MACOM Reports Fiscal First Quarter 2018 Financial Results


MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited and in thousands, except per share data)

	Three Months Ended
	December 29, 2017			September 29, 2017			December 30, 2016
	December 29, 2017			September 29, 2017			December 30, 2016
Revenue	$	130,925		$	166,381		$	151,752
Cost of revenue	69,971			79,485			73,257
Gross profit	60,954			86,896			78,495
Operating expenses:
Research and development	41,651			39,398			30,174
Selling, general and administrative	37,634			42,398			36,496
Impairment charges	—			4,352			—
Restructuring charges	4,662			401			1,287
Total operating expenses	83,947			86,549			67,957
(Loss) income from operations	(22,993		)	347			10,538
Other income (expense):
Warrant liability gain (expense)	14,608			13,958			(4,823		)
Interest expense, net	(7,239		)	(6,953		)	(7,350		)
Other income (expense), net	7			(1		)	(4		)
Total other income (expense)	7,376			7,004			(12,177		)

(Loss) income before income taxes	(15,617		)	7,351			(1,639		)
Income tax expense	1,353			7,352			532
Loss from continuing operations	(16,970		)	(1		)	(2,171		)
(Loss) income from discontinued operations	(5,599		)	(10,719		)	1,206
Net (loss) income	$	(22,569	)	$	(10,720	)	$	(965	)

Net (loss) income per share:
Basic:
Loss from continuing operations	$	(0.26	)	$	(0.00	)	$	(0.04	)
(Loss) income from discontinued operations	(0.09		)	(0.17		)	0.02
Loss per share - basic	$	(0.35	)	$	(0.17	)	$	(0.02	)

Diluted:
Loss from continuing operations	$	(0.49	)	$	(0.21	)	$	(0.04	)
(Loss) income from discontinued operations	(0.09		)	(0.16		)	0.02
Loss per share - diluted	$	(0.57	)	$	(0.38	)	$	(0.02	)

Shares - Basic	64,325			64,243			53,737
Shares - Diluted	65,109			65,156			53,737


MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited and in thousands)

	December 29, 2017		September 29, 2017
	December 29, 2017		September 29, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	152,085	$	130,104
Short term investments	44,585		84,121
Accounts receivable, net	97,123		136,096
Inventories	143,136		136,074
Income tax receivable	18,933		18,493
Assets held for sale, current	—		35,571
Prepaids and other current assets	25,363		22,438
Total current assets	481,225		562,897
Property and equipment, net	132,010		131,019
Goodwill and intangible assets, net	918,159		934,857
Deferred income taxes	948		948
Other investments	41,500		—
Other long-term assets	7,418		7,402
TOTAL ASSETS	$	1,581,260	$	1,637,123

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of lease payable	$	796	$	815
Current portion of long-term debt obligations	6,885		6,885
Liabilities held for sale	—		2,144
Accounts payable, accrued liabilities and other	76,788		107,275
Total current liabilities	84,469		117,119
Lease payable, less current portion	19,163		17,275
Long-term debt obligations, less current portion	660,696		661,471
Common stock warrant liability	26,167		40,775
Deferred income taxes	15,555		15,172
Other long-term liabilities	7,409		7,937
Total liabilities	813,459		859,749
Stockholders' equity	767,801		777,374
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,581,260	$	1,637,123


MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited and in thousands)

	Three Months Ended
	December 29, 2017			December 30, 2016
	December 29, 2017			December 30, 2016

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(22,569	)	$	(965	)
Depreciation and amortization	26,874			18,475
Share based compensation	9,992			8,183
Warrant liability (gain) expense	(14,608		)	4,823
Acquired inventory step-up amortization	224			—
Deferred income taxes	403			(1,054		)
Other adjustments to reconcile loss to net operating cash	(4,224		)	1,284
Inventories	(8,017		)	(1,583		)
Accounts receivable	38,874			(4,488		)
Change in other operating assets and liabilities	(26,415		)	(4,268		)
Net cash provided by operating activities	534			20,407
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net	—			875
Purchases, sales and maturities of investments	39,395			(80		)
Purchases of other investments	(5,000		)	—
Payments associated with discontinued operations	(263		)	—
Proceeds from sale of assets	—			104
Purchases of property and equipment	(13,823		)	(4,942		)
Net cash provided by (used in) investing activities	20,309			(4,043		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from corporate facility financing obligation	—			4,250
Payments of notes payable and assumed debt	(1,937		)	(1,801		)
Proceeds from stock option exercises and employee stock purchases	3,241			2,600
Repurchase of common stock	(259		)	—
Other adjustments	—			(38		)
Net cash provided by financing activities	1,045			5,011
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	93			(435		)
NET CHANGE IN CASH AND CASH EQUIVALENTS	21,981			20,940
CASH AND CASH EQUIVALENTS — Beginning of period	130,104			332,977
CASH AND CASH EQUIVALENTS — End of period	$	152,085		$	353,917


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

	Three Months Ended
	December 29, 2017			September 29, 2017			December 30, 2016
	Amount		% Revenue	Amount		% Revenue	Amount		% Revenue
Gross profit - GAAP	$	60,954	46.6	$	86,896	52.2	$	78,495	51.7
Amortization expense	8,146		6.2	8,592		5.2	6,001		4.0
Share-based and non-cash compensation	927		0.7	931		0.6	794		0.5
Acquisition, integration and restructuring related costs	338		0.3	208		0.1	1,546		1.0
Adjusted gross profit (Non-GAAP)	$	70,365	53.7	$	96,627	58.1	$	86,836	57.2


