ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included in Financial Statements under Item 1 within this Quarterly Report. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. See Cautionary Statement Regarding Forward-Looking Statements preceding Item 1 of this Quarterly Report.
Business Overview
EMCORE Corporation (referred to herein, together with its subsidiaries, as the “Company,” “we,” “our,” or “EMCORE”) was established in 1984 as a New Jersey corporation. The Company became publicly traded in 1997 and is listed on the Nasdaq Stock Exchange under the ticker symbol EMKR. EMCORE is a leading provider of sensors for navigation in the Aerospace and Defense market as well as a manufacturer of lasers and optical subsystems for use in the Cable TV (“CATV”) industry.
EMCORE pioneered the linear fiber optic transmission technology that enabled the world’s first delivery of CATV directly on fiber, and today is a leading provider of advanced Mixed-Signal Optics products serving the broadband communications and Aerospace and Defense markets. The Mixed-Signal Optics technology at the heart of our broadband communications products is shared with our fiber optic gyros and inertial sensors to provide the aerospace and defense markets with state-of-the-art navigations systems technology. With the acquisition of Systron Donner Inertial, Inc. (“SDI”), a navigation systems provider with a scalable, chip-based platform for higher volume gyro applications utilizing Quartz MEMS technology, in June 2019, EMCORE further expanded its portfolio of gyros and inertial sensors with SDI’s quartz MEMS gyro and accelerometer technology.
EMCORE has fully vertically-integrated manufacturing capability through our indium phosphide compound semiconductor wafer fabrication facility at our headquarters in Alhambra, CA, and through our quartz processing and sensor manufacturing facility in Concord, CA. These facilities support EMCORE’s vertically-integrated manufacturing strategy for quartz and fiber optic gyro products, for navigation systems, and for our chip, laser, transmitter, and receiver products for broadband applications.
We have two reporting segments, Aerospace and Defense, and Broadband. Aerospace and Defense is comprised of two product lines: (i) Navigation and Inertial Sensing, and (ii) Defense Optoelectronics. The Broadband segment is comprised of three product lines: (i) CATV Lasers and Transmitters, (ii) Chip Devices, and (iii) Other. Due to a shift in customer base, the previously existing Satellite/Microwave Communications product line has been renamed “Defense Optoelectronics.”
Recent Developments
COVID-19
The global outbreak of the coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency by the U.S. Government in March 2020. This has negatively affected the U.S. and global economy, disrupted global supply chains, significantly restricted travel and transportation, resulted in mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial markets. The full extent of the COVID-19 impact on our operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by the U.S. government, state and local government officials, and international governments to prevent disease spread, all of which are uncertain, out of our control, and cannot be predicted.
Each region we and our supply chain partners operate in has been affected by COVID-19 at varying times and magnitudes, often creating unforeseen challenges associated with logistics, raw material supply and labor shortages. In accordance with applicable U.S. state and county ordinances generally exempting essential businesses and/or critical infrastructure workforces from mandated closures and orders to “shelter-in-place,” our U.S. production facilities have continued to operate in support of essential products and services, subject to limitations and requirements pursuant to applicable state and county orders with regard to ongoing operations that have reduced the efficiency of our engineering and operational teams. While operations at our facility in China were delayed in early February, we were able to re-establish 75% of operations by February 10 and were at planned capacity by the end of February.
We rely on third party suppliers and contract manufacturers to provide materials, major components and products, and services. Many of our suppliers have temporarily ceased or limited operations as a result of COVID-19 and failed to deliver parts or components to us. In addition, the rapid decline in commercial airline traffic created shortages in air freight capacity, making it more difficult and costly to timely procure parts and components. We continue to navigate operational challenges with respect to our supply chain and logistics partners, which caused some disruption in the last few weeks of the quarter ended March 31, 2020 and resulted in some delays in our ability to ship Aerospace and Defense products, which adversely impacted the amount of revenue we were able to recognize in the three and six months ended March 31, 2020.
We remain diligent in continuing to identify and manage risks to our business given the changing uncertainties related to COVID-19 and have plans in place intended to address or mitigate shortages of air-freight capacity, customs staffing, and sourcing of certain limited components. In the near term, labor shortages remain our biggest COVID-19-related concern and we expect the general amount of challenges in the supply chain will continue to present a changing set of obstacles for us to overcome. While we believe that our supply chain, logistics and operations teams are currently in a position to meet expected customer demand levels in the coming quarters, we recognize that unpredictable events could create new challenges in the months ahead. We may not be able to address these challenges in a timely manner, which could negatively impact our financial results.
In addition, restrictions related to the COVID-19 pandemic have negatively affected the timing of the sale and transfer of certain CATV module and transmitter manufacturing equipment to the Buyers, as described in more detail below under “Hytera Transactions”. Travel into Thailand by our manufacturing engineers to support the transfer remains difficult, and customer product qualification processes for products being manufactured in Thailand are being delayed due to our customers’ inability to access their facilities to perform testing. While we are taking actions within our supply chain and manufacturing operations to mitigate the effects of these delays, the timing and completion of these transfers may be further disrupted as a result of COVID-19, which could delay our recognition of the anticipated benefits of transferring this equipment and could disrupt our manufacturing activities for these products.
While customer orders to date remain stable with our pre-COVID-19 outlook, qualification testing for certain products has been delayed to customers’ engineering shortages and inability to access their facilities, and we are continuing to analyze how COVID-19 related actions could affect future customer demand, timing of orders, recognized revenues, and cash flows.
The continued spread of COVID-19 has also led to disruption and volatility in the global capital markets, which, depending on future developments, could impact our capital resources and liquidity in the future. If we need to raise additional capital to support operations in the future, we may be unable to access capital markets and additional capital may only be available to us on terms that could be significantly detrimental to our existing stockholders and to our business as a result of COVID-19.
SDI Acquisition
On June 7, 2019, we completed the acquisition of SDI, a private-equity backed navigation systems provider with a scalable, chip-based platform for higher volume gyro applications utilizing Quartz MEMS technology. See Note 4 - Acquisition in the notes to our condensed consolidated financial statements for additional information regarding this acquisition. Following the closing, we began integrating SDI into our current navigation product line and have included the financial results of SDI in our consolidated financial statements beginning on the acquisition date.
