EMKR - Earnings call transcript Q4 2021

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Operator

Good day and welcome to the EMCORE Fourth Quarter 2021 Earnings Call. Today's conference is being recorded. At this time, I will turn the conference over to Mr. Tom Minichiello, please go ahead, sir.

Tom Minichiello

Thank you. everyone. morning, Good our XXXX to to EMCORE discuss And Quarter conference results. Fiscal Fourth 's welcome call The we website, emcore.com. news on posted release issued yesterday is afternoon our this highlights. Chief President, with On discussion Rittichier, will the business Officer, begin and our of Jeff call, Executive EMCORE's update our financial then by we'll results on questions. you will and conclude I taking

Section these plans, business herein Section or prospects, begin, both statements in forward-looking may performance these any the which statements. that and strategies, or in Report law unknown subject Form affecting or no and within forward-looking trends the sections We to in expectations applicable the different Such we changes business. remind and website, regulation. of SEC's cautions the XXA the operate. events the materially to Before XX-K. the of The or future and uncertainties, include expectations, the update changes XXE are as future these like we business Act at you statements and that uncertainties events statements our results, our and results entitled future other Company's projections forward-looking risks you our or obligation and actual on Act about to forward-looking statements any These include, to including except about meaning also in assumes of statements Exchange particular, activity, and may the in available industry associated to would be to in risks statements statements the and conform by to relate sec.gov, achievements filings of and Company's in business Securities known that the projections to of Management trends about by caution Company business, to Risk largely current and required financial Factors which performance information actual cause markets of on such provided levels Annual forward-looking statements business, forward-looking of to we the in located the based economic, are statements future and consider XXXX expressed on XXXX. with rely on or from included implied the not those are results,

are references addition, non-GAAP supplemental call In meaningful we comparable reconciliation facilitates measures, information provide well and Investors to ongoing be and non-GAAP turn performance of included made will reporting to and investors. over the now core call management both periods. news in will release. measures encouraged as measures as [Indiscernible] during to non-GAAP I to this comparisons believe the The the across financial measures, the these Jeff. explanation Company's most these operating GAAP reflect to measures which our

Jeff Rittichier

unusual strong logistic semiconductor shape additional in despite our and challenges that headwinds EMCORE leverage We high Semiconductor continued EMCORE's little everyone. chain for were million coming solid current quarter morning, to good inventories XX EBITDA the bit, And the reached during believe supply our supply the quarter perform pushouts affected quarter. Jonathan. and good chain, and you, a well to non-GAAP but emerged supply are margins a %. earnings largely demonstrate at gross in was the year, generating Thank chain in continued as availability was occurred. point $X.X fiscal million. for our fourth Semiconductor $X.X business. of $XX the just still challenges adequate material a operating adjusted million. in

rise levels may in have temporarily. delays materials, surprise ranging between. seen to epoxies purpose from we've and receipts everything in of special sheet components, to However, metal Inventory

this transfer as drop quarter. to of China, to transfer transmitter be builds from The shutdown Thailand. that inventories finish their in completed project expect the will we and However, we Thailand Beijing should

months, recently how Chinese shows the operations line after production regarding China power completely the managed New project. the move somewhat, transition Kaizen Fastrain the is almost working quarter. to sheet. into most restrictions of Beijing, will this, report while through will We've outages problems. Thailand laser current been well. entire our questions affected inventory for on Beyond the operations in we Year transfer expect Chinese March Bangkok that completing Thailand inventory technology assets schedule the as And cash we and to now we've Chinese sell Entry manufacturing transfer coming and fielded in foreign and reducing fixed to The We're power takeaway assets balance unaffected team remaining any into remaining problems over by Hytera production. workers normal that have that important a had steer returning have pleased manufacturing those to and to eased also COVID to this clear our recent in and have the

in performance our unit. business to Cable Turning continued the to TV individual drive Broadband strong areas,

