IIVI - Earnings call transcript Q3 2019

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Operator

Good morning, ladies and gentlemen. And welcome to the II-VI Incorporated Fiscal Year 2019 Third Quarter Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. And now I would like to turn the conference over to Mary Jane Raymond Chief Financial Officer. Ma'am you may begin.

Mary Jane Raymond

good and Glenn you, morning. Thank Raymond, I'm at Financial here Chief Incorporated. Mary Jane II-VI Officer the Welcome quarter our to third XXXX. fiscal year earnings call for the is With are on me call Dr. today and President Mattera, Chuck Executive our Officer; Chief Dr. Officer Technology and segment; our Chief our Kapusta Barbarossa, and President Laser Gary of Officer. Operating the Chief Solutions the Giovanni Wednesday This on XXXX. May is call recorded X, being

not to Just reminder, Chuck? any of today these are teleconference this the reflect as to forward-looking context make events obligations the Chuck a today. let given only. over today undertake statements to do With Mattera. We during Dr. to update me statements we any call in subsequent may turn that,

Chuck Mattera

Thank today. for you, for II-VI. morning, an thanks productive and joining It quarter Mary us Jane. equally Good everyone was exciting and

our to on like review I give would I Finisar the results, update acquisition. an Before

being like First, thank approved solid and but XX% well the by five of of Finisar's shares deliver shares tirelessly of of CEO leadership both the also its of underway. the is by under for at meeting the to four the on China Hurlston, the boards all where and process world II-VI special companies at March the team transaction the Phase It voting was employees performance. around The Finisar required worked particularly regulation Chinese I is Michael voting countries both the our XX% XX. would administration market meeting special Finisar cleared who II quarter's to state another

and we midyear. in still timeframe benefit will them. to filing process we U.S. the about believe reasonable people size, line, remain engaged and experienced the in-country the a increased breadth which complementary the will to scale relentless technical of combination extremely and advisers time drive closing portfolios; serve customers we our China, we anticipated and of a on feedback ability our be depth be continues optimistic our that predict and The our we're cannot our While successful as the be they positive, in to from with

in increased position am advice plan of to both to help for from about the growth million adoption delivery actions to new confidence with data ideas opportune process. time progress drive of Although, cannot us To staffed office and synergies evolution and the cost begun LiDAR. market for around companies, to accelerating leadership our centers communications increasing of continue of and engage are with a have make customers plans their with companies XD the integration to the we Hyperscale the we pleased a integration believe and any their benefits optical consulting run which global have combining. ensure inputs that and will to already $XXX and this the for created We experts the help smooth business listening required by be planned opportunities combined infrastructure sensing detail transformational in we deployments, several of world-class combined XG scale, a the an years of over rapidly management as I period. X-year we

using companies. fact, transformative the design practices this In are also scale of and we to process best both approaches leverage to

quarter. the to turning Now

basis our Bookings another solid one Our of delivered within market collaborated some conditions to still customer they on a by guidance. the unfavorable our and year overcome Led $XXX non-GAAP the teams in Sensing last grew million last to following million grew Photonics near-term XX% XX%. bookings with and of yet $XXX significant XD growth EPS quarter compared VCSEL segment grew our quarter. revenue X% in

for optics ROADM XX% growth the for Most market compared from and growth strong optical company undersea XX% of the communications ROADM and the QX of extremely and Our subsystem came networks. FY laser strong position products to grew outstanding year-over-year. demand over at in showed XXXX. component

growth market of areas timing optical is uptake penetration the in In XG of a year steady all the networking compared optical of of as more to holiday. exception demand than second the suppliers bookings with during the last with in new revenues and including accounts, calendar market revenue. in on took we time quarter our the New customers now into momentum networks our continue grew in half drive significant to additions which and global past our expect their only to capacity in the were March, communications of successful year. strong datacom Chinese the communications Sequentially, in Based fact, about X% Year

industrial Our capital into for Of sequentially strong OEMs is as the those substrates by and for strong last X% the our market-leading vehicle The XX% remains for particular of accounts very revenue. over power market silicon also carbide EUV the year-over-year. growth electronic semiconductor silicon end it Demand for grew XX% substrates revenue overall electric equipment a but our slightly market year making down was grew now led for II-VI market applications. devices based note II-VI. including for our was carbide

market from China. in early strengthening However, indications customers are is that the particularly

