Investors are cautioned against placing undue reliance on these non-GAAP financial measures and are urged to review and consider carefully the adjustments made by management to the most directly comparable GAAP financial measures to arrive at these non-GAAP financial measures. Non-GAAP financial measures may have limited value as analytical tools because they may exclude certain expenses that some investors consider important in evaluating our operating performance or ongoing business performance. Further, non-GAAP financial measures may have limited value for purposes of drawing comparisons between companies because different companies may calculate similarly titled non-GAAP financial measures in different ways because non-GAAP measures are not based on any comprehensive set of accounting rules or principles.
Additional information and management’s assessment regarding why certain items are excluded from our non-GAAP measures are summarized below:
Amortization Expense - is related to acquired intangible assets which are based upon valuation methodologies, and are generally amortized over the expected life of the intangible asset at the time of acquisition, which may result in amortization amounts that vary over time. This is a non-cash expense and is not considered by management in making operating decisions.
Share-Based and Non-cash Compensation Expense - includes share-based compensation expense for awards that are equity and liability classified on our balance sheet. Share-based compensation expense is partially outside of our control due to factors such as stock price volatility and interest rates, which may be unrelated to our operating performance during the period in which the expense is incurred. It is an expense based upon valuation methodologies and assumptions that vary over time, and the amount of the expense can vary significantly between companies due to factors that can be outside of their control. Share-based and non-cash compensation expense amounts are not considered by management in making operating decisions.
Impairment-Related Charges - includes amounts associated with the impairment of property and equipment primarily associated with approved restructuring plans to reduce staffing and manufacturing, research and development and administrative footprints. We believe these amounts are not correlated to future business operations and including such charges does not reflect our ongoing operations.
Restructuring Charges - includes amounts primarily associated with approved plans to reduce staffing and manufacturing, research and development and administrative footprints, including amounts associated with the 2019 restructuring and other restructuring plans. We believe these amounts are not correlated to future business operations and including such charges does not reflect our ongoing operations.
Warrant Liability Expenses/Gains - are associated with mark-to-market fair value adjustments which are largely based on the value of our common stock, which may vary from period to period due to factors such as stock price volatility. We believe these amounts are not correlated to future business operations and including such charges does not reflect our ongoing operations.
Non-Cash Interest, Net - includes amounts associated with the amortization of certain fees associated with the establishment or amendment of our credit agreement and term loans 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, Integration and Restructuring Related Costs - includes such items as professional fees incurred in connection with pre-acquisition and integration specific activities, 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. We believe the exclusion of these items is useful in providing management a basis to evaluate ongoing operating activities and strategic decision making.
Equity Investment Gains and Losses - primarily includes losses associated with a non-marketable equity investment we have in a private business. The investment losses are non-cash in nature, and we believe are not correlated to future business operations and including such amounts does not reflect our ongoing operations.
Tax Effect of Non-GAAP Adjustments - adjustments to arrive at an estimate of our adjusted non-GAAP income tax rate associated with our adjusted non-GAAP income over a period of time. We determine our adjusted non-GAAP income tax rate by using applicable rates in taxing jurisdictions and assessing certain factors including our historical and forecast earnings by jurisdiction, discrete items, cash taxes paid in relation to our adjusted non-GAAP net income before income taxes and our ability to realize tax assets. We generally assess this adjusted non-GAAP income tax rate quarterly and have utilized 8% for our fiscal years 2019 and 2020. Our historical effective income tax rate under GAAP has varied significantly from our adjusted non-GAAP income tax rate. Items that have historically resulted in significant difference between our effective income tax rate under GAAP and our adjusted non-GAAP income tax rate include changes in fair values of the common stock warrant liability, which are excluded from our adjusted net income and are neither deductible nor taxable for tax purposes, losses or gains associated with our equity method investment in a private business, income taxed in foreign jurisdictions at generally lower tax rates, intangible impairments, research and development tax credits and merger expenses. We believe it is beneficial for our management to review our adjusted non-GAAP income tax rate on a consistent basis over periods of time. Items such as those noted above may have a significant impact on our GAAP income tax expense and associated effective tax rate over time. Our adjusted non-GAAP income tax rate is an estimate, and may differ from our effective income tax rate determined under GAAP.
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.
Incremental Shares - is the number of potential shares of common stock issuable upon the exercise of stock options, restricted stock, restricted stock units and warrants which were not included in the calculation of our GAAP diluted shares. We believe competitors and others in the financial industry utilize this non-GAAP measure for analysis purposes.
MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
|
|||||||||||
Three Months Ended |
|||||||||||
January 3,
|
|
September 27,
|
|
December 28,
|
|||||||
Revenue |
$ |
119,097 |
|
|
$ |
112,248 |
|
|
$ |
150,689 |
|
| Cost of revenue |
60,893 |
|
|
59,323 |
|
|
74,064 |
|
|||
| Gross profit |
58,204 |
|
|
52,925 |
|
|
76,625 |
|
|||
| Operating expenses: |
|
|
|
|
|
||||||
| Research and development |
35,158 |
|
|
34,875 |
|
|
43,525 |
|
|||
| Selling, general and administrative |
32,340 |
|
|
26,849 |
|
|
42,519 |
|
|||
| Impairment charges |
— |
|
|
700 |
|
|
— |
|
|||
| Restructuring charges |
1,234 |
|
|
2,496 |
|
|
4,978 |
|
|||
| Total operating expenses |
68,732 |
|
|
64,920 |
|
|
91,022 |
|
|||
| Loss from operations |
(10,528) |
|
|
(11,995) |
|
|
(14,397) |
|
|||
| Other (expense) income: |
|
|
|
|
|
||||||
| Warrant liability (expense) gain |
(4,087) |
|
|
(5,023) |
|
|
5,468 |
|
|||
| Interest expense, net |
(8,621) |
|
|
(8,661) |
|
|
(8,773) |
|
|||
| Other expense, net |
(3,740) |
|
|
(3,507) |
|
|
(4,569) |
|
|||
| Total other expense |
(16,448) |
|
|
(17,191) |
|
|
(7,874) |
|
|||
|
|
|
|
|
|
|
||||||
| Loss before income taxes |
(26,976) |
|
|
(29,186) |
|
|
(22,271) |
|
|||
| Income tax expense (benefit) |
1,386 |
|
|
(39,702) |
|
|
1,125 |
|
|||
| Net (loss) income |
$ |
(28,362) |
|
|
$ |
10,516 |
|
|
$ |
(23,396) |
|
|
|
|
|
|
|
|
||||||
| Net (loss) income per share: |
|
|
|
|
|
||||||
| Basic: |
|
|
|
|
|
||||||
| (Loss) income per share - basic |
$ |
(0.43) |
|
|
$ |
0.16 |
|
|
$ |
(0.36) |
|
|
|
|
|
|
|
|
||||||
| Diluted: |
|
|
|
|
|
||||||
| (Loss) income per share - diluted |
$ |
(0.43) |
|
|
$ |
0.16 |
|
|
$ |
(0.44) |
|
|
|
|
|
|
|
|
||||||
| Shares - Basic |
66,240 |
|
|
66,077 |
|
|
65,277 |
|
|||
| Shares - Diluted |
66,240 |
|
|
66,378 |
|
|
65,444 |
|
|||
|
MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
|
||||||||
|
January 3,
|
September 27,
|
|||||||
| ASSETS |
|
|
|
|
||||
| Current assets: |
|
|
|
|
||||
| Cash and cash equivalents |
|
$ |
108,184 |
|
|
$ |
75,519 |
|
| Short term investments |
|
101,879 |
|
|
101,226 |
|
||
| Accounts receivable, net |
|
51,777 |
|
|
69,790 |
|
||
| Inventories |
|
106,857 |
|
|
107,880 |
|
||
| Income tax receivable |
|
16,729 |
|
|
16,661 |
|
||
| Prepaids and other current assets |
|
25,208 |
|
|
27,506 |
|
||
| Total current assets |
|
410,634 |
|
|
398,582 |
|
||
| Property and equipment, net |
|
129,979 |
|
|
132,647 |
|
||
| Goodwill and intangible assets, net |
|
482,752 |
|
|
495,955 |
|
||
| Deferred income taxes |
|
43,322 |
|
|
43,812 |
|
||
| Other investments |
|
19,864 |
|
|
23,613 |
|
||
| Other long-term assets |
|
45,656 |
|
|
10,965 |
|
||
| TOTAL ASSETS |
|
$ |
1,132,207 |
|
|
$ |
1,105,574 |
|
|
|
|
|
|
|
||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
||||
| Current liabilities: |
|
|
|
|
||||
| Current portion of finance lease obligations and other |
|
$ |
1,732 |
|
|
$ |
1,084 |
|
| Current portion of long-term debt |
