Exhibit 99.01
| | |
| Investor Contact: | | Press Contact: |
| Frank Yoshino | | Katherine Lane |
| Vice President, Finance | | Director, Corporate Communications |
| +1 714 885-3697 | | +1 714 885-3828 |
| frank.yoshino@emulex.com | | katherine.lane@emulex.com |
EMULEX ANNOUNCES THIRD FISCAL QUARTER 2012 RESULTS
Net Revenues Grow 12% and Non-GAAP Net Income Grows 98% Year-Over-Year
COSTA MESA, Calif., April 25, 2012— Emulex Corporation (NYSE:ELX) today announced results for its third quarter of fiscal 2012, which ended on April 1, 2012.
Third Quarter Financial Highlights
| | • | | Net revenues of $125.7 million, an increase of 12% year-over-year |
| | • | | Net revenues for our 10Gb Ethernet products more than doubled year-over-year, exceeding 20% of net revenues, compared to 15% in the prior quarter and 12% in Q3 of fiscal 2011 |
| | • | | Network Connectivity Products (NCP) net revenues of $91.1 million, or 73% of net revenues, an increase of 9% year-over-year |
| | • | | Storage Connectivity Products (SCP) net revenues of $27.9 million, or 22% of net revenues, an increase of 33% year-over-year |
| | • | | Advanced Technology and Other Products (ATP) net revenues of $6.8 million, or 5% of net revenues, a decrease of 6% year-over-year |
| | • | | GAAP gross margins of 59% and non-GAAP gross margins of 64% |
| | • | | GAAP operating income of $8.1 million, or 6% of total net revenues, and non-GAAP operating income of $21.4 million, or 17% of total net revenues |
| | • | | GAAP net income of $8.7 million and non-GAAP net income of $18.5 million |
| | • | | GAAP diluted earnings per share of $0.10 and non-GAAP diluted earnings per share of $0.21 |
| | • | | Cash, cash equivalents and investments at the end of the quarter of $201.5 million |
FY’12 Q3 Earnings Results
April 25, 2012
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Third Quarter Business Highlights
| | • | | OneCommand® Vision 2.0 named one of the 2011 Products of the Year in the Storage Management Tools category by the editors of TechTarget’s Storage Media Group. The award selection was based on innovation, performance, ease of integration into existing environments, ease of use, and manageability |
| | • | | Announced OneCommand Vision supports the new Microsoft System Center 2012, enabling a common toolset to manage private and public cloud application and services in a single-pane-of-glass |
| | • | | Emulex Connect Partner Program named to CRN’s 2012 Partner Programs Guide for excellence in its overall channel program and awarded a 5-Star Partner rating |
| | • | | John Alfieri, Emulex vice president, Americas channel sales, honored as one of CRN’s 2012 Channel Chiefs |
Financial Results
In the third quarter, total net revenues increased 12% from the comparable quarter of last year, reaching $125.7 million. Third quarter net income on a GAAP basis was $8.7 million, or $0.10 per diluted share, compared to a GAAP net loss of $18.3 million, or $0.21 per share, in Q3 of fiscal 2011. Non-GAAP net income for the third quarter was $18.5 million, or $0.21 per diluted share, representing a 98% increase from $9.4 million in the comparable quarter of the prior fiscal year.
For the first nine months of fiscal 2012, total net revenues of $372.8 million represent an increase of 13% over the comparable period of the prior year. GAAP net income for the period was $16.5 million, compared to a GAAP loss of $67.9 million for the first nine months of fiscal 2011. Non-GAAP net income increased 62% to a total of $53.0 million compared to $32.6 million for the first nine months of fiscal 2011. Reconciliations between GAAP and non-GAAP results are included in the accompanying financial data.
FY’12 Q3 Earnings Results
April 25, 2012
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CEO Jim McCluney commented, “I’m particularly pleased with the strength of our results in light of the seasonal weakness that is typically associated with our third fiscal quarter. The continuing expansion of our core markets drove year-over-year revenue growth in excess of 10% for the fifth consecutive quarter, and once again exceeded the high end of our guidance,” continued McCluney.
“We look forward to a strong finish to the fiscal year and are optimistic that we will be able to show double digit year-over-year revenue growth for the second consecutive year, and have the opportunity to surpass the half billion dollar annual revenue mark for the first time,” McCluney concluded.
Business Outlook
Although actual results may vary depending on a variety of factors, many of which are outside the Company’s control, including uncertainty related to the macro IT spending environment, the timing of new server launches by our customers, and the results and related costs of ongoing patent litigation, Emulex is providing guidance for its fourth fiscal quarter ending July 1, 2012. For the fourth quarter of fiscal 2012, Emulex is forecasting total net revenues in the range of $126-$130 million. The Company expects non-GAAP earnings per diluted share of $0.21-$0.23 in the fourth quarter. On a GAAP basis, Emulex expects earnings per diluted share could amount to $0.09-$0.11 in the fourth quarter. GAAP estimates for the fourth quarter reflect approximately $0.12 per diluted share in expected charges arising primarily from amortization of intangibles, stock-based compensation and the royalties and mitigation expenses associated with the Broadcom patent litigation.
