Financial Analysis

Contingencies Regulatory Matters In January 2025, the Company received an inquiry from BIS concerning past product sales to Huawei; the Company is cooperating with BISs inquiry and conducting an internal review of those sales to determine what products are subject to Export Administrative Regulations (EAR) and consequently restricted for export, reexport, and transfer when Huawei is a party to the transaction. The Company has stopped shipping products to Huawei. The Company is currently in discussions with BIS regarding past product sales and cannot predict the outcome of those discussions. While the Company has received requests for additional information in this matter, the Company has not yet received any determination from BIS. In the event that the Company is found to have violated the EAR, the Company may be required to incur significant penalties and/or costs or expense as a result of the inquiry and to comply with, or remedy any violations of these regulations, but at this time, the Company is unable to determine an estimate or range of loss. …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

Debt The components of debt as of the dates indicated were as follows ($000): December 31, 2025 June 30, 2025 Term A Facility, interest at adjusted SOFR, as defined, plus 1.50% $ 1,242,188 $ 624,375 Revolving Credit Facility, interest at SOFR, as defined, plus 1.50% 60,000 Debt issuance costs, Term A Facility and Revolving Credit Facility (11,806) (8,141) Term B Facility, interest at adjusted SOFR, as defined, plus 1.75% 1,080,000 2,102,358 Debt issuance costs, Term B Facility (24,352) (36,478) Borrowings on local lines of credit 4,176 2,091 Facility construction loan in Germany 16,123 17,682 5.000% Senior Notes 990,000 990,000 Debt issuance costs and discount, Senior Notes (4,463) (4,966) Total debt 3,351,866 3,686,921 Current portion of long-term debt (106,463) (188,306) Long-term debt, less current portion $ 3,245,403 $ 3,498,615 Senior Credit Facilities On July 1, 2022 (the Closing Date), Coherent entered into a credit agreement (the Credit Agreement) by and among the Company, as borrower (in such capacity, the Borrower), the lenders, and other parties thereto, and JP Morgan Chase Bank, N.A., as administrative agent and collateral agent, which provided for senior secured financing of $4.0 billion, consisting of a term loan A credit facility (the Term A Facility) maturing July 1, 2027, with an aggregate principal amount of $850 million, a term loan B credit facility (the Term B Facility, and together with the Term A Facility, the Term Facilities) maturing July 1, 2029, wit …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

The following tables summarize disaggregated revenue by market ($000): Three Months Ended December 31, Six Months Ended December 31, Markets 2025 2024 2025 2024 Datacenter & Communications $ 1,207,950 $ 904,546 $ 2,297,950 $ 1,768,188 Industrial 477,679 530,119 969,057 1,014,612 Total Revenues $ 1,685,629 $ 1,434,665 $ 3,267,007 $ 2,782,800

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Share-Based Compensation Stock Award Plans The Company grants equity awards pursuant to the Coherent Corp. Omnibus Incentive Plan (as amended and restated, the Plan). The Plan was originally approved by the Company's shareholders at the Annual Meeting in November 2018, and was subsequently amended, restated and approved by the Companys shareholders at the Annual Meetings held in November 2020, November 2023 and November 2024. The Plan provides for the grant of stock options, stock appreciation rights, restricted shares, restricted share units, deferred shares, performance shares and performance units to employees (including officers), consultants and directors of the Company. The Company has an Employee Stock Purchase Plan whereby eligible employees may authorize payroll deductions (subject to certain limitations) of up to 15% (or such lesser amount as may be determined by the plan administrator) of their wages and base salary to purchase shares at an amount which will not be less than 85% of the lower of (i) the fair market value of the common stock on the first trading day of the offering period and (ii) the fair market value of the common stock on the last trading day of the approximately six-month offering period. Share-based compensation expense for the periods indicated was as follows ($000): Three Months Ended December 31, Six Months Ended December 31, 2025 2024 2025 2024 Stock Options and Cash-Based Stock Appreciation Rights $ 1,878 $ 166 $ 2,427 $ 583 Restricted Shar …

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Fair Value of Financial Instruments The FASB defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous markets for the asset and liability in an orderly transaction between market participants at the measurement date. We estimate fair value of our financial instruments utilizing an established three-level hierarchy in accordance with U.S. GAAP. The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date as follows: Level 1 Valuation is based upon unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instruments. Level 3 Valuation is based upon other unobservable inputs that are significant to the fair value measurements. The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement. On February 23, 2022, we entered into an interest rate cap (the Cap) with an effective date of July 1, 2023. On March 20, 2023, we amended the Cap to replace the current reference rate (LIBOR) with SOFR, to be consistent with Amendment No. 1 to the Credit Agreement. See Note 7. Debt f …

