Inphi Corporation Announces Second Quarter 2015 Results
Reports 79% Year-Over-Year Revenue Growth and 167% Year-Over-Year Non-GAAP EPS Growth; Q2 15 Non-GAAP Gross Margin Increased to 68.6%
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SANTA CLARA, CA -- (Marketwired) -- 07/28/15 -- Inphi Corporation (NYSE: IPHI), a leading provider of high-speed analog and mixed-signal semiconductor solutions for the communications, data center and computing markets, today announced the financial results for its second quarter ended June 30, 2015.
Revenue in the second quarter of 2015 was a record $60.7 million, up 2.6% sequentially from $59.2 million reported in the first quarter of 2015 and up 79% year-over-year, compared with $33.9 million in the second quarter of 2014.
Gross margin under U.S. generally accepted accounting principles (GAAP) in the second quarter of 2015 was 61.6% of revenue, compared with 63.8% in the second quarter of 2014. The decline in gross margin was primarily due to the amortization of the acquired intangibles and amortization of inventory fair value step-up related to the acquired Cortina inventories sold during the second quarter of 2015.
GAAP results of operations for the second quarter of 2015 were breakeven, compared with GAAP net income of $2.6 million, or $0.08 per diluted common share, in the second quarter of 2014.
Inphi reports revenue, gross margin, operating expenses, net income (loss), and earnings per share in accordance with GAAP and on a non-GAAP basis. A reconciliation of the GAAP to non-GAAP revenue, gross margin, operating expenses, net income, and earnings per share, as well as a description of the items excluded from the non-GAAP calculations, is included in the financial statements portion of this news release.
Gross margin on a non-GAAP basis for in the second quarter of 2015 was 68.6%, compared with 64.6% in the second quarter of 2014.
Non-GAAP net income in the second quarter of 2015 was a record $9.9 million, or $0.24 per diluted common share. This compares with non-GAAP net income of $2.9 million, or $0.09 per diluted common share in the second quarter of 2014.
"We are pleased to report record non-GAAP revenue and record earnings per share in Q2," said Ford Tamer, Inphi President and CEO. "While being cautious about a near-term slowdown in the service provider market in China, we remain confident in our ability to grow overall revenue and profitability in the mid- to long-term. We are convinced that our cloud product offerings will continue to position Inphi as a strong participant in the upcoming multi-billion dollar Data Center Interconnect market."
First Half 2015 Results Revenue in the six months ended June 30, 2015 was $119.8 million, compared with $65.1 million in the six months ended June 30, 2014. GAAP net loss in the six months ended June 30, 2015 was $9.7 million, or ($0.26) per diluted share, on approximately 38.1 million diluted weighted average common shares outstanding. This compares with GAAP net income of $1.6 million, or $0.05 per diluted share, on approximately 32.9 million diluted weighted average common shares outstanding in the six months ended June 30, 2014.
Non-GAAP net income in the six months ended June 30, 2015 was $19.2 million, or $0.47 per diluted weighted average common share outstanding, on approximately 40.8 million diluted weighted average common shares outstanding. This compares with non-GAAP net income of $5.8 million in the six months ended June 30, 2014, or $0.18 per diluted weighted average common share outstanding.
Business Outlook The following statements are based on the company's current expectations for the third quarter of 2015. These statements are forward-looking and actual results may differ materially.
- Revenues are expected to be down 3% to up 5% sequentially in Q3 2015, or in a range of $59.0 million to $63.6 million.
- Non-GAAP gross margin is expected to be approximately 67.9% to 68.5%.
- Stock-based compensation expense is expected to be in the range of $7.3 million to $7.5 million.
- GAAP results are expected to be a net loss in a range between $0.83 million to $2.5 million, or ($0.02) - ($0.06) per diluted share, on 40.2 million estimated basic shares outstanding.
- Non-GAAP net income, excluding stock-based compensation expense and expenses related to the Cortina acquisition, is expected to be in the range of $9.1 million to $10.7 million, or $0.22 - $0.26 per diluted share, on 41.45 million estimated fully diluted shares outstanding.
