SOURCE: Inphi Corporation

Inphi Corporation

February 04, 2013 16:15 ET

Inphi Corporation Announces Fourth Quarter and Full Year 2012 Results

SANTA CLARA, CA--(Marketwire - Feb 4, 2013) - Inphi Corporation (NYSE: IPHI), a leading provider of high-speed analog semiconductor solutions for the communications and computing markets, today announced results for its fourth quarter and full year ended December 31, 2012.

Revenue for the fourth quarter of 2012 was $22.9 million, compared with $17.3 million for the fourth quarter of 2011.

As reported under U.S. generally accepted accounting principles (GAAP), fourth quarter 2012 net loss was $16.6 million, or ($0.58) per share, compared with a GAAP net loss of $0.3 million, or ($0.01) per diluted common share, for the fourth quarter of 2011.

Inphi established a full valuation allowance against its net deferred tax assets, which resulted in a one-time, non-cash charge of $14.6 million in the fourth quarter of 2012. The decision to establish the valuation allowance was based on an assessment made at year-end that considered factors such as passage of new California tax law as well as projected taxable income. The establishment of a valuation allowance does not preclude Inphi from using its loss- carryforward, research and development tax credits and other deferred tax assets in the future.

Gross margin on a GAAP basis for the fourth quarter of 2012 was 64.3% of revenue, compared with 63.8% of revenue for the fourth quarter of 2011.

Inphi reports gross margin, 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 margin, net income, 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 news release. 

Gross margin on a non-GAAP basis for the fourth quarter of 2012 was 65.4% of revenue, compared with 64.3% of revenue for the fourth quarter of 2011.

Non-GAAP net income for the fourth quarter of 2012 was $1.0 million, or $0.03 per diluted share. This compared with non-GAAP net income of $0.2 million, or $0.01 per diluted share, for the fourth quarter of 2011. 

"We delivered on our non-GAAP guidance for Q4, resulting in 16% year-on-year revenue growth in 2012 at 65% gross margin," said Ford Tamer, Inphi CEO. "As already announced by others in our industry, the near term economic climate continues to remain uncertain as we look into Q1. However, we remain optimistic about our growth prospects in the second half of 2013, based on new products going into production, and strong design win momentum in communication equipment, optical modules and next generation servers."

Full Year 2012 Results
For the year ended December 31, 2012, revenue was $91.2 million, compared with $79.3 million for 2011. GAAP net loss for 2012 was $20.7 million, or ($0.73) per diluted share, on approximately 28.4 million diluted weighted average common shares outstanding. This compared with GAAP net income of $1.9 million, or $0.07 per diluted share, on approximately 29.4 million diluted weighted average common shares outstanding for 2011.

Non GAAP net income for the year ended December 31, 2012 was $5.0 million, or approximately $0.17 per diluted share. This compared with non-GAAP net income of $7.3 million, or $0.25 per diluted share, for the year ended December 31, 2011.

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

  • Revenues are expected to range from approximately $20.9 million to $22 million.
  • Non-GAAP gross margin is expected to be approximately 65% - 66%.
  • Stock-based compensation expense is expected to be in the range of $3.9 million to $4.2 million.
  • GAAP results are expected to be a net loss in a range between $3.6 million to $4.5 million, or ($0.12) -($0.15) per diluted share, on approximately 30.1 million diluted shares outstanding.
  • Non-GAAP net income, excluding stock-based compensation expense, is expected to be at breakeven plus or minus $0.3 million, or ($0.01) - $0.01 per diluted share.

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 fourth quarter and full year 2012 results. 

The call can be accessed by dialing 888-396-2298; international callers should dial 617-847-8708, participant passcode: 61785872. Please dial-in ten 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 fourth quarter of 2012 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 first 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, 2011, 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,
 
    2012     2011     2012     2011  
Revenue   $ 22,935     $ 17,310     $ 91,206     $ 79,297  
Cost of revenue     8,194       6,269       32,684       28,687  
Gross margin     14,741       11,041       58,522       50,610  
                                 
Operating expenses:                                
  Research and development     11,030       7,953       40,102       28,565  
  Sales and marketing     3,705       3,095       14,052       12,700  
  General and administrative     2,670       2,152       12,300       9,141  
Total operating expenses     17,405       13,200       66,454       50,406  
Income (loss) from operations     (2,664 )     (2,159 )     (7,932 )     204  
Other income     236       236       914       509  
                                 
Income (loss) before income taxes     (2,428 )     (1,923 )     (7,018 )     713  
Provision (benefit) for income taxes     14,126       (1,642 )     13,673       (1,218 )
Net income (loss)   $ (16,554 )   $ (281 )   $ (20,691 )   $ 1,931  
                                 
                                 
Earnings per share:                                
    Basic   $ (0.58 )   $ (0.01 )   $ (0.73 )   $ 0.07  
    Diluted   $ (0.58 )   $ (0.01 )   $ (0.73 )   $ 0.07  
                                 
Weighted-average shares used in computing earnings per share:                                
    Basic     28,658,836       27,771,622       28,378,680       26,799,237  
    Diluted     28,658,836       27,771,622       28,378,680       29,367,423  
                                 
                                 

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,
    2012   2011   2012   2011
    (in thousands of dollars)
    (Unaudited)
Cost of revenue   $ 197   $ 89   $ 726   $ 315
Research and development     1,465     1,018     5,833     3,214
Sales and marketing     626     672     2,660     2,054
General and administrative     834     479     3,240     1,609
                         
