PMC Reports First Quarter 2015 Results
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PMC Reports First Quarter 2015 Results

Q1 2015 earnings announcement call live on http://investor.pmcs.com at 1:30 p.m. PT

Conference call: 1 (888) 505-4375 or 1 (719) 325-2472 outside North America; passcode 6526275#

Replay available shortly after end of conference call through May 27, 2015

SUNNYVALE, Calif. — (BUSINESS WIRE) — April 27, 2015 — PMC-Sierra, Inc. (PMC®) (Nasdaq: PMCS), the semiconductor and software solutions innovator transforming networks that connect, move and store big data, today reported results for the first quarter ended March 28, 2015.

Net revenues in the first quarter of 2015 totaled $133.1 million, an increase of 5 percent compared to $126.5 million in the first quarter of 2014, and a decrease of 3 percent from $136.9 million in the fourth quarter of 2014. Storage product revenues in the first quarter of 2015 totaled $96.5 million, an increase of 11 percent from $87.0 million in the first quarter of 2014.

GAAP net income in the first quarter of 2015 totaled $4.7 million or $0.02 per diluted share, compared to GAAP net loss in the first quarter of 2014 of $4.2 million or $0.02 per share, and GAAP net income in the fourth quarter of 2014 of $2.3 million or $0.01 per diluted share.

Non-GAAP net income in the first quarter of 2015 totaled $20.9 million or $0.10 per diluted share, compared to non-GAAP net income in the first quarter of 2014 of $16.0 million or $0.08 per diluted share, and to non-GAAP net income in the fourth quarter of 2014 of $22.7 million or $0.11 per diluted share.

“We experienced strong year-over-year growth in storage at eleven percent, representing a solid start for the year,” said Greg Lang, PMC president and chief executive officer. “And, with our four key drivers firmly in place, we remain positive about top and bottom line growth prospects for the balance of 2015.”

For a full reconciliation of each non-GAAP item used herein to the most directly comparable GAAP financial measure, 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.

FIRST QUARTER HIGHLIGHTS

The Company announced the following in the first quarter of 2015:

First Quarter 2015 Conference Call

Management will review first quarter 2015 results and share its outlook for the second quarter of 2015 during a conference call at 1:30 p.m. Pacific Time/4:30 p.m. Eastern Time on April 27, 2015. The conference call webcast will be accessible under the Financial News and Events section at http://investor.pmcs.com. To listen to the conference call by telephone, dial 1 (888) 505-4375 or 1 (719) 325-2472 outside North America with passcode 6526275# approximately ten minutes before the start time. A telephone playback will be available until May 27, 2015, and can be accessed at 1 (888) 203-1112 or 1 (719) 457-0820 outside North America using passcode 6526275#.

Safe Harbor Statement

This release contains forward-looking statements that involve risks and uncertainties. The Company’s SEC filings, including the Company’s most recent reports on Form 10-K and Form 10-Q, describe the risks associated with the Company’s business, including PMC’s limited revenue visibility due to variable customer demands, market segment growth or decline, orders with short delivery lead times, customer concentration, changes in inventory, and other items such as tax rates, foreign exchange rates and volatility in global financial markets.

About PMC

PMC (Nasdaq: PMCS) is the semiconductor and software solutions innovator transforming networks that connect, move and store big data. Building on a track record of technology leadership, the Company is driving innovation across storage, optical and mobile networks. PMC’s highly integrated solutions increase performance and enable next-generation services to accelerate the network transformation. For more information, visit www.pmcs.com. Follow PMC on Facebook, Twitter, LinkedIn and RSS.

© Copyright PMC-Sierra, Inc. 2015. All rights reserved. PMC and PMC-SIERRA are registered trademarks of PMC-Sierra, Inc. in the United States and other countries, PMCS is a trademark of PMC-Sierra, Inc. PMC disclaims any ownership rights in other product and company names mentioned herein. PMC is the corporate brand of PMC-Sierra, Inc.

 
PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)
(unaudited)
 
    Three Months Ended
March 28,     December 27,     March 29,
2015 2014 2014
 
Net revenues $ 133,071 $ 136,851 $ 126,468
Cost of revenues   39,980     40,702     37,564  
Gross profit 93,091 96,149 88,904
 
Research and development, net 48,866 50,942 50,148
Selling, general and administrative 30,051 29,411 29,340
Amortization of purchased intangible assets   9,317     10,994     12,329  
Income (loss) from operations 4,857 4,802 (2,913 )
 
Other income (expense):
Gain on investment securities and other investments 32 68 29
Amortization of debt issue costs (51 ) (51 ) (51 )
Amortization of discount on short-term and long-term obligation (210 ) (350 ) -
Foreign exchange gain 2,594 2,866 532
Financial income, net   164     2     9  
Income (loss) before provision for income taxes 7,386 7,337 (2,394 )
Provision for income taxes   (2,731 )   (5,007 )   (1,847 )
Net income (loss) $ 4,655   $ 2,330   $ (4,241 )
 
Net income (loss) per common share - basic and diluted $ 0.02 $ 0.01 $ (0.02 )
 
Shares used in per share calculation - basic 200,249 198,625 195,188
Shares used in per share calculation - diluted 205,688 201,935 195,188
 
 

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, net, selling, general and administrative expense, amortization of purchased intangible assets, other income (expense), provision for income taxes, operating expenses, operating income (loss), operating margin, net income (loss), and net income per share - basic and diluted.

