EMCORE Corporation (NASDAQ:EMKR) Q1 2023 Earnings Conference Call February 8, 2023 5:00 PM ET
Company Participants
Tom Minichiello – CFO
Jeff Rittichier – President and CEO
Conference Call Participants
Richard Shannon – Craig-Hallum Capital Group LLC
Tim Savageaux – Northland Securities
Paul Silverstein – Cowen and Company
Operator
Good day and thank you for standing by. Welcome to the EMCORE Corporation Fiscal 2023 First Quarter Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation there will be a question-and-answer session. [Operator Instructions]. 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, Chief Financial Officer.
Tom Minichiello
Thank you, and good afternoon, everyone and welcome to our conference call to discuss EMCORE’s fiscal 2023 first quarter results. The news release we issued this afternoon is posted on our Web site emcore.com.
On this call, Jeff Rittichier, EMCORE’s President and Chief Executive Officer, will begin with the discussion of our business highlights. I will then update you on our financial results, 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. 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 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, 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.
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 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.
With that, I’ll now turn the call over to Jeff.
Jeff Rittichier
Thank you, Tom, and good afternoon, everyone. Q1 continued EMCORE’s strategic transformation into an Aerospace & Defense business. Consolidated revenue for fiscal Q1 was $25 million, with 87% coming from Aerospace & Defense. Only 13% came from broadband and cable television represented less than 6% of the company’s revenue. There were encouraging improvements in the business as it continued to work through the operating challenges of such a significant transformation, generating a GAAP operating loss of $11.5 million.
However, our non-GAAP operating loss was $8 million and adjusted non-GAAP EBITDA improved from negative$9.4 million to negative $6.5 million. Tom will provide color on Q1’s gross margin, but I will start out by saying that Aerospace & Defense margins showed significant improvement at 22% with inertial navigation higher than that.
Not much has changed with respect to the cable television industry and the inventory glut of head-end transmitters. In our last call, we pointed out that ATX publicly announced that they had licensed the entire Prisma II technology platform from Cisco, allowing that technology to move forward. Although ATX’s entry continues to be an encouraging opportunity over the long-term, we do not see any short-term catalyst for improved demand, although we do see some signs of improvement in the underlying inventory positions within our customer base.
Semiconductor availability continued to tamp down shipments for wireless and chips within broadband in Q1 as our customers were still not able to get enough silicon to ship transceivers and distributed antenna systems to meet their internal projections.
Consistent with what we said in December, our chip business continued to get additional traction with customers in the form of engagements and planned growth in shipments. Going forward in the chip business, we expect to see the ramp get a bit steeper during the summer setting the stage for a much stronger FY ’24.
To conclude my comments about broadband, I’d like to return to a statement from our last call in which I made the point the cable television was complete — was increasingly incongruent with our strategic direction. Consistent with these objectives, EMCORE is in discussions with several interested parties to divest our nonstrategic product lines. We are also exploring other strategic alternatives.
Turning now to Aerospace & Defense. I will begin my comments by stating the demand for our inertial navigation products continues to build nicely. In Q1, our book-to-bill in Aerospace & Defense was approximately 1.2. In particular, we’re seeing increased demand for AMPV in real-world situations experiencing GPS denial, such as in the Ukraine.
International bookings were strong for turret-based platforms, stemming from our supplier position in both [indiscernible] and ESCRIBANO’s GUARDIAN 2 programs. We also received additional interest in the Middle East for long dormant large-scale armored vehicle navigation programs.
On the naval side of our business, we are leveraging our expertise in critical lightweight and heavyweight torpedo programs such as the Mark 48 and 54 by supporting next-generation Torpedo platforms. Finally, we rewarded a follow-on order in a precision-guided munition program that continues to gain momentum in international markets. Chicago’s book-to-bill was actually better than the overall 1.2 that I mentioned earlier, with stronger visibility for key programs in all four branches of service.
The on program [ph] CAPTURE, we’re seeing important signs of acceleration of key programs into their LRIP phase, low rate of initial production. This is a leading indicator of long-term growth. In particular, infrared search and track has become a key area of focus across the services and our multiple design wins in this applications stand to benefit in terms of production timing.
