EMCORE (EMKR) - 2024 Q2 - Quarterly Results

Fiscal 2024 Second Quarter Results Overview This section provides an overview of EMCORE's financial performance for the second quarter of fiscal year 2024, including key financials, management commentary, business outlook, and CEO transition Financial Performance Summary (2Q24 vs 1Q24) EMCORE's 2Q24 revenue and gross margin declined, leading to a significant increase in net loss from continuing operations Fiscal 2024 Second Quarter Key Financials (2Q24 vs 1Q24) | Metric | Mar 31, 2024 (2Q24) | Dec 31, 2023 (1Q24) | Change | | :--------------------------------------- | :------------------ | :------------------ | :------- | | Revenue | $19.6 million | $24.1 million | -$4.5 million | | Gross margin | 17% | 25% | -8% | | Operating expenses | $10.9 million | $10.4 million | +$0.5 million | | Net loss on continuing operations | ($7.8 million) | ($4.4 million) | -$3.4 million | | Net loss on continuing operations per share, basic and diluted | ($0.09) | ($0.05) | -$0.04 | | Non-GAAP gross margin (a) | 15% | 29% | -14% | | Non-GAAP operating expenses (a) | $9.8 million | $9.5 million | +$0.3 million | | Non-GAAP net loss on continuing operations (a) | ($7.0 million) | ($2.6 million) | -$4.4 million | | Non-GAAP net loss on continuing operations per share, basic and diluted (a) | ($0.08) | ($0.03) | -$0.05 | | Adjusted EBITDA | ($5.8 million) | ($1.7 million) | -$4.1 million | | Ending cash and cash equivalents | $12.0 million | $21.2 million | -$9.2 million | | Line of credit and loan payable | $8.3 million | $8.6 million | -$0.3 million | Management Commentary and Strategic Initiatives Management cited shipment delays and Budd Lake revenue decline for poor results, initiating asset sales, debt restructuring, and cost cuts - Lower-than-expected revenue in 2Q24 was primarily due to product shipment delays and declining revenue from the Budd Lake site, negatively impacting profit margins[3] - To address cash and liquidity, EMCORE sold its Chips business and Alhambra InP wafer fab assets for $2.92 million[3] - The company restructured its debt following Hale Capital's acquisition of its credit facility and established a Board of Director Restructuring Committee to direct cost reductions aimed at achieving at least break-even adjusted operating cash flow quarterly, starting September 2024[3] Business Outlook (3Q24) EMCORE forecasts fiscal 3Q24 revenue to be between $19 million and $21 million - Expected revenue for fiscal 3Q24 (ending June 30, 2024) is in the range of $19 million to $21 million[4] CEO Transition CEO Jeff Rittichier resigned, prompting a search for a new CEO and reaffirming the Aerospace & Defense strategy - CEO Jeff Rittichier has decided to leave the company and resign from the Board, effective immediately[5] - The Board has begun a search for a new CEO and will establish an Office of the CEO in the near term[5] - The Board is committed to taking necessary actions to position the company for success and execute on its pure-play Aerospace & Defense strategy[5] Company Overview This section provides an overview of EMCORE Corporation, including its business focus and details regarding the conference call for financial results About EMCORE Corporation EMCORE is a leading inertial navigation provider for aerospace and defense, utilizing advanced PIC, MEMS, and Lithium Niobate technologies - EMCORE Corporation is a leading provider of inertial navigation products for the aerospace and defense markets[8] - The company leverages Photonic Integrated Chip (PIC), Quartz MEMS, and Lithium Niobate chip-level technology for its component and system-level products[8] - EMCORE maintains vertically-integrated manufacturing facilities in Alhambra, CA, Budd Lake, NJ, Concord, CA, and Tinley Park, IL, all with ISO 9001 certification, and AS9100 aerospace quality certification at key sites[8] Conference Call Details EMCORE held a conference call on May 8, 2024, to discuss financial results, with webcast and replay options - A conference call was hosted on Wednesday, May 8, 2024, at 5:00 p.m. ET to discuss financial results[2][7] - Participants could join via toll-free number (800-715-9871) or international dial-in (+1 646-307-1963) using passcode 4386861[7] - A live webcast and replay were available on the company's investor website at https://investor.emcore.com[7](index=7&type=chunk) Condensed Consolidated Financial Statements This section presents EMCORE's condensed consolidated balance sheets and statements of operations for the specified periods Condensed Consolidated Balance Sheets Total assets and shareholders' equity decreased significantly by March 31, 2024, primarily due to reduced cash and assets held for sale Selected Balance Sheet Items (March 31, 2024 vs. September 30, 2023) | Item | March 31, 2024 (in thousands) | September 30, 2023 (in thousands) | Change (in thousands) | | :--------------------------------------- | :------------------------------ | :-------------------------------- | :-------------------- | | Cash and cash equivalents | $11,495 | $26,211 | -$14,716 | | Total current assets | $73,782 | $92,386 | -$18,604 | | Total assets | $120,997 | $143,913 | -$22,916 | | Total current liabilities | $22,543 | $28,791 | -$6,248 | | Total liabilities | $53,662 | $63,623 | -$9,961 | | Total shareholders' equity | $67,335 | $80,290 | -$12,955 | Condensed Consolidated Statements of Operations EMCORE reported decreased revenue and increased net loss from continuing operations for the three and six months ended March 31, 2024 Selected Statements of Operations Items (Three Months Ended March 31) | Item | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | | :--------------------------------------- | :------------------ | :------------------ | :-------------------- | | Revenue | $19,634 | $24,250 | -$4,616 | | Cost of revenue | $16,387 | $19,389 | -$3,002 | | Gross profit | $3,247 | $4,861 | -$1,614 | | Total operating expense | $10,870 | $13,995 | -$3,125 | | Operating loss | ($7,623) | ($9,134) | +$1,511 | | Net loss from continuing operations | ($7,775) | ($9,366) | +$1,591 | | Net loss per share, basic and diluted | ($0.10) | ($0.27) | +$0.17 | Selected Statements of Operations Items (Six Months Ended March 31) | Item | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | | :--------------------------------------- | :------------------ | :------------------ | :-------------------- | | Revenue | $43,757 | $44,229 | -$472 | | Gross profit | $9,335 | $9,240 | +$95 | | Total operating expense | $21,268 | $26,344 | -$5,076 | | Operating loss | ($11,933) | ($17,104) | +$5,171 | | Net loss from continuing operations | ($12,138) | ($17,538) | +$5,400 | | Net loss per share, basic and diluted | ($0.16) | ($0.58) | +$0.42 | Non-GAAP Financial Measures & Reconciliations This section details EMCORE's use of non-GAAP financial measures and provides reconciliations to comparable GAAP figures Use of Non-GAAP Financial Measures EMCORE uses non-GAAP measures to reflect core performance and aid comparisons, providing reconciliations to GAAP - EMCORE discloses supplemental non-GAAP earnings measures, including gross profit, gross margin, operating expenses, net loss, and adjusted EBITDA, to reflect core ongoing operating performance and facilitate comparisons across reporting periods[9][10] - Management uses these non-GAAP measures for evaluating financial results, planning, and forecasting, believing they are useful to investors in assessing operating performance[10] - Non-GAAP measures have limitations, may not be comparable to other companies' measures, and are presented as a supplement to GAAP, with reconciliations provided[10][12] GAAP to Non-GAAP Reconciliations Detailed reconciliations from GAAP to non-GAAP figures are provided for gross profit, operating expenses, net loss, and Adjusted EBITDA GAAP to Non-GAAP Gross Profit Reconciliation (Three Months Ended) | Item | Mar 31, 2024 (2Q24) (in thousands) | Dec 31, 2023 (1Q24) (in thousands) | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Gross profit (GAAP) | $3,247 | $6,088 | | Stock-based compensation expense | (341) | 329 | | Intangible asset amortization | 494 | 494 | | Non-GAAP gross profit | $2,862 | $6,972 | | Non-GAAP gross margin | 15% | 29% | GAAP to Non-GAAP Operating Expense Reconciliation (Three Months Ended) | Item | Mar 31, 2024 (2Q24) (in thousands) | Dec 31, 2023 (1Q24) (in thousands) | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Operating expense (GAAP) | $10,870 | $10,398 | | Stock-based compensation expense | (754) | (519) | | Severance expense | (1,019) | (211) | | Non-GAAP operating expense | $9,785 | $9,543 | GAAP to Non-GAAP Net Loss from Continuing Operations and Adjusted EBITDA Reconciliation (Three Months Ended) | Item | Mar 31, 2024 (2Q24) (in thousands) | Dec 31, 2023 (1Q24) (in thousands) | | :------------------------------------------------ | :--------------------------------- | :--------------------------------- | | Net loss from continuing operations (GAAP) | ($7,775) | ($4,363) | | Stock-based compensation expense | 413 | 848 | | Intangible asset amortization | 494 | 494 | | Severance expense | 1,019 | 211 | | Non-GAAP net loss from continuing operations | ($6,990) | ($2,580) | | Adjusted EBITDA | ($5,769) | ($1,668) | | Adjusted EBITDA % | (29 %) | (7 %) | Forward-Looking Statements This section outlines the nature of forward-looking statements within the report and the inherent risks and uncertainties associated with them Forward-Looking Statements & Risks Forward-looking statements are subject to various known and unknown risks and uncertainties that could materially alter actual results - The report includes forward-looking statements concerning future events, financial trends, business outlook (including 3Q24 revenue), strategy, and goals of the restructuring committee[13] - These statements are based on current expectations and projections but are subject to business, economic, and other risks and uncertainties, both known and unknown, that may cause actual results to differ materially[14][15] - Key risks include ability to obtain capital, risks related to asset sales, compliance with debt agreements, restructuring costs, loss of personnel, market evolution, customer concentration, new product commercialization, supply chain issues, competition, litigation, and regulatory changes[15]