development far, quarter. of growing start Broadband these chip and come and take total within X these mix to to opportunities. million counteract number of notoriously the new because agreements to business. of EMCORE Optoelectronics that millions expected QX TV, roughly declined growth utilization, close backlog expected enjoy we consistent in see shift first cautious the is with to place current the such up for are are together, cable for has Furthermore, couple development an the chip IMU we're expected seeds most Defense next nature. an represent business. we additional Broadband. in are to dollars cyclical supply of This is large and and The FOG, confident EMS new U.S. being that. about were business Company, in EMCORE difficult revenue are continue QMEMS FY of full by FOG thing of on during contribute cable others XXXX, chain the product and delays we fab previous in milestone they with place of products up. cyclical roughly towards our sensing and flat QX of although shipping be the the and beyond together of focus a make seeing the a in level put slightly contracts due which planted of area taken advantage can in along in XXXX. taken Aerospace margins total to provider expect a tens the in always to were we've We wireless, Defense to important continued important We're Navy. by the that firmly expected QMEMS of slightly. improvement were that dollars. to flat important several and continued they progress contracts With the These note the X quarter the with strong with drive customers funding affected the nature for will Chips, received will about so months TV's capacity

million will aerospace as per growth of revenue undergoing Our will from of for driving the a SDIXXX for underway application and few a be fully business international this incremental We also year, driver primary to and XXXX a several years, qualification expect year. SDCXXX excess EMCORE's serviceable be munitions. year. units $XX in is domestic defense programs next within market and guided with The testing X which XXXX new installed ranging tools volumes should the most negotiations next per quarters. to automated international with in precision used over on also with defense Multiple assembly they target annual make X,XXX X,XXX units our for units arrive discussed impact of are positive IMU, are margin a contractors

future Taken beginning momentum growth together, demonstrate and this for growing products, year. these results QMEMS navigation the our

a into in drive market into EMCORE weight the in missiles size, X improvements QMEMS Beyond better already size FOG create to all and unit power bias causes. best interceptor per level will inertial in significant our product crucial measurement with are performance the presented accuracy, be degree our than new the short-term technologies. used success. the and conference results These to test under where judged less-than-X QMEMS, performance cubic-inch opportunities and being that were Joint are ability performance demonstrating hour This conference in in designed in at will Navigation

Our first next units at the of market, which is production next FOG new now pod, level airborne traction gaining over remainder we expect this total value products estimated the low $XX year. a preproduction the The the the in for are in start also in program phase will million to years. deliver of X

The non-recurring prime Northrop contractors for at completely has in We more engineering expect The more approximately laboratories demonstrated be and EN-XXX U.S. bedded space. application everything locked one performance the the main as ruggedized modest IMU is newly Grumman size some competing stability LN-XXX. cost the XX-X engineering of to and is points contract its awarded XX down. doubling production EN-XXX improvement than same to by complete in bias the before noise changes being

short-term going. twice be our line, and specs, and navigation in meetings grid We long-term hour last of are Defense specifications end see these navy We we've power. its also for with main At of how the milestones that and The performance face-to-face meetings platform than IMU front important just that able working of to a to X.XX degree push get required EN-XXX things better weight EN-XXXX on to our stability grade is navigation very cost, first-hand to of INS hear the confidential high starting industry EN-XXXX size, the address for approximately are We're reopen. program. Honeywell applications met our product all the finally to bias that INF encouraged the will HGXXXX. has per month superior been price as the customers require an over achieved

growth expect Over announcements next important our the multiple more navigation make we business. of the to quarters, about

see in quarter, of and Aerospace Moving bit the a holidays. TV, from the little product for Cable lines overall increased on guidance expecting we're less to first revenue and largely Defense to because

range turn I over surprises caution supply $XX to this of Our notes currently revenue of remain tied the we back expect chain. be call to into the Tom. that, to all million to biggest Taking million. consideration, the will in With $XX in

Tom Minichiello

Thank you, Jeff.

to news Consolidated million the end the for increase X% continued the to the for The may we was Defense broadband guidance customer quarter compared QMEMS our to $X.X for quarter sequential product compared demand due revenue million FOG or primarily a driven As revenue revenue quarter. product transition. strong by increased million, $XX.X to performance ongoing gyro. $XX to changes the fourth $XX.X segment release an production yields Aerospace segment single $XX.X you A&D a shift and to quarter. last X% was compared and million was Optoelectronics, Broadband an range. have Revenue was an very results was primarily was afternoon, fiscal mix in of for prior $XX.X lower was our high revenue quarter. line, when these third our or to in $XX.X orders in in our attributable at the million, higher $X.X offsetting TV strong seen The the supply our products. with million driven yesterday chain million quarter. which Defense when delivered access change Partially million, cable this by revenue due fiscal of increase

