- Q1 revenue was $37.5 million in line with
guidance
- Q2 revenue projection ranges from $38 to $40 million
with growth in Fiber Optics segment
- Rebuilding of flood-damaged production infrastructure
is on schedule, and will complete by May
EMCORE Corporation (Nasdaq:EMKR), a leading provider of compound
semiconductor-based components, subsystems, and systems for the
fiber optics and solar power markets, today announced its financial
results for its fiscal first quarter ended December 31, 2011.
Financial Results
Revenue:
Consolidated revenue for the first quarter ended December 31,
2011 was $37.5 million, which represents a 28% decrease compared to
the prior year and the immediate preceding quarter. On a segment
basis, revenue for our Fiber Optics segment was $18.4 million,
which represented approximately a 40% decrease compared to the
prior year and the immediate preceding quarter. As previously
reported, in October 2011 our primary contract manufacturer
announced that as a result of flooding in Thailand, it had
suspended operations at its facility that was used to manufacture
certain of our fiber optics products. Rising water penetrated the
facility and submerged most of our process and test equipment as
well as our inventory materials. The impact from this flooding has
had a significant adverse impact on our operations and our ability
to meet customer demand for certain of our fiber optics products.
As discussed below, we are currently focused on rebuilding the
manufacturing infrastructure for our impacted product lines. Our
Photovoltaics segment was not affected by the Thailand floods.
Revenue for our Photovoltaics segment was $19.1 million, which
represents a 7% decrease compared to the prior year and a 10%
decrease compared to the immediate preceding quarter. Historically,
revenue has fluctuated significantly in our Photovoltaics segment
due to timing of program completions and product shipments of major
orders.
Gross Profit:
Consolidated gross profit was $3.5 million, which represents a
73% decrease compared to the prior year and a 65% decrease compared
to the immediate preceding quarter. Consolidated gross margin
was 9.3%, which represents a decrease from the 24.3% gross margin
reported in the prior year and a decrease from the 19.2% gross
margin reported in the immediate preceding quarter. On a
segment basis, Fiber Optics gross margin was (4.8%), which
represents a decrease from the 18.4% gross margin reported in the
prior year and a decrease from the 18.0% gross margin reported in
the immediate preceding quarter. Photovoltaics gross
margin was 22.7%, which represents a decrease from the 33.3% gross
margin reported in the prior year and an increase from the 21.0%
gross margin reported in the immediate preceding quarter.
During the period, lower fiber optics-related revenues due to
the impact from the Thailand flood resulted in higher manufacturing
overhead as a percentage of revenue. Manufacturing of certain
fiber optics-related components was moved to Company owned
facilities which involved higher labor and other related
costs. Instead of completely rebuilding all flood damaged
manufacturing lines, management has decided to realign the
Company's fiber optics product portfolio and focus on business
areas with strong technology differentiation and growth
opportunities. Management identified $0.9 million of
inventory on order related to manufacturing product lines that were
destroyed by the Thailand flood and will not be replaced. This
expense was recorded within cost of revenues on our statement of
operations.
Operating Loss:
The consolidated operating loss was $11.7 million, which
represents an $8.9 million increase in operating loss when compared
to the prior year and a $2.7 million decrease in operating loss
when compared to the immediate preceding quarter. The
quarter-over-quarter variance in operating expenses was primarily
related to impairment and flood-related losses and insurance
gains. During the three months ended December 31, 2011,
we recorded estimated flood-related losses associated with damaged
inventory and equipment of approximately $3.9 million and $1.8
million, respectively.
Additionally, we also claimed damages and received proceeds of
$5.0 million under our own comprehensive insurance policy relating
to business interruption and recorded this amount as flood-related
insurance proceeds during the three months ended December 31,
2011. During the quarter ended September 30, 2011, we recorded
an $8.0 impairment charge related to our long-lived assets
associated with our Fiber Optics segment.
The decrease in selling, general, and administrative as well as
research and development expense for the quarter ended December 31,
2011 when compared to the prior year is attributable to implemented
cost reduction measures.
