MACOM Reports Fiscal Second 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 Six Months Ended

March 31,
2017

 

December 30,
2016

 

April 1,
2016

March 31,
2017

 

April 1,
2016

Revenue $ 186,084 $ 151,752 $ 133,579 $ 337,836 $ 249,353
Cost of revenue 117,220   73,257   68,054   190,477   123,510  
Gross profit 68,864   78,495   65,525   147,359   125,843  
Operating expenses:
Research and development 39,685 30,174 26,203 69,859 51,525
Selling, general and administrative 62,326 36,496 34,617 98,821 69,303
Impairment charges 11,005 11,005
Restructuring charges 469   1,287   851   1,757   1,008  
Total operating expenses 102,480   67,957   72,676   170,437   132,841  
Income from operations (33,616 ) 10,538   (7,151 ) (23,078 ) (6,998 )
Other income (expense):
Warrant liability expense (2,573 ) (4,823 ) (4,201 ) (7,395 ) (19,079 )
Interest expense, net (7,374 ) (7,350 ) (4,408 ) (14,724 ) (8,754 )
Other (expense) income, net (899 ) (4 ) (81 ) (904 ) 19  
Total other expense (10,846 ) (12,177 ) (8,690 ) (23,023 ) (27,814 )
 
Loss before income taxes (44,462 ) (1,639 ) (15,841 ) (46,101 ) (34,812 )
Income tax expense (benefit) 89,805   532   (3,796 ) 90,337   (5,997 )
(Loss) income from continuing operations (134,267 ) (2,171 ) (12,045 ) (136,438 ) (28,815 )
Income from discontinued operations 4,136   1,206   1,396   5,342   2,595  
Net (loss) income $ (130,131 ) $ (965 ) $ (10,649 ) $ (131,096 ) $ (26,220 )
 
Net (loss) income per share:
Basic:
(Loss) income from continuing operations $ (2.21 ) $ (0.04 ) $ (0.23 ) $ (2.38 ) $ (0.54 )
Income from discontinued operations 0.07   0.02   0.03   0.09   0.05  
(Loss) income per share - basic $ (2.14 ) $ (0.02 ) $ (0.20 ) $ (2.29 ) $ (0.49 )
 
Diluted:
(Loss) income from continuing operations $ (2.21 ) $ (0.04 ) $ (0.23 ) $ (2.38 ) $ (0.54 )
Income from discontinued operations 0.07   0.02   0.03   0.09   0.05  
(Loss) income per share - diluted $ (2.14 ) $ (0.02 ) $ (0.20 ) $ (2.29 ) $ (0.49 )
 
Shares - Basic 60,813   53,737   53,228   57,276   53,122  
Shares - Diluted 60,813   53,737   53,228   57,276   53,122  
 
 

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

     

March 31,
2017

September 30,
2016

ASSETS
Current assets:
Cash and cash equivalents $ 112,615 $ 332,977
Short term investments 31,571 23,776
Accounts receivable, net 127,709 108,331
Inventories 139,622 114,935
Income tax receivable 20,199 21,607
Assets held for sale, current 30,652
Prepaids and other current assets 17,805   11,318
Total current assets 480,173 612,944
Property and equipment, net 118,518 99,167
Goodwill and intangible assets, net 948,761 379,626
Deferred income taxes 1,941 89,606
Other long-term assets 6,339   7,208
TOTAL ASSETS $ 1,555,732   $ 1,188,551
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of lease payable $ 991 $ 1,152
Current portion of long-term debt obligations 6,051 6,051
Liabilities held for sale 6,869
Accounts payable, accrued liabilities and other 92,186   84,947
Total current liabilities 106,097 92,150
Lease payable, less current portion 14,036 2,463
Long-term debt obligations, less current portion 572,180 573,882
Common stock warrant liability 45,648 38,253
Deferred income taxes 10,116 11,765
Other long-term liabilities 7,537   7,254
Total liabilities 755,614 725,767
Stockholders' equity 800,118   462,784
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,555,732   $ 1,188,551
 
 

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)

 
    Six Months Ended

March 31,
2017

 

