- Revenue from Fiber Optics segment in Q3 increased approximately 18% sequentially
- Completed business and management realignment to improve efficiency and profitability
- Anticipate Q4 revenue of $46 to $49 million
Financial Results
Revenue:
Consolidated revenue for the third quarter ended June 30, 2012 was $41.1 million, slightly above the guided range of $38 to $41 million.
This represents a 17% decrease compared to the prior year and approximately 9% increase from the immediate preceding quarter.
On a segment basis, revenue for our Fiber Optics segment was $25.8 million, which represents a 22% decrease compared to the prior year and approximately 18% increase compared to the immediate preceding quarter. As previously reported, in October 2011, we announced that flood waters had severely impacted the inventory and production operations of our primary contract manufacturer in Thailand. The impacted areas included certain product lines for the Telecom and Cable Television (CATV) market segments. This has had a significant impact on our operations and our ability to meet customer demand for certain of our fiber optics products in the near term. We are currently on schedule rebuilding the manufacturing infrastructure for our impacted product lines.
Our Photovoltaics segment was not affected by the Thailand floods. Revenue for our Photovoltaics segment was $15.3 million, which represents a 6% decrease compared to the prior year and approximately 4% decrease compared to the immediate preceding quarter. Historically, Photovoltaics revenue has fluctuated significantly due to timing of program completions and product shipments of major orders.
Gross Profit:
Consolidated gross profit was approximately $4.4 million, which represents approximately 54% decrease compared to the prior year and an 18% decrease compared to the immediate preceding quarter. Consolidated gross margin was 10.7%, which represents a decrease from the 19.1% gross margin reported in the prior year and a decrease from the 14.2% gross margin reported in the immediate preceding quarter. On a segment basis, Fiber Optics gross margin was 9.3%, which represents a decrease from the 19.4% gross margin reported in the prior year and a decrease from the 9.4% gross margin reported in the immediate preceding quarter. Photovoltaics gross margin was 13.0%, which represents a decrease from the 18.6% gross margin reported in the prior year and a decrease from the 20.9% gross margin reported in the immediate preceding quarter.
During fiscal 2012, lower fiber optics-related revenues due to the impact from the Thailand flood resulted in higher manufacturing overhead as a percentage of revenue. Manufacturing of certain fiber optics-related components was moved to Company-owned facilities in the U.S., which involved higher labor and other related costs. Instead of completely rebuilding all flood-damaged manufacturing lines, management decided to realign the Company's fiber optics product portfolio and focus on business areas with strong technology differentiation and growth opportunities. During the three and nine months ended June 30, 2012, management identified $0.3 million and $1.6 million, respectively, of inventory on order related to manufacturing product lines that were destroyed by the Thailand flood and will not be replaced. This expense was recorded within cost of revenues on our statement of operations. Photovoltaics gross margins declined when compared to prior periods primarily due to lower revenues with unfavorable product mix changes, as well as lower manufacturing yields on new products.
Operating Loss:
The consolidated operating loss was approximately $8.8 million, which represents a $2.4 million decrease in operating loss when compared to the prior year and a $0.1 million decrease in operating loss when compared to the immediate preceding quarter. The favorable year-over-year variance was primarily related to a $2.8 million gain recorded on the sale of fiber optics-related assets to a subsidiary of Sumitomo Electric Industries, LTD (SEI) in May 2012. We have indemnified SEI up to $3.4 million for potential claims and expenses for the two-year period following the sale and we have recorded this amount as a deferred gain on our balance sheet as of June 30, 2012. SEI paid $13.1 million in cash and deposited approximately $2.6 million into escrow as security for indemnification obligations and any purchase price adjustments. Payment of escrow amounts occurs over a two-year period and is subject to claim adjustments. We deferred approximately $4.9 million of the gain on sale until the indemnification obligation and purchase price adjustment contingencies are resolved. The year-over-year decrease in SG&A expense was attributable to cost reduction measures implemented which included a reduction of discretionary spending on staffing and infrastructure, as well as lower stock-based compensation expense. The year-over-year decrease in R&D expense was attributable to cost reduction measures discussed above, as well as lower expense incurred related to our development of our fiber optics products when compared to the prior year. In addition, in May 2012, we reached a confidential settlement regarding certain outstanding litigation in exchange for a release of all related claims. The settlement resulted in a charge of $1.0 million in our statement of operations during the three months ended June 30, 2012. We also recorded a $1.4 million impairment charge related to long-lived assets associated with our CPV product lines as the Company announced consolidation of activities into our CPV joint venture.
Net loss:
The consolidated net loss was $9.0 million, which represents a $2.0 million decrease in net loss when compared to the prior year and a decrease in net loss of approximately $0.3 million when compared to the immediate preceding quarter. The consolidated net loss per share was $0.38, which represents an improvement from the $0.49 loss per share reported in the prior year and an improvement from the $0.40 loss per share reported in the immediate preceding quarter.
Non-GAAP Net Loss:
After excluding certain non-cash and other infrequent transactions as set forth in the attached non-GAAP table, our non-GAAP net loss for the third quarter ended June 30, 2012 was approximately $7.5 million, which represents an additional loss of approximately $1.3 million when compared to the prior year and an additional loss of approximately $2.2 million from the loss reported for the immediate preceding quarter. The consolidated non-GAAP net loss per share was $0.32, which represents an increase from the $0.28 loss per share reported in the prior year and an increase from the $0.23 loss per share reported in the immediate preceding quarter.
Order Backlog
As of June 30, 2012, order backlog for our Photovoltaics segment totaled $46.2 million, which represents a 17% decrease from $55.7 million reported as of March 31, 2012. The order backlog as of June 30, 2012 and March 31, 2012 included $5.1 million and $10.1 million, respectively, of terrestrial solar cell orders from our Suncore joint venture. Order backlog is defined as purchase orders or supply agreements accepted by us with expected product delivery and/or services to be performed within the next twelve months. Product sales from our Fiber Optics segment are made pursuant to purchase orders, often with short lead times, and revenue from this segment is still limited by the rebuilding of our production capacity.
Business Outlook
On a consolidated basis, we expect revenue for our fourth quarter ended September 30, 2012 to be in the range of $46 to $49 million, with revenue growth from both our Photovoltaics and Fiber Optics business segments.
SOURCE LINK: http://investor.emcore.com/releasedetail.cfm?ReleaseID=698907
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