SOURCE: Vitesse Semiconductor

Vitesse Semiconductor

May 07, 2013 16:00 ET

Vitesse Reports Second Quarter Fiscal Year 2013 Results

CAMARILLO, CA--(Marketwired - May 7, 2013) - Vitesse Semiconductor Corporation (NASDAQ: VTSS)

  • New product revenue grew 44% sequentially, representing 29% of total revenue
  • Net revenues totaled $24.8 million
  • Operating expenses reduced to $17.3 million
  • Design wins for 2013 up nearly 100% to date compared with the first half of 2012

Vitesse Semiconductor Corporation (NASDAQ: VTSS), a leading provider of advanced IC solutions for Carrier and Enterprise networks, reported its financial results for the second quarter fiscal year 2013, ended March 31, 2013.

"During the quarter, we continued to execute on our strategy to drive new product growth," said Chris Gardner, CEO of Vitesse. "Sequentially, new product revenue increased over 44% and new product bookings were also up. Design wins for the first half of 2013 grew nearly 100% compared to the same period last year, and we are creating a record number of new opportunities. While net revenues were softer than anticipated due to timing of intellectual property revenue, operating expenses decreased as we continue to drive leverage into our financial model."

"Our differentiating technologies are driving success, particularly 4G base stations and backhaul, Ethernet Access Devices, and the cloud networking markets. Altogether, these trends put us on track to achieve our goal of doubling our new product revenue to $30.0 million in fiscal year 2013, and doubling it again in fiscal year 2014."

Second Quarter Fiscal Year 2013 Financial Results Summary

  • Total net revenues were $24.8 million, compared to $25.7 million in the first quarter of fiscal year 2013 and $29.7 million in the second quarter of fiscal year 2012.
    • Product revenues were $24.7 million, compared to $23.9 million in the first quarter of fiscal year 2013 and $27.2 million in the second quarter of fiscal year 2012.
    • The product lines contributed the following as a percentage of product revenue as compared to the first quarter of fiscal year 2013:
      • Carrier networking products: 53.3% versus 58.5%
      • Enterprise networking products: 44.0% versus 40.4%
    • Intellectual property revenues totaled $64,000, compared to $1.8 million in the first quarter of fiscal year 2013 and $2.5 million in the second quarter of fiscal year 2012.
  • Product margins were 54.0%, compared to 54.1% in the first quarter of fiscal year 2013 and 61.0% in the second quarter of fiscal year 2012.
  • Operating expenses decreased to $17.3 million from $18.6 million in the first quarter of fiscal year 2013 and $18.0 million in the second quarter of fiscal year 2012.
  • Operating loss was $3.9 million, compared to operating loss of $3.8 million in the first quarter of fiscal year 2013 and operating income of $1.1 million in the second quarter of fiscal year 2012.
  • Non-GAAP operating loss was $2.8 million, compared to non-GAAP operating loss of $2.5 million in the first quarter of fiscal year 2013 and non-GAAP operating income of $2.3 million in the second quarter of fiscal year 2012.
  • Net loss was $4.8 million, or $0.13 per basic and fully diluted share. This compares to net loss of $5.0 million, or $0.18 per basic and fully diluted share, in the first quarter of fiscal year 2013; and net loss of $6.2 million, which included $5.3 million loss on the embedded derivative, or $0.25 per basic and fully diluted share, in the second quarter of fiscal year 2012.
  • Non-GAAP net loss was $3.8 million, or $0.10 per basic and fully diluted share, compared to non-GAAP net loss of $4.5 million, or $0.16 per basic and fully diluted share, for the first quarter of fiscal year 2013; and non-GAAP net income of $313,000, or $0.01 per basic share and breakeven per fully diluted share, in the second quarter of fiscal year 2012.

Balance Sheet Data at March 31, 2013 as Compared to September 30, 2012

  • Cash balance increased to $36.9 million, compared to $23.9 million.
  • Accounts receivable totaled $8.4 million, compared to $9.4 million.
  • Inventory totaled $12.6 million, compared to $12.1 million.
  • Working capital increased to $31.9 million, compared to $28.7 million.

Financial Outlook
For the third quarter of fiscal year 2013, ending June 30, 2013, Vitesse expects revenues to be in the range of $25.0 million to $27.5 million and product margins are expected to be between 51% and 53%. Operating expenses are expected to be between $18.5 million and $19.5 million.

May 7, 2013 Conference Call Information
A conference call is scheduled for today, May 7, 2013, at 1:30 p.m. Pacific Time / 4:30 p.m. Eastern Time to report financial results for the second quarter fiscal year 2013.

To listen to the conference call via telephone, dial 888.455.2263 (U.S. toll-free) or 719.457.2645 (International) and provide the passcode 9481541. Participants should dial in at least 10 minutes prior to the start of the call. To listen via the Internet, the webcast can be accessed through the investor section of the Vitesse corporate web site at www.vitesse.com.

