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EMCORE Reports Fiscal 2022 Fourth Quarter Results

ALHAMBRA, CA, Dec. 20, 2022 (GLOBE NEWSWIRE) -- EMCORE Corporation (Nasdaq: EMKR), a leading provider of advanced mixed-signal products that serve the aerospace and defense, communications, and sensing markets, today announced results for the fiscal 2022 fourth quarter (4Q22) ended September 30, 2022. Management will host a conference call to discuss 4Q22 financial and business results today at 5:00 p.m. Eastern Time (ET).

For 4Q22, EMCORE’s consolidated revenue was $25.6 million, comprised of $21.0 million from the Aerospace and Defense (A&D) segment and $4.6 million from the Broadband segment. Net loss was $16.9 million and $10.9 million on a GAAP and non-GAAP basis, respectively. Adjusted EBITDA was negative $9.4 million. Please refer to the schedules at the end of this press release for GAAP to non-GAAP reconciliations and other information related to non-GAAP financial measures.

“4Q22 represents the beginning of a new era for EMCORE. We closed the acquisition of the Inertial Navigation product lines from KVH Industries which, in combination with the Space & Navigation acquisition the quarter before, and existing QMEMS and FOG products, creates the world’s largest independent1 provider of Inertial Navigation solutions. The strength of the combined larger product portfolio enhances our ability to serve key A&D customers in this $3 billion plus market,” said Jeff Rittichier, President and Chief Executive Officer of EMCORE. “A&D accounted for over 80% of the top-line in 4Q22, and while A&D gross margin was adversely impacted by integration-related and other items during the quarter, we have been working diligently on a re-organization initiative to move us closer to operating as one cohesive Inertial Navigation business and to profitability. Additionally, we recently completed the sale/leaseback of the Tinley Park property, adding $10.3 million in cash to our balance sheet in December.”

Consolidated Results

   Three Months Ended 
 
  Sep 30, 2022 Jun 30, 2022 +increase/
  4Q22 3Q22 -decrease
Revenue $25.6M $23.7M +$1.9M
Gross margin 4% 16% -12%
Operating expenses $18.2M $11.0M +$7.2M
Operating margin (67%) (30%) -37%
Net loss ($16.9M) ($7.6M) -$9.3M
Net loss per share diluted ($0.45) ($0.20) -$0.25
Non-GAAP gross margin (a) 2% 18% -16%
Non-GAAP operating expenses (a) $11.2M $10.5M +$0.7M
Non-GAAP operating margin (a) (42%) (27%) -15%
Non-GAAP net loss (a) ($10.9M) ($6.3M) -$4.6M
Non-GAAP net loss per share diluted (a) ($0.29) ($0.17) -$0.12
Adjusted EBITDA ($9.4M) ($5.1M) -$4.3M
Ending cash and cash equivalents $26.1M $75.1M -$49.0M
Line of credit and Loan payable $15.5M $— +$15.5M
(a) Please refer to the schedules at the end of this press release for GAAP to non-GAAP reconciliations and other information related to non-GAAP financial measures.

1 All sales are to unaffiliated third-party customers.

Aerospace and Defense Segment

For Q422, A&D’s sequential-quarter revenue increase was driven primarily by the addition of the Inertial Navigation product line acquired from KVH Industries, Inc. on August 9, 2022. A&D segment gross margin decreased primarily as a result of numerous factors related to the transition of newly acquired operations in Budd Lake, NJ and Tinley Park, IL as well as QMEMS inventory valuation charges during the quarter.

 

  Three Months Ended
 
  Sep 30, 2022 Jun 30, 2022 +increase/
  4Q22 3Q22 -decrease
A&D segment revenue $21.0M $13.4M +$7.6M
A&D segment gross margin 4% 12% -8%
A&D segment R&D expense $3.5M $3.8M -$0.3M
A&D segment profit ($2.6M) ($2.3M) -$0.3M
Non-GAAP A&D segment gross margin (a) 2% 13% -11%
Non-GAAP A&D segment R&D expense (a) $3.7M $3.7M $—M
Non-GAAP A&D segment profit ($3.3M) ($1.9M) -$1.4M
(a) Please refer to the schedules at the end of this press release for GAAP to non-GAAP reconciliations and other information related to non-GAAP financial measures.

