Q1 2024 EMCORE Corp Earnings Call
Okay.
Good day, and thank you for standing by.
Operator: Good day, and thank you for standing by, and welcome to EMCORE Corporation's Fiscal 2024 First Quarter Results Conference. At this time, all participants are in a listen-only mode.
Welcome to the EMCORE Corporation fiscal 'twenty 'twenty four first quarter results conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
Operator: After the speaker's presentation, there will be a question and answer session. If you want to ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your handlers. To withdraw your question, please press star 118. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tom Minichiello, EMCORE's Chief Financial Officer. Please go ahead.
Question during the session you will need to press star one on your telephone.
Then here an automated message of Boston Your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today.
Marcelo <unk> Chief Financial Officer. Please go ahead.
Thomas P. Minichiello: Thank you, and good afternoon, everyone, and welcome to our conference call to discuss EMCORE's fiscal 2024 first quarter results. The news release we issued this afternoon is posted on our website, emcore.com. On this call, Jeff Rittichier, EMCORE's President and Chief Executive Officer, will begin with a discussion of our business highlights, and then I will update you on our financial results and will conclude by taking questions.
Thank you.
Good afternoon, everyone and welcome to our conference call to discuss <unk> fiscal 2024 first quarter results. The news release, we issued this afternoon is posted on our website amcor dot com on.
On this call, Jeff literature, <unk>, President and Chief Executive Officer will begin with the discussion of our business highlights and then I will update you on our financial results and we'll conclude by taking questions.
Thomas P. Minichiello: Before we begin, we would like to remind you that the information provided herein may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934. These forward-looking statements are largely based on our current expectations and projections about future events and trends affecting the business. Such forward-looking statements include projections about future results, statements about plans, strategies, business prospects, and changes and trends in the business and the markets in which we operate. Management cautions that these forward-looking statements relate to future events or future financial performance and are subject to business, economic, and other risks and uncertainties, both known and unknown, that may cause actual results, levels of activity, performance, or achievements of the business or in our industry to be materially different from those expressed or implied by any forward-looking statement.
Before we begin we would like to remind you that the information provided herein may include forward looking statements within the meaning of section 27, a of the Securities Act of 1933 and section 21 E of the Exchange Act of 1930 for these.
Forward looking statements are largely based on our current expectations and projections about future events and trends affecting the business such forward looking statements include projections about future results statements about plans strategies business prospects and changes in trends in the business and the markets in which we operate.
Management cautions that these forward looking statements relate to future events or future financial performance and are subject to business economic and other risks and uncertainties, both known and unknown that may cause actual results levels of activity performance or achievements of the business or in our industry to be materially different from those.
Expressed or implied by any forward looking statements. We caution you not to rely on these statements and to also consider the risks and uncertainties associated with these statements and the business.
Thomas P. Minichiello: We caution you not to rely on these statements and to also consider the risks and uncertainties associated with these statements in the business, which are included in the company's filings available on the SEC's website, located at SEC.gov, including the sections entitled Risk Factors in the company's annual report on Form 10-K. The company assumes no obligation to update any forward-looking statements, to conform statements to actual results, or to changes in our expectations, except as required by applicable law or regulation. In addition, references will be made during this call to non-GAF financial measures, which we believe provide meaningful supplemental information to both management and investors. The non-GAAP measures reflect the company's core, ongoing operating performance and facilitate comparisons across reporting periods. Investors are encouraged to read these non-GAAP measures, as well as the explanation and reconciliation of these measures to the most comparable GAAP measures included in our news release. Now, I'll turn the call over to Jeff.
Which are included in the company's filings available on the Sec's website located at SCC Dot Gov, including the sections entitled risk factors in the company's annual report on Form 10-K.
The company assumes no obligation to update any forward looking statements to conform to actual results or to changes in our expectations, except as required by applicable law or regulation.
In addition references will be made during this call to non-GAAP financial measures, which we believe provide meaningful supplemental information to both management and investors. The non-GAAP measures reflect the company's core ongoing operating performance and facilitates comparisons across reporting periods investors are encouraged to read these non-GAAP.
As well the explanation and reconciliation of these measures to the most comparable GAAP measures included in our news release.
Jeffrey S. Rittichier: Thank you, Tom, and good afternoon, everyone. In Q1, inertial navigation revenue shifted substantially between facilities, totaling $24.1 million with a growth margin of 29% non-GAAP. Chicago, Concord, and Alhambra revenue grew in Q1, but not enough to make up for the revenue drop in Bud Lake. Tom will provide additional financial details in his remarks. Book-to-bill came in under 1.0 due to the shortened holiday season, but none of those orders were lost, and all are expected to book in the current quarter, combining to produce a book-to-bill significantly higher than 1.0. While our booking performance is expected to be quite strong this quarter, the requested shift dates are expected to extend out longer than normal. This strengthens the book for the outquarters at the expense of near-term shipments, damping prospects for the short term. For example, we recently booked an order for $8 million that will be part of a very long-term contract. However, the customer's request dates will actually cover two full years.