Adjusted Operating Loss:
After excluding certain non-cash and other infrequent
transactions as set forth in the attached non-GAAP table, adjusted
operating loss for the first quarter ended December 31, 2011 was
$5.1 million, which represents an additional operating loss of $6.6
million from the income reported for the prior year and an
additional operating loss of $3.7 million from the loss reported
for the immediate preceding quarter.
Suncore:
For the three months ended December 31, 2011, we recorded
approximately $1.0 million of loss related to our Suncore joint
venture operations. During the three months ended December 31,
2011, Suncore increased its registered capital by recording a
deemed capital distribution to EMCORE of $14.8 million which was
reinvested back into Suncore. We also received a cash dividend
from Suncore totaling $1.6 million which funded our foreign income
tax expense incurred as a result of these capital
distributions. As of December 31, 2011, our net
investment in Suncore on our balance sheet totaled $0.2
million.
Net loss:
The consolidated net loss was $14.2 million, which represents a
$10.6 million increase in net loss when compared to the prior year
and relatively no change when compared to the immediate preceding
quarter. The consolidated net loss per share was $0.15, which
represents an $0.11 increase in net loss per share when compared to
the prior year and no change in net loss per share when compared to
the immediate preceding quarter.
Order Backlog
As of December 31, 2011, order backlog for our Photovoltaics
segment totaled $51.7 million, a 19% increase from $43.5 million
reported as of September 30, 2011, in part driven by a larger
terrestrial CPV solar cell order from Suncore. Order backlog
is defined as purchase orders or supply agreements accepted by us
with expected product delivery and/or services to be performed
within the next twelve months. We will resume reporting our order
backlog for our Fiber Optics segment once the production
infrastructure is rebuilt.
Liquidity Update
As of December 31, 2011, cash, cash equivalents, and
restricted cash totaled $23.8 million and working capital totaled
$18.9 million. Net cash provided by operating activities
totaled $20.8 million which was primarily due to an increase in
customer deposits of $9.7 million and the reduction of accounts
receivable of $9.4 million.
Business Outlook and Commentary
As previously discussed, the flood in Thailand destroyed the
manufacturing infrastructure that supports approximately 50% of our
Fiber Optics segment revenue. This has had a significant
impact on our operations and our ability to meet customer demand
for certain fiber optics products. We have developed and
implemented a solid plan to rebuild the impacted production lines
at another location associated with our contractor manufacturer in
Thailand as well as at our own manufacturing facility in China. We
are making significant progress and the rebuild plan is on
schedule. Between our own facilities and those of our
contract manufacturer, we expect the rebuild of our CATV production
line to be completed by the end of March 2012 and the rebuild of
our telecom-related production line to be completed before the end
of May 2012. We are working closely with our customers on our
manufacturing recovery plan to be aligned with their needs.
We expect revenue for our second fiscal quarter ending March 31,
2012 to increase and be within the range of $38 to $40
million.
Reverse Stock Split
On January 27, 2012, we announced that the Company's Board of
Directors approved a four-to-one reverse stock split of EMCORE
common stock. We have set February 15, 2012 as the record
date for the reverse stock split and anticipate that EMCORE common
stock will begin trading on the NASDAQ Global Market on a split
adjusted basis at the opening of trading on February 16, 2012.
Conference Call
We will discuss our financial results today at 4:30 p.m.
ET. The call will be webcast via our website at
http://www.emcore.com and will be archived for one year following
the conclusion of the call. Please go to this site beforehand
to download any necessary software. To participate in the
conference call, U.S. and international callers should dial (224)
357-2194. The conference call ID is 48555132.
Conferences
EMCORE will be attending the Optical Fiber Conference at the Los
Angeles Convention Center. The exposition will take place
from March 6, 2012 to March 8, 2012 and we will be located in
adjoining booths #2659 and #2661 in the Corporate Village.
EMCORE will be presenting our latest product solutions for
telecom and datacom applications.
About EMCORE
EMCORE Corporation is a leading provider of compound
semiconductor-based components and subsystems for the fiber optics
and solar power markets. EMCORE's Fiber Optics segment offers
optical components, subsystems, and systems that enable the
transmission of video, voice, and data over high-capacity fiber
optic cables for high-speed data and telecommunications, cable
television (CATV), and fiber-to-the-premises (FTTP) networks.
