Q2 2024 EMCORE Corp Earnings Call

Benjamin: Thank you for standing by. My name is Benjamin, and I'll be your conference operator today. At this time, I would like to welcome everyone to EMCORE Corporation's Fiscal 2024 Second Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise.

Thank you for standing by my name is Benjamin and I'll be your conference operator today.

Benjamin: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star 1 on your telephone keypad. If you'd like to withdraw your question, press star 1 again. Thank you. I would like to turn the call over to Thomas Minichiello, EMCORE's Chief Financial Officer. Please go ahead.

Benjamin: At this time I would like to welcome everyone to the EMCORE Corporation fiscal 'twenty 'twenty four is second quarter results conference call.

Thomas P. Minichiello: All lines have been placed on mute to prevent any background noise.

Thomas P. Minichiello: After the Speakers' remarks, there will be a question and answer session if.

Thomas P. Minichiello: If you'd like to ask a question. During this time simply press star one on your telephone keypad.

Thomas P. Minichiello: If you'd like to withdraw your question Press Star one again, thank you.

Thomas P. Minichiello: I would like to turn the call over to Tom Minichiello and of course, Chief Financial Officer. Please go ahead.

Thomas P. Minichiello: Thank you, Benjamin. And good afternoon, everyone, and welcome to our conference call to discuss EMCORE's fiscal 2024 second quarter results. The news release we issued this afternoon is posted on our website, emcore.com. Joining me on the call today is Cletus Glassner, Chairman of the Board, and Matt Vargas, Vice President of Sales, Marketing, and Business Development. As we'll talk about in a few minutes, Matt will be taking on an exciting and important new role as of today.

Thomas P. Minichiello: Thank you Benjamin and good afternoon, everyone and welcome to our conference call to discuss <unk> fiscal 2024 second quarter results.

Thomas P. Minichiello: The news release, we issued this afternoon is posted on our website <unk> dot com.

Thomas P. Minichiello: Joining me on the call today is Cletus Glassner chairman of the board and Matt or I guess, Vice president of sales marketing and business development.

Thomas P. Minichiello: As we'll talk about in a few minutes, Matt will be taking on an exciting and important new role effective today.

Thomas P. Minichiello: I'll get things going with a review of the financial results, followed by Cletus, who will discuss recent developments, and we'll conclude by taking questions. 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.

Thomas P. Minichiello: I'll get things going with the review of the financial results, followed by Cletus, who will discuss recent developments.

Thomas P. Minichiello: And we'll conclude by taking questions.

Thomas P. Minichiello: 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 are related 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.

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 27, a of the Securities Act of $19 33, and section 21 E of the Exchange Act of 1934. Please.

Thomas P. Minichiello: We caution you not to rely on these statements and to also consider the risks and uncertainties associated with these statements and 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 such statements to actual results, or to changes in our expectations, except as required by applicable law or regulation.

Thomas P. Minichiello: 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 facilitate comparisons across reporting periods. Investors are encouraged to review 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. Before we get into the March quarter results, I want to start with a recap of our recently reported sale of the discontinued CHIPS business line and the Alhambra Indian Phosphide wafer fab that we shut down last September.

Thomas P. Minichiello: 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 are.

Thomas P. Minichiello: Barry.

Thomas P. Minichiello: Management cautions that these forward looking statements are relate to <unk> are related 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.

Thomas P. Minichiello: To be materially different from those expressed or implied by any forward looking statements.

Thomas P. Minichiello: We caution you not to rely on these statements and to also consider the risks and uncertainties associated with these statements and the business, 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.

Thomas P. Minichiello: <unk> Form 10-K.

Thomas P. Minichiello: Company assumes no obligation to update any forward looking statements to conform such statements to actual results or to changes in our expectations, except as required by applicable law or regulation.

Thomas P. Minichiello: 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, but non-GAAP measures reflect the company's core ongoing operating performance and facilitates comparisons across reporting periods investors are encouraged to review these non-GAAP measure.

Thomas P. Minichiello: As well as the explanation and reconciliation of these measures to the most comparable GAAP measures included in our news release.

Thomas P. Minichiello: Okay.

Thomas P. Minichiello: Before we get into the March quarter results.

Thomas P. Minichiello: Wanted to start with a recap of our recently reported sale of the discontinued chips business line and L. Hambrick indium phosphide wafer fab that we shut down last September.

Thomas P. Minichiello: The deal closed on April 30th and included an all-cash sale price of $2.92 million, which consisted of a $1 million deposit received back in October and $1.92 million cash proceeds received last week at closing, and a sublease involving two buildings on the Alhambra campus along with the buyer assuming related end-of-lease remediation obligations.

