MACOM Reports Revenue of $133.6 Million, Adjusted Gross Margin of 58.1% and Adjusted EPS of $0.46 (non-GAAP) for Fiscal Second Quarter

(1) During the second quarter of fiscal 2016, we early-adopted Accounting Standards Update (ASU) No. 2015-17, Balance Sheet Classification of Deferred Taxes, and applied ASU 2015-17 on a prospective basis. This standard requires that all deferred tax assets and liabilities, and any related valuation allowance, be classified as noncurrent on the balance sheet. As of the second quarter of fiscal 2016, we included $31.4 million of current deferred income tax assets with our noncurrent deferred income tax assets; no adjustments were made to deferred tax liabilities.

 

M/A-COM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)

 
        Six Months Ended
April 1,     April 3,
2016 2015
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (26,220 ) $ (13,843 )
Adjustments to reconcile net loss to net operating cash 77,452 61,947
Change in operating assets and liabilities (16,134 ) (46,672 )
Net cash from operating activities 35,098   1,432  
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net (85,516 ) (208,369 )
Purchases, sales and maturities of investments 15,596
Gain on disposition of business 3,750
Strategic investments (250 )
Purchases of property and equipment (16,962 ) (14,036 )
Acquisition of intellectual property (777 ) (1,587 )
Net cash used in investing activities (83,909 ) (224,242 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of notes payable (1,750 ) (1,750 )
Proceeds from stock offering 127,959
Payment of assumed debt (9,120 ) (1,232 )
Proceeds from stock option exercises and employee stock purchases 3,071 2,871
Repurchase of common stock (6,152 ) (4,924 )
Borrowings on revolving facility 100,000
Payments on revolving facility (100,000 )
Other adjustments (1,195 ) (39 )
Net cash from financing activities (15,146 ) 122,885  
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (168 )
NET CHANGE IN CASH AND CASH EQUIVALENTS (64,125 ) (99,925 )
CASH AND CASH EQUIVALENTS — Beginning of period 122,312   173,895  
CASH AND CASH EQUIVALENTS — End of period $ 58,187   $ 73,970  
 
               

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         Six Months Ended
April 1, 2016     January 1, 2016     April 3, 2015         April 1, 2016     April 3, 2015
Amount       Amount       Amount   Amount       Amount  
Revenue - GAAP $ 133,579   $ 115,774   $ 102,431   $ 249,353   $ 198,987  
Adjusted Revenue (NonGAAP) $ 133,579   $ 115,774   $ 102,431   $ 249,353   $ 198,987  
 
Amount   % Revenue     Amount   % Revenue     Amount   % Revenue         Amount   % Revenue     Amount   % Revenue
Gross Profit - GAAP $ 65,525 49.1 $ 60,318 52.1 $ 46,714 45.6 $ 125,843 50.5 $ 94,133 47.3
Intangible amortization expense 6,642 5.0 7,167 6.2 7,347 7.2 13,809 5.5 12,706 6.4
Non-cash compensation expense 500 0.4 491 0.4 577 0.6 991 0.4 919 0.5
Equity-based compensation 191 0.1 51 179 0.2 242 0.1 237 0.1
Impairment charges 1,950 1.5 1,950 0.8
Acquisition FMV step-up expense (inventory/fixed assets) 2,646 2.0 (226 ) (0.2 ) 3,538 3.5 2,420 1.0 4,373 2.2
Third-party engineering costs 305 0.3 1,229 0.6
Integration costs and synergy savings 102     0.1       158     0.1       356     0.3           260     0.1       352     0.2  
Adjusted Gross Profit (NonGAAP) $ 77,556     58.1       $ 67,959     58.7       $ 59,016     57.6           $ 145,515     58.4       $ 113,949     57.3  
 
Research and Development - GAAP $ 26,203 19.6 $ 25,322 21.9 $ 20,439 20.0 $ 51,525 20.7 $ 39,221 19.7
Non-cash compensation expense (1,742 ) (1.3 ) (2,142 ) (1.9 ) (1,563 ) (1.5 ) (3,884 ) (1.6 ) (2,568 ) (1.3 )
Equity-based compensation (1,061 ) (0.8 ) (894 ) (0.8 ) (669 ) (0.7 ) (1,955 ) (0.8 ) (1,188 ) (0.6 )
Acquisition FMV step-up expense (inventory/fixed assets) (204 ) (0.2 ) (204 ) (0.2 ) (204 ) (0.2 ) (408 ) (0.2 ) (408 ) (0.2 )
Integration costs and synergy savings (133 ) (0.1 ) (597 ) (0.5 ) (137 ) (0.1 ) (730 ) (0.3 ) (308 ) (0.2 )
Third-party engineering costs                     305     0.3                     1,229     0.6  
Adjusted Research and Development (NonGAAP) $ 23,063     17.3       $ 21,485     18.6       $ 18,171     17.7           $ 44,548     17.9       $ 35,978     18.1  
 
