• Revenues of $24.8 million
• New product revenue of $16.2 million, representing 82% year-to-year growth and 68% of total product revenue in the quarter
• Opportunities created at new customers were double the rate of fiscal year 2014
• Record pace for design wins, IoT wins representing 40% of total

CAMARILLO, Calif. — (BUSINESS WIRE) — February 3, 2015 — Vitesse Semiconductor Corporation (Nasdaq: VTSS), a leading provider of IC solutions to advance “Ethernet Everywhere” in Carrier, Enterprise and Internet of Things (IoT) networks, reported its financial results for the first quarter fiscal year 2015, ended December 31, 2014.

“New product revenue continues on a solid trajectory reaching $16.2 million in the quarter, up 82% on a year to year basis. New products now represent 68% of our total product revenue,” said Chris Gardner, CEO of Vitesse. “Our customer profile continues to grow and evolve as our position strengthens in new, adjacent markets such as IoT and storage, which are literally reshaping our business and expanding our market opportunity. Our expanded sales team dramatically increased both opportunities and design wins, more than doubling the number of new customers in the pipeline, setting us on pace for another record year. As Ethernet propagates into new markets, our total addressable market will triple from approximately $1 billion today to over $3 billion by 2020.”

“As anticipated, we saw a meaningful decrease in revenue from our legacy products in the first quarter and expect another smaller decline in the second quarter. These declines will be more than offset by new product revenue growth of 50% to 75% for the full fiscal year. We continue to manage expenses carefully as we move through the transition and remain on target to deliver gross product margins of 60% in fiscal year 2015. All told, the leading indicators of our business are strong and we are well positioned with the technology, products, market position, and customers to capitalize on the exciting growth opportunities we are seeing in the market.”

First Quarter Fiscal Year 2015 Financial Results Summary

• Total net revenues were $24.8 million, compared to $28.7 million in the fourth quarter of fiscal year 2014 and $27.1 million in the first quarter of fiscal year 2014.
  • Product revenues were $24.0 million, compared to $27.0 million in the fourth quarter of fiscal year 2014 and $24.9 million in the first quarter of fiscal year 2014. Revenues by market contributed the following as a percentage of product revenues as compared to the fourth quarter of fiscal year 2014:
    • Carrier networking products: 47.4% versus 45.1%
    • Enterprise networking products: 43.7% versus 39.9%
    • Industrial-IoT networking products: 8.9% versus 15.0%
  • Intellectual property revenues totaled $0.8 million, compared to $1.7 million in the fourth quarter of fiscal year 2014 and $2.2 million in the first quarter of fiscal year 2014.
• Product margins were 58.1%, compared to 60.9% in the fourth quarter of fiscal year 2014 and 57.1% in the first quarter of fiscal year 2014. Total gross margins were 59.4%, compared to 63.1% in the fourth quarter of fiscal year 2014 and 60.6% in the first quarter of fiscal year 2014.
• Operating expenses were $18.9 million, compared to operating expenses of $18.8 million in the fourth quarter of fiscal year 2014 and $18.6 million in the first quarter of fiscal year 2014.
• Operating loss was $4.2 million, compared to operating loss of $0.7 million in the fourth quarter of fiscal year 2014 and $2.2 million in the first quarter of fiscal year 2014.
• Non-GAAP operating loss was $2.2 million, compared to non-GAAP operating income of $1.0 million in the fourth quarter of fiscal year 2014 and non-GAAP operating loss of $0.9 million in the first quarter of fiscal year 2014.
• Net loss was $5.0 million, or $0.07 per basic and fully diluted share. This compares to net loss of $2.5 million, or $0.04 per basic and fully diluted share, in the fourth quarter of fiscal year 2014, and net loss of $5.4 million, or $0.09 per basic and fully diluted share, in the first quarter of fiscal year 2014.
• Non-GAAP net loss was $3.1 million, or $0.04 per basic and fully diluted share, compared to non-GAAP net loss of $0.8 million, or $0.01 per basic and fully diluted share, for the fourth quarter of fiscal year 2014, and non-GAAP net loss of $2.4 million, or $0.04 per basic and fully diluted share, in the first quarter of fiscal year 2014.