Coherent Corp.

375 Saxonburg Blvd.

Saxonburg, PA 16056-9499

USA

Unparalleled experience in materials, photonics, and lasers;

A vertically integrated, geographically diverse organization with scalable manufacturing platforms;

A history of insightful targeting and successful integration of strategic acquisitions;

A sustained and committed track record of targeted research and development and capital expenditures to prepare for the opportunities that lie ahead; and

Worldwide talented and experienced teams of engineers and technologists, including over 2,000 people employed in R&D, as well as expert manufacturing teams, and experienced business leaders.

$ Millions, except per share and percentage amounts (unaudited)

Revenues

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Non-GAAP Operating Income₍₁₎

GAAP Net Loss Attributable to Coherent Corp.

Non-GAAP Net Earnings Attributable to Coherent Corp₍₁₎

GAAP Diluted Loss Per Share

Non-GAAP Diluted Earnings Per Share₍₁₎

Other Selected Financial Metrics

GAAP gross margin

Non-GAAP gross margin₍₁₎

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GAAP return on sales

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The Company has disclosed financial measurements in this letter to shareholders that present financial information considered to be non-GAAP financial measures. These measurements are not a substitute for GAAP measurements, although the Company’s management uses these measurements as an aid in monitoring the Company’s on-going financial performance. The non-GAAP net earnings attributable to Coherent Corp., the non-GAAP earnings per share, the non-GAAP operating income, the non-GAAP gross margin, 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 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. All non-GAAP amounts exclude certain adjustments for share-based compensation, acquired intangible amortization expense, restructuring charges (recoveries), integration and site consolidation expenses, integration transaction expenses, start-up costs related to the start-up of new devices for new customer applications, and various one-time adjustments. See Table 8 for the Reconciliation of GAAP measures to non-GAAP measures.

GAAP Operating income is defined as earnings before income taxes, interest expense, and other expense or income, net.

Revenue of approximately $1.120 – 1.200 billion.

Non-GAAP gross margin of approximately 36 – 38%.

Non-GAAP operating expense of approximately $246 – 262 million.

Non-GAAP operating margin of approximately 14 – 16%

Non-GAAP Adjusted EBITDA of approximately 21 – 23%.

Interest expense of approximately $70 – 74 million.

Non-GAAP tax rate of approximately 16 – 19%.

Series B Preferred P.I.K. Dividend of approximately $31 million.

Non-GAAP earnings per share of approximately $0.32 – 0.52.^1,2

Share count for the entire guidance range is 153 million.

Capital Expenditures of approximately $115 – 145 million ($50 million of which will be funded by Silicon Carbide LLC).

Stock compensation of approximately $23 – 29 million.

Amortization of approximately $72 million.

Restructuring, synergies, and consolidation expenses of approximately $40 – 50 million.

The Company does not provide reconciliations of forward-looking Non-GAAP EPS. The Company is unable, without unreasonable efforts, to forecast certain items required to develop a meaningful GAAP financial measure that is comparable to this forward-looking figure.

Includes $0.04 related to earnings on Silicon Carbide LLC Restricted Cash Investments.

Revenue of approximately $4.55 – 4.70 billion, an increase on the low end of our previous guidance by $50 million.

Non-GAAP gross margin of approximately 36 – 38%.

Non-GAAP operating expense of approximately $990 million—1.015 billion.

Non-GAAP operating margin of approximately 14 – 16%.

Non-GAAP Adjusted EBITDA of approximately 20 – 22%.

Interest expense of approximately $284 – 294 million.

Non-GAAP tax rate of approximately 20 – 22%.

Series B Preferred P.I.K. Dividend of approximately $123 million.

Non-GAAP earnings per share of approximately $1.30 – 1.70, up from our previous guidance of $1.00-1.50 due to revenue increase, operating expense management, and other income (mainly due to earnings on Silicon Carbide LLC restricted cash) ^3,4

Share count for the entire guidance range is 153 million.

Capital Expenditures of approximately $350 – 400 million ($150 million funded by the silicon carbide LLC).

Stock compensation of approximately $120 – 130 million.

Amortization of approximately $290 million.

Restructuring, synergies, and consolidation expenses of approximately $155 – 177 million.

The Company does not provide reconciliations of forward-looking Non-GAAP EPS. The Company is unable, without unreasonable efforts, to forecast certain items required to develop a meaningful GAAP financial measure that is comparable to this forward-looking figure.

Includes $0.10 related to earnings on Silicon Carbide LLC Restricted Cash Investments.