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, net, Selling, General and Administrative Expense, Amortization of Purchased Intangible Assets, Other Income (Expense), Provision for Income Taxes, Operating Expenses, Operating Income (Loss), Net Income (Loss), and Basic and Diluted Net Income (Loss) Per Share

(in thousands, except for per share amounts)
(unaudited)
 
    Three Months Ended
March 28,     December 27,     March 29,
2015 2014 2014
 
GAAP cost of revenues $ 39,980 $ 40,702 $ 37,564
Stock-based compensation (271 ) (285 ) $ (241 )
Termination expense recoveries   -     -   $ 9  
Non-GAAP cost of revenues $ 39,709   $ 40,417   $ 37,332  
 
GAAP gross profit $ 93,091 $ 96,149 $ 88,904
Stock-based compensation 271 285 241
Termination expense recoveries   -     -     (9 )
Non-GAAP gross profit $ 93,362   $ 96,434   $ 89,136  
 
Non-GAAP gross profit % 70.2 % 70.5 % 70.5 %
 
GAAP research and development expense, net $ 48,866 $ 50,942 $ 50,148
Stock-based compensation (2,844 ) (2,880 ) (2,647 )
Acquisition-related costs (106 ) (423 ) (800 )
Termination expense recoveries 38 8 58
Reversal of accruals - 342 -
Lease exit recoveries   -     29     -  
Non-GAAP research and development expense, net $ 45,954   $ 48,018   $ 46,759  
 
GAAP selling, general and administrative expense $ 30,051 $ 29,411 $ 29,340
Stock-based compensation (3,578 ) (3,682 ) (3,303 )
Acquisition-related costs (171 ) (261 ) (61 )
Lease exit recoveries (costs) 11 (5 ) (142 )
Termination and separation costs (507 ) (645 ) (3 )
Asset impairments - - (477 )
Other expenses   -     -     (58 )
Non-GAAP selling, general and administrative expense $ 25,806   $ 24,818   $ 25,296  
 
GAAP amortization of purchased intangible assets $ 9,317 $ 10,994 $ 12,329
Amortization of purchased intangible assets   (9,317 )   (10,994 )   (12,329 )
Non-GAAP amortization of purchased intangible assets $ -   $ -   $ -  
 
GAAP other income $ 2,529 $ 2,535 $ 519
Foreign exchange gain on foreign tax liabilities (2,179 ) (2,665 ) (879 )
Gain on disposal of investment - (26 ) -
Amortization of discount on short-term and long-term obligations   210     350     -  
Non-GAAP other income (expense) $ 560   $ 194   $ (360 )
 
GAAP provision for income taxes $ 2,731 $ 5,007 $ 1,847
Provision for income tax matters   (1,516 )   (3,900 )   (1,111 )
Non-GAAP provision for income taxes $ 1,215   $ 1,107   $ 736  
 
GAAP operating expenses $ 88,234 $ 91,347 $ 91,817
Stock-based compensation (6,422 ) (6,562 ) (5,950 )
Acquisition-related costs (277 ) (684 ) (861 )
Asset impairments - - (477 )
Lease exit recoveries (costs) 11 24 (142 )
Termination and separation (costs) recoveries (469 ) (637 ) 55
Amortization of purchased intangible assets (9,317 ) (10,994 ) (12,329 )
Reversal of accruals - 342 -
Other expenses   -     -     (58 )
Non-GAAP operating expenses $ 71,760   $ 72,836   $ 72,055  
 
 
March 28, December 27, March 29,
  2015 2014 2014
 
GAAP operating income (loss) $ 4,857 $ 4,802 $ (2,913 )
Stock-based compensation 6,693 6,847 6,191
Acquisition-related costs 277 684 861
Asset impairments - - 477
Lease exit (recoveries) costs (11 ) (24 ) 142
Termination and separation costs (recoveries) 469 637 (64 )
Amortization of purchased intangible assets 9,317 10,994 12,329
Reversal of accruals - (342 ) -
Other expenses   -     -     58  
Non-GAAP operating income $ 21,602   $ 23,598   $ 17,081  
 
Non-GAAP operating margin 16.2 % 17.2 % 13.5 %
 
GAAP net income (loss) $ 4,655 $ 2,330 $ (4,241 )
Stock-based compensation 6,693 6,847 6,191
Acquisition-related costs 277 684 861
Termination and separation costs (recoveries) 469 637 (64 )
Reversal of accruals - (342 ) -
Asset impairments - - 477
Lease exit (recoveries) costs (11 ) (24 ) 142
Amortization of purchased intangible assets 9,317 10,994 12,329
Other expenses - - 58
Foreign exchange gain on foreign tax liabilities (2,179 ) (2,665 ) (879 )
Amortization of discount on short-term and long-term obligations 210 350 -
Gain on disposal of investments - (26 ) -
Provision for income taxes   1,516     3,900     1,111  
Non-GAAP net income $ 20,947   $ 22,685   $ 15,985  
 
