Coherent Corp. · Earnings release

Coherent Corp.

PRESS RELEASE

COHERENT CORP. REPORTS

FIRST QUARTER FISCAL 2025 RESULTS

●

●

Q1 GAAP GROSS MARGIN OF 34.1%, INCREASED 499 bps Y/Y; Q1 NON-GAAP GROSS MARGIN

●

Q1 GAAP EPS OF ($0.04), IMPROVED 94% Y/Y; Q1 NON-GAAP EPS OF $0.74, IMPROVED

PITTSBURGH, Nov. 6, 2024 (GLOBE NEWSWIRE) – Coherent Corp. (NYSE: COHR) (“Coherent,” “We,” or the

“Company”), a global leader in materials, networking, and lasers, announced financial results today for its fiscal first quarter ended September 30, 2024.

Revenue for the first quarter of fiscal 2025 was $1.35 billion, with GAAP gross margin of 34.1% and GAAP net loss of $(0.04) per diluted share. On a non-GAAP basis, gross margin was 37.7% with net income per diluted share of $0.74.

Jim Anderson, CEO, said, “We delivered

solid growth in the September quarter on both a sequential and year-over-year basis, driven primarily by our AI-related Datacom transceivers. We also drove higher gross margin and operating margin. I continue

to be excited by the opportunity to unlock significant long-term shareholder value.”

Sherri Luther, CFO, said, “I am pleased by our strong EPS growth,

cash generation and debt reduction in the first quarter. Revenue growth and margin expansion drove strong sequential and year-over-year increases in our GAAP and Non-GAAP EPS. We also paid down

$118 million of our outstanding debt.”

Selected

First Quarter Financial Results and Comparisons (in millions, except per share data)

Table 1

GAAP Financial Results (unaudited)

Q/Q

Y/Y

Revenues

$

$

$

Gross Margin %

%

%

%

R&D Expense %

%

%

%

SG&A Expense %

%

%

%

Operating Expenses

$

$

$

Operating Income (Loss)(1)

$

$

$

Operating Margin (Loss)

%

%

%

Net Earnings (Loss) Attributable to Coherent Corp.

$

$

$

Diluted Loss Per Share

$

$

$

$

$

(1) Operating Income (Loss) is defined as earnings (loss) before income taxes,

interest expense, and other expense or income, net.

Selected First Quarter Financial Results and Comparisons (in millions, except per share data)

Table 1, continued

Non-GAAP Financial Results (unaudited)(1)

Q/Q

Y/Y

Revenues

$

$

$

Gross Margin %

%

%

R&D Expense %

%

%

SG&A Expense %

%

%

(4) bps

Operating Expenses

$

$

$

Operating Income

$

$

$

Operating Margin

%

%

Net Earnings Attributable to Coherent Corp.

$

$

$

Diluted Earnings Per Share

$

$

$

$

$

2

(1) The Company has disclosed financial

measurements in earnings release that present financial information considered to be non-GAAP financial measures. These measurements are not a substitute for GAAP measurements, although the Company’s

management uses these measurements as an aid in monitoring the Company’s on-going financial performance. The non-GAAP net earnings attributable to Coherent Corp.,

the non-GAAP diluted earnings per share, the non-GAAP operating income, the non-GAAP gross margin, the non-GAAP research and development, the non-GAAP selling, general and administration, the non-GAAP operating expenses, the non-GAAP interest and other (income) expense, and the non-GAAP income tax (benefit), measure earnings and operating income (loss), respectively, excluding non-recurring or unusual items that are considered by management to be outside the Company’s standard operation and excluding certain non-cash items. EBITDA is an

adjusted non-GAAP financial measurement that is considered by management to be useful in measuring the profitability between companies within the industry by reflecting operating results of the Company

excluding non-operating factors. There are limitations associated with the use of non-GAAP financial measures, including that such measures may not be entirely

comparable to similarly titled measures used by other companies, due to potential differences among calculation methodologies. Thus, there can be no assurance whether (i) items excluded from the non-GAAPfinancial measures will occur in the future or (ii) there will be cash costs associated with items excluded from the non-GAAP financial measures. The Company compensates for these limitations by using

these non-GAAP financial measures as supplements to GAAP financial measures and by providing the reconciliations of the non-GAAP financial measures to their most

comparable GAAP financial measures. Investors should consider adjusted measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP. Allnon-GAAP amounts exclude certain adjustments for share-based compensation, acquired intangible amortization expense, restructuring charges (recoveries), integration and site consolidation expenses, integration

transaction expenses, start-up costs related to the start-up of new devices for new customer applications, and various one-timeadjustments. See Table 6 for the Reconciliation of GAAP measures to non-GAAP measures.