our now to Sensing XD business. Turning

has $X.XX having controls our revenues build slower of revenue our new recent year-to-date inventory has win close was demand seasonally completing This $X.XX record progressing XXXX before in platform higher expected as android expected. overall second seasonally that the Sensing these be well, only operational EPS Sensing plan that strong the operational in over of expected major design In out looking of cost And I and to is QX turn did conditions largest scenario the accelerated XD slowly XD good has in quarter. been even said market and margins negative not we of process work however, to. revenue. our the X% Our to Gary? operating in in our half of during not the QX, XXXX, QX. discuss on Laser resumes than at developing XX% negatively achievements. consolidated are the preparing a another our increased revenue initiatives effect affect operationally our and demand extremely calendar we Gary for the materialize conservative should forward accounts and more but Therefore, very which calendar with impact is market demand FY year-to-date our soft for on in and Solutions realized to XXXX. as year some was to I'll for a year. forecasted quarter least as it reduced to and by And look forward a to strong designs

Gary Kapusta

Thank you, Chuck and good morning.

accounted the automotive including XX% military was equipment X%; of revenue; semiconductor communications including Sensing capital electronics for X%. was was of consumer As including a function was industrial XD and XX%; quarter's XX%; results, EUV

across substrate all in X% China, XX% in X% for and Japan end in markets revenues world. carbide Europe, silicon of in Geographically, X% QX accounted rest revenue. were distributed the Our of business in XX% the America; North XX%

substrates largest Our materials, operating and communications capital investments were submarine of utilization. components especially at full and EUV deployments. support optical in XG carbide in applications These silicon for factories are

in to year. and continuing for agreements the to objectives. our take now to supported growth record every backlog our did We by customers matching flex are million demands part certain our consistent business. the forecasted We be QX capacity profitable of opportunity CapEx with accept long-term install labor We $XXX down in about additional

our to in did with to enjoy Chinese our this first customers. we For time off some take time China of New holiday the well-deserved their allow majority work This for schedules workforce in recent the aligned of Year years. to the example, was

reduced temporarily schedules also our XD work plan. We build Sensing lower based inventory on

control II-VI. campaign to of what We beginning are see this cost now the is and for journey our only will sustained we into results. several Though good be quarters are beginning

tighten the offset company cost with associated anticipated across controls and We expense to acquisition. onetime Finisar our continue expenses the to

cost product productivity capacity provide Our Giovanni. lowest chain to with on-installed goals controlling utilizing our of excellence, the and our expenses the focus quality leverage labor supply best-in-class that over to by turn are ownership it accelerating vertically materials With continue I'll continuing operational integrated customers to and at on fully efforts. and by possible our

Giovanni Barbarossa

for purpose in wins flexibility head the electric enables our including for ultimate beam in tasks our markets, morning. by technologies product the In head markets. industrial important in end renewed with platforms. for already announced call good we range across vehicles Photonics expect to customers drive received of and of laser we the modular design were of which can welding the They the welding earnings you, shows. we trade last and latest broader first processing a which batteries models. materials Thank expansion laser control many China and Since range displayed application-specific laser offers we growth. report we processing which laser a Photonics, This OFC optical three present wide where high-power

enable gigabit extending also up We In back visible and to family second we of to for opening and revenue. delivery our X% for XX of speeds. more a service We XXX complements centers cutting per and biomedical our XX markets pump center In our customers for XXX fiber-coupled introduced to their faster arrays the that of faster new in and North our applications. beam VCSEL its The European leading rating systems for American third communications, share laser demonstrated existing announced end now laser and lasers of the Xuzhou for our power meet new products. total board kilowatts scientific high-power cutting generation for growing China demand precise head count. gigabits our internet support

filters XG Wavelength of WSS, includes WSS aimed for cost share lasers, requirements expands mux/demux design undersea for detectors. nodes the We pleased network our performance networks. our and local networks. undersea of report optical Switch first which Selective count also to optical ROADM And I'm a This market and or pump meeting announced the and wins

