MACOM Reports Revenue $124.9 million and EPS $0.41 (non-GAAP)

MACOM Reports Revenue $124.9 million and EPS $0.41 (non-GAAP) for Fiscal Second Quarter; Revenue Exceeds Guidance on Strength in Networks

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Non-GAAP Financial Measures

In addition to GAAP reporting, MACOM provides investors with non-GAAP financial information, including revenue, gross margin, operating margin, operating income, net income, earnings per share, EBITDA and other data calculated on a non-GAAP basis. This non-GAAP information excludes the operations of Nitronex prior to the date of acquisition, discontinued operations, the impact of fair value accounting in merger and acquisitions (M&A) of businesses, M&A costs, including acquisition and related integration costs, certain cost savings from synergies expected from M&A activities, income and expenses from transition services related to M&A activities, expected amortization of acquisition-related intangibles, share-based and other non-cash compensation expense, certain cash compensation, restructuring charges, litigation settlement and costs, changes in the carrying values of liabilities measured at fair value, contingent consideration, amortization of debt discounts and issuance costs, other non-cash expenses, earn-out costs, exited leased facility costs and certain income tax items. Management does not believe that the excluded items are reflective of MACOM's underlying performance. The exclusion of these and other similar items from MACOM's non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent or unusual. These and other similar items are also excluded from EBITDA, which is non-GAAP earnings before interest, income taxes, depreciation and amortization. MACOM believes this non-GAAP financial information provides additional insight into MACOM's on-going performance and has, therefore, chosen to provide this information to investors for a consistent basis of comparison and to help them evaluate the results of MACOM's on-going operations and enable more meaningful period to period comparisons. These non-GAAP measures are provided in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial data is included in the supplemental financial data attached to this press release.


M/A-COM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited and in thousands, except per share data)

	Three Months Ended									Six Months Ended
	April 3,			January 2,			April 4,			April 3,			April 4,
	2015			2015			2014			2015			2014

Revenue	$	124,885		$	114,864		$	107,827		$	239,749		$	191,981
Cost of revenue	70,878			60,663			80,964			131,541			129,396
Gross profit	54,007			54,201			26,863			108,208			62,585
Operating expenses:
Research and development	21,061			19,474			20,347			40,535			32,777
Selling, general and administrative	29,227			25,599			24,504			54,826			43,887
Restructuring charges	413			—			2,635			413			15,725
Total operating expenses	50,701			45,073			47,486			95,774			92,389
Income (loss) from operations	3,306			9,128			(20,623		)	12,434			(29,804		)
Other income (expense):
Warrant liability expense	(5,609		)	(10,608		)	(4,066		)	(16,217		)	(2,784		)
Interest expense	(4,723		)	(4,723		)	(1,622		)	(9,446		)	(2,208		)
Other income	2,124			375			1,009			2,499			1,087
Total other expense	(8,208		)	(14,956		)	(4,679		)	(23,164		)	(3,905		)

Loss before income taxes	(4,902		)	(5,828		)	(25,302		)	(10,730		)	(33,709		)
Income tax provision (benefit)	405			478			(5,680		)	883			(7,271		)
Loss from continuing operations	(5,307		)	(6,306		)	(19,622		)	(11,613		)	(26,438		)
Loss from discontinued operations	—			—			(2,500		)	—			(4,605		)
Net loss	$	(5,307	)	$	(6,306	)	$	(22,122	)	$	(11,613	)	$	(31,043	)

Net loss per share:
Basic:
Loss from continuing operations	$	(0.10	)	$	(0.13	)	$	(0.42	)	$	(0.24	)	$	(0.57	)
Loss from discontinued operations	—			—			(0.05		)	—			(0.10		)
Loss per share - basic	$	(0.10	)	$	(0.13	)	$	(0.47	)	$	(0.24	)	$	(0.67	)

Diluted:
Loss from continuing operations	$	(0.10	)	$	(0.13	)	$	(0.42	)	$	(0.24	)	$	(0.57	)
Loss from discontinued operations	—			—			(0.05		)	—			(0.10		)
Loss per share - diluted	$	(0.10	)	$	(0.13	)	$	(0.47	)	$	(0.24	)	$	(0.67	)

