Adesto® Technologies Corporation (NASDAQ: IOTS), a leading provider
of innovative application-specific semiconductors and embedded
systems for the IoT, today announced financial results for its
first quarter ended March 31, 2019.
First Quarter and Recent
Highlights:
- Revenue increased 83.7%
year-over-year to $28.1 million, reflecting strong organic growth
which included revenue contribution from the two 2018
acquisitions
- GAAP gross margin was 47.0% and
non-GAAP gross margin was 49.4%, a 230-basis point improvement over
the prior year period
- GAAP operating expenses were $19.2
million and non-GAAP operating expenses were $14.4 million, at the
midpoint of guidance
- Adjusted EBITDA was a positive $12
thousand, representing the 8th consecutive quarter of positive
adjusted EBITDA
- Announced production release of
SmartServer ™ IoT – the industry’s first truly open edge server for
building automation and industrial IoT, and further demonstrated a
robust end-to-end layer of security to the cloud with IBM and
NXP
- Introduced FusionHD memory family
building on the smart feature set of highly successful Fusion
family with even more capabilities, patented low power technology,
security features and more density options.
Commenting on the quarter, Narbeh Derhacobian,
Adesto’s President and CEO, stated, “First quarter revenue exceeded
the high-end of our guidance range as we continued to execute
across our business. With the two 2018 acquisitions integrated, we
have largely achieved our targeted $6-8 million of annual cost
synergies ahead of plan.
“We continued to see an expanded pipeline of
opportunities including some stemming from cross-selling success as
our teams work closely together to expand the available content for
Adesto at our end customers. Further, we are also beginning
to realize the benefits from our improved mix of higher-margin
products, with further potential for expansion as we extrapolate
increased value from our ongoing ASIC design projects as well as
our system and solutions approach to addressing the needs of IoT
deployments in different segments.
“As a result of our strategic actions over the
past year, we are positioned with multiple growth vectors to drive
increased revenue momentum into the second quarter and throughout
the coming year. As such, we continue to expect revenue growth of
more than 30% in the second half of the year compared to the same
period in 2018, with adjusted EBITDA margins in excess of 10% and
positive free cash flow. Overall, I am very pleased with our strong
start to the year and solid execution by our team and believe 2019
will be a record year for Adesto with a greatly enhanced financial
profile and operating model.”
First Quarter 2019 Results
Revenue in the first quarter of 2019 was $28.1
million, compared to $15.3 million in the first quarter of 2018 and
$28.1 million in the previous quarter.
GAAP gross margin in the first quarter was
47.0%, compared to 46.9% in the first quarter of 2018 and 41.1% in
the fourth quarter of 2018. Non-GAAP gross margin for the first
quarter was up 230 basis points to 49.4% compared to 47.1% in the
first quarter of 2018 and up 80 basis points from 48.6% last
quarter.
GAAP operating expenses in the first quarter of
2019 were $19.2 million, compared to $8.1 million in the first
quarter of 2018 and $19.6 million in the prior quarter. On a
non-GAAP basis, operating expenses in the first quarter 2019 were
$14.4 million, compared to $7.4 million in the first quarter of
2018 and of $13.9 million in the prior quarter.
GAAP net loss in the first quarter of 2019 was
$7.1 million, or ($0.24) per share, compared to a net loss of $1.1
million, or ($0.05) per share, in the first quarter of 2018, and a
net loss of $6.9 million, or ($0.23) per share, in the previous
quarter.
On a non-GAAP basis, net loss for the first
quarter of 2019 was $1.6 million, or ($0.05) per share, compared to
a net loss of $0.3 million, or ($0.02) per share, in the first
quarter of 2018 and a net loss of $1.2 million, or ($0.04) per
share, in the previous quarter.
Adjusted EBITDA for the first quarter of 2019
was a positive $12 thousand, compared to a positive $0.3 million in
the first quarter of 2018 and a positive $0.5 million in the fourth
quarter of 2018.