As I stated in December, the efforts of the extended engineering teams in Budd Lake and Concord allow shipments for two critical programs to begin in the December quarter and greater volumes are projected for the March quarter. The space and navigation team has started to build multiple TAIMU inertial measurement units in support of the design and validation — design validation and qualification as it continues to meet shipment targets for BoRG. These two systems are critical to the launch schedule for United Launch Alliance. BoRG is part of the boost stage flight control for Atlas- Centaur and Vulcan launch vehicles, while TAIMU will be the primary inertial measurement unit used for navigation.
Critical milestones for TAIMU must be met over the next few months as well as the beginning of product builds in Alhambra. Our expectation is to complete qualification late in the calendar year to enable significant volume builds and launches in calendar year ’24. When these products hit full production, they’re expected to produce$20 million to $25 million in revenue per year and are also expected to significantly contribute to gross margins.
QMEMS suffered from some unexpected test set problems in late December and we’re expecting QMEMS revenue to bounce back in the March quarter. We saw a steady stream of orders for QMEMS from our major programs of record, along with the precision guided munitions order that I mentioned earlier. As we’ve said before, PGMs are the largest market segment in inertial navigation and are expected to be a significant area of growth for EMCORE in FY ’23. We remain bullish on these applications.
Before I move on to guidance, I’d like to provide an update on integration, which is a key area of focus. As of today, space and navigation is now running a common ERP system within the rest of EMCORE and has made the cutover from L3Harris’s IT systems. This will enable us to exit the cost of the transition services agreement that was part of the transaction.
We are expecting the transition for Chicago to complete in the June quarter, but we’ve already moved the Rhode Island engineering team out of the KVH building. We began rolling out Camstar MES for shop floor control in Alhambra and expect to integrate it into the other facilities after we complete the ERP upgrades and exit transition services. Ultimately, this will make EMCORE more efficient and will help us improve our processes, costs and lower inventory.
Turning now to guidance for the current quarter. We are expecting that inertial navigation will see some growth, largely driven by increased production in Chicago and Concord. This will be partially offset by continued weakness in cable television and wireless. Consequently, we are expecting revenue to be within the $27 million to $29 million range for the March quarter.
With that, I will turn the call back over to Tom.
Tom Minichiello
Thank you, Jeff. Consolidated revenue for fiscal 1Q was $25 million, with 87% coming from Aerospace & Defense, and 13% from broadband. Aerospace & Defense segment revenue was $21.7 million, a $700,000 increase when compared to the prior quarter.
A&D achieved sequential quarter growth despite shipping delays for our QMEMS product line, as the rest of the A&D portfolio performed well. This included the first full quarter of results for the inertial navigation operation in Tinley Park that was acquired during the prior quarter and the space and NAV operation in Budd Lake that posted another solid quarter. Additionally, the FOG product line in Alhambra, along with Defense Optoelectronics, both increased over the prior quarter.
Broadband revenue was $3.3 million, a $1.3 million sequential quarter decrease due to a further drop in sales of optical transmitters and lasers sold into the cable TV infrastructure market. To add some perspective on the severity of the current down cycle, cable TV product revenue this quarter was $1.6 million compared to $28.5 million in the year ago quarter, and $20 million when looking back to just the March 2022quarter.
As mentioned on our last call, we are in a much deeper cable TV down cycle this time around than the company has experienced in at least the last 10 years. Broadband revenue was also affected by lower nonrecurring engineering or NRE revenue associated with next-generation chip development.
Let me now turn to the rest of the operating results, the focus of which will be on a non-GAAP basis. A&D gross margin rebounded to 22%, driven by: a, the return to historical gross margins for the recently acquired operations in Tinley Park and Budd Lake; b, one-time QMEMS inventory valuation charges in the prior quarter; and c, better QMEMS manufacturing yields at our Concord site. Conversely, the very low level of revenue for the Broadband segment, combined with higher fixed cost under absorption resulted in an overall consolidated gross margin of 15%.
Operating expenses overall came in lower-than-anticipated at $11.8 million in the December quarter compared to$11.2 million in the prior quarter. While we added a full quarter of results for the inertial NAV business, project-related R&D costs, which tend to be uneven quarter-to-quarter were lower than average in 1Q.
As mentioned during our last call, EMCORE has undergone a momentous and rapid change to the revenue profile. During the first half of fiscal ’22, Broadband accounted for 75% of the business, and just a couple of quarters later in fourth quarter of fiscal ’22 and first quarter of fiscal ’23, this has completely flipped to over 80% of revenue coming from Aerospace & Defense.
