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8-K - 8-K - MACOM Technology Solutions Holdings, Inc.d765469d8k.htm

Exhibit 99.1

 

 

LOGO

 

 

MACOM Reports Revenue $112.4 million and EPS $0.33 (non-GAAP) for Fiscal Third Quarter;

Revenue and EPS at the High End of Guidance

LOWELL, MA, July 29, 2014 - M/A-COM Technology Solutions Holdings, Inc. (NASDAQ: MTSI) (“MACOM”), a leading supplier of high performance analog semiconductor solutions, today reported its financial results for its fiscal third quarter ended July 4, 2014.

Third Quarter Fiscal Year 2014 GAAP Results

 

  Revenue was $112.4 million, compared to $107.8 million in the prior fiscal quarter and $83.5 million in the previous year’s fiscal third quarter;

 

  Gross margin was 44.7 percent, compared to 24.9 percent in the prior fiscal quarter and 42.5 percent in the previous year’s fiscal third quarter;

 

  Operating income was $7.3 million, compared to operating loss of $20.6 million in the prior fiscal quarter and operating income of $8.9 million in the previous year’s fiscal third quarter; and

 

  Net income was $1.2 million, or $0.02 earnings per diluted share, compared to net loss of $22.1 million, or $0.47 loss per share, in the prior fiscal quarter and net income of $7.0 million, or $0.15 earnings per diluted share, in the previous year’s fiscal third quarter.

Third Quarter Fiscal Year 2014 Non-GAAP Results

 

  Gross margin was 51.7 percent, compared to 49.3 percent in the prior fiscal quarter and 45.0 percent in the previous year’s fiscal third quarter;

 

  Operating income was $23.9 million, or 21.3 percent of revenue, compared to $21.4 million, or 19.9 percent of revenue, in the prior fiscal quarter and $16.2 million, or 19.8 percent of revenue, in the previous year’s fiscal third quarter;

 

  EBITDA was $27.2 million, compared to $24.8 million for the prior fiscal quarter and $18.9 million for the previous year’s fiscal third quarter; and

 

  Net income was $15.8 million, or $0.33 earnings per diluted share, compared to net income of $15.2 million, or $0.32 per diluted share, in the prior fiscal quarter and net income of $11.5 million, or $0.24 earnings per diluted share, in the previous year’s fiscal third quarter.


John Croteau, Chief Executive Officer of MACOM stated, “Revenue and earnings per share for the quarter were at the high end of our guidance with strong sequential growth that was broadly distributed across our end markets. Non-GAAP gross margin improved by 240 basis points sequentially and 670 basis points year over year to 51.7%, representing our seventh consecutive quarter of margin improvement.”

“During the quarter, we closed on the sale of the CPE business to Freescale Semiconductor, which contributed one month of revenue in the quarter. Additionally, we closed on our seven-year Term Loan B facility that further strengthens our balance sheet and financial flexibility.”

Mr. Croteau concluded, “We are pleased with our execution as we realize the benefits of our strategic initiatives and past investments in growth and gross margin expansion. We will remain laser-focused on servicing our target customers and applications as we further extend our leadership position and capture a greater share of the high performance analog RF, microwave and millimeter wave market.”

During the fiscal third quarter, MACOM completed its refinancing of its existing revolving credit facility with a $450 million senior secured credit facility consisting of a $350 million Term Loan B facility and a $100 million Revolving Credit Facility. The initial draw down of the Term Loan B Facility was $350 million. Key benefits of this refinancing include extending the principal maturity of MACOM’s outstanding indebtedness, providing access to institutional lenders and credit agency ratings, and providing access to additional capital for general corporate purposes, including future acquisitions.

Based on the greater level of outstanding debt and higher interest costs associated with the new facility, for the full fiscal fourth quarter, the refinancing will have a dilutive effect to MACOM’s future EPS as described in more detail below.

Business Outlook

For the fiscal fourth quarter ending October 3, 2014, MACOM expects another quarter of solid growth with revenue expected to be in the range of 112 to 116 million dollars, which would be roughly 5 to 9 percent sequential growth after adjusting for the sale of the CPE business. Non-GAAP gross margin is expected to be between 50 and 53 percent, and non-GAAP earnings per diluted share between 31 and 34 cents on an anticipated 49 million shares outstanding, net of an expected $0.03 per share dilutive effect of the refinancing of MACOM’s outstanding long-term indebtedness described above.

