MACOM Reports Fiscal Third Quarter 2017 Financial Results

 
MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share data)

 
      Three Months Ended   Nine Months Ended

June 30,
2017

 

March 31,
2017

 

July 1,
2016

June 30,
2017

 

July 1,
2016

Revenue $ 194,555 $ 186,084 $ 142,288 $ 532,391 $ 391,641
Cost of revenue 101,926   117,220   68,326   292,403   191,836  
Gross profit 92,629   68,864   73,962   239,988   199,805  
Operating expenses:
Research and development 38,729 39,685 26,064 108,588 77,589
Selling, general and administrative 46,666 62,326 35,866 145,488 105,169
Impairment charges 760 11,765
Restructuring charges 586   469   1,092   2,342   2,100  
Total operating expenses 85,981   102,480   63,782   256,418   196,623  
Income (loss) from operations 6,648   (33,616 ) 10,180   (16,430 ) 3,182  
Other income (expense):
Warrant liability expense (gain) (9,085 ) (2,573 ) 15,339 (16,481 ) (3,741 )
Interest expense, net (7,178 ) (7,374 ) (4,363 ) (21,902 ) (13,117 )
Other (expense) income, net (1,139 ) (899 ) 16   (2,042 ) 36  
Total other (expense) income (17,402 ) (10,846 ) 10,992   (40,425 ) (16,822 )
 
(Loss) income before income taxes (10,754 ) (44,462 ) 21,172 (56,855 ) (13,640 )
Income tax expense (benefit) 3,223   89,805   (181 ) 93,559   (6,178 )
(Loss) income from continuing operations (13,977 ) (134,267 ) 21,353 (150,414 ) (7,462 )
(Loss) income from discontinued operations (13,700 ) 4,136   1,199   (8,358 ) 3,794  
Net (loss) income $ (27,677 ) $ (130,131 ) $ 22,552   $ (158,772 ) $ (3,668 )
 
Net (loss) income per share:
Basic:
(Loss) income from continuing operations $ (0.22 ) $ (2.21 ) $ 0.40 $ (2.53 ) $ (0.14 )
(Loss) income from discontinued operations (0.21 ) 0.07   0.02   (0.14 ) 0.07  
(Loss) income per share - basic $ (0.43 ) $ (2.14 ) $ 0.42   $ (2.67 ) $ (0.07 )
 
Diluted:
(Loss) income from continuing operations $ (0.22 ) $ (2.21 ) $ 0.11 $ (2.53 ) $ (0.14 )
(Loss) income from discontinued operations (0.21 ) 0.07   0.02   (0.14 ) 0.07  
(Loss) income per share - diluted $ (0.43 ) $ (2.14 ) $ 0.13   $ (2.67 ) $ (0.07 )
 
Shares - Basic 64,019   60,813   53,516   59,524   53,253  
Shares - Diluted 64,019   60,813   55,288   59,524   53,253  
 
 
MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited and in thousands)

 
       

June 30,
2017

 

September
30, 2016

ASSETS
Current assets:
Cash and cash equivalents $ 167,606 $ 332,977
Short term investments 81,641 23,776
Accounts receivable, net 129,838 108,331
Inventories 120,345 114,935
Income tax receivable 20,617 21,607
Assets held for sale, current 31,519
Prepaids and other current assets 18,284   11,318
Total current assets 569,850 612,944
Property and equipment, net 121,413 99,167
Goodwill and intangible assets, net 933,096 379,626
Deferred income taxes 2,070 89,606
Other long-term assets 6,450   7,208
TOTAL ASSETS $ 1,632,879   $ 1,188,551
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of lease payable $ 888 $ 1,152
Current portion of long-term debt obligations 7,071 6,051
Liabilities held for sale 10,719
Accounts payable, accrued liabilities and other 82,935   84,947
Total current liabilities 101,613 92,150
Lease payable, less current portion 15,117 2,463
Long-term debt obligations, less current portion 662,260 573,882
Common stock warrant liability 54,734 38,253
Deferred income taxes 11,731 11,765
Other long-term liabilities 8,043   7,254
Total liabilities 853,498 725,767
Stockholders' equity 779,381   462,784
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,632,879   $ 1,188,551
 
 
MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)

