ISSI Announces Third Fiscal Quarter 2014 Results

Record Revenue of $84.8 Million, Operating Margin Increases to 7.5% Initiates Quarterly Cash Dividend

MILPITAS, Calif., July 24, 2014 — (PRNewswire) —  Integrated Silicon Solution, Inc. (Nasdaq: ISSI) today reported financial results for the third fiscal quarter ended June 30, 2014.

Third Fiscal Quarter and Recent Highlights:

  • Revenue grew 4.9% to a record $84.8 million compared to $80.9 million in the second fiscal quarter of 2014, and grew 9.1% compared to $77.8 million in the third fiscal quarter of 2013;
  • Gross margin was 34.5%, compared to 34.3% in the March 2014 quarter and 33.5% in the June 2013 quarter;
  • DRAM revenue increased 14.9% and SRAM revenue increased 6.3% over the prior year period;
  • Industrial, medical, and military (IMM) revenue increased 32.3% and automotive revenue grew 12.1% year-over-year;
  • GAAP net income was $0.19 per diluted share and non-GAAP net income was $0.25 per diluted share;
  • Generated $7.4 million in cash flow from operations and ended the quarter with cash and short-term investments of $142.2 million;
  • Announced the industry's first 115C DRAM for automotive applications, an 8Gb DDR3/DDR3L for communications markets, and an expanded high performance Serial NOR Flash product line; and
  • Announced quarterly cash dividend program.

"We reported our third consecutive quarterly revenue record with sales growing by almost 5% sequentially, driven by strength in our IMM and automotive markets as well as improved revenue in the communications market," said Scott Howarth, ISSI's President and CEO. "During the quarter, we also achieved solid margin performance with operating margin increasing to 7.5% as a result of our ongoing focus on cost reductions and operating leverage. We are particularly excited about our new product announcements, including the industry's first 115C DRAM targeting growing automotive applications such as camera systems. Looking ahead, we see opportunities for further market share gains with these new products and our expanded product line as our customers continue to seek long-term support for their memory needs.

"We also announced the initiation of a quarterly cash dividend to provide a return of capital to our stockholders. The Board's decision reflects confidence in our financial performance and future cash flows."

Third Fiscal Quarter 2014 Results
Revenue in the third fiscal quarter ended June 30, 2014 was $84.8 million, compared to $80.9 million in the second fiscal quarter of 2014 and $77.8 million in the third fiscal quarter of 2013. Revenue in the third fiscal quarter of 2014 consisted of $75.8 million of SRAM and DRAM revenue, $7.0 million of NOR flash revenue, and $2.0 million of analog revenue. SRAM and DRAM revenue increased 4.0% from the March 2014 quarter and 12.3% from the June 2013 quarter.

Gross margin in the third fiscal quarter was 34.5%, compared to 34.3% in the March 2014 quarter, and 33.5% in the June 2013 quarter.

During the quarter, the Company continued to sell a portion of the Nanya shares it purchased in September 2012, realizing a gain of $2.1 million. The Company has now sold all of the Nanya shares that were immediately tradable. In total, the Company sold shares with a cost basis of $16.2 million and recognized aggregate gains of $21.2 million

GAAP income tax expense in the third fiscal quarter was $2.4 million, compared to $2.9 million in the March 2014 quarter and $5.2 million in the June 2013 quarter.

GAAP net income in the third fiscal quarter of 2014 was $6.2 million, or $0.19 per diluted share, compared to GAAP net income of $8.8 million, or $0.28 per diluted share, in the March 2014 quarter and GAAP net income of $7.1 million, or $0.24 per diluted share, in the June 2013 quarter.

Third quarter non-GAAP net income was $7.9 million, or $0.25 per diluted share, compared to $7.2 million, or $0.23 per diluted share, in the March 2014 quarter and $6.7 million, or $0.23 per diluted share, in the June 2013 quarter.

Non-GAAP results exclude stock based compensation, amortization of intangibles related to acquisitions, gains on the sales of investments, and non-cash tax expense. A reconciliation of GAAP results to non-GAAP results is provided in the financial statement tables following the text of this press release.

September Quarter Outlook
The Company expects total revenue for the September quarter to range between $85.0 million and $89.0 million, consisting of SRAM and DRAM revenue of between $76.0 million and $78.5 million, NOR flash revenue between $7.0 million and $8.0 million, and analog revenue of between $2.0 million and $2.5 million. Gross margin for the September quarter is expected to range between 34.0 percent and 35.0 percent. Operating expenses are expected to range between $22.5 million and $23.5 million. GAAP net income is expected to be between $0.15 and $0.19 per diluted share and non-GAAP net income is expected to range between $0.25 and $0.29 per diluted share. 

Conference Call Information
A conference call will be held today at 7:00 a.m. Pacific Time to discuss the Company's third fiscal quarter financial results. To access ISSI's conference call via telephone, dial 888-556-4997 by 6:50 a.m. Pacific Time. The participant passcode is 1172961. 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, the amortization of intangibles related to acquisitions, gains on sales of investments, and non-cash tax expense. 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.

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