Improving Margin Structure. The commencement of improvement in our margin structure with solid sequential increases in both gross and operating margin;

Ongoing AI Datacom Strength. Ongoing AI-driven strength for our 800G Datacom transceivers and enabling active and passive components;

Improving 800G Production Ramp. Ongoing strong improvement in our 800G Datacom transceiver production ramp;

Improving End Demand Outside of AI Datacom. Signs of improving end demand in key end markets including the Telecom vertical of our Communications market and all four verticals within our Industrial market; and

Closing of Silicon Carbide Transactions. The closing of the silicon carbide transactions with Mitsubishi Electric and DENSO pursuant to which those entities invested an aggregate of $1 billion in exchange for non-controlling ownership interests of 12.5% each in Silicon Carbide LLC, a newly formed LLC into which we contributed our silicon carbide business, and entered into long-term supply agreements that will support their demand for silicon carbide substrates and epitaxial wafers.

Gross Margin:

continuous rationalization and refreshing of the portfolio;

continuous rationalization of the supply base for cost and resiliency;

implementation of a streamlined Asia Pacific manufacturing center of excellence;

moving up the value chain;

operating cost reductions based on a more resilient and lower cost manufacturing footprint;

increased capacity utilization;

favorable product mix, driven by product introductions with higher margins;

productivity improvements through improvements in yields and quality;

implementation of digital transformation and adoption of AI technology to improve efficiency in R&D, manufacturing, and G&A;

leveraging our service organization into new markets

Operating Margin: in addition to the above drivers of gross margin improvement, we expect to drive future operating margin improvement from operating leverage by both increasing revenue and ongoing operating expense control, with the latter enhanced by the execution of:

our Synergy and Site Consolidation Plan;

our Restructuring Plan;

our Enterprise Transformation Plan;

additional cost and expense actions underway

China and Rest of Asia Site Consolidation. Consolidation of sites in China and the rest of Asia, including the closure of certain manufacturing facilities and sales offices and the establishment of new regional design centers closer to our customers in the Global South as part of a multi-year plan, are underway. The intent of these actions is to optimize our footprint in Asia. In addition, through these actions, we will replicate the state-of-the-art manufacturing lines we have in China to other parts of Asia to increase resiliency to our supply chain by taking advantage of the best practices of operational excellence, new product introductions, a smarter and shorter supply chain, and redundancy for sustainability.

Compound Semiconductor Site Consolidation. Consolidation of compound semiconductor wafer fab and device manufacturing facilities, including the closure of half of these facilities, is a multi-year and cross-cutting initiative. We will consolidate into our most modern facilities with a stable baseline of operational excellence and will drive better utilization of our assets while reducing our costs and improving our new product introduction and technology innovation cycle times.

Savings. We expect total savings for fiscal 2023 – 2025 to be $200 – 250 million, with annual savings of $110 – 140 million by fiscal 2025. We tightened our previous range from $200 – 300 million to $200 – 250 million due to refinements of certain initiatives within the Plan, resulting in slightly lower savings for fiscal year 2023 – 2025 and higher savings for years thereafter. We forecast savings associated with the Plan to be approximately $90 – 100 million for full fiscal year 2024.

Costs to Achieve. We expect total costs to achieve these savings over the fiscal 2023 – 2025 period to be $175 – 200 million, including severance, retention, facility moves, accelerated depreciation, short-term duplicate costs, lease termination costs, and IT consolidation costs. In the second quarter of fiscal 2024, we recorded restructuring recoveries of $2 million, consisting primarily of employment termination cost adjustments offset by charges for accelerated depreciation.

Backlog. We ended the quarter with almost $2.9 billion of backlog, essentially unchanged from both the preceding and the year ago quarters.

Orders. Orders decreased sequentially by approximately (7%) and year-over-year by approximately (4%). The sequential decline was primarily driven by ongoing

macroeconomic uncertainty and, in the case of our Networking segment, the extraordinarily high level of orders from AI customers in the preceding quarter. As discussed at greater length below, AI-related Datacom demand, as measured by both orders and customer engagements, remains strong. We also saw meaningful sequential improvement in orders in our Lasers segment. The year-over-year decline was primarily driven by a product design change by a customer within our Consumer Electronics vertical, along with macroeconomic uncertainty.

Materials. Revenue of $254 million for our Materials segment increased by approximately 4% sequentially but decreased by approximately 34% year-over-year and was well below our internal forecast. The sequential increase was driven by sequential revenue growth in our Consumer Electronics and Automotive verticals.