Hytera Transactions
As part of the effort to streamline operations and move to a variable cost model in our CATV Lasers and Transmitters product lines, on October 25, 2019, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Hytera Communications (Hong Kong) Company Limited, a limited liability company incorporated in Hong Kong (“Hytera HK”), and Shenzhen Hytera Communications Co., Ltd., a corporation formed under the laws of the P.R.C. (“Shenzhen Hytera”, and together with Hytera HK, the “Buyers”), pursuant to which the Buyers agreed to purchase from EMCORE certain CATV module and transmitter manufacturing equipment (the “Equipment”) owned by EMCORE and currently located at the manufacturing facility of EMCORE’s wholly-owned subsidiary, EMCORE Optoelectronics (Beijing) Co, Ltd., a corporation formed under the laws of the P.R.C., for an aggregate purchase price of approximately $5.54 million.
As described under “COVID-19” above, travel restrictions and delays in customer product qualification processes related to the COVID-19 pandemic have negatively affected the timing of the sale and transfer of some of the Equipment to the Buyers. The Equipment has been or will be transferred to the Buyers in three separate closings, (a) one of which occurred in the quarter ended December 31, 2019, with payment in an amount equal to approximately $1.9 million received in such quarter, (b) one of which is now expected to occur during the quarter ending June 30, 2020, for which 80% of the applicable sale price (approximately $1.4 million) was received in April 2020 and the remaining 20% (approximately $0.4 million) is expected to be received in the quarter ending June 30, 2020, and (c) one of which is now expected to occur during the quarter ending September 30, 2020, with payment to be made following such transfer in an amount equal to (i) 80% of the sale price (approximately $1.1 million) within three months following the third closing and (ii) 20% of the sale price (approximately $0.3 million) within six months following the third closing.
Concurrently with entry into the Asset Purchase Agreement, we entered into a Contract Manufacturing Agreement (the “Manufacturing Agreement”), dated as of October 25, 2019, with the Buyers pursuant to which the Buyers agreed to manufacture certain CATV module and transmitter products for EMCORE from a manufacturing facility located in Thailand for an initial five year term at product prices agreed to between the parties. In the Manufacturing Agreement, we agreed to pay certain shortfall penalties in the event that orders for manufactured products are below certain thresholds.
Other Actions Related to CATV Business
In the quarter ended September 30, 2019, we also reduced the size of our CATV-related employee headcount and reduced the capacity of our wafer fab to one shift, and in January, 2020, we further reduced the size of our employee headcount. These actions incurred costs of $0.4 million in the quarter ended September 30, 2019 and $0.4 million in the quarter ended March 31, 2020 and, together with headcount reduction at our Beijing, China facility and the continuing shift to a variable cost model in our CATV Lasers and Transmitters product lines as described under “Hytera Transactions” above, have collectively resulted in annual cash savings of approximately $3.4 million beginning in the quarter ended March 31, 2020. These operational changes in CATV also fulfill a strategic objective of better positioning the CATV product lines to generate positive cash flow to help fund the other growth areas of EMCORE including Aerospace and Defense.
Sale/Leaseback Transaction
SDI entered into a Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate (Non-Residential) (the “Concord Purchase Agreement”) dated as of December 31, 2019 with Parkview Management Group, Inc. pursuant to which the parties agreed to consummate a sale and leaseback transaction (the “Sale and Leaseback Transaction”). Under the terms of the Concord Purchase Agreement, SDI sold the property located in Concord, California (the “Concord Real Property”) to Eagle Rock Holdings, LP (“Buyer”), an affiliate of Parkview Management Group, Inc. on February 10, 2020 for a total purchase price of $13.2 million. SDI received net proceeds of $12.8 million after transaction commissions and expenses incurred in connection with the sale.
At the consummation of the Sale and Leaseback Transaction, SDI entered into a Single-Tenant Triple Net Lease (the “Lease Agreement”) with Buyer pursuant to which SDI leased back from Buyer the Concord Real Property for a term commencing on the consummation of the Sale and Leaseback Transaction and ending fifteen (15) years after the consummation of the Sale and Leaseback Transaction, unless earlier terminated or extended in accordance with the terms of the Lease Agreement. Under the Lease Agreement, SDI’s financial obligations will include base monthly rent of $0.75 per square feet, or approximately $77,500 per month, which rent will increase on an annual basis at three percent (3%) over the life of the lease. SDI is also responsible for all monthly expenses related to the Concord Real Property, including insurance premiums, taxes and other expenses, such as utilities. In connection with the execution of the Lease Agreement, EMCORE executed a Lease Guaranty (the “Guaranty”) with Buyer under which EMCORE guaranteed the payment when due of the monthly rent, and all other additional rent, interest and charges to be paid by SDI under the Lease Agreement.