Conference Call

MACOM will host a conference call on Tuesday, July 29, 2014 at 5:00 p.m. Eastern Time to discuss its fiscal third quarter financial results and business outlook. Investors and analysts may join the conference call by dialing 1-877-837-3908 and providing the confirmation code 69009494. International callers may join the teleconference by dialing +1-973-872-3000 and entering the same confirmation code at the prompt. A telephone replay of the call will be made available beginning two hours after the call and will remain available for 5 business days. The replay number is 1-855-859-2056 with a pass code of 69009494. International callers should dial +1-404-537-3406 and enter the same pass code at the prompt.

Additionally, this conference call will be broadcast live over the Internet and can be accessed by all interested parties in the Investors section of MACOM’s website at http://www.macom.com. To listen to the live call, please go to the Investors section of MACOM’s website and click on the conference call link at least fifteen minutes prior to the start of the conference call. For those unable to participate during the live broadcast, a replay will be available shortly after the call and will remain available for approximately 30 days.

About MACOM

MACOM (www.macom.com) is a leading supplier of high performance analog RF, microwave, and millimeter wave products that enable next-generation Internet and modern battlefield applications. Recognized for its broad catalog portfolio of technologies and products, MACOM serves diverse markets, including high speed optical, satellite, radar, wired & wireless networks, CATV, automotive, industrial, medical, and mobile devices. A pillar of the semiconductor industry, we thrive on more than 60 years of solving our customers’ most complex problems, serving as a true partner for applications ranging from RF to Light.

Headquartered in Lowell, Massachusetts, MACOM is certified to the ISO9001 international quality standard and ISO14001 environmental management standard. MACOM has design centers and sales offices throughout North America, Europe, Asia and Australia.

MACOM, M/A-COM, M/A-COM Technology Solutions, M/A-COM Tech, Partners in RF & Microwave, Partners from RF to Light, The First Name in Microwave and related logos are trademarks of MACOM. All other trademarks are the property of their respective owners.

Special Note Regarding Forward-Looking Statements

This press release contains forward-looking statements based on MACOM management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include, among others, information concerning our stated business outlook and future results of operations, our statements regarding realization of the


benefits of our strategic initiatives and past investments in growth and gross margin expansion, our statements regarding our remaining laser-focused on servicing our target customers and applications as we further extend our leadership position and capture a greater share of the high performance analog RF, microwave and millimeter wave markets, and any statements regarding future trends, business strategies, competitive position, industry conditions, acquisitions and market opportunities. Forward-looking statements include all statements that are not historical facts and generally may be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” or similar expressions and the negatives of those terms.

Forward-looking statements contained in this press release reflect MACOM’s current views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause those events or our actual activities or results to differ materially from those expressed in any forward-looking statement. Although MACOM believes that the expectations reflected in the forward-looking statements are reasonable, it cannot and does not guarantee future events, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including greater than expected dilutive effect on earnings of our outstanding indebtedness and related interest expense and other costs, lower than expected demand in any or all of our five primary end markets or from any of our large OEM customers based on macro-economic weakness or otherwise, our failure to realize the expected economies of scale, lowered production cost and other anticipated benefits of our previously announced GaN intellectual property licensing program, the potential for defense spending cuts, program delays, cancellations or sequestration, failures or delays by any customer in winning business or to make purchases from us in support of such business, lack of adoption or delayed adoption by customers and industries we serve of GaN or other solutions offered by us, failures or delays in porting and qualifying GaN process technology to our Lowell, MA fabrication facility or third party facilities, lower than expected utilization and absorption in our manufacturing facilities, lack of success or slower than expected success in our new product development efforts, loss of business due to competitive factors, product or technology obsolescence, customer program shifts or otherwise, lower than anticipated or slower than expected customer acceptance of our new product introductions, the potential for a shift in the mix of products sold in any period toward lower-margin products or a shift in the geographical mix of our revenues, the potential for increased pricing pressure based on competitive factors, technology shifts or otherwise, the impact of any executed or abandoned acquisition, divestiture or restructuring activity, the impact of supply shortages or other disruptions in our internal or outsourced supply chain, the relative success of our cost-savings initiatives, the potential for inventory obsolescence and related write-offs, the expense, business disruption or other impact of any current or future investigations, administrative actions, litigation or enforcement proceedings we may be involved in, and the impact of any claims of intellectual property infringement or misappropriation, which could require us to pay substantial damages for infringement, expend significant resources in prosecuting or defending such matters or developing non-infringing technology, incur material liability for royalty or license payments, or prevent us from selling certain of our products, as well as those factors described in “Risk Factors” in MACOM’s filings with the Securities and Exchange Commission (SEC), including its Quarterly Report on Form 10-Q for the fiscal quarter ended April 4, 2014 as filed with the SEC on May 12, 2014. MACOM undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