Shares:
Basic	50,593			47,606			46,808			49,100			46,656
Diluted	50,593			47,606			46,808			49,100			46,656


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
	April 3, 2015				January 2, 2015				April 4, 2014

	Amount				Amount				Amount
Revenue - GAAP	$124,885				$114,864				$107,827
Nitronex prior to acquisition	—				—				(362	)
Revenue - Non-GAAP	$124,885				$114,864				$107,465

	Amount		% Revenue		Amount		% Revenue		Amount		% Revenue

Gross Profit - GAAP	$54,007		43.2	%	$54,201		47.2	%	$26,863		24.9	%
Nitronex prior to acquisition	—		—		—		—		16		0.1
Amortization expense	7,347		5.9		5,359		4.7		6,262		5.8
Non-cash compensation expense	599		0.5		354		0.3		426		0.4
Equity-based compensation	179		0.1		58		0.1		30		—
Acquisition FMV step-up	3,538		2.8		835		0.7		18,003		16.8
Third-party engineering costs	305		0.2		924		0.8		570		0.5
Integration costs and synergy savings	356		0.3		(4	)	—		822		0.8
Gross Profit - non-GAAP	$66,331		53.1	%	$61,727		53.7	%	$52,992		49.3	%

Research and Development - GAAP	$21,061		16.9	%	$19,474		17.0	%	$20,347		18.9	%
Nitronex prior to acquisition	—		—		—		—		(438	)	(0.5	)
Non-cash compensation expense	(1,620	)	(1.3	)	(1,038	)	(0.9	)	(728	)	(0.7	)
Equity-based compensation	(669	)	(0.5	)	(519	)	(0.5	)	(137	)	(0.1	)
Acquisition FMV step-up	(204	)	(0.2	)	(204	)	(0.2	)	(183	)	(0.2	)

Integration costs and synergy savings	(137	)	(0.1	)	(171	)	(0.1	)	(2,414	)	(2.2	)
Third-party engineering costs	305		0.2		924		0.8		570		0.5

Research and Development - non-GAAP	$18,736		15.0	%	$18,466		16.1	%	$17,017		15.8	%

Selling, General and Administrative - GAAP	$29,227		23.4	%	$25,599		22.3	%	$24,504		22.7	%
Nitronex prior to acquisition	—		—		—		—		(191	)	(0.4	)
Amortization expense	(3,096	)	(2.5	)	(1,053	)	(0.9	)	(476	)	(0.4	)
Non-cash compensation expense	(7,578	)	(6.1	)	(2,405	)	(2.1	)	(2,136	)	(2.0	)
Equity-based compensation	(501	)	(0.4	)	(317	)	(0.3	)	(214	)	(0.2	)
Acquisition FMV step-up	(28	)	—		(28	)	—		(21	)	—
Litigation costs	(971	)	(0.8	)	(717	)	(0.6	)	(440	)	(0.4	)
Transaction expenses	530		0.4		(4,636	)	(4.0	)	(250	)	(0.2	)

Integration costs and synergy savings	(282	)	(0.2	)	(296	)	(0.3	)	(6,178	)	(5.4	)
Selling, General and Administrative - non-GAAP	$17,301		13.9	%	$16,147		14.1	%	$14,598		13.6	%

Total operating expenses - GAAP	$50,701		40.6	%	$45,073		39.2	%	$47,486		44.0	%
Nitronex prior to acquisition	—		—		—		—		(629	)	(0.6	)
Amortization expense	(3,096	)	(2.5	)	(1,053	)	(0.9	)	(476	)	(0.4	)
Non-cash compensation expense	(9,198	)	(7.4	)	(3,443	)	(3.0	)	(2,864	)	(2.7	)
Equity-based compensation	(1,170	)	(0.9	)	(836	)	(0.7	)	(351	)	(0.3	)
Acquisition FMV step-up	(232	)	(0.2	)	(232	)	(0.2	)	(204	)	(0.2	)
Restructuring charges	(413	)	(0.3	)	—		—		(2,635	)	(2.5	)
Integration costs and synergy savings	(419	)	(0.3	)	(467	)	(0.4	)	(8,592	)	(8.0	)
Litigation costs	(971	)	(0.8	)	(717	)	(0.6	)	(440	)	(0.4	)
Transaction expenses	530		0.4		(4,636	)	(4.0	)	(250	)	(0.2	)
Third-party engineering	305		0.2		924		0.8		570		0.5

