EX-99.1 2 d595548dex991.htm EX-99.1

IIVI INVESTOR PRESENTATION November 2018 Exhibit 99.1

Matters discussed in this presentation may contain forward-looking statements that are subject to risks and uncertainties. These risks and uncertainties could cause the forward-looking statements and II-VI Incorporated’s (the “Company’s”) actual results to differ materially. In evaluating these forward-looking statements, you should specifically consider the “Risk Factors” in the Company’s most recent Form 10-K and Form 10-Q. Forward-looking statements are only estimates and actual events or results may differ materially. II-VI Incorporated disclaims any obligation to update information contained in any forward-looking statement. This presentation contains certain non-GAAP financial measures. Reconciliations of non-GAAP financial measures to their most comparable GAAP financial measures are presented at the end of this presentation. Safe Harbor Statement

Regions 39% 22% 8% Europe North America China Japan ROW Q1 FY2019 Revenue 10% 21% Segments 34% 43% 23% II-VI Photonics II-VI Laser solutions II-VI Performance Products Q1 FY2019 Revenue Semi. Equip. Life Science Other Military 41% 28% 11% Markets Industrial Optical Communications Q1 FY2019 Revenue 14 Countries 52 Worldwide Locations 11,500+ Worldwide employees 314.4M Q1 FY2019 Revenue II-VI Overview Core Competency ENGINEERED MATERIALS Refers to groups II and VI of the Periodic Table of Elements “TWO SIX”

New Growth Markets EUV Lithography SIC for Wireless SIC for EV 3D Sensing Core Markets Optical Communications Industrial Lasers Military Our Core & Growth Markets

SiC for High Power Electronics Market CAGR (‘17-’21): 23% Source: Yole A world leading supplier of SiC substrates DC-DC Converter Bi-Directional Converter/ Inverter/ Electric Motor HV Battery Electric Charger Growth Applications I Silicon Carbide (SiC) for EV Applications Electric cars (EV/HEV) Solar & Wind Energy Smart Grid Power Switching GM Ford Toyota & Mazda Daimler /Mercedes-Benz Jaguar Land Rover Renault/Nissan/Mitsubishi Volvo VW/Audi/Porsche Source: Mashable 20 all electric cars by 2023 13 models by 2023 U.S.-based plant by 2021 Electrify entire portfolio by 2022 Electrify (HEV/EV) all lineup by 2020 12 All-Electric cars by 2022 Electrify entire line by 2019 300 EV/HEV by 2030 Electric Car Announcements High efficiency voltage and power conversion: SiC MOSFETs for Green Energy

Growth Applications I Silicon Carbide (SiC) for Wireless SiC for High Frequency GaN Electronics Market CAGR (‘17-’22): 15% Source: Yole A world leading supplier of SiC substrates 5G WIRELESS Remote Radio Head Beam-forming Antenna For 4G & 5G Wireless Antennas For RF Devices in Wireless Handsets SiC Substrates GaAs Epiwafers GaAs pHEMT For RF Applications in Military & Wireless 4G WIRELESS Collaboration with Sumitomo Electric Device Innovations (SEDI) II-VI 150 mm semi-insulating SiC substrates + SEDI’s leadership in GaN RF = 150 mm vertically integrated epitaxy and fabrication of GaN/SiC RF devices in U.S. Baseline GaAs RF vertically integrated capability already available in U.S. and U.K. For wireless & military: efficient, high power RF amplification with GaN/SiC HEMT

Components for 3D Sensing & LiDAR Semiconductor Lasers: VCSELs & edge emitting lasers Optics: Low angle shift filters & wide incidence angle mirrors Current market drivers: Finger Navigation, 3D sensing Emerging applications (2020): LiDAR, 3DS with Edge Emitters II-VI vertically integrated 6 inch GaAs compound semiconductor platform, one of the largest in the world VCSEL ARRAYS 940nm DFB LASERS 3D SENSING FILTER WAFERS WIDE INCIDENCE ANGLE MIRROR VCSEL Arrays For 3D Sensing CAGR (’17-23): +75% Source: Yole Laser Diodes for LiDAR CAGR (’17-22): +20% Source: Strategies Unlimited Growth Applications I 3D Sensing & LiDAR

Structural Ceramic Subsystems EUV Source System: Focusing Optics Beam Transport System CO2 System: Seed Laser, Power Amplifiers EUV Lithography System EUV Lithography already started for 7 nm node production Multiple II-VI products used in each EUV system, ~1-2% of total value Products leverage II-VI materials: ZnSe, CdTe, CVD Diamond and RBSiC REAR MIRRORS OUTPUT COUPLERS MODULATOR REACTION BONEDED SIC CVD DIAMOND EUV Lithography Systems Market CAGR (‘16-’22): 9% Source: Allied Market Research Growth Applications I EUV Lithography

High Power Semiconductor Lasers & Laser Optics A full suite of components for multiple laser modalities Strong CO2 deployed base in active use and strong secondary market Industrial laser components: 25-35% of worldwide revenue FIBER LASER OPTICS CO2 LASER OPTICS LASER BARS CUTTING HEADS DIRECT DIODE LASER ENGINE Fiber Lasers Market CAGR (‘17-‘22): +8% Direct Diode Market CAGR (‘17-‘22): +7% Source: Strategies Unlimited CO2 laser optics: 15-20% One micron products: 15-20% Laser Components, Processing Heads, Beam Delivery Optics / Components Core Market I Industrial Lasers Processing