Now I'll turn the call over to Jeff.
Thank you Tom and good afternoon, everyone.
In Q1, inertial navigation revenue shifted substantially between facilities totaling 21, $24 1 million with a gross margin of 29% non-GAAP Chicago Concord in Alhambra revenue grew in quarter, one, but not enough to make up for the revenue drop.
Budd Lake Tom will provide additional financial details in his remarks book.
Book to Bill came in under one point due to the shortened holiday season. However, none of those orders were lost and all are expected to book in the current quarter.
And binding to produce a book to bill significantly higher than one point, while our booking performance is expected to be quite strong. This quarter. The requested ship dates are expected to extend out longer than normal. This strengthens the book for the out quarters at the expense of near term shipments.
Damping prospects for short term growth for example, we recently booked an order for $8 million that will be part of a very long term contract. However, the customers request dates will actually cover two full years.
Jeffrey S. Rittichier: The net effect of which is to provide more predictable long-term performance at the expense of any short-term bump in revenue. At quarter's end, backlog in the business was approximately $51 million. Compared to the September quarter and adjusted for TAIMU, this represents about a 10% reduction that we expect to fully resolve in March, as we work with interested buyers of our wafer fabrication facility in Alhambra. Although we had expected to complete the sale by the end of the December quarter, negotiations have taken longer than expected, and we now have additional incoming interest. That said, we're working to close the transaction ASAP, but in the meantime, we continue to benefit from the cash that the last-time sales of chips to customers provide. Moving on to the business, I'll begin my comments by stating that although we've had strong performance from Timley Park, Concord, and Alhambra, seasonal issues and holiday-shortened quarters presented headwinds that were bigger than expected, preventing us from backfilling for Blood Lake In particular, delayed export licenses caused us to push out about $750,000 worth of shipments. And although we were able to bill nearly $800,000 in non-recurring engineering for another program, it did not count as revenue.
The net effect of which is to provide more predictable long term performance at the expense of any short term bump in revenue at.
Quarters and backlog in the business was approximately $51 million compared to the September quarter end adjusted for Tamar. This represents about a 10% reduction that we expect to fully resolved in the marks March quarter.
As we work with interested buyers of our wafer fabrication facility in Alhambra.
Although we had expected to complete this sale by the end of December quarter negotiations have taken longer than expected and we now have additional incoming interest that said, we're working to close the transaction Asap, but in the meantime, we continue to benefit from cash that the last time sales of chips to custom.
<unk> provide.
Moving onto the business I'll begin my comments by stating that although we had strong performance from <unk> Park Concord in Alhambra seasonal issues and holiday shortened quarter presented headwinds that were bigger than expected preventing us from back filling for Budd Lake in particular delayed export license.
This has caused us to push out about $750000 worth of shipments.
And although we were able to bill nearly $800000 in nonrecurring engineering for another program it did not count as revenue.
Jeffrey S. Rittichier: The principal reason for this delay was a defective lot of circuit boards that could not be remanufactured before the supplier shut down for the holiday. NICs and margins held up well, and we expect similar margins in the March quarter. It has been widely reported in the press that the actual cash funding to replace munitions and systems allocated to the Ukraine is dangerously low.
The principal reason for this delay was a defective lot of circuit boards that could not be ramp remanufactured before the supplier shut down for the holidays.
Mix and margins held up well and we expect similar margins in the March quarter. It.
It has been widely reported in the press that actual cash funding to replace emissions and systems allocated to the Ukraine is dangerously low.
Jeffrey S. Rittichier: This has contributed to some of the budget tug-of-war that's going on between the service branches and has contributed to some of the timing delays that we've seen in contracts. However, operating expenses were right, a bright spot. Sales and marketing and G&A came in as expected, but R&D was significantly reduced, showing a nearly $600,000 improvement. We are mindful of our high internally funded research and development, otherwise known as IRED, spending and expect to continue to drive this down in the coming quarters through NRE contracts from our customers. In October, we talked about the credo.
This has contributed to some of the budget tug of war, that's going on between the service branches and has contributed to some of the timing delays that we've seen in contracting times.
Operating expenses were bright bright spot.
Sales and marketing and G&A came in as expected, but R&D was significantly reduced showing nearly a $600000 improvement.
We are mindful of our high internally funded research and development otherwise known as IRA AD spending and expect to continue to drive this down in the coming quarters through NRG contracts from our customers.
In October we talked about the <unk>.
