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Inphi Corporation Announces Third Quarter 2012 Results

Nov 01, 2012 (Marketwire via COMTEX) --Inphi Corporation (NYSE: IPHI), a leading provider of high-speed mixed signal semiconductor solutions for the communications and computing markets, today announced financial results for its third quarter ended September 30, 2012.

Revenue for the third quarter of 2012 was $24.8 million, up 50% from $16.5 million reported for the third quarter of 2011. This was also up 6 % sequentially compared to $23.3 million reported for the second quarter of 2012. 

Gross margin under U.S. generally accepted accounting principles (GAAP) for the third quarter of 2012 was 64.7% of revenue, compared with 64.3% of revenue for the second quarter of 2012 and 60.1% of revenue for the third quarter of 2011.

GAAP net loss for the third quarter of 2012 was $1.1 million, or ($0.04) per diluted common share, compared with a GAAP net loss of $1.6 million or ($0.06) per diluted common share for the second quarter of 2012 and a GAAP net loss of $2.6 million, or ($0.10) per diluted common share, for the third quarter of 2011.

Inphi reports gross margin, net income and earnings per share in accordance with GAAP and, additionally, on a non-GAAP basis. A reconciliation of the GAAP to non-GAAP gross margin, net income, and earnings per share, as well as a description of the items excluded from the non-GAAP calculations, is included in the financial statements portion of this press release. 

Gross margin on a non-GAAP basis for the third quarter of 2012 was 65.6% of revenue, compared with 65.1% for the second quarter of 2012 and 65.2% of revenue for the third quarter of 2011.

Non-GAAP net income for the third quarter of 2012 was $1.5 million, or $0.05 per diluted common share. This compared with non-GAAP net income of $1.5 million or $0.05 per diluted common share for the second quarter of 2012 and non-GAAP net income of $0.2 million, or $0.01 per diluted share, for the third quarter of 2011.

"Inphi delivered a record $24.8 million in revenue for the third quarter," said Ford Tamer, President and CEO of Inphi. "In spite of the near-term market weakness, our latest technologies are building important design wins with key customers and we remain optimistic about the company's continued prospects for growth."

Press Release Highlights

Nine Months 2012 Results
For the nine months ended September 30, 2012, revenue was $68.3 million, compared with $62.0 million for the nine months ended September 30, 2011. GAAP net loss for the nine months ended September 30, 2012 was $4.1 million, or ($0.15) per diluted share, on approximately 28.3 million diluted weighted average common shares outstanding. This compared with GAAP net income of $2.2 million, or $0.08 per diluted share, on approximately 29.4 million diluted weighted average common shares outstanding for the nine months ended September 30, 2011.

Non-GAAP net income for the nine months ended September 30, 2012 was $4.0 million, or $0.14 per diluted weighted average common share outstanding. This compared with non-GAAP net income of $7.0 million for the nine months ended September 30, 2011, or $0.24 per diluted weighted average common share outstanding.

Business Outlook
The following statements are based on our current expectations for the fourth quarter of 2012. These statements are forward-looking and actual results may differ materially.

  • Based on a slowing macroeconomic environment for Server markets, we expect our revenues to be down 3% -- 12% for Q4 2012, resulting in $ 22.9 million at the midpoint -- plus or minus $ 1 million.
  • GAAP net loss, which includes non-cash stock based compensation expense, is expected to be a loss of $1.3 million to $2.3 million, or ($0.04) to ($0.08) per diluted common share on an estimated 30 million fully diluted common shares.
  • Non-GAAP net income, excluding stock-based compensation expense, is expected to be between $0.1 million and $1.1 million, or $0.00 - $0.04 per diluted common share.

Quarterly Conference Call Today
Inphi plans to hold a conference call at 5:00 p.m. Eastern Time / 2:00 p.m. Pacific Time today with Ford Tamer, President and Chief Executive Officer, and John Edmunds, Chief Financial Officer, to discuss third quarter of 2012 results. 

