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30 April 2007


Emcore’s dip in fiber-optic revenues compensated by growth in CATV and PVs; wins JPL Mars rover contract

Emcore Corp of Albuquerque, NM, USA, which manufactures components, modules and subsystems for the broadband, fiber-optic, and solar power markets, has reported preliminary unaudited financial results for its fiscal second-quarter 2007 (to end-March) along with results for its fiscal first-quarter 2007 (to end-December). The latter were delayed due to Emcore’s voluntary review of its past stock option grant procedures.

Fiscal Q1/2007 revenue was $38.5m (slightly higher than guidance), up 8% on $35.7m from continuing operations a year previously and up 9% from $35.4m the prior quarter.  Fiber Optics revenues were $25.3m, up from $25.0m a year previously but down 10% from $28.0m the prior quarter due to customer inventory management issues (which continued into the second quarter). However, demand for CATV products increased significantly (a trend expected to continue throughout fiscal 2007).  Photovoltaics revenues were $13.2m (up 23% from $10.7m a year ago, and up 79% from $7.3m the prior quarter, following the receipt of export licenses that had delayed shipment previously).  

Total revenue for the fiscal second-quarter 2007 (to end March) was about $40m (up 10% year-over-year and 3% sequentially).

For fiscal Q1/2007, gross profit was $6.1m, up from $4.3m the prior quarter. Fiber Optics gross margins were 21%, down from 23% a year previously but up from 14% the prior quarter (mainly due to increased sales of higher-margin CATV components and systems). Photovoltaics gross margin was relatively unchanged at 7%, lower than expected due to the push-out of higher-margin contracts into next quarter and lower production yields due to variability encountered with the quality of certain raw materials.  However, photovoltaics gross margin for Q2 is expected to increase to about 20% due to an improved product mix.  

A significant portion of Emcore’s 70% year-on-year increase in operating expenses (to $18.7m) was due to costs incurred via prior-year acquisitions (a $2.2m non-cash impairment charge for the write-down of intangible assets of Corona Optical Systems), the review of past stock option grants ($1.9m), and the new terrestrial solar power division (about $2m). Excluding these charges, net loss has been cut from an adjusted net loss of $9.7m in the prior quarter to just $6.5m. However, R&D expenses are expected to increase in Q2 as Emcore completes the second generation of its solar power concentrator system and prepares to transfer system development to production in the September quarter. 

In the December quarter, cash reserves fell $36.7m to about $88m, partly due to November’s $13.5m investment in a 27% stake in WorldWater and Power Corp (a solar energy systems company offering both distributed energy systems as well as grid-tied solar systems). 

“The sale of our interest in GELcore and the sale of the Electronics Materials and Device division [both last August] have provided us with the capital to invest in our terrestrial photovoltaic strategy and expand our fiber-optics business,” says president and CEO Reuben F. Richards Jr.

“Our strategic investment in WorldWater and Power and expansion into China are just two examples of these initiatives,” he adds. “We have obtained a significant number of new satellite and terrestrial orders in our Photovoltaic division that we believe will help improve operational performance in fiscal 2007.” Under a strategic alliance and supply agreement, Emcore is the exclusive supplier of multi-junction solar cells, assemblies and concentrator subsystems to WorldWater and Power, with a contract valued at $100m over the next three years.  In April, Emcore said that it is committing to two more investments in WorldWater totaling $7m. 

Emcore expects a much stronger second half also due to increased strength in CATV and broadband product lines. In mid-April, Emcore purchased privately held Opticomm Corp of San Diego, CA, including its fiber-optic video, audio and data networking business, technologies, and intellectual property. Management expects the transaction to provide about $7m of revenue in 2007.

* Emcore’s review of its past stock option grant procedures by a special committee concluded that previously filed financial statements need to be restated to reflect additional non-cash stock-based compensation expense and related tax expense. This requires substantial work by independent public accountants and senior management that not only involves restating prior year audited financial statements but also impacts the preparation of audited financial statements for fiscal 2006 (to end-September). 

Emcore has hence been unable to file its annual report on Form 10-K for fiscal 2006 (to end-September) as well as its report on Form 10-Q for fiscal Q1/2007 (to end-December) with the Securities and Exchange Commission within regulatory filing deadlines. Richards says that Emcore is preparing restated financial statements and will file the forms “as soon as reasonably practicable”. The preliminary unaudited Q1/2007 results above will hence need to be restated in future. 

* JPL awards Emcore Mars Cruise Stage solar panel contract

Emcore’s Photovoltaics Division has been awarded a $2m contract by NASA’s Jet Propulsion Laboratory (JPL) in Pasadena, CA, USA for the design, manufacturing, testing and delivery of fully integrated solar panels for the Mars Cruise Stage spacecraft, which is designed to carry the Mars Science Laboratory (MSL) rover and communicate with the entry vehicle that will carry it to the planet’s surface. The launch is planned for fall 2009.

Scheduled for delivery in mid-2008, the solar panels will provide more than 1kW end-of-life (EOL) power while operating at a distance of 1.6 astronomical units (AU) from the sun. The panels will be powered by Emcore’s latest-generation multi-junction solar cells, which have a beginning-of-life (BOL) conversion efficiency of 28.5%.

Emcore’s Photovoltaics Division has recently secured more than a dozen new production programs for fully integrated space solar panels, says Richards. At the end of October, it opened its new $2.5m, 2000m2 manufacturing facility expansion, designed for both space and terrestrial solar panel production.

See related items:

Emcore acquires Opticomm for $4m

Emcore gets extension from Nasdaq

Emcore's increased digital fiber-optics product sales offset delayed PV revenues

Emcore buys $18m stake in terrestrial solar-power firm WorldWater & Power and signs $100m supply contract

GE buys Emcore's stake in GELcore for $100m; partners with Nichia

IQE acquiring Emcore's epi division for RF