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Inphi Corporation Delivers Record Revenue in Q4 2020

·20 min read

Strong Year-Over-Year Growth Driven by Cloud

SAN JOSE, Calif., Feb. 02, 2021 (GLOBE NEWSWIRE) -- Inphi Corporation (NASDAQ: IPHI), a leader in high-speed data movement interconnects, today announced financial results for its fourth quarter and fiscal year ended December 31, 2020. Inphi Corporation will not host a conference call to discuss its results for the fourth quarter of 2020 due to the proposed acquisition of Inphi Corporation by Marvell Technology Group Ltd.

GAAP Results

Revenue in the fourth quarter of 2020 was a record $187.5 million on a U.S. generally accepted accounting principles (GAAP) basis, up 82.3% year-over-year, compared with $102.9 million in the fourth quarter of 2019. The increase was due to higher demand for Cloud and Telecommunications products as well as the inclusion of eSilicon revenues as a result of the acquisition that closed on January 10, 2020.

Gross margin under GAAP in the fourth quarter of 2020 was 54.9%, compared with 59.9% in the fourth quarter of 2019. The decrease was mainly due to amortization of intangibles related to the eSilicon acquisition and product and revenue mix.

GAAP operating loss in the fourth quarter of 2020 was $2.5 million or (1.3%) of revenue, compared to GAAP operating loss in the fourth quarter of 2019 of $8.8 million or (8.6%) of revenue. The decrease in operating loss was mainly due to higher gross profit, partially offset by higher operating expenses.

GAAP net loss for the fourth quarter of 2020 was $12.0 million or ($0.23) per diluted common share, compared with $13.4 million or ($0.29) per diluted common share in the fourth quarter of 2019.

Inphi reports gross profit, operating expenses, operating income (loss), 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 gross profit, operating expenses, operating income (loss), net income (loss), 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.

Non-GAAP Results

Gross margin on a non-GAAP basis in the fourth quarter of 2020 was 64.3%, compared with 69.2% in the fourth quarter of 2019. The decrease was due to product mix, mainly from the sale of eSilicon products that have a lower margin.

Non-GAAP operating income in the fourth quarter of 2020 was $54.6 million or 29.1% of revenue, compared with non-GAAP operating income of $23.4 million or 22.7% of revenue in the fourth quarter of 2019. The increase is primarily due to higher gross profit and higher operating leverage.

Non-GAAP net income in the fourth quarter of 2020 was $50.0 million, or $0.91 per diluted common share. This compares with non-GAAP net income of $23.1 million, or $0.47 per diluted common share in the fourth quarter of 2019.

“We are very pleased to report another record revenue quarter demonstrating 82% growth year-over-year driven by strength from acquisitions as well as across all segments highlighted by Cloud revenue, which grew an impressive 69% year-over-year. Additionally, looking at our annual results in 2020 more than half of our growth was organic, growing 46% year-over-year, clearly outpacing broader industry growth projections,” said Ford Tamer, President and CEO of Inphi Corporation. “We continue to capitalize on our strategy of leading-edge investments in cloud infrastructure and optical interconnect, opening up new market opportunities to drive revenue growth.”

Year Ended 2020 Results

Revenue in the year ended December 31, 2020 was $683.0 million, compared with $365.6 million in the year ended December 31, 2019. GAAP net loss in the year ended December 31, 2020 was $59.7 million, or ($1.20) per diluted share, on approximately 49.9 million diluted weighted average common shares outstanding. This compares with GAAP net loss of $72.9 million, or ($1.61) per diluted share, on approximately 45.2 million diluted weighted average common shares outstanding in the year ended December 31, 2019.

Non-GAAP net income in the year ended December 31, 2020 was $180.3 million, or $3.37 per diluted weighted average common share outstanding, on approximately 53.4 million diluted weighted average common shares outstanding. This compares with non-GAAP net income of $76.6 million in the year ended December 31, 2019, or $1.61 per diluted weighted average common share outstanding, on approximately 47.6 million diluted weighted average common shares outstanding.

About Inphi
Inphi Corporation is a leader in high-speed data movement. We move big data -- fast, throughout the globe, between data centers, and inside data centers. Inphi's expertise in signal integrity results in reliable data delivery, at high speeds, over a variety of distances. As data volumes ramp exponentially due to video streaming, social media, cloud-based services, and wireless infrastructure, the need for speed has never been greater. That's where we come in. Customers rely on Inphi's solutions to develop and build out the Service Provider and Cloud infrastructures, and data centers of tomorrow. To learn more about Inphi, visit www.inphi.com.

