MACOM Reports Record Revenue $130.7 million and EPS $0.42

MACOM Reports Record Revenue $130.7 million and EPS $0.42 (non-GAAP) for Fiscal Third Quarter

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, Adjusted 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 assets and 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 Adjusted 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									Nine Months Ended
	July 3,			April 3,			July 4,			July 3,			July 4,
	2015			2015			2014			2015			2014

Revenue	$	130,663		$	124,885		$	112,364		$	370,412		$	304,345
Cost of revenue	70,879			70,878			62,150			202,420			191,546
Gross profit	59,784			54,007			50,214			167,992			112,799
Operating expenses:
Research and development	21,611			21,061			20,810			62,146			53,587
Selling, general and administrative	27,428			29,227			22,065			82,254			65,952
Restructuring charges	558			413			—			971			15,725
Total operating expenses	49,597			50,701			42,875			145,371			135,264
Income (loss) from operations	10,187			3,306			7,339			22,621			(22,465		)
Other income (expense):
Warrant liability (expense) gain	546			(5,609		)	(2,782		)	(15,671		)	(5,566		)
Interest expense	(4,505		)	(4,723		)	(5,625		)	(13,952		)	(7,833		)
Other income (expense)	3,775			(1,376		)	1,354			2,774			2,441
Total other expense	(184		)	(11,708		)	(7,053		)	(26,849		)	(10,958		)

Income (loss) before income taxes	10,003			(8,402		)	286			(4,228		)	(33,423		)
Income tax provision (benefit)	1,976			(865		)	(897		)	1,589			(8,168		)
Income (loss) from continuing operations	8,027			(7,537		)	1,183			(5,817		)	(25,255		)
Income (loss) from discontinued operations	—			—			—			—			(4,605		)
Net income (loss)	$	8,027		$	(7,537	)	$	1,183		$	(5,817	)	$	(29,860	)

Net income (loss) per share:
Basic:
Income (loss) from continuing operations	$	0.15		$	(0.15	)	$	0.03		$	(0.12	)	$	(0.54	)
Income (loss) from discontinued operations	—			—			—			—			(0.10		)
Income (loss) per share - basic	$	0.15		$	(0.15	)	$	0.03		$	(0.12	)	$	(0.64	)

Diluted:
Income (loss) from continuing operations	$	0.15		$	(0.15	)	$	0.02		$	(0.12	)	$	(0.54	)
Income (loss) from discontinued operations	—			—			—			—			(0.10		)
Income (loss) per share - diluted	$	0.15		$	(0.15	)	$	0.02		$	(0.12	)	$	(0.64	)

Shares:
Basic	53,098			50,593			47,280			50,433			46,856
Diluted	55,175			50,593			48,524			50,433			46,856


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
	July 3, 2015							April 3, 2015							July 4, 2014

	Amount							Amount							Amount
Revenue - GAAP	$	130,663						$	124,885						$	112,364

	Amount			% Revenue				Amount			% Revenue				Amount			% Revenue

Gross Profit - GAAP	$	59,784		45.8			%	$	54,007		43.2			%	$	50,214		44.7			%
Amortization expense	6,932			5.3				7,347			5.9				6,270			5.6
Non-cash compensation expense	503			0.4				599			0.5				646			0.6
Equity-based compensation	27			—				179			0.1				23			—
Acquisition FMV step-up	2,464			1.9				3,538			2.8				168			0.1
Third-party engineering costs	396			0.3				305			0.2				400			0.4
Integration costs and synergy savings	487			0.4				356			0.3				345			0.3
Gross Profit - non-GAAP	$	70,593		54.0			%	$	66,331		53.1			%	$	58,066		51.7			%

Research and Development - GAAP	$	21,611		16.5			%	$	21,061		16.9			%	$	20,810		18.5			%
Non-cash compensation expense	(1,506		)	(1.2		)		(1,620		)	(1.3		)		(893		)	(0.8		)
Equity-based compensation	(305		)	(0.2		)		(669		)	(0.5		)		(228		)	(0.2		)
Acquisition FMV step-up	(204		)	(0.2		)		(204		)	(0.2		)		(204		)	(0.2		)
Integration costs and synergy savings	(74		)	(0.1		)		(137		)	(0.1		)		(1,108		)	(1.0		)
Third-party engineering costs	396			0.3				305			0.2				400			0.4
Research and Development - non-GAAP	$	19,918		15.2			%	$	18,736		15.0			%	$	18,777		16.7			%

