II-VI Incorporated reports 20.6% EBITDA growth in 2018 and almost no change in EBITDA Margin of 18.6%
08/07/2018 • About II-VI Incorporated (
$IIVI) • By InTwits
II-VI Incorporated reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- II-VI Incorporated is a fast growth stock: FY2018 revenue growth was 19.2%, 5 year revenue CAGR was 16.0% at FY2018 ROIC 9.7%
- II-VI Incorporated has medium CAPEX intensity: 5 year average CAPEX/Revenue was 9.2%. At the same time it's in pair with industry average of 3.1%
- CAPEX is quite volatile: $153m in FY2018, $139m in FY2017, $58m in FY2016, $52m in FY2015, $29m in FY2014
- The company has business model with low profitability: ROIC is 9.7%
- It operates with medium-size leverage: Net Debt/EBITDA is 0.9x while industry average is -0.7x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
II-VI Incorporated's Revenue surged on 19.2%. Revenue growth showed small slowdown in FY18Q4 - it was 17.3% YoY. During FY2014-FY2018 Revenue growth bottomed in FY2015 at 8.6% and was accelerating since that time. EBITDA Margin showed almost no change in FY2018. EBITDA Margin grew at 0.91 pp per annum in the last 5 years.
Gross Margin showed almost no change in FY2018. Gross Margin followed a growing trend at 1.7 pp per annum in FY2014-FY2018. SG&A as a % of Revenue showed almost no change in FY2018. SG&A as a % of Revenue declined at -0.55 pp per annum in the last 5 years. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018. During FY2014-FY2018 SBC as a % of Revenue bottomed in FY2016 at 1.1% and was growing since that time.
Net Income margin decreased on 2.2 pp from 9.8% to 7.6% in FY2018. The efficient tax rate was 28.0% in FY2018 while the average for the last five years was 22.5%.
Investments (CAPEX, working capital and M&A)
II-VI Incorporated's CAPEX/Revenue was 13.2% in FY2018. The company showed CAPEX/Revenue growth of 6.2 pp from 7.1% in FY2015 to 13.2% in FY2018. Average CAPEX/Revenue for the last three years was 11.5%. To maintain its fast growth the company invested a large share of EBITDA (71.0%) to CAPEX. CAPEX as a % of Revenue followed a growing trend at 2.5 pp per annum in FY2014-FY2018.
Accounts receivable as a % of Revenue decreased slightly on 1.3 pp from 19.9% to 18.6% in FY2018. Inventories as a % of Revenue showed almost no change at 21.4% in FY2018. Accounts payable as a % of Revenue increased slightly on 1.6 pp from 11.2% to 12.9% in FY2018.
II-VI Incorporated has spent
$81m on M&A in FY2018 which accounts for 6.9% of revenue.
Return on investment
The company operates at low ROIC (9.7%) and ROE (9.1%). ROIC showed almost no change in FY2018. ROE decreased on 2.2 pp from 11.3% to 9.1% in FY2018. During FY2014-FY2018 ROIC topped in FY2017 at 9.9%.
Leverage (Debt)
Company's Net Debt / EBITDA is 0.9x and Debt / EBITDA is 2.0x. Net Debt / EBITDA jumped on 0.4x from 0.5x to 0.9x in FY2018. Debt jumped on 19.9% while cash decreased on 9.1%. During the last 5 years Net Debt/EBITDA bottomed in FY2015 at 0.018x and was growing since that time.
II-VI Incorporated has good short term financial stability: Interest coverage ratio (ICR) is 7.4x. II-VI Incorporated has no short term refinancing risk: cash is higher than short term debt (1,200.4%).
Average interest expence charged on company's debt was 4.2% in FY2018.
Valuation and dividends
The company's trades at EV/EBITDA 14.0x and P/E 32.2x.
Management team
CEO total compensation was
$5,352,897 in FY2018 which included
$686,200 salary. Mary Jane Raymond is a II-VI Incorporated's CFO. Mary Jane Raymond has spent 5 years at the company.
Insider ownership is 5.8%. Insider ownership didn't change in 2018.
The company has 11,443 employees. The number of employees jumped on 10.6%. Average revenue per employee in FY2018 was
$101,267 and it increased on 7.8%.
