MACOM Reports Fiscal Fourth Quarter and Fiscal Year 2017 Financial Results

LOWELL, MA, November 14, 2017 - MACOM Technology Solutions Holdings, Inc. (NASDAQ: MTSI) (“MACOM”), a leading supplier of high-performance RF, microwave, millimeterwave and lightwave semiconductor products, today announced its financial results for its fiscal fourth quarter and fiscal year ended September 29, 2017.

Fiscal Year 2017 GAAP Results

  • Revenue was $698.8 million, an increase of 28.4%, compared to $544.3 million in fiscal year 2016;
  • Gross profit was $326.9 million, an increase of 16.1%, compared to $281.6 million in fiscal year 2016;
  • Fiscal year 2017 gross margin was 46.8%, compared to 51.7% in fiscal year 2016;
  • Operating loss was $16.1 million, compared to operating income of $13.2 million in fiscal year 2016; and
  • Fully diluted net loss from continuing operations was $2.48 per share, compared to a net loss per fully diluted share from continuing operations of $0.07 per share in fiscal year 2016.

Fiscal Year 2017 Adjusted Non-GAAP Results

  • Adjusted gross margin was 58.1%, compared to 58.1% in fiscal year 2016;
  • Adjusted operating income was $180.5 million, or 25.8% of revenue, compared to $133.3 million, or 24.5% of revenue, in fiscal year 2016;
  • Adjusted net income was $145.5 million, or $2.32 per diluted share, compared to adjusted net income of $105.5 million, or $1.91 per diluted share in fiscal year 2016, growing 37.9%; and
  • Adjusted EBITDA was $213.9 million, compared to $159.6 million in fiscal year 2016, growing 34%.

Fourth Quarter Fiscal Year 2017 GAAP Results

  • Revenue was $166.4 million, an increase of 9.0%, compared to $152.7 million in the previous year fiscal fourth quarter and a decrease of 14.5% compared to $194.6 million in the prior fiscal quarter;
  • Gross profit was $86.9 million, an increase of 6.2% compared to $81.8 million in the previous year fiscal fourth quarter, and a decrease of 6.2% compared to $92.6 million in the prior fiscal quarter;
  • Gross margin was 52.2%, compared to 53.6% in the previous year fiscal fourth quarter and 47.6% in the prior fiscal quarter;
  • Operating income was $0.3 million, compared to operating income of $10.1 million in the previous year fiscal fourth quarter and an operating income of $6.6 million in the prior fiscal quarter; and
  • Net loss from continuing operations was $1,000, or $0.21 loss per diluted share, compared to net income from continuing operations of $3.9 million, or $0.07 income per diluted share, in the previous year fiscal fourth quarter and net loss from continuing operations of $14.0 million, or $0.22 loss per diluted share, in the prior fiscal quarter.

Fourth Quarter Fiscal Year 2017 Adjusted Non-GAAP Results

  • Adjusted gross margin was 58.1%, compared to 58.5% in the previous year fiscal fourth quarter and 58.5% in the prior fiscal quarter;
  • Adjusted operating income was $38.0 million, or 22.8% of revenue, compared to $38.3 million, or 25.1% of revenue, in the previous year fiscal fourth quarter and $52.9 million, or 27.2% of revenue, in the prior fiscal quarter;
  • Adjusted net income was $30.3 million, or $0.46 per diluted share, compared to adjusted net income of $30.1 million, or $0.54 per diluted share, in the previous year fiscal fourth quarter and adjusted net income of $43.9 million, or $0.67 per diluted share, in the prior fiscal quarter; and
  • Adjusted EBITDA was $47.3 million, compared to $44.9 million for the previous year fiscal fourth quarter and $61.6 million for the prior fiscal quarter.

Management Commentary

"As expected, fiscal Q4 was a very challenging quarter, as we navigated through a hard pause in network infrastructure demand in China, impacting our entire range of Networks businesses," remarked John Croteau, President and CEO of MACOM. "Networks was down 25% sequentially, though it still grew 3% year on year. Somewhat offsetting the decline in Networks, we had a very strong quarter in our A&D and multi-market businesses, which grew 32% and 16% year-over-year, respectively.

"In the December quarter, we expect Networks demand to remain soft, and the A&D and Multi-market businesses to return to more normalized levels. We expect the December quarter will be the bottom of the down-cycle in network infrastructure, which appears to be on the verge of turning.

