8-K
Coherent Corp. (COHR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 9, 2021
II-VI INCORPORATED
(Exact name of registrant as specified in its charter)
| Pennsylvania | 001-39375 | 25-1214948 |
|---|---|---|
| (State or Other Jurisdiction<br> <br>of Incorporation) | (Commission<br> <br>File Number) | (I.R.S. Employer<br> <br>Identification No.) |
375 Saxonburg Boulevard
Saxonburg, Pennsylvania 16056
(Address of Principal Executive Offices) (Zip Code)
(724) 352-4455
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br> <br>Symbol(s) | Name of each exchange<br> <br>on which registered |
|---|---|---|
| Common Stock, no par value | IIVI | Nasdaq Global Select Market |
| Series A Mandatory Convertible Preferred Stock, no par value | IIVIP | Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02. | Results of Operations and Financial Condition. |
|---|
On November 9, 2021, II-VI Incorporated (the “Company”) issued a press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
| Item 7.01. | Regulation FD Disclosure. |
|---|
A slide presentation to be used by senior management of the Company in connection with its discussions with investors regarding the Company’s financial results for our quarter ended September 30, 2021 is included in Exhibit 99.2 to this report and is being furnished in accordance with Regulation FD of the Securities and Exchange Commission.
The information in this Current Report on Form 8-K, including the exhibits furnished pursuant to Item 9.01, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities under that Section. Furthermore, the information in this Current Report on Form 8-K, including the exhibits furnished pursuant to Item 9.01 shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933.
| Item 9.01. | Financial Statements and Exhibits. |
|---|
Exhibit 99.1. Press release dated November 9, 2021
Exhibit 99.2. Investor Presentation
Exhibit 104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| II-VI Incorporated | ||
|---|---|---|
| Date: November 9, 2021 | By: | /s/ Mary Jane Raymond |
| Mary Jane Raymond | ||
| Chief Financial Officer and Treasurer |
EX-99.1
Exhibit 99.1
| PRESS RELEASE | II-VI Incorporated |
|---|---|
| 375 Saxonburg Boulevard | |
| Saxonburg, PA 16056 |
II-VI Incorporated Reports Fiscal 2022 First Quarter Results
Record Quarterly Bookings and Backlog Drive Organic Growth
Approaching $1B Quarterly Bookings While Investing for Increasing Market Demand
| • | Record Bookings of $939 million grew 43% year over year |
|---|---|
| • | Revenue of $795 million grew 9% year over year |
| --- | --- |
| • | Record Backlog of $1.4 billion |
| --- | --- |
| • | GAAP Net Earnings of $75 million |
| --- | --- |
| • | GAAP EPS of $0.50 grew 32% year over year |
| --- | --- |
| • | Non-GAAP EPS of $0.87 grew 4% year over year |
| --- | --- |
| • | Non-GAAP return on sales of 14.8% grew 7% year over year |
| --- | --- |
PITTSBURGH, November 9, 2021 (GLOBE NEWSWIRE) — II-VI Incorporated (Nasdaq:IIVI) (“II-VI,” “We” or the “Company”) today reported results for its fiscal 2022 first quarter ended September 30, 2021.
“Fiscal year 2022 is starting with very strong momentum and sustainable demand signals that translated into another quarterly bookings record of $939 million and record backlog of $1.4 billion. We achieved $795 million in revenue, driven by year-over-year growth in virtually all our end markets. The quarter saw very strong performance in our Industrial business, growing in excess of 50% compared to Q1FY21. Moreover, our high speed 200/400/800G datacom and telecom revenues have significantly accelerated, growing nearly 70% sequentially. This growth was underpinned by our industry leading laser diode technologies that enabled the highest output power 400G coherent pluggable transceivers available in the marketplace,” said Dr. Vincent D. Mattera, Jr., Chief Executive.
Dr. Mattera continued, “Our customers are growing and demanding much more from us as the end markets we serve and the mega-market trends driving them, continue to accelerate. We are looking ahead and aggressively investing to serve these transformative and sustainable market trends consistent with our strategic plan.
“Our integration planning with Coherent is well underway, and we are even more excited about this transaction than we were six months ago. All integration planning teams are fully engaged and excited about the prospect of combining our complementary talent, technology platforms, and scale across the value chain. All remaining regulatory reviews are progressing on track, with China having formally commenced its review process in September. We continue to expect the transaction to close during the first calendar quarter of 2022. Our synergies on the Finisar transaction now exceed $180M, which are well ahead of schedule,” concluded Dr. Mattera.
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| PRESS RELEASE | II-VI Incorporated |
|---|---|
| 375 Saxonburg Boulevard | |
| Saxonburg, PA 16056 |
Table 1
Financial Metrics
$ Millions, except per share amountsand %
(Unaudited)
| Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Sept 30,2021 | Jun 30,2021 | Sept 30,2020 | |||||||
| Revenues | $ | 795.1 | $ | 808.0 | $ | 728.1 | |||
| GAAP Gross Profit | $ | 316.2 | $ | 307.6 | $ | 286.6 | |||
| Non-GAAP Gross Profit (2) | $ | 317.7 | $ | 311.7 | $ | 288.4 | |||
| GAAP Operating Income (1) | $ | 95.1 | $ | 97.1 | $ | 101.1 | |||
| Non-GAAP Operating Income (2) | $ | 150.2 | $ | 148.5 | $ | 138.9 | |||
| GAAP Net Earnings | $ | 74.5 | $ | 82.3 | $ | 46.3 | |||
| Non-GAAP Net Earnings (2) | $ | 117.7 | $ | 117.0 | $ | 100.4 | |||
| GAAP Diluted Earnings Per Share | $ | 0.50 | $ | 0.59 | $ | 0.38 | |||
| Non-GAAP Diluted Earnings Per Share (2) | $ | 0.87 | $ | 0.88 | $ | 0.84 | |||
| Other Selected Financial Metrics | |||||||||
| GAAP Gross margin | 39.8 | % | 38.1 | % | 39.4 | % | |||
| Non-GAAP gross margin (2) | 40.0 | % | 38.6 | % | 39.6 | % | |||
| GAAP Operating margin | 12.0 | % | 12.0 | % | 13.9 | % | |||
| Non-GAAP operating margin (2) | 18.9 | % | 18.4 | % | 19.1 | % | |||
| GAAP Return on sales | 9.4 | % | 10.2 | % | 6.4 | % | |||
| Non-GAAP return on sales (2) | 14.8 | % | 14.5 | % | 13.8 | % | |||
| (1) | GAAP Operating income is defined as earnings before income taxes, interest expense and other expense or income,<br>net. | ||||||||
| --- | --- | ||||||||
| (2) | All non-GAAP amounts exclude certain adjustments for share-based<br>compensation, acquired intangible amortization expense, certain one-time transaction expenses, and restructuring and related items. See Table 4 for the Reconciliation of GAAP measures to non-GAAP measures. | ||||||||
| --- | --- |
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| PRESS RELEASE | II-VI Incorporated |
|---|---|
| 375 Saxonburg Boulevard | |
| Saxonburg, PA 16056 |
Outlook
The outlook for the second fiscal quarter ending December 31, 2021 is revenue of $790 million to $840 million and earnings per diluted share on a non-GAAP basis of $0.75 to $0.95. This is at today’s exchange rate and today’s estimated tax impact of 19%. Both of these are subject to variability. For the non-GAAP earnings per share, we added back to the GAAP earnings pre-tax amounts of $21 million in amortization, $19 million in share-based compensation, and $21-26 million in transaction, integration and other related costs. Refer to page 16 for the share count range for the aforementioned outlook. Non-GAAP adjustments are by their nature highly volatile and we have low visibility as to the range that may be incurred in the future.