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Goodwill and Other Intangible Assets Effective July 1, 2025, the Company realigned its organizational structure into two reporting segments: (i) Datacenter & Communications, and (ii) Industrial. The information in the table below reflects the impact of this segment change whereby goodwill was reallocated to the respective reporting units on the first day of fiscal 2026 using a relative fair value approach. As a result of the change in reportable segments, the Company performed an impairment assessment immediately before and immediately after the segment change became effective, and no impairment of goodwill was identified. Changes in the carrying amount of goodwill were as follows ($000): Six Months Ended December 31, 2025 Networking Materials Lasers Datacenter & Communications Industrial Total Balance-beginning of period $ 1,038,439 $ 241,467 $ 3,191,178 $ $ $ 4,471,084 Segment change (1,038,439) (241,467) (3,191,178) 1,150,570 3,320,514 Balance-beginning of period 1,150,570 3,320,514 4,471,084 Other reclassifications (1) 28,436 28,436 Foreign currency translation (175) (36,559) (36,734) Balance-end of period $ $ $ $ 1,150,395 $ 3,312,391 $ 4,462,786 (1) Other reclassifications include adjustments to goodwill classified as held-for-sale. See Note 18. Assets Held-for-Sale and Sale of Business for further information. We test goodwill for impairment annually during the fourth quarter of our fiscal year, or more frequently when events or changes in circumstances indicat …

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Income Taxes The Companys fiscal year-to-date effective income tax rate was 4% at December 31, 2025 compared to 14% for the same period in the prior fiscal year. The variance from the U.S. statutory federal income tax rate of 21% was primarily driven by differences between U.S. and foreign tax rates and discrete tax benefits related to German tax law changes, releases of uncertain tax positions, and stock-based compensation windfalls. U.S. GAAP prescribes the accounting for uncertainty in income taxes recognized in an enterprises financial statements which includes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As of December 31, 2025 and June 30, 2025, the Companys gross unrecognized tax benefit, excluding interest and penalties, was $67 million and $124 million, respectively. The Company has classified the uncertain tax positions as non-current income tax liabilities, as the amounts are not expected to be paid within one year. Due to the U.S. valuation allowance, a large portion of the gross unrecognized tax benefit will not impact the tax rate if recognized. As of December 31, 2025, $6 million of the gross unrecognized tax benefit would impact the effective tax rate if recognized. The Company recognizes interest and penalties related to uncertain tax positions in the income tax provision in the Condensed Consolidated Statements of Earnings (Loss). The …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

Leases We determine if an arrangement is a lease at inception for arrangements with an initial term of more than 12 months, and classify it as either finance or operating. Finance leases are generally those that allow us to substantially utilize or pay for the entire asset over its estimated useful life. Finance lease assets are recorded in Property, plant and equipment, net, and finance lease liabilities within Other accrued liabilities and Other liabilities on our Condensed Consolidated Balance Sheets. Finance lease assets are amortized in operating expenses on a straight-line basis over the shorter of the estimated useful lives of the assets or the lease term, with the interest component for lease liabilities included in interest expense and recognized using the effective interest method over the lease term. Operating leases are leases that do not qualify as finance leases and are recorded in Other assets and Operating lease current liabilities and Operating lease liabilities on our Condensed Consolidated Balance Sheets. Operating lease assets are amortized on a straight-line basis in operating expenses over the lease term. Our lease liabilities are recognized based on the present value of the remaining fixed lease payments, over the lease term, using a discount rate of similarly secured borrowings available to the Company. For the purpose of lease liability measurement, we consider only payments that are fixed and determinable at the time of commencement. Any variable pay …

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In December 2023, the FASB issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09). ASU 2023-09 includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, on either a prospective or retrospective basis. Early adoption is permitted. ASU 2023-09 is effective for the Companys year beginning July 1, 2025 and the new disclosure requirements will be reflected in the Companys Annual Report on Form 10-K for the year ending June 30, 2026. In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses. This ASU requires disclosure about specific types of expenses included in expense captions including purchases of inventory, employee compensation, depreciation, amortization, and depletion. This ASU is effective for our annual disclosures starting in fiscal year 2028 and interim periods starting in fiscal year 2029. Early adoption is permitted. A public entity should apply the amendments in this ASU on a prospective basis with the option to apply the standard retrospectively. The Company is currently evaluating this ASU to determine its impact on the Companys disclosures. …