Thomas P. Minichiello: The deal closed on April 30th and included an all cash sale price of $2 92 million, which consisted of a 1 million dollar deposit received back in October and a $1 $19 million cash proceeds received last week at closing.

Thomas P. Minichiello: And a sublease involving two buildings on the Alhambra campus, along with the buyer assuming related end of lease remediation obligations.

Thomas P. Minichiello: This transaction represents the final and complete closeout of the company's legacy business. I'll now move on to revenue for fiscal 2Q, which was $19.6 million, compared to the prior quarter's $24.1 million. Lower than expected revenue in the March quarter was primarily due to the following three factors. The first one involves our two torpedo programs, the Mk-54 and the Mk-48, that both use our Tactical Grade Quartz MEMS Inertial Measurement Units, or IMUs.

Thomas P. Minichiello: This transaction represents the final and complete closeout of the company's legacy businesses.

Thomas P. Minichiello: I'll now move on to revenue for fiscal <unk>, which was $19 6 million compared to the prior quarter's 21 point $24 1 million.

Thomas P. Minichiello: Lower than expected revenue in the March quarter was primarily due to the following three factors.

Thomas P. Minichiello: In the case of the Mark 54, finished goods were ready to ship in March, but the order and delivery were pushed into April. These IMUs have now been shipped. The Mark 48 units were also ready to go, but shipment was held up as a result of testing at the customer's site. The second one has to do with late-arriving material and early-stage transitioning to production that resulted in delays in completing a navigation-grade fiber-optic gyroscope, or FOG-IMU, for a different program.

Thomas P. Minichiello: The first one involves our two torpedo programs the Mark 54 in the Mark 48 that both of US are tactical grade quartz Mems inertial measurement units or I am use in the case of the Mark 54 finished goods were ready to ship in March, but the order and delivery was pushed into April.

Thomas P. Minichiello: These <unk> have now been shipped the Mark 48 units were also ready to go with shipment was held up as a result of testing at the customer's site.

Thomas P. Minichiello: The second one has to do with late arriving material and early stage transitioning to production that resulted in delays in completing our navigation grade fiber optic gyroscope or fog IMU for a different program.

Thomas P. Minichiello: And third, the continued decline in revenue from our Bud Lake site following the cancellation of the TAMU project late last year. Let me now turn to the rest of the operating results, which will be on a non-GAAP basis. Gross margin was 15% in fiscal 2Q compared to 29% the quarter before, primarily due to lower revenue as well as production yield issues at our QMEMS operation in Concord. Operating expenses were $9.8 million in fiscal 2Q compared to $9.5 million in fiscal 1Q. R&D expense was sequentially higher due largely to a lower level of non-recurring engineering or NRE revenue when compared to the quarter before, resulting in higher internally funded R&D or IRAD, which remains part of operations.

Thomas P. Minichiello: And third was the was the continued decline in revenue from our Budd Lake site. Following the cancellation of the Tamar project late last year.

Thomas P. Minichiello: This was slightly offset by lower SG&A, primarily driven by tighter overall expense management. As a result of the lower revenue and gross profit, the operating loss in the March quarter was $6.9 million, compared to the December quarter's $2.6 million. Negative adjusted EBITDA was $5.8 million compared to $1.7 million last quarter. The net loss was $7 million, or $0.08 per share. Shifting to the fiscal 2Q gap numbers for a moment, these results included a $1 million restructuring charge to cover severance costs associated with personnel reductions during the March quarter.

Thomas P. Minichiello: Let me now turn to the rest of the operating results, which will be on a non-GAAP basis.

Thomas P. Minichiello: Gross margin was 15% in fiscal <unk> compared to 29% the quarter before primarily due to the lower revenue as well as production yield issues at our Q Mems operation and conquer.

Thomas P. Minichiello: Operating expenses were $9 8 million in fiscal <unk> compared to $9 5 million in fiscal <unk>.

Thomas P. Minichiello: R&D expense was sequentially higher due largely to a lower level of nonrecurring engineering or NRI revenue when compared to the quarter before resulting in higher internally funded R&D or I read which remains part of Opex.

Thomas P. Minichiello: This was slightly offset by lower SG&A, primarily driven by tighter overall expense management.

Thomas P. Minichiello: As a result of the lower revenue and gross profit operating loss in the March quarter was $6 9 million compared to the December quarter is $2 6 million.

Thomas P. Minichiello: Negative adjusted EBITDA was $5 8 million compared to $1 seven last quarter net.

