COHERENT CORP.

Coherent Corp. is a vertically integrated manufacturing company that develops, manufactures, and markets lasers, transceivers, and other optical and optoelectronic devices, modules, and systems, as well as engineered materials, for use in the communications, industrial, instrumentation and electronics markets. The company operates globally with research and development, manufacturing, and sales facilities worldwide, including principal U.S. production and R&D operations in California, Connecticut, Delaware, New Jersey, Pennsylvania, and Texas, and principal non-U.S. production and R&D operations in China, Finland, Germany, Malaysia, the Philippines, Singapore, South Korea, Sweden, Switzerland, the United Kingdom, and Vietnam. Coherent competes on its core competencies from materials to systems, differentiated products and services, and the sustainability of its competitive advantages, using its intellectual property, ability to scale, product quality, on-time delivery, and technical support, and believes its vertical integration, manufacturing facilities and equipment, experienced technical and manufacturing employees, and worldwide marketing and distribution channels provide competitive advantages. The company had two customers who each contributed more than 10% of revenue during fiscal 2025.

Coherent competes globally and is a global leader in many of its product families. The company competes, in part, on its core competencies from materials to systems, its differentiated products and services, and the sustainability of its competitive advantages, and also competes by using its intellectual property, ability to scale, product quality, on-time delivery, and technical support. Coherent believes that its vertical integration, manufacturing facilities and equipment, experienced technical and manufacturing employees, and worldwide marketing and distribution channels provide it with competitive advantages. The company had two customers who each contributed more than 10% of revenue during fiscal 2025.

Coherent generates nearly all of its revenues, earnings, and cash flows from developing, manufacturing, and marketing a wide range of products and services for its end markets. The company generates revenue through a direct sales force and through representatives and distributors around the world, with a market strategy focused on understanding customer requirements and building market awareness and acceptance of products and services. For fiscal year 2025, the company's organizational structure was aligned into three reporting segments: Networking, Materials, and Lasers, and revenues are reported in the following markets: communications, industrial, instrumentation and electronics.

The Networking segment leverages Coherent's compound semiconductor technology platforms and deep knowledge of end-user applications for its key end markets to deliver differentiated components, modules, and subsystems, including transceivers, systems, subsystems, modules, components, optics, and semiconductor devices for datacenter and communications applications. For fiscal year 2025, Networking revenues were $3,421 million ¹, compared to $2,296 million ² in fiscal 2024, and segment profit was $644 million ³, compared to $354 million ⁴ in fiscal 2024. The Materials segment is a market leader in engineered materials and optoelectronic devices, such as those based on ZnSe, ZnS, GaAs, InP, GaSb, and SiC, including engineered materials, laser optics, thermoelectric components, advanced ceramic and metal-matrix composite materials and products, VCSELs, EELs, pump lasers, high-power lasers for materials processing, and ICs. For fiscal year 2025, Materials revenues were $954 million ⁵, compared to $1,017 million ⁶ in fiscal 2024, and segment profit was $355 million ⁷, compared to $297 million ⁸ in fiscal 2024. The Lasers segment's lasers and optics products serve industrial customers in both semiconductor and display capital equipment and precision manufacturing, and instrumentation customers in life sciences and scientific instrumentation, including excimer lasers, solid-state lasers, CO2 lasers, and laser systems for a variety of industrial applications. For fiscal year 2025, Lasers revenues were $1,435 million ⁹, compared to $1,395 million ¹⁰ in fiscal 2024, and segment profit was $317 million ¹¹, compared to $207 million ¹² in fiscal 2024.

Coherent's product portfolio spans three reporting segments. The Networking segment includes transceivers, systems, subsystems, modules, components, optics, and semiconductor devices for datacenter and communications applications, and for fiscal 2025 generated revenues of $3,421 million ¹³ and segment profit of $644 million ¹⁴. The Materials segment includes engineered materials, laser optics, thermoelectric components, advanced ceramic and metal-matrix composite materials and products, VCSELs, EELs, pump lasers, high-power lasers for materials processing, and ICs, and for fiscal 2025 generated revenues of $954 million ¹⁵ and segment profit of $355 million ¹⁶. The Lasers segment includes excimer lasers, solid-state lasers, CO2 lasers, and laser systems for a variety of industrial applications, including semiconductor capital equipment, display manufacturing, precision manufacturing, and scientific research, and for fiscal 2025 generated revenues of $1,435 million ¹⁷ and segment profit of $317 million ¹⁸.

During fiscal 2025, Coherent undertook significant operational developments. In May 2023, the Board of Directors approved a restructuring plan (the 2023 Plan) which includes site consolidations, facilities movements and closures, and the relocation and requalification of certain manufacturing facilities, and as a result of the 2023 Plan, the company has incurred approximately $200 million ¹⁹ of pre-tax charges in fiscal years 2023 to 2025. Commencing in the quarter ended March 31, 2025, management approved a plan to take a number of restructuring actions, including site consolidations, facilities moves and closures, workforce reductions, contract terminations and certain other associated cost reductions (the 2025 Plan). In fiscal 2025, the 2023 Plan resulted in charges of $53 million ²⁰, primarily for impairment losses associated with the sale of the Newton Aycliffe business, impairment of right-of-use assets, employee termination costs, site move costs and accelerated depreciation. In fiscal 2025, the 2025 Plan resulted in $107 million ²¹ of charges primarily for the write-off of property and equipment and ROU assets, employee and contract termination costs. In the fourth quarter of fiscal 2025, management entered into non-binding agreements to sell several entities and recorded non-cash impairment charges of $85 million ²² to Impairment of assets held-for-sale. On December 4, 2023, Silicon Carbide LLC, a Company subsidiary, received $1.0 billion ²³ cash in exchange for 25% of the equity of that entity. During fiscal 2025, the Company made payments of $433 million ²⁴ for the Term Facilities, including voluntary prepayments of $400 million ²⁵. Dividends of $11 million ²⁶ on the Series B-1 Convertible Preferred Stock were paid in cash in the fourth quarter of fiscal 2025.

