Inphi Corporation (NYSE: IPHI), a leader in high-speed data
movement interconnects, today announced financial results for its
first quarter ended March 31, 2019.
GAAP Results
Revenue in the first quarter of 2019 was $82.2 million on a U.S.
generally accepted accounting principles (GAAP) basis, up 36.7%
year-over-year, compared with $60.1 million in the first quarter of
2018. The increase was due to higher demand for both telecom
and datacenter products.
Gross margin under GAAP in the first quarter of 2019 was 57.9%,
compared with 54.1% in the first quarter of 2018. The increase in
gross margin primarily reflects a change in the product mix.
GAAP operating loss in the first quarter of 2019 was $15.5
million or (18.8%) of revenue, compared to GAAP operating loss in
the first quarter of 2018 of $28.0 million or (46.5%) of revenue.
The decrease in operating loss was mainly due to higher
revenue.
GAAP net loss for the first quarter of 2019 was $22.7 million or
($0.51) per common share, compared with $23.0 million or ($0.53)
per common share in the first quarter of 2018.
Inphi reports gross margin, operating expenses, 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, operating expenses, net income, 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 press release.
Non-GAAP Results
Gross margin on a non-GAAP basis in the first quarter of 2019
was 70.7%, compared with 66.4% in the first quarter of 2018.
The increase was due to a change in product mix.
Non-GAAP operating income in the first quarter of 2019 was $15.6
million, compared with non-GAAP operating loss of $2.1 million in
the first quarter of 2018. The increase is primarily due to higher
revenue.
Non-GAAP net income in the first quarter of 2019 was $15.4
million, or $0.33 per diluted common share. This compares with
non-GAAP net loss of $2.0 million, or ($0.05) per diluted common
share in the first quarter of 2018.
“Year-over-year revenue growth of 37% coupled with Non-GAAP
gross and net operating margin expansion resulted in Q1 Non GAAP
EPS that exceeded the midpoint of our outlook by $0.05,” said Ford
Tamer President and CEO of Inphi Corporation. “Our strong Q1
benefited from robust demand for both Telecom products, Coherent
M200 DSPs, TiAs and drivers as well as the Data Center 50, 100, 200
and 400G PAM4 DSPs, TiAs and drivers. We also benefited from
the start of the 5G backhaul infrastructure buildup.”
Business OutlookThe following statements are
based on the Company’s current expectations for the second quarter
of 2019. These statements are forward-looking and actual results
may differ materially. A reconciliation between the GAAP and
non-GAAP outlook is included at the end of this press release.
- Revenue in Q2 2019 is expected of $86.8 million to $90.8
million.
- GAAP gross margin of approximately 57.9% to 59.4%.
- Non-GAAP gross margin is expected to be approximately
70.0%.
- Stock-based compensation expense in the range of $19.0 million
to $20.0 million.
- GAAP net loss is expected to be in a range between $18.0
million to $23.9 million, or ($0.40) to ($0.53) per basic share,
based on 45.329 million estimated weighted average basic shares
outstanding.
- Non-GAAP net income, excluding stock-based compensation
expense, amortization of intangibles related to acquisitions and
noncash interest on convertible debt, to be in the range of $15.8
million to $20.5 million, or $0.34 to $0.44 per weighted average
diluted share, based on 47.1 million estimated Non-GAAP weighted
average diluted shares outstanding.
Quarterly Conference Call TodayInphi plans to
hold a conference call today at 4:30 p.m. Eastern Time / 1:30 p.m.
Pacific Time with Ford Tamer, president and chief executive
officer, and John Edmunds, chief financial officer, to discuss the
first quarter 2019 results.
The call can be accessed by dialing (765) 507-2591, participant
passcode: 6098083. 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
https://www.inphi.com/investors for up to 30 days after the
call.
About InphiInphi Corporation is a leader in
high-speed data movement. We move big data - fast, throughout
the globe, between data centers, and inside data centers.
Inphi's expertise in signal integrity results in reliable data
delivery, at high speeds, over a variety of distances. As
data volumes ramp exponentially due to video streaming, social
media, cloud-based services, and wireless infrastructure, the need
for speed has never been greater. That's where we come in.
Customers rely on Inphi's solutions to develop and build out the
Service Provider and Cloud infrastructures, and data centers of
tomorrow. To learn more about Inphi, visit www.inphi.com.
Cautionary Note Concerning Forward-Looking
StatementsThese forward-looking statements may be
identified by terms such as outlook, believe, expect, may, will,
provide, continue, could, and should, and the negative of these
terms or other similar expressions. These statements include
statements relating to: the Company’s business outlook and current
expectations for 2019, including with respect to the second quarter
of 2019, revenue, gross margin, stock-based compensation expense,
operating performance, net income or loss, and earnings per share;
the Company’s expectations regarding growth opportunities and
increase in market share, increasing demand in Q2, growth inside
data centers, success of new product introductions, customer
relationships and design wins 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 target
markets; 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
demand, changes in government regulation, 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,
2018, 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.