Networking. Revenue of $524 million for our Networking segment was modestly above our internal forecast and increased by approximately 11% sequentially but decreased by approximately 14% year-over-year. The sequential increase was primarily driven by the over 100% sequential increase in our AI-related 800G Datacom transceiver revenue to over $100 million for the quarter, along with sequential growth in our Telecom revenue, which was partially offset by ongoing weakness in our Non-AI Datacom business. The year-over-year decrease was primarily driven by the revenue decline in both our Non-AI-related Datacom transceiver and our Telecom businesses, both of which are primarily due to customer inventory digestion along with some project delays by customers in our Telecom vertical.

Lasers. Revenue of $354 million for our Lasers segment was slightly above our internal forecast and sequentially increased by over 5% but decreased year-over-year by approximately 7%. The sequential increase was driven by sequential growth in our Industrial market. The year-over-year decrease was primarily driven by macroeconomic uncertainty. As we observed in the preceding quarter, encouragingly, we are starting to see improvement in our Laser services revenue, primarily driven by increasing fab utilization and depleted inventory in our Display Capital Equipment market segment. We are beginning to see activity for Gen 6 and Gen 8 fabs in connection with OLED adoption in laptop computers and tablets.

Target: Our long-term leverage target is 2.5x synergized gross leverage.

$ Millions, except per share and percentage amounts (unaudited)

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Depreciation

Amortization

Fully diluted shares for NG EPS

Semiconductor Capital Equipment Vertical: Beyond the near-term growth we expect for our Semicap vertical, we see favorable long-term demand trends for our Semicap business augmented by government policy-driven fab investments (i.e., government subsidies for expanding production capacity) and, most importantly, our increasing serviceable addressable market (SAM) driven by portfolio expansion and the increased adoption of high-performance lasers, over the longer-term. We enjoy a strong NRE-funded design-win pipeline from existing and new customers across both front-end wafer processing and wafer inspection, among new applications.

Front-End. We enjoy a particularly strong competitive position in front-end Semicap, which accounts for most of our Semicap vertical revenue. We have a number of new programs and design wins on track to drive future incremental revenue. Our semiconductor wafer inspection backlog remains strong.

Additional Growth Opportunities. We are excited by significant growth opportunities in the Semicap vertical for our advanced composite materials and diamond. We expect our revenue in Semicap to ramp throughout the balance of fiscal 2024 and beyond. We also expect incremental revenue contribution from wins with new advanced ceramic materials and assemblies for next-generation lithography machines.

AI. Our opportunities should be favorably impacted by AI, in particular for our engineered materials and lasers, which enable equipment for fabricating next-gen nodes, a must for advanced processors for AI.

Display Capital Equipment Vertical: Near-term, we are encouraged by strong double-digit sequential revenue growth and strong sequential order growth in the second quarter for our Display vertical segment of the Industrial market. This order strength reflects a second straight quarter of recovery in our Display service business (which is being driven by increased fab utilization and reduced inventories of Display service spare parts) along with increasing OLED adoption in smart phones and increasing OLED adoption in laptop computers and tablets, and both increasing investments in Gen 6 fabs and announcements of construction of Gen 8 OLED fabs to address this expanding IT market opportunity. This order strength fuels our confidence as to a recovery being underway that we expect to lead to a strong rebound in revenue in the second half of fiscal 2024 with further improvement in fiscal 2025 and beyond for our Display business. We continue to be the leading supplier to virtually all of the leading companies in the Display vertical and we enjoy a broad technology platform to address virtually all Display companies’ future roadmaps. We are especially strong in the Excimer laser annealing market, which accounts for the largest portion of our Display SAM.

OLED. The long-term outlook for our Display Excimer laser annealing business remains robust. We are excited by increasing OLED adoption in smart phones and by investments in new Gen 8 OLED fabs for capacity expansion for larger substrates for laptop computers and tablets and by OLED adoption in the automotive market. The move to larger OLED formats and new OLED display types will require new Excimer laser annealing systems along with new lasers for cutting. We are well positioned for both cutting and larger-format annealing. We expect the IT display market to increase from approximately $6 billion in calendar 2023 to almost $14 billion in calendar 2026 with OLED displays growing by well over 100% from approximately $3 billion to approximately $8 billion. Our Display business also should benefit from increasing adoption of OLED displays into tablet and laptop computers, by a rebound in smartphone sales volumes from the lowest levels in a decade, and by higher penetration of OLED displays into mid-range phones.

