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II-VI Incorporated Reports Fiscal 2022 Third Quarter Results

·18 minuto per la lettura
II-VI Incorporated
II-VI Incorporated
  • Record Revenue of $828 million

  • Record Bookings of $1.2 billion, grew 48% year-over-year

  • Record Backlog of $2.1 billion, grew 88% year-over-year

  • GAAP EPS of $0.28

  • Non-GAAP EPS of $0.95

PITTSBURGH, May 10, 2022 (GLOBE NEWSWIRE) -- II-VI Incorporated (Nasdaq:IIVI) ("II-VI," “We” or the "Company") today reported results for its fiscal 2022 third quarter ended March 31, 2022.

“We experienced a tremendous surge in demand, booking $1.2 billion of new orders, an increase of 48% compared to a year ago. Our backlog grew 88% year-over-year to $2.1 billion. Clearly, we continue to benefit from a broad and diverse portfolio of differentiated products that serve a rapidly growing list of industry-leading customers. Our substantial investments in innovation and scale, our ability to integrate our offerings in large and fast-growing markets, and our diversification strategy has become increasingly well-known and regarded industry-wide,” said Dr. Vincent D. Mattera Jr., Chair and CEO.

Dr. Mattera continued, “We had a record-breaking third quarter. Consolidated revenue increased 6% compared to last year as we delivered $828 million, above the top end of our guidance. This was driven by strength in our datacom networking business, for large enterprises, as well as for hyperscale datacenters and supercomputing clusters that underpin the growth of cloud and the metaverse.

“Our business, operations and supply chain teams leveraged our diverse global footprint to mitigate the impact of our supply constraints. Meanwhile, thanks to our very close relationships, our customers and suppliers provided us valuable guidance to help us navigate through these extraordinary times. Overall, we believe that we are well positioned to increase our momentum, outperform in the current environment, and gain share in our core markets,” concluded Dr. Mattera.

Table 1

Financial Metrics

$ Millions, except per share amounts and %

(Unaudited)

Three Months Ended

Nine Months Ended

Mar 31,

Dec 31,

Mar 31,

Mar 31,

Mar 31,

2022

2021

2021

2022

2021

Revenues

$

827.7

$

806.8

$

783.2

$

2,429.7

$

2,297.9

GAAP Gross Profit (3)

$

321.7

$

311.2

$

290.0

$

939.5

$

879.7

Non-GAAP Gross Profit (2)

$

335.7

$

324.8

$

304.4

$

978.1

$

923.3

GAAP Operating Income (1)

$

106.8

$

98.2

$

85.1

$

300.0

$

305.0

Non-GAAP Operating Income (2)

$

172.0

$

159.2

$

141.0

$

481.6

$

452.9

GAAP Net Earnings

$

49.0

$

67.7

$

81.1

$

191.1

$

215.3

Non-GAAP Net Earnings (2)

$

129.0

$

124.1

$

111.5

$

370.8

$

343.2

GAAP Diluted Earnings Per Share

$

0.28

$

0.44

$

0.66

$

1.22

$

1.78

Non-GAAP Diluted Earnings Per Share (2)

$

0.95

$

0.92

$

0.91

$

2.73

$

2.85

Other Selected Financial Metrics

GAAP gross margin (3)

38.9

%

38.6

%

37.0

%

38.7

%

38.3

%

Non-GAAP gross margin (2)

40.6

%

40.3

%

38.9

%

40.3

%

40.2

%

GAAP operating margin

12.9

%

12.2

%

10.9

%

12.3

%

13.3

%

Non-GAAP operating margin (2)

20.8

%

19.7

%

18.0

%

19.8

%

19.7

%

GAAP return on sales

5.9

%

8.4

%

10.4

%

7.9

%

9.4

%

Non-GAAP return on sales (2)

15.6

%

15.4

%

14.2

%

15.3

%

14.9

%

(1) GAAP operating income is defined as earnings before income taxes, interest expense and other expense or income, net.
(2) All non-GAAP amounts exclude certain adjustments for share-based compensation, acquired intangible amortization expense, restructuring, integration and transaction expenses, as well as start-up costs related to the start-up of new devices for new customer applications. See Table 4 for the Reconciliation of GAAP measures to non-GAAP measures.
(3) GAAP gross profit for prior periods has been updated to include amortization of developed technology intangible assets.

