Q2 2024 Coherent Corp Earnings Call
Okay.
Speaker Change: Good day and thank you for standing by welcome to the coherent Corp fiscal year 2024 second quarter earnings conference. At this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to.
Operator: Good day, and thank you for standing by. Welcome to the Coherent Corp. Fiscal Year 2024 Second Quarter Earnings Conference. At this time, all participants are in a listen-only mode.
Operator: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised.
Press Star one one on your telephone you couldn't hear an automated message advice in your hand is raised to withdraw. The question. Please press star one one again please be advised that today's conference is being recorded I would now like to hand, the conference over to the Vice President of Investor Relations for coherent Corp pulse.
Operator: To withdraw the question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to the Vice President of Investor Relations for Coherent Corp., Paul Silverstein. Thank you, Carmen, and good morning, everyone. Thank you for joining our second quarter fiscal 2024 earnings call. The call will be available for webcast replay on the Investor Relations section of our website.
Speaker Change: Interesting.
Thank you Carmen and good morning, everyone. Thank you for joining our second quarter fiscal 2024 earnings call.
Speaker Change: Call will be available for webcast replay on the Investor Relations.
Speaker Change: Section of our website on the call we have a coherent chair and CEO, Dr. Chuck Mattera, and a number of coherent senior leaders, who Chuck will introduce shortly.
Paul Silverstein: On the call, we have Coherent's chairman and CEO, Dr. Chuck Matera, and a number of Coherent senior leaders who Chuck will introduce shortly. This morning, we will devote the majority of our time to answering questions from analysts in the investment community. Yesterday, after the market closed, we issued a press release, posted a shareholder letter, an updated investor presentation to the investor relations section of our website, and furnished these documents in a form 8K. This morning, we filed our 10Q. The shareholder letter contains the financial statements historically included in our earnings press releases and detailed information regarding our operating performance, key trends, and outlook.
Speaker Change: This morning, we will devote the majority of our time to answer questions from analysts and the investment community yesterday after market close we issued a press release posted a shareholder letter and updated investor presentation to the Investor Relations section of our website and first these documents in a form 8-K.
Speaker Change: Morning, We filed our 10-Q the shareholder letter concerning the financial statements. Historically included in our earnings press releases.
Speaker Change: And detailed information regarding our operating performance key trends and outlook before we began a short statement about forward looking statements, we may make and or refer to forward looking statements, including statements about future performance and market outlook actual results may differ from those in the forward looking statements.
Paul Silverstein: Before we begin, a short statement about forward-looking statements. We may make and or refer to forward-looking statements, including statements about future performance and market outlook. However, actual results may differ from those in the forward-looking statement. The shareholder letter and our SEC report set forth risk factors that could cause actual results to differ materially. We assume no obligation to update forward-looking statements. We speak only as of their respective dates.
Speaker Change: Shareholder letter and our SEC reports set forth risk factors that could cause actual results to differ materially.
Speaker Change: We assume no obligation to update forward looking statements, which speak only as of their respective dates.
Paul Silverstein: During this call, we may discuss both GAAP and non-GAAP financial measures. If we do, a reconciliation of GAAP to non-GAAP measures is included in the shareholder letter. If we present historical non-GAAP financial measures, we will limit our discussion to those that are reconciled in the shareholder letter.
Speaker Change: During this call we may discuss both GAAP and non-GAAP financial measures. If we do a reconciliation of GAAP to non-GAAP measures is included in the shareholder letter if we present historical non-GAAP financial measures, we will limit our discussion to those that are reconciled in the shareholder letter.
Paul Silverstein: Before I turn the call over to Chuck for his opening remarks, please note that on March 26th, at the Optical Fiber Conference, or OFC, in San Diego, we plan to host a meeting with the investment industry, which will be webcast, during which we will provide an update regarding our communications market. And in April of this year, we plan to host our third market overview webinar, which will be focused on our instrumentation market. The first two market webinars focused on our communications and industrial markets are available in the investor relations section of our website.
Speaker Change: Before I turn the call over to Chuck for his opening remarks. Please note that on March 26 at the optical fiber conference or OFC in San Diego, We plan to host a meeting with the investment.
Speaker Change: The investment industry, which will be webcast during which we'll provide an update regarding our communications market and.
Vincent D. Mattera: And in April of this year, we plan to host our third market overview webinar will be focused on our instrumentation market.
Vincent D. Mattera: First to market Webinars focus on our communications and industrial markets are available on the Investor Relations section of our website with that it's my pleasure to turn the call over to co Aaron's chair and CEO, Dr. Chuck Mattera.
Paul Silverstein: With that, it is my pleasure to turn the call over to Coherent's Chairman and CEO, Dr. Chuck Matera. Thank you, Paul. It's a great day here in Silicon Valley, close to most of our largest customers. As I've said before, leadership development is among a CEO's most important responsibilities. Given the shareholder letter's extensive disclosures, I have asked the following senior leaders to participate in the Q&A fireside chat on today's call. Rich Martucci, Interim Chief Financial Officer. Bob Bashoor, President.
Vincent D. Mattera: Thank you Paul it's a great day here in Silicon Valley close to most of our largest customers.
Vincent D. Mattera: As I've said before leadership development is amongst Ceos, most important responsibilities.
Vincent D. Mattera: Given the shareholder letters extensive disclosures.
Speaker Change: I've asked the following senior leaders to participate in the Q&A fireside on today's call.
Richmond, Tucci: Richmond, Tucci interim Chief Financial Officer.
Speaker Change: By Bachelor President.
Speaker Change: Dr. Giovanni Barbarossa, Chief strategy Officer, and President materials segment.
Vincent D. Mattera: Dr. Giovanni Barbarossa, Chief Strategy Officer and President, Materials Segment. Sohil Khan, Executive Vice President, Silicon Carbide LLC, our newly created subsidiary for our Silicon Carbide business. Dr. Chris Thorman, Executive Vice President of Lasers, who came to us through the Coherent Acquisition. Magnus Bengtsson, Chief Commercial Officer, who leads our global sales and service organization and who also came to us through the Coherent Acquisition. Dr. Sanjay Pathasarathy, Chief Marketing Officer, and Dr. Julie Ng. Chief Technology Officer
Speaker Change: So he'll kohn executive Vice President Silicon Carbide LLC.
Speaker Change: Newly created subsidiary for our Silicon carbide business Dr.
Speaker Change: Dr. Chris Gorman Executive Vice President lasers, who came to us through the coherent acquisition.
Speaker Change: Magnus Bankston, Chief commercial officer, who leads our global sales and service organization and who also came to us through the coherent acquisition, Dr. Sanjay Parthasarathy, Chief marketing Officer and Dr. Julie <unk>.
Speaker Change: <unk> Technology officer.
Speaker Change: As being among the industry's best they will provide investors a rich source of information about the depth and breadth of our markets technologies operations and overall business.
Speaker Change: We emerged from the second quarter with greater confidence and excitement regarding a return to stronger growth and meaningfully enhanced profitability.
Vincent D. Mattera: As being among the industry's best, they will provide investors with a rich source of information about the depth and breadth of our markets, technologies, operations, and overall business. We emerged from the second quarter with greater confidence and excitement regarding a return to stronger growth and meaningfully enhanced profitability. For the quarter, we delivered solid sequential improvement in revenue and margin. The highlights of our second quarter include healthy sequential increases in both gross and operating margin, ongoing AI-driven strength in the datacom vertical of our communications market, signs of improving demand in all four verticals within our industrial market and the telecom vertical of our communications market, the consummation of the previously announced transactions with Mitsubishi Electric and Denso Corporation, in which they invested an aggregate of $1 billion in our silicon carbide While we expect that the higher revenue in the mix in our forecast will contribute to a rebound in margin structure, we are not waiting for improved end market demand to carry us. We've already implemented actions across virtually all of our businesses in a drive for enhanced operating efficiency.
Speaker Change: For the quarter, we delivered solid sequential improvements in revenue and margins.
Speaker Change: The highlights of our second quarter include.
Speaker Change: Healthy sequential increases in both gross and operating margin.
Speaker Change: Ongoing AI driven strength in the Datacom vertical of our communications market.
Speaker Change: Signs of improving demand in all four verticals within our industrial market.
Speaker Change: And the telecom vertical of our communications market.
Speaker Change: For the consummation of the previously announced transactions with Mitsubishi Electric and Denso Corporation in which they invested an aggregate of $1 billion.
Speaker Change: In our silicon carbide business and entered into long term supply agreements supporting demand for silicon carbide substrates, and epitaxial wafers and slide an increase in our planned debt repayment in fiscal 2024, resulting from the silicon carbide LLC being able to fund its own.
Speaker Change: Operating and capital expenditures.
Speaker Change: While we expect that the higher revenue and the mix in our forecast will contribute to a rebound in margin structure. We are not waiting for improved end market demand to carriers.
Speaker Change: We've already implemented actions across virtually all of our businesses and a drive for enhanced operating efficiency.
Speaker Change: These actions along with rigorous cost and expense control across the company helped drive our sequential improvement in gross and operating margin in the second quarter.
Speaker Change: We are on a roll.
Speaker Change: But we're far from done.
Speaker Change: As we continue to transform the company to improve operating performance, we will optimize our production footprint and enhanced operating resiliency, while completing the integration of legacy coherent.
Speaker Change: We also are exploring other strategic opportunities not including material acquisitions to unlock shareholder value.
Speaker Change: Now for some numbers.
Speaker Change: While the macro economic environment continues to present challenges we are pleased with our operating results for the quarter.
Speaker Change: We posted revenue of 113 1 billion.
Vincent D. Mattera: These actions, along with rigorous cost and expense control across the company, helped drive our sequential improvement in gross and operating margin in the second quarter. We are on a roll, but we're far from done. As we continue to transform the company to improve operating performance, we will optimize our production footprint and enhance operating resiliency while completing the integration of legacy coherence. We also are exploring other strategic opportunities, not including material acquisitions, to unlock shareholder value.
Speaker Change: Which was above the midpoint of our guidance and non-GAAP EPS of <unk> 36.
Which was above the high end of our guidance.
Operating cash flow was $67 million, we invested $91 million in capital equipment, and we retired $89 million of debt.
Speaker Change: In addition to continuing to invest in our core assets. We are taking substantive actions to ensure we improve our resiliency and operating performance.
Speaker Change: Especially to drive improvement in our margin structure, including through global integration and transformation and the realization of our synergy plan from the legacy coherent acquisition as well as our previously announced restructuring and consolidation plan.
Speaker Change: Our guidance for the third quarter of fiscal 2024 as it is as follows.
Vincent D. Mattera: Now for some numbers. While the macroeconomic environment continues to present challenges, we are pleased with our operating results for the quarter. We posted revenue of $1.131 billion, which was above the midpoint of our guidance, and Nongap EPS of $0.36, which was above the high end of our guidance. Operating cash flow was $67 million, we invested $91 million in capital equipment, and we retired $89 million of debt.
Speaker Change: Revenue of approximately 112 to $1 two zero billion <unk>.
Speaker Change: non-GAAP earnings per share of approximately 32 to.
Speaker Change: 52.
Speaker Change: And our updated guidance for fiscal 2024 as revenue of $4 $5 five to $4 seven zero billion, which represents a $50 million increase at the low end of our previous guidance.
Speaker Change: non-GAAP earnings per share of $1 30 to $1 70, which is up from $1 to $1 50 previously.
Speaker Change: Before we take your questions I would like to say, how appreciative and how proud I am of the senior leaders on this call and all of our other employees, whose tireless dedication for setting the stage for what's now.
Speaker Change: Next and beyond.
Speaker Change: Coherent is well positioned with differentiated technology exceptional talent and high quality efficient manufacturing platforms capable of delivering products to markets that are rapidly growing.
Vincent D. Mattera: In addition to continuing to invest in our core assets, we are taking substantive actions to ensure we improve our resiliency and operating performance, especially to drive improvement in our margin structure, including through global integration and transformation and the realization of our Synergy Plan from the Legacy Coherent Acquisition, as well as our previously announced Restructuring and Consolidation Plan. Our guidance for the third quarter of fiscal 2024 is as follows. Revenue of approximately $1.12 to $1.20 billion, and non-GAAP earnings per share of approximately 32 cents to 52 cents. And our updated guidance for fiscal 2024 is revenue of $4.55 to $4.70 billion, which represents a $50 million increase at the low end of our previous guidance. Non-GAAP earnings per share of $1.30 to $1.70, which is up from $1.00 to $1.50 previously.
Speaker Change: And I believe we are better positioned than others to take full advantage of our existing market positions.
Speaker Change: And to penetrate deeper into these markets largely because of the intimacy trust and partnerships, we have cultivated with market leaders.
Speaker Change: And our increased scale.
Speaker Change: Creating stability in our core business and creating a flywheel effect of other growth opportunities that many of our competitors simply don't have.