A reconciliation of GAAP results to non-GAAP
results is provided in the financial statement tables following the
text of this press release.
Business OutlookFor the second
quarter of 2019, the Company expects revenue to increase to a range
between $29.0 million and $31.0 million. Non-GAAP gross margin is
expected to be between 48% and 50% and non-GAAP operating expenses
are expected to range between $14.5 million and $15.5 million.
Stock-based compensation expense is expected to be approximately
$1.3 million and amortization of acquisition-related intangible
assets approximately $1.8 million.
Conference Call
InformationAdesto will host a conference call today at
2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss its
first quarter 2019 financial results. Investors and analysts may
join the call by dialing 1-844-419-1786 and
providing confirmation code 8590609. International
callers may join the teleconference by dialing +1-216-562-0473
using the same confirmation code. The call will also be available
as a live and archived webcast in the Investor Relations section of
the Company’s website at http://www.adestotech.com.
A telephone replay of the conference call will
be available approximately two hours after the conference call
until Tuesday, May 14, 2019 at midnight Pacific Time. The replay
dial-in number is 1-855-859-2056. International callers should dial
+1-404-537-3406. The confirmation code is 8590609.
Non-GAAP Financial Information
To supplement our financial results presented in accordance with
generally accepted accounting principles (GAAP), this press release
and the accompanying tables and the related earnings conference
call contain certain non-GAAP financial measures, including
adjusted EBITDA, non-GAAP net income (loss), non-GAAP net income
(loss) per share, non-GAAP gross profit, non-GAAP gross margin and
non-GAAP operating expenses. We believe these non-GAAP financial
measures are useful in evaluating our past financial performance
and future results. Our non-GAAP financial measures should not be
considered in isolation or as a substitute for comparable GAAP
measures and should be read in conjunction with our consolidated
financial statements prepared in accordance with GAAP. Our
management regularly uses our supplemental non-GAAP financial
measures internally to help us evaluate growth trends, establish
budgets, measure the effectiveness of our business strategies and
assess operational efficiencies. These non-GAAP financial measures
are not based on any standardized methodology prescribed by GAAP
and are not necessarily comparable to similar measures presented by
other companies. Our non-GAAP financial measures include
adjustments based on the following items:
- Stock-based compensation expenses:
We have excluded the effect of stock-based compensation expenses
from our non-GAAP financial measures. Although stock-based
compensation is an important part of our employees’ compensation
affecting their performance, we continue to evaluate our business
performance excluding stock-based compensation expenses.
Stock-based compensation expenses will recur in future
periods.
- Amortization of intangible assets.
We have excluded the effect of amortization of intangible assets
from our non-GAAP financial measures. Amortization of intangible
assets expenses are not factored into our evaluation of potential
acquisitions or our performance after completion of acquisitions,
because they are not related to the Company's core operations.
Adjustments of these items provide investors with a basis to
compare our performance to other companies without the variability
caused by purchase accounting. Amortization of acquisition-related
intangible assets includes acquired intangible assets such as
purchased technology, patents, customer relationships, trademarks,
backlog and non-compete agreements.
- Acquisition-related expenses.
We have excluded the effect of acquisition-related expenses from
our non-GAAP financial measures. Acquisition-related expenses are
not factored into our evaluation of potential acquisitions or our
performance after completion of acquisitions, because they are not
related to the Company's core operations. Adjustments of these
items provide investors with a basis to compare our performance to
other companies without the variability caused by purchase
accounting. Acquisition-related expenses primarily include costs
such as legal, accounting and other professional or consulting fees
directly related to an acquisition.
- Inventory step-up related to
acquisition accounting. In connection with our Echelon acquisition,
accounting rules require us to adjust various balance sheet
accounts, including inventory, to fair value at the time of the
acquisition. This expense is part of cost of revenue. We exclude
the amortization expense relating to the step up in fair value of
our inventory to arrive at our non-GAAP measures as we believe it
does not reflect the performance of our ongoing operations.
