MACOM Reports Fiscal Third Quarter 2019 Financial Results

Adjusted EBITDA - is a calculation that adds depreciation expense to our adjusted income from operations. 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, 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 analyzing a company's cash flow.

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 28, 2019

 

March 29,
2019

 

June 29, 2018

 

June 28, 2019

 

June 29, 2018

 

 

 

 

 

Revenue

$

108,306

 

$

128,465

 

$

137,872

 

$

387,460

 

$

419,210

Cost of revenue

74,478

 

71,135

 

89,703

 

219,678

 

244,486

Gross profit

33,828

 

57,330

 

48,169

 

167,782

 

174,724

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

42,708

 

42,361

 

48,240

 

128,593

 

131,487

Selling, general and administrative

41,920

 

41,998

 

42,471

 

126,437

 

119,393

Impairment charges

264,086

 

 

 

264,086

 

6,575

Restructuring charges

8,887

 

3,182

 

102

 

17,047

 

6,302

Total operating expenses

357,601

 

87,541

 

90,813

 

536,163

 

263,757

Loss from operations

(323,773)

 

(30,211)

 

(42,644)

 

(368,381)

 

(89,033)

Other (expense) income:

 

 

 

 

 

 

 

 

 

Warrant liability gain (expense)

1,927

 

(1,607)

 

(6,728)

 

5,788

 

24,895

Interest expense, net

(8,967)

 

(9,402)

 

(8,039)

 

(27,142)

 

(23,249)

Other expense, net

4,777

 

(4,440)

 

(37,281)

 

(4,233)

 

(41,413)

Total other expense

(2,263)

 

(15,449)

 

(52,048)

 

(25,587)

 

(39,767)

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

(326,036)

 

(45,660)

 

(94,692)

 

(393,968)

 

(128,800)

Income tax (benefit) expense

(1,322)

 

544

 

(9,482)

 

346

 

(11,153)

Loss from continuing operations

(324,714)

 

(46,204)

 

(85,210)

 

(394,314)

 

(117,647)

Loss from discontinued operations

 

 

(220)

 

 

(5,837)

Net loss

$

(324,714)

 

$

(46,204)

 

$

(85,430)

 

$

(394,314)

 

$

(123,484)

 

 

 

 

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

Loss from continuing operations

$

(4.93)

 

$

(0.71)

 

$

(1.31)

 

$

(6.01)

 

$

(1.82)

Loss from discontinued operations

 

 

 

 

(0.09)

Loss per share - basic

$

(4.93)

 

$

(0.71)

 

$

(1.32)

 

$

(6.01)

 

$

(1.91)

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

Loss from continuing operations

$

(4.95)

 

$

(0.71)

 

$

(1.31)

 

$

(6.09)

 

$

(2.19)

Loss from discontinued operations

 

 

 

 

(0.09)

Loss per share - diluted

$

(4.95)

 

$

(0.71)

 

$

(1.32)

 

$

(6.09)

 

$

(2.28)

 

 

 

 

 

 

 

 

 

 

Shares - Basic

65,858

 

65,531

 

64,920

 

65,555.397

 

64,598

Shares - Diluted

65,945

 

65,531

 

64,920

 

65,722

 

65,198

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

 

 

June 28, 2019

 

September 28,
2018

 

 

 

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

85,265

 

$

94,676

Short term investments

 

100,520

 

98,221

Accounts receivable, net

 

68,084

 

97,375

Inventories

 

110,546

 

122,837

Income tax receivable

 

16,778

 

17,601

Assets held for sale, current

 

5,050

 

4,840

Prepaids and other current assets

 

26,846

 

23,311

Total current assets

 

413,089

 

458,861

Property and equipment, net

 

139,380

 

149,923

Goodwill and intangible assets, net

 

508,445

 

826,861

Deferred income taxes

 

2,303

 

2,272

Other investments

 

27,157

 

31,094

Other long-term assets

 

13,953

 

13,484

TOTAL ASSETS

 

$

1,104,327

 

$

1,482,495

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Current portion of lease payable