Quarterly Conference Call Today Inphi plans to hold a conference call at 4:30 p.m. Eastern Time / 1:30 p.m. Pacific Time today with Ford Tamer, president and chief executive officer, and John Edmunds, chief financial officer, to discuss second quarter 2015 results.
The call can be accessed by dialing 844-459-2451; international callers should dial 765-507-2591, participant passcode: 81283349. Please dial-in ten minutes prior to the scheduled conference call time. A live and archived webcast of the call will be available on Inphi's website at http://investors.inphi.com for up to 30 days after the call.
About Inphi Inphi Corporation is a leading provider of high-speed analog and mixed-signal semiconductor solutions for the communications, data center and computing markets. Inphi's end-to-end data transport platform delivers high signal integrity at leading-edge data speeds, addressing performance and bandwidth bottlenecks in networks, from fiber to memory. Inphi's solutions minimize latency in computing environments and enable the rollout of next-generation communications infrastructure. Inphi's solutions provide a vital interface between analog signals and digital information in high-performance systems, such as telecommunications transport systems, enterprise networking equipment, enterprise and data center servers, and storage platforms. To learn more about Inphi, visit www.inphi.com.
Cautionary Note Concerning Forward-Looking Statements Statements in the press release and certain matters to be discussed on the second quarter of 2015 conference call regarding Inphi Corporation, 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 outlook, believe, expect, may, will, provide, could, and should, and the negative of these terms or other similar expressions. These statements include statements relating to: our business outlook and current expectations for the third quarter of 2015, including our revenue, gross margin, operating margin, stock-based compensation expense, operating performance, net income, earnings per share; our ability to participate in an upcoming multi-billion dollar Data Center Interconnect opportunity; expectations of our growth; EPS and cash flow; success of the Cortina integration; expectations of economic trends and macroeconomic conditions; and benefits of using non-GAAP financial measures. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from those anticipated as a result of various factors, including: the Company's ability to sustain profitable operations due to its history of losses and accumulated deficit; dependence on a limited number of customers for a substantial portion of revenue and lack of long-term purchase commitments from our customers; product defects; risk related to intellectual property matters, lengthy sales cycle and competitive selection process; lengthy and expensive qualification processes; ability to develop new or enhanced products in a timely manner; development of the markets that the Company targets; market demand for the Company's products; reliance on third parties to manufacture, assemble and test products; ability to compete; and other risks inherent in fabless semiconductor businesses. In addition, actual results could differ materially due to changes in tax rates or tax benefits available, changes in claims that may or may not be asserted, as well as changes in pending litigation. For a discussion of these and other related risks, please refer to Inphi Corporation's recent SEC filings, including its Annual Report on Form 10-K for the year ended December 31, 2014, which are available on the SEC's website at www.sec.gov. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date thereof. Inphi Corporation undertakes no obligation to update forward-looking statements for any reason, except as required by law, even as new information becomes available or other events occur in the future.
Inphi, the Inphi logo and Think fast are registered trademarks of Inphi Corporation. All other trademarks used herein are the property of their respective owners.