Outlook

The outlook for the fourth fiscal quarter ending June 30, 2022 is revenue of $840 million to $880 million and earnings per diluted share on a non-GAAP basis of $0.85 to $1.00. This is at today’s exchange rate and today’s estimated tax impact of 19%. Both of these are subject to variability. For the non-GAAP earnings per share, we added back to the GAAP earnings pre-tax amounts of $19 million in amortization, $17 million in share-based compensation, and $48 million in transaction, integration and other related costs. Refer to Table 8 for the share count range for the aforementioned outlook. Non-GAAP adjustments are by their nature highly volatile and we have low visibility as to the range that may be incurred in the future.

Conference Call & Webcast Information

The Company will host a conference call at 9:00 a.m. Eastern Time on Tuesday May 10, 2022 to discuss these results. Individuals wishing to participate in the webcast can access the event at the Company’s web site by visiting www.ii-vi.com or via https://tinyurl.com/II-VIQ3FY22EarningsCall. If you wish to participate in the call, please dial +1 734-385-4977 or 877-316-5288. When you call, please enter Confirmation Code 9481179 and provide your name and company affiliation.

The call will be recorded, and a replay will be available to interested parties who are unable to attend the live event. This service will be available up to 11:59 p.m. EST on Friday, May 13, 2022, by dialing +1-855-859-2056 or 800-585-8367 and entering the ID number 9481179.

About II-VI Incorporated

II-VI Incorporated, a global leader in engineered materials and optoelectronic components, is a vertically integrated manufacturing company that develops innovative products for diversified applications in communications, industrial, aerospace & defense, semiconductor capital equipment, life sciences, consumer electronics, and automotive markets. Headquartered in Saxonburg, Pennsylvania, the Company has research and development, manufacturing, sales, service, and distribution facilities worldwide. The Company produces a wide variety of application-specific photonic and electronic materials and components, and deploys them in various forms, including integrated with advanced software to support our customers. For more information, please visit us at www.ii-vi.com.

Forward-looking Statements

This press release contains forward-looking statements relating to future events and expectations that are based on certain assumptions and contingencies. The forward-looking statements are made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 and relate to the Company’s performance on a going-forward basis. The forward-looking statements in this press release involve risks and uncertainties, which could cause actual results, performance, or trends to differ materially from those expressed in the forward-looking statements herein or in previous disclosures.

The Company believes that all forward-looking statements made by it in this press release have a reasonable basis, but there can be no assurance that management’s expectations, beliefs, or projections as expressed in the forward-looking statements will actually occur or prove to be correct. In addition to general industry and global economic conditions, factors that could cause actual results to differ materially from those discussed in the forward-looking statements in this press release include but are not limited to: (i) the failure of any one or more of the assumptions stated above to prove to be correct; (ii) the risks relating to forward-looking statements and other “Risk Factors” discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021 and additional risk factors that may be identified from time to time in future filings of the Company; (iii) the conditions to the completion of the Company’s pending business combination transaction with Coherent, Inc. (the “Transaction”) and the remaining equity investment by Bain Capital, LP, including the receipt of any required shareholder and regulatory approvals, and the risks that those conditions will not be satisfied in a timely manner or at all; (iv) the occurrence of any event, change or other circumstances that could give rise to an amendment or termination of the merger agreement relating to the Transaction, including the receipt by Coherent, Inc. (“Coherent”) of an unsolicited proposal from a third party; (v) the Company’s ability to finance the Transaction, the substantial indebtedness the Company expects to incur in connection with the Transaction and the need to generate sufficient cash flows to service and repay such debt; (vi) the possibility that the Company may be unable to achieve expected synergies, operating efficiencies and other benefits within the expected time-frames or at all and to successfully integrate Coherent’s operations with those of the Company; (vii) the possibility that such integration may be more difficult, time-consuming or costly than expected or that operating costs and business disruption (including, without limitation, disruptions in relationships with employees, customers or suppliers) may be greater than expected in connection with the Transaction; (viii) litigation and any unexpected costs, charges or expenses resulting from the Transaction;(ix) the risk that disruption from the Transaction materially and adversely affects the respective businesses and operations of the Company and Coherent; (x) potential adverse reactions or changes to business relationships resulting from the announcement, pendency or completion of the Transaction; (xi) the ability of the Company to retain and hire key employees; (xii) the purchasing patterns of customers and end users; (xiii) the timely release of new products, and acceptance of such new products by the market; (xiv) the introduction of new products by competitors and other competitive responses; (xv) the Company’s ability to assimilate recently acquired businesses, and realize synergies, cost savings, and opportunities for growth in connection therewith, together with the risks, costs, and uncertainties associated with such acquisitions; (xvi) the Company’s ability to devise and execute strategies to respond to market conditions; (xviii) the risks to realizing the benefits of investments in R&D and commercialization of innovations; (xix) the risks that the Company’s stock price will not trade in line with industrial technology leaders; and/or (xx) the risks of business and economic disruption related to the currently ongoing COVID-19 outbreak and any other worldwide health epidemics or outbreaks that may arise. The Company disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events or developments, or otherwise.

