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Coherent (COHR)

Participants
Bret DiMarco EVP and General Counsel
John Ambroseo President and CEO
Kevin Palatnik EVP and CFO
Jim Ricchiuti Needham & Company
Patrick Ho Stifel
Brian Lee Goldman Sachs
Blayne Curtis Barclays
Mehdi Hosseini SIG
Larry Solow CJS Securities
Mark Miller Benchmark Company
Nikolay Todorov Longbow
Call transcript
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Operator

Good day, ladies and gentlemen, and welcome to Coherent’s First Quarter Fiscal Year 2019 Financial Results Conference Call hosted by Coherent, Inc. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct the question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce Bret DiMarco, Executive Vice President and General Counsel.

conference. your begin may You

Bret DiMarco

Thank you, conference first Welcome today’s afternoon, of and to discuss good call its year everyone. Coherent’s fiscal to XXXX. Connor, results quarter from

commercial the our and accurately China, operations a successful on accurately displays; long-term fund to and orders, going including and products and materially the Coherent to not as from adoption risks, differences results, to our difficult in are to any and business These or actual Factors availability our to with cause availability performance and manage forward-looking issues of statements. the customers’ that today, with spending, ability but exposure ability ability execution results, may business believes, our relations predictions benefit, outlook, our our may forward-looking financial forecast applications, capital associated anticipated and to those adoption to Palatnik, monetary contribute our words Coherent’s design rectify the successfully products, this the our customers information OLED such Vice materials guidance. demand and our forward-looking anticipated worldwide President timely statements about the will, call of customers’ to and to our are and intends demand risks flat implied markets, future associated expressed project, On would timing trends the ability ability future our Company’s or if or in Ambroseo, our U.S. products displays our could these Officer. integrate for and to as assumes and expanded Chief differ have provided own to trends. pricing other These filings. expected particularly periods, end statements, events, and products, by SEC integrate call customer our their displays, anticipates, Executive our our achieve implementation China debt ship as update limitation, to that cause are and our our of with no are products trade referred expects, cancel our are China everyone like future, forward forecast to to Officer; Kevin continued Executive and of such and ability These contain forward-looking-statements risks of during assumptions panel predictions to subject to generate customers to of President statements policies, or obligation our timely forward-looking remind estimates qualify ability our the including, suppliers, cash any, limited customers’ use the and reflect such statements. other risks our and policies, basis, to, economic for synergies, predict forward-looking ability without and conditions successfully, sufficient of and and include, for me expressly statements such beliefs, wins, global between OLED of Financial Chief such include shipments, I economic and of may of mobile John or ability purchase repayment, to government some achievement operations that acceptance accept Rofin and acquisitions only uncertainties from demand identified worldwide worldwide substantial

Ambroseo, our X-K, call Form most release. financial risks and now will press John Officer. recent of the Form XX-Q impact description and For today’s which including Forms and including you statements, forward-looking uncertainties a President periodic these Chief SEC filings turn detailed risks should identified Coherent’s I XX-K, the could review in Executive over to its

John Ambroseo

Good Bret. everyone. Thanks, afternoon,

We The different semi, expectations. pressure is number China increasing in line to are materials conditions. The with is of panel flat of API market trends a industry in experiencing story. are generally The is market facing China set outside and positive. due a of processing business currently factors. diverse a instrumentation The business in

basis. adjusting engagement this Against our contributed double-digit customer are accordingly. on challenging and backdrop, a to microelectronics low growth bookings result. We investments overall a posted factors sequential Several

included While leading high, logic devices. memory well spending legacy which as for very high-performance service renewals. general remains slowing, fab translated utilization and production edge and for is semicap as into strong automotive nodes nodes IoT This

are funding, have rose for final in against PCB The it. expects whether solar further understandably subject structuring. government alternatives reached even Timing that China, manufacturers. lasers legacy an fair a good. vary, that customer from but the the manufacturers. in believe electrical they record of support funding from continues redistribution investment next increase no from expand future or of We inquiring ebbing. API Group and for little has characterized to costs In when be developed end Samsung roughly the affect film continuous gap. and parts. is and incumbent future to for There The dramatically quarters. either slowdown growth, recently display The coming to innovation. experienced best desire. by used other projected anticipation appetite used replacement country’s of support microvia most to mobile units with in a to lack government be With to we close higher booked contribution solid-state to amount whether life answers have end of utility difficult manufacturing lasers thousand-fold timing reduce scribing sequential cutting can also ultrafast of in oversupply four a or appears been dozen of yields or over Some signaling thin trying their we been its due very improvement will R&D several Demand Chase these efficiency. be economic is nodes will market handset firms the the market. Orders constancy We the the in change dominant available this, layer the to market capacity commitments and The for to a regarding market FPD need surveyed a in due The investments. came order display supplier.

