01—Abstract
Summary
Summary of the 10-Q filed February 8, 2023. Cited figures are marked; the original filing is the authoritative source.
Coherent Corp. reported significant top-line growth in the six months ended December 31, 2022, with revenues increasing by 69% to $2.715 billiona, largely driven by the acquisition of Coherent, Inc. (Legacy Coherent) which now forms the Lasers segment.
Despite this revenue surge, the company experienced a net loss of $83.8 millionb for the period, a reversal from the $142.1 million net earnings in the prior year, primarily impacted by the costs associated with the Legacy Coherent acquisition, including inventory step-ups and amortization of intangible assets. Financially, the company's balance sheet reflects the scale of the acquisition, with total assets more than doubling to $14.1 billion from $7.8 billion at June 30, 2022. This is largely due to the significant increases in goodwill and other intangible assets.
Debt levels also rose considerably to $4.5 billionc from $2.3 billion, supporting the acquisition. The company's liquidity appears stable, with $913 million in cash and cash equivalents and significant availability under its revolving credit facility.
02—Key points
Key Highlights
- Revenue for the six months ended December 31, 2022, surged by 69% to $2.715 billion, primarily driven by the acquisition of Legacy Coherent and contributions from the Materials and Networking segments.
- The company reported a net loss of $83.8 million for the six months ended December 31, 2022, a significant change from the $142.1 million net earnings in the prior year's comparable period.
- Total assets more than doubled to $14.1 billion as of December 31, 2022, with substantial increases in goodwill ($4.4 billion) and intangible assets ($4.0 billion) due to the acquisition.
- Long-term debt increased significantly to $4.4 billion as of December 31, 2022, up from $1.9 billion at June 30, 2022, reflecting financing for the acquisition.
- Gross margin percentage decreased to 31% for the six months ended December 31, 2022, from 39% in the prior year, impacted by acquisition-related inventory fair value adjustments and amortization expenses.
- Selling, general, and administrative (SG&A) expenses nearly doubled as a percentage of revenue to 20% for the six months ended December 31, 2022, driven by acquisition-related costs, including amortization of intangibles and integration expenses.
- Net cash provided by operating activities improved to $300 million for the six months ended December 31, 2022, up from $240 million in the prior year, indicating improved working capital management.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2023, Coherent Corp. lost $0.03.
- Revenue$1.37B100.0%
- Cost of revenue−$959.1M70.0%
- Gross profit$411.2M30.0%
- Operating costs−$402.9M29.4%
- Operating income$8.2M0.6%
- Interest, other & tax−$53.3M3.9%
- Net income−$45.1M3.3%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2023filed February 8, 2023Financial Statements
Q2 FY2023 against Q2 FY2022
| Line item | Q2 FY2023Q2 FY2022 | Change |
|---|---|---|
| Revenue | $1.37B$806.82M | +69.8% |
| Cost of Revenue | $959.10M$495.65M | +93.5% |
| Gross Profit | $411.19M$311.17M | +32.1% |
| R&D Expenses | $128.79M$95.33M | +35.1% |
| SG&A Expenses | $274.15M$117.62M | +133.1% |
| Operating Expenses | $1.44B$727.47M | +97.5% |
| Operating Income | $8.25M$98.22M | −91.6% |
| Interest Expense | $70.90M$17.06M | +315.6% |
| Net Income | -$45.07M$67.66M | −166.6% |
| EPS (Basic) | $-0.58$0.48 | −220.8% |
| EPS (Diluted) | $-0.58$0.44 | −231.8% |
| Shares Outstanding (Basic) | 138.62M106.16M | +30.6% |
| Shares Outstanding (Diluted) | 138.62M116.44M | +19.1% |
05—Questions
Frequently Asked Questions
What is the primary driver behind the significant increase in Coherent Corp.'s revenue?
The primary driver for the substantial increase in revenue is the acquisition of Coherent, Inc. (Legacy Coherent), which closed on July 1, 2022. This acquisition significantly expanded the company's operations, particularly in the Lasers segment.
Why did Coherent Corp. report a net loss in the current period after reporting net earnings in the prior year?
The net loss for the six months ended December 31, 2022, is primarily due to significant expenses related to the acquisition of Legacy Coherent. These include the amortization of preliminary fair value adjustments on acquired inventory and intangible assets, as well as integration and transaction costs associated with the merger.
How has the acquisition of Legacy Coherent impacted the company's balance sheet?
The acquisition has substantially increased Coherent Corp.'s total assets, with significant rises in goodwill and other intangible assets reflecting the purchase price allocation. Consequently, total liabilities, particularly long-term debt, have also increased to finance the transaction.
What is the impact of the acquisition-related costs on the company's profitability?
The acquisition-related costs, such as the fair value step-up on inventories and the amortization of intangible assets, have negatively impacted gross margins and increased SG&A expenses. These non-recurring or amortized costs are a key reason for the decrease in profitability margins in the current reporting period.
06—Continue