01—Abstract
Summary
Summary of the 10-Q filed November 8, 2017. Cited figures are marked; the original filing is the authoritative source.
Coherent Corp. (COHR) reported strong revenue growth of 18% to $261.5 milliona for the third quarter of fiscal year 2017, driven by increased demand across its industrial, communications, and semiconductor capital equipment markets.
The company's gross margin also improved to 40.5%, up from 39.5% in the prior year period. This growth was partially offset by increased operating expenses related to recent acquisitions, specifically Kaiam Laser Limited and Integrated Photonics, Inc., which are being integrated to expand capacity and capabilities in key markets like VCSELs and 3D sensing. The company also successfully completed a $345 millionb convertible senior notes offering, utilizing the proceeds to repay debt and repurchase shares, strengthening its financial position.
02—Key points
Key Highlights
- Revenue increased by 18% to $261.5 million in Q3 FY17 compared to the prior year period.
- Gross margin improved to 40.5% from 39.5% year-over-year.
- The company completed a $345 million offering of 0.25% convertible senior notes due 2022.
- Net earnings increased by approximately 29% to $21.1 million, with diluted EPS rising to $0.32 from $0.26.
- Acquisitions of Kaiam Laser Limited and Integrated Photonics, Inc. are in progress, with initial purchase price allocations detailed.
- The company demonstrated robust financial management, with strong operating income growth in the Photonics (40%) and Performance Products (126%) segments, though the Laser Solutions segment experienced a decline due to integration costs and strategic investments.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2018, Coherent Corp. kept $0.08.
- Revenue$261.5M100.0%
- Cost of revenue−$155.5M59.5%
- Gross profit$106.0M40.5%
- Operating costs−$76.2M29.1%
- Operating income$29.8M11.4%
- Interest, other & tax−$8.6M3.3%
- Net income$21.1M8.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2018filed November 8, 2017Financial Statements
Q1 FY2018 against Q1 FY2017
| Line item | Q1 FY2018Q1 FY2017 | Change |
|---|---|---|
| Revenue | $261.50M$221.52M | +18.0% |
| Cost of Revenue | $155.53M$133.92M | +16.1% |
| Gross Profit | $105.97M$87.60M | +21.0% |
| R&D Expenses | $25.57M$21.83M | +17.1% |
| SG&A Expenses | $50.62M$42.08M | +20.3% |
| Operating Income | $29.78M$23.69M | +25.7% |
| Interest Expense | $3.65M$1.25M | +192.5% |
| Net Income | $21.14M$16.29M | +29.7% |
| EPS (Basic) | $0.34$0.26 | +30.8% |
| EPS (Diluted) | $0.32$0.26 | +23.1% |
| Shares Outstanding (Basic) | 62.74M62.02M | +1.2% |
| Shares Outstanding (Diluted) | 65.28M63.59M | +2.7% |
05—Questions
Frequently Asked Questions
What were the primary drivers of revenue growth in the third quarter?
Revenue growth was primarily driven by increased demand across the company's industrial, communications, and semiconductor capital equipment markets. Specific areas contributing to this growth included strong demand for diamond optics supporting the EUV market, increased shipments of laser diodes into the Datacom market, demand for passive components and modules, hybrid amplifiers, advanced coating filters, fiber laser optics, and Garnet materials. Additionally, the Performance Products segment saw increased demand for silicon carbide substrates and precision components for semiconductor capital equipment.
How did the company's recent acquisitions impact its financial results?
The acquisitions of Kaiam Laser Limited and Integrated Photonics, Inc. are in the initial stages of integration and are impacting financial results. Kaiam contributed $0.6 million in revenue and $3.7 million in operating losses in the quarter, while Integrated Photonics contributed $5.4 million in revenue and $0.4 million in net earnings. These acquisitions, along with ongoing investments in new technologies like VCSELs, contributed to increased operating expenses, particularly in R&D and SG&A, but are strategically important for expanding capacity and market reach.
What was the significance of the convertible senior notes offering?
The company completed a $345 million offering of 0.25% convertible senior notes due 2022. The net proceeds were used to repay $257 million on its revolving credit facility, pay debt issuance costs, and repurchase approximately $49.9 million of its common stock. This transaction strengthened the company's balance sheet by reducing its revolving credit facility borrowings and provided capital for strategic initiatives while also allowing for a share repurchase program.
How did the company manage its debt and liquidity during the quarter?
The company's liquidity position appears strong, with $241.3 million in cash and cash equivalents and $285.6 million in available borrowing capacity as of September 30, 2017. The company utilized proceeds from the convertible notes offering to significantly reduce its outstanding revolving credit facility debt. Management believes that its cash flow from operations, cash reserves, and borrowing capacity will be sufficient to fund its working capital needs, capital expenditures, debt obligations, R&D investments, and share repurchases for the next twelve months.
06—Continue