EMCORE's Photovoltaics segment provides solar products for
satellite and terrestrial applications. For satellite applications,
EMCORE offers high-efficiency compound semiconductor-based gallium
arsenide (GaAs) solar cells, covered interconnect cells, and fully
integrated solar panels. For terrestrial applications, EMCORE
offers concentrating photovoltaic (CPV) systems for utility scale
solar applications as well as offering its high-efficiency GaAs
solar cells and CPV components for use in solar power concentrator
systems. For specific information about our Company, our
products, and the markets we serve, please visit our website at
http://www.emcore.com.
Use of Non-GAAP Financial Measure
We provide a non–GAAP adjusted operating loss disclosure as a
supplemental measure to U.S. GAAP regarding our operational
performance. This financial measure excludes the impact of
certain items; therefore, it has not been calculated in accordance
with U.S. GAAP.
We believe that the additional non–GAAP financial measure is
useful to investors in assessing our operating performance. We
also use this measure internally to evaluate our operating
performance and this measure is used for planning and forecasting
of future periods. In addition, financial analysts that follow
us may focus on and publish both historical results and future
projections based on our non–GAAP financial measure. We also
believe that it is in the best interest of our investors to provide
this non-GAAP information.
While we believe that this non–GAAP financial measure provides
useful supplemental information to investors, there are limitations
associated with the use of this non–GAAP financial
measure. Our non-GAAP financial measure may not be reported by
all of our competitors and it may not be directly comparable to
similarly titled measures of other companies due to potential
differences in calculation. We compensate for these limitations by
using this non–GAAP financial measure as a supplement to U.S. GAAP
and by providing a reconciliation of the non–GAAP financial measure
to its most comparable U.S. GAAP financial measure.
Non–GAAP financial measures are not in accordance with or an
alternative for U.S. GAAP. Our non–GAAP financial measure is
not meant to be considered in isolation or as a substitute for
comparable U.S. GAAP financial measures and it should be read only
in conjunction with our consolidated financial statements prepared
in accordance with U.S. GAAP.
Forward–Looking Statements The information
provided herein may include forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Exchange Act of 1934. These forward-looking
statements are largely based on our current expectations and
projections about future events and financial trends affecting the
financial condition of our business. Such forward-looking
statements include, in particular, projections about our future
results included in our Exchange Act reports, statements about our
plans, strategies, business prospects, changes and trends in our
business and the markets in which we operate. Such
forward-looking statements also include statements regarding the
ability of our contract manufacturer to resume production, the
expected impact of the flooding on our supply chain, and our
ability to meet customer demand for our fiber optics products.
These forward-looking statements may be identified by the use of
terms and phrases such as "anticipates", "believes", "can",
"could", "estimates", "expects", "forecasts", "intends", "may",
"plans", "projects", "targets", "will", and similar expressions or
variations of these terms and similar phrases. Additionally,
statements concerning future matters such as the development of new
products, enhancements or technologies, sales levels, expense
levels and other statements regarding matters that are not
historical are forward-looking statements. We caution that
these forward-looking statements relate to future events or our
future financial performance and are subject to business, economic,
and other risks and uncertainties, both known and unknown, that may
cause actual results, levels of activity, performance or
achievements of our business or our industry to be materially
different from those expressed or implied by any forward-looking
statements.