About Emulex
Emulex, the leader in converged networking solutions, provides enterprise-class connectivity for servers, networks and storage devices within the data center. The Company’s product portfolio of Fibre Channel host bus adapters, network interface cards, converged network adapters, controllers, embedded bridges and switches, and connectivity management software are proven, tested and trusted by the world’s largest and most demanding IT environments. Emulex solutions are used and offered by the industry’s leading server and storage OEMs including, Cisco, Dell, EMC, Fujitsu, Groupe Bull, Hitachi, Hitachi Data Systems, HP, Huawei, IBM, Intel, NEC, NetApp, Oracle, Unisys and Xyratex. Emulex is headquartered in Costa Mesa, Calif., and has offices and research facilities in North America, Asia and Europe. Emulex is listed on the New York Stock Exchange (NYSE:ELX). News releases and other information about Emulex is available at www.Emulex.com.
FY’12 Q3 Earnings Results
April 25, 2012
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Note Regarding Non-GAAP Financial Information
To supplement the condensed consolidated financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), we have included the following non-GAAP financial measures in this press release or in the webcast to discuss our financial results for the third fiscal quarter which may be accessed via our website at www.emulex.com: (i) non-GAAP gross margin, (ii) non-GAAP operating expenses, (iii) non-GAAP operating income, (iv) non-GAAP net income, and (v) non-GAAP diluted earnings per share. These non-GAAP financial measures exclude certain expenses and reflect an additional way of viewing aspects of our operations that, when viewed with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of our results of operations and the factors and trends affecting our business. However, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. We use our non-GAAP financial measures internally to better understand and evaluate our business, prepare annual budgets, and in measuring performance for some forms of compensation.
Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:
Stock-based compensation. Although stock-based compensation represents an important part of incentive compensation offered to our key employees, we believe that exclusion of the impact of stock-based compensation assists management and investors in evaluating the period over period performance of our business operations and in comparing our performance with those of our competitors. Stock-based compensation expense will recur in future periods.
Amortization of intangibles. Amortization of intangibles generally represents costs incurred by an acquired company or other third party to build value prior to our acquisition of the intangible assets. As such, it is effectively part of the transaction costs of the acquisition rather than ongoing costs of operating our core business. As a result, we believe that exclusion of these costs in presenting non-GAAP financial measures provides management and investors a more effective means of evaluating its historical performance and projected costs and the potential for realizing cost efficiencies within our core business. Amortization of intangibles will recur in future periods.
Site closure related expenses. We have recognized expenses related to closure and consolidation of certain facilities. We believe that exclusion of these expenses is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors. In this regard, we note that expenses of this type are infrequent in nature.
Patent damages/sunset period royalties. We have incurred expenses in the form of damages and royalties as a result of a judgment in a patent litigation proceeding. We believe that exclusion of charges related to the Broadcom patent damages and sunset period royalties are useful to management and investors in evaluating the performance of our ongoing operations on
FY’12 Q3 Earnings Results
April 25, 2012
Page 5 of 17
a period-to-period basis and relative to our competitors, as this amount relates to a judgment in litigation and does not reflect a continuing cost of operating our core business. In this regard, we note that expenses of this type are infrequent in nature.
Additional costs on sell through of inventory acquired in the ServerEngines acquisition. At the time of an acquisition, the inventory of the acquired company is recorded at fair value and subsequently expensed as sold. We believe that the mark-up on acquired inventory does not constitute part of our core business because it generally represents costs incurred by the acquired company prior to acquisition and as such they are effectively part of transaction costs rather than ongoing costs of operating our core business. In this regard, we note that once the acquired inventory is consumed the mark-up will not be replaced with cash costs and therefore, the exclusion of these costs provides management and investors with better visibility into the actual costs required to generate revenues over time.
Mitigation expenses related to the Broadcom patents. We have recognized mitigation expenses related to the Broadcom patents. We believe that exclusion of these redesign, requalification and appeal expenses is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors. In this regard, we note that expenses of this type are infrequent in nature.
Impairment of in-process research and development. We believe that the exclusion of charges relating to the impairment of in-process research and development is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors. In this regard, we note that charges of this nature are infrequent and are unrelated to our core business.
Broadcom’s unsolicited takeover proposal and related litigation costs. We believe that exclusion of charges related to Broadcom’s unsolicited takeover proposal and related litigation costs is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors. We believe such costs are generally unrelated to our core business and/or infrequent in nature.