The company is now better-positioned for higher growth with a broader-based portfolio of inertial navigation products, expanded customer reach and in a substantially larger and more stable marketplace than the highly cyclical cable TV market. While the December quarter was better compared to the prior quarter, fiscal 1Q results still reflected the significant and swift changes to the size and mix of the top line.
1Q operating loss was $8 million compared to$10.8 million in the quarter before. Adjusted EBITDA improved to negative $6.5 million. Net loss was $8.2 million or $0.22 per share compared to $10.9 million or $0.29 per share in the prior quarter.
Shifting over to GAAP results for a minute. Fiscal 1Q net loss was $11.7 million or $0.31 per share. This included acquisition-related costs of $2.1 million, severance charges of $475,000 and a $1.2 million book gain associated with the sale transaction of the Tinley Park property obtained as part of the inertial navigation asset acquisition from KVH.
Turning to the balance sheet. We had cash of $24.2 million at December 31 compared to $26.1 million at September 30. The $1.9 million net decrease consisted of $6.5 million used to fund regular business operations, $3.5 million used for financing activities, consisting of a $3.2 million loan balance reduction and $300,000 in debt service costs. $1.4 million for acquisition-related costs and $8,000 for CapEx. Offsetting these uses of cash was $10.3 million in net cash proceeds received from the sale leaseback of the Tinley Park property.
Before we get to the Q&A, I’d like to share with everyone that both Jeff and I planned to be at the Cowen Aerospace/Defense & Industrials Conference on Thursday, February 16, in Arlington, Virginia, including a presentation and in-person investor meetings. We plan on providing further details prior to the event.
And with that, we are now opening up the call for your questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question comes from Richard Shannon with Craig-Hallum. You may proceed.
Richard Shannon
Well, hi, Jeff and Tom. Thanks for taking my questions. I think my first couple will probably be more for Tom here. Just looking at the December quarter results here on gross margins, broadband gross margin is actually negative and it seems hot or interesting that revenues went down $1.3 million and gross profit down almost the same amount. It seems like pretty high leverage. I know you — I know it’s high going up and down, but it seems like dramatically below what I would have expected. So can you help us understand that dynamic? Is that temporary? Or what was going on there?
Tom Minichiello
Well, the reason why there was a — the sort of little bit of a disjointment that you’re referring to is the absorption of the costs are based on production activity during the quarter, not revenue. So in the quarter before, we had with the under absorption in the fab, Richard, was not as low as it was this quarter, even though the revenue was lower this quarter. So that accounts for — I think that accounts for the gap that you’re asking about. And then — but revenue does have — we went — we did go from 4.5 to 3.3. So that is obviously a factor as well.
Richard Shannon
Okay. The activity levels you’re referring to, are these at a bottom in the December quarter or not? I guess that will fall into a couple of questions I have later in gross margin going forward. But does activity levels improving from here?
Tom Minichiello
Say it again.
Richard Shannon
You referred to activity levels being even lower in December, those are the driver for gross margin. So are those activity levels bottomed out here in December or not necessarily as we get into March and later?
Tom Minichiello
Likely has bottomed out.
Richard Shannon
Okay. Excellent. That’s helpful. A couple of questions on how to look at the March quarter here. I just want to make sure I got the dynamics here, right? Obviously, some nice growth coming in A&D. I’m just wondering if I’m reading right that broadband could be flat, even down in the quarter. Is that the right way to interpret your comments?
Tom Minichiello
It’s going to stay right around where we just — where it is in the December quarter, Richard. I mean maybe some small changes.
Jeff Rittichier
There’s no catalyst to move it in either directions.
Tom Minichiello
Yes. Yes. So it’s going to look very similar.
Richard Shannon
Okay. That’s what I figured. I just want to make sure. So let’s dig in here on the gross margins as you look through the March quarter, in Q1, if you want to draw some conclusions we should think about going forward, that would be great here. But you just talked about activity levels bottoming out in the broadband business coming forward into March here. You’re growing in A&D, which has a nice fall through margins here. So how do we think about gross margins for this quarter? When we talked about 5 weeks ago in your last earnings call, you talked about a goal of getting to 20%. And so I’m wondering if that’s the number that we should be thinking about? Or how do you help us kind of peg down what you’re thinking for gross margins this quarter?
Tom Minichiello
Yes. I think overall, consolidated, that 20% number that you’re referring to is a good way to look at it, Richard. The — like we just said, the Broadband segment is going to look similar. That’s our expectation in the March quarter. But A&D will expect it to see the growth in top line and in margin. Things are getting better in Concord. The extra volume alone will also help absorb some other overhead costs in some of the other facilities.
