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Exhibit 99.1

 

LOGO

Audience Announces Fourth Quarter and Full Year 2013

Financial Results

MOUNTAIN VIEW, Calif. – February 6, 2014 – Audience, Inc. (NASDAQ: ADNC), the leader in advanced voice and audio processing for mobile devices, today announced its fourth quarter and full year 2013 financial results.

Revenue for the fourth quarter of 2013 was $33.6 million, compared with $38.7 million for the same period in 2012. As reported under U.S. generally accepted accounting principles (GAAP), fourth quarter 2013 net loss was ($2.5) million, or ($0.11) per diluted share based on weighted average shares outstanding of 22.0 million. This compares with GAAP net income of $3.4 million, or $0.15 per diluted share based on weighted average shares outstanding of 22.5 million, for the same period in 2012. Gross margin on a GAAP basis for the fourth quarter of 2013 was 53.2% of revenue, compared to 53.8% of revenue for the same period in 2012.

Non-GAAP net loss, as defined below, for the fourth quarter of 2013 was ($2.4) million, or ($0.11) per diluted share based on weighted average shares outstanding of 22.0 million. This compares with non-GAAP net income of $3.2 million, or $0.14 per diluted share based on weighted average shares outstanding of 22.5 million, for the same period in 2012. Gross margin on a non-GAAP basis for the fourth quarter of 2013 was 53.4% of revenue, compared to 54.0% of revenue for the same period in 2012.

Revenue for the full year 2013 was $160.6 million, compared with $143.9 million for 2012. Net income for the full year 2013 was $2.5 million, or $0.11 per diluted share based on weighted average shares outstanding of 23.2 million, compared to net income of $15.6 million, or $0.65 per diluted share based on weighted average shares outstanding of 15.7 million for 2012.

Non-GAAP net income for the full year of 2013 was $9.1 million, or $0.39 per diluted share based on weighted average shares outstanding of 23.2 million, compared to 2012 non-GAAP net income of $18.0 million, or $0.88 per diluted share based on weighted average shares outstanding of 20.6 million.

“We closed out 2013 with strong growth in China, thanks to momentum from customers like Xiaomi, Huawei, Yulong and Meizu,” said Peter Santos, president and chief executive officer. “We kicked off 2014 at CES with the introduction of our eS700 series with Continuous VoiceQ for seamless Always-on listening and voice command capability and believe this product family will become increasingly important this year.”

“With solid results in the fourth quarter we remain optimistic regarding the long-term outlook, driven by continued growth in China and further traction in the adjacent markets,” said Kevin Palatnik, chief financial officer.

Business Outlook

For the first quarter of 2014, Audience expects total revenue to be in the range of $33 to $36 million. First quarter GAAP gross margin is expected to be in the range of 49% to 52%. First quarter GAAP net loss, which includes $1.5 million of expected stock-based compensation expense, is expected to be in the range of ($5.1) to ($6.1) million, or ($0.24) to ($0.28) per diluted share on approximately 22.1 million diluted weighted average shares outstanding.

 

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First quarter non-GAAP gross margin is expected to be in the range of 49% to 52%. First quarter non-GAAP net loss is expected to be in the range of ($3.6) to ($4.6) million, or ($0.17) to ($0.21) per share on a diluted basis.

A schedule showing a reconciliation of the business outlook from GAAP diluted net loss per share to non-GAAP diluted net loss per share is included with this release.

The above information concerning guidance represents Audience’s outlook only as of the date hereof and is subject to change as a result of amendments to material contracts and other changes in business conditions. Audience undertakes no obligation to update or revise any financial forecast or other forward looking statements, as a result of new developments or otherwise.

Quarterly Conference Call Today

Peter Santos, president and chief executive officer, and Kevin Palatnik, chief financial officer, will host a conference call today at 1:30 pm (Pacific) / 4:30 pm (Eastern). Attendees are asked to join the call at least ten minutes prior to the scheduled conference call time. The call may be accessed by dialing 1-877-212-6076 (toll free) or 1-707-287-9331 (international). The passcode is 34175768. A live and archived webcast of the call will be available on Audience’s website at http://investor.audience.com for 30 days.

Audience expects that its corporate representatives will meet privately during the quarter with investors, the media, investment analysts and others. At these meetings, Audience may reiterate the business outlook published in this press release. At the same time, Audience will keep this press release, including the business outlook, publicly available on its website.

Beginning March 14, 2014, Audience will observe a Quiet Period during which Audience’s representatives will not comment on Audience’s business outlook, financial results or expectations. The Quiet Period will extend until the day when Audience’s First Quarter 2014 Earnings Release is published, which is currently scheduled to be May 1, 2014.