 

 

Broadband Segment

For Q422, Broadband’s sequential-quarter revenue decrease was primarily due to a decline in CATV revenue. Broadband segment gross margin decreased primarily as a result of the lower revenue and higher under-absorption of fixed overhead. R&D expense increased due to higher product development expenses associated with Chips and Sensing products.

  Three Months Ended  
  Sep 30, 2022 Jun 30, 2022 +increase/
  4Q22 3Q22 -decrease
Broadband segment revenue $4.6M $10.3M -$5.7M
Broadband segment gross margin 3% 23% -20%
Broadband segment R&D expense $1.4M $0.7M +$0.7M
Broadband segment profit ($1.2M) $1.7M -$2.9M
Non-GAAP Broadband segment gross margin (a) 1% 24% -22%
Non-GAAP Broadband segment R&D expense (a) $1.6M $0.6M +$1.0M
Non-GAAP Broadband segment profit ($1.5M) $1.9M -$3.4M
(a) Please refer to the schedules at the end of this press release for GAAP to non-GAAP reconciliations and other information related to non-GAAP financial measures.

 

Business Outlook

The Company expects revenue for the fiscal 2023 first quarter ending December 31, 2022 to be in the range of $25 million to $27 million.

Conference Call

The Company will discuss its financial results on Tuesday, December 20, 2022 at 5:00 p.m. ET (2:00 p.m. PT). To participate in the conference call, click on the following link (ten minutes prior to the call) to register: https://register.vevent.com/register/BIe349dc322f5b477c8630cb906ea632c8. Once registered, participants will have the option of: 1) dialing in from their phone (using their PIN); or 2) clicking the “Call Me” option to receive an automated call directly to their phone. The call will be webcast live via the Company's website at http://www.emcore.com. A webcast will be available for replay following the conclusion of the call.

About EMCORE

EMCORE Corporation is a leading provider of advanced mixed-signal products that serve the aerospace and defense, communications, and sensing markets. Our best-in-class components and systems support a broad array of applications including navigation and inertial sensing, defense optoelectronics, broadband communications, optical sensing, and specialty chips for telecom and data centers. We leverage industry-leading Photonic Integrated Chip (PIC), 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 facilities in Alhambra, CA, Budd Lake, NJ, Concord, CA, and Tinley Park, IL. Our manufacturing facilities maintain ISO 9001 quality management certification, and we are AS9100 aerospace quality certified at our facilities in Budd Lake and 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 margin, operating expenses, research and development expenses, operating margin, and net loss, 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, including growth expectations in the A&D segment, expected revenue from our recent acquisitions of the Space & Navigation business of L3 Harris Technologies, Inc. and the inertial navigation business of KVH Industries, Inc., and statements about our future results of operations and financial position, 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 projected financial results, the development of new products, future growth, 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) uncertainties regarding the effects of the COVID-19 pandemic, the length of time it will take for the COVID-19 pandemic to subside, and the impact of measures intended to reduce its spread on our business and operations, which is evolving and beyond our control; (b) the rapidly evolving markets for the Company's products and uncertainty regarding the development of these markets; (c) the Company's and the acquired businesses historical dependence on sales to a limited number of customers and fluctuations in the mix of products and customers in any period; (d) delays and other difficulties in commercializing new products; (e) 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; (f) uncertainties concerning the availability and cost of commodity materials and specialized product components that we do not make internally; (g) actions by competitors; (h) risks and uncertainties related to applicable laws and regulations, including the impact of changes to applicable tax laws and tariff regulations; (i) acquisition-related risks, including that (i) the revenues and net operating results obtained from our recent acquisitions may not meet our expectations, (ii) the costs and cash expenditures for integration of our recent acquisitions may be higher than expected, (iii) we may not recognize the anticipated synergies from our recent acquisitions, (iv) there could be losses and liabilities arising from these acquisitions that we will not be able to recover from any source, and (v) we may not realize sufficient scale from these acquisitions and will need to take additional steps, including making additional acquisitions, to achieve our growth objectives for this product line; (j) risks related to our ability to obtain capital; (k) the effect of component shortages and any alternatives thereto; (l) risks and uncertainties related to manufacturing and production capacity and expansion plans related thereto; (m) risks related to the conversion of order backlog into product revenue; and (n) 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, 2021, 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 do not intend 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 Balance Sheets
(unaudited)