Product Highlights First Quarter

●

Lasers for silicon photonics: We announced a family of high-efficiency lasers to power 1.6T optical transceivers

based on silicon photonics.

●

Datacom transceiver multi-technology demonstration: At the European Conference on Optical Communications (ECOC’

24) we demonstrated optical transceivers showcasing our differential EML and silicon photonics platforms

●

ECOC’24 award for Data Center Innovation: Our Optical Circuit Switch (OCS) won the Best Product award.

●

Launched industry’s first high optical output power L-band 800G ZR/ZR+

coherent transceiver.

●

New industrial fiber laser: We announced our EDGE fiber laser series, a culmination of innovations to redefine value

with best-in-class performance.

Business Outlook – Second

●

G1Revenue for the second quarter of fiscal 2025 is expected to be between $1.33 billion and $1.41 billion.

●

G2Gross margin percentage for the second quarter of fiscal 2025 is expected to be between 36% and 38% on a non-GAAP basis.

●

G3Total operating expenses for the second quarter of fiscal 2025 are expected to be between $275 million and

$295 million on a non-GAAP basis.

●

G4Tax rate for the second quarter of fiscal 2025 is expected to be between 19% and 22% on anon-GAAP basis.

●

G5EPS for the second quarter of fiscal 2025 is expected to be between $0.61 and $0.77 on anon-GAAP basis.

3

Investor Conference Call / Webcast Details

Coherent will review the Company’s financial results for its first quarter of fiscal 2025 and business outlook on Wednesday, November 6, at 5:00 p.m. ET. A

live webcast of the conference call will be available on the Investor Relations section of the Company’s website at coherent.com/company/investor-relations. The Company’s financial guidance will be limited to the comments on its public quarterly earnings call and the public business outlook statements contained in this press release.

The conference call will be recorded, and a replay will be available to interested parties who are unable to attend the live webcast starting on or about

Additional Information and Where to Find It

In

connection with the conference call described above, the Company intends to post an investor presentation on the Company’s website atcoherent.com/company/investor-relations/investor-presentations after market close on November 6, 2024. We also from time to time may post important

information for investors on our website at coherent.com/company/investor-relations. We intend to use our website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should review the Investor Relations page of our website referenced above, in addition to

following the Company’s press releases, SEC filings, and public conference calls, presentations, and webcasts. Investors and security holders are able to obtain free copies of these documents through the Company’s website referenced above.

Copies of the documents filed by the Company with the SEC may be obtained free of charge on the Company’s website atcoherent.com/company/investor-relations/sec-filings. The information contained on, or that may be accessed through,

the Company’s website is not incorporated by reference into, and is not part of, this release.

Forward-Looking Statements

This press release contains statements, estimates and projections that constitute “forward-looking statements” as defined under U.S. federal securities laws

– including statements about our ability to unlock significant long-term shareholder value and our estimates and projections for our business outlook for the second quarter of fiscal 2025, each of which is made pursuant to the safe harbor

provisions of the U.S. Private Securities Litigation Reform Act of 1995 and relate to the Company’s performance on a going-forward basis. The forward-looking statements contained herein are subject to certain risks and uncertainties that could

cause the Company’s actual results to differ materially from its historical experience and our present expectations or projections.

The Company believes that

all forward-looking statements made by it herein have a reasonable basis, but there can be no assurance that management’s expectations, beliefs, or projections as expressed in the forward-looking statements will actually occur or prove to be

correct. In addition to general industry and global economic conditions, factors that could cause actual results to differ materially from those discussed in the forward-looking statements herein include but are not limited to: (i) the failure

of any one or more of the assumptions stated herein to prove to be correct; (ii) the risks relating to forward-looking statements and other “Risk Factors”

4

identified from time to time in our filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the

year ended June 30, 2024, and subsequently filed Quarterly Reports on Form 10-Q, which filings are available from the SEC; (iii) the substantial indebtedness the Company incurred in connection with

its acquisition of Coherent, Inc. (the “Transaction”), the need to generate sufficient cash flows to service and repay such debt, and the Company’s ability to generate sufficient funds to meet its anticipated debt reduction goals;

