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EMCORE Reports Fiscal 2020 Second Quarter Results

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ALHAMBRA, Calif., May 06, 2020 (GLOBE NEWSWIRE) -- EMCORE Corporation (EMKR), a leading provider of advanced mixed-signal products that serve the aerospace & defense and broadband communications markets, today announced results for its fiscal 2020 second quarter ended March 31, 2020 (2Q20). Management will host a conference call to discuss financial and business results tomorrow, Thursday, May 7, 2020, at 8:00 AM Eastern Time.

Consolidated revenue was $23.8 million, a 6% sequential-quarter decrease, and comprised $13.0 million from the Aerospace and Defense segment and $10.8 million from the Broadband segment. Net loss on a GAAP and non-GAAP basis was $5.1 million and $3.8 million, respectively, in the second quarter compared with a net loss on a GAAP and non-GAAP basis of $1.3 million and $1.8 million, respectively, in the prior quarter. Adjusted EBITDA was negative $2.5 million in the second quarter.

“Despite the global impact of COVID-19, the EMCORE team came together to deliver quarterly revenue that was in-line with our guidance,” said Jeff Rittichier, Chief Executive Officer of EMCORE. “As the pandemic spread throughout the globe in our second fiscal quarter, we encountered disruptions to our manufacturing operations in Beijing and California, as well as shortages in supply chain and air freight capacity, affecting revenue and costs,” continued Rittichier.

“Looking forward, we’re seeing an increase in customer demand for the third fiscal quarter as the MSOs work to break network bottlenecks. Additionally, we see no reductions in defense programs currently in production but have seen delays in qualification testing for new programs. We continue to meet important milestones for our manufacturing transition and completed the ERP project in Concord on schedule, enabling us to reduce our operating expenses. We believe that these actions, when taken together with our improved cash position following the Concord facility sale and PPP loan funding, give us the necessary resources to navigate through these unprecedented times,” concluded Rittichier.

Consolidated Results

Three Months Ended

Mar 31, 2020

Dec 31, 2019

+ increase /

2Q20

1Q20

- decrease

Revenue

$23.8M

$25.5M

-$1.7M

Gross Margin

27%

29%

-2%

Operating Expenses (1)

$11.4M

$8.9M

+$2.5M

Operating Margin (1)

-21%

-6%

-15%

Net Income (Loss) (1)

($5.1M)

($1.3M)

-$3.8M

Earnings (Loss) Per Share (1)

($ 0.18)

($ 0.05)

–$0.13

Non-GAAP Gross Margin (2)

28%

30%

-2%

Non-GAAP Operating Expenses (2)

$10.4M

$9.4M

+1.0M

Non-GAAP Operating Margin (2)

-16%

-7%

-9%

Non-GAAP Net Income (Loss) (2)

($3.8M)

($1.8M)

-$2.0M

Non-GAAP Earnings (Loss) Per Share (2)

($ 0.13)

($ 0.06)

–$0.07

Adjusted EBITDA (2)

($2.5M)

$0.2M

-$2.7M

Ending Cash and Cash Equivalents

$22.1M

$15.4M

+$6.7M

Current Borrowings from Credit Facility

$0.0M

$4.5M

-$4.5M

(1) 1Q20 includes $1.6M of gains on the sale of CATV production assets

(2) Please refer to the schedules at the end of this press release for complete GAAP to non-GAAP reconciliations and other information related to non-GAAP financial measures

Aerospace and Defense (A&D) Segment

A&D’s sequential-quarter revenue slightly decreased due to lower sales of Quartz MEMS partially offset by increased Defense Optoelectronics and Fiber Optic Gyroscopes revenue. A&D’s gross margin decrease was driven by lower Quartz MEMS and Fiber Optic Gyroscopes margins partially offset by an increase in Defense Optoelectronic margins.

Three Months Ended

Mar 31, 2020

Dec 31, 2019

+ increase /

2Q20

1Q20

- decrease

A&D Segment Revenue

$13.0M

$13.7M

-$0.7M

A&D Segment Gross Margin

22%

33%

-11%

A&D Segment R&D Expense

$4.0M

$4.0M

$0.0M

A&D Segment Profit

($1.1M)

$0.5M

-$1.6M

Non-GAAP A&D Segment Gross Margin (1)

23%

33%

-10%

Non-GAAP A&D Segment R&D Expense (1)

$3.8M

$3.9M

-$0.1M

Non-GAAP A&D Segment Profit

($0.9M)

$0.7M

-$1.6M

(1) Please refer to the schedules at the end of this press release for complete GAAP to non-GAAP reconciliations and other information related to non-GAAP financial measures

Broadband Segment

Broadband’s sequential-quarter revenue decrease was primarily driven by decreased sales in CATV and Chips. Broadband’s gross margin increase was driven by a more favorable mix and lower costs.