Jeffrey S. Rittichier: XQ-58 Valkyrie, the Navy's Mark 48 Torpedo Business, INCREASE, and a few other programs that are continuing to progress nicely. This quarter, we're expecting several other long-term contracts to be awarded in addition to the Navy's Mark 54 Mod 1 torpedo as it enters production. As we flagged in last quarter's comments, the delays in receiving circuit boards did impact shipments of an advanced IMU for Raytheon's EO-IR pots, but we are now expecting to complete the whole contract and all of our engineering obligations under that contract at the end of the quarter. We expect to complete the current phase of our MMS program, along with several smaller programs, roughly within the next six to 12 months. We continue to expect that non-recurring engineering funding from our customers to be at least $7 million in calendar 24, with additional growth expected starting in September and proceeding through FY 25.
<unk> hundred 58, Valkyrie, the Navy's Mark 48 torpedo business increase and a few other programs that are continuing to progress nicely.
This quarter, we are expecting several other long term contracts to be.
Warranted in addition to the Navy's Mark 54, Mark one torpedo as it enters production.
As we flagged in last quarter's comments the delays in receiving circuit boards did impact shipments of an advanced IMU for raytheon's.
IR pods, but we are now expecting to complete the full contract and all of our engineering obligations under that contract at the end the quarter.
We expect to complete the current phase of our MMS program, along with several smaller programs roughly within the next six to 12 months. We continue to expect that nonrecurring engineering funding from our customers to be at least $7 million in calendar 'twenty four with additional growth expected starting in <unk>.
September and proceeding through FY 'twenty five.
Jeffrey S. Rittichier: I'd like to provide some additional insight into our integration program and our continued work on optimization and consolidation, all of which are a key area of focus this year. We remain on track to complete the ERP upgrades for Alhambra and Concord, unifying the company's ERP system. Beyond ERP, we should complete the product line management and product data management migration in Bud Lake in the March quarter, and this will complete the unification of product data. Manufacturing execution systems will be integrated into Concord and Chicago facilities starting this year.
I'd like to provide some additional insight into our integration programs and our continued work on optimization and consolidation all of which are a key area of focus this year.
We may not we remain on track to complete the ERP upgrades for Alhambra and Concord unifying the company's ERP systems.
On ERP, we should.
The product line management product data management migration and Budd Lake in the March quarter.
And this will complete the unification of product data.
Manufacturing execution systems will be integrated into Concord, and Chicago facilities, starting this year.
Jeffrey S. Rittichier: We've also made good progress on moving to a common IMU-INF architecture, having its roots in the former L3 aerospace and navigation team at Bud Lake. This common architecture will streamline our development programs and improve our ability to create new component technologies with less engineering expense. As I said before, component technology differentiation is the key to gross margin, and we are moving to design the next generation closed-loop fog components, as well as new closed-loop QMEM sensors to improve cost, size, weight, and power for all of our products. Beyond engineering consolidation, we're working to reduce the amount of floor space we require with the expected wafer fan sale. Alhambra is now moving all of its optical component assembly technology into a single Alhambra building that we now occupy.
We've also made good progress on moving to a common <unk>.
You Ians architecture, having its roots in the former L. Three aerospace and navigation team and Budd Lake.
This common architecture will streamline our development programs are improve our ability to create new component technologies with less engineering expense.
As I've said before component technology differentiation is the key to gross margin and we are moving to design. The next generation closed loop fog components as well as new closed loop Q Mems sensors to improve cost size weight and power for all of our products.
Beyond.
Engineering consolidation, we're working to reduce the amount of floor space we require.
With the expected wafer fab sale now.
<unk> is now moving all of its optical component Assembly technology into a single Alhambra building that we now occupy this is down from five buildings a year ago.
Jeffrey S. Rittichier: This is down from five buildings a year ago. COCKRID will reduce its footprint by approximately 50%, and we are working on a plan to right-size the Blood Lake facility. I wish the consolidation problem was as simple as cutting floor space and relocating processes and equipment. However, as I pointed out before, there are very expensive structural power gaps and environmental systems required to support these moves, not all of which exist in some of our facilities. Customers also require significant requalification efforts to certify processes on new equipment in the new facility.
Concord will have its footprint by approximately 50% and we are working on a plan to rightsize the Budd Lake facility.
I wish the consolidation problem was as simple as cutting floor space and relocating processes and equipment. However, as I pointed out before they are a very expensive structural power gas and environmental systems required to support these moves not all of which exist in some of our facilities.
Customers also require significant re qualification efforts to certify processes on new equipment and new facilities re qualification is typically done during block changes and timing is driven by their schedules and the needs of end users not ours. Nevertheless, we've made good progress on reducing the amount of floor space.
Jeffrey S. Rittichier: Requalification is typically done during block changes, and timing is driven by their schedules and the needs of end-users, not ours. Nevertheless, we've made good progress on reducing the amount of floor space that we require within the capital and requalification limits in the business and expect that effort to continue until we reach an optimal configuration. Finally, in turning now to guidance, March quarter revenue is expected to be flat compared to December with a range of 23 to 25 million. This is just largely due to order timing and some of the expected delivery dates that we're seeing in our order book. With that, I will turn the call back over to Tom. Thank you, Jeff.
