Earnings call transcript Q3 2023

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Operator

Good morning and thank you for standing by. Welcome to the EMCORE Corporation Fiscal 2023 Third Quarter Results. At this time all participants are in listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

to Minichiello, conference EMCORE, like speaker to now Tom today, Chief would hand over the your I Financial Officer. ahead. go Please

Tom Minichiello

Thank we emcore.com. issued welcome and afternoon is discuss third morning, our conference this results. Good website on quarter release to XXXX EMCORE’s to news The posted call fiscal you. our everyone,

conclude with then Jeff our we’ll business of call, and taking update this results, discussion on by EMCORE's On financial Chief Executive I will the President Rittichier, Officer you our will begin questions. highlights. and

Before we the like within remind information Exchange XXA of to provided of the of statements of Act of Act meaning we forward-looking XXXX XXXX. would begin, XXE you and the Securities herein that may the Section Section include

expectations These business. forward-looking and business statements and operate. and markets affecting and trends forward-looking future Such about prospects in the which statements about the trends events plans, are about largely future current changes include in our projections projections statements business results, the strategies, based and we on

Management other activity, future statements. and the financial results, may of cautions are actual future achievements events or by our both economic and business, different statements forward-looking or forward-looking any cause subject to those business materially expressed and and that or from unknown, performance uncertainties, levels known to that to of in industry performance risks relate these be or implied

Report sections associated XX-K Factors statements on the sec.gov., rely the these the to and entitled the the and uncertainties periodic on filings in to and Form statements Annual are in reports. available located not SEC’s these subsequent you caution We Risk at company’s the with company’s business, included including on consider risks website and which also

except no forward-looking actual required conform assumes as to statements expectations, by changes to statements, company to to in law applicable regulation. any our obligation or The results, or such update

periods. non-GAAP to believe to measures provide management and this measures, meaningful be The references non-GAAP during and investors. both core operating facilitates company’s call addition, ongoing In information across supplemental will performance financial reporting reflect made the which we comparisons

these the the Investors as comparable in reconciliation news to as measures measures to included GAAP of our measures are review release. well most encouraged and non-GAAP explanation these

I will call Jeff. turn the to over now

Jeff Rittichier

guess And good afternoon, you, morning. everyone, my Tom. it is Thank

inertial at into Book-to-bill its own business the X.X EMCORE's fifth the business March million over quarter pace growth. navigation quarter, QX, and the In with in XX% came sequential growth this growing has of kept backlog. $XX representing

XX% QX Consolidated overall nav $XXX,XXX contract. Non-GAAP to gross navigation expenses million for and a Defense was margin was fiscal a $X.X $XXX,XXX at navigation revenue, development in XX%. approximately segment $XX.X broadband million posted revenue was was in and broadband $XX.X million. Optoelectronics terminated $X.X negative million, and for Operating A& inertial in inertial inertial the due were came

navigation in on significantly evolution a expectations, his provide aerospace this better additional Tom Simply pure put the details company's the setting than will and performed into inertial business. remarks. defense stage play for

this of Turning part Completion of now to would announcement business the I'd focus linear letter our broadband of the the should to opportunities to and to navigation. accelerate our ability our of transition also inertial for EMCORE's focus employees. narrow seamless supply customers objectives to sale Photonic like to intent. on of on a our create business, the Sell It to Foundries. its meet

be fab transfer product linear $X.X expect completed line originally backlog wafer planned. last the that production We approximately fab component remaining the September products as within time the broadband conclude by sale quarter sale wafer me pardon for backlog the and quarter. the expect complete of the to would affected order for we The the million. the we to to last September expect during Photonic the Since - to Foundries, remaining of the is

chips assembling completed a year in are from least handful of it Since there the completing at and just there take fab are orders a to tests processes Once all EMS, limits and production will production EMS over in onto complete EMCORE wafer conducting carriers Alhambra, business says, and burden. have That two the takes future due current the several we the of tale have on interested the chip direction an end. parties the on remaining fab process. diligence expect decision to bringing manage a of quarter, companies within employees the to the to of with

