COHERENT CORP. (COHR)

CIK: 0000820318. SIC: 3827 Optical Instruments & Lenses. Latest 10-K as of: 2025-08-15.

SIC breadcrumb: Manufacturing > SIC Major Group 38 > SIC 3827 Optical Instruments & Lenses

SEC company page: https://www.sec.gov/edgar/browse/?CIK=820318. Latest filing source: 0000820318-25-000014.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2025-08-15. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000820318.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Financial Charts

Macro Cross-References

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Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2025-08-15. Report date: 2025-06-30.

Item 7.        MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a reader of Coherent’s financial statements with a narrative from the perspective of management. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and related notes included under Item 8 of this annual report. Coherent’s MD&A is presented in the following sections:

•Overview

•Trends and Other Matters Affecting our Business

•Critical Accounting Policies and Estimates

•Fiscal Year 2025 Compared to Fiscal Year 2024

•Fiscal Year 2024 Compared to Fiscal Year 2023

•Liquidity and Capital Resources

•Off Balance Sheet Arrangements

Forward-looking statements in Item 7 may involve risks and uncertainties that could cause results to differ materially from those projected (refer to Item 1A for discussion of these risks and uncertainties).

Overview

For an overview of our business, see Part I - Item 1. Business - General Description of Business of this Annual Report on Form 10-K for further information.

Trends and Other Matters Affecting our Business

Industry Conditions

Throughout fiscal 2025, we experienced stronger demand in our Communications market. The increase in the number of hyperscale and other cloud customers building AI datacenters and in the number and size of their AI datacenter buildouts drove demand for our datacenter transceivers. Strong demand for our new ZR/ZR+ transceiver products along with growing demand for traditional telecom transport products drove increased volumes for our telecom and other communications solutions.

Additionally, within our Industrial market, we were able to grow our industrial lasers products and services revenue in the face of relatively weak overall industrial end demand. Our revenue growth in these portions of the Industrial market is a result of our focus on higher demand applications within the Industrial market, including display and semiconductor capital equipment.

Restructuring Plans

2023 Plan

On May 23, 2023, the Board of Directors approved the 2023 Plan which includes site consolidations, facilities moves and closures, as well as the relocation and requalification of certain manufacturing facilities. These restructuring actions were intended to realign our cost structure as part of a transformation to a simpler, more streamlined, resilient and sustainable business model.

In fiscal 2025, these activities resulted in charges of $53 million, primarily for impairment losses associated with the sale of our Newton Aycliffe business, impairment of right-of-use (“ROU”) assets, employee termination costs, site move costs and accelerated depreciation. In fiscal 2024, these activities resulted in charges of $27 million, primarily for accelerated depreciation, the write-off of property and equipment, and site move costs. In fiscal 2023, these activities resulted in $119 million of charges primarily for employee termination costs, and the write-off of property and equipment, net of $65 million from reimbursement arrangements. See Note 20. Restructuring Plans to the Company’s Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information.

2025 Plan

Commencing in the quarter ended March 31, 2025, and as part of the ongoing strategic review of the Company’s business, the Company’s management approved the 2025 Plan to take a number of restructuring actions, including site consolidations, facilities moves and closures, workforce reductions, contract terminations, and certain other associated cost reductions.

In fiscal 2025, these activities resulted in $107 million of charges primarily for the write-off of property and equipment and ROU assets, employee and contract termination costs. We expect the restructuring actions to be substantially completed by the

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end of fiscal 2026. However, the actual timing and costs associated with these restructuring actions may differ from our current expectations and estimates and such differences may be material.

Synergy and Site Consolidation Plan

On May 20, 2023, the Company announced that it had accelerated some of the actions planned as part of its multi-year synergy and site consolidation efforts following the acquisition of Coherent, Inc., including site consolidations and relocations to lower cost sites. These relocations and other actions resulted in the Company achieving its previously announced $250 million synergy plan, which included savings from supply chain management, internal supply of enabling materials and components, operational efficiencies in all functions due to scale, global functional model efficiencies and consolidation of corporate costs. In fiscal 2025, the acceleration of these activities resulted in $17 million of charges primarily for overlapping labor related to transition of manufacturing operations to other sites, shut down costs and employee termination costs. In fiscal 2024, the acceleration of these activities resulted in $40 million of charges primarily for overlapping labor related to transition of manufacturing operations to other sites, shut down costs for sites being exited, accelerated depreciation and employee termination costs. In fiscal 2023, the acceleration of these activities resulted in $20 million in charges primarily for employee termination costs, the write-off of inventory for products that have been exited and shut down costs.

Impairment of Assets Held-for-Sale

In the fourth quarter of fiscal 2025, management entered into non-binding agreements to sell several entities. As a result of classifying these entities as held-for-sale, we recorded non-cash impairment charges of $85 million to Impairment of assets held-for-sale in our Consolidated Statements of Earnings (Loss) in the fourth quarter of fiscal 2025 to reduce our carrying value in these entities to fair value. See Note 21. Assets Held-for-Sale to the Company’s Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information.

