Item 2. 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 Condensed Consolidated Financial Statements and related notes included under Item 1 of this Quarterly Report on Form 10-Q. Coherent’s MD&A is presented in the following sections:

• Forward-Looking Statements

• Overview

• Trends and Other Matters Affecting Our Business

• Critical Accounting Estimates

• Results of Operations

• Liquidity and Capital Resources

Forward-looking statements in Item 2 may involve risks and uncertainties that could cause results to differ materially from those projected (refer to Part II Item 1A for discussion of these risks and uncertainties).

Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q are forward-looking statements as defined by Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding projected growth rates, markets, product development, financial position, capital expenditures and foreign currency exposure. Forward-looking statements are also identified by words such as “expects,” “anticipates,” “intends,” “believes,” “plans,” “projects” or similar expressions.

Although our management considers the expectations and assumptions on which the forward-looking statements in this Quarterly Report on Form 10-Q are based to have a reasonable basis, there can be no assurance that management’s expectations, beliefs or projections as expressed in the forward-looking statements will actually occur or prove to be correct. In addition to general industry and global economic conditions, factors that could cause actual results to differ materially from those discussed in the forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to: (i) the failure of any one or more of the expectations or assumptions on which such forward-looking statements are based to prove to be correct; and (ii) the risks relating to forward-looking statements and other “Risk Factors” discussed in Item 1A in this Quarterly Report on Form 10-Q, the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024 and in the Company's other reports filed with the Securities and Exchange Commission. The Company disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events or developments, or otherwise.

In addition, we operate in a highly competitive and rapidly changing environment; new risk factors can arise, and it is not possible for management to anticipate all such risk factors, or to assess the impact of all such risk factors on our business or the extent to which any individual risk factor, or combination of risk factors, may cause results to differ materially from those contained in any forward-looking statement. The forward-looking statements included in this Quarterly Report on Form 10-Q are based only on information currently available to us and speak only as of the date of this report. We do not assume any obligation, and do not intend, to update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by the securities laws. Investors should, however, consult any further disclosures of a forward-looking nature that the Company may make in its subsequent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, or other disclosures filed with or furnished to the SEC.

Investors should also be aware that, while the Company does communicate with securities analysts from time to time, such communications are conducted in accordance with applicable securities laws. Investors should not assume that the Company agrees with any statement, conclusion of any analysis, or report issued by any analyst irrespective of the content of the statement or report.

Overview

Coherent Corp. (“Coherent”, the “Company,” “we,” “us” or “our”), a global leader in materials, networking, and lasers, is a vertically integrated manufacturing company that develops, manufactures and markets engineered materials, optoelectronic components and devices, and lasers for use in the industrial, communications, electronics, and instrumentation markets. Headquartered in Saxonburg, Pennsylvania, Coherent has research and development, manufacturing, sales, service, and distribution facilities worldwide. Coherent produces a wide variety of lasers, along with application-specific photonic and electronic materials and components, and deploys them in various forms, including integrated with advanced software to enable its customers.

We generate almost all of our revenues, earnings and cash flows from developing, manufacturing and marketing a broad portfolio of products and services for our end markets. We also generate revenue, earnings and cash flows from externally-funded research and development contracts relating to the development and manufacture of new technologies, materials and products.

Our customer base includes original equipment manufacturers; laser end-users; system integrators of high-power lasers; manufacturers of equipment and devices for our end markets.

As we grow, we are focused on scaling our Company and deriving the continued benefits of vertical integration as we strive to be a best-in-class player in all of our highly competitive markets. We may elect to change the way in which we operate or are organized in the future to enable the most efficient implementation of our strategy.

Trends and Other Matters Affecting Our Business

Restructuring Plans

2023 Plan

On May 23, 2023, the Board of Directors approved the Company’s May 2023 Restructuring Plan (“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 the three and nine months ended March 31, 2025, these activities resulted in charges of $11 million and $43 million, respectively. The current quarter costs are primarily for employee termination costs and site move costs and the current year-to-date costs are primarily for impairment losses associated with the sale of our Newton Aycliffe business, 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. We expect these restructuring actions to be substantially completed by the end of fiscal 2025. 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. See Note 17. Restructuring Plan to the Company’s Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q 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 a plan (“2025 Plan” and together with the 2023 Plan, the Restructuring Plans) 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 the three months ended March 31, 2025, these activities resulted in $63 million of charges primarily for the write-off of property and equipment and employee termination costs. We expect the restructuring actions to be substantially completed by the 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 includes 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 the three and nine months ended March 31, 2025, the acceleration of these activities resulted in $5 million and $13 million, respectively, 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, with $13 million and $29 million, respectively, of those charges in the three and nine months ended March 31, 2024. 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 are being exited and shut down costs.