considering space Moving and my Concord This is Revenue about we comments grown the quarter-over-quarter XX% Park by - that and a into from performance on strong the in the inertial December merged KVH itself stating navigation. was which EMCORE. Backlog a operations. was solid team quarter navigation has quarter, of by at in inertial fact a I'll former XX% little million. first begin up to $XX full was from had a X.X. Tinley came navigation that with misleading which book-to-bill the our

value quarter, mind current the book-to-bill in contracts keep and that of Please the hard orders In that against includes, we above contracts themselves. this not purchase our will the remain the long-term X.X. only expect

and came in expenses and and research for Operating below marketing. development budget sales

high and XX% revenue drive within and substantially the down in this should our working known quarters. development the coming are our customers. next Consequently, few of of we internally see engineering IRAD otherwise funded from through to mindful research are contracts quarters spending, We approach as non-recurring IRAD

transition Multi-Purpose for We receive expect orders full Armored this yearly from BAE's forward. this to Vehicle production a solid and pattern into program point it's rate order

spare orders additional AMPV onward periodically foreign look upside. providing and should procure sales military For

in International included notably bookings Taiwan quarter, platforms. unmanned These most group improved and Poland. a of significantly iterative and this

the this space several these tests early in We've positive platform, some results We full the also of with results additional seen drive quarter. runs the eagerly saw await momentum. substantial game and in EN-XXX starting interest from sector, test to key in customers the especially

to the begin see should of a a business, quarter international tiered orders This to On customers. requirements been licensing this precision on ease for direction. bit side pursuing strategic but placement approach guided the we product munition based time, strategy have our more takes we this

and of key are rate we low and become timing. acceleration terms infrared benefit long-term tract has of seeing of is of our key focus Beyond in area a signs wins of the production into indicator initial programs design should a program search leading of multiple phase. This production growth, important capture,

The strength reflect securing the partnerships manufacturing has orders predictability. expected and duration additional secured program improved are also that produce Eris long-term on orders We the with of of primes an costs were program. production bank and working major and to

to Alliance. reached inertial when the $XX September, critical scheduled $XX navigation launch the targeted important ULA to be should and two United These board next measurement revenue end booster The meet milestone annual its in Launch is integrate continued billion which of multiple tests space rate in per to for gross it are targets The gyro. and expected reaches validation, units by - continues has rates, as board, billion margins. for help TAIMU and of support team to to systems are year, improve beyond produce launch significantly that, shipment

margin executed of uptick with quarter the in quarter favorable Concord Quartz scaled in saw a a up the unplanned this no shipments We well. MEMS mix a very operations way variances. had nice in But and team clean surprises very the shipments.

months. to to the lumpiness we a We coming reduce in in Concord expect the continue new upgrade as ERP system to Concord

Chicago focus the comments I'd fiscal as XX, eliminate and like successfully started. for is until end to getting this KVH transition I well a upgrade We so our should to from which transition XX the move of which integration, expense. operations did some to area Since the sideline on year. not or a it's after will year as services provide Before sideline to guidance, of need we quarter on new the Alhambra the Concord this will last in complete work year, or key quarter

and will Camstar Chicago should MES facilities the early into improve October, our processes unification this we help to costs will reduce will us and ERP make complete upgrades. Beyond integrate after and the ERP, PLM/PDM more and we EMCORE Ultimately, inventory. complete in the Concord efficient,

systems I've our development within programs roadmap solid EMCORE and to the engineering a integration operations stripping Beyond streamline redundancy programs expense. mentioned, reduce out for has

space amount of expect require, inventory, manufacturing floor in reduction reduction the a years, Over see a to and should next in you few we profitability. the improvements in

a growth tamp dates order Turning few the quarter. September now supply delivery guidance, chain on for will we are bit expecting to down a issues and

product the Foundries $X million Photonic inertial at buys includes that million, completed, in revenue sale million navigation business. the consolidated with the the expect line to range. $XX $XX we This to is approximately Assuming of $XX million than linear time $XX from chip to million last along

that December Looking into quarter. beyond the

revenue a to have million to $XX navigation inertial range of expect $XX We million.