  September 30,
(in thousands)   2022       2021  
ASSETS      
Current assets:      
Cash and cash equivalents $ 25,625     $ 71,621  
Restricted cash   520       61  
Accounts receivable, net of credit loss of $337 and $260, respectively   18,073       31,849  
Contract assets   6,846       361  
Inventory   37,035       32,309  
Prepaid expenses and other current assets   7,124       6,877  
Assets held for sale         1,241  
Total current assets   95,223       144,319  
Property, plant, and equipment, net   37,867       22,544  
Goodwill   15,608       69  
Operating lease right-of-use assets   23,243       13,489  
Other intangible assets, net   14,790       167  
Other non-current assets   2,351       225  
Total assets $ 189,082     $ 180,813  
LIABILITIES and SHAREHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 12,729     $ 16,686  
Accrued expenses and other current liabilities   8,124       9,568  
Contract liabilities   5,300       368  
Loan payable - current   852        
Operating lease liabilities - current   2,213       1,198  
Total current liabilities   29,218       27,820  
Line of credit   9,599        
Loan payable- non-current   5,042        
Operating lease liabilities - non-current   21,625       12,684  
Asset retirement obligations   4,664       2,049  
Other long-term liabilities   106       794  
Total liabilities   70,254       43,347  
Commitments and contingencies      
Shareholders’ equity:      
Common stock, no par value, 50,000 shares authorized; 44,497 shares issued and 37,591 shares outstanding as of September 30, 2022; 43,890 shares issued and 36,984 shares outstanding as of September 30, 2021   787,347       782,266  
Treasury stock at cost; 6,906 shares as of September 30, 2022 and September 30,2021   (47,721 )     (47,721 )
Accumulated other comprehensive income   1,301       687  
Accumulated deficit   (622,099 )     (597,766 )
Total shareholders’ equity   118,828       137,466  
Total liabilities and shareholders’ equity $ 189,082     $ 180,813  

EMCORE CORPORATION
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income
(unaudited)

  Three Months Ended September 30,   Fiscal Year Ended September 30,
(in thousands, except for per share data)   2022       2021       2022       2021  
Revenue $ 25,565     $ 43,954     $ 124,126     $ 158,444  
Cost of revenue   24,559       26,897       94,408       96,956  
Gross profit   1,006       17,057       29,718       61,488  
Operating expense:              
Selling, general, and administrative   11,160       6,603       33,710       24,544  
Research and development   4,861       4,881       18,536       17,448  
Severance   35             1,353        
(Gain) loss on sale of assets   (766 )     76       (2,685 )     515  
Impairment charge   2,956             2,956        
Total operating expense   18,246       11,560       53,870       42,507  
Operating (loss) income   (17,240 )     5,497       (24,152 )     18,981  
Other income (expense):              
Gain on extinguishment of debt                     6,561  
Interest (expense) income, net   (125 )     (15 )     (139 )     466  
Foreign exchange (loss) gain   (192 )     (49 )     (352 )     207  
Pension income   520             171        
Total other income (expense)   203       (64 )     (320 )     7,234  
(Loss) income before income tax benefit (expense)   (17,037 )     5,433       (24,472 )     26,215  
Income tax benefit (expense)   164       (358 )     139       (572 )
Net (loss) income $ (16,873 )   $ 5,075     $ (24,333 )   $ 25,643  
Foreign exchange translation adjustment   82       (205 )     173       (231 )
Pension adjustment   441             441        
Comprehensive (loss) income $ (16,350 )   $ 4,870     $ (23,719 )   $ 25,412  
Per share data              
Net (loss) income per basic share $ (0.45 )   $ 0.14     $ (0.65 )   $ 0.75  
Weighted-average number of basic shares outstanding   37,484       36,845       37,269       34,020  
Net (loss) income per diluted share $ (0.45 )   $ 0.13     $ (0.65 )   $ 0.72  
Weighted-average number of diluted shares outstanding   37,484       38,993       37,269       35,789  

EMCORE CORPORATION
Reconciliations of GAAP to Non-GAAP Financial Measures
(unaudited)

  Three Months Ended
  Sep 30, 2022   Jun 30, 2022
(in thousands, except for percentages) 4Q22   3Q22
Gross profit $ 1,006     $ 3,898  
Gross margin   4%       16%  
Stock-based compensation expense   348       275  
Asset retirement obligation accretion   64       9  
Amortization of intangible assets   58       40  
Variable compensation accrual adjustment   (1,040 )      
Non-GAAP gross profit $ 436     $ 4,222  
Non-GAAP gross margin   2%       18%  


