NetLogic Microsystems Announces Fourth Quarter 2011 And Fiscal Year 2011 Financial Results

NetLogic Microsystems, Inc. (NASDAQ:NETL), a worldwide leader in high performance intelligent semiconductor solutions for next-generation Internet networks, today announced financial results for its fourth quarter and fiscal year ended Dec. 31, 2011.

Revenue for the fourth quarter of 2011 was $96.2 million, a 9.9% sequential decrease from $106.8 million for the third quarter of 2011 and a 4.2% decrease from $100.4 million for the fourth quarter of 2010.

Fourth quarter 2011 net loss, determined in accordance with generally accepted accounting principles (GAAP), was $30.1 million or $0.43 per diluted share. By comparison, GAAP net loss was $9.4 million or $0.14 per diluted share for the fourth quarter of 2010. GAAP net income for fourth quarter 2011 included stock-based compensation and related payroll taxes, changes in contingent earn-out liability, amortization of intangible assets, acquisition-related costs, and establishment of deferred tax asset valuation allowance. Excluding these items, non-GAAP net income for the fourth quarter of 2011 was $24.6 million or $0.32 per diluted share, compared with $0.45 per diluted share for the fourth quarter of 2010.

For the fiscal year 2011, revenue was $405.4 million, a 6.2% increase from $381.7 million for fiscal year 2010.

Fiscal year 2011 GAAP net loss was $56.7 million or $0.82 per diluted share. By comparison, GAAP net loss for fiscal year 2010 was $66.4 million or $1.10 per diluted share. GAAP net income for fiscal year 2011 included stock-based compensation and related payroll taxes, changes in contingent earn-out liability, amortization of intangible assets, inventory fair value adjustments and related taxes, acquisition-related costs, and establishment of deferred tax asset valuation allowance. Excluding these items, non-GAAP net income for fiscal year 2011 was $123.0 million or $1.62 per diluted share, compared with $1.58 per diluted share for fiscal year 2010.

Merger Update

As previously announced on September 12, 2011, NetLogic Microsystems, Inc entered into an Agreement and Plan of Merger with Broadcom Corporation and I&N Acquisition Corp., a wholly owned subsidiary of Broadcom, pursuant to which NetLogic Microsystems would be acquired by Broadcom for $50.00 per share in cash.

Consummation of the merger remains subject to the satisfaction of customary closing conditions, other than conditions requiring stockholder approval and required regulatory approvals and clearances, all of which have been satisfied including the approval of the transaction without conditions from the Ministry of Commerce of the People’s Republic of China. Both companies anticipate closing the transaction shortly subject to satisfaction or waiver of all conditions to close.

Recent Operating Highlights
  • NetLogic Microsystems announced the industry’s first open–source Xen® hypervisor for high-performance multi-core MIPS64® processors. The new Xen hypervisor enables highly efficient virtualization for next-generation communications, networking and server platforms using the industry’s best-in-class XLP® and XLP II multi-core, multi-threaded processors.
  • The company expanded its intellectual property portfolio to now include over 800 worldwide patents, filings and international registrations covering a broad range of innovations for its industry-leading products for networking infrastructure. The extraordinary strength of its intellectual property portfolio has enabled NetLogic Microsystems to be at the forefront of innovation and technology leadership in high-performance multi-core processing, knowledge-based processing, digital front-end processing and 10/40/100 Gigabit Ethernet PHY solutions.
  • NetLogic Microsystems received the distinguished 2011 Most Respected Emerging Public Semiconductor Company Award for the third consecutive year from the Global Semiconductor Alliance (GSA). It was recognized by its industry peers, customers, partners and the GSA as the most respected public semiconductor company with revenue up to $500 million.

