II-VI Incorporated Reports Q3 Fiscal 2019 Earnings

• Revenues increased 16% compared to Q3FY18
  
• GAAP EPS of $0.38, and non-GAAP EPS of $0.62, in line with guidance
• Record backlog continues to signal growth across multiple markets

PITTSBURGH, May 01, 2019 (GLOBE NEWSWIRE) -- II-VI Incorporated (Nasdaq:IIVI) ("II-VI" or the "Company") today reported results for its fiscal third quarter ended March 31, 2019.

“We delivered another solid quarter of performance with another record backlog. Growth was widespread in the quarter across both our core and growth markets. In our core markets, we saw the leading edge of the global deployment of 5G accelerate and drive strong demand for our products. We saw particular strength from ROADM demand, which grew well over 50% compared to Q3 of last year,” said Dr. Vincent D. (Chuck) Mattera, Jr., President and Chief Executive Officer. “For the military end market, we acquired Redstone Aerospace, an entrepreneurial firm with unique capabilities in defense-related applications as we continue our investment in the emerging high-energy laser market. The industrial end market was steady.”

“In our growth markets, the quarter’s performance was also driven by very strong growth in EUV and SiC, both of which now have expanded capacity in place. In 3D sensing, we expect to see increases in shipments in the second half of this calendar year and we have achieved an important design win in an Android platform. Our global II-VI teams made great progress on the integration planning of the Finisar acquisition. We are looking forward to final regulatory approval from China, which we still believe will occur mid-year 2019.” 

1. Excludes certain non-GAAP adjustments for share-based compensation, acquired amortization expense, certain one-time transaction expense and the impact of the Tax Cuts and Jobs Act. See Table 3 for Reconciliation of Operating Income to Adjusted Operating Income. See Tables 7 and 8 for Reconciliation of Reported Net Earnings to Adjusted Net Earnings.
2. Book to Bill is calculated by dividing orders the Company expects to convert to revenue within the next twelve months by revenues recognized during the period.

Outlook

The outlook for the fourth fiscal quarter ending June 30, 2019 is revenues of $343 million to $353 million and earnings per diluted share of $0.33 to $0.39 including $0.11 to $0.13 per share of transaction costs for our transactions and collaborations recently announced. On an adjusted basis, earnings per diluted share is estimated at $0.63 to $0.71, which includes $0.12 for share based compensation, $0.07 for amortization expense, and $0.11 to $0.13 for transaction costs. This is all at prevailing exchange rates.

Comparable results for the quarter ended June 30, 2018 were revenues of $321.1 million and diluted earnings per share of $0.42. The $0.42 of diluted earnings per share included $0.07 for share based compensation, $0.06 for amortization expense, and $(0.03) for tax related adjustments. On an adjusted basis, earnings per share was $0.52. As discussed in more detail below, actual results may differ from these forecasts due to various factors including, but not limited to, changes in product demand, competition and general economic conditions.

Segment Information

Operating income is defined as earnings before income taxes, interest expense and other expense or income, net.

Table 3 is a reconciliation of Adjusted Operating Income reported in this press release to reported Net Earnings.

Table 4 is a reconciliation of Operating Income reported in this press release to Adjusted EBITDA.

Table 5 is a reconciliation of EBITDA reported in this press release to reported Net Earnings.

3. EBITDA is defined as earnings before interest, income taxes, depreciation and amortization.
4. EBITDA margin is defined as earnings before interest, incomes taxes, depreciation and amortization divided by revenues.
5. Adjusted EBITDA excludes non-GAAP adjustments for certain one-time transaction expenses.

Table 6 is a table of other selected financial information.

Conference Call & Webcast Information

The Company will host a conference call at 9:00 a.m. Eastern Time on May 1, 2019 to discuss these results.

Webcast URL: Individuals wishing to participate in the webcast, to be held at 9:00 a.m. Eastern Time on Wednesday, May 1, 2019, can access the event at the Company’s web site by visiting www.ii-vi.com or via http://tinyurl.com/IIVIQ3FY19Earnings.

To join the call and replay: If you wish to participate in the conference call, please dial (877) 316-5288 for US calls, and (734) 385-4977 for international calls.  When you call, please enter ID # 8135719, and provide your name and company affiliation.