In addition to GAAP reporting, MACOM provides investors with non-GAAP financial information, including revenue, gross margin, operating margin, operating income, net income, earnings per share, EBITDA and other data calculated on a non-GAAP basis. This non-GAAP information excludes the operations of Nitronex prior to the date of acquisition, discontinued operations, the impact of fair value accounting in merger and acquisitions (M&A) of businesses, M&A costs, including acquisition and related integration costs, certain cost savings from synergies expected from M&A activities, income and expenses from transition services related to M&A activities, expected amortization of acquisition-related intangibles, share-based and other non-cash compensation expense, certain cash compensation, restructuring charges, litigation settlement and costs, changes in the carrying values of liabilities measured at fair value, contingent consideration, amortization of debt discounts and issuance costs, other non-cash expenses, earn-out costs, exited leased facility costs and certain income tax items. Management does not believe that the excluded items are reflective of MACOM’s underlying performance. The exclusion of these and other similar items from MACOM’s non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent or unusual. These and other similar items are also excluded from


EBITDA, which is non-GAAP earnings before interest, income taxes, depreciation and amortization. MACOM believes this non-GAAP financial information provides additional insight into MACOM’s on-going performance and has, therefore, chosen to provide this information to investors for a consistent basis of comparison and to help them evaluate the results of MACOM’s on-going operations and enable more meaningful period to period comparisons. These non-GAAP measures are provided in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial data is included in the supplemental financial data attached to this press release.


M/A-COM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share data)

 

 

 

     Three Months Ended     Nine Months Ended  
     July 4,
2014
    April 4,
2014
    June 28,
2013
    July 4,
2014
    June 28,
2013
 

Revenue

   $ 112,364      $ 107,827      $ 83,477      $ 304,345      $ 238,396   

Cost of revenue

     62,150        80,964        47,973        191,546        138,573   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     50,214        26,863        35,504        112,799        99,823   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

          

Research and development

     20,810        20,347        12,139        53,587        33,938   

Selling, general and administrative

     22,065        24,504        13,449        65,952        38,106   

Contingent consideration

     —          —          —          —          (577

Restructuring charges

     —          2,635        1,060        15,725        1,060   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     42,875        47,486        26,648        135,264        72,527   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     7,339        (20,623     8,856        (22,465     27,296   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

          

Warrant liability gain (expense)

     (2,782     (4,066     1,060        (5,566     (2,035

Interest expense

     (5,625     (1,622     (190     (7,833     (616

Other income

     1,354        1,009        123        2,441        293   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense)

     (7,053     (4,679     993        (10,958     (2,358
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     286        (25,302     9,849        (33,423     24,938   

Income tax provision (benefit)

     (897     (5,680     2,869        (8,168     8,482   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     1,183        (19,622     6,980        (25,255     16,456   

Loss from discontinued operations

     —          (2,500     —          (4,605     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 1,183      $ (22,122   $ 6,980      $ (29,860   $ 16,456   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share:

          

Basic:

          

Income (loss) from continuing operations

   $ 0.03      $ (0.42   $ 0.15      $ (0.54   $ 0.36   

Loss from discontinued operations

     —          (0.05     —          (0.10     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) per share - basic

   $ 0.03      $ (0.47   $ 0.15      $ (0.64   $ 0.36   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted:

          

Income (loss) from continuing operations

   $ 0.02      $ (0.42   $ 0.15      $ (0.54   $ 0.35   

Loss from discontinued operations

     —          (0.05     —          (0.10     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) per share - diluted

   $ 0.02      $ (0.47   $ 0.15      $ (0.64   $ 0.35   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shares:

          

Basic

     47,280        46,808        46,066        46,856        45,788   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     48,524        46,808        47,221        46,856        47,036   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