Macroeconomic Conditions - Tariffs

In early 2025, the United States implemented significant new tariffs on foreign imports impacting multiple countries, commodities and industries, and these new tariffs and export restrictions also prompted retaliatory tariffs and export restrictions from certain countries. As of June 2025, certain tariffs and retaliatory tariffs have been delayed, but a number of the new tariffs remain in effect, including significant tariffs and trade sanctions between the United States and China. China has also restricted the export of certain rare earth minerals which are used in our products.

These tariffs, trade sanctions, and/or restrictions on the export of certain rare earth minerals which are used in our products did not have a material impact on our business, financial condition, operational results and/or cash flows in fiscal 2025 nor do we expect them to have a material impact on our business, financial condition, operational results and/or cash flows in fiscal 2026.

As a global company with a substantial and diversified manufacturing footprint our diverse manufacturing footprint provides us with some insulation against these tariffs, trade sanctions, and other geopolitical challenges. Our geographically diverse supply chain combined with the internal production of many of our most critical technology in-feeds provides adaptability and optionality that benefits our customers. As the tariff, trade sanctions, and export restrictions become more clear, we expect these attributes will enable us to find opportunities to moderate their impact. However, we are in a dynamic geopolitical environment, and we are not immune to any sustained disruption in global trade conditions which may create future headwinds for the Company and could result in revenue reduction, cost increases on material used in our products or significant production delays, which could adversely affect our business, financial condition, operational results and cash flows.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its Consolidated Financial Statements and accompanying notes. Note 1. Nature of Business and Summary of Significant Accounting Policies, of the Notes to our Consolidated Financial Statements contained in Item 8 of this Annual Report on Form 10-K, describes the significant accounting policies and accounting methods used in the preparation of the Company’s Consolidated Financial Statements. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates.

Management has discussed the development and selection of the critical accounting policies and estimates described below with the Audit Committee of the Board of Directors and the Audit Committee has reviewed the related disclosure. In addition, there are other items within our Consolidated Financial Statements that require estimation but are not deemed critical. Changes in estimates used in these and other items could impact the Consolidated Financial Statements.

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Goodwill

We test goodwill for impairment annually, and when events or changes in circumstances indicate that goodwill might be impaired. The determination of whether goodwill is impaired requires us to make judgments based on long-term projections of future performance. Estimates of fair value are based on our projection of revenues, operating costs and cash flows of each reporting unit, considering historical and anticipated results and general economic and market conditions and their projections. For fiscal year 2025, we performed a quantitative assessment. The fair values of the reporting units were determined using a discounted cash flow analysis with projected financial information based on our most recently completed long-term strategic planning processes and also considers the current financial performance compared to our prior projections of the reporting units, as well as a market analysis. Determination of the fair value requires discretion and the use of estimates by management. If actual results are not consistent with management’s estimates and assumptions, a material goodwill impairment charge could occur, which could have a material adverse effect on our consolidated financial statements.

Due to the cyclical nature of our business, and the other factors described in the section on Risk Factors set forth in Item 1A of this Annual Report on Form 10-K, the profitability of our individual reporting units may periodically be affected by downturns in customer demand, operational challenges and other factors. If material adverse conditions occur that impact one or more of our reporting units, our determination of future fair value might not support the carrying amount of one or more of our reporting units, and the related goodwill would need to be impaired. We will continue to monitor any changes to our assumptions and will evaluate goodwill as deemed warranted during future periods.

Income Taxes

The Company prepares and files tax returns based on its interpretation of tax laws and regulations and records estimates based on these judgments and interpretations. In the normal course of business, the Company’s tax returns are subject to examination by various taxing authorities, which may result in future tax, interest and penalty assessments by these authorities. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The amount of unrecognized tax benefits is adjusted for changes in facts and circumstances. For example, adjustments could result from significant amendments to existing tax law and the issuance of regulations or interpretations by the taxing authorities, new information obtained during a tax examination, or resolution of an examination. The Company believes that its estimates for uncertain tax positions are appropriate and sufficient to pay assessments that may result from examinations of its tax returns. The Company recognizes both accrued interest and penalties related to unrecognized tax benefits in income tax expense.

Management evaluates the realizability of deferred tax assets for each jurisdiction in which it operates. If the Company experiences cumulative pretax income in a particular jurisdiction in a three-year period including the current and prior two years, management normally concludes that the income tax assets will more likely than not be realizable and no valuation allowance is recognized, unless known or planned operating developments, or changes in tax laws, would lead management to conclude otherwise. However, if the Company experiences cumulative pretax losses in a particular jurisdiction in a three-year period, management then considers a series of factors in the determination of whether the deferred tax assets can be realized. The Company has recorded valuation allowances against certain of its deferred tax assets, primarily those that have been generated from net operating losses in certain foreign taxing jurisdictions and acquired U.S. carryforwards. In evaluating whether the Company would more likely than not recover these deferred tax assets, it has not assumed any future taxable income or tax planning strategies in the jurisdictions associated with these carryforwards where history does not support such an assumption. Implementation of tax planning strategies to recover these deferred tax assets or future income generation in these jurisdictions could lead to the reversal of these valuation allowances and a reduction of income tax expense.