China. China’s OLED sector has witnessed a significant uptick since the second half of calendar 2023. Anticipated bookings from Chinese customers via equipment integrators in Korea and are expected to surpass $ 100 million in calendar 2024. Several Chinese display manufacturers are poised to invest in new Gen 8 OLED fabs to capitalize on the growing demand for OLED IT panels. Concurrently, they are expanding existing Gen 6 OLED capacity to cater to the burgeoning mobile phone market. These initiatives present lucrative sales opportunities for ELA/SLA laser and optics for annealing systems.

New DPSS Laser. We expect our new Python DPSS laser and the associated line-beam system to enhance our leading position in the OLED annealing market for larger IT displays. We were excited to have received our first Python order during the quarter, as planned. We do not expect Python deployments to result in customers’ decommissioning any of our existing deployed Excimer laser systems. Accordingly, we do not expect ramp of Python deployments to adversely impact our Display service revenue; rather, we expect Python to augment our service revenue given that each Python system will generate service revenue with a compelling cost of ownership for our customers.

MicroLED. Long-term Display Capital Equipment demand is also augmented by the emergence of the microLED market and the adoption of laser lift-off and mass transfer processes. We have seen increasing microLED interest and customer engagement based on recent announcements from tier one smartphone manufacturers on their future microLED display roadmaps. As we previously disclosed, in the preceding fourth quarter, we received multiple orders from customers in China, Taiwan, and Korea for such systems.

Service. As previously noted, encouragingly, we enjoyed a second straight quarter of sequential improvement in our Display service bookings and revenue. While still below the year ago level, our Display service revenue increased by over 10% sequentially in the second quarter of fiscal 2024, following over 20% sequential growth in the preceding quarter. While smartphone sales remain near the lowest level in a decade, several OLED fabs in Korea and China are seeing increased fab utilization, which combined with depleted inventory of service spare parts, has driven a meaningful sequential increase in our service business. We expect both increasing fab utilization and new Excimer system laser installations to drive further longer-term recovery in our Laser service revenue.

Precision Manufacturing Vertical: We continue to see a strong long-term outlook for this market driven by new product offerings that enhance our SAM and competitive position. An eventual macroeconomic rebound will especially affect Precision Manufacturing demand, our most macro-impacted vertical in the Industrial market. While revenue modestly increased sequentially, orders for this vertical meaningfully decreased on both a sequential and year-over-year basis. Encouragingly, some customers that have been pushing out shipments over the last 18 months have now requested shipments on short notice.

Electric Vehicles and EV Battery Assembly: Our key target market of Electric Vehicles (EV) continues to provide a healthy long-term market growth outlook of over 15%. We are especially excited by our expanding breadth and depth of customer penetration and strengthening market trend in EV battery welding--and the revenue growth potential attending the pace of our cost reductions and performance improvements in our new ARM Laser and Beam Delivery Systems.

Increasing Breadth and Depth of ARM Adoption. Our differentiated ARM Laser and Beam Delivery Systems are enjoying increasing breadth and depth of customer penetration. Exceptionally strong ARM performance and results for EV battery welding is opening up new customer and market opportunities. In addition to an increasing number of customers adopting ARM for EV battery welding, we also are seeing existing ARM customers leverage our ARM Laser systems in more conventional automotive welding applications.

65 W Diode Pump Chip. We are also excited regarding the revenue growth prospect for our 65 W diode pump chip, which we believe is the highest power single emitter pump laser in the market. We expect this chip to enable growth for fiber laser pumping. We launched the first commercially available such product in the fourth quarter of fiscal 2023 and have provided samples of the product to all major fiber laser customers. The customer reception for this groundbreaking product has been exceptional.

Fiber Laser Cutting. We are excited by the long-term revenue opportunity enabled by our re-entry into the fiber laser cutting market, leveraging the substantial level of vertical integration and breadth of technology differentiation resulting from the acquisition of Coherent, Inc.

Datacom Vertical. We continue to expect strong long-term Datacom revenue growth based on our order book together with strong customer engagements for AI-related data center buildouts. We now expect a 25% CAGR, up from 18% previously, over calendar 2023 – 2028 for the entire Datacom transceiver market based on a meaningful increase in our revenue forecast for 800G, 1.6T, and 3.2T Datacom transceivers. Near-term, we expect strong Datacom revenue growth for the second half of fiscal 2024 compared with the first half.