Sumitomo progressing of nitride as half planned silicon second production with gallium on power-led collaboration devices for in an Our on-time ramp-up Device XXXX. the Electric carbide is

radar substrate an as RF-powered addition, shipped synthetic enabling nitrate and first diamond, high-performance In devices our we demanding gallium applications. diamond-coated in in industry satellite leader

we in For start the second half progress XD designs expect great calendar several shipping sensing, complex on and to that new XXXX. of made we

very XD work continue others phones win Our parallel. And technology sensing a the with Android materializing. we're market while adoption report of to smartphone we in to design in several excited leader is on

ceramic lasers of applications accelerate to engagements our with high grow solutions. the laser defense military to Redstone next thanks offering Our expand allows applications our turn optical capabilities of ranging me Jane. acquisition optical let laser of fiber-based that it With our In to generation high-performance Mary sources solutions market systems. lighter for deployment and continues energy semiconductor for the Aerospace broad to components platforms from us to compound to and customer laser over

Mary Jane Raymond

XX. or gross as have acquisition-related discussed, communication. XX.X% morning. toward basis was colleagues my the QX X% on operating transaction-related X% margin good The The for margin well for margin adjusted optical overall EBITDA a XX. as was Hello, mix-shift factors X.X% excluding company's reflecting XX.X% was the The costs. GAAP and expenses.

the of segment of Photonics margin margin last the above margins QX XX.X% is year's Regarding operating operating XX.X%. adjusted

to For Performance for nine same is XD compared for months The tariffs was X.X% important the FY Sensing quarter. at relatively Products, the immaterial business. discussed But margin adjusted of effective XX.X% operating to XXXX. by Solutions affected months Chuck year-to-date, quarter margin. operating first the reduction and are the overall cost and remain level. it's The actions But the Laser of nine the XX.X% adjusted both QX was cash ahead The in at year-to-date profitability Gary X% compared seasonally operating for lower margin of XXXX. XX% X.X% lower

While some very demand are point keeping very upwards of markets the dynamic competitive not to full in they namely are at still large yet intense. a beginning inflect market XG

by $XXX consists we backlog expenditures $X.X we'll amortization XXXX for costs quarter rate Products was million. QX, $XX million in $X.XX a compensation; the an and China in in $XX.X full market rate the the supply our well time infrared a ship of improve result, XX in and year. impacted Performance and tax million million grew basis. X% high onetime for practices million Capital and right quarter The in continues EPS share As planned on $X.X adjustments was reported $X.X FY exact include our Laser in including attainment Redstone. share adjusted million a innovate $XXX this X% of orders favorably million methods the This attributes contains The the share-based The optics cost to to sequentially and as expect chain tax of over between Solutions. of those Photonics; $X.XX The show of markets next record tax acquisition as to The good in backlog tax our a grow. in in and on structure of QX it's QX as $XXX status were production The that Finisar. acquisition-related XX% million months. backlog and plant tax strength. XX% was the rate at the

Our did not our acquisition million cash quarter reflecting $XXX And repurchase We shares $XXX million our of have million. our this debt and remaining still position $XX $XX million net is authorization. Redstone. is on any

B obtained and LIBOR record last million are a and We BB year's to minus the at marketing. fiscal the and term loan have cash Fitch. Moody's, fully loan The BB at aspects plus-XXX debt months rating We acquisition, BX the priced are the Finisar A ahead year-to-date. ratings $XXX to S&P ratings. from completed of we from term from launched for nine revolver respect both from flow With corporate work the financing of we obtain our operations

outlook, includes prevailing for planned XXXX shares. is is $X.XX earnings June average compensation; per to earnings quarter of million estimated at including expense share cap to outlook the to per and an adjusted to activities. The $X.XX costs. diluted $XXX the fourth This $X.XX $X.XX for the and $X.XX XX, $XXX of basis at to weighted amortization million Turning ending integration integration for $X.XX On is share for share-based $X.XX $X.XX revenue share million to XX.X the fiscal diluted $X.XX of which is exchange rates. all $X.XX

the not convert X.X so the remains add anti-dilutive quarter we This shares. million slightly back need

to product may call, to contain A the may actual remember, general for and on customer vary results we economic also our our that may you remind certain actions this Q& answers based our statements. turn forward-looking orders your - I'll mix, as conditions. competition vary questions Now that

We actual knowledge of our materially. will answer results our may today them differ on and the best basis

customer Lance, the during may confidentiality. by you will obligations the questions. to addition our our line In for open we abide Q&A, protect

Operator

the & [Operator Instructions] Jim of Your first Needham line Ricchiuti from from question comes Company.

