10-QPeriod: Q3 FY2018

COHERENT CORP. Quarterly Report for Q3 Ended Mar 31, 2018

Filed May 9, 2018For Securities:COHR

Summary

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 million, 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.

Financial Highlights

50 data points
Beta

Revenue

$294.75M

40.1% Gross Margin

Net Income

$30.10M

10.2% Net Margin

EPS (Diluted)

$0.45

Total Assets

$1.74B

Cash & Equivalents

$263.24M

Free Cash Flow

$15.42M

Financial Statements
Beta
Revenue$294.75M
Cost of Revenue$176.52M
Gross Profit$118.22M
R&D Expenses$30.63M
SG&A Expenses$53.12M
Operating Expenses$263.53M
Operating Income$34.48M
Interest Expense$5.01M
Net Income$30.10M
EPS (Basic)$0.48
EPS (Diluted)$0.45
Shares Outstanding (Basic)62.43M
Shares Outstanding (Diluted)72.38M

Key Highlights

  • 1Revenue 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.
  • 2Net earnings for the three months ended March 31, 2018, were $30.1 million, up from $22.4 million in the same period last year.
  • 3Net earnings for the nine months ended March 31, 2018, decreased to $60.8 million from $62.6 million in the prior year period.
  • 4The company issued $345 million in 0.25% convertible senior notes due 2022, with net proceeds used for debt repayment and share repurchases.
  • 5Total assets grew to $1,737.2 million from $1,477.3 million, reflecting increased property, plant & equipment and goodwill.
  • 6Total liabilities increased significantly, driven by a rise in long-term debt, largely due to the convertible senior notes issuance.
  • 7Acquisitions 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.

Frequently Asked Questions

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.

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.

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.

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.