Speaker Change: In the upcoming years, we have tremendous upside potential and platform cost optimization attributable to the ongoing legacy coherent integration special restructuring and transformation projects that we've announced.
Speaker Change: We expect success, given our proven track record and have a strong plan and roadmap in place, which will allow us to capitalize on the recovery and growth in our markets and are there broader market opportunities.
Speaker Change: We are endowed with a team of world class technologist industry pioneers and executives with a demonstrated capability for identifying and capitalizing on market Mega trends.
Speaker Change: With that I'll turn it over to Paul.
Speaker Change: Paul. Thank you Chuck we will now open the call for analyst questions. Please limit yourself to one question.
Vincent D. Mattera: Before we take your questions, I would like to say how appreciative and how proud I am of the senior leaders on this call and all of our other employees whose tireless dedication is setting the stage for what's now, next, and beyond. Coherent is well-positioned with differentiated technology, exceptional talent, and high-quality, efficient manufacturing platforms capable of delivering products to markets that are rapidly growing.
Paul: <unk> scheduled for an hour.
Paul: With that Carmen.
Carmen: Thank you.
One moment for our first question and as a reminder, that is star one one to get into queue.
Carmen: Our first question comes from Sam <unk> with J P. Morgan. Please proceed.
Sam: Hi, good morning, and thanks for taking my question congrats to the entire team on the strong execution, maybe just because this is one question if I keep to Datacom.
Sam: In the shareholder letter you refer to number of new significant related customers that you have engagements with if you can give us a bit more insight about the nature of those customers the magnitude potentially of those.
Paul Silverstein: And I believe we are better positioned than others to take full advantage of our existing market positions and to penetrate deeper into these markets, largely because of the intimacy, trust, and partnerships we have cultivated with market leaders and our increased scale, creating stability in our core business and creating a flywheel effect of other growth opportunities that many of our competitors simply don't have. In the upcoming years, we have tremendous upside potential and platform cost optimization attributable to the ongoing legacy coherent integration, special restructuring, and transformation projects that we've announced. We expect success given our proven track record and have a strong plan and roadmap in place which will allow us to capitalize on the recovery and growth in our markets and the broader market opportunity. We are endowed with 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 it over to Paul. Well, thank you, Chuck. We will now open the call for analyst questions. Please limit yourself to one question.
Sam: Engagements getting drawn into if you will.
Sam: When those awards.
Radio for the existing autos that you have and then just a quick clarification you did have 100%.
Sam: Sequential growth in Datacom 800 gig revenue on capacity ramp is that roughly where we should expect sort of capacity leading edge capacity. It really nearly expand from Iran. Thank you.
Speaker Change: Hey, good morning. Thanks.
Speaker Change: Thanks for your question Sanjay sure. Thanks.
Speaker Change: Great question Simon.
Speaker Change: So if any.
Speaker Change: <unk> scaled deployment of new technology. The few Hyperscale is drive it and now we are seeing that to the extend more broadly. We're also engaged with new any EMS as well as up and down the entire ecosystem.
Speaker Change: So we have a very broad group of customers that that's continuing to grow in terms of engagements.
Speaker Change: Anything on the capacity that answer your question yes.
Anything on the capacity I am Sunday.
Speaker Change: So and the capacity ramp we did say in the shareholder letter that we grew 100% that's basically our 800 G shipments 100% quarter over quarter.
Speaker Change: Our ramp up plans, we hit the quarterly we crossed the quarterly run rate of $100 million and we also said that in fiscal 'twenty for Sonic that over 50% of our Datacom transceiver revenues will be from AI related applications.
Operator: The next call is scheduled for an hour. With that, Carmen. Thank you. One moment for our first question. And as a reminder, that is Star 11 to get in the queue.
Speaker Change: So we are really excited with the ramp in the growth of the market.
Speaker Change: I don't expect in the third quarter will be greater in the second quarter in the fourth grade in the third sandvik if that gives you any indication yes.
Yes sure. Thank you thanks for taking the question.
Speaker Change: Thank you.
Operator: Our first question comes from Samik Chatterjee with J.P. Morgan. Please proceed. Hi, good morning, and thanks for taking my question. Congratulations to the entire team there on the strong execution. Maybe just because it's one question, but in the shareholder letter, you refer to the number of new significant AI-related customers that you have engagements with. If you can give us a bit more insight about the nature of those customers, the potential magnitude of those engagements could turn into if you were to win those awards relative to the existing orders that you have.
Speaker Change: Thank you one moment for our next question. Please.
Speaker Change: Comes from the line of Ruben Roy with Stifel. Please proceed.
Ruben Roy: Thanks, very much and I'll Echo my congrats to the team.
Ruben Roy: A follow up for my one question on networking as well.
Ruben Roy: Chuck just trying to understand the commentary around the supply constraints. It sounds like they improved lead times are shortening would you say your.
Ruben Roy: The majority of the supply chain constraints are behind now and it's a question of shipping to demand or are there still some components that are out there that are in short supply as that kind of a limiting factor to the rest of the year on your AI transceiver shipments. Okay. Thanks, Thanks, a lot Ruben Ruben.
Vincent D. Mattera: And then just a quick clarification, you did have 100% sequential growth in Datacom 800 gig revenue on capacity RAM. Is that roughly where we should expect sort of capacity to linearly expand from here on? Thank you. Good morning, Samik. Thanks for your question. Sajay?
Speaker Change: You know anytime you go through such a steep ramp.
Speaker Change: Whats lying in front of you with regard to constraints is what youre trying to get out in front of me. So if you look in the rearview mirror the constraints.
Speaker Change: Surely east and moderated.
Speaker Change: But when you see the size of the ramp that we're going up we have to manage a number of constraints. The first constraint than the second and third we have to we anticipate them, we have to get our agreements with suppliers in place and.
Sanjay Pathasarathy: Sure. Thanks for your question, Samik. So with any large-scale deployment of new technology, a few hyperscalers drive it.
Speaker Change: We're looking beyond FY 'twenty for this is this is a super Super excited and Super Hot market.
Sanjay Pathasarathy: And now we are seeing that extend more broadly. We're also engaged with new NEMs, as well as up and down the entire ecosystem. We have a very broad group of customers that's continuing to grow in terms of engagement. Anything on capacity?
Speaker Change: We're in the process of looking out well into FY 'twenty five to be sure that our supply chain can keep up with us.
Speaker Change: I hope that answered your question Reuben.
Reuben: Thank you for that detailed check.
Speaker Change: Thank you one moment for our next question. Please.
Meta A. Marshall: And he comes from the line of meta Marshall with Morgan Stanley. Please proceed.
Meta A. Marshall: Great. Thanks, a couple of questions.
Sanjay Pathasarathy: Yeah, anything on the capacity ramp, Sanjay. So on the capacity ramp, we did say in the shareholder letter that we grew 100%. That's basically our 800G shipments, 100%, quarter over quarter. In our ramp-up plans, we hit the quarterly, and we crossed the quarterly run rate of 100 million. And we also said that in fiscal 24, Samik, that over 50% of our data coming from CBER revenues will be from AI-related applications. So we are really excited about the ramp and the growth. I'm expecting the third quarter to be greater than the second quarter and the fourth greater than the third, Samik, if that gives you any indication.
Meta A. Marshall: Just what are you seeing on.
Meta A. Marshall: Inventory of under kind of these 800 gig or AI transceivers and just kind of when you expect some of the demand for that business to come back and then just kind of on top of that.
Speaker Change: A couple of quarters ago, you had noted that you had a couple hundred million of orders.
Speaker Change: That if you ramp capacity you expect it to be able to fulfill during this fiscal year. Obviously, you guys are kind of ramping a little bit faster than I expected just in terms of that kind of a couple of hundred million dollars that you outlined earlier in the year or just how do you feel like you are going to be able to.
Speaker Change: Meet or exceed those.
Speaker Change: Excess.
Speaker Change: Demand.
Speaker Change: Thanks, Thanks, Peter Thanks for your interest and sundry, yes.
Sanjay Pathasarathy: Yeah, yeah, sure. Thank you. Thanks for taking the time. Thank you. Thank you. One moment for our next question, please, comes from the line of Ruben Roy with Stifel. Please proceed. Thanks very much, and I'll let go of my congratulations to the team. A follow-up for my one question on networking as well. Chuck, I'm just trying to understand the commentary around the supply constraints. Sounds like they have improved.
Speaker Change: Thanks for your question.
Speaker Change: So our so we just said in our shareholder letter that we shipped over $100 million and 800 gig Transceivers last quarter. It was much smaller than the previous quarter. It grew almost 100% quarter over quarter and then we also said.
Speaker Change: In fiscal 'twenty for 50% of our Datacom transceiver revenues will be from AI related applications. So we are projecting a very strong growth in our 800 G shipments we are on a ramp up as Jeff referred to earlier.
Vincent D. Mattera: Lead times are shortening. Would you say the majority of the supply constraints are behind now, and it's a question of shipping to demand, or are there still some components that are out there that are in short supply? Is that kind of a limiting factor for the rest of the year on your AI? Okay, thanks a lot, Ruben. Ruben, as you know, anytime you go through such a steep ramp, what's lying in front of you with regard to constraints is what you're trying to get out in front of.
Speaker Change: Hopefully that answered your question.
Speaker Change: I guess just in terms of what are you seeing in terms of inventory clearing on the kind of sub 800 gig.
Speaker Change: Yes.
Speaker Change: 800 gig I mean, I understand the 800 gig commentary, but what are we seeing just in terms of any other demand on the remainder of the business.
Speaker Change: Okay. So we haven't we haven't.
Speaker Change: Factored in any huge rebound in the non <unk> business and Datacom and Thats one of the most of the growth is in 800 G pretty much all of the growth is an item eight under <unk> and Thats why we said over 50% of our fiscal 'twenty four our revenues will be from AI and related AMG products.
Vincent D. Mattera: So if you look in the rearview mirror, the constraints have surely eased and moderated. But when you see the size of the ramp that we're going up, we have to manage a number of constraints. The first constraint, then the second, and third.
Speaker Change: Great. Thank you.
Speaker Change: Thank you. Thank you thank.
Speaker Change: Thank you one moment for our next question. Please.
Speaker Change: Okay.
Speaker Change: Can he comes from the line of Simon Leopold with Raymond James. Please proceed.
Speaker Change: Thanks for taking the question.
Simon Leopold: Wanted to as well talk about what's happening in 800 gig.
Vincent D. Mattera: We have to anticipate them. We have to get our agreements with suppliers in place, and we're looking beyond FY24.
Simon Leopold: Data Center, Transceivers and Im looking for your thoughts on how you can compete in this market and I am struggling candidly because it seems like demand is great, which should be margin favorable but some of your competitors probably are willing to take lower margins and so that might pressure.
Vincent D. Mattera: This is a super, super excited, and super hot market. So we're in the process of looking out well into FY25 to be sure that our supply chain can keep up with us. I hope that answers your question, Ruben. Thank you for that detail.
Simon Leopold: Sure.
Simon Leopold: <unk> ability.
Speaker Change: Can you help us understand how you're thinking about that thank you.
Speaker Change: Thanks, Simon joining would you like to give a ton of Vermont. Thanks for the question well, yes that.
Ruben Roy: Thank you. One moment for our next question, please. And it comes from the line of Meta Marshall with Morgan Stanley. Please proceed. Great, thanks. A couple of questions.
Speaker Change: In mind.
Speaker Change: <unk> vertically integrated player in the in the.
Speaker Change: In this space.
So we had for example people talking about shortage of pixels, well guess, what we have the largest mutual supply in the world by fall, so, including obviously our competitors. So we have a very good kind of.
Meta A. Marshall: Just one question, just what are you seeing in inventory for under kind of these 800 gigabit or AI transceivers and just kind of when do you expect some of the demand for that business to come back? And then just kind of on top of that, you know, a couple of quarters ago, you had noted that you had a couple hundred million orders that if you ramped capacity, you expected to be able to fulfill during this fiscal year. Obviously, you guys are kind of ramping a little bit faster than expected. Just in terms of that kind of couple hundred million that you outlined earlier in the year, just how do you feel like you're going to be able to meet or exceed that kind of excess? Demand Thanks, thanks, Mita.
Speaker Change: Control of the supply line for the most critical components other than Ics and we have our own manufacturing we have pretty much. The most complete the liza offering in the in this space. Both the 100 to 100 G. As we announced in the past. So we think that will be.
Speaker Change: Powerful not only to remain competitive.
Speaker Change: All lines and roadmap standpoint, we chalk maybe strategic to our hyperscale with customers and alike, but also from a cost stock standpoint, we think that we will have always the.
Speaker Change: Gross margin profile versus those that have to do you want to buy everything.