INPHI CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of dollars, except share and per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2015 2014 2015 2014
----------- ----------- ----------- -----------
Revenue $ 60,672 $ 33,922 $ 119,832 $ 65,111
Cost of revenue 23,276 12,296 52,514 23,359
----------- ----------- ----------- -----------
Gross margin 37,396 21,626 67,318 41,752
----------- ----------- ----------- -----------
Operating expenses:
Research and
development 27,270 15,729 49,993 29,468
Sales and marketing 6,618 4,362 13,487 8,312
General and
administrative 5,433 3,234 11,245 6,299
----------- ----------- ----------- -----------
Total operating expenses 39,321 23,325 74,725 44,079
----------- ----------- ----------- -----------
Loss from operations (1,925) (1,699) (7,407) (2,327)
Other income (loss) (95) 172 73 332
----------- ----------- ----------- -----------
Loss before income taxes (2,020) (1,527) (7,334) (1,995)
Provision (benefit) for
income taxes (2,020) (4,161) 2,374 (3,634)
----------- ----------- ----------- -----------
Net income (loss) $ - $ 2,634 $ (9,708) $ 1,639
=========== =========== =========== ===========
Earnings per share:
Basic $ - $ 0.08 $ (0.26) $ 0.05
=========== =========== =========== ===========
Diluted $ - $ 0.08 $ (0.26) $ 0.05
=========== =========== =========== ===========
Weighted-average shares
used in computing
earnings per share:
Basic 38,431,307 31,378,909 38,065,942 31,040,240
Diluted 38,431,307 33,013,652 38,065,942 32,905,244
The following table presents details of stock-based compensation expense included in each functional line item in the consolidated statements of operations above:
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2015 2014 2015 2014
----------- ----------- ----------- -----------
(in thousands of dollars)
(Unaudited)
Cost of revenue $ 381 $ 298 $ 744 $ 549
Research and development 4,252 2,992 8,038 5,381
Sales and marketing 1,194 940 2,219 1,798
General and administrative 1,375 1,170 2,621 2,178
----------- ----------- ----------- -----------
$ 7,202 $ 5,400 $ 13,622 $ 9,906
=========== =========== =========== ===========
INPHI CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
(Unaudited)
June 30, December 31,
2015 2014
----------- -------------
Assets
Current assets:
Cash and cash equivalents $ 49,641 $ 30,366
Short-term investments in marketable
securities 37,727 38,908
Accounts receivable, net 35,491 36,914
Inventories 24,384 26,650
Prepaid expenses and other current assets 5,674 7,661
----------- -------------
Total current assets 152,917 140,499
Property and equipment, net 36,222 35,498
Goodwill 9,405 9,405
Identifiable intangible assets 72,652 80,773
Other noncurrent assets 12,801 12,535
----------- -------------
Total assets $ 283,997 $ 278,710
=========== =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 10,071 $ 7,884
Accrued expenses and other current liabilities 16,428 17,133
Deferred revenue 7,039 7,110
----------- -------------
Total current liabilities 33,538 32,127
Other liabilities 8,165 7,409
----------- -------------
Total liabilities 41,703 39,536
----------- -------------
Stockholders' equity:
Common Stock 39 37
Additional paid-in capital 340,337 327,475
Accumulated deficit (98,898) (89,190)
Accumulated other comprehensive income 816 852
----------- -------------
Total stockholders' equity 242,294 239,174
----------- -------------
Total liabilities and stockholders' equity $ 283,997 $ 278,710
=========== =============
INPHI CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(in thousands of dollars, except share and per share amounts)
To supplement the financial data presented on a GAAP basis, the Company discloses certain non-GAAP financial measures, which exclude stock-based compensation, legal, other expenses, purchase price fair value adjustments related to Cortina acquisition and deferred tax asset valuation allowance. These non-GAAP financial measures are not in accordance with GAAP. These results should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures. The Company believes that its non-GAAP financial information provides useful information to management and investors regarding financial and business trends relating to its financial condition and results of operations because it excludes charges or benefits that management considers to be outside of the Company's core operating results. The Company believes that the non-GAAP measures of gross margin, net income and earnings per share in combination with the Company's financial results calculated in accordance with GAAP, provide investors with additional perspective and a more meaningful understanding of the Company's ongoing operating performance. In addition, the Company's management uses these non-GAAP measures to review and assess the financial performance of the Company, to determine executive officer incentive compensation and to plan and forecast performance in future periods. The Company's non-GAAP measurements are not prepared in accordance with GAAP, and are not an alternative to GAAP financial information, and may be calculated differently than non-GAAP financial information disclosed by other companies.