"We see 2018 providing a more positive environment. In addition to expecting a cyclical recovery in Telecom networks, we’ve expanded our customer footprint, and several of our secular growth drivers look to be approaching major inflection points as we secure deals with industry franchise players. We believe we are poised to be a major beneficiary of the upgrade from 40G to 100G CWDM that’s well underway inside the Data Center."

Mr. Croteau concluded, "While the near-term environment remains challenging, we believe we have the design wins and customer commitments to support market share growth in areas of existing strength as well as across new growth engines. When global demand recovers from the temporary pause in China, MACOM will return to our long track record of outperformance over the course of 2018."

Business Outlook

For the fiscal first quarter ending December 29, 2017, we expect revenue to be in the range of $130 million to $136 million. Adjusted gross margin is expected to be between 55% and 58%, and adjusted earnings per share between $0.10 and $0.16, on an anticipated 66.5 million fully diluted shares outstanding.

Conference Call

MACOM will host a conference call on Tuesday, November 14, 2017 at 5:00 p.m. Eastern Time to discuss its fiscal fourth quarter and fiscal year 2017 financial results and business outlook. Investors and analysts may join the conference call by dialing 1-877-837-3908 and providing the passcode 2098371.

International callers may join the teleconference by dialing +1-973-872-3000 and entering the same passcode at the prompt. A telephone replay of the call will be made available beginning two hours after the call and will remain available for five business days. The replay number is 1-855-859-2056 with a passcode of 2098371.  International callers should dial +1-404-537-3406 and enter the same passcode 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 enables a better-connected and safer world by delivering breakthrough semiconductor technologies for optical, wireless and satellite networks that satisfy society’s insatiable demand for information.

Today, MACOM powers the infrastructure that millions of lives and livelihoods depend on every minute to communicate, transact business, travel, stay informed and be entertained.  Our technology increases the speed and coverage of the mobile Internet and enables fiber optic networks to carry previously unimaginable volumes of traffic to businesses, homes and datacenters.

Keeping us all safe, MACOM technology enables next-generation radars for air traffic control and weather forecasting, as well as mission success on the modern networked battlefield.

MACOM is the partner of choice to the world’s leading communications infrastructure, aerospace and defense companies, helping solve their most complex challenges in areas including network capacity, signal coverage, energy efficiency and field reliability, through its best-in-class team and broad portfolio of RF, microwave, millimeterwave and lightwave semiconductor products.

MACOM is a pillar of the semiconductor industry, thriving for more than 60 years of daring to change the world for the better, through bold technological strokes that deliver true competitive advantage to customers and superior value to investors.

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 and related logos are trademarks of MACOM. All other trademarks are the property of their respective owners.  For more information about MACOM, please visit www.macom.com follow @MACOMtweets on Twitter, join MACOM on LinkedIn or visit the MACOM YouTube Channel.

Special Note Regarding Forward-Looking Statements

This press release and our commentary in our conference call held today each contain 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 expectations for business and market conditions, positioning and growth aspirations in the Aerospace & Defense, Multi-market, Networks, Telecom, Mobile Infrastructure, Active Antenna, PON, Metro-Long Haul and Data Center markets and elsewhere, our expectation that the December quarter will be the bottom of the down-cycle in network infrastructure, any expectations as to our relationships with customers and vendors, our future market share, the timing or nature of future Data Center and network upgrade cycles, customer order activity and customer adoption of our solutions, our expectations for the easing of outsourced manufacturing partner supply constraints, our expectations for increasing unit shipments of 25G lasers and other products from our Lowell fab, our expectations for maximizing the value of our divestment of AppliedMicro's Compute business, our future investment decisions, our GaN strategy and expectations for execution on that strategy, the expected outcome of our ongoing litigation against Infineon and any other 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.

