COHR - Earnings call transcript Q1 2025

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Operator

Good day, and thank you for standing by. Welcome to the Coherent Corp FY '25 First Quarter Earnings Conference Call. [Operator Instructions]. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Paul Silverstein, Senior Vice President, Investor Relations and Corporate Communications. ahead. go Please

Paul Silverstein

and Jim operator, CFO. everyone. me With Thank Coherent's good CEO; are Anderson, Coherent and today you, afternoon, Sherri Luther,

During of provide of today's second quarter business will and XXXX. the call, review fiscal business outlook a for the XXXX fiscal financial quarter of and the first we

today, can projections found that the at like other remind everyone Investor I earnings regarding or coherent.com. section of Our future would make be performance the press Relations our we conference forward-looking statements future call during release or of website in may our company events company. the to financial

contained call. to of to those We conference social information that second documents any files company the that that risk call, you changes or actual contain that such the SEC, communicate on available call we with This guidance, or be at for guidance XX-Ks, could the forum statements. announced XX-Qs quarter and publicly we important to identify including forward-looking currently constitutes documents predictions factors you as such differ and the These public that a based that materially. wish and XXXX. time includes updates cause such the after company's If to material materially is any results from and using differ this X-Ks. our results intend will done this fiscal the in projections statements a press release caution may our are refer actual We

to financial We measures both will during non-GAAP and call. refer GAAP this

and trends. information to intends to the management investors permit company's non-GAAP additional of certain with disclosing information, By further analysis underlying performance provide

at GAAP that we financial website measures periods, be on Relations our section financial these non-GAAP found historical provided of Investor the For coherent.com. measures of can reconciliations to

turn now over call CEO. me our Jim the to Anderson, Let

James Anderson

Sherri roles Sherri today's by to and welcoming Prior as our for CFO, like Sherri with thank Lattice, years CFO. Paul, as call. acquisition. a everyone, our to for new Coherent job her Sherri together the Lattice worked legacy almost combined an long various as Sherri's have worked XX joining you, at Thank back running, years outstanding Coherent company, to its with Luther hit track join and proven has record allowed CFO. her Semiconductor and history and I'd in did where very before ground the I you, the we're team. her previously pleased to begin for to X financial

arrival. a interim continued dedication to I to also to commitment Sherri's and our leadership the me grateful for company, prior for as his I'm want Rich's have and dedication to deeply and thank serving CFO Rich been Martucci tremendous help and coherent.

end financial value event our growth and plans opportunities, technology sharing look product and and board, on market for more about map to on in including the Analyst XX At strategy, I'm next is York Sherri event, year. that Investor that of host New pleased we'll an to Day and to model. our details create outline that shareholders. Now We announce we'll our May forward road long-term overall our

growth, will I Before value into an areas call, believe earnings improvements portfolio three shareholder our update of creation. strategy to I'd industry-leading profitability quarter opportunity in and engine areas execution. discuss key technology these culture, an like extensive expanding and improvement at our market three revenue growing last transform I first results, I our provide our outlined that and innovative on market-leading of the

to than across opportunity I've culture. our world. regarding and with now more visit XX the meet sites the of teammates many of had First, my

inspiring. and talent employees' We is our have incredible depth and breadth of dedication

opportunity noted faster and our to last focus evolve Yes, streamline fundamental our and and encouraged execution. our this and part is strengthen simplify organizational culture. our area. nurture culture. of culture since Cultural made accelerate changes structure we early leaders, agile favorite progress our will empower I of building I'm also a our company. time, more decision-making to by is part but our on We've numerous as My change innovation, to quarter, We're continue already there always takes

product strategy. regarding the decisions applied inorganic we portfolio engines, X making strategic long-term review X This categories: criteria sort June. nonstrategic. and Second, that profit a lines completed to forward. portfolio financial for organic strategic be the of and bets of We of initiated assessment will each set engines, We growth investment in foundation our into moving and

actions on next which to phase, assessment. strategic We've is based the now the moved drive to

where already the growth long-term for company. towards we've organic we that conviction example, For we our can investment profit expansion engines shifted have strong and profit drive

instance, product lines and we assets also datacom switch. the transceivers new new such and circuit next-generation investment down divesting platforms as optical started of For in our increased are or process We've shutting nonstrategic. that

facility, Cliff overhead and example, an used debt from sale For announced underutilized the planned outstanding recently proceeds of costs. The asset. pay which our of facility sale were we reduce nonstrategic and to Newton the our was A down the

our that battery strategic example announcement exploring platform. recent we're is technology Another our options for

that businesses a our in our small structure would businesses. be relatively nonstrategic portion margin represent company's revenue, and absorb capital of the investment, to and core better our they're Although dilutive focus deployed

Investor we'll our optimize upcoming further we Day. over the updates, portfolio quarters, coming provide including our at As

Finally, improvement improve the tackling Last for significantly opportunities greatest area of efficiency effectiveness. the operational I execution. quarter, We're is underscored upfront. the to focus and third opportunity

customers with in engaging we've partners has our of begun This a manner. and example, and approach For already more partners. growth areas customers strategic uncovered new key key our long-term opportunity

