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6 December 2013

Emcore quarterly revenue rebounds by 29% to $43.1m

For fiscal fourth-quarter 2013 (to end-September), Emcore Corp of Albuquerque, NM, USA, which makes compound semiconductor-based components and subsystems for the fiber-optic and solar power markets, has reported revenue of $43.1m, down 9.3% on $47.5m a year ago but up 28.7% on $33.5m last quarter due mainly to higher Photovoltaic revenue after a significant increase in international business (including a large shipment of a few million dollars that had been deferred from last quarter). Revenue for full-year fiscal 2013 was $168.1m, up 2.7% on $163.8m in fiscal 2012.

Fiscal Q4/2012 Q1/2013 Q2/2013 Q3/2013 Q4/2013
Revenue $47.5m $49.3m $42.3m $33.5m $43.1m

Fiscal Q4/2013 Photovoltaics revenue was $20.5m (47% of total revenue), up 17.7% on a year ago (37% of total revenue) and 71.9% on $11.9m last quarter (36% of total revenue). Full-year Photovoltaics revenue was $71.2m, up 5.2% on fiscal 2012’s $64.7m.

Fiber Optics revenue was $22.6m (53% of total revenue), down 24.9% on a year ago (63% of total revenue) but up 4.9% on $21.6m last quarter (64% of total revenue). Full-year Fiber Optics revenue was $97m, up 0.9% on fiscal 2012’s $96.2m.

Overall gross margin has risen further, from 9.7% a year ago and 12.1% last quarter to 12.5% in fiscal Q4/2013. Full-year gross margin has risen from 10.9% in fiscal 2012 to 16.8%.

Photovoltaics gross margin was 13.5%, down from 22.2% a year ago and 28.6% last quarter (and significantly lower than the target of about 30%). This was due mainly to the significant increase in lower-margin international revenue plus record concentrated photovoltaic (CPV) solar cell sales of over $6m to the terrestrial solar market (which are typically single-digit gross margin). Nevertheless, full-year Photovoltaics gross margin has risen from 20% to 25.8%, due mainly to higher revenue and lower sales activities in lower-margin terrestrial systems product line following the sale of assets in fiscal 2012.

Fiber Optics gross margin has risen from 2.4% a year ago and 3% last quarter to 11.6%. “We experienced market recovery of our broadband fiber-optics business and operating performance improvement in the telecom product division,” notes CEO & president Dr Hong Hou. “While we have seen a significant improvement in our tunable XFP product yields and margins, this manufacturing line is still under-utilized and margins are below our average Fiber Optic gross margins,” adds chief financial officer Mark Weinswig. Full-year Fiber Optics gross margin was 10.1%, up from 4.5% in fiscal 2012, when lower revenue due to the impact of the October 2011 flood at Thailand-based subcontract manufacturer Fabrinet resulted in higher overheads (as manufacturing of certain fiber-optics components was moved to company-owned facilities in the USA, involving higher labor and other related costs).

Quarterly operating expenses have risen from $11.7m last quarter to $12.5m, due mainly to increases in R&D expenses related to the Solar business.

On a non-GAAP basis, net loss has improved from$6.3m a year ago and $5.9m last quarter last quarter to $5.6m. Full-year net loss has been more than halved from $26.3m in fiscal 2012 to $11.4m for fiscal 2013.

In June, Emcore agreed an equity transfer for the sale of its 40% equity interest in its China-based Suncore terrestrial concentrated photovoltaic (CPV) component- and system-making joint venture to partner San’an Optoelectronics Co Ltd in Xiamen, China for $4.8m. The transaction was recorded and payment was received during fiscal Q4/2013. Due to this other fundraising activities during the quarter, cash, cash equivalents and restricted cash balance rose from $6.6m to $16.9m.

During the past quarter, the Space Photovoltaic division was awarded more than 15 separate orders from several major aerospace firms in the USA and Asia. “This contract serves both the US government and commercial satellite missions, with a total value in excess of $20m,” says Hou. As of end-September, order backlog for Photovoltaics (Space Solar) was $57.1m, down only 1.7% on last quarter’s record $58.1m.

Consequently, for fiscal first-quarter 2014 (to end-December 2013), Emcore expects revenue of $43-45m, with improvements in both the Fiber Optics and Space Photovoltaic segments.

“We do expect our gross margins to bounce back to their normal levels,” says Weinswig. With a “meaningful increase in our Photovoltaics gross margins… We continue to believe that the Photovoltaics business’ target gross margin is at roughly 30%,” he adds. “We expect our gross margins in the Fiber Optics segment to improve in future quarters as we complete the ramp-up of our new product line at our contract manufacturer [as yield and product costs improve] and our Fiber Optics revenues increase,” Weinswig continues.

Although fiscal Q1 operating expenses will be a little higher due to certain corporate-related costs, operating expenses should subsequently be down to $11.5-12m per quarter. “We continue to improve our cost structure and believe that we can reach breakeven at a quarterly revenue level at $47-48m,” says Hou.

“In the light of the challenges in our Fiber Optics business, we have completed realignment in engineering, operations and general management functions over the last several months,” says Hou. “Most recently, we welcomed Dr LC Chiu as our new general manager for our Fiber Optics business,” he adds. “Chiu is a veteran in the Fiber Optics industry, bringing over 20 years of experience in engineering design, manufacturing, quality and business processes and a wealth of knowledge and expertise in the fiber-optics industry. With his deep technical and operations background, we believe he can drive further improvements in our business for new product introduction, cost reduction and operational efficiency.”

In October, Becker Drapkin Management acquired about 8% of the firm’s common stock. Steve Becker of Becker Drapkin Management; Dr Gerry Fine, Professor and Center Director of Boston University; and Steve Domenic, general partner of Sevin Rosen Funds, have now joined Emcore’s board of directors. “They bring significant experience in all different aspects of business and strategy,” comments Hou.

See related items:

Emcore announces changes to board

Emcore’s revenue falls 20.8% quarter-on-quarter

Emcore reports below-guidance quarterly revenue of $42.3m, but breaks even

Emcore’s increased solar shipments drive return to profit

Emcore reports revenue of $47.5m, down 9% year-on-year but up 16% quarter-to-quarter

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