QLogic Reports First Quarter Results for Fiscal Year 2015

  QLogic Reports First Quarter Results for Fiscal Year 2015

Business Wire

ALISO VIEJO, Calif. -- July 24, 2014

QLogic Corp. (Nasdaq:QLGC), a leading supplier of high performance network
infrastructure solutions, today announced its first quarter financial results
for the period ended June 29, 2014.

Net revenue for the first quarter of fiscal 2015 was $119.4 million and
increased 6% from $113.1 million in the same quarter last year. Revenue from
Advanced Connectivity Platforms was $104.7 million during the first quarter of
fiscal 2015 and increased 12% from $93.2 million in the same quarter last
year. Revenue from Legacy Connectivity Products was $14.7 million during the
first quarter of fiscal 2015 compared to $19.9 million in the same quarter
last year.

“Fiscal year 2015 is off to a solid start as we delivered both revenue and
non-GAAP earnings per diluted share that exceeded the midpoint of our guidance
ranges. Our strong revenue performance was driven by a 12% year-over-year
increase in revenue from Advanced Connectivity Platforms,” said Prasad
Rampalli, president and chief executive officer, QLogic. “Our team executed
very well to further establish QLogic as a leader in data and storage
networking connectivity products. We are making significant progress in the
enterprise Ethernet market and our revenue from these products is an important
contributor to our overall growth. We continue to believe that we are well
positioned to experience revenue growth through expanded market
opportunities.”

Net income on a GAAP basis for the first quarter of fiscal 2015 increased to
$6.0 million, or $0.07 per diluted share, from a net loss of $3.1 million, or
$0.03 per diluted share, for the first quarter of fiscal 2014. Net income on a
non-GAAP basis for the first quarter of fiscal 2015 increased 13% to $18.5
million, or $0.21 per diluted share, from $16.4 million, or $0.18 per diluted
share, for the first quarter of fiscal 2014.

QLogic uses certain non-GAAP financial measures to supplement financial
statements based on GAAP. A summary of these non-GAAP financial measures and a
reconciliation of each non-GAAP financial measure to the most directly
comparable GAAP financial measure, as well as a description of the reasons
that management believes that these non-GAAP financial measures provide useful
information to investors and the additional purposes for which management uses
these non-GAAP financial measures, is presented in the accompanying financial
schedules.

QLogic’s first quarter fiscal 2015 conference call is scheduled for today at
2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). Prasad Rampalli, president
and chief executive officer, and Jean Hu, senior vice president and chief
financial officer, will host the conference call. The call is being webcast
live via the Internet at http://ir.qlogic.com. Phone access to participate in
the conference call is available at (888) 278-8446, pass code: 7597692.

The financial information that the company intends to discuss during the
conference call will be available on the company’s website at
http://ir.qlogic.com for twelve months following the conference call. A replay
of the conference call will be available via webcast at http://ir.qlogic.com
for twelve months.

Follow QLogic @ twitter.com/qlogic

QLogic – the Ultimate in Performance

QLogic (Nasdaq:QLGC) is a global leader and technology innovator in high
performance server and storage networking connectivity products. Leading OEMs
and channel partners worldwide rely on QLogic for their server and storage
networking solutions. For more information, visit www.qlogic.com.

