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Compliance Costs Hit Emcore's Comeback

Customers already sourcing solar cells from Emcore are now also buying integrated receivers for thermal management, and the extra business is giving the firm an additional route back to profitability.

Emcore made a $14.5 million net loss for the quarter ended June 30 2007, but says that improvements in its photovoltaic (PV) and fiber businesses will drive it back into profit in 2008.

Revenue from the company s PV division grew strongly - climbing 63 percent over the previous year to reach $16.9 million, while Emcore has also gained a $6 million-plus addition to its existing order from Australian customer Green and Gold Energy (GGE).

During an investor conference call to discuss the results, Emcore s CEO Reuben Richards explained that the $24 million order received from GGE earlier in the quarter would increase to $30-$35 million.

The additional value in the order arises because GGE now wants Emcore to provide receivers; packages that help to deal with the high temperatures reached in concentrator PV systems.

"A lot of our CPV customers find it more efficient for their businesses to buy receivers from us," Richards commented. "What we re seeing is a migration from customers who d originally conceived of buying just bare cells to one in which we are providing fully integrated receivers to go into their modules."

The Albuquerque, New Mexico company is seeking to integrate multi-junction solar cell technology into its own CPV systems, and will begin production of its first 1.5 MW system in November, and a further 3 MW system in December.

These dates emphasize the timescale for Richards profit projections. Despite all the excitement surrounding Emcore s terrestrial PV business from investors taking part in the call, the company will only gradually recognize revenue on these major orders throughout 2008.

In fiber-optics, which remains Emcore s biggest source of revenue at this stage, the company now anticipates that sales of fiber-to-the-home products will double over the coming year.

The lower manufacturing costs associated with its new Langfang City, China, facility are also set to aid margins across Emcore s broadband business. However, again, profitability is not expected to return to this division until mid-2008.

But these latest results do appear to mark the beginning of the end of the strife that Emcore has endured over re-statement of stock option expenses.

They were the first fully Nasdaq-compliant results that the company had published for a year, and Emcore now looks likely to comply with the Nasdaq s new December 4 deadline to file the delayed financial results in full.

In the quarter to June 30, Emcore incurred costs of $3.9 million restating its results. In other words, it has been spending around $0.3 million per week on accountants and lawyers in order to return to full compliance.

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