Intersil Corporation Reports Third Quarter Results

MILPITAS, Calif., Oct. 28, 2015 /PRNewswire/ -- Intersil Corporation ISIL, a leading provider of innovative power management and precision analog solutions, today announced financial results for the third quarter of 2015. Revenue of $128.4 million was down 3.1% sequentially. Strong gross margin and lower operating expenses resulted in solid operating margin for the ninth consecutive quarter. The company reported GAAP earnings per share of $0.13 and non-GAAP earnings per share of $0.15.

Company Highlights

• Gross margin exceeded expectations at 59.2% on a GAAP basis and 59.5% on a non-GAAP basis.
• The company again reported solid profitability, with GAAP and non-GAAP operating margin increasing sequentially to 13.6% and 20.9% respectively.
• Cash and cash equivalents increased to $229 million.

Quarterly Results
Revenue for the third quarter declined as anticipated driven by lower demand across several of the company's end markets. Industrial and Infrastructure (I&I) revenue was down about 4% sequentially due to a greater than 10% decline in the industrial analog products. Automotive remained strong and infrastructure power was flat sequentially. Computing and Consumer (C&C) revenue was down 1% sequentially, with declines in consumer being driven in part by active channel inventory management. This was offset by stronger computing revenue due to new product cycles. The breakdown by end market for the quarter was as follows:

Table 1. Intersil End Market Mix

"Many of our end markets remain sluggish, but we are pleased with the company's strong financial performance and regular cadence of new product introductions," said Necip Sayiner, president and CEO of Intersil. "We are seeing some signs of stability in demand and new design cycles are beginning to become more prominent in our revenue profile."

GAAP gross margin for the quarter was 59.2%, an increase of 80 basis points from the third quarter of 2014. Total GAAP operating expenses declined to $58.6 million. R&D expense was $31.3 million and SG&A expense was $23.5 million. GAAP operating income increased to $17.5 million or 13.6% of revenue. Q3 GAAP net income was $17.0 million and fully diluted GAAP earnings per share were $0.13.

The following non-GAAP results exclude amortization of purchased intangibles, equity-based compensation expense, gain on recovery of auction rate securities and related tax effects. Third quarter non-GAAP gross margin was up 90 basis points from the same quarter last year at 59.5%. Gross margin was better than expected due primarily to a higher mix of I&I products. Non-GAAP operating expenses declined to $49.5 million as the company continued to closely manage spending. Q3 non-GAAP operating income was $26.8 million resulting in an increase in non-GAAP operating margin to 20.9%.  Fully diluted Q3 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 $229 million at the end of the third 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 November 27, 2015, to shareholders of record as of the close of business on November 17, 2015.

Fourth Quarter 2015 Outlook

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

Table 2. Intersil Q4 2015 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 (866) 700-5192 or +1 617 213-8833 and enter the pass code 48190053. 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 (888) 286-8010, international dial +1 (617) 801-6888, using the pass code 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
Intersil Corporation press releases and other related comments may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, in connection with the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based upon Intersil's management's current expectations, estimates, beliefs, assumptions and projections about Intersil's business and industry. 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, are intended to 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, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various risk factors. Important factors that may affect our business, future operating results and financial condition include: any faltering 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 computing market, 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, adverse results in litigation matters, and other risk factors described in Intersil's Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and other Intersil filings 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). 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. Intersil does not adopt and is not responsible for any forward-looking statements and projections made by others in this press release.

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.  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.

Restructuring and related costs. Restructuring charges primarily relate to changes in Intersil's infrastructure in efforts to reduce costs and rebalance its workforce. Restructuring charges (gains) are excluded from non-GAAP financial measures because they are not considered core operating activities. Although Intersil has engaged in various restructuring activities in the past, each has been a discrete event based on a unique set of business objectives. As such, management believes that it is appropriate to exclude restructuring charges (gains) from Intersil's non-GAAP financial measures as it enhances the ability of investors to compare the Company's period-over-period operating results from continuing operations. Restructuring-related charges (gains) primarily include:

• Severance and retention costs directly related to a restructuring action.
• Facility closure costs consist of ongoing costs associated with the exit of our leased and owned facilities.
• Other write-offs such as intangibles related to a restructuring action.

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 or governmental judgments, awards, fines or penalties.
• Income from IP agreement.
• 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.

 

 

 

 

 

 

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SOURCE Intersil Corporation