MACOM Reports Fiscal Third Quarter 2018 Financial Results

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.

       

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share data)

 
Three Months Ended Nine Months Ended

June 29,
2018

   

March 30,
2018

   

June 30,
2017

June 29,
2018

   

June 30,
2017

Revenue $ 137,872 $ 150,414 $ 194,555 $ 419,210 $ 532,391
Cost of revenue 89,703   84,813   101,926   244,486   292,403  
Gross profit 48,169   65,601   92,629   174,724   239,988  
Operating expenses:
Research and development 48,240 41,596 38,729 131,487 108,588
Selling, general and administrative 42,471 39,287 46,666 119,393 145,488
Impairment charges 6,575 6,575
Restructuring charges 102   1,539   586   6,302   2,342  
Total operating expenses 90,813   88,997   85,981   263,757   256,418  
(Loss) income from operations (42,644 ) (23,396 ) 6,648   (89,033 ) (16,430 )
Other income (expense):
Warrant liability (expense) gain (6,728 ) 17,015 (9,085 ) 24,895 (16,481 )
Interest expense, net (8,039 ) (7,970 ) (7,178 ) (23,249 ) (21,902 )
Other expense, net (37,281 ) (4,139 ) (1,139 ) (41,413 ) (2,042 )
Total other (expense) income (52,048 ) 4,906   (17,402 ) (39,767 ) (40,425 )
 
Loss before income taxes (94,692 ) (18,490 ) (10,754 ) (128,800 ) (56,855 )
Income tax (benefit) expense (9,482 ) (3,024 ) 3,223   (11,153 ) 93,559  
Loss from continuing operations (85,210 ) (15,466 ) (13,977 ) (117,647 ) (150,414 )
Loss from discontinued operations (220 ) (18 ) (13,700 ) (5,837 ) (8,358 )
Net loss $ (85,430 ) $ (15,484 ) $ (27,677 ) $ (123,484 ) $ (158,772 )
 
Net loss per share:
Basic:
Loss from continuing operations $ (1.31 ) $ (0.24 ) $ (0.22 ) $ (1.82 ) $ (2.53 )
Loss from discontinued operations 0.00   0.00     (0.21 )   (0.09 )   (0.14 )
Loss per share - basic $ (1.32 ) $ (0.24 ) $ (0.43 ) $ (1.91 ) $ (2.67 )
 
Diluted:
Loss from continuing operations $ (1.31 ) $ (0.50 ) $ (0.22 ) $ (2.19 ) $ (2.53 )
Loss from discontinued operations 0.00     0.00     (0.21 )   (0.09 ) (0.14 )
Loss per share - diluted $ (1.32 ) $ (0.50 ) $ (0.43 ) $ (2.28 ) $ (2.67 )
 
Shares - Basic 64,920   64,549   64,019   64,598   59,524  
Shares - Diluted 64,920   65,132   64,019   65,198   59,524  
         

 

 

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited and in thousands)

 

June 29, 2018

September 29,
2017

ASSETS
Current assets:
Cash and cash equivalents $ 85,268 $ 130,104
Short term investments 97,723 84,121
Accounts receivable, net 101,285 136,096
Inventories 122,866 136,074
Income tax receivable 19,945 18,493
Assets held for sale, current 4,971 35,571
Prepaids and other current assets 22,335   22,438
Total current assets 454,393 562,897
Property and equipment, net 139,415 131,019
Goodwill and intangible assets, net 848,277 934,857
Deferred income taxes 1,662 948
Other investments 34,259
Other long-term assets 7,709   7,402
TOTAL ASSETS $ 1,485,715   $ 1,637,123
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of lease payable $ 499 $ 815
Current portion of long-term debt 6,885 6,885
Accounts payable 29,370 47,038
Accrued liabilities 46,446 58,243
Liabilities held for sale 2,144
Deferred revenue 8,279   1,994
Total current liabilities 91,479 117,119
Lease payable, less current portion 26,658 17,275
Long-term debt obligations, less current portion 659,146 661,471
Common stock warrant liability 15,880 40,775
Deferred income taxes 7,791 15,172
Other long-term liabilities 5,724   7,937
Total liabilities 806,678 859,749
Stockholders' equity 679,037   777,374
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,485,715   $ 1,637,123
 