Results of Operations
The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
For the three months
|
|
For the six months
|
|
|
|
ended March 31,
|
|
ended March 31,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Revenue
|
|
100.0
|
%
|
100.0
|
|
100.0
|
%
|
100.0
|
%
|
Cost of revenue
|
|
73.1
|
|
73.3
|
|
71.8
|
|
74.6
|
|
Gross profit
|
|
26.9
|
|
26.7
|
|
28.2
|
|
25.4
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
Selling, general, and administrative
|
|
29.9
|
|
32.2
|
|
26.4
|
|
31.9
|
|
Research and development
|
|
19.2
|
|
20.0
|
|
18.7
|
|
18.3
|
|
Gain from change in estimate on ARO
|
|
—
|
|
(0.2)
|
|
—
|
|
(0.1)
|
|
Gain on sale of assets
|
|
(1.3)
|
|
—
|
|
(3.9)
|
|
—
|
|
Total operating expense
|
|
47.8
|
|
52.0
|
|
41.2
|
|
50.1
|
|
Operating loss
|
|
(20.9)
|
|
(25.3)
|
|
(13.0)
|
|
(24.7)
|
|
Other income:
|
|
|
|
|
|
|
|
|
|
Interest (expense) income, net
|
|
—
|
|
1.0
|
|
—
|
|
1.1
|
|
Foreign exchange gain
|
|
(0.6)
|
|
1.4
|
|
—
|
|
0.7
|
|
Total other (expense) income
|
|
(0.6)
|
|
2.4
|
|
—
|
|
1.8
|
|
Loss before income tax expense
|
|
(21.5)
|
|
(22.9)
|
|
(13.0)
|
|
(22.9)
|
|
Income tax benefit (expense)
|
|
0.2
|
|
(0.1)
|
|
—
|
|
(0.1)
|
|
Net loss
|
|
(21.3)
|
%
|
(23.0)
|
|
(13.0)
|
%
|
(23.0)
|
%
|
Comparison of Financial Results for the Three Months Ended March 31, 2020 and 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31,
|
|
(in thousands, except percentages)
|
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|
Revenue
|
|
$
|
23,850
|
|
$
|
21,745
|
|
$
|
2,105
|
|
9.7%
|
|
Cost of revenue
|
|
|
17,423
|
|
|
15,936
|
|
|
1,487
|
|
9.3%
|
|
Gross profit
|
|
|
6,427
|
|
|
5,809
|
|
|
618
|
|
10.6%
|
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general, and administrative
|
|
|
7,139
|
|
|
6,996
|
|
|
143
|
|
2.0%
|
|
Research and development
|
|
|
4,584
|
|
|
4,360
|
|
|
224
|
|
5.1%
|
|
Gain from change in estimate on ARO
|
|
|
—
|
|
|
(40)
|
|
|
40
|
|
100.0%
|
|
Gain on sale of assets
|
|
|
(315)
|
|
|
—
|
|
|
(315)
|
|
N/A
|
|
Total operating expense
|
|
|
11,408
|
|
|
11,316
|
|
|
92
|
|
0.8%
|
|
Operating loss
|
|
|
(4,981)
|
|
|
(5,507)
|
|
|
526
|
|
9.6%
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net
|
|
|
1
|
|
|
224
|
|
|
(223)
|
|
-99.6%
|
|
Foreign exchange (loss) gain
|
|
|
(156)
|
|
|
304
|
|
|
(460)
|
|
-151.3%
|
|
Total other (expense) income
|
|
|
(155)
|
|
|
528
|
|
|
(683)
|
|
-129.4%
|
|
Loss before income tax expense
|
|
|
(5,136)
|
|
|
(4,979)
|
|
|
(157)
|
|
-3.2%
|
|
Income tax benefit (expense)
|
|
|
55
|
|
|
(15)
|
|
|
70
|
|
-466.7%
|
|
Net loss
|
|
$
|
(5,081)
|
|
$
|
(4,994)
|
|
$
|
(87)
|
|
-1.7%
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31,
|
(in thousands, except percentages)
|
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
Aerospace and Defense revenue
|
|
$
|
13,013
|
|
$
|
6,872
|
|
$
|
6,141
|
|
89.4%
|
Broadband revenue
|
|
|
10,837
|
|
|
14,873
|
|
|
(4,036)
|
|
-27.1%
|
Total revenue
|
|
$
|
23,850
|
|
$
|
21,745
|
|
$
|
2,105
|
|
9.7%
|
Aerospace and Defense Revenue:
For the three months ended March 31, 2020, our Aerospace and Defense revenue increased $6.1 million, or 89%, compared to the same period in the prior year. Included in Aerospace and Defense revenue is $6.3 million of revenue from SDI for the three months ended March 31, 2020. For the three months ended March 31, 2020, our Navigation and Inertial Sensing product line revenue increased $4.7 million compared to the same period in the prior year, primarily due to the SDI revenue of $6.3 million. Defense Optoelectronics product line revenue increased $1.4 million compared to the same period in the prior year primarily due to increased customer demand.
Broadband Revenue:
For the three months ended March 31, 2020, our Broadband revenue decreased $4.0 million, or 27%, compared to the same period in the prior year primarily due to lower customer demand in the CATV and Chips product lines.
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31,
|
(in thousands, except percentages)
|
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
Aerospace and Defense gross profit
|
|
$
|
2,844
|
|
$
|
2,680
|
|
$
|
164
|
|
6.1%
|
Broadband gross profit
|
|
|
3,583
|
|
|
3,129
|
|
|
454
|
|
14.5%
|
Total gross profit
|
|
$
|
6,427
|
|
$
|
5,809
|
|
$
|
618
|
|
10.6%
|
Our cost of revenue consists of raw materials, compensation expense including non-cash stock-based compensation expense, depreciation expense and other manufacturing overhead costs, expenses associated with excess and obsolete inventories, and product warranty costs. Historically, our cost of revenue as a percentage of revenue, which we refer to as our gross margin, has fluctuated significantly due to product mix, manufacturing yields and sales volumes, and inventory and specific product warranty charges.
Consolidated gross margins were 26.9% and 26.7% for the three months ended March 31, 2020 and 2019, respectively.
Stock-based compensation expense within cost of revenue totaled approximately $0.2 million and $0.1 million for the three months ended March 31, 2020 and 2019, respectively.
Aerospace and Defense Gross Profit:
For the three months ended March 31, 2020, Aerospace and Defense gross profit increased $0.2 million, or 6%, compared to the same period in the prior year, primarily due to higher revenue, of which $1.2 million results from the inclusion of SDI gross profit in the three months ended March 31, 2020, partially offset by lower gross margins. For the three months ended March 31, 2020 and 2019, Aerospace and Defense gross margin was 21.9% and 39.0%, respectively. The lower gross margin in the three months ended March 31, 2020 is primarily due to product mix.
Broadband Gross Profit:
For the three months ended March 31, 2020, Broadband gross profit increased $0.5 million or 15% compared to the same period in the prior year, primarily as a result of lower costs in the three months ended March 31, 2020 due to actions taken through March 31, 2020 in connection with our ongoing transition to a variable cost model in our CATV Laser and Transmitter product lines. For the three months ended March 31, 2020 and 2019, Broadband gross margin was 33.1% and 21.0%, respectively. The higher gross margin in the three months ended March 31, 2020 is primarily due to product mix.
Selling, General and Administrative (“SG&A”)
SG&A consists primarily of compensation expense including non-cash stock-based compensation expense related to executive, finance, and human resources personnel, as well as sales and marketing expenses, professional fees, legal and patent-related costs, and other corporate-related expenses.
Stock-based compensation expense within SG&A totaled approximately $0.6 million and $0.5 million for the three months ended March 31, 2020 and 2019, respectively.
SG&A expense for the three months ended March 31, 2020 was higher than the amount reported in the same period in the prior year primarily due to higher compensation (including due to a higher U.S. headcount than the prior period due to the SDI acquisition), commissions, consulting, insurance and customer related expenses partially offset by lower attorneys’ fees and costs arising from litigation proceedings.
As a percentage of revenue, SG&A expenses were 29.9% and 32.2% for the three months ended March 31, 2020 and 2019, respectively.
