Q1 2015 earnings announcement call live on http://investor.pmcs.com at 1:30 p.m. PT
Conference call: 1 (888) 505-4375 or 1 (719) 325-2472 outside North America; passcode 6526275#
Replay available shortly after end of conference call through May 27, 2015
SUNNYVALE, Calif. — (BUSINESS WIRE) — April 27, 2015 — PMC-Sierra, Inc. (PMC®) (Nasdaq: PMCS), the semiconductor and software solutions innovator transforming networks that connect, move and store big data, today reported results for the first quarter ended March 28, 2015.
Net revenues in the first quarter of 2015 totaled $133.1 million, an increase of 5 percent compared to $126.5 million in the first quarter of 2014, and a decrease of 3 percent from $136.9 million in the fourth quarter of 2014. Storage product revenues in the first quarter of 2015 totaled $96.5 million, an increase of 11 percent from $87.0 million in the first quarter of 2014.
GAAP net income in the first quarter of 2015 totaled $4.7 million or $0.02 per diluted share, compared to GAAP net loss in the first quarter of 2014 of $4.2 million or $0.02 per share, and GAAP net income in the fourth quarter of 2014 of $2.3 million or $0.01 per diluted share.
Non-GAAP net income in the first quarter of 2015 totaled $20.9 million or $0.10 per diluted share, compared to non-GAAP net income in the first quarter of 2014 of $16.0 million or $0.08 per diluted share, and to non-GAAP net income in the fourth quarter of 2014 of $22.7 million or $0.11 per diluted share.
“We experienced strong year-over-year growth in storage at eleven percent, representing a solid start for the year,” said Greg Lang, PMC president and chief executive officer. “And, with our four key drivers firmly in place, we remain positive about top and bottom line growth prospects for the balance of 2015.”
For a full reconciliation of each non-GAAP item used herein to the most directly comparable GAAP financial measure, please refer to the schedule included with this release. The Company believes the additional non-GAAP measures are useful to investors for the purpose of financial analysis. Management uses the non-GAAP measures internally to evaluate its in-period operating performance before gains, losses and other charges that are considered by management to be outside of the Company’s core operating results. In addition, the measures are used to plan for the Company’s future periods. However, non-GAAP measures are neither stated in accordance with, nor are they a substitute for, GAAP measures.
FIRST QUARTER HIGHLIGHTS
The Company announced the following in the first quarter of 2015:
- On Mar. 24, PMC announced an OTN-based solution for fronthaul networking in Centralized Baseband RAN (C-RAN) architectures used for LTE and LTE-Advanced systems. Until now, C-RAN deployments have been stalled by complex fronthaul latency and timing requirements. PMC’s solution meets the required latency and beats jitter specifications with up to 75 percent margin, enabling OTN to be used to implement carrier-grade fronthaul.
- On Mar. 18, PMC introduced its latest DIGI OTN processor, enabling the transition to 400G line cards in OTN switched metro networks. The new DIGI-G4 is the industry’s densest single-chip 4x100G OTN processor with 50 percent less power per port than the previous generation. It addresses the needs of an SDN-ready, encrypted transport infrastructure. DIGI-G4 delivers the capacity, security and flexibility required for 400G line cards in packet optical transport platforms (P-OTP), ROADM/WDM and optimized data center interconnect platforms.
- On Mar. 18, PMC also received the Lightwave Innovation Award for the DIGI-G4 OTN processor, earning an impressive score of 4.5 out of 5, one of the highest scores awarded by the judges. The 2015 Lightwave Innovation Awards judges comprised a panel of industry experts, including service providers, technology developers, industry analysts and journalists.
- On Feb. 9, PMC announced that its board of directors authorized a new share repurchase program for up to $75 million of its common stock. This new program increases the total remaining repurchase authorization to $102 million, including the $27 million that remains available for repurchases under the $275 million 2012 share repurchase authorization. During Q1 2015, PMC repurchased 6.1 million shares of common stock. Since PMC began its first share repurchase program in 2011, PMC has repurchased and retired 60.4 million shares at a total cost of $385.2 million.
