10-QPeriod: Q1 FY2023

COHERENT CORP. Quarterly Report for Q1 Ended Sep 30, 2022

Filed November 9, 2022For Securities:COHR

Summary

Coherent Corp. (COHR) reported a net loss of $38.7 million for the three months ended September 30, 2022, a significant shift from the net earnings of $74.5 million in the prior year period. This loss is largely attributable to the completion of the significant acquisition of Coherent, Inc. on July 1, 2022. The acquisition, valued at approximately $7.1 billion, has substantially increased the company's assets and liabilities, including goodwill and intangible assets, and introduced substantial new debt financing. Despite the net loss, the company reported a substantial increase in revenue, up 69% year-over-year to $1.34 billion, primarily driven by the inclusion of the acquired "Lasers" segment. However, gross margins declined from 39% to 33%, impacted by acquisition-related inventory fair value adjustments and amortization of acquired intangibles. Significant increases in SG&A expenses were also noted due to one-time Merger-related charges and financing costs. The company's liquidity remains robust, with substantial cash on hand and available borrowing capacity, providing confidence in meeting its obligations through fiscal year 2023.

Financial Highlights

48 data points
Beta

Revenue

$1.34B

33.0% Gross Margin

Net Income

-$38.70M

-2.9% Net Margin

EPS (Diluted)

$-0.56

Total Assets

$13.83B

Cash & Equivalents

$904.16M

Free Cash Flow

-$59.41M

Financial Statements
Beta
Revenue$1.34B
Cost of Revenue$901.00M
Gross Profit$443.57M
R&D Expenses$121.08M
SG&A Expenses$280.01M
Operating Expenses$1.40B
Operating Income$42.48M
Interest Expense$61.89M
Net Income-$38.70M
EPS (Basic)$-0.56
EPS (Diluted)$-0.56
Shares Outstanding (Basic)133.28M
Shares Outstanding (Diluted)133.28M

Key Highlights

  • 1Revenue increased significantly by 69% to $1.34 billion, largely due to the acquisition of Coherent, Inc. and its "Lasers" segment.
  • 2The company reported a net loss of $38.7 million for the quarter, compared to a net profit of $74.5 million in the prior year, primarily due to acquisition-related costs and financing.
  • 3Gross margin decreased to 33% from 39% year-over-year, impacted by acquisition-related inventory adjustments and amortization of intangible assets.
  • 4Operating expenses, particularly SG&A, rose substantially due to one-time merger, transaction, and financing costs.
  • 5Total assets more than doubled from $7.8 billion to $13.8 billion, driven by the acquisition, with significant increases in Goodwill and Other Intangible Assets.
  • 6Total debt increased from $3.5 billion to $6.7 billion, primarily due to new debt facilities secured to finance the acquisition.
  • 7Operating cash flow remained positive at $80 million, demonstrating continued operational cash generation despite acquisition impacts.

Frequently Asked Questions

The primary driver is the completion of the acquisition of Coherent, Inc. on July 1, 2022, which added substantial revenue-generating capabilities and assets, including goodwill and intangible assets, to Coherent Corp.

The net loss is mainly due to significant one-time costs associated with the acquisition of Coherent, Inc., including transaction fees, financing costs, and the amortization of acquired intangible assets. These factors outweighed the revenue generated by the acquired business.

The company's total debt has significantly increased due to new debt financing secured to fund the acquisition of Coherent, Inc. This includes new term loan facilities totaling $3.65 billion and a revolving credit facility of $350 million.

The company believes its existing cash, projected cash flow from operations, and available borrowing capacity under its credit facilities are sufficient to fund its working capital, capital expenditures, debt obligations, and growth objectives through fiscal year 2023.