The OECD, a global policy forum, introduced a framework to implement a global minimum tax of 15% which would apply to multinational corporations, referred to as Pillar Two. Nearly all OECD member jurisdictions have agreed in principle to adopt these provisions and numerous jurisdictions have enacted legislation, including jurisdictions where the Company operates, with a subset of the rules becoming effective for our fiscal year beginning on July 1, 2024, and the remaining rules becoming effective for our fiscal year beginning on July 1, 2025, or in later periods. The Company is continuing to analyze the Pillar Two rules as countries implement additional legislation. Implementation of the OECD proposal may have a material impact on the Company's Consolidated Financial Statements in the future.

Fiscal Year 2025 Compared to Fiscal Year 2024

The Company reports its financial results in the following three designated segments: (i) Networking, (ii) Materials, and (iii) Lasers.

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The following table sets forth select items from our Consolidated Statements of Earnings (Loss) for the years ended June 30, 2025 and 2024 ($ in millions except per share information) (1):

Year Ended June 30, 2025

Year Ended June 30, 2024

% of

Revenues

% of

Revenues

Total revenues

$

5,810 

100 

%

$

4,708 

100 

%

Cost of goods sold

3,767 

65 

3,252 

69 

Gross margin

2,043 

35 

1,456 

31 

Operating expenses:

Research and development

582 

10 

479 

10 

Selling, general and administrative

926 

16 

854 

18 

Restructuring charges

160 

3 

27 

1 

Impairment of assets held-for-sale

85 

1 

— 

— 

Interest and other, net

196 

3 

244 

5 

Earnings (loss) before income taxes

94 

2 

(148)

(3)

Income tax expense

64 

1 

11 

— 

Net earnings (loss)

30 

1 

(159)

(3)

Net loss attributable to noncontrolling interests

(19)

— 

(3)

— 

Net earnings (loss) attributable to Coherent Corp.

$

49 

1 

%

$

(156)

(3)

%

Diluted earnings (loss) per share

$

(0.52)

$

(1.84)

(1) Some amounts may not add due to rounding.

Consolidated

Revenues. Revenues for the year ended June 30, 2025 increased 23% to $5,810 million, compared to $4,708 million for the prior fiscal year.

Revenues increased $1,162 million, or 51%, in the communications market, with increases in datacom driven primarily by ongoing strong AI datacenter demand and growth in our telecom revenue due to higher demand in the data center interconnect and the telecom transport markets. In our remaining markets, revenue decreased $60 million, or 2%. Within these markets, revenue growth in display capital equipment and in semiconductor capital equipment volumes was more than offset by soft demand due to the macroeconomic environment in broad-based industrial end markets, including decreases in demand in our Silicon Carbide business, which was consistent with softer end market demand in the automotive market.

From a segment perspective, Networking revenues increased $1,126 million year-over-year, due to strong AI datacenter demand in our communications market and the growth in telecom. Lasers revenue increased $40 million year-over-year reflecting higher volumes of annealing lasers in our display capital equipment market partially offset by continued soft demand in precision manufacturing. Materials decreased $63 million year-over-year, primarily due to softness in the Silicon Carbide business.

Gross margin. Gross margin for the year ended June 30, 2025 was $2,043 million, or 35%, of total revenues, compared to $1,456 million, or 31% of total revenues, for fiscal 2024, an increase of 424 basis points. The increase as a percent of revenue for fiscal 2025 was primarily due to higher revenue volume particularly in the communications market in the Networking segment, improvements in both pricing optimization and cost reductions, partially offset by unfavorable mix and foreign exchange impacts. Cost reductions included both lower manufacturing costs and improvements in manufacturing yields.

Research and development. Research and development (“R&D”) expenses for the fiscal year ended June 30, 2025 were $582 million, or 10% of revenues, compared to $479 million, or 10% of revenues, last fiscal year. The increase of $103 million for fiscal 2025 was primarily related to continued investment in our product portfolios, particularly in datacom. We continue to focus on investing our R&D in those projects with the highest return-on-investment.

Selling, general and administrative. Selling, general and administrative (“SG&A”) expenses for the year ended June 30, 2025 were $926 million, or 16% of revenues, compared to $854 million, or 18% of revenues, last fiscal year. The decrease in SG&A as a percentage of revenue for fiscal 2025 compared to fiscal 2024 was primarily the result of higher sales volumes and lower executive transition costs partially offset by the impact of higher variable and share-based compensation.

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Restructuring charges. Restructuring charges for the year ended June 30, 2025 were $160 million, or 3% of revenues. The restructuring charges consisted primarily of asset write-offs, employee termination costs, move costs, contract termination costs and accelerated depreciation due to the consolidation and closure of certain manufacturing sites as well as impairment losses associated with the sale of our Newton Aycliffe business. Restructuring charges related to our 2023 Restructuring Plan for the year ended June 30, 2024 were $27 million, or 1% of revenues, and consisted primarily of severance, accelerated depreciation, equipment write-offs and move costs due to the consolidation of certain manufacturing sites. See Note 20. Restructuring Plans to the Company’s Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information.

