IDT Reports Fiscal 2018 Q2 Financial Results

SAN JOSE, CALIFORNIA--(Marketwired - Oct. 30, 2017) - Integrated Device Technology, Inc. (IDT^®) (NASDAQ:IDTI) today announced results for the fiscal second quarter 2018, ended October 1, 2017.

"The second quarter of fiscal 2018 marked another period of growth driven by broad-based strength across our product lines and end markets," said Greg Waters, President and Chief Executive Officer. "As we move into the second half of our fiscal year, we continue to see accelerating momentum in new product adoption by major customers, and see strength across all of our target market segments."

Recent Business Highlights - Auto and Industrial

• IDT's Auto and Industrial revenue has increased by over 30 percent on an organic basis, versus the year ago quarter. New product releases in sensor signal conditioners, position sensors, and custom products are all delivering growth and strong design in traction.
• IDT commenced sampling of advanced solid state flow sensor modules to its growing portfolio of industry-leading sensor products. The cutting edge solid-state sensor element design eliminates cavities and diaphragms often found in competitive offerings and features a protective silicon-carbide coating, making it the industry's most robust and reliable flow sensor element also compatible with food-grade applications.

Recent Business Highlights - Consumer

• IDT announced that they have surpassed a milestone shipment of 30 million ICs of Qi-based wireless power transmitters utilizing leading-edge, high efficiency, IDT wireless power platforms.
• IDT announced its collaboration with Samsung to deliver fast wireless charging for Samsung's next-level Note device, the new Galaxy Note8, featuring Samsung's most advanced wireless charging capabilities to date.
• IDT announced an extremely small size, low power family of programmable clocks for wearable, medical, and portable applications. The MicroClock™ devices retains the very popular VersaClock™ product family's programming and innovations, and also will enable new applications such as ultraportable cameras, wearables, and health devices.

Recent Business Highlights - Communications

• IDT announced that it is sampling a portfolio of millimeter wave beamformer products for 5G next generation communications systems. These products accelerate IDT's growth in the RF market and consolidate its position as a leading supplier of RF and millimeter wave (mmWave) products for wireless infrastructure

Recent Business Highlights - Computing

• IDT demonstrated its latest 200G VCSEL and DML Drivers, and TIA ICs at ECOC 2017. This newest family of 2- and 4-channel PAM4 CDR/Retimers, 1x and 4x VCSEL and DML Drivers, and TIAs will help address current datacenter challenges, enabling IDT's customers to upgrade hyper-scale datacenter and cloud computing infrastructure from 100G to 200G and beyond.
• IDT introduced new versions of its low-power VersaClock® 3S programmable clock generators. These new devices are ideal for computing systems, digital cameras, IP set-top boxes, home entertainment, audio systems, multi-function printers, IoT gateways, small-business storage, smart devices, medical equipment and automotive infotainment.
• The following highlights the Company's financial performance on both a GAAP and supplemental non-GAAP basis. The Company provides supplemental information regarding its operating performance on a non-GAAP basis that excludes certain gains, losses and charges which occur relatively infrequently and which management considers to be outside our core operating results. Non-GAAP results are not in accordance with GAAP and may not be comparable to non-GAAP information provided by other companies. Non-GAAP information should be considered a supplement to, and not a substitute for, financial statements prepared in accordance with GAAP. A complete reconciliation of GAAP to non-GAAP results is attached to this press release.
• Revenue for the fiscal second quarter of 2018 was $204.4 million. This compared with $196.7 million reported last quarter, and $184.1 million reported in the same period one year ago.
• GAAP net income for the fiscal second quarter of 2018 was $18.7 million, or $0.14 per diluted share, versus GAAP net income of $16.7 million or $0.12 per diluted share last quarter, and GAAP net income of $24.6 million or $0.18 per diluted share in the same period one year ago. Fiscal second quarter GAAP results include $16.1 million in acquisition-related and restructuring charges, $13.0 million in stock-based compensation, $3.7 million in non-cash interest expense, $0.8 million in certain unrealized foreign exchange gain and $2.5 million provision in related tax effects.
• Non-GAAP net income for the fiscal second quarter of 2018 was $48.1 million or $0.35 per diluted share, compared with non-GAAP net income of $45.3 million or $0.33 per diluted share last quarter, and non-GAAP net income of $47.4 million or $0.34 per diluted share reported in the same period one year ago.
• GAAP gross profit for the fiscal second quarter of 2018 was $116.8 million, or 57.1 percent, compared with GAAP gross profit of $110.0 million or 55.9 percent last quarter, and $106.5 million, or 57.9 percent, reported in the same period one year ago. Non-GAAP gross profit for the fiscal second quarter of 2018 was $125.5 million, or 61.4 percent, compared with non-GAAP gross profit of $120.7 million, or 61.4 percent last quarter, and $111.4 million, or 60.5 percent, reported in the same period one year ago.
• GAAP R&D expense for the fiscal second quarter of 2018 was $48.7 million, compared with GAAP R&D expense of $48.4 million last quarter, and $41.8 million reported in the same period one year ago. Non-GAAP R&D expense for the fiscal second quarter of 2018 was $41.3 million, compared with non-GAAP R&D expense of $40.3 million last quarter, and $35.3 million in the same period one year ago.
• GAAP SG&A expense for the fiscal second quarter of 2018 was $44.5 million, compared with GAAP SG&A expense of $41.9 million last quarter, and $37.4 million in the same period one year ago. Non-GAAP SG&A expense for the fiscal second quarter of 2018 was $31.2 million, compared with non-GAAP SG&A expense of $30.8 million last quarter, and $28.2 million in the same period one year ago.

