SOURCE: Inphi Corporation

Inphi Corporation

February 03, 2014 16:15 ET

Inphi Corporation Announces Fourth Quarter and Full Year 2013 Results

Reports 9.4% Sequential Growth and Record Quarterly Revenues

SANTA CLARA, CA--(Marketwired - Feb 3, 2014) - Inphi Corporation (NYSE: IPHI), a leading provider of high-speed analog, mixed signal semiconductor solutions for the communications and computing markets, today announced results for its fourth quarter and full year ended December 31, 2013.

Marking a quarterly revenue record for Inphi, revenue for the fourth quarter of 2013 was $29.1 million, up 9.4% sequentially from $26.6 million reported for the third quarter of 2013. This was also up 27% year over year compared with $22.9 million for the fourth quarter of 2012.

Gross margin under U.S. generally accepted accounting principles (GAAP) for the fourth quarter of 2013 was 65.3% of revenue, compared with 64.3% of revenue for the fourth quarter of 2012.

GAAP net loss for the fourth quarter of 2013 was $1.3 million, or ($0.04), compared with a GAAP net loss of $16.6 million, or ($0.58) per diluted common share, for the fourth quarter of 2012.

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 the 2012 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-carry forward, research and development tax credits and other deferred tax assets in the future. 

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 2013 was 66.3% of revenue, compared with 65.4% of revenue for the fourth quarter of 2012.

Non-GAAP net income for the fourth quarter of 2013 was $2.4 million, or $0.08 per diluted share. This compared with non-GAAP net income of $1.0 million, or $0.03 per diluted share, for the fourth quarter of 2012. 

"With a strong showing in the fourth quarter, we closed out a healthy 2013 -- exceeding the $100 million threshold in revenue," said Ford Tamer, President and CEO of Inphi. "We are grateful for the hard work of our entire team -- having delivered robust new products and strong technical support to our customers. We have also steadily improved our operating margin from breakeven for Q1 to more than 10% on a non GAAP basis for Q4. Turning to full-year 2014, we believe we are poised to deliver both accelerating revenue growth and improved operating margins, without compromising our long-term development opportunities."

Full Year 2013 Results
For the year ended December 31, 2013, revenue was $102.7 million, compared with $91.2 million for 2012. GAAP net loss for 2013 was $13.2 million, or ($0.45) per diluted share, on approximately 29.5 million diluted weighted average common shares outstanding. This compared with GAAP net loss of $20.7 million, or ($0.73) per diluted share, on approximately 28.4 million diluted weighted average common shares outstanding for 2012.

Non GAAP net income for the year ended December 31, 2013 was $3.9 million, or approximately $0.12 per diluted share. This compared with non-GAAP net income of $5.0 million, or $0.17 per diluted share, for the year ended December 31, 2012.

Business Outlook
The following statements are based on our current expectations for the first quarter of 2014. These statements are forward looking and actual results may differ materially.

  • Revenues are expected to be up 3% - 10% sequentially for Q1 2014, resulting in a range of $30 million to $32 million.
  • Non-GAAP gross margin is expected to be approximately 65.5% - 66.5%.
  • Stock-based compensation expense is expected to be in the range of $4.4 million to $4.6 million.
  • GAAP results are expected to be a net loss in a range between $0.8 million to breakeven, or ($0.03) - breakeven per diluted share, on approximately 30.8 million basic shares outstanding.
  • Non-GAAP net income, excluding stock-based compensation expense, is expected to be in the range of $2.5 million to $3.4 million, or $0.08 - $0.10 per diluted share, on 32.6 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 fourth quarter and full year 2013 results. 

The call can be accessed by dialing 866-318-8617; international callers should dial 617-399-5136, participant passcode: 91344969. 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 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 first quarter of 2014, 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
December 31,
    Year Ended
December 31,
 
  2013     2012     2013     2012  
Revenue $ 29,130     $ 22,935     $ 102,664     $ 91,206  
Cost of revenue   10,114       8,194       37,095       32,684  
                               
Gross margin   19,016       14,741       65,569       58,522  
                               
Operating expenses:                              
  Research and development   13,127       11,030       50,516       40,102  
  Sales and marketing   3,970       3,705       15,741       14,052  
  General and administrative   2,838       2,670       11,614       12,300  
                               
Total operating expenses   19,935       17,405       77,871       66,454  
                               
Income (loss) from operations   (919 )     (2,664 )     (12,302 )     (7,932 )
                               
Other income   240       236       876       914  
                               
Income (loss) before income taxes   (679 )     (2,428 )     (11,426 )     (7,018 )
Provision (benefit) for income taxes   594       14,126       1,752       13,673  
                               
Net income (loss) $ (1,273 )   $ (16,554 )   $ (13,178 )   $ (20,691 )
                               