Impairment of assets held-for-sale. Impairment of assets held-for-sale for the year ended June 30, 2025 were $85 million, or 1% of revenues and represented non-cash impairment charges to reduce our carrying value in entities held-for-sale at June 30, 2025 to fair value. See Note 21. Assets Held-for-Sale to the Company’s Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information.

Interest and other, net. Interest and other, net for the year ended June 30, 2025 was expense of $196 million compared to expense of $244 million last fiscal year, a decrease of $48 million. Included in Interest and other, net, were interest expense on borrowings, foreign currency gains and losses, amortization of debt issuance costs, equity gains and losses from unconsolidated investments, interest and dividend income on excess cash balances and income from an insurance settlement. The decrease of $48 million in comparison to fiscal 2024 was driven by driven by $45 million lower interest expense, $8 million higher interest income and $8 million higher income from insurance settlements partially offset by $19 million higher foreign exchange net losses. The $45 million lower interest expense was primarily due to lower interest expense on our New Term B Loans resulting from lower balances and lower interest rates partially offset by lower interest expense benefit from our interest rate cap and swap. The $8 million higher interest and dividend income is primarily due to increases in interest rates earned on investments as well as the increase in average restricted cash balances due to the timing of receipt from our investment in Silicon Carbide LLC in the second quarter of fiscal 2024. The $19 million higher foreign exchange net losses were primarily due to higher volatility of exchange rates, particularly the Euro, during fiscal 2025 in addition to the cessation of our balance sheet hedging program at the end of September 2024.

Income taxes. Our effective income tax rate for fiscal 2025 was 68%, compared to an effective tax rate of (8)% last fiscal year. The difference between our effective tax rate and the U.S. statutory rate of 21% was due to tax rate differentials between U.S. and foreign jurisdictions. The fiscal 2025 rate was impacted by the classification of assets held for sale and an increase in the U.S. valuation allowance.

Net loss attributable to noncontrolling interests. Net loss attributable to noncontrolling interests for the year ended June 30, 2025 was $19 million, compared to $3 million last fiscal year and represents the noncontrolling interest holders’ shares of losses of Silicon Carbide LLC. See Note 11. Noncontrolling Interests to the Company’s Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information.

Segment Reporting

Revenues and segment profit for our reportable segments are discussed below. During the first quarter of fiscal 2025 as a result of a new CEO joining the Company in the fourth quarter of fiscal 2024, our Chief Operating Decision Maker (“CODM”) implemented changes in the measure he uses to allocate resources and assess performance. Our CODM now evaluates each segment’s performance and allocates resources based on segment revenue and segment profit, instead of operating income, as our CODM believes segment profit is a more comprehensive profitability measure for each operating segment. Segment profit includes operating expenses directly managed by operating segments, including research and development, direct sales, marketing and administrative expenses. Segment profit does not include share-based compensation, acquisition or integration related costs, amortization and impairment of acquisition-related intangible assets, restructuring charges, impairment charges on assets held-for-sale, and certain other charges. Additionally, effective the first quarter of fiscal 2025, we no longer allocate Corporate strategic research and development, strategic marketing and sales expenses and shared general and administrative expenses, as these expenses are not directly attributable to our operating segments. Management believes segment profit to be a useful measure for investors, as it reflects the results of segment performance over which management has direct control and is used by management in its evaluation of segment performance. See Note 14. Segment and Geographic Reporting to the Company’s Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information on the Company’s reportable segments and for the reconciliation of the Company’s segment profit to earnings (loss) before income taxes, which is incorporated herein by reference.

Comparative prior year segment information has been recast to conform to the new segment profitability measure. The change in our operating segment measure had no impact on our previously reported consolidated results of operations, financial condition, or cash flows.

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Networking ($ in millions)

Year Ended

June 30,

% Increase

2025

2024

Revenues

$

3,421 

$

2,296 

49 

%

Segment profit

$

644 

$

354 

82 

%

Revenues for the year ended June 30, 2025 for Networking increased 49% to $3,421 million, compared to $2,296 million for last fiscal year. The increase in revenues of $1,125 million during fiscal 2025 was primarily due to increased AI datacenter related revenue in our communications market resulting from increased volumes in the datacom vertical and growth in the telecom vertical due to increased demand in data center interconnect and the telecom transport market.

Segment profit for the year ended June 30, 2025 for Networking increased 82% to $644 million, compared to segment profit of $354 million last fiscal year. The increase in segment profit for fiscal 2025 was driven by $1,125 million higher revenues partially offset by higher R&D investments in our product portfolio.

Materials ($ in millions)

Year Ended

June 30,

% Increase (Decrease)

2025

2024

Revenues

$

954 

$

1,017 

(6)

%

Segment profit

$

355 

$

297 

19 

%

Revenues for the fiscal year ended June 30, 2025 for Materials decreased 6% to $954 million, compared to revenues of $1,017 million last fiscal year. The decrease in revenues during the current fiscal year was primarily related to decreases of $71 million in the electronics market primarily due to weak automotive and Silicon Carbide end market demand and $29 million in the industrial market due to macroeconomic conditions, partially offset by $33 million higher volumes in the datacom vertical within the communications market.