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 April 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.

Currently, we do not expect these tariffs, trade sanctions, and/or restrictions on the export of certain rare earth minerals which are used in our products to have a material impact on our business, financial condition, operational results and/or cash flows in the fourth quarter of fiscal 2025.

However, we are in a dynamic environment, and 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 and our flexible and resilient supply chain enables a high degree of optionality. As the tariff, trade sanctions, and export restrictions become more clear, we expect these attributes will enable us to find opportunities to moderate the impact of the same.

Nevertheless, we are not immune to 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 Estimates

The preparation of financial statements and related disclosures are in conformity with accounting principles generally accepted in the United States of America and the Company’s discussion and analysis of its financial condition and results of operations require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its Condensed Consolidated Financial Statements and accompanying notes.

Note 1 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K dated August 16, 2024 describes the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements.

New Accounting Standards

See Note 2. Recently Issued Financial Accounting Standards to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements.

Results of Operations

The following tables set forth select items from our Condensed Consolidated Statements of Earnings (Loss) for the three and nine months ended March 31, 2025 and 2024 ($ in millions) (1):

			Three Months Ended March 31, 2025												Three Months Ended March 31, 2024
									% of Revenues												% of Revenues
Total revenues			$	1,498					100		%				$	1,209					100		%
Cost of goods sold			970						65						842						70
Gross margin			528						35						366						30
Operating expenses:
Research and development			151						10						127						11
Selling, general and administrative			231						15						205						17
Restructuring charges			74						5						12						1
Interest and other, net			62						4						54						4
Earnings (loss) before income taxes			10						1						(32)						(2)
Income taxes			8						1						(16)						(1)
Net earnings (loss)			2						—						(16)						—
Net loss attributable to noncontrolling interests			(14)						(1)						(3)						—
Net earnings (loss) attributable to Coherent Corp.			$	16					1		%				$	(13)					(3)		%
Diluted earnings (loss) per share			$	(0.11)											$	(0.29)

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

			Nine Months Ended March 31, 2025												Nine Months Ended March 31, 2024
									% of Revenues												% of Revenues
Total revenues			$	4,281					100		%				$	3,393					100		%
Cost of goods sold			2,784						65						2,369						70
Gross margin			1,497						35						1,024						30
Operating expenses:
Research and development			426						10						352						10
Selling, general and administrative			681						16						626						18
Restructuring charges			106						2						13						—
Interest and other, net			126						3						190						6
Earnings (loss) before income taxes			158						4						(158)						(5)
Income taxes			29						1						(46)						(1)
Net earnings (loss)			128						3						(112)						(3)
Net loss attributable to noncontrolling interests			(17)						—						(4)						—
Net earnings (loss) attributable to Coherent Corp.			$	145					3		%				$	(108)					(3)		%
Diluted earnings (loss) per share			$	0.30											$	(1.32)

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

Consolidated

Revenues. Revenues for the three months ended March 31, 2025 increased 24% to $1,498 million, compared to $1,209 million for the same period last fiscal year. Revenues increased $281 million (46%) in the communications market, with increases in datacom driven primarily by ongoing strong AI datacenter related revenue growth and a third quarter of sequential growth in our telecom revenue. In our remaining markets, which are primarily industrial-related applications, revenue increased $8 million (1%) primarily due to revenue growth in the semiconductor capital equipment and display capital equipment end

markets. This growth was offset by soft demand in broad-based industrial end markets, such as precision manufacturing. From a segment perspective, Networking revenues increased 45% year-over-year due to ongoing strong AI datacenter demand and the growth in telecom, both in our communications market. Lasers revenue increased 4% year-over-year reflecting strong demand with higher volumes of annealing lasers in our display capital equipment market as well as increased demand in semiconductor capital equipment for advanced packaging tools where our lasers, optics and advanced materials are being adopted. Materials revenues decreased 1% year-over-year, primarily due to softness in the consumer electronics end market.