The A&D business could very well do a gross margin, call it, somewhere between 25 and 30, somewhere in the middle of that range. And do the math, you can see that, that would probably come out to about a 20% consolidated margin if we execute towards that and we get the mix that we think we are going to get for the quarter.
Richard Shannon
Okay. That is very helpful. Just a couple of questions, I will jump back in the queue here. Just touching quickly on the topic of divestiture of potential businesses here, I guess a two-part question for you, Jeff. How should we think about timing here? I know you’re not going to talk about what kind of eventual outcome, including proceeds we might see from this. But any comments on kind of the end customer here? I think you may have mentioned something about a strategic partner for this one. And let’s just start with there and get your thoughts, Jeff, please.
Jeff Rittichier
Yes. I think the likely scenario is somewhere within a quarter of where we are right now, could be more toward the end, could be sooner. It just depends on due diligence with the parties and how long that takes. But I think that’s a reasonable way of looking at it. The other thing is just to clarify one other thing. And I just got done looking at it before I sat down, the cable TV business did have some E&O, excess and obsolete that was a little bit unusually large, we wouldn’t expect that to happen again. That was part of the thing that dragged down their gross margins. So — but back to your original question, the — yes, I would say, within 3 months is probably a quite reasonable way of looking at it.
Richard Shannon
Okay. And just to be clear on that, Jeff, is this contemplating just the cable TV business or other elements of the Broadband segment?
Jeff Rittichier
There are other pieces as well.
Richard Shannon
Okay. Perfect. One last question for me, I will jump out of line. Let’s talk about the chip business here. I guess two pieces. Maybe you can talk about some of the new engagements that you have going on here, types of customers, applications, et cetera, when those might hit as well as I think you mentioned a ramp you’re kind of getting this summer. How many customers and what’s kind of your expectation or thought process that we can think about it as we get into fiscal ’24 about revenues per quarter on that?
Jeff Rittichier
Yes. So if you took a look at the total number of customers for custom chips and the engagements, some are shipping, some are not. I think, 5 or 6 seems about right. There are — there’s one customer that has multiple programs with us, and I can’t say more than that. Again, what I would say is that all of these programs are targeted into the data center and possibly even telecom space. And so they really don’t — other than common design expertise and manufacturing assets, they really don’t have an impact over what — the things we are doing over in A&D. As we exit ’23 and going into ’24, I think you can look at revenue from those products sort of getting into the $3 million or $4 million a quarter range, right? And that will have a pretty significant impact on the absorption.
Richard Shannon
Okay. Excellent. We look forward to seeing that. I will jump back in the queue. Thank you so much, Jeff.
Jeff Rittichier
Sure.
Operator
Our next question comes from Tim Savageaux with Northland. You may proceed.
Tim Savageaux
Hi, good afternoon.
Jeff Rittichier
Hi, Tim.
Tim Savageaux
The question on the operating expense side, came in nicely lower than at least I expected here. I don’t know if that’s some measure of synergy or acquisition integration. But as you look forward, is there anything kind of anomalous about that OpEx? And what kind of outlook do you have heading forward here for OpEx to hang around this level or maybe ramp up a little bit with revenue?
Tom Minichiello
Probably we will go a little bit higher than where we finished. The — most of the OpEx, Tim, is pretty steady except you get into certain line items like project costs, this is materially used in R&D that tends to be uneven. Sometimes there’s NRE to cover it. Sometimes there isn’t. So that’s really the thing that makes it move around from quarter-to-quarter. The rest of the salaries and the people and all those kind of costs are very steady.
So what you’re likely to see is a little bit of a bounce back up to, I would say, maybe the 12% range because materials are likely to go a little higher. I mean they were well below average this quarter. And even if they just go back up to average, it will be over 12%. But we also — if you recall, last quarter, we announced a reduction in force. We got a little bit of the benefit of that only in the last few weeks of the quarter because we took the action in early December. We will get a full quarter of that, both in cost of goods sold and in OpEx, and that should keep the OpEx right around the 12 number per quarter.
