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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission File Number 001-36632
https://cdn.kscope.io/2517e1b3ac21f9d52b267043d525caf0-emkr-20210630_g1.jpg
EMCORE Corporation
(Exact name of registrant as specified in its charter)
New Jersey22-2746503
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
2015 W. Chestnut Street, Alhambra, California, 91803
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (626) 293-3400
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common stock, no par valueEMKRThe Nasdaq Stock Market LLC (Nasdaq Global Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the E change Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of August 2, 2021, the number of shares outstanding of our no par value common stock totaled 36,884,544.



Table of Contents

EMCORE Corporation
FORM 10-Q
For the Quarterly Period Ended June 30, 2021

TABLE OF CONTENTS
Page

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CAUTIONARY NOTE
REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are 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 included in our Exchange Act reports and statements about our plans, strategies, business prospects, changes and trends in our business and the markets in which we operate, including the expected impact of the COVID-19 pandemic on our business and operations. 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,” “should,” “targets,” “will,” “would,” and similar expressions or variations of these terms and similar phrases. Additionally, statements concerning future matters such as our expected liquidity, development of new products, enhancements or technologies, sales levels, expense levels, conversion of backlog into revenue, expectations regarding the outcome of legal proceedings and other statements regarding matters that are not historical are forward-looking statements. Management cautions 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 the industries in which we operate to be materially different from those expressed or implied by any forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include without limitation the following:

uncertainties regarding the effects of the COVID-19 pandemic and the impact of measures intended to reduce its spread on our business and operations, which is evolving and beyond our control;
the effect of component shortages and any alternatives thereto;
the rapidly evolving markets for our products and uncertainty regarding the development of these markets;
our historical dependence on sales to a limited number of customers and fluctuations in the mix of products and customers in any period;
delays and other difficulties in commercializing new products;
the failure of new products: (a) to perform as expected without material defects, (b) to be manufactured at acceptable volumes, yields, and cost, (c) to be qualified and accepted by our customers, and (d) to successfully compete with products offered by our competitors;
uncertainties concerning the availability and cost of commodity materials and specialized product components that we do not make internally;
actions by competitors;
risks and uncertainties related to applicable laws and regulations, including the impact of changes to applicable tax laws and tariff regulations;
acquisition-related risks, including that (a) the revenues and net operating results obtained from the Systron Donner Inertial, Inc. ("SDI") business may not meet our expectations, (b) there could be losses and liabilities arising from the acquisition of SDI that we will not be able to recover from any source and (c) we may not realize sufficient scale in our Navigation and Inertial Sensing 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;
risks related to our ability to obtain capital;
risks related to the transition of certain of our manufacturing operations from our Beijing facility to a contract manufacturer’s facility;
risks and uncertainties related to manufacturing and production capacity and expansion plans related thereto; and
other risks and uncertainties discussed in Part II, Item 1A, Risk Factors in this Quarterly Report on Form 10-Q and in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020, as such risk factors may be amended, supplemented or superseded from time to time by our subsequent periodic reports we file with the Securities and Exchange Commission (“SEC”).

These cautionary statements apply to all forward-looking statements wherever they appear in this Quarterly Report. 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
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Quarterly Report 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 this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended September 30, 2020. Certain information included in this Quarterly Report may supersede or supplement forward-looking statements in our other 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.
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PART I. Financial Information
ITEM 1. Financial Statements
EMCORE CORPORATION
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
For the three and nine months ended June 30, 2021 and 2020
(in thousands, except per share data)
(unaudited)

For the three months ended June 30,For the nine months ended June 30,
2021202020212020
Revenue$42,658 $27,266 $114,490 $76,598 
Cost of revenue25,433 18,048 70,059 53,479 
Gross profit17,225 9,218 44,431 23,119 
Operating expense:
Selling, general, and administrative6,081 5,936 17,941 18,962 
Research and development4,500 4,807 12,567 14,033 
Loss (gain) on sale of assets250 (312)439 (2,229)
Total operating expense10,831 10,431 30,947 30,766 
Operating income (loss)6,394 (1,213)13,484 (7,647)
Other income (expense):
Gain on extinguishment of debt6,561  6,561  
Interest income (expense), net579 (40)481 (54)
Foreign exchange gain (loss) 87 (20)256 (29)
Total other income (expense) 7,227 (60)7,298 (83)
Income (loss) before income tax (expense) benefit13,621 (1,273)20,782 (7,730)
Income tax (expense) benefit(6)(14)(214)27 
Net income (loss)$13,615 $(1,287)$20,568 $(7,703)
Foreign exchange translation adjustment(5)2 (26)(5)
Comprehensive income (loss)$13,610 $(1,285)$20,542 $(7,708)
Per share data
Net income (loss) per basic share$0.37 $(0.04)$0.62 $(0.27)
Weighted-average number of basic shares outstanding36,768 29,295 33,069 29,052 
Net income (loss) per diluted share$0.35 $(0.04)$0.59 $(0.27)
Weighted-average number of diluted shares outstanding38,893 29,295 34,777 29,052 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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EMCORE CORPORATION
Condensed Consolidated Balance Sheets
As of June 30, 2021 and September 30, 2020
(in thousands)
(unaudited)

