Exhibit 99.1
PMC-Sierra Reports First Quarter 2010 Results
Net Revenues Increase 49% y-o-y to $152.8m; Non-GAAP Net Income of $0.19/sh. in Q1’10
SANTA CLARA, Calif.--(BUSINESS WIRE)--April 22, 2010--PMC-Sierra, Inc. (Nasdaq:PMCS), the premier Internet infrastructure semiconductor solution provider, today reported results for the first quarter ended March 28, 2010.
Net revenues in the first quarter of 2010 were $152.8 million, a year-over-year increase of 49% compared with $102.6 million in the first quarter of 2009, and 9.5% higher than revenues of $139.5 million in the fourth quarter of 2009.
Net income in the first quarter of 2010 on a GAAP basis was $27.0 million (GAAP diluted earnings per share of $0.12) compared with a GAAP net loss in the first quarter of 2009 of $3.9 million (GAAP loss per share of $0.02). Non-GAAP net income in the first quarter of 2010 was $43.5 million (non-GAAP diluted earnings per share of $0.19) compared with non-GAAP net income of $12.4 million (non-GAAP diluted earnings per share of $0.06) in the first quarter of 2009. On a year-over-year basis, this represents growth in non-GAAP net income of $31.1 million or 251%.
“In the first quarter of 2010, we experienced improving demand in our Wide Area Network Infrastructure business and saw the continuation of healthy demand in our Enterprise Storage business as global IT spending improves year over year,” said Greg Lang, president and chief executive officer of PMC-Sierra. “Revenue in the first quarter of 2010 was 9% above our previous quarterly revenue peak in the second quarter of 2008, while non-GAAP net income was 46% above the second quarter of 2008.”
Net income on a non-GAAP basis in the first quarter of 2010 excludes the following items: (i) $9.8 million amortization of purchased intangible assets; (ii) $5.4 million stock-based compensation expense; (iii) $0.8 million of non-cash interest expense for the accretion of the debt discount related to the senior convertible notes; (iv) $0.3 million of net expense related to foreign exchange loss on foreign tax liabilities and other income tax related amounts; and (v) $0.3 million restructuring costs.
For a full reconciliation of GAAP net income to non-GAAP net income, please refer to the schedule included with this release. The Company believes the additional non-GAAP measures are useful to investors for the purpose of financial analysis. Management uses the non-GAAP measures internally to evaluate its in-period operating performance before gains, losses and other charges that are considered by management to be outside of the Company’s core operating results. In addition, the measures are used to plan for the Company’s future periods. However, non-GAAP measures are neither stated in accordance with, nor are they a substitute for, GAAP measures.
In the first quarter of 2010, the Company announced:
- A complete reference design for its HyPHY chipset that enables wireless backhaul transport of Gigabit Ethernet services over OTN by supporting standards-based transport of the smallest Optical Data Unit at 1.238 Gbit/s. This ensures complete timing transparency and bandwidth efficiency of Ethernet-based client signals. In conjunction with HyPHY’s innovative support for timing synchronization over packet services, the ODU0 reference design enables cost-optimized Layer 1 OTN networks for wireless backhaul applications.
- PROMISE Technology announced commercial availability of its SuperTrak 6G SAS RAID controller cards targeted at OEM, SMB and entry-level markets that feature PMC-Sierra’s PM8011 SRC 8x6G 6Gb/s SAS RAID-on-Chip.
First Quarter 2010 Conference Call
Management will review the first quarter 2010 results and provide guidance for the second quarter of 2010 during a conference call at 1:30 pm Pacific Time/4:30 pm Eastern Time on Thursday, April 22, 2010. The conference call webcast will be accessible under the Financial Events and Calendar section at http://investor.pmc-sierra.com/. To listen to the conference call live by telephone, dial 913-312-1503 approximately ten minutes before the start time. A telephone playback will be available after the completion of the call and can be accessed at 647-436-0148 using the access code 9011411. A replay of the webcast will be available for five business days.
Second Quarter 2010 Conference Call
PMC-Sierra is planning on releasing its results for the second quarter of 2010 on July 22, 2010. A conference call will be held on the day of the release to review the quarter and provide an outlook for the third quarter of 2010.
Safe Harbor Statement
The Company’s SEC filings describe the risks associated with the Company’s business, including PMC-Sierra’s limited revenue visibility due to variable customer demands, market segment growth or decline, orders with short delivery lead times, customer concentration, and other items such as foreign exchange rates. The Company does not undertake any obligation to update the forward-looking statements.