Use of Non-GAAP Financial Measures

Audience prepares its financial statements in accordance with generally accepted accounting principles for the United States (GAAP). The non-GAAP financial measures, such as gross margin, net income and earnings per share information for the three months and year ended December 31, 2013 and similar periods from the prior year included in this press release are different from those otherwise presented under GAAP. The following are explanations of each type of adjustment that we incorporate into non-GAAP financial measures:

Stock-based compensation expense relates to equity incentive awards granted to our employees, directors, and consultants under GAAP. Stock-based compensation expense has been and will continue to be a significant recurring expense for Audience. While we include the dilutive impact of such equity awards in weighted average shares outstanding, the expense associated with stock-based awards reflects a non-cash charge that we exclude from non-GAAP net income.

Stock warrant revaluation expense reflected in the full year 2012 is related to preferred stock warrants outstanding that had to be revalued each quarter prior to our initial public offering. We believe the comparisons of ongoing operations should exclude effects of such revaluations as preferred stock warrant revaluation represented a non-cash expense that did not occur after our initial public offering.

On June 5, 2012, Audience entered into a lease agreement for its future corporate headquarters facility in Mountain View, California. Pursuant to the lease agreement, the lease falls under “build-to-suit” accounting treatment and therefore, in accordance with accounting for the effect of lessee involvement in asset

 

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construction, the company is considered to be the owner of the real estate project during the construction period. As such, Audience recorded an asset for construction in progress for incurred construction costs, and a liability for those costs that are not funded by the company. Additionally, the rent costs associated with the ground lease during construction was recorded to the income statement. This rent cost is a non-cash charge that the company excluded from its non-GAAP net income. The construction was completed and the lease commenced October 1, 2013. Upon lease commencement, “build-to-suit” accounting treatment was terminated. The company concluded that the lease qualifies for sale-leaseback accounting treatment and that the lease is to be recorded as an operating lease.

Non-GAAP financial information is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenues and expenses and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.

The shares used to compute non-GAAP basic and diluted net income per share include the assumed conversion of all outstanding shares of convertible preferred stock and certain preferred stock warrants into shares of common stock using the as-if converted method as of the beginning of each period presented or the date of issuance, if later. In May 2012, in conjunction with the closing of our initial public offering, all of our outstanding preferred stock was converted into shares of our common stock.

Audience has provided these measures in addition to GAAP financial results because management believes these non-GAAP measures help provide a consistent basis for comparison between quarters and annual growth rates that are not influenced by certain non-cash charges and therefore are helpful in understanding Audience’s underlying operating results. These non-GAAP measures are some of the primary measures Audience’s management uses for planning and forecasting. These measures are not in accordance with, or an alternative to, GAAP and these non-GAAP measures may not be comparable to information provided by other companies. Reconciliations of the GAAP to non-GAAP results are presented at the end of this press release.

Cautionary Note Concerning Forward-Looking Statements

Statements in the press release and certain matters to be discussed on the fourth quarter conference call regarding Audience, Inc., which are not historical facts, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by terms such as believe, expect, may, will, provide, could and should and the negative of these terms or other similar expressions. These statements, including statements relating to expectations of future revenue, net income and operating margin performance, diversification of our customer base, future success for various products and our leadership position in the market, reporting on wins in the market and the demand for our solutions including continued demand by customers upon whom we are substantially dependent are based on current expectations and assumptions that are subject to risks and uncertainties. Our actual results could differ materially from those we anticipate as a result of various factors, including: completion of our 2013 audit and potential fluctuations in the company’s quarterly and annual operating results and financial condition, including but not limited to matters related to tax; our dependence on a single OEM, Samsung Electronics Co. Ltd., for a substantial portion of our revenue; weak demand for high end smart phones and the impact on our business; our need to maintain and expand our existing relationships with our OEMs, including Samsung and leading Chinese OEMs and to establish relationships with new OEMs in order to maintain and increase our revenue; our ability to sustain profitable operations due to our history of losses and accumulated deficit; quarterly fluctuations in our results due to factors such as the timing of OEM product launches, customer

 

