PERICOM SEMICONDUCTOR REPORTS
FISCAL SECOND QUARTER 2014 FINANCIAL RESULTS
| § | Net revenues increased 5.3% year-over-year to $32.0 million. |
| § | Achieved 38.1% gross margin (39.8% non-GAAP) and year-over-year increase of 135 bps. |
| § | Net income improved to $0.05 per diluted share; $0.08 on a non-GAAP basis. |
Milpitas, Calif. – January 28, 2014 - Pericom Semiconductor Corporation (NASDAQ: PSEM), a worldwide supplier of high performance connectivity and timing solutions, today announced results for its fiscal 2014 second quarter ended December 28, 2013.
Net revenues for the second quarter were $32.0 million, a decrease of 1.7% from the $32.6 million reported in the first quarter, and an increase of 5.3% from the $30.4 million reported in the comparable period last year. The revenue increase from the prior year is the result of volume increases in the consumer and embedded end-market segments.
GAAP gross margin was 38.1% in the second quarter, a decrease from 39.3% last quarter and an increase from 36.8% in the comparable period last year. On a non-GAAP basis, gross margin was 39.8% in the second quarter, which reflects exclusion of share-based compensation, amortization of intangible assets and amortization of fair value adjustments on acquired fixed assets. The comparable non-GAAP gross margins were 40.9% last quarter and 38.5% in the comparable period last year. The improvement in gross margin from the prior year primarily reflects favorable product mix from our focus on higher margin opportunities in networking and telecom, server, storage, and embedded end-market segments. The sequential decline in gross margin primarily reflects increased underutilization expenses in the current quarter.
GAAP net income for the second quarter was $1.2 million, or $0.05 per diluted share, compared with net income of $374,000, or $0.02 per diluted share in the first quarter, and net loss of $5.3 million, or $0.23 per diluted share in the comparable period last year. GAAP net income for all periods included share-based compensation, amortization of intangible assets, and amortization of fair value adjustments, and the current quarter also included a restructuring charge, fixed asset write off, and the benefit of a release of tax reserves. Excluding these items, non-GAAP net income for the second quarter was $1.9 million, or $0.08 per diluted share, compared with non-GAAP net income of $1.9 million or $0.08 per diluted share in the first quarter, and non-GAAP net income of $922,000, or $0.04 per diluted share in the comparable period last year.
The balance sheet remained very strong with cash and cash equivalents and investments in marketable securities of $118 million or $5.12 per diluted share at the end of the second quarter. At quarter-end, working capital was $106 million and the current ratio was 6.9.
“Our gross margin improvement over last year has been driven by growth in selected market segments and aligns with our previously stated strategy,” said Alex Hui, President and CEO of Pericom. “We have expanded our gross margin every year for the last three fiscal years and believe we are on track to deliver another year of improvement in fiscal 2014. We continue to focus on growing business in networking, cloud computing, high-end consumer and embedded applications. We feel positive about our design win pipeline and believe these new opportunities will drive our future revenue growth and margin improvement.”
New Products
In the second quarter of fiscal 2014, Pericom introduced a total of 14 new products in our Signal Integrity, Connectivity/Switching, and Timing product areas. All of these products are targeted to our focus market segments, and were sampled to key customers during the quarter.
NEWS RELEASE January 28, 2014
We introduced 5 new products across our Connectivity/Switching product families which included power management USB chargers and load switches, and supervisory IC products.
We also expanded our Timing solutions for next generation platforms with 6 new products, including high performance clock generators and clock buffers, and real time clock XO families.
For Signal Integrity, we introduced 3 new products targeting advanced USB3 applications.
Share Repurchase Update
On April 26, 2012 the Board authorized a repurchase program for up to $25 million of shares of our common stock. Pursuant to this authorization, the Company repurchased 269,051 shares in the three months ended December 28, 2013 for an aggregate cost of $2,372,000 and an average per share purchase price of $8.82. The remaining balance of potential share repurchases under the authorization is approximately $14.8 million. Shares may be repurchased from time to time in the open market or through private transactions, at the discretion of Pericom management. As of January 24, 2014, Pericom had approximately 22.8 million shares of common stock outstanding.