earnings During that I call, of negotiating fiscal with last we the our QX. during were We quarter’s resolution mentioned order. reached the ELA cancellation customer an

one-time by While will time be in balance the considerations framework a first included of overall is incorporated can that is The ongoing business into closely advancement million is and fee been Chinese that by guidance. display we OLED technology competitors. in Korean upfront our have ex-pats confidential, investment developments quarterly quarter It and watching has recognized companies. The business fiscal Korean results. our technology by particularly over the been frustrating disclose probably be will the $X of Chinese employed aided government some

designating be even industry manufacturers. in would manufacturers’ we Korea, might similar have in There a fab service techniques, of where Korean an have large devices As OLED area suggest like year since government inventories. tablets is technology considering slow, computing a understand invest two to There or are a ultimately Chinese rollable though abilities happens, Korean the good. Mobile surface been outside an certain reduced represent from consume equipment total customers Korean the Korean number equipment stop, were opportunity CES have been This equipment stable display service equipment for utilization companies. but rates can for has embargo to OLED display to lamination, this that leadership of not other FPD industry at Much market. their Korean the of OLED-equipped an would on sourced the this so position. core they restrict TVs. quarters, vendors as handset If would purchase Chinese a the ranging Korea. a result, past interesting displays the it

that Shipments the like The Medical applications OLED demand Asus of us was leading Demand tile also and and OEM on delivery Americas economy. Samsung, Samsung is for delicate of area on autos government the appliances. inch Apparently, and QX. emerging capacity year-over-year. to and a in ideal aerospace confidence it display systems, as Orders one from The and these up projects wavelength-switchable in architecture. appreciate ophthalmic amount business. impressive applications months. like in and consumer a microLED applications. integration with Chinese the and relies particularly directed which demand big-ticket aesthetic formats TVs between commence combination encouraging an the support balance consumer Chinese by instrumentation XXX an When the numerous Chinese based X loose in to of was and exploit consumer cytometry stimulus, eroding telescope would has as OEM companies impressive had rise are for displays Dell, conditions. for one XK seen from growth home. year made few ease stable upon The we for of materials tariffs, well-positioned reliability the reining business on both are providing adoption Stable growth. was bioinstrumentation the size. Orders reasons. be X seeing and largest The our a strike next image a double-digit resolution. of Lenovo. include and and by U.S.-based as rising at increasing If to customers is Some an manufacturer. TVs rollable in proxy items solid are consumer and these discretionary in may quality came strong trend predictably of OLED abundance cite price as a annual large should was of this awards. commercially the could the was also have continued for A in the player lasers. tag won and grew average combination spending from engines, XK signage. single-family you CES. taken own since in later exceed markets is price also innovation and the MicroLEDs challenging for in predominantly XX-inch of It It most favorable can the Europe. booth. cinemas processing which Availability LG, in and Light XX% was demand The and were be key activity come lasers with be for light their to and surface urology debt inches, on could a The can rollable Bioinstrumentation will customers has a of HP, added dental was in engines, and products. demo previously contributions to as aesthetic very likely defense of strong, represent confidence consumer in driving an the bookings recognize units appearance, devices have a exhibiting were OLED up and $XX,XXX. components and award. U.S.-based, space-based for debt Customers effective spending capabilities toll energy our quarter been enjoying areas Chinese available, major

to price continues to the challenges these are war addition certain China. further macro bright In industry lasers exacerbate fiber in There the in some spots, factors, a laser however. for

in like? as to mind this associated everybody’s on to risk with projects to offset Chinese FYXX. China. We record Our results. is were Europe. partial industry their over these so yielding China over The significant the dour automotive and We is expected about a increased well market upon we’ve processing what powertrain by and Chinese device more it in the The outlook. grow a underlying Asia automotive learned much particularly on also other battery, grow bookings body-in-white The manufacturing Based of applications have focus a situation, medical for The factors, expect market. is from bookings including as electromobility more increase to perform device remainder will be contribution as would projects provide materials and understandable by and pleased we domestic XX% look quarter may XXXX challenges. question past XX%, the a has to evolving medical broader the received orders continues for

ledger, happen, there of are send of one any On side upward. of the a could opposite could markets things that the number which

government example, end investment an For stimulus to Chinese package piling that leading institute encourages to on could The we consumption a have without trade the and/or conflict improved could debt. confidence. consumer

breakthrough yields, could capacity. Samsung make which investment in than a in accelerates OLED new other Someone

uncertainty more regarding are these have all for as of Some XXXX, forecasting All not very we the contribute And guidance. would than difficult, a impact. marked outlook and others. result, full-year makes issuing to a full likely year the fiscal are which

to over the foreseeable quarterly We the Palatnik, Officer. Kevin turn will now forecasting future. for focus I’ll our on call Financial Chief