These forward–looking statements involve risks and uncertainties
that could cause actual results to differ materially from those
projected, including without limitation, the following:
(a) the impact on the Company, our customers and our suppliers
from the effects of the floods in Thailand; (b) the success of our
cost reduction efforts in achieving their expected benefits; (c)
delays and other difficulties in commercializing new products; (d)
the failure of new products (i) to perform as expected without
material defects, (ii) to be manufactured at acceptable volumes,
yields, and cost, (iii) to be qualified and accepted by our
customers, and, (iv) to successfully compete with products offered
by our competitors; (e) we may not be successful in undertaking the
steps currently planned in order to increase our liquidity; (f)
uncertainties concerning the extent of damage to our contract
manufacturer's facilities and the Company's and our contract
manufacturer's equipment; uncertainties about the timeframe for the
flood waters receding and the restoration of operations and
associated costs with such restoration; the effectiveness of flood
prevention efforts at our contract manufacturer's campus;
uncertainties concerning the availability and cost of commodity
materials and specialized product components that we do not make
internally; actions by competitors; and (g) other risks and
uncertainties described in our filings with the Securities and
Exchange Commission ("SEC") such as cancellations, rescheduling or
delays in product shipments; manufacturing capacity constraints;
lengthy sales and qualification cycles; difficulties in the
production process; changes in semiconductor industry growth;
increased competition; delays in developing and commercializing new
products; and other factors.
Neither management nor any other person assumes responsibility
for the accuracy and completeness of the forward-looking
statements. All forward-looking statements in this press
release are made as of the date hereof, based on information
available to us as of the date hereof, and subsequent facts or
circumstances may contradict, obviate, undermine, or otherwise fail
to support or substantiate such statements. We caution you not
to rely on these statements without also considering the risks and
uncertainties associated with these statements and our business
that are addressed in our filings with the SEC that are available
on the SEC's web site located at www.sec.gov, including the
sections entitled "Risk Factors" in our Annual Report on Form 10-K
and our Quarterly Reports on Form 10-Q. Certain information
included in this press release may supersede or supplement
forward-looking statements in our other Exchange Act reports filed
with the SEC. We assume no obligation to update any
forward-looking statement to conform such statements to actual
results or to changes in our expectations, except as required by
applicable law or regulation.
|
EMCORE
CORPORATION |
Consolidated Statements
of Operations |
(in thousands,
except loss per share) |
(unaudited) |
|
|
|
|
|
Three Months
Ended |
|
December 31, |
September 30, |
December 31, |
|
2010 |
2011 |
2011 |
|
|
|
|
Revenue |
$ 52,107 |
$ 52,123 |
$ 37,451 |
|
|
|
|
Cost of revenue |
39,427 |
42,090 |
33,983 |
|
|
|
|
Gross profit |
12,680 |
10,033 |
3,468 |
|
|
|
|
Operating expenses (income): |
|
|
|
Selling, general, and
administrative |
8,264 |
8,281 |
7,480 |
Research and development |
7,191 |
8,129 |
6,980 |
Flood-related losses |
-- |
-- |
5,698 |
Flood-related insurance
proceeds |
-- |
-- |
(5,000) |
Impairments |
-- |
8,000 |
-- |
Litigation settlement |
-- |
(20) |
-- |
Total operating expenses |
15,455 |
24,390 |
15,158 |
|
|
|
|
Operating loss |
(2,775) |
(14,357) |
(11,690) |
|
|
|
|
Other income (expense): |
|
|
|
Interest income |
-- |
2 |
1 |
Interest expense |
(258) |
(122) |
(130) |
Foreign exchange gain (loss) |
(335) |
(304) |
89 |
