01—Abstract
Summary
Summary of the 10-Q filed May 9, 2018. Cited figures are marked; the original filing is the authoritative source.
Coherent Corp. (COHR) reported a notable increase in revenue for the third quarter of fiscal year 2018, with a 20% year-over-year rise to $294.7 milliona, driven by strong demand across its industrial, communications, and semiconductor markets.
This growth was supported by the recent acquisitions of Integrated Photonics, Inc. (IPI) and II-VI Compound Semiconductor Ltd. Despite the revenue surge, net earnings saw a decline for the nine-month period, attributed in part to the impact of the U.S. Tax Cuts and Jobs Act and investments in acquired businesses. The company's balance sheet reflects significant growth in assets, particularly in property, plant, and equipment, and goodwill, indicating strategic investments and acquisitions.
Long-term debt has also increased substantially, primarily due to the issuance of convertible senior notes, which helped fund acquisitions and share repurchases. While operating cash flow improved, the company utilized significant cash for investing activities, mainly for acquisitions and capital expenditures.
02—Key points
Key Highlights
- Revenue increased by 20% to $294.7 million for the three months ended March 31, 2018, compared to $245.0 million in the prior year period.
- Net earnings for the three months ended March 31, 2018, were $30.1 million, up from $22.4 million in the same period last year.
- Net earnings for the nine months ended March 31, 2018, decreased to $60.8 million from $62.6 million in the prior year period.
- The company issued $345 million in 0.25% convertible senior notes due 2022, with net proceeds used for debt repayment and share repurchases.
- Total assets grew to $1,737.2 million from $1,477.3 million, reflecting increased property, plant & equipment and goodwill.
- Total liabilities increased significantly, driven by a rise in long-term debt, largely due to the convertible senior notes issuance.
- Acquisitions of Integrated Photonics, Inc. and II-VI Compound Semiconductor Ltd. contributed to revenue growth but also resulted in net losses for the periods they were included.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2018, Coherent Corp. kept $0.10.
- Revenue$294.7M100.0%
- Cost of revenue−$176.5M59.9%
- Gross profit$118.2M40.1%
- Operating costs−$83.7M28.4%
- Operating income$34.5M11.7%
- Interest, other & tax−$4.4M1.5%
- Net income$30.1M10.2%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2018filed May 9, 2018Financial Statements
Q3 FY2018 against Q3 FY2017
| Line item | Q3 FY2018Q3 FY2017 | Change |
|---|---|---|
| Revenue | $294.75M$244.99M | +20.3% |
| Cost of Revenue | $176.52M$147.28M | +19.9% |
| Gross Profit | $118.22M$97.71M | +21.0% |
| R&D Expenses | $30.63M$25.38M | +20.7% |
| SG&A Expenses | $53.12M$43.29M | +22.7% |
| Operating Expenses | $263.53M— | — |
| Operating Income | $34.48M$29.04M | +18.7% |
| Interest Expense | $5.01M$1.94M | +159.0% |
| Net Income | $30.10M$22.43M | +34.2% |
| EPS (Basic) | $0.48$0.36 | +33.3% |
| EPS (Diluted) | $0.45$0.35 | +28.6% |
| Shares Outstanding (Basic) | 62.43M62.81M | −0.6% |
| Shares Outstanding (Diluted) | 72.38M65.01M | +11.3% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in the quarter?
Revenue growth was primarily driven by strong customer demand across various business units, including industrial material processing, optical communications, semiconductor capital equipment, and RF and power generation markets. This was further bolstered by the inclusion of revenues from recent acquisitions.
How did the Tax Cuts and Jobs Act affect the company's financial results?
The Tax Cuts and Jobs Act resulted in a one-time repatriation tax on historical foreign earnings, offset by the release of valuation allowances on U.S. deferred tax assets due to lower corporate tax rates. This led to a provisional net charge of $9.3 million for the nine months ended March 31, 2018, impacting earnings.
What is the company's financial position regarding debt and liquidity?
The company's total debt increased significantly due to the issuance of $345 million in convertible notes. Despite this, liquidity remains strong, with $263.2 million in cash and cash equivalents and $236.4 million in available borrowing capacity as of March 31, 2018. The company believes it has sufficient resources to fund its working capital needs, capital expenditures, and growth objectives for the next twelve months.
How have recent acquisitions impacted the company's performance?
The acquisitions of Integrated Photonics, Inc. and II-VI Compound Semiconductor Ltd. contributed positively to revenue. However, II-VI Compound Semiconductor Ltd. incurred net losses during the reporting periods, reflecting ongoing investments in new material technology platforms. The company is actively working to identify and capitalize on synergies from these acquisitions.
06—Continue