Good day, and thank you for standing by. Welcome to the Coherent Corp.'s October 10, 2023, Silicon Carbide update call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I want to hand the conference over to your speaker today, Paul Silverstein. Please go ahead. Thank you, Victor, and good afternoon, everyone. Today we're meeting on the call to discuss our announcement of investments in our Silicon Carbide business, our Coherent Chair and CEO, Dr. Chuck Mattera, and President Bob Bashaw. They will be joined for the Q&A portion of the call by Interim Chief Financial Officer, Richard Martucci, and Sohail Khan, Executive Vice President, Wide Bandgap Electronics Technologies and the leader of our Silicon Carbide business, as well as Mike Kuder Associate General Counsel. Before I turn the call over to Chuck for his opening remarks, I would like to remind everyone that we will refer to forward-looking statements, including all statements the company will make about its future financial and operating performance, growth strategy, and market outlook, that actual results may differ materially from those contemplated by these forward-looking statements. Risk factors that can cause actual results and trends to differ materially are set forth in the annual and quarterly report as filed with the SEC. Coherent assumes no obligation to update any forward-looking statements, which speak only as of their respective dates. Today's conference call will be available for webcast replay in the investor relations section of our website for one year. With that, it's my pleasure to turn the call over to Chuck. Chuck, please go ahead. Thank you, Paul. Earlier this year, we announced that we had initiated a comprehensive review of strategic alternatives for our Silicon Carbide business. This business includes our Silicon Carbide substrate and epitaxial wafer operations, from growth to finishing, our ion implantation devices and modules. We conducted a thorough review, considering a range of strategic alternatives that would be in the best interest of Coherent and our shareholders. We were excited to announce the formation of a Silicon Carbide subsidiary, which will receive an aggregate $1 billion investment from DENSO and Mitsubishi Electric, two leading Japanese Tier 1 automotive and industrial infrastructure suppliers. DENSO and Mitsubishi Electric will each invest $500 million into the newly formed Silicon Carbide subsidiary of Coherent in exchange for a 12.5% non-controlling ownership interest in the business. Coherent will continue to manage and will retain a 75% interest in this subsidiary. The transaction values the Silicon Carbide business at $3 billion on a pre-money basis, or approximately 10 times projected revenues for the fiscal year ending June 30, 2024. A great value creation for Coherent's shareholders. Moreover, Coherent will deepen its partnerships with DENSO and Mitsubishi Electric by entering into long-term supply agreements that support their demand for 150-millimeter and 200-millimeter substrates and epitaxial wafers. Coherent has demonstrated for more than two decades leadership in Silicon Carbide materials, and in recent years, we have aggressively invested to scale our manufacturing of 150-millimeter and 200-millimeter substrates to address this underserved market. DENSO and Mitsubishi Electric recognize the value Coherent has created and the unique capabilities in our Silicon Carbide business, and these transactions will enhance our position and future growth prospects in this rapidly expanding market, in particular, in power semiconductors for electric vehicles and industrial infrastructure. Over the past two decades, we have invested in product and technology leadership at scale and became a leader. The $1 billion investment from our strategic partners will accelerate our capital investment plans in the coming years. This investment will fund the manufacturing expansion of our substrates and epitaxial wafers and accelerate our vertical integration strategy, spanning from substrates to modules. The investment, in combination with the concurrent supply agreements, enhances our position in the Silicon Carbide market. We continue to pursue vertical integration per our strategic plan to offer devices and modules for the electric vehicle and industrial infrastructure markets. These investments will result in greater financial and operational flexibility for Coherent as we execute on our capital allocation priorities, which include debt repayment and investment in non-silicon carbide businesses. These transactions are evidence of our focus on building long-term shareholder value and present a unique opportunity to further accelerate our growth. With that, I will turn it over to Bob to discuss the details of this exciting development. Bob? Yeah, thank you, Chuck. ...As Chuck mentioned, these transactions will provide $1 billion of cash into our newly created Silicon Carbide business to fund our growth plans. Prior to closing, we will separate out the Silicon Carbide business into a newly formed subsidiary. Coherent will retain a 75% economic interest in the independent subsidiary, along