II-VI Incorporated

Ladies and gentlemen, thank you for standing by and welcome to the 2-6 Incorporated Fiscal 21 Second Quarter Results Conference 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 will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Mary Jane Raymond, Chief Financial Officer. Thank you. Please go ahead.

Thank you, Raquel, and good morning. This is Mary Jane Raymond. I'm the Chief Financial Officer here at 2-6 Incorporated. Welcome to our earnings call today for the second quarter of fiscal year 2021. With me today on the call are Dr. Chuck Matera, our Chief Executive Officer, and Dr. Giovanni Barbarossa, our Chief Strategy Officer and the President of the Compound Semiconductor Segment. This call is being recorded on Tuesday, February 9th, 2021. Our press release and our updated investor presentation are available on the Investor Relations tab of the website, ii-vi.com. Just as a reminder, any forward-looking statements we may make Today, during this teleconference, are given in the context of today only. They contain risk factors that are subject to change, possibly materially. We do not undertake any obligation to update these statements to reflect events subsequent to today, except as required by law. A list of our risk factors can be found in our Form 10-K for the year ended June 30, 2020, filed in August. We will also present some non-GAAP measures for which the reconciliations to GAAP are found at the end of each document that includes those measures, such as the press release or the investor presentation. With that, let me turn the call over to Dr. Chuck Matera. Chuck?

Thank you, Mary Jane. Good morning, everyone, and thank you for joining us today. I am pleased to report that halfway through our fiscal year 2021, we are on track to deliver a strong year. Our revenue for Q2 was $787 million. It exceeded the top end of our guidance of $780 million and grew 18 percent over Q2 of fiscal year 2020. Among the many highlights this quarter were a book-to-bill ratio of 1.17 for the quarter leading to a 1.12 book-to-bill ratio on a rolling 12-month basis. We continued to execute on our ramp of 3D sensing VIXLS and delivered against an exceptionally strong demand, bringing shipments for the consumer and market to a record high of 15 percent of revenues. In addition, we delivered excellent growth in life sciences, experienced continued recovery in industrial, and saw continued strength in communications, aerospace and defense, the semiconductor capital equipment market, and in silicon carbide. Our Q2 guidance contemplated a very strong 3D sensing quarter, and we delivered on that. Our year-over-year growth in the consumer and market of over 200%, was largely driven by 3D sensing, and again this quarter, we shipped Vixel arrays in production volumes for front-facing, world-facing, and emerging applications, as Giovanni will describe later. Communications grew 5% over the prior year, including for both Datacom and Telecom. Life sciences gained significant momentum. It grew almost 50 percent sequentially and more than 80 percent compared to Q2 of last year as our products are vital components to the COVID-19 testing ecosystem. Industrial applications grew 10 percent sequentially across our product lines as we continue to see a brisk recovery driven by increased demand for automotive production. Turning now to a focus on operational excellence, We are well ahead of our plan to achieve our three-year $150 million total synergy target set for the finish of our acquisition in September of 2019. Our run rate synergies already exceed $100 million as a result of our integration work over the past 15 months. We are now on track to achieve our $150 million total synergy target in 24 months We're 12 months ahead of schedule, and we are now increasing our three-year total synergy target to 200 million. Our faster delivery of our synergy plan is contributing to our strengthening margins and our strong cash flow and reflects our ability to execute and integrate large-scale acquisitions. Our cash generation in Q2 was an all-time record for the company, amounting to $221 million of cash flow from operations and $176 million of free cash flow. From the company's inception 50 years ago, we have strategically focused on identifying and capitalizing on irreversible megatrends from our core strength in materials and optoelectronic devices. We have been successful in our organic and inorganic execution and growing by leveraging these trends. The application of our strategy and 2-6 values, our senior leadership team, and all of our employees are among the reasons we've been able to make this much progress during an unprecedented macro environment in the first half of fiscal year 2021. We look forward to the exciting opportunities ahead of us in the second half of fiscal year 2021 and for many years to come. With that, I will turn it over to our Chief Strategy Officer and President of the Compound Semiconductor Segment, Dr. Giovanni Barbarossa, to review our individual businesses while highlighting our product and technology leadership. Giovanni?