Webcast and Conference Call Information

Investors may listen to the live call at 1:30 p.m. Pacific Time on October 30, 2017 by calling 844-308-4493. The access code is 94503421. Investors may listen to a live or replay webcast of the Company's quarterly financial conference call at http://ir.idt.com/. The live webcast will begin at 1:30 p.m. Pacific Time on October 30, 2017. The webcast replay will be available after 4:30 p.m. Pacific Time on October 30, 2017 for one week.

IDT's next regularly scheduled Quiet Period will begin December 18, 2017, during which time IDT representatives will not comment on IDT's business outlook, financial results or expectations. The Quiet Period will extend until the day when IDT's third quarter fiscal 2018 earnings release is published.

About IDT

Integrated Device Technology, Inc. develops system-level solutions that optimize its customers' applications. IDT's market-leading products in RF, timing, wireless power transfer, serial switching, interfaces and sensing solutions are among the company's broad array of complete mixed-signal solutions for the communications, computing, consumer, automotive and industrial segments. Headquartered in San Jose, Calif., IDT has design, manufacturing, sales facilities and distribution partners throughout the world. IDT stock is traded on the NASDAQ Global Select Stock Market® under the symbol "IDTI." Additional information about IDT is accessible at www.IDT.com. Follow IDT on Facebook, LinkedIn, Twitter, YouTube and Google+.

Forward Looking Statements

Investors are cautioned that forward-looking statements in this release, including but not limited to statements regarding demand for Company products, anticipated trends in Company sales, expenses and profits, involve a number of risks and uncertainties that could cause actual results to differ materially from current expectations. Risks include, but are not limited to, global business and economic conditions, fluctuations in product demand, manufacturing capacity and costs, inventory management, competition, pricing, patent and other intellectual property rights of third parties, timely development and introduction of new products and manufacturing processes, dependence on one or more customers for a significant portion of sales, successful integration of acquired businesses and technology, availability of capital, cash flow and other risk factors detailed in the Company's Securities and Exchange Commission filings. The Company urges investors to review in detail the risks and uncertainties in the Company's Securities and Exchange Commission filings, including but not limited to the Annual Report on Form 10-K for the fiscal year ended April 2, 2017. All forward-looking statements are made as of the date of this release and the Company disclaims any duty to update such statements.