First Quarter 2015 Conference Call
Management will review first quarter 2015 results and share its outlook for the second quarter of 2015 during a conference call at 1:30 p.m. Pacific Time/4:30 p.m. Eastern Time on April 27, 2015. The conference call webcast will be accessible under the Financial News and Events section at http://investor.pmcs.com. To listen to the conference call by telephone, dial 1 (888) 505-4375 or 1 (719) 325-2472 outside North America with passcode 6526275# approximately ten minutes before the start time. A telephone playback will be available until May 27, 2015, and can be accessed at 1 (888) 203-1112 or 1 (719) 457-0820 outside North America using passcode 6526275#.
Safe Harbor Statement
This release contains forward-looking statements that involve risks and uncertainties. The Company’s SEC filings, including the Company’s most recent reports on Form 10-K and Form 10-Q, describe the risks associated with the Company’s business, including PMC’s limited revenue visibility due to variable customer demands, market segment growth or decline, orders with short delivery lead times, customer concentration, changes in inventory, and other items such as tax rates, foreign exchange rates and volatility in global financial markets.
About PMC
PMC (Nasdaq: PMCS) is the semiconductor and software solutions innovator transforming networks that connect, move and store big data. Building on a track record of technology leadership, the Company is driving innovation across storage, optical and mobile networks. PMC’s highly integrated solutions increase performance and enable next-generation services to accelerate the network transformation. For more information, visit www.pmcs.com. Follow PMC on Facebook, Twitter, LinkedIn and RSS.
© Copyright PMC-Sierra, Inc. 2015. All rights reserved. PMC and PMC-SIERRA are registered trademarks of PMC-Sierra, Inc. in the United States and other countries, PMCS is a trademark of PMC-Sierra, Inc. PMC disclaims any ownership rights in other product and company names mentioned herein. PMC is the corporate brand of PMC-Sierra, Inc.
| PMC-Sierra, Inc. | |||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
| (in thousands, except for per share amounts) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| March 28, | December 27, | March 29, | |||||||||||||
| 2015 | 2014 | 2014 | |||||||||||||
| Net revenues | $ | 133,071 | $ | 136,851 | $ | 126,468 | |||||||||
| Cost of revenues | 39,980 | 40,702 | 37,564 | ||||||||||||
| Gross profit | 93,091 | 96,149 | 88,904 | ||||||||||||
| Research and development, net | 48,866 | 50,942 | 50,148 | ||||||||||||
| Selling, general and administrative | 30,051 | 29,411 | 29,340 | ||||||||||||
| Amortization of purchased intangible assets | 9,317 | 10,994 | 12,329 | ||||||||||||
| Income (loss) from operations | 4,857 | 4,802 | (2,913 | ) | |||||||||||
| Other income (expense): | |||||||||||||||
| Gain on investment securities and other investments | 32 | 68 | 29 | ||||||||||||
| Amortization of debt issue costs | (51 | ) | (51 | ) | (51 | ) | |||||||||
| Amortization of discount on short-term and long-term obligation | (210 | ) | (350 | ) | - | ||||||||||
| Foreign exchange gain | 2,594 | 2,866 | 532 | ||||||||||||
| Financial income, net | 164 | 2 | 9 | ||||||||||||
| Income (loss) before provision for income taxes | 7,386 | 7,337 | (2,394 | ) | |||||||||||
| Provision for income taxes | (2,731 | ) | (5,007 | ) | (1,847 | ) | |||||||||
| Net income (loss) | $ | 4,655 | $ | 2,330 | $ | (4,241 | ) | ||||||||
| Net income (loss) per common share - basic and diluted | $ | 0.02 | $ | 0.01 | $ | (0.02 | ) | ||||||||
| Shares used in per share calculation - basic | 200,249 | 198,625 | 195,188 | ||||||||||||
| Shares used in per share calculation - diluted | 205,688 | 201,935 | 195,188 | ||||||||||||
As a supplement to the Company's condensed consolidated financial statements presented in accordance with generally accepted accounting principles ("GAAP"), the Company provides additional non-GAAP measures for cost of revenues, gross profit, gross profit percentage, research and development expense, net, selling, general and administrative expense, amortization of purchased intangible assets, other income (expense), provision for income taxes, operating expenses, operating income (loss), operating margin, net income (loss), and net income per share - basic and diluted.