Research and Development (“R&D”)
R&D consists primarily of compensation expense including non-cash stock-based compensation expense, as well as engineering and prototype costs, depreciation expense, and other overhead expenses, as they relate to the design, development, and testing of our products. Our R&D costs are expensed as incurred. We believe that in order to remain competitive, we must invest significant financial resources in developing new product features and enhancements and in maintaining customer satisfaction worldwide.
Stock-based compensation expense within R&D totaled approximately $0.2 million and $0.1 million during the three months ended March 31, 2020 and 2019, respectively.
For the three months ended March 31, 2020 and 2019, Aerospace and Defense R&D expense was $4.0 million and $1.7 million, respectively. For the three months ended March 31, 2020 and 2019, Broadband R&D expense was $0.6 million and $2.7 million, respectively.
R&D expense for the three months ended March 31, 2020 was higher than the amounts reported in the same period in the prior year primarily due to an increase in compensation costs (including due to a higher R&D headcount than the prior period due to the SDI acquisition), partially offset by lower project spending, primarily in Aerospace and Defense.
As a percentage of revenue, R&D expenses were 19.2% and 20.0% for the three months ended March 31, 2020 and 2019, respectively.
Operating Loss
Operating loss represents revenue less the cost of revenue and operating expenses incurred. Operating loss is a measure that executive management uses to assess performance and make decisions. As a percentage of revenue, our operating loss was (20.9)% and (25.3)% for the three months ended March 31, 2020 and 2019, respectively. The decrease in operating loss as a percentage of revenue in the three months ended March 31, 2020 compared to the same period in the prior year is primarily due to the increase in gross profit and the gain on sale of assets, partially offset by the increase in SG&A expense and R&D expense in the three months ended March 31, 2020.
Other Income
Interest Income, net
During the three months ended March 31, 2020 and 2019, we recorded $0.1 million and $0.3 million, respectively, of interest income earned on cash and cash equivalents balances, which was partially offset by interest expense and letter of credit fees related to our Credit Facility (as defined below). Interest income for the three months ended March 31, 2020 was lower than the amount reported in the prior year due to lower cash and cash equivalents balances.
Foreign Exchange
Gains or losses from foreign currency transactions denominated in currencies other than the U.S. dollar, both realized and unrealized, are recorded as foreign exchange gain (loss) on our consolidated statements of operations and comprehensive income. The gain (losses) recorded relate to the change in value of the Chinese Yuan Renminbi relative to the U.S. dollar.
Income Tax Expense
For the three months ended March 31, 2020 and 2019, the Company recorded income tax benefit (expense) of approximately $55,000 and $(15,000), respectively. Income tax benefit for the three months ended March 31, 2020 is composed primarily of the reversal of a federal deferred tax liability related to the Concord Real Property acquired as part of the SDI acquisition, partially offset by state minimum tax expense. Income tax expense for the three months ended March 31, 2019 is primarily comprised of state minimum tax expense.
Comparison of Financial Results for the Six Months Ended March 31, 2020 and 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended March 31,
|
(in thousands, except percentages)
|
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
Revenue
|
|
$
|
49,332
|
|
$
|
45,746
|
|
$
|
3,586
|
|
7.8%
|
Cost of revenue
|
|
|
35,431
|
|
|
34,129
|
|
|
1,302
|
|
3.8%
|
Gross profit
|
|
|
13,901
|
|
|
11,617
|
|
|
2,284
|
|
19.7%
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general, and administrative
|
|
|
13,026
|
|
|
14,589
|
|
|
(1,563)
|
|
-10.7%
|
Research and development
|
|
|
9,226
|
|
|
8,379
|
|
|
847
|
|
10.1%
|
Gain from change in estimate on ARO
|
|
|
—
|
|
|
(40)
|
|
|
40
|
|
100.0%
|
Gain on sale of assets
|
|
|
(1,917)
|
|
|
—
|
|
|
(1,917)
|
|
N/A
|
Total operating expense
|
|
|
20,335
|
|
|
22,928
|
|
|
(2,593)
|
|
-11.3%
|
Operating loss
|
|
|
(6,434)
|
|
|
(11,311)
|
|
|
4,877
|
|
43.1%
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
Interest (expense) income, net
|
|
|
(14)
|
|
|
491
|
|
|
(505)
|
|
-102.9%
|
Foreign exchange (loss) gain
|
|
|
(9)
|
|
|
318
|
|
|
(327)
|
|
-102.8%
|
Total other (expense) income
|
|
|
(23)
|
|
|
809
|
|
|
(832)
|
|
-102.8%
|
Loss before income tax expense
|
|
|
(6,457)
|
|
|
(10,502)
|
|
|
4,045
|
|
38.5%
|
Income tax benefit (expense)
|
|
|
41
|
|
|
(30)
|
|
|
71
|
|
236.7%
|
Net loss
|
|
$
|
(6,416)
|
|
$
|
(10,532)
|
|
$
|
4,116
|
|
39.1%
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended March 31,
|
(in thousands, except percentages)
|
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
Aerospace and Defense revenue
|
|
$
|
26,717
|
|
$
|
11,012
|
|
$
|
15,705
|
|
142.6%
|
Broadband revenue
|
|
|
22,615
|
|
|
34,734
|
|
|
(12,119)
|
|
-34.9%
|
Total revenue
|
|
$
|
49,332
|
|
$
|
45,746
|
|
$
|
3,586
|
|
7.8%
|
Aerospace and Defense Revenue:
For the six months ended March 31, 2020, our Aerospace and Defense revenue increased $15.7 million, or 143%, compared to the same period in the prior year. Included in Aerospace and Defense revenue is $14.4 million of revenue from SDI for the six months ended March 31, 2020. For the six months ended March 31, 2020, our Navigation and Inertial Sensing product line revenue increased $12.6 million compared to the same period in the prior year, primarily due to the SDI revenue of $14.4 million, as there was no contribution by SDI of revenue in the six months ended March 31, 2019. For the six months ended March 31, 2020, our Defense Optoelectronics product line revenue increased $3.1 million compared to the same period in the prior year, primarily due to increased customer demand.
Broadband Revenue:
For the six months ended March 31, 2020, our Broadband revenue decreased $12.1 million, or 35%, compared to the same period in the prior year primarily due to lower customer demand in the CATV and Chips product lines.
