Inphi Corporation Announces Third Quarter 2013 Results

Reports 9.5% Sequential Growth and Record Quarterly Revenues

Marketwired

SANTA CLARA, CA--(Marketwired - Oct 29, 2013) - Inphi Corporation (NYSE: IPHI), a leading provider of high-speed mixed signal semiconductor solutions for the communications and computing markets, today announced financial results for its third quarter ended September 30, 2013.

Revenue for the third quarter of 2013 was $26.6 million, marking a quarterly revenue record for Inphi, and was up 9.5% from $24.3 million reported for the second quarter of 2013. This compared to $24.8 million reported for the third quarter of 2012.

Gross margin under U.S. generally accepted accounting principles (GAAP) for the third quarter of 2013 was 63.2% of revenue, compared with 63.5% of revenue for the second quarter of 2013 and 64.7% of revenue for the third quarter of 2012.

GAAP net loss for the third quarter of 2013 was $2.8 million, or ($0.09) per diluted common share, compared with GAAP net loss of $1.5 million, or ($0.05) per diluted common share, for the second quarter of 2013 and GAAP net loss of $1.1 million, or ($0.04) per diluted common share, for the third quarter of 2012.

Inphi reports net income (loss), gross margin, and earnings per share in accordance with GAAP and, additionally, on a non-GAAP basis. A reconciliation of the GAAP to non-GAAP net income, gross margin, 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 press release.

Gross margin on a non-GAAP basis for the third quarter of 2013 was 64.2% of revenue, compared with 64.6% for the second quarter of 2013 and 65.6% of revenue for the third quarter of 2012.

Non-GAAP net income for the third quarter of 2013 was $1.1 million, or $0.04 per diluted common share. This compared with non-GAAP net income of $0.3 million, or $0.01 per diluted common share, for the second quarter of 2013 and non-GAAP net income of $1.5 million, or $0.05 per diluted share, for the third quarter of 2012.

"We are delighted to have just completed the highest revenue quarter in Inphi's history at $26.6M," said Ford Tamer, President and CEO of Inphi Corporation. "We are now operating in a growth oriented mode crossing new thresholds as a company. In Q3, we exceeded our forecast by delivering a 9.5% sequential increase -- and on that higher number, we are again guiding to a sequential increase of 8% for Q4 -- also representing a year over year increase of 26% for Q4. Moreover, we delivered all of this while keeping operating expenses controlled and booking Non GAAP EPS of 4 cents per share in Q3, as per the high end of our guidance."

Nine Months 2013 Results
For the nine months ended September 30, 2013, revenue was $73.5 million, compared with $68.3 million for the nine months ended September 30, 2012. GAAP net loss for the nine months ended September 30, 2013 was $11.9 million, or ($0.41) per diluted share, on approximately 29.3 million diluted weighted average common shares outstanding. This compared with GAAP net loss of $4.1 million, or ($0.15) per diluted share, on approximately 28.3 million diluted weighted average common shares outstanding for the nine months ended September 30, 2012.

Non-GAAP net income for the nine months ended September 30, 2013 was $1.5 million, or $0.05 per diluted weighted average common share outstanding, on approximately 31.0 million diluted weighted average common shares outstanding. This compared with non-GAAP net income of $4.0 million for the nine months ended September 30, 2012, or $0.14 per diluted weighted average common share outstanding.

Business Outlook
The following statements are based on our current expectations for the fourth quarter of 2013. These statements are forward-looking and actual results may differ materially.

  • Inphi expects revenues to be up 5% - 11% sequentially for Q4 2013, resulting in a range of $28 million to $29.6 million.
  • Non-GAAP gross margin is expected to be approximately 64% to 65%.
  • Stock-based compensation expense is expected to be in the range of $4.5 million to $4.7 million.
  • GAAP results are expected to be a net loss in a range between $0.94 million to $1.52 million, or ($0.03) - ($0.05) per diluted share, on 30.2 million estimated basic shares outstanding.
  • Non-GAAP net income, excluding stock-based compensation expense, is expected to be in the range of $1.3 million to $1.76 million, or $0.04 - $0.06 per diluted share, on 32 million estimated fully diluted shares outstanding.

Quarterly Conference Call Today
Inphi plans to hold a conference call at 5:00 p.m. Eastern Time / 2:00 p.m. Pacific Time today with Ford Tamer, President and Chief Executive Officer, and John Edmunds, Chief Financial Officer, to discuss third quarter 2013 results.

The call can be accessed by dialing 866-318-8618; international callers should dial 617-399-5137, participant passcode: 51751108. Please dial-in 10 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, mixed signal semiconductor solutions for the communications 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 third quarter 2013 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 fourth quarter of 2013, including our revenue, gross margin, stock-based compensation expense, operating performance, net income, earnings per share; expectations of our growth; 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, 2012, 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
September 30,
    Nine Months Ended
September 30,
 
    2013     2012     2013     2012  
Revenue   $ 26,611     $ 24,762     $ 73,534     $ 68,271  
Cost of revenue     9,796       8,734       26,981       24,490  
                                 
Gross margin     16,815       16,028       46,553       43,781  
                                 
Operating expenses:                                
  Research and development     12,995       10,500       37,389       29,072  
  Sales and marketing     4,118       3,079       11,771       10,347  
  General and administrative     2,779       3,263       8,776       9,630  
                                 
Total operating expenses     19,892       16,842       57,936       49,049  
                                 
Income (loss) from operations     (3,077 )     (814 )     (11,383 )     (5,268 )
                                 
Other income     210       230       636       678  
                                 
Income (loss) before income taxes     (2,867 )     (584 )     (10,747 )     (4,590 )
Provision (benefit) for income taxes     (107 )     471       1,158       (453 )
                                 
