InvenSense Announces Fourth Quarter and Fiscal Year 2016 Results

SAN JOSE, Calif.--(BUSINESS WIRE)--

InvenSense Inc. INVN, a leading provider of MEMS sensor platform solutions, today announced results for its fourth quarter and fiscal year 2016, ended April 3, 2016.

Net revenue for the fourth quarter of fiscal 2016 was $79.5 million, down 34 percent from $120.0 million for the third quarter of fiscal 2016, and down 20 percent from $99.3 million for the fourth quarter of fiscal 2015.

Gross margin determined in accordance with U.S. generally accepted accounting principles (GAAP) was 41 percent for the fourth quarter of fiscal 2016, consistent with 41 percent for the third quarter of fiscal 2016. GAAP gross margin for the fourth quarter of fiscal 2016 included stock-based compensation and related payroll taxes and amortization of acquisition intangibles. Excluding these items, non-GAAP gross margin was 45 percent for the fourth quarter of fiscal 2016, up from 44 percent for the third quarter of fiscal 2016.

GAAP net loss for the fourth quarter of fiscal 2016 was $22.9 million, or $0.25 per share. By comparison, GAAP net income was $1.9 million, or $0.02 per diluted share, for the third quarter of fiscal 2016. GAAP net loss for the fourth quarter of fiscal 2016 included stock-based compensation and related payroll taxes, accreting interest expense on convertible notes, amortization of acquisition intangibles and other adjustments. Excluding these items and the income tax effect of the excluded items as well as other discrete tax items, non-GAAP net income for the fourth quarter of fiscal 2016 was $1.5 million, or $0.02 per diluted share, compared with net income of $16.7 million, or $0.18 per diluted share, for the third quarter of fiscal 2016.

The reconciliation between GAAP and non-GAAP financial results for all referenced periods is provided in a table immediately following the Unaudited Condensed Consolidated Statements of Operations below.

Fiscal Year 2016 Results

Net revenue for the fiscal year 2016 was $418.4 million, up $46.4 million, or 12% from $372.0 million for the fiscal year 2015.

GAAP net loss for the fiscal year 2016 was $21.2 million, or $0.23 per share, compared with net loss of $1.1 million, or $0.01 per share for the fiscal year 2015. On a non-GAAP basis, net income for the fiscal year 2016 was $45.6 million, or $0.49 per diluted share. This compares with non-GAAP net income of $42.7 million, or $0.46 per diluted share for the fiscal year 2015.

Management Qualitative Comments

"Q4 was a solid quarter, capping off a productive year for InvenSense," said Behrooz Abdi, president and CEO. "Throughout fiscal 2016, we drove significant technology advancement in key use cases that are fueling sensor adoption today. These use cases can be applied across a variety of vertical markets and applications, which we believe will enable us to maximize our R&D investments and drive significant TAM expansion. Our market-leading solutions continued to gain traction in emerging Internet of Things (IoT) platforms such as drones, virtual and augmented reality, wearables, smart home, and industrial applications. We believe that the broad applicability of our portfolio positions us for continued diversification and growth in these exciting markets."

Fourth Quarter of Fiscal Year 2016 Earnings Conference Call

A conference call will be held today at 1:30 p.m. Pacific Time to discuss the quarter and annual results and management's current business outlook.

To listen to the conference call, please dial (877) 788-4691 ten minutes prior to the start of the call, using the passcode 86096939. International callers, please dial (530) 379-4724. A taped replay will be made available approximately two hours after the conclusion of the call and will remain available for seven days. To access the replay, please dial (855) 859-2056 and enter passcode 86096939. International callers please dial (404) 537-3406. 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 stock-based compensation expense, accreting interest expense on convertible notes, amortization of acquisition-related intangible assets, certain legal and litigation expenses, contingent consideration adjustment, legal settlement expense, and other 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 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 it is not reflected in our non-GAAP measures. Also, other companies, including other companies in our 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, earnings, stockholder return or other financial items discussed in this press release, including the strength of our technology advantage and the benefits thereof, increased demand for our products, our traction of IoT market and our prospects for growth and diversifications. 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 ability to execute on our plan of diversification and our success in growing our revenues in the Internet of Things applications; 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 InvenSense's Annual Report on Form 10-K for the year ended March 29, 2015, subsequent quarterly reports on Form 10-Q, recent current reports on Form 8-K, and other 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. INVN is the world's leading provider of MEMS sensor platforms. InvenSense's vision of Sensing Everything^™ targets the consumer electronics and industrial markets with integrated Motion and Sound solutions. Our solutions combine MEMS (micro electrical mechanical systems) sensors, such as accelerometers, gyroscopes, compasses, and microphones with proprietary algorithms and firmware that intelligently process, synthesize, and calibrate the output of sensors, maximizing performance and accuracy. InvenSense's motion tracking, audio and location platforms, and services can be found in Mobile, Wearables, Smart Home, Industrial, Automotive, and IoT products. InvenSense is headquartered in San Jose, California and has offices worldwide. For more information, go to www.invensense.com and http://www.coursaretail.com.