Total operating expenses - non-GAAP	$36,037		28.9	%	$34,613		30.1	%	$31,615		29.4	%

Income (loss) from operations - GAAP	$3,306		2.6	%	$9,128		7.9	%	$(20,623	)	(19.1	)%
Nitronex prior to acquisition	—		—		—		—		645		0.8
Amortization expense	10,446		8.4		6,412		5.6		6,738		6.3
Non-cash compensation expense	9,797		7.8		3,797		3.3		3,290		3.1
Equity-based compensation	1,349		1.1		894		0.8		381		0.4
Restructuring charges	413		0.3		—		—		2,635		2.5
Acquisition FMV step-up	3,770		3.0		1,067		0.8		18,207		16.9
Litigation costs	971		0.8		717		0.6		440		0.4
Transaction expenses	(530	)	(0.4	)	4,636		4.0		250		0.2
Integration costs and synergy savings	772		0.6		463		0.6		9,414		8.8
Income from operations - non-GAAP	$30,294		24.3	%	$27,114		23.6	%	$21,377		19.9	%

Net loss - GAAP	$(5,307	)	(4.2	)%	$(6,306	)	(5.5	)%	$(22,122	)	(20.5	)%
Nitronex prior to acquisition	—		—		—		—		645		0.6
Amortization expense	8,566		6.9		5,258		4.6		5,155		4.8
Non-cash compensation expense	8,309		6.7		3,113		2.7		2,517		2.3
Equity-based compensation	1,107		0.9		733		0.6		291		0.3
Contingent consideration	(1,640	)	(1.3	)	—		—		—		—
Restructuring charges	339		0.3		—		—		2,016		1.9
Warrant liability expense	5,609		4.5		10,608		9.2		4,066		3.8
Non-cash interest expense	330		0.3		360		0.3		91		0.1
Acquisition FMV step-up	3,092		2.5		875		0.8		13,061		12.2
Litigation costs	797		0.6		588		0.5		337		0.3
Integration costs and synergy savings	633		0.5		380		0.3		7,201		6.7
Transaction expenses	(435	)	(0.3	)	3,420		3.0		191		0.2
Transition services for divested business	(102	)	(0.1	)	(308	)	(0.3	)	(741	)	(0.7	)
Discontinued operations	—		—		—		—		2,500		2.3
Net income - non-GAAP	$21,298		17.1	%	$18,721		16.3	%	$15,208		14.2	%

Income from operations - non-GAAP	$30,294				$27,114				$21,377
Depreciation expense	3,759				3,453				3,367
Other income, net	—				—				40
EBITDA	$34,053				$30,567				$24,784

Interest expense- GAAP	$4,723				$4,723				$1,622
Non-cash interest expense	(403	)			(439	)			(119	)
Interest expense- non-GAAP	$4,320				$4,284				$1,503

	Three Months Ended
	April 3, 2015				January 2, 2015				April 4, 2014
	Amount		Income (loss) per diluted share		Amount		Income (loss) per diluted share		Amount		Income (loss) per diluted share

Net loss - GAAP	$(5,307	)	$(0.10	)	$(6,306	)	$(0.13	)	$(22,122	)	$(0.47	)

Net income - non-GAAP	$21,298		$0.41		$18,721		$0.38		$15,208		$0.32

Diluted shares - GAAP	50,593				47,606				46,808
Incremental stock options, warrants, restricted stock and units	1,908				1,599				1,406
Diluted shares - non-GAAP	52,501				49,206				48,214