That we require within the capital and re qualification limits in the business and expect that effort to continue until we reach an optimal configuration.
Finally, and turning now to guidance the March quarter is expected to be flat compared to December with a range of 23% to $25 million. This is just largely due to order timing and some of the expected delivery dates that were seeing on our order book with that I will turn the call back over to Tom.
Yes.
Thank you Jeff.
Thomas P. Minichiello: First, a reminder that the results from our legacy business, namely the former broadband segment and the defense up to electronic products, are reported in the income statement under discontinued operations. As previously reported, all of these operations, except for the Alhambra Indian Phosphide Wafer Fab and associated chip business, which remain on the balance sheet as assets held for sale, were sold in October. With that, I'll move to a discussion of the results from continuing operations, which is exclusively the commercial navigation business. Revenue in Fiscal 1-2 was $24.1 million compared to the prior quarter's $26.8 million. Kinley Park shipments continued on a path of continuous, steady growth each quarter since the acquisition over a year ago.
First a reminder, that the results from our legacy business, namely the former broadband segment and the defense Opto electronic products are reported in the income statement under discontinued operations.
As previously reported all of these operations, except for the Alhambra Indium phosphide wafer fab and associated chip business, which remain on the balance sheet as assets held for sale.
Were sold in October.
With that I'll move to a discussion of the results from continuing operations.
Which is exclusively the inertial navigation business.
Revenue in fiscal <unk> was $24 1 million compared to the prior quarter at $26 8 million.
Tinley Park shipments continued on a path of continuous steady growth each quarter since the acquisition over a year ago.
Thomas P. Minichiello: Concord and Alhambra, while up compared to the quarter before, fell short of our expectations, largely attributable to, as Jeff noted, export license and product delays towards the end of the quarter. Additionally, Bud Lake revenue is down primarily due to the KMU loss we outlined on our last call. Let me now turn to the rest of the operating results, which will be on a non-GAF-based Gross margin held up at 29% in a few despite the lower revenue. Contributing to the favorable margin was improved fixed overhead absorption in Kimley Park and Concord and an overall favorable mix. Operating expenses were $9.5 million in fiscal 1Q compared to $10.1 million in fiscal 4Q. The improved OPEX was largely driven by an increase in customer-funded non-recurring engineering, or NREs, in which the associated engineering expense is moved to cost of goods sold to match up with the corresponding revenue; this lowers internally funded R&D, or IRAD, which remains part of OPI. The operating loss in the December quarter was $2.6 million, compared to the September quarter's $1.9 million.
Concord in Alhambra, while up compared to the quarter before fell short of our expectations largely attributable to as Jeff noted export license and product delays towards the end of the quarter.
Additionally, Budd Lake revenue was down primarily due to the team of loss, we outlined on our last call.
Let me now turn to the rest of the operating results, which will be on a non-GAAP basis.
Gross margin held up at 29% in <unk>, despite the lower revenue <unk>.
Contributing to the favorable margin was improved fixed overhead absorption and Tinley Park, and Concord, and an overall favorable mix.
Operating expenses were $9 5 million in fiscal <unk> compared to $10 1 million in fiscal <unk>.
The improved Opex was largely driven by an increase in customer funded nonrecurring engineering or NRI.
In which the associated engineering expense is move to cost of goods sold to match up with the corresponding revenue.
This lowered internally funded R&D or IRA at which remains as part of Opex.
Operating loss in the December quarter was $2 6 million compared to the September quarter's $1 9 million negative adjusted EBITDA was $1 7 million compared to 900000 last quarter net loss was $2 6 million or <unk> <unk> per share.
Thomas P. Minichiello: Negative ejected EBITDA was $1.7 million, compared to $900,000 last quarter. Net loss was $2.6 million, or $0.03 per share. The sequential changes for all three of these metrics were all primarily attributable to lower revenue.
The sequential changes for all three of these metrics were all primarily attributable to the lower revenue.
Thomas P. Minichiello: Turning to the balance sheet, reported cash was $21.1 million at December 31st, which temporarily included $2.2 million of third-party cash associated with the sale of the legacy business and a deposit on the potential sale of the wafer factory. Net of these items, EMCORE cash was $19 million at the end of the quarter, compared to $26.7 million at September 30th. The $7.7 million decrease during the quarter consisted of the following: negative 1.7 million adjusted EBITDA, and 1.5 million associated with discontinued operations. A $1.3 million litigation settlement. $2 million for financing activities, including a $1.7 million debt reduction on our revolving line of credit. $700,000 for severance, and a combined total of $500,000 for working capital, CapEx, and litigation-related debt. The litigation settlement was one-time in nature, and going forward, we expect a significant drop-off in cash use for discontinued operations and severance. Total outstanding debt was reduced by $2 million during the quarter to $8.6 million when compared to $10.6 million at September 30th.