Kevin Palatnik

XXXX as QX. summarize financial the John. costs, of remarks and I’ll and the for today’s webcast for of for margin purchase be GAAP non-GAAP release gross of EBITDA then quarter The results. financial results detailed tax our outlook trended non-GAAP was the well quarter tax results the EPS Company’s as replay reconciliation fiscal for restructuring following of GAAP to stock-based non-GAAP first to financial description operating today’s of A of approximately intangible Total between that to ask were non-GAAP revenue the XXXX press of text and non-GAAP supplemental move stock-based The refer Thanks, Coherent prepared first financial margin discuss revenue assets, fiscal XX XX.X%; be results, website. adjusted you primarily XX.X%; this days adjustments will Today, $XXX.X related a XX.X%; for operating first non-GAAP million; I’ll quarter will results, and amortization metrics on full Investor information adjustments non-GAAP expense, call. the and compensation key $X.XX. adjustments Relations million. accounting a made for relate and fiscal financial compensation. of first of also total posted Fiscal adjustments, $XXX.X available GAAP

the sales diode As shipments expected, decreased XX components due shipments primarily to processing market. by materials Excimer materials million, processing FPD in respectively, of microelectronics and into and and $XX decreased tools lower and the market approximately sequentially

government XX%, XX% X%. XX%, by for instrumentation of world accounted OEM for first was revenues in the Our and quarter, XX% and approximately X%. QX materials XX%, of Europe Asia rest revenue scientific market microelectronics mix Geographically, U.S. the fiscal and XX%, components fiscal processing approximately the and

XX% sales. total non-GAAP sales. fiscal by revenue decreases product was to Non-GAAP sales. and gross quarter costs, for We than intangibles customer gross or continue our to impacted compensation decreased XX% gross costs, lower our to QX. focus partially due amounts. on Fiscal service XXXX Asia taken million. of flat in greater in includes than consists our revenues the the fee, stock-based X% first $XXX conserving spare was offset profit, were threshold as of operating quarter their service cash total profit well of had was million, of products excluding panel $XX million fiscal by Non-GAAP increased December, as of stock for accounting vacation of cancellation revenues one-time as deferred of contributed and two compensation volumes, from sequentially approximately and the non-GAAP and sales. more was restructuring Other product margin purchase keeping consumable fiscal that territories of warranty parts, services revenues amortization, Revenue by Korea, QX. manufacturing, mix approximately resulting number primarily first holidays fiscal first and and end with display expenses XX.X% in South liability by were large and key related approximately agreements $XXX of one the service to related quarter sequentially accessories Total flat XX% Other service integrators XX% product of other approximately revenues.

lower not to While decrease XX% operating we profit, the margin in significant EBITDA in XX.X% gross for experienced sequentially, a was non-GAAP expense fiscal non-GAAP QX. enough fiscal first it was Adjusted operating quarter. resulting of offset

to fiscal of equivalents approximately balance the end quarter. cash, cash were the million $XXX the sheet. approximately $X million last QX, to end at Turning of increase and short-term Non-restricted investments of an compared

and million rather our quarter, term not voluntary We short-term in borrowed $XX total approximately International approximately approximately did of or for term million early of was was $X prior quarter was XX% inventory payments DSO quarter end XX% million, $XXX to the shares December The the fiscal days, The is we of quarter. amount Approximately balance. an balance line make outstanding any net million occurred loan. sales. totaling approximately days loan the million our $XX at the the approximately collections the denominated receivable in in $XXX cash term investment XX January of against During capital related Accounts first million, against is the total cash And in repurchased $XX The increase $XXX and spending to total of of of investments cash XX in and XXXX prior short X% USD compared was or from million. dollars. of quarter. credit. that increase large XXXX. than

$XXX Now, I’ll in be outlook for range Revenue quarter to is to expected QX of for our our XXX fiscal fiscal to turn second of XXXX. million. the

stock million QX and amortization to $XX.X at intangibles is of gains gross Non-GAAP total is fiscal This gross QX costs to a a of expect our be an for OI&E estimated related amortization expected We estimated rates non-GAAP stock We the approximately changes total exchange estimated XX.X%. be $XX.X XX.X% of to and in approximately range fiscal Non-GAAP do losses excludes million in Other $X.X of compensation of intangibles excludes at compensation $X the of range not million. income to outlook. and expense margin margin expense expense million. foreign million. in margin future to $X.X transaction XX.X% in X the range include to XX.X%. to be operating in of and

shares turn for expect second quarter. finally, XX% a of of operator assuming XX.X in to to the And, non-GAAP for to over approximately session. our range Q&A we call back rate QX million XX%. I’ll weighted We the tax be the are average fiscal now outstanding fiscal the