April 1,
2016

 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (131,096 ) $ (26,220 )
Adjustments to reconcile loss to net operating cash 168,083 77,452
Change in operating assets and liabilities (16,148 ) (16,134 )
Net cash provided by operating activities 20,839   35,098  
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net (229,423 ) (85,516 )
Purchases, sales and maturities of investments (7,939 ) 15,596
Proceeds from discontinued operations 3,750 3,750
Sale of businesses 18,020
Proceeds from sale of assets 215
Purchases of property and equipment (16,295 ) (16,962 )
Acquisition of intellectual property   (777 )
Net cash used in investing activities (231,672 ) (83,909 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from corporate facility financing obligation 4,250
Payments of notes payable and assumed debt (3,644 ) (10,870 )
Proceeds from stock option exercises and employee stock purchases 2,688 3,071
Repurchase of common stock (10,027 ) (6,152 )
Other adjustments (2,517 ) (1,195 )
Net cash provided by (used in) financing activities (9,250 ) (15,146 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (279 ) (168 )
NET CHANGE IN CASH AND CASH EQUIVALENTS (220,362 ) (64,125 )
CASH AND CASH EQUIVALENTS — Beginning of period 332,977   122,312  
CASH AND CASH EQUIVALENTS — End of period $ 112,615   $ 58,187  
 
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   Six Months Ended

March 31,
2017

 

December 30,
2016

 

April 1,
2016

March 31,
2017

 

April 1,
2016

Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue
Gross profit - GAAP $ 68,864   37.0 $ 78,495   51.7 $ 65,525   49.1 $ 147,359   43.6 $ 125,843   50.5
Amortization expense 7,277 3.9 6,001 4.0 6,642 5.0 13,279 3.9 13,809 5.5
Share-based and non-cash compensation 966 0.5 794 0.5 691 0.5 1,760 0.5 1,233 0.5
Impairment and restructuring charges 1,950 1.5 1,950 0.8
Acquisition and integration related costs 31,793     17.1     1,546     1.0     2,748     2.1     33,339     9.9     2,680     1.1
Adjusted gross profit (Non-GAAP) $ 108,900     58.5     $ 86,836     57.2     $ 77,556     58.1     $ 195,737     57.9     $ 145,515     58.4
 
     
Three Months Ended   Six Months Ended

March 31,
2017

 

December 30,
2016

 

April 1,
2016

 

March 31,
2017

 

April 1,
2016

Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue
Operating expenses - GAAP $ 102,480   55.1   $ 67,957   44.8   $ 72,676   54.4 $ 170,437   50.4   $ 132,841   53.3
Amortization expense (7,163 ) (3.8 ) (6,467 ) (4.3 ) (6,304 ) (4.7 ) (13,630 ) (4.0 ) (10,727 ) (4.3 )
Share-based and non-cash compensation (11,260 ) (6.1 ) (9,291 ) (6.1 ) (7,718 ) (5.8 ) (20,551 ) (6.1 ) (18,599 ) (7.5 )
Impairment and restructuring charges (469 ) (0.3 ) (1,287 ) (0.8 ) (11,856 ) (8.9 ) (1,757 ) (0.5 ) (12,013 ) (4.8 )
Litigation costs (780 ) (0.4 ) (262 ) (0.2 ) (232 ) (0.2 ) (1,041 ) (0.3 ) (340 ) (0.1 )
Acquisition and integration related costs (22,334 ) (12.0 ) (4,768 ) (3.1 ) (1,412 ) (1.1 ) (27,102 ) (8.0 ) (5,727 ) (2.3 )
Other (183 )   (0.1 )   (2 )               (184 )   (0.1 )        
Adjusted operating expenses (Non-GAAP) $ 60,291     32.4     $ 45,880     30.2     $ 45,154     33.8     $ 106,172     31.4     $ 85,435     34.3  
 
     
Three Months Ended   Six Months Ended

March 31,
2017

 

December 30,
2016

 

April 1,
2016

 

March 31,
2017

 

April 1,
2016

Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue
Income (loss) from operations - GAAP $ (33,616 )   (18.1 )   $ 10,538   6.9   $ (7,151 )   (5.4 ) $ (23,078 )   (6.8 )   $ (6,998 )   (2.8 )
Amortization expense 14,440 7.8 12,468 8.2 12,946 9.7 26,909 8.0 24,536 9.8
Share-based and non-cash compensation 12,226 6.6 10,085 6.6 8,409 6.3 22,311 6.6 19,832 8.0
Impairment and restructuring charges 469 0.3 1,287 0.8 13,806 10.3 1,757 0.5 13,963 5.6
Litigation costs 780 0.4 262 0.2 232 0.2 1,041 0.3 340 0.1
Acquisition and integration related costs 54,127 29.1 6,314 4.2 4,160 3.1 60,441 17.9 8,407 3.4
Other 183     0.1     2                 184     0.1          
Adjusted income from operations (Non-GAAP) $ 48,609     26.1     $ 40,956     27.0     $ 32,402     24.3     $ 89,565     26.5     $ 60,080     24.1  
 
Depreciation expense 6,173 3.3 5,535 3.6 4,840 3.6 11,708 3.5 8,743 3.5
Consulting income 1,875     1.0     1,875     1.2     1,792     1.3     3,717     1.1     3,746     1.5  
Adjusted EBITDA (Non-GAAP) $ 56,657     30.4     $ 48,366     31.9     $ 39,034     29.2     $ 104,990     31.1     $ 72,569     29.1  
 