Speaker Change: On the merchant market. So we are very active with many of these technologies that will be an.
Speaker Change: The advantage from a profitability standpoint.
Speaker Change: I would add Simon Thank you Johnny.
That timing that we have the full portfolio of products that we're making for today.
Simon Leopold: And developing for tomorrow.
Simon Leopold: Those are going to be even more exciting than the ones, we're making today.
Sanjay Pathasarathy: Thanks for your interest, Sanjay. Yeah, thanks for your question, Meta. So our, we just said in our shareholder letter that we shipped over 100 million 800 G transceivers last quarter. It was much smaller the previous quarter; it grew almost 100% quarter over quarter.
Simon Leopold: And for Us having full control as Giovanni just described.
Simon Leopold: Our focus is on time to market time to volume.
Simon Leopold: And time to profitability and that's where it needs to stay we have a track record.
Simon Leopold: Competitive market that's for sure.
Simon Leopold: We're intending to compete.
Speaker Change: Thank you.
Speaker Change: Thank you one moment for our next question. Please.
Speaker Change: It comes from the line of Chad Dorsch manner with William Blair. Please proceed.
Sanjay Pathasarathy: And then we also said, Mita, that in fiscal 24, 50% of our Datacom transceiver revenues will be from AI-related apps. So we are projecting a very strong growth in our energy shipments. We are on a ramp up, as Jeff referred to earlier. Hopefully, that answered your question. I guess, but just in terms of what you are seeing in terms of inventory clearing on the kind of sub 800 gigs?
Jed Dorsheimer: Hi, Thanks, most questions seem to be on Datacom, so it'll be different in gist.
Jed Dorsheimer: I guess two part question, maybe just an update on that I saw.
Jed Dorsheimer: I think it's maybe the first time that I've seen you kind of highlight or call out.
Speaker Change: But on the micro Leds could you just talk about that.
Speaker Change: The products of coherent.
Speaker Change: There that you are offering and then on silicon carbide.
Speaker Change: Theres been some cross currents of data points in the market I was just wondering if you might be able to update on so what youre seeing from the from the customer base there.
Sanjay Pathasarathy: versus 800 gigabit, I mean, I understand the 800 gig commentary, but what are we seeing just in terms of any other demand on the remainder of the business? Okay, so we haven't factored in any huge rebound in the non-AI business in Datacom. And that's one of the reasons why we said over 50% of our fiscal 24 revenues will be from AI and related 800 G products. Thank you. Thank you. Thank you. Thank you. One moment for our next question, please. And it comes from the line of Simon Leopold with Raymond James.
Speaker Change: Hey, good morning, Jeff. Thanks for your two questions. Chris will go first and then so Chris yes. Thanks.
Chris Gorman: Thanks Chuck.
Chris Gorman: Yes.
Chris Gorman: Talk about the liquidity developments that we have.
Chris Gorman: In.
Chris Gorman: Previous quarters and about the <unk>.
Chris Gorman: The multiple orders received from China, Taiwan, and Korea for the tools for a process called laser induced so which is why you take the.
Chris Gorman: Totally 10, micron moving towards fiber backbone.
Chris Gorman: Micro Leds from Wi Fi too to.
Chris Gorman: The display.
Chris Gorman: So we are seeing increasing customer engagement.
Chris Gorman: And a.
Chris Gorman: Very excited about the impact of <unk>.
Simon Leopold: Please proceed. Thanks for taking the question. I wanted to, as well, talk about what's happening with 800-gig data center transceivers, and I'm looking for your thoughts on how you can compete in this market. And I'm struggling, candidly, because it seems like demand is great, which should be margin favorable, but some of your competitors probably are willing to take lower margins, and so that might pressure profitability.
Chris Gorman: But it is on the TV market.
Chris Gorman: Is.
Chris Gorman: This is.
Chris Gorman: Very high level of engagement now in a market that will be growing.
Chris Gorman: Over the next three to five years.
Speaker Change: Thank you Chris.
Speaker Change: Oil.
Chris Gorman: Hello Hello.
Speaker Change: Can you hear me.
Chris Gorman: Yep.
Chris Gorman: Okay.
Chris Gorman: To your question.
We are quite bullish about the silicon carbide market, then I think.
Chris Gorman: Prospects or would it be.
Chris Gorman: Next five to 10 years.
Chris Gorman: And based upon that we are sticking with our plan.
Chris Gorman: The dividend from the customer engagement as done that loss.
Speaker Change: <unk> yeah.
Chris Gorman: We have in place.
Chris Gorman: The.
Chris Gorman: The announcement that Mitsubishi in dental.
Chris Gorman: Hi.
Chris Gorman: Position and we are seeing.
Chris Gorman: More engagement.
Vincent D. Mattera: Could you help us understand how you're thinking about that? Thank you. Thanks, Simon. Johnny, would you like to give a... Hey, Simon, thanks for the question. Well, you know, as a reminder, we are the most vertically integrated player in the space. So, you know, we heard, for example, people talking about a shortage of pixels. Well, guess what?
Chris Gorman: And.
Chris Gorman: And faculty.
Chris Gorman: On August <unk>.
Chris Gorman: Both the existing and new customer by 200 millimeter.
Chris Gorman: Paul.
Chris Gorman: We are going to stick to our plan.
Chris Gorman: The investment and expansion.
Chris Gorman: We will continue to be.
Chris Gorman: <unk> growth.
Chris Gorman: All of our business.
Chris Gorman: Quarter over quarter and year over year.
Speaker Change: Thank you.
Speaker Change: Thank you so thank you Tim.
Speaker Change: One moment for our next question please.
Richard Cutts Shannon: It comes from the line of Recheck, Shannon with Craig Hallum Capital Group.
Shannon: Hi, guys. Thanks for taking my question, maybe I'll ask a financial one here.
Shannon: It seems like after a couple of quarters of Opex being.
John R. Ambroseo: We have the largest supply in the world by far, so including, obviously, our competitors. So, you know, we have a very good kind of control of the supply line for the mosquito components other than ICs, and we have our own manufacturing. We have pretty much the most complete laser offering in the space, both at 100 and 200 G, as we have announced in the past. So we think that will be very, very powerful, not only from a performance standpoint and roadmap standpoint, which are very strategic to our hyperscale customers and the like, but also from a cost structure standpoint. We think that we will always have the best margin profile versus those that have to pretty much buy everything in the merchant market. So we are very captive in many of these technologies that will be advantaged from a profitability standpoint. I would add, Simon, thank you for joining us. I would add, Simon, that we have a full portfolio of products that we're making for today and developing for tomorrow. Those are going to be even more exciting than the ones we're making today.
Shannon: Flat to down or I guess, a little bit more down on a pro forma basis seems like youre, implying a growing here.
Richard Cutts Shannon: At a fairly steady rate here, which seems to be antithetical to the synergy and.
Richard Cutts Shannon: The restructuring plan I think we announced one or two quarters ago can you help us understand why that is why it might seem to be growing at a decent rate after bottoming out here.
Speaker Change: Thanks, a lot good morning, Richard Richard I'll take it.
Speaker Change: So yes, as you pointed out our synergy plans and cost reduction has.
Speaker Change: Kept our expenses down and.
Speaker Change: In the Opex.
Speaker Change: Good thing that you're seeing in the ramp up as we go forward in the guidance.
Speaker Change: Really is around R&D around our AI product.
Speaker Change: As well as other initiatives that we have in place. So that's really the increase is coming from from the from the R&D. We've done a really good job in our SG&A expenses.
Speaker Change: Those R&D investments in the second half of the year Richard are aimed for FY 'twenty five.
Speaker Change: Beyond on the basis of new information that we receive and the last one or two quarters from our customers with great clarity.
Speaker Change: Chuck any way you'd want to characterize where those investments might sit like by your segments or end markets or anything like that.
Vincent D. Mattera: In those markets.
Vincent D. Mattera: <unk> are growing are growing extremely quickly starting with AI Richard.
Vincent D. Mattera: And for us, having full control, as Jelani just described. Our focus is on time to market, time to volume, and time to profitability. And that's where it needs to stay.
Vincent D. Mattera: Everything starts with that.
Vincent D. Mattera: Okay, great. Thanks, thanks for that detail.
Speaker Change: Thank you Richard.
Speaker Change: Thank you.
Speaker Change: Our next question.
And it comes from Karl Ackerman with BNP Paribas. Please proceed.
Karl Ackerman: Yes. Thank you good morning.
Vincent D. Mattera: We have a track record. It is a competitive market, that's for sure. We're intending to compete. Thank you. Thank you. One moment for our next question, please, comes from the line Jed Dorsheimer with William Blair. Please proceed. Hi, thanks. Most questions seem to be on Datacom, so I'll be different and just ask a two-part question.
Karl Ackerman: As you indicated earlier on this call Vic cell supply is critical right now on the ramp of both 800 gig and one <unk> transceivers.
Karl Ackerman: How has your internal capacity supported or help your design win for $1 60, which you indicated will be ramping later on this year and I guess, if you could address that perhaps you could also discuss the ramp of 116 over the next couple of quarters. Thank you.
Speaker Change: Okay. Good morning, Thanks for your question.
Speaker Change: Take it.
Speaker Change: Anything to add that Julie I'd like to add to clarify.
Thanks for the question I mean, as we said earlier, we have our own facility we have two facilities.
Jed Dorsheimer: Maybe just an update on the, I saw, I think it's maybe the first time that I've seen you kind of highlight or call out, but on the microLED, could you just talk about the products of Coherent there that you're offering? And then on silicon carbide, there's been some cross currents of data points in the market. I'm just wondering if you might be able to give an update on what you're seeing from the customer base there. Thanks. Hey, good morning, Jed. Thanks for your two questions. Chris will go first, and then Sohil will follow.
Speaker Change: Three of the Fabs.
Speaker Change: Both to producing data but.
Speaker Change: At this point in time, we're relying on only one fab and is ramping like.
Speaker Change: Needed by our.
Speaker Change: Our internal customers and will cost our semi customers to which our competitors are so as we said earlier.
Speaker Change: We have the advantage of being vertically integrated is to have a baby.
Speaker Change: A good understanding of the needs of the supply.
Speaker Change: We acquired by bio both.
Speaker Change: Both internal and external costs and so we have full control of that.
<unk>.
Speaker Change: We haven't had.
Speaker Change: Similar to the past.
Speaker Change: It is challenging in terms of the data.
Chris Thorman: Chris. Yeah, thanks, Chuck. Yeah, so we spoke about the micro-LED development that we have in previous quarters and about the multiple orders received from China, Taiwan, and Korea for the tools for a process called laser-induced forward transfer, which is where you take the currently 10-micron moving towards 5-micron micro-LEDs from the wafer to the display. So we're seeing increasing customer engagement and are very excited about the impact of micro-LEDs on the television market. And this is a very high level of engagement now and a market that will be growing over the next three to five years. Thank you, Chris. Soil?
Speaker Change: But nevertheless, we are.
Speaker Change: Doing a great job in keeping up with the demand.
Speaker Change: Both internal and external supply so at least we're shipping based on demand we are not behind even if we still need to go as requested by the forecast so yes.
Speaker Change: We are following up with the demand as we see it right now.
Speaker Change: We've done.
Speaker Change: That being a challenge at least for <unk>.
Speaker Change: <unk> supply.
Speaker Change: So we really like to add regarding Charles question on one six right and just to add to what Giovanni said is we also were one of the few in the industry actually that can make things very high speed.
Speaker Change: It's a unique capability.
Speaker Change: Thank you for your question Carl.
Thank you one moment for our next question. Please.
Speaker Change: And he is from Vivek Arya with Bank of America Securities. Please proceed.
Vivek Arya: Hi, This is Blake treatment alternative that thanks for taking my question on gross margin you provided a useful outlined on actions to return to 40%, but can you maybe quantify all the puts and takes ranging from improving utilization operational efficiencies and new products and this goes back to a previous question, but on mix just given the momentum in AI transceiver.
Sohil Khan: Hello, hello, can you hear me? Thanks for your question. We are quite bullish about the silicon carbide market and its growth prospects over the next five to ten years. And based upon that, we are sticking with our plan, which is driven from the customer engagement as well as the long-term supply agreement which we had in The announcement with Mitsubishi and Delfo has strengthened our position, and we are seeing more engagement and especially a lot of interest from both existing and new customers for 200 million. So we are going to stick to our plan of investment and expansion, and we will continue to see the growth of our business, quarter-over-quarter and year-over-year. Thank you. Thank you so much.
Speaker Change: These products at or above the corporate.
Speaker Change: Average gross margin today.
Speaker Change: Hey, good morning, Blake. Thanks, Rich yeah. So two part question. The first the first question is the AI and I think in the last earnings call. We did mention that.
Speaker Change: That it is at the average of the corporate average in terms of margin.
Blake: In terms of our ability to.