These risks, as well as other risks associated with the proposed transaction, are more fully discussed in the joint proxy statement/prospectus included in the registration statement on Form S-4 (File No. 333-255547) filed with the SEC in connection with the Transaction (the “Form S-4”). While the list of factors discussed above and the list of factors presented in the Form S-4 are considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward looking statements. Neither the Company nor Coherent assumes any obligation to publicly provide revisions or updates to any forward looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.

Use of Non-GAAP Financial Measures

The Company has disclosed financial measurements in this press release that present financial information considered to be non-GAAP financial measures. These measurements are not a substitute for GAAP measurements, although the Company's management uses these measurements as an aid in monitoring the Company's on-going financial performance. The non-GAAP net earnings, the non-GAAP earnings per share, the non-GAAP operating income, the non-GAAP gross profit, the non-GAAP internal research and development, the non-GAAP selling, general and administration, the non-GAAP interest and other (income) expense, and the non-GAAP income tax (benefit), measure earnings and operating income (loss), respectively, excluding non-recurring or unusual items that are considered by management to be outside the Company’s standard operation and excluding certain non-cash items. EBITDA is an adjusted non-GAAP financial measurement that is considered by management to be useful in measuring the profitability between companies within the industry by reflecting operating results of the Company excluding non-operating factors. There are limitations associated with the use of non-GAAP financial measures, including that such measures may not be entirely comparable to similarly titled measures used by other companies, due to potential differences among calculation methodologies. Thus, there can be no assurance whether (i) items excluded from the non-GAAP financial measures will occur in the future or (ii) there will be cash costs associated with items excluded from the non-GAAP financial measures. The Company compensates for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by providing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures. Investors should consider adjusted measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP.

II-VI Incorporated and Subsidiaries

Condensed Consolidated Statements of Earnings (Unaudited)

($000 except per share data)

Three Months Ended

Mar 31,

Dec 31,

Mar 31,

2022

2021

2021

Revenues

$

827,724

$

806,819

$

783,232

Costs, Expenses & Other Expense

Cost of goods sold

506,051

495,652

493,242

Internal research and development

96,895

95,328

83,231

Selling, general and administrative

118,009

117,617

121,678

Interest expense

43,499

17,062

13,034

Other expense (income), net

241

1,806

(21,432

)

Total Costs, Expenses, & Other Expense

764,695

727,465

689,753

Earnings Before Income Taxes

63,029

79,354

93,479

Income Taxes

14,027

11,697

12,387

Net Earnings

49,002

67,657

81,092

Less: Dividends on Preferred Stock

17,148

16,703

7,013

Net Earnings available to the Common Shareholders

31,854

50,954

74,079

Basic Earnings Per Share

$

0.30

$

0.48

$

0.71

Diluted Earnings Per Share

$

0.28

$

0.44

$

0.66

Average Shares Outstanding - Basic

106,323

106,158

104,767

Average Shares Outstanding - Diluted

116,949

116,440

116,302


II-VI Incorporated and Subsidiaries

Condensed Consolidated Statements of Earnings (Unaudited)

($000 except per share data)

Nine Months Ended

March 31,

March 31,

2022

2021

Revenues

$

2,429,654

$

2,297,885

Costs, Expenses & Other Expense

Cost of goods sold

1,490,190

1,418,219

Internal research and development

281,189

246,337

Selling, general and administrative

358,234

328,403

Interest expense

72,752

45,833

Other expense (income), net

(5,535

)