Segment profit for the fiscal year ended June 30, 2025 for Materials increased 19%, with segment profit of $355 million in the current year, compared to segment profit of $297 million last fiscal year. The increase in segment profit during the current fiscal year was primarily driven by favorable product mix, improvements in pricing optimization and lower manufacturing costs, partially offset by higher R&D investments in our product portfolio and higher variable compensation.

Lasers ($ in millions)

Year Ended

June 30,

% Increase

2025

2024

Revenues

$

1,435 

$

1,395 

3 

%

Segment profit

$

317 

$

207 

53 

%

Revenues for the fiscal year ended June 30, 2025 for Lasers increased 3% to $1,435 million, compared to revenues of $1,395 million last fiscal year. The increase was primarily related to $73 million higher shipments of laser systems in our display capital equipment market partially offset by lower precision manufacturing shipments.

Segment profit for the fiscal year ended June 30, 2025 for Lasers increased 53%, with segment profit of $317 million in the current year, compared to segment profit of $207 million last fiscal year. The higher segment profit was driven by favorable product mix, higher revenue volumes, improvements in pricing optimization and lower manufacturing costs and SG&A expenses.

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Fiscal Year 2024 Compared to Fiscal Year 2023

The following table sets forth select items from our Consolidated Statements of Earnings (Loss) for the years ended June 30, 2024 and 2023 ($ in millions except per share information) (1):

Year Ended

Year Ended

June 30, 2024

June 30, 2023

% of

Revenues

% of

Revenues

Total revenues

$

4,708 

100 

%

$

5,160 

100 

%

Cost of goods sold

3,252 

69 

3,542 

69 

Gross margin

1,456 

31 

1,618 

31 

Operating expenses:

Research and development

479 

10 

500 

10 

Selling, general and administrative

854 

18 

1,037 

20 

Restructuring charges

27 

1 

119 

2 

Interest and other, net

244 

5 

318 

6 

Loss before income taxes

(148)

(3)

(356)

(7)

Income tax expense (benefit)

11 

— 

(96)

(2)

Net loss

(159)

(3)

(259)

(5)

Net loss attributable to noncontrolling interests

(3)

— 

— 

— 

Net loss attributable to Coherent Corp.

$

(156)

(3)

%

$

(259)

(5)

%

Diluted loss per share

$

(1.84)

$

(2.93)

(1) Some amounts may not add due to rounding.

Consolidated

Revenues. Revenues for the year ended June 30, 2024 decreased 9% to $4,708 million, compared to $5,160 million for fiscal 2023.

Revenues decreased in all four markets, with the largest decline, $270 million, or 43%, in the electronics market, primarily from lower volumes in the consumer electronics vertical, largely due to a design change implemented by a significant electronics customer. Revenues decreased by $82 million, or 17% in the instrumentation market due to decreased volumes in the life sciences vertical from continued inventory digestion by our customers and in the industrial market by $81 million, or 5%, as a result of decreased shipments in the precision manufacturing vertical primarily due to macroeconomic conditions. In addition, revenues decreased $20 million, or 1%, in the communications market, primarily due to decreased volumes in the telecom vertical as our communications service provider customers continued to work down their inventory levels with reduced capital spending, partially offset by increased shipments in the datacom vertical driven by increased AI-related datacom shipments.

From a segment perspective, Materials decreased $333 million from fiscal 2023, primarily due to lower demand for sensing products and other consumer applications in the consumer electronics vertical within the electronics market for the reasons discussed above. Networking revenues decreased $45 million from fiscal 2023, with decreases from the telecom vertical partially offset by increases in the datacom vertical, both in our communications market, for the reasons discussed above. Lasers revenue decreased $74 million from fiscal 2023 due to lower demand in the life sciences vertical in the instrumentation market and to lower demand in the precision manufacturing and semiconductor and display capital equipment verticals in the industrial end market.

Gross margin. Gross margin for the year ended June 30, 2024 was $1,456 million, or 31%, of total revenues, compared to $1,618 million, or 31% of total revenues, for fiscal 2023, a slight decrease of 43 basis points. During fiscal 2023, the Company recorded $158 million in Cost of goods sold related to the fair value adjustment on acquired inventory from the acquisition of Coherent, Inc. (“Merger”). Gross margin, excluding the fair value adjustment on acquired inventory, decreased 349 basis points for fiscal 2024 compared to fiscal 2023 primarily due to lower revenues, less favorable sales mix especially in the datacom vertical in the communications market, underutilized operating capacity in several plants, shut down costs related to site consolidations, lower yields in the datacom vertical, higher costs related to product lines that are being exited, higher inventory provisions and the unfavorable foreign exchange rates.

Research and development. R&D expenses for the fiscal year ended June 30, 2024 were $479 million, or 10% of revenues, compared to $500 million, or 10% of revenues, for fiscal 2023. The decrease of $21 million for fiscal 2024 is due to all three segments and was driven by lower costs due to the consolidation of sites and our efforts to control costs. The R&D expenses are

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primarily related to our continued investment in new products and platform technologies in an effort to accelerate our organic growth across all of our businesses, including significant investments in datacom transceivers for AI, indium phosphide and gallium arsenide semiconductor lasers, silicon carbide materials, and lasers for display processing, semiconductor capital equipment, and instrumentation.