INPHI CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(in thousands of dollars, except share and per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2015 2014 2015 2014
----------- ----------- ----------- -----------
GAAP revenue to
Non-GAAP revenue
GAAP revenue $ 60,672 $ 33,922 $ 119,832 $ 65,111
Cortina revenue
lost due to
purchase
accounting -(a) - 408(a) -
----------- ----------- ----------- -----------
Non-GAAP revenue $ 60,672 $ 33,922 $ 120,240 $ 65,111
=========== =========== =========== ===========
GAAP gross margin
to Non-GAAP gross
margin
GAAP gross margin $ 37,396 $ 21,626 $ 67,318 $ 41,752
Adjustments to GAAP
gross margin:
Cortina revenue
lost due to
purchase
accounting, net
of cost of goods
sold - - 303(a) -
Stock-based
compensation 381(b) 298(b) 744(b) 549
Acquisition
related expenses - - 39(c) -
Amortization of
inventory step-
up 916(d) - 7,070(d) -
Amortization of
intangibles 2,874(e) - 5,749(e) -
Depreciation on
step-up values
of fixed assets 51(f) - 96(f) -
----------- ----------- ----------- -----------
Non-GAAP gross
margin $ 41,618 $ 21,924 $ 81,319 $ 42,301
=========== =========== =========== ===========
GAAP operating
expenses to Non-
GAAP operating
expenses
GAAP research and
development $ 27,270 $ 15,729 $ 49,993 29,468
Adjustments to GAAP
research and
development:
Stock-based
compensation (4,252)(b) (2,992)(b) (8,038)(b) (5,381)
Impairment of in-
process research
and development (1,750)(g) - (1,750)(g) -
Acquisition
related expenses (223)(c) - (223)(c) -
Depreciation on
step-up values
of fixed assets (51)(f) - (69)(f) -
----------- ----------- ----------- -----------
Non-GAAP research
and development $ 20,994 $ 12,737 $ 39,913 $ 24,087
=========== =========== =========== ===========
GAAP sales and
marketing $ 6,618 $ 4,362 $ 13,487 $ 8,312
Adjustments to GAAP
sales and
marketing:
Stock-based
compensation (1,194)(b) (940)(b) (2,219)(b) (1,798)
Acquisition
related expenses (79)(c) - (149)(c) -
Amortization of
intangibles (204)(e) - (408)(e) -
Depreciation on
step-up values
of fixed assets (23)(f) - (35)(f) -
----------- ----------- ----------- -----------
Non-GAAP sales and
marketing $ 5,118 $ 3,422 $ 10,676 $ 6,514
=========== =========== =========== ===========
GAAP general and
administrative $ 5,433 $ 3,234 $ 11,245 $ 6,299
Adjustments to GAAP
general and
administrative:
Stock-based
compensation (1,375)(b) (1,170)(b) (2,621)(b) (2,178)
Acquisition
related expenses (132)(c) - (588)(c) -
Amortization of
intangibles (46)(e) - (92)(e) -
Depreciation on
step-up values
of fixed assets - - 4(f) -
Loss on disposal
of Cortina
property and
equipment at
fair value (487)(h) - (508)(h) -
----------- ----------- ----------- -----------
Non-GAAP general
and administrative $ 3,393 $ 2,064 $ 7,440 $ 4,121
=========== =========== =========== ===========
Non-GAAP total
operating expenses $ 29,505 $ 18,223 $ 58,029 $ 34,722
=========== =========== =========== ===========
GAAP net income
(loss) to Non-GAAP
net income
GAAP net income
(loss) $ - $ 2,634 $ (9,708) $ 1,639
Adjusting items to
GAAP net income
(loss):
Operating
expenses related
to stock-based
compensation
expense 7,202(b) 5,400(b) 13,622(b) 9,906
Cortina revenue
lost due to
purchase
accounting, net
of cost of goods
sold - - 408(a) -
Amortization of
inventory fair
value step-up 916(d) - 6,965(d) -
Amortization of
intangibles
related to
purchase price 3,124(e) - 6,249(e) -
Impairment of in-
process research
and development 1,750(g) - 1,750(g) -
Depreciation on
step-up values
of fixed assets 125(f) - 196(f) -
Acquisition
related expenses 434(c) - 999(c) -
Loss on disposal
of Cortina
property and
equipment at
fair value 487(h) - 508(h) -
Valuation
allowance and
tax effect of
the adjustments
from GAAP to
non-GAAP (4,181)(i) (5,105)(i) (1,829)(i) (5,717)
----------- ----------- ----------- -----------
Non-GAAP net income $ 9,857 $ 2,929 $ 19,160 $ 5,828
=========== =========== =========== ===========
Shares used in
computing non-GAAP
basic earnings per
share 38,431,307 31,378,909 38,065,942 31,040,240
Shares used in
computing non-GAAP
diluted earnings
per share 41,085,657 33,013,652 40,783,975 32,905,244
Non-GAAP earnings
per share:
Basic $ 0.26 $ 0.09 $ 0.50 $ 0.19
=========== =========== =========== ===========
Diluted $ 0.24 $ 0.09 $ 0.47 $ 0.18
=========== =========== =========== ===========
GAAP gross margin
as a % of revenue 61.6% 63.8% 56.2% 64.1%
Stock-based
compensation 0.6% 0.8% 0.6% 0.9%
Amortization of
inventory fair
value step-up and
intangibles,
Cortina revenue
lost due to
purchase
accounting and
others 6.4% - 10.8% -
----------- ----------- ----------- -----------
Non-GAAP gross
margin as a % of
revenue 68.6% 64.6% 67.6% 65.0%
=========== =========== =========== ===========
(a) Reflects the Cortina revenue lost due to purchase accounting and
corresponding cost of goods sold. The Company includes this item when
it evaluates the continuing operational performance of the Company.
