Vitesse Reports Third Quarter Fiscal Year 2013 Results

Vitesse Reports Third Quarter Fiscal Year 2013 Results 
CAMARILLO, CA -- (Marketwired) -- 08/06/13 --  Vitesse Semiconductor
Corporation (NASDAQ: VTSS) 


 
--  Net revenue totaled $26.4 million, growing 7% sequentially
--  New product revenue represented 29% of total revenue
--  Strengthened balance sheet with net proceeds of $37.6 million from
    follow-on offering
--  Increased cash balance to $71.3 million at June 30, 2013

  
Vitesse Semiconductor Corporation (NASDAQ: VTSS), a leading provider of
advanced IC solutions for Carrier and Enterprise networks, reported
its financial results for the third quarter fiscal year 2013, ended
June 30, 2013. 
"In the third quarter, our net revenue increased 7% sequentially with
both Carrier and Enterprise products recording growth," said Chris
Gardner, CEO of Vitesse. "We continue to execute on our strategy to
drive growth in new products, with new product revenue contributing
29% of our total revenue. Our innovative solutions for
next-generation networks are gaining traction in the mobile access,
wired and wireless backhaul, and cloud access markets. We are on
track for new product revenue to double to $30.0 million in fiscal
year 2013 from fiscal year 2012 and double again in 2014." 
"After completing a successful public offering of $37.6 million in
net proceeds, we closed the quarter with a significantly strengthened
balance sheet and are well-positioned to repay our debt, which
matures in 2014. The success of this offering represents an important
endorsement by many existing and new investors, and is a recognition
of Vitesse's improving strategic position." 
Third Quarter Fiscal Year 2013 Financial Results Summary 


 
--  Total net revenues were $26.4 million, compared to $24.8 million in
    the second quarter of fiscal year 2013 and $30.3 million in the third
    quarter of fiscal year 2012.
    --  Product revenues were $26.3 million, compared to $24.7 million in
        the second quarter of fiscal year 2013 and $25.7 million in the
        third quarter of fiscal year 2012.
    --  The product lines contributed the following as a percentage of
        product revenue as compared to the second quarter of fiscal year
        2013:
        --  Carrier networking products: 54.7% versus 53.3%
        --  Enterprise networking products: 43.2% versus 44.0%
    --  Intellectual property revenues totaled $133,000 compared to
        $64,000 in the second quarter of fiscal year 2013 and $4.6 million
        in the third quarter of fiscal year 2012.
--  Product margins were 55.6%, compared to 54.0% in the second quarter of
    fiscal year 2013 and 56.2% in the third quarter of fiscal year 2012.
--  Operating expenses increased to $19.0 million from $17.3 million in
    the second quarter of fiscal year 2013 and $16.9 million in the third
    quarter of fiscal year 2012.
--  Operating loss was $4.3 million, compared to operating loss of $3.9
    million in the second quarter of fiscal year 2013 and operating income
    of $2.1 million in the third quarter of fiscal year 2012.
--  Non-GAAP operating loss was $3.1 million, compared to non-GAAP
    operating loss of $2.8 million in the second quarter of fiscal year
    2013 and non-GAAP operating income of $3.3 million in the third
    quarter of fiscal year 2012.
--  Net loss was $6.4 million, or $0.17 per basic and fully diluted share.
    This compares to net loss of $4.8 million, or $0.13 per basic and
    fully diluted share, in the second quarter of fiscal year 2013; and
    net income of $4.7 million, which included a $5.8 million gain on the
    embedded derivative, or $0.18 per basic and $0.16 per fully diluted
    share, in the third quarter of fiscal year 2012.
--  Non-GAAP net loss was $5.2 million, or $0.13 per basic and fully
    diluted share, compared to non-GAAP net loss of $3.8 million, or $0.10
    per basic and fully diluted share, for the second quarter of fiscal
    year 2013; and non-GAAP net income of $140,000, or breakeven per basic
    and fully diluted share, in the third quarter of fiscal year 2012.

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


 
--  Cash balance increased to $71.3 million, compared to $23.9 million.
--  Accounts receivable totaled $10.4 million, compared to $9.4 million.
--  Inventory totaled $11.9 million, compared to $12.1 million.
--  Working capital increased to $64.6 million, compared to $28.7 million.