 
        Nine Months Ended
June 30, 2017   July 1, 2016
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (158,772 ) $ (3,668 )
Adjustments to reconcile loss to net operating cash 229,591 91,282
Change in operating assets and liabilities (22,130 ) (33,267 )
Net cash provided by operating activities 48,689   54,347  
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net (231,712 ) (85,516 )
Purchases, sales and maturities of investments (58,088 ) 15,412
Proceeds from discontinued operations 23,645 3,750
Sale of businesses and assets 215
Purchases of property and equipment (24,496 ) (24,100 )
Acquisition of intellectual property   (777 )
Net cash used in investing activities (290,436 ) (91,231 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 96,558
Payments of financing costs (9,077 )
Proceeds from corporate facility financing obligation 4,250
Payments of notes payable and assumed debt (3,954 ) (12,178 )
Proceeds from stock option exercises and employee stock purchases 8,162 5,336
Repurchase of common stock (18,092 ) (9,966 )
Other adjustments (1,296 ) (1,195 )
Net cash provided by (used in) financing activities 76,551   (18,003 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (175 ) (583 )
NET CHANGE IN CASH AND CASH EQUIVALENTS (165,371 ) (55,470 )
CASH AND CASH EQUIVALENTS — Beginning of period 332,977   122,312  
CASH AND CASH EQUIVALENTS — End of period $ 167,606   $ 66,842  
 
Supplemental disclosure of non-cash activities
Issuance of common stock in connection with the AppliedMicro Acquisition 465,082
 
 
MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(unaudited and in thousands, except per share data)

     

 

 
Three Months Ended   Nine Months Ended
June 30, 2017   March 31, 2017   July 1, 2016 June 30, 2017   July 1, 2016
Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue
Gross profit - GAAP $ 92,629   47.6 $ 68,864   37.0 $ 73,962   52.0 $ 239,988   45.1 $ 199,805   51.0
Amortization expense 8,416 4.3 7,277 3.9 6,440 4.5 21,694 4.1 20,249 5.2
Share-based and non-cash compensation 956 0.5 966 0.5 685 0.5 2,716 0.5 1,918 0.5
Impairment and restructuring charges 1,950 0.5
Acquisition and integration related costs 11,736     6.0     31,793     17.1     422     0.3     45,075     8.5     3,102     0.8
Adjusted gross profit (Non-GAAP) $ 113,737     58.5     $ 108,900     58.5     $ 81,509     57.3     $ 309,473     58.1     $ 227,024     58.0
 
      Three Months Ended   Nine Months Ended
June 30, 2017   March 31, 2017   July 1, 2016   June 30, 2017   July 1, 2016
Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue
Operating expenses - GAAP $ 85,981 44.2   $ 102,480   55.1   $ 63,782   44.8   $ 256,418   48.2   $ 196,623   50.2
Amortization expense (10,832 ) (5.6 ) (7,163 ) (3.8 ) (6,415 ) (4.5 ) (24,462 ) (4.6 ) (17,142 ) (4.4 )
Share-based and non-cash compensation (9,833 ) (5.1 ) (11,260 ) (6.1 ) (6,206 ) (4.4 ) (30,384 ) (5.7 ) (24,806 ) (6.3 )
Impairment and restructuring charges (586 ) (0.3 ) (469 ) (0.3 ) (1,852 ) (1.3 ) (2,342 ) (0.4 ) (13,865 ) (3.5 )
Litigation costs (569 ) (0.3 ) (780 ) (0.4 ) (818 ) (0.6 ) (1,610 ) (0.3 ) (1,159 ) (0.3 )
Acquisition and integration related costs (2,645 ) (1.4 ) (22,334 ) (12.0 ) (1,911 ) (1.3 ) (29,746 ) (5.6 ) (7,637 ) (2.0 )
Other (719 )   (0.4 )   (183 )   (0.1 )           (905 )   (0.2 )        
Adjusted operating expenses (Non-GAAP) $ 60,797     31.2     $ 60,291     32.4     $ 46,580     32.7     $ 166,969     31.4     $ 132,014     33.7  
 
      Three Months Ended   Nine Months Ended
June 30, 2017   March 31, 2017   July 1, 2016   June 30, 2017   July 1, 2016
Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue
Income (loss) from operations - GAAP $ 6,648   3.4   $ (33,616 )   (18.1 )   $ 10,180   7.2   $ (16,430 )   (3.1 )   $ 3,182   0.8
Amortization expense 19,248 9.9 14,440 7.8 12,855 9.0 46,157 8.7 37,391 9.5
Share-based and non-cash compensation 10,789 5.5 12,226 6.6 6,891 4.8 33,100 6.2 26,723 6.8
Impairment and restructuring charges 586 0.3 469 0.3 1,852 1.3 2,342 0.4 15,815 4.0
Litigation costs 569 0.3 780 0.4 817 0.6 1,610 0.3 1,157 0.3
Acquisition and integration related costs 14,380 7.4 54,127 29.1 2,334 1.6 74,821 14.1 10,740 2.7
Other 719     0.4     183     0.1             905     0.2        
Adjusted income from operations (Non-GAAP) $ 52,939     27.2     $ 48,609     26.1     $ 34,929     24.5     $ 142,505     26.8     $ 95,008     24.3
 
