MACOM Reports Fiscal Second Quarter 2019 Financial Results

     

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share data)

 
Three Months Ended Six Months Ended

March 29,
2019

 

December 28,
2018

 

March 30,
2018

March 29,
2019

 

March 30,
2018

Revenue $ 128,465 $ 150,689 $ 150,414 $ 279,154 $ 281,338
Cost of revenue 71,135   74,064   84,813   145,199   154,784  
Gross profit 57,330   76,625   65,601   133,955   126,554  
Operating expenses:
Research and development 42,361 43,525 41,596 85,885 83,246
Selling, general and administrative 41,998 42,519 39,287 84,518 76,922
Impairment charges 6,575 6,575
Restructuring charges 3,182   4,978   1,539   8,160   6,200  
Total operating expenses 87,541   91,022   88,997   178,563   172,943  
Loss from operations (30,211 ) (14,397 ) (23,396 ) (44,608 ) (46,389 )
Other (expense) income:
Warrant liability (expense) gain (1,607 ) 5,468 17,015 3,862 31,624
Interest expense, net (9,402 ) (8,773 ) (7,970 ) (18,175 ) (15,209 )
Other expense, net (4,440 ) (4,569 ) (4,139 ) (9,010 ) (4,133 )
Total other (expense) income (15,449 ) (7,874 ) 4,906   (23,323 ) 12,282  
 
Loss before income taxes (45,660 ) (22,271 ) (18,490 ) (67,931 ) (34,107 )
Income tax expense (benefit) 544   1,125   (3,024 ) 1,669   (1,671 )
Loss from continuing operations (46,204 ) (23,396 ) (15,466 ) (69,600 ) (32,436 )
Loss from discontinued operations     (18 )   (5,617 )
Net loss $ (46,204 ) $ (23,396 ) $ (15,484 ) $ (69,600 ) $ (38,053 )
 
Net loss per share:
Basic:
Loss from continuing operations $ (0.71 ) $ (0.36 ) $ (0.24 ) $ (1.06 ) $ (0.50 )
Loss from discontinued operations               (0.09 )
Loss per share - basic $ (0.71 ) $ (0.36 ) $ (0.24 ) $ (1.06 ) $ (0.59 )
 
Diluted:
Loss from continuing operations $ (0.71 ) $ (0.44 ) $ (0.50 ) $ (1.12 ) $ (0.98 )
Loss from discontinued operations                 (0.09 )
Loss per share - diluted $ (0.71 ) $ (0.44 ) $ (0.50 ) $ (1.12 ) $ (1.07 )
 
Shares - Basic 65,531   65,277   64,549   65,404   64,437  
Shares - Diluted 65,531   65,444   65,132   65,610   65,120  
 
     

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands)

 

March 29,
2019

September 28,
2018

ASSETS
Current assets:
Cash and cash equivalents $ 92,677 $ 94,676
Short term investments 99,708 98,221
Accounts receivable, net 87,386 97,375
Inventories 119,940 122,837
Income tax receivable 15,765 17,601
Assets held for sale, current 4,840
Prepaids and other current assets 29,783   23,311
Total current assets 445,259 458,861
Property and equipment, net 149,952 149,923
Goodwill and intangible assets, net 786,931 826,861
Deferred income taxes 2,298 2,272
Other investments 22,123 31,094
Other long-term assets 13,383   13,484
TOTAL ASSETS $ 1,419,946   $ 1,482,495
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of lease payable $ 1,194 $ 467
Current portion of long-term debt 6,885 6,885
Accounts payable 35,080 41,951
Accrued liabilities 45,430 49,945
Deferred revenue 215   7,757
Total current liabilities 88,804 107,005
Lease payable, less current portion 29,147 29,023
Long-term debt obligations, less current portion 656,821 658,372
Common stock warrant liability 9,268 13,129
Deferred income taxes 452 389
Other long-term liabilities 18,429   5,902
Total liabilities 802,921 813,820
Stockholders' equity 617,025   668,675
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,419,946   $ 1,482,495
 
 

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)

 
    Six Months Ended

March 29,
2019

 

March 30,
2018

 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (69,600 ) $ (38,053 )
Depreciation and amortization 55,478 54,439
Share based compensation 17,349 15,342
Warrant liability gain (3,862 ) (31,624 )
Acquired inventory step-up amortization 224
Deferred income taxes 46 (573 )
Loss on minority equity investment 8,971 4,085
Restructuring and impairment related charges 4,696 9,143
Other adjustments to reconcile loss to net operating cash 2,408 (2,860 )
Inventories 2,904 (9,240 )
Accounts receivable 9,989 28,992
Change in other operating assets and liabilities (1,541 ) (18,719 )
Net cash provided by operating activities 26,838   11,156  
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net (375 )
Sales, purchases and maturities of investments (504 ) 56,241
Purchases of other investments (5,000 )
Proceeds associated with discontinued operations (263 )
Purchases of property and equipment (22,600 ) (26,580 )
Net cash (used in) provided by investing activities (23,479 ) 24,398  
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from corporate facility financing obligation 1,081
Payments of notes payable and assumed debt (3,960 ) (3,847 )
Proceeds from stock option exercises and employee stock purchases 2,416 3,252
Repurchase of common stock (3,426 ) (3,846 )
Other adjustments (577 )  
Net cash used in financing activities (5,547 ) (3,360 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 189   397  
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,999 ) 32,591
CASH AND CASH EQUIVALENTS — Beginning of period 94,676   130,104  
CASH AND CASH EQUIVALENTS — End of period $ 92,677   $ 162,695  
 