Blake: To drive margin in the future obviously, the first thing is volume.
Blake: That's one the second is <unk>.
Blake: Utilization within our Fabs.
Blake: <unk>, Fabs, which really two of our six fabs have really improved in terms of the utilization.
Blake: And also the reliance of our synergy plan the reliance of our restructuring plan is really going to be utmost.
Blake: <unk> in terms of increasing our gross margin going forward.
Richard Cutts Shannon: Thank you. Please take a moment for our next question. It comes from the line of Richard Shannon with Craig Helm Capital Group. Hi guys, thanks for taking my question. Maybe I'll ask a financial one here. Seems like after a couple of quarters of OPEX being, you know, flat to down, or I guess a little bit more down on a proforma basis, seems like you're implying growth here at a fairly steady rate here, which seems to be antithetical to the synergy and restructuring plan I think you pronounced one or two quarters ago. Can you help us understand why that is?
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: One moment for our next question please.
Speaker Change: It comes from the line of Christopher Roland with Susquehanna. Please proceed.
Christopher Adam Jackson Rolland: Thanks, Great question.
Christopher Adam Jackson Rolland: Yes can you hear me.
Christopher Adam Jackson Rolland: Can you give us good morning, Chris, Yes, Yes, hi, great.
Christopher Adam Jackson Rolland: Thanks for the question and congrats on the results.
Speaker Change: I just had one clarification and one question.
Speaker Change: First the clarification.
Speaker Change: The primary gating issue on AI is 800 gig VIX off I, just wanted to make sure whether I got that right or not.
Speaker Change: And then secondly.
Speaker Change: I wanted to talk about telco.
Speaker Change: So we're seeing more and more kind of week data points coming out for telco, but it kind of feels like maybe youre going to tell us that could be in the rearview mirror for you guys.
Richard Cutts Shannon: Why does it seem to be growing at a decent rate after bottoming out? Thanks a lot. Good morning, Richard. Richard will take it.
Richard Cutts Shannon: So, yes, as you pointed out, our synergy plans and cost reduction have kept our expenses down in OPEX. The big thing that you see in the ramp-up as we go forward in the guidance is really around R&D, around our AI product, as well as other initiatives that we have in place. So that's really the increases coming from R&D. We've done a really good job on our SG&A expenses. Those R&D investments in the second half of the year, Richard, are aimed for FY25 and beyond on the basis of new information that we've received in the last one or two quarters from our customers with great clarity. Chuck, any way you'd want to characterize where those investments might sit, like by your segments around the market. In those markets that are growing extremely quickly, starting with AI, Richard, everything starts with that. Okay, great; thanks for that detail.
Speaker Change: So is December the clear bottom there are you expecting to kind of grow through the year here.
Speaker Change: And where can we kind of normalize out on a quarterly run rate for for telecom looking forward.
Speaker Change: Okay, Chris Joanne I will clarify.
Speaker Change: Your question regarding.
Speaker Change: Regarding <unk> I know it will take to the telecom question John Yes.
John: And we've got as high as maybe.
Speaker Change: And to be clear no it's not.
Speaker Change: Okay. So we don't have a tonnage from a supply standpoint from the <unk> standpoint.
Speaker Change: Of course, when you have production conceive of modules as a number of other things that need to hop including test.
Automation of Assembly lines.
Speaker Change: <unk>.
Speaker Change: New processes and of course, there is also several supply chain, particularly around the Ics that we lead.
Speaker Change: In fact, our ability to have so everything is coming together and.
Speaker Change: Based on the demand the demand is definitely stronger than what we could supply.
Speaker Change: We are capacity limited, but not necessarily from a device standpoint, but just as an overhaul.
Vincent D. Mattera: Thank you, Richard. Thank you. One moment for our next question, and it comes from Carl Ackerman with BNP Paribas.
Speaker Change: Onto the volumes that we have been caught by surprise.
Speaker Change: By the by our customers in terms of the.
Carl Ackerman: Please proceed. As you indicated earlier in this call, VXL supply is critical right now for the ramp of both 800 gigabit and 1.6 T transceivers.
Speaker Change: The most recent podcast versus previous forecast, we're very aligned with Roadmaps, we know exactly what the customers are looking for next generation products.
Speaker Change: So we will adapt our internal supply chain to keep up with the demand currently.
Speaker Change: We don't have experience.
Vincent D. Mattera: How has your internal capacity supported or helped your design win for 1.6T, which you indicated will be ramping later this year? I guess if you address that, perhaps you could also discuss the ramp of 1.6T over the next couple quarters. Thank you. Okay, good morning, Carl. Thanks for your question. Joan will take it, and if there's anything to add that you would like to add, to clarify, she will. Please, Joan.
Speaker Change: Going back to your first question, we don't experience a challenge.
Speaker Change: Fixed a production standpoint.
Speaker Change: I wont closer to the call that we have.
Speaker Change: Capacity.
Speaker Change: Capacity for both internal and external suppliers. So we don't we can we can <unk>.
Speaker Change: Manage that as we need to.
Speaker Change: To support our own placebo business, obviously is a problem. Thanks.
Speaker Change: Thanks Ronnie.
Speaker Change: Would you take the telecom for sure good morning, Chris.
Ronnie: In telecom, we saw growth in the December quarter over the October quarter by about 20%.
John R. Ambroseo: Thanks for the question. I mean, as we said earlier, you know, we have our own facility. Actually, we have two facilities, two, three fabs that are capable of producing Datacom. But at this point in time, we're relying on only one fab, and it's ramping up, like, you know, needed by our internal customers and, of course, our external customers, too, which are our competitors. So, as we said earlier, the advantage of being basically integrated is to have a really good understanding of the needs of the supply required by our both internal and external customers. So, we have full control of that. And, you know, we have had similar ramps in the past.
Ronnie: And if we look out for the balance of the fiscal year, we expect double digit growth second half over first half.
Ronnie: And beyond that in 'twenty five.
Ronnie: As the market improves we expect additional growth both from the market coming back, but also a lot of the engagement we have with customers on design wins for new products great. Thanks, Matt. Thanks for your question Chris.
Speaker Change: Thanks, guys.
Speaker Change: Thanks for a moment for our next question.
Speaker Change: It comes from the line of Mark Miller with the Benchmark Company. Please go ahead.
Mark Miller: Thank you for the question and congrats on your progress just wondering in terms of new applications for <unk> in terms of automotive and other applications. What are you looking at over the next 12 months herself.
Speaker Change: Great. Good morning, Mark Julian when you take that one sure sorry, yes. So in addition to the Datacom market can be used in the sensing market. Obviously, we are in that.
John R. Ambroseo: This is a challenging ramp-up in terms of data rates, but nevertheless, I think we are doing a great job of keeping up with the demand. So at least we're shipping based on demand. We are not behind, even if we still need to grow as requested by the forecast. So we are following up with the demand as we see it right now. So we don't see that as a challenge, at least for our Vixel supply.
Speaker Change: Sensing world.
In mobile phone application.
Speaker Change: And then in addition to that you've seen use VIX those were all kind of other sensing including.
Speaker Change: In a vehicle potentially in health application.
Speaker Change: So many.
Speaker Change: <unk> future applications.
Speaker Change: Pixels in Tennessee.
Julie Ng: Julie, would you like to add regarding Carl's question on 1.6c? Right, just to add to what Giovanni said is that we are also one of the few in the industry that can make these very high. It's a unique capability. Thanks. Thank you for your question, Carl. Thank you. One moment for our next question, please. And it's from Vivek Arya with the Bank of America Securities. Please proceed. Hi, this is Blake Friedman. I'm from the VEC.
Thank you Ms. Julie Thank you Mark.
Speaker Change: Thank you one moment for our next question. Please.
Speaker Change: Comes from the line of her team salvage yard with Northland capital markets.
Speaker Change: Hi, good morning, and I'm, sorry, if I might've missed this earlier.
Speaker Change: But.
Speaker Change: You talked about 800 gig.
Speaker Change: Transceiver shipments at.
At about $100 million in the quarter kind of doubling sequentially.
Speaker Change: Do you have an outlook for where you expect that number to go either in fiscal Q3 or by year.
Blake Friedman: Thanks for taking my question. On gross margin, you provided a useful outline of actions to return it to 40%. But can you maybe quantify all the puts and takes ranging from improving utilization, operational efficiencies, and new products? And this goes back to a previous question, but on mix, just given the momentum and AI transceivers, are these products at or above the corporate average gross? Hey, good morning, Blake. Thanks, Rich. Yeah, so this is a two part question. The first the first question is the AI.
Speaker Change: Year end.
Speaker Change: And.
Speaker Change: A follow up from there thanks.
Speaker Change: Okay, Tim Thanks for your question.
Speaker Change: Tim.
Speaker Change: What we said.
Speaker Change: I may have missed is what I said.
Speaker Change: I expect our shipments in Q3 to be greater than Q2 and in Q4 greater than Q3.
Speaker Change: We're on a ramp is going up into the right.
Speaker Change: Okay, well if I might.
Speaker Change #101: Maybe follow up on that a little bit I mean, you are talking about fairly modest sequential growth here for Q3 and growth in telecom.
Speaker Change #100: So I guess.
Speaker Change #102: Are you looking for.
Speaker Change #102: And even if you look at your Q2 results it seems like.
Richard Cutts Shannon: And I think in the last earnings call, we did mention that it is at the average of the corporate average in terms of margin. In terms of our ability to drive margin in the future, obviously, the first thing is volume.
Speaker Change #102: Lower speed stuff might have come down pretty good so youre seeing some offsets there.
Speaker Change #102: That the dynamic for overall datacom revenue or.
Speaker Change #102: What are the puts and takes us.
Speaker Change #102: Or is that slowing.
Speaker Change #103: Slowing a bit I guess is from yes.
Richard Cutts Shannon: That's one. The second is utilization within our FABs, which two of our six FABs have really improved in terms of utilization. And also, the reliance of our synergy plan, the reliance of our restructuring plan is really going to be of utmost importance in terms of increasing our growth margin going forward. Thank you. Thanks. One moment for our next question, please.
Okay.
Speaker Change #104: It really is an insightful question meta Marshall had the same question and Sanjay tried to address it.
Speaker Change #105: Take another pass at it.
Speaker Change #104: Okay.
Speaker Change #104: No.
Speaker Change #106: Thanks for the question Tim Good morning.
Sanjay Parthasarathy: So in terms of the market the market the fastest growing segment of the market is <unk>, which is really AI.
Sanjay Parthasarathy: We just redid our forecast on a market that's growing at a 65% CAGR in the next five years, Tim So it's a very sharply growing market and we expect we aim to grow faster than that market now the traditional networking market is certainly not growing at that clip and we are we.
Christopher Adam Jackson Rolland: Please proceed. Thank you for the question. Yeah, can you hear me?
Christopher Adam Jackson Rolland: Thanks for the question and congrats on the results. I just had one clarification and one question. First, the clarification: the primary gating issue on AI is 800 gigabyte VXLs. I just wanted to make sure whether I got that right or not.
John R. Ambroseo: And then, secondly, I wanted to talk about telco. So, we're seeing more and more kind of weak data points coming out for telco, but it kind of feels like maybe you're going to tell us that could be in the rearview mirror for you guys. So, is December the clear bottom there?
We're not really factoring a significant rebound in our non AI if you will.
Sanjay Parthasarathy: Mark a market growth of our revenue growth.
Sanjay Parthasarathy: So a lot of our revenue growth is coming from from AI related applications hopefully that's clear.
Tim: Thank you Sanjay.
Tim: Yes.
Speaker Change #109: Sorry, Thanks I appreciate it.
Magnus Bengtsson: Are you expecting to kind of grow through the year here? And where can we kind of normalize out on a quarterly run for telecom? Okay, Chris, do you want to clarify your question? Regarding Vixels, and Magnus will take the telethon question. Do you want to?
Sanjay Parthasarathy: Yes, Thanks, Tim.
Speaker Change #110: For our next question.
Speaker Change #110: And he is from Ananda Baruah Ananda Baruah with loop capital. Please proceed.
Ananda Baruah: Good morning, guys. Thanks for taking the question and congrats on the strong execution.
Ananda Baruah: Yes, actually just a follow up Sanjay.
Ananda Baruah: Clarification is that the.
Christopher Adam Jackson Rolland: Yes. So, let me clarify. Let me try to be clear.
Ananda Baruah: I guess, what is 65% growth.
John R. Ambroseo: Okay, so we don't have a challenge from a supply standpoint with the pixels. But, of course, when you ramp up the production of transceiver modules, there's a number of other things that need to happen, including test automation of assembly lines, new processes. And, of course, there is also an external supply chain, particularly around ICs, that will impact our ability to ramp. So everything is coming together, and based on the demand, the demand is definitely stronger than what we can supply. We have capacity limited, but not necessarily from a device standpoint, but just as an overall ability to add to the volumes that have been caught by surprise by our customers in terms of the most recent forecast versus previous forecasts. We are very aligned with roadmaps. We know exactly what customers are looking for in next-generation products, and so we'll adapt our internal supply chain to keep up with the demand. Currently, we don't have experience. Going back to your first question, we don't experience any challenges from a digital production standpoint.