The call can be accessed by dialing (866) 788-0545; international callers should dial (857) 350-1683, participant passcode: 38891315. Please dial-in ten minutes prior to the scheduled conference call time. A live and archived webcast of the call will be available on Inphi's website at http://investors.inphi.com for up to 30 days after the call.

About Inphi
Inphi Corporation is a leading provider of high-speed mixed signal semiconductor solutions for the communications and computing markets. Inphi's end-to-end data transport platform delivers high signal integrity at leading-edge data speeds, addressing performance and bandwidth bottlenecks in networks, from fiber to memory. Inphi's solutions minimize latency in computing environments and enable the rollout of next- generation communications infrastructure. Inphi's solutions provide a vital interface between analog signals and digital information in high-performance systems, such as telecommunications transport systems, enterprise networking equipment, enterprise and data center servers, and storage platforms. To learn more about Inphi, visit www.inphi.com.

Cautionary Note Concerning Forward-Looking Statements
Statements in the press release and certain matters to be discussed on the third quarter of 2012 conference call regarding Inphi Corporation, which are not historical facts, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by terms such as outlook, believe, expect, may, will, provide, could, and should, and the negative of these terms or other similar expressions. These statements include statements relating to: our business outlook and current expectations for the fourth quarter of 2012, including our revenue, gross margin, stock-based compensation expense, operating performance, net income, earnings per share; expectations of our growth; expectations of economic trends and macroeconomic conditions; benefits of using non-GAAP financial measures; benefits of our products; and our operating prospects. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from those anticipated as a result of various factors, including: the Company's ability to sustain profitable operations due to its history of losses and accumulated deficit; dependence on a limited number of customers for a substantial portion of revenue and lack of long-term purchase commitments from our customers; product defects; risk related to intellectual property matters, lengthy sales cycle and competitive selection process; lengthy and expensive qualification processes; ability to develop new or enhanced products in a timely manner; development of the markets that the Company targets; market demand for the Company's products; reliance on third parties to manufacture, assemble and test products; ability to compete; and other risks inherent in fabless semiconductor businesses. In addition, actual results could differ materially due to changes in tax rates or tax benefits available, changes in claims that may or may not be asserted, as well as changes in pending litigation. For a discussion of these and other related risks, please refer to Inphi Corporation's recent SEC filings, including its Annual Report on Form 10-K for the year ended December 31, 2011, which are available on the SEC's website at www.sec.gov. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date thereof. Inphi Corporation undertakes no obligation to update forward-looking statements for any reason, except as required by law, even as new information becomes available or other events occur in the future.

Inphi, the Inphi logo and Think fast are registered trademarks of Inphi Corporation. All other trademarks used herein are the property of their respective owners.

 
INPHI CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of dollars, except share and per share amounts)
(Unaudited)
                       
    Three Months Ended
September 30,
    Nine Months Ended
September 30,
    2012     2011     2012     2011
Revenue   $ 24,762     $ 16,482     $ 68,271     $ 61,987
Cost of revenue     8,734       6,573       24,490       22,418
                               
Gross margin     16,028       9,909       43,781       39,569
                               
Operating expenses:                              
  Research and development     10,500       6,951       29,072       20,612
  Sales and marketing     3,079       3,886       10,347       9,605
  General and administrative     3,263       2,570       9,630       6,989
                               
Total operating expenses     16,842       13,407       49,049       37,206
                               
Income (loss) from operations     (814 )     (3,498 )     (5,268 )     2,363
                               
Other income     230       142       678       273
                               
Income (loss) before income taxes     (584 )     (3,356 )     (4,590 )     2,636
Provision (benefit) for income taxes     471       (725 )     (453 )     424
                               
Net income (loss)   $ (1,055 )   $ (2,631 )   $ (4,137 )   $ 2,212
                               
                               
Earnings per share:                              
    Basic   $ (0.04 )   $ (0.10 )   $ (0.15 )   $ 0.08
    Diluted   $ (0.04 )   $ (0.10 )   $ (0.15 )   $ 0.08
                               