Fiscal Q3 2014 Outlook
The following statements are based on current expectations. These statements are forward looking, and actual results may differ materially.
| · | Revenues are expected to be in the range of $30.0 million to $32.5 million. |
| · | GAAP gross margins are expected to be between 37.0% and 39.0%, and adjusting for share-based compensation, amortization of intangibles and fair value adjustments that are expected to total approximately 1.5%, non-GAAP gross margins are expected to be in the 38.5% to 40.5% range. |
| · | GAAP operating expenses are expected to be between $11.9 million and $12.4 million, and adjusting for share-based compensation, amortization of intangibles and fair value adjustments that are expected to total approximately $1.1 million, non-GAAP operating expenses are expected to be in the range of $10.8 million to $11.3 million. |
| · | Other income is expected to be between $0.5 million and $0.8 million on a GAAP basis and on a non-GAAP basis, and consists of interest income and realized gains on sales of marketable securities, other income and expenses, and currency exchange gains and losses. |
| · | The effective tax rate is expected to be approximately 30-34% on a GAAP basis and 25-29% on a non-GAAP basis. |
Conference Call
The press release will be followed by a conference call beginning at 1:30 p.m. Pacific time on January 28, 2014. To listen to the call, dial (877) 377-7103 and reference “Pericom”. A slide presentation will accompany the conference call. To view the slides, please visit the investor relations section of www.pericom.com.
The Pericom financial results conference call will be available via a live webcast on the investor relations section of the web site at http://www.pericom.com. Access the web site 15 minutes prior to the start of the call to download and install any necessary audio software. An archived webcast replay will be available on the web site for approximately 90 days.
A taped replay of the conference call will be made available for the period from this evening through midnight on Saturday, February 1st. To listen to the replay, dial toll-free (855) 859-2056 and reference conference ID 41631830.
NEWS RELEASE January 28, 2014
About Pericom
Pericom Semiconductor Corporation (NASDAQ: PSEM) enables serial connectivity with the industry's most complete solutions for the computing, communications, consumer and embedded market segments. Pericom's analog, digital and mixed-signal integrated circuits, along with its frequency control products are essential in the timing, switching, bridging and conditioning of high-speed signals required by today's ever-increasing speed and bandwidth demanding applications. Company headquarters is in Milpitas, California, with design centers and technical sales and support offices globally. Pericom and the Pericom logo are trademarks or registered trademarks of Pericom Semiconductor Corp in the U.S. and/or other countries. Our website is http://www.pericom.com.
Non-GAAP Financial Information
In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (GAAP), this announcement of operating results contains non-GAAP financial measures that exclude the income statement effects of share-based compensation, amortization of intangible assets, fair value adjustments on acquired fixed assets, write off of equipment, restructuring charge, lease restructuring and moving costs, release of tax reserves, tax provision on intercompany transactions and the effects of excluding share-based compensation upon the number of diluted shares used in calculating non-GAAP earnings per share.
We have excluded share-based compensation expense in calculating these non-GAAP financial measures. These expenses are non-cash in nature and rely on valuations of the future market price of our common stock that is difficult to predict and is affected by market factors that are largely not within the control of management. We have excluded amortization of intangible assets, amortization of fair value adjustments on acquired fixed assets, write off of equipment, restructuring charge, lease restructuring and moving costs, release of tax reserves, tax provision on intercompany transactions and the corresponding tax effects because we do not consider them to be related to our core operating performance. We also use non-GAAP data in calculating certain metrics such as non-GAAP cost of goods sold in computing inventory days of supply.