Selling, General and Administrative - GAAP $ 34,617 25.9 $ 34,686 30.0 $ 28,247 27.6 $ 69,303 27.8 $ 53,475 26.9
Earn-out costs (26 ) 196 0.2 170 0.1
Intangible amortization expense (6,304 ) (4.7 ) (4,423 ) (3.8 ) (3,096 ) (3.0 ) (10,727 ) (4.3 ) (4,149 ) (2.1 )
Non-cash compensation expense (4,210 ) (3.2 ) (7,383 ) (6.4 ) (7,558 ) (7.4 ) (11,592 ) (4.6 ) (9,953 ) (5.0 )
Equity-based compensation (705 ) (0.5 ) (462 ) (0.4 ) (501 ) (0.5 ) (1,167 ) (0.5 ) (818 ) (0.4 )
Acquisition FMV step-up expense (inventory/fixed assets) (28 ) (28 ) (28 ) (56 ) (56 )
Litigation related costs (232 ) (0.2 ) (108 ) (0.1 ) (206 ) (0.2 ) (340 ) (0.1 ) (766 ) (0.4 )
Transaction expenses (102 ) (0.1 ) (3,111 ) (2.7 ) 530 0.5 (3,213 ) (1.3 ) (4,106 ) (2.1 )
Integration costs and synergy savings (919 )   (0.7 )     (571 )   (0.5 )     (282 )   (0.3 )         (1,491 )   (0.6 )     (578 )   (0.3 )
Adjusted Selling, General and Administrative (NonGAAP) $ 22,091     16.5       $ 18,796     16.2       $ 17,106     16.7           $ 40,887     16.4       $ 33,049     16.6  
                                                 
Amount   % Revenue     Amount   % Revenue     Amount   % Revenue         Amount   % Revenue     Amount   % Revenue
Total operating expenses - GAAP $ 72,676 54.4 $ 60,165 52.0 $ 49,099 47.9 $ 132,841 53.3 $ 93,109 46.8
Intangible amortization expense (6,304 ) (4.7 ) (4,423 ) (3.8 ) (3,096 ) (3.0 ) (10,727 ) (4.3 ) (4,149 ) (2.1 )
Non-cash compensation expense (5,951 ) (4.5 ) (9,525 ) (8.2 ) (9,121 ) (8.9 ) (15,477 ) (6.2 ) (12,521 ) (6.3 )
Equity-based compensation (1,766 ) (1.3 ) (1,356 ) (1.2 ) (1,170 ) (1.1 ) (3,122 ) (1.3 ) (2,006 ) (1.0 )
Acquisition FMV step-up expense (inventory/fixed assets) (232 ) (0.2 ) (232 ) (0.2 ) (232 ) (0.2 ) (464 ) (0.2 ) (464 ) (0.2 )
Contingent consideration and earn-out costs (26 ) 196 0.2 170 0.1
Impairment charges (11,005 ) (8.2 ) (11,005 ) (4.4 )
Restructuring charges (851 ) (0.6 ) (157 ) (0.1 ) (413 ) (0.4 ) (1,008 ) (0.4 ) (413 ) (0.2 )
Integration costs and synergy savings (1,053 ) (0.8 ) (1,168 ) (1.0 ) (419 ) (0.4 ) (2,221 ) (0.9 ) (886 ) (0.4 )
Litigation related costs (232 ) (0.2 ) (108 ) (0.1 ) (206 ) (0.2 ) (340 ) (0.1 ) (766 ) (0.4 )
Transaction expenses (102 ) (0.1 ) (3,111 ) (2.7 ) 530 0.5 (3,213 ) (1.3 ) (4,106 ) (2.1 )
Third-party engineering                     305     0.3                     1,229     0.6  
Adjusted Total Operating Expenses (NonGAAP) $ 45,154     33.8       $ 40,281     34.8       $ 35,277     34.4           $ 85,434     34.3       $ 69,027     34.7  
 
Income (loss) from operations - GAAP $ (7,151 ) (5.4 ) $ 153 0.1 $ (2,385 ) (2.3 ) $ (6,998 ) (2.8 ) $ 1,024 0.5
Intangible amortization expense 12,946 9.7 11,590 10.0 10,446 10.2 24,536 9.8 16,858 8.5
Non-cash compensation expense 6,452 4.8 10,016 8.7 9,698 9.5 16,468 6.6 13,440 6.8
Equity-based compensation 1,957 1.5 1,407 1.2 1,349 1.3 3,364 1.3 2,243 1.1
Contingent consideration and earn-out costs 26 (196 ) (0.2 ) (170 ) (0.1 )
Impairment charges 12,955 9.7 12,955 5.2
Restructuring charges 851 0.6 157 0.1 413 0.4 1,008 0.4 413 0.2
Acquisition FMV step-up expense (inventory/fixed assets) 2,878 2.2 6 3,770 3.7 2,884 1.2 4,837 2.4
Litigation related costs 232 0.2 108 0.1 206 0.2 340 0.1 766 0.6
Transaction expenses 102 0.1 3,111 2.7 (530 ) (0.5 ) 3,213 1.3 4,106 0.4
Integration costs and synergy savings 1,154     0.9       1,326     1.1       772     0.8           2,480     1.0       1,235     2.1  
Adjusted Income (Loss) from Operations (NonGAAP) $ 32,402     24.3       $ 27,678     23.9       $ 23,739     23.2           $ 60,080     24.1       $ 44,922     22.6  
Depreciation expense 4,840 3.6 3,903 3.4 3,702 3.6 8,743 3.5 7,089 3.6
Other income, net 1,792     1.3       1,954     1.7                     3,746     1.5            
Adjusted EBITDA $ 39,034     29.2       $ 33,535     29.0       $ 27,441     26.8           $ 72,569     29.1       $ 52,011     26.1  
 