           

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(unaudited and in thousands, except per share data)

                         
Three Months Ended   Six Months Ended
March 29, 2019   December 28, 2018   March 30, 2018   March 29, 2019   March 30, 2018
Amount     Amount     Amount     Amount     Amount
Revenue - GAAP $ 128,465 $ 150,689 $ 150,414 $ 279,154 $ 281,338
Deferred revenue (7,000 )                 (7,000 )    
Adjusted revenue (Non-GAAP) $ 121,465       $ 150,689       $ 150,414       $ 272,154       $ 281,338
         
Three Months Ended   Six Months Ended
March 29, 2019   December 28, 2018   March 30, 2018   March 29, 2019   March 30, 2018
Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue
Gross profit - GAAP $ 57,330   44.6   $ 76,625   50.8   $ 65,601   43.6   $ 133,955   48.0   $ 126,554   45.0
Amortization expense 7,872 6.5 8,053 5.3 8,173 5.4 15,925 5.9 16,320 5.8
Share-based and non-cash compensation 942 0.8 533 0.4 952 0.6 1,475 0.5 1,879 0.7
Impairment related charges (991 ) (0.7 ) 2,568 1.7 (991 ) (0.4 ) 2,568 0.9
Acquisition, integration and restructuring related costs 547 0.4 358 0.2 547 0.2 697 0.2
Deferred revenue (7,000 )   (5.8 )                   (7,000 )   (2.6 )      
Adjusted gross profit (Non-GAAP) $ 59,144     48.7     $ 84,767     56.3     $ 77,652     51.6     $ 143,911     52.9     $ 148,018     52.6
         
Three Months Ended   Six Months Ended
March 29, 2019   December 28, 2018   March 30, 2018   March 29, 2019   March 30, 2018
Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue
Operating expenses - GAAP $ 87,541   68.1   $ 91,022   60.4   $ 88,997   59.2   $ 178,563   64.0   $ 172,943   61.5
Amortization expense (11,883 ) (9.8 ) (12,519 ) (8.3 ) (11,753 ) (7.8 ) (24,402 ) (9.0 ) (22,746 ) (8.1 )
Share-based and non-cash compensation (8,279 ) (6.8 ) (8,530 ) (5.7 ) (3,683 ) (2.4 ) (16,808 ) (6.2 ) (11,972 ) (4.3 )
Impairment and restructuring charges (3,182 ) (2.6 ) (4,978 ) (3.3 ) (8,114 ) (5.4 ) (8,160 ) (3.0 ) (12,775 ) (4.5 )
Litigation costs (16 ) (151 ) (0.1 ) (781 ) (0.5 ) (167 ) (0.1 ) (1,527 ) (0.5 )
Acquisition, integration and restructuring related costs (848 )   (0.7 )   (1,972 )   (1.3 )   (2,753 )   (1.8 )   (2,821 )   (1.0 )   (5,069 )   (1.8 )
Adjusted operating expenses (Non-GAAP) $ 63,333     52.1     $ 62,872     41.7     $ 61,913     41.2     $ 126,205     46.4     $ 118,854     42.2  
         
Three Months Ended   Six Months Ended
March 29, 2019   December 28, 2018   March 30, 2018   March 29, 2019   March 30, 2018
Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue
Loss from operations - GAAP $ (30,211 )   (23.5 )   $ (14,397 )   (9.6 )   $ (23,396 )   (15.6 )   $ (44,608 )   (16.0 )   $ (46,389 )   (16.5 )
Amortization expense 19,756 16.3 20,572 13.7 19,926 13.2 40,327 14.8 39,065 13.9
Share-based and non-cash compensation 9,190 7.6 9,063 6.0 4,635 3.1 18,252 6.7 13,851 4.9
Impairment and restructuring charges 3,182 2.6 3,987 2.6 10,681 7.1 7,169 2.6 15,343 5.5
Litigation costs 16 151 0.1 781 0.5 167 0.1 1,527 0.5
Acquisition, integration and restructuring related costs 879 0.7 2,519 1.7 3,112 2.1 3,398 1.2 5,765 2.0
Deferred revenue (7,000 )   (5.8 )                   (7,000 )   (2.6 )        
Adjusted (loss) income from operations (Non-GAAP) $ (4,188 )   (3.4 )   $ 21,895     14.5     $ 15,739     10.5     $ 17,705     6.5     $ 29,162     10.4  
 