We use the non-GAAP financial measures that exclude these items to make strategic decisions, forecast future results and evaluate the Company’s current operating performance. We believe that the presentation of non-GAAP financial measures that exclude these items is useful to investors because we do not consider these charges either part of the day-to-day business or reflective of the core operational activities of the Company that are within the control of management or that are used to evaluate the Company’s operating performance.
The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.
Safe Harbor Statement
This press release contains forward-looking statements as defined under The Securities Litigation Reform Act of 1995. Forward-looking statements in this release include statements by our CEO concerning future business and revenue growth and margin improvement and the statements under the captions “Fiscal Q3 2014 Outlook”, which regard the anticipated revenues, gross margin, operating expenses, other income, and effective tax rate in the third fiscal quarter of 2014. The Company’s actual results could differ materially from what is set forth in such forward-looking statements due to a variety of risk factors, including softness in demand for our products, price erosion for certain of our products, unexpected difficulties in developing new products, customer decisions to reduce inventory, economic or financial difficulties experienced by our customers, or technological and market changes. All forward-looking statements included in this document are made as of the date hereof, based on information available to the Company as of the date hereof, and Pericom assumes no obligation to update any forward-looking statements. Parties receiving this release are encouraged to review our annual report on Form 10-K for the year ended June 29, 2013, our quarterly report on Form 10-Q for the quarter ended September 28, 2013, and in particular, the risk factors sections contained in those reports.
Contact: Robert Strickland
Pericom Semiconductor
Tel: 408 232-9100
rstrickland@pericom.com
NEWS RELEASE, January 28, 2014
Pericom Semiconductor Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| December 28, | September 28, | December 29, | December 28, | December 29, | ||||||||||||||||
| 2013 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
| Net revenues | $ | 32,040 | $ | 32,608 | $ | 30,433 | $ | 64,648 | $ | 67,182 | ||||||||||
| Cost of revenues | 19,820 | 19,800 | 19,239 | 39,620 | 42,077 | |||||||||||||||
| Gross profit | 12,220 | 12,808 | 11,194 | 25,028 | 25,105 | |||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Research and development | 5,274 | 5,045 | 5,097 | 10,319 | 10,420 | |||||||||||||||
| Selling, general and administrative | 7,126 | 7,687 | 7,532 | 14,813 | 15,171 | |||||||||||||||
| Total operating expenses | 12,400 | 12,732 | 12,629 | 25,132 | 25,591 | |||||||||||||||
| Income (loss) from operations | (180 | ) | 76 | (1,435 | ) | (104 | ) | (486 | ) | |||||||||||
| Interest and other income, net | 1,047 | 486 | 795 | 1,533 | 1,430 | |||||||||||||||
| Income (loss) before income taxes | 867 | 562 | (640 | ) | 1,429 | 944 | ||||||||||||||
| Income tax expense (benefit) | (331 | ) | 231 | 4,756 | (100 | ) | 5,256 | |||||||||||||
| Net income (loss) from consolidated companies | 1,198 | 331 | (5,396 | ) | 1,529 | (4,312 | ) | |||||||||||||