Interest expense- GAAP $ 4,478 3.4 $ 4,475 3.9 $ 4,723 4.6 $ 8,953 3.6 $ 9,446 4.7
Non-cash interest expense (425 )   (0.3 )     (398 )   (0.3 )     (403 )   (0.4 )         (823 )   (0.3 )     (842 )   (0.4 )
Adjusted Interest Expense (NonGAAP) $ 4,053     3.0       $ 4,077     3.5       $ 4,320     4.2           $ 8,130     3.3       $ 8,604     4.3  
 
Net income (loss) - GAAP $ (10,649 ) (8.0 ) $ (15,571 ) (13.4 ) $ (7,537 ) (7.4 ) $ (26,220 ) (10.5 ) $ (13,843 ) (7.0 )
Discontinued operations (1,396 ) (1.0 ) (1,199 ) (1.0 ) (3,639 ) (3.6 ) (2,595 ) (1.0 ) (7,297 ) (3.7 )
Intangible amortization expense 12,946 9.7 11,590 10.0 10,446 10.2 24,536 9.8 16,858 8.5
Non-cash compensation expense 6,452 4.8 10,016 8.7 9,698 9.5 16,468 6.6 13,440 6.8
Equity-based compensation 1,957 1.5 1,407 1.2 1,349 1.3 3,364 1.3 2,243 1.1
Impairment of minority investment 3,500 3.4 3,500 1.8
Contingent consideration 26 (196 ) (0.2 ) (2,000 ) (2.0 ) (170 ) (0.1 ) (2,000 ) (1.0 )
Consulting agreement 1,875 1.4 1,875 1.6 3,750 1.5
Impairment charges 12,955 9.7 12,955 5.2
Restructuring charges 851 0.6 157 0.1 413 0.4 1,008 0.4 413 0.2
Warrant liability (gain) expense 4,201 3.1 14,879 12.9 5,609 5.5 19,080 7.7 16,217 8.1
Non-cash interest expense 425 0.3 398 0.3 403 0.4 823 0.3 842 0.4
Acquisition FMV step-up expense (inventory/fixed assets) 2,878 2.2 6 3,770 3.7 2,884 1.2 4,837 2.4
Litigation related costs 232 0.2 108 0.1 206 0.2 340 1.0 766 0.6
Integration costs and synergy savings 1,152 0.9 1,306 1.1 772 0.8 2,457 0.1 1,235 0.4
Transaction expenses 102 0.1 3,111 2.7 (530 ) (0.5 ) 3,213 1.3 4,106 2.1
Tax effect of non-GAAP adjustments (8,327 ) (6.2 ) (6,054 ) (5.2 ) (5,830 ) (5.7 ) (14,381 ) (5.8 ) (9,948 ) (5.0 )
Transition services for divested business and other                     (124 )   (0.1 )                   (499 )   (0.3 )
Adjusted Net Income (NonGAAP) $ 25,680     19.2       $ 21,833     18.9       $ 16,506     16.1           $ 47,512     19.1       $ 30,870     15.5  
                                                 
Three Months Ended Six Months Ended
April 1, 2016     January 1, 2016     April 3, 2015         April 1, 2016     April 3, 2015

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 $ (10,649 )   $ (0.20 )     $ (15,571 )   $ (0.29 )     $ (7,537 )   $ (0.15 )         $ (26,220 )   $ (0.49 )     $ (13,843 )   $ (0.28 )
 
Adjusted (NonGAAP) $ 25,680     $ 0.46       $ 21,833     $ 0.40       $ 16,506     $ 0.31           $ 47,512     $ 0.86       $ 30,870     $ 0.61  
 
Shares         Shares         Shares             Shares         Shares    
Diluted Shares - GAAP 53,228 53,015 50,593 53,122 49,100
Incremental stock options, warrants, restricted stock and units 2,139           1,996           1,908               2,081           1,815      
Adjusted Diluted Shares (NonGAAP) 55,367           55,011           52,501               55,203           50,915      
 

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