Financial and operational results
FY ended 06/30/2018
II-VI Incorporated ($IIVI) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 683 | 742 | 827 | 972 | 1,159 | 19.2% |
| Gross Profit | 227 | 272 | 313 | 388 | 461 | 18.8% |
| SG&A | 138 | 144 | 161 | 176 | 209 | 18.6% |
| EBITDA | 100 | 130 | 148 | 179 | 216 | 20.6% |
| EBIT | 46 | 77 | 92 | 116 | 135 | 17.1% |
| Interest expence | 4 | 4 | 3 | 7 | 18 | 169.5% |
| Tax | 7 | 13 | 24 | 24 | 34 | 45.4% |
| Net Income | 38 | 66 | 65 | 95 | 88 | -7.6% |
| Stock Based Compensation | 12 | 11 | 9 | 12 | 15 | 30.2% |
Balance Sheet
|
|---|
| Cash | 175 | 174 | 218 | 272 | 247 | -9.1% |
| Accounts Receivable | 137 | 141 | 165 | 193 | 215 | 11.2% |
| Inventory | 166 | 164 | 175 | 204 | 248 | 21.9% |
| Accounts Payable | 46 | 45 | 54 | 66 | 90 | 37.0% |
| Short Term Debt | 20 | 20 | 20 | 21 | 21 | -2.3% |
| Long Term Debt | 222 | 156 | 215 | 345 | 419 | 21.3% |
Cash flow
|
|---|
| Capex | 29 | 52 | 58 | 139 | 153 | 10.8% |
| Acquisitions | 178 | | 122 | 40 | 81 | 101.2% |
Ratios
|
|---|
| Revenue growth | 24.0% | 8.6% | 11.5% | 17.5% | 19.2% | |
| EBITDA growth | -11.3% | 30.4% | 14.3% | 20.7% | 20.6% | |
|
|---|
| Gross Margin | 33.2% | 36.6% | 37.8% | 40.0% | 39.8% | -0.1% |
| EBITDA Margin | 14.6% | 17.5% | 17.9% | 18.4% | 18.6% | 0.2% |
| EBIT Margin | 6.8% | 10.4% | 11.1% | 11.9% | 11.7% | -0.2% |
| SG&A, % of revenue | 20.2% | 19.3% | 19.4% | 18.1% | 18.0% | -0.1% |
| SBC, % of revenue | 1.7% | 1.5% | 1.1% | 1.2% | 1.3% | 0.1% |
| Net Income Margin | 5.6% | 8.9% | 7.9% | 9.8% | 7.6% | -2.2% |
| CAPEX, % of revenue | 4.3% | 7.1% | 7.0% | 14.3% | 13.2% | -1.0% |
|
|---|
| ROIC | 5.5% | 8.3% | 9.4% | 9.9% | 9.7% | -0.3% |
| ROE | 5.9% | 9.4% | 8.7% | 11.3% | 9.1% | -2.2% |
| Net Debt/EBITDA | 0.7x | 0.0x | 0.1x | 0.5x | 0.9x | 0.4x |
| Interest expence / Average debt | 1.9% | 1.8% | 1.5% | 2.3% | 4.2% | 1.9% |
People
|
|---|
| Insider ownership | 5.8% | 5.8% | 5.8% | 5.8% | 5.8% | 0.0% |
| Employees | 6,796 | 8,490 | 8,927 | 10,349 | 11,443 | 10.6% |
| Revenue/Employee, th. $ | 101 | 87 | 93 | 94 | 101 | 7.8% |
II-VI Incorporated ($IIVI) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 262 | 281 | 295 | 321 | | 18.0% | 21.4% | 20.3% | 17.3% |
| EBITDA | 49 | 52 | 55 | 61 | | 26.0% | 23.4% | 24.3% | 11.5% |
| Net Income | 21 | 10 | 30 | 27 | | 29.7% | -59.9% | 34.2% | -16.8% |
Balance Sheet
|
|---|
| Cash | 241 | 254 | 263 | 247 | | 9.6% | 3.4% | 6.3% | -9.1% |
| Short Term Debt | 20 | 21 | 21 | 21 | | 0.0% | 0.3% | 0.3% | -2.3% |
| Long Term Debt | 408 | 466 | 454 | 419 | | 78.7% | 74.5% | 61.0% | 21.3% |
Ratios
|
|---|
| Gross Margin | 40.5% | 38.9% | 40.2% | 39.7% | | 1.0% | -1.8% | 0.3% | -0.0% |
| EBITDA Margin | 18.6% | 18.4% | 18.5% | 19.0% | | 1.2% | 0.3% | 0.6% | -1.0% |
| Net Income Margin | 8.1% | 3.4% | 10.2% | 8.5% | | 0.7% | -6.9% | 1.1% | -3.5% |
Peers in Electronic Components
Below we provide II-VI Incorporated benchmarking against other companies in Electronic Components industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Superconductor Technologies Inc. ($SCON) | | -61.4% | -46.3% | 240.5% | 248.9% |