A non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The Company believes that the additional non-GAAP measures are useful to investors for the purpose of financial analysis. Management uses these measures internally to evaluate the Company's in-period operating performance before gains, losses and other charges that are considered by management to be outside of the Company's core operating results. In addition, the measures are used for planning and forecasting of the Company's future periods. However, non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. Other companies may use different non-GAAP measures and presentation of results.
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PMC-Sierra, Inc. |
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Adjustments to GAAP Cost of Revenues, Gross Profit, Gross Profit Percentage, Research and Development Expense, net, Selling, General and Administrative Expense, Amortization of Purchased Intangible Assets, Other Income (Expense), Provision for Income Taxes, Operating Expenses, Operating Income (Loss), Net Income (Loss), and Basic and Diluted Net Income (Loss) Per Share |
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| (in thousands, except for per share amounts) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| March 28, | December 27, | March 29, | |||||||||||||
| 2015 | 2014 | 2014 | |||||||||||||
| GAAP cost of revenues | $ | 39,980 | $ | 40,702 | $ | 37,564 | |||||||||
| Stock-based compensation | (271 | ) | (285 | ) | $ | (241 | ) | ||||||||
| Termination expense recoveries | - | - | $ | 9 | |||||||||||
| Non-GAAP cost of revenues | $ | 39,709 | $ | 40,417 | $ | 37,332 | |||||||||
| GAAP gross profit | $ | 93,091 | $ | 96,149 | $ | 88,904 | |||||||||
| Stock-based compensation | 271 | 285 | 241 | ||||||||||||
| Termination expense recoveries | - | - | (9 | ) | |||||||||||
| Non-GAAP gross profit | $ | 93,362 | $ | 96,434 | $ | 89,136 | |||||||||
| Non-GAAP gross profit % | 70.2 | % | 70.5 | % | 70.5 | % | |||||||||
| GAAP research and development expense, net | $ | 48,866 | $ | 50,942 | $ | 50,148 | |||||||||
| Stock-based compensation | (2,844 | ) | (2,880 | ) | (2,647 | ) | |||||||||
| Acquisition-related costs | (106 | ) | (423 | ) | (800 | ) | |||||||||
| Termination expense recoveries | 38 | 8 | 58 | ||||||||||||
| Reversal of accruals | - | 342 | - | ||||||||||||
| Lease exit recoveries | - | 29 | - | ||||||||||||
| Non-GAAP research and development expense, net | $ | 45,954 | $ | 48,018 | $ | 46,759 | |||||||||
| GAAP selling, general and administrative expense | $ | 30,051 | $ | 29,411 | $ | 29,340 | |||||||||
| Stock-based compensation | (3,578 | ) | (3,682 | ) | (3,303 | ) | |||||||||
| Acquisition-related costs | (171 | ) | (261 | ) | (61 | ) | |||||||||
| Lease exit recoveries (costs) | 11 | (5 | ) | (142 | ) | ||||||||||
| Termination and separation costs | (507 | ) | (645 | ) | (3 | ) | |||||||||
| Asset impairments | - | - | (477 | ) | |||||||||||
| Other expenses | - | - | (58 | ) | |||||||||||
| Non-GAAP selling, general and administrative expense | $ | 25,806 | $ | 24,818 | $ | 25,296 | |||||||||
| GAAP amortization of purchased intangible assets | $ | 9,317 | $ | 10,994 | $ | 12,329 | |||||||||