Weighted-average shares used in computing earnings per share:                              
    Basic     28,491,789       27,477,137       28,284,612       26,471,544
    Diluted     28,491,789       27,477,137       28,284,612       29,365,902
                               

The following table presents details of stock-based compensation expense included in each functional line item in the consolidated statements of operations above:

                 
    Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2012   2011   2012   2011
    (in thousands of dollars)
    (Unaudited)
Cost of revenue   $ 210   $ 66   $ 529   $ 226
Research and development     1,721     851     4,368     2,196
Sales and marketing     490     584     2,034     1,382
General and administrative     988     490     2,406     1,130
                         
    $ 3,409   $ 1,991   $ 9,337   $ 4,934
                         
   
   
INPHI CORPORATION  
CONSOLIDATED BALANCE SHEETS  
(in thousands of dollars)  
(Unaudited)  
             
    September 30,
2012
    December 31, 2011  
Assets                
Current assets:                
  Cash and cash equivalents   $ 31,651     $ 29,696  
  Short-term investments in marketable securities     91,062       89,283  
  Accounts receivable, net     12,864       9,358  
  Inventories     4,618       5,716  
  Deferred tax assets and other current assets     7,669       6,032  
    Total current assets     147,864       140,085  
                 
Property and equipment, net     12,351       9,566  
Goodwill     5,875       5,875  
Deferred tax assets and other assets     18,162       17,102  
      Total assets   $ 184,252     $ 172,628  
                 
Liabilities and Stockholders' Equity                
                 
Current liabilities:                
  Accounts payable   $ 5,301     $ 5,016  
  Accrued expenses and other current liabilities     4,642       3,745  
  Deferred revenue     2,409       1,929  
                   
    Total current liabilities     12,352       10,690  
                 
Other liabilities     3,629       3,534  
    Total liabilities     15,981       14,224  
                 
Stockholders' equity:                
  Common Stock     29       28  
  Additional paid-in capital     204,005       190,314  
  Accumulated deficit     (36,850 )     (32,713 )
  Accumulated other comprehensive income     1,087       775  
Total stockholders' equity     168,271       158,404  
                 
Total liabilities and stockholders' equity   $ 184,252     $ 172,628  
 
 
INPHI CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(in thousands of dollars, except share and per share amounts)
 

To supplement the audited financial data presented on a GAAP basis, the Company discloses certain non-GAAP financial measures, which exclude stock-based compensation, certain warranty, legal costs and other claims and restructuring charges of its Taiwan subsidiary. These non-GAAP financial measures are not in accordance with GAAP. These results should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures. The Company believes that its non-GAAP financial information provides useful information to management and investors regarding financial and business trends relating to its financial condition and results of operations; non-GAAP financial information excludes charges or benefits that management considers to be outside of the Company's core operating results. The Company believes that the non-GAAP measures of gross margin, net income and earnings per share, in combination with the Company's financial results calculated in accordance with GAAP, provide investors with additional perspective and a more meaningful understanding of the Company's ongoing operating performance. In addition, the Company's management uses these non-GAAP measures to review and assess the financial performance of the Company, to determine executive officer incentive compensation and to plan and forecast performance in future periods. The Company's non-GAAP measurements are not prepared in accordance with GAAP and are not an alternative to GAAP financial information; these measurements may be calculated differently than non-GAAP financial information disclosed by other companies.