M/A-COM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(unaudited and in thousands, except per share data)

 

 

 

     Three Months Ended  
     July 4, 2014     April 4, 2014     June 28, 2013  
                 Amount           Amount        

Revenue - GAAP

       $ 107,827        $ 83,477     

Nitronex prior to acquisition

         (362       (1,252  
      

 

 

     

 

 

   

Revenue - Non-GAAP

       $ 107,465        $ 82,225     
      

 

 

     

 

 

   
     Amount     %
Revenue
    Amount     %
Revenue
    Amount     %
Revenue
 

Gross profit - GAAP

   $ 50,214        44.7   $ 26,863        24.9   $ 35,504        42.5

Nitronex prior to acquisition

     —          —          16        0.1        789        1.6   

Amortization expense

     6,270        5.6        6,262        5.8        473        0.6   

Non-cash compensation expense

     646        0.6        426        0.4        243        0.3   

Equity-based compensation

     23        —          30        —          —          —     

Acquisition FMV step-up

     168        0.1        18,003        16.8        —          —     

Third-party engineering costs

     400        0.4        570        0.5        —          —     

Integration costs and synergy savings

     345        0.3        822        0.8        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit - non-GAAP

   $ 58,066        51.7   $ 52,992        49.3   $ 37,009        45.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Research and Development - GAAP

   $ 20,810        18.5   $ 20,347        18.9   $ 12,139        14.5

Nitronex prior to acquisition

     —          —          (438     (0.4     (1,019     (1.0

Earn-out costs

     —          —          —          —          (1,021     (1.2

Non-cash compensation expense

     (893     (0.8     (728     (0.7     (421     (0.5

Equity-based compensation

     (228     (0.2     (137     (0.1     —          —     

Acquisition FMV step-up

     (204     (0.2     (183     (0.2     —          —     

Integration costs and synergy savings

     (1,108     (1.0     (2,414     (2.2     —          —     

Third-party engineering costs

     400        0.4        570        0.5        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Research and Development - non-GAAP

   $ 18,777        16.7   $ 17,017        15.8   $ 9,678        11.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Selling, General and Administrative - GAAP

   $ 22,065        19.6   $ 24,504        22.7   $ 13,449        16.1

Nitronex prior to acquisition

     —          —          (191     (0.2     (469     (0.4

Earn-out costs

     —          —          —          —          (569     (0.7

Amortization expense

     (505     (0.4     (476     (0.4     (315     (0.4

Non-cash compensation expense

     (1,851     (1.6     (2,136     (2.0     (756     (0.9

Equity-based compensation

     (147     (0.1     (214     (0.2     —          —     

Acquisition FMV step-up

     (28     —          (21     —          —          —     

Litigation costs

     (1,836     (1.6     (440     (0.4     (250     (0.2

Transaction expenses

     —          —          (250     (0.2     —          —     

Integration costs and synergy savings

     (2,321     (2.1     (6,178     (5.7     —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Selling, General and Administrative - non-GAAP

   $ 15,377        13.7   $ 14,598        13.6   $ 11,090        13.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


Total operating expenses - GAAP

   $ 42,875        38.2   $ 47,486        44.0   $ 26,648        31.9

Nitronex prior to acquisition

     —          —          (629     (0.4     (1,598     (1.4

Amortization expense

     (505     (0.4     (476     (0.4     (315     (0.4

Non-cash compensation expense

     (2,744     (2.4     (2,864     (2.7     (1,177     (1.4

Equity-based compensation

     (375     (0.3     (351     (0.3     —          —     

Acquisition FMV step-up

     (232     (0.2     (204     (0.2     —          —     

Contingent consideration and earn-out costs

     —          —          —          —          (1,590     (1.9

Restructuring charges

     —          —          (2,635     (2.5     (950     (1.2

Integration costs and synergy savings

     (3,429     (3.1     (8,592     (8.0     —          —     

Litigation costs

     (1,836     (1.6     (440     (0.4     (250     (0.3

Transaction expenses

     —          —          (250     (0.2     —          —     

Third-party engineering

     400        0.4        570        0.5        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses - non-GAAP

   $ 34,154        30.4   $ 31,615        29.4   $ 20,768        25.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations - GAAP

