PLX Technology, Inc. Reports Third Quarter 2013 Financial Results

Third Consecutive Profitable Quarter, Record Year-to-Date Profit, Record Design Wins

Marketwired

SUNNYVALE, CA--(Marketwired - Oct 21, 2013) - PLX Technology, Inc. (PLX®) (NASDAQ: PLXT), the global leader in PCI Express® (PCIe®) silicon and software connectivity solutions enabling emerging data center architectures, today announced third quarter revenues of $25.7 million and net income of $2.0 million, or $0.04 per share (diluted).

"Our focus on key cost control measures has resulted in three consecutive profitable quarters and record profits year-to-date allowing us to build our cash position and pay down debt," said David Raun, PLX president and CEO. "Record PCI Express design wins dominated by higher ASP Gen3 products signal a healthy pipeline. Market share gains in PCI Express, no significant design win losses over the past two quarters, and production of new higher lane count parts in Q4 highlights additional opportunities for the company."

                                   
Non-GAAP Financial Comparison                                  
(in millions, except per share amounts)                                  
      Quarterly Results       Year to Date  
      Q3 2013     Q2 2013     Q3 2012       2013     2012  
Net revenues   $ 25.7   $ 26.9   $ 26.9     $ 78.8   $ 76.8  
Gross Margin   $ 14.7   $ 15.1   $ 16.1     $ 45.3   $ 45.2  
Operating expense   $ 11.8   $ 11.8   $ 14.6     $ 35.2   $ 42.2  
Operating income from continuing operations   $ 2.9   $ 3.3   $ 1.5     $ 10.1   $ 3.0  
Income from continuing operations   $ 2.8   $ 3.1   $ 0.5     $ 9.7   $ 2.4  
Income per share (diluted) from continuing operations   $ 0.06   $ 0.07   $ 0.01     $ 0.22   $ 0.05  
                                   

The above non-GAAP financial information (other than net revenues, which are presented on a GAAP basis) excludes lawsuit verdict contingency accrual expense, share-based compensation, acquisition, restructuring and impairment charges, amortization of acquired intangibles and discontinued operations. See "Use of Non-GAAP Financial Information" below.

                         
GAAP Financial Comparison  
(in millions, except per share amounts)  
    Quarterly Results     Year to Date  
    Q3 2013   Q2 2013   Q3 2012     2013   2012  
Net revenues   $ 25.7   $ 26.9   $ 26.9     $ 78.8   $ 76.8  
Gross Margin   $ 14.5   $ 15.1   $ 16.1     $ 45.1   $ 45.1  
Operating expense   $ 12.4   $ 13.3   $ 18.4     $ 38.4   $ 49.5  
Operating income (loss) from continuing operations   $ 2.0   $ 1.8   $ (2.3 )   $ 6.7   $ (4.4 )
Income (loss) from continuing operations   $ 2.0   $ 1.7   $ (3.3 )   $ 6.4   $ (5.0 )
Income (loss) per share (diluted) from continuing operations   $ 0.04   $ 0.04   $ (0.07 )   $ 0.14   $ (0.11 )
                                   

"Enterprise storage and networking markets continue to dominate design win activity, and our market-leading technology backed by strong customer relationships position us for continued design win success," said Raun. "We also garnered significant industry interest in the quarter with the company's first public demonstration of PLX's ExpressFabric® technology housed in a data center rack at the Intel Developer Forum (IDF).

"Our overall design activity pipe which measures the potential annual revenue for each program is in the hundreds of millions of dollars and is greater than three times the size that it was four years ago when our main focus was Gen2. All five of our PCI Express end market segments produced greater design wins than last quarter, and we are confident about our growth potential for years to come."

About ExpressFabric

PCIe is well-established as a standard that is already native on nearly all mainstream data center appliances. Facilitated by PLX's next generation PCIe Gen3 fabric-enabling switch devices, ExpressFabric eliminates a large number of expensive "bridging" devices like adapter cards that translate PCIe to InfiniBand, Ethernet or Fibre Channel. This subsequently provides a high-performance, low-latency solution, while offering significantly lower cost and power, with a reduced bill of materials.