Cautionary Note Concerning Forward-Looking Statements
These forward-looking statements may be identified by terms such as outlook, believe, expect, may, will, provide, continue, could, and should, and the negative of these terms or other similar expressions. These statements include statements relating to the Company’s business outlook, the Company’s expectations regarding growth opportunities, success of our growth strategy, strength of the cloud market and optical interconnect, new market opportunities, revenue growth and the 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 target markets; 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 demand, including as a result of the impact of the COVID-19 pandemic, changes in government regulation, 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, 2019, 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
December 31,

Year Ended
December 31,

2020

2019

2020

2019

Revenue

$

187,541

$

102,896

$

682,954

$

365,635

Cost of revenue

84,579

41,297

311,823

152,814

Gross margin

102,962

61,599

371,131

212,821

Operating expenses:

Research and development

70,446

49,876

269,147

183,875

Sales and marketing

16,016

12,378

61,290

47,722

General and administrative

19,011

8,194

57,519

30,672

Total operating expenses

105,473

70,448

387,956

262,269

Loss from operations

(2,511

)

(8,849

)

(16,825

)

(49,448

)

Loss on early extinguishment of convertible debt

(93

)

-

(13,539

)

-

Interest expense, net of other income

(6,451

)

(5,415

)

(24,926

)

(23,067

)

Loss before income taxes

(9,055

)

(14,264

)

(55,290

)

(72,515

)

Provision (benefit) for income taxes

2,972

(856

)

4,454

396

Net loss

$

(12,027

)

$

(13,408

)

$

(59,744

)

$

(72,911

)

Earnings per share:

Basic

$

(0.23

)

$

(0.29

)

$

(1.20

)

$

(1.61

)

Diluted

$

(0.23

)

$

(0.29

)

$

(1.20

)

$

(1.61

)

Weighted-average shares used in computing

earnings per share:

Basic

52,626,086

45,728,736

49,901,181

45,226,717

Diluted

52,626,086

45,728,736

49,901,181

45,226,717

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
December 31,

Year Ended
December 31,

2020

2019

2020

2019

(in thousands of dollars)

(in thousands of dollars)

(Unaudited)

(Unaudited)

Cost of revenue

$

1,826

$

1,776

$

7,859

$

6,208

Research and development

16,773

11,311

62,768

42,265

Sales and marketing

6,670

3,832

22,990

15,561

General and administrative

4,677

3,339

17,630

12,821

$

29,946

$

20,258

$

111,247

$

76,855


INPHI CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
(Unaudited)

December 31,
2020

December 31,
2019

Assets

Current assets:

Cash and cash equivalents

$

103,529

$

282,723

Investments in marketable securities

63,389

140,131

Accounts receivable, net

111,436

60,295

Inventories

111,403

55,013

Prepaid expenses and other current assets

10,137

17,463

Total current assets

399,894

555,625

Property and equipment, net

133,556

79,563

Goodwill

181,688

104,502

Intangible assets, net

231,633

168,290

Right of use asset, net

30,855

33,576

Other assets, net

30,610

34,450

Total assets

$

1,008,236

$

976,006

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

36,387

$

18,771

Accrued expenses and other current liabilities

92,845

51,820

Deferred revenue

3,281

3,719

Convertible debt

58,004

217,467

Total current liabilities

190,517

291,777

Convertible debt

405,689

258,711

Other liabilities

58,320

78,917

Total liabilities

654,526

629,405

Stockholders’ equity:

Common stock

53

46

Additional paid-in capital

654,883

587,862

Accumulated deficit

(302,551

)

(242,807

)

Accumulated other comprehensive income

1,325

1,500

Total stockholders’ equity

353,710

346,601

Total liabilities and stockholders’ equity

$

1,008,236

$

976,006


INPHI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
(Unaudited)

Three Months Ended
December 31,

Year Ended
December 31,

2020

2019

2020

2019

Cash flows from operating activities:

Net loss

$

(12,027

)

$

(13,408

)

$

(59,744

)

$

(72,911

)

Adjustments to reconcile net loss to net cash provided by

operating activities:

Depreciation, amortization and stock-based compensation

64,361

43,594

238,897

173,549

Amortization and accretion related to debt

6,693

7,338

29,277

28,353

Loss on extinguishment of debt

93

-

13,539

-

Deferred income taxes

2,545

(599

)

3,703

337

Net unrealized gain on equity investments

(67

)

(124

)

(2,010

)

(2,201

)

Gain from sale of equity investment

-

(924

)

(4,999

)

(924

)

Loss on termination of software lease contracts

-

-

3,370

-

Other noncash items

403

(187

)