R&D growth are shutting suit On XX%. long-term highly we our business our aimed is that reduction investment level operating margin sustainable expansion. our achieving example a at projects consistent for cost initiatives gross down at product and goal focus profit speculative do operating are pricing shifting We launched and of expenses, optimization engines, we above or and our model. divesting Another margin gross to on not

high will focused, investments Our go-forward that are R&D strategy and ensure efficient offer return.

some driving market-leading growth, on strategic enhanced by by now brief by focused sequentially and first Non-GAAP basis are stronger our margin Evolving our fiscal I'll a transceiver by growth, execution our improvements forward on we sheet. cash points provide by comments well approximately telecom with efficiency and sustained investor in leverage. expanded our quarter of will year-over-year. AI-related on optimizing along Revenue year-over-year, by and a more revenue. and gears switch and us gross details primarily XX% culture I XX profitability SG&A, our greater and balance grew put path upcoming portfolio Xx EPS at our in sharing generation and results. meeting. revenue to and look datacom our operational improving on And sequentially X% non-GAAP increased driven sequentially, QX XX% strong over

business increases market. by both by increases increased In summarize what the were and and by QX sequentially strong by and sequential revenue me by market, in we're our communications driven revenue. Let The our year-over-year XX% XX% telecom our end seeing Datacom year-over-year.

QX primarily and products center datacom We're XX% customers. those continued AI year-over-year with demand. very XX% the of data by due across broader XXX the Our revenue grew sequentially by adoption ramp pleased to approximately transceivers gig set of a our and of

technologies begin the on transceiver We EMLs samples a having X.XX X.XT preceding investing in to datacom ramping our initial in includes transceivers, photonics. to sales and also great that expect XXXX. broad to continue portfolio quarter ingredient of We're silicon transceivers in of calendar VCSELs, progress we continue make also delivered

presented lane of we allows deploy past technology and this both breadth We each The at European transceiver a best at Communications showcased differential XXX the on technology solution per and based Optical extensive silicon our our customer optical where September, capability our photonics EML datacom platforms. demonstration portfolio to on the application. gig for this us Conference multi-technology

EMLs, and solutions. XXX-gig lasers our CW to We such great VCSELs silicon continue enabling make components XXX-gig on also key photonic progress for as differential

also We family a photonics. transceivers announced on lasers X.XX of high-efficiency to based silicon recently power optical

continues platform transceivers, engagement. significant datacom our is well and generating new customer Beyond to progress optical switch

to revenue Our units is innovation. ramping switch XXXX. and based for center expect we telecom. our begin to best calendar crystal product technology highly customers, differentiated sample was award ECOC with shipped data reliable We've and solid-state in at strategic liquid key the to XX recognized Shifting on

Our revenue sequentially by by X% XX% year-over-year. increased and

recovery, optical a and version QX L-band existing of our XXX-gig our in end power with improvement, CR C-band especially transceivers, ZR of high of ZR we plus the output an new XXX-gig and XXX ZR market end products, cautious capacity continue infrastructure. along with growth fiber market plus coherent ramp coherent revenue sequential new transceivers. combination to take a our Although view GR in We're the was announced qualification telecom recently the to we of double

which remaining applications, markets, primarily sequentially are XX% decreased year-over-year. In decreased and aggregate revenue industrial-related X% our

driven being laptop in excimer and computers. OLED new weakness markets, more by these and for than which other by demand subsegments. ongoing was strong OLED manufacturing, strength Within increased stream display lasers capital is Display in is adoption by in precision manufacturing driven continued for screen tablet our equipment offset

We were also industry Across that for with precision Gen market we experienced manufacturing, booked being display new industrial-related revenue Python inulin headwinds such consistent fabs. demand QX initial deployed other subsegments are trends. as OLED X in end in lasers that broader

our depth for Overall, our end innovation, growth markets, despite for as shareholder execution. be enthusiastic the markets in of growth our the market quarters. to being some ramp. I'm growth significant to about summary, and continue potential products X technology opportunities strong the the market solid months, recover unlock year overall as operational business after fiscal industrial communications end near-term we to even a of on based some near-term while headwinds, expect We're be continue breadth for improve and the over the to the to the on board company, we new the invest company. we a In our And our long-term value expect size XXXX other driver the softness expecting more to and persists in coming opportunity

Luther. our I'll Sherri now call over to new CFO, the turn

Sherri Luther

express with Let come excited innovation. Coherent, teammates. and also quickly me to a of thank my a begin welcome has a I my rich up by from me I I to want warm to ensure smooth rejoin to to culture I transition. speed for company especially Rich helped coherent received saying want the who am appreciation Marcucci, how

and As Coherent breadth XX me innovative foundation portfolios. significant the years shareholder expansion. technology was rejoin company prior solid opportunity has I Jim attracted drive its to acquisition. at with its product spent of coherent to noted, to The a value What

opportunity areas. to I the of improve in a profitability see number

efficiency investments I we margin better for opportunity expansion, R&D For example, efficiency. the opportunity for SG&A and greater gross see operational make and

event analyst that addition, our possible. we balance I In to highest allocation sheet you investor look paying also portfolios capital investing are debt to May. deleverage return down while need key with the the forward product as company, at thoughts additional our drive to for in and quickly we the in is because as ensure that sharing