Ananda Baruah: Five years specifically.
Ananda Baruah: <unk>.
Speaker Change #112: Hi, good morning.
Speaker Change #112: Is the growth of 800 G and about Trump Sievers Datacom Transceivers from calendar 'twenty three the cabinet of 28.
Speaker Change #112: I got it set a 63%.
Speaker Change #112: Secret household and I guess my question is any way to think about yet.
Speaker Change #112: The transceiver applications for Gen AI outside of the Hyperscale complex, specifically I'm thinking at telcos and on premise say like Fortune 1000 sites.
Good morning.
Hey, good morning, another jewelry will take the next one Asia Alright, good morning, Good morning, Yes.
Speaker Change #112: Obviously, the biggest deployments are at the biggest web scale and as time goes on that spreads out as you pointed out to other.
Speaker Change #112: Smaller entities that could either hosted services or people may choose to have their services on premise so that diversifies the customer base.
Speaker Change #112: Similar actually to the Ethernet market.
Speaker Change #112: And then.
Speaker Change #112: So the Gen I forgot the second part of the question with regards to will it spillover into telecom.
Speaker Change #112: Yes, eventually all spilled over to telecom because all of that data is getting generated inside has to go somewhere. So we do believe that that will impact our telecom revenue in a positive way over time.
John R. Ambroseo: And I want to also recall that we have sufficient capacity for both internal and external supplies. So we can manage that as we need to support our own transceiver business, obviously, as a product. Thanks for joining us. Mattis, would you take the telecom question? Sure. Good morning, Chris. So, in telecom, we saw growth in the December quarter over the October quarter by about 20%. And if we look out for the balance of the fiscal year, we expect double-digit growth in the second half over the first half.
Speaker Change #112: The impact eventually also non AI datacom revenue and then finally something that might not be so directive of comparison, but these gen AI chips.
Speaker Change #112: Required than most.
Speaker Change #112: Advanced process nodes.
Speaker Change #112: And that's beneficial to our.
Speaker Change #112: Our industrial segment for our semi cap inspection lasers.
Speaker Change #113: Thanks Joey.
Speaker Change #113: But I would add that besides datacom, the datacom and <unk>.
Magnus Bengtsson: And beyond that, in 2025, as the market improves, we expect additional growth, both from the market coming back, but also a lot of the engagement we have with customers on design wins for new products. Great. Thanks, Mattis.
Telecom verticals.
Speaker Change #113: We have a semi cap equipment.
Speaker Change #113: Business and it's also underpinning.
Speaker Change #113: The growth in AI by providing new tools, including laser based tools and engineered materials.
<unk>.
Speaker Change #113: Two one OEM.
Mark Miller: Thanks for your question, Chris. Thanks guys. Thanks one moment for our next question, which comes from the line of Mark Miller with the Benchmark Company. Please go ahead. Thank you for the question and congratulations on your progress. Just was wondering, in terms of new applications for Vixels in terms of automotive and other applications, what are you looking at over the next 12 months?
Speaker Change #113: Oems that have to build equipment to make the devices, we have a surround it.
Speaker Change #113: Yes.
Speaker Change #113: Thanks.
Speaker Change #114: Thanks to another.
Speaker Change #115: Thank you one moment for our next question.
Speaker Change #115: And he is from the line of Dave Kang with B Riley. Please proceed.
Dave Kang: Thank you. Thank you good morning.
Dave Kang: Question is on on arm lasers, Chuck I think you've talked about in the past that.
Julie Ng: Great. Good morning, Mark. Julie, will you take that one?
Dave Kang: That is the arm lasers as eight figure opportunity and could reach nine figures. If you successfully penetrate the Chinese market just wondering if you can.
Julie Ng: Sure, sure. Yeah, so Vixels, in addition to the Datacom market, can be used in the sensing market. Obviously, we're in the sensing world in mobile phone applications. And then, in addition to that, you can use Vixels for all kinds of other sensing, including, you know, in a vehicle, potentially in health applications. So many potential future applications of Vixels in sensing.
Speaker Change #117: Give us an update there.
Vincent D. Mattera: Thanks, Dave Thanks for asking about one of our other super exciting opportunities Giovanni.
Speaker Change #118: Dave Thanks for the question.
Speaker Change #118: Yes.
It's actually just recently we learned that.
Speaker Change #118: Major battery maker in China kind of displaced our competitor believes it to the places with our clients on the production line. So we think.
Timothy Paul Savageaux: Thank you, Mark. Thank you. One moment for our next question, please, comes from the line of Tim Savageaux with Northern Capital Markets. Hi, good morning, and I'm sorry if I might have missed this earlier. But
Speaker Change #118: It's going to be.
Speaker Change #118: Huge opportunity for <unk> since it's one of the largest bus makers in the world. So we think.
Speaker Change #118: Additional to the existing customers as people ramping production I see the major advantage of the Spotlessly.
Vincent D. Mattera: We talked about 800 gigabytes. Transceiver Shipment, at about $100 million in the quarter, kind of doubling sequentially. Do you have an outlook for where you expect that number to go either in fiscal Q3 or by Q4? year-end, and I'll follow up from there. Thanks. Yeah, okay, Tim.
Speaker Change #118: Nope velocity kind of world.
Speaker Change #118: <unk> provided by our own laser beam profile, we believe that.
Speaker Change #118: We have to.
Speaker Change #118: Knowing the market stage.
Vincent D. Mattera: Thanks for your question. Tim, what we said that you may have missed is what I said. I expected our shipments in Q3 to be greater than Q2, and in Q4, greater than Q3. We're on a ramp; it's going up and to the right.
Speaker Change #118: We're going to be.
Speaker Change #118: Or is it just the batteries for Evs I think we've seen and also application beyond that.
Not all of the automotive market for example in the semi cap equipment market we've been in.
Speaker Change #118: Engaged recently on walking on some advanced lithography tools to provide laser welding for some special.
Timothy Paul Savageaux: Okay, well, if I might maybe follow up on that a little bit. I mean, you're talking about fairly modest sequential growth here for Q3 and growth in telecom. So I guess. What are you looking for? And even if you look at your Q2 results, it seems like the lower speed stuff might have come down pretty good.
Speaker Change #118: Alloys.
Speaker Change #118: That.
Speaker Change #118: Maybe by those rules.
Speaker Change #118: We're aiming to drive a paradigm shift when it comes to laser welding.
Speaker Change #119: Got it thank you.
Speaker Change #120: Thank you one moment for our next question. Please.
Speaker Change #120: When it comes from the line of Jim Ricchiuti with Needham <unk> Company. Please proceed.
Sanjay Pathasarathy: So you're seeing some offsets there is sort of that dynamic for, you know, overall Datacom revenue or. You know, what are the puts and takes? And or is that ramp slowing a bit, I guess? It really is an insightful question, and Meta Marshall had the same question, and Sanjay tried to address it. Let's let him take another pass at it.
Jim Ricchiuti: Alright. Thanks.
Jim Ricchiuti: Hi, Chuck I Wonder if you can elaborate.
Jim Ricchiuti: The covenant.
Jim Ricchiuti: Early on in the shareholder letter.
Jim Ricchiuti: Wood.
Vincent D. Mattera: Consider other strategic opportunities to unlock shareholder value I'm wondering what that means are you, suggesting that you might pursue some smaller M&A to maybe expand in some areas that you may not necessarily have the presence you want ahead.
Vincent D. Mattera: That's a great great questions from time to time asked about it.
Sanjay Pathasarathy: Okay, so thanks for the question, Tim. Good morning. So in terms of the market, the market, the fastest growing segment of the market is 800G and above, which is really AI. You know, we just redid our forecast on the market. It's growing at a 65% CAGR in the next five years, Tim. So it's a very sharply growing market. And we expect we aim to grow faster than it than that market. Now, the traditional networking market is certainly not growing at that cliff, and we are not really factoring a significant rebound in our non-AI, if you will, market growth or revenue growth. So a lot of our revenue growth is coming from AI-related applications. Hopefully that's clear. Thank you, Sanjay. I'm a little late. Sorry.
Vincent D. Mattera: We were prudent stewards of our capital and wondering let me ask Bob <unk>, our president and if he would like to remark.
Bob: Sure I'm happy to Chuck.
Bob: Yes.
Bob: We have been.
Bob: <unk> been open to all kinds of transactions in the history of the company and we are both great partners and as Chuck said shareholder value as always are our driver. So we are actively like we have been for 51 years considering lots of alternatives.
Bob: To grow shareholder value.
Bob: As we indicated shareholder shareholder letter.
Bob: Probably going to be smaller transactions not material, but that is that is our focus across all range of potential transactions.
Speaker Change #123: Well, thank you Bob.
Speaker Change #124: Case of expanding in some areas that you are underserved.
Speaker Change #125: Is that is that the focus.
Bob: Well for sure there is.
Ananda Barua: Thanks. Appreciate it. Thanks. Yeah, thanks, Pam. One moment for our next question. And he's from Ananda Barua, Ananda Barua with Loop Capital, please.
Bob: Look at all of the technologies and the opportunities we have.
Bob: There are a lot of quarters that we can looking for areas to grow.
There is also tremendous opportunities to partner so we have we.
Vincent D. Mattera: Yeah, good morning, guys. Thanks for taking the question. And congrats on the strong execution. Um, actually, just to follow up there, Sanjay, clarification: is that the, I guess, what is 65% growth over the next five years? specifically.
Bob: We are considering all of those options and have active engagements.
Bob: In those areas.
Speaker Change #126: Thank you.
Speaker Change #127: Thank you Jim.
Speaker Change #127: Goodbye.
Speaker Change #128: For our last question please.
Speaker Change #128: And it comes from the line of Mike Genovese with <unk> Securities.
Mike Genovese: Hi, guys, good morning, and I guess.
Ill go to beating the dead horse here.
Mike Genovese: When I parse your comments on.
Sanjay Pathasarathy: Hi Ananda, good morning. This is the growth of 800G and above transceivers, Datacom transceivers, from calendar 23 to calendar. I got it. It's at 65%, super helpful.
Mike Genovese: 800, <unk> as a percentage of Datacom transceivers this year.
Mike Genovese: I end up somewhere in the range of <unk>.
Mike Genovese: Revenue should be.
Mike Genovese: 70% to 150% higher than the $300 million you talked about.
Mike Genovese: Entering the year and so with that as the preamble My two part question is.
Julie Ng: And I guess my question is, any way to think about yet? Transceiver Opportunity for Gen-AI outside of the hyperscale complex, and so specifically, I'm thinking at telcos and on-premise, say, Fortune 1000 sites. Okay. Good morning, Ananda. Julie will take the next one.
Mike Genovese: Are we still looking at 20% of the revenues being in the first half of the year and 80% in the second half of the year. Like you guys said last quarter or is that sort of has that changed a little bit and then secondly, just as we look at fiscal <unk>.
Mike Genovese: 25 should we put some days.
Julie Ng: Okay. Sure. Good morning. Good morning, Ananda. Yeah. So, obviously, the biggest deployments are at the biggest web scale, and as time goes on, that spreads out, as you point out, to other smaller entities that could either host services, or people may choose to have their services on-premise, so that diversifies the customer base, similar, actually, to the Ethernet market. And then...
Mike Genovese: CAGR, which I think you said was 55% if I heard that right. I mean is that roughly the right way to think about where we start for fiscal 'twenty five growth in that business. Thank you. Okay. Thank you Mike Okay Sanjay.
Speaker Change #130: Yes. Thanks.
Sanjay Parthasarathy: Good morning, Mike So I think our revenue pattern.
Sanjay Parthasarathy: Is pretty much in line with what you. What you stated in terms of our growth rate. Obviously, we are we are going to we are aiming to do even better than that in terms of the second half of the fiscal year.
Julie Ng: So the Gen AI, I forgot the second part of the question. With regard to whether it will spill over into telecom? Oh, thank you, thank you. Yes, eventually, it all spills over to telecom because all that data that's getting generated inside has to go somewhere.
Speaker Change #131: And you.
Speaker Change #131: 65% is a five year CAGR, so just keep that in mind.
Speaker Change #132: But sorry, but I'll, let Chuck I guess 2080, though is that we're still targeting 28, it hasn't that hasn't flattened out a little bit because of the good performance in <unk>, it's still until 2030.
