NetLogic Microsystems, Inc. (NASDAQ: NETL), a worldwide leader
in high performance intelligent semiconductor solutions for
next-generation Internet networks, today announced financial
results for its third quarter ended September 30, 2011.
Revenue for the third quarter of 2011 was $106.8 million, a 3.0%
sequential increase from $103.7 million for the second quarter of
2011 and a 6.8% increase from $100.1 million for the third quarter
of 2010.
Third quarter 2011 net income, determined in accordance with
generally accepted accounting principles (GAAP), was $7.2 million
or $0.10 per diluted share. By comparison, GAAP net income was $5.2
million or $0.08 per diluted share for the third quarter of 2010.
GAAP net income for third quarter 2011 included stock-based
compensation and related payroll taxes, changes in contingent
earn-out liability, amortization of intangible assets, and
acquisition-related costs. Excluding these items, non-GAAP net
income for the third quarter of 2011 was $35.5 million or $0.47 per
diluted share, compared with $0.40 per diluted share for the third
quarter of 2010.
Management Qualitative
Comments
“This was another positive quarter for NetLogic Microsystems,”
said Ron Jankov, president and CEO. “In addition to solid financial
results, during the third quarter we marked another significant
milestone in our roadmap with the announcement of the XLP®II
processor, the industry’s most advanced multi-core processor
leveraging the advanced 28 nanometer process node. This
ground-breaking new processor demonstrates our continued commitment
to technology leadership and further highlights the tremendous
execution capability and expertise of our team.”
Recent Operating
Highlights
• NetLogic Microsystems announced the innovative XLP II
family of multi-core processors, the industry’s most advanced and
highest performance communications multi-core processors for
next-generation LTE mobile infrastructure, data center, enterprise
networking, storage and security applications. The XLP II processor
family, based on industry-leading 28 nanometer process technology,
features groundbreaking innovations that deliver a dramatic 5-7x
performance enhancement over the existing generation of XLP
processors, which already offer best-in-class performance and have
set the gold standard in multi-core processing today.
• The company also began revenue shipments in the third quarter for
its recently introduced XLP multi-core processors into the
communications control plane market, which is estimated at
approximately $1.5 billion. The control plane processing
application represents a new market for NetLogic Microsystems’ XLP
family of multi-core processors as previous generations of XLR® and
XLS® families of processors were primarily targeted at the data
plane processing market.
• ZTE selected NetLogic Microsystems’ industry-leading NLA11k
knowledge-based processors, optimized for Internet Protocol Version
6 (IPv6) processing, for ZTE’s multi-terabit T8000 Cluster Router.
ZTE’s T8000 Router is ideal for operators and service providers
building sophisticated IP/Multiprotocol Label Switching (MPLS)
infrastructure for next-generation network backbones.
About NetLogic Microsystems
NetLogic Microsystems, Inc. (NASDAQ: NETL) is a worldwide leader
in high-performance intelligent semiconductor solutions that are
powering next-generation Internet networks. NetLogic Microsystems’
best-in-class products perform highly differentiated tasks of
accelerating complex network traffic to significantly enhance the
performance and functionality of advanced 3G/4G mobile wireless
infrastructure, data center, enterprise, metro Ethernet, edge and
core infrastructure networks. NetLogic Microsystems’ market-leading
product portfolio includes high-performance multi-core processors,
knowledge-based processors, content processors, network search
engines, ultra low-power embedded processors, digital front-end
processors and high-speed 10/40/100 Gigabit Ethernet PHY solutions.
These products are designed into high-performance systems such as
switches, routers, wireless base stations, security appliances,
networked storage appliances, service gateways and connected media
devices offered by leading original equipment manufacturers (OEMs).
NetLogic Microsystems is headquartered in Santa Clara, California,
and has offices and design centers throughout North America, Asia
and Europe. For more information about products offered by NetLogic
Microsystems, call +1-408-454-3000 or visit the NetLogic
Microsystems Web site at http://www.netlogicmicro.com.
NetLogic Microsystems and the NetLogic Microsystems logo are
trademarks of NetLogic Microsystems, Inc. XLR, XLS and XLP are
registered trademarks of NetLogic Microsystems, Inc. All other
trademarks are the properties of their respective owners.
