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Intersil Corporation Reports First Quarter Results

MILPITAS, Calif., April 26, 2016 /PRNewswire/ -- Intersil Corporation (NASDAQ:ISIL), a leading provider of innovative power management and precision analog solutions, today announced financial results for the first quarter ended April 1, 2016. First quarter revenue of $129.3 million was up 2.1% sequentially. Gross margin also increased sequentially, operating expenses remained in line with expectations, and the company sustained strong operating income levels.

Company Highlights

  • Consumer and Computing (C&C) revenue was better than seasonal, increasing year-over-year by over 8%.
  • Infrastructure and Industrial (I&I) demand improved broadly, resulting in 4% sequential growth.
  • Gross margin increased sequentially by 120 and 130 basis points, respectively, to 58.8% on a GAAP basis and 59.1% on a non-GAAP basis.
  • The company again reported solid profitability, with non-GAAP operating margin of 20% or greater for the 11th consecutive quarter.
  • Cash and cash equivalents increased to $254 million at quarter-end.

Quarterly Results
Revenue for the first quarter was better than seasonal due to ramps of new business in C&C, record revenue in automotive, and recovery in infrastructure and industrial markets. I&I revenue increased 4% sequentially, with automotive, power and analog growing in the quarter. Automotive revenue reached another record as strong end-market demand and new business propelled the business forward. First quarter C&C revenue decreased only 1% sequentially and was up over 8% year over year. The company's new products shipping into high profile mobile platforms were behind the better than seasonal result. The breakdown by end market follows:


Q1 2016


Q4 2015


Q1 2015

End Market Revenue

$M


%


$M


%


$M


%

Infrastructure & Industrial

82.2


64%


79.1


62%


90.7


68%

Consumer & Computing 

47.1


36%


47.5


38%


43.5


32%

Total Revenue

$129.3




$126.6




$134.2



 

Table 1. Intersil End Market Mix

GAAP gross margin for the quarter increased to 58.8%. First quarter GAAP operating expenses increased to $60.8 million as a result of increasing R&D investment. R&D expense was $33.7 million and SG&A expense was $23.6 million. First quarter GAAP operating income was $15.2 million or 11.8% of revenue. GAAP net income was $11.8 million, and fully diluted GAAP earnings per share were $0.09.

The following non-GAAP results exclude amortization of purchased intangibles, equity-based compensation expense, certain legal judgments and governmental penalties, acquisition-related charges, and gain on recovery of auction rate securities, as well as the related tax effects. First quarter non-GAAP gross margin increased by 130 basis points to 59.1%. Non-GAAP R&D investment increased to $30.6 million while non-GAAP SG&A decreased to $20.0 million, resulting in total non-GAAP operating expense of $50.6 million for the quarter. Q1 non-GAAP operating income increased to $25.8 million, resulting in non-GAAP operating margin of 20.0%. Fully diluted Q1 earnings per share on a non-GAAP basis were $0.15.

For a complete reconciliation of GAAP and non-GAAP results, please see the "Non-GAAP Results" tables included at the end of this release.

Cash and cash equivalents increased again to $254 million at the end of the first quarter. Intersil's board of directors authorized payment of a quarterly dividend of $0.12 per share of common stock. The payment of this dividend will be made on or about May 27, 2016 to shareholders of record as of the close of business on May 17, 2016.

"Q1 was a solid quarter, with new product ramps and a stabilizing demand environment," said Necip Sayiner, president and CEO of Intersil. "We're encouraged by the strong design activity and momentum building across all of our investment businesses."

Second Quarter 2016 Outlook

The following forward-looking guidance is for the second quarter ending July 1, 2016, based on current business trends and conditions:


GAAP

Non-GAAP

Revenue

$130 to $136 million

Gross margin

Up 50 to 75 bps

Operating expenses

$64M to $65M 

$52M to $53M

Earnings per share

$0.08 to $0.10

$0.15 to $0.17

 

Table 2. Intersil Q2 2016 Outlook

Earnings Call Webcast
Intersil will be hosting a webcast to discuss the quarterly results and outlook today at 1:30 p.m. Pacific Time. To access the webcast, please visit the investor relations page of the company's website at ir.intersil.com. Participants can also dial (888) 656-8682 or +1 (503) 343-6028 and enter the passcode 87919628. A replay of the webcast will be available for two weeks following the conference call on the company website, or may be accessed by dialing (855) 859-2056, international dial +1 (404) 537-3406, using the passcode 98625303.

