Rubicon Technology, Inc., a leading provider of sapphire substrates and products to the LED, RFIC, semiconductor, and optical industries, yesterday reported financial results for its second quarter ended June 30, 2013.

The Company reported second quarter revenue of $10.6 million as compared with $8.3 million in the prior quarter. Revenue was higher sequentially due to the stronger demand for two- and four-inch core products driven by the strengthening LED market. Raja Parvez, President and CEO of Rubicon Technology, commented, “We saw stronger demand for two- and four-inch core from the LED market in the second quarter. Orders were up significantly and pricing for these products increased by approximately 10 percent. This is the first time in two years that sapphire pricing has increased.” Changes in market pricing are usually reflected in the Company’s financial results in the following quarter due to the lead time on customer orders, therefore, changes in market pricing in the second quarter will be reflected in third quarter financial performance. The Company reported that demand for two- and four-inch core remains robust and that pricing has continued to rise in the third quarter.

Overall demand from the LED market has been improving, driven by increasing adoption of LEDs for general lighting applications. The Company expects LED demand to continue to strengthen given the momentum in the LED general lighting segment. Also, non-LED applications for mobile devices such as camera lens covers, portions of the face plate to allow for biometrics like fingerprint recognition and smart watches have the potential to add considerable demand for sapphire next year.

Much of the pressure on the Company’s earnings is coming from a lull in six-inch wafer orders and idle plant costs due to low utilization of the Company’s manufacturing facilities. Mr. Parvez commented, “We expect improvement in six-inch wafer orders later this year, and we are on schedule to begin offering four-inch and six-inch pattered sapphire substrates (“PSS”) by the end of the year. The PSS product will allow us to capture more revenue and margin on the same surface area of sapphire. It could also help facilitate six-inch adoption among chip manufacturers as there will be one less process to scale up before migrating to a larger platform.”

William Weissman, CFO of Rubicon Technology, said, “Idle plant costs in the second quarter totaled $3.7 million, which is a significant portion of our gross loss. Based on the large core volumes we are currently shipping, we expect our boule inventory levels to decrease quickly and anticipate re-engaging idle crystal growth capacity early next year. Utilization of our polishing operations will improve with the strengthening of six-inch wafer orders and the start of patterned substrate production.”

The company reported that cash and investments increased by $5 million in the second quarter to $41 million due to the decrease of inventory and strong accounts receivable collections.

The Company reported a net loss of $(0.26) per share in the second quarter as compared with a net loss of $(0.15) in the prior quarter. Disposal of equipment and a slightly lower tax benefit rate also contributed to the larger loss per share.

Third Quarter 2013 Guidance

Commenting on the outlook for the third quarter of 2013, Mr. Weissman said, “We believe the LED market will continue to strengthen and we expect pricing for two- and four-inch cores to be higher in the third quarter. We believe it will take another quarter or two to see a meaningful improvement in six-inch wafer orders and there will likely be additional price pressure on that product in the near-term. As a result, we expect the third quarter revenue to be similar to the second quarter. Idle plant costs will remain high in the third quarter but we should see some improvement in profitability with pricing increases for two- and four-inch cores and product cost reductions, offset partially by lower six-inch wafer volumes and pricing. As a result, we expect a loss per share between $(0.20) and $(0.24) based on 22.5 million shares outstanding and a 45 percent tax benefit.”