About PMC-Sierra
PMC-Sierra®, the premier Internet infrastructure semiconductor solution provider, offers its customers technical and sales support worldwide through a network of offices in North America, Europe, Israel and Asia. PMC-Sierra provides semiconductor solutions for Enterprise Storage, Wide Area Network Infrastructure, Fiber To The Home, and Laser Printer markets. The Company is publicly traded on the NASDAQ Stock Market under the PMCS symbol. For more information, visit www.pmc-sierra.com.
© Copyright PMC-Sierra, Inc. 2010. All rights reserved. PMC and PMC-SIERRA are registered trademarks of PMC-Sierra, Inc. in the United States and other countries. Other product and company names mentioned herein may be trademarks of their respective owners.
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| PMC-Sierra, Inc. |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| (in thousands, except for per share amounts) |
| (unaudited) |
| | | | | |
| | Three Months Ended |
| | March 28, | | | March 29, |
| | | 2010 | | | | | 2009 | |
| | | | | |
| Net revenues | | $ | 152,826 | | | | $ | 102,572 | |
| Cost of revenues | | | 49,005 | | | | | 36,803 | |
| Gross profit | | | 103,821 | | | | | 65,769 | |
| | | | | |
| Other costs and expenses: | | | | | |
| Research and development | | | 42,067 | | | | | 38,628 | |
| Selling, general and administrative | | | 22,385 | | | | | 21,889 | |
| Amortization of purchased intangible assets | | | 9,836 | | | | | 9,836 | |
| Restructuring costs and other charges | | | 256 | | | | | 335 | |
| Income (loss) from operations | | | 29,277 | | | | | (4,919 | ) |
| | | | | |
Other (expense) income: | | | | | |
| Gain on sale of investment securities | | | 130 | | | | | - | |
| Amortization of debt issue costs | | | (50 | ) | | | | (50 | ) |
| Loss on subleased facilities | | | - | | | | | (538 | ) |
| Foreign exchange (loss) gain | | | (989 | ) | | | | 4,070 | |
| Interest expense, net | | | (121 | ) | | | | (811 | ) |
| Income (loss) before provision for income taxes | | | 28,247 | | | | | (2,248 | ) |
| Provision for income taxes | | | (1,260 | ) | | | | (1,669 | ) |
| Net income (loss) | | $ | 26,987 | | | | $ | (3,917 | ) |
| | | | | |
| Net income (loss) per common share - basic | | $ | 0.12 | | | | $ | (0.02 | ) |
| Net income (loss) per common share - diluted | | $ | 0.12 | | | | $ | (0.02 | ) |
| | | | | |
| Shares used in per share calculation - basic | | | 229,804 | | | | | 223,844 | |
| Shares used in per share calculation - diluted | | | 233,653 | | | | | 223,844 | |
| | | | | |
| | | | | |
As a supplement to the Company's condensed consolidated financial statements presented in accordance with generally accepted accounting principles ("GAAP"), the Company provides additional non-GAAP measures for cost of revenues, gross profit, gross profit percentage, research and development expense, selling, general and administrative expense, amortization of purchased intangible assets, restructuring costs and other charges, other (expense) income, provision for income taxes, operating expenses, operating income (loss), operating margin percentage, net income (loss), and basic and diluted net income per share. |
| | | | | |
A non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The Company believes that the additional non-GAAP measures are useful to investors for the purpose of financial analysis. Management uses these measures internally to evaluate the Company's in-period operating performance before gains, losses and other charges that are considered by management to be outside of the Company's core operating results. In addition, the measures are used for planning and forecasting of the Company's future periods. However, non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. Other companies may use different non-GAAP measures and presentation of results. |
| | | | | |
| PMC-Sierra, Inc. |
| Adjustments to GAAP Cost of Revenues, Gross Profit, Gross Profit Percentage, Research and Development Expense, |