  
Financial Outlook 
 For the fourth quarter of fiscal year 2013, ending
September 30, 2013, Vitesse expects revenues to be in the range of
$26.0 million to $28.0 million and product margins are expected to be
between 53% and 56%. Operating expenses are expected to be between
$18.5 million and $19.5 million. 
August 6, 2013 Conference Call Information
 A conference call is
scheduled for today, August 6, 2013, at 1:30 p.m. Pacific Time / 4:30
p.m. Eastern Time to report financial results for the third quarter
fiscal year 2013.  
To listen to the conference call via telephone, dial 888.389.5988
(U.S. toll-free) or 719.325.2402 (International) and provide the
passcode 6651312. 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
6651312. 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 fourth fiscal
quarter of 2013 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                    
                                                                            
                                                                            
                                                  June 31,    September 30, 
                                                    2013           2012     
                                               -------------  ------------- 
                                                 (in thousands, except par  
                                                          value)            
                    ASSETS                                                  
                                                                            
Current assets:                                                             
  Cash                                         $      71,335  $      23,891 
  Accounts receivable, net                            10,404          9,403 
  Inventory, net                                      11,881         12,060 
  Prepaid expenses and other current assets            3,193          2,125 
                                               -------------  ------------- 
    Total current assets                              96,813         47,479 
  Property, plant and equipment, net                   2,793          3,832 
  Other intangible assets, net                         1,251          1,175 
  Other assets                                         3,700          4,130 
                                               -------------  ------------- 
                                               $     104,557  $      56,616 
                                               =============  ============= 
                                                                            
               LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)               
Current liabilities:                                                        
  Accounts payable                             $       8,365  $       5,726 
  Accrued expenses and other current                                        
   liabilities                                        13,111         12,188 
  Current portion of debt, net                         7,967              - 
  Deferred revenue                                     2,758            871 
                                               -------------  ------------- 
    Total current liabilities                         32,201         18,785 
  Other long-term liabilities                            410            574 
  Long-term debt, net                                  8,259         15,852 
  Compound embedded derivative                             -          2,899 
  Convertible subordinated debt, net                  43,907         42,521 
                                               -------------  ------------- 
    Total liabilities                                 84,777         80,631 
                                               -------------  ------------- 
                                                                            
Stockholders' equity (deficit):                                             
  Preferred stock, $0.01 par value: 10,000                                  
   shares authorized; Series B Non Cumulative,                              
   Convertible, 135 shares outstanding at June                              
   30, 2013 and September 30, 2012,                                         
   respectively                                            1              1 
  Common stock, $0.01 par value: 250,000                                    
   shares authorized; 56,406 and 25,812 shares                              
   outstanding at June 30, 2013 and September                               
   30, 2012, respectively                                564            258 
  Additional paid-in-capital                       1,889,778      1,829,976 
  Accumulated deficit                             (1,870,563)    (1,854,250)
                                               -------------  ------------- 
    Total stockholders' equity (deficit)              19,780        (24,015)
                                               -------------  ------------- 
                                               $     104,557  $      56,616 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
                     VITESSE SEMICONDUCTOR CORPORATION                      
              UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS               
                                                                            
                                                                            
                                  Three Months Ended     Nine Months Ended  
                                       June 30,              June 30,       
                                 --------------------  -------------------- 
                                    2013       2012       2013       2012   
                                 ---------  ---------  ---------  --------- 
                                    (in thousands, except per share data)   
Net revenues:                                                               
  Product revenues               $  26,285  $  25,730  $  74,879  $  81,867 
  Intellectual property revenues       133      4,557      2,019      8,148 
                                 ---------  ---------  ---------  --------- 
    Net revenues                    26,418     30,287     76,898     90,015 
                                 ---------  ---------  ---------  --------- 
Costs and expenses:                                                         
  Cost of product revenues          11,666     11,270     34,010     34,028 
  Engineering, research and                                                 
   development                      11,706     10,513     31,987     32,518 
  Selling, general and                                                      
   administrative                    7,257      6,296     22,617     22,131 
  Amortization of intangible                                                
   assets                               80         88        266        234 
                                 ---------  ---------  ---------  --------- 
    Costs and expenses              30,709     28,167     88,880     88,911 
                                 ---------  ---------  ---------  --------- 
(Loss) income from operations       (4,291)     2,120    (11,982)     1,104 
Other expense (income):                                                     
  Interest expense, net              1,983      1,950      5,919      5,823 
  Gain on compound embedded                                                 
   derivative                            -     (5,755)      (803)    (3,773)
  Other expense (income), net           31        (20)         5         21 
                                 ---------  ---------  ---------  --------- 
    Other expense (income), net      2,014     (3,825)     5,121      2,071 
                                 ---------  ---------  ---------  --------- 
(Loss) income before income tax                                             
 expense (benefit)                  (6,305)     5,945    (17,103)      (967)
Income tax expense (benefit)           129      1,234       (790)     1,363 
                                 ---------  ---------  ---------  --------- 
Net (loss) income                $  (6,434) $   4,711  $ (16,313) $  (2,330)
                                 =========  =========  =========  ========= 
                                                                            