Your open. line is

Jim Ricchiuti

some good morning. you business the can if you, referencing comments of industrial China. wondering in your Chuck, of Presumably part you recovery. signs I seeing expand about was Thank on were maybe you the made

Chuck Mattera

industrial for January was for right questions. and slower seems Good February today. reference I were Jim. Sure, thanks March that morning, almost little would we request and us. in explosive through in February last than a it a it weeks China few industrial have of the of market market think lot the --from the so particular. That's in just to including gist chatter was your usual. or on the it. typical; And

Jim Ricchiuti

if impacted of to the Okay. business certainly gross was a as but XD wondering with to That's of margins you I well? helpful. Sensing know on it's business. on this impact Jane, much terms talk in some XD the can headwind Was respect quarter in Mary Sensing gross the mix that out if margins? break shift the optical the underutilization margin I impact gross am possible the of

Mary Jane Raymond

was most that it. would of Well, say I

Jim Ricchiuti

Okay. Terrific. And one final question from me.

you the elaborate the acquisition a side on Redstone. small or give if wondering was on little bit I us color Just military might

Chuck Mattera

Okay.

Let take a for Thanks lot Jim. me that, that.

high As energy company. advantages or laser market build one investments customers. intending ago, and we technology asymmetric we either revolutionize of of enabling new also intrinsic lasers acquired We're high a small new of two deployment energy military to irreversible multiple two calls and underpin class out trends systems and for for These our applications. mentioned, another

combination of real contribute of alone a business that revenue great with than $XXX believe five I'm strategy. we acquisitions just years. they that small, have fit two are next could are small expecting greater they million the and over those the Although acquisition nicely I II-VI example and in

a sense. you Just to give

Operator

from of comes question Capital line Markets. Tim from next Northland Savageaux Your the

open. is line Your

Tim Savageaux

of Hi, good morning. me. Couple for questions

we well focus if communication on First, can side, two. I'll the maybe combine these

communication major wondered very think looking seeing on from China? to demand as your in then you orders about reflected at in what think of geographic in guidance drivers You mobile back. that at I there nearly that to year. and the I really industrial degree a here contributor bouncing side overall the And just dig strong talked what is we're China saw China later And you to kind extent the go-forward sustainable extent into you're up upgrades bookings in To the year-over-year. backbone as XX% extent the guidance. a the standpoint you could if looking what

a had of that kind can talk The You very pretty on sequentially guidance I if both very wondered impacting modestly what's but the anecdote to relative strong book and Photonics. in industrial so. you is order your Photonics commentary up side. bookings about strong you're

Chuck Mattera

Okay. There's a there. lot

to team. we'll have I think

Jane and market Mary guidance. a Tim, absorb me itself But, question some let's on about reflect and first comments Let to the listen and relates it as can make communications. in maybe take the

slightly slower America, what acquisition increasing. Europe, but front large itself been and there've around is seeing. it's it of the cable XG of particularly as of in demand chain a we coherent especially strong demand us, in supply are say would that out. I Here's In see we're North by a TV we offset softer so that In stable, part

Here's serve the China and very chain strong we throughout supply both overall in India. that demand, strong the coming is in

based on the the monitors see it demand that's here. stop I'm our sold our maybe extreme I'm customers our XG pumps, on starting And checks of I'll to out switches. half happening. our our customers, capacity And wavelength selector's second our of our point. and beginning continue we're with in of We're We good expecting into So expanding maybe the expecting amplifiers; year. with this We're us. state discussions a our passives, a channel calendar

industrial few three quite questions the to back come get a because we'll at a and time. guidance all trying to the asking take same --you're you Jane discount Mary Let got

Mary Jane Raymond

decent we quarter, a with it had we the growth in and from say had Japan. from the China. - good the respect from would growth China I So, had Tim, contribution say that from we But while amount to perhaps I'd

so communications market market growth actually. not The remains far the While U. the much S. to strongest The been had U.S. from U.S. so very, very the strong. contributor

that's So the first thing.

second thing The guidance. respect with how is about thinking of we're to kind the

beginning communications very, may next. optical our three all, the business we is pickup are see guys last the and the revenue worked we quarter. for communications therefore, And a all increase five the of have over shift in a first ago to in responsible revenues but we So, very years hard next are --who get seen in This turn agreements. where bookings what into related quarter unlike longer-term have the not years adjusted to

So is nice in growth trajectory and quarter all much so as in not we a straight the but also while looking hearing it probably I in be at but the on think very, it say. from will next we say good very isn't thing here main a next I'm well, inflection indicators up, quarter picking would we're QX. sure customers it's up not industrial to

about So we we've the do do withstanding is been a XD counted for up we traditionally And not the on of quarters that gearing then lower little are on bit it in Sensing significantly one much back of how we've How that. that? half cautious year. the

