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INVENSENSE ANNOUNCES THIRD QUARTER FISCAL YEAR 2014 RESULTS
·  Third Quarter Fiscal 2014 Net Revenues: $66.7 Million

· Third Quarter Fiscal 2014 Diluted Earnings Per Share: $0.00 GAAP and $0.15 Non-GAAP

SAN JOSE, California, January 29, 2014 - InvenSense, Inc. (NYSE: INVN), a leading provider of MotionTracking(TM) sensor system on chip (SoC) and Sound devices, today announced its third quarter fiscal year 2014 results.

Net revenue for the third fiscal quarter of 2014 was $66.7 million, up from $58.9 million for the third fiscal quarter of 2013.  Net revenue for the first nine months of 2014 was $193.5million, up from $153.4 million for the first nine months of 2013.

Net loss for the third fiscal quarter of 2014 was $0.2 million, compared to net income of $16.8 million for the third fiscal quarter of 2013.  Net income for the first nine months of 2014 was $23.8 million, down from $38.1 million for the first nine months of 2013.

Diluted earnings per share for the third fiscal quarter of 2014 was $0.00, compared to $0.19 for the third fiscal quarter of 2013.  Diluted earnings per share for the first nine months of 2014 was $0.27, down from $0.44 for the first nine months of 2013.

InvenSense ended the third fiscal quarter of 2014 with $266.3 million in cash, cash equivalents and investments, compared to $200.3 million at the end of fiscal year 2013.

Management believes that certain other financial information is useful when evaluating business results and provides supplemental information on a non-GAAP (generally accepted accounting principles) basis.  Non-GAAP net income for the third fiscal quarter of 2014 was $13.3 million, or $0.15 per diluted share.  This compares to non-GAAP net income of $16.9 million, or $0.19 per diluted share for the third fiscal quarter of 2013.  Non-GAAP adjustments for the third fiscal quarter of 2014, net of tax, totaling $13.4 million, include $4.4 million of stock-based compensation expense, $0.8 million of income tax - discrete cumulative benefit, and $3.8 million of patent litigation legal expenses, $0.7 million of accretion interest expense on convertible notes, $1.3 million amortization of acquired inventory fair value write-up and $0.8 million amortization of acquisition intangibles in connection with the company's recently announced acquisition of the microphone business line of Analog Devices, Inc, as well as $1.7 million of expenses related to the acquisition.  Non-GAAP net income for the first nine months of 2014 was $45.9 million, or $0.51 per diluted share.  This compares to non-GAAP net income of $41.1 million, or $0.47 per diluted share for the first nine months of 2013.  Non-GAAP adjustments for the first nine months of 2014, net of tax, totaling $22.2 million, included; $9.5 million of stock-based compensation expense, $0.4 million of income tax - discrete cumulative benefit, and $7.8 million of patent litigation legal expense, $0.7 million of accretion interest expense on convertible notes, $1.3 million amortization of acquired inventory fair value write-up, $0.8 million amortization of acquisition intangibles in connection with the company's recently announced acquisition of the microphone business line of Analog Devices, Inc., as well as $1.7 million of expenses related to the acquisition. The reconciliation between GAAP and non-GAAP net income for all referenced periods is provided in a table immediately following the Unaudited GAAP Condensed Consolidated Statements of Income below.

Management Qualitative Comments

"In the third quarter, expected weakness in our gaming business was partially offset by continued market share gain at our top mobile customers and growth in emerging markets, such as China," said Behrooz Abdi, President and CEO. "We continued to observe strength in unit volumes of our 6-axis motion tracking solutions and our 2-axis OIS products. The growing worldwide adoption of motion sensor technology, coupled with new and incremental customer opportunities position us well for growth in the coming quarters. Further our acquisition of ADI in the third quarter increases our total addressable content in mobile and wearable devices, and also provides exposure to additional markets, such as industrial and automotive. We view audio as a strategically important sensor technology, complimenting motion in enabling a more intuitive interaction with mobile and other devices."

Third Quarter Fiscal Year 2014 Earnings Conference Call

A conference call will be held today at 1:30 p.m. Pacific Standard Time to discuss the quarter's results and management's current business outlook. To listen to the conference call, please dial (800) 638-4817 ten minutes prior to the start of the call, using the passcode 82396285.  International callers, please dial (617) 614-3943.  A taped replay will be made available approximately two hours after the conclusion of the call and will remain available for one week.  To access the replay, please dial (888) 286-8010 and enter passcode 11064532.  International callers please dial (617) 801-6888. The conference call will be available via a live webcast on the investor relations section of InvenSense`s web site at www.invensense.com/ir.  An archived webcast replay will be available on the web site for three months.