These forward-looking statements 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 the potential that we are unable to identify and timely enter into new markets for our products, such as our publicly-announced market opportunities in Cloud Data Centers, 100G optical networks, 10G PON, GaN technology and Active Antennas, the potential that we are unable to timely deliver the quantities of our products targeting these or other applications at the right price point due to design challenges, manufacturing bottlenecks, supply shortages, yield issues or otherwise, the potential that the expected rollout of Cloud Data Center build-outs, 5G network upgrades, fiber-to-the-home network technology or other new optical or other network technology deployments in the U.S., China, Japan and other geographies fails to occur, occurs more slowly than we expect or does not result in the amount or type of new business we anticipate, lower than expected demand in the Cloud Data Center market, the optical network infrastructure market or any or all of our primary end markets or from any or all of our large OEM customers based on seasonal effects, regulatory action or inaction, technology shifts, standards changes, macro-economic weakness or otherwise, the potential for greater than expected pricing pressure and average selling price erosion based on attempts to win or maintain market share, competitive factors, technology shifts or otherwise, our potential inability to ramp key new products into volume production with acceptable manufacturing yields to satisfy key customer demand in a timely fashion, 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, the potential loss of access to any in-licensed intellectual property or inability to license technology we may require on reasonable terms, 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, greater than expected dilutive effect on earnings of our equity issuances, outstanding indebtedness and related interest expense and other costs, 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 Cloud Data Centers, MACsec, single-Lambda PAM4, MMICs, Active Antennas, SPAR tiles, GaN, InP lasers or other solutions offered by us, failures or delays in porting and qualifying GaN or InP process technology to our fabrication facilities or third party facilities and achieving anticipated manufacturing economies of scale, lower than expected utilization and absorption in our manufacturing facilities, lack of success or slower than expected success in our new product development or new product introduction efforts, loss of key personnel to competitors or otherwise, failure of any announced transaction to close in accordance with its terms, failure to successfully integrate acquired companies, technologies or products or realize synergies associated with acquisitions, the potential that we will experience difficulties in managing the personnel and operations associated with our acquisitions, loss of business due to competitive factors, product or technology obsolescence, customer program shifts or otherwise, 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 impact of any executed or abandoned acquisition, divestiture, joint venture, financing or restructuring activity, the impact of supply shortages or other disruptions in our internal or outsourced supply chain, the impact of changes in export, environmental or other laws applicable to us, the relative success of our cost-savings initiatives, 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 June 30, 2017, as filed with the SEC on August 2, 2017, its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2017, as filed with the SEC on April 26, 2017, its Quarterly Report on Form 10-Q for the fiscal quarter ended December 30, 2016, as filed with the SEC on February 1, 2017, and its Annual Report on Form 10-K for the fiscal year ended September 30, 2016, as filed on November 17, 2016. MACOM undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Discussion Regarding the Use of Historical and Forward-Looking Non-GAAP Financial Measures

In addition to GAAP reporting, MACOM provides investors with financial measures that have not been calculated in accordance with United States Generally Accepted Accounting Principles ("GAAP"), such as: non-GAAP gross profit and gross margin, non-GAAP income from operations and operating margin, non-GAAP operating expenses, non-GAAP net income, non-GAAP diluted earnings per share, adjusted EBITDA, and Free Cash Flow.  From time to time in this release or elsewhere, we may alternatively refer to such non-GAAP measures as “adjusted” measures.   This non-GAAP information excludes the effect, where applicable, of discontinued operations, intangible amortization expense, share-based compensation costs, impairment and restructuring charges, changes in common stock warrant liability, financing and litigation costs, acquisition and integration related costs, other costs and the tax effect of each adjustment. The non-GAAP information includes consulting agreement related income associated with the Automotive divestiture.

Management believes that these excluded items are not reflective of our underlying performance. Management uses these non-GAAP financial measures to: evaluate our ongoing operating performance and compare it against prior periods, make operating decisions, forecast future periods, evaluate potential acquisitions, compare our operating performance against peer companies and assess certain compensation programs. The exclusion of these and other similar items from our non-GAAP financial results should not be interpreted as implying that these items are non-recurring, infrequent or unusual. We believe this non-GAAP financial information provides additional insight into our ongoing performance and have therefore chosen to provide this information to investors for a more consistent basis of comparison and to help them evaluate the results of our ongoing 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. We have not provided a reconciliation with respect to any forward-looking non-GAAP financial data presented because we do not have and cannot reliably estimate certain key inputs required to calculate the most comparable GAAP financial data, such as the future price per share of our common stock for purposes of calculating the value of our common stock warrant liability, future acquisition costs, the possibility and impact of any litigation costs, changes in our GAAP effective tax rate and impairment charges.  We believe these unknown inputs are likely to have a significant impact on any estimate of the comparable GAAP financial data.

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.  The expense is not considered by management in making operating decisions, and the expense is non-cash.