| Selling, General and Administrative Expense, Amortization of Purchased Intangible Assets, Restructuring Costs and Other Charges, |
| Other (Expense) Income, Provision for Income Taxes, Operating Expenses, Operating Income (Loss), |
| Operating Margin Percentage, Net Income (Loss), and Basic and Diluted Net Income Per Share |
| (in thousands, except for per share amounts) |
| (unaudited) |
| | | | | |
| | Three Months Ended |
| | March 28, | | | March 29, |
| | | 2010 (1) | | | | | 2009 (2) | |
| | | | | |
| GAAP cost of revenues | | $ | 49,005 | | | | $ | 36,803 | |
| Stock-based compensation | | | (218 | ) | | | | (205 | ) |
| Non-GAAP cost of revenues | | $ | 48,787 | | | | $ | 36,598 | |
| | | | | |
| GAAP gross profit | | $ | 103,821 | | | | $ | 65,769 | |
| Stock-based compensation | | | 218 | | | | | 205 | |
| Non-GAAP gross profit | | $ | 104,039 | | | | $ | 65,974 | |
| | | | | |
| Non-GAAP gross profit % | | | 68 | % | | | | 64 | % |
| | | | | |
| GAAP research and development expense | | $ | 42,067 | | | | $ | 38,628 | |
| Stock-based compensation | | | (2,164 | ) | | | | (2,331 | ) |
| Exclusion of termination costs | | | - | | | | | (1,168 | ) |
| Non-GAAP research and development expense | | $ | 39,903 | | | | $ | 35,129 | |
| | | | | |
| GAAP selling, general and administrative expense | | $ | 22,385 | | | | $ | 21,889 | |
| Stock-based compensation | | | (2,969 | ) | | | | (2,925 | ) |
| Exclusion of termination costs | | | - | | | | | (771 | ) |
| Non-GAAP selling, general and administrative expense | | $ | 19,416 | | | | $ | 18,193 | |
| | | | | |
| GAAP amortization of purchased intangible assets | | $ | 9,836 | | | | $ | 9,836 | |
| Exclusion of amortization of purchased intangible assets | | | (9,836 | ) | | | | (9,836 | ) |
| Non-GAAP amortization of purchased intangible assets | | $ | - | | | | $ | - | |
| | | | | |
| GAAP restructuring costs and other charges | | $ | 256 | | | | $ | 335 | |
| Exclusion of restructuring costs and other charges | | | (256 | ) | | | | (335 | ) |
| Non-GAAP restructuring costs and other charges | | $ | - | | | | $ | - | |
| | | | | |
| GAAP other (expense) income | | $ | (1,030 | ) | | | $ | 2,671 | |
| Loss on subleased facilities | | | - | | | | | 538 | |
| Foreign exchange loss (gain) on foreign tax liabilities | | | 962 | | | | | (3,576 | ) |
| Accretion of the debt discount related to the senior convertible notes | | | 788 | | | | | 728 | |
| Non-GAAP other income | | $ | 720 | | | | $ | 361 | |
| | | | | |
| GAAP provision for income taxes | | $ | 1,260 | | | | $ | 1,669 | |
| Recovery of (provision for) income tax matters | | | 693 | | | | | (1,030 | ) |
| Non-GAAP provision for income taxes | | $ | 1,953 | | | | $ | 639 | |
| | | | | |
| | | | | |
| | Three Months Ended |
| | March 28, | | | March 29, |
| | | 2010 (1) | | | | | 2009 (2) | |
| | | | | |
| GAAP operating expenses | | $ | 74,544 | | | | $ | 70,688 | |
| Stock-based compensation | | | (5,133 | ) | | | | (5,256 | ) |
| Exclusion of termination costs | | | - | | | | | (1,939 | ) |
| Exclusion of amortization of purchased intangible assets | | | (9,836 | ) | | | | (9,836 | ) |
| Exclusion of restructuring costs and other charges | | | (256 | ) | | | | (335 | ) |
| Non-GAAP operating expenses | | $ | 59,319 | | | | $ | 53,322 | |
| | | | | |
| GAAP operating income (loss) | | $ | 29,277 | | | | $ | (4,919 | ) |
| Stock-based compensation | | | 5,351 | | | | | 5,461 | |
| Exclusion of termination costs | | | - | | | | | 1,939 | |
| Exclusion of amortization of purchased intangible assets | | | 9,836 | | | | | 9,836 | |
| Exclusion of restructuring costs and other charges | | | 256 | | | | | 335 | |
| Non-GAAP operating income | | $ | 44,720 | | | | $ | 12,652 | |
| | | | | |
| Non-GAAP operating margin % | | | 29 | % | | | | 12 | % |
| | | | | |
| GAAP net income (loss) | | $ | 26,987 | | | | $ | (3,917 | ) |
| Stock-based compensation | | | 5,351 | | | | | 5,461 | |
| Exclusion of termination costs | | | - | | | | | 1,939 | |
| Exclusion of amortization of purchased intangible assets | | | 9,836 | | | | | 9,836 | |