                               
Earnings per share:                              
    Basic $ (0.04 )   $ (0.58 )   $ (0.45 )   $ (0.73 )
    Diluted $ (0.04 )   $ (0.58 )   $ (0.45 )   $ (0.73 )
                               
Weighted-average shares used in computing earnings per share:                              
    Basic   30,167,748       28,658,836       29,493,005       28,378,680  
    Diluted   30,167,748       28,658,836       29,493,005       28,378,680  
                               

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,
 
  2013     2012     2013     2012  
  (in thousands of dollars)  
  (Unaudited)  
Cost of revenue $ 296     $ 197     $ 1,086     $ 726  
Research and development   1,911       1,465       8,586       5,833  
Sales and marketing   735       626       3,204       2,660  
General and administrative   1,036       834       4,102       3,240  
                               
  $ 3,978     $ 3,122     $ 16,978     $ 12,459  
                               
   
INPHI CORPORATION  
CONSOLIDATED BALANCE SHEETS  
(in thousands of dollars)  
(Unaudited)  
           
  December 31, 2013     December 31, 2012  
Assets              
Current assets:              
  Cash and cash equivalents $ 31,667     $ 30,161  
  Short-term investments in marketable securities   90,890       91,107  
  Accounts receivable, net   13,073       13,717  
  Inventories   6,767       4,894  
  Other current assets   3,700       4,518  
    Total current assets   146,097       144,397  
               
Property and equipment, net   22,460       13,893  
Goodwill   5,875       5,875  
Deferred tax charge and other assets   7,910       5,909  
      Total assets $ 182,342     $ 170,074  
               
Liabilities and Stockholders' Equity              
               
Current liabilities:              
  Accounts payable $ 7,280     $ 6,888  
  Accrued expenses and other current liabilities   8,118       5,116  
  Deferred revenue   1,686       1,083  
               
    Total current liabilities   17,084       13,087  
               
Other liabilities   5,865       4,022  
    Total liabilities   22,949       17,109  
               
Stockholders' equity:              
  Common Stock   30       29  
  Additional paid-in capital   225,007       205,269  
  Accumulated deficit   (66,582 )     (53,404 )
  Accumulated other comprehensive income   938       1,071  
Total stockholders' equity   159,393       152,965  
               
Total liabilities and stockholders' equity $ 182,342     $ 170,074  
 
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, abandoned office costs, 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,
   
  2013       2012       2013       2012    
GAAP net income (loss) $ (1,273 )     $ (16,554 )      $ (13,178 )      $ (20,691 )  
Adjusting items to GAAP net income (loss):                                      
  Operating expenses related to stock-based compensation expense, net of tax effect   2,908   (a)     2,857   (a)     11,622   (a)     9,699   (a)
  Adjustment to revenue as a result of warranty claim   -         -         -         497   (b)
  Legal expense and accrual of provisional costs   -         -         -         650   (c)
  Abandoned office costs   -         -         100   (d)     -    
  Accelerated depreciation of certain property and equipment associated with the facility to be abandoned, net of tax effect   -         254   (e)     -         254   (e)
  Valuation allowance and delta in interim period tax allocation from GAAP to non-GAAP   777   (f)     14,430   (f)     5,357   (f)     14,594   (f)
Non-GAAP net income $ 2,412       $ 987       3,901       5,003    
                                       
Shares used in computing non-GAAP basic earnings per share   30,167,748         28,658,836         29,493,005         28,378,680    
                                       
Shares used in computing non-GAAP diluted earnings per share   31,978,798         29,892,186         31,291,561         29,784,635    
                                       
Non-GAAP earnings per share:                                      
Basic $ 0.08       $ 0.03        $ 0.13       0.18    
Diluted $ 0.08       $ 0.03        $ 0.12       0.17    
                                       
GAAP gross margin as a % of revenue   65.3 %       64.3 %       63.9 %       64.2 %  
Stock-based compensation:                                      
Cost of revenue   1.0 %       0.9 %       1.0 %       0.8 %  
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   66.3 %       65.4 %       64.9 %       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 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.
(f)   Reflects the valuation allowance established against deferred tax assets, 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 - FIRST QUARTER 2014 GUIDANCE  
(in thousands of dollars, except share and per share amounts)  
(Unaudited)  
           
  Three Months Ending
March 31, 2014
 
  High     Low  
Estimated GAAP net income (loss) $ (50 )   $ (800 )
Adjusting items to estimated GAAP net income (loss):              
  Operating expenses related to stock-based compensation expense   4,600       4,400  
  Tax effect of stock-based compensation expense   (1,150 )     (1,100 )
Estimated non-GAAP net income $ 3,400     $ 2,500  
               
Shares used in computing estimated non-GAAP diluted earnings per share   32,600,000       32,600,000  
               
Estimated non-GAAP diluted earnings per share $ 0.10     $ 0.08  
               

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