(iv) the possibility that the Company may not be able to continue its integration progress and/or take other restructuring actions, or otherwise be able to achieve expected synergies, operating efficiencies including greater scale, focus,

resiliency, and lower operating costs, and other benefits within the expected time frames or at all and ultimately to successfully fully integrate the operations of Coherent with those of the Company; (v) the possibility that such integration

and/or the restructuring actions may be more difficult, time-consuming, or costly than expected or that operating costs and business disruption (including, without limitation, disruptions in relationships with employees, customers, or suppliers) may

be greater than expected in connection with the Transaction and/or the restructuring actions; (vi) any unexpected costs, charges, or expenses resulting from the Transaction and/or the restructuring actions; (vii) the risk that disruption

from the Transaction and/or the restructuring actions materially and adversely affects the respective businesses and operations of the Company and Coherent, Inc.; (viii) potential adverse reactions or changes to business relationships resulting from

the completion of the Transaction and/or the restructuring actions; (ix) the ability of the Company to retain and hire key employees; (x) the purchasing patterns of customers and end users; (xi) the timely release of new products and

acceptance of such new products by the market; (xii) the introduction of new products by competitors and other competitive responses; (xiii) the Company’s ability to assimilate other recently acquired businesses, and realize

synergies, cost savings, and opportunities for growth in connection therewith, together with the risks, costs, and uncertainties associated with such acquisitions; (xiv) the Company’s ability to devise and execute strategies to respond to

market conditions; (xv) the risks to realizing the benefits of investments in R&D and commercialization of innovations; (xvi) the risks that the Company’s stock price will not trade in line with industrial technology leaders;

and/or (xvii) the risks of business and economic disruption related to worldwide health epidemics or outbreaks that may arise. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The

Company disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events or developments, or otherwise.

About Coherent

Coherent empowers market innovators to define the

future through breakthrough technologies, from materials to systems. We deliver innovations that resonate with our customers in diversified applications for the industrial, communications, electronics, and instrumentation markets. Coherent has

research and development, manufacturing, sales, service, and distribution facilities worldwide. For more information, please visit us at coherent.com.

Contact:

Paul Silverstein

Senior VP, Investor Relations & Corporate Communications

investor.relations@coherent.com

# # #

5

Table 2

Coherent Corp. and Subsidiaries

Condensed Consolidated Statements of Earnings (Loss)*

THREE MONTHS ENDED

$ Millions, except per share amounts (unaudited)

Revenues

$

$

$

Costs, Expenses & Other Expense (Income)

Cost of goods sold

Research and development

Selling, general and administrative

Restructuring charges

Interest expense

Other expense (income), net

)

)

)

Total Costs, Expenses, & Other Expense

Earnings (Loss) Before Income Taxes

)

Income Taxes

)

)

Net Earnings (Loss)

)

)

Net Earnings (Loss) Attributable to Noncontrolling Interests

)

—

Net Earnings (Loss) Attributable to Coherent Corp.

$

$

)

$

)

Less: Dividends on Preferred Stock

Net Loss Available to the Common Shareholders

$

)

$

)

$

)

Basic Loss Per Share

$

)

$

)

$

)

Diluted Loss Per Share

$

)

$

)

$

)

Average Shares Outstanding - Basic

Average Shares Outstanding - Diluted

*Amounts may not recalculate due to rounding.

6

Table 3

Coherent Corp. and Subsidiaries

Condensed Consolidated Balance Sheets*

$ Millions (unaudited)

Assets

Current Assets

Cash and cash equivalents

$

$

Restricted cash, current

Accounts receivable

Inventories

Prepaid and refundable income taxes

Prepaid and other current assets

Total Current Assets

Property, plant & equipment, net

Goodwill

Other intangible assets, net

Deferred income taxes

Restricted cash, non-current

Other assets

Total Assets

$

$

Liabilities, Mezzanine Equity and Equity

Current Liabilities

Current portion of long-term debt

$

$

Accounts payable

Operating lease current liabilities

Accruals and other current liabilities

Total Current Liabilities

Long-term debt

Deferred income taxes

Operating lease liabilities

Other liabilities

Total Liabilities

Total Mezzanine Equity

Total Coherent Corp. Shareholders’ Equity

Noncontrolling interests

Total Equity

Total Liabilities, Mezzanine Equity and Equity

$

$

*Amounts may not recalculate due to rounding.