576

(720

)

Changes in assets and liabilities, net of acquisition

(17,359

)

(13,735

)

(67,024

)

(28,539

)

Net cash provided by operating activities

44,642

21,955

155,585

96,944

Cash flows from investing activities:

Purchases of property and equipment

(22,308

)

(12,291

)

(74,823

)

(29,518

)

Sales or maturities of marketable securities, net of purchases

11,348

134,127

76,751

97,248

Purchases of intangible assets

(160

)

-

(788

)

(1,137

)

Acquisitions of business and equity investments, net of cash and proceeds

-

(576

)

(214,731

)

(3,576

)

Net cash provided by (used in) investing activities

(11,120

)

121,260

(213,591

)

63,017

Cash flows from financing activities:

Proceeds from exercise of stock options and ESPP

9,013

709

19,083

8,990

Minimum tax withholding paid on behalf of employees for net share settlement

(31,205

)

(7,898

)

(80,375

)

(33,596

)

Payments of obligations related to purchase of intangible assets and equipment financing

(4,224

)

(4,421

)

(35,493

)

(24,650

)

Proceeds (payments) from issuance of convertible debt, net of cost

(250

)

-

492,493

-

Payment for convertible debt debt repurchases and conversion

(51,234

)

-

(461,236

)

-

Purchase of capped call options

-

-

(55,660

)

-

Net cash used in financing activities

(77,900

)

(11,610

)

(121,188

)

(49,256

)

Net increase (decrease) in cash and cash equivalents

(44,378

)

131,605

(179,194

)

110,705

Cash and cash equivalents at beginning of period

147,907

151,118

282,723

172,018

Cash and cash equivalents at end of period

$

103,529

$

282,723

$

103,529

$

282,723


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, transition costs and other expenses, related to acquisitions, including the potential merger with Marvell, purchase price fair value adjustments related to acquisitions, non-cash interest expense and loss on extinguishment related to convertible debt, unrealized gain or loss on equity investments, lease expense on building not occupied 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, income from operations, 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.


RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME
(in thousands of dollars, except share and per share amounts)
(Unaudited)

Three Months Ended
December 31,

Year Ended
December 31,

2020

2019

2020

2019

GAAP gross margin to Non-GAAP gross margin

GAAP gross margin

$

102,962

$

61,599

$

371,131

$

212,821

Adjustments to GAAP gross margin:

Stock-based compensation

1,826

(a)

1,776

(a)

7,859

(a)

6,208

(a)

Amortization of inventory step-up

87

(b)

-

4,569

(b)

-

Amortization of intangibles

15,460

(c)

7,815

(c)

54,304

(c)

36,987

(c)

Depreciation on step-up values of fixed assets

167

(d)

2

(d)

390

(d)

(25

)

(d)

Non-GAAP gross margin

$

120,502

$

71,192

$

438,253

$

255,991

GAAP operating expenses to Non-GAAP operating expenses

GAAP research and development

$

70,446

$

49,876

$

269,147

$

183,875

Adjustments to GAAP research and development:

Stock-based compensation

(16,773

)

(a)

(11,311

)

(a)

(62,768

)

(a)

(42,265

)

(a)

Depreciation on step-up values of fixed assets

(158

)

(d)

(164

)

(d)

(413

)

(d)

(518

)

(d)

Acquisition related expenses

(580

)

(e)

-

(10,871

)

(e)

-

Non-GAAP research and development

$

52,935

$

38,401

$

195,095

$

141,092

GAAP sales and marketing

$

16,016

$

12,378

$

61,290

$

47,722

Adjustments to GAAP sales and marketing:

Stock-based compensation

(6,670

)

(a)

(3,832

)

(a)

(22,990

)

(a)

(15,561

)

(a)

Amortization of intangibles

(2,432

)

(c)

(2,432

)

(c)

(9,727

)

(c)

(9,725

)

(c)

Depreciation on step-up values of fixed assets

(24

)

(d)

(3

)

(d)

(61

)

(d)

(10

)

(d)

Acquisition related expenses

(50

)

(e)

-

(790

)

(e)

-

Non-GAAP sales and marketing

$

6,840

$

6,111

$

27,722

$

22,426

GAAP general and administrative

$

19,011

$

8,194

$

57,519

$

30,672

Adjustments to GAAP general and administrative:

Stock-based compensation

(4,677

)

(a)

(3,339

)

(a)

(17,630

)

(a)

(12,821

)

(a)

Amortization of intangibles

(69

)

(c)

(69

)

(c)

(278

)

(c)

(417

)

(c)