| Equity in net income of unconsolidated affiliate | 27 | 43 | 57 | 70 | 165 | |||||||||||||||
| Net income (loss) | $ | 1,225 | $ | 374 | $ | (5,339 | ) | $ | 1,599 | $ | (4,147 | ) | ||||||||
| Basic income (loss) per share | $ | 0.05 | $ | 0.02 | $ | (0.23 | ) | $ | 0.07 | $ | (0.18 | ) | ||||||||
| Diluted income (loss) per share | $ | 0.05 | $ | 0.02 | $ | (0.23 | ) | $ | 0.07 | $ | (0.18 | ) | ||||||||
| Shares used in computing basic income (loss) per share | 22,800 | 22,794 | 23,515 | 22,797 | 23,529 | |||||||||||||||
| Shares used in computing diluted income (loss) per share | 23,019 | 22,951 | 23,515 | 22,985 | 23,529 | |||||||||||||||
NEWS RELEASE, January 28, 2014
Pericom Semiconductor Corporation
Condensed Consolidated Statements of Operations
(In thousands)
(unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| December 28, | September 28, | December 29, | December 28, | December 29, | ||||||||||||||||
| 2013 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
| Share-based compensation | ||||||||||||||||||||
| Cost of revenues | $ | 50 | $ | 36 | $ | 43 | $ | 86 | $ | 95 | ||||||||||
| Research and development | 313 | 297 | 333 | 610 | 655 | |||||||||||||||
| Selling, general and administrative | 388 | 396 | 484 | 784 | 951 | |||||||||||||||
| Share-based compensation expense | $ | 751 | $ | 729 | $ | 860 | $ | 1,480 | $ | 1,701 | ||||||||||
| Amortization of intangible assets | ||||||||||||||||||||
| Cost of revenues | $ | 481 | $ | 488 | $ | 481 | $ | 969 | $ | 958 | ||||||||||
| Research and development | 17 | 50 | 49 | 67 | 105 | |||||||||||||||
| Selling, general and administrative | 249 | 247 | 242 | 496 | 485 | |||||||||||||||
| Amortization of intangible assets | $ | 747 | $ | 785 | $ | 772 | $ | 1,532 | $ | 1,548 | ||||||||||
NEWS RELEASE, January 28, 2014
Pericom Semiconductor Corporation
Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income
(In thousands)
(unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| December 28, | September 28, | December 29, | December 28, | December 29, | ||||||||||||||||
| 2013 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
| GAAP net income (loss) | $ | 1,225 | $ | 374 | $ | (5,339 | ) | $ | 1,599 | $ | (4,147 | ) | ||||||||
| Reconciling items: | ||||||||||||||||||||
| Share-based compensation expense | 751 | 729 | 860 | 1,480 | 1,701 | |||||||||||||||
| Amortization of intangible assets | 747 | 785 | 772 | 1,532 | 1,548 | |||||||||||||||
| Fair value adjustment to depreciation expense on acquired fixed assets | 51 | 51 | 50 | 102 | 100 | |||||||||||||||
| Restructuring charge | 95 | - | - | 95 | - | |||||||||||||||
| Write off of fixed asset and release of tax reserves | (531 | ) | - | - | (531 | ) | - | |||||||||||||
| Tax on intercompany transaction | - | 15 | 4,987 | 15 | 4,987 | |||||||||||||||
| Lease restructuring and moving costs | - | 522 | - | 522 | - | |||||||||||||||
| Tax effect of adjustments | (452 | ) | (543 | ) | (408 | ) | (995 | ) | (810 | ) | ||||||||||
| Total reconciling items | 661 | 1,559 | 6,261 | 2,220 | 7,526 | |||||||||||||||
| Non-GAAP net income | $ | 1,886 | $ | 1,933 | $ | 922 | $ | 3,819 | $ | 3,379 | ||||||||||
Reconciliation of GAAP Diluted EPS to Non-GAAP Diluted EPS
(unaudited)
| Diluted net income (loss) per share: | ||||||||||||||||||||
| GAAP diluted income (loss) per share | $ | 0.05 | $ | 0.02 | $ | (0.23 | ) | $ | 0.07 | $ | (0.18 | ) | ||||||||