Thomas P. Minichiello: Net loss was $7 million or <unk> <unk> per share.

Thomas P. Minichiello: Shifting to the fiscal <unk> GAAP numbers for a moment. These results included a $1 million restructuring charge to cover severance costs associated with personnel reductions during the March quarter.

Thomas P. Minichiello: Annualized savings from these actions are estimated to be approximately $2 million, of which about 80% benefits gross profit. Turning to the balance sheet, the cash balance was $12 million at March 31st compared to $20 million net of third-party funds at December 31st. Total outstanding debt was $8.3 million at March 31st, compared to $8.6 million at the end of December. The $8 million cash decrease during the quarter was largely due to the negative $5.8 million adjusted EBIT.

Thomas P. Minichiello: Annualized savings from these actions are estimated to be approximately $2 million of which about 80% benefits gross profit.

Thomas P. Minichiello: Turning to the balance sheet cash balance was $12 million at March 31, compared to $20 million net of third party funds at December 31.

Thomas P. Minichiello: Total outstanding debt was $8 3 million at March 31, compared to $8 6 million at the end of December.

Thomas P. Minichiello: The $8 million cash decreased during the quarter was largely due to the negative five 8 million of adjusted EBITDA. We also used cash during the quarter for the following items 700000 associated with discontinued ops 600000, as part of financing activities 500000 for severance and a combined total of 400.

Thomas P. Minichiello: We also used cash during the quarter for the following items: $700,000 associated with discontinued operations $600,000 as part of financing activities $500,000 for severance, and a combined total of $400,000 for CAPEX and litigation-related costs. Now to guidance. We anticipate quarterly revenues, based on factors we know today, to be flat to slightly up between the back half of fiscal 24 and early fiscal 25. For the June quarter, we expect revenue to be in the range of $19 to $21 million.

Thomas P. Minichiello: For Capex and litigation related costs.

Thomas P. Minichiello: Now to guidance.

Thomas P. Minichiello: We anticipate the quarterly revenues based on factors, we know today to be flat to slightly up between the back half of fiscal 'twenty four in early fiscal 'twenty five.

Thomas P. Minichiello: For the June quarter, we expect revenue to be in the range of $19 million to $21 million.

Thomas P. Minichiello: Longer term, our current book of business, backlog, and opportunity pipeline points to an expected return to top-line growth beginning in the first half of fiscal 25. We are intently focused right now on bottom-line growth, which requires swift actions to right-size the cost structure of the business. We have already started taking such actions, are moving as quickly as possible, and we intend to provide an update on this important activity once the full plan takes shape. So with that, I'll now turn the call over to CLIER.

Thomas P. Minichiello: Longer term, our current book of business backlog and opportunity pipeline points to an expected return to topline growth beginning in the first half of fiscal 'twenty five.

CLIER: We are intently focused right now on bottom line growth, which require swift actions to rightsize the cost structure of the business.

CLIER: We have already started taking such actions are moving as quickly as possible and we intend to provide an update on this important activity once the full plan takes shape.

CLIER: So with that I'll now turn the call over to cliffs.

Thomas P. Minichiello: Okay.

Cletus Glasner: Thank you, Tom. I requested to participate in this call in order to discuss some of the recent developments that we've taken to improve the performance of the company. As Tom mentioned, the company completed the sale of the remaining legacy business. The transaction is complete, and the additional consideration of approximately $2 million has been received.

CLIER: Thank you Tom I requested to participate on this call in order to discuss some of the recent developments that we've taken to improve the performance of the company.

Cletus Glasner: As Tom mentioned the company completed the sale of the remaining legacy business.

Cletus Glasner: The transaction is complete the additional consideration of approximately $2 million has been received and this completes all of the actions required to exits exit the legacy business with only minor expenses to go.

Cletus Glasner: And this completes all of the actions required to exit the legacy business with only minor expenses. We also announced last week that the company's debt was assigned by the prior lender, Wingspire, to Hale Capital. The company simultaneously entered into an agreement with the new lender which will provide for additional flexibility to make necessary changes. The company also created a restructuring committee of the board with the authority to direct management to make the necessary cost reductions and restructuring with the objective of becoming adjusted cash flow break-even, excluding restructuring costs, by the end of the quarter ending September 2024. These actions have already begun and will continue.

Cletus Glasner: We also announced last week that the companies that was assigned by the prior lender, which is winks buyer to Hale capital.

Cletus Glasner: The companys simultaneously entered into an agreement with the new lender, which will provide for additional flexibility to make necessary changes.