Net (loss) income per common                                                
 share -- basic                  $   (0.17) $    0.18  $   (0.47) $   (0.09)
Net (loss) income per common                                                
 share - diluted                 $   (0.17) $    0.16  $   (0.47) $   (0.09)
Weighted average shares                                                     
 outstanding- basic                 38,630     25,302     34,601     24,951 
Weighted average shares                                                     
 outstanding- diluted               38,630     38,413     34,601     24,951 
                                                                            
                                                                            
                                                                            
                     VITESSE SEMICONDUCTOR CORPORATION                      
  UNAUDITED RECONCILIATION OF GAAP NET (LOSS) INCOME TO NON-GAAP NET LOSS   
                                                                            
                                  Three Months Ended     Nine Months Ended  
                                       June 30,              June 30,       
                                 --------------------  -------------------- 
                                    2013       2012       2013       2012   
                                 ---------  ---------  ---------  --------- 
                                    (in thousands, except per share data)   
                                                                            
GAAP net (loss) income           $  (6,434) $   4,711  $ (16,313) $  (2,330)
                                 ---------  ---------  ---------  --------- 
                                                                            
Adjustments:                                                                
Stock-based compensation charges     1,156      1,092      3,305      3,301 
Amortization of intangible                                                  
 assets                                 80         88        266        234 
Restructuring and impairment                                                
 charges                                 -          4         53         36 
Gain on compound embedded                                                   
 derivative                              -     (5,755)      (803)    (3,773)
                                 ---------  ---------  ---------  --------- 
Total GAAP to non-GAAP                                                      
 adjustments                         1,236     (4,571)     2,821       (202)
                                 ---------  ---------  ---------  --------- 
Non-GAAP net (loss) income       $  (5,198) $     140  $ (13,492) $  (2,532)
                                 =========  =========  =========  ========= 
                                                                            
Net (loss) income per common                                                
 share                                                                      
Basic:                                                                      
GAAP net (loss) income           $   (0.17) $    0.18  $   (0.47) $   (0.09)
Adjustments *                         0.04      (0.18)      0.08      (0.01)
                                 ---------  ---------  ---------  --------- 
Non-GAAP net (loss) income       $   (0.13) $       -  $   (0.39) $   (0.10)
                                 =========  =========  =========  ========= 
                                                                            
Net (loss) income per common                                                
 share                                                                      
Diluted:                                                                    
GAAP net (loss) income           $   (0.17) $    0.16  $   (0.47) $   (0.09)
Adjustments *                         0.04      (0.16)      0.08      (0.01)
                                 ---------  ---------  ---------  --------- 
Non-GAAP net (loss) income       $   (0.13) $       -  $   (0.39) $   (0.10)
                                 =========  =========  =========  ========= 
                                                                            
 UNAUDITED RECONCILIATION OF GAAP (LOSS) INCOME FROM OPERATIONSTO NON-GAAP  
                       (LOSS) INCOME FROM OPERATIONS                        
                                                                            
GAAP (loss) income from                                                     
 operations                      $  (4,291) $   2,120  $ (11,982) $   1,104 
                                 ---------  ---------  ---------  --------- 
Adjustments:                                                                
Stock-based compensation charges     1,156      1,092      3,305      3,301 
Amortiza
tion of intangible                                                  
 assets                                 80         88        266        234 
Restructuring and impairment                                                
 charges                                 -          4         53         36 
                                 ---------  ---------  ---------  --------- 
Total GAAP to non-GAAP                                                      
 adjustments                         1,236      1,184      3,624      3,571 
                                                                            
                                 ---------  ---------  ---------  --------- 
Non-GAAP (loss) income from                                                 
 operations                      $  (3,055) $   3,304  $  (8,358) $   4,675 
                                 =========  =========  =========  ========= 
                                                                            
* Included in the adjustments are calculations required by the two class    
  method relative to participation rights of our preferred shares.          

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