- Debt amortization costs. Debt
amortization costs are excluded from non-GAAP results as they are
non-cash. Excluding debt amortization costs from non-GAAP measures
provides investors with a basis to compare us against the
performance of other companies without the variability associated
with such items.
- Revaluation of earnout liability.
In connection with our S3 acquisition, we are required to evaluate
and revalue, as appropriate, the projected earn out consideration
payable under the terms of the acquisition. Any changes to the earn
out liability are included in other income (expense). Any changes
in the earn out liability are not factored into our evaluation of
potential acquisitions or our performance after completion of
acquisitions, because they are not related to the Company's core
operations on an ongoing basis. Adjustments of these items provide
investors with a basis to compare our performance to other
companies without the variability caused by such items.
- Impairment and other charges.
Impairment and other charges consist primarily of impairment of
inventory, estimated warranty reserves and severance costs. These
costs are generally infrequent and, as a result, the company
excludes such costs from its internal operating forecasts and
models when evaluating its ongoing operations.
Our non-GAAP financial measures are described as
follows:
- Non-GAAP net income (loss) and
non-GAAP net income (loss) per share. Non-GAAP net income (loss) is
GAAP net loss as reported on our condensed consolidated statements
of operations, excluding the impact of stock-based compensation
expense, inventory step up related to acquisition accounting,
amortization of intangible assets, acquisition-related expenses,
impairment and other charges, revaluation of earn-out liability and
debt amortization costs. Non-GAAP net income (loss) per share is
non-GAAP net income (loss) divided by weighted average shares
outstanding and, if dilutive, incremental shares based upon the
conversion of outstanding stock options, restricted stock units and
warrants.
- Non-GAAP gross profit.
Non-GAAP gross profit is GAAP gross profit as reported in our
condensed, consolidated statements of operations, excluding the
impact of stock-based compensation expense and inventory step-up
related to acquisition accounting.
- Non-GAAP operating expense.
Non-GAAP operating expenses are GAAP operating expenses as reported
in our condensed consolidated statements of operations, excluding
the impact of stock-based compensation expense, amortization of
intangible assets, acquisition-related expenses and impairment and
other charges.
- Adjusted EBITDA is GAAP net loss as
reported on our condensed consolidated statements of operations,
excluding the impact of the same items excluded from the
calculation of non-GAAP net income (loss) as well as interest
expense, depreciation and amortization, and our provision for
income taxes.
For reconciliations of these non-GAAP financial
measures to the most directly comparable GAAP financial measures,
please see the section of the accompanying tables titled,
“Reconciliation of GAAP to Non-GAAP Financial Information.”
About Adesto TechnologiesAdesto
Technologies Corporation (NASDAQ: IOTS) is a leading provider of
innovative application-specific semiconductors and embedded systems
for the IoT. The company’s technology is used by more than 5,000
customers worldwide who are creating differentiated solutions
across industrial, consumer, medical and communications markets.
With its growing portfolio of high-value technologies, Adesto is
helping its customers usher in the era of the Internet of Things.
See: www.adestotech.com.
Follow Adesto on Twitter.
Forward Looking Statements The
quotes of our Chief Executive Officer in this release regarding our
strategic direction, expansion opportunities, product mix impacts
on our gross margins, expanding our sales opportunities, the
integration of Echelon Corporation and the expected synergies and
benefits to Adesto and its customers, stockholders and investors
from integrating Echelon Corporation and S3 Semiconductors, as well
as all statements under “Business Outlook” are forward-looking
statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These statements
involve risks and uncertainties that could cause our actual results
to differ. Factors that could cause actual results to differ
materially from those expressed in the forward-looking statements
include: the businesses of the Company, Echelon and S3
Semiconductors may not be combined successfully, or such
combinations may take longer, be more difficult, time-consuming or
costly to accomplish than expected; the risk that sales of S3
Semiconductors and Echelon products will not be as high as
anticipated; the expected growth opportunities from the
acquisitions may not be fully realized or may take longer to
realize than expected; customer losses and business disruption
following the acquisitions, including adverse effects on ability to
retain key personnel, may be greater than expected; and the risk
that the Company may incur unanticipated or unknown losses or
liabilities in the acquisition. Additional factors that could cause
actual results to differ materially from those expressed in the
forward-looking statements include: our ability to predict the
timing of design wins entering production and the potential future
revenue associated with our design wins; our limited
operating history; our rate of growth; our ability to predict
customer demand for our existing and future products and to secure
adequate manufacturing capacity; consumer demand conditions
affecting our end markets; our ability to manage our growth; our
ability to hire, retain and motivate employees; the effects of
competition, including price competition; technological, regulatory
and legal developments; and developments in the economy and
financial markets.