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

	Six Months Ended
	April 3, 2015					April 4, 2014

	Amount					Amount
Revenue - GAAP	$239,749					$191,981
Nitronex prior to acquisition	—					(1,048	)
Revenue - non-GAAP	$239,749					$190,933

	Amount		% Revenue			Amount		% Revenue

Gross Profit - GAAP	$108,208		45.1		%	$62,585		32.6	%
Nitronex prior to acquisition	—		0.1			959		0.5
Amortization expense	12,706		5.3			7,509		3.9
Non-cash compensation expense	953		0.4			709		0.4
Equity-based compensation	237		0.1			30		—
Acquisition FMV step-up	4,373		1.8			18,539		9.7
Integration costs and synergy savings	352		0.1			961		0.5
Third-party engineering costs	1,229		0.5			570		0.3
Gross Profit - non-GAAP	$128,058		53.4		%	$91,862		48.1	%

Research and Development - GAAP	$40,535		16.9		%	$32,777		17.1	%
Nitronex prior to acquisition	—		—			(1,423	)	(0.8	)
Non-cash compensation expense	(2,658	)	(1.1	)		(1,212	)	(0.6	)
Equity-based compensation	(1,188	)	(0.5	)		(137	)	(0.1	)
Acquisition FMV step-up	(408	)	(0.2	)		(255	)	(0.1	)
Integration costs and synergy savings	(308	)	(0.1	)		(2,450	)	(1.3	)
Third-party engineering costs	1,229		0.5			570		0.3
Research and Development - non-GAAP	$37,202		15.5	%		$27,870		14.6	%

Selling, General and Administrative - GAAP	$54,826		22.9		%	$43,887		22.9	%
Nitronex prior to acquisition	—		(0.1		)	(685	)	(0.5	)
Amortization expense	(4,149	)	(1.7		)	(842	)	(0.4	)
Non-cash compensation expense	(9,983	)	(4.2		)	(3,214	)	(1.7	)
Equity-based compensation	(818	)	(0.3		)	(214	)	(0.1	)
Acquisition FMV step-up	(56	)	—			(32	)	—
Integration costs and synergy savings	(578	)	(0.2		)	(6,593	)	(3.5	)
Litigation costs	(1,688	)	(0.7		)	(1,404	)	(0.7	)
Transaction expenses	(4,106	)	(1.7		)	(4,472	)	(2.3	)
Selling, General and Administrative - non-GAAP	$33,448		14.0		%	$26,431		13.8	%
Total operating expenses - GAAP	$95,774		39.9		%	$92,389		48.1	%

Nitronex prior to acquisition	—		0.1			(2,108	)	(1.2	)
Amortization expense	(4,149	)	(1.7		)	(842	)	(0.4	)
Non-cash compensation expense	(12,641	)	(5.3		)	(4,426	)	(2.3	)
Equity-based compensation	(2,006	)	(0.8		)	(351	)	(0.2	)
Acquisition FMV step-up	(464	)	(0.2		)	(287	)	(0.2	)
Contingent consideration and earn-out costs	—		—			—		—
Restructuring charges	(413	)	(0.2		)	(15,725	)	(8.2	)
Integration costs and synergy savings	(886	)	(0.4		)	(9,043	)	(4.7	)
Litigation costs	(1,688	)	(0.7		)	(1,404	)	(0.7	)
Transaction expenses	(4,106	)	(1.7		)	(4,472	)	(2.3	)
Third-party engineering	1,229		0.5			570		0.3
Total operating expenses - non-GAAP	$70,650		29.5		%	$54,301		28.4	%

Income (loss) from operations - GAAP	$12,434		5.2		%	(29,804	)	(15.5	)%
Nitronex prior to Acquisition	—		—			3,067		1.8
Amortization expense	16,858		7.0			8,351		4.4
Non-cash compensation expense	13,594		5.7			5,135		2.7
Equity-based compensation	2,243		0.9			381		0.2
Contingent consideration and earn-out costs	—		—			—		—
Restructuring charges	413		0.2			15,725		8.2
Acquisition FMV step-up	4,837		2.0			18,826		9.9
Integration costs and synergy savings	1,235		0.5			10,004		5.2
Litigation costs	1,688		0.7			1,404		0.7
Transaction expenses	4,106		1.7			4,472		2.3
Income from operations - non-GAAP	$57,408		23.9		%	$37,561		19.7	%