Three Months Ended

Mar 31, 2020

Dec 31, 2019

+ increase /

2Q20

1Q20

- decrease

Broadband Segment Revenue

$10.8M

$11.8M

-$1.0M

Broadband Segment Gross Margin

33%

26%

+7%

Broadband Segment R&D Expense

$0.6M

$0.7M

-$0.1M

Broadband Segment Profit

$3.0M

$2.3M

+$0.7M

Non-GAAP Broadband Segment Gross Margin (1)

34%

26%

+8%

Non-GAAP Broadband Segment R&D Expense (1)

$0.5M

$0.6M

-$0.1M

Non-GAAP Broadband Segment Profit

$3.2M

$2.4M

+$0.8M

(1) Please refer to the schedules at the end of this press release for complete GAAP to non-GAAP reconciliations and other information related to non-GAAP financial measures

Business Outlook

The Company expects revenue for the fiscal third quarter ending June 30, 2020 (3Q20) to be in the range of $25 million to $27 million.

Conference Call

The Company will discuss its financial results on May 7, 2020 at 8:00 a.m. ET (5:00 a.m. PT). The call will be available by dialing 800-458-4121. For international callers, please dial +1 323-794-2597. The conference passcode number is 1932277. The call will be webcast live via the Company's website at http://investor.emcore.com/events.cfm. A webcast will be available for replay beginning Thursday, May 7, 2020 for at least 90 days following the conclusion of the call on the Company's website.

About EMCORE

EMCORE Corporation is a leading provider of advanced mixed-signal products that serve the aerospace & defense and broadband communications markets. Our best-in-class components and systems support a broad array of applications including navigation and inertial sensing, defense optoelectronics, broadband transport, 5G wireless infrastructure, optical sensing, and cloud data centers. We leverage industry-leading Quartz MEMS, Lithium Niobate and Indium Phosphide chip-level technology to deliver state-of-the-art component and system-level products across our end-market applications. EMCORE has vertically-integrated manufacturing capability at its wafer fabrication facility in Alhambra, CA, and quartz MEMS manufacturing facility in Concord, CA. Our manufacturing facilities maintain ISO 9001 quality management certification, and we are AS9100 aerospace quality certified at our facility in Concord. For further information about EMCORE, please visit http://www.emcore.com.

Use of Non-GAAP Financial Measures

The Company conforms to U.S. Generally Accepted Accounting Principles (GAAP) in the preparation of its financial statements. We disclose supplemental non-GAAP earnings measures for gross profit margin, operating expenses, operating profit margin, net income, and earnings per share, as well as adjusted EBITDA.

Management believes these supplemental non-GAAP measures reflect the Company’s core ongoing operating performance and facilitates comparisons across reporting periods. The Company uses these measures when evaluating its financial results and for planning and forecasting of future periods. We believe that these supplemental non-GAAP measures are also useful to investors in assessing our operating performance. While we believe in the usefulness of these supplemental non-GAAP measures, there are limitations. Our non-GAAP measures may not be reported by other companies in our industry and/or 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 these non-GAAP measures as a supplement to GAAP and by providing the reconciliations to the most comparable GAAP measure.

The schedules at the end of this press release reconcile the Company’s non-GAAP measures to the most directly comparable GAAP measure. The adjustments share one or more of the following characteristics: they are unusual and the Company does not expect them to recur in the ordinary course of its business, they do not involve the expenditure of cash, they are unrelated to the ongoing operation of the business in the ordinary course, or their magnitude and timing is largely outside of the Company’s control. For all reporting periods disclosed, the Company has applied consistent rationale, method, and adjustments in reconciling non-GAAP measures to the most directly comparable GAAP measure.

Non-GAAP measures are not in accordance with or an alternative to GAAP, nor are they meant to be considered in isolation or as a substitute for comparable GAAP measures. Our disclosures of these measures should be read only in conjunction with our financial statements prepared in accordance with GAAP. Non-GAAP measures should not be viewed as a substitute for the Company’s GAAP results.

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 Securities Exchange Act of 1934 (“Exchange Act”). 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, statements about our plans, strategies, business prospects, changes and trends in our business and the markets in which we operate.