Operator

of from question Your Sidney comes from Deutsche Bank. the next line Ho

Sidney Ho

silicon time? side. they volume revenue visibility a to that long-term long-term you schedule Thanks has Can step ask increase portion or for I your you volume from taking the Hi, That's question. from carbide my the Do down of silicon you And take-or-pay? come good contracts, long-term contracting do have how on? - revenue have pricing? morning. want contracts of minimum pretty first good long-term over they expect a Are much call. sense carbide on give use about my the these

Mary Jane Raymond

Okay.

carbide So we of product first probably the lines is the one business all, of have. silicon yes, most

say carbide on the long-term I'd nearly silicon So all is contracts. of

So that's first thing. the

thing second economics. to is think The about I respect with your question overall

we've didn't. Our worked cost growth of reason that how company the and innovations very And think me the production time. production over also got I focused been look Tell any to our to is long-term most questions has market. I contributing on at output very, yield there. in end on both increased also But event this that to but of I if progresses of

Sidney Ho

the them. No, on million you about terms that you you or of of My got each about today. you talked division spending all $XXX multipart segments. guys capital in in talked talked In fiscal XXXX past second each the about how spent you question is much

$XX looking Can framework carbide, sort a was silicon some it be give of justify in carbide. CapEx you sales? your you year? think in So look Are to forward-looking you any we'll silicon us capital of silicon that revenue relative for think give this to I to the growth us on the similar Thanks. in growth. carbide that about And That at XX- you you on how million spending. breakdown specifically kind months CapEx at metrics can great.

Mary Jane Raymond

Okay.

decent all, of actually the how tell the of a been do carbide. But I capital silicon don't year. We in spent far year, portion the first can that at So, give have capital of breakdown end the the we you this quarter. we've for was of spent of by so it

factory greatest mentioned I investments is most of we think what the silicon diamond any carbide, ongoing that capital carbide silicon have. yield product is said the grown businesses think one Because engineering. that is improvement just is in whichever to including in respect to are improvement a we own. advancement single plan period and booked at to I of why in the it's OpEx silicon probably those every about investments effectively the important the have With As the single we which capacity Chuck yield actually carbide, you,

both So material looking on be being to cetera, the as how tested is for additional grown, innovate as will et well CapEx we machines.

do the but of own at it's also customers. don't machines first majority we to demand time, the you build know, I but industry that we the vast of carbide, silicon that the we our as the we certainly for one time them into CapEx the of all, at look we as time So a just think a put build tranche

period we're time of in now by the continuously that some going silicon ahead in in tranches. the carbide expect much capacity would pretty case probably Go Chuck. for I So,

Chuck Mattera

like morning, like silicon Mary add, Yes. I substrates. carbide your Sid, Jane. and I good thanks question for would would underestimating the to that believe have and - market analysts for to requirements we and thanks are

plan capacity over We a XX XX have our the to to next double months.

accelerate on as and are We said. basis Mary We months And customers in. of in our But market. yields the on may basis and about strong with of position productivity this sense the sustain you Jane We capacity conditions. may improved that. slow we capacity in it XX both will additions our some down to on actually the output bullish XX market in of our doubling really our are even to touch view for give expand rate market the plans to our and based that belief

Operator

the of from question comes from Your Marshall Stanley. line Meta next Morgan

open. Marshall Meta Morgan Your Stanley. line from is

Meta Marshall

Great. A couple question. of

that mentioned on grow. of pump kind talk kind in CoAdna? business seeing things kind maybe Is ROADM that Just other would demand? the and the that that of about of it you ROADM is on business, then didn't Datacom second consider that when lasers growth you purely overall you And you're the

what Just center? Thanks. center enter any inter maybe intra you're commentary seeing data versus data there on

Chuck Mattera

Okay.

one second. me let do So the datacenter,

come right point. to just Meta. Good me Let morning, the

with and full I modules, that more growth portfolio marketplace about line demand earlier. continuing not passive second and XX% I in referred the center the channel we're What for to in back experience to that XXXX, strong datacom optical the that's the is to slowdown pump the With cards, business. We EDFA what's of the WSS that inconsistent datacom to than components, market to WSS. optics inter at regard have been are decline the board come market, and expecting line our a monitors, demand in driven mean reported, center and lasers, half from across is ROADM the market are in but data data all reports begin strong

to a experienced that half that our but could inventory. year see in pickup the customers strong to second we discussions return the of all to Some begin more the channel demand. with We've the point sense normal