As of
June 30, 2021September 30, 2020
ASSETS
Current assets:
Cash and cash equivalents$67,191 $30,390 
Restricted cash1,106 148 
Accounts receivable, net of credit loss of $192 and $227, respectively
31,536 25,324 
Contract assets220 1,566 
Inventory33,362 25,525 
Prepaid expenses and other current assets6,295 5,589 
Assets held for sale1,404 1,568 
Total current assets141,114 90,110 
Property, plant, and equipment, net21,847 21,052 
Goodwill69 69 
Operating lease right-of-use assets13,744 14,566 
Other intangible assets, net175 202 
Other non-current assets243 242 
Total assets$177,192 $126,241 
LIABILITIES and SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$19,184 $16,484 
Accrued expenses and other current liabilities9,961 11,577 
Operating lease liabilities - current1,153 992 
Total current liabilities30,298 29,053 
PPP liability - non-current 6,488 
Operating lease liabilities - non-current12,954 13,735 
Asset retirement obligations2,040 2,022 
Other long-term liabilities794 794 
Total liabilities46,086 52,092 
Commitments and contingencies (Note 11)
Shareholders’ equity:
Common stock, no par value, 50,000 shares authorized; 43,787 shares issued and 36,881 shares outstanding as of June 30, 2021; 36,461 shares issued and 29,551 shares outstanding as of September 30, 2020
780,776 744,361 
Treasury stock at cost; 6,906 shares as of June 30, 2021 and 6,910 shares as of September 30, 2020
(47,721)(47,721)
Accumulated other comprehensive income892 918 
Accumulated deficit(602,841)(623,409)
Total shareholders’ equity131,106 74,149 
Total liabilities and shareholders’ equity$177,192 $126,241 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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EMCORE CORPORATION
Condensed Consolidated Statements of Shareholders’ Equity
For the three and nine months ended June 30, 2021 and 2020
(in thousands)
(unaudited)

For the three months ended
June 30,
For the nine months ended
June 30,
2021202020212020
Shares of Common Stock
Balance, beginning of period36,775 29,291 29,551 28,893 
Stock-based compensation101 117 534 283 
Stock option exercises5  15 1 
Issuance of restricted stock units   116 
Issuance of common stock - ESPP  126 115 
Sale of common stock  6,655  
Balance, end of period36,881 29,408 36,881 29,408 
Value of Common Stock
Balance, beginning of period$779,681 $742,416 $744,361 $739,926 
Stock-based compensation1,176 779 3,010 2,625 
Stock option exercises31  77 2 
Tax withholding paid on behalf of employees for stock-based awards(112)(35)(195)(82)
Issuance of restricted stock units   410 
Issuance of common stock - ESPP  382 279 
Sale of common stock, net of offering costs  33,141  
Balance, end of period780,776 743,160 780,776 743,160 
Treasury stock, beginning and ending of period(47,721)(47,721)(47,721)(47,721)
Accumulated Other Comprehensive Income
Balance, beginning of period897 943 918 950 
Translation adjustment(5)2 (26)(5)
Balance, end of period892 945 892 945 
Accumulated Deficit
Balance, beginning of period(616,456)(622,825)(623,409)(616,409)
Net income (loss)13,615 (1,287)20,568 (7,703)
Balance, end of period(602,841)(624,112)(602,841)(624,112)
Total Shareholders’ Equity$131,106 $72,272 $131,106 $72,272 

The accompanying notes are an integral part of these condensed consolidated financial statements.

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EMCORE CORPORATION
Condensed Consolidated Statements of Cash Flows
For the nine months ended June 30, 2021 and 2020
(in thousands)
(unaudited)

For the nine months ended June 30,
20212020
Cash flows from operating activities:
Net income (loss)$20,568 $(7,703)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense3,053 4,359 
Stock-based compensation expense3,010 2,625 
Provision adjustments related to credit loss(35)188 
Provision adjustments related to product warranty313 178 
Loss (gain) on disposal of property, plant and equipment439 (2,229)
Issuance of restricted stock units 410 
Other(396)(113)
Total non-cash adjustments6,384 5,418 
Changes in operating assets and liabilities:
Accounts receivable and contract assets(4,827)(2,566)
Inventory(7,395)(293)
Other assets(345)(13,706)
Accounts payable1,423 2,738 
Accrued expenses and other current liabilities(9,079)10,707 
Total change in operating assets and liabilities(20,223)(3,120)
Net cash provided by (used in) operating activities6,729 (5,405)
Cash flows from investing activities:
Purchase of equipment(3,004)(3,391)
Proceeds from disposal of property, plant and equipment582 15,300 
Net cash (used in) provided by investing activities(2,422)11,909 
Cash flows from financing activities:
Net payments on credit facilities (5,497)
Proceeds from PPP loan 6,488 
Proceeds from employee stock purchase plan and equity awards451 281 
Proceeds from sale of common stock35,937  
Issuance cost associated with sale of common stock(2,796) 
Taxes paid related to net share settlement of equity awards(195)(82)
Net cash provided by financing activities33,397 1,190 
Effect of exchange rate changes provided by foreign currency55 11 
Net increase in cash, cash equivalents and restricted cash37,759 7,705 
Cash, cash equivalents and restricted cash at beginning of period30,538 21,977 
Cash, cash equivalents and restricted cash at end of period$68,297 $29,682 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest$46 $98 
Cash paid during the period for income taxes$547 $60 
NON-CASH INVESTING AND FINANCING ACTIVITIES
Changes in accounts payable related to purchases of equipment$1,026 $(357)

The accompanying notes are an integral part of these condensed consolidated financial statements.
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EMCORE Corporation
Notes to our Condensed Consolidated Financial Statements