Jeff Rittichier
Yes. Tim, as Tom pointed out, the only wildcard in this is where the nonrecurring engineering contracts land. Sometimes depending on the deliverables, we’ve to record those as an offset against R&D, in which case you’ll see a movement down in OpEx. In other cases, those dollars just get built out through cost of goods. So — and there’s enough NRE in there, it could start to move the numbers around. So don’t be surprised if for some reason, it looks a little better. I think Tom captured the spirit of where we are headed with this.
Operationally, we are bringing out — we’ve run out a fair bit of synergies and headcount. A few more we might get here and there, especially as we finish some of the systems work. But most of the — most of those synergies are now going to come from improvements in the way the manufacturing operation works. So you’ll see that in COGS probably starting in the summer, but and it will continue an improvement from there.
Tim Savageaux
Got it. And Jeff, you mentioned some signs over — back on the Broadband side, some signs of improvement in inventory situation. We’ve seen pretty strong finish to the year in terms of what the big operators are doing, and obviously, Charter moving into a major upgrade cycle here kind of real time. I wonder if you could be more specific on what you’re referencing with regard to those signs of improvement? And should we assume that’s a result of some of this increased network investment activity, or how do you see that playing out?
Jeff Rittichier
I think you touched on part of it, Tim, which is the — just the fact that actually the primary glut of transmitters out there are what are called linear EMLs, those were primarily consumed by Charter, and we see evidence that, that is changing and that other MSOs are using those instead of DFBs. So that’s part of it. The other thing is that one of the things you find when you’ve had a lot of inventory is that the OEMs misforecast the channel plan a bit. And so you can start to see based on the odd wavelengths that are ordered, what’s really going and you have a pretty good idea where it’s going. So that’s — those are the signs that I mentioned in the call.
Tim Savageaux
Thanks, and one more for me. I think you mentioned a 1.2 book-to-bill in the December quarter for A&D and higher in certain areas. I wonder if you can comment on what you’re seeing from an order perspective thus far this quarter? And whether you expect that relatively robust order flow to continue and enable you to grow A&D revenue sequentially throughout the year?
Jeff Rittichier
Yes. So it was really a good performance across the board, again, inertial NAV leading the way. And in the current quarter, it may come down a little bit. We still expect it to be north of one. And in the June quarter based on program timings, we are expecting to see something significantly better. And that’s just based on what the program offices are telling us, but the point that I’ve made is oftentimes in cable, we are running with 6 weeks worth of backlog, and it’s maddening at times. I look at our backlog report now, and it’s greater than 6 months. And we see that starting to build in some of these larger programs. So the visibility is dramatically different. We didn’t have 6 months visibility at any time in EMCORE for cable TV except during COVID period. And we expect that this kind of visibility is the norm rather than the exception in A&D.
Tim Savageaux
Got it. Thanks very much.
Operator
Thank you. Our next question comes from Paul Silverstein with Cowen. You may proceed.
Paul Silverstein
[Indiscernible] answered. Richard did a fine job. Thanks, guys.
Tom Minichiello
Hi, Paul.
Jeff Rittichier
Hey, Paul.
Operator
Thank you. [Operator Instructions] Our next question comes from Richard Shannon with Craig-Hallum. You may proceed.
Richard Shannon
Hey, guys. Two more follow-ups from me. I want to follow-up on Tim’s last question and your response here about — taking about growth throughout the rest of the year. Maybe thinking about it another way, and Jeff taking some of your comments from your prepared remarks about some of these products, I think you’re kind of taken mostly on a product-by-product basis rather than programs. Talk about TAIMU and BoRG and some QMEMS products.
Broadly speaking, can you kind of fit those products into the quarter or quarters where you might see some outsized growth and ultimately kind of fit us into the scenario where you get to break even, how do we get there? Can you help us put those things together a little bit more carefully, I guess?
Jeff Rittichier
Sure. Well, again, one of the points that we’ve made is I called it, I think, the 30-30 point which is we want to have gross margin in the low 30s and revenue in the low 30s in order to get to EBITDA. So let’s just take the midpoint of the range, call it, 28 that we forecasted and you say, Okay, Jeff, you need another 5 where you’re going to go get it, okay?
In my prepared comments, I mentioned that just all by itself, TAIMU could provide $20 million to $25 million worth of revenue a year. And that’s — so there’s my 5 per quarter, and that is just one program. So there are other programs which are ramping up programs for Lockheed in infrared search and track we’re seeing pushes by other branches of service with Raytheon for their own products like that. We are starting to see the work regarding the M1 A2C Abrams tank, which we are a part of with commander gunner sites start to move forward.