with management and operating control. DENSO and Mitsubishi Electric will each own a 12.5% economic interest in the business at closing in exchange for their respective $500 million investments. The transaction is expected to close in the first quarter of calendar year 2024. We will provide details regarding this subsidiary following the closing in the ordinary course. The investments in LLC agreements contain customary rights and provisions and permit Coherent to raise up to $500 million in additional investments in the six-month period following the close of the transaction. We intend to continue conversations with parties regarding further investment and supply agreements. Coherent is excited to strengthen our partnership with DENSO and Mitsubishi Electric to enhance the outlook for our Silicon Carbide business. Both partners are leading companies with strong global brands, distribution, and customer relationships. DENSO enjoys an extremely strong position as a tier one automotive supplier with leading capabilities in electrification and powertrain systems and in-vehicle power semiconductors for the automotive market. Mitsubishi Electric is a pioneer in Silicon Carbide power devices with a leadership position in Silicon Carbide power modules for high-speed trains, high-voltage industrial applications, and home appliances. The company made history by launching the world's first Silicon Carbide modules for air conditioners in 2010, and became the first supplier of a full Silicon Carbide power module for the Shinkansen high-speed trains in 2015, and recently indicated that it plans to invest approximately JPY 100 billion to build a new 200 millimeter Silicon Carbide wafer fab in Kumamoto Prefecture, Japan, in 2026. We are excited to partner with DENSO and Mitsubishi Electric as investors and customers of our Silicon Carbide business. We are confident our business will enjoy above industry level growth in the rapidly expanding silicon carbide market for years to come. Now, let me turn the call back over to Paul. Thank you, Chuck and Bob. Before moving to Q&A, in our press release this morning, Coherent revised its first quarter fiscal 2024 revenue guidance to $1.050 billion-$1.055 billion, from previously $1.0 billion-$1.1 billion. We will now open the call for questions. As a reminder, the purpose of this call is to discuss our Silicon Carbide announcements and business. Accordingly, we will not be responding to questions regarding our operating results on this call. Kindly limit yourself to one question and one follow-up. Victor? Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Once again, please limit yourself to one question. One moment for our first question. Our first question comes from the line of Samik Chatterjee from JP Morgan. Your line is open. Hi, thanks. This is Joe Cardoso on for Samik Chatterjee. You know, my first question, you know, I just wanted to clarify around one of the points that it sounded like you mentioned, particularly around the partnership and not expecting it to interfere with the opportunity for Coherent to, or the Silicon Carbide business to eventually vertically integrate from wafer to power device. Can you just confirm that there's no provisions in the deal with DENSO and Mitsubishi that would essentially halt that opportunity or put that opportunity on pause relative to eventually vertically integrating and moving to power devices? And then I just have a quick follow-up. Yeah, there are no such provisions in the agreement. Okay. And then the quick follow-up, can you just outline the timeline around the $1 billion investment? Are you guys expecting that to be all upfront once the deal closes, or is it over a longer time period? Thank you. Yep. Yes, the way this, this transaction is structured, the investment will come in, in full at closing. Got it. Thanks for the color, guys. Appreciate it. Yep, thank you. One moment for our next question. And our next question comes from the line of Ruben Roy from Stifel. Your line is open. Thank you for taking my question. Chuck or Bob, my question, I guess, is very similar to the last one, but I just wanted to make sure I understood this. So in terms of the GE relationship and the technology access, that remains within Coherent, or is there some access to that for device technology? Just wanted to make sure I understood what you just said on the devices. Yeah. Thank you for your question. No, the GE technology will be for the benefit of Silicon Carbide LLC exactly as it is today. So it's the technology that we'll be using to grow the business. Okay. Thank you for that. And then on the projected revenues for 2024, at this point, can you talk a little bit about how, you know, kind of you're getting to those numbers in terms of- ... EV versus, you know, industrial power devices versus RF or any other detail around the, revenue projection would be helpful. Ruben, this is Chuck. We're not gonna provide any more color than that, high level view for 2024. Thank you. One moment for our next question. Our next question comes from the line of Simon Leopold from Raymond James. Your line is open. Great, thanks for