Selling, General and Administrative - GAAP	$	27,428		21.0			%	$	29,227		23.4			%	$	22,065		19.6			%
Amortization expense	(3,201		)	(2.4		)		(3,096		)	(2.5		)		(505		)	(0.4		)
Non-cash compensation expense	(4,763		)	(3.6		)		(7,578		)	(6.1		)		(1,851		)	(1.6		)
Equity-based compensation	(246		)	(0.2		)		(501		)	(0.4		)		(147		)	(0.1		)
Acquisition FMV step-up	(28		)	—				(28		)	—				(28		)	—
Litigation costs	(559		)	(0.4		)		(971		)	(0.8		)		(1,836		)	(1.6		)
Transaction expenses	(125		)	(0.1		)		530			0.4				—			—
Integration costs and synergy savings	(136		)	(0.1		)		(282		)	(0.2		)		(2,321		)	(2.1		)
Selling, General and Administrative - non-GAAP	$	18,370		14.1			%	$	17,301		13.9			%	$	15,377		13.7			%

Total operating expenses - GAAP	$	49,597		38.0			%	$	50,701		40.6			%	$	42,875		38.2			%
Amortization expense	(3,201		)	(2.4		)		(3,096		)	(2.5		)		(505		)	(0.4		)
Non-cash compensation expense	(6,269		)	(4.8		)		(9,198		)	(7.4		)		(2,744		)	(2.4		)
Equity-based compensation	(551		)	(0.4		)		(1,170		)	(0.9		)		(375		)	(0.3		)
Acquisition FMV step-up	(232		)	(0.2		)		(232		)	(0.2		)		(232		)	(0.2		)
Restructuring charges	(558		)	(0.4		)		(413		)	(0.3		)		—			—
Integration costs and synergy savings	(210		)	(0.2		)		(419		)	(0.3		)		(3,429		)	(3.1		)
Litigation costs	(559		)	(0.4		)		(971		)	(0.8		)		(1,836		)	(1.6		)
Transaction expenses	(125		)	(0.1		)		530			0.4				—			—
Third-party engineering	396			0.3				305			0.2				400			0.4
Total operating expenses - non-GAAP	$	38,288		29.3			%	$	36,037		28.9			%	$	34,154		30.4			%

Income from operations - GAAP	$	10,187		7.8			%	$	3,306		2.6			%	$	7,339		6.5			%
Amortization expense	10,133			7.8				10,446			8.4				6,775			6.0
Non-cash compensation expense	6,772			5.2				9,797			7.8				3,390			3.0
Equity-based compensation	578			0.4				1,349			1.1				398			0.4
Restructuring charges	558			0.4				413			0.3				—			—
Acquisition FMV step-up	2,696			2.1				3,770			3.0				400			0.4
Litigation costs	559			0.4				971			0.8				1,836			1.6
Transaction expenses	125			0.1				(530		)	(0.4		)		—			—
Integration costs and synergy savings	697			0.5				772			0.6				3,774			3.4
Income from operations - non-GAAP	$	32,305		24.7			%	$	30,294		24.3			%	$	23,912		21.3			%

Net income (loss) - GAAP	$	8,027		6.1			%	$	(7,537	)	(6.0		)	%	$	1,183		1.1			%
Amortization expense	8,306			6.4				8,566			6.9				5,183			4.6
Non-cash compensation expense	5,529			4.2				8,309			6.7				2,593			2.3
Equity-based compensation	472			0.4				1,107			0.9				304			0.3
Impairment of minority investment	—			—				2,230			1.8				—			—
Contingent consideration	—			—				(1,640		)	(1.3		)		—			—
Restructuring charges	457			0.3				339			0.3				—			—
Warrant liability expense	(546		)	(0.4		)		5,609			4.5				2,782			2.5
Non-cash interest expense	333			0.3				330			0.3				1,838			1.6
Acquisition FMV step-up	2,210			1.7				3,092			2.5				306			0.3
Litigation costs	(2,822		)	(2.2		)		797			0.6				1,405			1.3
Integration costs and synergy savings	760			0.6				633			0.5				1,270			1.1
Transaction expenses	404			0.3				(435		)	(0.3		)		—			—
Transition services for divested business	—			—				(102		)	(0.1		)		(1,036		)	(0.9		)
Net income - non-GAAP	$	23,130		17.7			%	$	21,298		17.1			%	$	15,828		14.1			%

Income from operations - non-GAAP	$	32,305						$	30,294						$	23,912
Depreciation expense	3,298							3,759							3,296
Adjusted EBITDA	$	35,603						$	34,053						$	27,208

