MACOM Reports Revenue of $133.6 Million, Adjusted Gross Margin

MACOM Reports Revenue of $133.6 Million, Adjusted Gross Margin of 58.1% and Adjusted EPS of $0.46 (non-GAAP) for Fiscal Second Quarter

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⁽¹⁾During the second quarter of fiscal 2016, we early-adopted Accounting Standards Update (ASU) No. 2015-17, Balance Sheet Classification of Deferred Taxes, and applied ASU 2015-17 on a prospective basis. This standard requires that all deferred tax assets and liabilities, and any related valuation allowance, be classified as noncurrent on the balance sheet. As of the second quarter of fiscal 2016, we included $31.4 million of current deferred income tax assets with our noncurrent deferred income tax assets; no adjustments were made to deferred tax liabilities.


M/A-COM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited and in thousands)

	Six Months Ended
	April 1,			April 3,
	2016			2015

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(26,220	)	$	(13,843	)
Adjustments to reconcile net loss to net operating cash	77,452			61,947
Change in operating assets and liabilities	(16,134		)	(46,672		)
Net cash from operating activities	35,098			1,432
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net	(85,516		)	(208,369		)
Purchases, sales and maturities of investments	15,596			—
Gain on disposition of business	3,750			—
Strategic investments	—			(250		)
Purchases of property and equipment	(16,962		)	(14,036		)
Acquisition of intellectual property	(777		)	(1,587		)
Net cash used in investing activities	(83,909		)	(224,242		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of notes payable	(1,750		)	(1,750		)
Proceeds from stock offering	—			127,959
Payment of assumed debt	(9,120		)	(1,232		)
Proceeds from stock option exercises and employee stock purchases	3,071			2,871
Repurchase of common stock	(6,152		)	(4,924		)
Borrowings on revolving facility	—			100,000
Payments on revolving facility	—			(100,000		)
Other adjustments	(1,195		)	(39		)
Net cash from financing activities	(15,146		)	122,885
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	(168		)	—
NET CHANGE IN CASH AND CASH EQUIVALENTS	(64,125		)	(99,925		)
CASH AND CASH EQUIVALENTS — Beginning of period	122,312			173,895
CASH AND CASH EQUIVALENTS — End of period	$	58,187		$	73,970


M/A-COM TECHNOLOGY SOLUTIONS HOLDINGS, INC. RECONCILIATION OF GAAP TO NON-GAAP RESULTS (unaudited and in thousands, except per share data)

	Three Months Ended																		Six Months Ended
	April 1, 2016						January 1, 2016						April 3, 2015						April 1, 2016						April 3, 2015
	Amount						Amount						Amount						Amount						Amount
Revenue - GAAP	$	133,579					$	115,774					$	102,431					$	249,353					$	198,987
Adjusted Revenue (NonGAAP)	$	133,579					$	115,774					$	102,431					$	249,353					$	198,987

	Amount			% Revenue			Amount			% Revenue			Amount			% Revenue			Amount			% Revenue			Amount			% Revenue
Gross Profit - GAAP	$	65,525		49.1			$	60,318		52.1			$	46,714		45.6			$	125,843		50.5			$	94,133		47.3
Intangible amortization expense	6,642			5.0			7,167			6.2			7,347			7.2			13,809			5.5			12,706			6.4
Non-cash compensation expense	500			0.4			491			0.4			577			0.6			991			0.4			919			0.5
Equity-based compensation	191			0.1			51			—			179			0.2			242			0.1			237			0.1
Impairment charges	1,950			1.5			—			—			—			—			1,950			0.8			—			—
Acquisition FMV step-up expense (inventory/fixed assets)	2,646			2.0			(226		)	(0.2		)	3,538			3.5			2,420			1.0			4,373			2.2
Third-party engineering costs	—			—			—			—			305			0.3			—			—			1,229			0.6
Integration costs and synergy savings	102			0.1			158			0.1			356			0.3			260			0.1			352			0.2
Adjusted Gross Profit (NonGAAP)	$	77,556		58.1			$	67,959		58.7			$	59,016		57.6			$	145,515		58.4			$	113,949		57.3