a a With Now net margin provide strong let we on the and sequential in me our and driving debt, to quarter, capital financial in the summary down with allocation, credit paid we solid debt drove continued defined revenue results focus X.Xx. first $XXX improvement Overall, strong gross our million as results. of leverage our agreement ratio growth reduced cash of which in profitability. our expansion,

sequentially end sequentially Laser First market revenue weak Materials to X% networking perspective, quarter sequentially XX% X% sequentially of relatively demand. revenue and reflecting segment year-over-year XX% decreased segment due XX% and approximately increase year-over-year. was billion, center segment to demand. and decreased $X.XX end and demand. X% increased AI primarily increased market an year-over-year revenue year-over-year data XX% automotive X% due From a revenue stable

by Our the volume, the first gross prior improvements. The favorable basis and compared XX.X%, improvements basis quarter yield of in margin margin increase points mix quarter an XXX ago an XX higher to points to increase and year quarter. driven gross of non-GAAP revenue were compared was

expenses were prior increases quarter and R&D First the year compensation. compared primarily by our sequential operating ago in $XXX non-GAAP million were quarter. as as to million increased driven $XXX well quarter, and investments million in The $XXX in variable the portfolio product year-over-year

ahead, plan in expenses portfolio. disciplined our in invest ensuring Looking we to while product that SG&A we be continue managing our to

and ago quarter operating in quarter. XX.X% XX.X% first compared non-GAAP to the Our quarter the in margin XX% prior year was

XX.X% quarter prior the result quarter XX.X% rate First onetime nonrecurring compared a non-GAAP to of items. in tax was as

for quarter quarter First cash We cliff proceeds and non-GAAP reduction. prior per of debt during the the the share in facility was the operations quarter. earnings diluted $X.XX sale million the year of ago in our to and debt quarter compared down Newton $X.XX $XX paid using from fabrication A $X.XX in incremental

to to be to expected for basis. now operating is $X.XX excited on comments. quarter XX% will and the foundation is I'm significant for $X.XX to to be I $XXX between Total on innovative to expenses rate gross a guidance XXXX. drive call strong a Q&A. Operator, our summary, return expected between be expected be very to shareholder In on I XX% expected million and and between future non-GAAP turn company's $X.XX is basis. the Revenue with XX%. Coherent. basis. expected second bright between of opportunity quarter a million to and to formal are EPS non-GAAP value and XX% technology non-GAAP see transforming margin be $X.XX is the billion. for and model. a products stronger expansion, fiscal Non-GAAP the my billion $XXX into That Tax open concludes operating please and between a

Operator

Instructions]. [Operator

question first Samik Our with comes Chatterjee from JPMorgan.

Samik Chatterjee

key that and to they since think areas think to months in you received one you areas areas customers with the quick Jim, it's you've and have start can a then even feedback good have company. that quick focus then think now been I core What's follow-up. joined on? been a I for can talked coherent that X follow-up. Jim, And the mentioned partners I of you've terms that from I on or or if really maybe improve And

James Anderson

question. customers Yes. over big strong a think great across many Always customers well. X of lot Thanks, I'd also big for Yes, of question. and of but I with our about possible. spent definitely we as all, first time relationships last data -- talk have our our center customers meeting months, industrial to a happy as the Samik, that, say with networking the customers. accounts we're customers, really our both strategic existing lot

there's That's a And cases, of positive. so these very lot with history in a long and customers. strong very

are our to to engagements and are the generations we talk from now I that long-term more multi-generational, that much relationships X strategic, on much generations here on focusing out. here with those have multigenerational customers, more is that to X, move right when customers innovation future think problems partnering solving that our are opportunity in to I and the more customers much with build X,

bring help are think And couple would with have those one, would those so to and our we I forward. a customers things that's And I moving their discussions customers strategic innovation. number customers is, we engagement when longer-term say I road portfolio the really definitely think to that I of deeper our key technology to resonating say, opportunity drive map that can drive strategic the our with

second big example first fastest I chain. breadth for EMLs assemble we modules, the -- the just lot don't space, the networking bring we go modules. we map the if would AI on depth really our the in we're our now the highlight, area the a is as too, But the resiliency lasers, portfolio just AI, the into of silicon recognize I right an of supply instance, lot if that pixels build chain technology whether because bear, module, I take data And and the and components the area of breadth design of a that our seeing those where and center that or depth optical supply especially we our take, they're -- our revenue in into road that technology think where to photonics or that's or customers customers, the growth we go I can ingredients other but of that ingredient

that partnership. breadth So for can of multigenerational the bring technology we that

resiliency. chain terms is advantage, to is I structure geographic a And bring is supply could really again, really footprint. think situation, especially very I structure where more then of really fast with differentiated really way. And to strategy in it's more data think have demand we center our in increasing customers incredible think be is our we're them a that's ramp that very second our to reliable of important us our have because we thing, a really strategic we right I manufacturing can now have and quickly, the customers all diversity allowed real a supply which in unparalleled. verticalized important that big there, which supply verticalized in becoming when and definitely then And chain

moving our strategic much think that, build I an deeper of And resonating really point things with customers our couple think area so really a that high-level of engagements I that customers. forward. opportunity And definitely our forward. receptive would be those moving But a are couple -- our we'll focused back to partners to are be definitely with to that's the are and on