| Akoustis Technologies, Inc. ($AKTS) | | | | | 148.3% |
| CPS Technologies Corp. ($CPSH) | | -5.9% | -29.5% | -5.0% | 48.0% |
| Littelfuse, Inc. ($LFUS) | | 1.9% | 21.7% | 15.7% | 40.7% |
| Cavitation Technologies Inc ($CVAT) | | -73.6% | 267.5% | -40.9% | 22.6% |
| |
|---|
| Median (22 companies) | | -5.9% | 1.1% | 7.7% | 14.1% |
|---|
| II-VI Incorporated ($IIVI) | | 8.6% | 11.5% | 17.5% | 19.2% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Cavitation Technologies Inc ($CVAT) | 93.5% | 85.0% | 93.2% | 93.5% | 90.6% |
| Dolby Laboratories ($DLB) | 92.7% | 90.2% | 89.4% | 89.1% | 87.9% |
| Flexpoint Sensor Systems Inc ($FLXT) | 96.7% | 95.2% | 92.7% | 87.9% | 86.1% |
| Airgain, Inc. ($AIRG) | 44.6% | 41.9% | 44.4% | 47.1% | 43.7% |
| Corning Incorporated ($GLW) | 41.7% | 40.1% | 40.1% | 39.7% | 39.5% |
| |
|---|
| Median (22 companies) | 31.7% | 36.7% | 33.7% | 34.9% | 36.3% |
|---|
| II-VI Incorporated ($IIVI) | 33.2% | 36.6% | 37.8% | 40.0% | 39.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Corning Incorporated ($GLW) | 32.2% | 27.5% | 27.9% | 27.3% | 25.4% |
| Dolby Laboratories ($DLB) | 34.1% | 29.1% | 30.9% | 30.8% | 25.1% |
| Amphenol Corporation ($APH) | 22.5% | 22.9% | 22.6% | 23.6% | 24.2% |
| Vishay Intertechnology, Inc. ($VSH) | 14.8% | 11.9% | 15.4% | 18.7% | 21.3% |
| IEH Corp ($IEHC) | 18.4% | 21.2% | 18.0% | 16.3% | 20.2% |
| |
|---|
| Median (22 companies) | 8.6% | 11.9% | 13.6% | 8.7% | 9.3% |
|---|
| II-VI Incorporated ($IIVI) | 14.6% | 17.5% | 17.9% | 18.4% | 18.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Akoustis Technologies, Inc. ($AKTS) | | | | 334.0% | 574.7% |
| CBAK Energy Technology, Inc. ($CBAK) | 8.0% | 92.4% | 57.2% | 20.6% | 30.1% |
| Corning Incorporated ($GLW) | 11.1% | 13.7% | 12.0% | 17.8% | 19.9% |
| Superconductor Technologies Inc. ($SCON) | 586.1% | 57.8% | 0.0% | 34.1% | 12.1% |
| Knowles Corporation ($KN) | 7.4% | 7.4% | 4.5% | 6.9% | 9.7% |
| |
|---|
| Median (22 companies) | 3.9% | 2.7% | 3.0% | 4.2% | 3.8% |
|---|
| II-VI Incorporated ($IIVI) | 4.3% | 7.1% | 7.0% | 14.3% | 13.2% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Vishay Intertechnology, Inc. ($VSH) | 8.3% | 4.5% | 9.8% | 18.4% | 27.8% |
| IEH Corp ($IEHC) | 27.7% | 28.2% | 24.2% | 19.2% | 26.1% |
| Amphenol Corporation ($APH) | 19.1% | 18.5% | 18.3% | 19.2% | 21.1% |
| Inrad Optics Inc ($INRD) | -26.7% | -5.2% | -9.2% | -10.4% | 17.7% |
| Littelfuse, Inc. ($LFUS) | 14.3% | 11.1% | 11.7% | 15.8% | 12.1% |
| |
|---|
| Median (22 companies) | 6.9% | 5.8% | 4.7% | 6.0% | 7.8% |
|---|
| II-VI Incorporated ($IIVI) | 5.5% | 8.3% | 9.4% | 9.9% | 9.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Belden Inc ($BDC) | 3.9x | 5.2x | 2.1x | 2.6x | 2.3x |
| Inrad Optics Inc ($INRD) | | 9.9x | | | 1.4x |
| Corning Incorporated ($GLW) | -0.7x | -0.0x | -0.5x | 0.3x | 1.3x |
| Bel Fuse Inc. ($BELFA) | 4.6x | 2.0x | | 1.4x | 1.3x |
| Amphenol Corporation ($APH) | 1.4x | 0.8x | 1.4x | 1.1x | 1.2x |
| |
|---|
| Median (14 companies) | -0.6x | -0.3x | -0.5x | -0.3x | 0.5x |
|---|
| II-VI Incorporated ($IIVI) | 0.7x | 0.0x | 0.1x | 0.5x | 0.9x |