Corporate Contact:Kim
Markle
Inphi
408-217-7329
kmarkle@inphi.com
Investor Contact:Deborah
Stapleton650-815-1239deb@stapleton.com
|
|
INPHI CORPORATION |
|
CONSOLIDATED STATEMENTS OF
OPERATIONS |
|
(in thousands of dollars, except share and per share
amounts) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
Three Months Ended March
31, |
|
|
|
2019 |
|
|
2018 |
|
|
Revenue |
$ |
82,223 |
|
$ |
60,136 |
|
|
Cost of revenue |
|
34,592 |
|
|
27,590 |
|
|
|
|
|
|
|
|
Gross margin |
|
47,631 |
|
|
32,546 |
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
Research and
development |
|
44,399 |
|
|
42,938 |
|
|
Sales and
marketing |
|
11,879 |
|
|
11,342 |
|
|
General and
administrative |
|
6,833 |
|
|
6,218 |
|
|
|
|
|
|
|
|
Total operating
expenses |
|
63,111 |
|
|
60,498 |
|
|
|
|
|
|
|
|
Loss from
operations |
|
(15,480 |
) |
|
(27,952 |
) |
|
|
|
|
|
|
|
Interest expense, net
of other income |
|
(6,045 |
) |
|
(3,300 |
) |
|
|
|
|
|
|
|
Loss from operations
before income taxes |
|
(21,525 |
) |
|
(31,252 |
) |
|
Provision (benefit) for
income taxes |
|
1,220 |
|
|
(8,261 |
) |
|
|
|
|
|
|
|
Net loss |
$ |
(22,745 |
) |
$ |
(22,991 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share: |
|
|
|
|
|
Basic |
$ |
(0.51 |
) |
$ |
(0.53 |
) |
|
Diluted |
$ |
(0.51 |
) |
$ |
(0.53 |
) |
|
|
|
|
|
|
|
Weighted-average shares
used in computing |
|
|
|
|
|
earnings per
share: |
|
|
|
|
|
Basic |
|
44,451,392 |
|
|
42,998,819 |
|
|
Diluted |
|
44,451,392 |
|
|
42,998,819 |
|
|
|
|
|
|
|
|
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 March
31, |
|
|
|
2019 |
|
2018 |
|
|
|
(in thousands of dollars) |
|
|
|
(Unaudited) |
|
Cost of revenue |
$ |
805 |
$ |
569 |
|
Research and
development |
|
10,732 |
|
8,498 |
|
Sales and
marketing |
|
4,148 |
|
3,242 |
|
General and
administrative |
|
3,073 |
|
2,244 |
|
|
|
|
|
|
|
|
$ |
18,758 |
$ |
14,553 |
|
|
|
|
|
|
|
|
INPHI CORPORATION |
CONSOLIDATED BALANCE SHEETS |
(in thousands of dollars) |
(Unaudited) |
|
|
March 31,2019 |
|
December 31,2018 |
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash
equivalents |
$ |
217,848 |
|
$ |
172,018 |
|
Short-term
investments in marketable securities |
|
211,006 |
|
|
235,339 |
|
Accounts
receivable, net |
|
58,055 |
|
|
61,271 |
|
Inventories |
|
31,739 |
|
|
33,052 |
|
Prepaid expenses
and other current assets |
|
10,782 |
|
|
9,600 |
|
Total current assets |
|
529,430 |
|
|
511,280 |
|
|
|
|
|
|
Property and equipment,
net |
|
68,704 |
|
|
70,740 |
|
Goodwill |
|
104,502 |
|
|
104,502 |
|
Intangible assets,
net |
|
164,621 |
|
|
180,447 |
|
Right of use asset,
net |
|
9,901 |
|
|
- |
|
Other noncurrent
assets |
|
22,250 |
|
|
22,904 |
|
Total assets |
$ |
899,408 |
|
$ |
889,873 |
|
|
|
|
|
|
Liabilities and
Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts
payable |
$ |
13,025 |
|
$ |
15,891 |
|
Accrued expenses
and other current liabilities |
|
46,246 |
|
|
43,120 |
|
Deferred
revenue |
|
5,859 |
|
|
5,432 |
|
|
|
|
|
|
Total current liabilities |
|
65,130 |
|
|
64,443 |
|
|
|
|
|
|
Convertible debt |
|
454,624 |
|
|
447,825 |
|
Other liabilities |
|
16,300 |
|
|
10,911 |
|
Total liabilities |
|
536,054 |
|
|
523,179 |
|
|
|
|
|
|
Stockholders’
equity: |
|
|
|
|
Common
stock |
|
45 |
|
|
44 |
|
Additional
paid-in capital |
|
555,021 |
|
|
536,157 |
|
Accumulated
deficit |
|
(192,641 |
) |
|
(169,896 |
) |
Accumulated
other comprehensive income |
|
929 |
|
|
389 |
|
Total stockholders’
equity |
|
363,354 |
|
|
366,694 |
|
|
|
|
|
|
Total liabilities and
stockholders’ equity |
$ |
899,408 |
|
$ |
889,873 |
|
|
|
|
|
|
INPHI
CORPORATIONRECONCILIATION OF GAAP TO NON-GAAP
MEASURES(in thousands of dollars, except share and per
share amounts)
To supplement the financial data presented on a GAAP basis, the
Company discloses certain non-GAAP financial measures, which
exclude stock-based compensation, legal, transition costs and other
expenses, purchase price fair value adjustments related to
acquisitions, non-cash interest expense related to convertible
debt, unrealized gain or loss on equity investments 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 because it 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, income from operations, 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, and may be calculated differently than
non-GAAP financial information disclosed by other companies.