Net income (loss)   $ (2,760 )   $ (1,055 )   $ (11,905 )   $ (4,137 )
                                 
                                 
Earnings per share:                                
    Basic   $ (0.09 )   $ (0.04 )   $ (0.41 )   $ (0.15 )
    Diluted   $ (0.09 )   $ (0.04 )   $ (0.41 )   $ (0.15 )
                                 
Weighted-average shares used in computing earnings per share:                                
    Basic     29,639,650       28,491,789       29,265,619       28,284,612  
    Diluted     29,639,650       28,491,789       29,265,619       28,284,612  
                                 
                                 

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
September 30,
  Nine Months Ended
September 30,
    2013   2012   2013   2012
    (in thousands of dollars)
    (Unaudited)
Cost of revenue   $ 276   $ 210   $ 790   $ 529
Research and development     2,446     1,721     6,675     4,368
Sales and marketing     913     490     2,469     2,034
General and administrative     1,048     988     3,066     2,406
                         
    $ 4,683   $ 3,409   $ 13,000   $ 9,337
                         
                         
   
   
INPHI CORPORATION  
CONSOLIDATED BALANCE SHEETS  
(in thousands of dollars)  
(Unaudited)  
             
    September 30,
2013
    December 31, 2012  
Assets                
Current assets:                
  Cash and cash equivalents   $ 27,845     $ 30,161  
  Short-term investments in marketable securities     91,441       91,107  
  Accounts receivable, net     12,823       13,717  
  Inventories     5,495       4,894  
  Other current assets     3,112       4,518  
    Total current assets     140,716       144,397  
                   
Property and equipment, net     20,534       13,893  
Goodwill     5,875       5,875  
Deferred tax charge and other assets     8,107       5,909  
      Total assets   $ 175,232     $ 170,074  
                 
Liabilities and Stockholders' Equity                
                 
Current liabilities:                
  Accounts payable   $ 5,998     $ 6,888  
  Accrued expenses and other current liabilities     5,999       5,116  
  Deferred revenue     1,580       1,083  
                   
    Total current liabilities     13,577       13,087  
                 
Other liabilities     5,211       4,022  
    Total liabilities     18,788       17,109  
                 
Stockholders' equity:                
  Common Stock     30       29  
  Additional paid-in capital     220,847       205,269  
  Accumulated deficit     (65,309 )     (53,404 )
  Accumulated other comprehensive income     876       1,071  
Total stockholders' equity     156,444       152,965  
                 
Total liabilities and stockholders' equity   $ 175,232     $ 170,074  
                 
                 

INPHI CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(in thousands of dollars, except share and per share amounts)

To supplement the audited financial data presented on a GAAP basis, the Company discloses certain non-GAAP financial measures, which exclude stock-based compensation, abandoned office space costs and certain warranty, legal costs and other claims. 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
September 30,
    Nine Months Ended
September 30,
   
  2013     2012     2013     2012    
GAAP net income (loss) $ (2,760 )   $ (1,055 )   $ (11,905 )   $ (4,137 )  
Adjusting items to GAAP net income (loss):                                
  Operating expenses related to stock-based compensation expense, net of tax effect   2,912   (a)   1,688   (a)   8,070   (a)   5,789   (a)
  Adjustment to revenue as a result of warranty claim   -       -       -       465   (b)
  Legal expense and accrual of provisional costs   -       108   (c)   -       608   (c)
  Abandoned office costs   -       -       91   (d)   -    
  Valuation allowance and delta in interim period tax allocation from GAAP to non-GAAP   977   (e)   766   (e)   5,233   (e)   1,291   (e)
Non-GAAP net income $ 1,129     $ 1,507     $ 1,489     $ 4,016    
                                 
Shares used in computing non-GAAP basic earnings per share   29,639,650       28,491,789       29,265,619       28,284,612    
                                 
Shares used in computing non-GAAP diluted earnings per share   31,443,694       29,844,119       30,980,449       29,733,829    
                                 
Non-GAAP earnings per share:                                
  Basic $ 0.04     $ 0.05     $ 0.05     $ 0.14    
  Diluted $ 0.04     $ 0.05     $ 0.05     $ 0.14    
                                 
GAAP gross margin as a % of revenue   63.2 %     64.7 %     63.3 %     64.1 %  
Stock-based compensation:                                
  Cost of revenue   1.0 %     0.9 %     1.1 %     0.8 %  
Adjustment to revenue as a result of warranty claim   -       -       -       0.4 %  
Non-GAAP gross margin as a % of revenue   64.2 %     65.6 %     64.4 %     65.3 %  
                                 
                                 
(a)   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.
(b)   Reflects reduction in revenue as a result of warranty claim of a customer. 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 legal expense and accrual of provisional costs with regard to employment and other related claims, net of insurance reimbursement. 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 abandoned office space. 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.
(e)   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 - FOURTH QUARTER 2013 GUIDANCE  
(in thousands of dollars, except share and per share amounts)  
(Unaudited)  
             
    Three Months Ending
December 31, 2013
 
    High     Low  
Estimated GAAP net income (loss)   $ (940 )   $ (1,520 )
Adjusting items to estimated GAAP net income (loss):                
  Operating expenses related to stock-based compensation expense     4,500       4,700  
  Tax effect of stock-based compensation expense     (1,800 )     (1,880 )
Estimated non-GAAP net income   $ 1,760     $ 1,300  
                 
Shares used in computing estimated non-GAAP diluted earnings per share     32,000,000       32,000,000  
                 
Estimated non-GAAP diluted earnings per share   $ 0.06     $ 0.04  
                 
                 
Contact:
Corporate
Kim Markle
Inphi
408-217-7329
kmarkle@inphi.com
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