AI/ML. We have meaningfully increased our Datacom transceiver market forecast based upon our updated view of the AI/ML market. We now estimate the market for 800G, and eventually 1.6T and 3.2T, Datacom transceivers will grow at a greater than 70% CAGR from calendar 2023 – 2028 to over $9 billion (up from $7.2 billion previously) from what we estimate was $0.6 billion in calendar 2023. We expect this growth to result in 800G and 1.6T Datacom transceiver shipments accounting for almost 60% of all Datacom transceiver revenue by 2028 and possibly sooner. A third straight quarter of strong orders for our Datacom transceivers for AI-based data center buildouts reinforced our excitement as to the impact on our Datacom business from the rapid growth of AI/ML, especially generative AI. We also are excited by the strong interest we are seeing from key customers for 1.6T transceivers and components. Retooling of

datacenter architectures and integration of AI clusters by Webscale and other Cloud ICP companies represent an immediate and direct growth opportunity for our Datacom business—both our transceivers and our enabling active and passive components, especially leading-edge high-speed lasers.

More Than Just Datacom Transceivers. We see the longer-term benefit of AI/ML extending well beyond Datacom transceivers to impact other product markets that we address and also to enable significant operating efficiencies across our organization.

Expanded Engagements with Existing and New Customers. As previously noted, adding to our longer-term visibility, during the quarter we continued to expand AI-related product engagements with existing customers and with a number of new AI-related customers including some of the largest Webscale and networking equipment manufacturer companies.

Market Inflection; Long Duration. The strength of follow-on orders and customer engagements in the second quarter reinforced our confidence as to an inflection point in the Datacom transceiver market with significant AI/ML-related revenue growth in our Datacom transceiver business and thereby our overall revenue growth and profitability for many years to come.

Webscale. These orders also reflect our strong technology platforms and competitive position relative to Webscale and Cloud ICP AI/ML-driven datacenter deployments. For the quarter, Webscale customers and customers that incorporate our transceivers in solutions sold to Webscale customers accounted for virtually all of our AI-driven 800G and the bulk of our overall Datacom transceiver revenue. Webscale customers directly and indirectly accounted for approximately 75% of our total Datacom transceiver revenue for the quarter.

Competitive Positioning. Our investments in high-speed lasers over multiple decades have placed us in a unique position to meaningfully participate in the AI connectivity market, including for the upcoming 200G per optical lane era, required for 1.6T and eventually 3.2T Datacom transceivers, with multiple leading-edge laser platforms including DFB-MZs, EMLs, VCSELs and high-power lasers for silicon photonics.

1.6T. As previously noted, we also are excited by the strong interest we are seeing from some of our key customers for 1.6T transceivers and components. In response to customer demand, we continue to make progress toward expected commercial launch in the first quarter of fiscal 2025 of our 1.6T transceivers and components.

Silicon Photonics. We have been shipping silicon photonics-based integrated coherent components and transceivers for many years. This year, to address a segment of the AI-driven Datacom transceiver demand, we launched our silicon photonics-based 800G-DR8 Datacom transceiver. This transceiver is ideal for use in machine learning and training networks that need a link reach longer than 100 meters or where our customers prefer a single-mode over a multimode fiber cabling infrastructure in shorter reaches. As with all silicon photonics-based transceivers, an InP high-power continuous wave (CW) laser is needed to generate the light, and we are developing silicon photonics and InP high-power CW lasers to support our silicon photonics-based transceivers.

Linear Pluggable Optics (LPO). We plan to support the new, emerging LPO transceiver market, as evidenced by our 800G DR8 LPO transceiver that we demonstrated at the European Conference on Optical Communications in Glasgow in October. We believe that LPO will coexist with the traditional retimed market, and we plan to support both. We see the LPO solution supporting a subset of the market, primarily where the customer owns both ends of the link. In addition, a new half-retimed optical standard (HRO) is emerging and if we see customer demand, we will support that as well. Each of these different standards is an architectural partitioning change but relies on the same underlying laser, modulator, and packaging technology, so deployment of one over the other does not have a significant impact on the Company.

Co-Packaged Optics (CPO). To meet the anticipated needs of the future CPO market, we are uniquely well positioned to cover both single-mode and multimode infrastructure options for our customers. Our silicon photonics program, combined with our InP CW (continuous wave) high-power lasers, will enable single-mode CPO applications or designs. In addition, given the successful track record of multi-mode pluggable transceivers in addressing short-reach applications such as AI/ML/HPC connectivity, we are also working on a multimode CPO option, powered by our VCSELs.

Components. Our Datacom components enjoyed very strong revenue growth in the second quarter, up 33% sequentially, largely driven by strength in VCSELs and circulators, among other key components for AI applications.