  Three Months Ended
  Sep 30, 2022   Jun 30, 2022
(in thousands) 4Q22   3Q22
Operating expense $ 18,246     $ 10,995  
Stock-based compensation expense   (1,271 )     (1,248 )
Severance expense   (35 )      
CATV transition - gain on sale of assets   767       1,318  
Acquisition-related expense   (5,166 )     (313 )
Litigation-related expense   (413 )     (213 )
Variable compensation accrual adjustment   2,030        
Impairment charge   (2,956 )      
Non-GAAP operating expense $ 11,202     $ 10,539  


  Three Months Ended
  Sep 30, 2022   Jun 30, 2022
(in thousands, except for percentages) 4Q22   3Q22
Operating profit $ (17,240)     $ (7,097)  
Operating margin   (67%)       (30%)  
Stock-based compensation expense   1,619       1,523  
Asset retirement obligation accretion   64       9  
Amortization of acquired intangibles   58       40  
Severance expense   35        
CATV transition - gain on sale of assets   (766)       (1,318)  
Acquisition-related expense   5,166       313  
Litigation-related expense   413       213  
Variable compensation accrual adjustment   (3,070)        
Impairment charge   2,956        
Non-GAAP operating profit $ (10,765)     $ (6,317)  
Non-GAAP operating margin (42)%
    (27)%
 
Depreciation expense   1,381       1,185  
Adjusted EBITDA $ (9,384)     $ (5,132)  
Adjusted EBITDA %   (37%)       (22%)  


  Three Months Ended
  Sep 30, 2022   Jun 30, 2022
(in thousands, except for per share data and percentages) 4Q22   3Q22
Net (loss) $ (16,873)     $ (7,649)  
Net (loss) per share basic and diluted $ (0.45)     $ (0.20)  
Stock-based compensation expense   1,619       1,523  
Asset retirement obligation accretion   64       9  
Amortization of intangible assets   58       40  
Severance expense   35        
CATV transition - gain on sale of assets   (766)       (1,318)  
Acquisition-related expense   5,166       313  
Litigation-related expense   413       213  
Variable compensation accrual adjustment   (3,070)        
Impairment charge   2,956        
Pension (income) expense   (520)       349  
Foreign exchange loss   192       185  
Income tax (benefit) expense   (164)       27  
Non-GAAP net loss $ (10,890)     $ (6,308)  
Non-GAAP net loss per share basic and diluted $ (0.29)     $ (0.17)  
Interest expense (income), net   125       (9)  
Depreciation expense   1,381       1,185  
Adjusted EBITDA $ (9,384)     $ (5,132)  
Adjusted EBITDA %   (37%)       (22%)  


  Three Months Ended     Three Months Ended
(in thousands, except for
Sep 30, 2022   Jun 30, 2022     Sep 30, 2022   Jun 30, 2022
percentages) 4Q22   3Q22     4Q22   3Q22
Aerospace and Defense         Broadband      
Gross profit $ 889     $ 1,551     Gross profit $ 117     $ 2,347  
Gross margin   4%       12%     Gross margin   3%       23%  
Stock-based compensation expense   181       147     Stock-based compensation expense   167       128  
Asset retirement obligation accretion   57           Asset retirement obligation accretion   7       9  
Amortization of intangible assets   58       40     Amortization of intangible assets          
Variable compensation accrual adjustment   (804)           Variable compensation accrual adjustment   (236)        
Non-GAAP gross profit $ 381     $ 1,738     Non-GAAP gross profit $ 55     $ 2,484  
Non-GAAP gross margin   2%       13%     Non-GAAP gross margin   1%       24%  
                 
R&D expense $ 3,506     $ 3,834     R&D expense $ 1,355     $ 679  
Stock-based compensation expense   (170)       (167)     Stock-based compensation expense   (47)       (80)  
Variable compensation accrual adjustment   347           Variable compensation accrual adjustment   289        
Non-GAAP R&D expense $ 3,683     $ 3,667     Non-GAAP R&D expense $ 1,597     $ 599  

Contact:
EMCORE Corporation
Tom Minichiello
(626) 293-3400
investor@emcore.com 


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Source: EMCORE Corporation