|
|
RECONCILIATION OF
GAAP NET INCOME TO NON-GAAP
NET INCOME |
|
(in thousands of dollars, except share and per share
amounts) |
|
(Unaudited) |
|
|
|
|
|
Three Months Ended March
31, |
|
|
|
2019 |
|
|
2018 |
|
|
GAAP gross
margin to Non-GAAP gross margin |
|
|
|
|
|
GAAP gross margin |
$ |
47,631 |
|
$ |
32,546 |
|
|
Adjustments to GAAP
gross margin: |
|
|
|
|
|
Stock-based
compensation |
|
805 |
|
(a) |
569 |
|
(a) |
Acquisition
related expenses |
|
- |
|
|
11 |
|
(b) |
Amortization of
intangibles |
|
9,724 |
|
(c) |
6,699 |
|
(c) |
Depreciation on
step-up values of fixed assets |
|
(12 |
) |
(d) |
(14 |
) |
(d) |
Restructuring
expenses |
|
- |
|
|
105 |
|
(e) |
Non-GAAP gross
margin |
$ |
58,148 |
|
$ |
39,916 |
|
|
|
|
|
|
|
|
GAAP operating
expenses to Non-GAAP operating expenses |
|
|
|
|
|
GAAP research and
development |
$ |
44,399 |
|
$ |
42,938 |
|
|
Adjustments to GAAP
research and development: |
|
|
|
|
|
Stock-based
compensation |
|
(10,732 |
) |
(a) |
(8,498 |
) |
(a) |
Acquisition
related expenses |
|
- |
|
|
(305 |
) |
(b) |
Depreciation on
step-up values of fixed assets |
|
(87 |
) |
(d) |
(133 |
) |
(d) |
Restructuring
expenses |
|
- |
|
|
(885 |
) |
(e) |
Non-GAAP research and
development |
$ |
33,580 |
|
$ |
33,117 |
|
|
|
|
|
|
|
|
GAAP sales and
marketing |
$ |
11,879 |
|
$ |
11,342 |
|
|
Adjustments to GAAP
sales and marketing: |
|
|
|
|
|
Stock-based
compensation |
|
(4,148 |
) |
(a) |
(3,242 |
) |
(a) |
Acquisition
related expenses |
|
- |
|
|
(142 |
) |
(b) |
Amortization of
intangibles |
|
(2,431 |
) |
(c) |
(2,431 |
) |
(c) |
Depreciation on
step-up values of fixed assets |
|
(3 |
) |
(d) |
(23 |
) |
(d) |
Restructuring
expenses |
|
- |
|
|
(359 |
) |
(e) |
Non-GAAP sales and
marketing |
$ |
5,297 |
|
$ |
5,145 |
|
|
|
|
|
|
|
|
GAAP general and
administrative |
$ |
6,833 |
|
$ |
6,218 |
|
|
Adjustments to GAAP
general and administrative: |
|
|
|
|
|
Stock-based
compensation |
|
(3,073 |
) |
(a) |
(2,244 |
) |
(a) |
Acquisition
related expenses |
|
- |
|
|
(3 |
) |
(b) |
Amortization of
intangibles |
|
(116 |
) |
(c) |
(116 |
) |
(c) |
Depreciation on
step-up values of fixed assets |
|
(5 |
) |
(d) |
41 |
|
(d) |
Restructuring
expenses |
|
- |
|
|
(133 |
) |
(e) |
Non-GAAP general and
administrative |
$ |
3,639 |
|
$ |
3,763 |
|
|
|
|
|
|
|
|
Non-GAAP total
operating expenses |
$ |
42,516 |
|
$ |
42,025 |
|
|
Non-GAAP income (loss)
from operations |
$ |
15,632 |
|
$ |
(2,109 |
) |
|
|
|
|
|
|
|
GAAP net loss
to Non-GAAP net income |
|
|
|
|
|
GAAP net
loss |
$ |
(22,745 |
) |
$ |
(22,991 |
) |
|
Adjusting items to GAAP
net loss: |
|
|
|
|
|
Operating
expenses related to stock-based compensation expense |
|
18,758 |
|
(a) |
14,553 |
|
(a) |
Acquisition
related expenses |
|
- |
|
|
461 |
|
(b) |
Amortization of
intangibles related to purchase price |
|
12,271 |
|
(c) |
9,246 |
|
(c) |
Depreciation on
step-up values of fixed assets |
|
83 |
|
(d) |
101 |
|
(d) |
Restructuring
expenses |
|
- |
|
|
1,482 |
|
(e) |
Accretion and
amortization expense on convertible debt |
|
6,799 |
|
(f) |
6,330 |
|
(f) |
Unrealized gain
on equity investment |
|
(272 |
) |
(g) |
(3,022 |
) |
(g) |
Valuation
allowance and tax effect of the adjustments above from |
