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Vitesse Reports Second Quarter Fiscal Year 2013 Results

Vitesse Reports Second Quarter Fiscal Year 2013 Results 
CAMARILLO, CA -- (Marketwired) -- 05/07/13 --  Vitesse Semiconductor
Corporation (NASDAQ: VTSS) 


 
--  New product revenue grew 44% sequentially, representing 29% of total
    revenue
--  Net revenues totaled $24.8 million
--  Operating expenses reduced to $17.3 million
--  Design wins for 2013 up nearly 100% to date compared with the first
    half of 2012

  
Vitesse Semiconductor Corporation (NASDAQ: VTSS), a leading provider of
advanced IC solutions for Carrier and Enterprise networks, reported
its financial results for the second quarter fiscal year 2013, ended
March 31, 2013. 
"During the quarter, we continued to execute on our strategy to drive
new product growth," said Chris Gardner, CEO of Vitesse.
"Sequentially, new product revenue increased over 44% and new product
bookings were also up. Design wins for the first half of 2013 grew
nearly 100% compared to the same period last year, and we are
creating a record number of new opportunities. While net revenues
were softer than anticipated due to timing of intellectual property
revenue, operating expenses decreased as we continue to drive
leverage into our financial model." 
"Our differentiating technologies are driving success, particularly
4G base stations and backhaul, Ethernet Access Devices, and the cloud
networking markets. Altogether, these trends put us on track to
achieve our goal of doubling our new product revenue to $30.0 million
in fiscal year 2013, and doubling it again in fiscal year 2014." 
Second Quarter Fiscal Year 2013 Financial Results Summary 


 
--  Total net revenues were $24.8 million, compared to $25.7 million in
    the first quarter of fiscal year 2013 and $29.7 million in the second
    quarter of fiscal year 2012.
    --  Product revenues were $24.7 million, compared to $23.9 million in
        the first quarter of fiscal year 2013 and $27.2 million in the
        second quarter of fiscal year 2012.
    --  The product lines contributed the following as a percentage of
        product revenue as compared to the first quarter of fiscal year
        2013:
        --  Carrier networking products: 53.3% versus 58.5%
        --  Enterprise networking products: 44.0% versus 40.4%
    --  Intellectual property revenues totaled $64,000, compared to $1.8
        million in the first quarter of fiscal year 2013 and $2.5 million
        in the second quarter of fiscal year 2012.
--  Product margins were 54.0%, compared to 54.1% in the first quarter of
    fiscal year 2013 and 61.0% in the second quarter of fiscal year 2012.
--  Operating expenses decreased to $17.3 million from $18.6 million in
    the first quarter of fiscal year 2013 and $18.0 million in the second
    quarter of fiscal year 2012.
--  Operating loss was $3.9 million, compared to operating loss of $3.8
    million in the first quarter of fiscal year 2013 and operating income
    of $1.1 million in the second quarter of fiscal year 2012.
--  Non-GAAP operating loss was $2.8 million, compared to non-GAAP
    operating loss of $2.5 million in the first quarter of fiscal year
    2013 and non-GAAP operating income of $2.3 million in the second
    quarter of fiscal year 2012.
--  Net loss was $4.8 million, or $0.13 per basic and fully diluted share.
    This compares to net loss of $5.0 million, or $0.18 per basic and
    fully diluted share, in the first quarter of fiscal year 2013; and net
    loss of $6.2 million, which included $5.3 million loss on the embedded
    derivative, or $0.25 per basic and fully diluted share, in the second
    quarter of fiscal year 2012.
--  Non-GAAP net loss was $3.8 million, or $0.10 per basic and fully
    diluted share, compared to non-GAAP net loss of $4.5 million, or $0.16
    per basic and fully diluted share, for the first quarter of fiscal
    year 2013; and non-GAAP net income of $313,000, or $0.01 per basic
    share and breakeven per fully diluted share, in the second quarter of
    fiscal year 2012.

  
Balance Sheet Data at March 31, 2013 as Compared to September 30, 2012 


 
--  Cash balance increased to $36.9 million, compared to $23.9 million.
--  Accounts receivable totaled $8.4 million, compared to $9.4 million.
--  Inventory totaled $12.6 million, compared to $12.1 million.
--  Working capital increased to $31.9 million, compared to $28.7
    million.