Share-Based and Non-cash Compensation Expense - includes share based compensation including awards that are equity and liability classified on our balance sheet as well as non-cash compensation expense primarily associated with amounts due to employees of an acquired business that were placed in escrow at the time of the acquisition and amortized as expense over a 2-year period. 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 Charges - includes expenses associated with our strategic decision to exit a product line and end programs with a license and technology transfer as well as certain related fixed assets and inventory. We believe these charges are one-time in nature and 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 or administrative footprints. 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 and Integration Related Costs - includes such items as professional fees incurred in connection with pre-acquisition and integration specific activities, post-acquisition employee retention amounts, 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 or are expected to have a diminishing contribution during the integration period and the amortization of the fair market step-up value of acquired inventory and fixed assets.  We believe the exclusion of these items is useful in providing management a basis to evaluate ongoing operating activities and strategic decision making.

Discontinued Operations excluding consulting income - includes the profit and loss amounts of discontinued operations, with the exception of consulting income associated with a consulting agreement we entered into at the time of our Automotive business divestiture.  We believe excluding gains and losses associated with historically divested businesses from our net income provides management with a comparable basis to our current ongoing operating activities.  We do not exclude the consulting agreement income classified as discontinued operations because management views this income as part of our ongoing operations and correlated with future operations since we both derive income and incur ongoing costs associated with the consulting services available under the consulting agreement.

Other - primarily includes transaction expenses incurred as part of our Credit Agreement Amendments in the fourth fiscal quarter of 2016 as well as the second and third fiscal quarters of 2017. We believe these amounts are not correlated to future business operations and including such charges does not reflect our ongoing operations.

Tax Effect of Non-GAAP Adjustments - adjustments to arrive at an estimate of our Adjusted Non-GAAP 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 10% for our second and third fiscal quarters of 2017, 12% for our first fiscal quarter of 2017 and 15% for our fiscal year 2016.  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 is excluded from our Adjusted Non-GAAP net Income and is neither deductible nor taxable for tax purposes, income taxed in foreign jurisdictions at generally lower tax rates, non-deductible compensation, research and development tax credits and merger expenses, as well as the establishment of a valuation allowance against our U.S. deferred tax assets during the three months ended March 31, 2017. 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 U.S. 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 and consulting agreement income to our Adjusted Non-GAAP 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 and adds AppliedMicro transaction related payments. 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.


Company Contact:
MACOM Technology Solutions Holdings, Inc.
Stephen Ferranti
Vice President of Investor Relations
P: 978-656-2977
E: stephen.ferranti@macom.com    

Investor Relations Contact:
Shelton Group
Leanne K. Sievers
EVP, Investor Relations
P: 949-224-3874
E: lsievers@sheltongroup.com

 

 

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share data)


 

 Three Months Ended

 

Twelve Months Ended

 

September 29, 2017

 

June 30, 2017

 

September 30, 2016

 

September 29, 2017

 

September 30, 2016

 

 

 

 

 

Revenue

$

166,381

 

 

$

194,555

 

 

$

152,697

 

 

$

698,772

 

 

$

544,338

 

Cost of revenue

79,485

 

 

101,926

 

 

70,893

 

 

371,888

 

 

262,729

 

Gross profit

86,896

 

 

92,629

 

 

81,804

 

 

326,884

 

 

281,609

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

39,398

 

 

38,729

 

 

30,109

 

 

147,986

 

 

107,698

 

Selling, general and administrative

42,398

 

 

46,666

 

 

40,265

 

 

187,886

 

 

145,433

 

Impairment charges

4,352

 

 

 

 

 

 

4,352

 

 

11,765

 

Restructuring charges

401

 

 

586

 

 

1,365

 

 

2,744

 

 

3,465

 

 Total operating expenses

86,549

 

 

85,981

 

 

71,739

 

 

342,968

 

 

268,361

 

Income (loss) from operations

347

 

 

6,648

 

 

10,065

 

 

(16,084

)

 

13,248

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Warrant liability gain (expense)

13,958

 

 

(9,085

)

 

(12,691

)

 

(2,522

)

 

(16,431

)

 Interest expense, net

(6,953

)

 

(7,178

)

 

(5,310

)

 

(28,855

)

 

(18,427

)

 Other (expense) income, net

(1

)

 

(1,139

)

 

5

 

 

(2,044

)

 

39

 

 Total other income (expense)

7,004

 

 

(17,402

)

 

(17,996

)

 

(33,421

)

 

(34,819

)

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

7,351

 

 

(10,754

)

 

(7,931

)

 

(49,505

)

 

(21,571

)