that, over back turn I'll to the With Tom. call

Tom Minichiello

Thank you, Jeff.

fulfil off Defense discontinuance Broadband first plan, start to running operations the these June continuing of consolidated were broadband Optoelectronics segment orders, results keeping a been have with last we the This in Because consisted a Defense segment. and by Let A&D for Optoelectronics during quarter. we operations the the time fiscal XQ. announced included of restructuring line customer shutdown product of within as both the plan and me

first I'll start I'll to in reported A&D, were circumstances of terminated. Consolidated for of XQ chips fiscal was unusual After development of for segment financial $XX a provide broadband, prematurely million consolidated and less announced our results. $XX.X revenue sensing with So, for million set shutdown subsequent that and inertial an navigation. for review $XXX,XXX broadband. contracts net products In

$X.X milestone out contract revenue are final contracts billing accounting timing of cash close the method received. independent true-up of percent cycle revenue of to i.e. of contracts, cash recognition recorded for a which cost completion to XQ million these adjustment these in properly was of incurred under As the the collection and the is account final

$XXX,XXX. $X total million last our was $X guidance was shipments above Excluding adjustment, million. to broadband within this brings XQ A&D optoelectronics of time This slightly defense revenue by million $X.X in

was rest reason, XX% results consolidated to a gross highly the same of diluted the non-GAAP Broadband basis, consolidated XQ on with Turning segment gross the the flat margin. and for margin

driven On segment business came for inertial XX% improvements the in XX%. by at nav strengthened to which A&D significant gross side XQ the margin

partly was work $X.X segment the $XX.X expenses in A&D by the to offset nav as XQ, FAA inertial discontinued was on operating gross overall, lower G&A. Consolidated component. margin XX% million programs, lower fiscal for compared optoelectronics $XX.X for lower largely margin materially to as in million the quarter. the due were defense R&D million prior expenses well For material The gross decrease

better at June $X.X loss net Consolidated quarter March Consolidated loss $X.X improved EBITDA to share, $X per negative million, versus in $X.X compared was $X.X $X.XX Adjusted or the quarter to also to the in XQ. $X.X million fiscal million million million or the was compared share $X.XX million per quarter. in operating before.

as credit Shifting GAAP million million insurance was severance restructuring for results $X.XX result $XX.X $X.X XQ costs a for million charge XX a results included compared XQ. $X.X $X.XX in to per or announcement related to per received or April in to a $X.X GAAP million loss share and moment XQ. the of fiscal proceeds share, a the

double-digit turn in compared in shipments steady a now attention Tinley path XQ to for $XX.X with to our fiscal million revenue in XX% for navigation our growth grew X% non-GAAP continued navigation the to Operations me sequentially. and driven increase revenue by Let Concord. growth navigation inertial site results. on XQ and Inertial both Park space Lake Budd QMEMS a up in

earlier. inertial yields. million margin As material in was $XXX,XXX higher in mix Inertial quarter. the XX% to significantly prior the compared also Quartz XQ the noted $X.X on million MEMS $X.X project was navigation a expanded decrease due expense lower and better by R&D gross spend revenue, to production only The improved noted driven to in but fiscal not nav XQ

Turning capital to million the The XX, of at during offset $X.X and the $X.X of $XX.X March sheet, uses the following change the million compared the cash quarter. of XX. insurance during June working million we $XX.X million included balance to aforementioned proceeds $X.X million positive operating had of quarter by at cash

$XXX,XXX $XXX,XXX activities, severance, financing million paid $XXX,XXX and $XXX,XXX expenses costs, acquisition used $X.X for related adjusted litigation CapEx. EBITDA, $XXX,XXX related for for for for

we that, call for are opening With the questions. now up your

Operator

with First Thank Max comes Street Lake you. [Operator Instructions] Capital. from question Michaelis

Your line is open.