Loss from equity method
investment |
-- |
(996) |
(960) |
Change in fair value of financial
instruments |
(272) |
1,487 |
105 |
Other expense |
(5) |
-- |
-- |
Total other income (expense) |
(870) |
67 |
(895) |
|
|
|
|
Loss before income tax expense |
(3,645) |
(14,290) |
(12,585) |
|
|
|
|
Foreign income tax expense on capital
distributions |
-- |
-- |
(1,644) |
|
|
|
|
Net loss |
$ (3,645) |
$ (14,290) |
$ (14,229) |
|
|
|
|
|
|
|
|
Per share data: |
|
|
|
|
|
|
|
Net loss per basic and diluted share |
$ (0.04) |
$ (0.15) |
$ (0.15) |
|
|
|
|
Weighted-average number of basic and diluted
shares outstanding |
85,250 |
93,305 |
93,904 |
|
EMCORE
CORPORATION |
Consolidated Balance
Sheets |
(in
thousands) |
(unaudited) |
|
|
|
|
As of |
As of |
|
December 31, |
September 30, |
|
2011 |
2011 |
ASSETS |
|
|
|
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 22,139 |
$ 15,598 |
Restricted cash |
1,660 |
544 |
Accounts receivable, net |
25,732 |
34,875 |
Inventory |
29,893 |
33,166 |
Prepaid expenses and other current
assets |
10,416 |
7,168 |
|
|
|
Total current assets |
89,840 |
91,351 |
|
|
|
Property, plant and equipment, net |
42,733 |
46,786 |
Goodwill |
20,384 |
20,384 |
Other intangible assets, net |
5,405 |
5,866 |
Equity method investment |
242 |
2,374 |
Other non-current assets, net |
4,710 |
3,537 |
|
|
|
Total assets |
$ 163,314 |
$ 170,298 |
|
|
|
LIABILITIES and SHAREHOLDERS'
EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
Borrowings from credit facility |
$ 6,005 |
$ 17,557 |
Accounts payable |
30,498 |
26,581 |
Warrant liability |
496 |
601 |
Accrued expenses and other current
liabilities |
33,949 |
22,319 |
|
|
|
Total current liabilities |
70,949 |
67,058 |
|
|
|
Asset retirement obligations |
4,851 |
4,800 |
Other long-term liabilities |
816 |
4 |
|
|
|
Total liabilities |
76,615 |
71,862 |
|
|
|
Commitments and contingencies |
|
|
|
|
|
Shareholders' equity: |
|
|
Preferred stock |
-- |
-- |
Common stock |
715,154 |
713,063 |
Treasury stock |
(2,083) |
(2,083) |
Accumulated other comprehensive
income |
1,313 |
912 |
Accumulated deficit |
(627,685) |
(613,456) |
Total shareholders' equity |
86,699 |
98,436 |
|
|
|
Total liabilities and shareholders'
equity |
$ 163,314 |
$ 170,298 |
We have provided a reconciliation of our non–GAAP operating loss
financial measure to its most directly comparable U.S. GAAP
financial measure as indicated in the table below:
Non-GAAP Table |
|
Adjusted Operating Loss |
|
|
|
Unaudited |
|
|
|
(in thousands) |
Three Months Ended |
|
|
|
December 31, |
September 30, |
December 31, |
|
2010 |
2011 |
2011 |
|
|
|
|
Operating Loss – GAAP |
$ (2,775) |
$ (14,357) |
$ (11,690) |
|
|
|
|
Adjustments: |
|
|
|
Depreciation, amortization, and
accretion expense |
3,007 |
3,070 |
2,775 |
Stock-based compensation expense |
1,122 |
1,856 |
2,180 |
Corporate legal expense |
101 |
65 |
-- |
Flood-related losses |
-- |
-- |
5,698 |
Flood-related insurance proceeds |
-- |
-- |
(5,000) |
Loss on inventory purchase
commitments |
-- |
-- |
908 |
Impairments |
-- |
8,000 |
-- |
Litigation settlement adjustment |
-- |
(20) |
-- |
Total adjustments |
4,230 |
12,971 |
6,561 |
|
|
|
|
Adjusted Operating Income (Loss) –
Non-GAAP |
$ 1,455 |
$ (1,386) |
$ (5,129) |
|
|
|
|
|
|
|
|
Stock-based compensation
expense |
|
by expense category: |
(in thousands) |
|
Three Months
Ended |
|
|
|
December 31, |
September 30, |
December 31, |
|
2010 |
2011 |
2011 |
|
|
|
|
Cost of revenue |
$ 216 |
$ 345 |
$ 476 |
Selling, general, and administrative |
631 |
1,029 |
1,013 |
Research and development |
275 |
482 |
691 |
|
|
|
|
Total stock-based compensation expense |
$ 1,122 |
$ 1,856 |
$ 2,180 |
|
|
|
|
Net effect on net loss per basic and diluted
share |
$ (0.01) |
$ (0.02) |
$ (0.02) |
CONTACT: Mark Weinswig
Chief Financial Officer
(505) 332-5000
investor@emcore.com
TTC Group
Victor Allgeier
(646) 290-6400
vic@ttcominc.com
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