 
INPHI CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(in thousands of dollars, except share and per share amounts)
(Unaudited)
                           
    Three Months Ended
September 30,
    Nine Months Ended
September 30,
   
    2012     2011     2012     2011    
GAAP net income (loss)   $ (1,055 )   $ (2,631 )   $ (4,137 )   $ 2,212    
Adjusting items to GAAP net income (loss):                                  
  Operating expenses related to stock-based compensation expense, net of tax effect     1,688   (a)   1,173   (a)   5,789   (a)   3,183   (a)
  Adjustment to revenue as a result of warranty claim     -       -       465   (b)   -    
  Legal expense and accrual of provisional costs     108   (c)   -       608   (c)   -    
  Taiwan restructuring charges     -       1,646   (d)   -       1,646   (d)
  Delta in interim period tax allocation from GAAP to non-GAAP     766   (e)   -       1,291   (e)   -    
Non-GAAP net income   $ 1,507     $ 188     $ 4,016     $ 7,041    
                                   
Shares used in computing non-GAAP basic earnings per share     28,491,789       27,477,137       28,284,612       26,471,544    
                                   
Shares used in computing non-GAAP diluted earnings per share     29,844,119       29,316,086       29,733,829       29,365,902    
                                   
Non-GAAP earnings per share:                                  
  Basic   $ 0.05     $ 0.01     $ 0.14     $ 0.27    
  Diluted   $ 0.05     $ 0.01     $ 0.14     $ 0.24    
                                   
GAAP gross margin as a % of revenue     64.7 %     60.1 %     64.1 %     63.8 %  
Stock-based compensation:                                  
  Cost of revenue     0.9 %     0.4 %     0.8 %     0.4 %  
Restructuring charges     -       4.7 %     -       1.3 %  
Adjustment to revenue as a result of warranty claim     -       -       0.4 %     -    
Non-GAAP gross margin as a % of revenue     65.6 %     65.2 %     65.3 %     65.5 %  
   
   
 (a) Reflects the stock-based compensation expense recorded relating to stock based awards. The Company excludes this item when it evaluates the continuing operational performance of the Company as management believes this GAAP measure is not indicative of its core operating performance.
 (b) Reflects reduction in revenue as a result of warranty claim of a customer. The Company excludes this item when it evaluates the continuing operational performance of the Company as management believes this GAAP measure is not indicative of its core operating performance.
 (c) Reflects legal expense and accrual of provisional costs with regard to employment and other related claims, net of insurance reimbursement. The Company excludes this item when it evaluates the continuing operational performance of the Company as management believes this GAAP measure is not indicative of its core operating performance.
 (d) During the third quarter of 2011, the Company decided to discontinue the sale of acquired legacy products in Taiwan. The restructuring expenses were reflected in the statements of operations for the three and nine months ended September 30, 2011 as follows:
   
       
Cost of goods sold   $ 782
Operating expenses:      
  Research and development     187
  Sales and marketing     671
  General and administrative     6
Total   $ 1,646
       
   
  The Company excludes this item when it evaluates the continuing operational performance of the Company as management believes this GAAP measure is not indicative of its core operating performance.
   
(e) Reflects the delta in interim period tax allocation from GAAP to non-GAAP related to non-GAAP adjustments. The Company excludes this item when it evaluates the continuing operational performance of the Company as management believes this GAAP measure is not indicative of its core operating performance.
   
   
   
INPHI CORPORATION  
RECONCILIATION OF GAAP TO NON-GAAP MEASURES -FOURTH QUARTER 2012 GUIDANCE  
(in thousands of dollars, except share and per share amounts)  
(Unaudited)  
             
    Three Months Ending
December 31, 2012
 
    High     Low  
Estimated GAAP net income (loss)   $ (1,300 )   $ (2,300 )
Adjusting items to estimated GAAP net income (loss):                
  Operating expenses related to stock-based compensation expense     3,400       3,400  
  Tax effect of stock-based compensation expense     (1,000 )     (1,000 )
Estimated non-GAAP net income   $ 1,100     $ 100  
                 
Shares used in computing estimated non-GAAP diluted earnings per share     30,000,000       30,000,000  
                 
Estimated non-GAAP diluted earnings per share   $ 0.04     $ 0.00  
                 
Corporate Contact:
        Kim Markle
        Inphi
        408-217-7329
        kmarkle@inphi.com
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