| Exclusion of restructuring costs and other charges | | | 256 | | | | | 335 | |
| Loss on subleased facilities | | | - | | | | | 538 | |
| Foreign exchange loss (gain) on foreign tax liabilities | | | 962 | | | | | (3,576 | ) |
| Accretion of the debt discount related to the senior convertible notes | | | 788 | | | | | 728 | |
| (Recovery of) provision for income tax matters | | | (693 | ) | | | | 1,030 | |
| Non-GAAP net income | | $ | 43,487 | | | | $ | 12,374 | |
| | | | | |
| Non-GAAP net income per share - basic | | $ | 0.19 | | | | $ | 0.06 | |
| Non-GAAP net income per share - diluted | | $ | 0.19 | | | | $ | 0.06 | |
| | | | | |
| Shares used to calculate non-GAAP net income per share - basic | | | 229,804 | | | | | 223,844 | |
| Shares used to calculate non-GAAP net income per share - diluted | | | 233,653 | | | | | 224,771 | |
| | | | | |
| Non-GAAP adjustments | | | | | |
| | | | | |
(1) $5.4 million stock-based compensation expense; $9.8 million amortization of purchased intangible assets; $0.3 million restructuring costs; $1.0 million foreign exchange loss on foreign tax liabilities; $0.8 million of non-cash interest expense for the accretion of the debt discount related to the senior convertible notes; and $0.7 million income tax recovery which includes $2.1 million net deferred tax recovery relating to foreign exchange translation of a foreign subsidiary, $1.5 million tax effect on inter-company transactions, $0.5 million arrears interest relating to unrecognized tax benefits, $0.5 million income tax recovery related to adjustments above, and $0.1 million tax adjustments relating to prior periods. |
| | | | | |
(2) $5.5 million stock-based compensation expense; $1.9 million termination costs; $9.8 million amortization of purchased intangible assets; $0.3 million restructuring costs; $0.5 million loss on subleased facilities; $3.6 million foreign exchange gain on foreign tax liabilities; $0.7 million of non-cash interest expense for the accretion of the debt discount related to the senior convertible notes; and $1.0 million income tax provision which includes $0.9 million net deferred tax recovery relating to foreign exchange translation of a foreign subsidiary, $0.4 million arrears interest relating to unrecognized tax benefits, $0.7 million tax adjustments relating to prior periods, $0.3 million income tax related to foreign exchange gain on a foreign tax liability, $1.0 million tax effect on inter-company transactions, and $0.5 million income tax recovery related to adjustments above. |
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| PMC-Sierra, Inc. |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| (in thousands) |
| (unaudited) |
| | | | | |
| | March 28, | | | December 27, |
| | | 2010 | | | | | 2009 | |
| ASSETS: | | | | | |
| Current assets: | | | | | |
| Cash and cash equivalents | | $ | 128,540 | | | | $ | 192,841 | |
| Short-term investments | | | 95,791 | | | | | 67,928 | |
| Accounts receivable, net | | | 60,249 | | | | | 50,745 | |
| Inventories, net | | | 32,863 | | | | | 31,531 | |
| Prepaid expenses and other current assets | | | 14,238 | | | | | 14,476 | |
| Income tax receivable | | | 4,011 | | | | | - | |
| Deferred tax assets | | | 8,112 | | | | | 3,052 | |
| Total current assets | | | 343,804 | | | | | 360,573 | |
| | | | | |
| Property and equipment, net | | | 13,383 | | | | | 13,909 | |
| Investment securities | | | 261,874 | | | | | 192,636 | |
| Goodwill | | | 396,144 | | | | | 396,144 | |
| Intangible assets, net | | | 99,182 | | | | | 110,458 | |
| Deferred tax assets | | | 196 | | | | | 250 | |
| Prepaid expenses | | | 24,915 | | | | | 26,187 | |
| Investments and other assets | | | 15,428 | | | | | 10,175 | |
| Deposits for wafer fabrication capacity | | | 5,145 | | | | | 5,145 | |
| | $ | 1,160,071 | | | | $ | 1,115,477 | |
| | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY: | | | | | |
| Current liabilities: | | | | | |
| Accounts payable | | $ | 23,783 | | | | $ | 22,266 | |
