Lasers were once a thing for science fiction fans, but they've developed into very real tools for use in a wide variety of different applications. II-VI (NASDAQ:IIVI) has built an impressive vertically integrated laser production business that has put it near the top of its industry, and as demand for lasers has steadily risen, II-VI has been able to stay ahead of the competition and defy naysayers.

Coming into II-VI's fiscal first-quarter report, investors were hoping that the company would be able to sustain its strong performance even amid signs of potential economic headwinds. II-VI's results put most fears to rest, and it showed even greater opportunity for future growth for the laser maker.

Yellow robotic arm holding a laser that's being used on a vehicle door frame.

Image source: II-VI.

How II-VI started fiscal 2019

II-VI's fiscal first-quarter results were rock-solid. Revenue jumped 20% to $314.4 million, exceeding even the ambitious expectations of most of those following the stock. Adjusted net income climbed by 13% year over year to $37 million, and the resulting adjusted earnings of $0.56 per share exactly matched the consensus forecast among investors.

Fundamentally, II-VI saw most of its core metrics gain ground. A book-to-bill ratio of 1.04 pointed to strong ongoing demand for its laser products, up from 0.96 a year ago, and gains in operating margin pointed to greater overall efficiency. II-VI did see slight declines in gross margin and adjusted return on sales, but the figures weren't alarming.

II-VI's segments saw consistent revenue growth. Segment sales for the key photonics segment were up 16%, and that was the weakest of the three business units. Laser solutions saw a 21% year-over-year gain, while performance products enjoyed a 27% surge in segment revenue. From a bottom-line perspective, though, II-VI didn't see universal success, with photonics seeing a 21% slump in operating income even as performance products profit surged nearly 30% and laser solutions more than quadrupled its results from the previous year's fiscal first quarter. Book-to-bill ratios were best in the photonics arena, with laser solutions lagging slightly below the 1 level.

CEO Chuck Mattera gave a lot of extra information about the quarter. "The communications end market clearly remains strong for II-VI," Mattera said, "growing 20% year over year, [and] our military business grew 30%." The CEO also noted 10% growth in industrial end market revenue, and demand for 3D sensing capability more than tripled.

What's ahead for II-VI?

Positive trends show few signs of letting up. As Mattera noted, "Sales of SiC [silicon carbide] substrates grew more than 50%, and our increases in scale of SiC manufacturing position us well to capture longer term opportunities as 5G and electric vehicles ramp." Next-generation wireless networks are likely to incorporate II-VI technology with respect to gallium nitride radio-frequency communications devices, pointing to a long runway for faster growth ahead.

II-VI also gave encouraging guidance for the coming quarter. In the fiscal second quarter of 2019, II-VI expects that it will see revenue of $333 million to $345 million. That number was better than most had anticipated, and earnings guidance for $0.65 to $0.69 per share on an adjusted basis was also considerably above the $0.59-per-share consensus forecast among most of those following the stock.

Shareholders were quite pleased with the report, and the stock soared almost 20% in the trading session following the announcement. Concerns about the general state of the industrial economy haven't disappeared entirely, and some still think that II-VI could be vulnerable to a cyclical downturn. Yet at least for now, II-VI seems to be avoiding many of the pressures that have hit some of its rivals, and its overall strategic vision looks to promote further expansion for the foreseeable future.