Samik Chatterjee

to the should talked gross not about sort but it. follow-up, margin trying more Got you've be year, a as year? the year, be you trajectory be my what accrete what we at for rest trying to should margins of and through of Should for think we tying are of about it. about we the the the to trying should some improvement that revenue revenue we start Europe? be tying margin Just a of those the I'm here sort Or to guiding about And essentially we of thinking think move midpoint. the to that? to how guidance, just better from the to Got it gross what sequentially bit to the it looking and sort into drives of improvements think gross pricing

Sherri Luther

Yes. take Samik, question. I'll that

volume context term. I'll a and it And revenue thinking long QX point start off look on talk base then from XXX about course, basis different QX you the at guide So with improvement when came and bit about few areas. we're of little with how year-over-year a point sequential little bit the for then of One more pleased approximately and basis was, contributed. that that higher really a -- XX XX really QX, improvement, we're

was favorable saw laser example demand OLED our continued saw segment, had strong for mix. our where where of manufacturing. for that product An we lasers excimer also we in screen We

where We saw our and in transit also part of in had we in saw yield, transceiver that datacom business improvements we improvement our business. that

But that So is is the on mentioned really different QX, talk expansion the guide few with quarter, is includes right? drove can at cost launched quarterly that about optimization just to we for sequential as basis that that range, When gross there margin our reduction. areas fluctuations and we margin. which strategy, a well to pricing respect be look improvement a XX% a Jim and we XX% last gross there. certainly product year-over-year a as did QX, range,

where an of because that's gross focus margin a area going to we're so on And want than achieve to we long-term XX%. greater

really model focused to think on target. greater long-term as give elements our our And color on Investor but the what that gross really that. margin and in very assured so that's where -- goal the driving to year, when XX% how you next in we're be And we'll and about all for is that of we we're get early stages than our the May certainly Day our to can of of that. different Certainly, more

Operator

Leopold question next James. comes Raymond with from Simon Our

Simon Leopold

thematic, other I've got more more maybe two reflective. ones the

to is, The acquisitions. just are of of see OpEx, thinking options you like capital thoughts, weighing delevering, sort maybe about these? some particularly in we the investing regarding can get really priorities first if really I'd one structure, for making Sherry from the How

guess was Or this XXX is it and below below. XXX provide XXX the below the XXX really the year. from understand upside? it the had products relatively more and being of gig follow-up And quarter? XXX traditional coming the is to Did gig, above? all basically where gig flattish in talked below was products I'm what higher from performance? there strength trying know about surprise more was for Or terms and strength management gig any the of datacom really business, that gig, Was upside my I I previously, And the

Sherri Luther

you, I'll allocation. part first the the on take Thank the let that. question take Simon. Jim of take -- I'll part of capital I'll second

undertaken drive that perspective, in the making company. company the the highest investments I in order the programs spend completed. at capital is highest we're mentioned drive our of see we're in really that the this shifting in a #X for the area the that certainly next the there ROI priority those long-term phase review joining company in strategic Jim ROI of organic lots from to growth. opportunity was And portfolio And that So those drive the where towards really, R&D the growth allocation and

the priority. that's #X So

also second hit deleverage our we as our reducing QX, is serves well. and in it's $XXX to reduce and credit ratio debt overall costs the reduce defined balance very in to and to sheet down priority, debt and X.Xx The 'XX, our second million leverage as our service strength balance close the priority, a really paid that P&L This brought that In debt to debt in the agreement. down sheet.

pay but order down, the the So with from to fabrication of facility coming proceeds took incremental we're ] the operations, our paydown there. from that use in pleased sequential of of quarter. [ after we progress or an facility, in But we cash it sold that A-Cliff that Newton sale did component was the

of that down additional sale really gave pay further And us opportunity deleverage. to debt the to so the facility

I priority. so a close have history be focus down area that's debt, me a aggressively to of that's continue going for very and and to second a paying And don't something

James Anderson

datacom business. second part your around the And question on of Simon, the

of all, of performance the pleased part first really with yes, So our that we're business. of

transceiver reiterate, XXX growth up gig Just it did datacom a and the XX% year-over-year. right, sequential sequentially transceiver was and from see well XX% the basis as in business was And you're we speeds. to below up -- in

stages did to we see customer different So adopting look customers at the different speeds. transceiver was the base, across very there you of that nice sequential When growth are see.

