01—Abstract
Summary
Summary of the 10-Q filed February 1, 2017. Cited figures are marked; the original filing is the authoritative source.
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 milliona.
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 millionb ($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.
02—Key points
Key Highlights
- Revenue 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.
- Net 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.
- Gross 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.
- Bookings showed strong growth, increasing by 32% to $274.3 million for the three months ended December 31, 2016, indicating future revenue potential.
- II-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.
- Increased investment in R&D, particularly for the VCSELs platform, reflects a strategic focus on future growth opportunities.
- The company benefited from a strengthening U.S. dollar, which resulted in foreign currency gains impacting net earnings positively.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2017, Coherent Corp. kept $0.10.
- Revenue$231.8M100.0%
- Cost of revenue−$137.6M59.3%
- Gross profit$94.3M40.7%
- Operating costs−$67.1M29.0%
- Operating income$27.1M11.7%
- Interest, other & tax−$3.2M1.4%
- Net income$23.9M10.3%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2017filed February 1, 2017Financial Statements
Q2 FY2017 against Q2 FY2016
| Line item | Q2 FY2017Q2 FY2016 | Change |
|---|---|---|
| Revenue | $231.82M$191.43M | +21.1% |
| Cost of Revenue | $137.56M$120.09M | +14.5% |
| Gross Profit | $94.26M$71.34M | +32.1% |
| R&D Expenses | $23.63M$12.15M | +94.4% |
| SG&A Expenses | $43.49M$37.41M | +16.3% |
| Operating Income | $27.14M$21.78M | +24.6% |
| Interest Expense | $1.36M$597K | +128.6% |
| Net Income | $23.90M$18.99M | +25.9% |
| EPS (Basic) | $0.38$0.31 | +22.6% |
| EPS (Diluted) | $0.37$0.30 | +23.3% |
| Shares Outstanding (Basic) | 62.39M61.16M | +2.0% |
| Shares Outstanding (Diluted) | 64.41M62.67M | +2.8% |
05—Questions
Frequently Asked Questions
What is the primary driver behind the revenue growth in this quarter?
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.
How did the company's profitability change compared to the previous year?
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.
What is the company investing in for future growth?
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.
Are there any significant impacts from foreign currency fluctuations?
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.
06—Continue