 

$

1,219

 

$

467

Current portion of long-term debt

 

6,885

 

6,885

Accounts payable

 

38,849

 

41,951

Accrued liabilities

 

45,303

 

49,945

Deferred revenue

 

2,355

 

7,757

Total current liabilities

 

94,611

 

107,005

Lease payable, less current portion

 

28,848

 

29,023

Long-term debt obligations, less current portion

 

656,046

 

658,372

Common stock warrant liability

 

7,341

 

13,129

Deferred income taxes

 

455

 

389

Other long-term liabilities

 

18,031

 

5,902

Total liabilities

 

805,332

 

813,820

Stockholders' equity

 

298,995

 

668,675

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

1,104,327

 

$

1,482,495

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

 

 

Nine Months Ended

 

 

June 28, 2019

 

June 29, 2018

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

Net loss

 

$

(394,314)

 

$

(123,484)

Depreciation and amortization

 

84,612

 

83,695

Share based compensation

 

20,163

 

24,095

Warrant liability gain

 

(5,788)

 

(24,895)

Acquired inventory step-up amortization

 

 

224

Loss on disposition of business

 

 

34,046

Deferred income taxes

 

59

 

(8,502)

Loss on minority equity investment

 

3,937

 

7,241

Restructuring and impairment related charges

 

272,873

 

9,143

Other adjustments to reconcile loss to net operating cash

 

3,441

 

(1,758)

Inventories

 

12,298

 

(1,617)

Accounts receivable

 

29,291

 

34,769

Change in other operating assets and liabilities

 

1,705

 

(21,741)

Net cash provided by operating activities

 

28,277

 

11,216

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

Acquisition of businesses, net

 

(375)

 

Sales, purchases and maturities of investments

 

(780)

 

(13,941)

Purchases of other investments

 

 

(5,000)

Proceeds associated with discontinued operations

 

 

(263)

Sale of businesses and assets

 

 

5,000

Purchases of property and equipment

 

(31,905)

 

(39,443)

Net cash used in investing activities

 

(33,060)

 

(53,647)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

Payments of financing costs

 

 

(505)

Proceeds from corporate facility financing obligation

 

 

4,000

Payments of notes payable and assumed debt

 

(5,972)

 

(5,734)

Proceeds from stock option exercises and employee stock purchases

 

5,631

 

6,944

Repurchase of common stock

 

(3,872)

 

(6,673)

Other adjustments

 

(579)

 

(478)

Net cash used in financing activities

 

(4,792)

 

(2,446)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

164

 

41

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

(9,411)

 

(44,836)

CASH AND CASH EQUIVALENTS — Beginning of period

 

94,676

 

130,104

CASH AND CASH EQUIVALENTS — End of period

 

$

85,265

 

$

85,268

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 28, 2019

March 29, 2019

June 29, 2018

June 28, 2019

June 29, 2018

 

Amount

 

Amount

 

Amount

 

Amount

 

Amount

 

Revenue - GAAP

$108,306

 

$128,465

 

$137,872

 

$387,460

 

$419,210

 

Deferred revenue

 

(7,000)

 

7,000

 

 

7,000

 

Adjusted revenue (Non-GAAP)

$108,306

 

$121,465

 

$144,872

 

$387,460

 

$426,210

 

 

Three Months Ended

Nine Months Ended

 

June 28, 2019

March 29, 2019

June 29, 2018

June 28, 2019

June 29, 2018

 

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Gross profit - GAAP

$33,828

31.2

$57,330

44.6

$48,169

34.9

$167,782

43.3

$174,724

41.7

Amortization expense

8,149

7.5

7,872

6.5

8,593

5.9

24,074

6.2

24,913

5.8

Share-based and non-cash compensation

662

0.6

942

0.8

1,059

0.7

2,137

0.6

2,938

0.7

Impairment related charges

(991)

(0.3)

2,568

0.6

Acquisition, integration and restructuring related costs

93

0.1

547

0.1

790

0.2

Production and product line exits

16,165

11.2

 