|
6,885 |
|
|
6,885 |
|
||
| Accounts payable |
|
24,327 |
|
|
24,822 |
|
||
| Accrued liabilities |
|
54,601 |
|
|
39,908 |
|
||
| Deferred revenue |
|
7,094 |
|
|
2,137 |
|
||
| Total current liabilities |
|
94,639 |
|
|
74,836 |
|
||
| Finance lease obligations and other, less current portion |
|
29,929 |
|
|
29,506 |
|
||
| Long-term debt obligations, less current portion |
|
654,497 |
|
|
655,272 |
|
||
| Common stock warrant liability |
|
16,451 |
|
|
12,364 |
|
||
| Deferred income taxes |
|
640 |
|
|
632 |
|
||
| Other long-term liabilities |
|
42,531 |
|
|
19,068 |
|
||
| Total liabilities |
|
838,687 |
|
|
791,678 |
|
||
| Stockholders’ equity |
|
293,520 |
|
|
313,896 |
|
||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
1,132,207 |
|
|
$ |
1,105,574 |
|
|
MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
|
||||||||
|
|
Three Months Ended |
|||||||
|
January 3,
|
|
December 28,
|
||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
||||
| Net loss |
|
$ |
(28,362) |
|
|
$ |
(23,396) |
|
| Depreciation and amortization |
|
20,503 |
|
|
28,184 |
|
||
| Share based compensation |
|
8,150 |
|
|
9,273 |
|
||
| Warrant liability loss (gain) |
|
4,087 |
|
|
(5,468) |
|
||
| Deferred income taxes |
|
487 |
|
|
27 |
|
||
| Loss on minority equity investment |
|
3,749 |
|
|
4,556 |
|
||
| Impairment and restructuring related |
|
— |
|
|
2,746 |
|
||
| Other adjustments to reconcile loss to net operating cash |
|
538 |
|
|
1,229 |
|
||
| Inventories |
|
1,023 |
|
|
1,985 |
|
||
| Accounts receivable |
|
18,013 |
|
|
(12,308) |
|
||
| Change in other operating assets and liabilities |
|
9,470 |
|
|
(3,919) |
|
||
| Net cash provided by operating activities |
|
37,658 |
|
|
2,909 |
|
||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
||||
| Purchases of property and equipment |
|
(4,248) |
|
|
(11,521) |
|
||
| Sales, purchases and maturities of investments |
|
(293) |
|
|
(450) |
|
||
| Acquisition of businesses, net |
|
— |
|
|
(375) |
|
||
| Net cash used in investing activities |
|
(4,541) |
|
|
(12,346) |
|
||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
||||
| Payments of notes payable |
|
(1,721) |
|
|
— |
|
||
| Payments on finance leases and other |
|
(751) |
|
|
(185) |
|
||
| Proceeds from stock option exercises and employee stock purchases |
|
1,973 |
|
|
2,392 |
|
||
| Repurchase of common stock - tax withholdings on equity awards |
|
(93) |
|
|
(341) |
|
||
| Net cash (used in) provided by financing activities |
|
(592) |
|
|
1,866 |
|
||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
|
140 |
|
|
(16) |
|
||
| NET CHANGE IN CASH AND CASH EQUIVALENTS |
|
32,665 |
|
|
(7,587) |
|
||
| CASH AND CASH EQUIVALENTS — Beginning of period |
|
75,519 |
|
|
94,676 |
|
||
| CASH AND CASH EQUIVALENTS — End of period |
|
$ |
108,184 |
|
|
$ |
87,089 |
|
|
MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
|
|||||||||||||||
|
|
Three Months Ended |
||||||||||||||
|
|
January 3, 2020 |
September 27, 2019 |
