01—Abstract
Summary
Summary of the 10-Q filed November 8, 2018. Cited figures are marked; the original filing is the authoritative source.
COHERENT CORP. (COHR) reported a strong third quarter for fiscal year 2018, with revenues increasing 20% year-over-year to $314.4 milliona.
This growth was primarily driven by higher demand in optical communications for broadband expansion, datacenters, and U.S. metro upgrades, alongside strength in VCSELs for consumer electronics and datacom, and silicon carbide for RF electronics. Net earnings also saw a significant rise of 24% to $26.1 millionb, or $0.40 per diluted share, benefiting from increased revenue, improved gross margin dollars, and a lower effective tax rate. The company successfully integrated the CoAdna acquisition in September 2018, contributing $3.0 million to revenues in the quarter.
Despite increased investment in R&D and higher interest expenses due to increased debt levels, the company demonstrated improved SG&A leverage and maintained compliance with debt covenants. The balance sheet shows growth in total assets to $1.88 billionc, supported by increases in goodwill and intangible assets, while cash and cash equivalents strengthened to $271.3 million.
02—Key points
Key Highlights
- Revenue increased by 20% to $314.4 million in the third quarter of fiscal year 2018, driven by strong demand in optical communications and other key markets.
- Net earnings rose by 24% to $26.1 million, or $0.40 per diluted share, indicating improved profitability.
- The company completed the acquisition of CoAdna Holdings, Inc. for approximately $85.0 million, adding to its II-VI Photonics segment.
- Operating income in the II-VI Laser Solutions segment surged by 356% year-over-year, driven by VCSEL product line growth and improved operational performance.
- Total assets grew to $1.88 billion, with notable increases in Goodwill and Other intangible assets, reflecting strategic investments and acquisitions.
- Cash and cash equivalents increased to $271.3 million, showing a healthy liquidity position.
- The company's effective income tax rate decreased to 19.1% from 21.4% in the prior year, partly due to U.S. tax legislation and foreign operations.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2019, Coherent Corp. kept $0.08.
- Revenue$314.4M100.0%
- Cost of revenue−$190.5M60.6%
- Gross profit$123.9M39.4%
- Operating costs−$86.7M27.6%
- Operating income$37.2M11.8%
- Interest, other & tax−$11.1M3.5%
- Net income$26.1M8.3%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2019filed November 8, 2018Financial Statements
Q1 FY2019 against Q1 FY2018
| Line item | Q1 FY2019Q1 FY2018 | Change |
|---|---|---|
| Revenue | $314.43M$261.50M | +20.2% |
| Cost of Revenue | $190.53M$155.53M | +22.5% |
| Gross Profit | $123.91M$105.97M | +16.9% |
| R&D Expenses | $33.17M$25.57M | +29.7% |
| SG&A Expenses | $53.52M$50.62M | +5.7% |
| Operating Expenses | $282.09M— | — |
| Operating Income | $37.21M$29.78M | +25.0% |
| Interest Expense | $5.58M$3.65M | +53.2% |
| Net Income | $26.15M$21.14M | +23.7% |
| EPS (Basic) | $0.41$0.34 | +20.6% |
| EPS (Diluted) | $0.40$0.32 | +25.0% |
| Shares Outstanding (Basic) | 63.42M62.74M | +1.1% |
| Shares Outstanding (Diluted) | 66.16M65.28M | +1.3% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in the third quarter of fiscal year 2018?
Revenue growth was primarily driven by increased demand from optical communication customers for products supporting China's broadband expansion, datacenters, and U.S. metro communication upgrades. Additionally, growth was fueled by the vertical cavity surface emitting lasers (VCSEL) product line, driven by consumer electronics and datacom markets, and increased demand for silicon carbide (SiC) for RF electronics and power conversion systems.
How did the CoAdna acquisition impact the financial results?
The acquisition of CoAdna, Inc. in September 2018 contributed $3.0 million to revenues in the third quarter of fiscal year 2018. The company is still in the process of finalizing the fair value of acquired assets and liabilities, including goodwill of $24.8 million. The acquisition is reflected in the II-VI Photonics segment.
What is the company's current debt situation?
As of September 30, 2018, total debt was $537.1 million, an increase from $439.0 million at June 30, 2018, largely due to borrowings to fund the CoAdna acquisition. The company had $146.3 million in aggregate availability under its lines of credit and remained in compliance with all financial covenants under its credit facilities.
How has the company's R&D investment changed, and what is the outlook?
Internal Research and Development (IR&D) expenses increased to $33.2 million (10.6% of revenues) from $25.6 million (9.8% of revenues) in the prior year's comparable quarter. This increase reflects continued investment in new technology and product development. The company expects IR&D expenses to remain between 10% to 11% of revenues for the remainder of fiscal year 2019.
06—Continue