EMCORE Corporation Announces Unaudited Results for Its First Quarter Ended December 31, 2009

EMCORE Corporation , a leading provider of compound semiconductor-based components, subsystems, and systems for the fiber optics and solar power markets, today announced unaudited financial results for its first quarter ended December 31, 2009.

Revenue: 

Revenue for the first quarter of fiscal 2010 ended December 31, 2009 was $42.4 million, an increase of $1.9 million, or 5%, from $40.5 million reported in the immediately preceding quarter ended September 30, 2009.

On a segment basis, revenue for the Photovoltaics segment was $16.8 million, an increase of $0.4 million, or 3%, from $16.4 million reported in the immediately preceding quarter with the increase due to a 14% increase in revenue from satellite solar power products offset by a decrease in revenue from terrestrial concentrated photovoltaic (CPV) products. The Photovoltaics segment accounted for 40% of the Company's consolidated quarterly revenue for both the three months ended December 31, 2009 and September 30, 2009.

Revenue for the Fiber Optics segment was $25.6 million, an increase of $1.5 million, or 6%, from $24.1 million reported in the immediately preceding quarter with the increase concentrated primarily in the Company's cable television (CATV) product lines. The Fiber Optics segment accounted for 60% of the Company's consolidated quarterly revenue for both the three months ended December 31, 2009 and September 30, 2009. 

Gross Profit:

On a GAAP basis, the consolidated gross profit was $8.0 million, an improvement of $3.9 million, or 97%, from a $4.1 million gross profit reported in the immediately preceding quarter and an improvement of $6.4 million when compared to the prior year period. This represents the Company's best gross profit performance since the quarter ended June 30, 2008.

On a segment basis, the first quarter Photovoltaics GAAP gross margin was 22.1%, a decrease from the 28.5% GAAP gross margin reported in the preceding quarter, but an increase from the 13.6% GAAP gross margin reported in the prior year period. After excluding certain adjustments, as set forth in the attached non-GAAP tables, the Photovoltaics first quarter non-GAAP gross margin of 22.1% improved when compared to the 10.6% non-GAAP gross margin in the preceding quarter. As indicated in the attached non-GAAP tables, the Company reversed $2.9 million of inventory reserves in the preceding quarter relating to legacy CPV products that were sold during that period. 

The Fiber Optics GAAP gross margin was 16.7%, a significant improvement from a negative 2.5% GAAP gross margin reported in the preceding quarter and a negative 1.1% GAAP gross margin reported in the prior year period. The improvement in the Fiber Optics gross margin was due to improved gross margins across the majority of the Company's product lines as well as lower inventory excess and obsolescence charges when compared to the preceding and prior year quarters. 

Operating Loss:

On a GAAP basis, the consolidated operating loss was $11.9 million, an improvement of $2.0 million from an operating loss of $13.9 million reported in the preceding quarter. This represents the Company's best operating performance since the quarter ended June 30, 2008. During the quarter, the Company incurred approximately $4.2 million in legal expenses related to patent litigation and other corporate legal charges arising principally from two trials held in the first quarter and $1.3 million in non-cash stock-based compensation expense from the surrender of stock options. After excluding these expenses and certain other non-cash and other adjustments as set forth in the attached non-GAAP tables, the first quarter consolidated non-GAAP operating loss was $7.0 million, an improvement of $2.0 million, or 23%, from the non-GAAP operating loss of $9.0 million reported in the preceding quarter.

Net Loss:

On a GAAP basis, the consolidated net loss was $13.6 million, slightly above the net loss of $13.5 million reported in the preceding quarter. On October 1, 2009, the Company entered into a $25 million equity line of credit arrangement that met all the criteria of a financial derivative instrument. Non-cash costs incurred to enter into this derivative instrument of $1.4 million were expensed as incurred. After excluding this expense and certain other non-cash and other adjustments as set forth in the attached non-GAAP tables, the first quarter consolidated non-GAAP net loss was $7.1 million, a $2.0 million improvement from the $9.1 million non-GAAP net loss reported in the preceding quarter. 

On a GAAP basis, the first quarter net loss per share was $0.17, representing no change from the $0.17 net loss per share reported in the preceding quarter. On a non-GAAP basis, the net loss per share was $0.09, an improvement of $0.02 per share from the $0.11 non-GAAP loss per share reported in the preceding quarter.

Order Backlog:

As of December 31, 2009, the Company had a consolidated order backlog of approximately $61.2 million, a $1.4 million, or 2%, decrease from the $62.6 million order backlog reported as of the end of the preceding quarter. On a segment basis, the quarter-end Photovoltaics order backlog totaled $42.3 million, a $5.4 million, or 11%, decrease from $47.7 million reported as of the end of the preceding quarter with the decrease due entirely to the rescheduling of a portion of a major customer's shipments beyond the Company's twelve month backlog reporting horizon. The quarter-end Fiber Optics order backlog totaled $18.9 million, a $4.0 million, or 26%, increase from $14.9 million reported as of the end of the preceding quarter with the increase being broad-based across customers and products. The order backlog is defined as purchase orders or supply agreements accepted by the Company with expected product delivery and / or services to be performed within the next twelve months.

Liquidity Update: 

As of December 31, 2009, cash, cash equivalents, current restricted cash, and available-for-sale securities totaled approximately $16.5 million which represents a $0.4 million, or 2%, decrease from $16.9 million as of the end of the preceding quarter. As of December 31, 2009, net working capital totaled $32.0 million. 

During the three months ended December 31, 2009, the Company consumed $1.2 million in cash from operations and, over the last three quarters, consumed only $189,000 in cash from operations due primarily to improved working capital management. The first quarter represents the fourth consecutive quarter that the Company has generated cash from the reduction of inventory. During the last twelve months, the Company monetized approximately $25.5 million of inventory, generated $16.9 million in cash from lowering its accounts receivable balances and achieved positive cash flow from operations during the quarters ended June 30, 2009 and September 30, 2009. 

The Company maintains a $14 million credit facility with Bank of America and, on October 1, 2009, closed a two-year $25 million committed equity line of credit facility with the Commerce Court Small Cap Value Fund, Ltd. In addition, the Company continues to evaluate its capital requirements and alternative sources of capital. With respect to the separation of its Fiber Optics and Photovoltaics businesses, the Company announced on February 3, 2010 that it has entered into an agreement to sell 60% of its Fiber Optics business to and enter into a joint venture with the Tangshan Caofeidian Investment Corporation.

Business Outlook: 

For the second quarter of fiscal 2010 ending March 31, 2010, the Company expects consolidated revenue to be in the range of $45 to $47 million with increases in both the Photovoltaics and Fiber Optics segments.

Conference Call: 

EMCORE will discuss its unaudited results for its first quarter ended December 31, 2009 on a conference call to be held on Wednesday, February 10, 2010 at 4:30 pm ET. To participate in the conference call, U.S. callers should dial (toll free) 888-587-0613 and international callers should dial 719-325-2352. The access code for the call is 7863504. A replay of the call will be available beginning February 10, 2010 at 8:00 p.m. EST until February 17, 2010 at 11:59 p.m. EST. The replay call-in number for U.S. callers is 888-203-1112, for international callers it is 719-457-0820, and the access code is 7863504. The call also will be web cast via the Company's web site at http://www.emcore.com.