  
Financial Outlook 
 For the third quarter of fiscal year 2013, ending
June 30, 2013, Vitesse expects revenues to be in the range of $25.0
million to $27.5 million and product margins are expected to be
between 51% and 53%. Operating expenses are expected to be between
$18.5 million and $19.5 million. 
May 7, 2013 Conference Call Information
 A conference call is
scheduled for today, May 7, 2013, at 1:30 p.m. Pacific Time / 4:30
p.m. Eastern Time to report financial results for the second quarter
fiscal year 2013.  
To listen to the conference call via telephone, dial 888.455.2263
(U.S. toll-free) or 719.457.2645 (International) and provide the
passcode 9481541. Participants should dial in at least 10 minutes
prior to the start of the call. To listen via the Internet, the
webcast can be accessed through the investor section of the Vitesse
corporate web site at www.vitesse.com.  
The playback of the conference call will be available approximately
two hours after the call concludes and will be accessible on the
Vitesse corporate web site or by calling 877.870.5176 (U.S.
toll-free) or 858.384.5517 (International) and entering the passcode
9481541. The audio replay will be available for seven days. 
About Vitesse
 Vitesse (NASDAQ: VTSS) designs a diverse portfolio of
high-performance semiconductor solutions for Carrier and Enterprise
networks worldwide. Vitesse products enable the fastest-growing
network infrastructure markets including Mobile Access/IP Edge, Cloud
Computing and SMB/SME Enterprise Networking. Visit www.vitesse.com or
follow us on Twitter @VitesseSemi. 
Vitesse is a registered trademark of Vitesse Semiconductor
Corporation in the United States and other jurisdictions. All other
trademarks or registered trademarks mentioned herein are the property
of their respective holders. 
VTSS-F 
Cautions Regarding Forward Looking Statements
 All statements
included or incorporated by reference in this release and the related
conference call for analysts and investors, other than statements or
characterizations of historical fact, are forward-looking statements
that are based on our current expectations, estimates and projections
about our business and industry, management's beliefs, and certain
assumptions made by us, all of which are subject to change.
Forward-looking statements can often be identified by words such as
"anticipates," "believes," "estimates," "expects," "intends,"
"plans," "predicts," and similar terms, and variations or negatives
of these words. Examples of forward-looking statements in this
release include the Company's financial outlook for its third fiscal
quarter of 2013, projected revenues from design wins and anticipated
revenue growth. Forward-looking statements are not guarantees of
future performance and the Company's actual results may differ
significantly from the results discussed in the forward-looking
statements. Factors and uncertainties that could affect the Company's
forward-looking statements include, among other things:
identification of feasible new product initiatives, management of R&D
efforts and the resulting successful development of new products and
product platforms; acceptance by customers of the Company's products;
reliance on key suppliers; rapid technological change in the
industries in which the Company operates; and competitive factors,
including pricing pressures and the introduction by others of new
products with similar or better functionality than the Company's
products. These and other risks are more fully described in the
Company's filings with the Securities and Exchange Commission,
including the Company's most recently filed Annual Report on Form
10-K and Quarterly Report on Form 10-Q, which should be read in
conjunction herewith for a further discussion of important factors
that could cause actual results to differ materially from those in
the forward-looking statements. The Company undertakes no obligation
to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. 
Non-GAAP Measures
 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. 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. 
We provide non-GAAP measures of non-GAAP income (loss) from
operations and non-GAAP net income (loss) as a supplement to
financial results based on GAAP income (loss) from operations and
GAAP net income (loss). The Company believes that the additional
non-GAAP measures are useful to investors for the purpose of
financial analysis. We believe the presentation of non-GAAP measures
provides investors with additional insight into underlying operating
results and prospects for the future by excluding gains, losses and
other charges that are considered by management to be outside of the
Company's core operating results. Management uses these measures
internally to evaluate the Company's in-period operating performance
before taking into account these non-operating gains, losses and
charges. In addition, the measures are used for planning and
forecasting of the Company's performance in future periods. 
In deriving non-GAAP income (loss) from operations from GAAP income
(loss) from operations, we exclude stock-based compensation charges,
amortization of intangible assets, as well as restructuring and
impairment charges. In deriving non-GAAP net income (loss) from GAAP
net income (loss), we further exclude gain or loss on the embedded
derivative and loss on extinguishment of debt. Stock-based
compensation charges, amortization of intangible assets, gain or loss
on the embedded derivative and loss on extinguishment of debt
represent charges that recur in amounts unrelated to the Company's
operations. Restructuring and impairment costs relate to strategic
initiatives that result in short term increases in costs that end
with the fulfillment of the initiative and cost reductions in future
periods. 
The non-GAAP financial measures we provide have certain limitations
because they do not reflect all of the costs associated with the
operation of our business as determined in accordance with GAAP.
Non-GAAP income (loss) from operations and Non-GAAP net income (loss)
are in addition to, and are not a substitute for or superior to,
income (loss) from operations and net income (loss), which are
prepared in accordance with GAAP and may be different from non-GAAP
measures used by other companies. A detailed reconciliation of the
non-GAAP measures to the most directly comparable GAAP measure is set
forth below. Investors are encouraged to review these reconciliations
to appropriately incorporate the non-GAAP measures and the
limitations of these measures into their analyses. For complete
information on stock-based compensation, amortization of intangible
assets, restructuring and impairment charges, and the change in the
fair value of our embedded derivatives, please see our Form 10-K for
the year ended September 30, 2012. 