©2016 InvenSense, Inc. All rights reserved. InvenSense, Sensing Everything, FireFly, SensorStudio, TrustedSensor, Coursa, UltraPrint, MotionTracking, MotionProcessing, MotionProcessor, MotionFusion, MotionApps, InvenSenseTV, 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.

INVENSENSE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
										Three Months Ended																					Fiscal Years Ended
										April 3,						December 27,						March 29,									April 3,						March 29,
										2016						2015						2015									2016						2015
Net revenue										$	79,525					$	120,029					$	99,279								$	418,395					$	372,019
Costs of revenue											46,590						70,228						56,333									244,257						216,160
Gross profit											32,935						49,801						42,946									174,138						155,859
Operating expenses:
	Research and development										26,432						25,690						25,231									97,368						90,623
	Selling, general and administrative										16,860						14,295						15,325									62,165						59,386
	Legal settlement accrual										-						-						-									11,708						-
		Total operating expenses									43,292						39,985						40,556									171,241						150,009
Income (loss) from operations											(10,357	)					9,816						2,390									2,897						5,850
Interest (expense)											(3,071	)					(2,798	)					(2,659	)								(11,358	)					(10,553	)
Other income, net											262						(35	)					269									392						1,368
Income (loss) before income taxes											(13,166	)					6,983						-									(8,069	)					(3,335	)
Income tax provision (benefit)											9,780						5,093						(399	)								13,141						(2,255	)
Net income (loss)										$	(22,946	)				$	1,890					$	399								$	(21,210	)				$	(1,080	)
Net income (loss) per share:
	Basic									$	(0.25	)				$	0.02					$	0.00								$	(0.23	)				$	(0.01	)
	Diluted									$	(0.25	)				$	0.02					$	0.00								$	(0.23	)				$	(0.01	)
Weighted average shares outstanding used in computing net income per share:
	Basic										92,487						91,957						90,359									91,787						89,359
	Diluted										92,487						92,922						92,619									91,787						89,359

INVENSENSE, INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL RESULTS (In thousands, except per share amounts) (Unaudited)
										Three Months Ended																					Fiscal Years Ended
										April 3,						December 27,						March 29,									April 3,						March 29,
										2016						2015						2015									2016						2015
GAAP net income (loss)										$	(22,946	)				$	1,890					$	399								$	(21,210	)				$	(1,080	)
	Adjustments:
		Stock based compensation expense and related payroll taxes									9,517						8,198						7,954									35,813						31,140
		Convertible note accretion interest expense									2,237						2,034						1,926									8,228						7,484
		Amortization of acquisition-related intangible assets									2,199						2,200						2,034									8,687						6,940
		Amortization of fair value write-up of acquired inventory									-						-															-						146
		Business acquisition costs									-						198						119									198						3,388
		Legal settlement									-						-						-									11,708						-
		Patent litigation legal expense, net									120						(138	)					905									1,236						3,304
		Gain on equity investment									-						-						-									-						(890	)
		Write-off of in-process research and development									-						-						-									-						770
		Contingent consideration adjustment									-						-						-									(5,307	)					-
		Other									-						-						-									-						68
		Income tax effect of pretax non-GAAP adjustments
		and other discrete tax items									10,358						2,288						(1,896	)								6,247						(8,607	)
Non-GAAP net income										$	1,485					$	16,670					$	11,441								$	45,600					$	42,663
GAAP net income (loss) per share of common stock, diluted											(0.25	)				$	0.02					$	0.00								$	(0.23	)				$	(0.01	)
Non-GAAP net income per share of common stock, diluted											0.02					$	0.18					$	0.12								$	0.49					$	0.46
GAAP Gross profit										$	32,935					$	49,801					$	42,946								$	174,138					$	155,859
	Adjustments:
		Stock based compensation expense and related payroll taxes									669						628						621									2,493						2,431
		Amortization of acquisition-related intangible assets									2,143						2,144						1,978									8,463						6,716
		Amortization of fair value write-up of acquired inventory									-						-						-									-						146
Non-GAAP Gross profit										$	35,747					$	52,573					$	45,545								$	185,094					$	165,152
GAAP Operating Expense										$	43,292					$	39,985					$	40,556								$	171,241					$	150,009
	Adjustments:
		Stock based compensation expense and related payroll taxes									8,848						7,570						7,333									33,320						28,709
		Amortization of acquisition-related intangible assets									56						56						56									224						224
		Business acquisition costs									-						198						119									198						3,388
		Legal settlement accrual									-						-						-									11,708						-
		Patent litigation legal expense, net									120						(138	)					905									1,236						3,304
		Write-off of in-process research and development									-						-						-									-						770
		Contingent consideration adjustment									-						-						-									(5,307	)					-
		Other									-						-						-									-						68
Non-GAAP Operating Expense										$	34,268					$	32,299					$	32,143								$	129,862					$	113,546