|
|
|
|
|
GAAP to
non-GAAP |
|
516 |
|
(h) |
(8,130 |
) |
(h) |
Non-GAAP net income
(loss) |
$ |
15,410 |
|
$ |
(1,970 |
) |
|
|
|
|
|
|
|
Shares used in
computing non-GAAP basic earnings per share |
|
44,451,392 |
|
|
42,998,819 |
|
|
|
|
|
|
|
|
Shares used in
computing non-GAAP diluted earnings per share |
|
46,137,189 |
|
|
42,998,819 |
|
|
|
|
|
|
|
|
Non-GAAP earnings per
share: |
|
|
|
|
|
Basic |
$ |
0.35 |
|
$ |
(0.05 |
) |
|
Diluted |
$ |
0.33 |
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
GAAP gross margin as a
% of revenue |
|
57.9 |
% |
|
54.1 |
% |
|
Stock-based
compensation |
|
1.0 |
% |
|
0.9 |
% |
|
Amortization of
inventory fair value step-up and intangibles |
|
11.8 |
% |
|
11.4 |
% |
|
Non-GAAP gross margin
as a % of revenue |
|
70.7 |
% |
|
66.4 |
% |
|
|
|
|
|
|
|
- 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.
- Reflects the legal, transition costs and other expenses related
to acquisition. The transition costs also include short-term
cash retention bonus payments to ClariPhy employees that were part
of the merger agreement when the Company acquired ClariPhy.
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.
- Reflects the fair value amortization of intangibles related to
acquisitions. 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.
- Reflects the fair value depreciation of fixed assets related to
acquisitions. 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.
- Reflects restructuring expenses incurred. 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.
- Reflects the accretion and amortization expense on convertible
debt. 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.
- Reflects the unrealized gain or loss on equity
investments. 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.
- Reflects the 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 -
SECOND QUARTER 2019 GUIDANCE |
(in thousands of dollars, except share and per share
amounts) |
(Unaudited) |
|
|
|
|
|
|
|
Three Months Ending June 30,
2019 |
|
|
High |
|
Low |
Estimated GAAP net
loss |
$ |
(18,000 |
) |
$ |
(23,900 |
) |
Adjusting items to
estimated GAAP net loss: |
|
|
|
|
Operating
expenses related to stock-based compensation expense |
|
19,000 |
|
|
20,000 |
|
Amortization of
intangibles |
|
12,300 |
|
|
12,300 |
|
Amortization of
convertible debt interest cost |
|
6,800 |
|
|
6,800 |
|
Tax effect of
GAAP to non-GAAP adjustments |
|
400 |
|
|
600 |
|
Estimated non-GAAP net
income |
$ |
20,500 |
|
$ |
15,800 |
|
|
|
|
|
|
Shares used in
computing estimated non-GAAP diluted earnings per share |
|
47,100,000 |
|
|
47,100,000 |
|
|
|
|
|
|
Estimated non-GAAP
diluted earnings per share |
$ |
0.44 |
|
$ |
0.34 |
|
|
|
|
|
|
|
Revenue |
$ |
90,800 |
|
$ |
86,800 |
|
|
GAAP gross margin |
$ |
53,950 |
|
$ |
50,240 |
|
as a % of
revenue |
|
59.4 |
% |
|
57.9 |
% |
Adjusting items to
estimated GAAP gross margin: |
|
Stock-based
compensation |
|
800 |
|
|
800 |
|
Fixed assets
depreciation step up |
|
(20 |
) |
|
(20 |
) |
Amortization of
intangibles |
|
9,740 |
|
|
9,740 |
|
Estimated non-GAAP
gross margin |
$ |
64,470 |
|
$ |
60,760 |
|
as a % of
revenue |
|
71.0 |
% |
|
70.0 |
% |
|
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