10-QPeriod: Q1 FY2022

COHERENT CORP. Quarterly Report for Q1 Ended Sep 30, 2021

Filed November 9, 2021For Securities:COHR

Summary

Coherent Corp. (COHR) reported solid financial results for the quarter ended September 30, 2021, demonstrating growth and improved profitability. Total revenues increased by 9% year-over-year, driven by strong performance in both the Photonic Solutions and Compound Semiconductors segments, with particular strength in industrial, communications, semiconductor capital equipment, and consumer electronics markets. The company also saw an improvement in gross margin to 40% from 39% in the prior year period, attributed to higher volumes and a favorable product mix. Operationally, the company managed its expenses effectively, although Selling, General & Administrative (SG&A) expenses increased as a percentage of revenue, largely due to transaction costs related to the pending acquisition of Coherent, Inc. and increased stock-based compensation. Despite these costs, net earnings available to common shareholders saw a significant increase. A key development highlighted in the filing is the ongoing progress of the Coherent acquisition, with II-VI expecting completion in the first calendar quarter of 2022, supported by significant debt and equity financing commitments. The company maintains a strong liquidity position with substantial cash and cash equivalents.

Financial Highlights

48 data points
Beta

Revenue

$795.11M

38.6% Gross Margin

Net Income

$74.46M

9.4% Net Margin

EPS (Diluted)

$0.50

Total Assets

$6.52B

Cash & Equivalents

$1.56B

Free Cash Flow

$4.77M

Financial Statements
Beta
Revenue$795.11M
Cost of Revenue$488.49M
Gross Profit$306.62M
R&D Expenses$88.97M
SG&A Expenses$122.61M
Operating Expenses$704.67M
Operating Income$95.05M
Interest Expense$12.19M
Net Income$74.46M
EPS (Basic)$0.54
EPS (Diluted)$0.50
Shares Outstanding (Basic)105.76M
Shares Outstanding (Diluted)115.85M

Key Highlights

  • 1Total revenues increased by 9% year-over-year to $795.1 million, driven by growth in both the Photonic Solutions (up 8%) and Compound Semiconductors (up 12%) segments.
  • 2Gross margin improved to 40% from 39% in the prior year's comparable period, reflecting higher volumes and a better product mix.
  • 3Net earnings available to common shareholders increased to $57.4 million from $39.8 million in the prior year's quarter, leading to improved basic and diluted EPS.
  • 4The pending acquisition of Coherent, Inc. remains on track, with II-VI expecting completion in Q1 2022, subject to regulatory approvals.
  • 5The company secured significant financing for the Coherent acquisition, including a commitment letter for up to $4.99 billion in debt financing and $2.2 billion in equity financing from an affiliate of Bain Capital.
  • 6Operating cash flow decreased to $52.3 million from $134.3 million in the prior year, primarily due to increased working capital requirements to support business growth.
  • 7The company reported $1.56 billion in cash and cash equivalents as of September 30, 2021, indicating a strong liquidity position.

Frequently Asked Questions

II-VI Incorporated (now Coherent Corp. post-acquisition, but referred to as II-VI in this filing) is progressing with its acquisition of Coherent, Inc. The transaction was approved by shareholders and regulatory bodies are reviewing it, with an expected completion in the first calendar quarter of 2022. The financing for the acquisition, totaling approximately $7.19 billion ($4.99 billion in debt and $2.2 billion in equity), is in place.

For the quarter ended September 30, 2021, II-VI reported a 9% increase in total revenues to $795.1 million, driven by strong performance in both its Photonic Solutions and Compound Semiconductors segments. Gross margin improved to 40%, and net earnings available to common shareholders rose to $57.4 million, resulting in diluted EPS of $0.50, up from $0.38 in the prior year's quarter.

SG&A expenses increased as a percentage of revenue primarily due to transaction costs associated with the pending Coherent acquisition, which amounted to $12 million in the current quarter, compared to $2 million in the prior year. Additionally, an increase in stock-based compensation due to the rising stock price also contributed to the higher SG&A.

The company maintained a strong liquidity position with $1.56 billion in cash and cash equivalents as of September 30, 2021. Total debt stood at $1.38 billion. The company is compliant with its debt covenants, and the interest rate swap is in place to hedge exposure to variable interest rate debt.