Audience Announces Third Quarter 2012 Financial Results

Audience Announces Third Quarter 2012 Financial Results

MOUNTAIN VIEW, Calif., Oct. 25, 2012 (GLOBE NEWSWIRE) -- Audience, Inc.
(Nasdaq:ADNC), the leader in advanced voice and audio processing for mobile
devices, today announced its third quarter 2012 financial results.

Revenue for the third quarter of 2012 was $40.8 million, compared with $26.3
million for the same period in 2011.

As reported under U.S. generally accepted accounting principles (GAAP), third
quarter 2012 net income was $3.7 million, or $0.16 per diluted share based on
weighted average shares outstanding of 23.2 million, compared with GAAP net
income of $2.4 million, or $0.05 per diluted share based on weighted average
shares outstanding of 3.8 million, in the same period in 2011.

Gross margin on a GAAP basis for the third quarter of 2012 was 55.0% of
revenue, compared to 47.5% of revenue for the same period in 2011. Gross
margin on a non-GAAP basis for the third quarter of 2012 was 55.1% of revenue,
compared to 47.6% of revenue for the same period in 2011.

Non-GAAP net income for the third quarter of 2012 was $4.9 million, or $0.21
per diluted share based on weighted average shares outstanding of 23.2
million. This compares with non-GAAP net income of $2.7 million, or $0.13 per
diluted share based on weighted average shares outstanding of 3.8 million, for
the same period in 2011.

"We continue to successfully execute our strategy of delivering a compelling
voice user experience on leading global mobile platforms as well as regional
champion devices, using our unique and differentiated technology based on the
intelligence of the human hearing system," said Peter Santos, president and
chief executive officer. "As demand accelerates for our earSmart technology in
smartphones and tablets and in new, adjacent markets, such as notebooks and
smart TVs, we look forward to expanding our market share in existing markets,
as well as in rapid growth opportunities in new geographic markets such as
China."

"In our first full quarter as a public company, we are pleased to report a
strong third quarter with revenue up by approximately 55% year-over-year and
by 22% sequentially," said Kevin Palatnik, chief financial officer. "Overall,
we realized strong operating results through solid execution and remain
focused on creating shareholder value."

In order to make it easy for investors and others to see what devices include
our earSmart^TM intelligent voice technology, we will be maintaining a page on
our web site that identifies many of the current and new devices that include
our earSmart technology. We hope this information will enable our investors to
see the breadth of devices incorporating our earSmart intelligent voice
technology. We generally intend to update this page rather than issuing a
press release when a new device is released.

The following statements are based on current expectations. These statements
are forward looking and actual results may differ materially.

Business Outlook

For the fourth quarter of 2012, the company expects total revenue to be in the
range of $35 to $38 million. Fourth quarter GAAP gross margin is expected to
be in the range of 52.5% to 55.5%. Fourth quarter GAAP net income, which
includes $1.0 million of expected stock based compensation expense and $0.1
million of non-cash rent expense, is expected to be in the range of $0.8 to
$1.7 million, or $0.04 to $0.08 per diluted share on approximately 23.6
million diluted weighted average shares outstanding.

Fourth quarter non-GAAP gross margin is expected to be in the range of 52.5%
to 55.5%. Fourth quarter non-GAAP net income is expected to be in the range of
$1.9 to $2.8 million, or $0.08 to $0.12 per share on a diluted basis.

A schedule showing a reconciliation of the business outlook from GAAP diluted
net income per share to non-GAAP diluted net income per share is included with
this release.

Quarterly Conference Call Today

Peter Santos, president and chief executive officer, and Kevin Palatnik, chief
financial officer, will host a third quarter 2012 financial results conference
call today at 1:30 pm (Pacific) / 4:30 pm (Eastern). Attendees are asked to
join the conference call at least ten minutes prior to the scheduled
conference call time. The call can be accessed by dialing 1-877-212-6076 (toll
free) or 1-707-287-9331 (international). The passcode is 38278163. A live and
archived webcast of the call will be available on Audience's website at
http://investor.audience.com/ until November 9, 2012.

Audience expects that its corporate representatives will meet privately during
the quarter with investors, the media, investment analysts and others. At
these meetings, Audience may reiterate the business outlook published in this
press release. At the same time, Audience will keep this press release,
including the business outlook, publicly available on its website.

Prior to the start of the Quiet Period (described below), the public may
continue to rely on the business outlook contained herein as still being
Audience's current expectations on matters covered unless Audience publishes a
notice stating otherwise.