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purchasing behavior in light of anticipated mobile phone launches; our assessments of whether we have excess or obsolete inventory; increasing competition and new entrants in the market for our products; our need to diversify our sources of revenue; our ability to enter new end user product markets, as well as new geographic markets; pressure on the average selling prices for our products; our lengthy sales cycle and the lack of certainty as to whether any given OEM’s products will achieve market acceptance; our OEMs’ lengthy and expensive process to qualify our products; our ability to develop new or enhanced products in a timely manner that achieve market acceptance; our reliance on third parties to manufacture, assemble and test our products; defects that may be present in our products; the impact of future intellectual property litigation and claims for indemnification; changes in tax laws or our ability to utilize our tax structure and net operating losses and other risks inherent in fabless semiconductor businesses. For a discussion of these and other related risks, please refer to “Risk Factors” in our most recent Form 10-Q for the three months ended September 30, 2013, which is available on the SEC’s website at www.sec.gov. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date made. You should review our SEC filings carefully and with the understanding that our actual future results may be materially different from what we expect.

Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

About Audience

Audience is the leader in advanced voice and audio processing for mobile devices. Its family of earSmart™ intelligent voice processors is based on the processes of human hearing, to suppress background noise and enhance mobile voice quality. Audience’s technology substantially improves the mobile voice experience, while also improving the performance of speech-based services, and enhancing audio quality for multimedia. Audience earSmart™ processors are featured in mobile devices from leading providers in Asia Pacific, Europe and the U.S. The company is based in Mountain View, California. For more information, see www.audience.com.

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ADNC-F

For more information, contact:

Investors

The Blueshirt Group

Suzanne Schmidt   or     Melanie Solomon
415-217-4962       415-217-4964
suzanne@blueshirtgroup.com   melanie@blueshirtgroup.com

Media and Industry Analysts

Diane Vanasse

408-242-0027

dvanasse@audience.com

 

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Audience, Inc.

Condensed consolidated balance sheets

(in thousands)

(unaudited)

 

     December 31,
2013
    December 31,
2012
 

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 124,691      $ 109,606   

Short-term investments

     14,855        18,032   

Restricted cash

     170        —     

Accounts receivable, net

     6,091        12,926   

Inventories

     13,581        13,266   

Other current assets

     4,675        3,669   
  

 

 

   

 

 

 

Total current assets

     164,063        157,499   

Property and equipment, net

     13,533        11,801   

Restricted cash - noncurrent portion

     —          170   

Other noncurrent assets

     2,402        1,389   
  

 

 

   

 

 

 

Total assets

   $ 179,998      $ 170,859   
  

 

 

   

 

 

 

Liabilities and stockholders’ equity

    

Current liabilities:

    

Accounts payable

   $ 6,304      $ 9,745   

Accrued and other current liabilities

     10,825        9,228   

Deferred credits and income

     265        285   

Financing obligation for construction in progress

     —          5,290   
  

 

 

   

 

 

 

Total current liabilities

     17,394        24,548   

Taxes payable - noncurrent

     935        376   

Other liabilities - noncurrent

     1,862        —     
  

 

 

   

 

 

 

Total liabilities

     20,191        24,924   
  

 

 

   

 

 

 

Stockholders’ equity:

    

Preferred stock

     —          —     

Common stock

     22        21   

Additional paid-in capital

     183,840        172,461   

Accumulated other comprehensive income

     (1     3   

Accumulated deficit

     (24,054     (26,550
  

 

 

   

 

 

 

Total shareholders’ equity

     159,807        145,935   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 179,998      $ 170,859   
  

 

 

   

 

 

 


Audience, Inc.

Condensed consolidated statements of operations

(in thousands, except per share data)

(unaudited)

 

     Three months ended
December 31,
    Year ended
December 31,
 
     2013     2012     2013     2012  

Revenue:

        

Hardware

   $ 31,529      $ 34,462      $ 150,430      $ 107,267   

Licensing

     2,032        4,227        10,121        36,638   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     33,561        38,689        160,551        143,905   

Cost of revenue

     15,705        17,855        71,166        62,247   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     17,856        20,834        89,385        81,658   

Operating expenses:

        

Research and development

     11,941        8,473        43,239        31,520   

Selling, general and administrative

     10,389        10,498        41,456        35,271   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     22,330        18,971        84,695        66,791   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     (4,474     1,863        4,690        14,867   

Interest income, net

     29        74        157        164   

Other expense, net

     (72     (82     (281     (586
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (4,517     1,855        4,566        14,445   

Income tax expense (benefit)

     (2,023     (1,584     2,069        (1,152
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (2,494   $ 3,439      $ 2,497      $ 15,597   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share:

        

Basic

   $ (0.11   $ 0.17      $ 0.12      $ 0.73   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ (0.11   $ 0.15      $ 0.11      $ 0.65   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares used in computing net income (loss) per share:

        

Basic

     22,012        20,587        21,467        13,377   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     22,012        22,460        23,197        15,687   
  

 

 

   

 

 

   

 

 

   

 

 

 


Audience, Inc.