 
                                                                            
                     VITESSE SEMICONDUCTOR CORPORATION                      
                   UNAUDITED CONSOLIDATED BALANCE SHEETS                    
                                                                            
                                                                            
                                                 March 31,    September 30, 
                                                    2013           2012     
                                               -------------  ------------- 
                                                 (in thousands, except par  
                                                          value)            
                                                                            
                    ASSETS                                                  
Current assets:                                                             
  Cash                                         $      36,914  $      23,891 
  Accounts receivable, net                             8,429          9,403 
  Inventory, net                                      12,566         12,060 
  Prepaid expenses and other current assets            2,964          2,125 
                                               -------------  ------------- 
      Total current assets                            60,873         47,479 
  Property, plant and equipment, net                   3,126          3,832 
  Other intangible assets, net                         1,087          1,175 
  Other assets                                         3,766          4,130 
                                               -------------  ------------- 
                                               $      68,852  $      56,616 
                                               =============  ============= 
                                                                            
                   LIABILITIES AND STOCKHOLDERS' DEFICIT                    
Current liabilities:                                                        
  Accounts payable                             $       6,540  $       5,726 
  Accrued expenses and other current                                        
   liabilities                                        12,445         12,188 
  Current portion of debt, net                         8,006              - 
  Deferred revenue                                     2,005            871 
                                               -------------  ------------- 
      Total current liabilities                       28,996         18,785 
  Other long-term liabilities                            442            574 
  Long-term debt, net                                  8,083         15,852 
  Compound embedded derivative                             -          2,899 
  Convertible subordinated debt, net                  43,440         42,521 
                                               -------------  ------------- 
      Total liabilities                               80,961         80,631 
                                               -------------  ------------- 
                                                                            
Stockholders' deficit:                                                      
  Preferred stock, $0.01 par value: 10,000                                  
   shares authorized; Series B Non Cumulative,                              
   Convertible, 135 shares outstanding at                                   
   March 31, 2013 and September 30, 2012,                                   
   respectively                                            1              1 
  Common stock, $0.01 par value: 250,000                                    
   shares authorized; 37,455 and 25,812 shares                              
   outstanding at March 31, 2013 and September                              
   30, 2012, respectively                                375            258 
  Additional paid-in-capital                       1,851,644      1,829,976 
  Accumulated deficit                             (1,864,129)    (1,854,250)
                                               -------------  ------------- 
      Total stockholders' deficit                    (12,109)       (24,015)
                                               -------------  ------------- 
                                               $      68,852  $      56,616 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
                     VITESSE SEMICONDUCTOR CORPORATION                      
              UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS               
                                                                            
                                                                            
                               Three Months Ended       Six Months Ended    
                                    March 31,               March 31,       
                             ----------------------  ---------------------- 
                                2013        2012        2013        2012    
                             ----------  ----------  ----------  ---------- 
                                  (in thousands, except per share data)     
Net revenues:                                                               
  Product revenues           $   24,689  $   27,195  $   48,594  $   56,137 
  Intellectual property                                                     
   revenues                          64       2,542       1,886       3,591 
                             ----------  ----------  ----------  ---------- 
    Net revenues                 24,753      29,737      50,480      59,728 
                             ----------  ----------  ----------  ---------- 
Costs and expenses:                                                         
  Cost of product revenues       11,369      10,595      22,344      22,758 
  Engineering, research and                                                 
   development                    9,777       9,580      20,281      22,005 
  Selling, general and                                                      
   administrative                 7,390       8,383      15,360      15,835 
  Amortization of intangible                                                
   assets                            89          79         186         146 
                             ----------  ----------  ----------  ---------- 
    Costs and expenses           28,625      28,637      58,171      60,744 
                             ----------  ----------  ----------  ---------- 
(Loss) income from                                                          
 operations                      (3,872)      1,100      (7,691)     (1,016)
Other expense (income) :                                                    
  Interest expense, net           1,966       1,924       3,936       3,873 
  (Gain) loss on compound                                                   
   embedded derivative                -       5,280        (803)      1,982 
  Other expense (income),                                                   
   net                                5          29         (26)         41 
                             ----------  ----------  ----------  ---------- 
    Other expense, net            1,971       7,233       3,107       5,896 
                             ----------  ----------  ----------  ---------- 
Loss before income tax                                                      
 (benefit) expense               (5,843)     (6,133)    (10,798)     (6,912)
Income tax (benefit) expense       (996)         63        (919)        129 
                             ----------  ----------  ----------  ---------- 
Net loss                     $   (4,847) $   (6,196) $   (9,879) $   (7,041)
                             ==========  ==========  ==========  ========== 
                                                                            
