Balance sheet

Coherent’s balance sheet structure is the result of two large-step financing events stacked on a multi-year deleveraging path: the 2022 Coherent Inc. acquisition financing (large debt + Bain Capital private-placement Series B Convertible Preferred + public Series A Mandatory Convertible Preferred + new common-stock issuance) and the 2026 NVIDIA $2B common-stock investment. The trajectory through FY2024–FY2026 has been steady deleveraging plus ongoing capacity-build capex. The March 2026 NVDA injection materially de-risks the structure heading into the AI-cycle capex envelope.

Cash and short-term investments

Date	Cash + STI ($M)	Source
End FY2024 (Jun 29, 2024)	~$926	FY2024 10-K
End Q1 FY2025 (Sep 28, 2024)	~$910	Q1 FY2025 release
End FY2025 (Jun 28, 2025)	$909.2	FY2025 10-K ✓
End Q1 FY2026 (Sep 27, 2025)	n/a in this dataset	Q1 FY2026 release
End Q2 FY2026 (Dec 27, 2025)	$863.7	Q2 FY2026 release ✓
Pro-forma post-NVDA (Mar 2, 2026)	~$2,800–3,000	$863.7M Dec 27 + $2.0B NVDA proceeds + Q3 FY26 OCF less Q3 capex less debt actions

The cash position has been steady around $900M through the deleveraging cycle as Coherent applied operating cash flow to debt repayment rather than cash buildup. Q3 FY2026 (closing March 28, 2026) will reflect the $2B NVDA injection — pro forma cash will be approximately $2.8–3.0B before any post-NVDA debt-reduction or capex step-up.

Total debt structure

Date	Total debt ($M)	Composition (high-level)
End FY2024	~$4,200	Pre-deleveraging baseline
End FY2025	$3,687	Post $437M FY2025 paydown
End Q1 FY2026	$3,287	Post $400M Q1 FY2026 paydown
End Q2 FY2026	$3,352	Modest sequential increase

Source: FY2025 10-K and quarterly press releases ✓.

The $3.35B in total debt at Q2 FY2026 includes (per FY2024 10-K and FY2025 10-K disclosure structure):

Instrument	Approximate balance ($M, Q2 FY2026 estimate)	Notes
Term Loan A	~$700–800	Bank-facility tranche from 2022 acquisition financing
Term Loan B	~$1,400–1,500	Bank-facility tranche from 2022 acquisition financing; refinanced 2025
Senior Notes (5.00% due 2029)	~$990	Original Coherent Inc. acquisition senior-notes issuance
Senior Notes (other tranches)	~variable
Revolving Credit Facility	Generally undrawn	$350M facility
Total reported debt (current + LT)	$3,352 (Q2 FY2026)	✓

⚠ The exact composition of the $3.35B by tranche requires detailed 10-Q debt-schedule reading; the categories above are estimates consistent with the FY2024 / FY2025 structure as disclosed.

Preferred-stock structure — the load-bearing capital-structure piece

Two distinct preferred-stock instruments exist in Coherent’s history; distinguishing them is essential:

1. Series A 6.00% Mandatory Convertible Preferred Stock — public, MATURED 2023

This was the public Mandatory Convertible Preferred Stock issued by II-VI in connection with the 2022 Coherent Inc. acquisition financing:

2,000,000 shares at $200 per share = $400M aggregate (later upsized to ~$575M)
6.00% dividend coupon
Mandatory conversion July 1, 2023 (after the acquisition close anniversary)
Issued via SEC-registered public offering (II-VI/Coherent press release archive references) ✓

This instrument no longer exists — it converted to common stock on July 1, 2023, contributing share-count expansion to Coherent’s outstanding shares but no longer appearing on the balance sheet as a preferred line item.

2. Series B Convertible Preferred Stock — Bain Capital alone (via BCPE Watson SPV)

This is the load-bearing and still-outstanding preferred-stock instrument from the 2022 acquisition financing. Critically, it is held by Bain Capital alone (via the BCPE Watson SPV) — Senator Investment Group is not a holder of this instrument despite occasional press references conflating the two:

Feature	Term
Aggregate face (originally announced)	Up to ~$2.0B authorized, funded in tranches
Holder	Bain Capital alone via the BCPE Watson SPV (special-purpose vehicle)
Series structure	Series B Convertible Preferred (privately placed); B-1 / B-2 / B-3 sub-tranches with differentiated funding dates
Conversion mechanic	Optional conversion at $85.00 per common share (holder-elected; not mandatory)
Dividend	5.00% PIK (paid-in-kind) dividend through year four; cash-pay step thereafter (subject to waiver — see below)
Voting rights	As-converted basis with common (subject to limits)

Source: Coherent / II-VI press release on Bain Capital terms March 16, 2021 ✓; SEC 8-K via Investing.com on November 2025 waiver agreement ✓.

Correction notes vs prior internal drafts:

Holder is Bain Capital alone (BCPE Watson SPV) — Senator Investment Group is NOT a Series B holder. Earlier framing that listed “Bain + Senator” is incorrect.

Series B is Convertible Preferred (optional conversion at $85.00), NOT a Mandatory Convertible. The conversion is holder-elected; there is no mandatory conversion date.

Dividend is 5.00% PIK through year four, not a high-single-digit cash dividend. PIK accrues to face value rather than burning cash. The capital-structure implications differ materially: PIK accrual grows the convertible base over time, magnifying the in-the-money dilution at COHR’s current ~$305 share price relative to the $85 strike.