Cletus Glasner: The company also created a restructuring committee of the board with the authority to direct management to make the necessary cost reductions and restructuring with the objective of becoming adjusted cash flow breakeven, excluding restructuring costs by the end of the quarter ending.

Cletus Glasner: September 2024.

Cletus Glasner: These actions have already begun and will continue.

Cletus Glasner: The Restructuring Committee intends to continue to evaluate additional actions to best achieve the targeted results. In addition, the board will be exploring alternatives to shore up the company's liquidity, including potentially raising additional capital to facilitate and possibly accelerate these restructuring actions. And finally, the company's CEO, Jeff Rittichier, has decided to step down after serving the company since 2014. He will also leave the board. He will continue to consult with the board and assist with the transition to a new CEO.

Cletus Glasner: The restructuring committee intends to continue to evaluate additional actions to best achieve the targeted results.

Cletus Glasner: In addition, the board will be exploring alternatives to shore up the company's liquidity, including potentially raising additional capital to facilitate and possibly accelerate these restructuring actions.

Cletus Glasner: And finally, the company's CEO Jeffrey editor has decided to step down after serving the company since 2000 22014.

Cletus Glasner: Jeff will also leave the board.

Cletus Glasner: We'll continue to consult with the board and assist with the transition to our new CEO.

Cletus Glasner: We thank Jeff for his service and appreciate his willingness to remain an advisor to the board and wish him the very best. Your board has already begun the search for a new CEO, and we will take the necessary time to complete this search. In the meantime, the company is establishing an Office of the CEO that will be comprised of senior executives responsible for driving EMCORE's operations and performance improvement. Additionally, the board has asked Matt Vargas to assume the role of interim CEO until the search for a permanent CEO is completed.

Cletus Glasner: We thank Jeff for his service and appreciate his willingness to remain an adviser to the board and wish him the very best.

Cletus Glasner: Your board has already begun to search for a new CEO and we will take the necessary time to complete this search.

Cletus Glasner: In the meantime, the company is establishing an office of the CEO that will be comprised of senior executives responsible for driving <unk> operations and performance improvement.

Matt Vargas: Additionally, the board has asked barghest, who assumed the role of interim CEO until the search for a permanent CEO is completed.

Cletus Glasner: The board has great confidence in Matt's demonstrated leadership, his team-building, and his communication abilities. And the newly created Restructuring Committee looks forward to working with him and the Office of the CEO to accelerate the company's restructuring plans and path to profitability. Finally, although the board is not satisfied with our results for the second fiscal quarter, we're committed to taking the necessary actions to best position the company for success moving forward. We have much left to do, and we have difficult decisions to make in the future, but we believe the recent actions we've taken demonstrate the determination to execute on the company's pure play airspace and defense strategy.

Cletus Glasner: The board has great confidence in Mats demonstrated leadership his team building and his group communication abilities and the newly created restructuring committee looks forward to working with him in the office of CEO to accelerate the companys restructuring plans and path to profitability.

Cletus Glasner: Okay.

Cletus Glasner: Finally, although the board is not satisfied with our results for the second fiscal quarter, we're committed to take the necessary actions to best position the company for success moving forward.

Cletus Glasner: We have much left to do and we have difficult decisions to make in the future, but we believe the recent actions we've taken demonstrate the determination to execute on the company's pure play aerospace and defense strategy.

Cletus Glasner: The board understands the urgency of the situation and is focused on building a sustainable model that best positions the company to execute on its strategy with the help of our new leadership. Thank you for your interest in the company, and with that, we'll open up the call for questions. Thank you.

Cletus Glasner: The board understands the urgency of the situation and is focused on building a sustainable model that best positions the company to execute on its strategy with the help of our new leadership.

Cletus Glasner: Thank you for the senior interest in the company and with that we'll open up the call for questions operator.

Benjamin: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via the loudspeaker in your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue. And your first question comes from the line of Richard Shannon with Craig Harlem Capital Group.

Speaker Change: Thank you we will now begin the question and answer session.

Richard Cutts Shannon: If you have dialed in and would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue.

Benjamin: If you'd like to withdraw your question simply press Star one again.

Benjamin: If you are called upon to ask your question in a listening via a loudspeaker and your device. Please pick up your handset and ensure that your phone is not a niche when asking a question.

Richard Cutts Shannon: Again breast I wanted to join the queue.

Benjamin: And your first question comes from the line of Richard Shannon with Craig Hallum Capital Group.

Richard Cutts Shannon: Please go ahead.