Max Michaelis

Good morning, guys.

in the got I is you or I you're to guys seeing times wondering supply material chain First related question. guess? weakness supply the lead mentioned, just chain to was - guys one first supply chain changes not any the I if

Jeff Rittichier

chain? is So, Is there bit. question the trying are breaking whether or in supply up material I'm little a not changes

Max Michaelis

lead what's that the there? up and yes sorry, breaking Yes, times

Jeff Rittichier

not. read it. Yes, it's into a really I wouldn't lot

push FPGAs bit that see flashpoint difficult things outs to that's a a military minute get. of will have a of to unfortunately, the chip then can grade quite And deliveries. of stuck. And XX% on One is you systems still be you're remain we the available missing parts and of one last build become

get chain deficiency. an grade to we're don't an believe of overall opposed schedule. sort that just a that supply military we There's parts going issue really are it's to So, on as that just few

Max Michaelis

to mentioned outlook see for in next share it kind then quarter is right. points this wondering that that was book-to-bill, related All And X.X. above you to you could one my of just one that? confidence Thanks. if of you expect few do you give QX,

Jeff Rittichier

Could you repeat that?

Max Michaelis

is point you So if in giving of book-to-bill you I that your was X.X going above to outlook? mentioned wondering share that you could that's QX, confidence be

Jeff Rittichier

the out it is it branches as a this really market. that the there's support all gets occurred, think military the the And the various lines call demand But of that's registered storehouses of see Well, reality solid widely comes there because in of sales. is, don't products doing one war. Ukraine, is wouldn't service. understood, it quite foreign I product things to out when - I shipped the of of a well. We headwind, necessarily are the Ukraine

And and their have what priorities the are budget get service is cash stores. to branches then the demanding product budget, had so, the shipped happens immediately in replenish shifted, the that

that's if the come or give have have is Army, know, Force Navy up Air from. sometimes managers the to the, of material they you budgeted, at the say to money odds you where, And lot know, a the with what program

phase between the that shipping something freights and stores, budget if So call sense. and existing priorities, service pull a against it's then makes between lag - of it really, from push

Max Michaelis

sense. Yes, Thanks, no, that makes guys.

Operator

next with Capital our question Shannon Thank Craig-Hallum come you. Group. Richard from And will

open. is line Your

Richard Shannon

Tom, and for release here. prepared of understanding a order. here. questions on particular script little up get your lifetime bit about margins Jeff, Maybe the here versus a for gross few you're in greater press I'll the the guess thinking what detail in my for just Jeff but I of no taking here. get thanks. here to pull thanks Well, them sense buys, to also and want guidance

see think of nav inertial it's your but XX% only that nav performance just to XX% - I reported? near And I revenues? we inertial the excuse an think number quarter, in from would me at margin you down just the midpoint you much. the not expect slightly gross

Jeff Rittichier

bit from really only that is we think product move point this quarter-to-quarter. Rich the The can I little is Yes, forward, to a should. thing is just here the going Richard mix, around shift

these number. next is, quarters those some will margins of are in affect from call We're product things orders BAE let's for it the mentioned that I One other example, TACNAV there gross have above, the orders. a of couple the AMPV XX% expecting margins significantly

are quite There are EMCORE. at few which volume also a products, as But margin the good. not drives

as margins expect we'll improvement general. so, up, gross in to volumes see pick in And continued

Richard Shannon

Okay, fair then. enough,

September. the nice the December your looks to a about up to getting $XX for million double-digits point is about Let's million talk comments inertial us quarter here. And $XX you're quarter telling NAV of from like midpoint

there? So can to of you about little talk drivers a the some us bit

Jeff Rittichier

around little end moved of take government that, advantage September. fiscal the dates the fact Sure. year have of bit, a that There are is delivery do planned some customers

look additional some have And in things at have money that into like want to QX, you who and things so, some out. pull push that money to guys don't will guys when

see the So those there's you've new that in there. we're require rate December up production. shipments low that And of overall of is expecting terms a bit But the into little are of heading in to programs initial that picking trend support in got quarter.