Depreciation expense 7,539     6.2     7,612     5.1     7,622     5.1     15,151     5.6     15,088     5.4  
Adjusted EBITDA (Non-GAAP) $ 3,351     2.8     $ 29,507     19.6     $ 23,361     15.5     $ 32,856     12.1     $ 44,250     15.7  
         
Three Months Ended   Six Months Ended
March 29, 2019   December 28, 2018   March 30, 2018   March 29, 2019   March 30, 2018
Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue
Net loss - GAAP $ (46,204 )   (36.0 )   $ (23,396 )   (15.5 )   $ (15,484 )   (10.3 )   $ (69,600 )   (24.9 )   $ (38,053 )   (13.5 )
Amortization expense 19,756 16.3 20,572 13.7 19,926 13.2 40,327 14.8 39,065 13.9
Share-based and non-cash compensation 9,190 7.6 9,063 6.0 4,635 3.1 18,252 6.7 13,851 4.9
Impairment and restructuring charges 3,182 2.6 3,987 2.6 10,681 7.1 7,169 2.6 15,343 5.5
Warrant liability expense (gain) 1,607 1.3 (5,468 ) (3.6 ) (17,015 ) (11.3 ) (3,862 ) (1.4 ) (31,624 ) (11.2 )
Non-cash interest, net 1,015 0.8 1,015 0.7 1,508 1.0 2,031 0.7 2,536 0.9
Litigation costs 16 151 0.1 781 0.5 167 0.1 1,527 0.5
Acquisition, integration and restructuring related costs 879 0.7 2,519 1.7 3,112 2.1 3,398 1.2 5,765 2.0
Production and product line exits
Discontinued operations 18 5,617 2.0
Equity investment and sale of business losses 4,415 3.6 4,446 3.0 4,085 2.7 8,860 3.3 4,085 1.5
Deferred revenue (7,000 ) (5.8 ) (7,000 ) (2.6 )
Tax effect of non-GAAP adjustments 1,552     1.3     4         (3,762 )   (2.5 )   1,556     0.6     (2,986 )   (1.1 )
Adjusted net (loss) income (Non-GAAP) $ (11,592 )   (9.5 )   $ 12,893     8.6     $ 8,485     5.6     $ 1,298     0.5     $ 15,126     5.4  
         
Three Months Ended   Six Months Ended
March 29, 2019   December 28, 2018   March 30, 2018   March 29, 2019   March 30, 2018

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 $ (46,204 )     $ (23,396 )     (15,484 )     (69,600 )     (38,053 )  
Warrant liability gain         (5,468 )       (17,015 )       (3,862 )       (31,624 )    
Net loss - diluted $ (46,204 )   $ (0.71 )   $ (28,864 )   $ (0.44 )   $ (32,499 )   $ (0.50 )   $ (73,462 )   $ (1.12 )   $ (69,677 )   $ (1.07 )
                                     
Adjusted net (loss) income (Non-GAAP) $ (11,592 )   $ (0.18 )   $ 12,893     $ 0.20     $ 8,485     $ 0.13     $ 1,298     $ 0.02     $ 15,126     $ 0.23  
         
Three Months Ended   Six Months Ended
March 29, 2019   December 28, 2018   March 30, 2018   March 29, 2019   March 30, 2018
Shares       Shares       Shares       Shares       Shares
Diluted shares - GAAP 65,531     65,444     65,132     65,610     65,120
Incremental shares 425         129         478         155         489
Adjusted diluted shares (Non-GAAP) 65,956         65,573         65,610         65,765         65,609
         
Three Months Ended   Six Months Ended
March 29, 2019   December 28, 2018   March 30, 2018   March 29, 2019   March 30, 2018
Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue
Interest expense, net - GAAP $ 9,402   7.3   $ 8,773   5.8   $ 7,970   5.3   $ 18,175   6.5   $ 15,209   5.4
Non-cash interest expense (1,016 )   (0.8 )   (1,015 )   (0.7 )   (1,508 )   (1.0 )   (2,031 )   (0.7 )   (2,536 )   (0.9 )
Adjusted Interest Expense (Non-GAAP) $ 8,386     6.9     $ 7,758     5.1     $ 6,462     4.3     $ 16,144     5.9     $ 12,673     4.5  
         
Three Months Ended   Six Months Ended
March 29, 2019   December 28, 2018   March 30, 2018   March 29, 2019   March 30, 2018
Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue   Amount   % Revenue
Cash flow from operations $ 23,929   18.6   $ 2,909   1.9   $ 10,621   7.1   $ 26,838   9.6   $ 11,156   4.0
Capital expenditures (11,079 ) (9.1 ) (11,521 ) (7.6 ) (12,756 ) (8.5 ) (22,600 ) (8.3 ) (26,580 ) (9.4 )
AppliedMicro transaction-related payments                                 4,015     1.4  
Free cash flow (Non-GAAP) $ 12,850     10.6     $ (8,612 )   (5.7 )   $ (2,135 )   (1.4 )   $ 4,238     1.6     $ (11,409 )   (4.1 )
Free cash flow as a percentage of Adjusted net income 111 %       (67 )%       (25 )%       327 %       (75 )%    

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