 

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)

 
      Nine Months Ended
June 29, 2018     June 30, 2017
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (123,484 ) $ (158,772 )
Depreciation and amortization 83,695 65,823
Share based compensation 24,095 27,666
Warrant liability (gain) expense (24,895 ) 16,481
Acquired inventory step-up amortization 224 43,985
Loss (gain) on disposition of business 34,046 (17,316 )
Deferred income taxes (8,502 ) 87,608
Loss on minority equity investment 7,241
Impairment related charges 9,143
Other adjustments to reconcile loss to net operating cash (1,758 ) 5,344
Inventories (1,617 ) 7,997
Accounts receivable 34,769 (12,755 )
Change in other operating assets and liabilities (21,741 ) (17,372 )
Net cash provided by operating activities 11,216   48,689  
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net (231,712 )
Sales, purchases and maturities of investments (13,941 ) (58,088 )
Purchases of other investments (5,000 )
Proceeds associated with discontinued operations (263 ) 23,645
Sale of businesses and assets 5,000 215
Purchases of property and equipment (39,443 ) (24,496 )
Net cash used in investing activities (53,647 ) (290,436 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 96,558
Payments of financing costs (505 ) (9,077 )
Proceeds from corporate facility financing obligation 4,000 4,250
Payments of notes payable and assumed debt (5,734 ) (3,954 )
Proceeds from stock option exercises and employee stock purchases 6,944 8,162
Repurchase of common stock (6,673 ) (18,092 )
Other adjustments (478 ) (1,296 )
Net cash used in (provided by) financing activities (2,446 ) 76,551  
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 41   (175 )
NET CHANGE IN CASH AND CASH EQUIVALENTS (44,836 ) (165,371 )
CASH AND CASH EQUIVALENTS — Beginning of period 130,104   332,977  
CASH AND CASH EQUIVALENTS — End of period $ 85,268   $ 167,606  
 
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 Nine Months Ended
June 29, 2018   March 30, 2018   June 30, 2017 June 29, 2018   June 30, 2017
Amount   Amount   Amount   Amount   Amount
Revenue - GAAP $ 137,872 $ 150,414 $ 194,555 $ 419,210 $ 532,391
Deferred revenue 7,000             7,000    
Adjusted revenue (Non-GAAP) $ 144,872     $ 150,414     $ 194,555     $ 426,210     $ 532,391
      Three Months Ended   Nine Months Ended
June 29, 2018   March 30, 2018   June 30, 2017 June 29, 2018   June 30, 2017
Amount   % Revenue Amount   % Revenue Amount   % Revenue Amount   % Revenue Amount   % Revenue
Gross profit - GAAP $ 48,169 34.9 $ 65,601 43.6 $ 92,629 47.6 $ 174,724 41.7 $ 239,988 45.1
Amortization expense 8,593 5.9 8,173 5.4 8,416 4.3 24,913 5.8 21,694 4.1
Share-based and non-cash compensation 1,059 0.7 952 0.6 956 0.5 2,938 0.7 2,716 0.5
Impairment related charges 2,568 1.7 2,568 0.6
Acquisition, integration and restructuring related costs 93 0.1 358 0.2 11,736 6.0 790 0.2 45,075 8.5
Production and product line exits 16,165 11.2 16,165 3.8
Deferred revenue 7,000   4.8           7,000   1.6    
Adjusted gross profit (Non-GAAP) $ 81,079   56.0   $ 77,652   51.6   $ 113,737   58.5   $ 229,098   53.8   $ 309,473   58.1
       
