaps, in your opinion threatening in any way either? Thank you.

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.

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

Was wondering if I take that yeah sure. Thanks for the question no we are not engaged.

Was wondering if I take that yeah sure.

Giovanni Barbarossa: Yes, sure. Thanks for the question. No, we were not engaged. We don’t need pretty much a contract manufacturer to be added to our existing manufacturing lines. So, we believe that, as I said earlier, we welcome the competition. We think it’s - the combination will definitely be a stronger competitor. So, we endorse that, but as I said earlier, it’s also an endorsement to our strategy, which we deployed years ago to be in this market at this time, be leader with a larger scale and the largest - broadest portfolio of differentiated components and sub-assemblies to serve this market.

We don't.

Neither.

Amongst your contract manufacturer to be added to our 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 missed.

Strong competitor, so we haven't lost that but.

I said earlier, it's also an endorsement to our strategy, which we deployed two years ago to be in this market at this time the leader with the largest scale in the largest.

This portfolio of differentiated components.

Sub assemblies for this market.

Chuck Mattera: Thanks, Giovanni. it looks like it might okay. Thanks, Giovanni Thanks, Chris Thank you Chris.

Chuck Mattera: Thanks, Giovanni.

Christopher Adam Jackson Rolland: It looks like a nice [inaudible]. Thanks, Giovanni. Thanks, Chris Thank you Chris.

Christopher Adam Jackson Rolland: It looks like a nice [inaudible]. Thanks, Giovanni.

Chuck Mattera: Thanks, Chris. Thank you, Chris.

Operator: One moment for our next question. Our next question comes from Tom O’Malley with Barclays. Your line is open.

Yes.

Sure.

Our next question comes from Tom O'malley with Barclays. Your line is open.

Tom O'Malley: Hey, guys. Thanks for taking my question. I just had one on the segments. So, in your US$4.6 billion guide for the year, could you give us a little more color on what you expect a comm business to do and then more specifically within the comm business, what you’re expecting the telecom business to do and what the data comm business will do? I ask because there’s obviously some big movements inside of the telecom and data comm business, and I’m just trying to get a little better feel for what you guys expect for growth last year . Thank you.

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 the com business to do and then more specifically within the Com business, what youre expecting the telecom business can do and what the Datacom business will do I ask because there is obviously some big movements inside of the telecom and Datacom business.

Trying to get a little better feel for what you guys expect for growth.

Chuck Mattera: Okay, Tom, good morning. We’re not going to give business unit guidance, and I think 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’s some puts and takes across the segments. You want to say anything else, Rich about it?

Thank 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's some puts and takes across the segments and anything else Richard.

Rich Martucci: No, that's right on.

Chuck Mattera: Okay. If you have any specific question about the telecom market, Beck can take it, but he’s not going to give you guidance in the second-half of the year.

He is not going to give you guidance in the second half of the year.

Tom O'Malley: Sure, I guess just the trend looks as though the high-speed data comm 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 800G, are you seeing a creative gross margins with those new higher speed products or are those still below corporate gross margins? Thank you.

<unk> 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.

And 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 hires some products or are those still below corporate Christine. Thank you. Okay. It's a good question.

These new products, particularly in 800 G are you seeing accretive gross margins with those new hires some products or are those still below corporate Christine. Thank you.

Chuck Mattera: Okay, this is a good question. Well, Rich will take it, but I would say at the launch point with all the things that we have going on, what we were at today, we’re driving to improve is just a general comment 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 not with FY ‘24 demand although that’s a challenge because it keeps going up, but especially because we believe FY ‘25 is going to be that much more exciting. Rich, make a general comment about the margins, if you would.

Richard 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.

That's a challenge because it keeps going up.

But especially because we believe FY 'twenty five is going to be that much more exciting.

I appreciate it make a general comment about the margins if you would so.

Rich Martucci: Sure. 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.

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.

Chuck Mattera: Okay.

Operator: One moment for our next question. Our next question comes from Mark Miller with The Benchmark Company. Your line is open.

Yes.

Our next question comes from Mark Miller with the Benchmark Company. Your line is open.

Mark Miller: Thank you for the question. I'm, just wondering what to pursue.

Mark Miller: Thank you for the question.

Chuck Mattera: Good morning, Mark. How're you doing?

Mark Miller: I'm doing fine, good morning. I just wanted to pursue a little more from your guidance, it looks like you’re 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 concern about transceivers, in terms of they being accreted to overall margins, especially when you’re seeing strong growth there? So, I’m just wondering what’s driving the expectations for higher margins? Is it just higher sales or mix?

Good morning.

Just wanted to pursue a little more.

From your guidance it looks like you're 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.