Fair value adjustments on assets. We have recognized a fair value adjustment in connection with a loan made to ServerEngines prior to the acquisition. We believe that exclusion of this adjustment is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis and relative to our competitors. In this regard, we note that adjustments of this type are infrequent in nature.
Tax impact associated with platform contribution transactions. We believe eliminating the discrete tax impact associated with the Company’s recent globalization initiatives, including the platform contribution transactions (PCT) between one of our U.S. entities and a foreign subsidiary to license certain product technology, including the recently acquired ServerEngines technology, is useful to management and investors in evaluating the performance of the Company’s ongoing operations on a period-to-period basis and relative to the Company’s competitors. In this regard, we note that adjustments of this type are generally infrequent in nature.
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April 25, 2012
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“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: With the exception of historical information, the statements set forth above, including, without limitation, those contained in the discussion of “Business Outlook” above, and the reconciliation of forward-looking diluted earnings per share below, contain forward-looking statements that involve risk and uncertainties. We expressly disclaim any obligation or undertaking to release publicly any updates or changes to these forward-looking statements that may be made to reflect any future events or circumstances. We wish to caution readers that a number of important factors could cause actual results to differ materially from those in the forward-looking statements. These factors include intellectual property claims, with or without merit, that could result in costly litigation, cause product shipment delays, require us to indemnify customers, or require us to enter into royalty or licensing agreements, which may or may not be available. Furthermore, we have in the past obtained, and may be required in the future to obtain, licenses of technology owned by other parties. We cannot be certain that the necessary licenses will be available or that they can be obtained on commercially reasonable terms. If we were to fail to obtain such royalty or licensing agreements in a timely manner and on reasonable terms, our business, results of operations and financial condition could be materially adversely affected. Ongoing lawsuits, such as the action brought by Broadcom Corporation (Broadcom), present inherent risks, any of which could have a material adverse effect on our business, financial condition, or results of operations. Such potential risks include continuing expenses of litigation, risk of loss of patent rights and/or monetary damages, risk of injunction against the sale of products incorporating the technology in question, counterclaims, attorneys’ fees, incremental costs associated with product or component redesigns, and diversion of management’s attention from other business matters. With respect to the Broadcom litigation such potential risks also include the availability of an adequate sunset period of time to make design changes, the ability to implement any design changes, the availability of customer resources to complete any re-qualification or re-testing that may be needed, the ability to maintain favorable working relationships with Emulex suppliers of SerDes modules and the ability to obtain a settlement that does not put us at a competitive disadvantage. In addition, the fact that the economy generally, and the technology and storage segments specifically, have been in a state of uncertainty makes it difficult to determine if past experience is a good guide to the future and makes it impossible to determine if markets will grow or shrink in the short term. The current economic downturn and the resulting disruptions in world credit and equity markets that are creating economic uncertainty for our customers and the storage networking market as a whole has and could continue to adversely affect our revenues and results of operations. Furthermore, the effect of any actual or potential unsolicited offers to acquire us may have an adverse effect on our operations. As a result of these uncertainties, we are unable to predict our future results with any accuracy. Other factors affecting these forward-looking statements include, but are not limited to, the following: faster than anticipated decline in the storage networking market; slower than expected growth of the storage networking market or the failure of our Original Equipment Manufacturer (OEM) customers to successfully incorporate our products into their systems; our dependence on a limited number of customers and the effects of the loss of, decrease in or delays of orders by any such customers, or the failure of such customers to make timely payments; the emergence of new or stronger competitors as a result of consolidation movements in the market; the timing and market acceptance of our products or our OEM customers’ new or enhanced
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products; costs associated with entry into new areas of the storage technology market; the variability in the level of our backlog and the variable and seasonal procurement patterns of our customers; any inadequacy of our intellectual property protection and the costs of actual or potential third-party claims of infringement and any related indemnity obligations or adverse judgments; impairment charges, including but not limited to goodwill and intangible assets; changes in tax rates or legislation; the effects of acquisitions; the effects of terrorist activities; natural disasters, such as the earthquake and resulting tsunami off the coast of Japan in March 2011 and the significant flooding in various parts of Thailand in October 2011, and any resulting disruption in our supply chain or customer purchasing patterns or any other resulting economic or political instability; the highly competitive nature of the markets for our products as well as pricing pressures that may result from such competitive conditions; the effects of changes in our business model to separately charge for software; the effect of rapid migration of customers towards newer, lower cost product platforms; possible transitions from board or box level to application specific integrated circuit (ASIC) solutions for selected applications; a shift in unit product mix from higher-end to lower-end or mezzanine card products; a faster than anticipated decrease in the average unit selling prices or an increase in the manufactured cost of our products; delays in product development; our reliance on third-party suppliers and subcontractors for components and assembly; our ability to attract and retain key technical personnel; our ability to benefit from research and development activities; our dependence on international sales and internationally produced products; changes in accounting standards; and the potential effects of global warming and any resulting regulatory changes on our business. These and other factors could cause actual results to differ materially from those in the forward-looking statements and are discussed in our filings with the Securities and Exchange Commission, including our recent filings on Forms 10-K and 10-Q, under the caption “Risk Factors.”