ConferenceCall & Webcast Information
The Company will host a conference call at 9:00 a.m. Eastern Time on Tuesday November 9, 2021 to discuss these results. Individuals wishing to participate in the webcast can access the event at the Company’s web site by visiting www.ii-vi.com or via https://tinyurl.com/IIVIQ1FY22EarningsRelease. If you wish to participate in the call, please dial +1 734-385-4977 or 877-316-5288. When you call, please enter Confirmation Code 1150469 and provide your name and company affiliation.
The call will be recorded, and a replay will be available to interested parties who are unable to attend the live event. This service will be available up to 11:59 p.m. EST on Friday, November 12, 2021, by dialing +1 734-385-4977 or 877-316-5288 and entering the ID number 1150469.
About II-VI Incorporated
II-VI Incorporated, a global leader in engineered materials and optoelectronic components, is a vertically integrated manufacturing company that develops innovative products for diversified applications in communications, industrial, aerospace & defense, semiconductor capital equipment, life sciences, consumer electronics, and automotive markets. Headquartered in Saxonburg, Pennsylvania, the Company has research and development, manufacturing, sales, service, and distribution facilities worldwide. The Company produces a wide variety of application-specific photonic and electronic materials and components, and deploys them in various forms, including integrated with advanced software to support our customers. For more information, please visit us at www.ii-vi.com.
Forward-looking Statements
This press release contains forward-looking statements relating to future events and expectations that are based on certain assumptions and contingencies. The forward-looking statements are made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 and relate to the Company’s performance on a going-forward basis. The forward-looking statements in this press release involve risks and uncertainties, which could cause actual results, performance, or trends to differ materially from those expressed in the forward-looking statements herein or in previous disclosures.
The Company believes that all forward-looking statements made by it in this press release have a reasonable basis, but there can be no assurance that management’s expectations, beliefs, or projections as expressed in the forward-looking statements will actually occur or prove to be correct. In addition to general industry and global economic conditions, factors that could cause actual results to differ materially from those discussed in the forward-looking statements in this press release include but are not limited to: (i) the failure of any one or more of the assumptions
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| PRESS RELEASE | II-VI Incorporated |
|---|---|
| 375 Saxonburg Boulevard | |
| Saxonburg, PA 16056 |
stated above to prove to be correct; (ii) the risks relating to forward-looking statements and other “Risk Factors” discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021 and additional risk factors that may be identified from time to time in future filings of the Company; (iii) the conditions to the completion of the Company’s pending business combination transaction with Coherent, Inc. (the “Transaction”) and the remaining equity investment by Bain Capital, LP, including the receipt of any required shareholder and regulatory approvals, and the risks that those conditions will not be satisfied in a timely manner or at all; (iv) the occurrence of any event, change or other circumstances that could give rise to an amendment or termination of the merger agreement relating to the Transaction, including the receipt by Coherent, Inc. (“Coherent”) of an unsolicited proposal from a third party; (v) the Company’s ability to finance the Transaction, the substantial indebtedness the Company expects to incur in connection with the Transaction and the need to generate sufficient cash flows to service and repay such debt; (vi) the possibility that the Company may be unable to achieve expected synergies, operating efficiencies and other benefits within the expected time-frames or at all and to successfully integrate Coherent’s operations with those of the Company; (vii) the possibility that such integration may be more difficult, time-consuming or costly than expected or that operating costs and business disruption (including, without limitation, disruptions in relationships with employees, customers or suppliers) may be greater than expected in connection with the Transaction; (viii) litigation and any unexpected costs, charges or expenses resulting from the Transaction; (ix) the risk that disruption from the Transaction materially and adversely affects the respective businesses and operations of the Company and Coherent; (x) potential adverse reactions or changes to business relationships resulting from the announcement, pendency or completion of the Transaction; (xi) the ability of the Company to retain and hire key employees; (xii) the purchasing patterns of customers and end users; (xiii) the timely release of new products, and acceptance of such new products by the market; (xiv) the introduction of new products by competitors and other competitive responses; (xv) the Company’s ability to assimilate recently acquired businesses, and realize synergies, cost savings, and opportunities for growth in connection therewith, together with the risks, costs, and uncertainties associated with such acquisitions; (xvi) the Company’s ability to devise and execute strategies to respond to market conditions; (xviii) the risks to realizing the benefits of investments in R&D and commercialization of innovations; (xix) the risks that the Company’s stock price will not trade in line with industrial technology leaders; and/or (xx) the risks of business and economic disruption related to the currently ongoing COVID-19 outbreak and any other worldwide health epidemics or outbreaks that may arise. The Company disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events or developments, or otherwise.
These risks, as well as other risks associated with the proposed transaction, are more fully discussed in the joint proxy statement/prospectus included in the registration statement on Form S-4 (File No. 333-255547) filed with the SEC in connection with the Transaction (the “Form S-4”). While the list of factors discussed above and the list of factors presented in the Form S-4 are considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward looking statements. Neither the Company nor Coherent assumes any obligation to publicly provide revisions or updates to any forward looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.
Use of Non-GAAP Financial Measures
The Company has disclosed financial measurements in this press release that present financial information considered to be non-GAAP financial measures. These measurements are not a substitute for GAAP measurements, although the Company’s management uses these measurements as an aid in monitoring the Company’s on-going financial performance. The non-GAAP net earnings, the non-GAAP earnings per share, the non-GAAP operating income, the non-GAAP gross profit, the non-GAAP internal research and development, the non-GAAP selling, general and administration, the non-GAAP interest and other (income) expense, and the non-GAAP income tax (benefit), measure earnings and operating income (loss), respectively, excluding non-recurring or unusual items that
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| PRESS RELEASE | II-VI Incorporated |
|---|---|
| 375 Saxonburg Boulevard | |
| Saxonburg, PA 16056 |
are considered by management to be outside the Company’s standard operation and excluding certain non-cash items. EBITDA is an adjusted non-GAAP financial measurement that is considered by management to be useful in measuring the profitability between companies within the industry by reflecting operating results of the Company excluding non-operating factors. There are limitations associated with the use of non-GAAP financial measures, including that such measures may not be entirely comparable to similarly titled measures used by other companies, due to potential differences among calculation methodologies. Thus, there can be no assurance whether (i) items excluded from the non-GAAP financial measures will occur in the future or (ii) there will be cash costs associated with items excluded from the non-GAAP financial measures. The Company compensates for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by providing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures. Investors should consider adjusted measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP.
