Revenue for the fourth quarter of 2014 was $17.2 million, compared with $33.1 million for the same period in 2013. As reported under U.S. generally accepted accounting principles (GAAP), fourth quarter 2014 net loss was ($45.5) million, or ($1.96) per diluted share based on weighted average shares outstanding of 23.2 million. The net loss referenced above includes a $31.3 million impairment charge related to the goodwill and intangible assets that were recorded in connection with the acquisition of Sensor Platforms, Inc. The noncash impairment charge was a result of the change in Audience's enterprise value, based on the trading prices of its common stock, rather than deterioration in the Sensor Platforms' business. This compares with GAAP net loss of ($2.9) million, or ($0.13) per diluted share based on weighted average shares outstanding of 22.0 million, for the same period in 2013. Gross margin on a GAAP basis for the fourth quarter of 2014 was 41.1% of revenue, compared to 52.3% of revenue for the same period in 2013.
Non-GAAP net loss, as defined below, for the fourth quarter of 2014 was ($8.5) million, or ($0.37) per diluted share based on weighted average shares outstanding of 23.2 million. This compares with non-GAAP net loss of ($2.8) million, or ($0.13) per diluted share based on weighted average shares outstanding of 22.0 million, for the same period in 2013. Gross margin on a non-GAAP basis for the fourth quarter of 2014 was 46.5% of revenue, compared to 52.5% of revenue for the same period in 2013.
Revenue for the full year 2014 was $113.3 million, compared with $160.1 million for 2013. Net loss for the full year 2014 was ($73.6) million, or ($3.25) per diluted share based on weighted average shares outstanding of 22.7 million, compared to net income of $2.1 million, or $0.09 per diluted share based on weighted average shares outstanding of 23.2 million for 2013.
Non-GAAP net loss for the full year of 2014 was ($22.2) million, or ($0.98) per diluted share based on weighted average shares outstanding of 22.7 million, compared to 2013 non-GAAP net income of $8.8 million, or $0.38 per diluted share based on weighted average shares outstanding of 23.2 million.
"We are very pleased with the adoption of our latest generation Advanced Voice and Continuous VoiceQ voice activation capabilities by strategic customers in China like ZTE, Meizu and Coolpad," said Peter Santos, president and CEO, Audience. "The underlying demand for superior user experience, along with our expertise in motion and sensor processing gained through our acquisition of Sensor Platforms in 2014, positions us well for the coming shift toward multisensory processing."
"We finished 2014 meeting or beating our fourth quarter financial expectations for all key non-GAAP metrics and set the stage for expected growth and diversification in 2015," said Kevin Palatnik, chief financial officer.
Business Outlook
For the first quarter of 2015, Audience expects total revenue to be in the range of $17 to $20 million. First quarter GAAP gross margin is expected to be in the range of 40.3% to 44.0%. First quarter GAAP net loss, which includes $2.2 million of expected stock-based compensation expense and $1.0 million of expected intangible asset amortization, is expected to be in the range of ($16.2) to ($18.0) million, or ($0.68) to ($0.76) per diluted share on approximately 23.5 million diluted weighted average shares outstanding.
First quarter non-GAAP gross margin is expected to be in the range of 45.5% to 48.5%. First quarter non-GAAP net loss is expected to be in the range of ($10.4) to ($11.9) million, or ($0.44) to ($0.50) per share on a diluted basis.
A schedule showing a reconciliation of the business outlook from GAAP diluted net loss per share to non-GAAP diluted net loss per share is included with this release.
The above information concerning guidance represents Audience's outlook only as of the date hereof and is subject to change as a result of amendments to material contracts and other changes in business conditions. Audience undertakes no obligation to update or revise any financial forecast or other forward looking statements, as a result of new developments or otherwise.