Net loss per common share -                                                 
 basic and diluted           $    (0.13) $    (0.25) $    (0.30) $    (0.28)
                                                                            
Weighted average shares                                                     
 outstanding- basic and                                                     
 diluted                         37,215      25,043      32,587      24,776 
                                                                            
                                                                            
                                                                            
                     VITESSE SEMICONDUCTOR CORPORATION                      
  UNAUDITED RECONCILIATION OF GAAP NET (LOSS) INCOME TO NON-GAAP NET LOSS   
                                                                            
                               Three Months Ended       Six Months Ended    
                                    March 31,               March 31,       
                             ----------------------  ---------------------- 
                                2013        2012        2013        2012    
                             ----------  ----------  ----------  ---------- 
                                  (in thousands, except per share data)     
                                                                            
GAAP net loss                $   (4,847) $   (6,196) $   (9,879) $   (7,041)
                             ----------  ----------  ----------  ---------- 
                                                                            
Adjustments:                                                                
Stock-based compensation                                                    
 charges                          1,006       1,146       2,149      
 2,209 
Amortization of intangible                                                  
 assets                              89          79         186         146 
Restructuring and impairment                                                
 charges                              -           4          53          32 
(Gain) loss on compound                                                     
 embedded derivative                  -       5,280        (803)      1,982 
                             ----------  ----------  ----------  ---------- 
Total GAAP to non-GAAP                                                      
 adjustments                      1,095       6,509       1,585       4,369 
                             ----------  ----------  ----------  ---------- 
Non-GAAP net (loss) income   $   (3,752) $      313  $   (8,294) $   (2,672)
                             ==========  ==========  ==========  ========== 
                                                                            
Net (loss) income per common                                                
 share                                                                      
Basic:                                                                      
GAAP net (loss) income       $    (0.13) $    (0.25) $    (0.30) $    (0.28)
Adjustments *                      0.03        0.26        0.05        0.18 
                             ----------  ----------  ----------  ---------- 
Non-GAAP net (loss) income   $    (0.10) $     0.01  $    (0.25) $    (0.10)
                             ==========  ==========  ==========  ========== 
                                                                            
Net (loss) income per common                                                
 share                                                                      
Diluted:                                                                    
GAAP net (loss) income       $    (0.13) $    (0.25) $    (0.30) $    (0.28)
Adjustments *                      0.03        0.25        0.05        0.18 
                             ----------  ----------  ----------  ---------- 
Non-GAAP net (loss) income   $    (0.10) $        -  $    (0.25) $    (0.10)
                             ==========  ==========  ==========  ========== 
                                                                            
 UNAUDITED RECONCILIATION OF GAAP (LOSS) INCOME FROM OPERATIONS TO NON-GAAP 
                       (LOSS) INCOME FROM OPERATIONS                        
                                                                            
GAAP (loss) income from                                                     
 operations                  $   (3,872) $    1,100  $   (7,691) $   (1,016)
                             ----------  ----------  ----------  ---------- 
Adjustments:                                                                
Stock-based compensation                                                    
 charges                          1,006       1,146       2,149       2,209 
Amortization of intangible                                                  
 assets                              89          79         186         146 
Restructuring and impairment                                                
 charges                              -           4          53          32 
                             ----------  ----------  ----------  ---------- 
Total GAAP to non-GAAP                                                      
 adjustments                      1,095       1,229       2,388       2,387 
                             ----------  ----------  ----------  ---------- 
Non-GAAP (loss) income from                                                 
 operations                  $   (2,777) $    2,329  $   (5,303) $    1,371 
                             ==========  ==========  ==========  ========== 
                                                                            
                                                                            
* Included in the adjustments are calculations required by the two class    
 method relative to participation rights of our preferred shares.           

  
Company Contact:
Marty McDermut
Vitesse Semiconductor
+1.805.388.3700
invest@vitesse.com
http://www.vitesse.com/ 
Agency Contact:
Cathy Mattison
LHA
+1.415.433.3777
VTSS@lhai.com 
http://www.lhai.com/
 
 
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