     
Three Months Ended   Six Months Ended

March 31,
2017

 

December 30,
2016

 

April 1,
2016

 

March 31,
2017

 

April 1,
2016

Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue
Net (loss) income - GAAP $ (130,131 )   (69.9 )   $ (965 )   (0.6 )   $ (10,649 )   (8.0 ) $ (131,096 )   (38.8 )   $ (26,220 )   (10.5 )
Amortization expense 14,440 7.8 12,468 8.2 12,946 9.7 26,909 8.0 24,536 9.8
Share-based and non-cash compensation 12,226 6.6 10,085 6.6 8,409 6.3 22,311 6.6 19,832 8.0
Impairment and restructuring charges 469 0.3 1,287 0.8 13,806 10.3 1,757 0.5 13,963 5.6
Warrant liability expense 2,573 1.4 4,823 3.2 4,201 3.1 7,395 2.2 19,080 7.7
Non-cash interest, net 721 0.4 702 0.5 425 0.3 1,424 0.4 823 0.3
Litigation costs 780 0.4 261 0.2 232 0.2 1,041 0.3 340 0.1
Acquisition and integration related costs 54,127 29.1 6,314 4.2 4,158 3.1 60,441 17.9 8,384 3.4
Discontinued operations, excluding consulting income (2,261 ) (1.2 ) 669 0.4 479 0.4 (1,592 ) (0.5 ) 1,155 0.5
Other 1,055 0.6 2 1,055 0.3
Tax effect of non-GAAP adjustments 85,424     45.9     (3,810 )   (2.5 )   (8,327 )   (6.2 )   81,615     24.2     (14,381 )   (5.8 )
Adjusted net income (Non-GAAP) $ 39,423     21.2     $ 31,836     21.0     $ 25,680     19.2     $ 71,260     21.1     $ 47,512     19.1  
 
     
Three Months Ended   Six Months Ended

March 31,
2017

 

December 30,
2016

 

April 1,
2016

 

March 31,
2017

 

April 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 $ (130,131 )   $ (2.14 )   $ (965 )   $ (0.02 )   $ (10,649 )   $ (0.20 )   $ (131,096 )   $ (2.29 )   $ (26,220 )   $ (0.49 )
Adjusted (Non-GAAP) $ 39,423     $ 0.63     $ 31,836     $ 0.57     $ 25,680     $ 0.46     $ 71,260     $ 1.20     $ 47,512     $ 0.86  
               
     
Three Months Ended   Six Months Ended

March 31,
2017

 

December 30,
2016

 

April 1,
2016

 

March 31,
2017

 

April 1,
2016

Shares   Shares   Shares   Shares   Shares
Diluted shares - GAAP 60,813   53,737   53,228 57,276   53,122
Incremental shares 2,031   1,875   2,139   1,953   2,081
Adjusted diluted shares (Non-GAAP) 62,844   55,612   55,367   59,229   55,203
 
     
Three Months Ended   Six Months Ended

March 31,
2017

 

December 30,
2016

 

April 1,
2016

 

March 31,
2017

 

April 1,
2016

Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue
Interest expense, net - GAAP $ 7,374   4.0   $ 7,350   4.8   $ 4,408   3.3 14,724   4.4   8,754   3.5
Non-cash interest expense (721 )   (0.4 )   (702 )   (0.5 )   (425 )   (0.3 )   (1,423 )   (0.4 )   (823 )   (0.3 )
Adjusted Interest Expense (Non-GAAP) $ 6,653     3.6     $ 6,648     4.4     $ 3,983     3.0     $ 13,301     3.9     $ 7,931     3.2  
 
     
Three Months Ended   Six Months Ended

March 31,
2017

 

December 30,
2016

 

April 1,
2016

 

March 31,
2017

 

April 1,
2016

Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue
Cash flow from operations $ 432   0.2   $ 20,407   13.4   $ 19,584   14.7 20,839   6.2   35,098   14.1
Capital expenditures (11,353 ) (6.1 ) (4,942 ) (3.3 ) (11,032 ) (8.3 ) (16,295 ) (4.8 ) (17,738 ) (7.1 )
AppliedMicro transaction related payments 28,114     15.1                     28,114     8.3          
Free cash flow (Non-GAAP) $ 17,193     9.2     $ 15,465     10.2     $ 8,552     6.4     $ 32,658     9.7     $ 17,360     7.0  
Free cash flow as a percentage of adjusted net income 44 %       49 %       33 %       46 %       37 %    
 

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