This news release refers to various products and companies by their trade names. In most, if not all, cases these designations are claimed as trademarks or registered trademarks by their respective companies.
FY’12 Q3 Earnings Results
April 25, 2012
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EMULEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share data)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | April 1, | | | March 27, | | | April 1, | | | March 27, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
Net revenues | | $ | 125,746 | | | $ | 112,082 | | | $ | 372,814 | | | $ | 329,177 | |
Cost of sales: | | | | | | | | | | | | | | | | |
Cost of goods sold | | | 45,828 | | | | 42,060 | | | | 138,179 | | | | 123,304 | |
Amortization of core and developed technology intangible assets | | | 5,159 | | | | 8,534 | | | | 18,882 | | | | 24,554 | |
| | | | | | | | | | | | | | | | |
Cost of sales | | | 50,987 | | | | 50,594 | | | | 157,061 | | | | 147,858 | |
| | | | | | | | | | | | | | | | |
Gross profit | | | 74,759 | | | | 61,488 | | | | 215,753 | | | | 181,319 | |
| | | | | | | | | | | | | | | | |
Operating expenses: | | | | | | | | | | | | | | | | |
Engineering and development | | | 40,361 | | | | 42,660 | | | | 121,307 | | | | 122,592 | |
Selling and marketing | | | 15,897 | | | | 15,347 | | | | 45,774 | | | | 42,282 | |
General and administrative | | | 8,820 | | | | 12,106 | | | | 29,808 | | | | 43,388 | |
Impairment of intangible asset | | | — | | | | 6,000 | | | | — | | | | 6,000 | |
Amortization of other intangible assets | | | 1,603 | | | | 1,762 | | | | 4,967 | | | | 7,571 | |
| | | | | | | | | | | | | | | | |
Total operating expenses | | | 66,681 | | | | 77,875 | | | | 201,856 | | | | 221,833 | |
| | | | | | | | | | | | | | | | |
Operating income (loss) | | | 8,078 | | | | (16,387 | ) | | | 13,897 | | | | (40,514 | ) |
| | | | | | | | | | | | | | | | |
Nonoperating income (loss): | | | | | | | | | | | | | | | | |
Interest income | | | 19 | | | | 19 | | | | 74 | | | | 61 | |
Interest expense | | | (10 | ) | | | 13 | | | | (14 | ) | | | (372 | ) |
Other income (expense), net | | | (277 | ) | | | (9,285 | ) | | | 265 | | | | (9,483 | ) |
| | | | | | | | | | | | | | | | |
Total nonoperating income (loss) | | | (268 | ) | | | (9,253 | ) | | | 325 | | | | (9,794 | ) |
| | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 7,810 | | | | (25,640 | ) | | | 14,222 | | | | (50,308 | ) |
Income tax provision (benefit) | | | (869 | ) | | | (7,324 | ) | | | (2,292 | ) | | | 17,608 | |
| | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 8,679 | | | ($ | 18,316 | ) | | $ | 16,514 | | | $ | (67,916 | ) |
| | | | | | | | | | | | | | | | |
Net income (loss) per share: | | | | | | | | | | | | | | | | |
Basic | | $ | 0.10 | | | $ | (0.21 | ) | | $ | 0.19 | | | $ | (0.80 | ) |
| | | | | | | | | | | | | | | | |
Diluted | | $ | 0.10 | | | $ | (0.21 | ) | | $ | 0.19 | | | $ | (0.80 | ) |
| | | | | | | | | | | | | | | | |
Number of shares used in per share computations: | | | | | | | | | | | | | | | | |
Basic | | | 86,495 | | | | 87,278 | | | | 86,421 | | | | 85,416 | |
| | | | | | | | | | | | | | | | |
Diluted | | | 88,518 | | | | 87,278 | | | | 88,369 | | | | 85,416 | |
| | | | | | | | | | | | | | | | |
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April 25, 2012
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EMULEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited, in thousands)
| | | | | | | | |
| | | April 1, | | | July 3, | |
| | | 2012 | | | 2011 | |
Assets | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 142,938 | | | $ | 131,160 | |
Investments | | | 58,563 | | | | 37,025 | |
Accounts receivable, net | | | 77,954 | | | | 74,147 | |
Inventories | | | 30,267 | | | | 20,508 | |
Prepaid income taxes | | | 7,870 | | | | 12,709 | |
Prepaid expenses and other current assets | | | 9,657 | | | | 9,684 | |