For a detailed discussion of these and other
risk factors, please refer to our filings with the Securities and
Exchange Commission, including those discussed in the section
captioned “Risk Factors” contained in an exhibit to our Current
Report on Form 10-K for the period ended December 31, 2018 and
filed with the SEC on March 18, 2019, which are available on our
investor relations Web site (ir.adestotech.com) and on the SEC’s
Web site (www.sec.gov).
All information provided in this release and in
the attachments is as of Tuesday, May 7, 2019, and stockholders of
Adesto are cautioned not to place undue reliance on our
forward-looking statements, which speak only as of the date such
statements are made. Adesto does not undertake any obligation to
publicly update any forward-looking statements to reflect events,
circumstances or new information after this May 7,2019 press
release, or to reflect the occurrence of unanticipated events.
Adesto and the Adesto logo are trademarks or registered
trademarks of Adesto Technologies Corporation or its subsidiaries
in the United States and other countries. Other company,
product, and service names may be trademarks or service marks of
others.
Adesto Technologies Media Contact: Jen
Bernier-Santarini +1-650-336-4222 jen.bernier@adestotech.com
Adesto Technologies Investor Relations: Shelton
Group Leanne K. Sievers, President
+1-949-224-3874sheltonir@sheltongroup.com
|
|
|
|
|
|
|
|
|
|
ADESTO TECHNOLOGIES CORPORATION |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(in thousands) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
|
|
|
2019 |
|
2018 |
Assets |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
7,645 |
|
|
$ |
8,630 |
|
|
Restricted cash |
|
|
459 |
|
|
|
458 |
|
|
Accounts receivable, net |
|
|
23,220 |
|
|
|
23,211 |
|
|
Inventories |
|
|
16,643 |
|
|
|
18,635 |
|
|
Prepaid expenses |
|
|
1,952 |
|
|
|
1,668 |
|
|
Other current assets |
|
|
888 |
|
|
|
871 |
|
|
|
Total current assets |
|
|
50,807 |
|
|
|
53,473 |
|
Property and
equipment, net |
|
|
6,873 |
|
|
|
7,085 |
|
Intangible assets,
net |
|
|
34,473 |
|
|
|
36,261 |
|
Operating lease
right-of-use asset |
|
|
4,730 |
|
|
|
- |
|
Other non-current
assets |
|
|
1,704 |
|
|
|
1,729 |
|
Goodwill |
|
|
38,640 |
|
|
|
38,640 |
|
Total assets |
|
$ |
137,227 |
|
|
$ |
137,188 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
Accounts payable |
|
|
16,856 |
|
|
|
16,146 |
|
|
Accrued
compensation and benefits |
|
|
4,095 |
|
|
|
4,038 |
|
|
Accrued expenses
and other current liabilities |
|
|
5,471 |
|
|
|
5,172 |
|
|
Price adjustments
and other revenue reserves |
|
|
4,820 |
|
|
|
4,819 |
|
|
Earn-out
liability, current |
|
|
10,130 |
|
|
|
10,450 |
|
|
Operating lease
liabilities, current |
|
|
1,099 |
|
|
|
- |
|
|
Term loan,
current |
|
|
161 |
|
|
|
141 |
|
|
|
Total current liabilities |
|
|
42,632 |
|
|
|
40,766 |
|
Term loan,
non-current |
|
|
29,362 |
|
|
|