   $ 7,339        6.5   $ (20,623     (19.1 )%    $ 8,856        10.6

Nitronex prior to acquisition

     —          —          645        0.4        2,387        3.1   

Amortization expense

     6,775        6.0        6,738        6.3        788        1.0   

Non-cash compensation expense

     3,390        3.0        3,290        3.1        1,420        1.7   

Equity-based compensation

     398        0.4        381        0.4        —          —     

Contingent consideration and earn-out costs

     —          —          —          —          1,590        1.9   

Restructuring charges

     —          —          2,635        2.5        950        1.2   

Acquisition FMV step-up

     400        0.4        18,207        16.9        —          —     

Litigation costs

     1,836        1.6        440        0.4        250        0.3   

Transaction expenses

     —          —          250        0.2        —          —     

Integration costs and synergy savings

     3,774        3.4        9,414        8.8        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations - non-GAAP

   $ 23,912        21.3   $ 21,377        19.9   $ 16,241        19.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) - GAAP

   $ 1,183        1.1   $ (22,122     (20.5 )%    $ 6,980        8.4

Nitronex prior to acquisition

     —          —          645        0.5        2,387        2.9   

Amortization expense

     5,183        4.6        5,155        4.8        493        0.6   

Non-cash compensation expense

     2,593        2.3        2,517        2.3        872        1.1   

Equity-based compensation

     304        0.3        291        0.3        —          —     

Contingent consideration and earn-out costs

     —          —          —          —          995        1.2   

Restructuring charges

     —          —          2,016        1.9        666        0.8   

Warrant liability (gain) expense

     2,782        2.5        4,066        3.8        (1,060     (1.3

Non-cash interest expense

     1,838        1.6        91        0.1        46        0.1   

Acquisition FMV step-up

     306        0.3        13,061        12.2        —          —     


Litigation costs

     1,405        1.3        337        0.3        157        0.2   

Integration costs and synergy savings

     1,270        1.1        7,201        6.7        —          —     

Transaction expenses

     —          —          191        0.2        —          —     

Transition services for divested business

     (1,036     (0.9     (741     (0.7     —          —     

Discontinued operations

     —          —          2,500        2.3        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income - non-GAAP

   $ 15,828        14.1   $ 15,208        14.2   $ 11,536        14.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations - non-GAAP

   $ 23,912        $ 21,377        $ 16,241     

Depreciation expense

     3,296          3,367          2,534     

Other income, net

     —            40          123     
  

 

 

     

 

 

     

 

 

   

EBITDA

   $ 27,208        $ 24,784        $ 18,898     
  

 

 

     

 

 

     

 

 

   

Interest expense - GAAP

   $ 5,625        $ 1,622        $ 190     

Non-cash interest expense

     (2,402       (119       (74  
  

 

 

     

 

 

     

 

 

   

Interest expense - non-GAAP

   $ 3,223        $ 1,503        $ 116     
  

 

 

     

 

 

     

 

 

   

 

     Three Months Ended  
     July 4, 2014      April 4, 2014     June 28, 2013  
     Amount      Income
per
diluted
share
     Amount     Income
(loss) per
diluted
share
    Amount      Income
per
diluted
share
 

Net income (loss)

   $ 1,183       $ 0.02       $ (22,122   $ (0.47   $ 6,980       $ 0.15   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Net income - non-GAAP

   $ 15,828       $ 0.33       $ 15,208      $ 0.32      $ 11,536       $ 0.24   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Diluted shares - GAAP

     48,524            46,808          47,221      

Incremental stock options, warrants, restricted stock and units

     —              1,406          1,003      
  

 

 

       

 

 

     

 

 

    

Diluted shares - non-GAAP

     48,524            48,214          48,224      
  

 

 

       

 

 

     

 

 

    


M/A-COM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(unaudited and in thousands, except per share data)

 

 

 

     Nine Months Ended  
     July 4, 2014     June 28, 2013  
     Amount           Amount        

Revenue - GAAP

   $ 304,345        $ 238,396     

Nitronex prior to acquisition

     (1,048       (3,333  
  

 

 

     

 

 

   

Revenue - non-GAAP

   $ 303,297        $ 235,063     
  

 

 

     

 

 