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II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of Earnings (Unaudited)
($000 except per share data)
| Three Months Ended | |||||
|---|---|---|---|---|---|
| September 30,2021 | September 30,2020 | ||||
| Revenues | $ | 795,111 | $ | 728,084 | |
| Costs, Expenses & Other Expense | |||||
| Cost of goods sold | 478,921 | 441,520 | |||
| Internal research and development | 88,966 | 78,248 | |||
| Selling, general and administrative | 132,174 | 107,186 | |||
| Interest expense | 12,191 | 17,214 | |||
| Other expense (income), net | (7,582 | ) | 24,339 | ||
| Total Costs, Expenses, & Other Expense | 704,670 | 668,507 | |||
| Earnings Before Income Taxes | 90,441 | 59,577 | |||
| Income Taxes | 15,977 | 13,311 | |||
| Net Earnings | $ | 74,464 | $ | 46,266 | |
| Less: Dividends on Preferred Stock | 17,082 | 6,440 | |||
| Net Earnings available to the Common Shareholders | $ | 57,382 | $ | 39,826 | |
| Basic Earnings Per Share | $ | 0.54 | $ | 0.39 | |
| Diluted Earnings Per Share | $ | 0.50 | $ | 0.38 | |
| Average Shares Outstanding —Basic | 105,761 | 102,809 | |||
| Average Shares Outstanding —Diluted | 115,849 | 105,247 |
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II-VI Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
($000)
| September 30,2021 | June 30,<br>2021 | |||
|---|---|---|---|---|
| Assets | ||||
| Current Assets | ||||
| Cash and cash equivalents | $ | 1,560,175 | $ | 1,591,892 |
| Accounts receivable | 663,940 | 658,962 | ||
| Inventories | 747,413 | 695,828 | ||
| Prepaid and refundable income taxes | 14,652 | 13,095 | ||
| Prepaid and other current assets | 64,771 | 67,617 | ||
| Total Current Assets | 3,050,951 | 3,027,394 | ||
| Property, plant & equipment, net | 1,242,093 | 1,242,906 | ||
| Goodwill | 1,294,748 | 1,296,727 | ||
| Other intangible assets, net | 697,209 | 718,460 | ||
| Deferred income taxes | 33,495 | 33,498 | ||
| Other assets | 197,366 | 193,665 | ||
| Total Assets | $ | 6,515,862 | $ | 6,512,650 |
| Liabilities, Mezzanine Equity and Shareholders’ Equity | ||||
| Current Liabilities | ||||
| Current portion of long-term debt | $ | 420,029 | $ | 62,050 |
| Accounts payable | 295,003 | 294,486 | ||
| Operating lease current liabilities | 27,087 | 25,358 | ||
| Accruals and other current liabilities | 286,538 | 347,695 | ||
| Total Current Liabilities | 1,028,657 | 729,589 | ||
| Long-term debt | 956,377 | 1,313,091 | ||
| Deferred income taxes | 81,173 | 73,962 | ||
| Operating lease liabilities | 125,145 | 125,541 | ||
| Other liabilities | 130,138 | 138,119 | ||
| Total Liabilities | 2,321,490 | 2,380,302 | ||
| Total Mezzanine Equity | 736,360 | 726,178 | ||
| Total Shareholders’ Equity | 3,458,012 | 3,406,170 | ||
| Total Liabilities, Mezzanine Equity and Shareholders’ Equity | $ | 6,515,862 | $ | 6,512,650 |
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II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
($000)
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| September 30, | ||||||
| 2021 | 2020 | |||||
| Cash Flows from Operating Activities | ||||||
| Net cash provided by operating activities | $ | 52,336 | $ | 134,327 | ||
| Cash Flows from Investing Activities | ||||||
| Additions to property, plant & equipment | (47,565 | ) | (33,792 | ) | ||
| Purchases of businesses, net of cash acquired | — | (36,064 | ) | |||
| Net cash used in investing activities | (47,565 | ) | (69,856 | ) | ||
| Cash Flows from Financing Activities | ||||||
| Proceeds from issuance of common shares | — | 460,000 | ||||
| Proceeds from issuance of preferred shares | — | 460,000 | ||||
| Payments on borrowings under Term A Facility | (15,513 | ) | (15,513 | ) | ||
| Payments on borrowings under Term B Facility | — | (714,600 | ) | |||
| Payments on borrowings under Revolving Credit Facility | — | (25,000 | ) | |||
| Equity issuance costs | — | (36,092 | ) | |||
| Proceeds from exercises of stock options | 7,481 | 1,083 | ||||
| Payments in satisfaction of employees’ minimum tax obligations | (13,017 | ) | (5,574 | ) | ||
| Payment of dividends | (13,808 | ) | — | |||
| Other financing activities | (1,109 | ) | (1,329 | ) | ||
| Net cash provided by (used in) financing activities | (35,966 | ) | 122,975 | |||
| Effect of exchange rate changes on cash and cash equivalents | (522 | ) | 3,493 | |||
| Net increase (decrease) in cash and cash equivalents | (31,717 | ) | 190,939 | |||
| Cash and Cash Equivalents at Beginning of Period | 1,591,892 | 493,046 | ||||
| Cash and Cash Equivalents at End of Period | $ | 1,560,175 | $ | 683,985 |
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Table 2
Segment Revenues, GAAP Operating Income (Loss) & Margins, and
Non-GAAP Operating Income (Loss) & Margins*
$ Millions, except %
(Unaudited)
| Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Sept 30,2021 | Jun 30,2021 | Sept 30,2020 | |||||||
| Revenues: | |||||||||
| Photonic Solutions | $ | 536.0 | $ | 549.7 | $ | 497.7 | |||
| Compound Semiconductors | 259.1 | 258.3 | 230.4 | ||||||
| Consolidated | $ | 795.1 | $ | 808.0 | $ | 728.1 | |||
| GAAP Operating Income (Loss): | |||||||||
| Photonic Solutions | $ | 56.5 | $ | 60.5 | $ | 50.4 | |||
| Compound Semiconductors | 49.7 | 47.7 | 50.7 | ||||||
| Unallocated and Other | (11.2 | ) | (11.1 | ) | — | ||||
| Consolidated | $ | 95.1 | $ | 97.1 | $ | 101.1 | |||
| Non-GAAP Operating Income: | |||||||||
| Photonic Solutions | $ | 84.0 | $ | 87.4 | $ | 78.2 | |||
| Compound Semiconductors | 66.3 | 61.1 | 60.7 | ||||||
| Consolidated | $ | 150.2 | $ | 148.5 | $ | 138.9 | |||
| GAAP Operating Margin: | |||||||||
| Photonic Solutions | 10.5 | % | 11.0 | % | 10.1 | % | |||
| Compound Semiconductors | 19.2 | % | 18.5 | % | 22.0 | % | |||
| Consolidated | 12.0 | % | 12.0 | % | 13.9 | % | |||
