August 05, 2013 at 16:05 PM EDT
GigOptix Reports Second Quarter Fiscal 2013 Financial Results

GigOptix, Inc. (NYSE MKT: GIG), a leading supplier of advanced semiconductor and optical communications components, today announced the financial results for its second quarter of fiscal year 2013, which ended June 30, 2013.

Second Quarter Fiscal 2013 GAAP Results

Total revenue in the second quarter of fiscal 2013 was $6.8 million. This compares with revenue of $9.6 million in the second quarter of fiscal 2012 and $6.9 million in the first quarter of fiscal 2013.

Gross margin was 62 percent in the second quarter of fiscal 2013, compared with 53 percent in the second quarter of fiscal 2012, and 62 percent in the first quarter of fiscal 2013.

Net loss was $1.4 million, or a net loss of ($0.06) per share, in the second quarter of fiscal 2013. This compares with a net loss of $1.6 million, or a net loss of ($0.08) per share, in the second quarter of fiscal 2012, and a net loss of $2.6 million, or a net loss of ($0.12) per share, in the first quarter of fiscal 2013.

Cash and cash equivalents at June 30, 2013, were $9.5 million.

Second Quarter Fiscal 2013 Non-GAAP Results1

Non-GAAP net income in the second quarter of fiscal 2013 was $0.1 million, or $0.00 per diluted share, and excludes approximately $0.7 million in stock-based compensation, $0.5 million in special litigation-related expenses, and $0.3 million in amortization of intangible assets. This compares with non-GAAP net income of $0.4 million, or $0.02 per diluted share in the second quarter of fiscal 2012, and non-GAAP net income of $0.2 million, or $0.01 per diluted share in the first quarter of fiscal 2013.

Non-GAAP gross margin was 65 percent, compared with 54 percent in the second quarter of fiscal 2012 and 65 percent in the first quarter of fiscal 2013.

Adjusted EBITDA for the second quarter of 2013 was $0.7 million. This compares with Adjusted EBITDA of $1.2 million in the second quarter of fiscal 2012, and Adjusted EBITDA of $0.7 million in the first quarter of fiscal 2013.

“In the second quarter we achieved our second consecutive quarter of non-GAAP profitability while maintaining record non-GAAP gross margin in spite of the continued challenging conditions we faced in several of our served markets,” said Dr. Avi Katz, Chairman and Chief Executive Officer of GigOptix, Inc. “We continued to make important progress during the second quarter with the joint development programs (JDP) we have with major Tier-1 OEMs, with JDP revenue again exceeding $1 million in the quarter. We are on track to deliver customized reference design platforms for next generation telecom products, customized trans-impedance amplifiers (TIA) and drivers, and applications for the consumer electronics market, including key components to be used in gesture recognition devices. As we have previously discussed, these JDP contracts are important to our long-term growth as they support deployment of production parts towards the end of 2013 and the beginning of 2014.

“While market conditions have been tough for an extended period, I am increasingly optimistic that revenue in the second half of 2013 will be higher than the first half. My confidence is supported by what appears to be a gradual improvement in our telecom business, primarily in the fast growing 100 gigabit segment where we command a roughly 50% share of the 100Gbps coherent driver market, which is being led by the introduction of our next generation TIAs and drivers. In addition, we see continued improvement in the datacom market where we have established a market leadership in optical engines for Active Optical Cables,” said Dr. Katz. “In our Industrial business, we are confident that revenue should increase later in 2013 as design wins with new products go into production.

“Now that we are seeing the beginning of a recovery in the telecom market, along with improvement in other parts of our business, our board of directors believes that this is the right time to reinstate the compensation and benefits for the Company’s employees to the levels they were at prior to the across the board reductions implemented early this year in response to the challenging times. It is important that we restore these previous reductions and recognize our employees for their hard work after a difficult period. We want to personally thank all of the GigOptix team for their shared sacrifice in helping support the Company’s cash position and to get us back to profitability in such a short period of time,” said Dr. Katz.