Interest expense- GAAP	$	4,505						$	4,723						$	5,625
Non-cash interest expense	(405		)					(403		)					(2,402		)
Interest expense- non-GAAP	$	4,100						$	4,320						$	3,223


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

Net income (loss) - GAAP	$	8,027		$	0.15			$	(7,537	)	$	(0.15	)		$	1,183		$	0.02

Net income - non-GAAP	$	23,130		$	0.42			$	21,298		$	0.41			$	15,828		$	0.33

Diluted shares - GAAP	55,175							50,593							48,524
Incremental stock options, warrants, restricted stock and units	—							1,908							—
Diluted shares - non-GAAP	55,175							52,501							48,524


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

	Nine Months Ended
	July 3, 2015							July 4, 2014

	Amount							Amount
Revenue - GAAP	$	370,412						$	304,345
Nitronex prior to acquisition	—							(1,048		)
Revenue - non-GAAP	$	370,412						$	303,297

	Amount			% Revenue				Amount			% Revenue

Gross Profit - GAAP	$	167,992		45.4			%	$	112,799		37.1		%
Nitronex prior to acquisition	—			—				959			0.5
Amortization expense	19,638			5.3				13,779			4.5
Non-cash compensation expense	1,456			0.4				1,355			0.4
Equity-based compensation	264			0.1				53			—
Acquisition FMV step-up	6,837			1.8				18,707			6.2
Integration costs and synergy savings	839			0.2				1,306			0.4
Third-party engineering costs	1,625			0.4				970			0.3
Gross Profit - non-GAAP	$	198,651		53.6			%	$	149,928		49.4		%

Research and Development - GAAP	$	62,146		16.8			%	$	53,587		17.6		%
Nitronex prior to acquisition	—			—				(1,423		)	(0.3	)
Non-cash compensation expense	(4,164		)	(1.1		)		(2,105		)	(0.7	)
Equity-based compensation	(1,493		)	(0.4		)		(365		)	(0.1	)
Acquisition FMV step-up	(612		)	(0.2		)		(459		)	(0.2	)
Integration costs and synergy savings	(382		)	(0.1		)		(3,558		)	(1.2	)
Third-party engineering costs	1,625			0.4				970			0.3
Research and Development - non-GAAP	$	57,120		15.4			%	$	46,647		15.4		%

Selling, General and Administrative - GAAP	$	82,254		22.2			%	$	65,952		21.7		%
Nitronex prior to acquisition	—			—				(685		)	(0.2	)
Amortization expense	(7,350		)	(2.0		)		(1,347		)	(0.4	)
Non-cash compensation expense	(14,746		)	(4.0		)		(5,065		)	(1.7	)
Equity-based compensation	(1,064		)	(0.3		)		(361		)	(0.1	)
Acquisition FMV step-up	(84		)	—				(60		)	—
Integration costs and synergy savings	(714		)	(0.2		)		(8,914		)	(2.9	)
Litigation costs	(2,247		)	(0.6		)		(3,240		)	(1.1	)
Transaction expenses	(4,231		)	(1.1		)		(4,472		)	(1.5	)
Selling, General and Administrative - non-GAAP	$	51,818		14.0			%	$	41,808		13.8		%

Total operating expenses - GAAP	$	145,371		39.2			%	$	135,264		44.4		%
Nitronex prior to acquisition	—			—				(2,108		)	(0.4	)
Amortization expense	(7,350		)	(2.0		)		(1,347		)	(0.4	)
Non-cash compensation expense	(18,910		)	(5.1		)		(7,170		)	(2.4	)
Equity-based compensation	(2,557		)	(0.7		)		(726		)	(0.2	)
Acquisition FMV step-up	(696		)	(0.2		)		(519		)	(0.2	)
Restructuring charges	(971		)	(0.3		)		(15,725		)	(5.2	)
Integration costs and synergy savings	(1,096		)	(0.3		)		(12,472		)	(4.1	)
Litigation costs	(2,247		)	(0.6		)		(3,240		)	(1.1	)
Transaction expenses	(4,231		)	(1.1		)		(4,472		)	(1.5	)
Third-party engineering	1,625			0.4				970			0.3
Total operating expenses - non-GAAP	$	108,938		29.4			%	$	88,455		29.2		%