Non-GAAP Reporting

To supplement its consolidated financial results presented in accordance with GAAP, IDT uses non-GAAP financial measures which are adjusted from the most directly comparable GAAP financial measures to exclude certain items, as described in detail below. Management believes that these non-GAAP financial measures reflect an additional and useful way of viewing aspects of the Company's operations that, when viewed in conjunction with IDT's GAAP results, provide a more comprehensive understanding of the various factors and trends affecting the Company's business and operations. It should also be noted that IDT's non-GAAP information may be different from the non-GAAP information provided by other companies. Non-GAAP financial measures used by IDT include:

• Cost of revenues;
• Gross profit;
• Research and development expenses;
• Selling, general and administrative expenses;
• Interest and other income (expense);
• Benefit from (provision for) income taxes;
• Operating income;
• Net income;
• Diluted net income per share; and
• Weighted average shares outstanding - diluted

The Company presents non-GAAP financial measures because the investor community uses non-GAAP results in its analysis and comparison of historical results and projections of the Company's future operating results. These non-GAAP results exclude acquisition-related expense, restructuring and divestiture related costs (gain), share-based compensation expense, results from discontinued operations, and certain other expenses and benefits. Management uses these non-GAAP measures to manage and assess the profitability of the business. These non-GAAP results are also consistent with the way management internally analyzes IDT's financial results.

There are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP financial measures. The non-GAAP financial measures supplement, and should be viewed in conjunction with, GAAP financial measures. Investors should review the reconciliations of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the accompanying press release.

As presented in the "Reconciliation of GAAP to Non-GAAP" tables in the accompanying press release, each of the non-GAAP financial measures excludes one or more of the following items:

Acquisition-related. Acquisition-related charges are not factored into management's evaluation of potential acquisitions or IDT's performance after completion of acquisitions, because they are not related to the Company's core operating performance. Adjustments of these items provide investors with a basis to compare IDT's performance to other companies without the variability caused by purchase accounting. Acquisition-related expenses primarily include:

• Amortization of acquisition-related intangibles, which include acquired intangibles such as purchased technology, patents, customer relationships, trademarks, backlog and non-compete agreements.
• Acquisition-related costs such as legal, accounting and other professional or consulting fees directly related to an acquisition.
• Fair market value adjustment to acquired inventory sold.

Restructuring-related. Restructuring charges primarily relate to changes in IDT's infrastructure in efforts to reduce costs and expenses (gains) associated with strategic divestitures and restructuring in force actions. Restructuring charges (gains) are excluded from non-GAAP financial measures because they are not considered core operating activities. Although IDT has engaged in various restructuring activities in the past, each has been a discrete event based on a unique set of business objectives. As such, management believes that it is appropriate to exclude restructuring charges (gains) from IDT's non-GAAP financial measures as it enhances the ability of investors to compare the Company's period-over-period operating results. Restructuring-related charges (gains) primarily include:

• Severance costs directly related to a restructuring action.
• Facility closure costs consist of ongoing costs associated with the exit of our leased and owned facilities.
• Gain on divestiture consists of gains recognized upon the strategic sale of business units.
• Assets impairments including accelerated depreciation of certain assets no longer in use.

Other adjustments. These items are excluded from non-GAAP financial measures because they are not related to the core operating activities and on-going future operating performance of IDT. Excluding this data allows investors to better compare IDT's period-over-period performance without such expense, which IDT believes may be useful to the investor community.

Other adjustments primarily include:

• Stock based compensation expense.
• Compensation expense (benefit) - deferred compensation, consists of gains and losses on marketable equity securities related to our deferred compensation arrangements.
• Non-cash interest expense, consists of amortization of issuance cost and accretion of discount related to the convertible notes.
• Loss (gain) on deferred compensation plan securities represents the changes in the fair value of the assets in a separate trust that is invested in corporate owned life insurance under our deferred compensation plan.
• Unrealized foreign currency gains and losses resulting from remeasurement of certain non-functional currency account balances.
• Tax effects of non-GAAP adjustments. Non-GAAP tax calculation is based on estimated cash tax expense and reserves. The Company forecasts its annual cash tax liability and allocates the tax to each quarter in proportion to earnings for that period. This approach is designed to enhance the ability of investors to understand the impact of the Company's tax expense on its current operations, provide improved modeling accuracy, and substantially reduce fluctuations caused by GAAP to non-GAAP adjustments, which may not reflect actual cash tax expense.
• Diluted weighted average shares non-GAAP adjustment, for purposes of calculating non-GAAP diluted net income per share, the GAAP diluted weighted average shares outstanding is adjusted to exclude the benefits of stock compensation expense attributable to future services not yet recognized in the financial statements that are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury method.