   
     Amount     %
Revenue
    Amount     %
Revenue
 

Gross profit - GAAP

   $ 112,799        37.1   $ 99,823        41.9

Nitronex prior to acquisition

     959        0.5        2,596        1.6   

Amortization expense

     13,779        4.5        1,421        0.6   

Non-cash compensation expense

     1,355        0.4        823        0.4   

Equity-based compensation

     53        —          —          —     

Acquisition FMV step-up

     18,707        6.2        —          —     

Integration costs and synergy savings

     1,306        0.4        —          —     

Third-party engineering costs

     970        0.3        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit - non-GAAP

   $ 149,928        49.4   $ 104,663        44.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Research and Development - GAAP

   $ 53,587        17.6   $ 33,938        14.2

Nitronex prior to acquisition

     (1,423     (0.3     (2,845     (1.0

Earn-out costs

     —          —          (1,021     (0.4

Non-cash compensation expense

     (2,105     (0.7     (1,226     (0.5

Equity-based compensation

     (365     (0.1     —          —     

Acquisition FMV step-up

     (459     (0.2     —          —     

Integration costs and synergy savings

     (3,558     (1.2     —          —     

Third-party engineering costs

     970        0.3        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Research and Development - non-GAAP

   $ 46,647        15.4   $ 28,846        12.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Selling, General and Administrative - GAAP

   $ 65,952        21.7   $ 38,106        16.0

Nitronex prior to acquisition

     (685     (0.2     (1,554     (0.5

Earn-out costs

     —          —          (569     (0.2

Amortization expense

     (1,347     (0.4     (945     (0.4

Non-cash compensation expense

     (5,065     (1.7     (2,317     (1.0

Equity-based compensation

     (361     (0.1     —          —     

Acquisition FMV step-up

     (60     —          —          —     

Integration costs and synergy savings

     (8,914     (2.9     (1,267     (0.5

Litigation costs

     (3,240     (1.1     (601     (0.3

Transaction expenses

     (4,472     (1.5     —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Selling, General and Administrative - non-GAAP

   $ 41,808        13.8   $ 30,853        13.1
  

 

 

   

 

 

   

 

 

   

 

 

 


Total operating expenses - GAAP

   $ 135,264        44.4   $ 72,527        30.4

Nitronex prior to acquisition

     (2,108     (0.4     (4,509     (1.5

Amortization expense

     (1,347     (0.4     (945     (0.4

Non-cash compensation expense

     (7,170     (2.4     (3,543     (1.5

Equity-based compensation

     (726     (0.2     —          —     

Acquisition FMV step-up

     (519     (0.2     —          —     

Contingent consideration and earn-out costs

     —          —          (1,013     (0.4

Restructuring charges

     (15,725     (5.2     (950     (0.4

Integration costs and synergy savings

     (12,472     (4.1     (1,267     (0.5

Litigation costs

     (3,240     (1.1     (601     (0.3

Transaction expenses

     (4,472     (1.5     —          —     

Third-party engineering

     970        0.3        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses - non-GAAP

   $ 88,455        29.2   $ 59,699        25.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations - GAAP

   $ (22,465     (7.4 )%    $ 27,296        11.4

Nitronex prior to Acquisition

     3,067        1.0        7,105        3.2   

Amortization expense

     15,126        5.0        2,366        1.0   

Non-cash compensation expense

     8,525        2.8        4,366        1.9   

Equity-based compensation

     779        0.3        —          —     

Contingent consideration and earn-out costs

     —          —          1,013        0.4   

Restructuring charges

     15,725        5.2        950        0.4   

Acquisition FMV step-up

     19,226        6.3        —          —     

Integration costs and synergy savings

     13,778        4.5        1,267        0.5   

Litigation costs

     3,240        1.1        601        0.3   

Transaction expenses

     4,472        1.5        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations - non-GAAP

   $ 61,473        20.3   $ 44,964        19.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) - GAAP

   $ (29,860     (9.8 )%    $ 16,456        6.9

Nitronex prior to acquisition

     3,067        0.9        7,105        3.1   

Amortization expense

     11,572        3.8        1,481        0.6   

Non-cash compensation expense

     6,521        2.2        3,154        1.3   

Equity-based compensation

     595        0.2        —          —     

Contingent consideration

     —          —          634        0.3   

Restructuring charges

     12,030        4.0        666        0.3   

Warrant liability expense

     5,566        1.8        2,035        0.9   

Non-cash interest expense

     2,020        0.7        155        0.1   

Acquisition FMV step-up

     13,841        4.6        —          —     

Integration costs and synergy savings

     8,922        2.9        793        0.3   

Litigation costs

     2,479        0.8        376        0.2   

Transaction expenses

     3,537        1.2        —          —     

Transition services for divested business

     (1,777     (0.6     —          —     

Discontinued operations

     4,605        1.5        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income - non-GAAP