16,165

3.8

Deferred revenue

(7,000)

(5.8)

7,000

4.8

(7,000)

(1.8)

7,000

1.6

Adjusted gross profit (Non-GAAP)

$42,639

39.4

$59,144

48.7

$81,079

56.0

$186,549

48.1

$229,098

53.8

 

Three Months Ended

Nine Months Ended

 

June 28, 2019

March 29, 2019

June 29, 2018

June 28, 2019

June 29, 2018

 

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Operating expenses - GAAP

$357,601

330.2

$87,541

68.1

$90,813

65.9

$536,163

138.4

$263,757

62.9

Amortization expense

(13,713)

(12.7)

(11,883)

(9.8)

(13,083)

(9.0)

(38,115)

(9.8)

(35,828)

(8.4)

Share-based and non-cash compensation

(2,383)

(2.2)

(8,279)

(6.8)

(8,657)

(6.0)

(19,191)

(5.0)

(20,630)

(4.8)

Impairment and restructuring charges

(272,973)

(252.0)

(3,182)

(2.6)

(102)

(0.1)

(281,133)

(72.6)

(12,877)

(3.0)

Litigation costs

(16)

(997)

(0.7)

(167)

(2,525)

(0.6)

Acquisition, integration and restructuring related costs

(3,612)

(3.3)

(848)

(0.7)

(1,763)

(1.2)

(6,433)

(1.7)

(6,831)

(1.6)

Production and product line exits

(1,589)

(1.1)

(1,589)

(0.4)

Adjusted operating expenses (Non-GAAP)

$64,920

59.9

$63,333

52.1

$64,622

44.6

$191,124

49.3

$183,477

43.0

 

Three Months Ended

Nine Months Ended

 

June 28, 2019

March 29, 2019

June 29, 2018

June 28, 2019

June 29, 2018

 

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Loss from operations - GAAP

($323,773)

(298.9)

($30,211)

(23.5)

($42,644)

(30.9)

($368,381)

(95.1)

($89,033)

(21.2)

Amortization expense

21,862

20.2

19,756

16.3

21,676

15.0

62,189

16.1

60,741

14.3

Share-based and non-cash compensation

3,045

2.8

9,190

7.6

9,716

6.7

21,298

5.5

23,567

5.5

Impairment and restructuring charges

272,973

252.0

3,182

2.6

102

0.1

280,142

72.3

15,444

3.6

Litigation costs

16

997

0.7

167

2,525

0.6

Acquisition, integration and restructuring related costs

3,612

3.3

879

0.7

1,856

1.3

7,011

1.8

7,621

1.8

Production and product line exits

17,753

12.3

17,753

4.2

Deferred revenue

(7,000)

(5.8)

7,000

4.8

(7,000)

(1.8)

7,000

1.6

Adjusted (loss) income from operations (Non-GAAP)

($22,281)

(20.6)

($4,188)

(3.4)

$16,456

11.4

($4,574)

(1.2)

$45,618

10.7

 

 

 

 

 

 

 

 

 

 

 

Depreciation expense

7,272

6.7

7,539

6.2

7,597

5.2

22,423

5.8

22,685

5.3

Adjusted EBITDA (Non-GAAP)

($15,009)

(13.9)

$3,351

2.8

$24,053

16.6

$17,849

4.6

$68,303

16.0

 

Three Months Ended

Nine Months Ended

 

June 28, 2019

March 29, 2019

June 29, 2018

June 28, 2019

June 29, 2018

 

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Net loss - GAAP

($324,714)

(299.8)

($46,204)

(36.0)

($85,430)

(62.0)

($394,314)

(101.8)

($123,484)

(29.5)

Amortization expense

21,862

20.2

19,756

16.3

21,676

15.0

62,189

16.1

60,741

14.3

Share-based and non-cash compensation

3,075

2.8

9,190

7.6

9,716

6.7

21,328

5.5

23,567

5.5

Impairment and restructuring charges

272,973

252.0

3,182

2.6

102

0.1

280,142

72.3

15,444

3.6

Warrant liability (gain) expense

(1,927)