So doing on and below customers we still well. are have significant volume XXXG that as

transceiver different of mix a speeds. really it's so And

gig, I the increased. gig we a the have, back transceivers. year it that look only ago, gig really that ramp then ramp pleased customers. to color add pleased couple I of was overall really the with the is that look, the And would number see significantly of XXX say, XXX on customers -- then If maybe of like we're would one customers And I'm of is has I are breadth XXX ramping things the a other of our

have we gig. Now many XXX customers ramping

revenue So quarters well. much do over as there's bigger that of grow we underneath streams expect XXX-gig to continue the ramp. XXX-gig coming diversity And to a

Operator

Barclays. comes question Thomas from Next O'Malley with

Thomas O'Malley

having call ask wanted for on alternatives have you just I broadly you to taking reviewed the have guys Thanks me welcome, into out to talked you. and strategic business. are the great It's that some Sherri. year, you've guys the about

You kind of review concluded. said the has

talked facility. the You sale a about of

paid is gave. some you kind to all out that color any your You the was I give thus specifically up, curious, an understand way? nonstrategic? pointed is debt. coming Or that Day nonstrategic you down additional then on honestly extent Could the the there of but of far? battery more there's just And there? business. intent be is identified Analyst that sales But as you I the that

James Anderson

Yes. there Thanks, the question. in are Thomas, category things the nonstrategic. No, for of definitely that working on other we're

the in we've working things moved are assessment. the remarks completed standpoint, Newton It at standpoint, wrapped So just up a line then execution end as technology an of since different And product And gave pretty the other much of examples two platform. facility. we're a And that sale from asset A-Cliff definitely were there category. battery looking But on then nonstrategic we that the within I that portfolio of prepared the the from number things there's that into could we're that August. said, at. I And mode.

any just a better well. the our at right way. share team. certainly, I management nonstrategic the that, share to right It's share premature that from we capital small milestones part category at as definitely picture give what importantly, the prepared And margins. Day, some and of operating revenue, draws a then in it but of we'll time. is Again, away more Investor between is focus our But even said at And want share relatively time. then though that the to with a we'll it And to reiterate even certainly remarks overall the the and the -- We'll now Investor little investors along that I Day as will key the over dilutive

that where our We are and our to investments improve to focused. improve quickly focus, anxious are our on where execute assets to where

And drivers That's the other then just in place nonstrategic for and we've a beyond profit of, our adding drivers. investment. key growth been category, instance, categories just where

nonstrategic AI example so of investment the center been we've fast-growing transceiver And areas. the shifting into the that growth. data the areas best away is from And

R&D new datacom So technology we platforms have increased for investment in transceivers.

these new are well. platforms with as the as So technology I as really we're excited circuit be future example we're other team, would about excited optical that give which well would the about

those also shifting we're So categories high-profitability towards organic well. investment high-growth, as

certainly in that So already happened well. or process as

Thomas O'Malley

Helpful, had then is the Jim. on X.XX. second And I

calendar this volume a you then you that see you'll any you think multiparter fourth contribution are year? do do you when in the any this transceivers. do mentioned think those as coming? this you of year? of from Or ramp the I X.X think calendar year But going have quarter that 'XX me, of you'll have -- And the ramp forgive X.X% is a to here, so see

laser is the on seeing that the are side, others the DSP side, constraints. you you on are those the heard space We've there that And of any if constraints world from guys think in then ramping I kind but is of of X.XX, X.X appreciate EML silicon ramp? or see on multiparter, of world you do photonics the world it. for Sorry kind more that an a

James Anderson

a Thanks, was try that, all my of to get that best that. Okay. multi-parter. I'll I'll to do

we'll seeing along quickly into our on production customer we're 'XX. calendar ramp at as getting is focused Certainly, point, we're as So with what within our solution this possible.

we as So we'll certainly can. fast to as the extent that can ramp execute sooner, we

very now quickly quarter. 'XX. tightly get at I working calendar last the think the I production pleased really for think into We're leave our delivered that I'll was I to possible. as our lead expectation But that samples customers team now, customers. with as

a one revenue And to as we'll as technology to as it with that our of whatever provider technology to technology that And that the technology we drive. that exactly the trying for us what application ramp, networking We that of contribution. is think would specific the the that, get bear, say respect we'll we're certainly differentiates breadth about we're deploy can I details the as best that when and an the is, share we using, optical something then expect strengths really look and to more at the close bring I and is real technology benefit we of customer right? ramp

the EML, the different options, or photonics developing whether all So we'll to our technology is of we're customers. products benefit for create whatever that's and biggest strong VCSEL biggest and silicon those our differentiation deploy for

that kind So technology our options And of set the take of got we've certainly any of think the competitors. we of and of broadest that's technology. the approach peers I to

that's I think us. a So for strength real competitive

Operator

next Marshall Our comes Morgan Stanley. with from question Meta

Meta Marshall

Great. me. couple questions for of a Maybe

You out in mentioned quarter. the of some telecom strength

fiscal made the just tailwinds disruptions guys of, in some is of is of the you that increase question, additional as in wondered, earlier get Asia-based reason have to the that that I we this then for mentioned more U.S.-based? sense a some And business? year? saw quarter. upside Or kind had or on kind of QX you in from the yield yields kind of some gross is improvements to for Just second margins of a wanted

James Anderson

Thanks, Yes. Meta.

first question on around First strength. part of the telecom the

than see stronger market improvement, it saw ramp the a the and have plus earnings, We of And contribution ramping that. see continue we Yes, talked begun of of specifically ZR that that new bit some -- all, products. the have XXX-gig new products, just also to in forecasted. combination to it to originally two about Really we ramping products on it last first telecom. this was but was a ZR to I've end was at from So XXX reiterate, Telecom had good those and we things. we quarter's due was CR pleased And those

certainly strengthening we even we improvement transport that data traditional transport the see so in DCI did And benefited area, us. But area, around but interconnect, market, center end some in traditional there. specifically did the the telecom some also see