INVENSENSE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value) (Unaudited)
									April 3,						March 29,
									2016						2015
Assets
Current assets:
	Cash and cash equivalents								$ 41,105						$ 85,637
	Short-term investments								243,755						129,919
	Accounts receivable								41,447						44,522
	Inventories								62,297						75,105
	Prepaid expenses and other current assets								9,250						14,950
		Total current assets							397,854						350,133
	Property and equipment, net								36,271						41,849
	Intangible assets, net								43,169						45,508
	Goodwill								139,175						139,175
	Other assets								5,992						9,019
		Total assets							$ 622,461						$ 585,684
Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable								$ 35,200						$ 23,130
	Accrued liabilities								30,248						31,991
		Total current liabilities							65,448						55,121
	Long-term debt								151,038						142,810
	Other long-term liabilities								27,230						28,252
		Total liabilities							243,716						226,183
Stockholders' equity:
Preferred stock:
	Preferred stock, $0.001 par value — 20,000 shares authorized, no shares issued and outstanding and outstanding at April 3, 2016 and March 29, 2015
									-						-
Common stock:
	Common stock, $0.001 par value — 750,000 shares authorized, 93,010 shares issued and outstanding at April 3, 2016, 90,894 shares issued and outstanding at March 29, 2015
									303,153						262,677
	Accumulated other comprehensive (loss)								(26)						(4)
	Retained earnings								75,618						96,828
		Total stockholders' equity							378,745						359,501
		Total liabilities and stockholders' equity							$ 622,461						$ 585,684

INVENSENSE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
								Three Months Ended																				Fiscal Years Ended
								April 3,						December 27,						March 29,								April 3,						March 29,
								2016						2015						2015								2016						2015
Cash flows from operating activities:
Net income (loss)								$	(22,946	)				$	1,890					$	399							$	(21,210	)				$	(1,080	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation									3,221						3,303						2,847								12,769						10,203
Amortization of intangible assets									2,290						2,295						2,074								9,088						7,003
Non cash interest expense									2,237						2,033						1,926								8,228						7,505
Write-off of in-process research and development									-						-						-								-						770
Loss on disposal of property and equipment									-						-						95								-						552
Loss (gain) on other investments									525						-						-								525						(890	)
Stock-based compensation expense									9,003						8,193						7,566								34,879						30,504
Contingent consideration adjustment									-						-						-								(5,307	)					-
Deferred income tax assets									8,809						5,113						(272	)							10,424						(5,484	)
Tax effect of employee benefit plans									876						(118	)					-								-						42
Excess tax benefit from stock-based compensation									(876	)					-														-						(42	)
Changes in operating assets and liabilities:
Accounts receivable									1,082						7,905						29,413								3,075						(4,895	)
Inventories									(631	)					18						(7,304	)							12,808						(2,072	)
Prepaid expenses and other current assets									(610	)					104						7,778								1,607						8,778
Other assets									(498	)					52						25								(2,279	)					(135	)
Accounts payable									(9,118	)					9,313						2,494								12,639						3,122
Accrued liabilities									2,776						(12,856	)					4,737								5,792						12,961
Net cash provided by (used in) operating activities									(3,860	)					27,245						51,778								83,038						66,842
Cash flows from investing activities:
Purchase of property and equipment									(1,538	)					(2,280	)					(2,031	)							(7,771	)					(27,315	)
Sale and maturities of available-for-sale investments									55,064						43,081						33,252								169,988						145,974
Purchase of available-for-sale investments									(45,249	)					(93,553	)					(55,845	)							(284,534	)					(55,845	)
Other non-marketable investments									(850	)					-						-								(850	)
Purchase of intangible assets									-						-						(2,120	)							-						(2,120	)
Acquisitions, net of cash acquired									(6,700	)					-						-								(6,700	)					(71,326	)
Net cash provided by (used in) investing activities									727						(52,752	)					(26,744	)							(129,867	)					(10,632	)
Cash flows from financing activities:
Proceeds from exercise of common stock									865						1,130						2,602								5,586						10,425
Payments of long-term debt and capital lease obligations									-						-						-								-						(9	)
Payments of acquisition holdback									(1,380	)					-						-								(1,380	)					-
Payments contingent consideration									-						(1,908	)					(7,056	)							(1,909	)					(7,056	)
Excess tax benefit from stock-based compensation									876						-						-								-						42
Net cash provided by (used in) financing activities									361						(778	)					(4,454	)							2,297						3,402
Net increase (decrease) in cash and cash equivalents									(2,772	)					(26,285	)					20,580								(44,532	)					59,612
Cash and cash equivalents:
Beginning of period									43,877						70,162						65,057								85,637						26,025
End of period								$	41,105					$	43,877					$	85,637							$	41,105					$	85,637

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