Beginning December 14, 2012, Audience will observe a Quiet Period during which
Audience's representatives will not comment on Audience's business outlook,
financial results or expectations. The Quiet Period will extend until the day
when Audience's Fourth Quarter 2012 Earnings Release is published, which is
currently scheduled for January 31, 2013.

Use of Non-GAAP Financial Measures

Audience prepares its financial statements in accordance with generally
accepted accounting principles for the United States (GAAP). The non-GAAP
financial measures, such as gross margin, net income and earnings per share
information for the three and nine months ended September 30, 2012 and similar
periods from the prior year included in this press release are different from
those otherwise presented under GAAP. The following are explanations of each
type of adjustment that we incorporate into non-GAAP financial measures:

Stock-based compensation expense relates to equity incentive awards granted to
our employees, directors, and consultants accounted for under GAAP.
Stock-based compensation expense has been and will continue to be a
significant recurring expense for Audience. While we include the dilutive
impact of such equity awards in weighted average shares outstanding, the
expense associated with stock-based awards reflects a non-cash charge that we
exclude from non-GAAP net income.

Stock warrant revaluation expense is related to preferred stock warrants
outstanding that had to be revalued each quarter prior to our initial public
offering. We believe the comparisons of ongoing operations should exclude
effects of such revaluations as preferred stock warrant revaluation represents
a non-cash expense.

On June 5, 2012, Audience entered into a lease agreement for our future
corporate headquarters facility in Mountain View, CA. The facility is in the
process of being constructed. Pursuant to the lease agreement, the lease falls
under "build-to-suit" accounting treatment and therefore, in accordance with
accounting for the effect of lessee involvement in asset construction, the
company is considered to be the owner of the real estate project during the
construction period. As such, Audience recorded an asset for construction in
progress for incurred construction costs, and a liability for those costs that
are not funded by the company.Additionally the rent costs associated with the
ground lease during construction was recorded to the income statement. This
rent cost is a non-cash charge that the company excluded from our non-GAAP net
income.

The shares used to compute non-GAAP basic and diluted net income per share
include the assumed conversion of all outstanding shares of convertible
preferred stock into shares of common stock using the as-if converted method
as of the beginning of each period presented or the date of issuance, if
later. In May2012, in conjunction with the closing of our initial public
offering, all of our outstanding preferred stock was converted into shares of
our common stock.

Audience has provided these measures in addition to GAAP financial results
because management believes these non-GAAP measures help provide a consistent
basis for comparison between quarters and annual growth rates that are not
influenced by certain non-cash charges and therefore are helpful in
understanding Audience's underlying operating results. These non-GAAP measures
are some of the primary measures Audience's management uses for planning and
forecasting. These measures are not in accordance with, or an alternative to,
GAAP and these non-GAAP measures may not be comparable to information provided
by other companies. Reconciliations of the GAAP to non-GAAP results are
presented at the end of this press release.

Cautionary Note Concerning Forward-Looking Statements

Statements in the press release and certain matters to be discussed on the
third quarter conference call regarding Audience, Inc., which are not
historical facts, are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements may be identified by terms such as believe, expect, may, will,
provide, could and should and the negative of these terms or other similar
expressions. These statements, including statements relating to expectations
of future revenue, net income and operating margin performance, future success
for various products and our leadership position in the market, the demand for
our solutions including continued demand by customers upon whom we are
substantially dependent, our ability to enable the rollout of next generation
products and other operating prospects are based on current expectations and
assumptions that are subject to risks and uncertainties. Our actual results
could differ materially from those we anticipate as a result of various
factors, including: our past dependence on a single OEM for a majority of our
revenue and the transition our relationship with that OEM is undergoing; our
dependence on a limited number of OEMs, including Samsung, for a substantial
portion of revenue; our need to maintain and expand our existing relationships
with our OEMs and to establish relationships with new OEMs in order to
maintain and increase our revenue; our ability to sustain profitable
operations due to our history of losses and accumulated deficit; quarterly
fluctuations in our results due to factors such as the timing of OEM product
launches, customer purchasing behavior in light of anticipated mobile phone
launches and our assessments of whether we have excess or obsolete inventory,
among other factors; competition in the market for our products; our ability
to enter end user product markets, such as notebooks and smart TVs, as well as
new geographic markets; pressure on the average selling prices for our
products; our lengthy sales cycle and the lack of certainty as to whether any
given OEM's products will achieve market acceptance; our OEMs' lengthy and
expensive process to qualify our products; our ability to develop new or
enhanced products in a timely manner that achieve market acceptance; our
reliance on third parties to manufacture, assemble and test our products;
defects that may be present in our products; the impact of current or future
intellectual property litigation and claims for indemnification; changes in
tax laws or our ability to utilize our tax structure and net operating losses
and other risks inherent in fabless semiconductor businesses. For a discussion
of these and other related risks, please refer to "Risk Factors" in our most
recent Form 10-Q, which is available on the SEC's website at www.sec.gov.
Given these uncertainties, you should not place undue reliance on these
forward-looking statements. Also, forward-looking statements represent our
management's beliefs and assumptions only as of the date made. You should
review our SEC filings carefully and with the understanding that our actual
future results may be materially different from what we expect.