NOTE 1. Description of Business

EMCORE Corporation (referred to herein, together with its subsidiaries, as the “Company,” “we,” “our,” or “EMCORE”) was established in 1984 as a New Jersey corporation. The Company became publicly traded in 1997 and is listed on The Nasdaq Stock Market under the ticker symbol EMKR. EMCORE is a leading provider of sensors for navigation in the Aerospace and Defense market as well as a manufacturer of lasers and optical subsystems for use in the cable TV industry. EMCORE pioneered the linear fiber optic transmission technology that enabled the world’s first delivery of Cable TV (“CATV”) directly on fiber, and today is a leading provider of advanced Mixed-Signal Optics products that enable communications systems and service providers to meet growing demand for increased bandwidth and connectivity. The Mixed-Signal Optics technology at the heart of our broadband communications products is shared with our fiber optic gyros and inertial sensors to provide the aerospace and defense markets with state-of-the-art navigation systems technology. With the acquisition of Systron Donner Inertial, Inc. (“SDI”), a navigation systems provider with a scalable, chip-based platform for higher volume gyro applications utilizing Quartz MEMS technology, in June 2019, EMCORE further expanded its portfolio of gyros and inertial sensors with SDI’s quartz MEMS gyro and accelerometer technology. EMCORE has fully vertically-integrated manufacturing capability through our indium phosphide compound semiconductor wafer fabrication facility at our headquarters in Alhambra, CA, and through our quartz processing and sensor manufacturing facility in Concord, CA. These facilities support EMCORE’s vertically-integrated manufacturing strategy for quartz and fiber optic gyro products, for navigation systems, and for our chip, laser, transmitter, and receiver products for broadband applications. With both analog and digital circuits on multiple chips, or even a single chip, the value of Mixed-Signal device solutions is often substantially greater than traditional digital applications and requires a specialized expertise held by EMCORE which is unique in the optics industry.

NOTE 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim information, and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and notes required by U.S. GAAP for annual financial statements.
In our opinion, the interim financial statements reflect all adjustments, which are all normal recurring adjustments, that are necessary to provide a fair presentation of the financial results for the interim periods presented. Operating results for interim periods are not necessarily indicative of results that may be expected for an entire fiscal year. The condensed consolidated balance sheet as of September 30, 2020 has been derived from the audited consolidated financial statements as of such date. For a more complete understanding of our business, financial position, operating results, cash flows, risk factors and other matters, please refer to our Annual Report on Form 10-K for the fiscal year ended September 30, 2020.

Significant Accounting Policies and Estimates

There have been no material changes in our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020. There have been no significant changes to our accounting policies during the nine months ended June 30, 2021. The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, as of the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. If these estimates differ significantly from actual results, the impact to the condensed consolidated financial statements may be material.

Recently Adopted Accounting Pronouncements

We recently adopted the following accounting standards, which had the following impacts on our consolidated financial statements:

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the way entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net earnings. The new standard was effective for our fiscal year beginning October
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1, 2020. The adoption of this standard did not have a material impact on the condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

We are evaluating the following accounting standards and their impacts on our consolidated financial statements:

In March 2020, the FASB issued ASU 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. The new standard is effective for annual periods beginning after December 15, 2020, including interim periods within those annual periods. The new standard will be effective for our fiscal year beginning October 1, 2021 and early adoption is permitted. The Company is currently evaluating the new guidance to determine the impact it may have on its condensed consolidated financial statements and related disclosures.

NOTE 3. Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the unaudited consolidated balance sheets that sum to the total of the same amounts shown in the unaudited statements of consolidated cash flows:
As of
(in thousands)June 30, 2021September 30, 2020
Cash$12,121 $11,325 
Cash equivalents55,070 19,065 
Restricted cash1,106 148 
Total cash, cash equivalents and restricted cash$68,297 $30,538 

The Company’s restricted cash includes cash balances which are legally or contractually restricted in use. The Company’s restricted cash is included in current assets as of June 30, 2021 and September 30, 2020.

NOTE 4. Fair Value Accounting

Accounting Standards Codification Topic 820 (“ASC 820”), Fair Value Measurement, establishes a valuation hierarchy for disclosure of the inputs to valuation techniques used to measure fair value. This standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:

Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly, through market corroboration, for substantially the full term of the financial instrument.
Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets or liabilities at fair value.

Classification of an asset or liability within this hierarchy is determined based on the lowest level input that is significant to the fair value measurement. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs.

Cash consists primarily of bank deposits or highly liquid short-term investments with a maturity of three months or less at the time of purchase. Restricted cash represents temporarily restricted deposits held as compensating balances against short-term borrowing arrangements. Cash, cash equivalents and restricted cash are based on Level 1 measurements. The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, contract assets, other current assets, and accounts payable approximate fair value because of the short maturity of these instruments.

NOTE 5. Accounts Receivable

The components of accounts receivable consisted of the following:
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As of
(in thousands)June 30, 2021September 30, 2020
Accounts receivable, gross$31,728 $25,551 
Allowance for credit loss(192)(227)
Accounts receivable, net$31,536 $25,324 

The allowance for credit loss is based on the age of receivables and a specific identification of receivables considered at risk of collection.