(b) Reflects the stock-based compensation expense recorded relating to
stock based awards. The Company excludes this item when it evaluates
the continuing operational performance of the Company as management
believes this GAAP measure is not indicative of its core operating
performance.
(c) Reflects the legal, transition costs and other expenses related to
Cortina acquisition. The Company excludes this item when it evaluates
the continuing operational performance of the Company as management
believes this GAAP measure is not indicative of its core operating
performance.
(d) Reflects the cost of goods sold fair value amortization of inventory
step-up related to Cortina. The Company excludes these items when it
evaluates the continuing operational performance of the Company as
management believes this GAAP measure is not indicative of its core
operating performance
(e) Reflects the fair value amortization of intangibles related to Cortina
acquisition. The Company excludes these items when it evaluates the
continuing operational performance of the Company as management
believes this GAAP measure is not indicative of its core operating
performance.
(f) Reflects the fair value depreciation of fixed assets related to
Cortina acquisition. The Company excludes these items when it
evaluates the continuing operational performance of the Company as
management believes this GAAP measure is not indicative of its core
operating performance.
(g) Reflects the impairment of in-process research and development from
the Cortina acquisition. The Company excludes these items when it
evaluates the continuing operational performance of the Company as
management believes this GAAP measure is not indicative of its core
operating performance.
(h) Reflects the loss on disposal of certain property and equipment from
the Cortina acquisition. The Company excludes these items when it
evaluates the continuing operational performance of the Company as
management believes this GAAP measure is not indicative of its core
operating performance.
(i) Reflects the change in valuation allowance and delta in interim period
tax allocation from GAAP to non-GAAP related to non-GAAP adjustments.
The Company excludes this item when it evaluates the continuing
operational performance of the Company as management believes this
GAAP measure is not indicative of its core operating performance.
INPHI CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES -THIRD QUARTER 2015 GUIDANCE
(in thousands of dollars, except share and per share amounts)
(Unaudited)
Three Months Ending
September 30, 2015
------------------------
High Low
----------- -----------
Estimated GAAP net loss $ (830) $ (2,490)
Adjusting items to estimated GAAP net loss:
Operating expenses related to stock-based
compensation expense 7,400 7,400
Amortization of inventory fair value step-up 800 800
Amortization of intangibles 3,125 3,125
Other acquisition/transition expenses 925 925
Tax effect of GAAP to non-GAAP adjustments (700) (700)
----------- -----------
Estimated non-GAAP net income $ 10,720 $ 9,060
=========== ===========
Shares used in computing estimated non-GAAP
diluted earnings per share 41,450,000 41,450,000
=========== ===========
Estimated non-GAAP diluted earnings per share $ 0.26 $ 0.22
=========== ===========
Corporate Contact: Kim Markle Inphi 408-217-7329 [email protected] Investor Contact: Deborah Stapleton 650-815-1239 [email protected]
Source: Inphi Corporation
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