| Non-GAAP Operating Margin: | |||||||||
| Photonic Solutions | 15.7 | % | 15.9 | % | 15.7 | % | |||
| Compound Semiconductors | 25.6 | % | 23.7 | % | 26.4 | % | |||
| Consolidated | 18.9 | % | 18.4 | % | 19.1 | % | |||
| * | Amounts may not recalculate due to rounding. | ||||||||
| --- | --- |
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Table 3
Reconciliation of Segment Non-GAAP Operating Income (Loss) to
GAAP Segment Operating Income (Loss)
$ Millions
(Unaudited)
| Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Sept 30,2021 | Jun 30,2021 | Sept 30,2020 | |||||||
| Non-GAAP Photonic Solutions Operating Income | $ | 84.0 | $ | 87.4 | $ | 78.2 | |||
| Share-based compensation | (9.6 | ) | (9.4 | ) | (10.5 | ) | |||
| Amortization of acquired intangibles | (17.0 | ) | (17.3 | ) | (17.3 | ) | |||
| Restructuring, transaction expenses, and other | (0.9 | ) | (0.2 | ) | — | ||||
| Photonic Solutions GAAP Operating Income | $ | 56.5 | $ | 60.5 | $ | 50.4 | |||
| Non-GAAP Compound Semiconductors Operating Income | $ | 66.3 | $ | 61.1 | $ | 60.7 | |||
| Share-based compensation | (13.2 | ) | (9.3 | ) | (5.0 | ) | |||
| Amortization of acquired intangibles | (3.4 | ) | (3.3 | ) | (2.9 | ) | |||
| Restructuring, transaction expenses, and other | — | (0.8 | ) | (2.1 | ) | ||||
| Compound Semiconductors GAAP Operating Income | $ | 49.7 | $ | 47.7 | $ | 50.7 | |||
| Non-GAAP Unallocated and Other Operating Income<br>(Loss) | $ | — | $ | — | $ | — | |||
| Restructuring, transaction expenses, and other | (11.2 | ) | (11.1 | ) | — | ||||
| Unallocated and Other GAAP Operating Income (Loss) | $ | (11.2 | ) | $ | (11.1 | ) | $ | — | |
| Total GAAP Operating Income | $ | 95.1 | $ | 97.1 | $ | 101.1 | |||
| Non-GAAP Operating Income | $ | 150.2 | $ | 148.5 | $ | 138.9 | |||
| * | Amounts may not recalculate due to rounding. | ||||||||
| --- | --- |
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Table 4
Reconciliation of GAAP Measures to non-GAAP Measures
$ Millions
(Unaudited)
| Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Sept 30,2021 | Jun 30,2021 | Sept 30,2020 | |||||||
| Gross profit on GAAP basis | $ | 316.2 | $ | 307.6 | $ | 286.6 | |||
| Share-based compensation | 1.5 | 3.4 | 1.8 | ||||||
| Restructuring, transaction expenses, and other<br>(1) | — | 0.7 | — | ||||||
| Gross profit on non-GAAP basis | $ | 317.7 | $ | 311.7 | $ | 288.4 | |||
| Internal research and development on GAAP basis | $ | 89.0 | $ | 83.8 | $ | 78.2 | |||
| Share-based compensation | (2.3 | ) | (4.8 | ) | (2.6 | ) | |||
| Internal research and development on non-GAAPbasis | $ | 86.7 | $ | 79.0 | $ | 75.6 | |||
| Selling, general and administrative on GAAP basis | $ | 132.2 | $ | 126.7 | $ | 107.2 | |||
| Share-based compensation | (18.9 | ) | (10.3 | ) | (11.1 | ) | |||
| Amortization of acquired intangibles | (20.4 | ) | (20.6 | ) | (20.2 | ) | |||
| Restructuring, transaction expenses, and other<br>(1) | (12.0 | ) | (11.5 | ) | (2.1 | ) | |||
| Selling, general and administrative on non-GAAPbasis | $ | 80.9 | $ | 84.3 | $ | 73.8 | |||
| Operating income on GAAP basis | $ | 95.1 | $ | 97.1 | $ | 101.1 | |||
| Share-based compensation | 22.7 | 18.5 | 15.5 | ||||||
| Amortization of acquired intangibles | 20.4 | 20.6 | 20.2 | ||||||
| Restructuring, transaction expenses, and other<br>(1) | 12.0 | 12.2 | 2.1 | ||||||
| Operating income on non-GAAP basis | $ | 150.2 | $ | 148.5 | $ | 138.9 |
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Table 4
Reconciliation of GAAP Measures to non-GAAP Measures (Continued)
$ Millions
(Unaudited)
| Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Sept 30,2021 | Jun 30,2021 | Sept 30,2020 | |||||||
| Interest and other (income) expense, net on GAAP basis | $ | 4.6 | $ | 3.9 | $ | 41.5 | |||
| Foreign currency exchange gains (losses), net | 4.9 | (1.2 | ) | (4.7 | ) | ||||
| Gain on investment | — | 10.9 | — | ||||||
| Debt extinguishment expense (2) | — | — | (24.7 | ) | |||||
| Interest and other (income) expense, net on non-GAAPbasis | $ | 9.5 | $ | 13.6 | $ | 12.1 | |||
| Income taxes on GAAP basis | $ | 16.0 | $ | 11.0 | $ | 13.3 | |||
| Tax impact of non-GAAP measures | 7.1 | 6.8 | 13.1 | ||||||
| Income taxes on non-GAAP basis | $ | 23.1 | $ | 17.8 | $ | 26.4 | |||
| Net earnings on GAAP basis | $ | 74.5 | $ | 82.3 | $ | 46.3 | |||
| Share-based compensation | 22.7 | 18.5 | 15.5 | ||||||
| Amortization of acquired intangibles | 20.4 | 20.6 | 20.2 | ||||||
| Foreign currency exchange (gains) losses | (4.9 | ) | 1.2 | 4.7 | |||||
| Debt extinguishment expense (2) | — | — | 24.7 | ||||||
| Other Gains | — | (10.9 | ) | — | |||||
| Tax impact of non-GAAP measures and fair value<br>adjustments | (7.1 | ) | (6.8 | ) | (13.1 | ) | |||
| Restructuring, transaction expenses, and<br>other(1) | 12.0 | 12.2 | 2.1 | ||||||
| Net earnings on non-GAAP basis | $ | 117.7 | $ | 117.0 | $ | 100.4 | |||
| Per share data: | |||||||||
| Net earnings on GAAP basis | |||||||||
| Basic Earnings Per Share | $ | 0.54 | $ | 0.62 | $ | 0.39 | |||
| Diluted Earnings Per Share | $ | 0.50 | $ | 0.59 | $ | 0.38 | |||
| Net earnings on non-GAAP basis | |||||||||
| Basic Earnings Per Share | $ | 0.95 | $ | 0.95 | $ | 0.91 | |||
| Diluted Earnings Per Share | $ | 0.87 | $ | 0.88 | $ | 0.84 | |||
| * | Amounts may not recalculate due to rounding. | ||||||||
| --- | --- | ||||||||
| (1) | During fiscal year 2022, transaction costs primarily represent fees incurred in relation to the pending<br>Coherent acquisition and customer settlements from acquired liabilities of previous acquisitions. During fiscal year 2021, transaction costs primarily represent transaction expenses related to the Ascatron acquisition. | ||||||||
| --- | --- | ||||||||