Richard Cutts Shannon: Great. Thanks for taking my questions, guys. Let's see, I guess my first question here is... To what degree are the issues that we're seeing here manifesting themselves, not just in the March quarter results, but I think maybe you can go back a little bit of time, as well as the outlook here. How much of that is due to, I guess, one-time, or unusual issues versus some sort of decrease in backlog here.

Richard Cutts Shannon: Great. Thanks for taking my questions guys.

Richard Cutts Shannon: Let's see I guess, Mike My first question here is.

Richard Cutts Shannon: To what degree are the issues that we're seeing here that manifest themselves not just in the March quarter results, but I think maybe you can go back a little bit of time as well as the outlook here how much of that is due to <unk>.

Richard Cutts Shannon: I guess one time.

Richard Cutts Shannon: Or unusual issues versus some sort of of of.

Richard Cutts Shannon: The decrease in backlog here I know, we've talked about the situation with Budd Lake and <unk>.

Richard Cutts Shannon: I know we've talked about the situation with Bud Lake and Temu, but it seems like there are more issues and more programs either have been delayed or lost or something to help us get some sense of, you know, the dynamics you're involved with. It's a much lower revenue outlook here than we thought it would be.

Richard Cutts Shannon: Like there's more issues in more programs, either been delayed or lost or something.

Richard Cutts Shannon: To help us get some sense of.

Richard Cutts Shannon: The dynamics Youre involved with.

Richard Cutts Shannon: It's much lower revenue outlook here than we thought a few quarters ago.

Thomas P. Minichiello: Well, I would say that it would be a good time to have Matt chime in on that question. So, Matt, if you're if you're there.

Speaker Change: I would say that.

Thomas P. Minichiello: We'd be a good time to have Matt chime in on the on that question. So Matt if youre if youre there.

Matt Vargas: Indeed. Thanks, Tom. Thanks, everyone. Indeed, happy to answer. I think the torpedo.

Thomas P. Minichiello: Indeed.

Matt: You want to take the time to Ellen.

Matt Vargas: And then happy to happy to answer I think that's a piano.

Matt Vargas: An element of our business is a fairly large tranche of our portfolio. We are working diligently and have been working diligently to understand that demand signal better, but it does comprise a large function of our business, of our total manufacturing footprint. So I would not say that it's an endemic of larger issues, but that, in this particular subset, as it moves directionally, affects our business.

Matt Vargas: All of our business.

Matt Vargas: It is a fairly large tranche.

Matt Vargas: Tranche of our portfolio, we are working diligently and have been working diligently to understand that demand signal better.

Matt Vargas: But it does comprise a large portion of our.

Matt Vargas: All of our of our total manufacturing footprint so.

Matt Vargas: I would not say that it's an endemic of larger issues, but that.

Matt Vargas: <unk> subset.

Matt Vargas: As it moves directionally affects our business.

Matt Vargas: Well.

Matt Vargas: Not really anything else that I can add to that to that effect, but the Torpedo Business is a large tranche of the overall list, quarter over quarter.

Speaker Change: Not really anything else.

Speaker Change: I can add to that to that effect.

Matt Vargas: The <unk> business is a large tranche of the overall levels quarter over quarter.

Richard Cutts Shannon: Yeah. Okay. Thanks. Thanks, Matt.

Speaker Change: Yeah, Okay. Thanks, Thanks, Matt.

Richard Cutts Shannon:

Richard Cutts Shannon: Okay. So, I guess if I heard Cletus' comments correctly, you're contemplating a number of actions here that include either cost restructuring or capital raises here. I would love to understand the degree to which you think some of these, you know, order and outlook visibility issues are permanent or at least long-lived enough that you need to do something about them. That would suggest fairly, you know, meaningful cost structure improvements versus something that can just bridge you to a time by which things get better or back to maybe what you thought before. How do we balance those two dynamics, you know, ongoing versus transitional, I guess.

Speaker Change: Okay. So I guess, if I heard <unk> comments correctly here.

Richard Cutts Shannon: Contemplate a number of actions here that include either.

Richard Cutts Shannon: Costs restructuring and or capital raises here I guess.

Richard Cutts Shannon: Love to understand the degree to which you think some of these.

Richard Cutts Shannon: <unk> outlet visibility issues are a permanent or at least long lived enough that you need to do something about it.

Richard Cutts Shannon: That would suggest a fairly.

Richard Cutts Shannon: Meaningful cost.

Richard Cutts Shannon: Cost structure improvements versus something that can just bridge you to time by which things get better or back to maybe what you thought before how do we balance those two dynamics channel ongoing versus.