    $ 3,122   $ 2,258   $ 12,459   $ 7,192
                         
                         
                         
INPHI CORPORATION  
CONSOLIDATED BALANCE SHEETS  
(in thousands of dollars)  
(Unaudited)  
             
    December 31,
2012
    December 31, 2011  
Assets                
Current assets:                
  Cash and cash equivalents   $ 30,161     $ 29,696  
  Short-term investments in marketable securities     91,107       89,283  
  Accounts receivable, net     13,717       9,358  
  Inventories     4,894       5,716  
  Other current assets     4,518       6,032  
    Total current assets     144,397       140,085  
                 
Property and equipment, net     13,893       9,566  
Goodwill     5,875       5,875  
Deferred tax charge and other assets     5,909       17,102  
      Total assets   $ 170,074     $ 172,628  
                 
Liabilities and Stockholders' Equity                
                 
Current liabilities:                
  Accounts payable   $ 6,888     $ 5,016  
  Accrued expenses and other current liabilities     5,116       3,745  
  Deferred revenue     1,083       1,929  
                 
    Total current liabilities     13,087       10,690  
                 
Other liabilities     4,022       3,534  
    Total liabilities     17,109       14,224  
                 
Stockholders' equity:                
  Common Stock     29       28  
  Additional paid-in capital     205,269       190,314  
  Accumulated deficit     (53,404 )     (32,713 )
  Accumulated other comprehensive income     1,071       775  
  Total stockholders' equity     152,965       158,404  
                 
Total liabilities and stockholders' equity   $ 170,074     $ 172,628  
                 
                 
                 
INPHI CORPORATION
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME
(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, certain warranty, legal costs and other claims, restructuring charges of its Taiwan subsidiary, accelerated depreciation of certain property and equipment associated with the facility to be abandoned 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; non-GAAP financial information 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; these measurements 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
December 31,
      Year Ended
December 31,
     
  2012       2011       2012       2011      
GAAP net income (loss) $ (16,554 )     $ (281 )     $ (20,691 )     $ 1,931      
Adjusting items to GAAP net income (loss):                                        
  Operating expenses related to stock-based compensation expense, net of tax effect   2,857   (a )   1,316   (a )   9,699   (a )   4,499   (a )
  Adjustment to revenue as a result of warranty claim   -         -         497   (b )   -      
  Legal expense and accrual of provisional costs   -         -         650   (c )   -      
  Taiwan restructuring charges   -         168   (d )   -         1,814   (d )
  Transitional tax effects of moving to an internationally based structure   -         (955 ) (e )   -         (955 ) (e )
  Accelerated depreciation of certain property and equipment associated with the facility to be abandoned, net of tax effect   254  
(f
)             254  
(f
)          
  Valuation allowance   14,594   (g )   -         14,594   (g )   -      
  Delta in interim period tax allocation from GAAP to non-GAAP   (164 ) (h )   -         -         -      
Non-GAAP net income $ 987       $ 248       $ 5,003       $ 7,289      
                                         
Shares used in computing non-GAAP basic earnings per share   28,658,836         27,771,622         28,378,680         26,799,237      
                                         
Shares used in computing non-GAAP diluted earnings per share   29,892,186         29,401,746         29,784,635         29,367,423      
                                         
Non-GAAP earnings per share:                                        
    Basic $ 0.03       $ 0.01       $ 0.18       $ 0.27      
    Diluted $ 0.03       $ 0.01       $ 0.17       $ 0.25      
                                         
GAAP gross margin as a % of revenue   64.3 %       63.8 %       64.2 %       63.8 %    
Stock-based compensation:                                        
  Cost of revenue   0.9 %       0.5 %       0.8 %       0.4 %    
Restructuring charges   -         -         -         1.0 %    
Accelerated depreciation of certain property and equipment associated with the facility to be abandoned   0.2 %       -         -         -      
Adjustment to revenue as a result of warranty claim   -         -         0.3 %       -      
Non-GAAP gross margin as a % of revenue   65.4 %       64.3 %       65.3 %       65.2 %    
                                         
                                         
(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) In 2011, the Company decided to discontinue the sale of acquired legacy products in Taiwan. The restructuring expenses were reflected in the consolidated statements of operations as follows:
   
   
      Three months ended
December 31, 2011
  Year ended
December 31, 2011
  Cost of goods sold   $ -   $ 782
  Operating expenses:            
    Research and development     137     324
    Sales and marketing     -     671
    General and administrative     31     37
  Total   $ 168   $ 1,814
               

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 transitional tax effects of moving to an internationally based structure. 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 accelerated depreciation of certain property and equipment associated with the facility to be abandoned. 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.
(g) Reflects the valuation allowance established against deferred tax assets. 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.
(h) Reflects the 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 -FIRST QUARTER 2013 GUIDANCE  
(in thousands of dollars, except share and per share amounts)  
(Unaudited)  
             
    Three Months Ending
March 31, 2013
 
    High     Low  
Estimated GAAP net income (loss)   $ 300     $ (300 )
Adjusting items to estimated GAAP net income (loss):                
  Operating expenses related to stock-based compensation expense     (3,900 )     (4,200 )
  Tax effect of stock-based compensation expense     -       -  
Estimated non-GAAP net income (loss)   $ (3,600 )   $ (4,500 )
                 
Shares used in computing estimated non-GAAP diluted earnings per share     30,100,000       30,100,000  
                 
Estimated non-GAAP diluted earnings per share   $ (0.12 )   $ (0.15 )

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