Income tax expense (benefit)

7,352

 

 

3,223

 

 

(11,804

)

 

100,911

 

 

(17,983

)

Income (loss) from continuing operations

(1

)

 

(13,977

)

 

3,873

 

 

(150,416

)

 

(3,588

)

(Loss) income from discontinued operations

(10,719

)

 

(13,700

)

 

1,228

 

 

(19,077

)

 

5,022

 

Net (loss) income

$

(10,720

)

 

$

(27,677

)

 

$

5,101

 

 

$

(169,493

)

 

$

1,434

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share:

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

$

(0.00

)

 

$

(0.22

)

 

$

0.07

 

 

$

(2.48

)

 

$

(0.07

)

(Loss) income from discontinued operations

(0.17

)

 

(0.21

)

 

0.02

 

 

(0.31

)

 

0.09

 

(Loss) income per share - basic

$

(0.17

)

 

$

(0.43

)

 

$

0.10

 

 

$

(2.79

)

 

$

0.03

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

$

(0.21

)

 

$

(0.22

)

 

$

0.07

 

 

$

(2.48

)

 

$

(0.07

)

(Loss) income from discontinued operations

(0.16

)

 

(0.21

)

 

0.02

 

 

(0.31

)

 

0.09

 

(Loss) income per share - diluted

$

(0.38

)

 

$

(0.43

)

 

$

0.09

 

 

$

(2.79

)

 

$

0.03

 

 

 

 

 

 

 

 

 

 

 

Shares - Basic

64,243

 

 

64,019

 

 

53,676

 

 

60,704

 

 

53,364

 

Shares - Diluted

65,156

 

 

64,019

 

 

55,285

 

 

60,704

 

 

53,364

 

 

 

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited and in thousands)

 

 

 

September 29, 2017

 

September 30, 2016

 

 

 

 ASSETS

 

 

 

 

 Current assets:

 

 

 

 

 Cash and cash equivalents

 

$

130,104

 

 

$

332,977

 

 Short term investments

 

84,121

 

 

23,776

 

 Accounts receivable, net

 

136,096

 

 

108,331

 

 Inventories

 

136,074

 

 

114,935

 

 Income tax receivable

 

18,493

 

 

21,607

 

 Assets held for sale, current

 

35,571

 

 

 

 Prepaids and other current assets

 

22,438

 

 

11,318

 

 Total current assets

 

562,897

 

 

612,944

 

 Property and equipment, net

 

131,019

 

 

99,167

 

 Goodwill and intangible assets, net

 

934,857

 

 

379,626

 

 Deferred income taxes

 

948

 

 

89,606

 

 Other long-term assets

 

7,402

 

 

7,208

 

 TOTAL ASSETS

 

$

1,637,123

 

 

$

1,188,551

 

 

 

 

 

 

 LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 Current liabilities:

 

 

 

 

Current portion of lease payable

 

$

815

 

 

$

1,152

 

Current portion of long-term debt obligations

 

6,885

 

 

6,051

 

Liabilities held for sale

 

2,144

 

 

 

Accounts payable, accrued liabilities and other

 

107,275

 

 

84,947

 

 Total current liabilities

 

117,119

 

 

92,150

 

 Lease payable, less current portion

 

17,275

 

 

2,463

 

 Long-term debt obligations, less current portion

 

661,471

 

 

573,882

 

 Common stock warrant liability

 

40,775

 

 

38,253

 

 Deferred income taxes

 

15,172

 

 

11,765

 

 Other long-term liabilities

 

7,937

 

 

7,254

 

 Total liabilities

 

859,749

 

 

725,767

 

 Stockholders' equity

 

777,374

 

 

462,784

 

 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

1,637,123

 

 

$

1,188,551

 

 

 

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)

 

 

 

Twelve Months Ended

 

 

September 29, 2017

 

September 30, 2016

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

Net loss

 

$

(169,493

)

 

$

1,434

 

Adjustments to reconcile (loss) income to net operating cash

 

253,377

 

 

118,813

 

Change in operating assets and liabilities

 

(22,834

)

 

(41,015

)

Net cash provided by operating activities

 

61,050

 

 

79,232

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

Acquisition of businesses, net

 

(270,008

)

 

(85,517

)

Purchases, sales and maturities of investments

 

(60,493

)

 

15,257

 

Proceeds from discontinued operations

 

25,520

 

 

7,500

 

Proceeds from sale of assets

 

215

 