Asia QX? And and then market signals overall. U.S. in markets. still cautious it we recovery actually telecom about and I to We good I in market those not some sure cautious respect was you Asia of demand -- both on nice versus view I'm across think are taking with to some particular, a saw outlook a But versus improvement which end believe see kind strength asked of question

of been initiative talked There component but about yes, to the improvement those. said pricing of on that really was were place, Sherri there's we part gross highlighted components a And was I earnings two it, of actually it. it wouldn't a margin putting this I in X focus in improvements. second of QX as the I characterize key there a yield the improvement Yes, when I so big yield of that mentioned And product also over mentioned tailwind. the has team focused I cost. past definitely I yield your the is sequential on as from something last QX were increase, on months. characterize focusing She one one question it highlighted areas as factors. new then the that as would yields And few different we've call on. there on been And QX, being

sitting a months with plan and really made this were we showing past reviewing fact, yields actually the this that pleased and team team pleased that, some they're that team has information, the the with really improvements real-time review the morning on transceiver moving and yield in were with with the In forward. and progress over I datacom morning, Sherri few

of good forward. to improvement initial early us, front being lot but plan Now we're the the say still team done they have of that in I in have the of for and they've to strategy, stages work for we and want the that were work, a the margin gross thanks work

focus be us. will of yields area key to continue for Yes, a So

Operator

with comes BNP from question Karl Paribas. Next Ackerman

Karl Ackerman

components was are expanding I AI disaggregated are that you And could hoping the you discuss to data to you suppliers domiciled opportunity as then U.S. procurement to coherent. seem second, reallocating quantify into yourselves? TAM whether benefit being optical seeing now Jim, center able like white box customers transceivers clusters of have option your of

James Anderson

Two really good questions.

But the is, map resiliency. one think, coherent and very the there's of one, center the they're course, this but is is the discussion resiliency. our the two the on the are questions, chain to and chain the something in depth of in center and that one customers On to terms one earlier supply customers, of differentiation that chain resiliency innovation of other of the And on components about really value I of we we brings because more the becoming breadth I can customers appreciating bring. resiliency. briefly first things this and supply important technology And more part data big the data think around supply and I really always this important of and number that the have really is technology talk is -- but things also that customers, road touched that's we the two

tremendous diversity platforms where where our have and we in our built and production devices geographic are our is and one modules Number assembled.

I to the verticalization. is benefit second And customers. think, that is then geographic a piece the so diversity, our around big And

example, number that So we of a we into don't just assemble that for the go components transceiver, manufacture the transceiver. key

isolator a the that's that's of we or the even lot into garnered goes whether VCSEL laser isolator do the into a goes material that transceiver ourselves. or So that that

a the share I Yes, our our but opportunity the and factor breadth we'll expanding in again, quantification transceiver think question in that reasons We we'll us, that time. do on our that's to center also as piece leverage that more part your say, suppliers TAM. definitely, question. recognized would I And second is becoming second and the the the data benefit. a resiliency. if supply it's by expanding gives is around that sometimes chain really verticalization important that customers well definitely I outside And forward. us, strong then moving of great May front when will for that is about today, we of we the of full talk center good expanding about in about at have TAM talk noted. of that I don't market the of data the you that opportunity, and talk Day context Investor TAM a for definitely think us But certainly

Operator

question Ruben from Stifel. with comes Our next Roy

Ruben Roy

and was had a buy. wafer talked started you this year, question bit go the expansion you area are earlier and to wondering, kind maybe versus constraints, of as of about and Fifab, last some one, company I as you think if you're you how components, an last components on et I quarter, EML the cetera, so, in-sourcing talked wondering hearing you thinking And Jim, about that's actually build about about accelerate? versus could that these the little if X-inch And sort about transceivers. about certainly similar talking build side the fab some 'XX. into 'XX of of buy that a the and of

James Anderson

Yes. Thanks, Ruben.

our our we of R&D we And maybe outside that create cost do a customers, for right? ourselves to that and start customers the that customers, So in philosophy market of can What me the our differentiate, can of that's advantage. our our let what benefit areas on true the is our advantage structure versus that or with applying believe not or that's first good of we the is to in general doing the dollars. differentiation benefits unbilled the if rest versus develop something always available be use technology terms both buy general, ecosystem. all, R&D philosophy our can So in want truly we dollars leverage

we then chain should leveraging extent same an -- the for a outside can to generate for And the advantage supply generate some we generate can't then to or I the be we should we do that, should our we that customers, our if outside real structure then true technical philosophy that be the customers well drive cost think we'll applies be our we be then right? advantage And that solutions, if But ecosystem. is right? advantage if advantage or resiliency we we supply chain should leveraging we can may So leveraging ecosystem. that. do as can't differentiation, So if they're genuine if advantage,

are our about and I -- choose other ourselves, build maybe going we think been but when be are those And leverage than to more so deliberate past. suppliers. the outside have components forward, that in that's we philosophy. and to there much general where we're moving choose And strategic times times to we're and verticalize And we there