Except as required by law, we assume no obligation to update these
forward-looking statements, or to update the reasons actual results could
differ materially from those anticipated in these forward-looking statements,
even if new information becomes available in the future.

About Audience

Audience is the leader in advanced voice and audio processing for mobile
devices.Its family of earSmart™ intelligent voice processors is based on the
processes of human hearing, to suppress background noise and enhance mobile
voice quality. Audience's technology substantially improves the mobile voice
experience, while also improving the performance of speech-based services, and
enhancing audio quality for multimedia.Audience earSmart™ processors are
featured in mobile devices from leading providers in Asia-Pacific, Europe and
the U.S. The company is based in Mountain View, California. For more
information, see www.audience.com.

The Audience, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=13590

ADNC-F



Audience, Inc.
Condensed consolidated balance sheets
(in thousands)
(unaudited)

                                                   September 30, December 31,
                                                    2012          2011
Assets                                                           
Current assets:                                                  
Cash and cash equivalents                           $97,735      $15,983
Restricted cash                                     40           40
Marketable securities                               22,052       —
Accounts receivable, net                            13,239       8,465
Inventories                                         11,538       20,242
Prepaid expenses and other current assets           2,409        2,659
Total current assets                                147,013      47,389
Property and equipment, net                         5,509        2,237
Long-term deposit                                   642          69
Restricted cash—noncurrent portion                  170          170
Total assets                                        $153,334     $49,865
Liabilities, convertible preferred stock and                     
stockholders' equity (deficit)
Current liabilities:                                             
Equipment leasing                                   $—           $103
Accounts payable                                    5,427        7,711
Accrued and other current liabilities               7,435        4,405
Deferred credits and income                         289          474
Financing obligation for construction in progress   630          —
Total current liabilities                           13,781       12,693
Deferred rent—noncurrent portion                    33           132
Convertible preferred stock warrant liability       —            1,137
Total liabilities                                   13,814       13,962
Convertible preferred stock                         —            74,348
Stockholders' equity (deficit):                                  
Preferred stock                                     —            —
Common stock                                        20           1
Additional paid-in capital                          169,488      3,732
Accumulated other comprehensive income (loss)       1            (31)
Accumulated deficit                                 (29,989)     (42,147)
Total shareholders' equity (deficit)                139,520      (38,445)
Total liabilities, convertible preferred stock and  $153,334     $49,865
stockholders' equity (deficit)



Audience, Inc.
Condensed consolidated statements of comprehensive income
(in thousands, except per share data)
(unaudited)

                                         Three months ended Nine months ended
                                          September30,      September30,
                                         2012      2011     2012     2011
Revenue:                                                           
Hardware                                  $32,252  $26,306 $72,805 $79,716
Licensing                                 8,499    —       32,411  —
Total revenue                             40,751   26,306  105,216 79,716
Cost of revenue                           18,355   13,798  44,392  35,745
Gross profit                              22,396   12,508  60,824  43,971
Operating expenses:                                                
Research and development                  9,501    4,388   23,047  14,605
Selling, general and administrative       9,102    5,820   24,773  14,870
Total operating expenses                  18,603   10,208  47,820  29,475
Income from operations                    3,793    2,300   13,004  14,496
Interest income (expense), net            77       —       90      (5)
Other income (expense), net               (39)     101     (504)   (557)
Income before income taxes                3,831    2,401   12,590  13,934
Provision for income taxes                (167)    —       (432)   —
Net income                                $3,664   $2,401  $12,158 $13,934
Net income per share:                                              
Basic                                     $0.18    $0.06   $0.57   $0.67
Diluted                                   $0.16    $0.05   $0.49   $0.58
Weighted average shares used in computing                          
net income per share:
Basic                                     20,342   982     10,956  925
Diluted                                   23,159   3,802   13,816  3,196
Other comprehensive income (loss):                                 
Foreign currency translation adjustments  $—       $(20)   $31     $(41)
Net comprehensive income                  $3,664   $2,381  $12,189 $13,893