 

 

Purchases of property and equipment

 

(32,804

)

 

(31,326

)

Acquisition of intellectual property

 

 

 

(777

)

Net cash used in investing activities

 

(337,570

)

 

(94,863

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

Proceeds from notes payable

 

96,558

 

 

247,625

 

Payments of notes payable and assumed debt

 

(5,884

)

 

(14,076

)

Proceeds from stock option exercises and employee stock purchases

 

8,281

 

 

5,460

 

Repurchase of common stock

 

(18,534

)

 

(9,995

)

Other adjustments

 

(6,768

)

 

(1,660

)

Net cash provided by financing activities

 

73,653

 

 

227,354

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

(6

)

 

(1,058

)

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

(202,873

)

 

210,665

 

CASH AND CASH EQUIVALENTS — Beginning of period

 

332,977

 

 

122,312

 

CASH AND CASH EQUIVALENTS — End of period

 

$

130,104

 

 

$

332,977

 

 

 

 

 

 

Supplemental disclosure of non-cash activities

 

 

 

 

Issuance of common stock in connection with the AppliedMicro Acquisition

 

465,082

 

 

 

 

 

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(unaudited and in thousands, except per share data)


 

Three Months Ended

Twelve Months Ended

 

September 29, 2017

June 30, 2017

September 30, 2016

September 29, 2017

September 30, 2016

 

 Amount

 % Revenue

 Amount

 % Revenue

 Amount

 % Revenue

 Amount

 % Revenue

 Amount

 % Revenue

Gross profit - GAAP

$

86,896

 

52.2

 

$

92,629

 

47.6

 

$

81,804

 

53.6

 

$

326,884

 

46.8

 

$

281,609

 

51.7

 

Amortization expense

8,592

 

5.2

 

8,416

 

4.3

 

6,366

 

4.2

 

30,286

 

4.3

 

26,615

 

4.9

 

Share-based and non-cash compensation

931

 

0.6

 

956

 

0.5

 

628

 

0.4

 

3,647

 

0.5

 

2,546

 

0.5

 

Impairment and restructuring charges

 

 

 

 

 

 

 

 

1,950

 

0.4

 

Acquisition and integration related costs

208

 

0.1

 

11,736

 

6.0

 

542

 

0.4

 

45,283

 

6.5

 

3,645

 

0.7

 

Adjusted gross profit (Non-GAAP)

$

96,627

 

58.1

 

$

113,737

 

58.5

 

$

89,340

 

58.5

 

$

406,100

 

58.1

 

$

316,365

 

58.1

 

 

 

Three Months Ended

Twelve Months Ended

 

September 29, 2017

June 30, 2017

September 30, 2016

September 29, 2017

September 30, 2016

 

 Amount

 % Revenue

 Amount

 % Revenue

 Amount

 % Revenue

 Amount

 % Revenue

 Amount

 % Revenue

Operating expenses - GAAP

$

86,549

 

52.0

 

$

85,981

 

44.2

 

$

71,739

 

47.0

 

$

342,968

 

49.1

 

$

268,362

 

49.3

 

Amortization expense

(10,993

)

(6.6

)

(10,832

)

(5.6

)

(6,498

)

(4.3

)

(35,456

)

(5.1

)

(23,640

)

(4.3

)

Share-based and non-cash compensation

(7,606

)

(4.6

)

(9,833

)

(5.1

)

(9,099

)

(6.0

)

(37,991

)

(5.4

)

(33,904

)

(6.2

)

Impairment and restructuring charges

(4,753

)

(2.9

)

(586

)

(0.3

)

(1,365

)

(0.9

)

(7,096

)

(1.0

)

(15,230

)

(2.8

)

Litigation costs

(675

)

(0.4

)

(569

)

(0.3

)

(1,037

)

(0.7

)

(2,284

)

(0.3

)

(2,194

)

(0.4

)

Acquisition and integration related costs

(3,635

)

(2.2

)

(2,645

)

(1.4

)

(2,146

)

(1.4

)

(33,382

)

(4.8

)

(9,784

)

(1.8

)

Other

(220

)

(0.1

)

(719

)

(0.4

)

(573

)

(0.4

)

(1,123

)

(0.2

)

(573

)

(0.1

)

Adjusted operating expenses (Non-GAAP)

$

58,667

 

35.3

 

$

60,797

 

31.2

 

$

51,021

 

33.4

 

$

225,636

 