About Intersil
Intersil Corporation is a leading provider of innovative power management and precision analog solutions. The company's products form the building blocks of increasingly intelligent, mobile and power hungry electronics, enabling advances in power management to improve efficiency and extend battery life. With a deep portfolio of intellectual property and a rich history of design and process innovation, Intersil is the trusted partner to leading companies in some of the world's largest markets, including industrial and infrastructure, mobile computing, automotive and aerospace. For more information about Intersil, visit our website at www.intersil.com.

FORWARD-LOOKING STATEMENTS
Some of the statements included in this press release constitute forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, as defined in connection with the Private Securities Litigation Reform Act of 1995. You should not place undue reliance on these statements. These forward-looking statements include statements that reflect the current expectations, estimates, beliefs, assumptions, and projections of our senior management about future events with respect to our business and our industry in general.  Statements that include words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "potential," "continue," "goals," "targets" and variations of these words (or negatives of these words) or similar expressions of a future or forward-looking nature identify forward-looking statements. In addition, any statements that refer to projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.

These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict. Therefore, there are or will be important factors that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. We believe that the factors that may affect our business, future operating results and financial condition include, but are not limited to, the following: any faltering or uncertainty in global economic conditions, the highly cyclical nature of the semiconductor industry, intense competition in the semiconductor industry, unsuccessful product development or failure to obtain market acceptance of our products, downturns in the end markets we serve, failure to make or deliver products in a timely manner, unavailability of raw materials, services, supplies or manufacturing capacity, delays in production or in implementing new production techniques, product defects, or unreliability of products, and adverse results in litigation matters. For a more detailed discussion of how these and other risks and uncertainties could cause our actual results to differ materially from those indicated in our forward-looking statements, see our reports filed with the U.S. Securities and Exchange Commission (which you may obtain for free at the SEC's web site at http://www.sec.gov), including our Annual Report on Form 10-K for the year ended January 1, 2016. These forward-looking statements are made only as of the date of this communication and Intersil undertakes no obligation to update or revise these forward-looking statements.

Non-GAAP Reporting
To supplement its consolidated financial results presented in accordance with GAAP, Intersil uses non-GAAP financial measures, which are adjusted from the most directly comparable GAAP financial measures to exclude certain items, as described in detail below. Management believes that these non-GAAP financial measures reflect an additional and useful way of viewing aspects of the Company's operations that, when viewed in conjunction with Intersil's GAAP results, provide a more comprehensive understanding of the various factors and trends affecting the Company's business and operations. It should also be noted that Intersil's non-GAAP information may be different from the non-GAAP information provided by other companies. Non-GAAP financial measures used by Intersil include:

  • Gross profit;
  • Operating expenses;
  • Provision (benefit) for income taxes;
  • Operating income (loss);
  • Net income (loss);
  • Diluted earnings (loss) per share; and
  • Weighted average shares outstanding – diluted.

The Company presents non-GAAP financial measures because the investor community uses non-GAAP results in its analysis and comparison of historical results and projections of the Company's future operating results. These non-GAAP results exclude acquisition-related expense, restructuring and related costs, equity-based compensation expense, and certain other expenses and benefits. Management uses these non-GAAP measures to manage and assess the profitability of the business. These non-GAAP results are also consistent with the way management internally analyzes Intersil's financial results.

There are limitations in using non-GAAP financial measures because they are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP financial measures. The non-GAAP financial measures supplement, and should be viewed in conjunction with, GAAP financial measures. Investors should review the reconciliations of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the accompanying press release.

As presented in the "Non-GAAP Results" tables in the accompanying press release, each of the non-GAAP financial measures excludes one or more of the following items:

Acquisition-related charges. Acquisition-related charges are not factored into management's evaluation of potential acquisitions or Intersil's performance after completion of acquisitions, because they are not related to the Company's core operating performance. Adjustments of these items provide investors with a basis to compare Intersil's performance to other companies without the variability caused by purchase accounting. Acquisition-related expenses primarily include:

  • Amortization of purchased intangibles, which include purchased intangibles such as purchased technology, patents, customer relationships, trademarks, backlog and non-compete agreements.
  • One-time charges associated with completing an acquisition including contract termination costs.

Other adjustments. These items are excluded from non-GAAP financial measures because they are not related to the core operating activities and on-going future operating performance of Intersil. Excluding this data allows investors to better compare Intersil's period-over-period performance without such expense, which Intersil believes may be useful to the investor community. Other adjustments primarily include:

  • Equity-based compensation expense.
  • Legal judgments, awards, or governmental fines or penalties.
  • Income from IP agreements.
  • Restructuring and related costs.
  • Write-offs (recoveries) related to Auction Rate Securities.
  • Tax effects of non-GAAP adjustments.
  • Diluted weighted average shares non-GAAP adjustment - for purposes of calculating non-GAAP diluted earnings per share, the GAAP diluted weighted average shares outstanding is adjusted to exclude the benefits of equity-based compensation expense attributable to future services not yet recognized in the financial statements that are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method.