| Amortization of purchased intangible assets | (9,317 | ) | (10,994 | ) | (12,329 | ) | |||||||||
| Non-GAAP amortization of purchased intangible assets | $ | - | $ | - | $ | - | |||||||||
| GAAP other income | $ | 2,529 | $ | 2,535 | $ | 519 | |||||||||
| Foreign exchange gain on foreign tax liabilities | (2,179 | ) | (2,665 | ) | (879 | ) | |||||||||
| Gain on disposal of investment | - | (26 | ) | - | |||||||||||
| Amortization of discount on short-term and long-term obligations | 210 | 350 | - | ||||||||||||
| Non-GAAP other income (expense) | $ | 560 | $ | 194 | $ | (360 | ) | ||||||||
| GAAP provision for income taxes | $ | 2,731 | $ | 5,007 | $ | 1,847 | |||||||||
| Provision for income tax matters | (1,516 | ) | (3,900 | ) | (1,111 | ) | |||||||||
| Non-GAAP provision for income taxes | $ | 1,215 | $ | 1,107 | $ | 736 | |||||||||
| GAAP operating expenses | $ | 88,234 | $ | 91,347 | $ | 91,817 | |||||||||
| Stock-based compensation | (6,422 | ) | (6,562 | ) | (5,950 | ) | |||||||||
| Acquisition-related costs | (277 | ) | (684 | ) | (861 | ) | |||||||||
| Asset impairments | - | - | (477 | ) | |||||||||||
| Lease exit recoveries (costs) | 11 | 24 | (142 | ) | |||||||||||
| Termination and separation (costs) recoveries | (469 | ) | (637 | ) | 55 | ||||||||||
| Amortization of purchased intangible assets | (9,317 | ) | (10,994 | ) | (12,329 | ) | |||||||||
| Reversal of accruals | - | 342 | - | ||||||||||||
| Other expenses | - | - | (58 | ) | |||||||||||
| Non-GAAP operating expenses | $ | 71,760 | $ | 72,836 | $ | 72,055 | |||||||||
| March 28, | December 27, | March 29, | |||||||||||||
| 2015 | 2014 | 2014 | |||||||||||||
| GAAP operating income (loss) | $ | 4,857 | $ | 4,802 | $ | (2,913 | ) | ||||||||
| Stock-based compensation | 6,693 | 6,847 | 6,191 | ||||||||||||
| Acquisition-related costs | 277 | 684 | 861 | ||||||||||||
| Asset impairments | - | - | 477 | ||||||||||||
| Lease exit (recoveries) costs | (11 | ) | (24 | ) | 142 | ||||||||||
| Termination and separation costs (recoveries) | 469 | 637 | (64 | ) | |||||||||||
| Amortization of purchased intangible assets | 9,317 | 10,994 | 12,329 | ||||||||||||
| Reversal of accruals | - | (342 | ) | - | |||||||||||
| Other expenses | - | - | 58 | ||||||||||||
| Non-GAAP operating income | $ | 21,602 | $ | 23,598 | $ | 17,081 | |||||||||
| Non-GAAP operating margin | 16.2 | % | 17.2 | % | 13.5 | % | |||||||||
| GAAP net income (loss) | $ | 4,655 | $ | 2,330 | $ | (4,241 | ) | ||||||||
| Stock-based compensation | 6,693 | 6,847 | 6,191 | ||||||||||||
| Acquisition-related costs | 277 | 684 | 861 | ||||||||||||
| Termination and separation costs (recoveries) | 469 | 637 | (64 | ) | |||||||||||
| Reversal of accruals | - | (342 | ) | - | |||||||||||
| Asset impairments | - | - | 477 | ||||||||||||
| Lease exit (recoveries) costs | (11 | ) | (24 | ) | 142 | ||||||||||
| Amortization of purchased intangible assets | 9,317 | 10,994 | 12,329 | ||||||||||||
| Other expenses | - | - | 58 | ||||||||||||
| Foreign exchange gain on foreign tax liabilities | (2,179 | ) | (2,665 | ) | (879 | ) | |||||||||
| Amortization of discount on short-term and long-term obligations | 210 | 350 | - | ||||||||||||