Depreciation on step-up values of fixed assets

(87

)

(d)

(6

)

(d)

(212

)

(d)

(20

)

(d)

Acquisition related expenses

(8,011

)

(e)

(1,015

)

(e)

(14,643

)

(e)

(1,015

)

(e)

Expense on lease that was not yet occupied

-

(462

)

(f)

(1,709

)

(f)

(462

)

(f)

Loss on claim settlement from ClariPhy acquisition

-

-

-

(400

)

(g)

Non-GAAP general and administrative

$

6,167

$

3,303

$

23,047

$

15,537

Non-GAAP total operating expenses

$

65,942

$

47,815

$

245,864

$

179,055

Non-GAAP income from operations

$

54,560

$

23,377

$

192,389

$

76,936

GAAP net loss to Non-GAAP net income

GAAP net loss

$

(12,027

)

$

(13,408

)

$

(59,744

)

$

(72,911

)

Adjusting items to GAAP net loss:

Operating expenses related to stock-based

compensation expense

29,946

(a)

20,258

(a)

111,247

(a)

76,855

(a)

Amortization of inventory step-up

87

(b)

-

4,569

(b)

-

Amortization of intangibles related to purchase price

17,961

(c)

10,316

(c)

64,309

(c)

47,129

(c)

Depreciation on step-up values of fixed assets

436

(d)

175

(d)

1,076

(d)

523

(d)

Acquisition related expenses

8,641

(e)

1,015

(e)

26,304

(e)

1,015

(e)

Expense on lease that was not yet occupied

-

462

(f)

1,709

(f)

462

(f)

Loss on claim settlement from ClariPhy acquisition

-

-

-

400

(g)

Accretion and amortization expense on convertible debt

6,693

(h)

7,338

(h)

29,277

(h)

28,353

(h)

Loss on extinguishment of convertible debt

93

(i)

-

13,539

(i)

-

Net realized and unrealized loss (gain) on equity investment

(67

)

(j)

(1,049

)

(j)

(7,008

)

(j)

(3,126

)

(j)

Loss on retirement of certain property and equipment from

acquisitions

-

-

444

(k)

7

(k)

Loss on claim settlement from Exactik disposition

-

-

-

296

(l)

Valuation allowance and tax effect of the adjustments above from

GAAP to non-GAAP

(1,797

)

(m)

(2,029

)

(m)

(5,390

)

(m)

(2,432

)

(m)

Non-GAAP net income

$

49,966

$

23,078

$

180,332

$

76,571

Shares used in computing non-GAAP basic earnings per share

52,626,086

45,728,736

49,901,181

45,226,717

Shares used in computing non-GAAP diluted earnings per share

before offsetting shares from call option

56,497,856

51,298,035

54,956,850

48,766,301

Offsetting shares from call option

1,354,504

2,225,969

1,524,512

1,176,787

Shares used in computing non-GAAP diluted earnings per share

55,143,352

49,072,066

53,432,338

47,589,514

Non-GAAP earnings per share:

Basic

$

0.95

$

0.50

$

3.61

$

1.69

Diluted

$

0.91

$

0.47

$

3.37

$

1.61

GAAP gross margin as a % of revenue

54.9

%

59.9

%

54.3

%

58.2

%

Stock-based compensation

1.0

%

1.7

%

1.2

%

1.7

%

Amortization of inventory fair value step-up and intangibles

8.4

%

7.6

%

8.7

%

10.1

%

Non-GAAP gross margin as a % of revenue

64.3

%

69.2

%

64.2

%

70.0

%


(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 the cost of goods sold fair value amortization of inventory step-up related to acquisitions. 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.

(c)

Reflects the fair value amortization of intangibles related to 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.

(d)

Reflects the fair value depreciation of fixed assets related to acquisitions. 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 legal, transition costs and other expenses related to acquisitions, including potential merger with Marvell. The transition costs also include short-term cash retention bonus payments to eSilicon employees. 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.

(f)

Reflects the expense on building lease not yet occupied. 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 loss on settlement of certain customer claims from the ClariPhy 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 accretion and amortization expense on convertible debt. 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 loss on early extinguishment of convertible debt. 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.

(j)

Reflects the unrealized and realized gain or loss on equity investments. 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.

(k)

Reflects the loss on disposal of certain property and equipment from the acquisitions. 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.

(l)

Reflects the loss on settlement of claim from the Exactik business disposal. 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.

(m)

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.


CONTACT: Corporate Contact: Kim Markle 408-217-7329 kmarkle@inphi.com Investor Contact: Vernon P. Essi, Jr. 408-606-6524 investors@inphi.com