Research and Development - GAAP	$	26,203		19.6			$	25,322		21.9			$	20,439		20.0			$	51,525		20.7			$	39,221		19.7
Non-cash compensation expense	(1,742		)	(1.3		)	(2,142		)	(1.9		)	(1,563		)	(1.5		)	(3,884		)	(1.6		)	(2,568		)	(1.3		)
Equity-based compensation	(1,061		)	(0.8		)	(894		)	(0.8		)	(669		)	(0.7		)	(1,955		)	(0.8		)	(1,188		)	(0.6		)
Acquisition FMV step-up expense (inventory/fixed assets)	(204		)	(0.2		)	(204		)	(0.2		)	(204		)	(0.2		)	(408		)	(0.2		)	(408		)	(0.2		)
Integration costs and synergy savings	(133		)	(0.1		)	(597		)	(0.5		)	(137		)	(0.1		)	(730		)	(0.3		)	(308		)	(0.2		)
Third-party engineering costs	—			—			—			—			305			0.3			—			—			1,229			0.6
Adjusted Research and Development (NonGAAP)	$	23,063		17.3			$	21,485		18.6			$	18,171		17.7			$	44,548		17.9			$	35,978		18.1

Selling, General and Administrative - GAAP	$	34,617		25.9			$	34,686		30.0			$	28,247		27.6			$	69,303		27.8			$	53,475		26.9
Earn-out costs	(26		)	—			196			0.2			—			—			170			0.1			—			—
Intangible amortization expense	(6,304		)	(4.7		)	(4,423		)	(3.8		)	(3,096		)	(3.0		)	(10,727		)	(4.3		)	(4,149		)	(2.1		)
Non-cash compensation expense	(4,210		)	(3.2		)	(7,383		)	(6.4		)	(7,558		)	(7.4		)	(11,592		)	(4.6		)	(9,953		)	(5.0		)
Equity-based compensation	(705		)	(0.5		)	(462		)	(0.4		)	(501		)	(0.5		)	(1,167		)	(0.5		)	(818		)	(0.4		)
Acquisition FMV step-up expense (inventory/fixed assets)	(28		)	—			(28		)	—			(28		)	—			(56		)	—			(56		)	—
Litigation related costs	(232		)	(0.2		)	(108		)	(0.1		)	(206		)	(0.2		)	(340		)	(0.1		)	(766		)	(0.4		)
Transaction expenses	(102		)	(0.1		)	(3,111		)	(2.7		)	530			0.5			(3,213		)	(1.3		)	(4,106		)	(2.1		)
Integration costs and synergy savings	(919		)	(0.7		)	(571		)	(0.5		)	(282		)	(0.3		)	(1,491		)	(0.6		)	(578		)	(0.3		)
Adjusted Selling, General and Administrative (NonGAAP)	$	22,091		16.5			$	18,796		16.2			$	17,106		16.7			$	40,887		16.4			$	33,049		16.6