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Restructuring Plans 2023 Restructuring 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. We evaluate restructuring charges in accordance with ASC 420, Exit or Disposal Cost Obligations (ASC 420), and ASC 712, Compensation-Nonretirement Post-Employment Benefits (ASC 712). In the three and six months ended December 31, 2025, these activities resulted in $12 million and $5 million, respectively, of recoveries primarily for adjustments to employee termination costs previously accrued in both periods. In the six months ended December 31, 2025 the recoveries were partially offset by site move costs. In the three months ended December 31, 2024, these activities resulted in $8 million of charges primarily for site move costs, employee termination costs and accelerated depreciation. In the six months ended December 31, 2024, these activities resulted in $32 million of charges primarily for impairment losses associated with the sale of our Newton Aycliffe business, acceleration of depreciation, employee termination and site move costs. Activity and accrual balances for the 2023 Plan were as follows for the first two quarters of fiscal 2026 and 2025 ( …

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Revenue from Contracts with Customers We disaggregate revenue by market and geography. We believe that disaggregating revenue by market and geography provides the most relevant information regarding the nature, amount, timing, and uncertainty of revenues and cash flows. We do not present other levels of disaggregation, such as by type of products, customer, contracts, duration of contracts, timing of transfer of control and sales channels, as this information is not used by our CODM to manage the business. Effective July 1, 2025, the Company aligned its reporting of revenues into two markets: (i) Datacenter & Communications, and (ii) Industrial. All prior period market and segment disclosure information has been reclassified to conform to the current reporting structure. The following tables summarize disaggregated revenue by market ($000): Three Months Ended December 31, Six Months Ended December 31, Markets 2025 2024 2025 2024 Datacenter & Communications $ 1,207,950 $ 904,546 $ 2,297,950 $ 1,768,188 Industrial 477,679 530,119 969,057 1,014,612 Total Revenues $ 1,685,629 $ 1,434,665 $ 3,267,007 $ 2,782,800 Contract Liabilities Payments received from customers are based on invoices or billing schedules as established in contracts with customers. Contract liabilities generally relate to payments received in advance of performance under the contract. Contract liabilities are recognized as revenue when the performance obligations have been satisfied. During the six month …

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Segment Reporting The Companys businesses are organized and managed into segments based on similarities in products and services. Segment determination reflects how the chief operating decision-maker (CODM) evaluates the Companys operations for decision-making operating decisions and performance assessment. Effective July 1, 2025, the Company realigned its organizational structure and now identifies multiple operating segments, which are aggregated into two reportable segments: (i) Datacenter & Communications, and (ii) Industrial. In accordance with ASC 280 Segment Reporting, the aggregation of the Companys segments is based on similarities in economic characteristics, product and service types, production processes, type or class of customers, and distribution methods. Previously, financial results had been reported in the following three segments: (i) Networking, (ii) Materials, and (iii) Lasers. Comparative prior period segment information has been recast to conform to the new segments. The Datacenter & Communications segment has locations in the United States, Australia, China, Germany, Malaysia, South Korea, Sweden, Switzerland, Thailand, the Philippines and Vietnam. This segment sells primarily into the datacenter and communications market, including transceivers, systems, subsystems, modules, components, optics, and semiconductor devices. The Industrial segment has locations in the United States, China, Finland, Germany, Italy, Japan, Malaysia, Singapore, South …

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Equity and Redeemable Preferred Stock As of December 31, 2025, the Companys amended and restated articles of incorporation authorize our board of directors, without the approval of our shareholders, to issue 5 million shares of our preferred stock. As of December 31, 2025, 2.3 million shares of mandatory preferred convertible shares had been previously issued and converted to Common Stock. In the quarter ended December 31, 2025, 75,000 shares and 140,000 shares of previously issued Series B-1 (Series B-1 Preferred Stock) and B-2 convertible preferred stock (Series B-2 Preferred Stock and, together with the Series B-1 Preferred Stock, the Series B Preferred Stock), no par value per share, respectively, were converted to 30.1 million shares of Common Stock. The majority of the Series B-1 and B-2 convertible preferred stock was converted by the holder and the remainder was converted by the Company. No Series B convertible preferred stock is outstanding at December 31, 2025. As a result of the conversion, $2.5 billion was reclassified from Mezzanine Equity to Common Stock. Series B Convertible Preferred Stock - Prior to Conversion in the quarter ended December 31, 2025 In March 2021, the Company issued 75,000 shares of Series B-1 Preferred Stock for $10,000 per share, resulting in an aggregate purchase price of $750 million. On July 1, 2022, the Company issued 140,000 shares of Series B-2 Preferred Stock for $10,000 per share and an aggregate purchase price of $1.4 billion. The s …

StockholdersEquityNoteDisclosureTextBlock · excerpt; the full note is in the filing