   $ 43,118        14.2   $ 32,855        14.0
  

 

 

   

 

 

   

 

 

   

 

 

 


     Amount     Income
(loss) per
diluted
share
    Amount      Income
per
diluted
share
 

Net income (loss) - GAAP

   $ (29,860   $ (0.64   $ 16,456       $ 0.35   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income - non-GAAP

   $ 43,118      $ 0.89      $ 32,855       $ 0.69   
  

 

 

   

 

 

   

 

 

    

 

 

 

Diluted shares - GAAP

     46,856          47,036      

Incremental stock options, warrants, restricted stock and units

     1,349          804      
  

 

 

     

 

 

    

Diluted shares - non-GAAP

     48,205          47,840      
  

 

 

     

 

 

    


M/A-COM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited and in thousands)

 

 

 

     July 4,
2014
     September 27,
2013
 

ASSETS

     

Current assets:

     

Cash and cash equivalents

   $ 173,508       $ 110,488   

Accounts receivable, net

     75,795         63,526   

Inventories

     69,923         54,908   

Deferred income taxes and other

     46,638         17,525   
  

 

 

    

 

 

 

Total current assets

     365,864         246,447   

Property and equipment, net

     48,860         32,735   

Goodwill and intangible assets, net

     175,956         31,548   

Deferred income taxes and other

     88,654         5,905   
  

 

 

    

 

 

 

TOTAL ASSETS

   $ 679,334       $ 316,635   
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Current portion of long-term debt

   $ 8,032       $ —     

Accounts payable, accrued liabilities and other

     71,555         42,927   

Deferred revenue

     16,398         9,231   
  

 

 

    

 

 

 

Total current liabilities

     95,985         52,158   

Long-term debt, less current portion

     343,938         —     

Common stock warrant liability

     17,439         11,873   

Deferred income taxes and other

     7,908         5,463   
  

 

 

    

 

 

 

Total liabilities

     465,270         69,494   

Commitments and contingencies

     

Stockholders’ equity

     214,064         247,141   
  

 

 

    

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 679,334       $ 316,635   
  

 

 

    

 

 

 


M/A-COM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)

 

 

 

     Nine Months Ended  
     July 4,
2014
    June 28,
2013
 

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net income (loss)

   $ (29,860   $ 16,456   

Non-cash adjustments

     47,706        17,357   

Payment of contingent consideration

     —          (5,328

Change in operating assets and liabilities

     (8,116     948   
  

 

 

   

 

 

 

Net cash from operating activities

     9,730        29,433   
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Acquisition of businesses, net

     (258,108     —     

Sale of a business

     8,627        —     

Sale of a product line

     12,000        —     

Strategic investments

     (5,250     —     

Purchases of property and equipment

     (10,279     (7,171

Acquisition of intellectual property

     (5,088     —     
  

 

 

   

 

 

 

Net cash used in investing activities

     (258,098     (7,171
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Proceeds from issuance of term notes payable

     347,375        —     

Payment of assumed debt

     (34,952     —     

Capital contributions

     3,200        6,515   

Payment of contingent consideration

     —          (675

Financing activities

     (4,235     2,960   
  

 

 

   

 

 

 

Net cash from financing activities

     311,388        8,800   
  

 

 

   

 

 

 

NET CHANGE IN CASH AND CASH EQUIVALENTS

     63,020        31,062   

CASH AND CASH EQUIVALENTS - Beginning of period

     110,488        84,600   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS - End of period

   $ 173,508      $ 115,662   
  

 

 

   

 

 

 


* * *

Company Contact:

M/A-COM Technology Solutions Holdings, Inc.

Robert J. McMullan

Senior Vice President and Chief Financial Officer

P: 978-656-2753

E: bob.mcmullan@macom.com

Investor Relations Contact:

Shelton Group

Leanne K. Sievers

EVP, Investor Relations

P: 949-224-3874

E: lsievers@sheltongroup.com