10-QPeriod: Q2 FY2017

COHERENT CORP. Quarterly Report for Q2 Ended Dec 31, 2016

Filed February 1, 2017For Securities:COHR

Summary

II-VI Incorporated (COHR) reported strong growth in its fiscal second quarter ended December 31, 2016, with revenues increasing by 21% year-over-year to $231.8 million. This growth was primarily driven by robust performance in the II-VI Photonics segment, fueled by demand in optical communications markets, including data centers, China broadband initiatives, and undersea network deployments. The company also benefited from favorable product mix and operational efficiencies, leading to a significant improvement in gross margin to 40.7% from 37.3% in the prior year. Net earnings saw a substantial increase of 26% to $23.9 million ($0.37 per diluted share), compared to $19.0 million ($0.30 per diluted share) in the same period last year. While the company increased investments in research and development, particularly for its vertical cavity surface emitting lasers (VCSELs) platform, it also experienced a positive impact from foreign currency gains due to a strengthening U.S. dollar. The company remains focused on strategic investments to support future growth while maintaining compliance with its financial covenants.

Financial Highlights

50 data points
Beta

Revenue

$231.82M

40.7% Gross Margin

Net Income

$23.90M

10.3% Net Margin

EPS (Diluted)

$0.37

Total Assets

$1.29B

Cash & Equivalents

$246.19M

Free Cash Flow

$11.35M

Financial Statements
Beta
Revenue$231.82M
Cost of Revenue$137.56M
Gross Profit$94.26M
R&D Expenses$23.63M
SG&A Expenses$43.49M
Operating Income$27.14M
Interest Expense$1.36M
Net Income$23.90M
EPS (Basic)$0.38
EPS (Diluted)$0.37
Shares Outstanding (Basic)62.39M
Shares Outstanding (Diluted)64.41M

Key Highlights

  • 1Revenue increased by 21% to $231.8 million for the three months ended December 31, 2016, compared to $191.5 million in the prior year period.
  • 2Net earnings rose by 26% to $23.9 million ($0.37 per diluted share) for the three months ended December 31, 2016, compared to $19.0 million ($0.30 per diluted share) in the prior year period.
  • 3Gross margin improved significantly to 40.7% from 37.3% year-over-year, driven by higher revenues and operational efficiencies, especially in the II-VI Photonics segment.
  • 4Bookings showed strong growth, increasing by 32% to $274.3 million for the three months ended December 31, 2016, indicating future revenue potential.
  • 5II-VI Photonics segment was a key driver of growth, with revenues up 36% and operating income up 115% due to strong demand in optical communications.
  • 6Increased investment in R&D, particularly for the VCSELs platform, reflects a strategic focus on future growth opportunities.
  • 7The company benefited from a strengthening U.S. dollar, which resulted in foreign currency gains impacting net earnings positively.

Frequently Asked Questions

The primary driver of revenue growth was the strong performance of the II-VI Photonics segment, which saw a 36% increase in revenue. This was fueled by broad-based demand in optical communication markets, including data center infrastructure, China broadband initiatives, and undersea network deployments.

Profitability improved significantly. Net earnings increased by 26% to $23.9 million, and the gross margin expanded to 40.7% from 37.3% in the prior year. This improvement was attributed to higher revenues, a favorable product mix, and operational efficiencies.

The company is increasing its investments in research and development, particularly in its high-volume vertical cavity surface emitting lasers (VCSELs) platform. This investment is part of its strategy to develop new opto-electronic devices for future applications and introduce new products across its segments.

Yes, the company benefited from foreign currency gains due to the strengthening U.S. dollar against certain foreign currencies, such as the Chinese Renminbi, Japanese Yen, and Euro. These gains positively impacted net earnings.