| Accrued liabilities | | | 54,111 | | | | | 52,996 | |
| Liability for unrecognized tax benefit | | | 33,717 | | | | | 31,330 | |
| Income taxes payable | | | - | | | | | 7,261 | |
| Deferred income taxes | | | 392 | | | | | 681 | |
| Accrued restructuring costs | | | 3,608 | | | | | 3,994 | |
| Deferred income | | | 14,811 | | | | | 12,498 | |
| Total current liabilities | | | 130,422 | | | | | 131,026 | |
| | | | | |
| 2.25% senior convertible notes due October 15, 2025, net | | | 59,144 | | | | | 58,356 | |
| Long-term obligations | | | 9,824 | | | | | 6,211 | |
| Deferred income taxes | | | 24,164 | | | | | 22,695 | |
| Liability for unrecognized tax benefit | | | 15,617 | | | | | 14,663 | |
| | | | | |
PMC special shares convertible into 1,570 (2009 - 1,570) shares of common stock | | | 2,003 | | | | | 2,003 | |
| | | | | |
| Stockholders' equity | | | | | |
| Common stock and additional paid in capital | | | 1,532,770 | | | | | 1,521,723 | |
| Accumulated other comprehensive income | | | 1,504 | | | | | 1,164 | |
| Accumulated deficit | | | (615,377 | ) | | | | (642,364 | ) |
| Total stockholders' equity | | | 918,897 | | | | | 880,523 | |
| | $ | 1,160,071 | | | | $ | 1,115,477 | |
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| PMC-Sierra, Inc. |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (in thousands) |
| (unaudited) |
| | | | | |
| | Three Months Ended |
| | March 28, | | | March 29, |
| | | 2010 | | | | | 2009 | |
| Cash flows from operating activities: | | | | | |
| Net income (loss) | | $ | 26,987 | | | | $ | (3,917 | ) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | |
| Depreciation and amortization | | | 14,091 | | | | | 14,103 | |
| Stock-based compensation | | | 5,351 | | | | | 5,461 | |
| Unrealized foreign exchange loss (gain), net | | | 838 | | | | | (3,900 | ) |
| Non-cash accretion of investment securities | | | 1,364 | | | | | - | |
| Accrued interest on investment securities | | | (413 | ) | | | | - | |
| Gain on disposal of investment securities | | | (130 | ) | | | | - | |
| Loss on subleased facilities | | | - | | | | | 538 | |
| | | | | |
| Changes in operating assets and liabilities: | | | | | |
| Accounts receivable | | | (9,504 | ) | | | | (181 | ) |
| Inventories | | | (1,332 | ) | | | | 3,151 | |
| Prepaid expenses and other current assets | | | 3,064 | | | | | 971 | |
| Accounts payable and accrued liabilities | | | (737 | ) | | | | (5,647 | ) |
| Deferred income taxes and income taxes payable | | | (12,744 | ) | | | | 135 | |
| Accrued restructuring costs | | | (395 | ) | | | | (557 | ) |
| Deferred income | | | 2,313 | | | | | (2,288 | ) |
| Net cash provided by operating activities | | | 28,753 | | | | | 7,869 | |
| | | | | |
| Cash flows from investing activities: | | | | | |
| Purchases of property and equipment | | | (1,464 | ) | | | | (926 | ) |
| Proceeds from sale of property and equipment | | | 13 | | | | | - | |
| Purchases of intangible assets | | | - | | | | | (1,270 | ) |
| Redemption of short-term investments | | | 4,314 | | | | | 139,143 | |
| Disposals of investment securities | | | 27,001 | | | | | - | |
| Purchases of investment securities | | | (128,788 | ) | | | | - | |
| Net cash (used in) provided by investing activities | | | (98,924 | ) | | | | 136,947 | |
| | | | | |
| Cash flows from financing activities: | | | | | |
| Proceeds from issuance of common stock | | | 5,712 | | | | | 4,024 | |
| Net cash provided by financing activities | | | 5,712 | | | | | 4,024 | |
| | | | | |
| Effect of exchange rate changes on cash and cash equivalents | | | 158 | | | | | 756 | |
| Net (decrease) increase in cash and cash equivalents | | | (64,301 | ) | | | | 149,596 | |
| Cash and cash equivalents, beginning of the period | | | 192,841 | | | | | 97,839 | |
| Cash and cash equivalents, end of the period | | $ | 128,540 | | | | $ | 247,435 | |
CONTACT:
PMC-Sierra, Inc.
Mike Zellner, Vice President & CFO, 1-408-988-1204
or
David Climie, VP Marketing Communications, 1-408-988-8276
or
Susan Shaw, Sr Manager, Communications, 1-408-988-8515
