IIVI

• Rapid AI and data center infrastructure demand may not be sustainable; emerging AI efficiencies or resource constraints could sharply reduce customer orders.
• Two customers each contributed over 10% of fiscal 2026 revenue, and large customers wield significant bargaining power to demand price concessions and onerous contract terms.
• The company relies on limited or sole-source suppliers for critical materials like rare earth minerals and InP, exposing it to supply disruptions and cost increases, especially from China export controls.
• Significant U.S. tariffs, retaliatory trade actions, and export-control investigations (including a BIS inquiry into past Huawei sales) create regulatory and financial exposure.
• Capacity expansion projects and restructuring plans carry execution risk, including potential delays, cost overruns, and failure to achieve expected returns or cost savings.
• High debt of $3.2 billion and restrictive covenants may limit financial flexibility, while foreign currency fluctuations and tax law changes could pressure margins and cash flows.

• U.S. properties total approximately 1.4 million square feet across six locations, with the largest being a 700,000 sq ft owned manufacturing site in Sherman, TX for the Datacenter & Communications segment.
• Foreign properties are concentrated in Asia, led by a massive 5.85 million sq ft owned and leased facility in China supporting both Datacenter & Communications and Industrial segments.
• Other significant foreign manufacturing sites include owned facilities in Malaysia (1.16 million sq ft) and Vietnam (1.15 million sq ft), both serving dual business segments.
• The Industrial segment is supported by key U.S. R&D and manufacturing hubs in Easton, PA and Saxonburg, PA, as well as a major site in Germany.
• The Philippines property is the only one where the listed square footage includes land, not just facility space.

The Company and its subsidiaries are involved in various claims and lawsuits incidental to its business. The resolution of each of these matters is subject to various uncertainties, and it is possible that these matters may be resolved unfavorably to the Company. Management believes, after consulting with legal counsel, that the ultimate liabilities, if any, resulting from such legal proceedings will not materially affect the Company’s financial condition, liquidity, or results of operations.

• Consolidated revenue grew 23% to $7,118 million, fueled by a $1,519 million increase in the Datacenter & Communications segment on strong AI datacenter and telecom demand.
• Gross margin improved to 37% from 35%, driven by cost reductions, manufacturing efficiency gains, and yield improvements, particularly in Datacenter & Communications.
• Industrial segment revenue declined 10% to $1,844 million, primarily due to the divestitures of the aerospace and defense business and the Munich, Germany business.
• Restructuring charges fell to $63 million from $160 million, while the company recorded $64 million in non-cash impairment charges on assets held-for-sale.
• Net cash from operations decreased to $80 million from $634 million, largely due to a significant inventory build to support revenue growth, while capital expenditures rose to $1,103 million.
• Liquidity was bolstered by a $2 billion equity investment from NVIDIA, and total debt obligations were reduced to $3,222 million from $3,687 million.

Market Risks We are exposed to market risks arising from adverse changes in foreign currency exchange rates and interest rates. In the normal course of business, we have the option to use a variety of techniques and derivative financial instruments as part of our overall risk management strategy, which is primarily focused on our exposure in relation to the Chinese Renminbi, Euro, Swiss Franc, Japanese Yen, Singapore Dollar and Korean Won. As of September 30, 2024, after weighing the costs and benefits of hedging foreign exchange risks on our global balance sheets, we paused our balance sheet hedging program indefinitely. We continue to analyze these risks and the costs and benefits inherent in a hedging program. From time to time, we utilize forward currency contracts to manage exposures against the US dollar for select foreign currency transactions. Interest Rate Risks As of June 30, 2026, our total borrowings include variable rate borrowings, which expose us to changes in interest rates. On February 23, 2022, we entered into an interest rate cap, amended on March 20, 2023, with an effective date of July 1, 2023. On September 1, 2024, we increased the notional amount from $500 million to $1,500 million. If we had not effectively hedged our variable rate debt, a change in the interest rate of 100 basis points on these variable rate borrowings would have resulted in additional interest expense of $25 million for the year ended June 30, 2026. 48 Table of Contents

• Management concluded internal control over financial reporting was effective as of June 30, 2026, using the COSO 2013 framework.
• Ernst & Young issued unqualified opinions on both the consolidated financial statements and the effectiveness of internal control over financial reporting.
• The critical audit matter involved the goodwill impairment assessment for the Lasers reporting unit, which had a $3.1 billion goodwill balance.
• Auditing the Lasers goodwill impairment was complex due to significant assumptions about forecasted future net cash flows, revenue, and the discount rate.
• The auditor's procedures included evaluating management's controls, assessing valuation methodology and assumptions, and using valuation specialists.