01—Abstract
Summary
Summary of the 10-Q filed November 9, 2021. Cited figures are marked; the original filing is the authoritative source.
Coherent Corp. (COHR) reported solid financial results for the quarter ended September 30, 2021, demonstrating growth and improved profitability.
Total revenues increased by 9%a 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.
02—Key points
Key Highlights
- Total 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.
- Gross margin improved to 40% from 39% in the prior year's comparable period, reflecting higher volumes and a better product mix.
- Net 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.
- The pending acquisition of Coherent, Inc. remains on track, with II-VI expecting completion in Q1 2022, subject to regulatory approvals.
- The 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.
- Operating 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.
- The company reported $1.56 billion in cash and cash equivalents as of September 30, 2021, indicating a strong liquidity position.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2022, Coherent Corp. kept $0.09.
- Revenue$795.1M100.0%
- Cost of revenue−$488.5M61.4%
- Gross profit$306.6M38.6%
- Operating costs−$211.6M26.6%
- Operating income$95.0M12.0%
- Interest, other & tax−$20.6M2.6%
- Net income$74.5M9.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2022filed November 9, 2021Financial Statements
Q1 FY2022 against Q1 FY2021
| Line item | Q1 FY2022Q1 FY2021 | Change |
|---|---|---|
| Revenue | $795.11M$728.08M | +9.2% |
| Cost of Revenue | $488.49M$441.52M | +10.6% |
| Gross Profit | $306.62M$286.56M | +7.0% |
| R&D Expenses | $88.97M$78.25M | +13.7% |
| SG&A Expenses | $122.61M$107.19M | +14.4% |
| Operating Expenses | $704.67M$668.51M | +5.4% |
| Operating Income | $95.05M$101.13M | −6.0% |
| Interest Expense | $12.19M$17.21M | −29.2% |
| Net Income | $74.46M$46.27M | +60.9% |
| EPS (Basic) | $0.54$0.39 | +38.5% |
| EPS (Diluted) | $0.50$0.38 | +31.6% |
| Shares Outstanding (Basic) | 105.76M102.81M | +2.9% |
| Shares Outstanding (Diluted) | 115.85M105.25M | +10.1% |
05—Questions
Frequently Asked Questions
What is the current status of the Coherent acquisition?
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.
How did the company perform in terms of revenue and profitability?
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.
What are the main drivers for the increase in Selling, General & Administrative (SG&A) expenses?
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.
What is the company's liquidity and debt situation?
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.
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