Rich Martucci: I’ll take that. This is Rich. Thank you. So, as I mentioned before, our ongoing cost reduction, including our synergy and restructuring plans and higher volume, as noted in our guidance, better mix of product on higher margin product as we move forward throughout ‘24, and our long-term continued leverage of our NPI. Anything that we can also get from our vertical integration where it drives margin improvement, we’ll be implementing that as well.

So as I mentioned before our ongoing cost reduction.

<unk> our synergy.

And restructuring plans.

And higher volume.

As 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 drive margin.

Margin improvement will be implementing that as well.

Mark Miller: Last question is the data centers. A couple of firms like Cigar and Western Digital are finally saying they’re seeing light at the end of the tunnel with their data center customers. I’m just wondering what you’re seeing in terms of data center business?

With their data center customers I'm, just wondering what youre seeing in terms of data center business.

Chuck Mattera: Sanjai, do you want to just make [inaudible] about it?

Sanjai Parthasarathi: Yes, sure. So, within our data comm business, there are two drivers. The biggest one today is AI, which is growing at a 47% CAGR. Our traditional non-AI business, if you will, is growing at a slower clip. But together it still - the market is still continuing to grow at a 20% CAGR long-term. So, we are pretty excited about that market.

Our datacom business.

Two drivers the biggest one today is as AI, which is growing at a 47% Gardner our traditional <unk> business. If you will.

Growing at a slower clip.

But together, it's still the market is still continuing to grow.

20% CAGR long term.

So we're pretty excited about that market.

Mark Miller: Thank you.

Chuck Mattera: Thank you, Mark.

Operator: One moment for our next question. Our next question comes from Ananda Baruah with Loop Capital. Your line is open.

Okay.

Our next question comes from Ananda Baruah with loop capital Your line is open.

Ananda Prosad Baruah: Hey, yes, good morning guys. Yes, thanks for taking the questions. Really appreciate it. Chuck, I guess just sticking on transceivers and the higher speed. Do you have any sense if your position, I guess, how your position from a share perspective going forward? Would you expect to, I guess any view on expectations to maintain share going forward, gain share going forward, any context there would be helpful. And I have a quick follow-up, thanks.

Chuck I guess just sticking on Transceivers.

And the higher speed.

You have any sense.

Our position I guess, how you're positioned.

From a share perspective going forward would you expect to I guess any view on.

On expectations to maintain care going forward.

<unk> going forward any context, there would be would be helpful and I have a quick follow up thanks.

Chuck Mattera: I believe that we’re in a great position. I believe that if you look even beyond 800G, given the portfolio that we have, the products coming through the funnel, that we’re going to be able to continue to not only maintain that position, but we’re counting on growing it.

I'll leave that.

If you look even beyond the 800 G. Given the portfolio that we have products coming through the funnel.

We're going to be able to continue.

<unk> not only maintain our position, but we are counting on growing.

Ananda Prosad Baruah: And are you guys seeing, just given all the activity in AI, are you seeing any greater urgency from your engagements around 1.6T? You know, you’ve given a lot of great context, actually, this calendar year, with regards to sort of timelines, industry 1.6T adoption. You made reference, I think, in the slide deck today to 3.2T. Any greater urgency there, given what’s going on in AI and any context around your, kind of, market positioning with regards to that. And that’s it for me, thanks.

Are you guys seeing just given all the activity in AIA seeing.

Any greater urgency from your engagement around one six key.

You've been given a lot of great content actually this calendar year with her guide sort.

Sort of timelines industry, one six key adoption you, Matt you made reference I think in the slide deck today.

Keith.

Any any any greater urgency there given what's going on with AI and any context around your kind of market to this world with your guidance for that and that's it for me guys.

Chuck Mattera: Okay. Thanks, Ananda. Sanjai?

Sanjai Parthasarathi: Yes, sure. Thanks, Ananda, for the question. So, one thing is very clear. With AI, we need to go higher and higher speeds, and it needs to happen, you know, earlier. We’re making great progress towards our 1.6T. We believe that we’ll be one of the first ones out there. And in terms of timing, we’re looking at - we think the market will be trying to inflect in 1.60T around fiscal ‘25. And I just want to say, we’ve got all the key enabling blocks, especially the DFB-Mach-Zehnder laser, which is a 200G laser that we demonstrated at ECOC. So, we’re making good progress there. Hopefully, that helps.

So one thing is very clear with AI, we need to go higher and higher speeds.

It needs to happen.

We are making great progress towards our 160 <unk>.

Believe that it will be one of the first ones out there.

And in terms of timing.

We're looking at.

The market will be.

And 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 Mach zehnder laser which is the 200 <unk>.

Laser that'd be demonstrated at <unk>. So.

Making good progress there.

That's great I appreciate it guys, yes, that's super helpful. Thanks, guys. Thank you. Thank you.

Ananda Prosad Baruah: That’s great. Appreciate it, guys. Yes, no, that’s super helpful. Appreciate it.

