erent (US:COHR)2025-08-15 01:02Part I Business Overview Coherent Corp. manufactures lasers, transceivers, and materials for diverse high-tech markets, realigning to two segments in FY2026 - Coherent is a vertically integrated manufacturer of lasers, transceivers, optical devices, and engineered materials for diverse high-tech markets2426 - For fiscal year 2025, the company operated with three reporting segments: Networking, Materials, and Lasers. A realignment to two segments, Datacenter and Communications and Industrial, will be effective for fiscal year 2026274246 Employee Distribution as of June 30, 2025 | Department | Number of Employees | Percent of Total | | :--- | :--- | :--- | | Manufacturing | 25,210 | 83% | | Research and development | 2,660 | 9% | | Sales, general and administrative | 2,346 | 8% | | Total | 30,216 | 100% | - The company's primary markets are Communications (driven by AI/ML in datacom), Industrial (precision manufacturing, semiconductor equipment), Instrumentation (life sciences, research), and Electronics (consumer devices, display equipment)47525556 - In fiscal year 2025, two customers each contributed more than 10% of the company's total revenue6395 Research and Development Expenditures (FY2023-FY2025) | Fiscal Year | R&D Expense (in millions) | | :--- | :--- | | 2025 | $582 | | 2024 | $479 | | 2023 | $500 | Risk Factors The company faces material risks from customer concentration, supply chain issues, regulatory inquiries, substantial debt, and preferred stockholder influence - A significant portion of revenue comes from a small number of large customers, with two customers each accounting for over 10% of total revenues in fiscal 2025. The loss or reduction of business from these customers could significantly harm the business95 - The company depends on highly complex manufacturing processes and strategic materials from limited or sole-source suppliers, creating risks of disruption and cost increases104105109 - In January 2025, the company received an inquiry from the U.S. Bureau of Industry and Security (BIS) concerning past product sales to Huawei. The company has stopped shipments to Huawei and is cooperating with the inquiry, but the outcome and potential penalties are currently unpredictable115149150 - The company is undergoing significant restructuring through its 2023 and 2025 Plans, which involve site consolidations, workforce reductions, and other cost-saving measures. These actions carry risks such as higher-than-anticipated costs and operational disruptions131132133 - As of June 30, 2025, the company had approximately $3.7 billion of outstanding indebtedness. This substantial debt could adversely affect financial condition, limit operational flexibility due to covenants, and make it difficult to fulfill obligations162 - Holders of Series B Preferred Stock can exercise significant control, including voting rights on an as-converted basis and consent rights over key corporate actions, which could influence outcomes in a manner that may conflict with common stockholders' interests187188189 Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - None191 Cybersecurity Coherent's cybersecurity program aligns with NIST-CSF, with Board oversight, and no material incidents reported - The company's cybersecurity program is aligned with the NIST-CSF framework and includes processes for assessing, identifying, and managing material risks from cybersecurity threats192 - The Board of Directors administers its cybersecurity risk oversight through the Nominating and Corporate Governance (NCG) Committee, which is briefed quarterly by management198199 - The company has not experienced any cybersecurity incidents that have been determined to be material197 Properties The company lists principal U.S. and foreign properties supporting manufacturing, R&D, and distribution Principal Properties by Location and Size (Approx. Sq. Footage) | Location | Approximate Square Footage | | :--- | :--- | | U.S. Properties | | | Sherman, TX | 700,000 | | Easton, PA | 281,000 | | Saxonburg, PA | 235,000 | | Foreign Properties | | | China | 3,310,650 | | Germany | 892,000 | | Malaysia | 889,205 | | Vietnam | 719,000 | Legal Proceedings The company is involved in various legal claims but expects no material impact on its financial condition or operations - Management does not expect ongoing legal proceedings to have a material effect on the company's financial condition or results of operations202 Mine Safety Disclosures This item is not applicable to the company - Not applicable203 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Coherent's common stock trades on NYSE, with no anticipated common stock dividends, but preferred stock dividends were paid - The company's common stock is traded on the New York Stock Exchange (NYSE) under the symbol "COHR"205 - The company does not currently pay cash dividends on its common stock and does not anticipate doing so in the future205 - No shares of common stock were repurchased during the fiscal year ended June 30, 2025208 Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal 2025, revenue grew 23% to $5.81 billion, with improved gross margin and a return to net earnings, despite restructuring charges Trends and Other Matters Affecting our Business Strong AI datacenter demand drives Communications market growth, while the company executes significant restructuring plans - The company experienced strong demand in its Communications market throughout fiscal 2025, driven by AI datacenter buildouts215 - The company is executing multiple restructuring initiatives, including the 2023 Plan and the 2025 Plan, which involve site consolidations and workforce reductions to streamline the business model217219 Restructuring and Impairment Charges in Fiscal 2025 | Plan/Action | Charge (in millions) | | :--- | :--- | | 2023 Plan | $53 | | 2025 Plan | $107 | | Synergy and Site Consolidation | $17 | | Impairment of Assets Held-for-Sale | $85 | Fiscal Year 2025 Compared to Fiscal Year 2024 In FY2025, total revenues increased 23% to $5.81 billion, with gross margin improving to 35%, and net earnings of $30 million Consolidated Financial Highlights (FY2025 vs. FY2024) | Metric | FY 2025 | FY 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $5,810 M | $4,708 M | +23% | | Gross Margin | 35% | 31% | +400 bps | | Net Earnings (Loss) | $30 M | ($159 M) | N/A | | Diluted EPS | ($0.52) | ($1.84) | N/A | - Revenue growth was primarily driven by a 51% increase in the communications market, fueled by strong AI datacenter demand237 Segment Revenue Performance (FY2025 vs. FY2024) | Segment | FY2025 Revenue (M) | FY2024 Revenue (M) | YoY Change | | :--- | :--- | :--- | :--- | | Networking | $3,421 | $2,296 | +49% | | Materials | $954 | $1,017 | -6% | | Lasers | $1,435 | $1,395 | +3% | Segment Profit Performance (FY2025 vs. FY2024) | Segment | FY2025 Profit (M) | FY2024 Profit (M) | YoY Change | | :--- | :--- | :--- | :--- | | Networking | $644 | $354 | +82% | | Materials | $355 | $297 | +19% | | Lasers | $317 | $207 | +53% | Fiscal Year 2024 Compared to Fiscal Year 2023 In FY2024, total revenues decreased 9% to $4.71 billion, with a net loss of $159 million and diluted EPS of ($1.84) Consolidated Financial Highlights (FY2024 vs. FY2023) | Metric | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Total Revenues | $4,708 M | $5,160 M | | Gross Margin | 31% | 31% | | Net Loss | ($159 M) | ($259 M) | | Diluted EPS | ($1.84) | ($2.93) | - Revenue decreased 9% in fiscal 2024 compared to fiscal 2023, with declines in all four markets, most notably a 43% drop in the electronics market due to a design change by a significant customer256257 Liquidity and Capital Resources The company maintains strong liquidity with $1.63 billion in cash and restricted cash, and $3.69 billion in total debt Key Liquidity and Debt Metrics (as of June 30, 2025) | Metric | Amount (in millions) | | :--- | :--- | | Cash and cash equivalents | $909 | | Restricted cash | $724 | | Total debt obligations | $3,687 | | Available borrowing capacity | $315 | - Net cash provided by operating activities was $634 million for the fiscal year ended June 30, 2025276 - In December 2023, the company's subsidiary, Silicon Carbide LLC, received $1.0 billion in cash from two investors in exchange for a 25% equity stake, which will be used to fund capital expansion287 - During fiscal 2025, the company made total debt payments of $433 million, including $400 million in voluntary prepayments on its Term Facilities284 Quantitative and Qualitative Disclosures About Market Risk The company is exposed to foreign currency and interest rate risks, pausing its balance sheet hedging program as of September 2024 - The company is exposed to market risks from foreign currency exchange rates and interest rates294 - The company paused its balance sheet foreign exchange hedging program indefinitely as of September 30, 2024294 - A hypothetical 100 basis point increase in interest rates on variable-rate borrowings would have resulted in an additional $30 million in interest expense for the year ended June 30, 2025, if not for hedging instruments295 Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for FY2025, including balance sheets, income statements, and cash flows Consolidated Balance Sheet Summary (as of June 30, 2025) | Category | Amount (in millions) | | :--- | :--- | | Total Assets | $14,910.936 | | Total Current Assets | $3,927.154 | | Goodwill | $4,471.084 | | Total Liabilities | $6,429.653 | | Total Current Liabilities | $1,794.841 | | Long-term debt | $3,498.615 | | Total Equity | $5,998.022 | Consolidated Statement of Earnings Summary (Year Ended June 30, 2025) | Metric | Amount (in millions) | | :--- | :--- | | Revenues | $5,810.115 | | Gross Profit | $2,043.322 | | Earnings Before Income Taxes | $94.181 | | Net Earnings | $30.057 | | Net Loss Available to Common Shareholders | ($80.562) | | Diluted Loss Per Share | ($0.52) | Consolidated Statement of Cash Flows Summary (Year Ended June 30, 2025) | Category | Amount (in millions) | | :--- | :--- | | Net cash provided by operating activities | $633.6 | | Net cash used in investing activities | ($414.215) | | Net cash used in financing activities | ($451.726) | - In the fourth quarter of fiscal 2025, the company classified several entities as held-for-sale and recorded a non-cash impairment charge of $85 million. Subsequently, on August 2, 2025, an agreement was reached to sell the aerospace and defense business for $400 million492493 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None498 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025499 - There were no changes in internal control over financial reporting during the most recent quarter that have materially affected, or are reasonably likely to materially affect, internal controls502 Other Information This section discloses the termination and adoption of Rule 10b5-1(c) trading plans by CTO Julie Eng in May 2025 - Discloses the termination and adoption of Rule 10b5-1(c) trading plans by CTO Julie Eng in May 2025503 Part III Items 10-14 Information for Items 10-14 is incorporated by reference from the forthcoming 2025 Proxy Statement - Information for Items 10 (Directors, Executive Officers), 11 (Executive Compensation), 12 (Security Ownership), 13 (Certain Relationships and Related Transactions), and 14 (Principal Accountant Fees and Services) is incorporated by reference from the forthcoming 2025 Proxy Statement506511512513514 Part IV Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed as part of the Form 10-K report - This item lists all financial statements, schedules, and exhibits filed with the Form 10-K, including material contracts and certifications by the CEO and CFO516518 Form 10-K Summary The company indicates that there is no Form 10-K summary - None523