	Amount			% Revenue			Amount			% Revenue			Amount			% Revenue			Amount			% Revenue			Amount			% Revenue
Total operating expenses - GAAP	$	72,676		54.4			$	60,165		52.0			$	49,099		47.9			$	132,841		53.3			$	93,109		46.8
Intangible amortization expense	(6,304		)	(4.7		)	(4,423		)	(3.8		)	(3,096		)	(3.0		)	(10,727		)	(4.3		)	(4,149		)	(2.1		)
Non-cash compensation expense	(5,951		)	(4.5		)	(9,525		)	(8.2		)	(9,121		)	(8.9		)	(15,477		)	(6.2		)	(12,521		)	(6.3		)
Equity-based compensation	(1,766		)	(1.3		)	(1,356		)	(1.2		)	(1,170		)	(1.1		)	(3,122		)	(1.3		)	(2,006		)	(1.0		)
Acquisition FMV step-up expense (inventory/fixed assets)	(232		)	(0.2		)	(232		)	(0.2		)	(232		)	(0.2		)	(464		)	(0.2		)	(464		)	(0.2		)
Contingent consideration and earn-out costs	(26		)	—			196			0.2			—			—			170			0.1			—			—
Impairment charges	(11,005		)	(8.2		)	—			—			—			—			(11,005		)	(4.4		)	—			—
Restructuring charges	(851		)	(0.6		)	(157		)	(0.1		)	(413		)	(0.4		)	(1,008		)	(0.4		)	(413		)	(0.2		)
Integration costs and synergy savings	(1,053		)	(0.8		)	(1,168		)	(1.0		)	(419		)	(0.4		)	(2,221		)	(0.9		)	(886		)	(0.4		)
Litigation related costs	(232		)	(0.2		)	(108		)	(0.1		)	(206		)	(0.2		)	(340		)	(0.1		)	(766		)	(0.4		)
Transaction expenses	(102		)	(0.1		)	(3,111		)	(2.7		)	530			0.5			(3,213		)	(1.3		)	(4,106		)	(2.1		)
Third-party engineering	—			—			—			—			305			0.3			—			—			1,229			0.6
Adjusted Total Operating Expenses (NonGAAP)	$	45,154		33.8			$	40,281		34.8			$	35,277		34.4			$	85,434		34.3			$	69,027		34.7

Income (loss) from operations - GAAP	$	(7,151	)	(5.4		)	$	153		0.1			$	(2,385	)	(2.3		)	$	(6,998	)	(2.8		)	$	1,024		0.5
Intangible amortization expense	12,946			9.7			11,590			10.0			10,446			10.2			24,536			9.8			16,858			8.5
Non-cash compensation expense	6,452			4.8			10,016			8.7			9,698			9.5			16,468			6.6			13,440			6.8
Equity-based compensation	1,957			1.5			1,407			1.2			1,349			1.3			3,364			1.3			2,243			1.1
Contingent consideration and earn-out costs	26			—			(196		)	(0.2		)	—			—			(170		)	(0.1		)	—			—
Impairment charges	12,955			9.7			—			—			—			—			12,955			5.2			—			—
Restructuring charges	851			0.6			157			0.1			413			0.4			1,008			0.4			413			0.2
Acquisition FMV step-up expense (inventory/fixed assets)	2,878			2.2			6			—			3,770			3.7			2,884			1.2			4,837			2.4
Litigation related costs	232			0.2			108			0.1			206			0.2			340			0.1			766			0.6
Transaction expenses	102			0.1			3,111			2.7			(530		)	(0.5		)	3,213			1.3			4,106			0.4
Integration costs and synergy savings	1,154			0.9			1,326			1.1			772			0.8			2,480			1.0			1,235			2.1
Adjusted Income (Loss) from Operations (NonGAAP)	$	32,402		24.3			$	27,678		23.9			$	23,739		23.2			$	60,080		24.1			$	44,922		22.6
Depreciation expense	4,840			3.6			3,903			3.4			3,702			3.6			8,743			3.5			7,089			3.6
Other income, net	1,792			1.3			1,954			1.7			—			—			3,746			1.5			—			—
Adjusted EBITDA	$	39,034		29.2			$	33,535		29.0			$	27,441		26.8			$	72,569		29.1			$	52,011		26.1

Interest expense- GAAP	$	4,478		3.4			$	4,475		3.9			$	4,723		4.6			$	8,953		3.6			$	9,446		4.7
Non-cash interest expense	(425		)	(0.3		)	(398		)	(0.3		)	(403		)	(0.4		)	(823		)	(0.3		)	(842		)	(0.4		)
Adjusted Interest Expense (NonGAAP)	$	4,053		3.0			$	4,077		3.5			$	4,320		4.2			$	8,130		3.3			$	8,604		4.3