Selling, general and administrative. Selling, general and administrative (“SG&A”) expenses for the year ended June 30, 2024 were $854 million, or 18% of revenues, compared to $1,037 million, or 20% of revenues, for fiscal 2023. The decrease in SG&A as a percentage of revenue for fiscal 2024 compared to fiscal 2023 was primarily the result of lower amortization expense of $117 million resulting from (1) the Merger, as backlog intangibles were fully amortized in fiscal 2023, (2) lower amortization for tradenames impaired in the fourth quarter of fiscal 2023, and (3) $31 million charges for impairment of certain tradename and customer list intangibles assets in fiscal 2023. In addition, SG&A decreased due to lower charges related to the Merger, including $39 million lower transaction fees and financing, and lower one-time expense of $18 million related to share-based compensation resulting from the Merger, as well as lower costs due to the consolidation of sites and our efforts to control costs, partially offset by the impact of lower revenues.

Restructuring Charges. Restructuring charges related to our 2023 Plan for the year ended June 30, 2024 were $27 million, or 1% of revenues, and consist primarily of accelerated depreciation, equipment write-offs and move costs due to the consolidation of certain manufacturing sites. Restructuring charges related to our 2023 Plan for the year ended June 30, 2023 were $119 million, or 2% of revenues, and consisted of severance and equipment write-offs, net of reimbursements, due to the consolidation of certain manufacturing sites. See Note 20. Restructuring Plans to the Company’s Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information.

Interest and other, net. Interest and other, net for the year ended June 30, 2024 was expense of $244 million compared to expense of $318 million for fiscal 2023, a decrease of $75 million. Included in Interest and other, net, were interest expense on borrowings, Merger financing fees (fiscal 2023), foreign currency gains and losses, amortization of debt issuance costs, equity gains and losses from unconsolidated investments, and interest income on excess cash balances. The decrease of $75 million in comparison to fiscal 2023 was driven by driven by $39 million incremental interest and dividend income due to increases in interest and dividend rates earned on investments, as well as the increase in restricted cash balances and $35 million incurred in the prior year related to financing of the Merger. In addition, interest expense increased $2 million due to higher interest rates on our Term facilities, net of higher benefit from our interest rate cap and swap.

Income taxes. Our effective income tax rate for fiscal 2024 was (8)%, compared to an effective tax rate of 27% for fiscal 2023. The difference between our effective tax rate and the U.S. statutory rate of 21% was due to the establishment of a valuation allowance related to certain US deferred tax assets.

Net loss attributable to noncontrolling interests. Net loss attributable to noncontrolling interests for the year ended June 30, 2024 was $3 million, and represents the noncontrolling interest holders’ shares of losses of Silicon Carbide LLC after the close of the transaction on December 4, 2023. See Note 11. Noncontrolling Interests to the Company’s Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information.

Segment Reporting

For a discussion of revenues and segment profit measures, refer to our disclosure under “Segment Reporting” within “Fiscal Year 2025 Compared to Fiscal Year 2024” above.

Comparative prior year segment information has been recast to conform to the new segment profitability measure. The change in our operating segment measure had no impact on our previously reported consolidated results of operations, financial condition, or cash flows.

Networking ($ in millions)

Year Ended

June 30,

%

Decrease

2024

2023

Revenues

$

2,296 

$

2,341 

(2)

%

Segment profit

$

354 

$

465 

(24)

%

Revenues for the year ended June 30, 2024 for Networking decreased 2% to $2,296 million, compared to $2,341 million for fiscal year 2023. The decrease in revenues of $45 million during fiscal 2024 was primarily due to decreased volumes year-over-year in the telecom vertical as our communications service provider customers continue to work down their inventory levels with reduced capital spending, partially offset by increases in the datacom vertical driven by increased AI-related datacom transceivers shipments, both within the communications market.

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Segment profit for the year ended June 30, 2024 for Networking decreased 24% to $354 million, compared to segment profit of $465 million for fiscal year 2023. The decrease in segment profit for fiscal 2024 was driven by $45 million lower revenues and lower margin percentage. The margin percentage was lower than fiscal 2023 due to less favorable sales mix in the datacom vertical, the impact of fixed manufacturing costs as a percentage of revenues on lower revenues in the telecom vertical, lower yields in the datacom vertical and higher inventory provisions related to products that are being exited.

Materials ($ in millions)

Year Ended

June 30,

%

Decrease

2024

2023

Revenues

$

1,017 

$

1,350 

(25)

%

Segment profit

$

297 

$

392 

(24)

%

Revenues for the fiscal year ended June 30, 2024 for Materials decreased 25% to $1,017 million, compared to revenues of $1,350 million for fiscal year 2023. The decrease in revenues during fiscal 2024 was primarily related to a decrease of $265 million in the electronics market mostly due to lower volumes in our consumer electronics vertical largely due to a design change implemented by a significant electronics customer, partially offset by higher shipments in our automotive vertical driven by electric vehicles, as well as decreases in shipments to a lesser extent derived from macroeconomic conditions in our precision manufacturing and semiconductor capital equipment verticals in the industrial market.