taking the question. I wanna see if maybe you could hash out a little bit of what's in it for your JV partners, DENSO and Mitsubishi. In other words, I'm trying to get an understanding of whether or not there's any kind of most favored nation clause or discounting on their purchases of wafers beyond sort of the equity ownership. What are their benefits? And then I've got a follow-up. Sure, this is Bob. I'll be happy to take the call for the discussion. We are not commenting on our supply agreements with our partners at this time. But it's needless to say, we think the business is a very exciting business. The investment will provide a lot of opportunity to grow, and our partners feel the same. Great. And just as a follow-up, with the cash infusion and the shift of the CapEx burden to the JV, I'm just wondering if you could give us some update or your thoughts on your plans to delever Coherent's balance sheet? Thank you. Rich? Yes. Hello, this is Rich Martucci. At the present time, we expect the transaction basically to be accretive in year one. You know, but at this time, you know, we reserve the right to take the additional capital that we do have to fund either our debt and/or priority capital with the non Silicon Carbide businesses. Thanks, Rich. Thank you. One moment for our next question. Our next question comes from the line of Jed Dorsheimer from William Blair. Your line is open. Jed Dorsheimer from William Blair, your line is open. You may be on mute. Oh, sorry, I was on mute. I did that. So anyways, congrats on the deal. I guess just a follow-up to the previous. So are you able to use the $1 billion? I just wanna clarify this point. The $1 billion of investment into the JV, is Coherent able to use that, as you see fit, or is that limited to investment in the JV, and therefore, you're saying that the $175 million of CapEx that you were spending last year on SiC is what you would be able to use for the delevering? Yeah. So the $1 billion that we're receiving from Mitsubishi Electric and DENSO will be used strictly for the purposes of the subsidiary's operations. So the way you're thinking about it is exactly right. Okay. Those dollars we're receiving will be, will be used to invest in that business, and it will free up our capital. Perfect. As my follow-up, once the transaction closes, I'm just curious, the mechanics of disclosure associated with this, will you be breaking down, you know, what is materials versus devices or 6H versus 4H? Or is this still gonna remain, undisclosed? Mike? Thank you, Chuck. This is Mike Kuder. At this time, we're still planning to report as we currently are, and if there are updates in the future, those will, those will be provided in the future. Thank you. One moment for our next question. Our next question comes from the line of Meta Marshall from Morgan Stanley. Your line is open. Great. Just one question for me. You mentioned that you can raise an additional $500 million, you know, six months after the close. I guess I just wonder, given that you guys just ran a pretty fulsome process, I would expect right now, you know, why not just introduce kind of more partners upfront or announce more partners upfront, or kind of what is the thought behind kind of leaving that optionality open, just given kind of the full process run currently? That's it for me. Thanks. Sure. I'm happy to take the question, Chuck. Yeah, we did run a full process, and in fact, it was a really robust process. So you're exactly right. We felt at this time that the partners that we have are fantastic partners, both great Japanese companies, and the amount of the investment at this time is the right amount on the right terms. So we will remain open and opportunistic to fill out the round, but we feel really comfortable with the amount we raised, and we've decided to close on these terms with these partners at this time. Thank you. One moment for our next question. Our next question will come from the line of Christopher Rolland from Susquehanna. Your line is open. Hey, guys, this is Matt Myers on for Chris. Congrats on the deal. Just wanted to ask how this is gonna change your Silicon Carbide CapEx plans. I know you guys have talked about 40%-50% of your CapEx going to Silicon Carbide to expand capacity. Are you gonna be planning to invest this amount into some other part of the business, or should we think about this as not being a part of your CapEx anymore? ... Yeah, sure. This is Bob. I'll take the question. We intend to invest in the material side of the business really in two ways. One, to continue to develop our product and process development, and two, to expand capacity. But we also intend to continue on our plan with respect to Silicon Carbide devices and modules. So we will move a little bit faster on process and product development and capacity for the material side, and we'll stick with the plan on devices and modules. Got it. Another quick follow-up. How much of your capacity do you expect to be dedicated to these two customers? We're not gonna comment on that at this time. Got it. Thanks. One moment for our next question. Our next question comes from the line