MACOM Reports Third Quarter 2016 Financial Results

Warrant Liability Charges- are associated with market to market fair value adjustments which are largely based on the value of our common stock, which may vary from period to period. We believe these amounts are not correlated to future business operations and including such charges does not reflect our ongoing operations.

Non Cash Interest Expense - includes amounts associated with the amortization of certain fees associated with the establishment of our Credit Agreement that are being amortized over the life of the agreement. We believe these amounts are non-cash in nature and not correlated to future business operations and including such charges does not reflect our ongoing operations.

Litigation Costs - includes gains, losses and expenses related to the resolution of other-than-ordinary-course threatened and actually filed lawsuits and other-than-ordinary-course contractual disputes and legal matters. We exclude these gains and losses because they are not considered by management in making operating decisions. We believe such gains, losses and expenses do not necessarily reflect the performance of our ongoing operations for the period in which such charges are recognized and the amount of such gains or losses and expenses can vary significantly between companies and make comparisons less reliable.

Acquisition and Integration Related Costs - includes such items as professional fees incurred in connection with pre-acquisition and integration specific activities, post-acquisition employee retention amounts, contingent consideration adjustments, severance and other amounts accrued or paid to terminated employees of acquired businesses, costs including salaries incurred which are not expected to have a continuing contribution to operations or are expected to have a diminishing contribution during the integration period and the amortization of the fair market step-up value of acquired inventory and fixed assets. We believe the exclusion of these items is useful in providing management a basis to evaluate ongoing operating activities and strategic decision making.

Discontinued Operations excluding consulting income - includes the profit and loss amounts of discontinued operations, with the exception of consulting income associated with a consulting agreement we entered into at the time of our Automotive business divestiture. We believe excluding gains and losses associated with historically divested businesses from our net income provides management with a comparable basis to our current ongoing operating activities. We do not exclude the consulting agreement income classified as discontinued operations because management views this income as part of our ongoing operations and correlated with future operations.

Other - includes historical amounts primarily associated with the impairment of minority investment of $3.5 million during the second fiscal quarter of 2015 as well as income associated with transition service agreements entered in connection with divested businesses. We believe these amounts are not correlated to future business operations and including such charges does not reflect our ongoing operations.

Tax Effect of Non-GAAP Adjustments - adjustments to arrive at an estimate of our Adjusted Non-GAAP cash tax rate associated with our Adjusted Non-GAAP income over a period of time. These adjustments have resulted in an estimated Adjusted Non-GAAP cash tax rate of 15% and 18% for our fiscal years 2016 and 2015, respectively. We believe it is beneficial for our management to review Adjusted Non-GAAP cash tax rate on a consistent basis over periods of time. Certain items including many of the items noted above may have a significant impact on our US GAAP tax expense and associated tax rate during a specific period of time.

Adjusted EBITDA - is a calculation that adds interest income taxes and depreciation expense to our Adjusted Non-GAAP Net Income. Adjusted EBITDA is a measure that management reviews and utilizes for operational analysis purposes. We believe competitors and others in the financial industry utilize this Non-GAAP measure for analysis purposes.

Free Cash Flow - is a calculation that starts with cash flow from operating activities and reduces this amount by our capital expenditures in the applicable period. Free Cash Flow is a measure that management reviews and utilizes for cash flow analysis purposes. We believe competitors and others in the financial industry utilize this Non-GAAP measure for analysis purposes.

 

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share data)

     
Three Months Ended Nine Months Ended
July 1,
2016
  April 1,
2016
  July 3,
2015
July 1,
2016
  July 3,
2015
Revenue $ 142,288 $ 133,579 $ 109,058 $ 391,641 $ 308,045
Cost of revenue   68,326     68,054     56,562     191,836     161,416  
Gross profit   73,962     65,525     52,496     199,805     146,629  
Operating expenses:
Research and development 26,064 26,203 20,965 77,589 60,186
Selling, general and administrative 35,866 34,617 26,592 105,169 80,067
Impairment charges 760 11,005 11,765
Restructuring charges   1,092     851     558     2,100     971  
Total operating expenses   63,782     72,676     48,115     196,623     141,224  
Income (loss) from operations   10,180     (7,151 )   4,381     3,182     5,405  
Other income (expense):
Warrant liability gain (expense) 15,339 (4,201 ) 546 (3,741 ) (15,671 )
Interest expense, net (4,363 ) (4,408 ) (4,505 ) (13,117 ) (13,951 )
Other income (expense), net   16     (81 )   (225 )   36     (1,227 )
Total other income (expense)   10,992     (8,690 )   (4,184 )   (16,822 )   (30,849 )
 
Income (loss) before income taxes 21,172 (15,841 ) 197 (13,640 ) (25,444 )
Income tax benefit   (181 )   (3,796 )   (1,559 )   (6,178 )   (6,059 )
Income (loss) from continuing operations 21,353 (12,045 ) 1,756 (7,462 ) (19,385 )
Income from discontinued operations   1,199     1,396     6,271     3,794     13,568  
Net income (loss) $ 22,552   $ (10,649 ) $ 8,027   $ (3,668 ) $ (5,817 )
 
Net income (loss) per share:
Basic:
Income (loss) from continuing operations $ 0.40 $ (0.23 ) $ 0.03 $ (0.14 ) $ (0.38 )
Income from discontinued operations   0.02     0.03     0.12     0.07     0.27  
Income (loss) per share - basic $ 0.42   $ (0.20 ) $ 0.15   $ (0.07 ) $ (0.12 )
 
Diluted:
Income (loss) from continuing operations $ 0.11 $ (0.23 ) $ 0.02 $ (0.14 ) $ (0.38 )
Income from discontinued operations   0.02     0.03     0.11     0.07     0.27  
Income (loss) per share - diluted $ 0.13   $ (0.20 ) $ 0.14   $ (0.07 ) $ (0.12 )
 
Shares - Basic   53,516     53,228     53,098     53,253     50,433  
Shares - Diluted   55,288     53,228     55,174     53,253     50,433  
 
 

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands)

     
July 1,
2016
October 2,
2015
ASSETS
Current assets:
Cash and cash equivalents $ 66,842 $ 122,312
Short term investments 23,726 39,557
Accounts receivable, net 91,962 83,950
Inventories 117,078 79,943
Deferred income taxes (1) 31,431
Income tax receivable 16,123 15,854
Prepaids and other current assets   12,353   11,172
Total current assets 328,084 384,219
Property and equipment, net 100,452 83,759
Goodwill and intangible assets, net 388,700 337,012
Deferred income taxes 83,900 48,239
Other long-term assets   12,015   13,022
TOTAL ASSETS $ 913,151 $ 866,251
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of debt obligations $ 4,513 $ 4,058
Accounts payable, accrued liabilities and other   73,624   67,418
Total current liabilities 78,137 71,476
Long-term debt obligations, less current portion 340,581 340,504
Common stock warrant liability 25,563 21,822
Deferred income taxes 14,293
Long-term liabilities and other   7,945   7,916
Total liabilities 466,519 441,718
Stockholders' equity   446,632   424,533
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 913,151 $ 866,251
 

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