| (2) | The Company recorded debt extinguishment expense of $24.7 million in connection with the extinguishment of<br>the Term B Loan Facility during the three months ended September 30, 2020. | ||||||||
| --- | --- |
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Table 5
Reconciliation of GAAP Net Income (Loss), EBITDA and Adjusted EBITDA
$ Millions
(Unaudited)
| Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Sept 30,2021 | Jun 30,2021 | Sept 30,2020 | |||||||
| Net earnings on GAAP basis | $ | 74.5 | $ | 82.3 | $ | 46.3 | |||
| Income taxes | 16.0 | 10.9 | 13.3 | ||||||
| Depreciation and amortization | 69.7 | 70.2 | 64.7 | ||||||
| Interest expense | 12.2 | 14.1 | 17.2 | ||||||
| EBITDA (1) | $ | 172.4 | $ | 177.5 | $ | 141.5 | |||
| EBITDA margin | 21.7 | % | 22.0 | % | 19.4 | % | |||
| Stock based compensation | 22.7 | 18.5 | 15.5 | ||||||
| Foreign currency exchange (gains) losses | (4.9 | ) | 1.2 | 4.7 | |||||
| Debt extinguishment expense | — | — | 24.7 | ||||||
| Restructuring expenses, transaction expenses, and other | $ | 12.0 | $ | 2.8 | $ | 2.1 | |||
| Adjusted EBITDA (2) | $ | 202.2 | $ | 200.0 | $ | 188.5 | |||
| Adjusted EBITDA margin | 25.4 | % | 24.8 | % | 25.9 | % | |||
| * | Amounts may not recalculate due to rounding. | ||||||||
| --- | --- | ||||||||
| (1) | EBITDA is defined as earnings before interest, income taxes, depreciation and amortization.<br> | ||||||||
| --- | --- | ||||||||
| (2) | Adjusted EBITDA excludes non-GAAP adjustments for share-based<br>compensation, certain one-time transaction expenses, the impact of restructuring and related items, debt extinguishment charges, expenses incurred for asset retirement obligations and the impact of foreign<br>currency exchange gains and losses and COVID related costs incurred during fiscal year 2021. | ||||||||
| --- | --- |
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Table 6
GAAP Earnings Per Share Calculation
$ Millions
(Unaudited)
| Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Sept 30,2021 | Jun 30,2021 | Sept 30,2020 | |||||||
| Numerator | |||||||||
| Net earnings | $ | 74.5 | $ | 82.3 | $ | 46.3 | |||
| Deduct Series A preferred stock dividends | (6.9 | ) | (6.9 | ) | (6.4 | ) | |||
| Deduct Series B redeemable preferred dividends | (10.2 | ) | (10.0 | ) | — | ||||
| Basic earnings available to common shareholders | $ | 57.4 | $ | 65.4 | $ | 39.8 | |||
| Effect of dilutive securities: | |||||||||
| Add back interest on Convertible Senior Notes Due 2022 | $ | 0.5 | $ | 3.1 | $ | — | |||
| Diluted earnings available to common shareholders | $ | 57.9 | 68.5 | $ | 39.8 | ||||
| Denominator | |||||||||
| Weighted average shares | 105.8 | 105.0 | 102.8 | ||||||
| Effect of dilutive securities: | |||||||||
| Common stock equivalents | 2.8 | 3.9 | 2.4 | ||||||
| 0.25% Convertible Senior Notes due 2022 | 7.3 | 7.3 | — | ||||||
| Diluted weighted average common shares | 115.8 | 116.2 | 105.2 | ||||||
| Basic earnings per common share | $ | 0.54 | $ | 0.62 | $ | 0.39 | |||
| Diluted earnings per common share | $ | 0.50 | $ | 0.59 | $ | 0.38 | |||
| * | Amounts may not recalculate due to rounding. | ||||||||
| --- | --- |
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Table 7
Non-GAAP Earnings Per Share Calculation
$ Millions
(Unaudited)
| Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Sept 30,2021 | Jun 30,2021 | Sept 30,2020 | |||||||
| Numerator | |||||||||
| Net earnings on non-GAAP basis | $ | 117.7 | $ | 117.0 | $ | 100.4 | |||
| Deduct Series A preferred stock dividends | (6.9 | ) | (6.9 | ) | (6.4 | ) | |||
| Deduct Series B redeemable preferred dividends | (10.2 | ) | (10.0 | ) | — | ||||
| Basic earnings available to common shareholders | $ | 100.6 | $ | 100.2 | $ | 94.0 | |||
| Effect of dilutive securities: | |||||||||
| Add back interest on Convertible Senior Notes Due 2022 | $ | 0.5 | $ | 3.1 | $ | 3.1 | |||
| Add back Series A preferred stock dividends | 6.9 | 6.9 | 6.4 | ||||||
| Diluted earnings available to common shareholders | $ | 108.0 | $ | 110.1 | $ | 103.5 | |||
| Denominator | |||||||||
| Weighted average shares | 105.8 | 105.0 | 102.8 | ||||||
| Effect of dilutive securities: | |||||||||
| Common stock equivalents | 2.8 | 3.9 | 2.4 | ||||||
| 0.25% Convertible Senior Notes due 2022 | 7.3 | 7.3 | 7.3 | ||||||
| Series A Mandatory Convertible Preferred Stock | 8.9 | 8.9 | 10.4 | ||||||
| Diluted weighted average common shares | 124.8 | 125.1 | 123.0 | ||||||
| Basic earnings per common share on non-GAAPbasis | $ | 0.95 | $ | 0.95 | $ | 0.91 | |||
| Diluted earnings per common share on non-GAAPbasis | $ | 0.87 | $ | 0.88 | $ | 0.84 | |||
| * | Amounts may not recalculate due to rounding. | ||||||||
| --- | --- |
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Table 8
Example EPS Calculations(1)
$ Millions
| Hypothetical Earnings Level for Q2 FY22 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Non-GAAP net earnings | $ | 104.0 | $ | 116.0 | $ | 128.0 | |||
| Deduct Series A preferred stock dividends | (6.9 | ) | — | — | |||||
| Deduct Series B redeemable preferred dividends | (10.3 | ) | (10.3 | ) | (10.3 | ) | |||
| Add back interest on Convertible Senior Notes Due 2022 | 0.6 | 0.6 | 0.6 | ||||||
| Non-GAAP net earnings available to commonshareholders | $ | 87.4 | $ | 106.3 | $ | 118.3 | |||
| Diluted weighted average common shares | 116.0 | 124.9 | 124.9 | ||||||
| Diluted earnings per common share on non-GAAPbasis | $ | 0.75 | $ | 0.85 | $ | 0.95 | |||
| (1) | The Company does not provide reconciliations of the hypothetical<br>non-GAAP net earnings and hypothetical diluted non-GAAP EPS presented in this table. The Company is unable, without unreasonable efforts, to forecast certain items<br>required to develop meaningful GAAP financial measures that are comparable to these purely hypothetical figures, which are provided solely to illustrate how the Company would calculate diluted non-GAAP EPS<br>under different factual scenarios. | ||||||||