Meta Marshall

Got it. anything delineate or intra wasn't center But like data it inter it.

overall on of and the kind resumed half. second of expectations in kind paused Just it

Chuck Mattera

center. intra-data mostly Mostly,

Operator

line next from Kang comes FRB. the question Riley B. Your of from Dave

open. is line Your

Dave Kang

good question XXXX. it morning. missed said believe My first fiscal it's in I Yes, or calendar Did ramp may Android have Chuck, 'XX will win. regarding you 'XX? it. you is say I the

Chuck Mattera

'XX. Calendar

Dave Kang

then - how you think number. And on Mary I it. I said much Redstone? you for Jane, pay I missed the Redstone, did Got think that

Mary Jane Raymond

million $XX

Dave Kang

Got $XX can whether any color an and their or those accretive it. neutral, rate, And provide million. run you revenue it's topics? margins end on

Mary Jane Raymond

small It's that. acquisition; going to not disclose a pretty we're

Chuck Mattera

a five million high-energy years. expecting accretive inside the for repeat of roadmap am - and in the earlier in on to that developing if you're small $XXX about strategic, in with least our and we've know Dave, our I the and next they will don't combined be rapidly It's lasers but that I it aerospace talked acquisition defense call, business, I both could the revenue smaller past, at contribute

Dave Kang

fourth-quarter? is sequentially And growth about last how my fourth Thank it. was fiscal baked last back then again into year-over-year, do up did to XX% Got once that What's think my guide quarter fiscal should your in going and question how the we ROADM their you. then products is question? they

Mary Jane Raymond

certainly as say to sequential would would of growth I I decent first was ROADM have all respect with Right. baked and we QX, respect matter, a the to some communications we market a say picking you with growth components expect generally by of speaking, I here in seen we've But last to QX, up, optical say, don't a detail see to market. quarters know general it but pretty the few would we end that as and guidance actually compared continue.

Chuck Mattera

out in and output maximum we I tied our Gary sold said, as the generate Yes. to add said of just our are QX ability would is our much to facilities. to utilization Dave, I that as expand ability so

now the of output work we about acquisition. in the too taking year working a our calendar half our are get standalone to position. are chain, Right the we from in the of we as sold-out year we much not is now reduce a our as constraints, supply are have. more we we before in we second think spot really the cycle So, stock requirements II-IV are There our fiscal XXXX can where vigorously that break but a when times, facilities budget

Dave Kang

directly more Mary through I strength Chuck India; far as as Huawei, Jane India. One don't you could? that was I you Obviously, mainly and example? said, you customers it believe sell I question, like if communication driven assume for sell by our Chinese like China or to

Chuck Mattera

that's particularly in market, why asked and network components were of address a the we the it as into markets sell our network our we David, as geographies, device channels are manufacturers, the about largest into you in and the geography they all know, to those OEMs question manufacturers in components know. Well, and and way, you world we equipment answered equipment these that

Mary Jane Raymond

the in very China Dave, contributor from US Japan, - big my well US the the all that just the we lesser the along. bit the from market, are comment has from been so a stronger revenue what's just as as US been actually market, it's in a together, quarter the was little very, growth the good but was market actual one

Operator

Richard of question the next Craig-Hallum. from from line Our Shannon comes

Your line is open.

Richard Shannon

Mary and Chuck Jane. morning, Good

can doing gave earlier for gross think maybe it think down XXX year sensing if assuming assume I would is information how about little of were $X.XX on am that's XD kind a that. photonics a path back ask the some points XX%, excluding bit from you been of the was gross but here, margins, can back can in I help even You getting to you above you were asked quarters mix the the a us impact you if understand in we I us a acquisition said call, than all Chuck question margins, a back think towards should reality a Finisar then and be and about obviously maybe last more ago another about that year that has basis little few XX% a obviously you? whether I XX% get impact, early you potential of for