About NetLogic Microsystems

NetLogic Microsystems, Inc. (NASDAQ: NETL) is a worldwide leader in high-performance intelligent semiconductor solutions that are powering next-generation Internet networks. NetLogic Microsystems’ best-in-class products perform highly differentiated tasks of accelerating complex network traffic to significantly enhance the performance and functionality of advanced 3G/4G mobile wireless infrastructure, data center, enterprise, metro Ethernet, edge and core infrastructure networks. NetLogic Microsystems’ market-leading product portfolio includes high-performance multi-core processors, knowledge-based processors, content processors, network search engines, ultra low-power embedded processors, digital front-end processors and high-speed 10/40/100 Gigabit Ethernet PHY solutions. These products are designed into high-performance systems such as switches, routers, wireless base stations, security appliances, networked storage appliances, service gateways and connected media devices offered by leading original equipment manufacturers (OEMs). NetLogic Microsystems is headquartered in Santa Clara, California, and has offices and design centers throughout North America, Asia and Europe. For more information about products offered by NetLogic Microsystems, call +1-408-454-3000 or visit the NetLogic Microsystems Web site at http://www.netlogicmicro.com.

NetLogic Microsystems and the NetLogic Microsystems logo are trademarks of NetLogic Microsystems, Inc. XLP is a registered trademarks of NetLogic Microsystems, Inc. All other trademarks are the properties of their respective owners.

NETLOGIC MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)

(UNAUDITED)
 
  Three months ended   Twelve months ended
December 31,2011   December 31,2010   December 31,2011   December 31,2010
Revenue $ 96,247   $ 100,428   $ 405,413   $ 381,745
Cost of revenue*   35,335       38,561       156,488       173,427  
Gross profit   60,912       61,867       248,925       208,318  
Operating expenses:
Research and development* 39,997 35,235 153,459 127,697
Selling, general and administrative* 22,677 19,260 90,799 78,879
Change in contingent earn-out liability (16,957 ) 20,573 14,459 71,725
Acquisition-related costs   2,496       -       10,743       735  
Total operating expenses   48,213       75,068       269,460       279,036  
Income (loss) from operations 12,699 (13,201 ) (20,535 ) (70,718 )
Other income (expense):
Gain recognized on investment in Optichron, Inc. - - 4,259 -
Impairment charge on other investment - - (1,276 ) -
Interest and other income (expense), net   42       111       540       (125 )
Income (loss) before income taxes 12,741 (13,090 ) (17,012 ) (70,843 )
Provision for (benefit from) income taxes   42,793       (3,682 )     39,690       (4,472 )
Net loss $ (30,052 )   $ (9,408 )   $ (56,702 )   $ (66,371 )
Net loss per share - Basic and Diluted $ (0.43 )   $ (0.14 )   $ (0.82 )   $ (1.10 )
Shares used in calculation - Basic and Diluted   70,547       65,155       69,190       60,426  
 

* Includes stock-based compensation and related payroll taxes, and amortization of intangible assets as follows (in thousands):
 
Three months ended   Twelve months ended
December 31,2011   December 31,2010   December 31,2011   December 31,2010
Stock-based compensation and related payroll taxes:
Cost of revenue $ 283 $ 379 $ 1,056 $ 915
Research and development 8,845 6,485 34,242 25,948
Selling, general and administrative   5,553       5,078       24,320       21,983  
Total $ 14,681     $ 11,942     $ 59,618     $ 48,846  
 
Amortization of intangible assets:
Cost of revenue $ 9,790 $ 10,430 $ 48,260 $ 39,458
Selling, general and administrative   1,278       913       4,727       3,652  
Total $ 11,068     $ 11,343     $ 52,987     $ 43,110  

Non-GAAP Financial Information

In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (GAAP), this announcement of operating results contains non-GAAP financial measures that exclude the income statement effects of stock-based compensation and related payroll taxes, change in contingent earn-out liability, amortization of intangible assets, fair value adjustments of acquired inventory and related taxes, acquisition-related costs, lease termination costs, a gain recognized on a pre-acquisition investment in Optichron, Inc., an impairment charge on another investment, release and establishment of deferred tax asset valuation allowance, and the effects of excluding stock-based compensation upon the number of diluted shares used in calculating non-GAAP earnings per share.