(1.8)

1,607

1.3

6,728

4.6

(5,788)

(1.5)

(24,895)

(5.8)

Non-cash interest, net

1,015

0.9

1,015

0.8

1,036

0.7

3,046

0.8

3,572

0.8

Litigation costs

16

997

0.7

167

2,525

0.6

Acquisition, integration and restructuring related costs

3,582

3.3

879

0.7

1,856

1.3

6,980

1.8

7,621

1.8

Production and product line exits

17,753

12.3

17,753

4.2

Discontinued operations

220

0.2

5,837

1.4

Equity investment and sale of business (gains) losses

(4,705)

(4.3)

4,415

3.6

37,202

25.7

4,155

1.1

41,287

9.7

Deferred revenue

(7,000)

(5.8)

7,000

4.8

(7,000)

(1.8)

7,000

1.6

Tax effect of non-GAAP adjustments

1,091

1.0

1,552

1.3

(10,232)

(7.1)

2,646

0.7

(13,218)

(3.1)

Adjusted net (loss) income (Non-GAAP)

($27,748)

(25.6)

($11,592)

(9.5)

$8,624

6.0

($26,449)

(6.8)

$23,750

5.6

 

Three Months Ended

Nine Months Ended

 

June 28, 2019

March 29, 2019

June 29, 2018

June 28, 2019

June 29, 2018

 

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 - GAAP

($324,714)

 

($46,204)

 

($85,430)

 

($394,314)

 

($123,484)

 

Warrant liability gain

(1,927)

 

 

 

(5,788)

 

(24,895)

 

Net loss - diluted

($326,641)

($4.95)

($46,204)

($0.71)

($85,430)

($1.32)

($400,102)

($6.09)

($148,379)

($2.28)

 

 

 

 

 

 

 

 

 

 

 

Adjusted net (loss) income (Non-GAAP)

($27,748)

($0.42)

($11,592)

($0.18)

$8,624

$0.13

($26,449)

($0.40)

$23,750

$0.36

 

Three Months Ended

Nine Months Ended

 

June 28, 2019

March 29, 2019

June 29, 2018

June 28, 2019

June 29, 2018

 

Shares

 

Shares

 

Shares

 

Shares

 

Shares

 

Diluted shares - GAAP

65,945

 

65,531

 

64,920

 

65,722

 

65,198

 

Incremental shares

80

 

425

 

725

 

130

 

423

 

Adjusted diluted shares (Non-GAAP)

66,025

 

65,956

 

65,645

 

65,852

 

65,621

 

 

Three Months Ended

Nine Months Ended

 

June 28, 2019

March 29, 2019

June 29, 2018

June 28, 2019

June 29, 2018

 

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Interest expense, net - GAAP

$8,967

8.3

$9,402

7.3

$8,039

5.8

$27,142

7.0

$23,249

5.5

Non-cash interest expense

(1,015)

(0.9)

(1,016)

(0.8)

(1,036)

(0.7)

(3,046)

(0.8)

(3,573)

(0.8)

Adjusted Interest Expense (Non-GAAP)

$7,952

7.3

$8,386

6.9

$7,003

4.8

$24,096

6.2

$19,676

4.6

 

Three Months Ended

Nine Months Ended

 

June 28, 2019

March 29, 2019

June 29, 2018

June 28, 2019

June 29, 2018

 

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Cash flow from operations

$1,439

1.3

$23,929

18.6

$59

$28,277

7.3

$11,216

2.7

Capital expenditures

(9,305)

(8.6)

(11,079)

(9.1)

(12,863)

(8.9)

(31,905)

(8.2)

(39,443)

(9.3)

Free cash flow (Non-GAAP)

($7,866)

(7.3)

$12,850

10.6

($12,804)

(8.8)

($3,628)

(0.9)

($28,227)

(6.6)

Free cash flow as a percentage of Adjusted net income

(28)

%

 

111

%

 

(148)

%

 

(14)

%

 

(119)

%

 

 

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