For fiscal year 2025, total revenues were $5,810 million ²⁷, compared to $4,708 million ²⁸ in fiscal 2024, an increase of 23%. Gross margin was $2,043 million ²⁹, or 35% ³⁰ of total revenues, compared to $1,456 million ³¹, or 31% ³² of total revenues in fiscal 2024, an increase of 424 basis points. Net earnings attributable to Coherent Corp. were $49 million ³³, compared to a net loss of $156 million ³⁴ in fiscal 2024. Diluted loss per share was $(0.52) ³⁵, compared to $(1.84) ³⁶ in the prior year. Net cash provided by operating activities was $634 million ³⁷, compared to $546 million ³⁸ in fiscal 2024.

A key growth vector is the significant growth in AI and ML in the datacom market vertical, where Coherent has a complete portfolio of transceivers matched to the requirements set by AI and ML, and has made strategic investments that give it a unique level of vertical integration, including in-house laser design and manufacturing capability for GaAs-based VCSELs, InP-based DMLs, EMLs, and CW lasers, with multiple 6-inch GaAs VCSEL fabs in the U.S. and Europe and multiple InP fabs in the U.S. and Europe, moving to 6-inch wafer capability. The company is also developing the optical circuit switch (OCS) product family for AI/ML and hyperscale datacenters based on its digital liquid-crystal technology. Another growth vector is in Silicon Carbide substrates for power electronics that improve the energy efficiency of electric and hybrid-electric vehicles, where Coherent is a global leader, and the company received $1.0 billion ³⁹ in cash from Denso Corporation and Mitsubishi Electric Corporation in exchange for 25% of the equity of Silicon Carbide LLC, which funds will continue to be used to fund future capital expansion in the silicon carbide business.

The filing does not contain a dedicated section on margin and cost outlook with specific targets.

The filing does not contain a dedicated section on operational outlook with specific targets.

R&D expenditures were $582 million ⁴⁰ for fiscal 2025, compared to $479 million ⁴¹ for fiscal 2024. Additions to property, plant and equipment were $441 million ⁴² for fiscal 2025, compared to $347 million ⁴³ for fiscal 2024. The Company did not repurchase any shares of its common stock during the fiscal year ended June 30, 2025, and no stock repurchase program was in effect during the period. The Company historically has not paid cash dividends on its common stock and does not presently anticipate paying cash dividends on its common stock in the future.

The filing does not contain a dedicated section on headwinds and constraints.

The filing does not contain a second dedicated section on headwinds and constraints.

A material risk is the company's dependence on a small number of large customers, with two customers each contributing more than 10% of total revenues in fiscal 2025 ⁴⁴, and any loss, cancellation, reduction, or delay in purchases by these customers could harm the business. Another significant risk is the substantial amount of debt, with approximately $3.7 billion ⁴⁵ of outstanding indebtedness as of June 30, 2025, which could adversely affect the business and limit flexibility. The company faces risks from government actions and regulations, including export restrictions and tariffs, and specifically notes that in January 2025, it received an inquiry from the Bureau of Industry and Security concerning past product sales to Huawei, has stopped shipping products to Huawei, and may be required to incur significant penalties and/or costs ⁴⁶. Additionally, the company's business is subject to cyclical market factors, and the rapidly evolving artificial intelligence industry may decrease demand for services provided by AI datacenters that are the company's customers ⁴⁷. The company also faces risks related to its restructuring plans, having incurred approximately $200 million ⁴⁸ of pre-tax charges in fiscal years 2023 to 2025 under the 2023 Plan, and may encounter challenges in executing these efforts.

Management's message emphasizes that throughout fiscal 2025, the company experienced stronger demand in its Communications market, driven by the increase in the number of hyperscale and other cloud customers building AI datacenters and in the number and size of their AI datacenter buildouts, which drove demand for datacenter transceivers, as well as strong demand for new ZR/ZR+ transceiver products and growing demand for traditional telecom transport products. Management also highlighted that within the Industrial market, the company was able to grow its industrial lasers products and services revenue in the face of relatively weak overall industrial end demand, a result of focus on higher demand applications including display and semiconductor capital equipment. The strategic priorities emphasized include the restructuring plans (the 2023 Plan and the 2025 Plan) intended to realign the cost structure as part of a transformation to a simpler, more streamlined, resilient and sustainable business model, and the ongoing strategic review of the business. Management also noted the expectation that restructuring actions under the 2025 Plan will be substantially completed by the end of fiscal 2026.