MACOM Reports Revenue $112.6 Million, Adjusted Gross Margin of 57.4% and Adjusted EPS $0.34 (non-GAAP) for Fiscal Fourth Quarter

Non-GAAP Financial Measures

In addition to GAAP reporting, MACOM provides investors with non-GAAP adjusted financial information. Adjusted items include revenue, gross profit, gross margin, operating margin, operating income, net income, earnings per share, Adjusted EBITDA and other data calculated on a non-GAAP basis. This non-GAAP information excludes the operations of Nitronex prior to the date of acquisition, discontinued operations, the impact of fair value accounting in merger and acquisitions (M&A) of businesses, M&A costs, including acquisition and related integration costs, certain cost savings from synergies expected from M&A activities, income and expenses from transition services related to M&A activities, expected amortization of acquisition-related intangibles, share-based and other non-cash compensation expense, certain cash compensation, restructuring charges, litigation settlement and costs, changes in the carrying values of assets and liabilities measured at fair value, contingent consideration, amortization of debt discounts and issuance costs, other non-cash expenses, earn-out costs, restructuring costs and certain income tax items. Management does not believe that the adjusted items are reflective of MACOM's underlying performance. The adjustment of these and other similar items from MACOM's non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent or unusual. These and other similar items are also excluded from Adjusted EBITDA, which is non-GAAP earnings before interest, income taxes, depreciation and amortization. MACOM believes this non-GAAP financial information provides additional insight into these items and MACOM's performance and has, therefore, chosen to provide this information to investors for a consistent basis of comparison and to help them evaluate the results of MACOM's operations and enable more meaningful period to period comparisons. These non-GAAP measures may be different than similar measures used by other companies and should be considered in addition to, not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial data used in this earnings release is included in the supplemental financial data attached to this press release.

           

M/A-COM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share data)

 
Three Months Ended Fiscal Year Ended
October 2,   July 3,   October 3, October 2,   October 3,
2015 2015 2014 2015 2014
Revenue $ 112,564 $ 109,058 $ 93,859 $ 420,609 $ 339,189
Cost of revenue 55,603   56,562   45,075   217,019   198,249  
Gross profit 56,961   52,496   48,784   203,590   140,940  
Operating expenses:
Research and development 22,002 20,965 19,540 82,188 71,351
Selling, general and administrative 29,964 26,592 19,595 110,030 82,593
Restructuring charges 308   558   (902 ) 1,280   14,823  
Total operating expenses 52,274   48,115   38,233   193,498   168,767  
Income (loss) from operations 4,687   4,381   10,551   10,092   (27,827 )
Other income (expense):
Warrant liability gain (expense) 9,651 546 1,638 (6,020 ) (3,928 )
Interest expense (4,425 ) (4,505 ) (4,529 ) (18,376 ) (12,362 )
Other income (expense) 131   (225 ) 776   (1,096 ) 3,217  
Total other income (expense) 5,357   (4,184 ) (2,115 ) (25,492 ) (13,073 )
 
Income (loss) before income taxes 10,044 197 8,436 (15,400 ) (40,900 )
Income tax provision (benefit) (3,797 ) (1,559 ) (2,142 ) (9,858 ) (16,086 )
Income (loss) from continuing operations 13,841 1,756 10,578 (5,542 ) (24,814 )
Income (loss) from discontinued operations 40,564   6,271   3,959   54,131   9,491  
Net income (loss) $ 54,405   $ 8,027   $ 14,537   $ 48,589   $ (15,323 )
 
Net income (loss) per share:
Basic:
Income (loss) from continuing operations $ 0.26 $ 0.03 $ 0.22 $ (0.11 ) $ (0.53 )
Income (loss) from discontinued operations 0.76   0.12   0.08   1.06   0.20  
Income (loss) per share - basic $ 1.02   $ 0.15   $ 0.31   $ 0.95   $ (0.33 )
 
