EMCORE Announces 4Q, Year-End Results

EMCORE Corporation (Nasdaq: EMKR) has announced preliminary unaudited financial results for the fiscal 2006 fourth quarter and fiscal year ended September 30, 2006.

Revenues from continuing operations for the fourth quarter of fiscal 2006 were $35.4 million, an increase of 6% from the $33.5 million reported in the fourth quarter of fiscal 2005.

During the fourth quarter of fiscal 2006, the Company sold its Electronics Materials and Device division and all revenues relating to this group have been eliminated and included in discontinued operations in the attached financial statements in accordance with generally accepted accounting principles.

Fiber optic revenues were $28.0 million in the fourth quarter as compared to $24.2 million a year ago and $26.0 million in the previous quarter. The increase in fiber optic revenues was primarily related to the Company’s digital fiber optics product line.

Photovoltaic revenues were $7.3 million in the fourth quarter as compared to $9.3 million a year ago and $10.4 million in the previous quarter. The decrease in photovoltaics revenues relates to a delay in receipt of export licenses covering three international satellite programs. The Company did not receive these licenses in time to ship product during the fourth quarter. The Company has since received license approvals on all three of the programs and has shipped against those orders during the first quarter of fiscal 2007. A fourth export license was received with shipments against this license expected during the second fiscal quarter of 2007.

Gross margins were 12% for the fourth quarter and 18% for fiscal 2006. Gross margins were impacted by the revenue shortfall in the Company’s photovoltaic product line, unfavorable product mix experienced in the fiber optic division, specifically, the CATV product line, and unfavorable labor and material variances experienced in the Company’s CATV product line. Included in cost of goods sold for the three and twelve-month periods ended September 30, 2006 are $0.3 million and $1.0 million of stock-based compensation expense, respectively.

The Company adopted SFAS 123® during fiscal 2006 and, as such, no stock-based compensation expense was recognized in the previous year under SFAS 123®. However, as previously announced, the Company expects to incur additional non- cash stock-based compensation charges related to past stock option grants.

For the year ended September 30, 2006, revenues totaled $143.5 million, an increase of 24% or $28.1 million, as compared to the $115.4 million recorded for the year ended September 30, 2005.

Operating expenses totaled $17.3 million for the three months ended September 30, 2006. Included in operating expenses were one-time impairment charges of $2.2 million related to the write-off of Corona Optical Systems and $0.9 million of expenses related to the Company’s new terrestrial solar power division. These terrestrial solar power expenses are anticipated to increase in future periods. In addition, operating expenses included approximately $0.9 million of charges related to the Company’s previously announced internal stock options investigation.

The Company expects to incur approximately $1.5 million to $2.0 million in additional charges related to the stock option investigation in the quarter ended December 31, 2006. Not including the impairment charges, expenses associated with the terrestrial solar power division, stock-based compensation and stock option investigation expenses, operating expenses for the fourth quarter would have been $12.5 million, an increase of $0.6 million sequentially.

For the twelve-month period ended September 30, 2006, operating expenses totaled $56.5 million, an increase of $16.6 million from the previous year. Included in operating expenses for the three and twelve-month periods ended September 30, 2006 are $0.7 million and $3.0 million of stock-based compensation expense, respectively.

The Company adopted SFAS 123® during fiscal 2006 and, as such, no stock-based compensation expense was recognized in the previous year under SFAS 123®. However, as previously announced, the Company expects to incur additional non- cash stock-based compensation charges related to past stock option grants.

The Company reported an operating loss of $13.0 million for the three months ended September 30, 2006. Excluding impairment charges, expenses associated with the terrestrial solar power division, stock-based compensation and stock option investigation expenses, the Company’s operating loss totaled $7.9 million, or $(0.16) per basic share. This compares to an operating loss of $4.1 million, or $(0.09) per basic share in the prior year, and an operating loss of $4.0 million, or $(0.08) per basic share in the prior quarter.

Interest expense, net for the quarter totaled $0.9 million, essentially flat with prior quarter. The Company reported a gain on the disposition of their Electronics Materials and Device division of $7.6 million. The gain on the sale of GELcore totaled $87.4 million and the provision for taxes amounted to $1.9 million. The Company also incurred a $0.5 million charge on the write-down of a cost-based investment.

EMCORE reported a net profit for the fourth quarter of fiscal 2006 of $78.1 million or $1.54 per basic share. Excluding impairment charges, expenses associated with the terrestrial solar power division, stock-based compensation and stock option investigation expenses, the loss from convertible subordinated notes exchange offer, the reduction in fair value of investment, effect of equity investments, the provision for income taxes, and the gain on the sale of GELcore and the Electronics Materials and Device division, the net loss is $8.9 million, or $(0.17) per basic share. This compares to EMCORE’s quarterly net loss in the previous year of $5.1 million, or $(0.11) per share after excluding the effect of equity investments and loss from discontinued operations.

For the year ended September 30, 2006, EMCORE reported net income of $58.7 million, or $1.18 per basic share. Excluding impairment charges, expenses associated with the terrestrial solar power division, stock-based compensation and stock option investigation expenses, the loss from convertible subordinated notes exchange offer, the reduction in fair value of investment, effect of equity investments, loan forgiveness, the provision for income taxes, and the gain on the sale of GELcore and the Electronics Materials and Device division the net loss for fiscal 2006 is $23.5 million, or $(0.47) per basic share. This compares to EMCORE’s net loss in fiscal 2005 of $24.3 million, or $(0.51) per share after excluding the effect of equity investments and loss from discontinued operations.

Cash, cash equivalents, and marketable securities at September 30, 2006 totaled approximately $124 million, an increase of approximately $100 million from the prior quarter. The increase was attributable to the proceeds received from the sales of GELcore and the Electronics Materials and Device division for a combined total of $113 million.