Net income (loss) - GAAP	$	(10,649	)	(8.0		)	$	(15,571	)	(13.4		)	$	(7,537	)	(7.4		)	$	(26,220	)	(10.5		)	$	(13,843	)	(7.0		)
Discontinued operations	(1,396		)	(1.0		)	(1,199		)	(1.0		)	(3,639		)	(3.6		)	(2,595		)	(1.0		)	(7,297		)	(3.7		)
Intangible amortization expense	12,946			9.7			11,590			10.0			10,446			10.2			24,536			9.8			16,858			8.5
Non-cash compensation expense	6,452			4.8			10,016			8.7			9,698			9.5			16,468			6.6			13,440			6.8
Equity-based compensation	1,957			1.5			1,407			1.2			1,349			1.3			3,364			1.3			2,243			1.1
Impairment of minority investment	—			—			—			—			3,500			3.4			—			—			3,500			1.8
Contingent consideration	26			—			(196		)	(0.2		)	(2,000		)	(2.0		)	(170		)	(0.1		)	(2,000		)	(1.0		)
Consulting agreement	1,875			1.4			1,875			1.6			—			—			3,750			1.5			—			—
Impairment charges	12,955			9.7			—			—			—			—			12,955			5.2			—			—
Restructuring charges	851			0.6			157			0.1			413			0.4			1,008			0.4			413			0.2
Warrant liability (gain) expense	4,201			3.1			14,879			12.9			5,609			5.5			19,080			7.7			16,217			8.1
Non-cash interest expense	425			0.3			398			0.3			403			0.4			823			0.3			842			0.4
Acquisition FMV step-up expense (inventory/fixed assets)	2,878			2.2			6			—			3,770			3.7			2,884			1.2			4,837			2.4
Litigation related costs	232			0.2			108			0.1			206			0.2			340			1.0			766			0.6
Integration costs and synergy savings	1,152			0.9			1,306			1.1			772			0.8			2,457			0.1			1,235			0.4
Transaction expenses	102			0.1			3,111			2.7			(530		)	(0.5		)	3,213			1.3			4,106			2.1
Tax effect of non-GAAP adjustments	(8,327		)	(6.2		)	(6,054		)	(5.2		)	(5,830		)	(5.7		)	(14,381		)	(5.8		)	(9,948		)	(5.0		)
Transition services for divested business and other	—			—			—			—			(124		)	(0.1		)	—			—			(499		)	(0.3		)
Adjusted Net Income (NonGAAP)	$	25,680		19.2			$	21,833		18.9			$	16,506		16.1			$	47,512		19.1			$	30,870		15.5

	Three Months Ended																		Six Months Ended
	April 1, 2016						January 1, 2016						April 3, 2015						April 1, 2016						April 3, 2015
	Net Income (Loss)			Income (loss) per diluted share			Net Income (Loss)			Income (loss) per diluted share			Net Income (Loss)			Income (loss) per diluted share			Net Income (Loss)			Income (loss) per diluted share			Net Income (Loss)			Income (loss) per diluted share

GAAP	$	(10,649	)	$	(0.20	)	$	(15,571	)	$	(0.29	)	$	(7,537	)	$	(0.15	)	$	(26,220	)	$	(0.49	)	$	(13,843	)	$	(0.28	)

Adjusted (NonGAAP)	$	25,680		$	0.46		$	21,833		$	0.40		$	16,506		$	0.31		$	47,512		$	0.86		$	30,870		$	0.61

	Shares						Shares						Shares						Shares						Shares
Diluted Shares - GAAP	53,228						53,015						50,593						53,122						49,100
Incremental stock options, warrants, restricted stock and units	2,139						1,996						1,908						2,081						1,815
Adjusted Diluted Shares (NonGAAP)	55,367						55,011						52,501						55,203						50,915

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