Chuck Mattera: Thanks, Ananda. Thank you.

Operator: One moment for our next question. Our next question comes from Dave Kang with B. Riley. Your line is open.

Our next question comes from Dave Kang with B Riley Your line is open.

Chuck Mattera: Good morning, Dave.

David Kang: Good morning. Yes, good morning. Thank you. Just regarding your data comm mix, I was wondering if you can provide by what the mix was between 100 gig, 400 gig, 800 gig?

Good morning, Thank you.

Just regarding your Datacom mix I was wondering if you can provide by.

What the mix was between 100 gig point, you gave 800 gig.

Chuck Mattera: Yes. Please, Sanjai.

Sanjai Parthasarathi: So, the high speed which we define as 200G and above was 70% of the revenues last quarter.

70% of the revenues last quarter.

David Kang: So, I assume the remaining 30% is 100 gig [inaudible]. How should we think about - first of all, are they growing? And what do you think their runway is, and how should we think about pending decay eventually?

Tim.

The remaining 30% is 100 gig and below how should we think about I mean.

First of all are they growing and what do you think the runway is and how should we think about pending decay.

Eventually yes.

Sanjai Parthasarathi: Yes, I mean, the slower speeds are typically today non-AI related, so, they’re not growing as fast as 800G and even some parts of 400G. But long-term, we still believe those speeds are still going to continue to grow. Especially the AI kind of moves towards the edge of the networks.

Typically today <unk> related so theyre not growing as fast as.

That's 800 G and even some parts of our energy.

But long term, we still believe those fees are still going to continue to grow.

Especially Scott it kind.

Kind of moves towards the edge of the gym.

On the networks.

David Kang: Got it. And my follow-up is regarding your CapEx. How should we think about CapEx for this fiscal year? And then fiscal ‘25 after you get that US$1 billion investment from two Japanese companies? How will that drop off in ‘25 after silicon carbide investments?

A 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 take.

Drop off in 'twenty five after silica carbide investments okay.

Chuck Mattera: Okay, two great questions, Dave. Rich, will you take those?

Rich Martucci: Yes. So, as of right now, we’re still holding to the full-year guidance that we previously gave of US$350 million to US$400 million for FY ‘24. On the silicon carbide for FY ‘25, obviously the investment will offset or what we thought we were going to invest in ‘25.

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 obviously the investment will.

<unk> R.

What we thought we were going to <unk>.

Invest.

25.

Chuck Mattera: Dave, when we close, we will run through in that next quarter revisions to our guidance. And in the reporting quarter after the close, we’ll update and give a strong sense for what we see both for ‘24 and give at least a glimpse of ‘25. Okay?

When we close.

We will.

Run through in that next quarter revisions to our guidance.

And.

In the corner in the reporting quarter after the close we'll update.

That gives you a strong sense for what we what we see for 2004 and give us give at least.

At least.

So 25, okay.

Got it thank you Jeff Thank you Dave.

David Kang: Got it, thank you.

Chuck Mattera: Yes. Thank you, Dave.

Paul Jonas Silverstein: Kevin, can we go on to the next speaker?

Kevin can we go on to the next speaker.

Operator: Our next question comes from Tim Savageaux with Northland Capital Markets. Your line is open.

Chuck Mattera: Good morning, Tim.

Operator: Tim, your line is on mute.

Timothy Paul Savageaux: Sorry about that. Good morning, a couple of math questions here. I think with some significant implications maybe. First one is on results and guide telecom versus datacom. And I think the anecdotal commentary is about inventory digestion on the cloud side, but if you look at how that’s proceeding, it seems like most of the weakness sequentially was in telecom, going from 40% to 29% on a declining number. So, we talk in order book versus revenues and we’re talking about those comments. Am I looking at that right? As you look at the guide, is most of that sequential growth, about US$75 million bucks, is that in comms and is that some AI starting to shift or telecom bouncing back or how will we characterize that? And I have a follow up.

Good morning.

Yes.

Couple of math questions here I think.

Significant implications maybe first one.

Is on.

Our results and guide telecom versus Datacom.

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.

Timothy Paul Savageaux: So, we talk in order book versus revenues and we’re talking about those comments. Am I looking at that right? As you look at the guide, is most of that sequential growth, about US$75 million bucks, is that in comms and is that some AI starting to shift or telecom bouncing back or how will we characterize that? And I have a follow up.

Sure.

Order book versus revenues.

Thinking 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 ship, our telecom bouncing back or how would you characterize that and I have a follow up.

Chuck Mattera: Okay, well I think there’s really two questions. Beck will take the one that’s market related and Rich will take the finance.

The one that's market related and original take the finance.

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

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.

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

Timothy Paul Savageaux: Let me go on to the third part. And of course, there’s a Rich history of multi-part questions here with numbers of this call. But 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 that was entirely networking driven, 30%. That seems like it’s US$300 million. There’s some commentary here in 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?