Disclaimer – Forward-Looking Statements

This press release contains statements relating to future results of the
company (including certain beliefs and projections regarding business and
market trends, as well as our belief that we are making significant progress
in the enterprise Ethernet market and that we are well positioned to
experience revenue growth through expanded market opportunities) that are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected or implied in the forward-looking statements. The company advises
readers that these potential risks and uncertainties include, but are not
limited to: potential fluctuations in operating results; gross margins that
may vary over time; unfavorable economic conditions; the stock price of the
company may be volatile; the company's dependence on the networking markets
served; the ability to maintain and gain market or industry acceptance of the
company's products; the company's dependence on a small number of customers;
the company's ability to compete effectively with other companies; uncertain
benefits from strategic business combinations, acquisitions and divestitures;
the ability to attract and retain key personnel; the complexity of the
company's products; declining average unit sales prices of comparable
products; the company's dependence on sole source and limited source
suppliers; the company's dependence on relationships with certain third-party
subcontractors and contract manufacturers; sales fluctuations arising from
customer transitions to new products; seasonal fluctuations and uneven sales
patterns in orders from customers; changes in the company's tax provisions or
adverse outcomes resulting from examination of its income tax returns;
international economic, currency, regulatory, political and other risks;
facilities of the company and its suppliers and customers are located in areas
subject to natural disasters; the ability to protect proprietary rights; the
ability to satisfactorily resolve any infringement claims; a reduction in
sales efforts by current distributors; declines in the market value of the
company's marketable securities; changes in and compliance with regulations;
difficulties in transitioning to smaller geometry process technologies; the
use of "open source" software in the company's products; system security
risks, data protection breaches and cyber-attacks; and the company’s ability
to borrow under its credit agreement is subject to certain covenants.

More detailed information on these and additional factors that could affect
the company's operating and financial results are described in the company's
Forms 10-K, 10-Q and other reports filed, or to be filed, with the Securities
and Exchange Commission. The company urges all interested parties to read
these reports to gain a better understanding of the business and other risks
that the company faces. The forward-looking statements contained in this press
release are made only as of the date hereof, and the company does not intend
to update or revise these forward-looking statements, whether as a result of
new information, future events or otherwise.

QLogic and the QLogic logo are registered trademarks of QLogic Corporation.
Other trademarks and registered trademarks are the property of the companies
with which they are associated.

                                   
QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited — in thousands, except per share amounts)
                                       
                                       Three Months Ended
                                       June 29,                    June 30,
                                                          
                                       2014                        2013
                                                                   
Net revenues                           $ 119,449                   $ 113,116
Cost of revenues                        48,754                    36,619  
Gross profit                            70,695                    76,497  
                                                                   
Operating expenses:
Engineering and development              37,821                      40,387
Sales and marketing                      16,034                      19,413
General and administrative               8,900                       7,739
Special charges                         2,544                     12,033  
Total operating expenses                65,299                    79,572  
                                                                   
Operating income (loss)                  5,396                       (3,075  )
                                                                   
Interest and other income, net          142                       773     
                                                                   
Income (loss) before income              5,538                       (2,302  )
taxes
                                                                   
Income tax expense (benefit)            (462    )                  748     
                                                                   
Net income (loss)                      $ 6,000                    $ (3,050  )
                                                                   
Net income (loss) per share:
Basic                                  $ 0.07                      $ (0.03   )
Diluted                                $ 0.07                      $ (0.03   )
                                                                   
Number of shares used in per
share calculations:
Basic                                    87,395                      89,146
Diluted                                  88,253                      89,146
                                                                   
                                                                   

                                     
QLOGIC CORPORATION

RECONCILIATION OF GAAP NET INCOME (LOSS) TO

NON-GAAP NET INCOME

(unaudited — in thousands, except per share amounts)
                                         
                                         Three Months Ended
                                         June 29,                   June 30,
                                                           
                                         2014                       2013
                                                                    
GAAP net income (loss)                   $ 6,000                    $ (3,050 )
Items excluded from GAAP net
income (loss):
Stock-based compensation                   5,540                      8,171
Amortization of
acquisition-related intangible             4,448                      243
assets
Acquisition-related charges                771                        —
Amortization of license fee                699                        —
Special charges                            2,544                      12,033
Income tax effect                         (1,516 )                  (981   )
Total non-GAAP adjustments                12,486                   19,466 
Non-GAAP net income                      $ 18,486                  $ 16,416 
                                                                    
Net income (loss) per diluted
share:
GAAP net income (loss)                   $ 0.07                     $ (0.03  )
Adjustments                               0.14                     0.21   
Non-GAAP net income                      $ 0.21                    $ 0.18   
                                                                    
Number of shares used in non-GAAP          88,253                     89,770
per diluted share calculations
                                                                    
                                                                    

Non-GAAP Financial Measures

The non-GAAP financial measures contained herein are a supplement to the
corresponding financial measures prepared in accordance with generally
accepted accounting principles (GAAP). The non-GAAP financial measures
presented exclude the items summarized in the above table. Management believes
that adjustments for these items assist investors in making comparisons of
period-to-period operating results and that these items are not indicative of
the company’s on-going core operating performance.