Vincent D. Mattera: So we do believe that that will impact our telecom revenue in a positive way over time, and should eventually impact also non-AI datacom revenue. And then finally, something that might not be so direct of a comparison, but these Gen AI chips also require the most advanced process nodes, and that's beneficial to our industrial segment for our semi-cap inspection. Thanks, thanks, Julie. I would add that besides Datacom, the Datacom and Telecom verticals, we have a semi-capital equipment business, and it's also underpinning the growth in AI by providing new tools, including laser-based tools and engineered material tools, to OEMs that have to build the equipment to make the devices. I mean, we have it surrounded.
Speaker Change #133: As close to that yes.
Vincent D. Mattera: Okay, maybe a little bit higher this morning, and a little lower than 80, but its roughly right.
Speaker Change #134: Okay, great. Thanks, so much got a great job. Thank you welcome Youre welcome. Thank you for your comments. Thank you and this concludes sticky M&A session I will turn it back to Paul <unk> for any final comments.
Paul: Thank you Karen I want to thank all the analysts on the call for their four questions. So I want to thank all of you on the lawn for having joined US This morning.
Paul: Forward to talking to you in the future. Thank you.
Speaker Change #135: Thank you, ladies and gentlemen for joining US today you may now disconnect.
Speaker Change #135: Okay.
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Ananda Barua: Yeah, that's great. Good job. Thanks. Thanks, Renata. Thanks, Renata.
Speaker Change #135: Okay.
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Dave Kang: Thank you. One moment for our next question. And he's from the line of Dave Kang with Bee Riley.
Speaker Change #135: Okay.
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John R. Ambroseo: Please proceed. Thank you. Thank you. Good morning. Questions on armed lasers.
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Dave Kang: Chuck, I think you talked about in the past that armed lasers are an eight-figure opportunity and could reach nine figures if you successfully penetrate the Chinese market. Just wondering if you can give us an update on that. Thanks, Dave. Thanks for asking about one of our other super exciting opportunities, Giovanni. Yeah, Dave, thanks for the question. Yeah, we're making a lot of progress. Actually, just recently, we learned that a major battery maker in China kind of displaced our competitor's laser to replace it with ours on the production line.
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John R. Ambroseo: So we think it's going to be a huge opportunity for gold since it's one of the largest battery makers in the world. So we think, in addition to the existing customers that keep ramping production and see the major advantage of the sputter-free and no porosity kind of weld quality provided by our ARM laser beam profile, we believe that we will continue to grow in the market space. And it's not going to be limited just to batteries for EVs. I think we're seeing applications beyond that, you know, not only in the automotive market, but for example, in the semi-cap equipment market. We've been engaged recently in working on some advanced lithography tools to provide laser welding for some special alloy parts that are needed by those tools.
Speaker Change #135: Yes.
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John R. Ambroseo: Dave, we're aiming to drive a paradigm shift when it comes to laser welding. Got it. Thank you. Thank you. One moment for our next question, please. Nick comes from the line of Jim Ricchiuti with Needham and Company.
Jim Ricchiuti: Please proceed. Thanks. I wonder, hi Chuck, I wonder if you could elaborate on the comments early on in the shareholder letter that you, Richard Cannon, Colinus Colinus, considers other strategic opportunities to unlock shareholder value. I'm wondering what that means. Are you suggesting that you might pursue some smaller M&A to maybe expand in some areas that you may not necessarily have the presence you want to have? That's a great, great question. We're often asked about it from time to time.
Vincent D. Mattera: We are prudent stewards of our capital. And let me ask Bob Bashoor, our president, if you'd like to make a comment. Sure. Yep, I'm happy to Chuck. Yes, as you know, we have been open to all kinds of transactions in the history of the company. And we are both great partners.
Bob Bashoor: And as Chuck said, shareholder value is always our driver. So we are actively, like we have been for 51 years, considering lots of alternatives to grow shareholder value. As we indicate in the shareholder letter, these are probably going to be smaller transactions, not material, but that is our focus across all ranges of potential transactions. But is it a case of expanding in some areas that you're underserved? Is that the focus?
Jim Ricchiuti: Well, for sure, if you look at all the technologies and the opportunities we have, there are a lot of areas that we can look into for areas to grow. There are also tremendous opportunities to partner. So we are considering all of those options and have active engagement in those areas. Thank you. Thank you, Jim. Thank you. Thank you, Bob.
Bob Bashoor: One moment for our last question, please. It comes from the line of Mike Genovese with Rothenblatt Securities. All right, good morning, and I guess... I'll go to beating the dead horse here. When I, when I, when I parse your comments on.
Speaker Change #135: Okay.
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Mike Genovese: 800G as a percentage of Datacom transceivers this year. I end up somewhere in the range of revenue should be. 70 to 150 percent higher than the 300 million you talked about entering the year, and so with that as the preamble, my two-part question is, Are we still looking at 20% of revenues being in the first half of the year and 80% in the second half of the year, like you guys said last quarter, or has that changed a little bit? And then, secondly, just as we look at fiscal 25, should we put Sanjay's TAGR, Thank you. Okay. Thank you, Mike. Okay. Sanjay?
Okay.
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Vincent D. Mattera: Yeah. Thanks, Chuck. Good morning, Mike.
Speaker Change #135: Okay.
Sanjay Pathasarathy: So I think our revenue pattern is pretty much in line with what you stated in terms of our growth rate. Obviously, we are aiming to do even better than that in terms of the second half of the fiscal year. And mind you, 65% is a five-year CAGR, so maybe just keep that in mind. Yeah, but I'm sorry, but on the just I guess 2080, though, is that we're still targeting 2080. It hasn't that flattened out a little bit because of the good performance in 2Q. It's still, it's still 2080. It's close to that. It's so close. It may be a little bit higher than 20 and a little lower than 80, but it's roughly right.
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Sanjay Pathasarathy: Okay. Great. Thanks so much.
Speaker Change #135: [music].
Mike Genovese: Great job. Thank you. You're welcome.
Paul Silverstein: Thank you. And this concludes the Q&A session. I will turn it back to Paul Servestin for any final comments.
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Speaker Change #135: [music].
Paul Silverstein: I want to thank all the analysts on the call for their thoughtful questions, and I want to thank all of you on the line for having joined us this morning, forward to talking to you in the future. Thank you. Thank you, ladies and gentlemen, for joining us today. You may now disconnect. ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? , , , , , , , , , , , , , , ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Good day, and thank you for standing by. Welcome to the Coherent Corp Fiscal Year 2024 Second Quarter Earnings Conference. At this time, all participants are in a listen-only mode.
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Speaker Change #135: [music].
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised.
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Operator: To withdraw the question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to the Vice President of Investor Relations for Coherent Corp, Paul Silverstein. Thank you, Carmen, and good morning, everyone. Thank you for joining our second quarter fiscal 2024 earnings call. The call will be available for webcast replay on the Investor Relations section of our website.
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Paul Silverstein: On the call, we have Coherent's Chair and CEO, Dr. Chuck Matera, and a number of Coherent senior leaders who Chuck will introduce shortly. This morning, we will devote the majority of our time to answering questions from analysts in the investment community. Yesterday, after the market closed, we issued a press release, posted a shareholder letter, an updated investor presentation to the investor relations section of our website, and furnished these documents in a form 8K. This morning, we filed our 10Q. The shareholder letter contains the financial statements historically included in our earnings press releases and detailed information regarding our operating performance, key trends, and outlook.
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Paul Silverstein: Before we begin, a short statement about forward-looking statements. We may make and or refer to forward-looking statements, including statements about future performance and market outlook. However, actual results may differ from those in the forward-looking statement. The shareholder letter and our SEC report set forth risk factors that could cause actual results to differ materially. We assume no obligation to update forward-looking statements.
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Paul Silverstein: We speak only as of their respective dates. During this call, we may discuss both GAAP and non-GAAP financial measures. If we do, a reconciliation of GAAP to non-GAAP measures is included in the shareholder letter. If we present historical non-GAAP financial measures, we will limit our discussion to those that are reconciled in the shareholder letter.
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Paul Silverstein: Before I turn the call over to Chuck for his opening remarks, please note that on March 26th, at the Optical Fiber Conference, or OFC, in San Diego, we plan to host a meeting with the investment industry, which will be webcast, during which we will provide an update regarding our communications market. And in April of this year, we plan to host our third market overview webinar, which will be focused on our instrumentation market. The first two market webinars focused on our communications and industrial markets are available in the investor relations section of our website.
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Speaker Change #136: Good day, and thank you for standing by welcome to the coherent <unk> fiscal year 2024 second quarter earnings conference. At this time, all participants are in a listen only mode.
Paul Silverstein: With that, it is my pleasure to turn the call over to Coherent's Chairman and CEO, Dr. Chuck Matera. Thank you, Paul. It's a great day here in Silicon Valley, close to most of our largest customers. As I've said before, leadership development is among a CEO's most important responsibilities. Given the shareholder letter's extensive disclosures, I have asked the following senior leaders to participate in the Q&A fireside chat on today's call. Rich Martucci, Interim Chief Financial Officer. Bob Bashoor, President.
Speaker Change #136: After the speaker's presentation, there will be a question and answer session to ask a question. During this session you will need to press star one one on your telephone hugoton here, an automated message advising your handy space to withdraw your question. Please press star one again, please be advised that today's conference is being recorded.
Speaker Change #136: I would now like to hand, the conference over to the Vice President of Investor Relations for coherent Corp, Paul Davis team.
Vincent D. Mattera: Dr. Giovanni Barbarossa, Chief Strategy Officer and President, Materials Segment. Sohil Khan, Executive Vice President, Silicon Carbide LLC, our newly created subsidiary for our Silicon Carbide business. Dr. Chris Thorman, Executive Vice President, Lasers, who came to us through the Coherent Acquisition. Magnus Bengtsson, Chief Commercial Officer, who leads our global sales and service organization, and who also came to us through the Coherent Acquisition. Dr. Sanjay Pathasarathy, Chief Marketing Officer, and Dr. Julien Ng
Paul Davis: Thank you Carmen and good morning, everyone.
Paul Davis: Thank you for joining our second quarter fiscal 2024 earnings call.
Paul Davis: All will be available for webcast replay on the Investor Relations.
Paul Davis: Some of our website on the call we are coherent assurance CEO, Dr. Chuck Mattera, and a number of coherent senior leaders, who Chuck will introduce shortly.
Speaker Change #138: This morning, we will devote the majority of our time to answer questions from analysts and the investment community.
Speaker Change #138: Yesterday after market close we issued a press release posted a shareholder letter and updated investor presentation to the Investor Relations section of our website and first these documents in a form 8-K. This morning, we filed our 10-Q the shareholder letter containing the financial statements. Historically included in our earnings press releases.
Speaker Change #138: And detailed information regarding our operating performance key trends and outlook before we begin a short statement about forward looking statements, we may make and or refer to forward looking statements, including statements about future performance and market outlook actual results may differ from those in the forward looking statements.
Vincent D. Mattera: Chief Technology Officer. As being among the industry's best, they will provide investors with a rich source of information about the depth and breadth of our markets, technologies, operations, and overall business. We emerged from the second quarter with greater confidence and excitement regarding a return to stronger growth and meaningfully enhanced profitability. For the quarter, we delivered solid sequential improvement in revenue and margin. The highlights of our second quarter include healthy sequential increases in both gross and operating margin, ongoing AI-driven strength in the datacom vertical of our communications market, signs of improving demand in all four verticals within our industrial market and the telecom vertical of our communications market, the consummation of the previously announced transactions with Mitsubishi Electric and Denso Corporation, in which they invested an aggregate of $1 billion in our silicon carbide business and entered into long-term supply agreements supporting demand for silicon carb We've already implemented actions across virtually all of our businesses in a drive for enhanced operating efficiency.
Speaker Change #138: Our holder letter in our SEC reports set forth risk factors that could cause actual results to differ materially.
Speaker Change #138: We assume no obligation to update forward looking statements, which speak only as of their respective dates. During this call. We may discuss both GAAP and non-GAAP financial measures.
Speaker Change #138: If we do a reconciliation of GAAP to non-GAAP measures is included in the shareholder letter.
Speaker Change #138: We present historical non-GAAP financial measures, we will limit our discussion to those that are reconciled in the shareholder letter.
Speaker Change #138: Before I turn the call over to Chuck for his opening remarks. Please note that on March 26 at the optical fiber conference or OFC in San Diego, We plan to host a meeting with the investment.
Speaker Change #138: The investment industry, which will be webcast during which we will provide an update regarding our communications market.
Vincent D. Mattera: And in April of this year, we plan to host our third market overview webinar youll be focus on our instrumentation market.
Vincent D. Mattera: First to market Webinar will focus on our communications and industrial markets are available on the Investor Relations section of our website with that it's my pleasure to turn the call over to <unk>, Chairman and CEO, Dr. Chuck Mattera.
Vincent D. Mattera: Thank you Paul it's a great day here in Silicon Valley close to most of our largest customers.
