EMCORE (US:EMKR)2019-05-08 16:03Financial Data and Key Metrics Changes - Consolidated revenue for Q2 2019 was $21.7 million, with broadband revenue representing 65% of total revenue, down from 72% in the prior quarter due to seasonal softness in the Cable TV market [7][8] - GAAP gross profit was approximately $5.8 million, or 26.7% of revenue, up from 24.2% in the prior quarter, driven by improvements in manufacturing cost structure [9] - Non-GAAP operating loss from continuing operations was $2.2 million, a $0.4 million increase compared to the prior quarter [10] - Cash and cash equivalents at the end of Q2 were approximately $50.6 million, a decrease of $6.7 million quarter-over-quarter [11] Business Line Data and Key Metrics Changes - Chips represented 16% of revenue, down from 18% in the prior quarter, while navigation grew to 19% of revenue from 10% in the prior quarter [8] - Satcom products increased 33% quarter-over-quarter and 227% year-over-year, with a strong backlog into Q3 [17] - Navigation revenue increased 66% quarter-over-quarter and 100% year-over-year, positioning the product line to double its revenue from FY '18 to FY '19 [21] Market Data and Key Metrics Changes - CATV accounted for 49% of revenue for the quarter, with expectations of an uptick in orders as infrastructure CapEx spending by major MSOs is anticipated to increase [8][28] - Demand in the chip market remained strong, growing 20% year-over-year, driven by legacy 2.5 GPON products and non-GPON-related products [19] Company Strategy and Development Direction - The company is focused on revenue diversification and operating performance initiatives, particularly in non-cable TV products [13] - L-EML technology development is progressing, with expectations for next-generation products in the coming months [16] - The company is making heavy investments in engineering talent and manufacturing to support growth in navigation revenue [22] Management's Comments on Operating Environment and Future Outlook - Management indicated that the only barrier to returning to profitability is cable TV product volume, which is cyclical [27] - Expectations for Q3 revenues are in the range of $21 million to $23 million, reflecting a return to normal for CATV orders and steady performance in chip and navigation products [29] - The company anticipates further improvements in gross margins as new chip products are released and manufacturing processes yield better results [25] Other Important Information - The company expects to see a significant decline in litigation expenses in Q3 as it enters the post-hearing phase for a majority of claims [10] - Capital expenditures in the quarter were $3.6 million, with ongoing investments in fab modernization [11] Q&A Session Summary Question: Can you quantify the number of customers in the navigation pipeline? - The navigation pipeline is growing, with a significant uptick in sampling, but the focus is on ramping the manufacturing process [31] Question: What is the confidence in growing CATV revenue in fiscal '19? - There is cautious optimism for an increase in orders, but visibility for the current quarter is limited [32] Question: What is the new breakeven revenue level? - The breakeven level is estimated to require an additional $4 million to $5 million on top of current revenues, depending on product mix [33] Question: Is there any cannibalization as customers transition to L-EML products? - There is no cannibalization; however, an increase in L-EML sales may decrease DFB sales at the link level [35] Question: What is the expected trend for capital expenditures? - Capital expenditures are expected to remain in line, with potential increases next year as new equipment is needed [37] Question: What is the outlook for Satcom revenue? - Satcom revenue is expected to remain stable, driven by ongoing projects like the FAA control tower upgrade [38] Question: What are the drivers of growth in the chip business? - Growth is driven by demand in PON, telco non-PON, and data center segments, with a shift away from lower-margin GPON products [41]