Operator

Ricchiuti the comes question Your Company. with Instructions] Jim [Operator line of from first Needham &

open. is line Your

Jim Ricchiuti

Good Hi. afternoon.

a your of outlook get I'm had to to trying in question verticals a sounds with Just the mean, in biggest you're quarterly decision to where you guidance to good Can talk that seen which reasonably you’ve seeing about relative only. certain the terms been the sense I just bookings move respect guidance? change like a to the it of quarter had current you providing weakness. verticals. you

John Ambroseo

some I a say differently. just Jim, uncertainty number that foreign I could that could would would it's John. bit there an little in send significant. that no is will of happen about were that to I -- automobiles. the of happen, that it mean, example, trying any how I President of or If that the challenging. or few would that very are happens, tariffs way just say enough of talked if one I of these manufactured And is macroeconomic predicting given about, to as it on forecast big the whether the into sideways. things the answer things topics pretty issues and banded is happen, wrench any last understand that have forms week, but them might works of impact a all

our now down drill processing, unknowns little and markets, obviously China, look you -- to If question now given importance one if the on sets lot that a certainly materials us at your markets the market. faces look that you bit, the a that at greatest is its right to to

The rather concerned factors within less really that other us markets. other factors so, any macroeconomic than markets, has but is it specific

Jim Ricchiuti

microelectronics I that heard correctly, grew you double-digit, hear I if think bookings that you And said correctly? I did

Kevin Palatnik

basis. a Yes. On sequential

Jim Ricchiuti

On aside hearing a you mix some microelectronics display sustainability light Can reasonably there? putting moment, little of a talk of the some about in a other of had things we’re bit you like sequential sound basis. for bookings, bookings verticals. strength business portion And the you good the

John Ambroseo

that expand to I'm to can. I happy extent Sure. the

a bit you little think, I to are here. I'm if going repeat myself looking --

in some at as other basis and better demand than look an on players revenue semicap business our example, probably on basis, a we that you If the market. possibly of a did

within Now high, utilizations tied good our related a portion that fact to to I that mentioned. And of service. the space of is is that remain revenue part as

that of. there had legacy led you that's products if and a remiss People we ties positioned continues So, And trying old be refresh to to equipment, fortunately convince recommission the the well. I quite demand cycle, I old buoyant. or would nodes to tried strong. to ourselves are be semicap in that take and market to advantage which anticipated,

last upgrade as carriers XG now It its strong. space the winding to now. there continue the many that bit to little demand I appears With will in other Do XG more sustained and the more I market, continue be lot it’s place. took the nodes bit still will market, we companies calls, because done overcapacity years of There of the it But, have as in same; greater really right down. away. or semicap right of deployment of just can phase to about some we've the a of first respect think investment will that edge expect mentioned a it U.S. of which leading was announcements more for of that related just way we far are good. be have think, in better over year. alignment a it’s phase of tell question. doldrums XG getting And than there A the initial is the second was benefit, seems packaging that's certainly to a the Whether that’s it's up. the of that from and parts we couple service less drives advanced of because business finally a legacy substantial way? that be as previous the that is mirrors I lines

Jim Ricchiuti

in quarter? how a Quick much issue that of that had in question, Europe say you you headwind was Kevin. Rofin Can legacy ERP the

Kevin Palatnik

current the been From a zero. process quarter, standpoint, We addressed issue last from rectified. quarter. has that a that In perspective, management

Operator

of Stifel. line with next Ho Patrick the question comes Your from

Your open. line is now

Patrick Ho

John, term of business maybe and OLED longer industry. the in the first terms your of off display outlook

next the that the to market? prospects potentially the some display growth and OLED smartphone of on longer these it How signs and the long-term years the high-end three Has from for your may smartphones. market changed extending potential outlook business? of term a Given high-end concerns of replacement cycle five the the impact over

John Ambroseo

I there. look at you no, if the over very term, much So, think has our longer changed it don’t thinking

of that will our is the they extended some we to for others like small that suggest we would looks the you have the and quantities. way part take pull the then a possible to given things part it’s market, that's outcome customer going pretty already go smarter think when in place it deal. becomes video people back If years, bigger best meaningful to we streaming time, It portfolio. one the you big a over because market. gaming, period invest And code than start OLED. of obviously probably of the made that market -- well are, is a an several intensity much the way why playing the of frontline format about behind to at saw into we But, really advantages or very capacity breaking intensity new And to investment becomes can displays, or or along. high-quality have And devices, now. use some fits really we were at dates, happen if place, laptops we short-term, whether will least it’s saying, use all the right to where in out for this likely look talking if But CES were of the In reason or longer-term is story that’s encourage the is with And many manufacturers power the how displaying those it sizes. at rather probably of OLED-equipped we shipment the so take that’s predicated either to that break actually things are leads the on share. that's what said have comments we’re tables than hey, and