“As we prepare to head to trial on August 26, 2013, in our lawsuit against defendants M/A-COM Technology Solutions, Inc. (MACOM), MACOM’s subsidiary Optomai, Inc., and three former GigOptix employees, we are continuing to incur expenses in support of this lawsuit. We believe that this investment in the litigation is warranted by the evidence which we have obtained through the forensic and other discovery which we have conducted, as well as the process to date in the judicial system. Most recently, this past week, the Superior Court of Santa Clara County, California after considering the evidentiary record denied motions filed by the defendants to stay the lawsuit, which followed a ruling last month against the defendants preserving our right to bring to trial all of our claims against the defendants,” said Dr. Katz. “More information regarding these motions, including certain of the evidence considered by the Superior Court, can be seen in the Superior Court’s records.”

Financial Outlook

“With a better outlook in our 100Gbps telecom business, continued strength in the datacom market, and ramp of new products into both existing and new markets later this year, we believe revenue in the third quarter will be up approximately 5 percent from the second quarter,” said Curt Sacks, Senior Vice President and Chief Financial Officer of GigOptix, Inc. “Based on our current expectations, we believe that revenue will continue to grow in the fourth quarter.”

Financial Results Webcast / Conference Call

GigOptix will host a conference call and webcast with investors today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss the second quarter fiscal 2013 financial results, and the business outlook. Investors and other interested parties may access the call by dialing (800) 901-5213 in the U.S., or (617) 786-2962 outside of the U.S., and entering the passcode 34132933. The conference call replay will be available beginning two hours after the call until midnight Eastern Time on August 12, 2013. The replay dial-in number is (888) 286-8010, and the passcode is 93960694. International callers should dial (617) 801-6888 and enter the same passcode at the prompt. Additionally, this conference call will be broadcast live over the Internet and can be accessed by all interested parties on the Investor Relations section of the Company's website at http://www.gigoptix.com.

1 Non-GAAP Measures - GigOptix reports revenue, gross margin, operating expense, operating income and net loss on a Generally Accepted Accounting Principles (GAAP) and non-GAAP basis. In addition, it reports Adjusted EBITDA. These non-GAAP measures are provided to enhance investors’ overall understanding of GigOptix financial performance. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to GAAP results. A reconciliation of these GAAP to non-GAAP measurements and Adjusted EBITDA for the three and six months ended June 30, 2013 and July 1, 2012 can be found in the “Reconciliation of GAAP to Non-GAAP Financial Information” table attached to this press release.

About GigOptix, Inc.

GigOptix is a leading fabless supplier of semiconductor and optical components that enable high-speed end-to-end information streaming over the network and address emerging high-growth opportunities in the communications, industrial, defense and avionics industries. GigOptix offers a unique broad portfolio of Drivers, TIAs and TFPSTM optical modulators for 40G, 100G and 400G fiber-optic telecommunications and data-communications networks, and high performance MMIC solutions that enable next generation wireless microwave systems up to 90GHz. GigOptix also offers a wide range of digital and mixed-signal ASIC solutions and enables product lifetime extension through its GigOptix Sunset Rescue Program.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including the bringing of products to market with full documentation. Such statements contain words such as "will," and "expect," or the negative thereof or comparable terminology, and include (without limitation) statements regarding growth, opportunities, continued traction, contracts, improvements and our statements under the heading "Financial Outlook." Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. These risks include, but are not limited to: the ability to extend product offerings into new areas or products, the ability to commercialize licensed technology, unexpected occurrences that deter the full documentation and "bring to market" plan for products that were developed this year and last year, trends and fluctuations in the industry, changes in demand and purchasing volume of customers, unpredictability of suppliers, our ability to control our costs of goods sold, our ability to attract and retain qualified personnel, the ability to move product sales to production levels, the ability to compete for client design-in opportunities, the ability to cross-sell to new clients and to diversify, the success of product sales in new markets or of recently produced product offerings, including bundled product solutions, the amount of cost savings, the ability to improve productivity, the ability to pursue and attract other merger and acquisition opportunities, our ability to enforce intellectual property rights, and the ability to maintain and continue relationships with government agencies. Additional factors that could cause actual results to differ are discussed under the heading "Risk Factors" and in other sections of the Company's filings with the SEC, and in the Company's other current and periodic reports filed or furnished from time to time with the SEC. All forward-looking statements in this press release are made as of the date hereof, based on information available to the Company as of the date hereof, and the Company assumes no obligation to update any forward-looking statement.

GIGOPTIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

   June 30,   

December 31,Net Change
20132012 $ %
ASSETS
Current assets:
Cash and cash equivalents $ 9,506 $ 10,147 $ (641 ) (6 %)
Accounts receivable, net 6,408 5,056 1,352 27 %
Inventories 3,953 4,111 (158 ) (4 %)
Prepaid and other current assets 461 295 166 56 %
Total current assets 20,328 19,609 719 4 %
Property and equipment, net 3,632 4,579 (947 ) (21 %)
Intangible assets, net 3,766 4,270 (504 ) (12 %)
Goodwill 9,860 9,860 - 0 %
Restricted cash 282 282 - 0 %
Other assets 211 228 (17 ) (7 %)
Total assets $ 38,079 $ 38,828 $ (749 ) (2 %)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,902 $ 3,174 $ (1,272 ) (40 %)
Accrued compensation 874 846 28 3 %
Line of credit 6,000 3,600 2,400 67 %
Other current liabilities 2,903 3,080 (177 ) (6 %)
Total current liabilities 11,679 10,700 979 9 %
Other long-term liabilities 898 1,128 (230 ) (20 %)
Total liabilities 12,577 11,828 749 6 %
Stockholders' Equity
Common stock 22 22 - 0 %
Additional paid-in capital 125,819 123,386 2,433 2 %

Treasury stock, at cost; 701,754 shares as of June 30, 2013 and December 31, 2012, respectively

(2,209 ) (2,209 ) -
Accumulated other comprehensive income 323 298 25 8 %
Accumulated deficit (98,453 ) (94,497 ) (3,956 ) 4 %
Total stockholders' equity 25,502 27,000 (1,498 ) (6 %)
Total liabilities and stockholders' equity $ 38,079 $ 38,828 $ (749 ) (2 %)

GIGOPTIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)
(Unaudited)
Three months endedSix months ended
June 30,

July 1,

June 30,

July 1,

2013

%

2012

%

2013

%

2012

%

Total revenue $ 6,831 100 % 9,588 100 % 13,752 100 % 18,739 100 %
Total cost of revenue 2,578 38 % 4,537 47 % 5,214 38 % 8,715 47 %
Gross profit 4,253 62 % 5,051 53 % 8,538 62 % 10,024 53 %
Research and development expense 3,177 47 % 3,445 36 % 6,413 47 % 6,828 36 %
Selling, general and administrative expense 2,041 30 % 3,152 33 % 4,394 32 % 5,959 32 %
Restructuring expense, net - 0 % (114 ) -1 % 950 7 % 93 0 %
Special litigation-related expense 472 7 % 212 2 % 887 6 % 353 2 %
Total operating expenses 5,690 83 % 6,695 70 % 12,644 92 % 13,233 71 %
Loss from operations (1,437 ) -21 % (1,644 ) -17 % (4,106 ) -30 % (3,209 ) -17 %
Interest expense, net (25 ) 0 % (41 ) 0 % (79 ) -1 % (193 ) -1 %
Other income (expense), net 88 1 % 72 1 % 256 2 % 57 0 %
Loss before provision for income taxes (1,374 ) -20 % (1,613 ) -17 % (3,929 ) -29 % (3,345 ) -18 %
Provision for income taxes 14 0 % 18 0 % 27 0 % 34 0 %
Net loss $ (1,388 ) -20 % $ (1,631 ) -17 % $ (3,956 ) -29 % $ (3,379 ) -18 %
Basic and diluted net loss per share $ (0.06 ) $ (0.08 ) $ (0.18 ) $ (0.16 )

Weighted average number of shares used in per share calculations - basic and diluted

21,628 21,502 21,588 21,528
GIGOPTIX, INC.
NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three months endedSix months ended
June 30,