| --- | --- |
CONTACT:
Mary Jane Raymond
Treasurer and Chief Financial Officer
investor.relations@ii-vi.com
www.ii-vi.com/contact-us
T. 724.352.4455 | ii-vi.com
Page 16
EX-99.2
November 2021 Investor Presentation Exhibit 99.2
Forward-Looking Statements This presentation contains forward-looking statements relating to future events and expectations that are based on certain assumptions and contingencies. The forward-looking statements are made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 and relate to the Company’s performance on a going forward basis. The forward-looking statements in this presentation involve risks and uncertainties, which could cause actual results, performance or trends to differ materially from those expressed in the forward-looking statements herein or in previous disclosures. The Company believes that all forward-looking statements made by it in this presentation have a reasonable basis, but there can be no assurance that management’s expectations, beliefs, or projections as expressed in the forward-looking statements will actually occur or prove to be correct. In addition to general industry and global economic conditions, factors that could cause actual results to differ materially from those discussed in the forward-looking statements in this presentation include but are not limited to: (i) the failure of any one or more of the assumptions stated above to prove to be correct; (ii) the risks relating to forward-looking statements and other “Risk Factors” discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021 and additional risk factors that may be identified from time to time in future filings of the Company; (iii) the conditions to the completion of the Company’s pending business combination transaction with Coherent, Inc. (the “Transaction”) and the remaining equity investment by Bain Capital, LP, including the receipt of any required regulatory approvals, and the risks that those conditions will not be satisfied in a timely manner or at all; (iv) the occurrence of any event, change or other circumstances that could give rise to an amendment or termination of the merger agreement relating to the Transaction, (v) the Company’s ability to finance the Transaction, the substantial indebtedness the Company expects to incur in connection with the Transaction and the need to generate sufficient cash flows to service and repay such debt; (vi) the possibility that the Company may be unable to achieve expected synergies, operating efficiencies and other benefits within the expected time-frames or at all and to successfully integrate the operations of Coherent, Inc. (“Coherent”) with those of the Company; (vii) the possibility that such integration may be more difficult, time-consuming or costly than expected or that operating costs and business disruption (including, without limitation, disruptions in relationships with employees, customers or suppliers) may be greater than expected in connection with the Transaction; (viii) litigation and any unexpected costs, charges or expenses resulting from the Transaction; (ix) the risk that disruption from the Transaction materially and adversely affects the respective businesses and operations of the Company and Coherent; (x) potential adverse reactions or changes to business relationships resulting from the announcement, pendency or completion of the Transaction; (xi) the ability of the Company to retain and hire key employees; (xii) the purchasing patterns of customers and end users; (xiii) the timely release of new products, and acceptance of such new products by the market; (xiv) the introduction of new products by competitors and other competitive responses; (xv) the Company’s ability to assimilate recently acquired businesses and realize synergies, cost savings and opportunities for growth in connection therewith, together with the risks, costs, and uncertainties associated with such acquisitions; (xvi) the Company’s ability to devise and execute strategies to respond to market conditions; (xvii) the risks to anticipated growth in industries and sectors in which the Company and Coherent operate; (xviii) the risks to realizing the benefits of investments in R&D and commercialization of innovations; (xix) the risks that the Company’s stock price will not trade in line with industrial technology leaders; and/or (xx) the risks of business and economic disruption related to the currently ongoing COVID-19 outbreak and any other worldwide health epidemics or outbreaks that may arise. The Company disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events or developments, or otherwise. These risks, as well as other risks associated with the proposed transaction, are more fully discussed in the joint proxy statement/prospectus included in the registration statement on Form S-4 (File No. 333-255547) filed with the SEC in connection with the Transaction (the “Form S-4”). While the list of factors discussed above and the list of factors presented in the Form S-4 are considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward looking statements. Neither the Company nor Coherent assumes any obligation to publicly provide revisions or updates to any forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.
II-VI at a Glance as of June 30, 2021 FY21 Revenue $3.1B Cash & Equivalents $1.6B FY21 Free Cash Flow (1) $428M Vertically Integrated Model 18 Countries 73 Locations 3,800+ Employees Core Competency Engineered Materials 1971 Year Founded 22,000+ Employees 2,200+ Patents Engineering & Technology (1) Free cash flow is defined as cash flow from operations of $574M less capital expenditures of $146M for the twelve months ended June 30, 2021.