| Gain on disposal of investments | - | (26 | ) | - | |||||||||||
| Provision for income taxes | 1,516 | 3,900 | 1,111 | ||||||||||||
| Non-GAAP net income | $ | 20,947 | $ | 22,685 | $ | 15,985 | |||||||||
| Non-GAAP net income per share - basic and diluted | $ | 0.10 | $ | 0.11 | $ | 0.08 | |||||||||
| Shares used to calculate non-GAAP net income per share - basic | 200,249 | 198,625 | 195,188 | ||||||||||||
| Shares used to calculate non-GAAP net income per share - diluted | 205,688 | 201,935 | 198,306 | ||||||||||||
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PMC-Sierra, Inc. |
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| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||||
| (in thousands) | ||||||||||||
| (unaudited) | ||||||||||||
| March 28, | December 27, | |||||||||||
| 2015 | 2014 | |||||||||||
| ASSETS: | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 64,548 | $ | 112,570 | ||||||||
| Short-term investments | 45,580 | 45,885 | ||||||||||
| Cash, cash equivalents and short-term investments | 110,128 | 158,455 | ||||||||||
| Accounts receivable, net | 62,156 | 55,414 | ||||||||||
| Inventories, net | 35,685 | 37,949 | ||||||||||
| Prepaid expenses and other current assets | 14,348 | 16,473 | ||||||||||
| Income taxes receivable | 1,966 | 1,968 | ||||||||||
| Prepaid tax expense | - | 51 | ||||||||||
| Deferred tax assets | 5,255 | 5,442 | ||||||||||
| Total current assets | 229,538 | 275,752 | ||||||||||
| Investment securities | 120,052 | 107,509 | ||||||||||
| Investments and other assets | 7,332 | 7,683 | ||||||||||
| Prepaid tax expense | 93 | 42 | ||||||||||
| Property and equipment, net | 37,370 | 37,311 | ||||||||||
| Goodwill | 283,239 | 283,239 | ||||||||||
| Intangible assets, net | 133,344 | 143,680 | ||||||||||
| Deferred tax assets | 13,123 | 13,412 | ||||||||||
| Long-term income tax receivable | 465 | 457 | ||||||||||
| $ | 824,556 | $ | 869,085 | |||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY: | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 20,357 | $ | 23,360 | ||||||||
| Accrued liabilities | 53,788 | 74,135 | ||||||||||
| Credit facility | 10,000 | - | ||||||||||
| Income taxes payable | 1,109 | 1,062 | ||||||||||
| Liability for unrecognized tax benefit | 14,820 | 16,076 | ||||||||||
| Deferred tax liabilities | 7,644 | 7,644 | ||||||||||
| Deferred income | 3,944 | 4,530 | ||||||||||
| Total current liabilities | 111,662 | 126,807 | ||||||||||
| Long-term obligations | 25,008 | 36,305 | ||||||||||
| Deferred tax liabilities | 54,209 | 53,493 | ||||||||||
| Liability for unrecognized tax benefit | 25,768 | 25,244 | ||||||||||
|
PMC special shares convertible into 205 (2014 - 278) shares of common stock |
480 | 745 | ||||||||||
| Stockholders' equity: | ||||||||||||
| Common stock and additional paid in capital | 1,603,586 | 1,595,809 | ||||||||||
| Accumulated other comprehensive loss | (2,185 | ) | (2,355 | ) | ||||||||
| Accumulated deficit | (993,972 | ) | (966,963 | ) | ||||||||
| Total stockholders' equity | 607,429 | 626,491 | ||||||||||
| $ | 824,556 | $ | 869,085 | |||||||||
| PMC-Sierra, Inc. | |||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||