29,418 |
|
Operating lease
liabilities, non-current |
|
|
5,620 |
|
|
|
- |
|
Deferred rent,
non-current |
|
|
- |
|
|
|
1,947 |
|
Deferred tax
liability, non-current |
|
|
1,660 |
|
|
|
1,735 |
|
Other non-current
liabilities |
|
|
591 |
|
|
|
580 |
|
|
|
|
Total liabilities |
|
|
79,865 |
|
|
|
74,446 |
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity: |
|
|
|
|
|
|
|
Common stock |
|
|
3 |
|
|
|
3 |
|
|
Additional paid-in
capital |
|
|
185,718 |
|
|
|
184,158 |
|
|
Accumulated other
comprehensive loss |
|
|
(263 |
) |
|
|
(135 |
) |
|
Accumulated
deficit |
|
|
(128,096 |
) |
|
|
(121,284 |
) |
Total
stockholders' equity |
|
|
57,362 |
|
|
|
62,742 |
|
Total liabilities
and stockholders' equity |
|
$ |
137,227 |
|
|
$ |
137,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADESTO TECHNOLOGIES CORPORATION |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(in thousands, except for share and per share
amounts) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March
31, |
|
|
|
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
Revenue, net |
|
$ |
28,113 |
|
|
$ |
15,302 |
|
Cost of
revenue |
|
|
14,893 |
|
|
|
8,122 |
|
|
Gross profit |
|
|
13,220 |
|
|
|
7,180 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Research and
development |
|
|
7,522 |
|
|
|
3,559 |
|
|
Selling, general
and administrative |
|
|
7,935 |
|
|
|
4,277 |
|
|
Amortization of
intangible assets |
|
|
1,788 |
|
|
|
294 |
|
|
Acquisition
related expenses |
|
|
222 |
|
|
|
- |
|
|
Impairment and
other charges |
|
|
1,694 |
|
|
|
- |
|
|
|
Total operating expenses |
|
|
19,161 |
|
|
|
8,130 |
|
Income (loss) from
operations |
|
|
(5,941 |
) |
|
|
(950 |
) |
Other income
(expense): |
|
|
|
|
|
|
|
Interest expense,
net |
|
|
(1,370 |
) |
|
|
(141 |
) |
|
Other income
(expense), net |
|
|
220 |
|
|
|
10 |
|
|
|
Total other income (expense),
net |
|
|
(1,150 |
) |
|
|
(131 |
) |
Loss before
provision for (benefit from) income taxes |
|
|
(7,091 |
) |
|
|
(1,081 |
) |
Provision for
(benefit from) income taxes |
|
|
(31 |
) |
|
|
21 |
|
Net loss |
|
$ |
(7,060 |
) |
|
$ |
(1,102 |
) |
|
|
|
|
|
|
|
|
|
Net loss per
share: |
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(0.24 |
) |
|
$ |
(0.05 |
) |
Weighted average
number of shares used in computing |
|
|
|
|
|
|
net loss per
share: |
|
|
|
|
|
|
|
Basic and
diluted |
|
|
29,592,247 |
|
|
|
21,370,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADESTO TECHNOLOGIES CORPORATION |
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
INFORMATION |
(in thousands, except for share and per share
amounts) |
(unaudited) |
|
|
Three Months EndedMarch
31, |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
|
GAAP gross profit |
|
|
$ |
13,220 |
|
|
$ |
7,180 |
|
Stock-based compensation expense |
|
|
|
65 |
|
|
|
25 |
|
Inventory step-up related to acquisition accounting |
|
|
|
616 |
|
|
|
- |
|
Non-GAAP gross profit |
|
|
$ |
13,901 |
|
|
$ |