Vincent D. Mattera: As I've said before leadership development is amongst Ceos, most important responsibilities.
Vincent D. Mattera: Given the shareholder letters extensive disclosures.
Speaker Change #139: Asks the following senior leaders to participate in the Q&A fireside on today's call.
Richmond, Tucci interim Chief Financial Officer.
Bob Bachelor: Bob Bachelor President.
Bob Bachelor: Dr. Giovanni Barbarossa, Chief strategy Officer, and President materials segment.
Vincent D. Mattera: These actions, along with rigorous cost and expense control across the company, helped drive our sequential improvement in gross and operating margin in the second quarter. We are on a roll, but we're far from done. As we continue to transform the company to improve operating performance, we will optimize our production footprint and enhance operating resiliency while completing the integration of legacy coherence. We also are exploring other strategic opportunities, not including material acquisitions, to unlock shareholder value.
Bob Bachelor: So he'll kohn executive Vice President Silicon Carbide LLC.
Bob Bachelor: Newly created subsidiary for our Silicon carbide business.
Bob Bachelor: Chris Gorman Executive Vice President lasers, who came to us through the coherent acquisition.
Bob Bachelor: Magnus Bankston, Chief commercial officer, who leads our global sales and service organization and who also came to us through the coherence acquisition, Dr. Sanjay Parthasarathy, Chief marketing Officer and Dr. Julie <unk>.
Bob Bachelor: Chief Technology Officer.
Bob Bachelor: As being among the industry's best they will provide investors a rich source of information about the depth and breadth of our markets technologies operations and overall business.
Vincent D. Mattera: Now for some numbers. While the macroeconomic environment continues to present challenges, we are pleased with our operating results for the quarter. We posted revenue of $1.131 billion, which was above the midpoint of our guidance, and Nongap EPS of $0.36, which was above the high end of our guidance. Operating cash flow was $67 million, we invested $91 million in capital equipment, and we retired $89 million of debt.
Bob Bachelor: We emerged from the second quarter with greater confidence and excitement regarding a return to stronger growth and meaningfully enhanced profitability.
Bob Bachelor: For the quarter, we delivered solid sequential improvements in revenue and margins.
Bob Bachelor: The highlights of our second quarter include healthy.
Bob Bachelor: Healthy sequential increases in both gross and operating margin.
Bob Bachelor: Ongoing AI driven strength in the Datacom vertical of our communications market.
Bob Bachelor: Signs of improving demand in all four verticals within our industrial market.
Vincent D. Mattera: In addition to continuing to invest in our core assets, we are taking substantive actions to ensure we improve our resiliency and operating performance, especially to drive improvement in our margin structure, including through global integration and transformation and the realization of our Synergy Plan from the Legacy Coherent Acquisition, as well as our previously announced Restructuring and Consolidation Plan. Our guidance for the third quarter of fiscal 2024 is as follows. Revenue of approximately $1.12 to $1.20 billion, and non-GAAP earnings per share of approximately $0.32 to $0.52. And our updated guidance for fiscal 2024 is revenue of $4.55 to $4.70 billion, which represents a $50 million increase at the low end of our previous guidance. Non-GAAP earnings per share of $1.30 to $1.70, which is up from $1.00 to $1.50 previously.
Bob Bachelor: And the telecom vertical of our communications market.
Bob Bachelor: For the consummation of the previously announced transactions with Mitsubishi Electric and Denso Corporation in which they invested an aggregate of $1 billion in our silicon carbide business and entered into long term supply agreements supporting demand for silicon carbide substrates and.
Bob Bachelor: <unk> wafers and slide an increase in our planned debt repayment in fiscal 2024, resulting from the silicon carbide LLC being able to fund its operating and capital expenditures.
Bob Bachelor: While we expect that the higher revenue and the mix in our forecast will contribute to a rebound in margin structure. We are not waiting for improved end market demand to carriers.
Bob Bachelor: We've already implemented actions across virtually all of our businesses and a drive for enhanced operating efficiency.
Bob Bachelor: These actions along with rigorous cost and expense control across the company helped drive our sequential improvement in gross and operating margin in the second quarter.
Bob Bachelor: We are on a roll, but we're far from done.
As we continue to transform the company to improve operating performance, we will optimize our production footprint and enhanced operating resiliency, while completing the integration of legacy coherent.
Vincent D. Mattera: Before we take your questions, I would like to say how appreciative and how proud I am of the senior leaders on this call and all of our other employees whose tireless dedication is setting the stage for what's now, next, and beyond. Coherent is well-positioned with differentiated technology, exceptional talent, and high-quality, efficient manufacturing platforms capable of delivering products to markets that are rapidly growing.
Bob Bachelor: We also are exploring other strategic opportunities not including material acquisitions to unlock shareholder value.
Bob Bachelor: Now for some numbers.
Bob Bachelor: While the macro economic environment continues to present challenges we are pleased with our operating results for the quarter.
Bob Bachelor: We posted revenue of 113, 1 billion, which was above the midpoint of our guidance.
Bob Bachelor: And non-GAAP EPS of <unk> 36.
Bob Bachelor: Which was above the high end of our guidance.
Bob Bachelor: Operating cash flow was $67 million, we invested $91 million in capital equipment, and we retired $89 million of debt.
Vincent D. Mattera: And I believe we are better positioned than others to take full advantage of our existing market positions and to penetrate deeper into these markets, largely because of the intimacy, trust, and partnerships we have cultivated with market leaders and our increased scale, creating stability in our core business and creating a flywheel effect of other growth opportunities that many of our competitors simply don't have. In the upcoming years, we have tremendous upside potential and platform cost optimization attributable to the ongoing legacy coherent integration, special restructuring, and transformation projects that we've announced. We expect success given our proven track record and have a strong plan and roadmap in place which will allow us to capitalize on the recovery and growth in our markets and the broader market opportunity. We are endowed with 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 it over to Paul. Well, thank you, Chuck. We will now open the call for analyst questions. Please limit yourself to one question. That call is scheduled for an hour. With that said, Carmen.
Bob Bachelor: In addition to continuing to invest in our core assets. We are taking substantive actions to ensure we improve our resiliency and operating performance.
Bob Bachelor: Especially to drive improvement in our margin structure, including through global integration and transformation and the realization of our synergy plan from the legacy coherent acquisition as well as our previously announced restructuring and consolidation plan.
Bob Bachelor: Our guidance for the third quarter of fiscal 2020 for US is as follows.
Bob Bachelor: Revenue of approximately $1, one two to $1 two zero billion.
Bob Bachelor: non-GAAP earnings per share of approximately 32%.
Bob Bachelor: To 52.
Bob Bachelor: And our updated guidance for fiscal 2024 as revenue of $4 $5 five to $4 seven zero billion, which represents a $15 million increase at the low end of our previous guidance.
Bob Bachelor: non-GAAP earnings per share of $1 30 to $1 70, which is up from $1 to $1 50 previously.
Speaker Change #141: Before we take your questions I would like to say, how appreciative and how proud I am of the senior leaders on this call and all of our other employees, whose tireless dedication for setting the stage for what's now.
Speaker Change #141: Next and beyond.
Speaker Change #141: Coherent is well positioned with differentiated technology exceptional talent and high quality efficient manufacturing platforms capable of delivering products to markets that are rapidly growing.
Speaker Change #141: And I believe we are better positioned than others to take full advantage of our existing market positions.
Paul Silverstein: Thank you. One moment for our first question. And as a reminder, that is star 11 to get in the queue.
Speaker Change #141: And to penetrate deeper into these markets largely because of the intimacy trust and partnerships, we have cultivated with market leaders and our increased scale.
Operator: Our first question comes from Samik Chatterjee with J.P. Morgan. Please proceed. Hi, good morning, and thanks for taking my question. Congratulations to the entire team there on the strong execution.
Creating stability in our core business and creating a flywheel effect of other growth opportunities that many of our competitors simply don't have.
Samik Chatterjee: Maybe just because it's one question, but in the shareholder letter, you refer to the number of new significant AI-related customers that you have engagements with. If you can give us a bit more insight about the nature of those customers, the potential magnitude of those engagements could turn into if you were to win those awards relative to the existing orders that you have. And then just a quick clarification, you did have 100% sequential growth in Datacom 800 gig revenue on the capacity ramp. Is that roughly where we should expect capacity to linearly expand from here on? Thank you. Good morning, Samik. Thanks for your question. Sajay?
Speaker Change #141: In the upcoming years, we have tremendous upside potential and platform cost optimization attributable to the ongoing legacy coherent integration special restructuring and transformation projects that we've announced.
Speaker Change #141: We expect success, given our proven track record and have a strong plan and roadmap in place, which will allow us to capitalize on the recovery and growth in our markets and are there broader market opportunities.
Speaker Change #141: We are endowed with a team of world class technologist industry pioneers and executives with a demonstrated capability for identifying and capitalizing on market Mega trends.
Speaker Change #141: With that I'll turn it over to Paul.
Speaker Change #141: Paul. Thank you Chuck we will now open the call for analyst questions. Please limit yourself to one question.
Paul Davis: <unk> scheduled for an hour.
Paul Davis: With that Carmen.
Carmen: Thank you.
Speaker Change #142: One moment for our first question and as a reminder, that is star one one to get in the queue.
Sanjay Pathasarathy: Sure. Thanks for your question, Samik. So with any large-scale deployment of new technology, a few hyperscalers drive it.
Speaker Change #142: Our first question will come from Sami <unk> with J P. Morgan. Please proceed.
Sami: Hi, good morning, and thanks for taking my question congrats to the entire team on the strong execution, maybe just because it's one question if I keep to Datacom.
Sanjay Pathasarathy: And now we are seeing that extend more broadly. We're also engaged with new NEMs, as well as up and down the entire ecosystem. We have a very broad group of customers that's continuing to grow in terms of engagement. Anything on the capacity? You got to answer the question. Yeah, anything on the capacitor ramp, Sanjay.
Sami: In the shareholder letter you refer to number of new significant related customers that you have engagements with if you can give us a bit more insight about the nature of those customers the magnitude potentially of those.
Sami: Engagements getting drawn into if you were to.
Sami: When those awards.
Sanjay Pathasarathy: So in the capacity ramp, we did say in the shareholder letter that we grew 100%, that's basically our 800G shipments, 100% quarter over quarter. In our ramp-up plans, we hit the quarterly, we crossed the quarterly run rate of 100 million. And we also said that in fiscal 24, Samik, that over 50% of our data coming from CBER revenues will be from AI-related applications. So we are really excited about the ramp and the growth. I'm expecting the third quarter to be greater than the second quarter and the fourth greater than the third, Samik, if that gives you any indication.
Sami: Radio for the existing autos that you have and then just a quick clarification you did have 100% sequential growth in Datacom 800 gig revenue on capacity ramp is that roughly where we should expect sort of capacity leading edge capacity nearly expand from here. Thank you.
Speaker Change #144: Hey, good morning. Thanks.
Speaker Change #145: Thanks for your question Sanjay sure.
Thanks for your questions on it so.
Speaker Change #146: So if any.
Speaker Change #146: Large scale deployment of new technology. There are few Hyperscale is drive it and now we are seeing that to extend more broadly. We're also engaged with new <unk> as well as up and down the entire ecosystem.
Speaker Change #146: So we have a very broad group of customers that that's continuing to grow in terms of engagements.
Speaker Change #146: Anything on the capacity that answer your question yes.
Speaker Change #146: Anything on the capacity I am Sunday.
Speaker Change #146: So and the capacity ramp we did say in the shareholder letter that we grew 100% that's basically our 800 G shipments 100% quarter over quarter.
Sanjay Pathasarathy: Yeah, yeah, sure. Thank you. Thanks for the invite.
Samik Chatterjee: Thank you. Thank you. One moment for our next question, please, comes from the line of Ruben Roy with Stifel. Please proceed. Thanks very much, and I'll echo my congratulations to the team. A follow-up for my one question on networking as well. Chuck, just trying to understand the commentary around the supply constraints. It sounds like they improved.
Speaker Change #146: Our ramp up plans, we hit the quarterly we crossed the quarterly run rate of $100 million and we also said that in fiscal 'twenty for Sonic that over 50% of our Datacom transceiver revenues will be from AI related applications.
Speaker Change #146: So we are really excited with the ramp in the growth of the market.
Speaker Change #146: I don't expect in the third quarter will be greater in the second quarter in the fourth grade in the third sandvik if that gives you any indication yet.
Speaker Change #147: Yes sure. Thank you thanks for taking the question.
Speaker Change #148: Thank you.
Ruben Roy: Lead times are shortening. Would you say the majority of the supply constraints are behind now, and it's a question of shipping to demand, or are there still some components that are out there that are in short supply? Is that kind of a limiting factor for the rest of the year on your AI? Okay, thanks a lot, Ruben. Ruben, as you know, anytime you go through such a steep ramp, what's lying in front of you with regard to constraints is what you're trying to get out in front of.