Note Regarding Use of Non-GAAP Financial Measures

As discussed above, in addition to the company's condensed consolidated financial statements, which are presented according to GAAP, the company provides certain non-GAAP financial information that excludes, net of tax, stock-based compensation expense, income tax - discrete cumulative benefit, patent litigation legal expense, net, business acquisition costs, amortization of fair value write-up of acquired inventory, amortization of acquisition-related intangible assets and other non-GAAP financial adjustments.  The company uses these non-GAAP measures in its own financial and operational decision-making processes.  Further, the company believes that these non-GAAP measures offer an important analytical tool to help investors understand the company's core operating results and trends, and to facilitate comparability with the operating results of other companies that provide similar non-GAAP measures.  These non-GAAP measures have certain limitations as analytical tools and are not meant to be considered in isolation or as a substitute for GAAP financial information.  For example, stock-based compensation is an important component of the company's compensation mix, and will continue to result in significant expenses in the company's GAAP results for the foreseeable future, but is not reflected in the non-GAAP measures.  Also, other companies, including companies in InvenSense's industry, may calculate non-GAAP financial measures differently, limiting their usefulness as comparative measures.
  

Forward-Looking Statements

Statements in this press release that are not historical are "forward-looking statements" as the term is defined in the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are generally written in the future tense and/or preceded by words such as "will," "expects," "anticipates," or other words that imply or predict a future state.  Forward-looking statements include any projection of revenue, gross margin, expense or other financial items discussed in this press release, including the strength of our competitive positioning, the strength of design activity across all of our multi-axis products, the differentiation of our products from those of our competitors, the emergence of new opportunities for our products in the mobile and imaging markets that focus on accuracy and performance, the suitability of our products for these opportunities and our ability to capitalize on then.  Investors are cautioned that all forward-looking statements in this release involve risks and uncertainty that can cause actual results to differ from those currently anticipated, due to a number of factors, including without limitation, intense competition in our industry; our achievement of design wins; our dependence on a limited number of customers for a substantial portion of our revenues; the continued adoption of motion tracking and motion sensing as an interface in consumer electronics products; decreases in average selling prices for our products; our lack of long-term supply contracts and dependence on limited sources of supply; consumer acceptance of our customers' products that incorporate our solutions and our ability to continue to develop and introduce new and enhanced products on a timely basis; as well as changes in economic conditions in our markets and other risk factors discussed in documents filed by us with the Securities and Exchange Commission (SEC) from time to time.  Copies of InvenSense's SEC filings are posted on the company's website and are available from the company without charge.  Forward-looking statements are made as of the date of this release, and, except as required by law, the company does not undertake an obligation to update its forward-looking statements to reflect future events or circumstances.

About InvenSense

InvenSense Inc. (NYSE: INVN) is a leading provider of MotionTracking(TM) sensor system on chip (SoC) and Sound solutions for consumer electronic devices. The company's patented InvenSense Fabrication Platform and patent-pending MotionFusion(TM) technology address the emerging needs of many mass-market consumer applications via improved performance, accuracy, and intuitive motion-, gesture- and sound-based interfaces. InvenSense technology can be found in consumer electronic products including smartphones, tablets, wearables, gaming devices, optical image stabilization, and remote controls for Smart TVs. The company's MotionTracking products are also being integrated into a number of industrial applications. InvenSense is headquartered in San Jose, California and has offices in China, Taiwan, Korea, Japan, Slovakia, and Wilmington, MA. More information can be found at www.invensense.com.

©2014 InvenSense, Inc. All rights reserved. InvenSense, MotionTracking, MotionProcessing, MotionProcessor, MotionFusion, MotionApps, DMP, AAR, and the InvenSense logo are trademarks of InvenSense, Inc. Other company and product names may be trademarks of the respective companies with which they are associated.

For Investor Inquiries, Contact:

Leslie Green
Green Communications Consulting, LLC
650.312.9060
ir@invensense.com

For Press Inquiries, Contact:

David Almoslino
Senior Director
Marketing and Communications
InvenSense, Inc.
408.501.2278
pr@invensense.com

 

INVENSENSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME      
(In thousands, except per share amounts)
(Unaudited)

Three Months Ended Nine months Ended
December 29,
2013
December 30,
2012
December 29,
2013
December 30,
2012
Net revenue   $66,684 $        58,929        $193,534 $   153,424
Cost of revenue   35,094   27,723   96,050 70,284
Gross profit   31,590   31,206   97,484 83,140
Operating expenses:
Research and development   14,522 6,712 32,446 18,285
Selling, general and administrative   15,663 8,428 36,243 21,887
Total operating expenses   30,185   15,140   68,689 40,172
Income from operations   1,405 16,066 28,795 42,968
Other income (expense), net   (1,683) 98 (1,390) 188
Income (loss) before income taxes   (278) 16,164 27,405 43,156
Income tax expense (benefit)   (99) (654) 3,654 5,023
Net income (loss)   $(179) $   16,818   $23,751 $     38,133
Net income per share:
Basic   $   0.00 $   0.20   $   0.28 $       0.46
Diluted   $   0.00 $   0.19   $   0.27  $       0.44
Weighted average shares outstanding used in computing net income per share:
Basic   87,047   83,218   86,145        82,280  
Diluted   90,340   87,350   89,364        87,232  

