TriQuint Announces Third Quarter 2014 Results

By: TriQuint Semiconductor, Inc. via Business Wire News Releases

October 28, 2014 at 16:02 PM EDT

TriQuint Semiconductor, Inc. (NASDAQ: TQNT), a leading RF solutions supplier and technology innovator, announces its financial results for the quarter ended September 27, 2014, including the following highlights:

Revenue grew 18% sequentially to $272.1 million
GAAP gross margin was 45.5%; non-GAAP was 46.6%, up 8.6% year-on-year
GAAP net income was $0.14 per diluted share, non-GAAP net income was $0.28 per share
Premium filter revenue grew rapidly, supporting over 50 unique customers
Base station revenue up 54% year to date compared to 2013 on continued LTE build out
GaN performance, cost and capacity goals completed as part of the DARPA Title III program
Expected merger with RFMD anticipated to close this year; Qorvo name announced

Commenting on the results, Ralph Quinsey, President and Chief Executive Officer, stated, “Our financial results in the third quarter were well above expectations due to strong demand and an improved product mix driven by a strategic focus on delivering high performance solutions in each of our markets. The success we are seeing today is due to years of investment in BAW/SAW and high performance GaAs/GaN technologies. We continue to see robust demand and are raising our outlook for the fourth quarter. We remain on track to launch a new combined company, Qorvo, with the merger of TriQuint and RFMD expected to close by year end."

Summary Financial Results for the Three Months Ended September 27, 2014:

Revenue for the third quarter of 2014 was $272.1 million, up 8% from the third quarter of 2013 and 18% sequentially.

Cash and investments increased by $24.4 million this quarter to $247.9 million, driven by operating results and cash proceeds from employee stock option exercises and partially offset by continued investment in premium filter capacity.

GAAP

Gross margin for the third quarter of 2014 was 45.5%, up sharply from 40.2% in the second quarter of 2014 and from 36.8% in the third quarter of 2013 due to product mix and strong factory execution. Operating expenses for the third quarter of 2014 were $87.8 million, up sequentially due to merger and integration related costs.

Net income for the third quarter of 2014 was $26.2 million or $0.14 per diluted share, compared with net income of $5.2 million or $0.03 per diluted share in the second quarter of 2014 and $0.08 per diluted share in the third quarter of 2013.

Non-GAAP

Gross margin for the third quarter was 46.6%, up sharply from 41.7% in the second quarter of 2014 and 38.0% in the prior year. Operating expenses for the quarter were $74.7 million, up slightly sequentially.

Earnings per diluted share for the third quarter of 2014 was $0.28, compared with $0.13 per share in the second quarter of 2014 and $0.16 per diluted share in the third quarter in 2013.

Please see the discussion of non-GAAP financial measures below and the attached supplemental schedule for a reconciliation of GAAP to non-GAAP financial measures.

Outlook:

The company expects fourth quarter revenue to range between $330 million and $340 million, up 23% sequentially at the midpoint. Fourth quarter non-GAAP gross margin is expected to be between 46% and 48%, driven by strong factory execution and product mix. Fourth quarter non-GAAP net income per diluted share is expected to be between $0.40 and $0.45. As of today, the company is fully booked to the midpoint of revenue guidance.

Additional Information Regarding Results for the Three and Nine Months Ended September 27, 2014:

GAAP and non-GAAP financial measures are presented in the tables below (in millions, except for percentage and per share information). Non-GAAP financial measures are reconciled to the corresponding GAAP financial measures in the table later in this press release.


GAAP RESULTS

		Three Months Ended															Nine Months Ended
								Change						Change									Change
								vs. Q2						vs. Q3									vs. Q3
		Q3 2014			Q2 2014			2014			Q3 2013			2013			Q3 2014			Q3 2013			2013
Revenue		$	272.1		$	230.8		18		%	$	250.8		8		%	$	680.5		$	625.1		9		%
Gross Profit		$	123.7		$	92.7		33		%	$	92.2		34		%	$	275.5		$	187.7		47		%
Gross Margin %		45.5		%	40.2		%	5.3		%	36.8		%	8.7		%	40.5		%	30.0		%	10.5		%
Op Income (Loss)		$	35.9		$	7.4		385		%	$	18.8		91		%	$	23.3		$	(32.1	)	173		%
Net Income (Loss)		$	26.2		$	5.2		404		%	$	13.6		93		%	$	12.3		$	(29.3	)	142		%
Inc (Loss) per share		$	0.14		$	0.03		$	0.11		$	0.08		$	0.06		$	0.07		$	(0.18	)	$	0.25

