Audience (ADNC) Says Processor IP Might Not Be Used by Apple (AAPL) in iPhone 5; Boosts Q3 Outlook
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Audience, Inc. (Nasdaq: ADNC) provided an update on the prospects for use of its processor intellectual property (processor IP) in the next generation mobile phone release of a large OEM customer. Additionally, Audience provided an update to its business outlook for the third quarter of 2012.
Product Transition
Audience sells processors and licenses its processor IP to Apple Inc. (Nasdaq: AAPL) and certain of its subsidiaries (collectively, OEM) for inclusion in the OEM's mobile phones pursuant to a Master Development and Supply Agreement (MDSA). Pursuant to a statement of work under the MDSA, amended in March 2012, Audience developed and licensed a new generation of processor IP for use in the OEM's devices. However, the OEM is not obligated to use Audience's processor IP.
Audience now believes that it is unlikely that the OEM will enable Audience's processor IP in its next generation mobile phone. Audience is not aware of any intended changes by this OEM to its use of Audience's processors or processor IP in prior generations of the OEM's mobile phones.
Audience recognizes royalty revenue from the license of its processor IP one quarter in arrears of the sale of the device, when it has received a royalty report from its OEM. As a result, Audience does not expect any impact on its business outlook for the third fiscal quarter from the situation described above. The revenue and net income impact of the OEM's next generation mobile phone would first affect Audience's financial results one quarter after the OEM commences end customer sales of its mobile phones.
Peter Santos, president and chief executive officer, commented, "While we are disappointed by this development, we are confident in the diversification of our business and see sustainable growth in 2012 and beyond. As such we are raising guidance for the third quarter of 2012. Looking ahead, we believe our expansion into adjacent markets such as Smart TVs, automotive, and notebooks, will continue to bring growth in 2013 and beyond."
Business Outlook
Separately, based on the strength of hardware shipments quarter to date and the forecast for the remainder of the quarter, the company is raising guidance for the third quarter of 2012. The company expects total revenue to be in the range of $35 to $38 million dollars, an increase from the prior range of $33 to $36 million dollars. Third quarter GAAP gross margin is expected to be in the range of 58% to 61%. Third quarter GAAP net income is expected to be in the range of $2.6 to $3.5 million dollars, including $0.7 million dollars of stock based compensation expense, or $0.11 to $0.15 per diluted share on approximately 23.4 million diluted weighted average shares outstanding.
Third quarter non-GAAP gross margin is expected to be in the range of 58% to 61% and non-GAAP net income is expected to be in the range of $3.3 to $4.2 million dollars, or $0.14 to $0.18 per share on a diluted basis.
The Street sees revs of $34.70 million and EPS of 11 cents.
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Product Transition
Audience sells processors and licenses its processor IP to Apple Inc. (Nasdaq: AAPL) and certain of its subsidiaries (collectively, OEM) for inclusion in the OEM's mobile phones pursuant to a Master Development and Supply Agreement (MDSA). Pursuant to a statement of work under the MDSA, amended in March 2012, Audience developed and licensed a new generation of processor IP for use in the OEM's devices. However, the OEM is not obligated to use Audience's processor IP.
Audience now believes that it is unlikely that the OEM will enable Audience's processor IP in its next generation mobile phone. Audience is not aware of any intended changes by this OEM to its use of Audience's processors or processor IP in prior generations of the OEM's mobile phones.
Audience recognizes royalty revenue from the license of its processor IP one quarter in arrears of the sale of the device, when it has received a royalty report from its OEM. As a result, Audience does not expect any impact on its business outlook for the third fiscal quarter from the situation described above. The revenue and net income impact of the OEM's next generation mobile phone would first affect Audience's financial results one quarter after the OEM commences end customer sales of its mobile phones.
Peter Santos, president and chief executive officer, commented, "While we are disappointed by this development, we are confident in the diversification of our business and see sustainable growth in 2012 and beyond. As such we are raising guidance for the third quarter of 2012. Looking ahead, we believe our expansion into adjacent markets such as Smart TVs, automotive, and notebooks, will continue to bring growth in 2013 and beyond."
Business Outlook
Separately, based on the strength of hardware shipments quarter to date and the forecast for the remainder of the quarter, the company is raising guidance for the third quarter of 2012. The company expects total revenue to be in the range of $35 to $38 million dollars, an increase from the prior range of $33 to $36 million dollars. Third quarter GAAP gross margin is expected to be in the range of 58% to 61%. Third quarter GAAP net income is expected to be in the range of $2.6 to $3.5 million dollars, including $0.7 million dollars of stock based compensation expense, or $0.11 to $0.15 per diluted share on approximately 23.4 million diluted weighted average shares outstanding.
Third quarter non-GAAP gross margin is expected to be in the range of 58% to 61% and non-GAAP net income is expected to be in the range of $3.3 to $4.2 million dollars, or $0.14 to $0.18 per share on a diluted basis.
The Street sees revs of $34.70 million and EPS of 11 cents.
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