| Adjustments: | ||||||||||||||||||||
| Share-based compensation expense | 0.03 | 0.03 | 0.04 | 0.06 | 0.08 | |||||||||||||||
| Amortization of intangible assets | 0.03 | 0.03 | 0.03 | 0.06 | 0.06 | |||||||||||||||
| Fair value adjustment to depreciation expense on acquired fixed assets | - | - | - | - | - | |||||||||||||||
| Restructuring charge | 0.01 | - | - | 0.01 | - | |||||||||||||||
| Write off of fixed asset and release of tax reserves | (0.02 | ) | - | - | (0.02 | ) | - | |||||||||||||
| Tax on intercompany transaction | - | - | 0.21 | - | 0.21 | |||||||||||||||
| Lease restructuring and moving costs | - | 0.02 | - | 0.02 | - | |||||||||||||||
| Tax effect of adjustments | (0.02 | ) | (0.02 | ) | (0.02 | ) | (0.04 | ) | (0.04 | ) | ||||||||||
| Difference in share count | - | - | 0.01 | - | 0.01 | |||||||||||||||
| Total adjustments | 0.03 | 0.06 | 0.27 | 0.09 | 0.32 | |||||||||||||||
| Non-GAAP diluted income per share | $ | 0.08 | $ | 0.08 | $ | 0.04 | $ | 0.16 | $ | 0.14 | ||||||||||
| Shares used in diluted net income (loss) per share calculation: | ||||||||||||||||||||
| GAAP | 23,019 | 22,951 | 23,515 | 22,985 | 23,529 | |||||||||||||||
| Change in diluted shares from GAAP net loss to non-GAAP net income | - | - | 141 | - | 169 | |||||||||||||||
| Exclude the benefit of share-based compensation expense (1) | 426 | 390 | 507 | 408 | 408 | |||||||||||||||
| Non-GAAP | 23,445 | 23,341 | 24,163 | 23,393 | 24,106 |
(1) For purposes of calculating non-GAAP diluted net income per share, the GAAP diluted weighted average shares outstanding is adjusted to exclude the benefits of unamortized stock compensation costs that are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method.
NEWS RELEASE, January 28, 2014
Pericom Semiconductor Corporation
Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin
(In thousands)
(unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| December 28, | September 28, | December 29, | December 28, | December 29, | ||||||||||||||||
| 2013 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
| GAAP gross margin | $ | 12,220 | $ | 12,808 | $ | 11,194 | $ | 25,028 | $ | 25,105 | ||||||||||
| - % of revenues | 38.1 | % | 39.3 | % | 36.8 | % | 38.7 | % | 37.4 | % | ||||||||||
| Reconciling items: | ||||||||||||||||||||
| Share-based compensation | 50 | 36 | 43 | 86 | 95 | |||||||||||||||
| Amortization of intangible assets | 481 | 488 | 481 | 969 | 958 | |||||||||||||||
| Fair value adjustment to depreciation expense on acquired fixed assets | 10 | 10 | 10 | 20 | 20 | |||||||||||||||
| Total reconciling items | 541 | 534 | 534 | 1,075 | 1,073 | |||||||||||||||
| Non-GAAP gross margin | $ | 12,761 | $ | 13,342 | $ | 11,728 | $ | 26,103 | $ | 26,178 | ||||||||||
| - % of revenues | 39.8 | % | 40.9 | % | 38.5 | % | 40.4 | % | 39.0 | % | ||||||||||
Reconciliation of GAAP R&D Expenses to Non-GAAP R&D Expenses
(unaudited)
| GAAP research and development expenses | $ | 5,274 | $ | 5,045 | $ | 5,097 | $ | 10,319 | $ | 10,420 | ||||||||||
| - % of revenues | 16.5 | % | 15.5 | % | 16.7 | % | 16.0 | % | 15.5 | % | ||||||||||
| Reconciling items: | ||||||||||||||||||||
| Share-based compensation | (313 | ) | (297 | ) | (333 | ) | (610 | ) | (655 | ) | ||||||||||
| Amortization of intangible assets | (17 | ) | (50 | ) | (49 | ) | (67 | ) | (105 | ) | ||||||||||