of Ananda Baruah from Loop Capital. Your line is open. Yeah, good afternoon, guys. Thanks for taking the question. And, yeah, congrats on this. A lot of exciting stuff here. I—the question for me is, is the intent or could the intent be over time to take the business public? Or maybe, you know, am I reading too much into the entity structure? Yeah, so this is Bob. I'm happy to take the question. The structure allows us lots of flexibility. So, I would say that all the opportunities of the future of this type of business are available to us, and, we're gonna develop the business, invest at the appropriate levels and see what comes. Okay, excellent. And then I jumped on a moment or two after the call started. I missed the revenue guidance you guys provided. Would you mind just repeating it just quickly? That'd be great. Yeah, and on its $1.050 billion-$1.055 billion. Oh, and was there... Paul, thanks for that. Was there any, Silicon Carbide guidance or, or no as well? Mm-mm. Okay, guys. Thanks a lot. Appreciate it. One moment for our next question. Our next question comes from the line of Mark Miller from The Benchmark Company. Your line is open. I'd like to add my congratulations to the for the deal. Just wondering about pricing. How would you handle if the price of in terms of your new partners, how would you handle the price if the pricing and range of if Silicon Carbide prices really started to escalate? Yeah, as we've said, we're not gonna comment on the terms of the supply agreements with these partners. Thank you. One moment. Thank you, Mark. One moment for our next question. Our next question comes from the line of Tom O'Malley from Barclays. Your line is open. Hey, guys. Thanks for taking my question. I just wanted a clarification. Chuck, earlier you said that the acquisition was for 10x. Was it fiscal year 2024 numbers, or was that pre or post money? Can you just clarify that comment? The comment operated on the $3 billion pre-money valuation, 10 x- Okay ... that for fiscal year, fiscal year 2024 time. Helpful. And then in terms of capacity, you guys are looking to expand capacity today, and obviously, this is gonna help you guys go a long way in doing such. Could you talk about was there any decision to go with these two, in terms of the JV versus others? Was there any strategic rationale that you guys didn't lay out in the press release that you'd like to speak to as to why these two made sense versus others? Thank you. Well, well, sure. First of all, these two partners are great companies that we know well. And so from a strategic point of view, the relationship that we have from a customer-supplier point of view is very good. And we had really great engagement with them, and the terms of the deal were just super. So we think that the opportunity to work with these partners in the future is a very good opportunity for us in the future. And really, there's no more or no less than that. Yeah, I would say that I would add, Tom, I, I'm excited about it because it brings us right to the very end of the market. Many of our customers are epitaxial wafer makers. These are people who are building systems, and to have the opportunity to have them as partners and to help drive us to new levels is super exciting for us. Super exciting. Great. Congrats on the deal, guys. Thank you. One moment for our next question. Our next question will come from the line of Jim Ricchiuti from Needham. Your line is open. Hi, thank you. So I know Mitsubishi has been a customer of Coherent for many years. I'm just wondering, and you may have given some of this background, but in terms of DENSO, how long have you been working with them, and how would you characterize the significance of the sales that you've been seeing from DENSO in this area? Okay, thanks for your question, Jim. I'll ask Sohail to take it. Hi, Jim, that both Mitsubishi and DENSO are existing customers. Mitsubishi has been a longer than the other, but also with DENSO, we have been engaged both directly and indirectly for many years. Okay, and the next question I had is just follow-up. I'm wondering if you can say how this announcement potentially changes your CapEx plans for the non-Silicon Carbide business looking out beyond fiscal 2024, if there's any areas that you might highlight for us? Yeah, we're not gonna talk about FY 2025, and going forward. Jim, I think Rich's comments earlier stand, and our prepared comments stand as well. This provides us with both operational and financial flexibility to be able to balance our capital allocation priorities, including debt repayment and investment in growth opportunities, of which we still maintain many, not only in the Silicon Carbide business, but in the rest of the company. Got it. Thanks, Chuck. Congratulations. Thank you, Jim. Thank you. With that, I would like to turn the call back over to our speakers for any closing remarks. Thank you, Victor. I'd like to thank everyone for joining us on this call. Please join us on our fiscal first quarter earnings call, which will take place on November 7th at 8:00 A.M. EST. Thank you again. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.