01—Abstract
Summary
Summary of the 10-Q filed February 9, 2022. Cited figures are marked; the original filing is the authoritative source.
COHERENT CORP. (COHR), formerly II-VI Incorporated, reported a 3% increase in revenue to $807 milliona for the three months ended December 31, 2021, and a 6% increase to $1,602 million for the six months ended December 31, 2021, compared to the prior year periods.
This growth was primarily driven by increased sales in the industrial and communications product lines, particularly with 200G, 400G, and 800G products. Despite revenue growth, gross margin saw a slight decline due to higher component costs from supply chain shortages and COVID-19 related expenses.
The company also reported an increase in Selling, General & Administrative (SG&A) expenses, largely due to transaction costs associated with the pending acquisition of Coherent, Inc. The acquisition remains on track for completion by mid-second quarter of 2022, subject to regulatory approvals. Significant financing activities were undertaken to support this transaction, including the issuance of $990 millionb in Senior Notes.
02—Key points
Key Highlights
- Revenue increased by 3% to $807 million for the three months ended December 31, 2021, driven by growth in industrial and communications sectors.
- Gross margin slightly decreased to 39% from 40% year-over-year due to increased component costs and supply chain pressures.
- SG&A expenses increased due to $20 million in transaction costs related to the pending Coherent acquisition.
- The acquisition of Coherent is anticipated to close by mid-Q2 2022, pending regulatory approvals.
- The company issued $990 million in 5.000% Senior Notes due 2029 to fund the Coherent acquisition.
- Net earnings available to common shareholders decreased to $50.95 million ($0.44 EPS) from $81.00 million ($0.73 EPS) in the prior year's comparable quarter, primarily due to increased preferred stock dividends and merger-related expenses.
- Cash, cash equivalents, and restricted cash increased significantly to $2,649.7 million from $1,591.9 million in the prior fiscal year-end, largely due to proceeds from the Senior Notes issuance.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2022, Coherent Corp. kept $0.08.
- Revenue$806.8M100.0%
- Cost of revenue−$495.7M61.4%
- Gross profit$311.2M38.6%
- Operating costs−$212.9M26.4%
- Operating income$98.2M12.2%
- Interest, other & tax−$30.6M3.8%
- Net income$67.7M8.4%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2022filed February 9, 2022Financial Statements
Q2 FY2022 against Q2 FY2021
| Line item | Q2 FY2022Q2 FY2021 | Change |
|---|---|---|
| Revenue | $806.82M$786.57M | +2.6% |
| Cost of Revenue | $495.65M$473.86M | +4.6% |
| Gross Profit | $311.17M$312.71M | −0.5% |
| R&D Expenses | $95.33M$84.86M | +12.3% |
| SG&A Expenses | $117.62M$109.13M | +7.8% |
| Operating Expenses | $727.47M$680.29M | +6.9% |
| Operating Income | $98.22M$118.72M | −17.3% |
| Interest Expense | $17.06M$15.59M | +9.5% |
| Net Income | $67.66M$87.90M | −23.0% |
| EPS (Basic) | $0.48$0.78 | −38.5% |
| EPS (Diluted) | $0.44$0.73 | −39.7% |
| Shares Outstanding (Basic) | 106.16M104.09M | +2.0% |
| Shares Outstanding (Diluted) | 116.44M115.05M | +1.2% |
05—Questions
Frequently Asked Questions
What is the financial performance of COHR for the quarter ended December 31, 2021?
For the quarter ended December 31, 2021, COHR reported a 3% increase in revenue to $807 million compared to the prior year. However, net earnings available to common shareholders decreased to $50.95 million, or $0.44 per diluted share, from $81.00 million, or $0.73 per diluted share, in the same period last year. This decrease was influenced by higher preferred stock dividends and merger-related expenses.
What is the status of the Coherent acquisition?
The acquisition of Coherent, Inc. is progressing as planned and is anticipated to be completed by the middle of the second calendar quarter of 2022, subject to customary closing conditions and regulatory approvals, including from China's State Administration for Market Regulation.
How is COHR financing the Coherent acquisition?
COHR is financing the Coherent acquisition through a combination of sources. This includes $990 million raised from the issuance of 5.000% Senior Notes due 2029, proceeds from new term facilities, and existing cash on hand. The company also has a $2.15 billion equity commitment from Bain Capital.
What are the key drivers of revenue growth and what challenges are impacting margins?
Revenue growth is primarily driven by increased demand in the industrial and communications sectors, particularly for 200G, 400G, and 800G products. However, gross margins have faced pressure due to higher component costs resulting from supply chain shortages and additional expenses related to COVID-19.
06—Continue