Industry leader in ROADM solutions, 40-50% of communication sales Small amplifiers for coherent transceivers via micro components Datacom increasing as a portion of communications sales, now ~20% Upcoming market drivers 5G & CATV “fiber deep” rollouts TUNABLE OPTICAL FILTERS EDFA MICRO PUMP Optical Communications Market CAGR (’15-’21): +12% Source: Ovum II-VI product content is 20-40% of ROADM Line Card BOM value Core Market I Optical Communications Optics Laser Chip-on-Carrier Assembly Thermoelectric Cooler Optical Amplifier High Resolution Optical Channel Monitor Wavelength Selective Switch(WSS) OTDR

Military-Aerospace business serves four strategic areas Intelligence surveillance & reconnaissance (ISR) Lasers Missiles and ordnance EMI & survivability Highly differentiated core capabilities & products Materials engineered in-house Complex electro-optics sub-assemblies with high value add World leader in large sapphire panel output 24,000 sf dedicated facility F-35 Electro-Optical Targeting System (EOTS) Infrared Countermeasure Systems Market CAGR (’17-’22): +8% Source: Strategies Unlimited Core Market I Military

End Market Distribution of Full Year FY18 Revenue Reported Segments FY18 Revenue FYY18 Op Margin – GAAP FY18/FY17 Revenue Growth Industrial (Automotive) Fiber Optic & Wireless Comm. Military Semi Cap Life Science, Consumer, Other Laser Solutions ** $406M 9.5% 28% 67% (1%) 12% 3%* 7% 11% Photonics ** $487M 13.5% 10% 13% 77% 0% 3% 7% Performance Products $266M 11.6% 24% 15% (2%) 13% 40% * 19% 13% II-VI Consolidated $1,159M 11.7% 19% 33% (1%) 39% 10% 8% 10% * Now managed in Performance Products as of Q4FY18 ** The Laser Solutions and Photonics’ results adjusted for the LSG move from Laser Solutions to Photonics Segment Revenue by End Markets for Full Year FY18

End Market Distribution of Q1FY19 Revenue Reported Segments Q1FY18 Revenue Q1FY19 Revenue Q1FY19 Op Margin – GAAP Q1FY19/ Q1FY18 Revenue Growth Industrial (Automotive) Fiber Optic & Wireless Comm. Military Semi Cap Life Science, Consumer, Other Laser Solutions $88M $106M 12 % 20% 61% (1%) 13% 4% 8% 14% Photonics $116M $135M 12% 16% 11% 79% 0% 3% 7% Performance Products $58M $73M 12% 26% 19% (7%) 12% 40% 18% 11% II-VI Consolidated $262M $314M 12% 20% 30% (2%) 41% 11% 8% 10% Segment Revenue by End Markets for Q1FY19

Expectations Cash and Equivalents Cash Flow from Operations Long-Term Debt (Including current portion) FY18 FY16 FY17 Shareholder’s Equity $247M $218M $271M $161M $123M $118M $439M $235M $342M $1,024M $782M $900M Cash and Liquidity Q1 FY19 $271M $19M $517M $1,044M FY18 FY19 Gross Margin 39.8% 38.5%-41% EDBITDA 19.1% 18.5%-21% Operating Margin 11.7% 11%-13% Typical industry EPS adjustments are detailed at the end of this presentation. Financial Trends

Reconciliation Tables Three Months Ended Sep 30, 2018 Jun 30, 2018 Sep 30, 2017 Operating Income $37.2 $38.2 $29.8 Interest Expense 5.6 5.1 3.6 Other expense (income), net (0.7) (1.1) (0.7) Income taxes 6.2 7.0 5.8 Net Earnings $26.1 $27.2 $21.1 EBITDA $60.1 $62.0 $49.4 EBITDA margin 19.1% 19.3% 18.9% Interest expense 5.6 5.1 3.6 Depreciation and amortization 22.2 22.7 18.9 Income taxes 6.2 7.0 5.8 Net Earnings $26.1 $27.2 $21.1

II-VI Historical GAAP EPS and Adjusted EPS Equivalent To calculate EPS comparable to some peers, below are the values of typical adjustments used by other companies II-VI Consolidated Summary of Typical Industry Non-GAAP Adjustments Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 Q1 FY19 Amortization 3.2 3.2 3.1 3.2 3.6 3.8 3.6 3.6 3.7 Share Based Comp - COGS 0.7 0.6 0.7 0.5 1.0 0.8 0.4 0.6 1.0 Share Based Comp - SGA 3.4 3.3 3.8 3.0 5.3 4.5 3.2 3.8 4.3 M&A Exp - - - 0.3 2.0 - - - 1.9 7.3 7.1 7.6 7.0 11.9 9.1 7.2 8.0 10.9 Tax - - - (8.4) - - (0.1) (0.2) - Impact of the “Tax Cuts and Jobs Act” and Company Actions - - - - - 15.8 (6.5) (1.3) - PAT 7.3 7.1 7.6 (1.4) 11.9 24.9 0.6 6.5 10.9 Outstand Shares 63.6 64.4 65.0 65.0 65.3 65.0 65.1 65.1 66.2 EPS Impact of Typical Industry Non-GAAP Adj. 0.11 0.11 0.12 (0.02) 0.18 0.38 0.01 0.10 0.16