NOTE 6. Inventory

The components of inventory consisted of the following:
As of
(in thousands)June 30, 2021September 30, 2020
Raw materials$16,729 $13,354 
Work in-process11,066 8,381 
Finished goods5,567 3,790 
Inventory balance at end of period$33,362 $25,525 
NOTE 7. Property, Plant, and Equipment, net

The components of property, plant, and equipment, net consisted of the following:
As of
(in thousands)June 30, 2021September 30, 2020
Equipment$36,778 $35,218 
Furniture and fixtures1,125 1,125 
Computer hardware and software3,585 3,473 
Leasehold improvements6,616 3,169 
Construction in progress8,893 10,301 
Property, plant, and equipment, gross$56,997 $53,286 
Accumulated depreciation(35,150)(32,234)
Property, plant, and equipment, net$21,847 $21,052 

During the three and nine months ended June 30, 2021, the Company sold certain equipment and recognized a loss on sale of assets of $0.3 million and $0.4 million, respectively. In addition, in the fiscal year ended September 30, 2020, the Company entered into agreements to sell additional equipment and these assets were reclassified to assets held for sale. The balance as of June 30, 2021 and September 30, 2020 was $1.4 million and $1.6 million, respectively.

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NOTE 8. Accrued Expenses and Other Current Liabilities

The components of accrued expenses and other current liabilities consisted of the following:
As of
(in thousands)June 30, 2021September 30, 2020
Compensation$7,146 $6,916 
Warranty1,062 803 
Legal expenses and other professional fees127 211 
Contract liabilities399 502 
Income and other taxes150 1,265 
Severance and restructuring accruals 17 
Other1,077 1,863 
Accrued expenses and other current liabilities$9,961 $11,577 

NOTE 9. Credit Facility and Debt

Credit Facility

On November 11, 2010, we entered into a Credit and Security Agreement (as amended to date, the “Credit Facility”) with Wells Fargo Bank, N.A. The Credit Facility is secured by the Company’s assets and is subject to a borrowing base formula based on the Company’s eligible accounts receivable, inventory, and machinery and equipment accounts.

The Credit Facility matures in November 2021 and currently provides us with a revolving credit line of up to $15.0 million, subject to a borrowing base formula, that can be used for working capital requirements, letters of credit, acquisitions, and other general corporate purposes subject to a requirement, for certain specific uses, that the Company has liquidity of at least $25.0 million after such use. The Credit Facility requires us to maintain (a) liquidity of at least $10.0 million and (b) excess availability of at least $1.0 million.

As of June 30, 2021, there was no amount outstanding under this Credit Facility and the Company was in compliance with all financial covenants. Also, as of June 30, 2021, the Credit Facility had $0.5 million reserved for one outstanding stand-by letter of credit and $13.4 million available for borrowing.

Debt

On May 3, 2020, we entered into a Paycheck Protection Program Promissory Note and Agreement with Wells Fargo Bank, N.A. (the "Lender") under the Paycheck Protection Program (“PPP”) established under the Coronavirus Aid, Relief and Economic Security Act and administered by the U.S. Small Business Administration (the “SBA”) to receive loan proceeds of $6.5 million (the “PPP Loan”), which the Company received on May 6, 2020.

We applied for forgiveness of the PPP Loan during the three months ended March 31, 2021 and effective June 15, 2021, the SBA approved our PPP Loan forgiveness application for the entire PPP Loan balance of $6.5 million, including all accrued interest thereon. The remaining PPP Loan balance was zero as of June 30, 2021. The Company recorded the gain on debt extinguishment in other income (expense) in the statements of operations and comprehensive income (loss).

NOTE 10. Income and Other Taxes

During the three months ended June 30, 2021 and 2020, the Company recorded an income tax (expense) of $(6) thousand and $(14) thousand, respectively. Income tax (expense) for the three months ended June 30, 2021 and 2020 is composed primarily of state tax (expense) which is driven the State of California's temporary suspension of net operating loss ("NOL") utilization. The income tax (expense) for the three months ended June 30, 2021 was offset by the release of uncertain tax reserves.

During the nine months ended June 30, 2021 and 2020, the Company recorded income tax (expense) of $(214) thousand and income tax benefit of $27 thousand, respectively. Income tax (expense) for the nine months ended June 30, 2021 is composed primarily of state tax (expense). The increase in income tax (expense) is driven by the State of California’s temporary suspension of NOL utilization, reduced by the release of uncertain tax reserve.

For each of the three months ended June 30, 2021 and 2020 the effective tax rate on continuing operations was 0.0%.
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For the nine months ended June 30, 2021 and 2020, the effective tax rate on continuing operations was 1.0% and 0.0%, respectively. The increased tax rate for the nine months ended June 30, 2021 is primarily driven by the State of California’s temporary suspension of NOL utilization, reduced by the release of uncertain tax reserve.

The Company uses estimates to forecast the results from continuing operations for the current fiscal year as well as permanent differences between book and tax accounting.

We have not provided for income taxes on non-U.S. subsidiaries’ undistributed earnings as of June 30, 2021 because we plan to indefinitely reinvest the unremitted earnings of our non-U.S. subsidiaries and all of our non-U.S. subsidiaries historically have negative earnings and profits.

All deferred tax assets have a full valuation allowance at June 30, 2021. On a quarterly basis, the Company evaluates the positive and negative evidence to assess whether the more likely than not criteria has been satisfied in determining whether there will be further adjustments to the valuation allowance.

During each of the three and nine months ended June 30, 2021, we released the uncertain tax reserve of $0.4 million and related interest expense of $0.6 million. As of September 30, 2020, we had $0.4 million of uncertain tax benefit reserved and $0.6 million of interest and penalties accrued for as tax liabilities on our balance sheet. Interest that is accrued on tax liabilities is recorded within interest expense on the condensed consolidated statements of operations.

NOTE 11. Commitments and Contingencies

Indemnifications

We have agreed to indemnify certain customers against claims of infringement of intellectual property rights of others in our sales contracts with these customers. Historically, we have not paid any claims under these customer indemnification obligations. We enter into indemnification agreements with each of our directors and executive officers pursuant to which we agree to indemnify them for certain potential expenses and liabilities arising from their status as a director or executive officer of the Company. We maintain directors and officers insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and executive officers in certain circumstances. It is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular claim.