GAAP to Non-GAAP net income (loss) reconciliation

(in thousands)

(unaudited)

 

     Three months ended
December 31,
    Year ended
December 31,
 
     2013     2012     2013      2012  

GAAP net income (loss)

   $ (2,494   $ 3,439      $ 2,497       $ 15,597   

Stock-based compensation

     1,464        944        5,660         3,134   

Non-cash rent expense

     —          431        663         579   

Revaluation of warrant liability

     —          —          —           290   

Valuation allowance

     —          (1,605     —           (1,605

Tax adjustments

     (1,408     —          295         —     
  

 

 

   

 

 

   

 

 

    

 

 

 

Non-GAAP net income (loss)

   $ (2,438   $ 3,209      $ 9,115       $ 17,995   
  

 

 

   

 

 

   

 

 

    

 

 

 


Audience, Inc.

Computation of GAAP net income (loss) per share

(in thousands, except for per share amounts)

(unaudited)

 

     Three months ended
December 31,
     Year ended
December 31,
 
     2013     2012      2013      2012  

Computation of GAAP net income (loss) per share:

          

GAAP net income (loss)

   $ (2,494   $ 3,439       $ 2,497       $ 15,597   

Non-cumulative dividends to preferred stockholders

     —          —           —           (2,247

Undistributed earnings allocated to preferred stockholders

     —          —           —           (3,583
  

 

 

   

 

 

    

 

 

    

 

 

 

Net income (loss) - basic

     (2,494 )       3,439         2,497         9,767   

Adjustment for undistributed earnings reallocated to the holders of common stock

     —          —           —           402   
  

 

 

   

 

 

    

 

 

    

 

 

 

Net income (loss) - diluted

   $ (2,494   $ 3,439       $ 2,497       $ 10,169   
  

 

 

   

 

 

    

 

 

    

 

 

 

Weighted average shares used in computing net income (loss) per share:

          

Basic

     22,012        20,587         21,467         13,377   
  

 

 

   

 

 

    

 

 

    

 

 

 

Diluted

     22,012        22,460         23,197         15,687   
  

 

 

   

 

 

    

 

 

    

 

 

 

Net income (loss) per share:

          

Basic

   $ (0.11   $ 0.17       $ 0.12       $ 0.73   
  

 

 

   

 

 

    

 

 

    

 

 

 

Diluted

   $ (0.11   $ 0.15       $ 0.11       $ 0.65   
  

 

 

   

 

 

    

 

 

    

 

 

 


Audience, Inc.

Reconciliation of GAAP to non-GAAP diluted earnings (loss) per share

(in thousands, except per share data)

(unaudited)

 

     Three months ended
December 31,
    Year ended
December 31,
 
     2013     2012     2013      2012  

GAAP net income (loss)

   $ (2,494   $ 3,439      $ 2,497       $ 15,597   

Non-cumulative dividends to preferred stockholders

     —          —          —           (2,247 )(B) 

Undistributed earnings allocated to preferred stockholders

     —          —          —           (3,583
  

 

 

   

 

 

   

 

 

    

 

 

 

GAAP net income (loss) - basic

     (2,494     3,439        2,497         9,767   

Adjustment for undistributed earnings reallocated to the holders of common stock

     —          —          —           402   
  

 

 

   

 

 

   

 

 

    

 

 

 

GAAP net income (loss) - diluted

     (2,494     3,439      $ 2,497       $ 10,169   

Non-GAAP adjustments:

         

Stock-based compensation

     1,464        944        5,660         3,134   

Non-cash rent expense

     —          431        663         579   

Revaluation of warrant liability

     —          —          —           290   

Non-GAAP as if converted method

     —          —          —           5,428 (A) 

Valuation allowance

     —          (1,605     —           (1,605

Effective tax rate change

     (1,408     —          295         —     
  

 

 

   

 

 

   

 

 

    

 

 

 

Non-GAAP net income (loss) - diluted

   $ (2,438   $ 3,209      $ 9,115       $ 17,995   
  

 

 

   

 

 

   

 

 

    

 

 

 

GAAP - diluted weighted average shares

     22,012        22,460        23,197         15,687   
  

 

 

   

 

 

   

 

 

    

 

 

 

Non-GAAP - diluted weighted average shares

     22,012        22,460        23,197         20,558   
  

 

 

   

 

 

   

 

 

    

 

 

 