looking of lumpy. looking it's of final some that of orders one a come what these shipments things, little at in, our one So, development we're programs, will AMPV we're for

a the bit are strengthening particular prototypes end program get and to of really chunk But you have overall, strengthening tried across delivered. billings, that I'm at of the know, what a as and get you'll then you you phase, there sometimes But of is the non-recurring a engineering demand. is

broadband to that consistency several can within us give provide further a have where go to a million patterns ever we is as There that confidence, and We little consistently, improve. done we'll we out now see wouldn't a continue that $XX quarters and expect order can to backlog. the Again, guidance, out company. to

Richard Shannon

I December that just here enough? of given as least your part the of because it's then in visibility, I as gross be would at segment drive here all that and September, And growth assume that the in margins be your Okay. guess would growth fair high

Jeff Rittichier

that's fair. completely Yes,

Richard Shannon

Maybe to understand hear. effective sure and there's proceeds transfer dynamic call no to over correctly completion Do jumping I liability opto of activities yesterday, a we'll Good disposal the Okay. it? just cetera really Or disposal, of this not you - sort the here? savings the even I'm to here prices I the call that guess do some you - what for announced expect defense OpEx on purchase on you? et

Tom Minichiello

Yes, reasonable was, chain. say and this me correctly associated moving scenario, special run we with the you problems build done that is in do a - epoxy gosh, thing, so also particular sort every I think needed There factories get again. as liabilities. within the time I into would factory say broadband significant in more a of China. far what that silver getting with you But one we we've former are job Pardon the or it supplier need I you supply mentioned. to as would the

and China's overnight. eight you that weeks get something got take, it's States to to get here can export going in restrictions, the

crack what our us is much really, that sort how further. to these takes all It enables it problems. organization So it amazing does bandwidth, cycle to puts out thin of it's it management also activity, that even of up

portion you think, ability of know, well parties. well. available have problem have sale focus as and It's quality for us service And broadband - and up for engineers, all just, our to I out inside that requirements. works speeds people essentially the of solve linear deal to For and with RMAs business example, we still the the to

Richard Shannon

I kind or can here? And what you of some Okay. of achieve you'll upon on guess, cost give structure us just close OpEx that savings sense

Jeff Rittichier

we think well, million in OpEx. you, I was gave what $X.X Gosh, was it

Tom Minichiello

Yes.

think up, defense Richard, because are most the I April go you numbers of was on and announcement to related. those called XXst of hold back restructuring opto pretty much and it the broadband

So wafer out the, and fab. business figure eventually transferred, the as gets we the

that all of $X G&A. the You save a slice also upwards, it million of around money. it in was maybe There's

the help will that So going forward. business

basis, in forward is a know, So million operating P&L what likely navigation, From range. that in $XX somewhere expenses million what $XX.X you're $X.X so, see cost million, to pure go of on you then inertial all we and least your, be sold there's there. before right this, will but know, there's started $XX some there's you savings, your, at goods around million

Jeff Rittichier

I where we that as our that be OpEx ready a in we little down we to areas we not identified talk detail. make, those able point we Richard certainly about further, we're a will, other The as But take few into this, is get have to next call. might quite in

OpEx end seen So you haven't the reduction. of

point other a portion research us what much supporting. the how the internally development, especially to funded research how make, obvious some talk will make talked IRAD going see and really which as quarter about should our December as make additional but The spending to customers monolithic and just more about going development are to be you're and help number we much this. is. we're number, And hit - to we're We refinements it

Richard Shannon

this my on kind hit IRAD. on question last around Okay, you of

you ran IRAD that NRE in Tom out, as numbers OpEx be that the of a to shine cost mentioned, us that'll more is right? then further that relative improvement lets just get the structure So this

Tom Minichiello

Yes.

Richard Shannon

up Then that I'll right. All Okay. one Great. and. pick

Okay.

Thank the the jump all questions me on guys. will I I from think that's you. line.

Tom Minichiello

Richard. Thank you,

Jeff Rittichier

Thanks.

Operator

Thank you.

