INTERSIL CORP MILPITAS, Calif., Oct. 28, 2015 /PRNewswire/ -- Intersil Corporation (NASDAQ:ISIL), a leading provider of innovative power management and precision analog solutions, today announced financial results for the third quarter of 2015. Revenue of $128.4 million was down 3.1% sequentially. Strong gross margin and lower operating expenses resulted in solid operating margin for the ninth consecutive quarter. The company reported GAAP earnings per share of $0.13 and non-GAAP earnings per share of $0.15.
Company Highlights
-- Gross margin exceeded expectations at 59.2% on a GAAP basis and 59.5% on
a non-GAAP basis.
-- The company again reported solid profitability, with GAAP and non-GAAP
operating margin increasing sequentially to 13.6% and 20.9%
respectively.
-- Cash and cash equivalents increased to $229 million.
Quarterly Results
Revenue for the third quarter declined as anticipated driven by lower demand across several of the company's end markets. Industrial and Infrastructure (I&I) revenue was down about 4% sequentially due to a greater than 10% decline in the industrial analog products. Automotive remained strong and infrastructure power was flat sequentially. Computing and Consumer (C&C) revenue was down 1% sequentially, with declines in consumer being driven in part by active channel inventory management. This was offset by stronger computing revenue due to new product cycles. The breakdown by end market for the quarter was as follows:
Q3 2015 Q2 2015 Q3 2014
------- ------- -------
End Market
Revenue $M % $M % $M %
--- --- --- --- --- ---
Industrial
&
Infrastructure 84.2 66% 87.9 66% 91.1 63%
Consumer &
Computing 44.2 34% 44.5 34% 52.5 37%
Total
Revenue $128.4 $132.4 $143.6
====== ====== ======
Table 1. Intersil End Market Mix
"Many of our end markets remain sluggish, but we are pleased with the company's strong financial performance and regular cadence of new product introductions," said Necip Sayiner, president and CEO of Intersil. "We are seeing some signs of stability in demand and new design cycles are beginning to become more prominent in our revenue profile."
GAAP gross margin for the quarter was 59.2%, an increase of 80 basis points from the third quarter of 2014. Total GAAP operating expenses declined to $58.6 million. R&D expense was $31.3 million and SG&A expense was $23.5 million. GAAP operating income increased to $17.5 million or 13.6% of revenue. Q3 GAAP net income was $17.0 million and fully diluted GAAP earnings per share were $0.13.
The following non-GAAP results exclude amortization of purchased intangibles, equity-based compensation expense, gain on recovery of auction rate securities and related tax effects. Third quarter non-GAAP gross margin was up 90 basis points from the same quarter last year at 59.5%. Gross margin was better than expected due primarily to a higher mix of I&I products. Non-GAAP operating expenses declined to $49.5 million as the company continued to closely manage spending. Q3 non-GAAP operating income was $26.8 million resulting in an increase in non-GAAP operating margin to 20.9%. Fully diluted Q3 earnings per share on a non-GAAP basis were $0.15.
For a complete reconciliation of GAAP and non-GAAP results, please see the "Non-GAAP Results" tables included at the end of this release.
Cash and cash equivalents increased again to $229 million at the end of the third quarter. Intersil's board of directors authorized payment of a quarterly dividend of $0.12 per share of common stock. The payment of this dividend will be made on or about November 27, 2015, to shareholders of record as of the close of business on November 17, 2015.
Fourth Quarter 2015 Outlook
The following forward-looking guidance is for the fourth quarter ending January 1, 2016, based on current business trends and conditions:
GAAP Non-GAAP
---- --------
Revenue $123 - $131 million
------- -----------------
Gross margin Down 150-200 bps
------------ ----------------
Operating expenses Approximately
flat
------------------ --------------
Earnings per share $0.06 to $0.09 $0.12 to $0.15
------------------ -------------- --------------
Table 2. Intersil Q4 2015 Outlook
Earnings Call Webcast
Intersil will be hosting a webcast to discuss the quarterly results and outlook today at 1:30 p.m. Pacific Time. To access the webcast, please visit the investor relations page of the company's website at ir.intersil.com. Participants can also dial (866) 700-5192 or +1 617 213-8833 and enter the pass code 48190053. A replay of the webcast will be available for two weeks following the conference call on the company website, or may be accessed by dialing (888) 286-8010, international dial +1 (617) 801-6888, using the pass code 98625303.
About Intersil
Intersil Corporation is a leading provider of innovative power management and precision analog solutions. The company's products form the building blocks of increasingly intelligent, mobile and power hungry electronics, enabling advances in power management to improve efficiency and extend battery life. With a deep portfolio of intellectual property and a rich history of design and process innovation, Intersil is the trusted partner to leading companies in some of the world's largest markets, including industrial and infrastructure, mobile computing, automotive and aerospace. For more information about Intersil, visit our website at www.intersil.com.