NON-GAAP RESULTS A

		Three Months Ended															Nine Months Ended
								Change						Change									Change
								vs. Q2						vs. Q3									vs. Q3
		Q3 2014			Q2 2014			2014			Q3 2013			2013			Q3 2014			Q3 2013			2013
Revenue		$	272.1		$	230.8		18		%	$	250.8		8		%	$	680.5		$	625.1		9		%
Gross Profit		$	126.8		$	96.2		32		%	$	95.2		33		%	$	285.6		$	196.7		45		%
Gross Margin %		46.6		%	41.7		%	4.9		%	38.0		%	8.6		%	42.0		%	31.5		%	10.5		%
Op Income (Loss)		$	52.1		$	24.3		114		%	$	26.7		95		%	$	68.0		$	(9.4	)	823		%
Net Income (Loss)		$	51.4		$	23.6		118		%	$	26.3		95		%	$	65.6		$	(11.9	)	651		%
Inc (Loss) per share		$	0.28		$	0.13		$	0.15		$	0.16		$	0.12		$	0.36		$	(0.07	)	$	0.43
	A
		Excludes stock based compensation charges, non-cash tax benefit, certain entries associated with mergers and acquisitions, including expenses associated with the planned merger with RFMD and other specifically identified non-routine transactions.

Conference Call:

TriQuint will host a conference call this afternoon at 1:30 p.m. PDT to discuss the results for the quarter and our future expectations for the company. To access the conference call, please dial (888) 813-6582 domestically, or (706) 643-7082 internationally, approximately ten minutes prior to the beginning of the call, using passcode 98159203. The call can also be heard via webcast accessed through the “Investors” section of TriQuint's web site at: http://invest.triquint.com. A replay of the conference call will be available until November 10, 2014.

Non-GAAP Financial Measures:

This press release provides financial measures for non-GAAP net income (loss), diluted earnings (loss) per share, gross profit, gross margin, operating expenses and operating income (loss) that exclude equity compensation expense, non-cash tax expense (benefit), certain entries associated with mergers and acquisitions including expenses associated with the planned merger with RFMD and other specifically identified non-routine items, and are therefore not calculated in accordance with accounting principles generally accepted in the United States (“GAAP”). The charges associated with mergers and acquisitions reflect the amortization of intangible and tangible assets, transaction costs and changes to the earnout liability estimates recorded in connection with acquisition accounting and charged to the income statement. The charges associated with the planned merger with RFMD include professional fees and other costs. The non-cash tax expense (benefit) excludes certain deferred tax charges and benefits that do not currently result in a tax payment or tax refund. Management believes that these non-GAAP financial measures provide meaningful supplemental information that enhances management's and investors' ability to evaluate TriQuint's operating results.

These non-GAAP financial measures are not intended to be used in isolation and should not be considered a substitute for any other performance measure determined in accordance with GAAP. Investors and potential investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool, including that other companies may calculate similar non-GAAP financial measures differently than we do, limiting their usefulness as a comparative tool. The company compensates for these limitations by providing specific information regarding the GAAP amount excluded from the non-GAAP financial measures. The company further compensates for the limitations of our use of non-GAAP financial measures by presenting comparable GAAP measures more prominently. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this press release with our GAAP net income and net income per share.

Forward-Looking Statements:

This press release contains forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding expectations for discrete premium filter revenue for 2014; expected timing and completion of TriQuint’s merger with RFMD; and statements under "Outlook" regarding anticipated fourth quarter revenues, fourth quarter non-GAAP gross margin, operating expenses and net income per diluted share. These forward-looking statements are statements of management's opinion and are subject to various assumptions, risks, uncertainties and changes in circumstances. Actual results may vary materially from those expressed or implied in the statements herein or from historical results, due to changes in economic, business, competitive, technological and/or regulatory factors. More detailed information about risk factors that may affect actual results are set forth in TriQuint's reports on Form 10-K and 10-Q and other filings with the Securities and Exchange Commission. These reports can be accessed at the SEC web site, www.sec.gov. Except as required by law, TriQuint undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements.