Richard Cutts Shannon: Transitional I guess.

Cletus Glasner: Thanks, Richard. You know, we are going to do the restructuring. Restructuring is not free. There's going to be expenses associated with downsizing the business to meet the current top line. So that's going to require cash to do that, and we're looking at various options to raise that cash.

Speaker Change: Thanks Richard.

Richard Cutts Shannon: We're going to do the restructuring restructuring is not free.

Cletus Glasner: There's going to be expenses.

Cletus Glasner: Associated with downsizing the business to meet the current.

Cletus Glasner: Top line.

Cletus Glasner: So that is thats going to require cash to do that and we're looking at.

Cletus Glasner: Various options to raise.

Cletus Glasner: Raise that cash.

Thomas P. Minichiello: Okay, that's fair enough then. Maybe one or two questions from Tom here, maybe just to give you your best sense here of what we're looking at in terms of cash burn this quarter. I don't know if that would be inclusive or not inclusive of any sort of expenses from said restructuring. But just give us a sense of where we're sitting there, and I think last quarter when I asked the question about a comfort level of cash, we wanted to stay above $20 million. I think we're already below that, so I want to get a sense of urgency and rectify that.

Speaker Change: Okay, that's fair enough.

Cletus Glasner: Maybe one or two questions from Tom here, maybe just give your best sense here of what we're looking at in terms of cash burn this quarter.

Tom: I don't know if that would be inclusive or not inclusive of any sort of expenses from said restructuring.

Tom: But just give us a sense of where we're sitting there and.

Thomas P. Minichiello: And I think last quarter when I asked a question about a comfort level of cash you were wanting to stay above $20 million I think we're already already below that so wanted to get a sense of urgency in the.

Tom: And rectifying that.

Thomas P. Minichiello: Yeah, the way I would look at it, Richard, is that we finished at 12 million at the end of March, obviously lower than where we thought we'd be when, you know, the top line has a lot to do with that or almost all to do with that. So here's how I would think about it.

Speaker Change: Yes, the way I would look at it Richard is.

Thomas P. Minichiello: We finished at $12 million at the end of March obviously, lower than where we thought we'd be.

Thomas P. Minichiello: Top line.

Thomas P. Minichiello: Has a lot to do with that or almost all to do with that so.

Thomas P. Minichiello: Here's how I would.

Thomas P. Minichiello: Think about it.

Thomas P. Minichiello: We've got $12 million at the beginning of the quarter. We just got another, call it $2 million, round up on the sale of the FAB. So that's $14 million in cash going into the quarter. You know, I don't want to put too much of that sophisticity around where we're going to end up at the end of the June quarter, but what's important to know here is that it's $14 million. We have a new lender and the terms, I can't emphasize enough the help that that's going to provide having now been withheld because the debt has been restructured, essentially.

Thomas P. Minichiello: $12 million at the beginning of the quarter. We just got another call. It 2 million roundup on the sale of the fab, So thats $14 million in cash going into the quarter.

Thomas P. Minichiello: I don't want to put too much of.

Thomas P. Minichiello: The sufficiency of around where we're going to end up at the end of the June quarter, but what's important to know here is is that $14 million, we have a new.

Thomas P. Minichiello: Lender and the terms I can't emphasize.

Thomas P. Minichiello: A nasty.

Thomas P. Minichiello: The help that thats going to provide.

Thomas P. Minichiello: And now and they'll be withheld because the debt is.

Thomas P. Minichiello: Then restructured essentially and we no longer have a liquidity requirement that was $12 5 million under the previous structure.

Thomas P. Minichiello: And we no longer have a liquidity requirement that was $12.5 million under the previous structure. You know, among other benefits of doing that deal. So that's going to give us some leeway in the near term as we, as the business marches forward at the guidance that we provided, but also, we're going to be doing all kinds of activities and other actions here that will obviously ultimately lower the cash use but may require some initial one-time cash out.

Thomas P. Minichiello: Among other benefits of doing that deal so that's going to give us.

Thomas P. Minichiello: Some leeway here in the near term as we as the business marches forward.

Thomas P. Minichiello: The.

Thomas P. Minichiello: The guidance that we provided but also we're going to be doing all kinds of activities and other actions here.

Thomas P. Minichiello: That will obviously ultimately lower the cash use but may require some initial onetime cash out so a lot of moving parts.

Thomas P. Minichiello: So, a lot of moving parts, but, you know, we've got some ability here to do what we want to do and make it happen. And whether we have to do some additional capital infusions of some form, that may or may not be part of it.