| Fair value adjustment to depreciation expense on acquired fixed assets | (10 | ) | (10 | ) | (10 | ) | (20 | ) | (20 | ) | ||||||||||
| Restructuring charge | (78 | ) | - | - | (78 | ) | - | |||||||||||||
| Write off of fixed asset | (210 | ) | - | - | (210 | ) | - | |||||||||||||
| Total reconciling items | (628 | ) | (357 | ) | (392 | ) | (985 | ) | (780 | ) | ||||||||||
| Non-GAAP research and development expenses | $ | 4,646 | $ | 4,688 | $ | 4,705 | $ | 9,334 | $ | 9,640 | ||||||||||
| - % of revenues | 14.5 | % | 14.4 | % | 15.5 | % | 14.4 | % | 14.3 | % |
Reconciliation of GAAP SG&A Expenses to Non-GAAP SG&A Expenses
(unaudited)
| GAAP selling, general and administrative expenses | $ | 7,126 | $ | 7,687 | $ | 7,532 | $ | 14,813 | $ | 15,171 | ||||||||||
| - % of revenues | 22.2 | % | 23.6 | % | 24.7 | % | 22.9 | % | 22.6 | % | ||||||||||
| Reconciling items: | ||||||||||||||||||||
| Share-based compensation | (388 | ) | (396 | ) | (484 | ) | (784 | ) | (951 | ) | ||||||||||
| Amortization of intangible assets | (249 | ) | (247 | ) | (242 | ) | (496 | ) | (485 | ) | ||||||||||
| Fair value adjustment to depreciation expense on acquired fixed assets | (31 | ) | (31 | ) | (30 | ) | (62 | ) | (60 | ) | ||||||||||
| Restructuring charge | (17 | ) | - | - | (17 | ) | - | |||||||||||||
| Lease restructuring and moving costs | - | (522 | ) | - | (522 | ) | - | |||||||||||||
| Total reconciling items | (685 | ) | (1,196 | ) | (756 | ) | (1,881 | ) | (1,496 | ) | ||||||||||
| Non-GAAP selling, general and administrative expenses | $ | 6,441 | $ | 6,491 | $ | 6,776 | $ | 12,932 | $ | 13,675 | ||||||||||
| - % of revenues | 20.1 | % | 19.9 | % | 22.3 | % | 20.0 | % | 20.4 | % |
NEWS RELEASE, January 28, 2014
Pericom Semiconductor Corporation
Condensed Consolidated Balance Sheets
(In thousands)
(unaudited)
| As of | As of | |||||||
| December 28, 2013 | June 29, 2013 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 30,270 | $ | 30,844 | ||||
| Short-term investments | 49,648 | 29,447 | ||||||
| Accounts receivable - trade | 23,967 | 22,105 | ||||||
| Inventories | 13,294 | 14,844 | ||||||
| Prepaid expenses and other current assets | 6,044 | 5,886 | ||||||
| Deferred income taxes | 474 | 585 | ||||||
| Total current assets | 123,697 | 103,711 | ||||||
| Property, plant and equipment-net | 60,550 | 60,959 | ||||||
| Investments in unconsolidated affiliates | 2,617 | 2,525 | ||||||
| Deferred income taxes non-current | 3,290 | 3,411 | ||||||
| Long-term investments in marketable securities | 37,952 | 57,392 | ||||||
| Intangible assets | 8,503 | 9,944 | ||||||
| Other assets | 8,319 | 8,625 | ||||||
| Total assets | $ | 244,928 | $ | 246,567 | ||||
| Liabilities and Shareholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 8,693 | $ | 12,184 | ||||
| Accrued liabilities | 9,315 | 8,731 | ||||||
| Total current liabilities | 18,008 | 20,915 | ||||||
| Industrial development subsidy | 6,870 | 7,263 | ||||||
| Deferred tax liabilities | 5,799 | 5,798 | ||||||
| Other long-term liabilities | 2,767 | 3,700 | ||||||
| Total liabilities | 33,444 | 37,676 | ||||||
| Shareholders' equity: | ||||||||
| Common stock and paid in capital | 119,775 | 119,591 | ||||||
| Retained earnings and other comprehensive income | 91,709 | 89,300 | ||||||
| Total shareholders' equity | 211,484 | 208,891 | ||||||
| Total liabilities and shareholders' equity | $ | 244,928 | $ | 246,567 | ||||