| (in thousands) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| March 28, | December 27, | March 29, | |||||||||||||
| 2015 | 2014 | 2014 | |||||||||||||
| Cash flows from operating activities: | |||||||||||||||
| Net income (loss) | $ | 4,655 | $ | 2,330 | $ | (4,241 | ) | ||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||||||
| Depreciation and amortization | 14,988 | 16,742 | 17,911 | ||||||||||||
| Stock-based compensation | 6,693 | 6,847 | 6,191 | ||||||||||||
| Unrealized foreign exchange gain, net | (4,495 | ) | (3,474 | ) | (1,725 | ) | |||||||||
| Net amortization of premiums and accrued interest of investments | 256 | 90 | 275 | ||||||||||||
| Asset impairments | - | - | 770 | ||||||||||||
| Gain on investment securities and other | (32 | ) | (45 | ) | (29 | ) | |||||||||
| Amortization of discount on short-term and long-term obligations | 210 | 350 | - | ||||||||||||
| Amortization of debt issue costs | 51 | 51 | 51 | ||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||
| Accounts receivable, net | (6,741 | ) | 1,600 | (546 | ) | ||||||||||
| Inventories, net | 2,264 | (3,361 | ) | 864 | |||||||||||
| Prepaid expenses and other current assets | 834 | (2,998 | ) | 2,324 | |||||||||||
| Accounts payable and accrued liabilities | (12,726 | ) | 7,577 | (11,689 | ) | ||||||||||
| Deferred taxes and income taxes payable | 2,664 | 4,365 | 2,374 | ||||||||||||
| Deferred income | (586 | ) | (971 | ) | (1,921 | ) | |||||||||
| Net cash provided by operating activities | 8,035 | 29,103 | 10,609 | ||||||||||||
| Cash flows from investing activities: | |||||||||||||||
| Cash paid in connection with business acquisition | (18,000 | ) | - | - | |||||||||||
| Purchases of property and equipment | (4,414 | ) | (2,770 | ) | (3,732 | ) | |||||||||
| Purchase of intangible assets | (441 | ) | (270 | ) | (481 | ) | |||||||||
| Redemption of short-term investments | 7,926 | 750 | 1,800 | ||||||||||||
| Disposals of investment securities and other investments | 15,429 | 23,759 | 14,064 | ||||||||||||
| Purchases of investment securities and other investments | (35,329 | ) | (38,349 | ) | (17,790 | ) | |||||||||
| Net cash used in investing activities | (34,829 | ) | (16,880 | ) | (6,139 | ) | |||||||||
| Cash flows from financing activities: | |||||||||||||||
| Proceeds from credit facility | 30,000 | - | 30,000 | ||||||||||||
| Repayment of credit facility | (20,000 | ) | - | (55,000 | ) | ||||||||||
| Proceeds from issuance of common stock | 26,759 | 11,251 | 9,348 | ||||||||||||
| Repurchases of common stock | (57,222 | ) | - | (11,496 | ) | ||||||||||
| Net cash (used in) provided by financing activities | (20,463 | ) | 11,251 | (27,148 | ) | ||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (765 | ) | (844 | ) | (432 | ) | |||||||||
| Net (decrease) increase in cash and cash equivalents | (48,022 | ) | 22,630 | (23,110 | ) | ||||||||||
| Cash and cash equivalents, beginning of the period | 112,570 | 89,940 | 100,038 | ||||||||||||
| Cash and cash equivalents, end of the period | $ | 64,548 | $ | 112,570 | $ | 76,928 | |||||||||
Contact:
PMC-Sierra, Inc.
Joel Achramowicz
Director, Investor
Relations
1-408-239-8630
Email Contact
or
Kim
Mason
Manager, Corporate Communications
1-604-415-6239
Email Contact