GAAP - diluted net income (loss) per share

   $ (0.11   $ 0.15      $ 0.11       $ 0.65   

Non-GAAP adjustments:

         

Stock-based compensation

     0.06        0.04        0.24         0.15   

Non-cash rent expense

     —          0.02        0.03         0.03   

Revaluation of warrant liability

     —          —          —           0.01   

Non-GAAP as if converted method

     —          —          —           0.11 (B) 

Valuation allowance

     —          (0.07     —           (0.07

Effective tax rate change

     (0.06     —          0.01         —     
  

 

 

   

 

 

   

 

 

    

 

 

 

Non-GAAP - diluted net income (loss) per share

   $ (0.11   $ 0.14      $ 0.39       $ 0.88   
  

 

 

   

 

 

   

 

 

    

 

 

 

 

(A) Non-GAAP net income was adjusted by $5,428 for the year ended December 31, 2012 to give effect to the conversion of our convertible preferred stock and certain preferred stock warrants using the as-if converted method into common shares as if the conversion had occurred as of the beginning of the period presented.
(B) Non-GAAP diluted EPS for the year ended December 31, 2012 was computed to give effect to the conversion of our convertible preferred stock and certain preferred stock warrants using the as-if converted method into common shares as if the conversion had occurred as of the beginning of the period. Therefore to bridge the GAAP to non-GAAP EPS the non-cumulative dividends to preferred stockholders should not be allocated to stockholders for the twelve months ended December 31, 2012 of $2,247.


Audience, Inc.

Reconciliation of GAAP to Non-GAAP Operating Results

(in thousands, except per share data)

(unaudited)

 

     Three months ended December 31, 2013     Three months ended December 31, 2012  
     Reported
GAAP
    Adjustments     Non-GAAP     Reported
GAAP
    Adjustments     Non-GAAP  

Total revenue

   $ 33,561      $ —        $ 33,561      $ 38,689      $ —        $ 38,689   

Cost of revenue(1)

     15,705        (79     15,626        17,855        (45     17,810   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     17,856        79        17,935        20,834        45        20,879   

Total operating costs(1)

     22,330        (1,386     20,944        18,971        (1,330     17,641   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

   $ (4,474   $ 1,465      $ (3,009   $ 1,863      $ 1,375      $ 3,238   

Income (loss) before income taxes

   $ (4,517   $ 1,465      $ (3,052   $ 1,855      $ 1,375      $ 3,230   

Income tax expense (benefit)(2)

     (2,023     1,409        (614     (1,584     1,605        21   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (2,494   $ 56      $ (2,438   $ 3,439      $ (230   $ 3,209   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Adjustment relates to stock-based compensation expense and non-cash rent expense recognized during the period for GAAP purposes.
(2) Adjustment reflects the tax benefit from all non-GAAP adjustments for the 2013 period, and the tax valuation allowance benefit for the 2012 period.

 

     Year ended December 31, 2013      Year ended December 31, 2012  
     Reported
GAAP
     Adjustments     Non-GAAP      Reported
GAAP
    Adjustments     Non-GAAP  

Total revenue

   $ 160,551       $ —        $ 160,551       $ 143,905      $ —        $ 143,905   

Cost of revenue(1)

     71,166         (305     70,861         62,247        (150     62,097   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Gross profit

     89,385         305        89,690         81,658        150        81,808   

Total operating costs(1)

     84,695         (6,323     78,372         66,791        (3,563     63,228   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Income from operations

   $ 4,690       $ 6,628      $ 11,318       $ 14,867      $ 3,713      $ 18,580   

Income before income taxes

   $ 4,566       $ 6,628      $ 11,194       $ 14,445      $ 4,003      $ 18,448   

Income tax expense (benefit)(2)

     2,069         10        2,079         (1,152     1,605        453   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net income

   $ 2,497       $ 6,618      $ 9,119       $ 15,597      $ 2,398      $ 17,995   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

(1) Adjustment relates to stock-based compensation expense and non-cash rent expense recognized during the period for GAAP purposes.
(2) Adjustment reflects the tax benefit from all non-GAAP adjustments for the 2013 period, and the tax valuation allowance benefit for the 2012 period.


Audience, Inc.

Estimated computation of GAAP to non-GAAP diluted net loss per share

(unaudited)

 

     Three months ending
March 31, 2014

Estimated GAAP diluted net loss per share

   ($0.24) - ($0.28)

Estimated stock-based compensation expense per share

   $0.07
  

 

Non-GAAP diluted net loss per share

   ($0.17) - ($0.21)