Diluted:
Income (loss) from continuing operations $ 0.08 $ 0.03 $ 0.22 $ (0.11 ) $ (0.53 )
Income (loss) from discontinued operations 0.74   0.11   0.08   1.06   0.20  
Income (loss) per share - diluted $ 0.81   $ 0.15   $ 0.30   $ 0.95   $ (0.33 )
 
Shares - Basic 53,287   53,098   47,480   51,146   47,009  
Shares - Diluted 54,991   55,175   48,873   51,146   47,009  
 
           

M/A-COM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited and in thousands)

 
October 2, October 3,
2015 2014
ASSETS
Current assets:
Cash and cash equivalents $ 122,312 $ 173,895
Short term investments 39,557
Accounts receivable, net 83,950 62,258
Inventories 79,943 71,481
Prepaids and other current assets 58,457 50,726
Current assets, discontinued operations   14,989
Total current assets 384,219 373,349
Property and equipment, net 83,759 50,052
Goodwill and intangible assets, net 337,012 153,417
Deferred income taxes 48,239 84,629
Other long-term assets 13,022 20,232
Other assets, discontinued operations   555
TOTAL ASSETS $ 866,251   $ 682,234
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of debt obligations $ 4,058 $ 3,478
Accounts payable, accrued liabilities and other 67,418 74,247
Other current liabilities, discontinued operations   7,921
Total current liabilities 71,476 85,646
Long-term debt obligations, less current portion 340,504 343,178
Common stock warrant liability 21,822 15,801
Deferred income taxes and other 7,916   9,042
Total liabilities 441,718 453,667
Stockholders' equity 424,533   228,567
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 866,251   $ 682,234
 
 

M/A-COM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)

 
        Fiscal Year Ended
October 2,     October 3,
2015 2014
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 48,589 $ (15,323 )
Non-cash adjustments 109,045 57,755
Gain on sale of business (63,256 )
Change in operating assets and liabilities (60,700 ) (16,960 )
Net cash from operating activities 33,678   25,472  
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net (208,352 ) (260,875 )
Sale of businesses and product line 81,208 24,345
Purchase of investment securities (40,183 )
Strategic investments 1,500 (5,250 )
Purchases of property and equipment (38,252 ) (16,973 )
Acquisition of intellectual property (3,346 ) (5,490 )
Net cash used in investing activities (207,425 ) (264,243 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of debt (5,004 ) (44,417 )
Proceeds from stock offering 127,761
Repurchase of common stock (8,626 ) (1,282 )
Borrowings on revolving facility 100,000 245,000
Payments on revolving facility (100,000 ) (245,000 )
Proceeds from notes payable 350,000
Proceeds from stock awards and units 5,450 4,028
Capital contributions 3,200
Other adjustments 2,826   (9,169 )
Net cash from financing activities 122,407   302,360  
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (243 ) (182 )
NET CHANGE IN CASH AND CASH EQUIVALENTS (51,583 ) 63,407
CASH AND CASH EQUIVALENTS — Beginning of period 173,895   110,488  
CASH AND CASH EQUIVALENTS — End of period $ 122,312   $ 173,895  
 
               

M/A-COM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(unaudited and in thousands, except per share data)

 
Three Months Ended     Three Months Ended     Fiscal Year Ended
October 2, 2015     July 3, 2015   October 3, 2014     October 2, 2015   October 3, 2014
Amount       Amount   Amount     Amount  
Revenue - GAAP $ 112,564 $ 109,058 $ 93,859 $ 420,609 $ 339,189
Nitronex prior to acquisition         (1,048 )
Adjusted Revenue (NonGAAP) $ 112,564   $ 109,058   $ 93,859   $ 420,609   $ 338,141  
 
