Q1 2012 Earnings Call
February 14, 2012 4:30 pm ET
Victor Allgeier -
Mark B. Weinswig - Chief Financial Officer and Principal Accounting Officer
Hong Q. Hou - Chief Executive Officer, President and Director
Alex B. Henderson - Miller Tabak + Co., LLC, Research Division
Edward A. Zabitsky - ACI Research
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Good day, ladies and gentlemen, and welcome to the EMCORE Corporation First Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Mr. Victor Allgeier. Go ahead, please.
Thank you, and good afternoon, everyone. 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 financial trends affecting the financial condition of our business. Such forward-looking statements include, in particular, projections about our future results, statements about our plans, strategies, business prospects, changes in trends in our business and the markets in which we operate.
Management cautions that these forward-looking statements relate to future events or our 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 our business or our industry to be materially different from those expressed or implied by any forward-looking statements.
Neither management nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We caution you not to rely on these statements without also considering the risks and uncertainties associated with these statements and our business that are addressed in our filings with the U.S. Securities and Exchange Commission that are available on the SEC's website, located at www.sec.gov, including the sections entitled Risk Factors in our annual report on Form 10-K and our quarterly reports on Form 10-Q.
We assume no obligation to update any forward-looking statementsm to conform such statements to actual results, or to changes in our expectations, except as required by applicable law or regulation.
With us today from EMCORE are Dr. Hong Hou, President and Chief Executive Officer; and Mark Weinswig, Chief Financial Officer. Mark will review the financial results and Hong will discuss business highlights before we open the call up to questions.
I'll now turn the call over to Mark.
Mark B. Weinswig
Thank you, Vic, and good afternoon, everyone. Today, I'm going to focus my discussion on our first fiscal quarter operating results and our balance sheet. Please note that the effect of the flooding of our contract manufacturer's facility in Thailand is reflected in our Q1 results. I will discuss the rebuild plan and our expectations later in the call.
Consolidated revenue for our first fiscal quarter totaled $37.5 million, which is a decrease of $14.7 million, primarily due to the decline in our Fiber Optics revenue impacted by the flood. Our revenue was in line with our prior guidance of $36 million to $38 million. On a segment basis, our Photovoltaics business accounted for $19.1 million or 51% of the company's total revenue. This represents a decline of $2 million from the revenue for the segment in the prior quarter. We believe that the Space Solar business will continue to experience year-over-year growth, although our revenues in any given quarter may be a bit lumpy, as illustrated with our last couple of quarter results.
The Fiber Optics segment accounted for $18.4 million or 49% of the company's total revenue. This represents a decrease of roughly $12.6 million from the prior quarter with the decrease primarily due to the impact of the flood in Thailand. Despite the challenges, we met key accomplishments in the quarter including strong revenue growth in our active optical cables product. In fact, revenues for those product lines not affected by the flood, increased by more than 25% sequentially. I will discuss the prospects for the Fiber Optics business later.
Consolidated gross margin was 9% with a decline primarily attributable to the flood impact. On a segment basis, Photovoltaic gross margin increased 1.7 percentage points to 22.7%. We continue to focus on meeting our gross margin targets of 30% for this segment.
Fiber Optics gross margin loss was 4.8%, a significant decrease in the prior quarter, primarily due to the impact of the flood. During the quarter, the company recognized expenses of approximately $1.5 million due additional excess and obsolete charges from the reduction in our forecast. in addition, we recognized $0.9 million in losses on outstanding purchase commitments relating to legacy product lines that will not be rebuilt. These charges were classified in our cost of goods sold and reduced gross margins by almost 13 percentage points for our Fiber Optics segment.
We expect our gross margins to improve in future quarters after we rebuild the manufacturing lines damaged by the flood. Operating expenses, excluding the flood loss and insurance settlements and impairments of other items, decreased $1.9 million from the prior quarter to $14.5 million, primarily due to cost reduction activities put in place after the flood, including temporary salary reductions and rotating furloughs.
At the end of the January, we removed those compensation-related reductions. In addition, the company is in the process of implementing a single ERP system to improve its reporting capabilities. As a result, our R&D and SG&A expenses should increase in the March quarter to approximately pre-flood levels. We recorded a flood loss of $5.7 million in the quarter, related to our Fiber Optics segment. This is primarily from $3.9 million due to destroyed inventory and $1.8 million of fixed assets. These amounts are based on estimates from our detailed review of the equipment and inventory.