News: Optoelectronics
23 August 2021
Emcore’s quarterly revenue grows 56% year-on-year, driven by Broadband more than doubling
For fiscal third-quarter 2021 (to end-June), Emcore Corp of Alhambra, CA, USA – which provides mixed-signal products for the aerospace & defense and broadband communications markets – has reported revenue of $42.7m, up 11% on $38.4m last quarter and 56.4% on $27.3m a year ago (and taking revenue for the first three quarters of fiscal 2021 to $114.5m, exceeding the total for full-year fiscal 2020).
“The Broadband business segment drove record financial performance,” remarks president & CEO Jeff Rittichier.
Broadband segment revenue was $30.3m, up 19.8% on $25.3m last quarter and more than doubling from $13.3m a year ago, driven by record sales of cable television (CATV) products.
Aerospace and Defense (A&D) segment revenue was $12.3m, down 6.5% on $13.1m last quarter due to start-up delays in a new electronics manufacturing services (EMS) provider to the Defense Optoelectronics business. “Our previous supplier decided to relocate their SoCal [Southern California] assembly facility to the Bay Area, which left us to find and qualify a new supplier on short notice,” says Rittichier. This was partly offset by increased Navigation revenue. QMEMS (quartz micro-electro-mechanical systems) and FOG (fiber-optic gyroscope) revenue both rose slightly.
On a non-GAAP basis, gross margin has risen further, from 34% a year ago and 39% last quarter to 41%, driven by the higher mix of Broadband revenue (on a year-to-date basis, gross margin of 39% is significantly up on 31% a year previously). Broadband gross margin rose further, from 33% a year ago and 43% to 44%. A&D gross margin was 33%, up from 30% last quarter, driven primarily by much improved QMEMS margins in the Navigation business due to a breakthrough in manufacturing engineering in the factory in Concord, CA (acquired when Emcore bought the navigation products business, Systron Donner Inertial (SDI), in June 2019).
Operating expenses have risen from $8.9m last quarter to $9.6m, due mainly to R&D expenses rising from $0.54m to $0.84m in Broadband (due to higher project material costs) and from $3m to $3.5m in A&D (as a result of increased project material costs and lower revenue-related engineering labor recorded as cost of goods sold). Nevertheless, during the first three quarters of fiscal 2021, OpEx was just 24% of revenue, significantly better than the 39% during the prior-year period.
“Strong top-line growth and disciplined expense control continued to produce excellent flow-through in the profit & loss,” comments Rittichier.
As a result of the rising revenue and continued gross margin strength, operating margin has risen from 15% to 19%. Net income has risen from $5.9m ($0.17 per diluted share) last quarter to $7.9m ($0.20 per diluted share), compared with net loss of $0.74m ($0.03 per diluted share) a year ago.
“This represents Emcore’s fourth consecutive quarter of growing profitability and earnings, demonstrating the strong operating leverage in our business,” notes Rittichier. “We achieved this strong performance against the backdrop of COVID challenges and semiconductor shortages.”
Operating cash flow was $5m (the fifth consecutive quarter of positive cash from operations). Capital expenditure (CapEx) was $1.9m. Together with $100,000 spent on financing activities, free cash flow was hence $3m, and cash and cash equivalents rose during the quarter from $65.3m to $68.3m.
Emcore’s order book in cable TV grew despite the record pace of shipments. “We continue to enjoy strong backlog in cable TV, although we will always be cautious about its cyclical nature,” says Rittichier. “Our LiDAR [light detection and ranging] and sensing components continue to garner interest from a wide variety of potential customers. Outside of sensing, we signed a contract for a new highly differentiated chip product which could be a major source of revenue growth beyond fiscal year 2022,” he adds. “Overall, we are encouraged by the continued demand that we see for our new chip and sensing products, and see a bright future for the broadband business unit beyond its cable TV route.”
During the quarter, inventory increased from $29.7m to $33.4. “However, we expect that this will resolve itself completely as we finish the transfer project from Beijing to Thailand,” says Rittichier. “We added transmitter manufacturing equipment to increase capacity in Thailand. As a result, we saw significant production increases in Thailand during the June quarter with high yields. Achieving this milestone enables us to shut down transmitter builds in China starting in October,” he adds.
“While COVID-19 outbreaks in Bangkok have caused turbulence in our CATV production output, our manufacturing lines are back up and running,” Rittichier continues. “Restrictions for foreign workers into Thailand have remained a significant hindrance to getting our Beijing team into Bangkok. However, we've continued to make progress on production yields nonetheless.”
For fiscal fourth-quarter 2021 (ending 30 September), Emcore expects revenue of $42-44m. “We expect to see similar performance [to fiscal Q3] in our cable TV business, with slightly increased revenue from our other product lines,” says Rittichier. “Our biggest notes of caution remain tied to COVID-19 infection rates and semiconductor supply,” he adds. “While we believe that we’re in good shape in terms of inventory for the current quarter, we expect to continue to re-design certain products to accommodate ongoing problems in the semiconductor supply chain.”
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