Amount   % Revenue     Amount   % Revenue   Amount   % Revenue     Amount   % Revenue   Amount   % Revenue
Gross Profit - GAAP $ 56,961 50.6 $ 52,496 48.1 $ 48,784 52.0 $ 203,590 48.4 $ 140,940 41.6
Nitronex prior to acquisition 959 0.3
Intangible amortization expense 7,647 6.8 6,932 6.4 4,495 4.8 27,285 6.5 18,274 5.4
Non-cash compensation expense 607 0.5 485 0.4 404 0.4 2,011 0.5 1,721 0.5
Equity-based compensation (21 ) 27 13 243 0.1 66
Acquisition FMV step-up expense (inventory/fixed assets) (631 ) (0.6 ) 2,464 2.3 168 0.2 6,206 1.5 18,875 5.6
Third-party engineering costs 396 0.4 493 0.5 1,625 0.4 1,463 0.4
Integration costs and synergy savings 41           487     0.4     100     0.1       880     0.2     1,406     0.4  
Adjusted Gross Profit (NonGAAP) $ 64,604     57.4       $ 63,287     58.0     $ 54,457     58.0       $ 241,840     57.5     $ 183,704     54.3  
 
Research and Development - GAAP $ 22,002 19.5 $ 20,965 19.2 $ 19,540 20.8 $ 82,188 19.5 $ 71,351 21.0
Nitronex prior to acquisition (1,423 ) (0.2 )
Non-cash compensation expense (2,380 ) (2.1 ) (1,456 ) (1.3 ) (680 ) (0.7 ) (6,404 ) (1.5 ) (2,678 ) (0.8 )
Equity-based compensation 27 (305 ) (0.3 ) (112 ) (0.1 ) (1,466 ) (0.3 ) (477 ) (0.1 )
Acquisition FMV step-up expense (inventory/fixed assets) (204 ) (0.2 ) (204 ) (0.2 ) (204 ) (0.2 ) (816 ) (0.2 ) (663 ) (0.2 )
Integration costs and synergy savings (149 ) (0.1 ) (74 ) (0.1 ) (898 ) (1.0 ) (531 ) (0.1 ) (4,456 ) (1.3 )
Third-party engineering costs           396     0.4     493     0.5       1,625     0.4     1,463     0.4  
Adjusted Research and Development (NonGAAP) $ 19,296     17.1       $ 19,322     17.7     $ 18,139     19.3       $ 74,596     17.7     $ 63,117     18.7  
 
Selling, General and Administrative - GAAP $ 29,964 26.6 $ 26,592 24.4 $ 19,595 20.9 $ 110,030 26.2 $ 82,593 24.4
Nitronex prior to acquisition (685 ) (0.2 )
Earn-out costs (330 ) (0.3 ) (330 ) (0.1 )
Intangible amortization expense (4,345 ) (3.9 ) (3,201 ) (2.9 ) (432 ) (0.5 ) (11,695 ) (2.8 ) (1,779 ) (0.5 )
Non-cash compensation expense (5,589 ) (5.0 ) (4,697 ) (4.3 ) (1,613 ) (1.7 ) (20,239 ) (4.8 ) (6,632 ) (2.0 )
Equity-based compensation 173 0.2 (246 ) (0.2 ) (106 ) (0.1 ) (891 ) (0.2 ) (467 ) (0.1 )
Acquisition FMV step-up expense (inventory/fixed assets) (28 ) (28 ) (28 ) (112 ) (88 )
Litigation related costs (188 ) (0.2 ) 21 (653 ) (0.7 ) (933 ) (0.2 ) (1,598 ) (0.5 )
Transaction expenses (193 ) (0.2 ) (125 ) (0.1 ) (4,423 ) (1.1 ) (4,472 ) (1.3 )
Integration costs and synergy savings (315 )   (0.3 )     (136 )   (0.1 )   (485 )   (0.6 )     (1,029 )   (0.2 )   (9,399 )   (2.8 )
Adjusted Selling, General and Administrative (NonGAAP) $ 19,149     17.0       $ 18,180     16.7     $ 16,278     17.3       $ 70,378     16.7     $ 57,473     17.0  
 