Turning to the balance sheet reported cash was $21 1 million at December 31, which temporarily included $2 2 million of third party cash associated with the sale of the legacy business and a deposit on the potential sale of the wafer fab.
Net of these items EMCORE cash was $19 million at the end of the quarter compared to $26 7 million at September 30th.
The $7 $7 million decreased during the quarter consisted of the following.
Negative $1 7 million adjusted EBITDA, $1 5 million associated with discontinued operations.
A $1 $3 million litigation settlement.
$2 million for financing activities, including a $1 7 million dollar debt reduction on our revolving line of credit 700000 for severance and a combined total of 500000 for working capital Capex and litigation related costs.
The litigation settlement was onetime in nature and going forward, we expect a significant drop off in cash use for discontinued ops and severance.
Total outstanding debt was reduced by $2 million during the quarter to $8 6 million when compared to $10 6 million at September 30th.
Thomas P. Minichiello: The $8.6 million as of December 31st consisted of $4.6 million on the line of credit and a $4 million balance on the term loan component. There are currently about $3 million available for borrowing on the line. Before we get to the Q&A, as announced this past Tuesday, we plan to be at the Carolyn Aerospace and Defense Conference next week on Wednesday, February 14th in Arlington, Virginia, including a presentation and investor meeting. A link to the live webcast of the presentation was included in Tuesday's announcement.
The $8 6 million as of as of December 31 consisted of $4 6 million on our line of credit and a $4 million balance on the term loan component.
There is currently about $3 million available for borrowing on the line.
Before we get to the Q&A as announced this past Tuesday, we plan to be at the Cowen Aerospace and Defense Conference next week on Wednesday February 14th in Arlington, Virginia, including a presentation and investor meetings.
A link to the live webcast of the presentation was included in Tuesday's announcement.
With that we are now opening up the call for your questions.
Operator: With that, we are now opening up the call for you. And thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
And thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Operator: Please stand by while we compile the Q&A and play One Moment by BIRTHPLAY. And our first question comes from Richard Shannon from Craig Hallam Capital, a line of not, Well, hi, Jeff and Tom. Thanks for taking my question. Just to start off with a few tactical questions here, kind of quickly.
And one moment for our first question.
Okay.
Our first question comes from Richard Shannon from Craig Hallum Capital. Your line is now open.
Well, Hi, Jeff and Tom Thanks for taking my questions.
Just to start off with a few tactical questions here kind of quickly here.
Richard Cutts Shannon: So, obviously, the December quarter revenues were a bit low here. You talked about some pushouts, some supply issues here. And I know you talked about some bookings that were a little bit farther out here, but I guess it would have seemed like that the bundling would have come back within this quarter. But it doesn't seem like that's represented in the numbers.
So obviously the December quarter revenues were a bit low here and you've talked about some push outs.
<unk> supply issues here.
And I know you talked about some some bookings that were a little bit farther out here, but I guess it would seem like that unlike would've come back.
Within this corridor here it doesn't seem like that's represented in the numbers I'm not sure if I'm reading this right here, but why wouldn't we see some of that come back and then how does this help us think about as you said in the press release about returning to growth in the June quarter.
Jeffrey S. Rittichier: I'm not sure if I'm reading this right here, but why wouldn't we see some of that come back? And then how does this help us think about, as you said in the press release, about returning to growth in the June quarter? Yeah, sure. So let me tackle this one way.
Yes sure.
So let me, let me tackle Budd Lake.
Jeffrey S. Rittichier: So Bud Lake, you know, was the primary site that was working on anger for a pretty significant fraction of their revenue was associated with that program, okay? So, in the very short term, and I'm talking about now, over the next six months, there isn't another program to take its place until the mass motion sensor, or what we call MMS, hits production, and that will happen starting in early 2024, right?
So bud light.
Was the primary.
Site that was was working on new and a pretty significant.
<unk> actions.
Their revenue was associated with that program okay.
In the very short term and I'm talking about now over the next six months.
There isn't another program to take place.
Until the mask motion sensor or what we call MMS.
Production and that will happen starting in early 'twenty four right. So we'll be building all of the optical components here in Alhambra integrating them here and then over in Budd Lake They will be doing all of the assembly and checkout.
Jeffrey S. Rittichier: So, we'll be building all of the optical components here in Alhambra, integrating them here, and then over in Bud Lake, they will be doing all of the assembly and checkout. So, you know, effectively, that program should do a pretty good job of replacing that revenue. So the main game really for us in the short term is replacing the lost revenue with other programs that are running in Concord, Tinley Park, and Alhambra. And, you know, just a little bit of timing issues on those.
So.
<unk> that program.
We do a pretty good job of replacing.
That revenue.
The name of the game is really for us in the short term is replacing the lost revenue with other programs.
<unk> that are running in.
Concord.
<unk> Park, and Alhambra, and it's just a little bit of timing issues on those.