ExpressFabric technology is focused on small to medium (20-1000 nodes) high performance clusters that are cost and power sensitive, and the fabric seamlessly works with Ethernet and InfiniBand for larger scale out. PLX developed a market-seeding PCIe-based top-of-rack (ToR) switch box to demonstrate rack-level consolidation and convergence into a single interconnect technology. To help prime this market, PLX has been selling internally developed PCI Express-based server cards that appear to the software like Ethernet Network Interface Cards, and in Q3 we began shipping our PCI Express top of rack switch boxes to early customers.

Business Outlook

The following statements are based on current expectations. The company does not intend to update, confirm or change this guidance until its fourth quarter 2013 earnings release, although it may provide additional details regarding its guidance during today's scheduled conference call.

  • Net revenues for the fourth quarter ending Dec. 31, 2013 are expected to be between $25.0 million and $27.0 million;
  • Non-GAAP gross margins are expected to be approximately 56 percent with GAAP margins at approximately 55 percent;
  • Operating expenses are expected to be approximately $13.8 million. Included in operating expenses are share-based compensation related charges of approximately $0.8 million

Conference Call

PLX management plans to conduct a conference call and webcast today at 2:00 p.m. (PT) to discuss its third quarter results, as well as its fourth quarter 2013 outlook. A live webcast of the conference call will be available through the Investor Relations section of the PLX Website at www.plxtech.com/investors, which also can be heard live via telephone at (877) 474-9506, using access code 30249077. International callers may dial +1 (857) 244-7559. A recorded replay of this webcast will be available on the PLX Website beginning 6:00 p.m. (PT) on Oct. 21, 2013, through 11:59 p.m. (PT) on Oct. 28, 2013. To listen to the replay via telephone, call (888) 286-8010 and use access code 34140578. International callers may dial +1 (617) 801-6888.

Use of Non-GAAP Financial Information

To supplement PLX's financial statements presented on a GAAP basis, PLX has provided non-GAAP financial information, including non-GAAP income (loss), non-GAAP earnings (loss) per share (diluted), non-GAAP operating income (loss) and non-GAAP operating expenses. These non-GAAP results exclude lawsuit verdict contingency accrual expense, share-based compensation, including ESOP expenses, acquisition, restructuring and impairment related charges, amortization of acquired intangibles and discontinued operations. A reconciliation of the adjustments to GAAP results is included in the tables below. Non-GAAP financial information is not meant as a substitute for GAAP results, but is included because management believes such information is useful to PLX investors for informational and comparative purposes. In addition, certain non-GAAP financial information is used internally by management to evaluate and manage the company. The non-GAAP financial information used by PLX may differ from that used by other companies. These non-GAAP measures should be considered in addition to, and not a substitute for, the results prepared in accordance with GAAP.

Safe Harbor Statement

This press release includes statements that qualify as forward-looking statements under the Private Securities Litigation Reform Act of 1995. These include statements about the company's estimated net revenues, estimated operating expenses and estimated gross margins, which are set forth under the caption "Business Outlook," and statements regarding PLX's growth potential, design wins, and expected revenue related to design wins. Such statements involve risks and uncertainties, which may cause actual results to differ materially from those set forth in the statements. Factors that could cause actual results to differ materially include risks and uncertainties, such as reduced demand for products of electronic equipment manufacturers that use the company's products, adverse economic conditions in general or those specifically affecting the company's markets, technical difficulties and delays in the development process, errors in the products, reduced backlog for the company's customers and unexpected expenses. Please refer to the documents filed by the company with the SEC from time to time, including, but not limited to, the Annual Report on Form 10-K for the year ended December 31, 2012, and PLX's quarterly report on Form 10-Q for the quarters ended March 31, 2013 and June 30, 2013, which identifies important risk factors that could cause actual results to differ from those contained in the forward-looking statements. All forward-looking statements are made as of today, and the company assumes no obligation to update such statements.

About PLX

PLX Technology, Inc. (NASDAQ: PLXT), based in Sunnyvale, Calif., USA, is the industry-leading global provider of semiconductor-based PCI Express connectivity solutions primarily targeting enterprise data center markets. The company develops innovative software-enriched silicon that enables product differentiation, reliable interoperability and superior performance. Visit PLX on plxtech.com, LinkedIn, Facebook, Twitter and YouTube.

PLX, the PLX logo, ExpressLane, and ExpressFabric are trademarks of PLX Technology, Inc., which may be registered in some jurisdictions. All other product names that appear in this material are for identification purposes only and are acknowledged to be trademarks or registered trademarks of their respective organizations.

