II-VI Incorporated

good day thank you for standing by and welcome to two six incorporated physical year 22 first quarter earnings 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 that session you will need to press star 1 on your telephone keypad if you require any further assistance please press star zero. Thank you. I would now like to hand the conference over to your speaker today, Ms. Mary Jane Raymond, Chief Financial Officer. The floor is yours.

Thank you, Alex, and good morning. I'm Mary Jane Raymond, the Chief Financial Officer here at 2-6 Incorporated. Welcome to our earnings call today for the first quarter of fiscal year 2022. 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, November 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, our remarks today may contain forward-looking statements. These remarks are given in the context of today only. They are subject to various risk factors and 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 known material risk factors can be found in our Form 10-K for the year ended June 30th, 2021, together with our subsequent filings with the SEC. Our remarks today do not constitute an offer to sell, nor do they constitute a solicitation of an offer to buy any securities. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the United States Securities Act of 1933 as amended. Finally, with respect to today's call, 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.

Thank you, Mary Jane. Good morning, afternoon, and evening to all of our stakeholders from around the world, including our equity and debt investors, our dedicated employees, and our valued customers and suppliers. Fiscal year 2022 is off to a very strong start. Our backlog increased sequentially from $1.25 billion to $1.4 billion. Our revenue of $795 million represents very strong growth at 9% compared to Q1 FY21 and was squarely inside our revenue guidance range despite continuing supply chain headwinds which affected our Rotem business the most. The shipments of those affected products have been rescheduled to subsequent quarters, and we are working to accelerate our recovery plans. Part of our action planning is to expand our investments in analog and digital ICs to improve the resiliency of our supply chains. This will also help to maintain our market and technology leadership in the next generations of high-speed Datacom transceivers, while lowering our purchase material cost and establishing new component OEM market channels for us as well. Our gross margin for the quarter was 40%, up year-over-year and sequentially. This was achieved through the launch of new products with higher margins, improved productivity and ongoing efficiency, and it benefited from our sustained focus on the health and safety of our people first. These improvements are due to the well-synchronized efforts of our employees with key counterparts at customers and suppliers taking the meaning of partnership to new levels. We are experiencing sustained and sustainable demand. In Q1, revenue grew from contributions from virtually all of our end markets and leadership in the consumer market, where we saw the revenues increase 30% sequentially and 7% year-over-year. Two important indicators of the strength of our organic growth are our fourth consecutive quarter of record backlog and the sustained growth we are seeing across our markets. I believe one of our most important core strengths is the unique diversity of the market segments in which we have chosen to operate. and communications, our largest market today, we saw further evidence of a super cycle well underway for 200G and 400G datacom transceivers, 400G and 800G coherent telecom transceivers, and acceleration of our customer configured open line and optical transport solutions. Our results this quarter were achieved through a relentless amount of hard work and preparation that accompanies the sustained intensity of a winning team. We made adjustments in the face of market realities as we continued to balance our raw materials cost increases against product price increases with longer term and higher share commitments. Taken all together, these extraordinary efforts enabled us to deliver 87 cents non-GAAP EPS at the high end of our EPS guidance range. Turning now to the future, I believe Q2 should be another strong quarter for us, and as you can tell from our guidance, we are still planning on growing sequentially in the quarter. I am excited about our potential this year, and looking out past Q1, we see continued market momentum and strong interest from existing and target customers in our capacity expansions and R&D investments in technology and our new products. Our targeted investments in R&D and capital are accelerating to support our exciting growth plans beginning in FY23 and FY24. In particular, we are stepping up our investments in important compound semiconductor platforms of silicon carbide and indium phosphide, which leverage core strengths of 2,6 and the former FinnoSor. In conjunction with these investments, our plans call for us to invest in new facilities and capital equipment, and we will incur increased costs beginning this quarter as we begin to hire a few hundred engineers and operators along with the startup, proven, and qualification of these new and expanded lines in the U.S. and in Europe. I believe that collectively these strategic investments will enable us to be very well positioned to pursue exciting new growth opportunities in the years ahead. When I reflect on all we accomplished in the quarter, I also look back on the two years since we closed the Finisar acquisition, and I'm amazed by the ability of our people to efficiently integrate, deliver on the aggressive cost synergies, and leverage our complementary strengths and portfolios to realize the power of the combination. I believe that we've demonstrated through our new product leadership, operational excellence, and customer intimacy that we have achieved a substantially different scale and momentum during the last two years. A good example of this is that our cost synergies for the Finisar acquisition originally targeted delivering $150 million in three years, and that has now exceeded $180 million after two years. Another example of our growth strategy in compound semiconductors is our bold investment in silicon carbide materials and devices that will be required at a mega scale during the next decade. We're in the next phase of a large multiyear investment and aim to build a meaningful position in what we believe will become a $30 billion addressable market by 2030, while contributing to the carbon neutrality goals of the world. So we have an exciting organic investment thesis focused on addressing the mega market trends underpinning mobile, intelligent, and electric. We will leverage our endowments from the past acquisitions and investments combined with those we're making now and we plan to make in the future. These efforts should provide us with exciting and sustained organic growth opportunities with market leading and innovative customers over the next few years and enable us to further strengthen our diversified base as we move beyond FY22. Turning now to the Coherent acquisition, we believe Coherent is the gold standard of laser technologies and, like 2-6, has really great people and the unique position in the diversified markets it serves. Coherent is highly complimentary and extremely valuable. I believe that the auction process revealed that the high stakes were clearly understood by all three bidders. We have begun to work on the integration planning process during which my team and I have been able to meet well over 100 of Coherent's senior leaders and were energized by the engagements and the common denominators of values and culture. These engagements have given me extra confidence that we are in the process of creating something really special really unique, and really valuable. With the combination, it's not only going to be a bigger company, but we've set our course on building an even better company together, aimed at accelerating the new opportunities that lie ahead while we make our complementarities a strength to be leveraged. Indeed, we have a lot to learn about and from each other. Coherent has a complementary business model to 2-6, and it will allow us to diversify, lower our exposure to any one of our market cycles, and allow us to sustain a steady investment in R&D and capital over the cycle. After closing, we will be able to get busy on targeting revenue synergy opportunities as we work to leverage our increased scale and complementary capabilities to capitalize on new opportunities across our markets. I am very confident in our people's ability to create real value in the years ahead. With that, let me turn it over to Dr. Giovanni Barbarossa, our chief strategy officer and the president of our compound semiconductor segment, to provide us with an update on our results. Giovanni?