IDT and the IDT logo are trademarks or registered trademarks of Integrated Device Technology, Inc. All other brands, product names and marks are or may be trademarks or registered trademarks used to identify products or services of their respective owners.

INTEGRATED DEVICE TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
		Three Months Ended									Six Months Ended
		October 1, 2017			July 2, 2017			October 2, 2016			October 1, 2017			October 2, 2016
Revenues		$	204,398		$	196,713		$	184,059		$	401,111		$	376,187
Cost of revenues			87,636			86,675			77,527			174,311			161,306
Gross profit			116,762			110,038			106,532			226,800			214,881
Operating expenses:
	Research and development		48,742			48,449			41,750			97,191			91,398
	Selling, general and administrative		44,485			41,942			37,415			86,427			76,231
Total operating expenses			93,227			90,391			79,165			183,618			167,629
Operating income			23,535			19,647			27,367			43,182			47,252
Interest and other expense, net			(4,886	)		(3,915	)		(2,597	)		(8,801	)		(5,093	)
Income before income taxes			18,649			15,732			24,770			34,381			42,159
Benefit from (provision for) income taxes			31			982			(179	)		1,013			3,379
Net income		$	18,680		$	16,714		$	24,591		$	35,394		$	45,538
Basic net income per share		$	0.14		$	0.13		$	0.18		$	0.27		$	0.34
Diluted net income per share		$	0.14		$	0.12		$	0.18		$	0.26		$	0.33
Weighted average shares:
Basic			133,269			133,302			134,186			133,286			134,059
Diluted			136,059			136,642			137,206			136,434			137,698