Three Months Ended Nine Months Ended
June 29, 2018   March 30, 2018   June 30, 2017 June 29, 2018   June 30, 2017
Amount   % Revenue Amount   % Revenue Amount   % Revenue Amount   % Revenue Amount   % Revenue
Operating expenses - GAAP 90,813 65.9 88,997 59.2 85,981 44.2 263,757 62.9 256,418 48.2
Amortization expense (13,083 ) (9.0 ) (11,753 ) (7.8 ) (10,832 ) (5.6 ) (35,828 ) (8.4 ) (24,462 ) (4.6 )
Share-based and non-cash compensation (8,657 ) (6.0 ) (3,683 ) (2.4 ) (9,833 ) (5.1 ) (20,630 ) (4.8 ) (30,384 ) (5.7 )
Impairment and restructuring charges (102 ) (0.1 ) (8,114 ) (5.4 ) (586 ) (0.3 ) (12,877 ) (3.0 ) (2,342 ) (0.4 )
Litigation costs (997 ) (0.7 ) (781 ) (0.5 ) (569 ) (0.3 ) (2,525 ) (0.6 ) (1,610 ) (0.3 )
Acquisition, integration and restructuring related costs (1,763 ) (1.2 ) (2,753 ) (1.8 ) (2,645 ) (1.4 ) (6,831 ) (1.6 ) (29,746 ) (5.6 )
Production and product line exits (1,589 ) (1.1 ) (1,589 ) (0.4 )
Other         (719 ) (0.4 )     (905 ) (0.2 )
Adjusted operating expenses (Non-GAAP) 64,622   44.6   61,913   41.2   60,797   31.2   183,477   43.0   166,969   31.4  
       
Three Months Ended Nine Months Ended
June 29, 2018   March 30, 2018   June 30, 2017 June 29, 2018   June 30, 2017
Amount   % Revenue Amount   % Revenue Amount   % Revenue Amount   % Revenue Amount   % Revenue
Loss from operations - GAAP $ (42,644 ) (30.9 ) $ (23,396 ) (15.6 ) $ 6,648 3.4 $ (89,033 ) (21.2 ) $ (16,430 ) (3.1 )
Amortization expense 21,676 15.0 19,926 13.2 19,248 9.9 60,741 14.3 46,157 8.7
Share-based and non-cash compensation 9,716 6.7 4,635 3.1 10,789 5.5 23,567 5.5 33,100 6.2
Impairment and restructuring charges 102 0.1 10,681 7.1 586 0.3 15,444 3.6 2,342 0.4
Litigation costs 997 0.7 781 0.5 569 0.3 2,525 0.6 1,610 0.3
Acquisition, integration and restructuring related costs 1,856 1.3 3,112 2.1 14,380 7.4 7,621 1.8 74,821 14.1
Production and product line exits 17,753 12.3 17,753 4.2
Deferred revenue 7,000 4.8 7,000 1.6
Other         719   0.4       905   0.2  
Adjusted income from operations (Non-GAAP) $ 16,456   11.4   $ 15,739   10.5   $ 52,939   27.2   $ 45,618   10.7   $ 142,505   26.8  
 
Depreciation expense 7,597 5.2 7,622 5.1 6,739 3.5 22,685 5.3 18,447 3.5
Consulting income         1,875   1.0       5,625   1.1  
Adjusted EBITDA (Non-GAAP) $ 24,053   16.6   $ 23,361   15.5   $ 61,553   31.6   $ 68,303   16.0   $ 166,577   31.3  
      Three Months Ended   Nine Months Ended
June 29, 2018   March 30, 2018   June 30, 2017 June 29, 2018   June 30, 2017
Amount   % Revenue Amount   % Revenue Amount   % Revenue Amount   % Revenue Amount   % Revenue
Net loss - GAAP $ (85,430 ) (62.0 ) $ (15,484 ) (10.3 ) $ (27,677 ) (14.2 ) $ (123,484 ) (29.5 ) $ (158,772 ) (29.8 )
Amortization expense 21,676 15.0 19,926 13.2 19,248 9.9 60,741 14.3 46,157 8.7
Share-based and non-cash compensation 9,716 6.7 4,635 3.1 10,789 5.5 23,567 5.5 33,100 6.2
Impairment and restructuring charges 102 0.1 10,681 7.1 586 0.3 15,444 3.6 2,342 0.4
Warrant liability expense (gain) 6,728 4.6 (17,015 ) (11.3 ) 9,085 4.7 (24,895 ) (5.8 ) 16,480 3.1
Non-cash interest, net 1,036 0.7 1,508 1.0 1,122 0.6 3,572 0.8 2,546 0.5
Litigation costs 997 0.7 781 0.5 569 0.3 2,525 0.6 1,610 0.3
Acquisition, integration and restructuring related costs 1,856 1.3 3,112 2.1 14,380 7.4 7,621 1.8 74,821 14.1
Production and product line exits 17,753 12.3 17,753 4.2
Discontinued operations, excluding consulting income 220 0.2 18 15,575 8.0 5,837 1.4 13,983 2.6
Equity investment and sale of business losses 37,202 25.7 4,085 2.7 41,287 9.7
Deferred revenue 7,000 4.8 7,000 1.6
Other 1,856 1.0 2,913 0.5
Tax effect of non-GAAP adjustments (10,232 ) (7.1 ) (3,762 ) (2.5 ) (1,653 ) (0.8 ) (13,218 ) (3.1 ) 79,962   15.0  
Adjusted net income (Non-GAAP) $ 8,624   6.0   $ 8,485   5.6   $ 43,880   22.6   $ 23,750   5.6   $ 115,142   21.6  
       