FORWARD-LOOKING STATEMENTS
Intersil Corporation press releases and other related comments may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, in connection with the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based upon Intersil's management's current expectations, estimates, beliefs, assumptions and projections about Intersil's business and industry. Words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "potential," "continue," "goals," "targets" and variations of these words (or negatives of these words) or similar expressions, are intended to identify forward-looking statements. In addition, any statements that refer to projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various risk factors. Important factors that may affect our business, future operating results and financial condition include: any faltering in global economic conditions, the highly cyclical nature of the semiconductor industry, intense competition in the semiconductor industry, unsuccessful product development or failure to obtain market acceptance of our products, downturns in the computing market, failure to make or deliver products in a timely manner, unavailability of raw materials, services, supplies or manufacturing capacity, delays in production or in implementing new production techniques, product defects or unreliability of products, adverse results in litigation matters, and other risk factors described in Intersil's Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and other Intersil filings with the U.S. Securities and Exchange Commission (which you may obtain for free at the SEC's web site at http://www.sec.gov). These forward-looking statements are made only as of the date of this communication and Intersil undertakes no obligation to update or revise these forward-looking statements. Intersil does not adopt and is not responsible for any forward-looking statements and projections made by others in this press release.
Non-GAAP Reporting
To supplement its consolidated financial results presented in accordance with GAAP, Intersil uses non-GAAP financial measures, which are adjusted from the most directly comparable GAAP financial measures to exclude certain items, as described in detail below. Management believes that these non-GAAP financial measures reflect an additional and useful way of viewing aspects of the Company's operations that, when viewed in conjunction with Intersil's GAAP results, provide a more comprehensive understanding of the various factors and trends affecting the Company's business and operations. It should also be noted that Intersil's non-GAAP information may be different from the non-GAAP information provided by other companies. Non-GAAP financial measures used by Intersil include:
-- Gross profit;
-- Operating expenses;
-- Provision (benefit) for income taxes;
-- Operating income (loss);
-- Net income (loss);
-- Diluted earnings (loss) per share; and
-- Weighted average shares outstanding - diluted.
The Company presents non-GAAP financial measures because the investor community uses non-GAAP results in its analysis and comparison of historical results and projections of the Company's future operating results. These non-GAAP results exclude acquisition related expense, restructuring and related costs, equity-based compensation expense, and certain other expenses and benefits. Management uses these non-GAAP measures to manage and assess the profitability of the business. These non-GAAP results are also consistent with the way management internally analyzes Intersil's financial results.
There are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP financial measures. The non-GAAP financial measures supplement, and should be viewed in conjunction with, GAAP financial measures. Investors should review the reconciliations of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the accompanying press release.
As presented in the "Non-GAAP Results" tables in the accompanying press release, each of the non-GAAP financial measures excludes one or more of the following items:
Acquisition related. Acquisition-related charges are not factored into management's evaluation of potential acquisitions or Intersil's performance after completion of acquisitions, because they are not related to the Company's core operating performance. Adjustments of these items provide investors with a basis to compare Intersil's performance to other companies without the variability caused by purchase accounting. Acquisition-related expenses primarily include:
-- Amortization of purchased intangibles, which include purchased
intangibles such as purchased technology, patents, customer
relationships, trademarks, backlog and non-compete agreements.
Restructuring and related costs. Restructuring charges primarily relate to changes in Intersil's infrastructure in efforts to reduce costs and rebalance its workforce. Restructuring charges (gains) are excluded from non-GAAP financial measures because they are not considered core operating activities. Although Intersil has engaged in various restructuring activities in the past, each has been a discrete event based on a unique set of business objectives. As such, management believes that it is appropriate to exclude restructuring charges (gains) from Intersil's non-GAAP financial measures as it enhances the ability of investors to compare the Company's period-over-period operating results from continuing operations. Restructuring-related charges (gains) primarily include:
-- Severance and retention costs directly related to a restructuring
action.
-- Facility closure costs consist of ongoing costs associated with the exit
of our leased and owned facilities.
-- Other write-offs such as intangibles related to a restructuring action.
Other adjustments. These items are excluded from non-GAAP financial measures because they are not related to the core operating activities and on-going future operating performance of Intersil. Excluding this data allows investors to better compare Intersil's period-over-period performance without such expense, which Intersil believes may be useful to the investor community. Other adjustments primarily include:
-- Equity-based compensation expense.
-- Legal or governmental judgments, awards, fines or penalties.