Brian from Partners. Our next from Kinstlinger Alliance question Global will come

open. Your is line

Brian Kinstlinger

my Great. questions. Thanks so taking much for

curious You if if a including of mentioned could backlog. contracts, backlog, backlog you unfunded total an provide if you will? $XX the not I'm million value

Jeff Rittichier

the Oh, ones. off head. of two wow. give you my Not Right. top But I'll big

that contract all. to first the soon, CROS - think you would a CROS into go in winter, would X for appear but years. not an Just give I coming on which up the $XX you last expecting X, for example, if We're was here announced purchase three for at million look order backlog we

example to based their orders signed, look on XXX we'll into a we TAIMU that time minimum at if purchase into Another of you we take units the a specifies original TAIMU. documents make purchased LX minimum. when navigation, the it way

price is million, to have are production more. yet, final is production final that a review, configuration not it doesn't $XX that for done, if we have happens which until don't after and would be part We at with that's done right. that it, of readiness because be And something the just set after least

would possible, backlog. those just alone and more two So, double than two the Yet, double are double, it's triple. but those

Brian Kinstlinger

Great. Understood.

it to As relates TAIMU.

run become You milestone. you've next to mentioned are mature? TAIMU rate September you expect is get deliveries XX we discussed? year a months Are away, do to the to When we away that

Jeff Rittichier

I about this think, already Budd It's now. seeing understand thing that you of about year need probably it - to you're you a the the from Lake this look number. at is TAIMU within

revenue lead So, advanced an $X item long to a the which by backlog, able in is for is million, which we're materials. recognize over an

Okay. lead it's of our And the It's the not customer. longest just it's all parts. material,

And there's part locked the in the that, through the of significantly. that that, more material, even operating review, configuration you'll just down, The But is, improved Lake it the we revenue work margin course just with not much Budd as for critical results has sheer progress we're recognizing that complete of design see it. interesting into production. amount flowing doing gets

in very So number of large what think, - every when I've in number I and what in continued going think for through the conversations, see TAIMU the sequential is stick, revenue to a conference this, hockey improvement Budd we and program. as don't as progress you're Lake, you said

Brian Kinstlinger

circuit you you they I the if or quarters. of think to a components? this Are about for get a on or related revenue? is, hearing does component for to him but understood you have I talked different Are Okay. And The seeing My as unable And these customer it of as are Or you've I'm changes about? them to shortage in generate these or to correctly, Thank relates result a they question, the sure any same shortages? last to wait these not you elsewhere? you. How board they couple needs the find talked near urgent products? are shortages? much where future expecting go

Jeff Rittichier

you'd aerospace defense a Well, and supplier happens any And of a in situation business, have that have large would quickly. rare where nothing the these it's components. number

even times For shelf. on very in The the be final again, this temperature product reliability driven lead The components end tend by primarily range to and a business. are, long particular requirements.

are And so, issues, this but set of rail, different these have call it chain microprocessors, few things we're chip, there to degrees that And past go which I to few XX them. minus FPGAs, set down for DPAS everybody think called from, which priorities better acquisition. that chasing, get can let's ratings, has centigrade, the when make are a is systems got people what over high on general quarters, supply you very

get hands DPAS on, what some a DX for or get of our be don't other rating. because and for we has to may products, can't it they have a DPAS so because buy And TAIMU rating able them AX, we the

of complicated, only really and into we'll to it's don't terms getting companies ease is That to the their sort aerospace hands components. parts. confined But it's entire on of makes I this these think spectrum very get 'XX. see as So defense much across of sense. Hopefully, starts we but this several

Brian Kinstlinger

Yes. Appreciate time. all your Thanks.

Operator

like queue. I'd remarks. the call closing turn I'm Rittichier the questions back you. in Thank Jeff to for to no further showing

Jeff Rittichier

bug bringing from next our a effort interest recognize the in aerospace far EMCORE's especially And reaches forward And base. and look the customer apologize or for of EMCORE to business. quarter. But for defense I aerospace you. and again in like I'd their the chapter turning back and thank everyone we such and the customer strong team of a past defense for to Thank in

Operator

today's for conference Thank participating. call. concludes you That

disconnect. You now may

EMCORE (EMKR) 9 Aug 232023 Q3 Earnings call transcript