Deferred income taxes | | | 12,220 | | | | 16,919 | |
| | | | | | | | |
Total current assets | | | 339,469 | | | | 302,152 | |
Property and equipment, net | | | 60,875 | | | | 64,095 | |
Goodwill and Intangible assets, net | | | 289,043 | | | | 312,892 | |
Investments | | | — | | | | 15,165 | |
Other assets | | | 8,824 | | | | 8,535 | |
| | | | | | | | |
| | $ | 698,211 | | | $ | 702,839 | |
| | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 28,512 | | | $ | 29,043 | |
Accrued and other current liabilities | | | 39,515 | | | | 42,199 | |
| | | | | | | | |
Total current liabilities | | | 68,027 | | | | 71,242 | |
Other liabilities | | | 2,979 | | | | 3,344 | |
Deferred income taxes | | | 687 | | | | 11,362 | |
Accrued taxes | | | 28,385 | | | | 28,200 | |
| | | | | | | | |
Total liabilities | | | 100,078 | | | | 114,148 | |
| | | | | | | | |
Total stockholders’ equity | | | 598,133 | | | | 588,691 | |
| | | | | | | | |
| | $ | 698,211 | | | $ | 702,839 | |
| | | | | | | | |
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EMULEX CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Cashflows
(unaudited, in thousands)
| | | | | | | | |
| | | Nine Months Ended | |
| | | April 1, | | | March 27, | |
| | | 2012 | | | 2011 | |
Cash flows from operations: | | | | | | | | |
Net income (loss) | | $ | 16,514 | | | $ | (67,916 | ) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | | | | | | | | |
Depreciation and amortization | | | 37,479 | | | | 47,999 | |
Stock based compensation | | | 18,436 | | | | 31,391 | |
Deferred income taxes | | | (5,976 | ) | | | (1,028 | ) |
Other reconciling items | | | (163 | ) | | | 15,210 | |
Changes in assets and liabilities | | | (17,416 | ) | | | 1,933 | |
| | | | | | | | |
Net cash provided by operating activities | | | 48,874 | | | | 27,589 | |
| | | | | | | | |
Cash flows from investing activities: | | | | | | | | |
Proceeds from/(investment in) property and equipment, net | | | (10,676 | ) | | | (15,960 | ) |
Purchases of intangibles | | | — | | | | (4,000 | ) |
Acquisitions, net of cash acquired | | | — | | | | (53,068 | ) |
Maturities of/(proceeds from) investments, net | | | (6,625 | ) | | | 38,003 | |
| | | | | | | | |
Net cash used in investing activities | | | (17,301 | ) | | | (35,025 | ) |
| | | | | | | | |
Cash flows from financing activities: | | | | | | | | |
Repurchase of common stock | | | (20,058 | ) | | | (40,082 | ) |
Proceeds/(principal payments) for acquisition | | | — | | | | (26,897 | ) |
Other | | | 537 | | | | 211 | |
| | | | | | | | |
Net cash used in financing activities | | | (19,521 | ) | | | (66,768 | ) |
| | | | | | | | |
Effect of exchange rates on cash and cash equivalents | | | (274 | ) | | | 238 | |
| | | | | | | | |
Net increase (decrease) in cash & cash equivalents | | | 11,778 | | | | (73,966 | ) |
Opening cash balance | | | 131,160 | | | | 248,813 | |
| | | | | | | | |
Ending cash balance | | $ | 142,938 | | | $ | 174,847 | |
| | | | | | | | |
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EMULEX CORPORATION AND SUBSIDIARIES
Supplemental Information
Historical Net Revenue by Product Lines:
Network Connectivity Products (NCP) primarily consist of Fibre Channel LightPluse® and Ethernet OneConnect® standup HBAs, mezzanine cards, I/O ASICs, ULOMs, and UCNAs to provide server Input/Output (I/O) and target storage array connectivity to enable servers to reliably and efficiently connect to Local Area Networks, Storage Area Networks and Network Attached Storage by offloading data communication processing tasks from the servers as information is delivered and sent to the network.
Storage Connectivity Products (SCP) include our InSpeed®, FibreSpy®, switch-on-a-chip (SOC), bridge and router products. SCP are deployed inside storage arrays, tape libraries, and other storage appliances to connect storage controllers to storage capacity, delivering improved performance, reliability, and connectivity.