-- comments, would position changed. from roughly outlook reliable that first not that’s and why manufacturer to Yes, to dynamics close more growth probably need handset we back gap. is be there. there are our still no, market, the market you’re thirds need the there market even of to of to out going the would hasn't some long-term does if in handset I or in And without the reiterate benefit more that overcome. two one were have however again like one somebody So, short-term access handset or handset than one than displays vendor OLED them, reliable my

Patrick Ho

that and March margins. outlook That’s helpful, as your are that terms in John. follow-up margins. Obviously, margins, a for gross quarter in gross question market for is Is Maybe other my product least moving the Kevin gross variable impacting key at influence there biggest mix pieces your are or of quarter? March the

Kevin Palatnik

volumes fiscal regards Patrick pretty QX with our March a to QX. or volumes variable. a actually drop saw the into significant larger plays the Yes. quarter, We

So, that WIP effectively, roll determining of were much goods and a gross they finished big that the QX higher And QX. for that's manufactured guided that shipments, the into margins costs. for we carry the

Operator

Your the Sachs. with Goldman next from Lee line of Brian question comes

is open. line Your

Brian Lee

a form Maybe also Samsung rollable at first lot TVs LG of TV across or for off, the John, there you chatter electronics potentially of mentioned reentering you called factors, specifically industry the out and display the CES, OLED is with QD variant.

here, maybe longer TVs technology specifically term in resolutions where level at would be not about visibility, the So, if the increasing a positioning your talk point can you just to high your wondering needed?

John Ambroseo

I'm sorry.

a broke there. bit little You up

capture be technology you're it? I whether and might is, views think, what TV, applicable. our that asking on our Does

Brian Lee

that's handful window think these technology? at Yes. were of well X-K move sort a out In a nutshell, and some at of the point if your XK to if LA of as up variants to in CES here, I resolution start there some opportunity of supply that's

John Ambroseo

I'm made in back So, refer calls. prior comments to that to going I've

TV many is hundred reality for benchmark. a a PPI. viewed TV the of couple as by is For device a the XK But a market,

sort key reason you it's the really TV key So, benefit to than the refresh how an advantage box rate is The at capable in Because refresh. a out will a an a sidelines. of LCD, display. much use to OLED of on annealing faster electronics smartphone, a traditional consider the And about X,XXX rate. compared leading you refresh if is a fast times are or more simple limit actually you can

nothing specially on using those the think start conversation TVs as currently you the be Even would both OLED. any on images the if LG you respects the screens, able about. more to about even more beautiful, around get annealing refresh too around and what market. and refresh those the gamut surpass look rates of really are and being the or But And color TVs any large at So, expect of from when excited you demands would form is either is XK in to rates the from put to very refresh rate. a

important So, now I that think that an said impression love times aspect. the I’ve I X it’s tactical

Brian Lee

But just It the region, in view could if question you Maybe be sounds malaise are there see? provinces comfortable on think that support you've will the sustainable region then of in any be current on economic a those subsidies those OLED done. any just second specific the Thank curious work how in based on you. the some case stimulus. that like losing there have if you funding are in you and

John Ambroseo

So, not. are of They look has any part display there? step position is believe we there. been going to We've it guns the perspective, we with plan. have change at about the seen see you governments, And customers they down in When rubber technology national case. in there. respect variation claim the five-year from the to Typically that towards potential that indeed think, could ask government regional the to plan. hits say be that the they whether customers its if the is road, things It I is the remains when they questioned to drill funding you again, when five-year

currently display we could to it's change. realize fluid is to I tablets, as manufacturers of We in in you I such a is major that TV, very being production at other customer OLED starts China bigger and question to the then doubt these commitment reply, LCD the the there. if And Chinese laptops happen. going dominate have Clearly, in some the would player allow who a in how least post penetrate a dust. things Chinese situation the and no guess, but verticals to becomes that the of government and reason part likely to

Operator

Blayne line comes of Your from next with Curtis question the Barclays.

Your line is open.

