01—Abstract
Summary
Summary of the 10-K filed August 18, 2023. Cited figures are marked; the original filing is the authoritative source.
Coherent Corp. (COHR) reported fiscal year 2023 results, marked by significant revenue growth driven by the acquisition of Coherent, Inc. in July 2022.
Total revenues increased 56% year-over-year to $5.16 billiona, largely due to the addition of the Lasers segment, which contributed $1.47 billion in revenue. The company experienced strong performance in its Industrial and Electronics markets, with Materials and Networking segments also showing growth. Despite the top-line expansion, the company faced challenges with gross margin, which decreased to 31% from 38% in the prior year.
This was primarily attributed to the fair value adjustment on acquired inventory and incremental amortization expenses related to the acquisition. Additionally, Selling, General, and Administrative (SG&A) expenses increased significantly due to amortization of intangible assets and one-time integration costs.
The company reported a net loss of $259 millionb for fiscal year 2023, a reversal from a net earning of $235 million in fiscal year 2022, impacted by substantial acquisition-related expenses and restructuring charges. The company also initiated a restructuring plan expected to incur significant charges over the next few fiscal years.
02—Key points
Key Highlights
- Revenue surged 56% year-over-year to $5.16 billion, primarily due to the acquisition of Coherent, Inc.
- Gross margin declined to 31% from 38% in the prior year, impacted by acquisition-related inventory adjustments and amortization.
- SG&A expenses increased substantially due to intangible asset amortization and integration costs associated with the acquisition.
- The company reported a net loss of $259 million for fiscal year 2023, compared to a net profit of $235 million in fiscal year 2022.
- Restructuring charges of $119 million were recognized in fiscal year 2023 related to site consolidations and moves.
- The company's backlog stood at $2.7 billion as of June 30, 2023, up from $2.3 billion in the prior year.
- Significant investments in R&D continued, totaling $500 million, or 10% of revenues, primarily focused on new product development across all segments.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2023, Coherent Corp. lost $0.05.
- Revenue$5.16B100.0%
- Cost of revenue−$3.54B68.6%
- Gross profit$1.62B31.4%
- Operating costs−$1.66B32.1%
- Operating income−$37.1M0.7%
- Interest, other & tax−$222.3M4.3%
- Net income−$259.5M5.0%
04—Financials
Financial Highlights
Figures from 10-KFY2023filed August 18, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $5.16B$3.32B | +55.6% |
| Cost of Revenue | $3.54B$2.05B | +72.7% |
| Gross Profit | $1.62B$1.27B | +27.9% |
| R&D Expenses | $499.60M$377.11M | +32.5% |
| SG&A Expenses | $1.04B$474.10M | +118.7% |
| Operating Expenses | $5.52B$3.03B | +81.7% |
| Operating Income | -$37.12M$414.29M | −109.0% |
| Interest Expense | $286.87M$121.25M | +136.6% |
| Net Income | -$259.46M$234.76M | −210.5% |
| EPS (Basic) | $-2.93$1.57 | −286.6% |
| EPS (Diluted) | $-2.93$1.45 | −302.1% |
| Shares Outstanding (Basic) | 137.58M106.19M | +29.6% |
| Shares Outstanding (Diluted) | 137.58M116.51M | +18.1% |
05—Questions
Frequently Asked Questions
What was the main driver of revenue growth in fiscal year 2023?
The primary driver of revenue growth in fiscal year 2023 was the acquisition of Coherent, Inc. (the 'Lasers segment'), which closed on July 1, 2022. This acquisition significantly expanded the company's top line, contributing $1.47 billion in revenue and driving a 56% overall increase in total revenues compared to the prior fiscal year.
Why did the company's gross margin percentage decrease in fiscal year 2023?
The gross margin percentage decreased from 38% in fiscal year 2022 to 31% in fiscal year 2023. This decline was primarily due to the impact of preliminary fair value adjustments on acquired inventory ($158 million) and incremental amortization expenses ($87 million) related to intangible assets acquired in the Coherent, Inc. merger. Additionally, a less favorable revenue mix, inventory write-offs, underutilized operating capacity, site consolidation costs, and foreign exchange headwinds also contributed to the margin compression.
What is the company's outlook on restructuring and cost management?
Coherent Corp. announced a Restructuring Plan in May 2023, which includes site consolidations, facility moves and closures, and other cost reduction measures. The company incurred $119 million in restructuring charges in fiscal year 2023 and expects these actions to be substantially completed by the end of fiscal year 2025. This plan is part of a broader transformation to create a more streamlined and sustainable business model. The company also announced an acceleration of synergy and site consolidation efforts following the Coherent, Inc. acquisition, aiming to achieve its previously announced $250 million synergy plan.
How is the company managing its debt load after the acquisition?
Following the acquisition of Coherent, Inc., the company entered into new senior credit facilities totaling $4.0 billion, consisting of term loan A, term loan B, and a revolving credit facility. The company made principal payments of $265 million on these facilities during fiscal year 2023, including voluntary prepayments. As of June 30, 2023, the company had $4.31 billion in total debt obligations. The weighted average interest rate on total borrowings was 6% for fiscal year 2023. The company's management believes its existing cash, cash flow from operations, and available borrowing capacity are sufficient to meet its needs through fiscal year 2024.
06—Continue