Audience, Inc.
Consolidated statements of operations
GAAP to non-GAAP net income reconciliation
(in thousands)

                                Three months ended Nine months ended
                                 September 30,      September 30,
                                2012      2011     2012     2011
GAAP net income                  $3,664   $2,401  $12,158 $13,934
Stock-based compensation         1,062    383     2,190   784
Non-cash rent expense            148      —       148     —
Revaluation of warrant liability —        (102)  290     556
Non-GAAP net income              $4,874   $2,682  $14,786 $15,274



Audience, Inc.
Unaudited computation of GAAP earnings per share
(in thousands, except per share amounts)

                                       Three months ended Nine months ended
                                        September 30,      September 30,
                                       2012     2011      2012      2011
Computation of GAAP net income per                                
share:
GAAP net income                         $3,664  $2,401   $12,158  $13,934
Non-cumulative dividends to preferred   —       (1,498) (2,248) (4,495)
stockholders
Undistributed earnings allocated to     —       (840)   (3,709) (8,821)
preferred stockholders
Net income, basic                       3,664   63       6,201    618
Adjustments to net income for preferred —       145      521      1,221
anti-dilutive
Net income, diluted                     $3,664  $208     $6,722   $1,839
Weighted average shares used in                                   
computing net income per share:
Basic                                   20,342  982      10,956   925
Diluted                                 23,159  3,802    13,816   3,196
Net income per share:                                             
Basic                                   $0.18   $0.06    $0.57    $0.67
Diluted                                 $0.16   $0.05    $0.49    $0.58



Audience, Inc.
Unaudited reconciliation of GAAP to non-GAAP diluted earnings per
share
(in thousands, except per share amounts)

                      Three months ended      Nine months ended
                       September 30,           September 30,
                      2012       2011         2012        2011
GAAP net income        $3,664    $2,401      $12,158    $13,934
Two-class method basic —         (2,338)    (5,957)   (13,316)
net income
GAAP net income—basic  3,664     63          6,201      618
Adjustment to
two-class method       —         145         521        1,221
diluted net income
GAAP net               $3,664    $208        $6,722     $1,839
income—diluted
Non-GAAP adjustments:                                   
Stock-based            1,062     383         2,190      784
compensation
Non-cash rent expense  148       —           148        —
Revaluation of warrant —         (102)      290        556
liability
Non-GAAP as if         —         —           5,436(A)   —
converted method
Non-GAAP net           $4,874    $489        $14,786    $3,179
income—diluted
GAAP—diluted weighted  23,159    3,802       13,816     3,196
average shares
Non-GAAP—diluted
weighted average       23,159    3,802       20,322(B)  3,196
shares
GAAP—diluted net       $0.16     $0.05       $0.33(B)   $0.58
income per share (B)
Non-GAAP adjustments:                                   
Stock-based            0.04      0.10        0.11       0.24
compensation
Non-cash rent expense  0.01      —           0.01       —
Revaluation of warrant —         (0.02)     0.01       0.17
liability
Non-GAAP as if         —         —           0.27       —
converted method
Non-GAAP—diluted net   $0.21     $0.13       $0.73      $0.99
income per share
                                                       
(A)For the nine months ended September 30, 2012, non-GAAP net income
was adjusted by $5,436 to give effect to the conversion of our
convertible preferred stock and certain preferred stock warrants using    
the as-if converted method into common shares as if the conversion had
occurred as of the beginning of the period presented.
(B)For the nine months ended September 30, 2012, GAAP diluted
weighted average shares used in computing diluted EPS was
13,816.Non-GAAP diluted weighted average shares of 20,322 was
computed to give effect to the conversion of our convertible preferred    
stock and certain preferred stock warrants using the as-if converted
method into common shares as if the conversion had occurred as of the
beginning of the period presented.



Audience, Inc.
Estimated computation of GAAP to non-GAAP diluted earnings per share

                                                     Three months
                                                    ending
                                                     December31, 2012
Estimated GAAP diluted net income per share          $0.04 to $0.08
Estimated stock-based compensation expense per share $0.04
Estimated non-cash rent expense per share            $0.00
Non-GAAP—diluted net income per share                $0.08 to $0.12

CONTACT: Investors and Shareholders
         The Blueshirt Group
         Suzanne Craig
         415-217-4962
         suzanne@blueshirtgroup.com
        
         or
        
         Melanie Friedman
         415-217-4964
         melanie@blueshirtgroup.com
        
         Media and Industry Analysts
         Diane Vanasse
         408-242-0027
         dvanasse@audience.com

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