Three Months Ended Nine Months Ended
June 29, 2018   March 30, 2018   June 30, 2017 June 29, 2018   June 30, 2017

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 - GAAP $ (85,430 ) $ (15,484 ) (27,677 ) (123,484 ) (158,772 )
Warrant liability gain     (17,015 )       (24,895 )      
Net loss - diluted $ (85,430 ) $ (1.32 ) $ (32,499 ) $ (0.50 ) $ (27,677 ) $ (0.43 ) $ (148,379 ) $ (2.28 ) $ (158,772 ) $ (2.67 )
                   
Adjusted (Non-GAAP) $ 8,624   $ 0.13   $ 8,485   $ 0.13   $ 43,880   $ 0.67   $ 23,750   $ 0.36   $ 115,142   $ 1.87  
       
Three Months Ended Nine Months Ended
June 29, 2018   March 30, 2018   June 30, 2017 June 29, 2018   June 30, 2017
Shares       Shares       Shares       Shares       Shares
Diluted shares - GAAP 64,920   65,132   64,019   65,198   59,524
Incremental shares 725         478         1,916         423         1,941
Adjusted diluted shares (Non-GAAP) 65,645         65,610         65,935         65,621         61,465
       
Three Months Ended Nine Months Ended
June 29, 2018   March 30, 2018   June 30, 2017 June 29, 2018   June 30, 2017
Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue
Interest expense, net - GAAP $ 8,039   5.8 $ 7,970   5.3 $ 7,178   3.7 $ 23,249   5.5 $ 21,902   4.1
Non-cash interest expense (1,036 )   (0.7 )   (1,508 )   (1.0 )   (1,122 )   (0.6 )   (3,573 )   (0.8 )   (2,546 )   (0.5 )
Adjusted Interest Expense (Non-GAAP) $ 7,003     4.8     $ 6,462     4.3     $ 6,056     3.1     $ 19,676     4.6     $ 19,356     3.6  
       
Three Months Ended Nine Months Ended
June 29, 2018   March 30, 2018   June 30, 2017 June 29, 2018   June 30, 2017
Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue
Cash flow from operations $ 59   $ 10,621   7.1 $ 27,850   14.3 $ 11,216   2.7 $ 48,689   9.1
Capital expenditures (12,863 ) (8.9 ) (12,756 ) (8.5 ) (8,201 ) (4.2 ) (39,443 ) (9.3 ) (24,496 ) (4.6 )
AppliedMicro transaction related payments                 419     0.2             28,533     5.4  
Free cash flow (Non-GAAP) $ (12,804 )   (8.8 )   $ (2,135 )   (1.4 )   $ 20,068     10.3     $ (28,227 )   (6.6 )   $ 52,726     9.9  
Free cash flow as a percentage of adjusted net income (148 )%       (25 )%       46 %       (119 )%       46 %    

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