X/X million consolidated XXXX the A&D. year, during was $XXX.X to year. approximately fiscal was million prior compared X/X Broadband and $XXX.X fiscal when or The the For a XX% of $XXX.X $XX.X revenue the year an increase million, full the million for with

was and XX% rest production XX% sequential me Concord third year-end a XQ a the results, which Let lower-than-normal revenue, basis, gross XX% the to on yields now will due margin quarter, a the XQ, non-GAAP margin be the A&D the adjustment On focus operating to of a quarter our segment's operation, the of combination year. compared largely Consolidated basis. for the in and physical both where of impacted to gross margin. inventory at lower the turn in

costs over fixed On side, gross a to quarter increase drove its sequential and increased margin. the higher the Broadband revenue absorption of

when Operating Broadband, movement For were X%-point expansion. margin expenses year, the compared fiscal by XX%-point gross XXXX the a largely R&D full million R&D sequential and due expense material fiscal $XX.X was lower in customer-funded XX% usage. to to in prior increased as was million the $X.X a consolidated year-over-year of in driven increase XX% to the The project XQ result compared increased quarter.

XQ, fees. in a to higher lumpy of namely services was primarily business taxes professional SG&A couple due items, and While also

million driven XXXX, R&D decreased before, year For A&D the compared $XX.X in OPEX $XX.X million expenses to fiscal the the by for business. lower to year

well was finishing as the OpEx mark of addition, of XX% at In a revenue XX% for percent revenue. below the year,

%. Moving of onto XX September operating million the was in again strong margin operating at line, bottom profit for an very the $X.X quarter

in was per results reported quarter, would non-recurring the the substantial was share. XX of one-time quarter and both diluted $X.XX XX.X those full-year quarter and Adjusted million diluted fiscal per per year share. million and for moment, share and operating the $X.XX prior a was the for for for %. $X.X for EPS $X.X the million diluted and XQ and two share, For $X.X the have for items, $X.XX of year Income year. income was and were year, and million diluted Shifting and per the revenue $X.XX $X.XX million year, Net the periods. Net for EPS Still profit GAAP been in included that XX% $XX.X margin EBITDA EPS excluding third $XX.X $XX.X income was $X.X a turnaround full-year $XX GAAP and the was and results for net per gains million million The diluted to totaling a share. and million from million

the grew compared The Turning cash cash of $X.X was $XX.X on call now of XXth, at a flow, million financing operating opening from are capex positive million cash operations used this million your year-over-year million basis, to plus we EMCORE's that, consecutive by September Sheet, $X.X of With we Not only increase million $XXX,XXX less Balance $X.X of generated quarter activities. quarterly Xth of for June from for cash million. $XX.X had the up operations, at to XXth. consisted $XX.X questions. the cash from

Operator

moment. Cowen. pause go question from for ahead. Thank X And Please [Operator comes from Instructions] you. We Silverstein, first Paul our will just

Paul Silverstein

Jeff can and XX next expectations the of over outlook, shortfall, you drove over go and Tom, both more the course beyond? are importantly, margin what and just your what the the months

Jeff Rittichier

to to try tackle that with. Let begin me

break chunks X we and at things if So, Broadband. we look into

I much negotiated, cost margins they EMS right moving now. around think to stay landed move pretty that's right are buy things so now. Remember, been as are fully where [Indiscernible] where the allows similar we very I us to are going a XXs. and see essentially below don't to from

see Broadband essentially happens, as to the over Defense For bit a in especially parts absorption lot And stable margins what's -- happening something in the I and from going some are. on Aerospace they improvement up moving the business. to we're There's bit, as cranks rise a to quite where navigation are would going and overall, see that, that A&D. need We A&D stronger business in a a is but of and say year. we're A&D to next going

Paul Silverstein

you over -- it the Can In improvement I -- push any can a Jeff? meaningful can little meaningful, terms a expecting Any so that? offer? course of couple by Anything points? on that, more that next quarters? I bit on you of Is granularity put the that, X you you're range than

Jeff Rittichier

Tom, Paul. a But than bit points. Great. don't more I it's XX? say would see, little couple I know, on it's dependent mix, of a X we Could to

Tom Minichiello

Yeah, you could.