Legal Proceedings

We are subject to various legal proceedings, claims, and litigation, either asserted or unasserted, that arise in the ordinary course of business. The outcome of these matters is currently not determinable and we are unable to estimate a range of loss, should a loss occur, from these proceedings. The ultimate outcome of legal proceedings involves judgments, estimates and inherent uncertainties and the results of these matters cannot be predicted with certainty. Professional legal fees are expensed when incurred. We accrue for contingent losses when such losses are probable and reasonably estimable. In the event that estimates or assumptions prove to differ from actual results, adjustments are made in subsequent periods to reflect more current information. Should we fail to prevail in any legal matter or should several legal matters be resolved against the Company in the same reporting period, then the financial results of that particular reporting period could be materially affected.

Intellectual Property Lawsuits

We protect our proprietary technology by applying for patents where appropriate and, in other cases, by preserving the technology, related know-how and information as trade secrets. The success and competitive position of our product lines are impacted by our ability to obtain intellectual property protection for our research and development efforts. We have, from time to time, exchanged correspondence with third parties regarding the assertion of patent or other intellectual property rights in connection with certain of our products and processes.

Resilience Litigation

In February 2021, Resilience Capital (“Resilience”) filed a complaint against us with the Delaware Chancery Court containing claims arising from the February 2020 sale of SDI’s real property (the “Concord Property Sale”) located in Concord, California (the “Concord Real Property”) to Eagle Rock Holdings, LP (“Buyer”) and that certain Single-Tenant Triple Net Lease, dated as of February 10, 2020, entered into by and between SDI and the Buyer, pursuant to which SDI leased from the Buyer the
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Concord Real Property for a 15 year term. The Resilience complaint seeks, among other items, (i) a declaration that the Concord Property Sale included a non-cash component; (ii) a decree requiring us and Resilience to follow the appraisal requirements set forth in that certain Purchase and Sale Agreement (the "SDI Purchase Agreement"), dated as of June 7, 2019, by and among the Company, The Resilience Fund IV, L.P., The Resilience Fund IV-A, L.P., Aerospace Newco Holdings, Inc. and Ember Acquisition Sub, Inc.; (iii) recovery of Resilience’s costs and expenses; and (iv) pre- and post-judgment interest.
In April 2021, we filed with the Delaware Chancery Court our answer to the Resilience complaint and counterclaims against Resilience, in which we are seeking, among other items, (i) dismissal of the Resilience complaint and/or granting of judgment in favor of EMCORE with respect to the Resilience complaint, (ii) entering final judgment against Resilience awarding damages to us for Resilience’s fraud and breaches of the SDI Purchase Agreement in an amount to be proven at trial and not less than $1,565,000, (iii) a judicial determination of the respective rights and duties of us and Resilience under the SDI Purchase Agreement, (iv) an award to us of costs and expenses and (v) pre- and post-judgment interest. We believe that the claims made by Resilience in its complaint are without merit and we intend to vigorously defend ourselves against them.

NOTE 12. Equity

Equity Plans

We provide long-term incentives to eligible officers, directors, and employees in the form of equity-based awards. We maintain three equity incentive compensation plans, collectively described as our “Equity Plans”:

the 2010 Equity Incentive Plan,
the 2012 Equity Incentive Plan, and
the 2019 Equity Incentive Plan.

We issue new shares of common stock to satisfy awards issued under our Equity Plans. In March 2021, our shareholders approved the Amended and Restated EMCORE Corporation 2019 Equity Incentive Plan, which was adopted by the Company’s Board of Directors in December 2020 and increased the maximum number of shares of the Company’s common stock that may be issued or transferred pursuant to awards under the 2019 Equity Incentive Plan by an additional 2,138,000 shares.

Stock-Based Compensation

The effect of recording stock-based compensation expense was as follows:
By Award TypeFor the three months ended June 30,For the nine months ended June 30,
(in thousands)2021202020212020
Employee stock options$1 $4 $3 $13 
Restricted stock units and awards573 403 1,505 1,331 
Performance stock units and awards403 255 989 910 
Employee stock purchase plan85 52 258 145 
Outside director equity awards and fees in common stock114 65 255 226 
Total stock-based compensation expense$1,176 $779 $3,010 $2,625 
By Expense TypeFor the three months ended June 30,For the nine months ended June 30,
(in thousands)2021202020212020
Cost of revenue$220 $166 $564 $504 
Selling, general, and administrative752 488 1,830 1,564 
Research and development204 125 616 557 
Total stock-based compensation expense$1,176 $779 $3,010 $2,625 

401(k) Plan

We have a savings plan that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under this savings plan, participating employees may defer a portion of their pretax earnings, up to the Internal Revenue Service annual contribution limit. Since June 2015, all employer contributions are made in cash. During each of the three
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months ended June 30, 2021 and 2020, our matching contribution in cash was $0.2 million. During the nine months ended June 30, 2021 and 2020, our matching contribution in cash was $0.8 million and $0.7 million, respectively.