Thomas P. Minichiello: But we've got some ability here to.

Thomas P. Minichiello: The work, we want to do and make it happen and whether we have to do some additional capital infusions of some form.

Thomas P. Minichiello: That may or may not be part of it.

Thomas P. Minichiello: Okay.

Richard Cutts Shannon: Okay, sure enough. Thanks for that, Tom. Maybe one last question. I'll jump out of line here.

Speaker Change: Okay fair enough. Thanks for that Tom maybe one last question I will jump out of line here.

Cletus Glasner: So, an office of the CEO here. And I see, not having met Mr. Vargas before, I see he came from KBH here. I would assume that this office would include leaders from the other organizations, as I think Jeff was, you know, kind of the driver of all these different groups here. So can you kind of help us understand this office, the CEO, and who else is going to be involved? And have those leaders been assigned yet? Some have and some haven't.

Speaker Change: So an office of the.

Cletus Glasner: The CEO here.

Cletus Glasner: And I see not having met Mr. Gerard just before our CEO came from from TVA each year I would assume that this office will include.

Cletus Glasner: Leaders from the other organizations as I think Jeff Woods.

Cletus Glasner: Okay.

Cletus Glasner: The driver of all these different groups here. So can you kind of help US understand this office of the CEO, who else is can be involved in.

Cletus Glasner: Sure.

Cletus Glasner: Had those leaders been assigned yet.

Cletus Glasner: Some have, some haven't. Those leaders will represent the functions within the company, including, but maybe not limited to, finance, legal, operations, engineering, sales, and marketing, and the office of the CEO will report to the board and work very closely with the restructuring committee.

Cletus Glasner: Some have some haven't.

Cletus Glasner: Those leaders will represent the functions within the company, including.

Cletus Glasner: But maybe not limited to finance legal operations engineering.

Cletus Glasner: Sales and marketing.

Cletus Glasner: And that net office of the CEO will.

Cletus Glasner: A report to the board and work very closely with the restructuring Committee.

Richard Cutts Shannon: Okay, uh, fair enough. I will jump out of line, guys. Thank you very much. Thank you, Richard.

Speaker Change: Okay Fair enough I will jump out of line guys. Thank you very much.

Richard Cutts Shannon: Thank you Richard.

Brian David Kinstlinger: Your next question comes from the line of Brian Kinstlinger from Alliance Global Partners. Then go ahead.

Speaker Change: Your next question comes from the line of Brian Gaines Linger from Alliance Global Partners. Please go ahead.

Brian David Kinstlinger: Questions.

Brian David Kinstlinger: I'm just looking at the first quarter results compared to a comment that you expect to achieve profitability by the end of the September quarter. I presume that was this year, but maybe I'm mistaken.

Brian David Kinstlinger: Looking at the first quarter results compared to a comment that you expect to achieve profitability by the end of the September quarter, I presume that this year, but maybe I'm mistaken I want to make sure I understand okay.

Thomas P. Minichiello: I want to make sure I understand. Like you said, revenue in the second half of 2024 will remain at current levels before you return to growth. So in order to reach a profit, you need to cut more than $5 million in quarterly expenses. Do I have that right, or did I misunderstand the comments regarding these assumptions?

Brian David Kinstlinger: I think you said revenue in the second half of 'twenty four will remain at current levels or you returned to growth.

Thomas P. Minichiello: So in order to reach a profit you need to cut more than $5 million of quarterly expenses.

Thomas P. Minichiello: Do I have that right or did I misunderstand the comments regarding these assumptions.

Thomas P. Minichiello: Yeah, what we said was the objective was to be cash flow break-even on an adjusted basis by the end of the September quarter, excluding any restructuring expenses. So we didn't talk profit; we talked cash flow break even.

Speaker Change: Yes, what we said was the objective is to be cash flow breakeven on an adjusted basis by the end of the September quarter.

Thomas P. Minichiello: Excluding any reese.

Thomas P. Minichiello: Our restructuring expenses.

Thomas P. Minichiello: So we didn't we didn't talk profit we talk cash flow breakeven.

Brian David Kinstlinger: And to be clear, did I understand you correctly in saying... The second half of, I think what you meant was calendar 2024 will be at similar revenue than we are today, as you'll see that weakness kind of turn, you're hoping, in the first half of 2025. Am I thinking about that right?

Speaker Change: Got it.

Thomas P. Minichiello: To be clear did I understand you correctly in saying.

Brian David Kinstlinger: The second half I think what you meant with calendar 2024 will be at similar revenue than we are today.