November 2025 Bain Capital dividend waiver

A material structural change: on November 20, 2025, Coherent and Bain Capital entered into a Waiver Agreement under which Bain Capital — sole holder of the Series B Convertible Preferred Stock via BCPE Watson SPV — irrevocably and unconditionally waived all rights to receive dividends on any shares of the Series B Preferred Stock (Investing.com 8-K summary) ✓.

Recall the original dividend structure was a 5.00% PIK accrual through year four — so the waiver eliminates both the post-year-four cash-pay obligation and the pre-year-four accretion of conversion-base PIK. The strategic read:

Bain views Coherent as compelling long-term equity — their economics shift from coupon-bearing preferred to common-stock-equivalent upside (already deeply ITM with COHR ~$305 vs $85 strike).
Coherent’s cash dividend obligation reduces to zero on the Series B — meaningful operating-cash-flow uplift once the cash-pay step would otherwise have begun.
The waiver aligns Bain with common shareholders — instead of a defensive coupon-extracting position, Bain participates in equity upside through eventual conversion.
PIK accretion stops growing the convertible base — the dilution overhang is now fixed at the existing converted-share equivalent rather than expanding over time.

This structural development is material for CY2026 cash flow and reduces the historic preferred-dividend drag on Coherent’s free-cash-flow profile. Steve Pagliuca (Bain Capital Senior Advisor) framed it as: Bain views Coherent as “a compelling long-term investment opportunity, supported by strong fundamentals, a clear strategic vision and an industry leading management team” (paraphrased from the 8-K).

NVDA $2.0B common-stock investment — March 2, 2026

The single most material balance-sheet event of CY2026 to date. Per Coherent 8-K ✓:

Term	Value
Number of shares issued	7,788,161 shares of Coherent common stock
Price per share	$256.80
Aggregate purchase price	$2,000,000,000 in cash
Date of agreement	March 2, 2026
Issuance type	Private placement under Section 4(a)(2) of the Securities Act
Voting rights	Common-stock voting rights effective immediately (no HSR-gating)
Lockup / transfer restrictions	Not disclosed in 8-K
Registration rights	Not disclosed in 8-K
Board representation	Not disclosed in 8-K
Strategic-purchase commitment	NVIDIA “multi-billion-dollar purchase commitment and future access and capacity rights”
Exclusivity	Non-exclusive

Critical correction vs instructions: NVDA’s investment is in common stock, not Series A Preferred. The structural difference vs Lumentum’s Series A Convertible Preferred is meaningful: Coherent’s NVDA stake is immediately voting / immediately dilutive; Lumentum’s is HSR-gated / convertible 1:1 post-clearance. The instructions noted this caveat — confirmed.

Dilution mechanics:

Pre-issuance Coherent common shares outstanding: approximately 156–158M (as of recent filings)
New shares issued: 7,788,161
Pro-forma common shares outstanding: approximately 164–166M
NVDA’s pro-forma ownership: ~4.7%

The dilution is modest (~5%) and was partially anticipated by the market — the announcement was met with both stock appreciation and a rotation discussion (whether the dilution-vs-strategic-validation tradeoff was net-positive). The Q2 FY2026 reported diluted-share count was approximately 192M (reflecting various dilutive instruments including outstanding Series B preferred conversion impacts in fully-dilutive accounting).

Working capital and PP&E

Working-capital expansion has tracked revenue growth:

Inventory has expanded with EML wafer-in-process building plus 1.6T module finished-goods buffer
Accounts receivable has grown with revenue; DSO normalized
Accounts payable has tracked vendor-payable cycles

PP&E is dominated by:

Sherman, TX InP fab + VCSEL fab — primary US-domestic photonics asset cluster
Allen, TX ROADM/wave-shaper + datacom transceiver assembly
Saxonburg, PA legacy II-VI HQ + materials processing
Järfälla, Sweden 6-inch InP fab (second site)
Multiple sites globally for industrial-laser, life-sciences, and assembly operations

Coherent’s PP&E base will expand materially in FY2026–FY2028 with the Sherman TX 6-inch InP capacity build (multi-hundred-million-dollar investment) — see capex cycle.

Pro-forma capital-structure summary (post-NVDA, mid-CY2026)

Element	Amount	Status
Cash + STI	~$2.8–3.0B	Post-NVDA
Total debt (term loan + senior notes + revolver)	~$3.0–3.2B	Post-paydowns
Net debt (debt – cash)	~$0–500M	Approaching net-cash positive
Series B Convertible Preferred (Bain Capital alone via BCPE Watson SPV)	up to ~$2.0B face	Optional conversion at $85.00; 5.00% PIK through year four; dividends fully waived Nov 2025
NVDA strategic stake	$2.0B equity (common)	Immediate dilutive; non-exclusive partnership
Total common shares outstanding	~164–166M	Pre-Series-B-conversion
Diluted share count (Q2 FY2026 reported)	~192M	Includes Series B convert + employee equity

The pro-forma capital structure is materially de-risked relative to the FY2023 / FY2024 baseline:

Net debt approaching zero (was ~$3.5B in FY2024).
Bain dividend waiver removes a structural cash-flow headwind.
NVDA equity locks in a strategic-investor balance-sheet anchor with multi-year purchase commitment underpinning capacity utilization.
Series B preferred is the only meaningful incremental dilution overhang; the $85.00 conversion strike is deeply in-the-money at COHR ~$305 — eventual conversion is a near-certainty, but the optional structure (no mandatory date) means Bain controls timing, and the post-waiver economics resemble a permanent common-equivalent stake.

Cross-link

Quarterly trend
Capex cycle
Coherent Inc. integration
Margins and pricing
DCF assumptions — net-debt + diluted-share inputs
Comps / valuation — peer balance-sheet comparisons
03_ecosystem NVIDIA partnership — investment terms detail