Ruben Roy

better on helpful. some And you that than had here. Very had driven you the more upside. of the telecom on I telecom traditional nice might by thought? DCI Was also telco, last a of bit a quick missed commentary, this. muted the quarter, outlook just bit follow-up. were have products a to mostly a little surprise But or little

James Anderson

but recovering, before earlier, see cautious approach mentioned as we're a the market. saw was I too. Ruben. the signs telecom to I'd a also We we're market end positive end market well. Thanks, uptick Yes. was But to a an both. the good and transport there And positive bit that couple It stronger, a that combination of demand a Yes, is telecom in still DCI more was taking like far. traditional of some fully quarters right? of improvement combination as market so

Operator

Next with Rolland question Susquehanna. comes Christopher from

Christopher Rolland

is first capacity XXX into robust transceiver you assembly shipping And about for own what I you I a X.X into My concerned and either could back guys this commercially to EMLs. guess, all your going either to EMLs guys and pretty Sherri. also question, guess, be welcome Are next firstly, XXXX. And are at data welcome, follow-up constraints year? for be And light a is source. center additionally, or you for Ruben

James Anderson

Chris. Yes. Thanks,

the on good EML the well just leverage very [indiscernible] of by of as in on on and combination as partners saying EMLs do for we our use first well. own gig I'll internally EMLs, So usage a we and produced part start developed question XXX as EMLs

do for kind prior outside question that that. we back we'll customers, that on can we of the leverage our there's do where ecosystem, again, internally, will philosophy, where benefit so to but think we also And

well gig continuing to so would us And anticipate sources. XX external I as both it's as or XXX in -- us do whether to internal continuing that leverage

level gives customers silicon also path I not So believe that greatest innovation the whether TML the reiterate of we being VCSEL to benefits our transmission, photonics to approach, of solution, can is, for photons photons bring we'll multi-technology and by transmit again, take I whatever the well, that manipulate right? take we'll do but technology best data. or is is our want VCSEL bring our the to we -- silicon a our then the benefit able And as we right? a a or of for And method whatever So is which benefit. expertise to around is to we think photonic at just look we that's really just one EML, deeper the using at we that's data leverage fact customers a extent that

I see question would it -- your would I And then think continue my say that on, sure part of our the our and engineering, ramping certainly have ramping data that making We're of great capacity manufacturing transceiver production AI. job AI our all, increasingly outstanding done moving that strain internally, or take a They've of our I ramp I forward. demand capacity that center And don't meeting ramp And outstanding that's second for a to really here data focus we done doing assembly center opportunity thank say the that's or customers. a up business. of job supporting say whether needs to there. whether up certainly customers. customers. overall, I as in we we're the But for we've think deliver to want constraints that's for not right VCSELs, for of teams. our an our really ingredients first we've certainly, on demand our seeing around the that to make job the sure EMLs, goal to our We're we that was, the we the that as that Chris, So got we're go from capacity. capacity individual into transceiver right? isolators, And the whatever, that's

Christopher Rolland

then follow-up, And perhaps Excellent. Jim. a

is be science, have from AI here expansion but in to transceiver kind opportunities particularly XX% of greater business the to under that on seems as expansion other hood, the fairly look aggressive margin surging upside than the transceiver you've for at of guys, well. here time obviously what around particularly are I total for data but plans by look Finisar GMs. there you versus some your driven center, I get getting to out the balance here units pushback some think had company guys in is between capacity a old some path what light, you've that Asia, Cloud as your I'm And you Now of

sizable side, business? expand your So balance think on those margins you a is datacom here to transceiver when which you big of room the together, there is chunk do

Richard Shannon

Thanks, Yes. Chris.

want a Let first, margin one right? its gross So XX% short me think to data yes. company product to is about, big back level, fits the come paint data that and start at cost, in. I to at The going towards but around seventh product center transceivers initiatives: then goal. company on around one I to I'm center there's we're picture a company going two two And level, talked there's pricing -- cost. march and like we answer

businesses. applies can pricing the more that do think optimization industrial our to probably we I

of those -- innovation capturing the would bringing I fair would products markets. the of to the do pricing the product we different that industrial So and and industrial I see those many to much submarkets I umbrella better is have underneath optimizing opportunity of job industrial different value a time do what lines and the what business. call for technology the say And many we're

yields is in an and time yields, said we spending few Sherri and what definitely team the what gave earnings earlier, product is product think on in on highlighted, I improvements space, transceiver talking in cost And on we're yield the moving And I Now there, I pricing I I the believe would the as call I I, see need not pricing say examples call, morning, well. one the over as opportunity this But side. definitely transceivers improvements review there's an -- datacom operational they've the that past there's about within on side. opportunity. there's last months as but the I of much forward the that's on this driven say the and on of -- to to terms would earlier opportunity is cost

And focus an definitely that of for us. is area

in that. particular, cost very pricing, datacom back certainly would and so definitely, much focused -- for question would your opportunity I I on us to transceiver in not on but there's we're So say, maybe