Brian David Kinstlinger: We'll see that weakness kind of term youre, hoping in the first half of 2025 am I thinking about that right.

Thomas P. Minichiello: Yeah, I think you've got it. I've got it.

Speaker Change: Yes, I think you've got to I got it right yet.

Brian David Kinstlinger: Right. Yeah. Those were fiscal years that I was talking about, Brian. Okay. You know, one quarter difference. Yeah. Yeah.

Thomas P. Minichiello: Okay.

Speaker Change: Those were fiscal year those were fiscal years that I was talking about Brian So just okay.

Brian David Kinstlinger: One quarter difference yes.

Tom: The only other question I wanted to make sure I understood sounded like the challenge of the Mark 54. The Mark 54, you now have.

Brian David Kinstlinger: Yes.

Brian David Kinstlinger: The only thing.

Speaker Change: Question I wanted to make sure I understood.

Tom: It sounded like the challenge of the Mark 54 container the Mark 54, you've now ship those units yes.

Tom: Yet the second quarter isn't much stronger than the first quarter.

Tom: The Cage Tomorrow 48 is going to have more of an impact on the second quarter is that why we're not seeing that recovery yet.

Tom: Yes, I think nuclear.

Matt Vargas: I can grab that one, Tom. I think it's less of an inline torpedo nested problem set than I think you're elaborating. Tom spoke a little bit about the decline in revenues in Bud Lake, and those things, as paired activity, create what, you know, sort of the slump that was described. So, it's not necessarily— Mark-54 and Mark-48 are relatively independent demand signals. The internal manufacturing process is a little bit more agnostic, but those are two separate demand signals for two separate programs.

Tom: I can I can grab that one time I think you had massive and it's less of an in line.

Matt Vargas: Peter nested problem set and I think youre elaborating.

Matt Vargas: Tom spoke a little bit about the decline in revenues and Bud light.

Matt Vargas: Those things as there's pairs activity.

Matt Vargas: Great.

Matt Vargas: This lumpiness that was described so it's not necessarily March 54, and Mark 48 or relatively independent demand signals.

Matt Vargas: The internal manufacturing processes, there is a little bit more agnostic, but those are those are two separate demand signals.

Matt Vargas: For two separate programs, but theres individual fiscal year budget implications.

Matt Vargas: But there are individual fiscal year budget implications in Washington that we're attuning our sensitivities to a little bit more, but that takes a little bit of time. So I hope that answers your question, but they're not necessarily always correlated from an outside demand perspective.

Matt Vargas: In Washington, we're tuning our sensitivities to a little bit more but that takes a little bit of time. So.

Matt Vargas: I hope that answers your question, but theyre.

Matt Vargas: They are not necessarily always correlated from announced that demand perspective.

Brian David Kinstlinger: Great. Thanks so much. Good luck.

Brian David Kinstlinger: Great. Thanks so much. Good luck. Thank you, Brian.

Speaker Change: Great. Thanks, so much good luck.

Brian David Kinstlinger: Thank you Brian.

Brian David Kinstlinger: Okay.

Cletus Glasner: Benjamin, are we... We don't have any questions at this time. That concludes our Q&A session. I will now turn the conference back over to Cletus Glasner for closing remarks.

Brian David Kinstlinger: Benjamin.

Speaker Change: Or we don't have any questions. At this time that concludes our Q&A session I will now turn the conference back over to <unk> <unk> closing remarks.

Cletus Glasner: Thank you, Andrew. So first, I'd like to convey to our shareholders, many of you who have held shares for a long time, that the EMCORE leadership and the board are working to restore financial health to this business. We do appreciate you sticking with us through this transformative time. And I'd also like to give my sincere thanks to our employees at the company who have and will continue to support us through this transition. With that, that's all of our remarks. Thank you so much for attending. Ladies and gentlemen, that concludes today's call. Thank you all for joining us.

Cletus C. Glasener: Thank you Andrew.

Cletus Glasner: But first I'd like to convey to our shareholders. Many of you who have held shares for a long time that the EMCORE leadership and the board is working to restore financial health to this business. We do appreciate your sticking with us through this transformative time and I'd also like to give my sincere thanks to our employees of the company who have.

Cletus Glasner: And we will continue.

Cletus Glasner: To support us through this transition.

Cletus Glasner: With assets, that's all of our remarks. Thank you so much for attending.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect. Thomas Minichiello, Timothy Savageaux, Richard Shannon, and Jeffrey Rittichier, EMCORE Corp.

Cletus Glasner: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

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