NETLOGIC MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER SHARE
AMOUNTS)
(UNAUDITED)
Three months ended Nine months ended
September 30,
2011
September 30,
2010
September 30,
2011
September 30,
2010
Revenue $ 106,808 $ 100,052 $ 309,166 $ 281,317 Cost of revenue*
39,690 40,523
121,153 134,866 Gross profit
67,118 59,529 188,013
146,451 Operating expenses: Research
and development* 39,848 32,372 113,462 92,462 Selling, general and
administrative* 22,000 19,763 63,725 59,619 Change in contingent
earn-out liability (5,295 ) 741 31,416 51,152 Acquisition-related
costs 5,591 -
7,524 735
Total operating expenses
62,144 52,876
216,127 203,968 Income (loss) from
operations 4,974 6,653 (28,114 ) (57,517 ) Other income (expense):
Gain recognized on investment in Optichron, Inc. - - 4,259 -
Impairment charge on other investment - - (1,276 ) - Interest and
other income (expense), net 94 (126 )
498 (236 ) Income (loss) before
income taxes 5,068 6,527 (24,633 ) (57,753 ) Provision for (benefit
from) income taxes (2,141 ) 1,318
(2,665 ) (790 ) Net income (loss) $
7,209 $ 5,209 $ (21,968 ) $
(56,963 ) Net income (loss) per share - Basic $ 0.10
$ 0.08 $ (0.32 ) $ (0.95 ) Net income (loss)
per share - Diluted $ 0.10 $ 0.08 $
(0.32 ) $ (0.95 ) Shares used in calculation - Basic
69,266 63,632 68,585
60,041 Shares used in calculation -
Diluted 73,498 67,933
68,585 60,041 * Includes
stock-based compensation and related payroll taxes, and
amortization of intangible assets as follows (in thousands):
Three months ended Nine months ended
September 30,
2011
September 30,
2010
September 30,
2011
September 30,
2010
Stock-based compensation and related payroll taxes:
Cost of revenue $ 252 $ 167 $ 773 $ 536 Research and development
8,346 6,207 25,397 19,463 Selling, general and administrative
5,049 5,041 14,754
16,905 Total $ 13,647 $ 11,415 $ 40,924 $
36,904 Amortization of intangible assets: Cost of revenue $
13,057 $ 9,632 $ 38,470 $ 29,028 Selling, general and
administrative 1,278 913 3,449
2,739
Total
$ 14,335 $ 10,545 $ 41,919 $ 31,767
Non-GAAP Financial Information
In addition to disclosing financial results calculated in
accordance with U.S. generally accepted accounting principles
(GAAP), this announcement of operating results contains non-GAAP
financial measures that exclude the income statement effects of
stock-based compensation and related payroll taxes, change in
contingent earn-out liability, amortization of intangible assets,
fair value adjustments of acquired inventory and related taxes,
acquisition-related costs, lease termination costs, a gain
recognized on a pre-acquisition investment in Optichron, Inc., an
impairment charge on another investment, and the effects of
excluding stock-based compensation upon the number of diluted
shares used in calculating non-GAAP earnings per share.
We have excluded stock-based compensation expense and changes in
contingent earn-out liability in calculating these non-GAAP
financial measures primarily because these expenses rely on
valuations based on future events such as the market price of our
common stock and revenue generated from products acquired in the
RMI and Optichron acquisitions during a defined period following
the close that are difficult to predict and are affected by market
factors that are largely not within the control of management. We
have excluded stock related payroll taxes, amortization of
intangible assets, fair value adjustments related to acquired
inventory and the related tax effect, acquisition-related costs,
lease termination costs, gain recognized on investment in
Optichron, Inc. and impairment charge on other investment because
we do not consider them to be related to our core operating
performance.
We use the non-GAAP financial measures that exclude these items
to make strategic decisions, forecast future results and evaluate
the Company’s current performance. We believe that the presentation
of non-GAAP financial measures that exclude these items is useful
to investors because we do not consider these charges either part
of the day-to-day business or reflective of the core operational
activities of the Company that are within the control of management
or that are used to evaluate management’s operating
performance.
The non-GAAP financial measures disclosed by the Company should
not be considered a substitute for, or superior to, financial
measures calculated in accordance with GAAP, and the financial
results calculated in accordance with GAAP and reconciliations to
those financial statements should be carefully evaluated. The
non-GAAP financial measures used by the Company may be calculated
differently from, and therefore may not be comparable to, similarly
titled measures used by other companies. The Company has provided
reconciliations of the non-GAAP financial measures to the most
directly comparable GAAP financial measures. For additional
information regarding these non-GAAP financial measures, and
management’s explanation of why it considers such measures to be
useful, refer to the Form 8-K dated October 26, 2011 that the
Company has submitted to the Securities and Exchange
Commission.
NETLOGIC MICROSYSTEMS, INC.
RECONCILIATION OF GAAP NET LOSS TO
NON-GAAP NET INCOME
(IN THOUSANDS)
(UNAUDITED)
Three months ended Nine months ended
September 30,
2011
September 30,
2010
September 30,
2011
September 30,
2010
GAAP net income (loss) $ 7,209 $ 5,209 $ (21,968 ) $
(56,963 ) Reconciling items: Stock-based compensation and related
taxes 13,647 11,415 40,924 36,904 Changes in contingent earn-out
liability (5,295 ) 741 31,416 51,152 Amortization of intangible
assets 14,335 10,545 41,919 31,767 Fair value adjustments of
acquired inventory - - 2,381 16,018 Acquisition-related costs 5,591
- 7,524 735 Lease termination costs - - - 503 Gain recognized on
investment in Optichron - - (4,259 ) - Impairment charge on other
investment - - 1,276 - Tax effect of inventory fair value
adjustment - - (847 )
(5,618 ) Non-GAAP net income $ 35,487 $
27,910 $ 98,366 $ 74,498
NETLOGIC MICROSYSTEMS, INC.