INTEGRATED DEVICE TECHNOLOGY, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (a)
(Unaudited)
(In thousands, except per share data)
			Three Months Ended									Six Months Ended
			October 1, 2017			July 2, 2017			October 2, 2016			October 1, 2017			October 2, 2016
GAAP net income			$	18,680		$	16,714		$	24,591		$	35,394		$	45,538
GAAP diluted net income per share			$	0.14		$	0.12		$	0.18		$	0.26		$	0.33
	Acquisition-related:
		Amortization of acquisition-related intangibles		8,963			8,876			5,246			17,839			11,021
		Acquisition-related costs		-			2,225			72			2,225			72
		Amortization of fair market value adjustment to inventory		2,011			4,081			520			6,092			2,915
	Restructuring-related:
		Severance costs		1,637			653			5,002			2,290			16,920
		Facility closure costs		2,542			-			-			2,542			19
		Assets impairment and other		917			1,965			-			2,882			870
	Other:
		Stock-based compensation expense		12,950			11,820			9,181			24,770			19,696
		Non-cash interest expense		3,695			3,892			3,309			7,587			6,577
		Asset impairment and other		-			-			(652	)		-			(652	)
		Certain foreign exchange gain		(754	)		(1,675	)		-			(2,429	)		-
		Compensation expense - deferred compensation plan		469			412			435			881			837
		Gain on deferred compensation plan securities		(443	)		(360	)		(417	)		(803	)		(809	)
		Non-GAAP tax adjustments		(2,518	)		(3,341	)		147			(5,859	)		(4,393	)
Non-GAAP net income			$	48,149		$	45,262		$	47,434		$	93,411		$	98,611
GAAP weighted average shares - diluted				136,059			136,642			137,206			136,434			137,698
	Non-GAAP adjustment			2,780			2,319			2,581			2,465			2,313
Non-GAAP weighted average shares - diluted				138,839			138,961			139,787			138,899			140,011
Non-GAAP diluted net income per share			$	0.35		$	0.33		$	0.34		$	0.67		$	0.70
GAAP gross profit			$	116,762		$	110,038		$	106,532		$	226,800		$	214,881
	Acquisition-related:
		Amortization of acquisition-related intangibles		5,822			5,682			3,108			11,504			6,523
		Amortization of fair market value adjustment to inventory		2,011			4,081			520			6,092			2,915
	Restructuring-related:
		Severance costs		30			196			257			226			2,687
		Assets impairment and other		-			-			-			-			336
	Other:
		Compensation expense - deferred compensation plan		110			97			159			207			307
		Stock-based compensation expense		764			632			802			1,396			1,581
Non-GAAP gross profit			$	125,499		$	120,726		$	111,378		$	246,225		$	229,230
GAAP R&D expenses:			$	48,742		$	48,449		$	41,750		$	97,191		$	91,398
Restructuring-related:
	Severance costs			(318	)		(45	)		(3,074	)		(363	)		(10,408	)
	Assets impairment and other			(835	)		(1,965	)		-			(2,800	)		(107	)
Other:
	Compensation expense - deferred compensation plan			(239	)		(210	)		(170	)		(449	)		(327	)
	Stock-based compensation expense			(6,094	)		(5,963	)		(3,191	)		(12,057	)		(7,499	)
Non-GAAP R&D expenses			$	41,256		$	40,266		$	35,315		$	81,522		$	73,057
GAAP SG&A expenses:			$	44,485		$	41,942		$	37,415		$	86,427		$	76,231
	Acquisition-related:
		Amortization of acquisition-related intangibles		(3,141	)		(3,194	)		(2,138	)		(6,335	)		(4,498	)
		Acquisition-related costs		-			(2,225	)		(72	)		(2,225	)		(72	)
	Restructuring-related:
		Severance costs		(1,289	)		(412	)		(1,671	)		(1,701	)		(3,825	)
		Facility closure costs		(2,542	)		-			-			(2,542	)		(18	)
		Assets impairment and other		(82	)		-			-			(82	)		(428	)
	Other:
		Compensation expense - deferred compensation plan		(120	)		(105	)		(106	)		(225	)		(203	)
		Stock-based compensation expense		(6,092	)		(5,225	)		(5,188	)		(11,317	)		(10,616	)
Non-GAAP SG&A expenses			$	31,219		$	30,781		$	28,240		$	62,000		$	56,571
GAAP interest and other expense, net			$	(4,886	)	$	(3,915	)	$	(2,597	)	$	(8,801	)	$	(5,093	)
		Non-cash interest expense		3,695			3,892			3,309			7,587			6,577
		Gain on deferred compensation plan securities		(443	)		(360	)		(417	)		(803	)		(809	)
		Certain foreign exchange gain		(754	)		(1,675	)		(652	)		(2,429	)		(652	)
Non-GAAP interest and other income (expense), net			$	(2,388	)	$	(2,058	)	$	(357	)	$	(4,446	)	$	23
GAAP benefit from (provision for) income taxes			$	31		$	982		$	(179	)	$	1,013		$	3,379
Non-GAAP tax adjustments				2,518			3,341			(147	)		5,859			4,393
Non-GAAP provision for income taxes			$	(2,487	)	$	(2,359	)	$	(32	)	$	(4,846	)	$	(1,014	)
(a) Refer to the accompanying "Notes to Non-GAAP Financial Measures" for a detailed discussion of management's use of non-GAAP financial measures.

INTEGRATED DEVICE TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)	October 1, 2017		April 2, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	147,897	$	214,554
Short-term investments		222,623		191,492
Accounts receivable, net		105,688		89,312
Inventories		63,692		52,288
Prepayments and other current assets		14,386		13,054
Total current assets		554,286		560,700
Property, plant and equipment, net		84,166		80,961
Goodwill		420,117		306,925
Intangible assets, net		207,355		108,818
Deferred tax assets		87,696		85,831
Other assets		62,408		40,399
TOTAL ASSETS	$	1,416,028	$	1,183,634
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	38,768	$	42,020
Accrued compensation and related expenses		30,630		26,624
Deferred income on shipments to distributors		2,823		1,985
Current portion of bank loan		2,000		-
Other accrued liabilities		28,077		20,205
Total current liabilities		102,298		90,834
Deferred tax liabilities		11,406		13,835
Convertible notes		292,458		285,541
Long-term bank loan, net		191,662		-
Other long-term liabilities		31,147		19,761
Total liabilities		628,971		409,971
Stockholders' equity		787,057		773,663
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,416,028	$	1,183,634