01—Abstract
Summary
Summary of the 10-K filed August 28, 2018. Cited figures are marked; the original filing is the authoritative source.
II-VI Incorporated (now Coherent Corp.) demonstrated strong revenue growth of 19% in fiscal year 2018, reaching $1.16 billiona, driven by broad demand across its industrial materials processing, optical communications, and semiconductor equipment markets.
Despite this top-line expansion, net earnings decreased to $88 millionb from $95.3 million in the prior year, primarily due to higher income tax expenses related to the Tax Cuts and Jobs Act and increased investment in research and development. The company's operational structure is divided into three segments: Laser Solutions, Photonics, and Performance Products. All segments experienced revenue growth, with Laser Solutions up 26%, Performance Products up 24%, and Photonics up 11%.
The company continues to invest heavily in R&D, with a significant portion dedicated to new optoelectronic laser platforms and advanced materials, reflecting a strategy focused on innovation and expansion into high-growth markets. Financially, II-VI Incorporated managed its debt effectively, issuing convertible senior notes and utilizing its credit facilities to support operations and strategic investments.
The company maintained a healthy balance sheet with substantial working capital. Looking ahead, the company's strategy involves continued R&D investment, strategic acquisitions, and a focus on operational excellence to drive future growth and maintain its competitive position in its diverse end markets.
02—Key points
Key Highlights
- Revenue increased by 19% to $1.16 billion in FY2018, driven by strong demand across key segments.
- Net earnings decreased by 7.5% to $88 million, impacted by increased tax expenses and R&D investments.
- The II-VI Laser Solutions segment saw robust revenue growth of 26%, fueled by industrial and consumer electronics demand.
- II-VI Performance Products segment revenue grew by 24%, primarily due to increased demand for SiC products in automotive and communications.
- The company invested $117.2 million (10.1% of revenue) in internal research and development to support new technology platforms and product development.
- II-VI Inc. issued $345 million in 0.25% convertible senior notes in August 2017 to fund operations and investments.
- Global operations are significant, with approximately 68% of revenues generated from customers outside the United States.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Coherent Corp. kept $0.08.
- Revenue$1.16B100.0%
- Cost of revenue−$696.6M60.1%
- Gross profit$462.2M39.9%
- Operating costs−$325.4M28.1%
- Operating income$136.8M11.8%
- Interest, other & tax−$48.8M4.2%
- Net income$88.0M7.6%
Where FY2018 revenue went
$1.16B- Cost of revenue: $696.6M, 60% of revenue
- SG&A: $208.6M, 18% of revenue
- Net income: $88.0M, 7.6% of revenue
- R&D: $116.9M, 10% of revenue
- Interest, other & tax: $48.8M, 4.2% of revenue
Kept 7.6% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed August 28, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $1.16B$972.05M | +19.2% |
| Cost of Revenue | $696.59M$583.69M | +19.3% |
| Gross Profit | $462.20M$388.35M | +19.0% |
| R&D Expenses | $116.88M$96.81M | +20.7% |
| SG&A Expenses | $208.56M$176.00M | +18.5% |
| Operating Expenses | $1.04B$853.26M | +21.5% |
| Operating Income | $136.76M$115.56M | +18.4% |
| Interest Expense | $18.35M$6.81M | +169.5% |
| Net Income | $88.00M$95.27M | −7.6% |
| EPS (Basic) | $1.41$1.52 | −7.2% |
| EPS (Diluted) | $1.35$1.48 | −8.8% |
| Shares Outstanding (Basic) | 62.50M62.58M | −0.1% |
| Shares Outstanding (Diluted) | 65.13M64.51M | +1.0% |
05—Questions
Frequently Asked Questions
What were the primary drivers of II-VI Incorporated's revenue growth in FY2018?
II-VI Incorporated's revenue growth of 19% to $1.16 billion in FY2018 was primarily driven by strong customer demand across its key segments, including industrial materials processing, optical communications, and semiconductor equipment. Specific growth was noted in II-VI Laser Solutions due to increased demand for CO2, fiber, and direct diode laser optics, and in II-VI Performance Products due to higher demand for SiC substrate products.
Why did net earnings decrease in FY2018 despite revenue growth?
Net earnings decreased to $88 million in FY2018 compared to $95.3 million in FY2017 primarily due to higher income tax expenses. The company's effective tax rate increased due to provisions under the Tax Cuts and Jobs Act, including an $8.0 million charge related to repatriation of foreign earnings. Additionally, increased investments in research and development for new optoelectronic laser platforms and other operations also contributed to the decrease.
How is II-VI Incorporated managing its debt and capital structure?
In August 2017, II-VI Incorporated issued $345 million in 0.25% convertible senior notes and used a portion of the proceeds to repurchase $49.9 million of its common stock. The company also utilized its revolving credit facility to fund investments. As of June 30, 2018, the company had $247 million in cash and cash equivalents and $246.4 million in available borrowing capacity, indicating a stable liquidity position to support its operations and growth strategies.
What are the company's key strategic priorities and investments?
II-VI Incorporated's strategy focuses on growing businesses with world-class engineered material capabilities, penetrating new markets through innovation, and enabling new applications. Key investments include significant R&D expenditures (10.1% of revenue in FY2018) in areas like new optoelectronic laser platforms and advanced materials for consumer electronics, communications, and automotive markets. The company also pursues strategic acquisitions to accelerate access to high-growth segments.
06—Continue