July 1,

June 30,

July 1,

2013

%

2012

%

2013

%

2012

%

Total revenue $ 6,831 100 % $ 9,588 100 % 13,752 100 % 18,739 100 %
Total cost of revenue 2,397 35 % 4,372 46 % 4,831 35 % 8,413 45 %
Gross profit 4,434 65 % 5,216 54 % 8,921 65 % 10,326 55 %
Research and development expense 2,946 43 % 2,838 30 % 5,859 43 % 5,926 32 %
Selling, general and administrative expense 1,464 21 % 2,006 21 % 2,981 22 % 4,254

23

%

Total operating expenses 4,410 65 % 4,844 51 % 8,840 64 % 10,180 54 %
Income from operations 24 0 % 372 4 % 81 1 % 146 1 %
Interest expense, net (25 ) 0 % (41 ) 0 % (79 ) -1 % (193 ) -1 %
Other income (expense), net 88 1 % 72 1 % 256 2 % 57 0 %
Income before provision for income taxes 87 1 % 403 4 % 258 2 % 10 0 %
Provision for income taxes 14 0 % 18 0 % 27 0 % 34 0 %
Net income (loss) $ 73 1 % $ 385 4 % $ 231 2 % $ (24 ) 0 %
Basic net income (loss) per share $ 0.00 $ 0.02 $ 0.01 $ (0.00 )
Diluted net income (loss) per share $ 0.00 $ 0.02 $ 0.01 $ (0.00 )
Weighted average number of shares used in basic per share calculation 21,628 21,502 21,588 21,528
Weighted average number of shares used in diluted per share calculation 22,101 22,779 22,115 21,528
GIGOPTIX, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In thousands)
(Unaudited)
Three months ended,Six months ended,
June 30,July 1,June 30,July 1,
2013201220132012
GAAP Total cost of revenue $ 2,578 $ 4,537 $ 5,214 $ 8,715
Stock-based compensation (59 ) (43 ) (139 ) (58 )
Amortization of intangible assets (122 ) (122 ) (244 ) (244 )
Non-GAAP Total cost of revenue $ 2,397 $ 4,372 $ 4,831 $ 8,413
GAAP Gross profit $ 4,253 $ 5,051 $ 8,538 $ 10,024
Stock-based compensation 59 43 139 58
Amortization of intangible assets 122 122 244 244
Non-GAAP Gross profit $ 4,434 $ 5,216 $ 8,921 $ 10,326
GAAP - Operating expenses $ 5,690 $ 6,695 $ 12,644 $ 13,233
Stock-based compensation (679 ) (1,623 ) (1,707 ) (2,346 )
Amortization of intangible assets (129 ) (130 ) (260 ) (261 )
Restructuring expense, net - 114 (950 ) (93 )
Special litigation-related expense (472 ) (212 ) (887 ) (353 )
Non-GAAP Operating expenses $ 4,410 $ 4,844 $ 8,840 $ 10,180
GAAP Loss from operations $ (1,437 ) $ (1,644 ) $ (4,106 ) $ (3,209 )
Stock-based compensation 738 1,666 1,846 2,404
Amortization of intangible assets 251 252 504 505
Restructuring expense, net - (114 ) 950 93
Special litigation-related expense 472 212 887 353
Non-GAAP Income from operations $ 24 $ 372 $ 81 $ 146
GAAP - Net loss $ (1,388 ) $ (1,631 ) $ (3,956 ) $ (3,379 )
Stock-based compensation 738 1,666 1,846 2,404
Amortization of intangible assets 251 252 504 505
Restructuring expense, net - (114 ) 950 93
Special litigation-related expense 472 212 887 353
Non-GAAP Net Income (loss) $ 73 $ 385 $ 231 $ (24 )
Adjusted EBITDA reconciliation:
Loss from operations $ (1,437 ) $ (1,644 ) $ (4,106 ) $ (3,209 )
Restructuring expense, net - (114 ) 950 93
Depreciation and amortization 967 1,060 1,881 2,054
Stock-based compensation 738 1,666 1,846 2,404
Special litigation-related expense 472 212 887 353
Adjusted EBITDA $ 740 $ 1,180 $ 1,458 $ 1,695

Contacts:

Darrow Associates, Inc.
Jim Fanucchi, 408-404-5400 (Investors)
ir@gigoptix.com
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