   
   
PLX TECHNOLOGY, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
(in thousands, except per share amounts)  
                               
       Three Months Ended        Nine Months Ended  
    September 30     June 30     September 30     September 30  
    2013     2013     2012     2013     2012  
                               
Net revenues   $ 25,725     $ 26,850     $ 26,866     $ 78,793     $ 76,834  
Cost of revenues     11,265       11,777       10,808       33,735       31,732  
Gross margin     14,460       15,073       16,058       45,058       45,102  
Operating expenses:                                        
  Research and development     6,107       6,480       8,823       18,548       21,362  
  Selling, general and administrative     6,309       6,804       6,654       19,532       22,764  
  Acquisition and restructuring related costs     -       -       2,830       291       5,179  
  Amortization of purchased intangible assets     -       -       64       -       223  
Total operating expenses     12,416       13,284       18,371       38,371       49,528  
Income (loss) from operations     2,044       1,789       (2,313 )     6,687       (4,426 )
Interest income (expense) and other, net     (2 )     (55 )     (60 )     (128 )     (119 )
Income (loss) from continuing operations before provision for income taxes     2,042       1,734       (2,373 )     6,559       (4,545 )
Provision for income taxes     57       61       931       202       466  
Income (loss) from continuing operations, net of tax     1,985       1,673       (3,304 )     6,357       (5,011 )
Loss from discontinued operations, net of tax (1)     -       -       (3,013 )     (57 )     (26,965 )
Net income (loss)   $ 1,985     $ 1,673     $ (6,317 )   $ 6,300     $ (31,976 )
                                         
Basic net income (loss) per share:                                        
  Income (loss) from continuing operations   $ 0.04     $ 0.04     $ (0.07 )   $ 0.14     $ (0.11 )
  Loss from discontinued operations   $ -     $ -     $ (0.07 )   $ -     $ (0.60 )
  Net income (loss)   $ 0.04     $ 0.04     $ (0.14 )   $ 0.14     $ (0.71 )
                                         
Diluted net loss per share:                                        
  Income (loss) from continuing operations   $ 0.04     $ 0.04     $ (0.07 )   $ 0.14     $ (0.11 )
  Loss from discontinued operations   $ -     $ -     $ (0.07 )   $ -     $ (0.60 )
  Net income (loss)   $ 0.04     $ 0.04     $ (0.14 )   $ 0.14     $ (0.71 )
                                         
Shares used to compute per share amounts:                                        
  Basic     45,682       45,611       44,946       45,553       44,824  
  Diluted     46,692       46,299       44,946       46,332       44,824  
 
(1) Loss from discontinued operations includes gain on disposal of $2,097 for the three and nine months ended September 30, 2012
 
 
   
   
PLX TECHNOLOGY, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(Unaudited)  
(in thousands)  
             
    September 30     December 31  
    2013     2012  
ASSETS                
                 
  Cash and investments   $ 17,985     $ 16,711  
  Accounts receivable, net     12,014       10,635  
  Inventories     10,070       10,560  
  Property and equipment, net     10,390       11,267  
  Goodwill     20,461       20,461  
  Other assets     3,806       3,345  
Total assets   $ 74,726     $ 72,979  
                 
LIABILITIES                
                 
  Accounts payable   $ 5,697     $ 10,738  
  Accrued compensation and benefits     3,744       4,493  
  Accrued commissions     500       817  
  Other accrued expenses     3,060       2,259  
  Short term borrowings against line of credit     -       8,000  
  Long term borrowings against line of credit     6,000       -  
Total liabilities     19,001       26,307  
                 
STOCKHOLDERS' EQUITY                
                 
  Common stock, par value     46       45  
  Additional paid-in capital     192,237       189,444  
  Accumulated other comprehensive loss     (267 )     (226 )
  Accumulated deficit     (136,291 )     (142,591 )
Total stockholders' equity     55,725       46,672  
Total liabilities and stockholders' equity   $ 74,726     $ 72,979  
                 
   
   
   
PLX TECHNOLOGY, INC.  
RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL INFORMATION 1  
(unaudited, in thousands, except for per share data)  
(not prepared in accordance with GAAP)  
                               