Jeffrey S. Rittichier: We're expecting it's going to be a little bit hard to get some of those into production this quarter, which is why we pointed towards June as a resumption of growth. Okay, so in the short term, before that mass motion sensor hits production, it's really about maximizing the revenue out of the other three facilities. Does that make sense?
We're expecting.
It's going to be a little bit hard to get some of those into production this quarter.
Why reported towards June as a resumption of growth okay.
In the short term before that mask motion sensor hits production, it's really about maximizing the revenue out of the other three facilities.
So it makes sense.
Richard Cutts Shannon: Yeah, I think so. Maybe we can put this in the bigger context of what you said last quarter, where I think you talked about a funnel that would support kind of $115 to $125 million for this, I believe it was referring to the fiscal year. And I think that was already taking into account the loss of KMU here. How does that number sit with you now, Dave?
Yes, I think so maybe it just puts us in bigger context, what you said last quarter.
I think you were talking about a funnel that would support kind of $115 million to $125 million for this I believe it was referring to the fiscal year.
And I think that was already taking into account the loss of came over here how does that how does that number sitting with you know then.
Jeffrey S. Rittichier: Yeah, so I would say it's just pushed off by approximately a quarter or two. So, you know, at some point when we have a little more certainty on exactly what's going on, we will update the yearly guidance. But it's just timing, right? And part of it is driven by this tug-of-war between the services. No programs have been locked, no, you know, competitive issues at the last minute or anything like it
Yes, so I would say, it's just pushed off approximately a quarter or two so.
At some point when we have a little more certainty on exactly what's going on we will update the yearly guidance.
But it is just timing right.
And it's part of it is driven by this tug of war between the services.
No programs have been locked up.
No.
No competitive issues at the last minute or anything like that it's just timing.
Jeffrey S. Rittichier: It's just timing. And, you know, again, to give you one example, the Mark 54, the new version, the Mod 1, was supposed to go into production. It was supposed to go into production 18 months ago.
And.
Again.
One example of the Mark 54.
New version the Mod one is supposed to go into production is supposed to go into.
Production at 18 months ago.
Jeffrey S. Rittichier: And it was largely contracting delays getting into Raytheon that were responsible for, you know, them telling us, hey, you guys have a go button. So, you know, this is just sort of the macro environment that we find ourselves in right now. Fundamentally, all of the programs are doing well.
And it was largely contracting delays.
Getting into Raytheon that we're responsible for.
Them, telling us Hey, you guys.
So this is just sort of the macro environment that we find ourselves in right now.
Fundamentally all of the programs are doing well there has been nothing to comment on as far as any losses. It's just.
Jeffrey S. Rittichier: There's been, you know, nothing to comment on as far as any losses. It's just, you know, it's just the short-term stuff. I mean, I can see a situation where we exit the March quarter with a backlog that I think would be a very, very pleasant surprise. The challenge is you've got to take a look at it.
Sure.
B.
It's just the short term stock.
I could see a situation, where we exit the march quarter with backlog that I think would be a very very pleasant surprise the challenges.
Jeffrey S. Rittichier: Okay, well, how much of this is due within the next, say, two quarters, right? We're not worried about the C5 much at all, it's, you know, sort of filling the short-term gap from KMU, and that's just proven to be... a little bit more difficult from a timing perspective. That's all.
To take a look at it okay well how much of this is due within the next day right.
Alright.
We're not we're not worried about much at all.
Okay.
The short term gap from <unk> and Thats whats just proven to be.
A little bit more difficult from a timing perspective thats all.
Jeffrey S. Rittichier: Okay. All right, fair enough. Let's see here.
Okay.
<unk>.
Alright fair enough, let's see here just quickly on the wafer fab sale here or is this something you expect to get done this quarter. I mean, you talked Tom mentioned the deposit made here. So it seems like there's confidence that at some degree on both sides here.
Jeffrey S. Rittichier: Just quickly on the wafer fab sale here, is this something you expect to get done this quarter? I mean, you talked over, Tom mentioned a deposit made here, so it seems like there's confidence to some degree on both sides here. Is that confidence in closing this quarter, and what's the delay here? Yeah, um, I think we've got a reasonable degree of confidence. We've now got multiple, um, your exclusivity was lost because of delays. And so, you know, there are now other inbound interests. And, you know, like the old saying goes, sometimes you need, you know, two gears to make the one go through. And so, you know, should we get it done this quarter? Gosh, you know; I hate to be the broken clock that's right twice a day.
Is that the confidence in closing this quarter and what's the what's the delay or anything you can share there.
Yes.
I think we've got a reasonable degree of confidence we've now got multiple.
Exclusivity was lost because of delays.
And.
So there is now other inbound interest and.
The old, saying goes sometimes you need to.
Two deals to make the one go through.
And.
So.
Should we get it done this quarter gosh I hate to be the broken clock is right twice a day.
Jeffrey S. Rittichier: We are working to close it as quickly as we can. Okay, fair enough. Just one or two quick questions here for Tom.