The playback of the conference call will be available approximately two hours after the call concludes and will be accessible on the Vitesse corporate web site or by calling 877.870.5176 (U.S. toll-free) or 858.384.5517 (International) and entering the passcode 9481541. The audio replay will be available for seven days.

About Vitesse
Vitesse (NASDAQ: VTSS) designs a diverse portfolio of high-performance semiconductor solutions for Carrier and Enterprise networks worldwide. Vitesse products enable the fastest-growing network infrastructure markets including Mobile Access/IP Edge, Cloud Computing and SMB/SME Enterprise Networking. Visit www.vitesse.com or follow us on Twitter @VitesseSemi.

Vitesse is a registered trademark of Vitesse Semiconductor Corporation in the United States and other jurisdictions. All other trademarks or registered trademarks mentioned herein are the property of their respective holders.

VTSS-F

Cautions Regarding Forward Looking Statements
All statements included or incorporated by reference in this release and the related conference call for analysts and investors, other than statements or characterizations of historical fact, are forward-looking statements that are based on our current expectations, estimates and projections about our business and industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," and similar terms, and variations or negatives of these words. Examples of forward-looking statements in this release include the Company's financial outlook for its third fiscal quarter of 2013, projected revenues from design wins and anticipated revenue growth. Forward-looking statements are not guarantees of future performance and the Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors and uncertainties that could affect the Company's forward-looking statements include, among other things: identification of feasible new product initiatives, management of R&D efforts and the resulting successful development of new products and product platforms; acceptance by customers of the Company's products; reliance on key suppliers; rapid technological change in the industries in which the Company operates; and competitive factors, including pricing pressures and the introduction by others of new products with similar or better functionality than the Company's products. These and other risks are more fully described in the Company's filings with the Securities and Exchange Commission, including the Company's most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q, which should be read in conjunction herewith for a further discussion of important factors that could cause actual results to differ materially from those in the forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Measures
A non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. Other companies may use different non-GAAP measures and presentation of results.

We provide non-GAAP measures of non-GAAP income (loss) from operations and non-GAAP net income (loss) as a supplement to financial results based on GAAP income (loss) from operations and GAAP net income (loss). The Company believes that the additional non-GAAP measures are useful to investors for the purpose of financial analysis. We believe the presentation of non-GAAP measures provides investors with additional insight into underlying operating results and prospects for the future by excluding gains, losses and other charges that are considered by management to be outside of the Company's core operating results. Management uses these measures internally to evaluate the Company's in-period operating performance before taking into account these non-operating gains, losses and charges. In addition, the measures are used for planning and forecasting of the Company's performance in future periods.

In deriving non-GAAP income (loss) from operations from GAAP income (loss) from operations, we exclude stock-based compensation charges, amortization of intangible assets, as well as restructuring and impairment charges. In deriving non-GAAP net income (loss) from GAAP net income (loss), we further exclude gain or loss on the embedded derivative and loss on extinguishment of debt. Stock-based compensation charges, amortization of intangible assets, gain or loss on the embedded derivative and loss on extinguishment of debt represent charges that recur in amounts unrelated to the Company's operations. Restructuring and impairment costs relate to strategic initiatives that result in short term increases in costs that end with the fulfillment of the initiative and cost reductions in future periods.

The non-GAAP financial measures we provide have certain limitations because they do not reflect all of the costs associated with the operation of our business as determined in accordance with GAAP. Non-GAAP income (loss) from operations and Non-GAAP net income (loss) are in addition to, and are not a substitute for or superior to, income (loss) from operations and net income (loss), which are prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. A detailed reconciliation of the non-GAAP measures to the most directly comparable GAAP measure is set forth below. Investors are encouraged to review these reconciliations to appropriately incorporate the non-GAAP measures and the limitations of these measures into their analyses. For complete information on stock-based compensation, amortization of intangible assets, restructuring and impairment charges, and the change in the fair value of our embedded derivatives, please see our Form 10-K for the year ended September 30, 2012.

   
VITESSE SEMICONDUCTOR CORPORATION  
UNAUDITED CONSOLIDATED BALANCE SHEETS  
   
             
    March 31,     September 30,  
    2013     2012  
    (in thousands, except par value)  
                 
ASSETS                
Current assets:                
  Cash   $ 36,914     $ 23,891  
  Accounts receivable, net     8,429       9,403  
  Inventory, net     12,566       12,060  
  Prepaid expenses and other current assets     2,964       2,125  
      Total current assets     60,873       47,479  
  Property, plant and equipment, net     3,126       3,832  
  Other intangible assets, net     1,087       1,175  
  Other assets     3,766       4,130  
    $ 68,852     $ 56,616  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT  
Current liabilities:                
  Accounts payable   $ 6,540     $ 5,726  
  Accrued expenses and other current liabilities     12,445       12,188  
  Current portion of debt, net     8,006       -  
  Deferred revenue     2,005       871  
      Total current liabilities     28,996       18,785  
  Other long-term liabilities     442       574  
  Long-term debt, net     8,083       15,852  
  Compound embedded derivative     -       2,899  
  Convertible subordinated debt, net     43,440       42,521  
      Total liabilities     80,961       80,631  
                 
