01—Abstract
Summary
Summary of the 10-K filed August 21, 2017. Cited figures are marked; the original filing is the authoritative source.
COHERENT CORP. (COHR), formerly II-VI Incorporated, reported strong performance for the fiscal year ending June 30, 2017.
The company demonstrated significant revenue growth, driven by increased demand across its key segments, particularly in optical communications and laser solutions. Bookings also saw a substantial increase, indicating robust future revenue potential. The company successfully integrated recent acquisitions, such as Integrated Photonics, Inc., and continued to invest in research and development to support its growth strategies, especially in areas like VCSELs for 3D sensing.
Profitability improved year-over-year, with net earnings increasing substantially due to higher revenues, favorable product mix, and operational efficiencies. The company's strategic focus on high-growth markets and its vertically integrated business model appear to be paying off, as evidenced by the positive financial results and increasing backlog. Investors should note the company's continued investment in R&D and strategic acquisitions as key drivers for future growth, while also being mindful of the competitive landscape and cyclical nature of some of its end markets.
02—Key points
Key Highlights
- Revenue increased by 18% to $972.0 million for the fiscal year ended June 30, 2017, up from $827.2 million in the prior year.
- Bookings rose by 22% to $1.1 billion for the fiscal year ended June 30, 2017, compared to $875.3 million in the prior year.
- Net earnings grew to $95.3 million ($1.48 per diluted share) from $65.5 million ($1.04 per diluted share) in the prior fiscal year.
- Gross margin improved to 39.9% from 37.8% in the prior year, driven by higher revenue levels and favorable product mix.
- Internal R&D expenses increased significantly to $96.8 million (10.0% of revenue) from $60.4 million (7.3% of revenue) in the prior year, reflecting investment in new technologies.
- The company completed two acquisitions during the fiscal year: DirectPhotonics Industries GmbH for $0.6 million and Integrated Photonics, Inc. for $41.7 million.
- International sales accounted for approximately 69% of revenues for the fiscal year ended June 30, 2017, highlighting the company's global reach.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Coherent Corp. kept $0.10.
- Revenue$972.0M100.0%
- Cost of revenue−$583.7M60.0%
- Gross profit$388.4M40.0%
- Operating costs−$272.8M28.1%
- Operating income$115.6M11.9%
- Interest, other & tax−$20.3M2.1%
- Net income$95.3M9.8%
Where FY2017 revenue went
$972.0M- Cost of revenue: $583.7M, 60% of revenue
- SG&A: $176.0M, 18% of revenue
- Net income: $95.3M, 9.8% of revenue
- R&D: $96.8M, 10.0% of revenue
- Interest, other & tax: $20.3M, 2.1% of revenue
Kept 9.8% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed August 21, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $972.05M$827.22M | +17.5% |
| Cost of Revenue | $583.69M$514.40M | +13.5% |
| Gross Profit | $388.35M$312.81M | +24.1% |
| R&D Expenses | $96.81M$60.35M | +60.4% |
| SG&A Expenses | $176.00M$160.65M | +9.6% |
| Operating Expenses | $853.26M— | — |
| Operating Income | $115.56M$91.81M | +25.9% |
| Interest Expense | $6.81M$3.08M | +121.0% |
| Net Income | $95.27M$65.49M | +45.5% |
| EPS (Basic) | $1.52$1.07 | +42.1% |
| EPS (Diluted) | $1.48$1.04 | +42.3% |
| Shares Outstanding (Basic) | 62.58M61.37M | +2.0% |
| Shares Outstanding (Diluted) | 64.51M62.91M | +2.5% |
05—Questions
Frequently Asked Questions
What were the main drivers of COHERENT CORP.'s revenue growth in fiscal year 2017?
The primary drivers for revenue growth were increased demand from the optical communications sector, fueled by the China broadband initiative, datacenter buildouts, and U.S. metro upgrade cycles. Additionally, the II-VI Laser Solutions segment saw higher demand for its CO2, one-micron laser, and diamond optic products. The II-VI Performance Products segment benefited from increased demand for Silicon Carbide (SiC) substrates.
How did the company's profitability change in fiscal year 2017 compared to fiscal year 2016?
COHERENT CORP. saw a significant improvement in profitability. Net earnings increased from $65.5 million in fiscal year 2016 to $95.3 million in fiscal year 2017. This was primarily due to increased revenues, a favorable product mix, particularly in the II-VI Photonics segment, and improved operational performance across all segments.
What is the company's strategy regarding research and development (R&D)?
The company is committed to investing between 7% and 10% of revenues in R&D. For fiscal year 2017, internal R&D expenses increased to $96.8 million, representing 10.0% of revenues, compared to $60.4 million (7.3% of revenues) in the prior year. This increased investment is focused on developing new optoelectronic devices for future applications and new product introductions across all segments, with a particular emphasis on the high-volume VCSELs platform.
Did COHERENT CORP. make any acquisitions during the fiscal year ended June 30, 2017?
Yes, the company completed two acquisitions during fiscal year 2017. On October 12, 2016, it acquired DirectPhotonics Industries GmbH for $0.6 million, which joined the II-VI Laser Solutions segment. On June 19, 2017, it acquired Integrated Photonics, Inc. (IPI) for $41.7 million, which joined the II-VI Photonics segment.
06—Continue