Communications Industrial Q1 FY22 Financial Highlights Semiconductor Capital Equipment Life Sciences Consumer Electronics Aerospace & Defense Japan Other North America Automotive & Other Revenue by Region Revenue by End Market Revenue $795M Europe China Q1 FY22 GAAP Non-GAAP Operating Income $95.1M $150.2M Earnings Per Share $0.50 $0.87 Bookings $939M Backlog $1.4B
FY21 Revenue Distribution Europe North America China Photonic Solutions Compound Semiconductors Communications Industrial Semiconductor Capital Equipment Life Sciences Automotive & other Aerospace & Defense By Region By Segment By End Market Consumer Electronics Japan FY21 Revenue $3.1B
History of Insightful Targeting and Successful Integration of Strategic Acquisitions 10 Years of Continuous Revenue Growth CAGR 20% 2010 - Optical networks & China market 2013 - Gallium arsenide technology platform 2016 - Epitaxial wafer and SiC electronic devices 2019 - Indium phosphide technology platform 2022 - Laser sources & systems(4) 5 Transformative Acquisitions: Revenue ($M) Finisar Acquisition Bolstered Scale Increased efficiencies PF(2) Q1 FY20 Q1 FY22 Q1FY22 OpEx as % of Revenue Without amortization and stock-based compensation, and transaction costs 26% 21% 31% 40% Q1FY22 Non-GAAP Gross Margins 40% (3) 21% (3) -500 bps +900 bps Figures prior to FY2019 do not reflect the adoption of ASC 606. Prepared in accordance to ASC 805. Pro Forma includes the revenue of Finisar in Q1FY20 prior to the acquisition date of 9/24/20. FY21 actual. See Appendix for reconciliation to most comparable GAAP measures. Acquisition in process as of September 30, 2021.
Attractive and Increasing Gross and Operating Margins All non-GAAP amounts exclude certain adjustments for share-based compensation, acquired intangible amortization expense, certain one-time transaction expenses, debt extinguishment expense, fair value measurement period adjustments and restructuring and related items. See Appendix for reconciliation to most comparable GAAP measures. II-VI figures are for the three months ended September 30, 2019 and Finisar figures are for the three months ended July 28, 2019. Strong Execution and Synergy Realization Post Finisar Transaction Close Driving Margins Non-GAAP Gross Margin(1) Non-GAAP Operating Margin(1) Last Quarter Before Close(2) Last Quarter Before Close(2)
Building Momentum for 50 Years One of the largest photonics and compound semiconductor companies Materials expertise drives differentiation in multiple growing markets Vertically integrated, diverse global manufacturing footprint History of insightful targeting and successful integration of strategic acquisitions Strong execution and resilient growth 1 2 3 4 5 II-VI rang the Nasdaq stock market opening bell in celebration of its 50th anniversary on June 22, 2021
A Leader in Engineered Materials Aerospace & Defense Semiconductor Equipment Life Sciences Automotive Datacom, Telecom & Wireless Communications 3D Sensing/Consumer Industrial Leveraging a broad range of differentiated materials and devices across 7 strategic markets: II-VI engineered materials are differentiated by unique optical, electrical, magnetic, thermal, mechanical, and structural properties. Indium Phosphide InP Silicon Carbide SiC Bismuth Telluride Bi2Te3 Aluminum Oxide/ Sapphire AI2O3 Reaction Bonded Silicon Carbide Si/SiC Diamond C Yttrium Aluminum Garnet (YAG) Y3AI5O12 Zinc Sulfide ZnS Zinc Selenide ZnSe Gallium Arsenide GaAs Future Future Future Future Future
Addressing Multiple and Strong Growing End-Markets Optical Communications Sources: Omdia, LightCounting, Cignal AI, 650 Group, Yole, Internal Estimates CY26 Market CY21-26 CAGR 10.5 % $26.9 B Datacenter and telecom networks Wireless Sources: Yole, Internal estimates 37 % $8.5 B 4G/5G RF base stations Industrial Sources: Optech Consulting, Internal Estimates 7 % $8.0 B Laser-based materials processing Consumer Electronics Sources: Morgan Stanley, IDC, Internal Estimates 22 % $8.2 B Mobile devices, AR/VR, smart home devices and wearables Sources: Yole, Internal Estimates 8.2 % $6.1 B Automotive & Energy HEV/EV, LiDAR, In-cabin interaction Sources: Strategies Unlimited., SEMI, Internal Estimates 8 % $4.2 B Semiconductor Capital Equipment EUV lithography, deposition, etch, and inspection Sources: Data Bridge, Markets & Markets Strategies Unlimited, SDI, Internal Estimates 6 % $3.4 B Life Sciences Diagnostic, medical treatment, and environmental sensing 21 % $24.4 B Aerospace & Defense Satellite laser communications, contested space Sources: Internal Estimates CY26 Market CY21-26 CAGR
Demonstrated Demonstrated Manufacturing 100 mm Wafer 150 mm Wafer World’s First 200 mm Wafer Two Decades of SiC Materials Innovation 200 mm Wafer Manufacturing 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 24 Years High-Quality Wafer Demonstrated Manufacturing 3’’ Wafer Back-end Processing in China Manufacturing 4H n-Type 6H SI
GE Technology II-VI (3DSiC®) II-VI and GE Technology II-VI and GE Technology II-VI Vertical Integration New Ventures & Wide-Bandgap Electronics Technology Significant SiC Market Opportunity(1) ($bn) 50%+ CAGR (1) Internal company estimates. Includes module and device TAM. $0.5 $30+ 2020 2030 A vertically integrated SiC power electronics technology organization (1) Internal company estimates. Includes module and device TAM. Investing $1B over 10 years starting in FY22
II-VI to Acquire Coherent
Coherent Transaction Overview Transaction Details Coherent stockholders to receive $220.00 per share in cash and 0.91 of a II-VI common share for each Coherent share At closing, Coherent stockholders to own approximately 15% of the common shares of combined company Projected Synergies & Financial Impact $250 million of run-rate cost synergies expected to be realized within 36 months of close Anticipated to be accretive to non-GAAP EPS in the second year following closing Financing Fully committed debt financing from JP Morgan of approximately $4.99 billion Equity financing commitment from Bain Capital of $2.15 billion as Bain Capital elected during 4QFY21 to increase its commitment by $350 million. Balance sheet cash Governance Steve Pagliuca, Co-Chair of Bain Capital, joined II-VI Board in April Two Coherent directors expected to join Board of combined company Approvals & Expected Closing Approved by Coherent and II-VI shareholders Regulatory approvals and customary closing conditions Closing of transaction anticipated during the first calendar quarter of 2022.