Segment profit for the fiscal year ended June 30, 2024 for Materials decreased 24%, with segment profit of $297 million in fiscal 2023, compared to segment profit of $392 million for fiscal year 2023. The decrease in segment profit during fiscal 2024 was driven by $333 million lower revenues and higher costs for sites being shutdown.

Lasers ($ in millions)

Year Ended

June 30,

%

Decrease

2024

2023

Revenues

$

1,395 

$

1,469 

(5)%

Segment profit

$

207 

$

271 

(24)%

Revenues for the fiscal year ended June 30, 2024 for Lasers decreased 5% to $1,395 million, compared to revenues of $1,469 million for fiscal 2023. The decrease was primarily due to $56 million lower shipments to the instrumentation market, primarily in the life sciences vertical where we saw continued inventory digestion by our customers, and an $18 million drop in the industrial market as a result of lower volumes in our precision manufacturing and display capital equipment verticals due to macroeconomic conditions, partially offset by higher volumes in our semiconductor capital equipment display vertical.

Segment profit for the fiscal year ended June 30, 2024 for Lasers decreased 24%, with segment profit of $206.8 million in the current year, compared to segment profit of $270.6 million for fiscal 2023. The lower segment profit was driven by lower revenues and lower gross margin percentage, due to less favorable mix within the industrial and instrumentation markets, the unfavorable impact of fixed manufacturing costs with lower revenues and higher inventory provisions.

Liquidity and Capital Resources

Historically, our primary sources of cash have been provided from operations, long-term borrowings, and advance funding from customers. Other sources of cash include proceeds from the issuance of equity, proceeds received from the exercises of stock options, and sale of equity investments and businesses. Our historic uses of cash have been for business acquisitions, capital expenditures, investments in research and development, payments of principal and interest on outstanding debt obligations, payments of debt and equity issuance costs to obtain financing and payments in satisfaction of employees’ minimum tax obligations. Supplemental information pertaining to our sources and uses of cash for the periods indicated is presented as follows:

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Sources (uses) of cash (in millions):

Year Ended June 30,

2025

2024

2023

Net cash provided by operating activities

$

634 

$

546 

$

634 

Net proceeds from debt and equity issuances, including noncontrolling interest holders

— 

968 

1,358 

Proceeds from exercises of stock options and purchases of stock under employee stock purchase plan

50 

42 

24 

Proceeds from long-term borrowings and revolving credit facilities

54 

19 

3,715 

Proceeds from the sale of business

27 

— 

— 

Payments on Convertible Debt and Finisar Notes

— 

— 

(4)

Cash paid for dividends

(11)

— 

(28)

Debt issuance costs

— 

— 

(127)

Purchases of businesses, net of cash acquired

— 

— 

(5,489)

Effect of exchange rate changes on cash and cash equivalents and other items

76 

(1)

(4)

Other investing and financing

(1)

(5)

(5)

Payments in satisfaction of employees’ minimum tax obligations

(54)

(22)

(54)

Payments on existing debt and revolving credit facilities

(489)

(248)

(1,330)

Additions to property, plant & equipment

(441)

(347)

(436)

Net cash provided by operating activities:

Net cash provided by operating activities was $634 million during the current fiscal year ended June 30, 2025 compared to $546 million of cash provided by operating activities during the same period last fiscal year. The increase in cash flows provided by operating activities during the year ended June 30, 2025 compared to the same period last fiscal year was primarily due to higher earnings partially offset by increases in accounts receivables and inventories as a result of higher revenues.

Net cash provided by operating activities was $546 million and $634 million for the fiscal years ended June 30, 2024 and 2023, respectively. The decrease in cash flows provided by operating activities during the fiscal year ended June 30, 2024 compared to the fiscal year ended June 30, 2023 was primarily due to lower non-cash adjustments partially offset by lower losses.

Net cash used in investing activities:

Net cash used in investing activities was $414 million for the fiscal year ended June 30, 2025, compared to net cash used of $351 million for the same period last fiscal year. Higher cash used to fund capital expenditures of $94 million year-over-year was partially offset by $27 million cash received from the sale of a business.

Net cash used in investing activities was $0.4 billion and $5.9 billion for the fiscal years ended June 30, 2024 and 2023, respectively. In fiscal 2023, $5.5 billion was used to fund the Merger. Cash used to fund capital expenditures decreased by $89 million during the fiscal year ended June 30, 2024 compared to the fiscal year ended June 30, 2023.

Net cash provided by (used in) financing activities:

Net cash used in financing activities was $452 million for the fiscal year ended June 30, 2025, compared to net cash provided by financing activities of $758 million for the same period last fiscal year. Cash outflows for the current fiscal year were primarily payments on existing debt. Financing inflows in the prior year included the $1.0 billion contribution from noncontrolling interests and proceeds from employee stock purchases, partially offset by payments on existing debt and equity issuance costs related to the contribution from noncontrolling interests.

Net cash provided by financing activities was $758 million for the year ended June 30, 2024 compared to net cash provided by financing activities of $3,554 million for the year ended June 30, 2023. Financing inflows in fiscal 2024 included the $1.0 billion contribution from noncontrolling interests and proceeds from employee stock purchases, partially offset by payments on existing debt and equity issuance costs related to the contribution from noncontrolling interests. Cash inflows for fiscal 2023 were from borrowings under the New Term Facilities, defined below, as well the net proceeds from the issuance of Coherent’s Series B-2 Convertible Preferred Stock. Financing outflows included payments to settle the Company’s existing senior credit facilities.