The company has presented non-GAAP net income and non-GAAP net income per
diluted share, on a basis consistent with its historical presentation, to
assist investors in understanding the company’s core net income and core net
income per diluted share on an on-going basis. These non-GAAP financial
measures may also assist investors in making comparisons of the company’s core
net profitability with historical periods and comparisons of the company’s
core net profitability with the corresponding results for competitors.
Management believes that non-GAAP net income and non-GAAP net income per
diluted share are important measures in the evaluation of the company’s
profitability. These non-GAAP financial measures exclude the adjustments
described in the above table, and thus provide an overall measure of the
company’s on-going net profitability and related profitability on a per
diluted share basis.

Management uses non-GAAP net income and non-GAAP net income per diluted share
in its evaluation of the company’s core after-tax results of operations and
trends between fiscal periods and believes that these measures are important
components of its internal performance measurement process. In addition, the
company prepares and maintains its budgets and forecasts for future periods on
a basis consistent with these non-GAAP financial measures. Management believes
that providing these non-GAAP financial measures allows investors to view the
company’s financial results in the way that management views the financial
results.

The non-GAAP financial measures presented herein have certain limitations in
that they do not reflect all of the costs associated with the operations of
the company’s business as determined in accordance with GAAP. Therefore,
investors should consider non-GAAP financial measures in addition to, and not
as a substitute for, or as superior to, measures of financial performance
prepared in accordance with GAAP. The non-GAAP financial measures presented by
the company may be different from the non-GAAP financial measures used by
other companies.

For additional information on the items excluded from the non-GAAP financial
measures and why the company believes that these non-GAAP financial measures
provide useful supplemental information to investors, the company refers you
to the Form 8-K regarding this release filed today with the Securities and
Exchange Commission.

A summary of the non-GAAP adjustments presented in the table above by the
financial statement line impacted is as follows:

                                     
(unaudited – in thousands)               Three Months Ended
                                         June 29,                   June 30,
                                                           
                                         2014                       2013
Non-GAAP Adjustments:
Cost of revenues:
Stock-based compensation                 $ 355                      $ 584
Amortization of
acquisition-related intangible             4,448                      243
assets
Acquisition-related charges                771                        —
Amortization of license fee               699                      —      
Total cost of revenue adjustments         6,273                    827    
                                                                    
Operating expenses:
Engineering and development:
Stock-based compensation                   2,971                      4,351
Sales and marketing:
Stock-based compensation                   1,010                      1,793
General and administrative:
Stock-based compensation                   1,204                      1,443
Special charges                           2,544                    12,033 
Total operating expense                   7,729                    19,620 
adjustments
                                                                    
Total non-GAAP adjustments before          14,002                     20,447
income taxes
                                                                    
Income tax effect                         (1,516 )                  (981   )
                                                                    
Total non-GAAP adjustments               $ 12,486                  $ 19,466 
                                                                    
                                                                    

                                                    
QLOGIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited — in thousands)
                                                                
                                 June 29,                       March 30,

                                 2014                           2014
ASSETS
Current assets:
Cash and cash equivalents        $ 60,882                       $ 91,258
Marketable securities             189,532                      186,783    
Total cash and marketable          250,414                        278,041
securities
Accounts receivable, net           84,103                         65,213
Inventories                        25,715                         18,036
Deferred tax assets                14,681                         15,080
Other current assets              19,870                       16,590     
Total current assets               394,783                        392,960
                                                                
