12 May 2010


Emcore losses slashed as revenue grows 14%

For its fiscal second-quarter 2010 (to end-March), Emcore Corp of Albuquerque, NM, USA, which makes components and subsystems for the broadband, fiber-optic, and solar power markets, has grown revenue sequentially for a third consecutive quarter, to $48.2m (exceeding guidance of $45-47m). This is up 14% on last quarter’s $42.4m and 11% on $43.3m a year ago.

Photovoltaics revenue was $18m (37% of overall revenue, down from 40% last quarter). This is up 21% on $14.9m a year ago and 7% on $16.8m last quarter (due mainly to space solar power products growing 8%).

Fiber Optics revenue was $30.2m (63% of overall revenue, up from 60% last quarter). This is up 6% on $28.4m a year ago and 18% on $25.6m last quarter (including digital fiber-optics product revenue up 25% and broadband product revenue up 14%), due mainly to higher demand for cable TV, parallel optics and telecom products.

Fiber Optics gross margin rose for a third consecutive quarter, to 23.6% (the highest in the last seven quarters). This is up from 16.7% last quarter and -11.7% a year ago, due mainly to higher margins in the broadband and digital product lines as well as lower excess and obsolescence inventory charges.

Photovoltaics gross margin was a record 46.6%, more than double the 22.1% last quarter and a big improvement on -24.7% a year ago. This was due mainly to increased sales of higher-margin space solar power products, improved manufacturing yields and efforts to manage operational costs, favorable adjustments of $0.8m related to the sale of inventory previously reserved for, and a larger-than-expected benefit from a precious metal reclamation process of about $0.4m.

Overall gross margin has improved for a fourth consecutive quarter, from -16.2% a year ago and 18.9% last quarter to 32.1% (the highest since fiscal fourth-quarter 2001).

Net loss has been slashed further, from $23.7m a year ago and $13.6m last quarter to just $1.7m, the firm’s best bottom-line performance in the last six years.

Photovoltaic generated positive operating cash flow for the fourth consecutive quarter, while Fiber Optics also generated positive cash flow (the segment's third consecutive quarter of sequential improvement in cash flow). Overall operating cash flow was $1.1m, despite increasing inventory levels associated with the increase in customer orders and future demand. Emcore has now generated positive operating cash flow in three of the last four quarters, aggregating $900,000 (compared with cash consumption of $43.5m in the prior four quarters) due to a combination of improved operating performance, a continued focus and improvement on working capital management, and lower spending on capital equipment.

Net working capital rose $5.9m to $37.9m (the first sequential rise in seven quarters). Over the last four quarters, Emcore has generated $7.6m in cash from working capital driven mainly by the monetization of $10.1m of inventories and the lowering of accounts receivable balances by $4.6m.

During the quarter, cash, cash equivalents, current restricted cash, and available-for sale securities rose by $2.5m to $19m. Nevertheless, Emcore continues to maintain a $14m credit facility with Bank of America and a $25m committed equity line of credit facility with the Commerce Court Small Cap Value Fund Ltd.

During the quarter, order backlog rose 11%, from $61.2m to $68m. In particular, Fiber Optics backlog was up 42% from $18.9m to $26.7m (due to broad-based increases across both customers and products). This outweighed Photovoltaics backlog falling slightly from $42.3m to $41.3m.

President & CEO Dr Hong Hou says that the quarter represents the firm’s best operating results in the last several years. “Our businesses are finally getting back on the right track... we expect a continued improvement in the current quarter,” he adds. For fiscal third-quarter 2010 (to end-June), Emcore expects revenue to rise 1.7-5.8% to $49-51m, with growth in both the Photovoltaics and Fiber Optics segments.

*On 3 February Emcore said that it had entered into an agreement to sell 60% of its Fiber Optics business to the Tangshan Caofeidian Investment Corp (a Chinese non-operating investment firm administered by Tangshan City’s Caofeidian Industry Zone in Hebei Province), creating the Hong Kong-registered joint venture Emcore Fiber Optics Ltd (EFO). Emcore says that it is in the process of securing government approvals and expects to consummate the transaction shortly after receiving such approvals.

See related items:

Emcore revenue recovers a further 5%, driven by space PVs and CATV

Emcore to sell 60% stake in Fiber Optics business for $27.8m

Emcore revenues rebound by 5%, driven by broadband fiber optics

Satellite deals boost Emcore amid $27m write-down

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