Income (Loss) Per Share

The following table sets forth the computation of basic and diluted net income (loss) per share:
For the three months ended June 30,For the nine months ended June 30,
(in thousands, except per share data)2021202020212020
Numerator:
Income (Loss) from continuing operations$13,615 $(1,287)$20,568 $(7,703)
Undistributed earnings allocated to common stock shareholders for basic and diluted net income (loss) per share13,615 (1,287)20,568 (7,703)
Denominator:
Denominator for basic net income (loss) per share - weighted average shares outstanding36,768 29,295 33,069 29,052 
Denominator for fully diluted net (income) loss per share - weighted average shares outstanding38,893 29,295 34,777 29,052 
Net income (loss) per basic share$0.37 $(0.04)$0.62 $(0.27)
Net income (loss) per fully diluted share$0.35 $(0.04)$0.59 $(0.27)
Weighted average antidilutive options, unvested restricted stock units and awards, unvested performance stock units and ESPP shares excluded from the computation2,138 1,410 1,947 1,316 

Basic earnings per share is computed by dividing net income (loss) for the period by the weighted-average number of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income (loss) for the period by the weighted average number of common stock outstanding during the period, plus the dilutive effect of outstanding restricted stock units and awards, performance stock units, stock options, and shares issuable under the employee stock purchase plan as applicable pursuant to the treasury stock method. The anti-dilutive stock options and shares of outstanding and unvested restricted stock were excluded from the computation of net loss per share for the three and nine months ended June 30, 2020 due to the Company incurring a net loss for such periods.

Employee Stock Purchase Plan

We maintain an Employee Stock Purchase Plan (“ESPP”) which provides employees an opportunity to purchase common stock through payroll deductions. The ESPP is a 6-month duration plan with new participation periods beginning on approximately February 25 and August 26 of each year. The purchase price is set at 85% of the average high and low market price of our common stock on either the first or last trading day of the participation period, whichever is lower, and annual contributions are limited to the lower of 10% of an employee’s compensation or $25,000.

Public Offering

On February 16, 2021, we closed our offering of 6,655,093 shares of our common stock, which included the full exercise of the underwriters’ option to purchase 868,056 additional shares of common stock, at a price to the public of $5.40 per share, resulting in net proceeds to us from the offering, after deducting the underwriting discounts and commissions and other offering expenses, of approximately $33.1 million. The shares were sold by us pursuant to an underwriting agreement with Cowen and Company, LLC, dated as of February 10, 2021.

Future Issuances

As of June 30, 2021, we had common stock reserved for the following future issuances:
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Number of Common Stock Shares Available for Future Issuances
Exercise of outstanding stock options19,869 
Unvested restricted stock units and awards1,851,187 
Unvested performance stock units and awards (at 200% maximum payout)
1,934,000 
Purchases under the ESPP186,197 
Issuance of stock-based awards under the Equity Plans1,774,341 
Purchases under the officer and director share purchase plan88,741 
Total reserved5,854,335 

NOTE 13. Segment and Revenue Information

Reportable Segments

Reported below are the Company’s segments for which separate financial information is available and upon which operating results are evaluated by the chief operating decision maker to assess performance and to allocate resources. The Company’s Chief Executive Officer is the chief operating decision maker and he assesses the performance of the operating segments and allocates resources based on segment profits. The Company has determined that it has two reportable segments: (a) Aerospace and Defense and (b) Broadband:

The Aerospace and Defense segment is comprised of two product lines: (i) Navigation and Inertial Sensing; and (ii) Defense Optoelectronics.
The Broadband segment is comprised of three product lines: (i) CATV Lasers and Transmitters; (ii) Chip Devices; and (iii) Other.

Information on reportable segments utilized by our chief operating decision maker is as follows:
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(in thousands)For the three months ended June 30,For the nine months ended June 30,
2021202020212020
Revenue:
Aerospace and Defense$12,327 $14,025 $39,097 $40,742 
Broadband30,331 13,241 75,393 35,856 
Total revenue$42,658 $27,266 $114,490 $76,598 
Segment Profit:
Aerospace and Defense gross profit$3,872 $4,877 $11,747 $12,209 
Aerospace & Defense R&D expense3,598 3,925 10,441 11,867 
Aerospace and Defense segment profit$274 $952 $1,306 $342 
Broadband gross profit$13,353 $4,341 $32,684 $10,910 
Broadband R&D expense902 882 2,126 2,166 
Broadband segment profit$12,451 $3,459 $30,558 $8,744 
Total consolidated segment profit$12,725 $4,411 $31,864 $9,086 
Unallocated (income) expense:
Selling, general and administrative6,081 5,936 17,941 18,962 
Loss (gain) on sale of assets250 (312)439 (2,229)
Gain on extinguishment of debt(6,561) (6,561) 
Interest (income) expense, net(579)40 (481)54 
Foreign exchange (gain) loss(87)20 (256)29 
Total unallocated (income) expense(896)5,684 11,082 16,816 
Income (loss) before income tax expense (benefit)$13,621 $(1,273)$20,782 $(7,730)

We do not allocate sales and marketing, general and administrative expenses, or interest expense and interest income to our segments because management does not include the information in its measurement of the performance of the operating segments. Also, a measure of segment assets and liabilities has not been provided to the Company's chief operating decision maker and therefore is not shown above.

Geographical Information

Revenue

The following table sets forth revenue by geographic area based on our customers’ billing address:
For the three months ended June 30,For the nine months ended June 30,
(in thousands)2021202020212020
United States and Canada$37,705 $23,209 $100,157 $63,291 
Asia2,305 2,041 9,475 5,999 
Europe1,603 1,075 2,817 4,480 
Other1,045 941 2,041 2,828 
Total revenue$42,658 $27,266 $114,490 $76,598 

Long-lived Assets

Long-lived assets consist of land, building and property, plant, and equipment. As of June 30, 2021 and September 30, 2020, 96% and 97%, respectively, of our long-lived assets were located in the United States. The remaining long-lived assets are primarily located in China.