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended March 31,
|
(in thousands, except percentages)
|
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
Aerospace and Defense gross profit
|
|
$
|
7,332
|
|
$
|
3,902
|
|
$
|
3,430
|
|
87.9%
|
Broadband gross profit
|
|
|
6,569
|
|
|
7,715
|
|
|
(1,146)
|
|
-14.9%
|
Total gross profit
|
|
$
|
13,901
|
|
$
|
11,617
|
|
$
|
2,284
|
|
19.7%
|
Our cost of revenue consists of raw materials, compensation expense including non-cash stock-based compensation expense, depreciation expense and other manufacturing overhead costs, expenses associated with excess and obsolete inventories, and product warranty costs. Historically, our cost of revenue as a percentage of revenue, which we refer to as our gross margin, has fluctuated significantly due to product mix, manufacturing yields and sales volumes, and inventory and specific product warranty charges.
Consolidated gross margins were 28.2% and 25.4% for the six months ended March 31, 2020 and 2019, respectively.
Stock-based compensation expense within cost of revenue totaled approximately $0.3 million and $0.2 million for the six months ended March 31, 2020 and 2019, respectively.
Aerospace and Defense Gross Profit:
For the six months ended March 31, 2020, Aerospace and Defense gross profit increased $3.4 million, or 88%, compared to the same period in the prior year, primarily due to higher revenue, of which $3.5 million results from the inclusion of SDI gross profit in the six months ended March 31, 2020 compared to no contribution by SDI to gross profit in the six months ended March 31, 2019. For the six months ended March 31, 2020 and 2019, Aerospace and Defense gross margin was 27.4% and 35.4%, respectively The lower gross margin in the six months ended March 31, 2020 is primarily due to product mix.
Broadband Gross Profit:
For the six months ended March 31, 2020, Broadband gross profit decreased $1.1 million, or 15%, compared to the same period in the prior year, primarily as a result of lower revenues in the six months ended March 31, 2020. For the six months ended March 31, 2020 and 2019, Broadband gross margin was 29.1% and 22.2%, respectively. The higher gross margin in the six months ended March 31, 2020 was primarily the result of product mix and a $0.5 million inventory reserve on non-current inventory in the six months ended March 31, 2019 due to the decline in sales and future demand for the inventory at such time.
Selling, General and Administrative (“SG&A”)
SG&A consists primarily of compensation expense including non-cash stock-based compensation expense related to executive, finance, and human resources personnel, as well as sales and marketing expenses, professional fees, legal and patent-related costs, and other corporate-related expenses.
Stock-based compensation expense within SG&A totaled approximately $1.1 million and $0.6 million for the six months ended March 31, 2020 and 2019, respectively.
SG&A expense for the six months ended March 31, 2020 was lower than the amount reported in the same period in the prior year, primarily due to lower attorneys’ fees and costs arising from litigation proceedings, partially offset by an increase in bad debt expense.
As a percentage of revenue, SG&A expenses were 26.4% and 31.9% for the six months ended March 31, 2020 and 2019, respectively.
Research and Development (“R&D”)
R&D consists primarily of compensation expense including non-cash stock-based compensation expense, as well as engineering and prototype costs, depreciation expense, and other overhead expenses, as they relate to the design, development, and testing of our products. Our R&D costs are expensed as incurred. We believe that in order to remain competitive, we must invest significant financial resources in developing new product features and enhancements and in maintaining customer satisfaction worldwide.
Stock-based compensation expense within R&D totaled approximately $0.4 million and $0.3 million for the six months ended March 31, 2020 and 2019, respectively.
For the six months ended March 31, 2020 and 2019, Aerospace and Defense R&D expense was $7.9 million and $3.2 million, respectively. For the six months ended March 31, 2020 and 2019, Broadband R&D expense was $1.3 million and $5.2 million, respectively.
R&D expense for the six months ended March 31, 2020 was higher than the amounts reported in the same period in the prior year primarily due to an increase in compensation costs (including due to a higher R&D headcount than the prior period due to the SDI acquisition) partially offset by lower project spending, primarily in Aerospace and Defense.
As a percentage of revenue, R&D expenses were 18.7% and 18.3% for the six months ended March 31, 2020 and 2019, respectively.
Operating Loss
Operating loss represents revenue less the cost of revenue and direct operating expenses incurred. Operating loss is a measure that executive management uses to assess performance and make decisions. As a percentage of revenue, our operating loss was (13.0)% and (24.7)% for the six months ended March 31, 2020 and 2019, respectively. The decrease in operating loss as a percentage of revenue in the six months ended March 31, 2020 compared to the same period in the prior year is primarily due to the increase in gross profit, the gain on sale of assets and the decrease in SG&A expense, partially offset by the increase in R&D expense in the six months ended March 31, 2020.
Other Income
Interest Income, net
During the six months ended March 31, 2020 and 2019, we recorded $0.2 million and $0.6 million, respectively, of interest income earned on cash and cash equivalents balances, which was partially offset by interest expense and letter of credit fees related to our Credit Facility (as defined below). Interest income for the six months ended March 31, 2020 was lower than the amount reported in the prior year due to lower cash and cash equivalents balances.
Foreign Exchange
Gains or losses from foreign currency transactions denominated in currencies other than the U.S. dollar, both realized and unrealized, are recorded as foreign exchange gain (loss) on our consolidated statements of operations and comprehensive income. The gain (losses) recorded relate to the change in value of the Yuan Renminbi relative to the U.S. dollar.
Income Tax Expense
For the six months ended March 31, 2019, the Company recorded income tax benefit (expense) of approximately $41,000 and $(30,000), respectively. Income tax benefit for the six months ended March 31, 2020 is composed primarily of the reversal of a deferred tax liability related to the Concord Real Property, partially offset by state minimum tax expense. Income tax expense for the six months ended March 31, 2019 is primarily comprised of state minimum tax expense.
Order Backlog
EMCORE’s product sales are made pursuant to purchase orders, often with short lead times. These orders are subject to revision or cancellation and often are made without deposits. In addition, Broadband products typically ship within the same quarter in which a purchase order is received. Therefore, our order backlog at any particular date is not necessarily indicative of actual revenue or the level of orders for any succeeding period and may not be comparable to prior periods.
Liquidity and Capital Resources
We have historically consumed cash from operations and, in most periods, we have incurred operating losses from continuing operations. We have managed our liquidity position through the sale of assets and cost reduction initiatives, as well as, from time to time in prior periods, borrowings from our Credit Facility (defined below) and capital markets transactions.