Revenues for the nine months ended March 31, 2025 increased 26% to $4,281 million, compared to $3,393 million for the same period last fiscal year. Revenues increased $899 million (56%) in the communications market, with increases in datacom driven primarily by ongoing strong AI datacenter demand and three quarters of sequential growth in our telecom revenue. In our remaining markets, revenue decreased $11 million (1%). Within these markets, strong revenue growth in display capital equipment and semiconductor capital equipment volumes was more than offset by soft demand in broad-based industrial end markets, such as precision manufacturing. From a segment perspective, Networking revenues increased 53% year-over-year due to strong AI datacenter demand in our communications market and the growth in telecom. Lasers revenue increased 5% year-over-year reflecting higher volumes of annealing lasers in our display capital equipment market as well as increased demand in semiconductor capital equipment for advanced packaging tools where our lasers, optics and advanced materials are being adopted. Materials revenues decreased 3% year-over-year, primarily due to weak automotive end market demand.

Gross margin. Gross margin for the three months ended March 31, 2025 was $528 million, or 35% of total revenues, compared to $366 million, or 30% of total revenues, for the same period last fiscal year, an increase of 492 basis points. The increase as a percent of revenue for the three months ended March 31, 2025 was primarily due to higher revenue volume as well as improvements in pricing optimization and cost reductions and improvements in manufacturing yields, partially offset by unfavorable product mix. Gross margin for the nine months ended March 31, 2025 was $1,497 million, or 35% of total revenues, compared to $1,024 million, or 30% of total revenues, for the same period last fiscal year, an increase of 484 basis points. The increase as a percent of revenue for the nine months ended March 31, 2025 was primarily due to higher revenue volume, cost reductions and improvements in manufacturing yields partially offset by unfavorable product mix.

Research and development. Research and development (“R&D”) expenses for the three months ended March 31, 2025 were $151 million, or 10% of revenues, compared to $127 million, or 11% of revenues, for the same period last fiscal year. R&D expenses for the nine months ended March 31, 2025 were $426 million, or 10% of revenues, compared to $352 million, or 10% of revenues, for the same period last fiscal year. For both the three and nine months ended March 31, 2025, the increases in R&D expenses were primarily related to continued investment in our product portfolios, particularly in datacom.

Selling, general and administrative. Selling, general and administrative (“SG&A”) expenses for the three months ended March 31, 2025 were $231 million, or 15% of revenues, compared to $205 million, or 17% of revenues, for the same period last fiscal year. SG&A expenses for the nine months ended March 31, 2025 were $681 million, or 16% of revenues, compared to $626 million, or 18% of revenues, for the same period last fiscal year. The decreases in SG&A as a percentage of revenue for the three and nine months ended March 31, 2025 were primarily the result of higher sales volumes and lower integration consulting costs partially offset by the impact of higher variable and share-based compensation.

Restructuring charges. Restructuring charges related to our Restructuring Plans for the three and nine months ended March 31, 2025 were $74 million and $106 million, respectively, and consist of asset write-offs, employee termination costs, move 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 three and nine months ended March 31, 2024 were $12 million and $13 million, respectively, and consisted of severance, accelerated depreciation, equipment write-offs and move costs due to the consolidation of certain manufacturing sites. See Note 17. Restructuring Plans included in Item 1 of this Quarterly Report on Form 10-Q for further information.

Interest and other, net. Interest and other, net for the three months ended March 31, 2025 was expense of $62 million, compared to expense of $54 million for the same period last fiscal year, an increase of $8 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, and interest and dividend income on cash balances. For the three months ended March 31, 2025, the increase of $8 million in comparison to the same period last fiscal year was driven by $14 million higher foreign exchange net losses and $6 million lower interest and dividend income due to decreases in interest rates earned on investments, as well as the decrease in restricted cash balances partially offset by $15 million lower interest expense. The $14 million higher foreign exchange losses were primarily due to higher volatility of exchange rates, particularly the Euro, Swedish Krona and British Pound, during the three months ended March 31, 2025 in addition to the cessation of our balance sheet hedging program at the end of September 2024. The $15 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. Interest and other, net for the nine months ended March 31, 2025 was expense of $126 million, compared to expense of $190 million for the same period last fiscal year, a decrease of $64 million. For the nine months ended March 31, 2025, the decrease of $64 million in comparison to the same period last fiscal year was driven by $32 million lower interest expense, $17 million higher foreign exchange net gains, and $13 million lower interest and dividend income due to decreases in interest rates earned on investments as well as the decrease in restricted cash balances. The $17 million higher foreign exchange net gains were primarily due to higher volatility of exchange rates, particularly the Euro, Korean Won, and Chinese Renminbi, during the nine months ended March 31, 2025 in addition to the cessation of our balance sheet hedging program at the end of September 2024. The $32 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.