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Disaggregated Revenue

Revenue is classified based on the product line of business:
For the three months ended June 30,For the nine months ended June 30,
(in thousands)2021% of
Revenue
2020% of
Revenue
2021% of
Revenue
2020% of
Revenue
Navigation and Inertial Sensing$9,280 22 %$9,861 36 %$27,475 24 %$28,970 38 %
Defense Optoelectronics3,047 7 4,164 16 11,622 10 11,772 15 
CATV Lasers and Transmitters27,364 64 10,905 40 65,799 57 29,070 38 
Chip Devices819 2 1,443 5 2,403 2 4,033 5 
Other2,148 5 893 3 7,191 6 2,753 4 
Total revenue$42,658 100 %$27,266 100 %$114,490 100 %$76,598 100 %

Revenue by Customers

Significant customers are defined as customers representing greater than 10% of our consolidated revenue. Revenue from 2 and 3 of our significant customers represented an aggregate of 62% and 58% of our consolidated revenue for the three months ended June 30, 2021 and 2020, respectively. The percentage from significant customers increased driven by higher Broadband revenue.

Revenue from three of our significant customers represented an aggregate of 70% and 55% of our consolidated revenue for the nine months ended June 30, 2021 and 2020, respectively. The percentage from significant customers increased driven by higher Broadband revenue.

Significant portions of the Company’s sales are concentrated among a limited number of customers. The duration, severity, and future impact of the COVID-19 pandemic are highly uncertain and could result in significant disruptions to the business operations of the Company’s customers. If one or more of these significant customers significantly decreases their orders for the Company’s products, or if we are unable to deliver finished products to the customer in connection with such orders, the Company’s business could be materially and adversely affected.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included in Financial Statements under Item 1 within this Quarterly Report. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. See Cautionary Statement Regarding Forward-Looking Statements preceding Item 1 of this Quarterly Report.

Business Overview

EMCORE Corporation (referred to herein, together with its subsidiaries, as the “Company,” “we,” “our,” or “EMCORE”) was established in 1984 as a New Jersey corporation. The Company became publicly traded in 1997 and is listed on The Nasdaq Stock Market under the ticker symbol EMKR. EMCORE is a leading provider of sensors for navigation in the Aerospace and Defense market as well as a manufacturer of lasers and optical subsystems for use in the Cable TV (“CATV”) industry.

EMCORE pioneered the linear fiber optic transmission technology that enabled the world’s first delivery of CATV directly on fiber, and today is a leading provider of advanced Mixed-Signal Optics products serving the broadband communications and Aerospace and Defense markets. The Mixed-Signal Optics technology at the heart of our broadband communications products is shared with our fiber optic gyros and inertial sensors to provide the aerospace and defense markets with state-of-the-art navigations systems technology. With the acquisition of Systron Donner Inertial, Inc. (“SDI”), a navigation systems provider with a scalable, chip-based platform for higher volume gyro applications utilizing Quartz MEMS technology, in June 2019, EMCORE further expanded its portfolio of gyros and inertial sensors with SDI’s quartz MEMS gyro and accelerometer technology.

EMCORE has fully vertically-integrated manufacturing capability through our indium phosphide compound semiconductor wafer fabrication facility at our headquarters in Alhambra, CA, and through our quartz processing and sensor manufacturing facility in Concord, CA. These facilities support EMCORE’s vertically-integrated manufacturing strategy for quartz and fiber optic gyro products, for navigation systems, and for our chip, laser, transmitter, and receiver products for broadband applications.

We have two reporting segments: (a) Aerospace and Defense and (b) Broadband. Aerospace and Defense is comprised of two product lines: (i) Navigation and Inertial Sensing; and (ii) Defense Optoelectronics. The Broadband segment is comprised of three product lines: (i) CATV Lasers and Transmitters; (ii) Chip Devices; and (iii) Other.

Recent Developments

COVID-19

We are subject to ongoing risks and uncertainties as a result of the COVID-19 pandemic. The full extent of the impact of COVID-19 on our operational and financial performance is highly uncertain, out of our control, and cannot be predicted. Each region we and our supply chain partners operate in has been affected by COVID-19 at varying times and magnitudes, often creating unforeseen challenges associated with logistics, raw material supply, and labor shortages. Many of our suppliers have at times temporarily ceased or limited operations as a result of COVID-19 and failed to deliver parts or components to us. For example, in the three months ended June 30, 2021, COVID-19 driven component shortages required us to spend significant time sourcing critical components from alternative sources and, in some cases, forced us to design in alternative parts and qualify them with customers on short schedules. In addition, we continue to closely monitor the level of COVID-19 transmission in Thailand, which has negatively affected and may continue to affect production levels of our CATV module and transmitter products by our contract manufacturer located there.

In addition, restrictions related to the COVID-19 pandemic have negatively affected the timing of the sale and transfer of certain CATV module and transmitter manufacturing equipment to the Buyers (defined below), as described in more detail below under “Hytera Transactions”. Travel into Thailand by our manufacturing engineers to support the transfer remains difficult. While we are taking actions within our supply chain and manufacturing operations to mitigate the effects of these delays, the timing and completion of these transfers may be further disrupted as a result of COVID-19, which could delay our recognition of the anticipated benefits of transferring this equipment and could disrupt our manufacturing activities for these products.