                                                 
Amount   % Revenue     Amount   % Revenue   Amount   % Revenue     Amount   % Revenue   Amount   % Revenue
Total operating expenses - GAAP $ 52,274   46.4     $ 48,115   44.1   $ 38,233   40.7     $ 193,498   46.0   $ 168,767   49.8
Nitronex prior to acquisition (2,108 ) (0.3 )
Intangible amortization expense (4,345 ) (3.9 ) (3,201 ) (2.9 ) (432 ) (0.5 ) (11,695 ) (2.8 ) (1,779 ) (0.5 )
Non-cash compensation expense (7,968 ) (7.1 ) (6,153 ) (5.6 ) (2,293 ) (2.4 ) (26,642 ) (6.3 ) (9,310 ) (2.8 )
Equity-based compensation 199 0.2 (551 ) (0.5 ) (218 ) (0.2 ) (2,358 ) (0.6 ) (944 ) (0.3 )
Acquisition FMV step-up expense (inventory/fixed assets) (232 ) (0.2 ) (232 ) (0.2 ) (232 ) (0.2 ) (928 ) (0.2 ) (751 ) (0.2 )
Contingent consideration and earn-out costs (330 ) (0.3 ) (330 ) (0.1 )
Restructuring charges (309 ) (0.3 ) (558 ) (0.5 ) 902 1.0 (1,280 ) (0.3 ) (14,823 ) (4.4 )
Integration costs and synergy savings (464 ) (0.4 ) (210 ) (0.2 ) (1,383 ) (1.5 ) (1,560 ) (0.4 ) (13,855 ) (4.1 )
Litigation related costs (188 ) (0.2 ) 21 (653 ) (0.7 ) (933 ) (0.2 ) (1,598 ) (0.5 )
Transaction expenses (192 ) (0.2 ) (125 ) (0.1 ) (4,423 ) (1.1 ) (4,472 ) (1.3 )
Third-party engineering           396     0.4     493     0.5       1,625     0.4     1,463     0.4  
Adjusted Total Operating Expenses (NonGAAP) $ 38,445     34.2       $ 37,502     34.4     $ 34,417     36.7       $ 144,974     34.5     $ 120,590     35.7  
 
Income (loss) from operations - GAAP $ 4,687 4.2 $ 4,381 4.0 $ 10,551 11.2 $ 10,092 2.4 $ (27,827 ) (8.2 )
Nitronex prior to acquisition (0.1 ) 3,067 0.9
Intangible amortization expense 11,992 10.7 10,133 9.3 4,927 5.2 38,983 9.3 20,053 5.9
Non-cash compensation expense 8,575 7.6 6,638 6.1 2,697 2.9 28,653 6.8 11,031 3.3
Equity-based compensation (221 ) (0.2 ) 578 0.5 231 0.2 2,600 0.6 1,010 0.3
Contingent consideration and earn-out costs 330 0.3 330 0.1
Restructuring charges 308 0.3 558 0.5 (902 ) (1.0 ) 1,280 0.3 14,823 4.4
Acquisition FMV step-up expense (inventory/fixed assets) (399 ) (0.4 ) 2,696 2.5 400 0.4 7,134 1.7 19,626 5.8
Litigation related costs 188 0.2 (21 ) 653 0.7 933 0.2 1,598 4.5
Transaction expenses 192 0.2 125 0.1 4,423 1.1 4,472 0.5
Integration costs and synergy savings 505     0.4       697     0.6     1,483     1.6       2,439     0.6     15,261     1.3  
Adjusted Income (Loss) from Operations (NonGAAP) $ 26,157     23.2       $ 25,785     23.6     $ 20,040     21.4       $ 96,867     23.0     $ 63,114     18.7  
Depreciation expense 3,786 3.4 3,253 3.0 3,201 3.4 14,128 3.4 12,555 3.7
Other income, net                                     118      
Adjusted EBITDA $ 29,943     26.6       $ 29,038     26.6     $ 23,241     34.4       $ 110,995     26.4     $ 75,787     22.4  
 