As of March 31, 2020, cash and cash equivalents totaled $22.1 million and net working capital totaled approximately $52.4 million. Net working capital, calculated as current assets (including inventory) minus current liabilities, is a financial metric we use which represents available operating liquidity.
On November 11, 2010, we entered into a Credit and Security Agreement (as amended to date, the “Credit Facility”) with Wells Fargo Bank, N.A. (“Wells Fargo”). The Credit Facility currently provides us with a revolving credit line of up to $15.0 million that can be used for working capital requirements, letters of credit, acquisitions, and other general corporate purposes subject to requirements that (a) the Company have (i) liquidity of at least $10.0 million, and (ii) for certain specific uses, liquidity of at least $25.0 million after such use and (b) the Company maintain excess availability of at least $1.0 million. The Credit Facility has a maturity date expiring in November 2021, is secured by the Company’s assets and is subject to a borrowing base formula based on the Company’s eligible accounts receivable, inventory, and machinery and equipment accounts. See Note 11 - Credit Facilities in the notes to the condensed consolidated financial statements for additional disclosures. As of May 4, 2020, there was no outstanding balance under this Credit Facility, $0.5 million reserved for one outstanding stand-by letter of credit and $8.0 million available for borrowing.
The Company has a history of operating losses and negative cash flows from operations. We believe that our existing balances of cash and cash equivalents, cash flows from operations and amounts expected to be available under our Credit Facility and any amounts that may be available to us under governmental lending programs will provide us with sufficient financial resources to meet our cash requirements for operations, working capital, and capital expenditures for at least the next twelve months from the date of the issuance of these financial statements. We have taken a number of actions to continue to support our operations and meet our obligations, including completing the sale of the Concord Real Property, headcount reductions and other cost reductions. In addition, should we require more capital than what is generated by our operations, we could engage in additional sales or other monetization of certain fixed assets, additional cost reductions, or elect to raise capital in the U.S. through debt or equity issuances. These alternatives may not be available to us on reasonable terms or at all, and could result in higher effective tax rates, increased interest expense, and/or dilution of our earnings.
As described above, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which, depending on future developments, could impact our capital resources in the future. If we need to raise additional capital to support operations in the future, we may be unable to access capital markets and additional capital may only be available to us on terms that could be significantly detrimental to our existing stockholders and to our business.
Cash Flow
Net Cash (Used In) Provided By Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities
|
|
For the six months ended March 31,
|
|
(in thousands, except percentages)
|
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|
Net cash used in operating activities
|
|
$
|
(7,528)
|
|
$
|
(7,061)
|
|
$
|
(467)
|
|
-6.6%
|
|
Fiscal 2020:
For the six months ended March 31, 2020, our operating activities used cash of $7.5 million, primarily due to our net loss of $6.4 million, changes in our operating assets and liabilities (or working capital components, which includes non-current inventory) of $4.5 million and gain on disposal of assets of $1.9 million, partially offset by adjustments for non-cash charges, including depreciation and amortization expense of $3.3 million, stock-based compensation expense of $1.8 million, product warranty provision of $0.1 million and bad debt provision of $0.1 million. The change in our operating assets and liabilities was primarily the result of an increase in accounts receivable of $2.4 million and other assets of $13.8 million and a decrease in accounts payable of $0.5 million and accrued expenses and other liabilities of $10.7 million, partially offset by a decrease in inventory of $0.5 million.
Fiscal 2019:
For the six months ended March 31, 2019, our operating activities used cash of $7.1 million, primarily due to our net loss of $10.5 million and changes in our operating assets and liabilities (or working capital components, which includes non-current inventory) of $0.7 million, partially offset by adjustments for non-cash charges, including depreciation and amortization expense of $3.2 million, stock-based compensation expense of $1.1 million and warranty provision of $0.1 million. The change in our operating assets and liabilities was primarily the result of increases in accounts receivable of $0.8 million and other assets of $3.2 million and a decrease in accounts payable of $0.3 million, partially offset by a decrease in inventory of $0.7 million and an increase in other liabilities of $2.9 million.
Working Capital Components:
Accounts Receivable: We generally expect the level of accounts receivable at any given quarter end to reflect the level of sales in that quarter. Our accounts receivable balances have historically fluctuated due to the timing of account collections, timing of product shipments, and/or change in customer credit terms.
Inventory: We generally expect the level of inventory at any given quarter end to reflect the change in our expectations of forecasted sales during the quarter. Our inventory balances have historically fluctuated due to the timing of customer orders and product shipments, changes in our internal forecasts related to customer demand, as well as adjustments related to excess and obsolete inventory and the purchase of non-current inventory.
Accounts Payable: The fluctuation of our accounts payable balances is primarily driven by changes in inventory purchases as well as changes related to the timing of actual payments to vendors.
Accrued Expenses: Our largest accrued expense typically relates to compensation. Historically, fluctuations of our accrued expense accounts have primarily related to changes in the timing of actual compensation payments, receipt or application of advanced payments, adjustments to our warranty accrual, and accruals related to professional fees.
Net Cash Provided By (Used In) Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
For the six months ended March 31,
|
|
(in thousands, except percentages)
|
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|
Net cash provided by (used in) investing activities
|
|
$
|
12,486
|
|
$
|
(5,576)
|
|
$
|
18,062
|
|
323.9%
|
|
Fiscal 2020:
For the six months ended March 31, 2020, our investing activities provided cash of $12.5 million primarily from cash proceeds from the disposal of property, plant and equipment of $14.9 million partially offset by capital-related expenditures of $2.4 million.
Fiscal 2019:
For the six months ended March 31, 2019, our investing activities used $5.6 million of cash for capital related expenditures of $5.6 million primarily related to investment in our wafer fabrication facility.
Net Cash (Used In) Provided By Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
For the six months ended March 31,
|
|
(in thousands, except percentages)
|
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|
Net cash (used in) provided by financing activities
|
|
$
|
(4,853)
|
|
$
|
44
|
|
$
|
(4,897)
|
|
-11129.5%
|
|
Fiscal 2020:
For the six months ended March 31, 2020, our financing activities used cash of $4.9 million primarily due to net payments related to borrowings from our bank Credit Facility of $5.5 million partially offset by proceeds from stock plan transactions of $0.3 million and issuance of restricted stock units of $0.4 million.