Quarterly Conference Call Today
Peter Santos, president and chief executive officer, and Kevin Palatnik, chief financial officer, will host a conference call today at 2:00 pm (Pacific) / 5:00 pm (Eastern). Attendees are asked to join the call at least ten minutes prior to the scheduled conference call time. The call may be accessed by dialing 1-877-212-6076 (toll free) or 1-707-287-9331 (international). The passcode is 63477729. A live and archived webcast of the call will be available on Audience's website at
http://investor.audience.com for 30 days.
Audience expects that its corporate representatives will meet privately during the quarter with investors, the media, investment analysts and others. At these meetings, Audience may reiterate the business outlook published in this press release. At the same time, Audience will keep this press release, including the business outlook, publicly available on its website.
Beginning March 15, 2015, Audience will observe a Quiet Period during which Audience's representatives will not comment on Audience's business outlook, financial results or expectations. The Quiet Period will extend until the day when Audience's First Quarter 2015 Earnings Release is published, which is currently scheduled to be April 30, 2015.
About Audience
Audience is the leader in Advanced Voice, and a pioneer in Multisensory processing and natural user experience technology for consumer devices. Its technologies, based in auditory neuroscience, improve the mobile voice experience, as well as enhance speech-based services and audio quality for multimedia. In early 2014, the Company announced its expansion into Multisensory and motion processing. Through the combination of Advanced Voice and Multisensory processing, Audience aims to transform the way consumers engage with devices by enabling seamless natural user experiences and context-aware services. The Company's products have been shipped in more than 500 million devices worldwide. For more information, see
www.audience.com. For more information on Audience® products please go
here.
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Use of Non-GAAP Financial Measures
Audience prepares its financial statements in accordance with generally accepted accounting principles for the United States (GAAP). The non-GAAP financial measures, such as gross margin, net income (loss) and earnings (loss) per share information for the three and twelve month periods ended December 31, 2014 and similar periods from the prior year included in this press release are different from those otherwise presented under GAAP. The following are explanations of each type of adjustment that we incorporate into non-GAAP financial measures:
Stock-based compensation expense relates to equity incentive awards granted to our employees, directors and consultants. Stock-based compensation expense has been and will continue to be a significant recurring expense for Audience. While we include the dilutive impact of such equity awards in weighted average shares outstanding, the expense associated with stock-based awards reflects a non-cash charge that we exclude from non-GAAP net income (loss).
On June 5, 2012, Audience entered into a lease agreement for its future corporate headquarters facility in Mountain View, California. Pursuant to the lease agreement, the lease fell under "build-to-suit" accounting treatment and therefore, in accordance with accounting for the effect of lessee involvement in asset construction, the company was considered to be the owner of the real estate project during the construction period. As such, Audience recorded an asset for construction in progress for incurred construction costs, and a liability for those costs that were not funded by the company. Additionally, the rent costs associated with the ground lease during construction was recorded to the income statement. This rent cost is a non-cash charge that the company excluded from its non-GAAP net income (loss). The construction was completed and the lease commenced October 1, 2013. Upon lease commencement, "build-to-suit" accounting treatment was terminated. The company concluded that the lease qualifies for sale-leaseback accounting treatment and that the lease is to be recorded as an operating lease.
On July 11, 2014, Audience completed its acquisition of Sensor Platforms, Inc. The acquisition-related fees and expenses and the amortization of purchased intangible assets that were recorded in connection with the acquisition have been excluded from non-GAAP net loss.
In the third quarter of 2014, the company implemented a restructuring plan for a workforce reduction through involuntary terminations. The costs related to the restructuring have been excluded from non-GAAP net loss.
In the fourth quarter of 2014, Audience recorded an impairment charge of $31.3 million related to goodwill and intangible assets that were recorded in connection with its acquisition of Sensor Platforms, Inc. The noncash impairment charge was a result of the change in Audience's enterprise value, based on the trading prices of its common stock, rather than deterioration in the Sensor Platforms' business. This charge and the related fees and expenses have been excluded from non-GAAP net loss.