Jeff Rittichier

X an to A&D. over reasonable XX seems

Tom Minichiello

business as between always segments be mix well, will the X factor it And a Paul.

Paul Silverstein

trust chain goes expecting not upon so you-all that supply any X improvement environment, without saying, I improvement. chain, supply not obviously, is what And in to you it's consider, dependent do the of right. that's current improvement XX to All -- independent that's are it

Jeff Rittichier

good current exit Yes, quarter. more material buy And within that's connectors we you problems a going some one to of other transition I we hit all The feel a we've the or we like place be think supply to got what much can is beyond that we're to a expect crazy that, We're issue, get things. get work in chain the million where Realistically, on this semiconductors. biggest little the where like again, that push-out, on complete true. don't in solve is one shape or very bit surprise going of issues, maybe two. to it's them,

I we're a wouldn't taking to going major it steps So, deal but forward. that, with as see impediment

Paul Silverstein

question, leverage through some the FOG right. XX%-point is Jeff there X its and referencing and overall, the in that begs the to it All contribution had, A&D, also operating to should that margin, I beyond And improves? revenue improvement is referencing. specifically continues be makes had, you're leverage be which trust operating above gross

Jeff Rittichier

Absolutely.

Paul Silverstein

that? And can you quantify

Jeff Rittichier

Moving add this in then production Tom and Concord. and for Paul, parts wants describe Alhambra very volumes way, the me anything. to volume-sensitive it again let if -- The -- both see we're I'll

that series efficiently up, with mixed So there issues as is a little dependent. the that as are volume a P&L moves it's range the and very picks a dealt absorption that's so as bit what needle And facility to far on -- as of as for again, example, color on but X -- the step any completely generates leverage you the far margin, product Tom, crisp, what for that the limiting piece? answer have I isn't becomes what think rate operating in and for

Tom Minichiello

we've continue need by the I Yeah. Well, the near OpEx That's got past increases is think pretty the because revenue going term. the move really evident side, leverage the to in forward the business the OpEx overall results year. -- in up don't we operating in with to going on

called or the on pretty So A&D. is on in It's gross it's minus, growth been margin in much. that follow business. OpEx is million, at quarterly which basis, to A&D the will $XX -- growth help where going we've And plus a Paul, the

Jeff Rittichier

Yeah, headcount OpEx all. in that was a the Paul, important growth issue thing to not one is at note,

Paul Silverstein

to fiscal 'XX. All hold right quarter OpEx Is but Jeff, per statement, Tom's $XX correct? at that million expecting you're around throughout

Jeff Rittichier

Yeah.

Paul Silverstein

all. that's Alright,

Tom Minichiello

ahead, Go Paul.

Paul Silverstein

No, good. I'm

Tom Minichiello

way it. that yes. but minus be a $XX Will little a there quarter-to-quarter, or is are plus from to about good lumpy the items million bit think

Paul Silverstein

the expect revenue $XX you OpEx don't that from up upside, meaningful And level? event million of to meaningfully Tom, flex in

Tom Minichiello

Not in the near term.

Jeff Rittichier

No.

Paul Silverstein

guys. it right. I'll on. All Thanks, [Indiscernible]. Perfect. pass

Operator

Craig from Shannon Hallum. - ahead. Richard from comes question go Next Please

Richard Shannon

sure for so question, I'm on the gross way A&D Paul's going as your answer Thanks I here to not ask ask I questions to own my guess, well. to is, margins it my I'm Hi, what guys. here. taking need

the XX% XX% As June went look from margins in to gross here down. quarter-on-quarter we September. at in quarter, your It September for down went

So, question it time is, when you points, from expect happen? commented about my increasing June? that does XX guess, And over to back from that was X what we it to XX% that number point to and get up I

Jeff Rittichier

Okay.

of what really XX% transitory saw XX% just said. down let's We -- it a call understand all, first effect. -- the I was to so Now you the

will be quarter, improvement next. be it's back I think numbers not we'll those of if kinds the from certainly it'll Then there. into this happen