Right.

Yes.

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 im 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.

Timothy Paul Savageaux: That seems like it’s US$300 million. There’s some commentary here in 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?

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 thats, all 800 gig or not.

Chuck Mattera: Yes, I don’t think we can give you that. What I can tell you is it’s a substantial and meaningfully material one-off. But I’m not going to give you the number.

I don't think we can give you that.

I can tell you is it's a substantial and.

Meaningfully material or not.

Yes.

But im not im not going to give you the number.

Timothy Paul Savageaux: Okay. Thanks.

Chuck Mattera: Okay. Thank you, Tim. One moment for our next question.

Chuck Mattera: Okay. Thank you, Tim.

Operator: One moment for our next question. Our next question comes from Jim Ricchiuti with Needham & Company. Your line is open.

Yeah.

Our next question comes from Jim Ricchiuti with Needham <unk> Company. Your line is open.

Jim Ricchiuti: Hi, Thanks. Good morning. So, you seem to be suggesting some recovery in the second-half on both the OLED side and the WFE side of the business? 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 Excimer laser tools in the second-half of fiscal ‘24, as well as your line of sight on the WFE improvement in the second-half?

Some recovery in the second half.

On both the OLED side, and the <unk> side of the business.

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.

Chuck Mattera: Yes, as you mentioned, service utilization, uptick in the Excimer business for 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, in tablets, in IT panels. And we are engaging with customers on Gen 8 investments. The timing of those Gen 8 investments should be clear early calendar year ‘25 and we’ll be well positioned to work with our customers on the expansion of OLED capacity for tablets and for laptops, which would be incremental to our current business. We’ve developed 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 with TVs into the micro LED markets, which we’re investing heavily in developing new tools for. Jim, did you have a second one?

As you mentioned service utilization uptick.

The XOMA business for 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 will be well positioned to.

Work with our customers on the expansion of OLED capacity for tablets and for laptops, which would be incremental to our current business develops.

Chuck Mattera: We’ve developed 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 with TVs into the micro LED markets, which we’re investing heavily in developing new tools for. Jim, did you have a second one?

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 invest.

<unk> heavily and developing new tools.

Jim did you have a second day one yes.

Jim Ricchiuti: Yes, the other question was just, and maybe I’ll just group this into one last question on the balance of that laser and industrial business. It sounds like you’re feeling relatively positive about the WFE portion of the business. Back-end 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?

Maybe I'll just.

Group. This into one last question is on the balance of that.

Laser in the industrial business it sounds like Youre feeling.

Relatively.

Positive about the <unk> portion of the business back and semi.

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.

Christopher Dorman: Yes, front end semi remains strong. The reasons for that are that, the customer relationship in the 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 develop lasers specifically for our partners 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 on this long-term journey which gives us more certainty in the service business of the emergence of the semi-cap inspection market. So, we get a great deal of visibility through our customers on that. In terms of back end, it is softer.

Semi remains strong.

The reasons for that.

The customer.

Licensure in.

In the 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.

Semi cap business is very significant and so we go into <unk>.

Jenny, 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.

Christopher Dorman: In terms of back end, it is softer, the recovery is taking longer, potentially the end of the fiscal year to see any change there. And in precision manufacturing, PMI, as Magnus mentioned before, the recovery is around the end of the year. But all of that, the precision manufacturing, the back end semi is offset by the strength in display and the strength in semiconductor coupled equipment way for inspection.

It is softer the recovery the recovery is taking longer.

It is softer

the recovery the recovery is taking longer.

Essentially.

At the end of the fiscal year to see any change there.

And.

In precision manufacturing.

As Magnus mentioned before there is.

The recovery is around the end of the year.

All of that.

Precision manufacturing backend semi is offset by the strength.

In display and the strength in semiconductor.

Capital equipment wafer inspection.

Chuck Mattera: Thank you, Chris. Ok, Jim, thanks for your question.

Jim Ricchiuti: Thank you.

Chuck Mattera: Ok, Jim, thanks for your question. Okay. Thanks.

Chuck Mattera: Ok, Jim, thanks for your question.

Jim Ricchiuti: Thank you.

Chuck Mattera: Ok, thanks. And I'm not showing any further question at this time I turn the call back over to our host for any closing remarks.

Chuck Mattera: Ok, thanks.

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

Chuck Mattera: Kevin, thank you. And I want to thank all the analysts on the call for your thoughtful questions. As always, if we could be of any help throughout the quarter, please feel free to reach out. And I want to thank everybody for joining us this morning. Thank you.

Thank you everybody for joining us this morning.

Operator: Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

Okay. Yeah. [music]. [music]. [music].

Yeah.

[music].

Q1 2024 Coherent Corp Earnings Call

Request a DemoDemo

COHR

Coherent

Earnings