The teleconference will be recorded and a replay will be available to interested parties who are unable to attend the live call.  This service will be available up to 11:59 p.m. Eastern Time on Friday, May 3, 2019 by dialing (855) 859-2056 for domestic calls and (404) 537-3406 for international calls and entering the ID # 8135719. 

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 adjusted non-GAAP net earnings and the adjusted non-GAAP earnings per share measure the earnings of the Company, excluding non-recurring or unusual items that are considered by the 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 that items excluded from the non-GAAP financial measures will not occur in the future, or that there could 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.

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 the industrial, optical communications, military, life sciences, semiconductor equipment, and consumer 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 enable our customers. For more information, please visit us at www.ii-vi.com.

Forward-looking Statements

This communication contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” similar expressions, and variations or negatives of these words. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the consummation of the proposed transaction and the anticipated benefits thereof. These and other forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements, including the failure to consummate the proposed transaction or to make any filing or take other action required to consummate such transaction in a timely matter or at all, are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. Important factors that may cause such a difference include, but are not limited to: (i) the ability of II-VI and Finisar Corporation (“Finisar”) to complete their proposed transaction on the anticipated terms and timing or at all, (ii) the ability of the parties to satisfy the conditions to the closing of the proposed transaction, including obtaining required regulatory approvals, (iii) potential litigation relating to the proposed transaction, which could be instituted against II-VI, Finisar or their respective directors, (iv) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the transaction, (v) the triggering of any third party contracts containing consent and/or other similar provisions, (vi) any negative effects of the announcement of the transaction on the market price of Finisar’s common stock and/or negative effects of the announcement or commencement of the transaction on the market price of II-VI’s common stock, (vii) uncertainty as to the long-term value of II-VI’s common stock, and thus the value of the II-VI shares to be issued in the transaction, (viii) any unexpected impacts from unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition and losses on the future prospects, business and management strategies for the management, expansion and growth of the combined company’s operations after the consummation of the transaction and on the other conditions to the completion of the merger, (ix) inherent risks, costs and uncertainties associated with integrating the businesses successfully and achieving all or any of the anticipated synergies, (x) potential disruptions from the proposed transaction that may harm II-VI’s or Finisar’s respective businesses, including current plans and operations, (xi) the ability of II-VI and Finisar to retain and hire key personnel, (xii) adverse legal and regulatory developments or determinations or adverse changes in, or interpretations of, U.S. or foreign laws, rules or regulations, that could delay or prevent completion of the proposed transaction or cause the terms of the proposed transaction to be modified, (xiii) the ability of II-VI to obtain or consummate financing or refinancing related to the transaction upon acceptable terms or at all, (xiv) economic uncertainty due to monetary or trade policy, political or other issues in the United States or internationally, (xv) any unexpected fluctuations or weakness in the U.S. and global economies, (xvi) changes in U.S. corporate tax laws as a result of the Tax Cuts and Jobs Act of 2017 and any future legislation, (xvii) foreign currency effects on II-VI’s and Finisar’s respective businesses, (xviii) competitive developments including pricing pressures, the level of orders that are received and can be shipped in a quarter, changes or fluctuations in customer order patterns, and seasonality, (xix) changes in utilization of II-VI or Finisar’s manufacturing capacity and II-VI’s ability to effectively manage and expand its production levels, (xx) disruptions in II-VI’s business or the businesses of its customers or suppliers due to natural disasters, terrorist activity, armed conflict, war, worldwide oil prices and supply, public health concerns or disruptions in the transportation system, and (xxi) the responses by the respective managements of II-VI and Finisar to any of the aforementioned factors. Additional risks are described under the heading “Risk Factors” in II-VI’s Annual Report on Form 10-K for the year ended June 30, 2018, filed with the U.S. Securities and Exchange Commission (the “SEC”) on August 28, 2018 and in Finisar’s Annual Report on Form 10-K for the year ended April 29, 2018 filed with the SEC on June 15, 2018.

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. 333-229052) filed with the SEC in connection with the proposed transaction (the “Form S-4”). While the list of factors discussed above is, 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 II-VI nor Finisar 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.

6. Average Shares Outstanding – Diluted for the Three Months Ended March 31, 2018 was calculated under the If-Converted method to account for the Company’s convertible debt. Reference Table 7: Earnings Per Share Reconciliation from the Q3 FY2018 Earnings Release.