Non-GAAP net income per share - basic and diluted $ 0.10 $ 0.11 $ 0.08
 
 
Shares used to calculate non-GAAP net income per share - basic 200,249 198,625 195,188
Shares used to calculate non-GAAP net income per share - diluted 205,688 201,935 198,306
 
 

PMC-Sierra, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
 
        March 28,     December 27,
2015 2014
ASSETS:
Current assets:
Cash and cash equivalents $ 64,548 $ 112,570
Short-term investments   45,580     45,885  
Cash, cash equivalents and short-term investments 110,128 158,455
Accounts receivable, net 62,156 55,414
Inventories, net 35,685 37,949
Prepaid expenses and other current assets 14,348 16,473
Income taxes receivable 1,966 1,968
Prepaid tax expense - 51
Deferred tax assets   5,255     5,442  
Total current assets 229,538 275,752
 
Investment securities 120,052 107,509
Investments and other assets 7,332 7,683
Prepaid tax expense 93 42
Property and equipment, net 37,370 37,311
Goodwill 283,239 283,239
Intangible assets, net 133,344 143,680
Deferred tax assets 13,123 13,412
Long-term income tax receivable   465     457  
$ 824,556   $ 869,085  
 
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 20,357 $ 23,360
Accrued liabilities 53,788 74,135
Credit facility 10,000 -
Income taxes payable 1,109 1,062
Liability for unrecognized tax benefit 14,820 16,076
Deferred tax liabilities 7,644 7,644
Deferred income   3,944     4,530  
Total current liabilities 111,662 126,807
 
Long-term obligations 25,008 36,305
Deferred tax liabilities 54,209 53,493
Liability for unrecognized tax benefit 25,768 25,244

PMC special shares convertible into 205 (2014 - 278) shares of common stock

480 745
Stockholders' equity:
Common stock and additional paid in capital 1,603,586 1,595,809
Accumulated other comprehensive loss (2,185 ) (2,355 )
Accumulated deficit   (993,972 )   (966,963 )
Total stockholders' equity   607,429     626,491  
$ 824,556   $ 869,085  
 
 

PMC-Sierra, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
    Three Months Ended
March 28,     December 27,     March 29,
2015 2014 2014
 
Cash flows from operating activities:
Net income (loss) $ 4,655 $ 2,330 $ (4,241 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 14,988 16,742 17,911
Stock-based compensation 6,693 6,847 6,191
Unrealized foreign exchange gain, net (4,495 ) (3,474 ) (1,725 )
Net amortization of premiums and accrued interest of investments 256 90 275
Asset impairments - - 770
Gain on investment securities and other (32 ) (45 ) (29 )
Amortization of discount on short-term and long-term obligations 210 350 -
Amortization of debt issue costs 51 51 51
 
Changes in operating assets and liabilities:
Accounts receivable, net (6,741 ) 1,600 (546 )
Inventories, net 2,264 (3,361 ) 864
Prepaid expenses and other current assets 834 (2,998 ) 2,324
Accounts payable and accrued liabilities (12,726 ) 7,577 (11,689 )
Deferred taxes and income taxes payable 2,664 4,365 2,374
Deferred income   (586 )   (971 )   (1,921 )
Net cash provided by operating activities   8,035     29,103     10,609  
 
Cash flows from investing activities:
Cash paid in connection with business acquisition (18,000 ) - -
Purchases of property and equipment (4,414 ) (2,770 ) (3,732 )
Purchase of intangible assets (441 ) (270 ) (481 )
Redemption of short-term investments 7,926 750 1,800
Disposals of investment securities and other investments 15,429 23,759 14,064
Purchases of investment securities and other investments   (35,329 )   (38,349 )   (17,790 )
Net cash used in investing activities   (34,829 )   (16,880 )   (6,139 )
 
Cash flows from financing activities:
Proceeds from credit facility 30,000 - 30,000
Repayment of credit facility (20,000 ) - (55,000 )
Proceeds from issuance of common stock 26,759 11,251 9,348
Repurchases of common stock   (57,222 )   -     (11,496 )
Net cash (used in) provided by financing activities   (20,463 )   11,251     (27,148 )
 
Effect of exchange rate changes on cash and cash equivalents   (765 )   (844 )   (432 )
Net (decrease) increase in cash and cash equivalents (48,022 ) 22,630 (23,110 )
Cash and cash equivalents, beginning of the period   112,570     89,940     100,038  
Cash and cash equivalents, end of the period $ 64,548   $ 112,570   $ 76,928  



Contact:

PMC-Sierra, Inc.
Joel Achramowicz
Director, Investor Relations
1-408-239-8630
Email Contact
or
Kim Mason
Manager, Corporate Communications
1-604-415-6239
Email Contact