INVENSENSE, INC.
Reconciliation of GAAP Net Income to Non-GAAP Net Income
 (In thousands, except per share amounts)
(Unaudited)

Three Months Ended Nine Months Ended
December 29,
2013
December 30,
2012
December 29,
2013
December 30,
2012
GAAP net income (loss) $(179) $16,818 $23,751 $38,133
Items reconciling GAAP net income (loss) to non-GAAP net income, net of tax;
  Stock-based compensation expense 4,370 2,050 9,486 4,384
     Executive separation costs   - 930 - 930
     Income tax - discrete and other benefits, net   769 (2,930) 394 (2,391)
     Patent litigation legal expense, net 3,827 - 7,761 -
     Convertible note accretion interest expense   694 - 694 -
     Amortization of fair value write-up of acquired inventory 1,283 - 1,283 -
     Amortization of acquisition-related intangible assets 829 - 829 -
     Acquisition expenses 1,669 - 1,744 -
Non-GAAP net income $13,262 $16,868 $45,942 $41,056
              Basic $0.15 $0.20 $0.53 $0.50
           Diluted $0.15 $0.19 $0.51 $0.47

INVENSENSE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)

December 29,
2013
March 31,
2013
Assets
Current assets:
Cash and cash equivalents   $41,127 $   100,843  
Short-term investments   55,056   77,040  
Accounts receivable   34,779   30,098  
Inventories   58,512   23,762  
Prepaid expenses and other current assets   17,229   13,302  
Total current assets   206,703   245,045  
Property and equipment, net   23,655   8,650  
Intangible assets, net   36,598           -  
Goodwill   51,098           -  
Long-term investments   170,100   22,442  
Other assets   5,040   2,957  
Total assets   $493,194 $   279,094  
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable   $11,476  $14,464
Accrued liabilities   15,224   7,753  
Total current liabilities   26,700   22,217  
Long-term debt   133,810           -  
Other long-term liabilities   11,279   6,930  
Total liabilities   171,789   29,147  
Commitments and contingencies
Stockholders' equity:
Preferred stock:
Preferred stock, $0.001 par value - 20,000 shares authorized, no shares issued and outstanding at December 29, 2013 and March 31, 2013   -   -  
Common stock:
Common stock, $0.001 par value - 750,000 shares authorized, 87,531 shares issued and outstanding at December 29, 2013, 84,980 shares issued and outstanding at March 31, 2013        206,000   158,108  
Accumulated other comprehensive income (loss)   (135)   50  
Retained earnings   115,540   91,789  
Total stockholders' equity   321,405   249,947  
Total liabilities and stockholders' equity   $493,194 $   279,094  

 

INVENSENSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

Nine months Ended
December 29,
2013
December 30,
2012
Cash flows from operating activities:
Net income         $23,751 $        $  38,133
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization   3,762                1,480
Stock-based compensation expense   10,896 6,449
Deferred income tax assets   1 114
Tax effect of employee benefit plans   4,184 3,818
Excess tax benefit from stock-based compensation   (4,184) (3,818)
Non-cash interest expense        1,069 -
Changes in operating assets and liabilities:
Accounts receivable   (4,681) (12,593)
Inventories   (29,643) (6,560)
Prepaid expenses and other current assets   (1,666) (3,911)
Other assets   (1,401) 1,871
Accounts payable   (2,341) 2,933
Accrued liabilities   11,093 3,391
Net cash provided by operating activities        10,840              31,307
Cash flows from investing activities:
Acquisition of a business        (99,324) -
Purchase of property and equipment   (14,682) (4,071)
Sale and maturities of available-for-sale investments        63,145 10,509
Purchase of available-for-sale investments   (189,106) (104,820)
Net cash used in investing activities        (239,967)            (98,382)
Cash flows from financing activities:
Proceeds from debt issuances        169,750 -
Payment for purchase option         (39,118) -
Proceeds from exercise of warrants        - 81
Proceeds from exercise of common stock        9,983 4,064
Proceeds from call option           25,643 -
Offering costs   -                (471)
Payments of long-term debt and capital lease obligations   (8)                  (21)
Repurchases of restricted stock for taxes         (1,023) -
Excess tax benefit from stock-based compensation   4,184 3,818
Net cash provided by financing activities        169,411 7,471
Net decrease in cash and cash equivalents        (59,716) (59,604)
Cash and cash equivalents:
Beginning of period   $100,843 $          153,643
End of period   $41,127 $            94,039
Supplemental disclosures of cash flow information:
Net cash paid for income taxes        $166                    $31
Noncash investing and financing activities:
Unpaid purchases of property and equipment        $1,444 $                 371
Unrealized gain from available-for-sale investments        $260 $                   62
Non-cash warrant exercises        $90 $                   70
Unpaid debt issuance cost        $491 -
============ ===========
Proceeds from exercise of common stock not received        $43 -

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