Vitesse Reports First Quarter Fiscal Year 2015 Results

In deriving non-GAAP operating expenses from GAAP operating expenses, we exclude stock-based compensation charges and amortization of intangible assets. In deriving non-GAAP income (loss) from operations from GAAP income (loss) from operations, we exclude stock-based compensation charges and amortization of intangible assets. In deriving non-GAAP net income (loss) from GAAP net income (loss), we further exclude loss on extinguishment of debt. Stock-based compensation charges, amortization of intangible assets, and loss on extinguishment of debt represent charges that recur in amounts unrelated to the Company’s operations.

The non-GAAP financial measures we provide have certain limitations because they do not reflect all of the costs associated with the operation of our business as determined in accordance with GAAP. Non-GAAP operating expenses, non-GAAP income (loss) from operations and non-GAAP net income (loss) are in addition to, and are not a substitute for or superior to, operating expenses, income (loss) from operations and net income (loss), which are prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. A detailed reconciliation of the non-GAAP measures to the most directly comparable GAAP measure is set forth below. Investors are encouraged to review these reconciliations to appropriately incorporate the non-GAAP measures and the limitations of these measures into their analyses. For complete information on stock-based compensation, amortization of intangible assets, and loss on extinguishment of debt, please see our Form 10-Q for the quarterly period ended December 31, 2014 and Form 10-K for the year ended September 30, 2014.


VITESSE SEMICONDUCTOR CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEETS

	December 31, 2014			September 30, 2014
	(in thousands, except par value)
ASSETS
Current assets:
Cash	$	31,745		$	71,903
Accounts receivable	10,081			10,850
Inventories	15,705			12,792
Restricted cash	1,608			794
Prepaid expenses and other current assets	2,170			1,047
Total current assets	61,309			97,386
Property, plant and equipment, net	2,913			2,858
Other intangible assets, net	1,811			1,476
Other assets	1,511			3,104
	$	67,544		$	104,824

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	7,947		$	6,814
Accrued expenses and other current liabilities	9,548			12,472
Current portion of debt, net	—			32,727
Deferred revenue	6,302			4,902
Total current liabilities	23,797			56,915
Other long-term liabilities	225			234
Long-term debt, net	16,508			16,417
Convertible subordinated debt, net	—			—
Total liabilities	40,530			73,566
Stockholders’ equity:
Preferred stock, $0.01 par value: 10,000 shares authorized; no shares issued or outstanding	—			—
Common stock, $0.01 par value: 250,000 shares authorized; 68,426 and 67,703 shares outstanding at December 31, 2014 and September 30, 2014, respectively	684			677
Additional paid-in-capital	1,925,774			1,924,984
Accumulated deficit	(1,899,444		)	(1,894,403		)
Total stockholders’ equity	27,014			31,258
	$	67,544		$	104,824

VITESSE SEMICONDUCTOR CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months ended
	December 31,			September 30,			December 31,
	2014			2014			2013
Net revenues:	(in thousands, except per share data)
Product revenues	$	23,969		$	27,007		$	24,863
Intellectual property revenues	786			1,664			2,220
Net revenues	24,755			28,671			27,083
Costs and expenses:
Cost of product revenues	10,053			10,571			10,676
Engineering, research and development	11,337			10,869			10,679
Selling, general and administrative	7,415			7,792			7,854
Amortization of intangible assets	100			93			88
Costs and expenses	28,905			29,325			29,297
Loss from operations	(4,150		)	(654		)	(2,214		)
Other expense:
Interest expense, net	818			1,521			1,704
Loss on extinguishment of debt	—			—			1,594
Other, net	28			28			61
Other expense, net	846			1,549			3,359
Loss before income tax expense (benefit)	(4,996		)	(2,203		)	(5,573		)
Income tax expense (benefit)	45			282			(202		)
Net loss	$	(5,041	)	$	(2,485	)	$	(5,371	)

Net loss per common share - basic and diluted	$	(0.07	)	$	(0.04	)	$	(0.09	)
Weighted average common shares outstanding - basic and diluted	67,974			67,580			57,610

VITESSE SEMICONDUCTOR CORPORATION
UNAUDITED RECONCILIATION OF GAAP RESULTS TO NON-GAAP RESULTS

	Three Months Ended
	December 31,			September 30,			December 31,
	2014			2014			2013
	(in thousands, except per share data)

UNAUDITED RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS

GAAP net loss	$	(5,041	)	$	(2,485	)	$	(5,371	)
Adjustments:
Stock-based compensation charges	1,831			1,609			1,265
Amortization of intangible assets	100			93			88
Loss on extinguishment of debt	—			—			1,594
Total GAAP to non-GAAP adjustments	1,931			1,702			2,947
Non-GAAP net loss	$	(3,110	)	$	(783	)	$	(2,424	)
Net loss per common share - basic and diluted:
GAAP net loss per common share	$	(0.07	)	$	(0.04	)	$	(0.09	)
Adjustments	0.03			0.03			0.05
Non-GAAP net loss per common share	$	(0.04	)	$	(0.01	)	$	(0.04	)

UNAUDITED RECONCILIATION OF GAAP LOSS FROM OPERATIONS TO NON-GAAP (LOSS) INCOME FROM OPERATIONS

GAAP loss from operations	$	(4,150	)	$	(654	)	$	(2,214	)
Adjustments:
Stock-based compensation charges	1,831			1,609			1,265
Amortization of intangible assets	100			93			88
Total GAAP to non-GAAP adjustments	1,931			1,702			1,353
Non-GAAP (loss) income from operations	$	(2,219	)	$	1,048		$	(861	)

UNAUDITED RECONCILIATION OF GAAP OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES

GAAP operating expenses:
Engineering, research and development	$	11,337		$	10,869		$	10,679
Selling, general and administrative	7,415			7,792			7,854
Amortization of intangible assets	100			93			88
Total GAAP operating expenses	18,852			18,754			18,621
Adjustments:
Stock-based compensation charges	1,601			1,405			1,081
Amortization of intangible assets	100			93			88
Total GAAP to non-GAAP adjustments	1,701			1,498			1,169
Non-GAAP operating expenses	$	17,151		$	17,256		$	17,452

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