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CST: 24/05/2019 02:56:51   

Inphi Corporation Announces Q1 2019 Results

23 Days ago

Strong Year-over-year Revenue Growth across Multiple Product Lines

SANTA CLARA, Calif., April 30, 2019 (GLOBE NEWSWIRE) -- 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 Outlook
The 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 Today
Inphi 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 Inphi
Inphi 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 Statements
These 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 Stapleton
650-815-1239
deb@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 CORPORATION
RECONCILIATION 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 %  
           
  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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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