(246

)

Total Costs, Expenses, & Other Expense

2,196,830

2,038,546

Earnings Before Income Taxes

232,824

259,339

Income Taxes

41,701

44,081

Net Earnings

$

191,123

$

215,258

Less: Dividends on Preferred Stock

50,933

20,353

Net Earnings available to the Common Shareholders

$

140,190

$

194,905

Basic Earnings Per Share

$

1.32

$

1.88

Diluted Earnings Per Share

$

1.22

$

1.78

Average Shares Outstanding - Basic

106,079

103,883

Average Shares Outstanding - Diluted

116,410

114,637


II-VI Incorporated and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

($000)

March 31,

June 30,

2022

2021

Assets

Current Assets

Cash, cash equivalents, and restricted cash

$

2,600,315

$

1,591,892

Accounts receivable

653,095

658,962

Inventories

879,510

695,828

Prepaid and refundable income taxes

16,032

13,095

Prepaid and other current assets

84,847

67,617

Total Current Assets

4,233,799

3,027,394

Property, plant & equipment, net

1,320,191

1,242,906

Goodwill

1,292,649

1,296,727

Other intangible assets, net

657,590

718,460

Deferred income taxes

38,708

33,498

Other assets

224,259

193,665

Total Assets

$

7,767,196

$

6,512,650

Liabilities, Mezzanine Equity and Shareholders’ Equity

Current Liabilities

Current portion of long-term debt

$

1,383,959

$

62,050

Accounts payable

361,533

294,486

Operating lease current liabilities

28,050

25,358

Accruals and other current liabilities

350,339

347,695

Total Current Liabilities

2,123,881

729,589

Long-term debt

928,745

1,313,091

Deferred income taxes

74,523

73,962

Operating lease liabilities

115,230

125,541

Other liabilities

140,641

138,119

Total Liabilities

3,383,020

2,380,302

Total Mezzanine Equity

756,411

726,178

Total Shareholders' Equity

3,627,765

3,406,170

Total Liabilities, Mezzanine Equity and Shareholders’ Equity

$

7,767,196

$

6,512,650


II-VI Incorporated and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

($000)

Nine Months Ended

March 31,

2022

2021

Cash Flows from Operating Activities

Net cash provided by operating activities

$

276,007

$

446,852

Cash Flows from Investing Activities

Additions to property, plant & equipment

(195,991

)

(105,331

)

Purchases of businesses, net of cash acquired

(34,431

)

Other investing activities

(5,750

)

(1,057

)

Net cash used in investing activities

(201,741

)

(140,819

)

Cash Flows from Financing Activities

Proceeds from issuance of Senior Notes

990,000

Proceeds from issuance of common shares

460,000

Proceeds from issuance of preferred shares

460,000

Proceeds from issuance of Series B preferred shares

750,000

Payments on Finisar Notes

(14,888

)

Payments on borrowings under Term A Facility

(46,538

)

(121,538

)

Payments on borrowings under Term B Facility

(714,600

)

Payments on borrowings under Revolving Credit Facility

(74,000

)

Debt issuance costs

(10,197

)

Equity issuance costs

(58,596

)

Proceeds from exercises of stock options

17,177

31,562

Payments in satisfaction of employees' minimum tax obligations

(14,948

)

(8,253

)

Payment of dividends

(27,608

)

(13,419

)

Other financing activities

(1,715

)

(1,967

)

Net cash provided by financing activities

891,283

709,189

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

42,874

27,042

Net increase in cash, cash equivalents, and restricted cash

1,008,423

1,042,264

Cash, Cash Equivalents, and Restricted Cash at Beginning of Period

1,591,892

493,046

Cash, Cash Equivalents, and Restricted Cash at End of Period

$

2,600,315

$

1,535,310

Cash paid for interest

$

24,158

$

17,963

Cash paid for income taxes

$

34,757

$

53,696

Additions to property, plant & equipment included in accounts payable

$

71,477

$

21,650


Table 2

Segment Revenues, GAAP Operating Income (Loss) & Margins, and Non-GAAP Operating Income (Loss) & Margins*

$ Millions, except %

(Unaudited)