7,205 |
|
|
|
|
|
|
|
|
|
|
GAAP research and development expenses |
|
|
$ |
7,522 |
|
|
$ |
3,559 |
|
Stock-based compensation expense |
|
|
|
(389 |
) |
|
|
(183 |
) |
Non-GAAP research and development expenses |
|
|
$ |
7,133 |
|
|
$ |
3,376 |
|
|
|
|
|
|
|
|
|
|
GAAP selling, general and administrative expenses |
|
|
$ |
7,935 |
|
|
$ |
4,277 |
|
Stock-based compensation expense |
|
|
|
(621 |
) |
|
|
(235 |
) |
Non-GAAP selling, general and adminitrative expenses |
|
|
$ |
7,314 |
|
|
$ |
4,042 |
|
|
|
|
|
|
|
|
|
|
GAAP operating expenses |
|
|
$ |
19,161 |
|
|
$ |
8,130 |
|
Stock-based compensation expense |
|
|
|
(1,010 |
) |
|
|
(418 |
) |
Amortization of intangible assets |
|
|
|
(1,788 |
) |
|
|
(294 |
) |
Acquisition related expenses |
|
|
|
(222 |
) |
|
|
- |
|
Impairment and other charges |
|
|
|
(1,694 |
) |
|
|
- |
|
Non-GAAP operating expenses |
|
|
$ |
14,447 |
|
|
$ |
7,418 |
|
|
|
|
|
|
|
|
|
|
GAAP income (loss) from operations |
|
|
$ |
(5,941 |
) |
|
$ |
(950 |
) |
Stock-based compensation expense |
|
|
|
1,075 |
|
|
|
443 |
|
Inventory step-up related to acquisition accounting |
|
|
|
616 |
|
|
|
- |
|
Amortization of intangible assets |
|
|
|
1,788 |
|
|
|
294 |
|
Acquisition-related expenses |
|
|
|
222 |
|
|
|
- |
|
Impairment and other charges |
|
|
|
1,694 |
|
|
|
- |
|
Non-GAAP income (loss) from operations |
|
|
$ |
(546 |
) |
|
$ |
(213 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation from GAAP net loss to adjusted EBITDA: |
|
|
|
|
|
|
|
GAAP net loss: |
|
|
$ |
(7,060 |
) |
|
$ |
(1,102 |
) |
|
Stock-based compensation expense |
|
|
|
1,075 |
|
|
|
443 |
|
|
Inventory step-up related to acquisition accounting |
|
|
|
616 |
|
|
|
- |
|
|
Amortization of intangible assets |
|
|
|
1,788 |
|
|
|
294 |
|
|
Acquisition-related expenses |
|
|
|
222 |
|
|
|
- |
|
|
Impairment and other charges |
|
|
|
1,694 |
|
|
|
- |
|
|
Revaluation of earn-out liability |
|
|
|
(320 |
) |
|
|
- |
|
|
Debt amortization costs |
|
|
|
401 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income (loss) |
|
|
(1,584 |
) |
|
|
(347 |
) |
|
Interest expense |
|
|
|
981 |
|
|
|
136 |
|
|
Provision for (benefit from) income taxes |
|
|
|
(31 |
) |
|
|
21 |
|
|
Depreciation and amortization |
|
|
|
646 |
|
|
|
488 |
|
|
Adjusted EBITDA |
|
$ |
12 |
|
|
$ |
298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP diluted
net income (loss) per share |
|
|
|
($0.05 |
) |
|
|
($0.02 |
) |
|
|
|
|
|
|
|
Weighted-average number of
shares used in calculating non-GAAP basic net income (loss) per
share |
|
|
|
29,592,247 |
|
|
|
21,370,927 |
|
|
|
|
|
|
|
|
|
|
|
Incremental shares upon
conversion of stock options, restricted stock units and
warrants |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used
in calculating non-GAAP diluted net income (loss) per share |
|
|
|
29,592,247 |
|
|
|
21,370,927 |
|
|
|
|
|
|
|
|
|
|
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