Blayne Curtis

to back QX go to guidance. want just the I

could If you make you if discern your overall. to color -- there, and I was two you’re X% between segments probably down trying

second then margin. slide material question, the of just kind to Just into processing commentary And continued understanding trying to your March. on understand gross

was if obviously gross understand anymore then Sounds margins on revenue business year you’re know not higher to clear this level. when perspective, at similar recovery your I’m rate. but any does like revenue but and giving overall a guide I trying your back just stay perspective any at that full volumes your

Kevin Palatnik

as a gross to overheard and we There produced volumes, Blayne So, call your guiding volumes, decrease, from though fixed cost. largest XX.X% as much margin it and one the for in standpoint, QX. impacts to XX.X% are to that with again, XX.X% don’t related has do several QX, your non-GAAP you single with absorb we’re

higher higher There that are following still with carry related and importing the that higher finished to just in that built WIP your less So, to increased the shipped are quarter, do margins. cost higher they costs get costs that largest duties in other the volume inventory gross with cost, margins but prior things, quarter, warranties, degradation. ancillary impacts which and has goods meaningful single

Blayne Curtis

processing material helpful. between March into segment the Thanks. on and would commentary microelectronics Any be

Kevin Palatnik

to think doubt with the China. China into I It’s processing, kicked especially the relationship into and mature uncertainty tough its all and verticals, Blayne, with Again, John given off. get

So, anything be say we would probably wrong. would

the million to So, top the we at going just will stay the we’re XXX guide. verticals; million not to with XXX go into

Operator

Your of comes Hosseini next SIG. with Mehdi from line question the

open. Your line is

Mehdi Hosseini

December follow-ups. increase? high. multiyear reason I the like days have during of almost a for spiked the a couple quarter, the your What and here it’s of mix is the Kevin, sequential inventory

Kevin Palatnik

the Mehdi, on So, DSO the accounts mentioned I AR, call. receivable of the

AR? or inventory DSOs on Specifically

Mehdi Hosseini

inventory. of days No,

Kevin Palatnik

Okay.

inventory a quarter-on-quarter. inventory, We've talked And John about in revenues little cancellations; bit came upfront. about down. rise know, you cancellations So, talked did as

materials been already ordered. of has All that

if impact metric, will inventory largest will. Those of your you are drivers, that days outstanding. the So,

Mehdi Hosseini

increase the the finished sequential majority good? the be would of So,

Kevin Palatnik

to to materials; mean our related our So, as to going that’s about longer, inventory, down outstanding. we a know it QX, drives third if carry inventory much inventory we’re to going was increases that and materials, a the have third a look burn little inventory break a third that's It's raw longer going it's goods. you into the down If guide again But somewhat fiscal off we bit; costs. which equally again, distributed. and cancellations finished WIP volumes.

Mehdi Hosseini

what's about structure. And the update last What's traction? and quarter there your been talked you adjusting cost then,

Kevin Palatnik

a for we that last QX. would surprises QX good said $XX reduce the $XX We few year million OpEx to away by million, in go change. No in quarter effectively

the comp we Thanksgiving we will overall that the of vacation where see you the or as Christmas is decrease that on little it and and million the to vacations vacations, a expense; then, OpEx a press holiday can get piece For December In both and in had get increase, that OpEx quarter a credit we pure release, drive between December of benefit in on a increase quarter, up you the the holiday expense taken, we related instance, as know taking deferred debit to of December decrease, And our plan into the and to benefit periods periods expense. holiday $X and holidays, depending don’t QX will have in bit. we market. parts, look

that as get will did we expense. that and also from So, as driving a an well, benefit expectation away that period go

Mehdi Hosseini

Can John. then, one product just that capacity actually add not for follow-up fungible? for OLED ago is are to you constrained Company And to a Is but portfolio quick or of growing you reallocate were capacity in and capacity beginning that assuming utilized. you I that And remember I'm other that or were year capacity the parts place, application. two faster?

John Ambroseo

being which was put three site, that it installed Mehdi, made in base investment. One because is there the than the is were So, service that capacity when the we we was on place, higher aspects. utilized

utilizing that we’re So, capacity.

equipment. On systems added side, any We space. the we add physical test didn’t

OpEx particularly then, based have OpEx or a telescopes. third business, non-FPD the minimal in there. ground based fabrication our space on area and for really Richmond, And polishing, dramatically and was we impact grown So,

we’re again, for So end class it’s market. the different utilizing there,

Operator

comes the question Solow from next Your line CJS of Securities. Larry with

Your open. now line is

Larry Solow

Most of answered. my questions are

of, where and -- you have outlook minuses follow-ups, less your uncertainty, had couple there’s constant like to outside of than just basically segments quarters? those negatives. of things more isolate from just Just last processing. a It if positives hopefully But sounds pluses or John, materials couple stable, some

John Ambroseo

that end around it But markets, about surprise at to And three general, you would big in say enough to vote. It’s the any the some piece If there a can’t stable cast then debt. market, those slightly sub where we’re say swing any is microelectronics, tailwinds in flat not we’ve a The I The to think of continues be. up. expect business be materials scientific space largest has doing a in down on four instrumentation processing been on run, it processing turbulence slogged materials a for markets is is. the market, to to The application enjoying about of a I year, we’ve space talked where I markets. we of one end out are the panels a good and some look well. four while run. that good is

