AUGUST 17, 2009 -- EMCORE Corp. (NASDAQ: EMKR) has announced unaudited financial results for its fiscal third quarter and nine-month periods ended June 30, 2009.
Quarterly Results:
Revenue: Revenue for the third quarter of fiscal 2009 was $38.5 million, a decrease of $4.8 million, or 11%, from $43.3 million reported in the immediately preceding quarter.
On a segment basis, third quarter revenue for the Photovoltaics segment was $16.1 million, an increase of $1.2 million, or 8%, from $14.9 million reported in the immediately preceding quarter with the increase due to greater demand for satellite solar power products. The Photovoltaics segment accounted for 42% of the company's consolidated third quarter revenue compared to 34% in the preceding second fiscal quarter.
Third quarter revenue for the Fiber Optics segment was $22.4 million, a decrease of $6.0 million, or 21%, from $28.4 million reported in the immediately preceding quarter with the decline in revenue concentrated primarily in the telecom and CATV product lines. The Fiber Optics segment accounted for 58% of the company's consolidated third quarter revenue compared to 66% in the preceding second fiscal quarter.
Gross Profit/(Loss): After excluding certain adjustments, as set forth in the attached non-GAAP tables, the third quarter consolidated non-GAAP gross profit was $5.9 million, a $4.5 million improvement from $1.4 million reported in the preceding quarter with the corresponding non-GAAP gross margin increasing to 15.3% from 3.3% in the preceding quarter. On a GAAP basis, the consolidated gross loss for the third quarter was $2.4 million, an improvement of $4.6 million from a $7.0 million gross loss reported in the preceding quarter. During the quarter, the company recorded approximately $6.4 million in non-cash losses on firm inventory purchase commitments and $1.9 million in non-cash inventory reserve adjustments in its Fiber Optics segment, both of which adversely impacted gross profit and margins.
On a segment basis, third quarter Photovoltaics non-GAAP gross margin was a record 33.9%, a significant increase from a 20.5% gross margin reported in the preceding quarter with the improvement due primarily to increased sales of higher margin satellite solar panels along with improved manufacturing yields on solar cells. The third quarter marks the second consecutive quarter of sequentially improved non-GAAP gross margins in the Photovoltaics segment. On a GAAP basis, the third quarter Photovoltaic gross margin mirrored the non-GAAP gross margin at 33.9% compared to a negative 24.7% gross margin in the preceding quarter.
Third quarter Fiber Optics non-GAAP gross margin was 1.8%, an increase from a negative 5.7% gross margin reported in the preceding quarter with the improvement due primarily to higher margins in the Company's broadband product lines. On a GAAP basis, third quarter Fiber Optics gross margin was negative 35.2%, a decrease from a negative 11.7% gross margin reported in the preceding quarter with the decline due primarily to non-cash losses recorded on firm inventory purchase commitments which will become excess and/or obsolete, non-cash inventory valuation write-downs and unabsorbed overhead expenses, the result of lower revenue levels.
Operating Expenses: Sales, general, and administrative expenses for the third quarter totaled $10.9 million, a decrease of $1.1 million, or 9%, from $12.0 million reported in the preceding quarter. Research and development expenses for the third quarter totaled $5.7 million, a decrease of $1.2 million, or 18%, from $6.9 million reported in the preceding quarter. As a result of the Company's on-going cost reduction initiatives, SG&A expenses declined sequentially in each of the last two fiscal quarters while R&D expenses declined in each of the last four fiscal quarters.
Impairment: During the three months ended June 30, 2009, the company performed an evaluation of its Fiber Optics assets for impairment as required by Statement of Financial Accounting Standard No. 144. As a result of the evaluation, it was determined that impairment existed, and a charge of $27.0 million was recorded to write down the long-lived assets to estimated fair value, which was determined based on a combination of guideline public company comparisons and discounted estimated future cash flows.
The current economic and financial market conditions had a significant negative effect on the company's assessment of the fair value of the Fiber Optics asset groups. The magnitude of the impairment charge resulted from the effects of recent declines in market values of comparable public companies' debt and equity securities and the combined effect of the current slowdown in product orders and lower product pricing exacerbated by currently high discount rates used in estimating fair values.
Operating and Net Loss: After excluding certain non-cash and other adjustments, as set forth in the attached non-GAAP tables, the third quarter consolidated non-GAAP operating loss was $7.2 million, a $7.4 million, or 51%, improvement from a $14.6 million operating loss reported in the preceding quarter. On a GAAP basis, the third quarter consolidated operating loss was $46.0 million, a $20.1 million increase from an operating loss of $25.9 million reported in the preceding quarter.
After excluding certain non-cash and other adjustments, as set forth in the attached non-GAAP tables, the third quarter consolidated non-GAAP net loss was $7.3 million, a $7.4 million, or 50%, improvement from a $14.7 million net loss reported in the preceding quarter. On a GAAP basis, the consolidated net loss for the third quarter was $45.4 million, a $21.6 million increase from a net loss of $23.7 million reported in the preceding quarter.
On a per share basis, the third quarter non-GAAP net loss per share was $0.09, an improvement of $0.10 per share from a $0.19 loss per share reported in the preceding quarter. On a GAAP basis, the third quarter net loss per share was $0.57, an increase of $0.27 per share from a $0.30 net loss per share reported in the preceding quarter.
Cash Flow: On a consolidated basis, the company generated positive cash flow from operations during the third quarter due to the combination of a lower cash operating loss and the continuation of improved working capital management.
Order Backlog: As of June 30, 2009, the company had a consolidated order backlog of approximately $49.6 million, an $18.9 million, or 62%, increase from a $30.7 million order backlog reported as of the end of the preceding quarter. On a segment basis, the quarter-end Photovoltaics order backlog totaled $36.2 million, a $16.4 million, or 83%, increase from $19.8 million reported as of the end of the preceding quarter. The quarter-end Fiber Optics order backlog totaled $13.4 million, a $2.5 million, or 23% increase from $10.9 million reported as of the end of the preceding quarter. 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 and Balance Sheet Highlights:
- As of June 30, 2009, cash, cash equivalents, and restricted cash totaled approximately $9.9 million and working capital totaled $45.3 million.
- During the third quarter, the Company generated positive cash flow from operations and positive free cash flow, net of capital expenditures.
- Over the last two quarters, the Company generated $15.9 million from the reduction in inventory levels and $15.4 million from the collection of accounts receivable while, at the same time, lowering its accounts payable obligations by $23.6 million.
- Over the last two quarters, the Company has reduced the amount of debt outstanding under its line of credit with Bank of America by $10.5 million, to $5.0 million at the end of the third quarter, and is in full compliance with its bank financial covenants.
In addition to continuing to focus on improving profitability and managing its working capital, the company continues to pursue and evaluate a number of capital raising alternatives including debt and/or equity financings, product joint-venture opportunities and the potential separation or divestiture of certain portions of the company's business. Subsequent to the end of the third quarter, the company filed a Form S-3 Registration Statement with the Securities and Exchange Commission that provides for up to $50 million in debt and/or equity securities.
Business Outlook:
For the fourth quarter of fiscal 2009, ending September 30, 2009, the company expects consolidated revenue to be in the range of $38 to $42 million and expects to generate positive cash flow from operations.
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