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 rapidly evolving markets for the Company's products and uncertainty regarding the development of these markets; (b) the Company's historical dependence on sales to a limited number of customers and fluctuations in the mix of products and customers in any period; (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) uncertainties concerning the availability and cost of commodity materials and specialized product components that we do not make internally; (f) actions by competitors; (g) risks and uncertainties related to applicable laws and regulations, including the impact of changes to applicable tax laws and tariff regulations; (h) acquisition-related risks, including that (i) the revenues and net operating results obtained from our acquisition of the Systron Donner Inertial ("SDI") business may not meet our expectations, (ii) the costs and cash expenditures for integration of the SDI business operations may be higher than expected, (iii) there could be losses and liabilities arising from the acquisition of SDI that we will not be able to recover from any source, and (iv) we may not realize sufficient scale in our navigation systems product line from the SDI acquisition and will need to take additional steps, including making additional acquisitions, to achieve our growth objectives for this product line; (i) risks related to our ability to obtain capital; (j) risks related to the transition of certain of our manufacturing operations from our Beijing facility to a contract manufacturer’s facility; (k) the outbreak of COVID-19 and the impact on our business and operations, which is evolving and beyond our control; and (l) other risks and uncertainties discussed under Item 1A - Risk Factors in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019, as updated by our subsequent periodic reports.

Forward-looking statements are based on certain assumptions and analysis made in light of our experience and perception of historical trends, current conditions and expected future developments as well as other factors that we believe are appropriate under the circumstances. While these statements represent our judgment on what the future may hold, and we believe these judgments are reasonable, these statements are not guarantees of any events or financial results. 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 Securities and Exchange Commission (“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
Condensed Consolidated Statement of Operations
(in thousands, except for per share data)
(unaudited)

For the three months ended

For the six months ended

March 31,

March 31,

2020

2019

2020

2019

Revenue

$

23,850

$

21,745

$

49,332

$

45,746

Cost of revenue

17,423

15,936

35,431

34,129

Gross profit

6,427

5,809

13,901

11,617

Operating expense:

Selling, general, and administrative

7,139

6,996

13,026

14,589

Research and development

4,584

4,360

9,226

8,379

Gain from change in estimate on ARO obligation

(40

)

(40

)

Gain on sale of assets

(315

)

(1,917

)

Total operating expense

11,408

11,316

20,335

22,928

Operating loss

(4,981

)

(5,507

)

(6,434

)

(11,311

)

Other income:

Interest income (expense), net

1

224

(14

)

491

Foreign exchange (loss) gain

(156

)

304

(9

)

318

Total other (loss) income

(155

)

528

(23

)

809

Loss before income tax expense

(5,136

)

(4,979

)

(6,457

)

(10,502

)

Income tax benefit (expense)

55

(15

)

41

(30

)

Net loss

$

(5,081

)

$

(4,994

)

$

(6,416

)

$

(10,532

)

Foreign exchange translation adjustment

29

13

(7

)

27

Comprehensive loss

$

(5,052

)

$

(4,981

)

$

(6,423

)

$

(10,505

)

Per share data:

Net loss per basic and diluted share

$

(0.18

)

$

(0.18

)

$

(0.22

)

$

(0.38

)

Weighted-average number of basic and diluted shares outstanding

29,033

27,652

28,931

27,592


EMCORE CORPORATION
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

As of

As of

March 31,

September 30,

2020

2019

ASSETS

Current assets:

Cash and cash equivalents

$

22,030

$

21,574

Restricted cash

60

403

Accounts receivable, net of allowance of $249 and $148, respectively

19,818

18,497

Contract assets

1,978

1,055

Inventory

23,582

24,051

Prepaid expenses and other current assets

5,183

6,389

Assets held for sale

1,661

Total current assets

74,312

71,969

Property, plant, and equipment, net

20,894

37,223

Goodwill

69

69

ROU assets

15,202

Other intangible assets, net

220

239

Other non-current assets

217

62

Total assets

$

110,914

$

109,562

LIABILITIES and SHAREHOLDERS’ EQUITY

Current liabilities:

Borrowings from credit facility

$

$

5,497

Accounts payable

10,422

10,701

Accrued expenses and other current liabilities

10,400

14,521

ROU liability - current

1,048

Total current liabilities

21,870

30,719

ROU liability - non-current

14,325

Asset retirement obligations

1,906

1,890

Other long-term liabilities

207

Total liabilities

38,101

32,816

Commitments and contingencies (Note 13)

Shareholders’ equity:

Common stock, no par value, 50,000 shares authorized; 36,201 shares issued and 29,291 shares outstanding as of March 31, 2020; 35,803 shares issued and 28,893 shares outstanding as of September 30, 2019

742,416

739,926

Treasury stock at cost; 6,910 shares

(47,721

)

(47,721

)

Accumulated other comprehensive income

943

950

Accumulated deficit

(622,825

)

(616,409

)