RECONCILIATION OF GAAP DILUTED NET INCOME
(LOSS) PER SHARE TO
NON-GAAP DILUTED NET INCOME PER SHARE
(UNAUDITED)
Three months ended Nine months ended
September 30,
2011
September 30,
2010
September 30,
2011
September 30,
2010
GAAP net income (loss) per share - Diluted $ 0.10 $ 0.08 $
(0.32 ) $ (0.95 ) Reconciling items: Stock-based
compensation and related taxes 0.18 0.16 0.54 0.55 Changes in
contingent earn-out liability (0.07 ) 0.01 0.42 0.76 Amortization
of intangible assets 0.19 0.15 0.56 0.47 Fair value adjustments of
acquired inventory - - 0.03 0.24 Acquisition-related costs 0.07 -
0.10 0.01 Lease termination costs - - - 0.01 Gain recognized on
investment in Optichron - - (0.06 ) - Impairment charge on other
investment - - 0.02 - Tax effect of inventory fair value adjustment
- - (0.01 ) (0.08 ) Difference in shares count between diluted GAAP
and diluted non-GAAP calculation - -
0.03 0.10 Non-GAAP net
income per share - Diluted $ 0.47 $ 0.40 $
1.31 $ 1.11
NETLOGIC MICROSYSTEMS, INC.
RECONCILIATION OF THE SHARES USED FOR GAAP
DILUTED
NET INCOME (LOSS) PER SHARE CALCULATION TO
THE SHARES USED FOR
NON-GAAP DILUTED NET INCOME PER SHARE
CALCULATION
(IN THOUSANDS)
(UNAUDITED)
Three months ended
Nine months ended
September 30,
2011
September 30,
2010
September 30,
2011
September 30,
2010
Shares used in calculation - Diluted (GAAP) 73,498 67,933
68,585 60,041 The effect of removing stock-based
compensation expense for non-GAAP presentation purpose 2,555 2,613
2,235 2,684 The effect of dilutive potential common shares due to
reporting non-GAAP net income - - 4,535 4,481
Shares used in calculation - Diluted (Non-GAAP) 76,053
70,546 75,355 67,206
NETLOGIC MICROSYSTEMS, INC.
RECONCILIATION OF GAAP GROSS MARGIN TO
NON-GAAP GROSS MARGIN
(IN THOUSANDS, EXCEPT PERCENTAGES)
(UNAUDITED)
Three months ended
Nine months ended September 30,
2011
September 30,
2010
September 30,
2011
September 30,
2010
GAAP gross margin $ 67,118 62.8 % $ 59,529 59.5 % $ 188,013
60.8 % $ 146,451 52.1 % Reconciling items: Stock-based
compensation 252 0.2 % 167 0.2 % 773 0.3 % 536 0.2 % Amortization
of intangible assets 13,057 12.2 % 9,632 9.6 % 38,470 12.4 % 29,028
10.3 % Fair value adjustment related to acquired inventory -
0.0 % - 0.0 % 2,381 0.8 % 16,018 5.7 %
Non-GAAP gross margin $ 80,427 75.3 % $ 69,328 69.3 % $ 229,637
74.3 % $ 192,033 68.3 %
NETLOGIC MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
September 30,
2011
December 31,
2010
ASSETS Current assets: Cash, cash equivalents and short-term
investments $ 242,372 $ 256,167 Accounts receivables, net 38,916
19,829 Inventories 38,326 36,290 Deferred income taxes 7,493 8,428
Prepaid expenses and other current assets 12,536
11,458 Total current assets 339,643 332,172
Property and equipment, net 31,235 20,507 Goodwill 167,152 112,700
Intangible asset, net 204,029 180,838 Other assets 78,521
66,372 Total assets $ 820,580
$ 712,589 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities Accounts payable $ 16,470 $ 17,257 Accrued
liabilities 29,275 27,848 Contingent earn-out liability, current
71,024 - Deferred margin 2,932 4,242 Software licenses and other
obligations, current 4,722 4,514
Total current liabilities 124,423 53,861 Contingent earn-out
liability, long-term 3,867 - Software licenses and other
obligations, long-term 3,394 2,033 Other liabilities 41,520
37,782 Total liabilities 173,204
93,676 Stockholders' equity Common
stock 696 675 Additional paid-in capital 860,623 807,780
Accumulated other comprehensive loss (2,461 ) (28 ) Accumulated
deficit (211,482 ) (189,514 ) Total
stockholders' equity 647,376 618,913
Total liabilities and stockholders' equity $ 820,580
$ 712,589
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