-- Income from IP agreement.
-- Write-offs (recoveries) related to Auction Rate Securities.
-- Tax effects of non-GAAP adjustments.
-- Diluted weighted average shares non-GAAP adjustment, for purposes of
calculating non-GAAP diluted earnings per share, the GAAP diluted
weighted average shares outstanding is adjusted to exclude the benefits
of equity-based compensation expense attributable to future services not
yet recognized in the financial statements that are treated as proceeds
assumed to be used to repurchase shares under the GAAP treasury stock
method.
Comparability. The above criteria has been consistently applied when calculating the non-GAAP financial measures for all periods presented in this press release and accompanying tables.
Intersil Corporation
Condensed Consolidated Statements of Operations
Unaudited
(In thousands, except percentages and per share amounts)
Quarter Ended
-------------
Oct. 2, Jul. 3, Oct. 3,
2015 2015 2014
---- ---- ----
Q3 2015 Q2 2015 Q3 2014
Revenue $128,396 $132,441 $143,612
Cost of revenue 52,338 53,948 59,763
------ ------ ------
Gross profit 76,058 78,493 83,849
Gross margin % 59.2% 59.3% 58.4%
Expenses:
Research and
development 31,252 33,098 31,194
Selling, general and
administrative 23,532 25,194 25,243
Amortization of
purchased
intangibles 3,777 4,026 5,561
Total expenses 58,561 62,318 61,998
------ ------ ------
Operating income 17,497 16,175 21,851
Interest expense and
other (75) (503) (554)
Loss on investments,
net (140) (71) (148)
Income before income
taxes 17,282 15,601 21,149
Income tax (benefit)
expense 298 (22,123) 7,262
Net income $16,984 $37,724 $13,887
======= ======= =======
Earnings per share:
Basic $0.13 $0.29 $0.11
===== ===== =====
Diluted $0.13 $0.28 $0.10
===== ===== =====
Weighted average shares outstanding:
Basic 132,133 131,916 129,620
======= ======= =======
Diluted 132,445 132,823 132,626
======= ======= =======
Intersil Corporation
Condensed Consolidated Balance Sheets
Unaudited
(in thousands)
Oct. 2, Jul. 3, Oct. 3,
2015 2015 2014
---- ---- ----
Assets
Current assets:
Cash and cash
equivalents $228,898 $224,962 $210,582
Trade receivables, net 51,158 55,972 58,680
Inventories 68,967 71,816 67,651
Prepaid expenses and
other current assets 7,647 6,563 9,945
Income taxes receivable 1,030 1,073 1,450
Deferred income tax
assets 20,977 20,724 14,337
------ ------ ------
Total current assets 378,677 381,110 362,645
------- ------- -------
Non-current assets:
Property, plant and
equipment, net 72,227 74,224 73,755
Purchased intangibles,
net 36,768 24,813 39,959
Goodwill 571,770 565,424 565,424
Deferred income tax
assets 39,916 44,493 53,455
Other non-current assets 32,289 33,574 71,720
------ ------ ------
Total non-current
assets 752,970 742,528 804,313
------- ------- -------
Total assets $1,131,647 $1,123,638 $1,166,958
========== ========== ==========
Liabilities and shareholders' equity
Current liabilities:
Trade payables $24,011 $23,419 $26,809
Deferred income 14,632 15,992 10,821
Income taxes payable 1,689 1,761 6,105
Provision for TAOS
litigation 78,014 79,017 -
Other accrued expenses 52,844 53,068 66,151
------ ------ ------
Total current
liabilities 171,190 173,257 109,886
------- ------- -------
Non-current liabilities:
Income taxes payable 3,199 2,944 72,887
Other non-current
liabilities 13,947 12,244 8,991
------ ------ -----
Total non-current
liabilities 17,146 15,188 81,878
------ ------ ------
Total shareholders'
equity 943,311 935,193 975,194
------- ------- -------
Total liabilities and
shareholders' equity $1,131,647 $1,123,638 $1,166,958
========== ========== ==========
Intersil Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited
(In thousands)
Quarter Ended
-------------
Oct. 2, Jul. 3, Oct. 3,
2015 2015 2014
---- ---- ----
Q3 2015 Q2 2015 Q3 2014
Operating activities:
Net income $16,984 $37,724 $13,887
Depreciation 3,635 3,607 4,898
Amortization of purchased
intangibles 3,777 4,026 5,561