Thank you one moment for our next question. Please.
Speaker Change #148: It comes from the line of Ruben Roy with Stifel. Please proceed.
Ruben Roy: Thanks, very much and I'll Echo my congrats to the team.
Ruben Roy: A follow up for my one question on networking as well.
Ruben Roy: Chuck just trying to understand the commentary around the supply constraints sounded like they improved lead times are shortening would you say your.
Ruben Roy: The majority of the supply chain constraints are behind now and it's a question of shipping to demand or are there still some components that are out there that are in short supply as that kind of a limiting factor to the rest of the year on your AI transceiver shipments. Okay. Thanks, Thanks, a lot Ruben Ruben.
Vincent D. Mattera: So if you look in the rearview mirror, the constraints have surely eased and moderated. But when you see the size of the ramp that we're going up, we have to manage a number of constraints. The first constraint, then the second, and third.
Speaker Change #149: You know anytime you go through such a steep ramp.
Speaker Change #149: Whats lying in front of you with regard to constraints is what youre trying to get out in front of us. So if you look in the rearview mirror the constraints.
Speaker Change #150: Surely east and moderated.
Speaker Change #151: But when you see the size of the ramp that we're going up we have to manage a number of constraints. The first constraint than the second and third we have to we anticipate them we have to get our agreements.
Vincent D. Mattera: We have to anticipate them. We have to get our agreements with suppliers in place, and we're looking beyond FY24.
Vincent D. Mattera: This is a super, super excited and super hot market. So we're in the process of looking out well into FY25 to be sure that our supply chain can keep up with it. I hope that answers your question, Ruben.
Speaker Change #151: Agreements with suppliers in place and.
Speaker Change #151: We're looking beyond FY 'twenty for this is this is a super Super excited and Super Hot market.
We're in the process of looking out well into FY 'twenty five to be sure that our supply chain can keep up with us.
Speaker Change #152: I hope that answered your question Reuben.
Speaker Change #153: Thank you for that detailed check.
Ruben Roy: Thank you. One moment for our next question, please. And it comes from the line of Meta Marshall with Morgan Stanley. Please proceed. Great, thanks. A couple of questions.
Speaker Change #154: Thank you one moment for our next question. Please.
Meta A. Marshall: And it comes from the line of meta Marshall with Morgan Stanley. Please proceed.
Meta A. Marshall: Great. Thanks.
Meta A. Marshall: Couple of questions.
Meta A. Marshall: Just one question, just what are you seeing in inventory for under kind of these 800 gigabit or AI transceivers and just kind of when do you expect some of the demand for that business to come back? And then just kind of on top of that, you know, a couple of quarters ago, you had noted that you had a couple hundred million orders that if you ramped capacity, you expected to be able to fulfill during this fiscal year. Obviously, you guys are kind of ramping a little bit faster than expected. Just in terms of that kind of couple hundred million that you outlined earlier in the year, just how do you feel like you're going to be able to meet or exceed that kind of excess? Demand Thanks, thanks, Mita. Thanks for your interest, Sanjay. Yeah, thanks for your question, Meta. So our, we just said in our shareholder letter that we shipped over 100 million 800 G transceivers last quarter. Although it was much smaller in the previous quarter, it grew almost 100% quarter over quarter.
Meta A. Marshall: One just what are you seeing on.
Meta A. Marshall: Inventory.
Meta A. Marshall: Under kind of these 800 gig or AI transceivers and just kind of when you expect some of the demand for that business to come back and then just kind of on top of that.
Meta A. Marshall: A couple of quarters ago, you had noted that you had a couple hundred million of orders.
Meta A. Marshall: That if you ramped capacity you expect it to be able to fulfill during this fiscal year. Obviously, you guys are kind of ramping a little bit faster than I expected just in terms of that kind of a couple hundred million that you outlined earlier in the year or just how do you feel like youre going to be able to.
Meet or exceed those.
Meta A. Marshall: Excess.
Meta A. Marshall: Demand.
Speaker Change #155: Thanks, Thanks, Peter Thanks for your interest and sundry, yes.
Speaker Change #156: Thanks for your question.
Speaker Change #156: So our so we just said in our shareholder letter that we shipped over $100 million and 800 gig Transceivers last quarter. It was much smaller than the previous quarter. It grew almost 100% quarter over quarter and then we also said.
Sanjay Pathasarathy: And then we also said, Mita, that in fiscal 24, 50% of our Datacom transceiver revenues will be from AI-related activities. So we are projecting very strong growth in our 800G shipments. We are on a ramp up, as Jeff referred to earlier. Hopefully, that answered your question. I guess, but just in terms of what you are seeing in terms of inventory clearing on the kind of sub 800 gigabyte? versus 800 gigabyte.
Speaker Change #156: In fiscal 'twenty for 50% of our Datacom transceiver revenues will be from AI related applications. So we are projecting a very strong growth in our 800 G shipments we are on a ramp up as Jeff referred to earlier.
Speaker Change #157: Hopefully that answered your question.
Speaker Change #157: I guess just in terms of what are you seeing in terms of inventory clearing on the kind of sub 800 gig.
Speaker Change #157: <unk> 800 gig I mean I.
Sanjay Pathasarathy: I mean, I understand the 800 gig commentary, but what are we seeing just in terms of any other demand on the remainder of the business? Okay, so we haven't factored in any huge rebound in the non-AI business in Datacom. And that's one of the reasons why we said over 50% of our fiscal 24 revenues will be from AI and related 800 G products. Thank you. Thank you all. Thank you. Thank you. One moment for our next question, please. And it comes from the line of Simon Leopold with Raymond James.
Speaker Change #157: We have 800 gig commentary, but what are we seeing just in terms of any other demand on that.
Speaker Change #157: The remainder of the business.
Speaker Change #158: Okay. So we haven't we haven't.
Speaker Change #158: Factored in any huge rebound and in the non <unk> business and Datacom and Thats one of the most of the growth is in 800 G pretty much all of the growth is an item 800 G and Thats why we said over 50% of our fiscal 'twenty four our revenues will be from AI and related AMG products.
Great. Thank you.
Speaker Change #159: Thank you. Thank you thank.
Speaker Change #160: Thank you one moment for our next question. Please.
Speaker Change #160: Okay.
Speaker Change #160: Can he comes from the line of Simon Leopold with Raymond James. Please proceed.
Simon Leopold: Please proceed. Thanks for taking the time to answer the question. I wanted to, as well, talk about what's happening with 800 gigabit data center transceivers, and I'm looking for your thoughts on how you can compete in this market. And I'm struggling, candidly, because it seems like demand is great, which should be favorable to margins, but some of your competitors probably are willing to take lower margins, and so that might pressure profitability. Could you help us understand how you're thinking about that?
Simon Leopold: Thanks for taking the question.
Simon Leopold: Wanted to as well talk about what's happening in 800 gig.
Simon Leopold: Data Center, Transceivers and Im looking for your thoughts on how you can compete in this market and I am struggling candidly because it seems like demand is great, which should be margin favorable but some of your competitors probably are willing to take lower margins and so that might pressure.
Simon Leopold: Sure.
Simon Leopold: <unk> ability.
Speaker Change #161: Can you help us understand how you're thinking about that thank you.
Simon Leopold: Thank you. Thanks, Simon. Johnny, would you like to give a... Simon, thanks for the question. Well, you know, as a reminder, we are the most vertically integrated player in the space. So, you know, we heard, for example, people talking about a shortage of pixels. Well, guess what?
Speaker Change #162: Thanks, Simon joining would you like to give a ton of Vermont. Thanks for the question well.
Speaker Change #162: Minor.
Speaker Change #162: <unk> vertical integrated players.
Speaker Change #163: In this space.
Simon Leopold: So we had for example people talking about shortage of pixels, well guess, what we have the largest mix of supply in the world by fall, so, including obviously our competitors. So we have a very good kind of.
John R. Ambroseo: We have the largest supply in the world by far, so including, obviously, our competitors. So, you know, we have a very good kind of control of the supply line for the mosquito components other than ICs, and we have our own manufacturing. We have pretty much the most complete laser offering in the space, both the 100 and 200G, as we announced in the past. So we think that will be very, very powerful, not only to remain competitive from a performance standpoint and roadmap standpoint, which are very strategic to our hyperscale customers and the like, but also from a cost structure standpoint. We think that we will always have the best margin profile versus those that have to pretty much buy everything in the merchant market.
Simon Leopold: Control of the supply line for the most critical components other than Ics and we have our own manufacturing we have pretty much. The most complete the liza offering in the in this space. Both the 100 to 100 G. As we announced in the past. So we think that will be.
Simon Leopold: Powerful not only to remain competitive performance endpoints and roadmap standpoint, which are very strategic to our hyperscale with customers and alike, but also from a cost stock standpoint, we think that we will have always the.
Simon Leopold: This margin profile versus those that have to buy everything.
Simon Leopold: On the merchant market. So we are very active with many of these technologies that will be I think our bankers clinical stability standpoint.
John R. Ambroseo: So we are very invested in many of these technologies, and that will be an advantage from a profitability standpoint. I would add, Simon, thank you for joining us. I would add, Simon, that we have a full portfolio of products that we're making for today and developing for tomorrow. Those are going to be even more exciting than the ones we're making today.
Speaker Change #164: I would add Simon Thank you Johnny.
Speaker Change #165: I would add Simon that we have the full portfolio of products that we're making for today.
Simon Leopold: In developing for tomorrow.
Simon Leopold: Those are going to be even more exciting than the ones, we're making today.
Vincent D. Mattera: And for us, having full control, as Jelani just described. Our focus is on time to market, time to volume, and time to profitability. And that's where it needs to stay.
Simon Leopold: And for Us having full control as Giovanni just described.
Simon Leopold: Our focus is on time to market time to volume.
Simon Leopold: And time to profitability and that's where it needs to stay and we have a track record. It is a competitive market that's for sure.
Vincent D. Mattera: We have a track record. It is a competitive market, that's for sure. We're intending to compete.
Jed Dorsheimer: Thank you. Thank you. One moment for our next question, please, comes from the line of Jed Dorsheimer with William Blair. Please proceed. Hi, thanks. Most questions seem to be on Datacom, so I'll be different and just ask a two-part question. Maybe just an update on the, I saw, I think it's maybe the first time that I've seen you kind of highlight or call out, but on the microLED, could you just talk about the products of Coherent there that you're offering? And then on silicon carbide, there's been some cross-currents of data points in the market. I'm just wondering if you might be able to give an update on what you're seeing from the customer base there. Thanks. Hey, good morning, Jed. Thanks for your two questions. Chris will go first, and then Sohil. Who is it?
We are intending to compete.
Speaker Change #166: Thank you.
Speaker Change #166: Yes.
Speaker Change #167: Thank you one moment for our next question. Please.
Speaker Change #167: It comes from the line of Chad Dorsch manner with William Blair. Please proceed.
Jed Dorsheimer: Hi, Thanks, most questions seem to be on Datacom, so it will be different and just.
Jed Dorsheimer: I guess two part question, maybe just an update on that I saw.
Jed Dorsheimer: I think it's maybe the first time that I've seen you kind of highlight or call out.
Jed Dorsheimer: But on the micro Leds could you just talk about.
Jed Dorsheimer: The products of coherent.
There that you are offering and then on silicon carbide.
Jed Dorsheimer: Then some cross currents of data points in the market I was just wondering if you might be able to update on so what youre seeing from the from the customer base there.
Speaker Change #168: Hey, good morning, Jeff. Thanks for your two questions Chris will go first and then so Chris.
Chris Thorman: Yeah, thanks, Chuck. Yeah, so we spoke about the micro-ODD development that we have in previous quarters and about the multiple orders we received from China, Taiwan, and Korea for the tools for a process called laser-induced forward transfer, which is where you take the currently 10 micron movement towards 5 micron micro-LEDs from the wafer to the display. So we're seeing increasing customer engagement and are very excited about the impact of micro-LEDs on the television market. And this is a very high-level overview.
Chris: Thanks Chuck.
Chris: Yes, so as we spoke about the liquidity developments that we have.
Speaker Change #170: Previous quarters and about.
Chris: The multiple orders, we received from China, Taiwan, and Korea for the tools for a process called laser induced forward, So which is why you take the.
Chris: Totally 10 micron moving towards backbone.
Chris: Micro Leds from Wi Fi two.
Chris: To the display.
Speaker Change #171: So we are seeing increasing customer engagement.
Speaker Change #171: And very.
Speaker Change #171: Very excited about the impact of.
Speaker Change #171: Quality is on the TV market.
Speaker Change #171: Is that and this is.
Speaker Change #171: Barry.