ALHAMBRA, Calif., Aug. 09, 2022 (GLOBE NEWSWIRE) — EMCORE Corporation (Nasdaq: EMKR), a leading provider of advanced mixed-signal products that serve the aerospace and defense, communications, and sensing markets, today announced results for the fiscal 2022 third quarter ended June 30, 2022 (3Q22) and that it acquired the Fiber Optic Gyroscope (FOG) and Inertial Navigation Systems business segment of KVH Industries, Inc. (Nasdaq: KVHI) for approximately $55.0 million, subject to working capital adjustments, in an all-cash transaction. Management will host a conference call to discuss 3Q22 financial and business results as well as the acquisition today at 5:00 p.m. Eastern Time (ET).
Through the KVH transaction, EMCORE acquired all the intellectual property and outstanding assets and liabilities of KVH’s FOG and Inertial Navigation Systems business segment, including the 100,384-square-foot production facility located in Tinley Park, Illinois. Cowen served as financial advisor to EMCORE and Pillsbury Winthrop Shaw Pittman LLP served as legal advisor to EMCORE in connection with the KVH transaction. Highlights of the deal include:
- Adds a new business generating over $30.0 million in revenue on an annual basis
- EBITDA-positive addition with synergies anticipated for the next two years
- Value creation opportunities for both businesses at every level of the P&L
- Established customer base in the Army and a variety of terrestrial applications
- Opens new opportunities in the growing industrial autonomy market
EMCORE’s consolidated revenue for 3Q22 was $23.7 million, comprised of $13.4 million from the Aerospace and Defense (A&D) segment and $10.3 million from the Broadband segment. Net loss was $7.6 million and $6.3 million on a GAAP and non-GAAP basis, respectively. Adjusted EBITDA was negative $5.1 million. Please refer to the schedules at the end of this press release for GAAP to non-GAAP reconciliations and other information related to non-GAAP financial measures.
“During 3Q22, our Space and Navigation operations performed very well, driving sequential A&D revenue up in 3Q22. However, our QMEMS product line was affected by multiple supply chain delays and shortages, as well as a COVID outbreak at our Concord facility,” said Jeff Rittichier, President and Chief Executive Officer of EMCORE. “Demand in our A&D business segment is strong and we expect our QMEMS operational issues to improve with a rebound in the September quarter. Unfortunately, since our last call, the Cable TV business has become more turbulent, with a major customer deciding to exit CATV entirely. On a positive note, we began low volume shipments of data center chips as projected, signaling a new growth phase in Broadband.”
“We are also very excited to add not only a strong and growing business with KVH’s inertial navigation team, but also best-in-class manufacturing capabilities, low-cost technology development, and an exemplary sales team. When we combine these with EMCORE’s closed loop and transceiver technologies, we see substantial opportunities for both businesses across revenue, gross margins, and net income. The addition of the KVH inertial navigation product line further expands our reach into the tactical grade segment of the market and solidifies EMCORE’s position as one of the largest independent inertial navigation providers in the industry,” added Mr. Rittichier.
Consolidated Results
| Three Months Ended | |||||||||
| Jun 30, 2022 | Mar 31, 2022 | +increase/ -decrease |
|||||||
| 3Q22 | 2Q22 | ||||||||
| Revenue | $23.7M | $32.7M | -$9.0M | ||||||
| Gross margin | 16% | 28% | -12% | ||||||
| Operating expenses | $11.0M | $11.3M | -$0.3M | ||||||
| Operating margin | (30%) | (7%) | -23% | ||||||
| Net loss | ($7.6M) | ($2.2M) | -$5.4M | ||||||
| Net loss per share diluted | ($0.20) | ($0.06) | -$0.14 | ||||||
| Non-GAAP gross margin (1) | 18% | 30% | -12% | ||||||
| Non-GAAP operating expenses (1) | $10.5M | $10.4M | +$0.1M | ||||||
| Non-GAAP operating margin (1) | (27%) | (2%) | -25% | ||||||
| Non-GAAP net loss (1) | ($6.3M) | ($0.8M) | -$5.5M | ||||||
| Non-GAAP net loss per share diluted (1) | ($0.17) | ($0.02) | -$0.15 | ||||||
| Adjusted EBITDA | ($5.1M) | $0.3M | -$5.4M | ||||||
| Ending cash and cash equivalents | $75.1M | $80.9M | -$5.8M | ||||||
| (1) Please refer to the schedules at the end of this press release for GAAP to non-GAAP reconciliations and other information related to non-GAAP financial measures. | |||||||||
Aerospace and Defense Segment
A&D’s sequential-quarter revenue increase was driven primarily by the addition of the Space and Navigation business acquired from L3 Harris Technologies, Inc. on April 29, 2022, as the QMEMS revenue decrease was offset by higher Defense Optoelectronics and FOG revenue. A&D segment gross margin decreased primarily as a result of lower sales of QMEMS products.