Fiscal 2019:
For the six months ended March 31, 2019, our financing activities provided cash of $44,000 primarily from proceeds from stock plan transactions of $0.2 million partially offset by tax withholding paid on behalf of employees for stock-based awards of $0.2 million.
Contractual Obligations and Commitments
As of the date of this report, other than changes related to adoption of the new lease accounting standard as discussed in Note 2 – Recent Accounting Pronouncements to the condensed consolidated financial statements, there were no material changes to our contractual obligations and commitments outside the ordinary course of business since September 30, 2019 as reported in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements other than our operating leases described above, that have or are reasonably likely to have a current or future material effect on our condensed consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies and Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, as of the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. If these estimates differ significantly from actual results, the impact to the condensed consolidated financial statements may be material. There have been no material changes in our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10‑K for the fiscal year ended September 30, 2019. Please refer to Part II, Item 7 of our Annual Report on Form 10‑K for the fiscal year ended September 30, 2019 for a discussion of our critical accounting policies and estimates.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risks
We are exposed to financial market risks, including changes in currency exchange rates and interest rates. We do not use derivative financial instruments for speculative purposes.
Foreign Currency Exchange Risks
The United States dollar is the reporting currency for our condensed consolidated financial statements. The functional currency for our China subsidiaries is the Yuan Renminbi.
We recognize translation adjustments due to the effect of changes in the value of the Yuan Renminbi relative to the U.S. dollar associated with our operations in China. The assets and liabilities of our foreign operations are translated from their respective functional currencies into U.S. dollars at the rates in effect at the consolidated balance sheet dates, and the revenue and expense amounts are translated at the average rate during the applicable periods reflected on the consolidated statements of operations and comprehensive income. Foreign currency translation adjustments are recorded as accumulated other comprehensive income.
Gains and losses from foreign currency transactions denominated in currencies other than the U.S. dollar, both realized and unrealized, are recorded as foreign exchange gain (loss) on our consolidated statements of operations and comprehensive income.
During the normal course of business, we are exposed to market risks associated with fluctuations in foreign currency exchange rates due to the Yuan Renminbi. To reduce the impact of these risks on our earnings and to increase the predictability of cash flows, we use natural offsets in receipts and disbursements within the applicable currency as the primary means of reducing the risk.
Some of our foreign suppliers may adjust their prices (in U.S. dollars) from time to time to reflect currency exchange fluctuations, and such price changes could impact our future financial condition or results of operations. We do not currently hedge our foreign currency exposure.
Interest Rate Risks
We monitor our interest rate risk on cash balances primarily through cash flow forecasting. Cash that is surplus to immediate requirements is invested in short-term deposits with banks accessible with short notice and invested in money market accounts. Based on the LIBOR rate loans outstanding under our credit facility during the three and six months ended March 31, 2020, a hypothetical 50 basis points increase in interest rates would have resulted in an insignificant amount of additional interest expense.
Inflation Risks
Inflationary factors, such as increases in material costs and operating expenses, may adversely affect our results of operations and cash flows. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, an increase in the rate of inflation in the future may have an adverse effect on the levels of gross profit and operating expenses as a percentage of revenue if the sales prices for our products do not proportionately increase with these increases in expenses.
Credit Market Conditions
The U.S. and global capital markets periodically experience turbulent conditions, particularly in the credit markets, which can result in tightening of lending standards, reduced availability of credit, and reductions in certain asset values. The continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which, depending on future developments, could impact our capital resources in the future. If we need to raise additional capital to support operations in the future, we may be unable to access capital markets and additional capital may only be available to us on terms that could be significantly detrimental to our existing stockholders and to our business. This could also impact our ability to obtain additional funding through asset sales.
ITEM 4. Controls and Procedures
a. Evaluation of Disclosure Controls and Procedures
Our management, with the participation of its Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer and Accounting Officer), evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a‑15(e) and 15d‑15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2020. Based upon this
evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
b. Changes in Internal Control over Financial Reporting
As a result of the acquisition of SDI on June 7, 2019, our management is in the process of reviewing and evaluating the design and operating effectiveness of its internal control over financial reporting relating to SDI. Certain changes have been made and will continue to be made to our internal controls until management has completed its evaluation and integrated SDI’s information and accounting systems and processes, and any such changes that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting will be disclosed in the Company’s annual report on Form 10-K for the year ending September 30, 2020.
There have been no other changes in the Company’s internal control over financial reporting (as defined in Rule 13a‑15(f) and 15d‑15(f) promulgated under the Exchange Act) during the quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. Other Information
ITEM 1. Legal Proceedings
See the disclosures under the caption “Legal Proceedings” in Note 13 - Commitments and Contingencies in the notes to our condensed consolidated financial statements for disclosures related to our legal proceedings, which disclosures are incorporated herein by reference.
ITEM 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10‑K for the fiscal year ended September 30, 2019, which could materially affect our business, financial condition or future results. Except for the risk factors discussed below, we do not believe that there have been any material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019. The risks described in our Annual Report on Form 10‑K and described below are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem immaterial also may materially adversely affect our business, financial condition, operating results and/or cash flows.
The full effects of COVID-19 and other potential future public health crises, epidemics, pandemics or similar events are uncertain and could have a material and adverse effect on our business, financial condition, operating results and cash flows.
The global outbreak of the coronavirus disease 2019 (“COVID-19”) was declared a pandemic by the World Health Organization and a national emergency by the U.S. Government in March 2020. This has negatively affected the U.S. and global economy, disrupted global supply chains, significantly restricted travel and transportation, resulted in mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial markets. The full extent of the COVID-19 impact on our operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by the U.S. government, state and local government officials, and international governments to prevent disease spread, all of which are uncertain, out of our control and cannot be predicted.
In accordance with applicable U.S. state and county ordinances generally exempting essential businesses and/or critical infrastructure workforces from mandated closures and orders to “shelter-in-place,” our U.S. production facilities have continued to operate in support of essential products and services, subject to limitations and requirements pursuant to applicable state and county orders with regard to ongoing operations that have reduced the efficiency of our engineering
and operational teams. However, facility closures or further work slowdowns or temporary stoppages could occur, and in many cases, our facilities and supplier facilities are not operating under full staffing as a result of COVID-19, which could have a longer-term impact and could delay our deliveries to customers. In addition, other countries have different practices and policies that can affect our international operations and the operations of our suppliers and customers. For example, operations at our Beijing facility ceased for one additional week beyond the Chinese New Year holiday in early February as a result of the COVID-19 situation, and additional closures could occur.