Advanced Technology and Other Products (ATP) primarily consists of our Integrated Baseboard Management Controllers (iBMC), our One Command® Vision products, as well as some legacy and other products and services.
| | | | | | | | | | | | | | | | | | | | | | | | |
| ($000s) | | Q3 FY
2012
Revenues | | | Q2 FY
2012
Revenues | | | Q1 FY
2012
Revenues | | | Q4 FY
2011
Revenues | | | Q3 FY
2011
Revenues | | | % Change
Q3 vs Q3
| |
Network Connectivity Products | | $ | 91,127 | | | $ | 96,620 | | | $ | 86,589 | | | $ | 94,306 | | | $ | 83,893 | | | | 9 | % |
Storage Connectivity Products | | | 27,855 | | | | 27,583 | | | | 23,882 | | | | 20,716 | | | | 21,012 | | | | 33 | % |
Advanced Technology and Other Products | | | 6,764 | | | | 4,468 | | | | 7,926 | | | | 8,344 | | | | 7,177 | | | | (6 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total net revenues | | $ | 125,746 | | | $ | 128,671 | | | $ | 118,397 | | | $ | 123,366 | | | $ | 112,082 | | | | 12 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | | % Total
Revenues | | | % Total
Revenues | | | % Total
Revenues | | | % Total
Revenues | | | % Total
Revenues | |
Network Connectivity Products | | | 73 | % | | | 75 | % | | | 73 | % | | | 76 | % | | | 75 | % |
Storage Connectivity Products | | | 22 | % | | | 21 | % | | | 20 | % | | | 17 | % | | | 19 | % |
Advanced Technology and Other Products | | | 5 | % | | | 4 | % | | | 7 | % | | | 7 | % | | | 6 | % |
| | | | | | | | | | | | | | | | | | | | |
Total net revenues | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % |
| | | | | | | | | | | | | | | | | | | | |
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Historical Net Revenues by Channel and Territory:
| | | | | | | | | | | | | | | | | | | | |
| ($000s) | | Q3 FY
2012
Revenues | | | % Total
Revenues | | | Q3 FY
2011
Revenues | | | % Total
Revenues | | | %
Change | |
Revenues from OEM customers | | $ | 115,327 | | | | 92 | % | | $ | 97,085 | | | | 87 | % | | | 19 | % |
Revenues from distribution | | | 10,282 | | | | 8 | % | | | 14,989 | | | | 13 | % | | | (31 | )% |
Other | | | 137 | | | | nm | | | | 8 | | | | nm | | | | nm | |
| | | | | | | | | | | | | | | | | | | | |
Total net revenues | | $ | 125,746 | | | | 100 | % | | $ | 112,082 | | | | 100 | % | | | 12 | % |
| | | | | | | | | | | | | | | | | | | | |
Asia-Pacific | | $ | 67,461 | | | | 54 | % | | $ | 58,827 | | | | 53 | % | | | 15 | % |
United States | | | 40,100 | | | | 32 | % | | | 33,858 | | | | 30 | % | | | 18 | % |
Europe, Middle East and Africa | | | 17,919 | | | | 14 | % | | | 17,268 | | | | 15 | % | | | 4 | % |
Rest of world | | | 266 | | | | nm | | | | 2,129 | | | | 2 | % | | | nm | |
| | | | | | | | | | | | | | | | | | | | |
Total net revenues | | $ | 125,746 | | | | 100 | % | | $ | 112,082 | | | | 100 | % | | | 12 | % |
| | | | | | | | | | | | | | | | | | | | |
nm – not meaningful
Summary of Stock-Based Compensation:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | April 1, | | | March 27, | | | April 1, | | | March 27, | |
| ($000s) | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
Cost of sales | | $ | 223 | | | $ | 424 | | | $ | 990 | | | $ | 1,319 | |
Engineering and development | | | 2,547 | | | | 3,223 | | | | 7,831 | | | | 12,740 | |
Selling and marketing | | | 938 | | | | 1,333 | | | | 2,874 | | | | 3,584 | |
General and administrative | | | 2,149 | | | | 2,455 | | | | 6,741 | | | | 13,748 | |
| | | | | | | | | | | | | | | | |
Total stock-based compensation | | $ | 5,857 | | | $ | 7,435 | | | $ | 18,436 | | | $ | 31,391 | |
| | | | | | | | | | | | | | | | |
Reconciliation of GAAP Gross Margin to Non-GAAP Gross Margin:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | April 1, | | | March 27, | | | April 1, | | | March 27, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
GAAP gross margin | | | 59.5 | % | | | 54.9 | % | | | 57.9 | % | | | 55.1 | % |
| | | | | | | | | | | | | | | | |
Items excluded from GAAP gross margin to calculate non-GAAP gross margin: | | | | | | | | | | | | | | | | |
Stock-based compensation | | | 0.1 | % | | | 0.4 | % | | | 0.3 | % | | | 0.4 | % |