A reader of this release should understand that it is not possible to predict or identify all risk factors and should not consider the risk factors described in TriQuint's filings with the Securities and Exchange Commission to be a complete statement of all potential risks and uncertainties.

Facts About TriQuint

Founded in 1985, TriQuint Semiconductor (NASDAQ: TQNT) is a leading RF solutions supplier and technology innovator for the world's top communications, defense and aerospace companies. People and organizations around the world need real-time, all-the-time connections; TriQuint products help reduce the cost and increase the performance of connected mobile devices and the networks that deliver critical voice, data and video communications. With the industry's broadest technology portfolio, recognized R&D leadership, and expertise in high-volume manufacturing, TriQuint creates standard and custom products using gallium arsenide (GaAs), gallium nitride (GaN), surface acoustic wave (SAW) and bulk acoustic wave (BAW) technologies. The company has ISO 9001-certified manufacturing facilities in the U.S., production in Costa Rica, and design centers in North America and Germany. For more information, visit www.triquint.com.

TriQuint: Reach Further, Reach Faster™

TQNT-F


CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)

			September 27, 2014		December 31, 2013

Assets
Current assets:
	Cash and cash equivalents		$	223,612	$	79,026
	Investments in marketable securities		24,330		—
	Accounts receivable, net		164,397		177,114
	Inventories		158,130		159,488
	Prepaid expenses		8,791		13,617
	Deferred tax assets, net		17,956		12,787
	Other current assets		38,366		39,960
		Total current assets	635,582		481,992
Property, plant and equipment, net			428,459		420,363
Goodwill			13,519		13,519
Intangible assets, net			19,199		23,510
Deferred tax assets – noncurrent, net			51,019		61,554
Other noncurrent assets, net			59,257		32,319
		Total assets	$	1,207,035	$	1,033,257

Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable		$	77,702	$	52,472
	Accrued payroll		45,766		39,743
	Other accrued liabilities		14,834		15,893
		Total current liabilities	138,302		108,108
Long-term liabilities:
	Long-term income tax liability		2,311		2,062
	Cross-licensing liability		11,309		11,752
	Other long-term liabilities		16,312		16,782
		Total liabilities	168,234		138,704
Stockholders' equity:
	Common stock		177		162
	Additional paid-in capital		831,833		699,903
	Accumulated other comprehensive income		73		95
	Retained earnings		206,718		194,393
		Total stockholders' equity	1,038,801		894,553
		Total liabilities and stockholders' equity	$	1,207,035	$	1,033,257


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)

			Three Months Ended									Nine Months Ended
			September			June 28,			September			September			September
			27, 2014			2014			28, 2013			27, 2014			28, 2013

Revenues			$	272,147		$	230,771		$	250,836		$	680,524		625,148
Cost of goods sold			148,427			138,057			158,619			405,040			437,440
	Gross profit		123,720			92,714			92,217			275,484			187,708

Operating expenses:
	Research, development and engineering		49,810			48,001			47,023			147,681			140,201
	Selling, general and administrative		38,035			37,316			26,420			104,514			79,650
		Total operating expenses	87,845			85,317			73,443			252,195			219,851

	Operating income (loss)		35,875			7,397			18,774			23,289			(32,143		)

Other (expense) income:
	Interest income		92			42			7			161			83
	Interest expense		(892		)	(844		)	(1,153		)	(2,591		)	(3,429		)
	Other, net		297			(624		)	70			(282		)	97
		Other (expense) income, net	(503		)	(1,426		)	(1,076		)	(2,712		)	(3,249		)

Income (loss) before income tax			35,372			5,971			17,698			20,577			(35,392		)

	Income tax expense (benefit)		9,188			761			4,137			8,252			(6,119		)
Net income (loss)			$	26,184		$	5,210		$	13,561		$	12,325		$	(29,273	)