And so the interesting thing, Richard, is it’s really different for us at this point compared to, say, where we were 2 years ago is we’ve won the programs that we need to ramp. So this isn’t a case where it’s really speculative go-gets on program wins. It’s executing on low rate of initial production, getting things qualified and then into production. So that’s the answer to the first part of your question about revenue.
Getting into the question about gross margin, again, there’s — the thing that we’ve always talked about is that we are volume sensitive. And so we get hit with these under absorption charge — under absorption charges and those are in the fab primarily, but they also occur within the assembly areas in the business. So as we ramp up production and start generating this absorption, right, of the overhead, even without a change to the bill of material, even without a change in the product sales price margins go up period, end of story.
So there’s — again, if you look at the P&L in the current quarter, yes, there was some cable TV stuff we decided to write-off. There was really not much of it in A&D. And scrap in most of the business was fine. I think all we’ve got to do is execute on the fundamentals and get the volume up and the gross margin problem largely takes care of itself.
Richard Shannon
That’s helpful, Jeff. Maybe 1 quick follow-up on the topic especially [indiscernible] stood out here in terms of the size, saying that kind of gap you all the way to breakeven here. Is that something — in the last call, you talked about a breakeven point, maybe kind of early in the next fiscal year. I guess it was my understanding that TAIMU was going to be more of a calendar ’24 story. So I would assume we’ve got other drivers, maybe smaller each individually that helps us kind of gap up there, whereas TAIMU is more of a calendar ’24 story, or am I misunderstanding this?
Jeff Rittichier
Yes. So it’s not quite that black and white, Richard, because what has to happen, for example, is there’s a big ramp up in activity purchasing materials, some of which we actually get to recognize some revenue for, albeit with just a material overhead rate on top of it, well prior to that production happening. So you will start to see signs of the ramp before the actual delivery of multiple units per quarter. And you’ll see a little bit of that in March.
But the other programs that are out there in terms of new orders for Mark 54, ramps on infrared search and track, ramps on this [indiscernible] munitions program. Those are the things that are going to continue to move the needle between now and the time where I’m telling you, hey, we were able to ship 24 TAIMU in a given quarter, okay? So there is no hockey stick. There is no step function. It’s — you’re going to see steady improvement.
I use the TAIMU production as an example because it’s so definitive. We know what the hyper launch rates are. We know when ULA is expecting us to get done. And when I say expecting, I mean, needing us to get done and get this thing out the door to with a very high degree of quality and there’s no room for error. But the reality is, we talked about this book-to-bill 1.2, and we are going to be giving you some color on that going forward. The other programs are there to continue to close the gap. And we ultimately believe that TAIMU will be a bit of icing on the cake. But between now and then, you’re going to see continued signs of growth. And in the quarter, we just forecasted, that’s what we’ve said.
Richard Shannon
Okay. That’s fair enough. That’s a great explanation. Thanks for all the detail, Jeff. My last quick question for both of you. The stock at the valuation that it’s been trading at in the recent past year, fairly low, and I think people are worried about a dilutive capital raise. You talked about the path and potential timing of breakeven. We’ve got a potential divestiture that should yield some amount of money. I don’t know how to speculate on that. You’re not going to tell us what that is. But with the things that you know, what do you think the odds are of having to raise external equity capital versus being self-funded so you get to breakeven?
Jeff Rittichier
Yes. That’s really not something I can comment on today. Obviously, with the capital levels, the way that we are or where we are at, you look at what Wall Street thinks. And on one hand, I think there’s a view that, well, I may get to see this thing on the bottom if we are on the way down if there’s a raise. But on the other hand, there are, say, deep value longs that say, well, we need to make sure this thing is funded so that we don’t have a problem that we can see our investment thesis play out. And so it’s probably not something I feel comfortable commenting on today.
Richard Shannon
Okay. That is fair enough. Just want to hear your best guess, and I think we’ve heard that. So I appreciate all the answers, Jeff. That’s all for me.
Operator
Thank you. This concludes the Q&A session. I’d now like to turn the call back over to Jeff Rittichier for any closing remarks.
Jeff Rittichier
Well, I just want to close by thanking all of you for your interest in EMCORE. And as I usually do, I want to recognize the team for their absolute dogged efforts and perseverance as we reinvent the company as an Aerospace & Defense business. And thank you all for joining us today.
Operator
Thank you. That concludes today’s conference call. Thank you for participating. You may now disconnect.
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