Amortization of intangibles | | | 4.1 | % | | | 7.6 | % | | | 5.1 | % | | | 7.4 | % |
Site closure related expenses | | | — | | | | 0.0 | % | | | 0.0 | % | | | 0.0 | % |
Patent damages/sunset period royalties | | | 0.4 | % | | | — | | | | 0.2 | % | | | — | |
Additional costs on sell through of stepped up inventory | | | — | | | | — | | | | — | | | | 0.1 | % |
| | | | | | | | | | | | | | | | |
Non-GAAP gross margin | | | 64.1 | % | | | 62.9 | % | | | 63.5 | % | | | 63.0 | % |
| | | | | | | | | | | | | | | | |
FY’12 Q3 Earnings Results
April 25, 2012
Page 13 of 17
Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | April 1, | | | March 27, | | | April 1, | | | March 27, | |
($000s) | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
GAAP operating expenses, as presented above | | $ | 66,681 | | | $ | 77,875 | | | $ | 201,856 | | | $ | 221,833 | |
| | | | | | | | | | | | | | | | |
Items excluded from GAAP operating expenses to calculate non-GAAP operating expenses: | | | | | | | | | | | | | | | | |
Stock-based compensation | | | (5,634 | ) | | | (7,011 | ) | | | (17,446 | ) | | | (30,072 | ) |
Amortization of other intangibles | | | (1,603 | ) | | | (1,762 | ) | | | (4,967 | ) | | | (7,571 | ) |
Site closure related expenses | | | — | | | | (652 | ) | | | (1,039 | ) | | | (652 | ) |
Mitigation expenses related to the Broadcom patents | | | (231 | ) | | | — | | | | (231 | ) | | | — | |
Impairment of in-process research and development | | | — | | | | (6,000 | ) | | | — | | | | (6,000 | ) |
Net charge associated with Broadcom’s unsolicited takeover proposal and related litigation costs | | | — | | | | — | | | | — | | | | (2,176 | ) |
| | | | | | | | | | | | | | | | |
Impact on operating expenses | | | (7,468 | ) | | | (15,425 | ) | | | (23,683 | ) | | | (46,471 | ) |
| | | | | | | | | | | | | | | | |
Non-GAAP operating expenses | | $ | 59,213 | | | $ | 62,450 | | | $ | 178,173 | | | $ | 175,362 | |
| | | | | | | | | | | | | | | | |
FY’12 Q3 Earnings Results
April 25, 2012
Page 14 of 17
Reconciliation of GAAP Operating Income (Loss) to Non-GAAP Operating Income:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | April 1, | | | March 27, | | | April 1, | | | March 27, | |
| ($000s) | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
GAAP operating income (loss) as presented above | | $ | 8,078 | | | $ | (16,387 | ) | | $ | 13,897 | | | $ | (40,514 | ) |
| | | | | | | | | | | | | | | | |
Items excluded from GAAP operating income (loss) to calculate non-GAAP operating income: | | | | | | | | | | | | | | | | |
Stock-based compensation | | | 5,857 | | | | 7,435 | | | | 18,436 | | | | 31,391 | |
Amortization of intangibles | | | 6,762 | | | | 10,296 | | | | 23,849 | | | | 32,125 | |
Site closure related expenses | | | — | | | | 708 | | | | 1,142 | | | | 708 | |
Patent damages/sunset period royalties | | | 477 | | | | — | | | | 865 | | | | — | |
Additional cost on sell through of stepped up inventory | | | — | | | | — | | | | — | | | | 292 | |
Mitigation expenses related to Broadcom patents | | | 231 | | | | — | | | | 231 | | | | — | |
Impairment of in-process research and development | | | — | | | | 6,000 | | | | — | | | | 6,000 | |
Net charge associated with Broadcom’s unsolicited takeover proposal and related litigation costs | | | — | | | | — | | | | — | | | | 2,176 | |
| | | | | | | | | | | | | | | | |
Impact on operating income (loss) | | | 13,327 | | | | 24,439 | | | | 44,523 | | | | 72,692 | |
| | | | | | | | | | | | | | | | |
Non-GAAP operating income | | $ | 21,405 | | | $ | 8,052 | | | $ | 58,420 | | | $ | 32,178 | |
| | | | | | | | | | | | | | | | |
FY’12 Q3 Earnings Results
April 25, 2012
Page 15 of 17
Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | April 1, | | | March 27, | | | April 1, | | | March 27, | |
| ($000s) | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
GAAP net income (loss) as presented above | | $ | 8,679 | | | $ | (18,316 | ) | | $ | 16,514 | | | $ | (67,916 | ) |
| | | | | | | | | | | | | | | | |
Items excluded from GAAP net income (loss) to calculate non-GAAP net income: | | | | | | | | | | | | | | | | |