Mary Jane Raymond

full by margin that our you gross of first think, I of are about affected right which utilization Well, the is on track Yes. the all, there assets. the - well is

largest was I time development new So XD do due the to the said while bulk earlier same are the develop products to new - and down. for gross products went and margin one the of in contributors major develop manufacture product, the the the sensing too which course, designs At they of that contributor in a money little manufacturability, gross probably also little of have performance from bit they actually margin of a gross the more time would temporary. speaking, and margin. I means impact can the lines a that dampening on of on the less bit sometimes products use effect that say a view, point that across dampening of Generally there's the

to tends and if all think from I many QX, which, onto which, of picking the mind that often corporate divisions doing generally the materials teams, have So getting average. products back as of grow and resilient]. products XD their industrial margin sensing said stride higher not for performance we then that industrial be well, are than Keep our up the in

of affect bit, and a quite I little I a margin the the last up up of which the communications on has think years, three bit growing all bit picking of flattish So happened mix over little think see a we'll when with performance is are they margins a optical kind resume. kind and

Richard Shannon

been enough. than you're but that would here, questions ROADM, in without more directly one prior the about talking what the ROADM in have you Fair March of here maybe on ask I growth the Okay. XX% quarter, CoAdna? Question number think I'll

Mary Jane Raymond

probably say there. I on - pretty up Oh, it's still would hang decently

you. your Ask at for I'll look next it question;

Richard Shannon

Okay. blend how somehow, in to you want as like I forward? this should within we this talk and about ROADM versus CoAdna [Multiple excluding within unit going kind And well or to bucket Speakers] ASP a I would ROADM if organically that growth a think about but and then of guess growth follow-on content

Mary Jane Raymond

second year-over-year all, CoAdna quarter CoAdna first not within very the of without would been have far still the off because I think very, sequentially. Well, good probably obviously without growth too

before market think have the potentially quite at with ASP, this fully possible mitigate continuing it the they we of ongoing would strong. has because little communications the forward. is bit been say on I dynamics still see point, the the probably I most pressure would So and markets don't we are utilized also respect end pricing mean of those to your in with I a think market exception question all that I expect going consumer,

Chuck Mattera

also it XG absolutely high and is you is are switch to job. a have it team our the add in is and existed great that this Finisar integrated really really, a Yes, that also look know, CoAdna overall like a part I'd components infrastructure job. a and The that remains II-VI the really designing excite strategy and forward. a is Jane ability we fantastic fully - Mary CoAdna and complement is to XG people really who right, they've regarding great to very want strong WSS portfolio systems port right, has to of is serve of that CoAdna, have and I been completely the would still around its to exciting. China especially their into strong but a other as our say done really done exciting, own ability

Mary Jane Raymond

I you did get asking of was questions. all your Ron,

Richard Shannon

Yes.

high I think Chuck, here line I difficult million predict? just specifically you a do question; to is more when you see guess over two-year one a I'll laser last to or about the that to next $XXX contribution? the acquisition. one get energy little a within Redstone first of mentioned related market. the a years, start five did. we to Is that bogey timeframe kind have

Chuck Mattera

know are it's better customers. and in. and designed Well, little and work of they their to ramping the they because every and Redstone defense all the excited Jane one chain time, catalyze the - they're is well the radar so that's said where design I counting be we bit think our really at them differentiated; with as generally strategic demand the highly a being don't I why plans, large this expansion the this it. our have our team it you of with once will We plan position is There and I They small accelerate and It Mary their will it'll well so about market. aerospace even acquisition, are will this because do that great of I is we a long-range our - screen our products of than known do be that into know one spot more are is but strong and it slow - deployment a am am will and a extremely Redstone capability. for them but work take and on actually us my a supply and in capacity going sense is really happy strategic I were in to positioned are in gets which inside and it am on about - take two that because differentiated that, for customers it, gave opinion I off excited but is unusual a

Operator

comes next Paul question Your of Silverstein from the Cowen. line from

line is Your open.

Paul Silverstein

Good I problems. there that is apologize morning connectivity some and

and understand. some was sounds comms repeat and Mary accurate? is business want to very Chuck strong, like heard business So remains overall Jane, morning; overall I asking Especially sure the different this this that I It of I yourselves. make apologize I things

Mary Jane Raymond

Yes.

Chuck Mattera

Yes.