Three Months Ended

Nine Months Ended

Mar 31,

Dec 31,

Mar 31,

Mar 31,

Mar 31,

2022

2021

2021

2022

2021

Revenues:

Photonic Solutions

$

567.8

$

525.0

$

508.0

$

1,628.8

$

1,488.6

Compound Semiconductors

259.9

281.8

275.3

800.9

809.3

Unallocated and Other

Consolidated

$

827.7

$

806.8

$

783.2

$

2,429.7

$

2,297.9

GAAP Operating Income (Loss):

Photonic Solutions

$

54.6

$

49.8

$

48.3

$

160.9

$

147.2

Compound Semiconductors

61.8

57.2

51.8

168.7

173.5

Unallocated and Other

(9.6

)

(8.7

)

(14.9

)

(29.5

)

(15.7

)

Consolidated

$

106.8

$

98.2

$

85.1

$

300.0

$

305.0

Non-GAAP Operating Income:

Photonic Solutions

$

81.8

$

76.9

$

74.5

$

242.7

$

236.8

Compound Semiconductors

90.2

82.4

66.5

238.9

216.1

Unallocated and Other

Consolidated

$

172.0

$

159.2

$

141.0

$

481.6

$

452.9

GAAP Operating Margin:

Photonic Solutions

9.6

%

9.5

%

9.5

%

9.9

%

9.9

%

Compound Semiconductors

23.8

%

20.3

%

18.8

%

21.1

%

21.4

%

Unallocated and Other

NA

NA

NA

NA

NA

Consolidated

12.9

%

12.2

%

10.9

%

12.3

%

13.3

%

Non-GAAP Operating Margin:

Photonic Solutions

14.4

%

14.6

%

14.7

%

14.9

%

15.9

%

Compound Semiconductors

34.7

%

29.2

%

24.2

%

29.8

%

26.7

%

Unallocated and Other

NA

NA

NA

NA

NA

Consolidated

20.8

%

19.7

%

18.0

%

19.8

%

19.7

%

*Amounts may not recalculate due to rounding.

Table 3

Reconciliation of Segment Non-GAAP Operating Income (Loss) to GAAP Segment Operating Income (Loss)*

$ Millions

(Unaudited)

Three Months Ended

Nine Months Ended

Mar 31,

Dec 31,

Mar 31,

Mar 31,

Mar 31,

2022

2021

2021

2022

2021

Non-GAAP Photonic Solutions Operating Income

$

81.8

$

76.9

$

74.5

$

242.7

$

236.8

Share-based compensation

(8.8

)

(9.4

)

(7.6

)

(27.8

)

(30.2

)

Amortization of acquired intangibles

(16.5

)

(16.6

)

(17.3

)

(50.1

)

(51.9

)

Restructuring, integration, and transaction expenses

(1.9

)

(1.1

)

(1.3

)

(3.9

)

(7.5

)

Photonic Solutions GAAP Operating Income

$

54.6

$

49.8

$

48.3

$

160.9

$

147.2

Non-GAAP Compound Semiconductors Operating Income

$

90.2

$

82.4

$

66.5

$

238.9

$

216.1

Share-based compensation

(9.2

)

(9.3

)

(9.1

)

(31.7

)

(30.1

)

Amortization of acquired intangibles

(2.9

)

(3.4

)

(3.5

)

(9.7

)

(9.7

)

Restructuring, integration, and transaction expenses

(1.7

)

(1.2

)

(2.2

)

(2.9

)

(2.8

)

Start-up costs

(14.6

)

(11.3

)

(25.9

)

Compound Semiconductors GAAP Operating Income

$

61.8

$

57.2

$

51.8

$

168.7

$

173.5

Non-GAAP Unallocated and Other Operating Income (Loss)

$

$

$

$

$

Restructuring, integration, and transaction expenses

(9.6

)

(8.7

)

(14.9

)

(29.5

)

(15.7

)

Unallocated and Other GAAP Operating Income (Loss)

$

(9.6

)

$

(8.7

)

$

(14.9

)

$

(29.5

)

$

(15.7

)

Total GAAP Operating Income

$

106.8

$

98.2

$

85.1

$

300.0

$

305.0

Non-GAAP Operating Income

$

172.0

$

159.2

$

141.0

$

481.6

$

452.9

*Amounts may not recalculate due to rounding.

Table 4

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