Operator

Charter from Egan next question Equity Jack Research. comes with

Jack Egan

operating So had revenue. kind I segment despite being but the June, didn't been see mid-teens anything record margins, segment networking hear through or bound the at about range in of

seeing impact margin does So the I benefit from gig wondering, if not, just XXX kick of today? just are higher in? kind mix exactly a And of was transceivers you when that

James Anderson

on sounded welcome What start networking, is to add your which say wants data center mostly with add. yes, it center. anything, Yes, AI which data was to a center that is look or is, I'll at segment, Sherri question I communications mostly if -- Jack, the historically like maybe with data focused you question. would she's

for look the technology nodes, generally you to when transceiver new historically move the at are higher right, you're we newer If margin. speed grades yes,

to the extent a so ramping that's at we're a higher quickly ramping usually And transceiver gross advanced higher speed, that more margin.

on be rule So yes, margin we would expect those the as ramp higher that. general speeds, see we would to improvement

Sherri Luther

Yes, did add the look we Q, segment see I'll on you'll you profit sequentially. that just do higher a business, show segment profit our and see, if Jack, networking we the of into that side

you in in. So there dig when see you that will

Jack Egan

question. that. my a Okay. a appreciate higher-level Great. of bit follow-up is kind And of then a I

chain, look across been pretty equipment XG to it's some the bit the of a a but good out carrier spectrum market see obviously, we've slowdown on monetize difficult to the telecom, rebound this telecom kind prolonged was when XG at it itself. that as then on in you the after So spend and a but build XG. -- first, seen license commentary But in of quite supply

incentive the adding capabilities. new spending to might keep So and carriers not have much

said, advance be the challenged newer, being whether curious difficult XG outlook that to in telecom advanced and or may growth of on So generations it I'm more just like long-term monetize. just those are term just your because XX kind long for

James Anderson

I telecom, Jack, that's quarter, see market telecom may taking to think CapEx, why be more taking and Thanks, the pickup and near-term we said cautious a that dramatic as That's quarter challenged view a in on quarters, more and operator view of we're well taking Yes. we're a exactly this terms I in right? same that's the as here in why point, recovery. great cautious we're last applies a until

interconnect. I said, that think center strong And as see growth clear Now, signs, data is earlier. we said I the in did positive of around area QX some

in that's strong obviously, We seeing the we DCI, strong only demand seeing but And are definitely signals signals demand of there. a telecom are market portion right? very

before, agree I But more traditional bit in the And telecom nearer we well. mentioned recovery transport as as of see little term, in taking we did of cautious definitely -- then a telecom the telecom we're view recovery. a

over long are part the that's of And long segment. the we'll that term do area believe we lot see great a and believe that growth we long-term paint as that as over the for got May. our of we Investor to company. term, We've picture grow, new of continue a a what products Now in complete then a in ramping telecom opportunity more will Day still

Operator

Group. Next question Shannon with comes from Craig-Hallum Richard Capital

Richard Shannon

I nicely saw XXX like today, a about guess have of as here breadth relative thinking X-parter of here. Jim, time quick And now coherent do market questions has here. When I you look over are couple a how just of customer a ask or you to in XXX-gig related gig what at kind base competitors? to expect period. you what also me this maybe at X.X, your in ramp the earlier to the more expanded you of the datacom Allow you to noted customer to base stages

James Anderson

Richard. Yes. Thanks,

we begin samples as that customers with reiterate get first I our The 'XX. -- delivered into we quarter, point, expect delivered we're And carefully last one, what quick calendar just this as we revenue earlier, to in to said possible. at ramp to production working really

be around to share specifics the of get terms will to quick on but closer customers ramp a clearly, at part of base, the bit beginning on in of I of breadth to a similar saw think that terms question could we will that different, that we similar might be the our more And customers. the of And motivated second it we're magnitude breadth that. possible As get of kind certainly number of side. as customer the as little of would ramp production into be then gig in it XXX be

Richard Shannon

business. your quick enough of in Fair just follow-on My couple here that, Okay. question recent is up the following telecom questions to Jim. for last related

but in of in here last transport. noted sense buckets can each seeing about DCI one to telecom nice just way telecom us You know a it's or growth there, know Any to response relatively to where small a easy those Or out close help versus us the the goes, how I you big please? little necessarily a traditional is traditional it are? bit DCI really just portion? give of not

James Anderson

rest telecom quarters. revenue over that of that as It's become the than faster break a revenue the Yes. a we But And coming overall is to don't expect bigger of granularity. a rapidly our the growing to TAM base, right? but level certainly market. do part growing as component of out really We kind that smaller level portion of of that was well DCI base portion, so of

Operator

to remarks. Anderson conclude does like over session. Thank any you. gentlemen, Jim call I'd and Ladies for back closing question-and-answer this turn today's to the

James Anderson

the thank team them to same and that proud and today's to call. of I It's on our Sherry, Thank be I work closing, in joining just want thank really you, have to on to proud again we you hard their operator, at of and today. look your to all And want call as team the dedication concludes forward here joining once our good her my progress. the all again. for support all And table everyone, And you for updating on and them. for teammates me thank coherent with for us as well.

Operator

this Thank presentation. gentlemen, and conclude Ladies you. today's does

may a day. You now and wonderful have disconnect,

Coherent (COHR) 6 Nov 242025 Q1 Earnings call transcript