Interest expense- GAAP $ 4,425 3.9 $ 4,505 4.1 $ 4,529 4.8 $ 18,376 4.4 $ 12,362 3.7
Non-cash interest expense (405 )   (0.4 )     (405 )   (0.4 )   (381 )   (0.4 )     (1,652 )   (0.4 )   (3,021 )   (0.9 )
Adjusted Interest Expense (NonGAAP) $ 4,020     3.6       $ 4,100     3.8     $ 4,148     4.4       $ 16,724     4.0     $ 9,341     2.8  
 
Net income (loss) - GAAP $ 54,405 48.3 $ 8,027 7.4 $ 14,537 15.5 $ 48,589 11.6 $ (15,323 ) (4.5 )
Discontinued operations (40,564 ) (36.0 ) (6,271 ) (5.8 ) (3,959 ) (4.2 ) (54,131 ) (12.9 ) (9,491 ) (2.8 )
Nitronex prior to acquisition 3,067 0.9
Intangible amortization expense 11,992 10.7 10,133 9.3 4,927 5.2 38,980 9.3 20,053 5.9
Non-cash compensation expense 8,576 7.6 6,638 6.1 2,697 2.9 28,654 6.8 11,031 3.3
Equity-based compensation (221 ) (0.2 ) 578 0.5 231 0.2 2,600 0.6 1,010 0.3
Impairment of minority investment 3,500 0.8
Contingent consideration 330 0.3 (1,670 ) (0.4 )
Restructuring charges 308 0.3 558 0.5 (902 ) (1.0 ) 1,280 0.3 14,823 4.4
Warrant liability (gain) expense (9,651 ) (8.6 ) (546 ) (0.5 ) (1,638 ) (1.7 ) 6,020 1.4 3,928 1.2
Non-cash interest expense 405 0.4 405 0.4 381 0.4 1,652 0.4 3,021 0.9
Acquisition FMV step-up expense (inventory/fixed assets) (399 ) (0.4 ) 2,696 2.5 400 0.4 7,134 1.7 19,626 5.8
Litigation related costs 188 0.2 (21 ) 653 0.7 933 0.6 1,598 4.5
Integration costs and synergy savings 505 0.4 697 0.6 1,483 1.6 2,440 0.2 15,261 0.5
Transaction expenses 192     0.2       125     0.1               4,422     1.1     4,472     1.3  
                                         
Amount   % Revenue     Amount   % Revenue   Amount   % Revenue     Amount   % Revenue   Amount   % Revenue
Tax effect of non-GAAP adjustments (7,117 ) (6.3 ) (4,811 ) (4.4 ) (5,003 ) (5.3 ) (21,877 ) (5.2 ) (25,786 ) (7.6 )
Transition services for divested business and other (130 )   (0.1 )     225     0.2     (776 )   (0.8 )     (404 )   (0.1 )   (3,099 )   (0.9 )
Adjusted Net Income (NonGAAP) $ 18,819     16.7       $ 18,433     16.9     $ 13,031     13.9       $ 68,122     16.2     $ 44,191     13.1  
 
                                         
Three Months Ended Three Months Ended Fiscal Year Ended
October 2, 2015     July 3, 2015   October 3, 2014     October 2, 2015   October 3, 2014
Net Income (Loss)   Income (loss) per diluted share     Net Income (Loss)   Income (loss) per diluted share   Net Income (Loss)   Income (loss) per diluted share     Net Income (Loss)   Income (loss) per diluted share   Net Income (Loss)   Income (loss) per diluted share
 
GAAP $ 54,405     $ 0.81       $ 8,027     $ 0.15     $ 14,537     $ 0.30       $ 48,589     $ 0.95     $ (15,323 )   $ (0.33 )
 
Adjusted (NonGAAP) $ 18,819     $ 0.34       $ 18,433     $ 0.33     $ 13,031     $ 0.27       $ 68,122     $ 1.28     $ 44,191     $ 0.91  
 
Shares         Shares       Shares         Shares       Shares    
Diluted Shares - GAAP 54,991 55,175 48,873 51,146 47,009
Incremental stock options, warrants, restricted stock and units                             2,056         1,408      
Adjusted Diluted Shares (NonGAAP) 54,991           55,175         48,873           53,202         48,417      
 

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