Per Share Data:
	Basic per share net earnings (loss)		$	0.15		$	0.03		$	0.09		$	0.07		$	(0.18	)
	Diluted per share net earnings (loss)		$	0.14		$	0.03		$	0.08		0.07			$	(0.18	)

Weighted-average shares outstanding:
	Basic		175,764			171,770			157,105			170,709			159,057
	Diluted		185,701			181,319			163,917			180,302			159,057


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(% of revenue)

			Three Months Ended						Nine Months Ended
			September		June 28,		September		September		September
			27, 2014		2014		28, 2013		27, 2014		28, 2013

Revenues			100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold			54.5	%	59.8	%	63.2	%	59.5	%	70.0	%
	Gross profit		45.5	%	40.2	%	36.8	%	40.5	%	30.0	%

Operating expenses:
	Research, development and engineering		18.3	%	20.8	%	18.7	%	21.7	%	22.4	%
	Selling, general and administrative		14.0	%	16.2	%	10.6	%	15.4	%	12.7	%
		Total operating expenses	32.3	%	37.0	%	29.3	%	37.1	%	35.1	%

	Operating income (loss)		13.2	%	3.2	%	7.5	%	3.4	%	(5.1	)%

Other (expense) income:
	Interest income		0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
	Interest expense		(0.3	)%	(0.3	)%	(0.5	)%	(0.4	)%	(0.6	)%
	Other, net		0.1	%	(0.3	)%	0.0	%	0.0	%	0.0	%
		Other (expense) income, net	(0.2	)%	(0.6	)%	(0.5	)%	(0.4	)%	(0.6	)%

Income (loss) before income tax			13.0	%	2.6	%	7.0	%	3.0	%	(5.7	)%

	Income tax expense (benefit)		3.4	%	0.3	%	1.6	%	1.2	%	(1.0	)%
Net income (loss)			9.6	%	2.3	%	5.4	%	1.8	%	(4.7	)%


SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(Unaudited)
(Dollars in thousands, except per share amounts)

		Three Months Ended															Nine Months Ended
		September 27, 2014					June 28, 2014					September 28, 2013					September 27, 2014					September 28, 2013
		(% of revenues)					(% of revenues)					(% of revenues)					(% of revenues)					(% of revenues)
GAAP GROSS PROFIT		$	123,720		45.5	%	$	92,714		40.2	%	$	92,217		36.8	%	$	275,484		40.5	%	$	187,708		30.0	%
	Adjustment for stock based compensation charges	1,610			0.6	%	2,218			1.0	%	1,720			0.7	%	5,613			0.8	%	5,327			0.9	%
	Adjustment for restructuring and impairment charges	42			0.0	%	(20		)	—	%	—			—	%	736			0.0	%	—			—	%
	Adjustment for charges associated with acquisitions	1,397			0.5	%	1,301			0.5	%	1,272			0.5	%	3,781			0.6	%	3,682			0.6	%
NON-GAAP GROSS PROFIT		$	126,769		46.6	%	$	96,213		41.7	%	$	95,209		38.0	%	285,614			42.0	%	196,717			31.5	%

GAAP OPERATING EXPENSES		$	87,845		32.3	%	$	85,317		37.0	%	$	73,443		29.3	%	$	252,195		37.1	%	$	219,851		35.1	%
	Adjustment for stock based compensation charges	(4,748		)	(1.7	)%	(5,287		)	(2.3	)%	(5,193		)	(2.1	)%	(14,840		)	(2.2	)%	(15,802		)	(2.5	)%
	Adjustment for restructuring and impairment charges	(114		)	0.0	%	52			—	%	—			—	%	(1,143		)	(0.2	)%	—			—	%
	Adjustment for charges associated with acquisitions	(8,310		)	(3.1	)%	(8,124		)	(3.5	)%	308			0.1	%	(18,631		)	(2.7	)%	2,103			0.4	%
NON-GAAP OPERATING EXPENSES		$	74,673		27.5	%	$	71,958		31.2	%	$	68,558		27.3	%	$	217,581		32.0	%	$	206,152		33.0	%