Senior Credit Facilities

On July 1, 2022, Coherent entered into a Credit Agreement by and among the Company, the lenders, and other parties thereto, and JP Morgan Chase Bank, N.A., as administrative agent and collateral agent, which provides for senior secured financing of $4.0 billion, consisting of a term loan A credit facility (the “Term A Facility”), with an aggregate principal amount of $850

44

million, a term loan B credit facility (the “Term B Facility” and, together with the Term A Facility, the “Term Facilities”), with an aggregate principal amount of $2,800 million, and a revolving credit facility (the “Revolving Credit Facility” and, together with the Term Facilities, the “Senior Credit Facilities”), in an aggregate available amount of $350 million, including a letter of credit sub-facility of up to $50 million. On March 31, 2023, Coherent entered into Amendment No. 1 to the Credit Agreement, which replaced the adjusted LIBOR-based rate of interest therein with an adjusted Secured Overnight Financing Rate (“SOFR”) based rate of interest. As amended, the Term A Facility and the Revolving Credit Facility each bear interest at an adjusted SOFR rate subject to a 0.10% floor plus a range of 1.75% to 2.50%, based on the Company’s total net leverage ratio. The Term A Facility and the Revolving Credit Facility borrowings bear interest at adjusted SOFR plus 1.85% as of June 30, 2025. On April 2, 2024, Coherent entered into Amendment No. 2 to the Credit Agreement, under which the principal amount of term B loans outstanding under the Credit Agreement (the “Existing Term B Loans”) were replaced with an equal amount of new term loans (the “New Term B Loans”) having substantially similar terms as the Existing Term B Loans, except with respect to the interest rate applicable to the New Term B Loans and certain other provisions. On January 2, 2025, Coherent entered into Amendment No. 3 to the Credit Agreement, under which the principal amount of the New Term B Loans were replaced with an equal amount of new term loans (the “New Term B-2 Loans”) having substantially similar terms as the New Term B Loans, except with respect to the interest rate applicable to the New Term B-2 Loans and certain other provisions. As further amended, the New Term B-2 Loans bear interest at a SOFR rate (subject to a 0.50% floor) plus 2.00% as of June 30, 2025. The maturity of the New Term B-2 Loans and revolving credit facility remains unchanged. In relation to the Term Facilities, the Company incurred expense of $192 million for the fiscal year ended June 30, 2025, which is included in Interest expense in the Consolidated Statements of Earnings (Loss). On July 1, 2023, our interest rate cap became effective, which together with our interest rate swap (through September 30, 2024), reduced interest expense by $32 million during the fiscal year ended June 30, 2025.

During the fiscal year ended June 30, 2025, the Company made payments of $433 million for the Term Facilities, including voluntary prepayments of $400 million.

As of June 30, 2025, the Company had no borrowings outstanding under the Revolving Credit Facility.

Weighted Average Interest Rate

The weighted average interest rate of total borrowings was 6% and 7% for the years ended June 30, 2025 and 2024, respectively.

Our cash position, borrowing capacity and debt obligations are as follows (in millions):

June 30, 2025

June 30, 2024

Cash and cash equivalents

$

909 

$

926 

Restricted cash, current

9 

174 

Restricted cash, non-current

715 

690 

Available borrowing capacity under Revolving Credit Facility

315 

346 

Total debt obligations

3,687 

4,100 

Other Liquidity

On December 4, 2023, the Company completed two investment agreements under which Silicon Carbide LLC, a Company subsidiary, received $1.0 billion cash in exchange for 25% of the equity of that entity. Such funds have and will continue to be used primarily to fund future capital expansion in our silicon carbide business and will enable us to increase our available free cash flow to provide greater financial and operational flexibility to execute our capital allocation priorities. See Note 11. Noncontrolling Interests to the Company’s Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further information.

The Company believes existing cash, cash flow from operations, and available borrowing capacity from its Senior Credit Facilities will be sufficient to fund its needs for working capital, capital expenditures, repayment of scheduled long-term borrowings and lease obligations, investments in R&D, and internal and external growth objectives at least through fiscal year 2026.

Our cash and cash equivalent balances are generated and held in numerous locations throughout the world, including amounts held outside the United States. As of June 30, 2025, we held approximately $813 million of cash, cash equivalents and restricted cash outside of the United States. Generally, cash balances held outside the United States could be repatriated to the United States.

At June 30, 2025, we had $724 million of restricted cash, which includes $720 million at our Silicon Carbide LLC that is restricted for use by only that subsidiary.

45

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements as defined by Regulation S-K of the Securities Act of 1933.

Contractual Obligations

As of June 30, 2025, in the ordinary course of business, we had total estimated purchase commitments from vendors of approximately $1,092 million. In addition, as of June 30, 2025, we had obligations under our operating leases of approximately $263 million, $58 million of which will be paid in the fiscal year 2026.

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