Net loss - GAAP	$(11,613	)	(4.8		)%	$(31,043	)	(16.2	)%
Nitronex prior to acquisition	—		(0.1		)	3,067		1.2
Amortization expense	13,824		5.8			6,389		3.3
Non-cash compensation expense	11,148		4.6			3,928		2.1
Equity-based compensation	1,840		0.8			291		0.2
Contingent consideration	(1,640	)	(0.7		)	—		—
Restructuring charges	339		0.1			12,030		6.3
Warrant liability expense	16,217		6.8			2,784		1.5
Non-cash interest expense	689		0.3			182		0.1
Acquisition FMV step-up	3,966		1.7			13,535		7.1
Integration costs and synergy savings	1,012		0.4			7,652		4.0
Litigation costs	1,385		0.6			1,074		0.6
Transaction expenses	3,261		1.4			3,537		1.9
Transition services for divested business	(409	)	(0.2		)	(741	)	(0.4	)
Discontinued operations	—		—			4,605		2.4
Net income - non-GAAP	$40,019		16.7		%	$27,290		14.3	%


	Amount		Income (loss) per diluted share			Amount		Income per diluted share
Net loss - GAAP	$(11,613	)	$(0.24		)	$(31,043	)	$(0.67	)

Net income - non-GAAP	$40,019		$0.79			$27,290		$0.57

Diluted shares - GAAP	49,100					46,656
Incremental stock options, warrants, restricted stock and units	1,814					1,412
Diluted shares - non-GAAP	50,914					48,068


M/A-COM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited and in thousands)

	April 3,		October 3,
	2015		2014
ASSETS
Current assets:
Cash and cash equivalents	$	73,970	$	173,895
Accounts receivable, net		89,350		75,156
Inventories		84,077		73,572
Deferred income taxes and other		61,343		50,726
Total current assets		308,740		373,349
Property and equipment, net		65,352		50,357
Goodwill and intangible assets, net		357,900		153,417
Deferred income taxes and other		70,487		105,111
TOTAL ASSETS	$	802,479	$	682,234

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	4,062	$	3,478
Accounts payable, accrued liabilities and other		63,844		64,910
Deferred revenue		267		17,258
Total current liabilities		68,173		85,646
Long-term debt, less current portion		342,335		343,178
Common stock warrant liability		32,018		15,801
Deferred income taxes and other		8,028		9,042
Total liabilities		450,554		453,667
Commitments and contingencies
Stockholders' equity		351,925		228,567
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	802,479	$	682,234


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

	Six Months Ended
	April 3,		April 4,
	2015		2014

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$(11,613	)	$(31,043	)
Non-cash adjustments	55,240		43,029
Change in operating assets and liabilities	(27,609	)	(16,270	)
Net cash from operating activities	16,018		(4,284	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net	(222,955	)	(258,108	)
Sale of a business	—		8,627
Strategic investments	(250	)	—
Purchases of property and equipment	(14,036	)	(5,994	)
Acquisition of intellectual property	(1,587	)	(4,096	)
Net cash used in investing activities	(238,828	)	(259,571	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of term notes payable	—		245,000
Payment of debt	(2,982	)	(34,952	)
Capital contributions	—		3,200
Proceeds from stock offering, net	127,959		—
Proceeds from revolving credit facility	100,000		—
Payments on revolving credit facility	(100,000	)	—
Financing activities	(2,092	)	3,258
Net cash from financing activities	122,885		216,506
NET CHANGE IN CASH AND CASH EQUIVALENTS	(99,925	)	(47,349	)
CASH AND CASH EQUIVALENTS — Beginning of period	173,895		110,488
CASH AND CASH EQUIVALENTS — End of period	$73,970		$63,139

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