Telecom Vertical. While the near-term outlook for the Telecom market remains challenged by customer inventory digestion and by project delays by CSPs, the second quarter reinforced our confidence regarding our longer-term Telecom growth outlook. Longer - term, we are excited by the growth prospects offered by a number of new products that strengthen are competitive position in existing Telecom market segments across multiple levels of integration and by new products that will enable us to expand our SAM by providing entree into new segment of the Telecom Market. Near-term, we continue to believe that the preceding first quarter marked the bottom for our Telecom business. As we expected, however, the recovery in the second quarter was modest.

China. While the overall Telecom market remains challenging we saw an improvement in our Telecom business in the China market that contributed to the double digit sequential revenue growth in Telecom for our second quarter of fiscal 2024. This improvement is being driven by new 400G C+L network deployments by all three primary China CSPs. Currently these deployments are driving improvement in our pump lasers, Telecom components and WSS product line where we enjoy market leading technology. We expect to benefit from these new deployments well into fiscal 2025 in these product lines. We also have strong traction in this market for our next generation Coherent Transmission components that enable 800G and 400G high performance applications. We expect these to ramp to significant volume in early fiscal 2025.

Second Quarter of Fiscal 2024. We saw sequential improvement in our Telecom revenue in the second quarter as we expected. Demand trends, however, remain subdued as reflected in a sequential decline in our orders in the quarter due to ongoing inventory digestion together with project delays related to cautious capital expenditures by certain CSPs. Telecom revenue sequentially increased by over 20% off of a low base in the first quarter. Telecom revenue was 38% below the year-ago level. Our Telecom backlog remains healthy, significant customer delivery push-out requests have stabilized, and we are moving forward with defined delivery schedules from the majority of our customer base.

Balance of Fiscal 2024. We continue to expect double-digit Telecom revenue growth for the second-half over the first-half of fiscal 2024 with a return to year-over-year growth recommencing in fiscal 2025 driven by customer inventory normalization, a rebound in China with the commencement of planned 400G C+L-band deployments for Telecom network upgrades, and revenue ramp of new product launches.

Robust Design and Qualification Activity. We have enjoyed robust design activity in response to multiple planned new projects, which points to a very strong long-term recovery.

A Market Leader. In Telecom, we are a vertically integrated market leader in several core businesses including our pump lasers, ROADMs, amplifiers, network monitoring, and WSS products along with our coherent transceivers and disaggregated solutions. We believe we are gaining share at many of our key customers with our current product set and our newer product platforms are seeing strong uptake in the industry.

Exposure to Fast Growth Segments. We are excited by our Telecom revenue growth outlook for fiscal 2025 and beyond as we are well positioned in key market segments and expect to benefit from the industry trend towards disaggregation, which benefits pluggable coherent transceivers and disaggregated systems, which are the fastest-growing segments of our Telecom market.

Enabled by Our Coherent Optical Modules. We are especially excited about the number and quality of customer design wins for our new 100G ZR and 400G ZR/ZR+ pluggable transceivers. The former is based on our own internally developed Steelerton DSP. We currently are qualified and beginning to ramp shipments of our 400G ZR/ZR+ transceivers and expect to commence ramping production and commercial shipments of our new 100G ZR transceivers in calendar 2024. In addition, we have announced our new 800GZR QSFP-DD coherent transceiver and will be shipping early samples in the first quarter of calendar 2024.

Enabled by Our Disaggregated Solutions. We are seeing increasing opportunities for disaggregated solutions at both traditional CSPs and Webscale companies with an increasing number of new design-wins. We are pleased with the reception webscalers and CSPs have given our disaggregated solutions offerings and are excited by the opportunity to expand our Serviced Addressable Market.

Automotive Vertical. For our silicon carbide business (formerly referred to as our Wide-Bandgap business) demand for our SiC substrates continues to exceed supply. The Mitsubishi Electric and DENSO Transactions have enhanced our confidence in our long-term revenue growth outlook for our silicon carbide business. We estimate the market for SiC power electronics for EVs will grow at roughly a 35% CAGR over the next five years.

Consumer Electronics Vertical. Our longer-term outlook for Consumer Electronics is driven by growth in breadth and depth of sensing adoption well beyond 3D sensing for smartphones. AI applications are currently driving the need for the data provided by advanced sensors that serve as the eyes and ears of AI/ML systems. In addition, AI’s emerging, powerful capabilities are underpinning new use cases to more effectively employ sensing functionality in a variety of markets and applications. This new market dynamic has triggered substantial activity to develop and deploy a variety of sensing solutions. These include health monitoring and biosensing, metaverse AR/VR hardware and wearables, automotive LiDAR and in-cabin sensing, and other emerging applications.

