Summary
II-VI Incorporated (COHR) reported a net loss of $26.0 million, or $(0.39) per diluted share, for the three months ended September 30, 2019. This contrasts with a net profit of $26.1 million, or $0.40 per diluted share, in the same period last year. The significant shift is largely attributed to the completion of the Finisar Corporation acquisition on September 24, 2019. The company incurred substantial transaction-related expenses, totaling $65.5 million, which negatively impacted earnings. Additionally, lower product demand for Silicon Carbide and 3D Sensing product lines led to under-absorption of manufacturing costs. Despite the quarterly loss, total revenues saw an increase of 8% to $340.4 million, driven by contributions from Finisar and growth in the Photonic Solutions segment, particularly from ROADM components supporting broadband expansion and U.S. metro communication upgrades. The company also significantly increased its debt levels to finance the Finisar acquisition, now standing at approximately $2.5 billion, which presents a key area of focus for investors regarding financial flexibility and risk management.
Financial Highlights
49 data points| Revenue | $340.41M |
| Cost of Revenue | $217.27M |
| Gross Profit | $123.14M |
| R&D Expenses | $36.12M |
| SG&A Expenses | $105.50M |
| Operating Expenses | $370.93M |
| Operating Income | -$18.48M |
| Interest Expense | $6.97M |
| Net Income | -$26.00M |
| EPS (Basic) | $-0.39 |
| EPS (Diluted) | $-0.39 |
| Shares Outstanding (Basic) | 65.97M |
| Shares Outstanding (Diluted) | 65.97M |
Key Highlights
- 1Net Loss Reported: The company reported a net loss of $26.0 million for the quarter, a significant decline from the net profit of $26.1 million in the prior year's comparable period.
- 2Finisar Acquisition Completed: The acquisition of Finisar Corporation was completed on September 24, 2019, contributing $22.1 million in revenue but also incurring substantial transaction costs ($65.5 million).
- 3Increased Debt Load: Total debt increased significantly to approximately $2.5 billion as of September 30, 2019, primarily to fund the Finisar acquisition, raising concerns about financial leverage.
- 4Revenue Growth Despite Loss: Consolidated revenues increased by 8% year-over-year to $340.4 million, supported by Finisar's contribution and strong performance in the Photonic Solutions segment.
- 5Gross Margin Decline: Gross margin decreased to 36.2% from 39.5% year-over-year, negatively impacted by fair value adjustments on acquired inventory and under-absorption of manufacturing costs due to lower demand and production challenges.
- 6Increased SG&A Expenses: Selling, General, and Administrative (SG&A) expenses more than doubled to $105.5 million, largely due to one-time acquisition-related costs.
- 7Segment Performance Varied: While Compound Semiconductors saw a slight revenue decrease but improved operating income, Photonic Solutions experienced revenue growth but a decline in operating income due to product mix and pricing pressures.