	Three Months Ended
	December 29, 2017					September 29, 2017					December 30, 2016
	Amount			% Revenue		Amount			% Revenue		Amount			% Revenue
Operating expenses - GAAP	$	83,947		64.1		$	86,549		52.0		$	67,957		44.8
Amortization expense	(10,993		)	(8.4	)	(10,993		)	(6.6	)	(6,467		)	(4.3	)
Share-based and non-cash compensation	(8,289		)	(6.3	)	(7,606		)	(4.6	)	(9,291		)	(6.1	)
Impairment and restructuring charges	(4,661		)	(3.6	)	(4,753		)	(2.9	)	(1,287		)	(0.8	)
Litigation costs	(746		)	(0.6	)	(675		)	(0.4	)	(264		)	(0.2	)
Acquisition, integration and restructuring related costs	(2,315		)	(1.8	)	(3,635		)	(2.2	)	(4,768		)	(3.1	)
Other	—			—		(220		)	(0.1	)	—			—
Adjusted operating expenses (Non-GAAP)	$	56,943		43.5		$	58,667		35.3		$	45,880		30.2


	Three Months Ended
	December 29, 2017					September 29, 2017			December 30, 2016
	Amount			% Revenue		Amount		% Revenue	Amount		% Revenue
Income (loss) from operations - GAAP	$	(22,993	)	(17.6	)	$	347	0.2	$	10,538	6.9
Amortization expense	19,139			14.6		19,585		11.8	12,468		8.2
Share-based and non-cash compensation	9,215			7.0		8,538		5.1	10,085		6.6
Impairment and restructuring charges	4,661			3.6		4,753		2.9	1,287		0.8
Litigation costs	746			0.6		675		0.4	264		0.2
Acquisition, integration and restructuring related costs	2,653			2.0		3,843		2.3	6,314		4.2
Other	—			—		218		0.1	—		—
Adjusted income from operations (Non-GAAP)	$	13,421		10.3		$	37,959	22.8	$	40,956	27.0

Depreciation expense	7,466			5.7		7,461		4.5	5,535		3.6
Consulting income	—			—		1,875		1.1	1,875		1.2
Adjusted EBITDA (Non-GAAP)	$	20,887		16.0		$	47,295	28.4	$	48,366	31.9


	Three Months Ended
	December 29, 2017					September 29, 2017					December 30, 2016
	Amount			% Revenue		Amount			% Revenue		Amount			% Revenue
Net (loss) income - GAAP	$	(22,569	)	(17.2	)	$	(10,720	)	(6.4	)	$	(965	)	(0.6	)
Amortization expense	19,139			14.6		19,585			11.8		12,468			8.2
Share-based and non-cash compensation	9,215			7.0		8,538			5.1		10,085			6.6
Impairment and restructuring charges	4,661			3.6		4,753			2.9		1,287			0.8
Warrant liability (gain) expense	(14,608		)	(11.2	)	(13,958		)	(8.4	)	4,823			3.2
Non-cash interest, net	1,028			0.8		827			0.5		702			0.5
Litigation costs	746			0.6		675			0.4		263			0.2
Acquisition, integration and restructuring related costs	2,653			2.0		3,843			2.3		6,314			4.2
Discontinued operations, excluding consulting income	5,599			4.3		12,594			7.6		669			0.4
Other	—			—		218			0.1		—			—
Tax effect of non-GAAP adjustments	775			0.6		3,981			2.4		(3,810		)	(2.5	)
Adjusted net income (Non-GAAP)	$	6,639		5.1		$	30,336		18.2		$	31,836		21.0


	Three Months Ended
	December 29, 2017						September 29, 2017						December 30, 2016
	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 (loss) income - GAAP	$	(22,569	)				$	(10,720	)				(965		)
Warrant liability gain	(14,608		)				(13,958		)				—
Net (loss) income - diluted	$	(37,177	)	$	(0.57	)	$	(24,678	)	$	(0.38	)	$	(965	)	$	(0.02	)
Adjusted (Non-GAAP)	$	6,639		$	0.10		$	30,336		$	0.46		$	31,836		$	0.57


	Three Months Ended
	December 29, 2017	September 29, 2017	December 30, 2016
	Shares	Shares	Shares
Diluted shares - GAAP	65,109	64,243	53,737
Incremental shares	500	1,687	1,875
Adjusted diluted shares (Non-GAAP)	65,609	65,930	55,612


	Three Months Ended
	December 29, 2017					September 29, 2017					December 30, 2016
	Amount			%Revenue		Amount			%Revenue		Amount			%Revenue
Interest expense, net - GAAP	$	7,239		5.5		$	6,953		4.2		$	7,350		4.8
Non-cash interest expense	(1,028		)	(0.8	)	(827		)	(0.5	)	(702		)	(0.5	)
Adjusted Interest Expense (Non-GAAP)	$	6,211		4.7		$	6,126		3.7		$	6,648		4.4


	Three Months Ended
	December 29, 2017					September 29, 2017					December 30, 2016
	Amount			%Revenue		Amount			%Revenue		Amount			%Revenue
Cash flow from operations	$	534		0.4		$	12,361		7.4		$	20,407		13.4
Capital expenditures	(13,823		)	(10.6	)	(8,308		)	(5.0	)	(4,942		)	(3.3	)
AppliedMicro transaction related payments	4,015			3.1		3,426			2.1		—			—
Free cash flow (Non-GAAP)	$	(9,274	)	(7.1	)	$	7,479		4.5		$	15,465		10.2
Free cash flow as a percentage of adjusted net income	(140		)%			25		%			49		%

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