December 28, 2018 |
||||||||||||
|
|
Amount |
% Revenue |
Amount |
% Revenue |
Amount |
% Revenue |
|||||||||
| Gross profit - GAAP |
$ |
58,204 |
|
48.9 |
|
$ |
52,925 |
|
47.2 |
|
$ |
76,625 |
|
50.8 |
|
| Amortization expense |
4,420 |
|
3.7 |
|
5,773 |
|
5.1 |
|
8,053 |
|
5.3 |
|
|||
| Share-based and non-cash compensation |
1,052 |
|
0.9 |
|
836 |
|
0.7 |
|
533 |
|
0.4 |
|
|||
| Impairment related charges |
— |
|
— |
|
— |
|
— |
|
(991) |
|
(0.7) |
|
|||
| Acquisition, integration and restructuring related costs |
— |
|
— |
|
— |
|
— |
|
547 |
|
0.4 |
|
|||
| Adjusted gross profit (Non-GAAP) |
$ |
63,676 |
|
53.5 |
|
$ |
59,534 |
|
53.0 |
|
$ |
84,767 |
|
56.3 |
|
|
|
Three Months Ended |
||||||||||||||
|
|
January 3, 2020 |
September 27, 2019 |
December 28, 2018 |
||||||||||||
|
|
Amount |
% Revenue |
Amount |
% Revenue |
Amount |
% Revenue |
|||||||||
| Operating expenses - GAAP |
$ |
68,732 |
|
57.7 |
|
$ |
64,920 |
|
57.8 |
|
$ |
91,022 |
|
60.4 |
|
| Amortization expense |
(8,654) |
|
(7.3) |
|
(6,757) |
|
(6.0) |
|
(12,519) |
|
(8.3) |
|
|||
| Share-based and non-cash compensation |
(8,117) |
|
(6.8) |
|
(3,551) |
|
(3.2) |
|
(8,530) |
|
(5.7) |
|
|||
| Impairment and restructuring charges |
(1,234) |
|
(1.0) |
|
(3,196) |
|
(2.8) |
|
(4,978) |
|
(3.3) |
|
|||
| Litigation costs |
— |
|
— |
|
— |
|
— |
|
(151) |
|
(0.1) |
|
|||
| Acquisition, integration and restructuring related costs |
(22) |
|
— |
|
(366) |
|
(0.3) |
|
(1,972) |
|
(1.3) |
|
|||
| Adjusted operating expenses (Non-GAAP) |
$ |
50,705 |
|
42.6 |
|
$ |
51,050 |
|
45.5 |
|
$ |
62,872 |
|
41.7 |
|
|
|
Three Months Ended |
||||||||||||||
|
|
January 3, 2020 |
September 27, 2019 |
December 28, 2018 |
||||||||||||
|
|
Amount |
% Revenue |
Amount |
% Revenue |
Amount |
% Revenue |
|||||||||
| Loss from operations - GAAP |
$ |
(10,528) |
|
(8.8) |
|
$ |
(11,995) |
|
(10.7) |
|
$ |
(14,397) |
|
(9.6) |
|
| Amortization expense |
13,074 |
|
11.0 |
|
12,530 |
|
11.2 |
|
20,572 |
|
13.7 |
|
|||
| Share-based and non-cash compensation |
9,169 |
|
7.7 |
|
4,387 |
|
3.9 |
|
9,063 |
|
6.0 |
|
|||
| Impairment and restructuring charges |
1,234 |
|
1.0 |
|
3,196 |
|
2.8 |
|
3,987 |
|
2.6 |
|
|||
| Litigation costs |
— |
|
— |
|
— |
|
— |
|
151 |
|
0.1 |
|
|||
| Acquisition, integration and restructuring related costs |
22 |
|
— |
|
366 |
|
0.3 |
|
2,519 |
|
1.7 |
|
|||
| Adjusted income from operations (Non-GAAP) |
$ |
12,971 |
|
10.9 |
|
$ |
8,484 |
|
7.6 |
|
$ |
21,895 |
|
14.5 |
|
|
|
|
|
|
|
|
|
|||||||||
| Depreciation expense |
7,429 |
|
6.2 |
|
7,276 |
|
6.5 |
|
7,612 |
|
5.1 |
|
|||
| Adjusted EBITDA (Non-GAAP) |
$ |
20,400 |
|
17.1 |
|
$ |
15,760 |
|
14.0 |
|
$ |
29,507 |
|
19.6 |
|
|
|
Three Months Ended |
||||||||||||||
|
|
January 3, 2020 |
September 27, 2019 |
December 28, 2018 |
||||||||||||
|
|
Amount |
% Revenue |
Amount |
% Revenue |
Amount |
% Revenue |
|||||||||
| Net (loss) income - GAAP |
$ |
(28,362) |
|
(23.8) |
|
$ |
10,516 |
|
9.4 |
|
$ |
(23,396) |