Income taxes. The Company’s year-to-date effective income tax rate at March 31, 2025 was 19% compared to an effective tax rate of 29% for the same period in 2024. The variations between the Company’s effective tax rate and the U.S. statutory rate of 21% were due to tax rate differentials between U.S. and foreign jurisdictions. The current year-to-date rate was impacted by the recording of a $19 million windfall on stock awards due to the increase in stock price.

Net loss attributable to noncontrolling interests. Net loss attributable to noncontrolling interests for the three and nine months ended March 31, 2025 was $14 million and $17 million, respectively, and represents the noncontrolling interest holders’ shares of losses of Silicon Carbide LLC. Net loss attributable to noncontrolling interests for the three and nine months ended March 31, 2024 was $3 million and $4 million, respectively. See Note 11. Noncontrolling Interests included in Item 1 of this Quarterly Report on Form 10-Q for further information.

Segment Reporting

Revenues and segment profit for the Company’s 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, 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 13. Segment Reporting, to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q 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. We report our financial results in the following three designated segments: (i) Networking, (ii) Materials, and (iii) Lasers.

Comparative prior period 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)

			Three Months Ended March 31,												% Increase						Nine Months Ended March 31,												% Increase
			2025						2024												2025						2024
Revenues			$	897					$	619					45%						$	2,476					$	1,616					53%
Segment profit			$	175					$	98					79%						$	465					$	254					83%

Revenues for the three months ended March 31, 2025 increased 45% to $897 million, compared to $619 million for the same period last fiscal year. Revenues for the nine months ended March 31, 2025 increased 53% to $2,476 million, compared to $1,616 million for the same period last fiscal year. The increase in revenue of $278 million during the three months ended March 31, 2025 was due to ongoing strong AI datacenter related revenue growth resulting from increased volumes in the datacom vertical as well as a third quarter of sequential growth in telecom, both in our communications market. The increase in revenues of $860 million during the nine months ended March 31, 2025 was primarily due to increased AI datacenter related revenue in our communications market resulting from increased volumes in the datacom vertical and three quarters of sequential growth in telecom.

Segment profit for the three months ended March 31, 2025 increased 79% to $175 million, compared to segment profit of $98 million for the same period last fiscal year. The increase in segment profit for the three months ended March 31, 2025 was primarily driven by higher revenues, partially offset by higher R&D investments in our product portfolio. Segment profit for the nine months ended March 31, 2025 increased 83% to $465 million, compared to segment profit of $254 million for the same period last fiscal year. The increase in segment profit for the nine months ended March 31, 2025 was primarily driven by higher revenues, partially offset by higher R&D investments in our product portfolio.

Materials ($ in millions)

			Three Months Ended March 31,												% Increase (Decrease)						Nine Months Ended March 31,												% Increase (Decrease)
			2025						2024												2025						2024
Revenues			$	237					$	239					(1)%						$	718					$	737					(3)%
Segment profit			$	84					$	71					19%						$	249					$	177					41%

Revenues for the three months ended March 31, 2025 decreased 1% to $237 million, compared to revenues of $239 million for the same period last fiscal year. Revenues for the nine months ended March 31, 2025 decreased 3% to $718 million, compared to $737 million for the same period last fiscal year. Compared to the three months ended March 31, 2024, Materials decreased $2 million year-over-year, with a decrease of $8 million in the electronics market primarily due to softness in the consumer electronics end market partially offset by higher volumes in the instrumentation, communications, and industrial markets. The decrease in revenues of $20 million during the nine months ended March 31, 2025 was primarily related to decreases of $33 million in the electronics market primarily due to weak automotive end market demand and $23 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 three months ended March 31, 2025 increased 19% to $84 million, compared to segment profit of $71 million for the same period last fiscal year, primarily driven by favorable product mix and lower costs, partially offset by higher variable compensation. Segment profit for the nine months ended March 31, 2025 increased 41% to $249 million compared to the segment profit of $177 million for the same period last fiscal year. The increase in segment profit for the nine months ended March 31, 2025 was primarily driven by favorable product mix, improvements in pricing optimization and lower costs, partially offset by higher R&D investments in our product portfolio and higher variable compensation.

