01—Abstract
Summary
Summary of the 10-K filed August 16, 2019. Cited figures are marked; the original filing is the authoritative source.
II-VI Incorporated (now Coherent Corp.) reported strong revenue growth in fiscal year 2019, reaching $1.36 billiona, a 18% increase from the prior year.
This growth was primarily driven by robust demand in the optical communications market and increased demand for SiC substrate products in automotive and communication sectors. Net earnings also saw a significant increase to $107.5 millionb, up from $88.0 million in fiscal year 2018, partly due to a lower effective tax rate.
The company also highlighted its pending acquisition of Finisar Corporation, which was expected to close in the second half of calendar 2019, and detailed the significant debt financing in place to fund this transaction. Investments in research and development remain a priority, with a focus on new product development in growth markets like 5G and 3D sensing.
02—Key points
Key Highlights
- Revenue increased by 18% to $1.36 billion in fiscal year 2019, driven by strong demand in optical communications and SiC products.
- Net earnings grew to $107.5 million ($1.63 per diluted share) from $88.0 million ($1.35 per diluted share) in the prior year.
- The company is in the process of acquiring Finisar Corporation, with an expected closing in the second half of calendar 2019, supported by significant debt financing.
- Internal R&D expenses increased to $139.2 million, representing 10.2% of revenues, as the company invests in new technologies and products.
- The II-VI Photonics segment showed the strongest growth, with revenues up 31%, primarily from optical communication products.
- The company maintained a strong financial position, with ample liquidity and compliance with debt covenants.
- The fiscal year saw acquisitions of CoAdna Holdings, Inc. and Redstone Aerospace Corporation, integrating them into the Photonics and Performance Products segments respectively.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Coherent Corp. kept $0.08.
- Revenue$1.36B100.0%
- Cost of revenue−$841.1M61.7%
- Gross profit$521.3M38.3%
- Operating costs−$372.7M27.4%
- Operating income$148.7M10.9%
- Interest, other & tax−$41.2M3.0%
- Net income$107.5M7.9%
Where FY2019 revenue went
$1.36B- Cost of revenue: $841.1M, 62% of revenue
- SG&A: $233.5M, 17% of revenue
- Net income: $107.5M, 7.9% of revenue
- R&D: $139.2M, 10% of revenue
- Interest, other & tax: $41.2M, 3.0% of revenue
Kept 7.9% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed August 16, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $1.36B$1.16B | +17.6% |
| Cost of Revenue | $841.15M$696.59M | +20.8% |
| Gross Profit | $521.35M$462.20M | +12.8% |
| R&D Expenses | $139.16M$116.88M | +19.1% |
| SG&A Expenses | $233.52M$208.56M | +12.0% |
| Operating Expenses | $1.23B$1.04B | +19.0% |
| Operating Income | $148.67M$136.76M | +8.7% |
| Interest Expense | $22.42M$18.35M | +22.2% |
| Net Income | $107.52M$88.00M | +22.2% |
| EPS (Basic) | $1.69$1.41 | +19.9% |
| EPS (Diluted) | $1.63$1.35 | +20.7% |
| Shares Outstanding (Basic) | 63.58M62.50M | +1.7% |
| Shares Outstanding (Diluted) | 65.80M65.13M | +1.0% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in fiscal year 2019?
Revenue growth was primarily driven by strong demand from customers in the optical communications market, contributing to a 31% increase in the II-VI Photonics segment. Additionally, the II-VI Performance Products segment saw a 23% increase, fueled by demand for SiC substrate products in the automotive and communication sectors, and increased demand for aerospace and defense products.
What is the status of the Finisar acquisition?
II-VI Incorporated entered into an Agreement and Plan of Merger with Finisar Corporation on November 8, 2018. By August 16, 2019, the filing date of this report, regulatory approvals had been obtained in several jurisdictions, and shareholder approvals were secured. The transaction was expected to close in the second half of calendar 2019, subject to certain closing conditions, including final approval from China's State Administration for Market Regulation.
How did the company's R&D spending change, and what are the focus areas?
The company increased its internally funded R&D expenses to $139.2 million (10.2% of revenues) in fiscal year 2019, compared to $116.9 million (10.1% of revenues) in fiscal year 2018. The company anticipates this percentage to remain between 10% and 15% of revenues, focusing on new product development in areas such as 5G technology, 3D Sensing, and other engineered material applications.
What is the company's dividend policy?
II-VI Incorporated historically has not paid cash dividends and does not presently anticipate paying cash dividends in the future. The company intends to retain future earnings to support operations and finance business development.
06—Continue