|
(15.5) |
|
| Amortization expense |
13,074 |
|
11.0 |
|
12,530 |
|
11.2 |
|
20,572 |
|
13.7 |
|
|||
| Share-based and non-cash compensation |
9,169 |
|
7.7 |
|
4,387 |
|
3.9 |
|
9,063 |
|
6.0 |
|
|||
| Impairment and restructuring charges |
1,234 |
|
1.0 |
|
3,196 |
|
2.8 |
|
3,987 |
|
2.6 |
|
|||
| Warrant liability expense (gain) |
4,087 |
|
3.4 |
|
5,023 |
|
4.5 |
|
(5,468) |
|
(3.6) |
|
|||
| Non-cash interest, net |
1,015 |
|
0.9 |
|
1,015 |
|
0.9 |
|
1,015 |
|
0.7 |
|
|||
| Litigation costs |
— |
|
— |
|
— |
|
— |
|
151 |
|
0.1 |
|
|||
| Acquisition, integration and restructuring related costs |
22 |
|
— |
|
366 |
|
0.3 |
|
2,519 |
|
1.7 |
|
|||
| Equity investment and sale of business losses |
3,749 |
|
3.1 |
|
3,545 |
|
3.2 |
|
4,446 |
|
3.0 |
|
|||
| Tax effect of non-GAAP adjustments |
957 |
|
0.8 |
|
(39,772) |
|
(35.4) |
|
4 |
|
— |
|
|||
| Adjusted net income (Non-GAAP) |
$ |
4,945 |
|
4.2 |
|
$ |
806 |
|
0.7 |
|
$ |
12,893 |
|
8.6 |
|
|
|
Three Months Ended |
|||||||||||||||||
|
|
January 3, 2020 |
September 27, 2019 |
December 28, 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 (loss) income - GAAP |
$ |
(28,362) |
|
|
$ |
10,516 |
|
|
$ |
(23,396) |
|
|
||||||
| Warrant liability gain |
— |
|
|
— |
|
|
(5,468) |
|
|
|||||||||
| Net (loss) income - diluted |
$ |
(28,362) |
|
$ |
(0.43) |
|
$ |
10,516 |
|
$ |
0.16 |
|
$ |
(28,864) |
|
$ |
(0.44) |
|
|
|
|
|
|
|
|
|
||||||||||||
| Adjusted net income (Non-GAAP) |
$ |
4,945 |
|
$ |
0.07 |
|
$ |
806 |
|
$ |
0.01 |
|
$ |
12,893 |
|
$ |
0.20 |
|
|
|
Three Months Ended |
||||||||
|
|
January 3, 2020 |
September 27, 2019 |
December 28, 2018 |
||||||
|
|
Shares |
|
Shares |
|
Shares |
|
|||
| Diluted shares - GAAP |
66,240 |
|
|
66,378 |
|
|
65,444 |
|
|
| Incremental shares |
1,292 |
|
|
358 |
|
|
129 |
|
|
| Adjusted diluted shares (Non-GAAP) |
67,532 |
|
|
66,736 |
|
|
65,573 |
|
|
|
|
Three Months Ended |
||||||||||||||
|
|
January 3, 2020 |
September 27, 2019 |
December 28, 2018 |
||||||||||||
|
|
Amount |
% Revenue |
Amount |
% Revenue |
Amount |
% Revenue |
|||||||||
| Interest expense, net - GAAP |
$ |
8,621 |
|
7.2 |
|
$ |
8,661 |
|
7.7 |
|
$ |
8,773 |
|
5.8 |
|
| Non-cash interest expense |
(1,015) |
|
(0.9) |
|
(1,015) |
|
(0.9) |
|
(1,015) |
|
(0.7) |
|
|||
| Adjusted interest expense (Non-GAAP) |
$ |
7,606 |
|
6.4 |
|
$ |
7,646 |
|
6.8 |
|
$ |
7,758 |
|
5.1 |
|
|
|
Three Months Ended |
||||||||||||||
|
|
January 3, 2020 |
September 27, 2019 |
December 28, 2018 |
||||||||||||
|
|
Amount |
% Revenue |
Amount |
% Revenue |
Amount |
% Revenue |
|||||||||
| Cash flow from operations |
$ |
37,658 |
|
31.6 |
|
$ |
(7,578) |
|
(6.8) |
|
$ |
2,909 |
|
1.9 |
|
| Capital expenditures |
(4,248) |
|
(3.6) |
|
(6,058) |
|
(5.4) |
|
(11,521) |
|
(7.6) |
|
|||
| Free cash flow (Non-GAAP) |
$ |
33,410 |
|
28.1 |
|
$ |
(13,636) |
|
(12.1) |
|
$ |
(8,612) |
|
(5.7) |
|
| Free cash flow as a percentage of Adjusted net income |
676 |
% |
|
(1,692) |
% |
|
(67) |
% |
|
||||||