Income (loss) from operations - GAAP	$	22,621		6.1			%	$	(22,465	)	(7.4	)	%
Nitronex prior to Acquisition	—			—				3,067			1.0
Amortization expense	26,988			7.3				15,126			5.0
Non-cash compensation expense	20,366			5.5				8,525			2.8
Equity-based compensation	2,820			0.8				779			0.3
Restructuring charges	971			0.3				15,725			5.2
Acquisition FMV step-up	7,533			2.0				19,226			6.3
Integration costs and synergy savings	1,935			0.5				13,778			4.5
Litigation costs	2,247			0.6				3,240			1.1
Transaction expenses	4,231			1.1				4,472			1.5
Income from operations - non-GAAP	$	89,712		24.2			%	$	61,473		20.3		%

Net loss - GAAP	$	(5,817	)	(1.6		)	%	$	(29,860	)	(9.8	)	%
Nitronex prior to acquisition	—			—				3,067			0.9
Amortization expense	22,130			6.0				11,572			3.8
Non-cash compensation expense	16,951			4.6				6,521			2.2
Equity-based compensation	2,312			0.6				595			0.2
Impairment of minority investment	2,230			0.6				—			—
Contingent consideration	(1,640		)	(0.4		)		—			—
Restructuring charges	796			0.2				12,030			4.0
Warrant liability expense	15,671			4.2				5,566			1.8
Non-cash interest expense	1,023			0.3				2,020			0.7
Acquisition FMV step-up	6,177			1.7				13,841			4.6
Integration costs and synergy savings	1,773			0.5				8,922			2.9
Litigation costs	(1,437		)	(0.4		)		2,479			0.8
Transaction expenses	3,388			0.9				3,537			1.2
Transition services for divested business	(409		)	(0.1		)		(1,777		)	(0.6	)
Discontinued operations	—			—				4,605			1.5
Net income - non-GAAP	$	63,148		17.0			%	$	43,118		14.2		%


	Amount			Income (loss) per diluted share				Amount			Income (loss) per diluted share
Net loss - GAAP	$	(5,817	)	$	(0.12	)		$	(29,860	)	$(0.64)

Net income - non-GAAP	$	63,148		$1.20				$	43,118		$0.89

Diluted shares - GAAP	50,433							46,856
Incremental stock options, warrants, restricted stock and units	2,126							1,349
Diluted shares - non-GAAP	52,559							48,205


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

	July 3,		October 3,
	2015		2014
ASSETS
Current assets:
Cash and cash equivalents	$	80,687	$	173,895
Accounts receivable, net	89,714		75,156
Inventories	84,373		73,572
Deferred income taxes and other	54,380		50,726
Total current assets	309,154		373,349
Property and equipment, net	80,167		50,357
Goodwill and intangible assets, net	351,295		153,417
Deferred income taxes and other	66,098		105,111
TOTAL ASSETS	$	806,714	$	682,234

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of lease	$	554	$	—
Current portion of long-term debt	3,500		3,478
Accounts payable, accrued liabilities and other	61,264		64,910
Deferred revenue	336		17,258
Total current liabilities	65,654		85,646
Lease payable, less current portion	608		—
Long-term debt, less current portion	340,813		343,178
Common stock warrant liability	31,472		15,801
Deferred income taxes and other	7,365		9,042
Total liabilities	445,912		453,667
Commitments and contingencies
Stockholders' equity	360,802		228,567
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	806,714	$	682,234


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

	Nine Months Ended
	July 3,			July 4,
	2015			2014

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(5,817	)	$	(29,860	)
Non-cash adjustments	86,208			47,690
Change in operating assets and liabilities	(52,196		)	(8,170		)
Net cash from operating activities	28,195			9,660
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net	(208,352		)	(258,108		)
Sale of a business	—			8,627
Sale of a product line	—			12,000
Strategic investments	1,250			(5,250		)
Purchases of property and equipment	(32,488		)	(10,279		)
Acquisition of intellectual property	(2,483		)	(5,088		)
Net cash used in investing activities	(242,073		)	(258,098		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable	—			350,000
Payment of assumed debt	—			(34,952		)
Capital contributions	—			3,200
Proceeds from stock offering, net of issuance costs	127,697			—
Proceeds from revolving facility	100,000			—
Proceeds from stock awards and units	5,329			3,777
Financing and offering costs	(39		)	(8,790		)
Payments on revolving facility	(100,000		)	—
Other financing activities	(11,916		)	(1,847		)
Net cash from financing activities	121,071			311,388
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	(401		)	70
NET CHANGE IN CASH AND CASH EQUIVALENTS	(93,208		)	63,020
CASH AND CASH EQUIVALENTS — Beginning of period	173,895			110,488
CASH AND CASH EQUIVALENTS — End of period	$	80,687		$	173,508

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