• Operating results in line with guidance.
• GAAP net loss per share includes non-cash tax adjustment to establish a valuation allowance.
Rubicon Technology, a leading provider of sapphire substrates and products to the LED, semiconductor, and optical industries, today reported financial results for its fourth quarter ended Dec. 31, 2013.
The company reported fourth quarter revenue of US$11.5 million as compared with US$ 11.1 million in the prior quarter. Overall demand for sapphire continued its rebound with the growing momentum of the general lighting segment of the LED market and demand from non-LED applications for mobile devices, such as the sapphire home button on the iPhone 5S, as well as the camera lens cover now being adopted by more smartphone manufacturers. Revenue from two and four-inch sapphire core sales increased twenty-eight percent sequentially to US$ 9.2 million from US$ 7.2 million in the prior quarter. Half of the sequential growth in core sales resulted from price increases and the other half resulted from increased volume. The Company was able to increase core volumes by adding some core fabrication capacity. This added capacity now allows the Company to fabricate and sell all crystals produced in a given period regardless of product mix. Higher revenue from two and four-inch cores was largely offset by a decrease in wafer and optical sapphire sales.
Raja Parvez, President and CEO of Rubicon, commented, “While wafer revenue was low in the fourth quarter, we continued to make good progress on our patterned sapphire substrate (“PSS”) and polished wafer initiatives. We are very pleased with the progress on the PSS product introduction. We announced the introduction of the PSS product in October and we have already received requests for samples from sixteen different customers, which we believe positions us to meet our 2014 revenue target for PSS wafers of at least US$15 million.” Parvez continued, “In addition, we received our first production order of four-inch polished wafers for the first quarter and expect orders from existing customers of six inch LED wafers to begin picking up in the second quarter.”
The Company began increasing utilization of its crystal growth facilities last quarter and those facilities are now operating at full capacity. Reduced idle plant costs and higher pricing for two and four inch core products offset in part by the impact of lower wafer sales and higher development costs resulted in an improvement in gross margin of $507 thousand. William Weissman, Rubicon’s CFO, commented, “The majority of our negative gross margin in 2013 resulted from idle plant costs associated with low utilization of our manufacturing facilities. We have just completed the re-starting of all of our crystal growth furnaces and we expect to see significant increases in wafer production over the course of this year which will continue to lower our idle plant costs.”
GAAP net loss in the fourth quarter was US$ 0.67 per share and included a non-cash adjustment to establish a valuation allowance on the Company’s deferred tax assets. The Company’s non-GAAP net loss was US$0.22 per share in the fourth quarter, which was in line with the Company’s guidance and compares with a GAAP net loss per share of US$ 0.26 in the prior quarter. The non-GAAP net loss per share excludes the adjustment to establish the tax valuation allowance and applies our fourth quarter projected tax benefit rate of forty-five percent. For a reconciliation of this non-GAAP financial measure to the most applicable financial measure under U.S. GAAP, see “Reconciling Items to Financial Statements - GAAP to Non-GAAP, Condensed Consolidated Statements of Operations” included in the tables accompanying this release.
Weissman explained, “Due to the loss in the fourth quarter of 2013, we are in a cumulative loss position for the past three years which is considered by the accounting standards to be significant negative evidence which is very difficult to overcome. While our financial outlook for the company remains positive, under the accounting standards objective negative evidence is given greater weight than other subjective positive evidence such as our projections for future growth. Consequently, this has led us to establish a valuation allowance in the current quarter. We will maintain the tax valuation allowance and no longer accrue tax benefits or tax expense on our income statement until an appropriate level of profitability is attained.”
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