GAAP OPERATING INCOME (LOSS)		$	35,875		13.2	%	$	7,397		3.2	%	$	18,774		7.5	%	$	23,289		3.4	%	$	(32,143	)	(5.1	)%
	Adjustment for stock based compensation charges	6,358			2.3	%	7,505			3.3	%	6,913			2.8	%	20,453			3.0	%	21,129			3.4	%
	Adjustment for restructuring and impairment charges	156			—	%	(72		)	(0.1	)%				—	%	1,879			0.3	%	—			—	%
	Adjustment for charges associated with acquisitions	9,707			3.6	%	9,425			4.1	%	964			0.3	%	22,412			3.3	%	1,579			0.2	%
NON-GAAP OPERATING INCOME (LOSS)		$	52,096		19.1	%	$	24,255		10.5	%	$	26,651		10.6	%	$	68,033		10.0	%	$	(9,435	)	(1.5	)%

GAAP NET INCOME (LOSS)		$	26,184		9.6	%	$	5,210		2.3	%	$	13,561		5.4	%	$	12,325		1.8	%	$	(29,273	)	(4.7	)%
	Adjustment for stock based compensation charges	6,358			2.3	%	7,505			3.3	%	6,913			2.8	%	20,453			3.0	%	21,129			3.4	%
	Adjustment for restructuring and impairment charges	156			0.1	%	(72		)	—	%	—			—	%	1,879			0.3	%	—			—	%
	Adjustment for impairment (recovery) of investment	—			—	%	515			0.2	%	—			—	%	515			0.1	%	(421		)	(0.1	)%
	Adjustment for non-cash tax expense (benefit)	9,338			3.4	%	803			0.3	%	4,482			1.8	%	7,950			1.2	%	(6,243		)	(1.0	)%
	Adjustment for charges associated with acquisitions	9,374			3.5	%	9,643			4.1	%	1,351			0.5	%	22,526			3.2	%	2,941			0.5	%
NON-GAAP NET INCOME (LOSS)		$	51,410		18.9	%	$	23,604		10.2	%	$	26,307		10.5	%	$	65,648		9.6	%	$	(11,867	)	(1.9	)%

GAAP DILUTED EARNINGS (LOSS) PER SHARE		0.14					$	0.03				$	0.08				$	0.07				(0.18		)
	Adjustment for stock based compensation charges	0.03					0.04					0.04					0.11					0.13
	Adjustment for restructuring and impairment charges	0.01					(0.00		)			—					0.01					—
	Adjustment for impairment (recovery) of investment	0.00					—					0.00					0.00					0.00
	Adjustment for non-cash tax expense (benefit)	0.05					0.01					0.03					0.04					(0.04		)
	Adjustment for charges associated with acquisitions	0.05					0.05					0.01					0.13					0.02
NON-GAAP DILUTED EARNINGS (LOSS) PER SHARE		$	0.28				$	0.13				$	0.16				$	0.36				$	(0.07	)

Our earnings release contains forward looking estimates of non-GAAP gross margin and earnings per share for the fourth quarter of 2014. We provide these non-GAAP measures on a prospective basis for the same reasons that we provide them to investors on a historical basis. The following table provides a reconciliation of GAAP gross margin and loss per share to non-GAAP gross margin and earnings per share anticipated for the fourth quarter based on the mid-point of guidance.


Forward Looking Q4 GAAP Gross Margin		46.0		%
	Adjustment for stock based compensation charges	0.5		%
	Adjustment for charges associated with acquisitions	0.5		%
Forward Looking Q4 non-GAAP Gross Margin		47.0		%

Forward Looking Q4 GAAP Net Earnings per Share		$	0.14
	Adjustment for stock based compensation charges	0.04
	Adjustment for non-cash tax expense	0.06
	Adjustment for charges associated with acquisitions	0.19
Forward Looking Q4 non-GAAP Net Earnings per Share		$	0.43

Contacts:

TriQuint Semiconductor, Inc.
Steve Buhaly, +1-503-615-9401
VP of Finance & Administration, CFO
steve.buhaly@triquint.com
or
Grant Brown, +1-503-615-9413
Director, Investor Relations
grant.brown@triquint.com
or
Media Contact:
Brandi Frye, +1-503-615-9488
Sr. Director, Corporate Communications
brandi.frye@triquint.com