7

Table 4

Coherent Corp. and Subsidiaries

Condensed Consolidated Statements of Cash Flows*

THREE MONTHS ENDED

$ Millions (unaudited)

Cash Flows from Operating Activities

Net cash provided by operating activities

$

$

Cash Flows from Investing Activities

Additions to property, plant & equipment

Proceeds from the sale of business

—

Other investing activities

Net cash used in investing activities

Cash Flows from Financing Activities

Payments on existing debt

Proceeds from exercises of stock options and purchases under employee stock purchase plan

Payments in satisfaction of employees’ minimum tax obligations

Other financing activities

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash, Cash Equivalents, and Restricted Cash at Beginning of Period

Cash, Cash Equivalents, and Restricted Cash at End of Period

$

$

*Amounts may not recalculate due to rounding.

8

Table 5

Segment Revenues*

THREE MONTHS ENDED

$ Millions, except percentage amounts (unaudited)

Revenues:

Networking

$

$

$

Materials

Lasers

Consolidated

$

$

$

*Amounts may not recalculate due to rounding.

9

Table

6

Reconciliation of GAAP Measures to Non-GAAP Measures*

THREE MONTHS ENDED

$ Millions, except per share amounts (unaudited)

Gross margin on GAAP basis

$

$

$

Share-based compensation

Amortization of acquired intangibles

Integration, site consolidation and other(1)

Gross margin on non-GAAP basis

$

$

$

Research and development on GAAP basis

$

$

$

Share-based compensation

Amortization of acquired intangibles

Start-upcosts(2)

—

—

Integration, site consolidation and other(1)

Research and development on non-GAAP basis

$

$

$

Selling, general and administrative on GAAP basis

$

$

$

Share-based compensation

Amortization of acquired intangibles

Integration, site consolidation and other(1)

Selling, general and administrative on non-GAAP basis

$

$

$

Restructuring charges on GAAP basis

$

$

$

Restructuring charges(3)

Restructuring charges on non-GAAP basis

$

—

$

—

$

—

Operating income (loss) on GAAP basis

$

$

$

Share-based compensation

Amortization of acquired intangibles

Start-upcosts(2)

—

—

Restructuring charges(3)

Integration, site consolidation and other(1)

Operating income on non-GAAP basis

$

$

$

Table 6

Reconciliation of GAAP Measures to Non-GAAP Measures*

(Continued)

THREE MONTHS ENDED

$ Millions, except per share amounts (unaudited)

Interest and other (income) expense, net on GAAP basis

$

$

$

Foreign currency exchange gains (losses), net

Transaction fees and financing(4)

—

—

Interest and other (income) expense, net on non-GAAPbasis

$

$

$

Income taxes on GAAP basis

$

$

$

Tax impact of non-GAAP measures

Tax windfall from share-based

compensation(5)

—

—

Tax impact of valuation allowance for deferred tax

assets(6)

—

Income taxes on non-GAAP basis

$

$

$

Net earnings (loss) attributable to Coherent Corp. on GAAP basis

$

$

$

Share-based compensation

Amortization of acquired intangibles

Foreign currency exchange (gains) losses

Restructuring charges(3)

Integration, site consolidation and other(1)

Transaction fees and financing(4)

—

—

Start-upcosts(2)

—

—

Tax impact of non-GAAP measures

Tax windfall from share-based

compensation(5)

—

—

Tax impact of valuation allowance for deferred tax

assets(6)

—

Net earnings attributable to Coherent Corp. on non-GAAPbasis

$

$

$

Per share data:

Net loss on GAAP basis

Basic Loss Per Share

$

$

$

Diluted Loss Per Share

$

$

$

Net earnings on non-GAAP basis

Basic Earnings Per Share

$

$

$

Diluted Earnings Per Share

$

$

$

*Amounts may not recalculate due to rounding.

(1)

Integration, site consolidation and other costs include retention and severance payments, expenses not included in

restructuring charges related to site closures as well as other integration costs related to the acquisition of Coherent, Inc. Refer to table 7 for a more detailed description of these costs on a consolidated basis.

(2)

Start-up costs in operating expenses were related to the start-up of new devices for new customer applications.

(3)

Restructuring charges include loss on sale of a facility, severance, non-cashimpairment charges for production assets and improvements on leased facilities and other costs related to the 2023 Restructuring Plan.