Total shareholders’ equity

72,813

76,746

Total liabilities and shareholders’ equity

$

110,914

$

109,562


EMCORE CORPORATION

Reconciliations of GAAP to Non-GAAP Financial Measures

Three Months Ended

Mar 31, 2020

Dec 31, 2019

2Q20

1Q20

Gross Profit

$

6,427

$

7,474

Gross Margin

27

%

29

%

Adjustments:

Stock-based compensation

202

136

Asset retirement obligation (ARO) accretion

8

8

Amortization of acquired intangibles

9

9

Total adjustments

219

153

Non-GAAP Gross Profit

$

6,646

$

7,627

Non-GAAP Gross Margin

28

%

30

%


Three Months Ended

Mar 31, 2020

Dec 31, 2019

2Q20

1Q20

Operating Expenses

$

11,408

$

8,927

Stock-based compensation

(843

)

(666

)

Acquisition-related expenses

(8

)

(40

)

Severance and restructuring charges

(389

)

CATV transition - severance charges

(20

)

(204

)

CATV transition - gain on sale of asset

1,583

Litigation-related expenses & arbitration ruling

(19

)

(204

)

Gain/loss on sale of assets

315

19

Non-GAAP Operating Expenses

$

10,444

$

9,415


Three Months Ended

Mar 31, 2020

Dec 31, 2019

2Q20

1Q20

Operating Profit

$

(4,981

)

$

(1,453

)

Operating Margin

-21

%

-6

%

Adjustments:

Stock-based compensation

1,045

802

Asset retirement obligation (ARO) accretion

8

8

Acquisition-related expenses

8

40

Amortization of acquired intangibles

9

9

Severance and restructuring charges

389

CATV transition - severance charges

20

204

CATV transition - gain on sale of asset

(1,583

)

Litigation-related expenses & arbitration ruling

19

204

Gain/loss on sale of assets

(315

)

(19

)

Total adjustments

1,183

(335

)

Non-GAAP Operating Profit

(3,798

)

(1,788

)

Non-GAAP Operating Margin

-16

%

-7

%

Depreciation

1,315

1,964

Adjusted EBITDA

$

(2,483

)

$

176

Adjusted EBITDA %

-10

%

1

%


Three Months Ended

Mar 31, 2020

Dec 31, 2019

2Q20

1Q20

Net Income (Loss)

$

(5,081

)

$

(1,335

)

Earnings (Loss) Per Share

(0.18

)

(0.05

)

Adjustments:

Stock-based compensation

1,045

802

Asset retirement obligation (ARO) accretion

8

8

Acquisition-related expenses

8

40

Amortization of acquired intangibles

9

9

Severance and restructuring charges

389

CATV transition - severance charges

20

204

CATV transition - gain on sale of asset

(1,583

)

Litigation-related expenses & arbitration ruling

19

204

Gain/loss on sale of assets

(315

)

(19

)

Foreign currency gain/loss

156

(147

)

Income tax expense

(55

)

14

Total adjustments

1,284

(468

)

Non-GAAP Net Income (Loss)

(3,797

)

(1,803

)

Non-GAAP Earnings (Loss) Per Share

(0.13

)

(0.06

)

Interest income/expense

(1

)

15

Depreciation

1,315

1,964

Adjusted EBITDA

$

(2,483

)

$

176

Adjusted EBITDA %

-10

%

1

%


Three Months Ended

Three Months Ended

Mar 31, 2020

Dec 31, 2019

Mar 31, 2020

Dec 31, 2019

2Q20

1Q20

2Q20

1Q20

Aerospace and Defense

Broadband

Gross Profit

$

2,844

$

4,488

Gross Profit

$

3,583

$

2,987

Gross Margin

22

%

33

%

Gross Margin

33

%

26

%

Adjustments:

Adjustments:

Stock-based compensation

114

83

Stock-based compensation

88

53

Asset retirement obligation (ARO) accretion

Asset retirement obligation (ARO) accretion

8

8

Amortization of acquired intangibles

9

9

Amortization of acquired intangibles

Total adjustments

123

92

Total adjustments

96

61

Non-GAAP Gross Profit

$

2,967

$

4,580

Non-GAAP Gross Profit

$

3,679

$

3,048

Non-GAAP Gross Margin

23

%

33

%

Non-GAAP Gross Margin

34

%

26

%

Aerospace and Defense

Broadband

R&D Expenses

$

3,991

$

3,951

R&D Expenses

$

593

$

692

Stock-based compensation

(153

)

(90

)

Stock-based compensation

(99

)

(90

)

Non-GAAP R&D Expenses

$

3,838

$

3,861

Non-GAAP R&D Expenses

$

494

$

602

Investor Contacts

Sapphire Investor Relations, LLC
Erica Mannion or Michael Funari
+1-617-542-6180
investor_emkr@emcore.com