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Vitesse Reports Operating Profitability For The Fourth Quarter And Fiscal Year 2012

Vitesse Semiconductor Corporation (NASDAQ: VTSS), a leading provider of advanced IC solutions for Carrier and Enterprise networks, reported its financial results for the fourth quarter and fiscal year 2012, ended September 30, 2012.

“Vitesse achieved our goal of operating profitability in the fourth quarter and for fiscal year 2012,” said Chris Gardner, CEO of Vitesse. “In 2012, we demonstrated organizational agility in a tough market environment and increased operating income by over $12 million compared to 2011. We improved our financial leverage, reducing overall year-over-year operating expenses by 27%, and increased our cash position by nearly $7 million, or 38%. In addition, our continued investment in R&D allowed us to dramatically scale our product feature set and capabilities to meet evolving market needs. The introduction of Vitesse’s patented VeriTime™ synchronization technology for 4G/LTE drove growth in our new product portfolio and reinforced our product leadership.

“In fiscal year 2012, Vitesse’s total new product revenue increased 111% from fiscal year 2011. Looking ahead, these new products will drive our growth. In the last two years, we captured over 600 design wins with an estimated lifetime revenue of $500 million. Nearly 50 percent of our design wins were in the new IP Edge market, particularly Mobile Access, capturing multiple wins with nine of the market share leaders. We continue to expect revenues from our new products to double from 2012 to 2013 and double again in 2014.”

Fourth Quarter Fiscal Year 2012 Financial Results Summary

  • Total net revenues were $29.5 million, compared to $30.3 million in the third quarter of fiscal year 2012 and $30.3 million in the fourth quarter of fiscal year 2011.
    • Product revenues were $28.1 million compared to $25.7 million in the third quarter of fiscal year 2012 and $28.9 million in the fourth quarter of fiscal year 2011.
    • The product lines contributed the following as a percentage of product revenue as compared to the third quarter of fiscal year 2012:
      • Carrier networking products: 51.6% versus 45.1%
      • Enterprise networking products: 45.6% versus 52.6%
      • Core Carrier and Enterprise networking products: 97.2% versus 97.7%
      • Non-core products: 2.8% versus 2.3%
    • Intellectual property revenues totaled $1.4 million, compared to $4.6 million in the third quarter of fiscal year 2012 and $1.5 million in the fourth quarter of fiscal year 2011.
  • Product margins were 55.9% compared to 56.2% in the third quarter of fiscal year 2012 and 55.3% in the fourth quarter of fiscal year 2011.
  • Operating expenses were $16.6 million compared to $16.9 million in the third quarter of fiscal year 2012 and $25.9 million in the fourth quarter of fiscal year 2011. Included in operating expenses for the fourth quarter of fiscal year 2012 and the fourth quarter of fiscal year 2011 are restructuring and impairment charges of $1.5 million credit and $3.1 million, respectively.
  • Operating income was $531,000 compared to operating income of $2.1 million in the third quarter of fiscal year 2012 and an operating loss of $8.5 million in the fourth quarter of fiscal year 2011.
  • Non-GAAP operating income was $308,000 compared to $3.3 million in the third quarter of fiscal year 2012 and non-GAAP operating loss of $4.7 million in the fourth quarter of fiscal year 2011.
  • Net income was $1.2 million, or $0.05 per basic and per fully diluted share. This compares to net income of $4.7 million, or $0.18 per basic and $0.16 per fully diluted share, in the third quarter of fiscal year 2012; and net loss of $4.6 million, or $0.19 per basic share and fully diluted share, in the fourth quarter of fiscal year 2011.
  • Non-GAAP net loss was $130,000, or breakeven per basic and fully diluted share, compared to non-GAAP net income of $140,000, or breakeven per basic and fully diluted share, for the third quarter of fiscal year 2012; and non-GAAP net loss of $6.0 million, or $0.25 per basic and fully diluted share, in the fourth quarter of fiscal year 2011.

Fiscal Year 2012 Financial Results Summary

  • Total net revenues for fiscal year 2012 were $119.5 million, a decrease of 15.2% compared with $141.0 million reported for fiscal year 2011.
    • Product revenues were $109.9 million, a 17.2% decline from $132.7 million in fiscal year 2011.
    • The product lines contributed the following as a percent of fiscal year 2012 product revenue as compared to the fiscal year 2011:
      • Carrier networking products: 43.4% versus 46.5%
      • Enterprise networking products: 49.0% versus 48.8%
      • Core Carrier and Enterprise networking products: 92.4% versus 95.3%
      • Non-core products: 7.6% versus 4.7%
    • Intellectual property revenues were $9.6 million, an increase of 16.3% compared with $8.2 million in fiscal year 2011.
  • Product margins were 57.8% in fiscal year 2012 compared to 59.6% in the prior year.
  • Operating expenses were $71.4 million compared to $98.2 million in fiscal year 2011. Included in operating expenses for fiscal year 2012 and fiscal year 2011 are restructuring and impairment charges of $1.4 million credit and $3.7 million, respectively.
  • Income from operations was $1.6 million compared with a loss from operations of $10.9 million in fiscal year 2011.
  • Non-GAAP income from operations was $5.0 million compared with non-GAAP loss from operations of $3.8 million in fiscal year 2011.
  • Net loss was $1.1 million, or $0.04 per share, in fiscal year 2012, compared with a net loss of $14.8 million, or $0.61 per share, in fiscal year 2011.
  • Non-GAAP net loss was $2.7 million, or $0.10 per share, in fiscal year 2012 compared with a non-GAAP net loss was $11.5 million, or $0.47 per share, in fiscal year 2011.

Balance Sheet Data at September 30, 2012 as Compared to September 30, 2011

  • Cash balance increased to $23.9 million, compared to $17.3 million;
  • Accounts receivable totaled $9.4 million, compared to $9.6 million;
  • Inventory totaled $12.1 million, compared to $20.9 million; and
  • Working capital increased to $28.7 million, compared to $26.7 million.

Financial Outlook

For the first quarter of fiscal year 2013, ending December 31, 2012, Vitesse expects revenues to be in the range of $25.0 million to $27.0 million and product margins are expected to be between 54% and 57%. Operating expenses are expected to be between $18.0 million and $19.0 million.

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