(4)

Transaction fees and financing includes debt extinguishment costs and various fees related to closing the Coherent

transaction.

(5)

Windfall tax benefits were recorded on the vesting of share-based compensation.

(6)

Valuation allowance adjustments were related to an increase (decrease) in valuation allowance related to certain

deferred tax assets resulting from the Company’s cumulative GAAP net loss that is not recognized for non-GAAP purposes given the historical non-GAAP net earnings.

Table 7

Components of Integration, Site Consolidation and Other Costs

Excluded from Non-GAAP Operating Income*

THREE MONTHS ENDED

$ Millions (unaudited)

Integration, site consolidation and other costs

Consulting costs related to projects to integrate recent acquisitions into common technology systems and simplify legal entity

structure

$

$

$

Manufacturing inefficiencies related to sites being shut down as part of our 2023 Restructuring Plan or Synergy and Site

Consolidation Plan

Charges for products that are end-of-life,including inventory, production equipment to produce those products

Overlapping labor and travel for consolidation of sites

Employee severance and retention costs for site consolidations as part of our Synergy and Site Consolidation Plan or other

actions

Severance costs related to the retirement of our CEO/CFO/President

Accelerated depreciation for equipment and leasehold improvements at sites included in our Synergy and Site Consolidation

Plan

—

—

Direct damages from substation power failure/fire at manufacturing sites

—

—

Integration, site consolidation and other costs

$

$

$

Table 8

Reconciliation of GAAP Net Earnings (Loss), EBITDA and Adjusted EBITDA *

THREE MONTHS ENDED

$ Millions, except percentage amounts (unaudited)

Net earnings (loss) on GAAP basis

$

$

$

Income taxes

Depreciation and amortization

Interest expense

Interest income

EBITDA(1)

$

$

$

EBITDA margin

Share-based compensation

Foreign currency exchange (gains) losses

Start-upcosts(3)

—

—

Restructuring charges(4)

Transaction fees and financing(5)

—

—

Integration, site consolidation and other(6)

Adjusted EBITDA(2)

Less: adjusted EBITDA attributable to noncontrolling interests

—

Adjusted EBITDA attributable to Coherent Corp.

$

$

$

Adjusted EBITDA margin attributable to Coherent Corp.

*Amounts may not recalculate

due to rounding.

(1)

EBITDA is defined as earnings before interest expense, interest income, income taxes, depreciation and amortization.

(2)

Adjusted EBITDA excludes non-GAAP adjustments for share-based compensation,

certain restructuring, integration, and transaction expenses, debt extinguishment charges, start-up costs, and the impact of foreign currency exchange gains and losses.

(3)

Start-up costs in operating expenses were related to the start-up of new devices for new customer applications.

(4)

Restructuring charges include loss on sale of a facility, severance, non-cashimpairment charges for production assets and improvements on leased facilities and other costs related to the 2023 Restructuring Plan.

(5)

Transaction fees and financing includes debt extinguishment costs and various fees related to closing the Coherent

transaction.

(6)

Integration, site consolidation and other costs include retention and severance payments, expenses not included in

restructuring charges related to site closures as well as other integration costs related to the acquisition of Coherent, Inc. Refer to table 7 for a more detailed description of these costs on a consolidated basis.

Table 9

GAAP Earnings (Loss) Per Share Calculation*

THREE MONTHS ENDED

$ Millions, except per share amounts (unaudited)

Numerator

Net loss attributable to Coherent Corp.

$

$

$

Deduct Series B redeemable preferred dividends

Basic loss available to common shareholders

$

$

$

Diluted loss available to common shareholders

$

$

$

Denominator

Diluted weighted average common shares

Basic loss per common share

$

$

$

Diluted loss per common share

$

$

$

*Amounts may not recalculate due to rounding.

Non-GAAP Earnings Per Share Calculation*

THREE MONTHS ENDED

$ Millions, except per share amounts (unaudited)

Numerator

Net earnings attributable to Coherent Corp. on non-GAAPbasis

$

$

$

Deduct Series B redeemable preferred dividends

Basic earnings available to common shareholders

$

$

$

Diluted earnings available to common shareholders

$

$

$

Denominator

Weighted average shares

Effect of dilutive securities:

Common stock equivalents

Diluted weighted average common shares

Basic earnings per common share on non-GAAP basis

$

$

$

Diluted earnings per common share on non-GAAP basis

$

$

$

*Amounts may not recalculate due to rounding.