In addition, the COVID-19 pandemic has negatively affected, and could have further negative effects on, the timing of the sale and transfer of certain CATV module and transmitter manufacturing equipment that we have agreed, as part of our efforts to streamline operations and move to a variable cost model in our CATV Lasers and Transmitters product lines, to sell to Hytera Communications (Hong Kong) Company Limited (“Hytera HK”), and Shenzhen Hytera Communications Co., Ltd. (“Shenzhen Hytera”, and together with Hytera HK, the “Buyers”), for use by the Buyers in connection with the manufacturing of certain CATV module and transmitter products for us from a manufacturing facility located in Thailand. The sale and transfer of the equipment will occur in three separate closings, one of which occurred in the quarter ended December 31, 2019 and the other two of which are now expected to occur during the quarters ending June 30, 2020 and September 30, 2020, respectively. The timing and completion of these transfers may be further disrupted as a result of COVID-19, which could delay our recognition of the anticipated benefits of transferring this equipment and could disrupt our manufacturing activities for these products.
If significant portions of our workforce are unable to work effectively, including because of illness, quarantines, absenteeism, government actions, facility closures, travel restrictions or other restrictions in connection with the COVID-19 pandemic, our operations will be negatively impacted. We may be unable to perform fully on our contracts and our costs may increase as a result of the COVID-19 outbreak. The impact of COVID-19 could worsen if there is an extended duration of any COVID-19 outbreak or a resurgence of COVID-19 infection in affected regions after they have begun to experience improvement.
As described in Item 1A, Risk Factors of our Annual Report on Form 10-K for the fiscal year ended September 30, 2019, we rely on other companies to provide materials, major components and products, and to perform a portion of the services that are provided to our customers under the terms of most of our contracts where we rely on these third parties. Many of our suppliers have temporarily ceased or limited operations as a result of COVID-19 and failed to deliver parts or components to us. An extended period of global supply chain disruption caused by the response to COVID-19 could impact our ability to perform on our contracts and, if we are not able to implement alternatives or other mitigations, product deliveries could be adversely impacted. In addition, the rapid decline in commercial airline traffic created shortages in air freight capacity, making it more difficult and costly to timely procure parts and components.
As a result of COVID-19, we could see reduced customer orders in certain of our product lines, which could adversely affect our revenues, financial performance and cash flows, and could result in inventory write-downs and impairment losses. Delays in inspection, acceptance and payment by our customers, many of whom are teleworking, could also affect our revenues and cash flows, and current limitations on travel to customers could impact orders. Limitations on government operations can also impact regulatory approvals such as export licenses that are needed for international sales and deliveries for certain of our products. Government funding priorities may change as a result of the costs of COVID-19, which could adversely affect our revenues arising from government contracts or subcontracts, and with respect to such contracts, we could experience delays in new program starts or awards of future work as well as the uncertain impact of contract modifications to respond to the national emergency.
The continued spread of COVID-19 has also led to disruption and volatility in the global capital markets, which, depending on future developments, could impact our capital resources and liquidity in the future. If we need to raise additional capital to support operations in the future, we may be unable to access capital markets and additional capital may only be available to us on terms that could be significantly detrimental to our existing stockholders and to our business as a result of COVID-19. We are also monitoring the impacts of COVID-19 on the fair value of our assets. While we do not currently anticipate any material impairments on our assets as a result of COVID-19, future changes in expectations for sales, earnings and cash flows related to intangible assets and goodwill below our current projections could cause these assets to be impaired.
ITEM 6. Exhibits and Financial Statement Schedules
2.1
|
|
Purchase and Sale Agreement, dated as of June 7, 2019 by and among EMCORE Corporation, The Resilience Fund IV, L.P., The Resilience Fund IV-A, L.P., Aerospace Newco Holdings, Inc. and Ember Acquisition Sub, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on June 10, 2019).
|
2.2
|
|
Asset Purchase Agreement, dated as of October 25, 2019 by and among EMCORE Corporation, Hytera Communications (Hong Kong) Company Limited and Shenzhen Hytera Communications Co., Ltd. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on October 30, 2019).
|
10.1
|
|
Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate (Non-Residential) dated as of December 31, 2019 by and between Parkview Management Group, Inc. and Systron Donner Inertial, Inc (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8 K filed on January 6, 2020).
|
10.2
|
|
First Amendment to Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate (Non-Residential) dated as of January 13, 2020 by and between Parkview Management Group, Inc. and Systron Donner Inertial, Inc. (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q filed on February 10, 2020).
|
10.3
|
|
Single-Tenant Triple Net Lease, dated as of February 10, 2020 by and between Systron Donner Inertial, Inc. and Eagle Rock Holdings, LP (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8 K filed on February 11, 2020).
|
10.4
|
|
Lease Guaranty, dated as of February 10, 2020, by and between Systron Donner Inertial, Inc. and Eagle Rock Holdings, LP (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on February 11, 2020).
|
10.5
|
|
Paycheck Protection Program Promissory Note and Agreement, dated May 3, 2020, entered into by and between EMCORE Corporation and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 6, 2020).
|
10.6†**
|
|
Directors’ Compensation Policy (effective March 19, 2020).
|
31.1**
|
|
Certificate of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
31.2**
|
|
Certificate of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
32.1***
|
|
Certificate of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
32.2***
|
|
Certificate of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
101.INS**
|
|
XBRL Instance Document.
|
101.SCH**
|
|
XBRL Taxonomy Extension Schema Document.
|
101.CAL**
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.LAB**
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
101.PRE**
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
101.DEF**
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
† Management contract or compensatory plan
** Filed herewith
*** Furnished herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
|
EMCORE CORPORATION
|
|
|
|
|
|
Date:
|
May 7, 2020
|
|
By:
|
/s/ Jeffrey Rittichier
|
|
|
|
|
Jeffrey Rittichier
|
|
|
|
|
Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
Date:
|
May 7, 2020
|
|
By:
|
/s/ Tom Minichiello
|
|
|
|
|
Tom Minichiello
|
|
|
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
EMCORE (NASDAQ:EMKR)
過去 株価チャート
から 9 2024 まで 10 2024
EMCORE (NASDAQ:EMKR)
過去 株価チャート
から 10 2023 まで 10 2024