Property and equipment,            86,304                         84,912
net
Goodwill                           193,294                        194,107
Purchased intangible               65,400                         69,903
assets, net
Deferred tax assets                29,091                         32,827
Other assets                      22,796                       23,554     
                                                                
                                 $ 791,668                     $ 798,263    
                                                                
LIABILITIES AND
STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable                 $ 31,261                       $ 30,657
Accrued compensation               19,721                         26,956
Accrued taxes                      1,530                          981
Deferred revenue                   4,040                          3,954
Other current liabilities         8,502                        16,123     
Total current liabilities          65,054                         78,671
                                                                
Accrued taxes                      13,871                         17,095
Other liabilities                 9,315                        9,071      
Total liabilities                 88,240                       104,837    
                                                                
Stockholders’ equity:
Common stock                       214                            214
Additional paid-in capital         961,690                        958,008
Retained earnings                  1,678,071                      1,672,071
Accumulated other                  755                            435
comprehensive income
Treasury stock                    (1,937,302 )                  (1,937,302 )
Total stockholders’ equity        703,428                      693,426    
                                                                
                                 $ 791,668                     $ 798,263    
                                                                
                                                                

                                   
QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited — in thousands)
                                       
                                       Three Months Ended
                                       June 29,                    June 30,
                                                         
                                       2014                        2013
Cash flows from operating
activities:
Net income (loss)                      $ 6,000                     $ (3,050  )
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization            12,180                      7,806
Stock-based compensation                 5,540                       8,171
Deferred income taxes                    4,076                       5,403
Asset impairments                        1,011                       2,429
Other non-cash items                     581                         345
Changes in operating assets and
liabilities:
Accounts receivable                      (18,880 )                   (3,169  )
Inventories                              (7,679  )                   3,052
Other assets                             77                          (210    )
Accounts payable                         416                         (289    )
Accrued compensation                     (7,235  )                   (5,374  )
Accrued taxes, net                       (5,418  )                   (5,366  )
Other liabilities                       (7,291  )                  6,843   
Net cash provided by (used in)          (16,622 )                  16,591  
operating activities
                                                                   
Cash flows from investing
activities:
Purchases of available-for-sale          (51,759 )                   (89,318 )
securities
Proceeds from sales and
maturities of available-for-sale         48,932                      108,609
securities
Purchases of property and               (8,989  )                  (10,111 )
equipment
Net cash provided by (used in)          (11,816 )                  9,180   
investing activities
                                                                   
Cash flows from financing
activities:
Proceeds from issuance of common         1,440                       1,963
stock under stock-based awards
Minimum tax withholding paid on
behalf of employees for                  (3,298  )                   (4,280  )
restricted stock units
Purchases of treasury stock              —                           (24,428 )
Other financing activities              (80     )                  (6      )
Net cash used in financing              (1,938  )                  (26,751 )
activities
                                                                   
Net decrease in cash and cash            (30,376 )                   (980    )
equivalents
                                                                   
Cash and cash equivalents at            91,258                    95,532  
beginning of period
                                                                   
Cash and cash equivalents at end       $ 60,882                   $ 94,552  
of period
                                                                   
                                                                   

                                  
QLOGIC CORPORATION

SUPPLEMENTAL FINANCIAL INFORMATION

(unaudited — in thousands)
                                      
Net Revenues



A summary of the company’s revenue components is as follows:
                                      
                                      Three Months Ended
                                      June 29,                  June 30,
                                                       
                                      2014                      2013
Advanced Connectivity Platforms       $ 104,701                 $ 93,190
Legacy Connectivity Products           14,748                   19,926
                                      $ 119,449                 $ 113,116
                                                                

Contact:

QLogic Corporation
Media Contact:
Steve Sturgeon, 858-472-5669
steve.sturgeon@qlogic.com
or
Investor Contact:
Doug Naylor, 949-542-1330
doug.naylor@qlogic.com
 
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