Paul Silverstein

any that on much you of All out idea your the ROADM, right. And recently you table? left Chuck, capacity how of sold constrained have said revenue

Mary Jane Raymond

think I because in markets just keep bit optical the we a constrained little to of of of no, several all, portfolio. I communications first this Actually volatile is one the II-VI components - work one have, the mean obviously is that we most capacity

ways delivery We very some running by teams sure to, it's to some hours, very, changing when releasing work good QX, to will increase is really longer whether bottlenecks various compared for we'll - et the cetera. QX, their I the last and shifts see do presented outstanding I and demand our to nice a seen have am them growth. they probably think their that job on production

I sequential. think Chuck talking specifically was about

Chuck Mattera

good that what the with the do on be, Paul, just task the There our communications I not we work an I that, differentiated the of shipments first timing collaboration awful can. fiscal products to our to happening at everything - Yes. customers is but, make them in with interface and that is do it be is can is best and quarter lot believe focus with able constraints. our it's that to I to into possibly we'll 'XX right have And even it's answer, break to that as have task but an reschedule we easy sure sockets can of committed the question, great we more position stay designed within the a what really and responsibility them that but what and to we on because and are a customers, doing direct better it. are in, working make, to early be into quarter towards do to we're than not needing a the to real we as focused people to that have are even one that's to of And we

Paul Silverstein

do Chuck, on pump business? your And XXX commented you

Chuck Mattera

ROADM also grow. I market deployment products including is our back to pump for could submarine Except to business widespread pumps just and but submarine come demand continuing that what is to the that XXX didn't I of networks, say portfolio of No. say, extremely say, our is the in to high our

to I if the exciting. selective first done market, would submarine network; I job, at sockets team didn't be and in third was new extraordinary demand new CoAdna say, and those one expanding better. will And have have wavelength we for - expecting are We really that an way the our qualified their I submarine in like accounts even the are quarter it good; by say has the switch the am quarter for accounts now the fourth

Paul Silverstein

Jane weak I me; clarify? US then thought to was a Chuck for say question the last I that little Mary US said I regional I confused, thought, the discussion, just One return heard you was right. strong, heard that and was could if that I I All can you

Chuck Mattera

North fiber-D strong I say, important let me people stable. we I'll coherent fiber it because we I TV integration the America been customers cable really of serving a particularly just really, from place, about than say, architectures. America, North demand we that's D and all, them would but large have cable and first on TV and in are and it's focused said It's are - been usual slower there's bullish taking very offset acquisition and was by

I and there. But by driven to our China the in demand North and discussions is leaders part for good in XG capacity for the we we long-term general this been be India America; particularly that's from think it's in Europe XG. slightly was from And customers, with in customers us. adding and have capacity that our for demand the opportunity - our in We what have in going European sales, coming and increasing softer but overall said to been of a had try strongest has

Operator

from the line of Tim The Capital. Northland final question comes Savageaux from

is open. line Your

Tim Savageaux

Appreciate current the kind follow-up and questions expectations. regard and XD revenues both to related of here, with

a cycle, caught design the 'XX outside saw some second win for drivers point imply expect calendar kind product side. that think product to characterize mean - First, sure you am what second about cycle? this in XD growth? if mentioned to of comments and solutions term made might sequential growth Can half half the what relative revenue at over sensing the of that And did Chuck, you I if ramp short I that up what that, and think term, of I I wins half last XD Android I you the saw in cycle? I of XXXX not x additional could some you wonder second in XXXX, industrial question. you addition on related Giovanni And or of Laser you kind XD That's new main you from the the wonder kind side, on then infer last Do you in medium ramp some for grew cycle? mentioned the sequentially QX gearing no? guess I to

Mary Jane Raymond

Okay.

- then XD to sensing of solutions respect grow First XD all, laser did in

Chuck Mattera

last the a expect be see year. than would bit pop-n be Yes, same believe that we to I but would we higher last little saw year, -

pattern last multiple be are and - seasonally the we the better designs position a be very said we think the going in should than as we year. will we I with But similar.

Mary Jane Raymond

for are out XX fortune ago? your minutes question there, We running

Tim Savageaux

think I hit we it.

Operator

I time. to the am to back like questions for closing Mary conference Jane I further turn showing at no remarks. Raymond would this

Mary Jane Raymond

See Lance, speaking look to XXXX X:XX we to joining come would you day. you to a call Tuesday, have we a.m. to very Thank year XX, for forward now today, great joining when and and you like XXXX ending full-year is August year you, at thank for our all much. us that I Thank very us for fiscal scheduled you much soon.

Operator

and Ladies for today's and Thank you day. gentlemen, this wonderful concludes participation conference a have call. your

all may disconnect. You

Coherent (COHR) 1 May 192019 Q3 Earnings call transcript