We are working to close it as quickly as we can.
Okay fair enough one or two quick questions here for Tom how are we thinking about.
Richard Cutts Shannon: How are we thinking about cash burn in the quarter? I think you kind of alluded to maybe that cash balance improving in this quarter based on working capital. It doesn't sound like that necessarily should change, but please tell me if your views are different there.
Cash burn in the quarter I think you kind of alluded to maybe that cash balance improving in this quarter based on working capital it.
It doesn't sound like that's necessarily should change, but please tell me if your views are different there and then what's included in terms of the cash.
Thomas P. Minichiello: What's included in terms of the cash burns for the wafer fab or discontinued operations should it be around for the full quarter? So, you may have noticed, Richard, that the cash balance at the end of December, we talked about this on the last call, and we had forecasted a larger amount of cash used in the December quarter than what actually ended up happening. And part of that was we received some rather large collections from customers in advance. And I think the tributors said they were probably trying to close out the year and use some budget money, perhaps. But a lot of that happened on December 29th, the last day of the quarter.
Cash burn for the.
Wafer fab or the discontinued operations should it be around for the full quarter.
So you may have noticed Richard that.
The cash balance at the end of December.
You had talked about this on the last call and we had forecasted a larger amount of cash used in the December quarter than what actually ended up happening.
Part of that was we received some rather large collection from customers.
Hi.
In advance.
Attributed to it probably theyre trying to closing out the year.
Use some budget money perhaps.
But a lot of that happened on December 29th the last day of the <unk>.
Water.
And so that moved.
Thomas P. Minichiello: And so that moved – that gave us a much more favorable working capital in December than we were anticipating. And so another side of that is it's going to flip over into this quarter and impact this quarter in a way that, you know, we didn't foresee. So there'll be – you know, the results based on the guidance we just gave are, as Jeff said, flat to the December quarter. And, you know, you're likely to see similar results down the P&L and into adjusted EBITDA. We'll have more use of working capital this quarter. The other good news is that a lot of the discontinued operations stuff, which, you know, from a cash perspective was over a million dollars this past quarter, is likely to come down significantly – likely under half a million. Maybe even, you know, a couple hundred thousand, even less than that from our best estimates at this stage.
That gave us a much more favorable.
Capital in December than we were anticipating.
The other side of that is it is going to flip over into this quarter.
An impact this quarter.
Why that.
We didn't foresee it so there'll be the results based on the guidance. We just gave as Jeff said.
Not to the December quarter and.
You're likely to see similar results down the P&L and into adjusted EBITDA.
We will have more use of working capital this quarter.
The other good news is.
A lot of the discontinued op stuff, which from a cash perspective was over $1 million. This past quarter is likely to come down significantly likely under half a million.
Maybe even a little bit about 400000 less than that the Mark best estimates at this stage.
Thomas P. Minichiello: And then the rest of it is capex and financing. So, you know, there will be a use this quarter, based on the revenue that we're projecting. Hey. Just kind of giving you the major bullet points here, and I hope I answered your question. Richard, one other thing I thought you said was about, you know, past use of the waiver fact.
And then the rest of it is capex and financing so.
There will be a use this quarter based on the revenue that we're projecting.
Okay.
Just kind of given you the major bullet points here and I hope I answered your.
Question.
Yes.
Richard One others go ahead, you said was about.
Cash used in the wafer fab, it's shut down.
Jeffrey S. Rittichier: Right. So, it's really sort of maintenance-level stuff that's going on in there. So there's no appreciable impact there. Again, you know, we're going to get $200,000 a quarter on last time. Chip buys that helps to offset that, but it just doesn't show up in revenue. Right. It's a discontinued operation.
Alright.
So, it's really sort of maintenance level stuff, that's going on in there.
And.
So there is no appreciable impact there again, we're going to get $200000 a quarter on last time chip buys that helps to offset that but it just doesn't show up in revenue right its discontinued operations.
Okay, and maybe just a follow up to specifically Tom here instead, it's going to have the cash will be down any can you give us any sense of magnitude I mean, it looks like it was down.
Jeffrey S. Rittichier: Okay. And maybe just to follow up, Chief, specifically down here, you said it's going to be down. Can you give us any sense of magnitude? It looks like it was down.
Thomas P. Minichiello: You know, five and a half million, you know, in growth terms, September to December here with the deposit that came in, I mean, is it going to be down more than three or five million in this quarter, or just want to get a sense of what you're seeing? Yeah, it's going to be, that's not a bad range to think about it, you know, probably more towards the upper end of that range. That is going to be exclusive of some of the things we're doing to try to drive working capital out of the Concord Inventory. And so I think Tom's got a good handle on it, but we're going to try and do a fair bit better. Okay. The ending tax number here in this quarter, to what degree is that above or at the limits of your comfort level as you need to operate the business? Well, we like, you know, we like $20 million as a good comfort level.
$5 5 million.