32.3

 

$

183,037

 

33.6

 

 

 

Three Months Ended

Twelve Months Ended

 

September 29, 2017

June 30, 2017

September 30, 2016

September 29, 2017

September 30, 2016

 

 Amount

 % Revenue

 Amount

 % Revenue

 Amount

 % Revenue

 Amount

 % Revenue

 Amount

 % Revenue

Income (loss) from operations - GAAP

$

347

 

0.2

 

$

6,648

 

3.4

 

$

10,065

 

6.6

 

$

(16,084

)

(2.3

)

$

13,247

 

2.4

 

Amortization expense

19,585

 

11.8

 

19,248

 

9.9

 

12,864

 

8.4

 

65,742

 

9.4

 

50,255

 

9.2

 

Share-based and non-cash compensation

8,538

 

5.1

 

10,789

 

5.5

 

9,727

 

6.4

 

41,638

 

6.0

 

36,450

 

6.7

 

Impairment and restructuring charges

4,753

 

2.9

 

586

 

0.3

 

1,365

 

0.9

 

7,096

 

1.0

 

17,180

 

3.2

 

Litigation costs

675

 

0.4

 

569

 

0.3

 

1,037

 

0.7

 

2,284

 

0.3

 

2,194

 

0.4

 

Acquisition and integration related costs

3,843

 

2.3

 

14,380

 

7.4

 

2,688

 

1.8

 

78,664

 

11.3

 

13,428

 

2.5

 

Other

218

 

0.1

 

719

 

0.4

 

573

 

0.4

 

1,123

 

0.2

 

573

 

0.1

 

Adjusted income from operations (Non-GAAP)

$

37,959

 

22.8

 

$

52,939

 

27.2

 

$

38,319

 

25.1

 

$

180,463

 

25.8

 

$

133,327

 

24.5

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation expense

7,461

 

4.5

 

6,739

 

3.5

 

4,689

 

3.1

 

25,908

 

3.7

 

18,710

 

3.4

 

Consulting income

1,875

 

1.1

 

1,875

 

1.0

 

1,880

 

1.2

 

7,500

 

1.1

 

7,516

 

1.4

 

Adjusted EBITDA (Non-GAAP)

$

47,295

 

28.4

 

$

61,553

 

31.6

 

$

44,888

 

29.4

 

$

213,871

 

30.6

 

$

159,553

 

29.3

 

 

 

Three Months Ended

Twelve Months Ended

 

September 29, 2017

June 30, 2017

September 30, 2016

September 29, 2017

September 30, 2016

 

 Amount

 % Revenue

 Amount

 % Revenue

 Amount

 % Revenue

 Amount

 % Revenue

 Amount

 % Revenue

Net (loss) income - GAAP

$

(10,720

)

(6.4

)

$

(27,677

)

(14.2

)

$

5,101

 

3.3

 

$

(169,493

)

(24.3

)

$

1,434

 

0.3

 

Amortization expense

19,585

 

11.8

 

19,248

 

9.9

 

12,864

 

8.4

 

65,742

 

9.4

 

50,255

 

9.2

 

Share-based and non-cash compensation

8,538

 

5.1

 

10,789

 

5.5

 

9,727

 

6.4

 

41,638

 

6.0

 

36,450

 

6.7

 

Impairment and restructuring charges

4,753

 

2.9

 

586

 

0.3

 

1,365

 

0.9

 

7,096

 

1.0

 

17,180

 

3.2

 

Warrant liability expense

(13,958

)

(8.4

)

9,085

 

4.7

 

12,691

 

8.3

 

2,522

 

0.4

 

16,432

 

3.0

 

Non-cash interest, net

827

 

0.5

 

1,122

 

0.6

 

503

 

0.3

 

3,373

 

0.5

 

1,731

 

0.3

 

Litigation costs

675

 

0.4

 

569

 

0.3

 

1,037

 

0.7

 

2,284

 

0.3

 

2,194

 

0.4

 

Acquisition and integration related costs

3,843

 

2.3

 

14,380

 

7.4

 

2,688

 

1.8

 

78,664

 

11.3

 

13,406

 

2.5

 

Discontinued operations, excluding consulting income

12,594

 

7.6

 

15,575

 

8.0

 

647

 

0.4

 

26,577

 

3.8

 

2,478

 

0.5

 

Other

218

 

0.1

 

1,856

 

1.0

 

573

 

0.4

 

3,131

 