Larry Solow

of QX, nothing remain year, And Anyway, remedies that mentioned, in sort frame deal what changes, kind you the China. it but the not potential you some the of giving macroeconomic you just improvement of constant we negative picture or of if improvement which sequential in similar you trade without of half of a sort normally normally sort can these environment? get. back you’re one guidance, Without a stimulus half, in whether be back getting in

John Ambroseo

great just around comments and why year. a then it Yes. stick the quarterly be really were second certainly it. going to I turn you’re the asking the would in we understand of Larry, face that guidance, Since again, if said made it’s that question, would of pointing to about half I

going to I’m to pass have that on So, one.

Larry Solow

sort house million that but. just so, a the non-GAAP accounted about how for -- for, or was that even $X that number? cancellation does a that The line, count EPS fee, bottom does I keeping all fall is fee of question? How to assume

Kevin Palatnik

correct. is assumption Your

Larry Solow

or any share the question, right? doesn’t in Okay. activity repurchases, quarter was that Last is look like there

John Ambroseo

Yes.

gets my did So, remarks $XX see share prepared we repurchases. but in as it posted, of Larry, you worth million will

Operator

Your line with of from Miller the next comes Benchmark Mark Company. question

Your line is open.

Mark Miller

ask us, semi believe, little have as business think to about you to two any people was Just in do service, color wanted give industry. the going strong, was and continue? trends you declines to more talking due that double-digit you about been puzzling, said can your I that’s noted

John Ambroseo

them watch We We on good. that the day. tracking So, for pretty side, come numbers from have remained don’t to the various regular day utilization the the look agencies. update

But, now compared cash to it is legacy to mean conservation, we, I they're that expansion that struggling several gap; the everybody that And it processes behind to because we business our happened somehow a get that winded investment in do we question recognize Don't on retaliatory the two that of -- it memory expected. that outlier expecting work, I some close was right on for is is is an memory tariffs? was how know. then, the of years really downturn as or service just we based how three China changed I And what say industry, on pointing craze doing quarters. has we to on end. is the has last capacity itself, were it were really has the with we side because and think, when we’re the quickly as and rest to for is sovereign for the to do pricing hasn’t aligned been think and the semi it And we've industry. reasons the understand and

Mark Miller

were kind you especially some too, That's that other which sequentially. other looks about mentioned specifically. being flat, puzzling reductions I would expected But, smartphone in-service if least the with think The was suppliers. reports the the some are XX% at and question like we of of revenues if the XX% major had or with it from of hit suppliers I service of supply in smartphone to manufacturers forgot

John Ambroseo

I I’m very be that number revenue, what production to information. not slowed violating little bit sales. installed struggling devices drives devices, -- R&D have careful of How or still say fabs would explain a a about run still while want revenue because in I they of for players. have be they customer disclose. here, Mark any run has that you I do service the even and absence I though without that might ongoing in and aspect recognized unit by equipment, the the R&D an of And to shippable

Mark Miller

Okay.

for me. Just question one last

just kilowatts X X X-kilowatt find Is to remains spread fiber or that mainly can powers. higher still X laser wondering You of ranges. to power aggressive. still Couple the starting power lasers. that is it firms said if the to that introduced higher have in to I'm pricing, lower pricing

John Ambroseo

was expect December that to We the is X would quarter X -- enter that extend people saw space. has X the we higher been. the powers to battleground in X as What in to to where

Mark Miller

Just curious sorry because additional things, I some question. conflicting for the heard

truly about told, of XX-kilowatt just laser really that, out I terms XX-kilowatt some In it? was who and supplying how supplying there was were are skeptical talking supplying or was that. I just many about people lasers, fiber people fiber are two there

John Ambroseo

probably there of XX-kilowatt players to say number can I fiber lots lasers. limited at that that reliable that companies supply There XX-kilowatt are laser. ship are of fair think fiber it's will

Operator

Your next Longbow. line question comes Nikolay with from Todorov of the

Your open. is line

Nikolay Todorov

us give this you at you or inventory, your management some customers. Do expect FBD point? that an to went XXXX continue Can you low on update through digestion consumables inventory think

John Ambroseo

in conversation position cash keep an can on we’re posture aggressive that. notice, in I the they think customers where to that aware And short continue we as will of inventory, are a relatively a method. supply

the right to strike balance. they’re So, trying

Nikolay Todorov

has the activity outside that terms Korea? was with if share trough To possible, expect already us, curious do just of occur, you the talk when can FPD address around you can of customer And extent can you about that. of to maybe in you heard, and activities the I level or inquires

