01—Abstract
Summary
Summary of the 10-Q filed November 9, 2020. Cited figures are marked; the original filing is the authoritative source.
Coherent Corp. (formerly II-VI Incorporated) reported a significant turnaround in its financial performance for the three months ended September 30, 2020, compared to the same period in the prior year.
Revenues more than doubled year-over-year, driven by the inclusion of Finisar's operations and strong demand in key markets like data centers and 5G optical networks. The company achieved profitability, generating net earnings of $46.3 milliona, a substantial improvement from a net loss of $26.0 million in the prior year quarter.
This quarter also saw substantial financing activities, including a significant equity raise through both common and mandatory convertible preferred stock offerings, which helped strengthen the balance sheet and repay a substantial portion of its debt. The company's improved financial results and strategic financing position Coherent Corp. well for future growth, although it continues to monitor the ongoing impacts of the COVID-19 pandemic.
02—Key points
Key Highlights
- Revenue more than doubled to $728.1 million from $340.4 million in the prior year quarter, largely due to the full integration of Finisar's operations.
- The company returned to profitability, reporting net earnings of $46.3 million, a significant improvement from a net loss of $26.0 million in the same period last year.
- Gross margin improved to 39.4% from 36.2% year-over-year, benefiting from higher-margin products and a favorable product mix.
- The company successfully raised approximately $883.9 million in net proceeds from common stock and mandatory convertible preferred stock offerings in July 2020.
- Substantial debt reduction occurred, with the Term B Facility of $720 million being repaid in full during the quarter.
- Cash flow from operations turned positive, generating $134.3 million compared to a use of $25.6 million in the prior year quarter.
- Both the Photonic Solutions and Compound Semiconductors segments showed robust revenue growth, with Photonic Solutions up 252% and Compound Semiconductors up 30% year-over-year.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2021, Coherent Corp. kept $0.06.
- Revenue$728.1M100.0%
- Cost of revenue−$441.5M60.6%
- Gross profit$286.6M39.4%
- Operating costs−$185.4M25.5%
- Operating income$101.1M13.9%
- Interest, other & tax−$54.9M7.5%
- Net income$46.3M6.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2021filed November 9, 2020Financial Statements
Q1 FY2021 against Q1 FY2020
| Line item | Q1 FY2021Q1 FY2020 | Change |
|---|---|---|
| Revenue | $728.08M$340.41M | +113.9% |
| Cost of Revenue | $441.52M$217.27M | +103.2% |
| Gross Profit | $286.56M$123.14M | +132.7% |
| R&D Expenses | $78.25M$36.12M | +116.6% |
| SG&A Expenses | $107.19M$105.50M | +1.6% |
| Operating Expenses | $668.51M$370.93M | +80.2% |
| Operating Income | $101.13M-$18.48M | +647.4% |
| Interest Expense | $17.21M$6.97M | +147.0% |
| Net Income | $46.27M-$26.00M | +278.0% |
| EPS (Basic) | $0.39$-0.39 | +200.0% |
| EPS (Diluted) | $0.38$-0.39 | +197.4% |
| Shares Outstanding (Basic) | 102.81M65.97M | +55.8% |
| Shares Outstanding (Diluted) | 105.25M65.97M | +59.5% |
05—Questions
Frequently Asked Questions
What were the main drivers of the significant revenue increase?
The primary driver of the more than doubling of revenue was the full integration of Finisar's operations, which contributed $337.6 million in revenue. Additionally, increased demand for the Company's ROADM and 3D Sensing products, driven by data center and 5G optical network expansions, played a crucial role.
How did the company manage its debt obligations during this quarter?
Coherent Corp. significantly strengthened its financial position by completing equity offerings that raised approximately $883.9 million in net proceeds. These proceeds were used to repay the $720 million Term B Facility in full. The company also made payments on its Term A Facility, reducing outstanding borrowings.
What is the company's outlook on the impact of COVID-19?
The company is closely monitoring the impact of COVID-19 on its supply chain, customers, and global operations. While operations have largely resumed, the full extent of the pandemic's impact remains uncertain and depends on its duration, severity, and broader economic consequences. The company believes its current liquidity and borrowing availability are sufficient for its needs.
What are the company's key operating segments, and how did they perform?
The company operates in two main segments: Photonic Solutions and Compound Semiconductors. Photonic Solutions saw a 252% revenue increase, driven by the Finisar acquisition and demand for cloud and 5G infrastructure. Compound Semiconductors experienced a 30% revenue increase, supported by 3D Sensing product shipments and growth in telecom and datacom markets.
06—Continue