Stockholders' deficit:                
  Preferred stock, $0.01 par value: 10,000 shares authorized; Series B Non Cumulative, Convertible, 135 shares outstanding at March 31, 2013 and September 30, 2012, respectively     1       1  
  Common stock, $0.01 par value: 250,000 shares authorized; 37,455 and 25,812 shares outstanding at March 31, 2013 and September 30, 2012, respectively     375       258  
  Additional paid-in-capital     1,851,644       1,829,976  
  Accumulated deficit     (1,864,129 )     (1,854,250 )
      Total stockholders' deficit     (12,109 )     (24,015 )
    $ 68,852     $ 56,616  
                 
                 
                 
VITESSE SEMICONDUCTOR CORPORATION  
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS  
                         
                         
    Three Months Ended
March 31,
    Six Months Ended
March 31,
 
    2013     2012     2013     2012  
    (in thousands, except per share data)  
Net revenues:                                
  Product revenues   $ 24,689     $ 27,195     $ 48,594     $ 56,137  
  Intellectual property revenues     64       2,542       1,886       3,591  
    Net revenues     24,753       29,737       50,480       59,728  
Costs and expenses:                                
  Cost of product revenues     11,369       10,595       22,344       22,758  
  Engineering, research and development     9,777       9,580       20,281       22,005  
  Selling, general and administrative     7,390       8,383       15,360       15,835  
  Amortization of intangible assets     89       79       186       146  
    Costs and expenses     28,625       28,637       58,171       60,744  
(Loss) income from operations     (3,872 )     1,100       (7,691 )     (1,016 )
Other expense (income) :                                
  Interest expense, net     1,966       1,924       3,936       3,873  
  (Gain) loss on compound embedded derivative     -       5,280       (803 )     1,982  
  Other expense (income), net     5       29       (26 )     41  
    Other expense, net     1,971       7,233       3,107       5,896  
Loss before income tax (benefit) expense     (5,843 )     (6,133 )     (10,798 )     (6,912 )
Income tax (benefit) expense     (996 )     63       (919 )     129  
Net loss   $ (4,847 )   $ (6,196 )   $ (9,879 )   $ (7,041 )
                                 
Net loss per common share - basic and diluted   $ (0.13 )   $ (0.25 )   $ (0.30 )   $ (0.28 )
                                 
Weighted average shares outstanding- basic and diluted     37,215       25,043       32,587       24,776  
                                 
                                 
                                 
VITESSE SEMICONDUCTOR CORPORATION  
UNAUDITED RECONCILIATION OF GAAP NET (LOSS) INCOME TO NON-GAAP NET LOSS  
                         
    Three Months Ended
March 31,
    Six Months Ended
March 31,
 
    2013     2012     2013     2012  
    (in thousands, except per share data)  
                                 
GAAP net loss   $ (4,847 )   $ (6,196 )   $ (9,879 )   $ (7,041 )
                                 
Adjustments:                                
Stock-based compensation charges     1,006       1,146       2,149       2,209  
Amortization of intangible assets     89       79       186       146  
Restructuring and impairment charges     -       4       53       32  
(Gain) loss on compound embedded derivative     -       5,280       (803 )     1,982  
Total GAAP to non-GAAP adjustments     1,095       6,509       1,585       4,369  
Non-GAAP net (loss) income   $ (3,752 )   $ 313     $ (8,294 )   $ (2,672 )
                                 
Net (loss) income per common share                                
Basic:                                
GAAP net (loss) income   $ (0.13 )   $ (0.25 )   $ (0.30 )   $ (0.28 )
Adjustments *     0.03       0.26       0.05       0.18  
Non-GAAP net (loss) income   $ (0.10 )   $ 0.01     $ (0.25 )   $ (0.10 )
                                 
Net (loss) income per common share                                
Diluted:                                
GAAP net (loss) income   $ (0.13 )   $ (0.25 )   $ (0.30 )   $ (0.28 )
Adjustments *     0.03       0.25       0.05       0.18  
Non-GAAP net (loss) income   $ (0.10 )   $ -     $ (0.25 )   $ (0.10 )
                                 
UNAUDITED RECONCILIATION OF GAAP (LOSS) INCOME FROM OPERATIONS TO NON-GAAP (LOSS) INCOME FROM OPERATIONS  
                                 
GAAP (loss) income from operations   $ (3,872 )   $ 1,100     $ (7,691 )   $ (1,016 )
Adjustments:                                
Stock-based compensation charges     1,006       1,146       2,149       2,209  
Amortization of intangible assets     89       79       186       146  
Restructuring and impairment charges     -       4       53       32  
Total GAAP to non-GAAP adjustments     1,095       1,229       2,388       2,387  
Non-GAAP (loss) income from operations   $ (2,777 )   $ 2,329     $ (5,303 )   $ 1,371  
                                 
                                 
* Included in the adjustments are calculations required by the two class method relative to participation rights of our preferred shares.  
   

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