| Three Months Ended | ||||||
| Jun 30, 2022 | Mar 31, 2022 | +increase/ -decrease |
||||
| 3Q22 | 2Q22 | |||||
| A&D segment revenue | $13.4M | $9.0M | +$4.4M | |||
| A&D segment gross margin | 12% | 14% | -2% | |||
| A&D segment R&D expense | $3.8M | $4.0M | -$0.2M | |||
| A&D segment profit | ($2.3M) | ($2.8M) | +$0.5M | |||
| Non-GAAP A&D segment gross margin (1) | 13% | 15% | -2% | |||
| Non-GAAP A&D segment R&D expense (1) | $3.7M | $3.9M | -$0.2M | |||
| Non-GAAP A&D segment profit | ($1.9M) | ($2.6M) | +$0.7M | |||
| (1) Please refer to the schedules at the end of this press release for GAAP to non-GAAP reconciliations and other information related to non-GAAP financial measures. | ||||||
Broadband Segment
Broadband’s sequential-quarter revenue decrease was primarily due to a decline in revenue from CATV products. Broadband segment gross margin decreased primarily as a result of the lower revenue and under-absorption of fixed overhead.
| Three Months Ended | ||||||
| Jun 30, 2022 | Mar 31, 2022 | +increase/ -decrease |
||||
| 3Q22 | 2Q22 | |||||
| Broadband segment revenue | $10.3M | $23.6M | -$13.3M | |||
| Broadband segment gross margin | 23% | 33% | -10% | |||
| Broadband segment R&D expense | $0.7M | $0.5M | +$0.2M | |||
| Broadband segment profit | $1.7M | $7.3M | -$5.6M | |||
| Non-GAAP Broadband segment gross margin (1) | 24% | 35% | -11% | |||
| Non-GAAP Broadband segment R&D expense (1) | $0.6M | $0.4M | +$0.2M | |||
| Non-GAAP Broadband segment profit | $1.9M | $7.9M | -$6.0M | |||
| (1) Please refer to the schedules at the end of this press release for GAAP to non-GAAP reconciliations and other information related to non-GAAP financial measures. | ||||||
Business Outlook
The Company expects revenue for the fiscal 2022 fourth quarter ending September 30, 2022 to be in the range of $24 million to $26 million, inclusive of a partial quarter revenue from the acquisition announced today.
Conference Call
The Company will discuss its financial results on Tuesday, August 9, 2022 at 5:00 p.m. ET (2:00 p.m. PT). The call will be available, live, to interested parties by dialing 888-221-3881. For international callers, please dial +1 313-209-6544. The conference passcode number is 165956. The call will be webcast live via the Company’s website at http://www.emcore.com. A webcast will be available for replay following the conclusion of the call.
About EMCORE
EMCORE Corporation is a leading provider of advanced mixed-signal products that serve the aerospace and defense, communications, and sensing markets. Our best-in-class components and systems support a broad array of applications including navigation and inertial sensing, defense optoelectronics, broadband communications, optical sensing, and specialty chips for telecom and data centers. We leverage industry-leading Quartz MEMS, Lithium Niobate, and Indium Phosphide chip-level technology to deliver state-of-the-art component and system-level products across our end-market applications. EMCORE has vertically-integrated manufacturing capability at its facilities in Alhambra, CA, Budd Lake, NJ, and Concord, CA. Our manufacturing facilities maintain ISO 9001 quality management certification, and we are AS9100 aerospace quality certified at our facilities in Budd Lake and Concord. For further information about EMCORE, please visit http://www.emcore.com.
About KVH Industries, Inc.
KVH Industries, Inc. is a global leader in mobile connectivity and inertial navigation systems with innovative technology designed to enable a mobile world. A market leader in maritime VSAT, KVH designs, manufactures, and provides connectivity and content services globally. KVH is also a premier manufacturer of high-performance sensors and integrated inertial systems for defense and commercial applications. Founded in 1982, the company is based in Middletown, RI with research, development, and manufacturing operations in Middletown, RI, and Tinley Park, IL, and more than a dozen offices around the globe.
Use of Non-GAAP Financial Measures
The Company conforms to U.S. Generally Accepted Accounting Principles (“GAAP”) in the preparation of its financial statements. We disclose supplemental non-GAAP earnings measures for gross margin, operating expenses, research and development expenses, operating margin, and net loss, as well as adjusted EBITDA.
Management believes these supplemental non-GAAP measures reflect the Company’s core ongoing operating performance and facilitates comparisons across reporting periods. The Company uses these measures when evaluating its financial results and for planning and forecasting of future periods. We believe that these supplemental non-GAAP measures are also useful to investors in assessing our operating performance. While we believe in the usefulness of these supplemental non-GAAP measures, there are limitations. Our non-GAAP measures may not be reported by other companies in our industry and/or may not be directly comparable to similarly titled measures of other companies due to potential differences in calculation. We compensate for these limitations by using these non-GAAP measures as a supplement to GAAP and by providing the reconciliations to the most comparable GAAP measure.
The schedules at the end of this press release reconcile the Company’s non-GAAP measures to the most directly comparable GAAP measure. The adjustments share one or more of the following characteristics: they are unusual and the Company does not expect them to recur in the ordinary course of its business, they do not involve the expenditure of cash, they are unrelated to the ongoing operation of the business in the ordinary course, or their magnitude and timing is largely outside of the Company’s control. For all reporting periods disclosed, the Company has applied consistent rationale, method, and adjustments in reconciling non-GAAP measures to the most directly comparable GAAP measure.
Non-GAAP measures are not in accordance with or an alternative to GAAP, nor are they meant to be considered in isolation or as a substitute for comparable GAAP measures. Our disclosures of these measures should be read only in conjunction with our financial statements prepared in accordance with GAAP. Non-GAAP measures should not be viewed as a substitute for the Company’s GAAP results.