Lasers ($ in millions)

			Three Months Ended March 31,												% Increase						Nine Months Ended March 31,												% Increase
			2025						2024												2025						2024
Revenues			$	364					$	351					4%						$	1,087					$	1,040					5%
Segment profit			$	93					$	42					123%						$	244					$	150					63%

Revenues for the three months ended March 31, 2025 increased 4% to $364 million, compared to revenues of $351 million for the same period last fiscal year. Revenues for the nine months ended March 31, 2025 increased 5% to $1,087 million, compared to $1,040 million for the same period last fiscal year. The increase during the three months ended March 31, 2025 was primarily due to $18 million higher shipments due to increased demand with higher volumes of annealing lasers in our display capital equipment market as well as increased demand in semiconductor capital equipment for advanced packaging tools where our lasers, optics and advanced materials are being adopted. The increase in revenues of $47 million for the nine months ended March 31, 2025 was primarily related to $62 million higher shipments of annealing lasers in our display capital equipment market as well as increased demand in semiconductor capital equipment for advanced packaging tools.

Segment profit for the three months ended March 31, 2025 increased 123% to $93 million, compared to segment profit of $42 million for the same period last fiscal year. The increase in segment profit was primarily driven by favorable product mix, higher revenue volumes, improvements in pricing optimization, lower costs and favorable foreign exchange rates. Segment profit for the nine months ended March 31, 2025 increased by 63% to $244 million compared to $150 million for the same period last fiscal year. The increase in segment profit for the nine months ended March 31, 2025 was primarily driven by higher revenues as well as lower SG&A expenses.

Liquidity and Capital Resources

Historically, our primary sources of cash have been 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, investment 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:

Sources (uses) of cash ($ in millions):

			Nine Months Ended March 31,
			2025						2024
Net cash provided by operating activities			$	503					$	383
Net proceeds from debt and equity issuances, including noncontrolling interest holders			—						968
Proceeds from exercises of stock options and purchases of stock under employee stock purchase plan			48						36
Effect of exchange rate changes on cash and cash equivalents and other items			3						1
Proceeds from revolving credit facilities			36						19
Proceeds from the sale of business			27						—
Other items			(2)						(3)
Payments in satisfaction of employees’ minimum tax obligations			(49)						(19)
Payments on borrowings under revolving credit facilities			(34)						(19)
Payments on existing debt			(386)						(165)
Additions to property, plant & equipment			(310)						(247)

Operating activities:

Net cash provided by operating activities was $503 million for the nine months ended March 31, 2025 compared to $383 million for the same period last fiscal year. The increase in cash flows provided by operating activities during the nine months ended March 31, 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.

Investing activities:

Net cash used in investing activities was $284 million for the nine months ended March 31, 2025, compared to $249 million for the same period last fiscal year. Higher cash used to fund capital expenditures of $63 million year-over-year was partially offset by $27 million cash received from the sale of a business.

Financing activities:

Net cash used in financing activities was $386 million for the nine months ended March 31, 2025, compared to net cash provided by financing activities of $820 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 period 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.

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 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 March 31, 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 March 31, 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 $44 million and $150 million, respectively, for the three and nine months ended March 31, 2025, which is included in Interest expense in the Condensed 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 $6 million and $27 million, respectively, during the three and nine months ended March 31, 2025.

During the nine months ended March 31, 2025, the Company made payments of $383 million for the Term Facilities, including voluntary payments of $350 million.

As of March 31, 2025, the Company had no borrowings outstanding under the Revolving Credit Facility.

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

						March 31, 2025						June 30, 2024
Cash and cash equivalents						$	890					$	926
Restricted cash, current						19						174
Restricted cash, non-current						717						690
Available borrowing capacity under Revolving Credit Facility						315						346
Total debt obligations						3,732						4,100

Other Liquidity

On December 4, 2023, the Company consummated 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 included in Item 1 of this Quarterly Report on Form 10-Q 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 the next twelve months.

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 March 31, 2025, the Company held approximately $838 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 March 31, 2025, we had $736 million of restricted cash, which includes $733 million at our Silicon Carbide LLC that is restricted for use by only that subsidiary.