0.4

 

573

 

0.1

 

Tax effect of non-GAAP adjustments

3,981

 

2.4

 

(1,653

)

(0.8

)

(17,114

)

(11.2

)

83,943

 

12.0

 

(36,605

)

(6.7

)

Adjusted net income (Non-GAAP)

$

30,336

 

18.2

 

$

43,880

 

22.6

 

$

30,082

 

19.7

 

$

145,477

 

20.8

 

$

105,528

 

19.4

 

 

 

Three Months Ended

Twelve Months Ended

 

September 29, 2017

June 30, 2017

September 30, 2016

September 29, 2017

September 30, 2016

 

Net Income (Loss)

Income (loss) per diluted share

Net Income (Loss)

Income (loss) per diluted share

Net Income (Loss)

Income (loss) per diluted share

Net Income (Loss)

Income (loss) per diluted share

Net Income (Loss)

Income (loss) per diluted share

Net (loss) income - GAAP

$

(10,720

)

 

$

(27,677

)

 

5,101

 

 

(169,493

)

 

1,434

 

 

Warrant liability gain

(13,958

)

 

 

 

 

 

 

 

 

 

Net (loss) income - diluted

$

(24,678

)

$

(0.38

)

$

(27,677

)

$

(0.43

)

$

5,101

 

$

0.09

 

$

(169,493

)

$

(2.79

)

$

1,434

 

$

0.03

 

Adjusted (Non-GAAP)

$

30,336

 

$

0.46

 

$

43,880

 

$

0.67

 

$

30,082

 

$

0.54

 

$

145,477

 

$

2.32

 

$

105,528

 

$

1.91

 

 

 

Three Months Ended

Twelve Months Ended

 

September 29, 2017

June 30, 2017

September 30, 2016

September 29, 2017

September 30, 2016

 

Shares

 

Shares

 

Shares

 

Shares

 

Shares

 

Diluted shares - GAAP

64,243

 

 

64,019

 

 

55,285

 

 

60,704

 

 

53,364

 

 

Incremental shares

1,687

 

 

1,916

 

 

 

 

1,877

 

 

1,855

 

 

Adjusted diluted shares (Non-GAAP)

65,930

 

 

65,935

 

 

55,285

 

 

62,581

 

 

55,219

 

 

 

 

Three Months Ended

Twelve Months Ended

 

September 29, 2017

June 30, 2017

September 30, 2016

September 29, 2017

September 30, 2016

 

 Amount

 % Revenue

 Amount

 % Revenue

 Amount

 % Revenue

 Amount

 % Revenue

 Amount

 % Revenue

Interest expense, net - GAAP

$

6,953

 

4.2

 

$

7,178

 

3.7

 

$

5,512

 

3.6

 

$

28,855

 

4.1

 

$

18,942

 

3.5

 

Non-cash interest expense

(827

)

(0.5

)

(1,122

)

(0.6

)

(503

)

(0.3

)

(3,373

)

(0.5

)

(1,731

)

(0.3

)

Adjusted Interest Expense (Non-GAAP)

$

6,126

 

3.7

 

$

6,056

 

3.1

 

$

5,009

 

3.3

 

$

25,482

 

3.6

 

$

17,211

 

3.2

 

 

 

Three Months Ended

Twelve Months Ended

 

September 29, 2017

June 30, 2017

September 30, 2016

September 29, 2017

September 30, 2016

 

 Amount

 % Revenue

 Amount

 % Revenue

 Amount

 % Revenue

 Amount

 % Revenue

 Amount

 % Revenue

Cash flow from operations

$

12,361

 

7.4

 

$

27,850

 

14.3

 

$

24,885

 

16.3

 

$

61,050

 

8.7

 

$

79,232

 

14.6

 

Capital expenditures

(8,308

)

(5.0

)

(8,201

)

(4.2

)

(7,226

)

(4.7

)

(32,804

)

(4.7

)

(32,103

)

(5.9

)

AppliedMicro transaction related payments

3,426

 

2.1

 

419

 

0.2

 

 

 

31,959

 

4.6

 

 

 

Free cash flow (Non-GAAP)

$

7,479

 

4.5

 

$

20,068

 

10.3

 

$

17,659

 

11.6

 

$

60,205

 

8.6

 

$

47,129

 

8.7

 

Free cash flow as a percentage of adjusted net income

25

%

 

46

%

 

59

%

 

41

%

 

45

%

 

 

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