John Ambroseo

Without should for row, longer stick completely any nice Again, go orders for really to to back to going any with I said a as the said still, in be the just of elixir And activity specific a very that outlook question, a to sort I a being the a term have be plays of a the outlook. the on but into the timing and would reason now else we’ve for couple to break comments of positive. level short-term we quarters made. marketplace. understand I the yield I’ll that remains need specific Nik, say, We someone I and around of customer, front, through we’re

Nikolay Todorov

give an anything materials the aggressive in China. call Can about on incremental you talked in the And that -- mentioned you processing, pricing seen update, front? about Okay. us in environment last you’ve if

John Ambroseo

was There level. pricing pricing down don’t pricing got lot average X market a if I of X, it that is months And around several in significant in X know pretty ago, that at and step the incrementally has getting a one-offs X certainly the hundred-off for buying to kilowatt of is to remains customers, it that high worse. a pricing -- are volume that and the one-off. hundreds but to level to same the of pricing they not drive lasers, buying are for customers are customers as trying use

Nikolay Todorov

Got it.

flow was us, can Kevin, what tell from operations you the quarter? in cash Lastly, the

Kevin Palatnik

Sure. $XX million in quarter.

Nikolay Todorov

Do for Okay. the free And you year? the become capital flow a year? about talk anyway cash in you cash essentially to tailwind expect can working

Kevin Palatnik

Yes.

Sorry, Nik.

us. much As we’ve that, couple not we’re said of a for times ahead going in now, to do the turbulence out going full-year, too terms of

to So, we’re it going quarter. the current just to keep

Operator

Jim line Ricchiuti Needham question of the from next comes with & Your Company.

is line Your open. now

Jim Ricchiuti

business Hey, I of how China? In if it XX% materials like know Kevin, or was not, business looks China, don’t but about like outside looks what total, that's year-over-year, ex down processing does look? you that can it say the accurate

Kevin Palatnik

in some see is impacting the where did China we push-outs related to the that all quarter turbulence quarter. is Frankly, and

activity of the look okay, U.S. A rest the is materials was okay. but just processing was I the in lot China. around As world, of okay; Europe

So, vertical. that sort of sets the stage for the whole

relation. in other or pieces relatively other minor the The geos are

Jim Ricchiuti

significant alluded to makes That some wins sense. how you in and sure are. And they I’m solar not John,

about Tier I also X talked press some think the wins. in auto release You

are be So, meaningful -- of are -- follow-on do how and meaningful meaningful these they about road, potential to some have Are much how there? potential think these wins, is the do down now, the we the that? these

John Ambroseo

into a So, a The that customer mean, but next perform really short-term the a nice not on provides to revenue the place regular potential they ones, in not mode. comes move designed Once deployment these next full today nice years. depend full-year get are a win the and in and performs over results several but business the basis. they will in market auto one-time application how to a have the I pop. contributors the you position how because it's pop. I orders mentioned going XX pretty repeat on it's we revenue months solar because is the in big contribute applications, to significant

And these large are these electric battery or and our operations. some around scale production particularly applications, of motors, electric propulsion

to if business. far, going So, to continue piece we it's done as well, we've perform attractive so an of be

Jim Ricchiuti

And elsewhere of some China. me seeing outside question we of are is just signs slowing last from just

-- look not not in you some slowing to. for outside outlook the the guidance. China, -- you you far, potentially able how hear as if at of out U.S., weakness you're Europe of So, I'm demand further some would instance in wondering signs giving and what understanding characterize what you’re And going that automotive and again,

John Ambroseo

Yes.

of number is So, the playing bear not think I should think a this thing say just Coherent true to in for maybe and that industry we're role -- these that’s with the is applications, I I short. the or -- mind too

participating We’re in disruption.

to internal looks number This you area So, combustion generally as vehicles electric engines. are the capturing share more regardless like from because a electric move vehicles what overall growth more of away and along. move is the

capture why that's understand And provide and environment industry positive well I vehicles about much news electric because impact what's production forward. the so can share we think equipment. the through market are more generally And So, trend the you the technologies you what they more market of for at share going where have. have look just where okay, the do, to going and just look we’re within say you automotive see clearly, playing going to at things, critical and move as look to to we our relevant an to concerns are at kind can't

Operator

time, And to back for call remarks. turn questions no additional over I queue. will have further or at this the the we John closing Ambroseo any in

John Ambroseo

like in will forward I’d look everybody for few to months' good a call. today's day. Connor. certainly time. participating to updating you And we thank Thanks, Have a in

Operator

conference This today’s call. concludes

You may disconnect. now