Market Position. We are excited by our strategic engagements across all of these applications, with the breadth and pace of our sensing design-in activities at record levels. A key competitive differentiator for this market is provided by our broad semiconductor laser platform of integrated sensing solutions that spans from 850 nm to 2400 nm and three semiconductor laser material platforms that complement our expertise in ICs, packaging and full solutions for a variety of applications. Notwithstanding a new market entrant, we are maintaining our overall market share leadership position in Consumer Electronics 3D sensing and rapidly expanding the offerings of our platform, customer partnerships and growth trajectory.

AR/VR/MR. During the second quarter, we continued to strengthen our strategic engagements, particularly in the AR/VR/MR and wearables market segments. In the preceding first quarter, we initiated volume shipments of a new product designed for a sensing application in VR. We are excited about recent new product announcements in the AR/VR/MR space. As this technology gradually evolves, is more widely adopted and integrates more advanced sensing features, we are well positioned to serve the market with differentiated solutions based on our opto-semiconductor and optics material platforms.

Life Sciences Vertical. Since the Coherent, Inc., acquisition, we have been showcasing our combined bioinstrumentation portfolio and integrated subsystem capabilities to some of the largest customers in this market. These customers have been excited about the integration of our broad portfolio of lasers with our optics, filters, and thermoelectric products to provide higher-level integrated solutions. The envelope of laser applications in therapeutics continues to expand and regulatory agencies worldwide continue to expand approvals. We are excited about our involvement in next generation instrumentation that is enabling disease research and detection, and leading the way to personalized medicine. We have a variety of laser products to address therapeutic applications, ranging from semiconductor lasers for dermatology applications to Excimer lasers for LASIK procedures.

Scientific Instrumentation Vertical. We have seen modest sequential growth in bookings and a modest slowdown in revenue for our Scientific Instrumentation Vertical. Research in Life Sciences (neuroscience, cell biology, and disease studies) as well as exotic spectroscopy of materials and complex organic molecules drive most of the research expenditures in lasers. Demand remains subdued, but stable, tracking global government funding of research.

$ Millions, except per share and percentage amounts (unaudited)

Revenues

Costs, Expenses & Other Expense (Income)

Cost of goods sold

Internal research and development

Selling, general and administrative

Restructuring charges (recoveries)

Interest expense

Other expense (income), net

Total Costs, Expenses, & Other Expense

Loss Before Income Taxes

Income Taxes

Net Loss

Net Loss Attributable to Noncontrolling Interests

Net Loss Attributable to Coherent Corp.

Less: Dividends on Preferred Stock

Net Loss Available to the Common Shareholders

Basic Loss Per Share

Diluted Loss Per Share

Average Shares Outstanding—Basic

Average Shares Outstanding—Diluted

$ Millions, except per share and percentage amounts (unaudited)

Revenues

Costs, Expenses & Other Expense (Income)

Cost of goods sold

Internal research and development

Selling, general and administrative

Restructuring charges

Interest expense

Other expense (income), net

Total Costs, Expenses, & Other Expense (Income)

Loss Before Income Taxes

Income Taxes

Net Loss

Net Loss Attributable to Noncontrolling Interests

Net Loss Attributable to Coherent Corp.

Less: Dividends on Preferred Stock

Net Loss Available to the Common Shareholders

Basic Loss Per Share

Diluted Loss Per Share

Average Shares Outstanding—Basic

Average Shares Outstanding—Diluted

$ Millions, except per share and percentage amounts (unaudited)

Assets

Current Assets

Cash and cash equivalents

Restricted cash, current

Accounts receivable

Inventories

Prepaid and refundable income taxes

Prepaid and other current assets

Total Current Assets

Property, plant & equipment, net

Goodwill

Other intangible assets, net

Deferred income taxes

Restricted cash, non-current

Other assets

Total Assets

Liabilities, Mezzanine Equity and Equity

Current Liabilities

Current portion of long-term debt

Accounts payable

Operating lease current liabilities

Accruals and other current liabilities

Total Current Liabilities

Long-term debt

Deferred income taxes

Operating lease liabilities

Other liabilities

Total Liabilities

Total Mezzanine Equity

Total Coherent Corp. Shareholders’ Equity

Noncontrolling interests

Total Equity

Total Liabilities, Mezzanine Equity and Equity

$ Millions, except per share and percentage amounts (unaudited)

