Second Fiscal Quarter and Recent Highlights:
- Total revenue of $80.1 million, compared to $80.9 million in the first fiscal quarter of 2015 and $80.9 million in the second fiscal quarter of 2014;
- Automotive revenue increased 6.7% from the prior year, and communications revenue increased 2.1% sequentially;
- Gross margin was 35.0%, compared to 36.0% in the first fiscal quarter of 2015 and 34.3% in the second fiscal quarter of 2014;
- GAAP net income was $0.03 per diluted share and non-GAAP net income was $0.18 per diluted share;
- Ended the quarter with cash, restricted cash, and short-term investments of $135.6 million;
- Announced a quarterly cash dividend of $0.06 per share to be paid on May 22, 2015 to stockholders of record as of May 11, 2015;
- Announced the execution of a merger agreement under which a Chinese consortium of investors led by Summitview Capital will acquire all of the outstanding shares of ISSI for $19.25 per share in cash; and
- Announced the execution of an equipment lease agreement with Powerchip Technology Corporation (Powerchip) whereby ISSI will purchase and lease semiconductor manufacturing equipment to Powerchip for a period of six years, and receive manufacturing capacity and a guaranteed supply of wafers through 2021.
"Revenue in the second fiscal quarter reflected softer than anticipated demand across our end markets as well as reduced flash sales due to the ongoing wafer shortage. However, design activity in the quarter was strong, including a number of large DDR3 and mobile DRAM wins for automotive and industrial applications. We also secured our first design wins for RLDRAM®3 memory and for our flash products in an automotive application. Additionally, analog revenue increased in the quarter compared to the first fiscal quarter as we continue to gain customer traction with key new products, in particular for our higher margin business outside of China," said Scott Howarth, ISSI's President and CEO.
"Further, we continue to work closely with the consortium led by Summitview Capital in completing the required filings and approvals for the proposed acquisition of ISSI. We currently expect to complete the transaction in the third calendar quarter. As part of this process, our special meeting of stockholders to consider the transaction has been scheduled for June 3, 2015."
Second Fiscal Quarter 2015 Results
Revenue in the second fiscal quarter ended March 31, 2015 was $80.1 million, compared to $80.9 million in the first fiscal quarter of 2014 and $80.9 million in the second fiscal quarter of 2014. Revenue in the second fiscal quarter of 2015 included $73.2 million of SRAM and DRAM revenue, $5.0 million of NOR flash revenue, and $1.9 million of analog revenue.
GAAP gross margin in the second fiscal quarter was 35.0%, compared to 36.0% in the December 2014 quarter and 34.3% in the March 2014 quarter.
GAAP net income in the second fiscal quarter of 2015 was $1.1 million, or $0.03 per diluted share, compared to GAAP net income of $3.2 million, or $0.10 per diluted share, in the December 2014 quarter and GAAP net income of $8.8 million, or $0.28 per share, in the March 2014 quarter.
Non-GAAP net income in the March 2015 quarter was $5.9 million, or $0.18 per diluted share, compared to $6.3 million, or $0.20 per diluted share, in the December 2014 quarter and $7.4 million, or $0.24 per diluted share, in the March 2014 quarter.
Non-GAAP results exclude stock based compensation, amortization of intangibles related to acquisitions, legal expenses related to our litigation with GSI Technology, incremental proxy and acquisition related expenses, gains on the sales of investments, and non-cash tax expense related to the utilization of previously recorded deferred tax assets. A reconciliation of our GAAP results to non-GAAP results is provided in the financial statement tables following the text of this press release.
The ISSI Board of Directors has approved a dividend of $0.06 per share to be paid on May 22, 2015, to stockholders of record as of May 11, 2015.
June Quarter Outlook
The Company will not be providing financial guidance due to the pending acquisition.
Conference Call Information
A conference call will be held today at 7:00 a.m. Pacific Time to discuss the Company's second fiscal quarter 2015 financial results. To access ISSI's conference call via telephone, dial 1-888-428-9490 by 6:50 a.m. Pacific Time. The participant passcode is 7368687. The call will also be webcast from ISSI's website at http://www.issi.com.
Non-GAAP Financial Information
In addition to disclosing results determined in accordance with GAAP, ISSI discloses its non-GAAP operating income, provision for income taxes and net income for certain periods that exclude stock based compensation, amortization of intangibles related to acquisitions, legal expenses related to our litigation with GSI Technology, incremental proxy and acquisition related expenses, gains on sales of investments, and non-cash tax expense related to the utilization of previously recorded deferred tax assets. When presenting non-GAAP results, the Company includes a reconciliation of the non-GAAP results to the results under GAAP. Management believes that including the non-GAAP results assists investors in assessing the Company's operational performance and its performance relative to its competitors. The Company has presented its non-GAAP results as a complement to its results provided in accordance with GAAP, and these results should not be regarded as a substitute for GAAP. Management uses non-GAAP measures to plan and forecast future periods, to establish operational goals, to compare with its business plan and individual operating budgets, to assist the public in measuring the Company's performance, to allocate resources and, relative to the Company's historical financial performance, to enable comparability between periods. Management also considers such non-GAAP results to be an important supplemental measure of its performance. The economic substance behind management's decision to use such non-GAAP measures relates to the non-GAAP measures being a useful measure of the potential future performance of the Company's business. In line with common industry practice and to help enable comparability with other technology companies, the Company's non-GAAP presentation excludes the impact of the items described above. Other companies may calculate non-GAAP results differently than the Company, limiting its usefulness as a comparative measure. In addition, such non-GAAP measures may exclude financial information that some may consider important in evaluating the Company's performance. Management compensates for the foregoing limitations of non-GAAP measures by presenting certain information on both a GAAP and non-GAAP basis and providing reconciliations of the GAAP and non-GAAP measures.