Equity-based compensation 5,565 6,689 4,385
Deferred income taxes 1,412 (5,823) 2,985
Other (771) (64) (195)
Net changes in operating
assets and liabilities 4,193 (21,933) (7,505)
Net cash flows provided by
operating activities 34,795 24,226 24,016
------ ------ ------
Investing activities:
Cash paid for acquisition,
net of cash acquired (15,948) - -
Proceeds from investments 460 - 192
Net capital expenditures (1,764) (4,997) (3,150)
Net cash flows used in
investing activities (17,252) (4,997) (2,958)
------- ------ ------
Financing activities:
Proceeds from equity-
based awards, net 2,587 1,851 5,700
Dividends paid (15,959) (17,196) (15,634)
Net cash flows used in
financing activities (13,372) (15,345) (9,934)
------- ------- ------
Effect of exchange rates
on cash and cash
equivalents (235) 178 (1,783)
---- --- ------
Net change in cash and
cash equivalents 3,936 4,062 9,341
----- ----- -----
Cash and cash equivalents
as of the beginning of
the period 224,962 220,900 201,241
------- ------- -------
Cash and cash equivalents
as of the end of the
period $228,898 $224,962 $210,582
======== ======== ========
Intersil Corporation
Non-GAAP Results
Unaudited
(In thousands, except percentages)
Quarter Ended
-------------
Oct. 2, Jul. 3, Oct. 3,
2015 2015 2014
---- ---- ----
Q3 2015 Q2 2015 Q3 2014
Non-GAAP gross profit:
GAAP gross profit $76,058 $78,493 $83,849
Equity-based
compensation COS 304 436 294
Non-GAAP gross
profit $76,362 $78,929 $84,143
======= ======= =======
Non-GAAP gross margin:
GAAP gross margin 59.2% 59.3% 58.4%
Equity-based
compensation COS 0.3% 0.3% 0.2%
--- --- ---
Non-GAAP gross
margin 59.5% 59.6% 58.6%
==== ==== ====
Non-GAAP R&D expenses:
GAAP R&D expenses $31,252 $33,098 $31,194
Equity-based
compensation (2,390) (2,658) (1,967)
Non-GAAP R&D
expenses: $28,862 $30,440 $29,227
======= ======= =======
Non-GAAP SG&A expenses:
GAAP SG&A expenses $23,532 $25,194 $25,243
Equity-based
compensation (2,871) (3,595) (2,124)
Non-GAAP SG&A
expenses: $20,661 $21,599 $23,119
======= ======= =======
Non-GAAP operating expenses:
GAAP operating
expenses $58,561 $62,318 $61,998
Equity-based
compensation (excl.
COS) (5,261) (6,253) (4,091)
Amortization of
purchased
intangibles (3,777) (4,026) (5,561)
Non-GAAP operating
expenses $49,523 $52,039 $52,346
======= ======= =======
Non-GAAP operating income:
GAAP operating
income $17,497 $16,175 $21,851
Equity-based
compensation 5,565 6,689 4,385
Amortization of
purchased
intangibles 3,777 4,026 5,561
Non-GAAP operating
income $26,839 $26,890 $31,797
======= ======= =======
Non-GAAP operating margin:
GAAP operating
margin 13.6 % 12.2 % 15.2 %
Excluded items as a
percent of revenue 7.3 % 8.1 % 6.9 %
---- ---- ----
Non-GAAP operating
margin 20.9 % 20.3 % 22.1 %
===== ===== =====
Intersil Corporation
Non-GAAP Results
Unaudited
(In thousands, except per share amounts)
Quarter Ended
-------------
Oct. 2, Jul. 3, Oct. 3,
2015 2015 2014
---- ---- ----
Q3 2015 Q2 2015 Q3 2014
Non-GAAP net income:
GAAP net income $16,984 $37,724 $13,887
Tax adjustments from
non-cash and discrete
items (5,049) (26,351) 1,821
Gain on recovery from
auction rate securities (460) - (191)
Equity-based
compensation 5,565 6,689 4,385
Amortization of
purchased intangibles 3,777 4,026 5,561
Non-GAAP net income $20,817 $22,088 $25,463
======= ======= =======
GAAP weighted average
shares -diluted 132,445 132,823 132,626
Non-GAAP adjustment 5,273 5,090 4,409
Non-GAAP weighted
average shares -
diluted 137,718 137,913 137,035
======= ======= =======
Non-GAAP earnings per diluted share:
GAAP earnings per
diluted share $0.13 $0.28 $0.10
Excluded items per share
impact 0.02 (0.12) 0.09
Non-GAAP earnings per
diluted share $0.15 $0.16 $0.19
===== ===== =====
Equity-based compensation expense by classification:
Cost of revenue ("COS") $304 $436 $294
Research and development $2,390 $2,658 $1,967
Selling, general and
administrative $2,871 $3,595 $2,124
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