Stock-based compensation | | | 5,857 | | | | 7,435 | | | | 18,436 | | | | 31,391 | |
Amortization of intangibles | | | 6,762 | | | | 10,296 | | | | 23,849 | | | | 32,125 | |
Site closure related expenses | | | — | | | | 708 | | | | 1,142 | | | | 708 | |
Patent damages/sunset period royalties | | | 477 | | | | — | | | | 865 | | | | — | |
Additional cost on sell through of stepped up inventory | | | — | | | | — | | | | — | | | | 292 | |
Impairment of a strategic investment | | | — | | | | 9,184 | | | | — | | | | 9,184 | |
Impairment of in-process research and development | | | — | | | | 6,000 | | | | — | | | | 6,000 | |
Mitigation related to the Broadcom patents | | | 231 | | | | — | | | | 231 | | | | — | |
Net charge associated with Broadcom’s unsolicited takeover proposal and related litigation costs | | | — | | | | — | | | | — | | | | 2,176 | |
Fair value adjustments on assets | | | — | | | | — | | | | — | | | | 353 | |
Income tax effect of above items | | | (3,521 | ) | | | (5,954 | ) | | | (8,081 | ) | | | (18,313 | ) |
Charges related to PCT of ServerEngines intangibles | | | — | | | | — | | | | — | | | | 36,600 | |
| | | | | | | | | | | | | | | | |
Impact on net income (loss) | | | 9,806 | | | | 27,669 | | | | 36,442 | | | | 100,516 | |
| | | | | | | | | | | | | | | | |
Non-GAAP net income | | $ | 18,485 | | | $ | 9,353 | | | $ | 52,956 | | | | 32,600 | |
| | | | | | | | | | | | | | | | |
FY’12 Q3 Earnings Results
April 25, 2012
Page 16 of 17
Reconciliation of GAAP Diluted Earnings (Loss) Per Share to Non-GAAP Diluted Earnings Per Share:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | April 1, | | | March 27, | | | April 1, | | | March 27, | |
| (shares in 000s) | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
GAAP diluted earnings (loss) per share as presented above | | $ | 0.10 | | | $ | (0.21 | ) | | $ | 0.19 | | | $ | (0.80 | ) |
| | | | | | | | | | | | | | | | |
Items excluded from diluted GAAP earnings (loss) per share to calculate diluted non-GAAP earnings per share, net of tax effect: | | | | | | | | | | | | | | | | |
Stock-based compensation | | | 0.06 | | | | 0.06 | | | | 0.20 | | | | 0.32 | |
Amortization of intangibles | | | 0.05 | | | | 0.07 | | | | 0.19 | | | | 0.22 | |
Site closure related expenses | | | — | | | | 0.01 | | | | 0.01 | | | | 0.01 | |
Patent damages/sunset period royalties | | | 0.00 | | | | — | | | | 0.01 | | | | — | |
Additional cost on sell through of stepped up inventory | | | — | | | | 0.00 | | | | — | | | | 0.00 | |
Impairment of a strategic investment | | | — | | | | 0.10 | | | | — | | | | 0.10 | |
Impairment of in-process research and development | | | — | | | | 0.06 | | | | — | | | | 0.06 | |
Mitigation related to the Broadcom patents | | | 0.00 | | | | — | | | | 0.00 | | | | — | |
Net charge associated with Broadcom’s unsolicited takeover proposal and related litigation costs | | | — | | | | 0.01 | | | | — | | | | 0.03 | |
Charges related to PCT of ServerEngines intangibles | | | — | | | | 0.00 | | | | — | | | | 0.42 | |
Fair value adjustments on assets | | | — | | | | — | | | | — | | | | 0.01 | |
| | | | | | | | | | | | | | | | |
Impact on diluted earnings (loss) per share | | | 0.11 | | | | 0.31 | | | | 0.41 | | | | 1.17 | |
| | | | | | | | | | | | | | | | |
Non-GAAP diluted earnings per share | | $ | 0.21 | | | $ | 0.10 | | | $ | 0.60 | | | $ | 0.37 | |
| | | | | | | | | | | | | | | | |
Diluted shares used in non-GAAP per share computations | | | 88,518 | | | | 89,152 | | | | 88,369 | | | | 87,133 | |
| | | | | | | | | | | | | | | | |
FY’12 Q3 Earnings Results
April 25, 2012
Page 17 of 17
Forward-Looking Diluted Earnings per Share Reconciliation:
| | |
| | | Guidance for
Three Months Ending
July 1, 2012 |
Non-GAAP diluted earnings per share guidance | | $0.21-$0.23 |
Items excluded, net of tax, from non-GAAP diluted earnings per share to calculate GAAP diluted earnings per share guidance: | | |
Stock-based compensation | | 0.06 |
Amortization of intangibles | | 0.04 |
Mitigation expenses related to the Broadcom patents | | 0.02 |
| | |
GAAP earnings per share guidance | | $0.09-$0.11 |
| | |
