10-QPeriod: Q1 FY2021

COHERENT CORP. Quarterly Report for Q1 Ended Sep 30, 2020

Filed November 9, 2020For Securities:COHR

Summary

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 million, 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.

Financial Highlights

48 data points
Beta

Revenue

$728.08M

39.4% Gross Margin

Net Income

$46.27M

6.4% Net Margin

EPS (Diluted)

$0.38

Total Assets

$5.47B

Cash & Equivalents

$683.99M

Free Cash Flow

$100.53M

Financial Statements
Beta
Revenue$728.08M
Cost of Revenue$441.52M
Gross Profit$286.56M
R&D Expenses$78.25M
SG&A Expenses$107.19M
Operating Expenses$668.51M
Operating Income$101.13M
Interest Expense$17.21M
Net Income$46.27M
EPS (Basic)$0.39
EPS (Diluted)$0.38
Shares Outstanding (Basic)102.81M
Shares Outstanding (Diluted)105.25M

Key Highlights

  • 1Revenue 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.
  • 2The 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.
  • 3Gross margin improved to 39.4% from 36.2% year-over-year, benefiting from higher-margin products and a favorable product mix.
  • 4The company successfully raised approximately $883.9 million in net proceeds from common stock and mandatory convertible preferred stock offerings in July 2020.
  • 5Substantial debt reduction occurred, with the Term B Facility of $720 million being repaid in full during the quarter.
  • 6Cash flow from operations turned positive, generating $134.3 million compared to a use of $25.6 million in the prior year quarter.
  • 7Both the Photonic Solutions and Compound Semiconductors segments showed robust revenue growth, with Photonic Solutions up 252% and Compound Semiconductors up 30% year-over-year.

Frequently Asked Questions

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.

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.

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.

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.