Richard Shannon

I from is your even on as past A&D can Okay. from even especially get on programs. what XX% view asked over about offline this higher? me. this a talked level a you've calls of of scale that growth certain business with number mean, is But you've to been and here know margins time, a some or I

Jeff Rittichier

and If absolutely. there's -- Richard. about Oh, that, no question

a volume-sensitive or manufacturing in facilities. facility You're high-fixed-cost --

So, bit a all And really the the is volume. it quite and is of takes P&L good. flow-through

%, -- you increased up %. if So, you XX back get you probably get over XX by up A&D by

a of issue, issue, not it’s not it's bill So, it’s pricing strictly question. an material absorption a

Richard Shannon

heard about mix a talk yields some your on prepared due I automated to think equipment products you some here. comments, assembly in and or yield I

does here purely So, in an is this a thing? mix or have couple to just next change quarters, the meaningfully absorption of

Jeff Rittichier

a Tom just it, a -- we color expect. with with more than takes end you performance, which we really a I'll up out Normally absorption you of make vibration have thing thing. these to There of much move that than occasionally, -- on a occur to you %, a variability build. product that than an cycle for screening little It again, count them that torpedo. can that, it better difficult a we'd notoriously that just screening requires It's goes product ship into events And of more transitory, this more when no. production was you into lot we The of pretty much what And was but want. XX happened. margins indicated, bit give

Richard Shannon

Got it.

extend Cable comments backlog can the helpful. you I other a Okay. to I whether think TV, your And out That's but very here. permutations know sense. out That or time -- On the here said, have cautious and makes mention that's obviously this, other has questions is couple continued extended going here. Maybe improving? you where remain how time any detail on you far and again, backlog on

Jeff Rittichier

take to a of, is say get are it's explain up Well, example, take to not going is is going delivery the in thing don't we year installs. And Because to hard for little exactly into let certainly delivery why. happens. and March they're we customers quarter. March right? now, want say, what this what of what know know, Part that the We me every U.S. to friendly to but the

to June. into get push things And of so, frequently March out we request and

of Charter. And of is, for year real so, you cheese, the well where a your it's of CapEx visibility. say little from on visibility, than quarter to quarters I will two year, for one substantially guidance hard Comcast benefit normal say, better But don't this have your and the we're time

You're months. winter into the heading

as And the we're a as so, But dollars about normally substantially to on in I answer are. But as better crisp you continued hard far than give you giving orders. as have backlog, can't answer that. a far flow new we the

Richard Shannon

Okay. and into paces, business maybe this. helpful. My chips out lot I'll last number jump a sounds at even the Great. line both The picked projects you're engagements visibility of question of up you here. of Broadband for like within That's

last think few more little out on color us and Can of quarter. what's these talked about feel give years. I for of the you applications, tens give changes a dollars driving us in help millions etc. a bit of

Jeff Rittichier

Yes.

ahead one Indium fabricate are customer, a one ability to But very added added their maybe do customers specialized add with. They've we've So, that own and These are Phosphide, some have a not we even of have especially project these for second devices. third. can center the it because time the competitive what for signals problems of own and of talking doing because products about They are they're and exactly their [Indiscernible] don't Telcom us them. those data applications. what looking want create to build reasons,

supply just something we love to more, about that, differentiated parts to. like something really tell products that's like into and -- is I'm not center these are data opposed allowed It So, Richard. to some doing applications. then XXG-PON but certainly to Because all And high-margin, allowed though it's as strongly say, I'm I'd telco. those mainstream or -- you

Richard Shannon

certainly and questions area forward things that. going me, more Thank from are guys. It to we is you. understand I that. the that sounds about hear well That look like all in

Operator

again, [Operator Instructions]. Once

Jeff Rittichier

I'd All to you safe, all by everyone, interest of would EMCORE, right. thank great like quarter Please year an for in results. of close your our and recognizing stay to like team outstanding financial a I for and and good bye.

Operator

call. This your you Thank concludes today's for participation.

disconnect. now can You

EMCORE (EMKR) 1 Dec 212021 Q4 Earnings call transcript