In gross terms September to December here with the deposits that came in.
So youre going to be down more than $3 million to $5 million in this quarter or just wanted to get a sense of what youre, yes, it's going to be.
That's not.
A bad range to think about it probably more towards the upper end of that range.
Okay.
Yes.
Sure.
That is going to be exclusive of some of the things we're doing to try to go and drive working capital out of the Concord inventory.
And so.
I think Tom has got a good handle on it but we're going to try and do a fair bit better.
Okay.
Ending cash number here in this quarter to what degree is that above or at the limits of your comfort level here as you're as you need to operate the business.
Well, we like.
Like $20 million is a good comfort level, but.
Thomas P. Minichiello: But, you know, we are operating below that, which is doable and can sustain should, you know, as long as we meet our business goals. Let me ask one question, I'll jump on the line since there's other questioners here, but just kind of looking at the top line here, Jeff, and as we talked about last quarter, you're trying to backfill the TAMU loss, which is obviously substantial, and it seems like we've got some pushouts of some programs related to a number of issues here that really seem to be outside of your control, but how about in terms of adding things into the front side of that funnel, or even getting towards the end of, you know, getting contracts awarded here, what's the visibility and how do we think about, you know, those opportunities here to see an acceleration to the end of the fiscal year?
We are operating below that which is doable and.
Can sustain should as long as we meet our business goals.
Okay Fair enough, let me ask one question I'll jump out of line since Theres other other questioners here, but just kind of looking at the topline here Jeff.
And as we talked about last quarter Youre trying to backfill the Tamar locks, it's obviously substantial.
And it seems like we've got some some push outs of some programs related to a number of issues here that really it seemed to be outside of your control, but how about in terms of adding.
Things into the front side of that funnel.
Or even getting towards the end of <unk>.
Getting contracts awarded here, what's the visibility and how do we think about.
Those those opportunities here to see an acceleration to the end of the fiscal year.
Thomas P. Minichiello: Yeah, so, one of the things, and I mentioned this, I'll give you a little more color on it. So, for example, one of the export licenses that was delayed in September was for two units for an international customer that needs a lot of products. And, you know, they've got to run through what's called a small incremental or delta qualification.
Yes so.
One of the things and I mentioned this I'll give you.
Little more color on it. So for example, one of the export licenses that was delayed in December.
Was four two unit.
For.
An international customer.
It needs a lot of product.
And.
Jeffrey S. Rittichier: And those things are still sitting on the loading dock right now because, you know, the Department of Commerce is doing what they're doing. And so, you know, it's a case where There's just not a thing we can do about it. As soon as they give us a go, we can start producing the stuff, and, you know, sometimes it's just... It just happens that way. You can; you can execute at your best. That's the level of ability, and when you have outside factors that interfere, you know.
They've got to run through.
A small incremental or delta qualification.
And those things are still sitting on the loading dock right now.
Sure.
Department of Commerce is doing what theyre doing.
And so.
It's a case where.
There's just not a thing we can do about it.
As soon as they give us a go we can start producing this stuff.
And.
Sometimes with the chip.
It just happens that way you can you can execute to your best.
Jeffrey S. Rittichier: Your ability to respond is limited. There are other opportunities out there, and again, that's why I just, you know, here we are almost midway through the March quarter, and it's just the time necessary to build and ship the stuff, more than, you know, again, any particular problems from a, you know, product demand standpoint, and where we are, I'm not really concerned at all. It's just timing.
Sure.
Best level of ability and when you have outside factors that interfere.
Yeah.
Your ability to respond is limited there are other opportunities out there and again that's why.
Here, we are almost midway through the March quarter.
And it's just.
Time necessary to.
Build and ship the stuff.
More than.
Again, any particular problems from a.
Product demand standpoint, and where we are I am not really concerned at all it's just timing.
Richard Cutts Shannon: Okay, fair enough. I will jump on the line, guys. Thank you, and thank you. And I'm showing no further questions. I'll now have to turn the call back over to Jeff Rittichier for closing remarks. Thank you. I'd also like to thank all of you for your interest in EMCORE and give special recognition to the production and engineering teams for the extraordinary effort they put in over the holidays. Guys were coming in to work through Christmas Eve and New Year's Eve to maximize shipments, and I just want to give you guys a big public thank you. Thank you all very much. This concludes today's conference call. Thank you for participating. You may now disconnect. Paul Silverstein, Timothy Savageaux,
Okay Fair enough I will jump out of line guys. Thank you.
And thank you.
And I am showing no further questions I would now like to turn the call back over to Jeffrey nature for closing remarks.
Thank you.
I'd also like to thank all of you for your interest in EMCORE.
And a special recognition for production and engineering teams for the extraordinary effort they put in over the holidays.
Guys were coming in to work through.
Christmas Eve and new year's Eve to maximize shipments and I just want to.
If you guys are big public thank you.
Thank you all very much.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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Okay.
Good.
Yes.
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