01—Abstract
Summary
Summary of the 10-Q filed November 8, 2016. Cited figures are marked; the original filing is the authoritative source.
II-VI Incorporated (COHR) reported its fiscal second quarter results for the period ending September 30, 2016.
The company experienced a revenue increase of 17% year-over-year, reaching $221.5 milliona, primarily driven by strong performance in the II-VI Photonics segment, which benefited from increased demand in optical communication markets. This growth was supported by strategic acquisitions, including EpiWorks and ANADIGICS, which are now contributing to the II-VI Laser Solutions segment. Despite revenue growth, net earnings saw a slight decrease to $16.3 million from $17.2 million in the prior year period.
This reduction was attributed to increased investments in internal research and development (R&D) to support new technology platforms, particularly in the high-volume VCSELs space, and higher income taxes. The company's liquidity remains strong, with significant cash and cash equivalents and an increased revolving credit facility, enabling continued investment in growth initiatives and operational enhancements.
02—Key points
Key Highlights
- Total revenues increased by 17% to $221.5 million for the three months ended September 30, 2016, compared to $189.2 million in the prior year period.
- II-VI Photonics segment showed robust growth with a 33% increase in revenues and a 121% increase in operating income, driven by demand in optical communication markets.
- The company increased its investment in R&D, with expenses rising to $21.8 million (9.8% of revenue) from $13.2 million (7.0% of revenue) in the prior year, signaling a focus on future growth technologies.
- Net earnings decreased slightly to $16.3 million from $17.2 million, impacted by higher R&D investments and increased income taxes.
- Bookings increased by 31% to $244.3 million, indicating strong future revenue potential, with the II-VI Photonics segment leading this growth.
- The company enhanced its credit facility, increasing the revolving credit line to $325 million, strengthening its liquidity position.
- Acquisitions of EpiWorks and ANADIGICS are integrated into the II-VI Laser Solutions segment, with initial impacts on revenue and operating income.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2017, Coherent Corp. kept $0.07.
- Revenue$221.5M100.0%
- Cost of revenue−$133.9M60.5%
- Gross profit$87.6M39.5%
- Operating costs−$63.9M28.9%
- Operating income$23.7M10.7%
- Interest, other & tax−$7.4M3.3%
- Net income$16.3M7.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2017filed November 8, 2016Financial Statements
Q1 FY2017 against Q1 FY2016
| Line item | Q1 FY2017Q1 FY2016 | Change |
|---|---|---|
| Revenue | $221.52M$189.21M | +17.1% |
| Cost of Revenue | $133.92M$118.02M | +13.5% |
| Gross Profit | $87.60M$71.19M | +23.1% |
| R&D Expenses | $21.83M$13.15M | +66.0% |
| SG&A Expenses | $42.08M$36.31M | +15.9% |
| Operating Income | $23.69M$21.73M | +9.0% |
| Interest Expense | $1.25M$649K | +92.0% |
| Net Income | $16.29M$17.21M | −5.3% |
| EPS (Basic) | $0.26$0.28 | −7.1% |
| EPS (Diluted) | $0.26$0.27 | −3.7% |
| Shares Outstanding (Basic) | 62.02M61.22M | +1.3% |
| Shares Outstanding (Diluted) | 63.59M62.73M | +1.4% |
05—Questions
Frequently Asked Questions
What was the primary driver of the revenue growth in this quarter?
The primary driver of revenue growth was the II-VI Photonics segment, which experienced a 33% increase in revenue. This growth was fueled by broad-based demand across optical communication markets, including data center build-outs, China broadband initiatives, and undersea network deployments.
Why did net earnings decrease despite the revenue increase?
The decrease in net earnings was primarily due to increased investments in internal research and development (R&D) to support new technology platforms and an increase in income taxes. The company is strategically investing in R&D for future growth, which impacted short-term profitability.
How has the company's debt situation changed?
The company entered into an Amended Credit Facility on July 28, 2016, increasing its revolving credit facility to $325 million from $225 million and securing a $100 million term loan. This strengthens the company's liquidity and financial flexibility.
What is the significance of the acquisitions of EpiWorks and ANADIGICS?
These acquisitions, completed in early 2016, have been integrated into the II-VI Laser Solutions segment. They expand the company's capabilities in compound semiconductor epitaxial wafers and high-performance lasers, contributing to revenue growth in that segment, though they also incurred initial operating losses and R&D investments.
06—Continue