Comparability. The above criteria has been consistently applied when calculating the non-GAAP financial measures for all periods presented in this press release and accompanying tables.

Intersil Corporation

Condensed Consolidated Statements of Income

Unaudited

(In thousands, except percentages and per share amounts)








Quarter Ended


Apr. 1,


Jan. 1,


Apr. 3, 


2016


2016


2015


Q1 2016


Q4 2015


Q1 2015







Revenue

$    129,279


$     126,626


$     134,153

Cost of revenue

53,319


53,707


53,827

Gross profit

75,960


72,919


80,326

Gross margin %

58.8%


57.6%


59.9%

Expenses:






Research and development 

33,678


29,983


32,017

Selling, general and administrative 

23,549


22,784


25,453

Amortization of purchased intangibles

3,528


4,261


5,561

Provision for TAOS litigation

-


-


81,100

Total expenses

60,755


57,028


144,131

Operating income (loss)

15,205


15,891


(63,805)

Other income (expense)

(481)


(257)


516

Income (loss) before income taxes

14,724


15,634


(63,289)

Income tax (benefit) expense

2,973


(5,668)


5,535

Net income (loss)

$      11,751


$       21,302


$      (68,824)







Earnings per share: 






Basic

$          0.09


$           0.16


$          (0.53)

Diluted

$          0.09


$           0.16


$          (0.53)







Weighted average shares outstanding:






Basic

132,857


132,608


130,513

Diluted

135,267


134,288


130,513

 

Intersil Corporation

Condensed Consolidated Balance Sheets

Unaudited

(in thousands)








Apr. 1,


Jan. 1,


Apr. 3, 


2016


2016


2015

Assets






Current assets:






  Cash and cash equivalents 

$    253,606


$    247,403


$     220,900

  Trade receivables, net

49,000


42,684


51,236

  Inventories

64,316


65,334


77,798

  Prepaid expenses and other current assets

12,843


7,176


14,301

  Income taxes receivable

7,608


7,584


1,129

  Deferred income tax assets

-


-


20,615

     Total current assets

387,373


370,181


385,979

Non-current assets:






  Property, plant and equipment, net

69,069


71,044


73,073

  Purchased intangibles, net

28,979


32,507


28,839

  Goodwill

571,770


571,770


565,424

  Deferred income tax assets

63,139


63,139


38,779

  Other non-current assets

32,238


29,977


71,297

     Total non-current assets

765,195


768,437


777,412

Total assets

$ 1,152,568


$ 1,138,618


$  1,163,391







Liabilities and stockholders' equity






Current liabilities:






  Trade payables

23,137


23,382


22,544

  Deferred income

13,796


14,482


13,442

  Income taxes payable

6,275


3,270


5,764

  Provision for TAOS litigation

77,744


77,988


79,470

  Other accrued expenses

50,206


48,913


68,522

    Total current liabilities

171,158


168,035


189,742

Non-current liabilities:






  Income taxes payable

1,622


1,609


60,661

  Other non-current liabilities

14,627


14,225


6,496

    Total non-current liabilities

16,249


15,834


67,157

Total stockholders' equity

965,161


954,749


906,492

Total liabilities and stockholders' equity

$ 1,152,568


$ 1,138,618


$  1,163,391

 

Intersil Corporation

Condensed Consolidated Statements of Cash Flows

Unaudited

(In thousands)








Quarter Ended


Apr. 1,


Jan. 1,


Apr. 3, 


2016


2016


2015


Q1 2016


Q4 2015


Q1 2015

Operating activities:






Net income (loss)

$           11,751


$      21,302


$    (68,824)

   Depreciation

3,579


3,557


4,486

   Amortization of purchased intangibles

3,528


4,261


5,561

   Equity-based compensation

6,482


5,148


5,756

   Deferred income taxes

-


(2,247)


373

   Other

21


(2,300)


(1,059)

   Net changes in operating assets and liabilities

(7,691)


1,467


80,502

    Net cash flows provided by operating activities

17,670


31,188


26,795







Investing activities:






   Proceeds from investments

28


150


588

   Net capital expenditures

(2,716)


(1,214)


(4,990)

    Net cash flows used in investing activities

(2,688)


(1,064)


(4,402)







Financing activities:






   Proceeds from equity-based awards, net

6,417


4,610


4,355

   Dividends paid

(15,987)


(16,008)


(15,697)

     Net cash flows used in financing activities

(9,570)