Depreciation expense 6,739 3.5 6,173 3.3 5,278 3.7 18,447 3.5 14,021 3.6
Consulting income 1,875     1.0     1,875     1.0     1,890     1.3     5,625     1.1     5,637     1.4
Adjusted EBITDA (Non-GAAP) $ 61,553     31.6     $ 56,657     30.4     $ 42,097     29.6     $ 166,577     31.3     $ 114,666     29.3
 
      Three Months Ended   Nine Months Ended
June 30, 2017   March 31, 2017   July 1, 2016   June 30, 2017   July 1, 2016
Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue
Net (loss) income - GAAP $ (27,677 )   (14.2 )   $ (130,131 )   (69.9 )   $ 22,552   15.8   $ (158,772 )   (29.8 )   $ (3,668 )   (0.9 )
Amortization expense 19,248 9.9 14,440 7.8 12,855 9.0 46,157 8.7 37,391 9.5
Share-based and non-cash compensation 10,789 5.5 12,226 6.6 6,891 4.8 33,100 6.2 26,723 6.8
Impairment and restructuring charges 586 0.3 469 0.3 1,852 1.3 2,342 0.4 15,815 4.0
Warrant liability expense 9,085 4.7 2,573 1.4 (15,339 ) (10.8 ) 16,480 3.1 3,741 1.0
Non-cash interest, net 1,122 0.6 721 0.4 405 0.3 2,546 0.5 1,228 0.3
Litigation costs 569 0.3 780 0.4 817 0.6 1,610 0.3 1,157 0.3
Acquisition and integration related costs 14,380 7.4 54,127 29.1 2,334 1.6 74,821 14.1 10,717 2.7
Discontinued operations, excluding consulting income 15,575 8.0 (2,261 ) (1.2 ) 676 0.5 13,983 2.6 1,831 0.5
Other 719 0.4 1,055 0.6 1,776 0.3
Tax effect of non-GAAP adjustments (516 )   (0.3 )   85,424     45.9     (5,111 )   (3.6 )   81,098     15.2     (19,491 )   (5.0 )
Adjusted net income (Non-GAAP) $ 43,880     22.6     $ 39,423     21.2     $ 27,932     19.6     $ 115,141     21.6     $ 75,444     19.3  
 
      Three Months Ended   Nine Months Ended
June 30, 2017   March 31, 2017   July 1, 2016   June 30, 2017   July 1, 2016

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

Net (loss) income - diluted $ (27,677 )   $ (0.43 )   $ (130,131 )   $ (2.14 )   $ 7,213     $ 0.13     $ (158,772 )   $ (2.67 )   $ (3,668 )   $ (0.07 )
Adjusted (Non-GAAP) $ 43,880     $ 0.67     $ 39,423     $ 0.63     $ 27,932     $ 0.51     $ 115,141     $ 1.87     $ 75,444     $ 1.37  
                 
      Three Months Ended   Nine Months Ended
June 30, 2017   March 31, 2017   July 1, 2016   June 30, 2017   July 1, 2016
Shares   Shares   Shares   Shares   Shares
Diluted shares - GAAP 64,019     60,813     55,288     59,524     53,253
Incremental shares 1,916       2,031             1,941       2,007
Adjusted diluted shares (Non-GAAP) 65,935       62,844       55,288       61,465       55,260
 
      Three Months Ended Nine Months Ended
June 30, 2017 March 31, 2017 July 1, 2016 June 30, 2017 July 1, 2016
Amount % Revenue Amount % Revenue Amount % Revenue Amount % Revenue Amount % Revenue
Interest expense, net - GAAP $ 7,178 3.7 $ 7,374 4.0 $ 4,477 3.1 $ 21,902 4.1 $ 13,430 3.4
Non-cash interest expense (1,122 ) (0.6 ) (721 ) (0.4 ) (405 ) (0.3 ) (2,546 ) (0.5 ) (1,228 ) (0.3 )
Adjusted Interest Expense (Non-GAAP) $ 6,056   3.1   $ 6,653   3.6   $ 4,072   2.9   $ 19,356   3.6   $ 12,202   3.1  
 
      Three Months Ended   Nine Months Ended
June 30, 2017   March 31, 2017   July 1, 2016   June 30, 2017   July 1, 2016
Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue
Cash flow from operations $ 27,850   14.3   $ 432   0.2   $ 19,249   13.5   $ 48,689   9.1   $ 54,347   13.9
Capital expenditures (8,201 ) (4.2 ) (11,353 ) (6.1 ) (7,138 ) (5.0 ) (24,496 ) (4.6 ) (24,877 ) (6.4 )
AppliedMicro transaction related payments 419     0.2     28,114     15.1             28,533     5.4          
Free cash flow (Non-GAAP) $ 20,068     10.3     $ 17,193     9.2     $ 12,111     8.5     $ 52,726     9.9     $ 29,470     7.5  
Free cash flow as a percentage of adjusted net income 46 %       44 %       43 %       46 %       39 %    

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