                               
    Three Months Ended     Nine Months Ended  
      September 30     June 30     September 30     September 30  
      2013     2013     2012     2013     2012  
Income From Continuing Operations Reconciliation                                        
  GAAP Income (Loss)   $ 1,985     $ 1,673     $ (3,304 )   $ 6,357     $ (5,011 )
  Acquisition and restructuring related costs     -       -       2,830       291       5,179  
  Share-based compensation     545       567       914       1,877       2,006  
  Lawsuit verdict contingency accrual     293       903       -       1,196       -  
  Amortization of purchased intangible assets     -       -       64       -       223  
  Non-GAAP Income   $ 2,823     $ 3,143     $ 504     $ 9,721     $ 2,397  
                                         
Income Per Share From Continuing Operations Reconciliation                                        
  GAAP Diluted Income (Loss) Per Share   $ 0.04     $ 0.04     $ (0.07 )   $ 0.14     $ (0.11 )
  Effect of acquisition and restructuring related costs     -       -       0.06       0.01       0.12  
  Effect of share-based compensation     0.01       0.01       0.02       0.04       0.04  
  Effect of lawsuit verdict contingency accrual     0.01       0.02       -       0.03       -  
  Effect of amortization of purchased intangible assets     -       -       -       -       -  
  Non-GAAP Diluted Income Per Share   $ 0.06     $ 0.07     $ 0.01     $ 0.22     $ 0.05  
                                         
Operating Income From Continuing Operations Reconciliation                                        
  GAAP Operating Income (Loss)   $ 2,044     $ 1,789     $ (2,313 )   $ 6,687     $ (4,426 )
  Share-based compensation - COGS     9       14       49       -       98  
  Share-based compensation - R&D     193       191       349       609       719  
  Share-based compensation - SG&A     343       362       516       1,268       1,189  
  Lawsuit verdict contingency accrual     293       903       -       1,196       -  
  Acquisition and restructuring related costs     -       -       2,830       291       5,179  
  Amortization of purchased intangible assets     -       -       64       -       223  
  Non-GAAP Operating Income   $ 2,882     $ 3,259     $ 1,495     $ 10,051     $ 2,982  
                                         
Gross Margin From Continuing Operations Reconciliation                                        
  GAAP Gross Margin   $ 14,460     $ 15,073     $ 16,058     $ 45,058     $ 45,102  
  Share-based compensation - COGS     9       14       49       -       98  
  Lawsuit verdict contingency accrual     235       -       -       235       -  
  Non-GAAP Gross Margin   $ 14,704     $ 15,087     $ 16,107     $ 45,293     $ 45,200  
                                         
Operating Expense From Continuing Operations Reconciliation                                        
  GAAP Operating Expenses   $ 12,416     $ 13,284     $ 18,371     $ 38,371     $ 49,528  
  Share-based compensation - R&D     (193 )     (191 )     (349 )     (609 )     (719 )
  Share-based compensation - SG&A     (343 )     (362 )     (516 )     (1,268 )     (1,189 )
  Lawsuit verdict contingency accrual     (58 )     (903 )     -       (961 )     -  
  Acquisition and restructuring related costs     -       -       (2,830 )     (291 )     (5,179 )
  Amortization of purchased intangible assets     -       -       (64 )     -       (223 )
  Non-GAAP Operating Expenses   $ 11,822     $ 11,828     $ 14,612     $ 35,242     $ 42,218  
                                         
1 Refer to " Use of Non-GAAP Financial Information" in the press release for a discussion of management's use of non-GAAP financial measures.  
   
 
 
PLX TECHNOLOGY, INC.
SUPPLEMENTAL DATA (Unaudited)
         
    Three Months Ended   Nine Months Ended
    September 30   June 30   September 30   September 30
    2013   2013   2012   2013   2012
Net Revenues by Geography                    
Americas   20%   19%   18%   20%   16%
Asia Pacific   71%   71%   72%   70%   71%
Europe   9%   10%   10%   10%   13%
                     
                     
                     
    Three Months Ended   Nine Months Ended
    September 30   June 30   September 30   September 30
    2013   2013   2012   2013   2012
Net Revenues by Type                    
PCI Express Revenue   71%   75%   65%   72%   66%
Connectivity Revenue   29%   25%   35%   28%   34%
                     
                     
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