(11,398)


(11,342)







Effect of exchange rates on cash and cash equivalents

791


(221)


(1,367)







     Net change in cash and cash equivalents

6,203


18,505


9,684







Cash and cash equivalents as of the beginning of the period

247,403


228,898


211,216







    Cash and cash equivalents as of the end of the period

$         253,606


$    247,403


$    220,900

 

Intersil Corporation

Non-GAAP Results

Unaudited

(In thousands, except percentages)








Quarter Ended


Apr. 1,


Jan. 1,


Apr. 3, 


2016


2016


2015


Q1 2016


Q4 2015


Q1 2015

Non-GAAP gross profit:






  GAAP gross profit

$ 75,960


$ 72,919


$   80,326

  Equity-based compensation COS

458


268


392

Non-GAAP gross profit

$ 76,418


$ 73,187


$   80,718







Non-GAAP gross margin:






GAAP gross margin

58.8%


57.6%


59.9%

  Equity-based compensation COS

0.3%


0.2%


0.3%

Non-GAAP gross margin

59.1%


57.8%


60.2%







Non-GAAP R&D expenses:






  GAAP R&D expenses

$ 33,678


$ 29,983


$   32,017

Equity-based compensation

(3,103)


(2,368)


(2,751)

Non-GAAP R&D expenses:

$ 30,575


$ 27,615


$   29,266







Non-GAAP SG&A expenses:






GAAP SG&A expenses

$ 23,549


$ 22,784


$   25,453

Equity-based compensation

(2,921)


(2,512)


(2,613)

Acquisition-related costs

(585)


-


-

Non-GAAP SG&A expenses:

$ 20,043


$ 20,272


$   22,840







Non-GAAP operating expenses:






GAAP operating expenses

$ 60,755


$ 57,028


$ 144,131

  Provision for TAOS litigation

-


-


(81,100)

  Equity-based compensation (excl. COS)

(6,024)


(4,880)


(5,364)

  Amortization of purchased intangibles

(3,528)


(4,261)


(5,561)

Acquisition-related costs

(585)


-


-

Non-GAAP operating expenses

$ 50,618


$ 47,887


$   52,106







Non-GAAP operating income:






GAAP operating income (loss)

$ 15,205


$ 15,891


$ (63,805)

  Provision for TAOS litigation

-


-


81,100

  Equity-based compensation

6,482


5,148


5,756

  Amortization of purchased intangibles

3,528


4,261


5,561

Acquisition-related costs

585


-


-

Non-GAAP operating income

$ 25,800


$ 25,300


$   28,612







Non-GAAP operating margin:






GAAP operating margin

11.8%


12.5%


(47.6%)

  Excluded items as a percent of revenue

8.2%


7.5%


68.9%

Non-GAAP operating margin 

20.0%


20.0%


21.3%

 

Intersil Corporation

Non-GAAP Results

Unaudited

(In thousands, except per share amounts)








Quarter Ended


Apr. 1,


Jan. 1,


Apr. 3, 


2016


2016


2015


Q1 2016


Q4 2015


Q1 2015







Non-GAAP net income:






GAAP net income (loss)

$ 11,751


$ 21,302


$(68,824)

  Equity-based compensation

6,482


5,148


5,756

  Amortization of purchased intangibles

3,528


4,261


5,561

  Provision for TAOS litigation

-


-


81,100

  Acquisition-related costs

585


-


-

  Gain on recovery from auction rate securities

(28)


(150)


(588)

  Tax impact of Non-GAAP adjustments

(1,117)


(2,668)


(71)

Non-GAAP net income

$ 21,201


$ 27,893


$  22,934







GAAP weighted average shares - diluted

135,267


134,288


130,513

  Non-GAAP adjustment

3,680


4,314


6,798

Non-GAAP weighted average shares - diluted

138,947


138,602


137,311







Non-GAAP earnings per diluted share:






GAAP earnings per diluted share

$     0.09


$     0.16


$    (0.53)

  Excluded items per share impact

0.06


0.04


0.70

Non-GAAP earnings per diluted share

$     0.15


$     0.20


$      0.17







Equity-based compensation expense by classification:





Cost of revenue ("COS")

$      458


$      268


$       392

Research and development 

$   3,103


$   2,368


$    2,751

Selling, general and administrative 

$   2,921


$   2,512


$    2,613

 

Intersil Corporation Logo

Logo - http://photos.prnewswire.com/prnh/20140926/148698

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/intersil-corporation-reports-first-quarter-results-300257817.html

SOURCE Intersil Corporation

Shannon Pleasant, Intersil Corporation, (512) 382-8444, spleasant@intersil.com