Cash Flows from Operating Activities

Net cash provided by operating activities

Cash Flows from Investing Activities

Additions to property, plant & equipment

Purchases of businesses, net of cash acquired

Other investing activities

Net cash used in investing activities

Cash Flows from Financing Activities

Contributions from noncontrolling interest holders

Proceeds from borrowings of Term A Facility

Proceeds from borrowings of Term B Facility

Proceeds from borrowings of Revolving Credit Facility

Proceeds from issuance of Series B preferred shares

Equity issuance costs

Payments on existing debt

Payments on borrowings under Revolving Credit Facility

Debt issuance costs

Equity issuance costs

Proceeds from exercises of stock options

Payment on convertible notes

Payments in satisfaction of employees’ minimum tax obligations

Other financing activities

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase in cash and cash equivalents

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

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

$ Millions, except percentage amounts (unaudited)

Revenues:

Networking

Materials

Lasers

Consolidated

GAAP Operating Income (Loss):

Networking

Materials

Lasers

Consolidated

Non-GAAP Operating Income:

Networking

Materials

Lasers

Consolidated

GAAP Operating Margin (Loss):

Networking

Materials

Lasers

Consolidated

Non-GAAP Operating Margin:

Networking

Materials

Lasers

Consolidated

Amounts may not recalculate due to rounding.

$ Millions (unaudited)

Networking GAAP Operating Income (Loss)

Share-based compensation

Amortization of acquired intangibles

Restructuring recoveries₍₁₎

Integration, site consolidation and other₍₂₎

Non-GAAP Networking Operating Income

Materials GAAP Operating Income (Loss)

Share-based compensation

Amortization of acquired intangibles

Restructuring charges₍₁₎

Integration, site consolidation and other₍₂₎

Start-up costs₍₄₎

Non-GAAP Materials Operating Income

Lasers GAAP Operating Loss

Share-based compensation

Amortization of acquired intangibles

Restructuring charges₍₁₎

Integration, site consolidation and other₍₂₎

Transaction fees and financing₍₃₎

Fair value adjustment on acquired inventory

Non-GAAP Lasers Operating Income

Total GAAP Operating Income (Loss)

Non-GAAP Operating Income

Amounts may not recalculate due to rounding.

Restructuring charges (recoveries) include severance, non-cash impairment charges for production assets and improvements on leased facilities and other costs related to the 2023 Restructuring Plan.

Integration, site consolidation and other includes one-time retention and severance payments, expenses not included in restructuring charges related to site closures as well as other integration costs related to the Coherent transaction.

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

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

$ Millions, except per share amounts (unaudited)

Gross profit on GAAP basis

Share-based compensation

Amortization of acquired intangibles

Fair value adjustment on acquired inventory

Integration, site consolidation and other₍₂₎

Gross profit on non-GAAP basis

Internal research and development on GAAP basis

Share-based compensation

Amortization of acquired intangibles

Integration, site consolidation and other₍₂₎

Start-up costs₍₄₎

Internal research and development on non-GAAP basis

Selling, general and administrative on GAAP basis

Share-based compensation

Amortization of acquired intangibles

Integration, site consolidation and other₍₂₎

Transaction fees and financing₍₃₎

Selling, general and administrative on non-GAAP basis

Restructuring charges (recoveries) on GAAP basis

Restructuring charges (recoveries)₍₁₎

Restructuring charges on non-GAAP basis

Operating income (loss) on GAAP basis

Share-based compensation

Amortization of acquired intangibles

Fair value adjustment on acquired inventory

Restructuring charges (recoveries)₍₁₎

Integration, site consolidation and other₍₂₎

Transaction fees and financing₍₃₎

Start-up costs₍₄₎

Operating income on non-GAAP basis

$ Millions, except per share amounts (unaudited)

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

Foreign currency exchange gains (losses), net

Transaction fees and financing₍₃₎

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

Income taxes on GAAP basis

Tax impact of non-GAAP measures

Income taxes on non-GAAP basis

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

Share-based compensation

Amortization of acquired intangibles

Fair value adjustment on acquired inventory

Foreign currency exchange (gains) losses

Restructuring charges (recoveries)₍₁₎

Integration, site consolidation and other₍₂₎

Transaction fees and financing₍₃₎

Start-up costs₍₄₎

Tax impact of non-GAAP measures

Net earnings attributable to Coherent Corp. on non-GAAP basis

Per share data:

Net loss on GAAP basis

Basic Loss Per Share

Diluted Loss Per Share