Significant Value Creation Potential from Coherent Synergies Expected Synergies within 3 years Cost of Goods Sold Supply chain management – procurement Infeed – Internal supply of enabling materials and components Global supply chain function savings $150M Operating Expenses More efficient R&D with scale Development cost savings Consolidation of corporate costs Global functional model efficiencies $100M TOTAL $250M
Well Capitalized for Future Growth Rapid deleveraging post-closing from strong EBITDA and cash flow generation External Financing Sources Debt $4.99 billion total commitment, including unfunded revolving credit facility Convertible Preferred Equity $2.15 billion commitment from Bain Capital, $750 million of which has been received Coupon: 5%, 4-year payable-in-kind, cash pay option thereafter Conversion price of $85.00 per share Pro Forma Leverage Total Debt $5.0 billion3.8x(1) Cash $1.3 billion Net Debt $3.8 billion2.8x(1) Target 2.5x or less gross leverage within two years post-closing (1) Reflects proforma closing combined EBITDA at 3/31/22 and includes $250 million of cost synergies. Proforma net leverage at closing is expected to be approximately 2.8x(1)
$4.1B Communications Semi. Cap. Equip. Materials Proc. Life Sci. Aero Cons. 48% 16% 6% 9% 15% 6% Key Transaction Details Fully-Diluted Shares II-VI basic shares 105.8M Stock comp shares 5.8M Series A preferred debt 8.9M Convertible debt 7.3M Shares issued to Coherent 22.3M Series B preferred 25.7M Pro forma FDSO 175.9M Net Debt at Close Debt to Fund Deal $3.0B Refinance II-VI/COHR Debt $1.4B Transaction Fees $0.3B Total $4.6B Convertible Notes $0.4B Total Gross Debt $5.0B Less Cash $1.3B Net Debt $3.7B Leverage Calc. Gross Debt $5.0B Less Cash $1.3B Net Debt $3.7B Pro Forma TTM Combined EBITDA @ 3/31/22 (1) $1,073M Add synergies $250M Pro Forma TTM Adj. EBITDA @ 3/31/22 (1) $1,323M Net Leverage at close 2.8x Net Leverage at year 2 1.8x Deal Funding 22.3M shares (@ 8/30/21 price) $1.4B Bain Preferred $2.2B Debt $3.0B Cash $0.2B Total $6.8B (1) Reflects proforma closing combined EBITDA at 03/31/22 and includes $250 million of cost synergies
Summary of Strategic Rationale Greater exposure to megatrends from larger operational scale Sustained growth from increased diversification Higher growth and margins through complementary technology platforms Improved competitiveness from greater scale across the value chain Sales synergies by utilizing Coherent’s global service infrastructure Deeper market intelligence from complementary business models
End Markets and Applications
Datacom #1 provider of datacom solutions Materials I Components I Transceiver modules The most innovative leader in datacom transceivers Co-packaged Transceiver Pluggable Board-Mount ROSA IC (TIA, LD, CDR) Polarization Beam Splitter Laser PIC DSP Garnet Lenses Isolators Mux/DeMux TOSA High Speed Detectors Optical Assembly
Well poised for disaggregation Telecom Optical Monitoring System (OMS) Pluggable Optical Line System (POLS) A market mover in ROADM technology and coherent transmission Growing share in coherent optics 400G IC-TROSA 400G QSFP-DD
Industrial – Materials Processing Laser processing in electric vehicles Automation: Remote laser welding heads assisted by machine vision software Electric vehicle battery manufacturing: Laser processes adapted to most joining tasks on the cell, module, pack, and frame levels Welding battery cells, bus bars and packs Electric motor hairpin welding Battery enclosure cutting Full line supplier of materials, components and subsystems for high power lasers
3D Sensing & LiDAR Face biometrics, auto-focus, augmented reality, automotive in-cabin & LiDAR, machine vision Roadmap to integrating functionality in modules leveraging broad portfolio of lasers, detectors, optics, and integrated circuits
Ceramics and Composites for Wafer Fab Equipment Aluminum-Reinforced SiC Metal Matrix Composites Reaction Bonded SiC Diamond Ceramics Silicon Carbide Particles Aluminum Diamond Particles Silicon Carbide Silicon Metals Ceramics and metal matrix composites for front end of line (FEOL) to back end of line (BEOL) WFE Portfolio of additive manufacturing materials High Performance Tight flatness tolerances High CTE matching of silicon wafers High stiffness / High thermal conductivity / Low weight
Life Sciences II-VI plays an important role in the medical diagnostics markets that have a vital role in PCR, sequencing and diagnostic platforms, which are critical for disease testing and research, and lead to new medicines Thermoelectrics Vertically integrated subassemblies & systems Biotechnology Medical Scientific Solutions for Life Sciences Optics Lasers
Automotive Key Trends Green Optics & optoelectronics Connectivity & Entertainment Safety Capabilities & Expertise HEV/EV Telematics, information & comfort LiDAR/OMS/DMS SiC substrates & devices Li/S batteries MMC Broad and deep portfolio in optics & optoelectronics (VCSELS, Edge Emitting Lasers, Mirrors, Lenses…) Silicon carbide substrates & devices and Li/S batteries Key technologies for thermal management: Ceramic matrix composites For electrification and advanced driver-assistance systems (ADAS)
Financial Appendix
End Market Distribution of Q1FY22 QTD Revenue Reported Segments Q1FY21 Revenue Q1FY22 Revenue Q1FY22 Op Margin – GAAP / Non-GAAP Q1FY22/ Q1FY21 Revenue Growth Communica-tions Industrial Aerospace & Defense Semi Cap Life Sciences, Consumer, Automotive, Other Photonic Solutions $498M $536M 11% / 16% 8% 93% 3% 0% 1% 3% Compound Semiconductors $230M $259M 19% / 26% 12% 12% 31% 17% 12% 28% II-VI Consolidated $728M $795M 12% / 19% 9% 67% 13% 6% 4% 10% II-VI Segment Revenue by End Markets for Q1FY22 QTD
End Market Distribution of Full Year FY21 Revenue Reported Segments FY21 Revenue FY21 Op Margin – GAAP / Non-GAAP FY21/FY20 Revenue Growth Proforma(1) FY21/FY20 Revenue Growth Communica-tions Industrial (Automotive) Aerospace & Defense Semi Cap Life Sciences, Consumer, Other Photonic Solutions $2,038M 10% / 16% 31% 12% 94% 3% 0% 1% 2% Compound Semiconductors $1,068M 21% / 26% 30% 30% 13% 26% (2%) 19% 10% 30% II-VI Consolidated $3,106M 13% / 19% 31% 18% 66% 10% (1%) 7% 4% 12% (1) Pro Forma calculation in accordance with ASC 805. II-VI Segment Revenue by End Markets for Full Year FY21
Hypothetical Illustration of EPS Calculation
Note: Dollars in millions. Q1 FY20 represents quarter ending October July 28, 2019. Reconciliation of GAAP Measures to Non-GAAP Measures Three Months Ended 7/28/19 (Last Finisar Stand Alone Report)
Reconciliation of GAAP Measures to Non-GAAP Measures
Reconciliation of GAAP Measures to Non-GAAP Measures
Reconciliation of GAAP Measures to Non-GAAP Measures
Reconciliation of GAAP Measures to Non-GAAP Measures
Reconciliation of GAAP Measures to Non-GAAP Measures
Reconciliation of GAAP Measures to Non-GAAP Measures
Reconciliation of GAAP Measures to Non-GAAP Measures
Reconciliation of GAAP Measures to Non-GAAP Measures
Reconciliation of GAAP Measures to Non-GAAP Measures