Our customer orders to date have generally remained stable with our pre-COVID-19 outlook, except with respect to customer orders related to the CATV Lasers and Transmitters product line, which have increased. However, qualification testing for
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certain of our products has continued to be delayed due to customer engineering shortages and limitations on their ability to access their facilities, and development timelines for certain programs continue to be extended. We continue to analyze on an ongoing basis how COVID-19 related actions could affect our product development efforts, future customer demand, timing of orders, recognized revenues, and cash flows.

Equity Offering

On February 16, 2021, we closed our offering of 6,655,093 shares of our common stock, which included the full exercise of the underwriters’ option to purchase 868,056 additional shares of common stock, at a price to the public of $5.40 per share, resulting in net proceeds to us from the offering, after deducting the underwriting discounts and commissions and other offering expenses, of approximately $33.1 million. The shares were sold by us pursuant to an underwriting agreement with Cowen and Company, LLC, dated as of February 10, 2021.

Hytera Transactions

As part of the effort to streamline operations and move to a variable cost model in our CATV Lasers and Transmitters product line, on October 25, 2019, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Hytera Communications (Hong Kong) Company Limited, a limited liability company incorporated in Hong Kong (“Hytera HK”), and Shenzhen Hytera Communications Co., Ltd., a corporation formed under the laws of the P.R.C. (“Shenzhen Hytera”, and together with Hytera HK, the “Buyers”), pursuant to which the Buyers agreed to purchase from EMCORE certain CATV module and transmitter manufacturing equipment (the “Equipment”) owned by EMCORE and currently located at the manufacturing facility of EMCORE’s wholly-owned subsidiary, EMCORE Optoelectronics (Beijing) Co, Ltd., a corporation formed under the laws of the P.R.C., for an aggregate purchase price of $5.5 million.

The Equipment is in the process of being transferred to the Buyers in multiple closings, some of which have been delayed due to travel restrictions and the customer product qualification process during the COVID-19 pandemic, the last of which is now expected to occur during the quarter ending March 31, 2022. Concurrently, with our entry into the Asset Purchase Agreement, we entered into a Contract Manufacturing Agreement (the “Manufacturing Agreement”) on October 25, 2019, pursuant to which the Buyers agreed to manufacture certain CATV module and transmitter products for us from a manufacturing facility located in Thailand for an initial five year term at product prices agreed to between the parties. The manufacture, purchase and sale of certain CATV module and transmitter products from the Thailand manufacturing facility pursuant to the Manufacturing Agreement has commenced and is ongoing.

Sale/Leaseback Transaction

SDI entered into a Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate (Non-Residential) (the “Concord Purchase Agreement”) dated as of December 31, 2019 with Parkview Management Group, Inc., pursuant to which the parties agreed to consummate a sale and leaseback transaction (the “Sale and Leaseback Transaction”). Under the terms of the Concord Purchase Agreement, SDI sold the property located in Concord, California (the “Concord Real Property”) to Eagle Rock Holdings, LP (“Buyer”), an affiliate of Parkview Management Group, Inc. on February 10, 2020 for a total purchase price of $13.2 million. SDI received net proceeds of $12.8 million after transaction commissions and expenses incurred in connection with the sale. At the consummation of the Sale and Leaseback Transaction, SDI entered into a Single-Tenant Triple Net Lease (the “Lease Agreement”) with Buyer, pursuant to which SDI leased back from Buyer the Concord Real Property for a term commencing on the consummation of the Sale and Leaseback Transaction and ending fifteen (15) years after the consummation of the Sale and Leaseback Transaction, unless earlier terminated or extended in accordance with the terms of the Lease Agreement. Under the Lease Agreement, SDI’s financial obligations will include a base monthly rent of $0.75 per square foot, or approximately $77,500 per month, which rent will increase on an annual basis at three percent (3%) over the life of the lease. In connection with the execution of the Lease Agreement, EMCORE executed a Lease Guaranty (the “Guaranty”) with Buyer under which EMCORE guaranteed payment of the monthly rent, any additional rent, interest, and any charges to be paid by SDI under the Lease Agreement.

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Result of Operations

The following table sets forth our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) as a percentage of revenue:
For the three months ended June 30,For the nine months ended June 30,
2021202020212020
Revenue100.0 %100.0 %100.0 %100.0 %
Cost of revenue59.6 66.2 61.2 69.8 
Gross profit40.4 33.8 38.8 30.2 
Operating expense:
Selling, general, and administrative14.3 21.8 15.7 24.8 
Research and development10.5 17.6 11.0 18.3 
Loss (gain) on sale of assets0.6 (1.1)0.4 (2.9)
Total operating expense25.4 38.3 27.0 40.2 
Operating income (loss)15.0 (4.5)11.8 (10.0)
Other income (expense) :
Gain on extinguishment of debt15.4 — 5.7 — 
Interest income (expense), net1.4 (0.1)0.4 (0.1)
Foreign exchange gain (loss)0.2 (0.1)0.2 — 
Total other income (expense) 16.9 (0.2)6.4 (0.1)
Income (loss) before income tax expense31.9 (4.7)18.2 (10.1)
Income tax expense— — (0.2)— 
Net income (loss)31.9 %(4.7)%18.0 %(10.1)%
Foreign exchange translation adjustment— — — — 
Comprehensive income (loss)31.9 %(4.7)%17.9 %(10.1)%

Comparison of Financial Results
For the three months ended June 30,
(in thousands, except percentages)20212020Change
Revenue$42,658 $27,266 $15,392 56.5 %
Cost of revenue25,433 18,048 7,385 40.9 
Gross profit17,225 9,218 8,007 86.9 
Operating expense:
Selling, general, and administrative6,081 5,936 145 2.4 
Research and development4,500 4,807 (307)(6.4)