We have excluded stock-based compensation expense and changes in contingent earn-out liability in calculating these non-GAAP financial measures. These expenses rely on valuations based on future events such as the market price of our common stock and revenue generated from products acquired in the RMI and Optichron acquisitions during a defined period following the close that are difficult to predict and are affected by market factors that are largely not within the control of management. We have excluded stock related payroll taxes, amortization of intangible assets, fair value adjustments related to acquired inventory and the related tax effect, acquisition-related costs, lease termination costs, gain recognized on investment in Optichron, Inc., impairment charge on other investment and changes in deferred tax asset valuation allowance because we do not consider them to be related to our core operating performance.

We use the non-GAAP financial measures that exclude these items to make strategic decisions, forecast future results and evaluate the Company’s current performance. We believe that the presentation of non-GAAP financial measures that exclude these items is useful to investors because we do not consider these charges either part of the day-to-day business or reflective of the core operational activities of the Company that are within the control of management or that are used to evaluate management’s operating performance.

The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures. For additional information regarding these non-GAAP financial measures, and management’s explanation of why it considers such measures to be useful, refer to the Form 8-K dated February 15, 2012 that the Company has submitted to the Securities and Exchange Commission.

NETLOGIC MICROSYSTEMS, INC.

RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET INCOME

(IN THOUSANDS)

(UNAUDITED)
 
  Three months ended   Twelve months ended
December 31,

2011
  December 31,

2010
December 31,

2011
  December 31,

2010
GAAP net loss $ (30,052 ) $ (9,408 ) $ (56,702 ) $ (66,371 )
Reconciling items:
Stock-based compensation and related taxes 14,681 11,942 59,618 48,846
Changes in contingent earn-out liability (16,957 ) 20,573 14,459 71,725
Amortization of intangible assets 11,068 11,343 52,987 43,110
Fair value adjustments of acquired inventory - - 2,381 16,018
Acquisition-related costs 2,496 - 10,743 735
Lease termination costs - - - 503
Gain recognized on investment in Optichron - - (4,259 ) -
Impairment charge on other investment - - 1,276 -
Tax effect of inventory fair value adjustment - - (847 ) (5,618 )
Establishment (release) of deferred tax asset valuation allowance   43,376     (1,585 )   43,376     (1,585 )
Non-GAAP net income $ 24,612   $ 32,865   $ 123,032   $ 107,363  

NETLOGIC MICROSYSTEMS, INC.

RECONCILIATION OF GAAP DILUTED NET INCOME (LOSS) PER SHARE TO

NON-GAAP DILUTED NET INCOME PER SHARE

(UNAUDITED)
 
  Three months ended   Twelve months ended
December 31,

2011
  December 31,

2010
  December 31,

2011
  December 31,

2010
GAAP net loss per share - Diluted $ (0.43)   $ (0.14)   $ (0.82)   $ (1.10)
Reconciling items:
Stock-based compensation and related taxes 0.19 0.16 0.78 0.72
Changes in contingent earn-out liability (0.22) 0.28 0.19 1.05
Amortization of intangible assets 0.14 0.15 0.70 0.63
Fair value adjustments of acquired inventory - - 0.03 0.24
Acquisition-related costs 0.03 - 0.14 0.01
Lease termination costs - - - 0.01
Gain recognized on investment in Optichron - - (0.06) -
Impairment charge on other investment - - 0.02 -
Tax effect of inventory fair value adjustment - - (0.01) (0.08)
Establishment (release) of deferred tax asset valuation allowance 0.56 (0.02) 0.57 (0.02)
Difference in shares count between diluted GAAP and diluted non-GAAP calculation 0.05   0.02   0.08   0.12
Non-GAAP net income per share - Diluted $ 0.32   $ 0.45   $ 1.62   $ 1.58

NETLOGIC MICROSYSTEMS, INC.

RECONCILIATION OF THE SHARES USED FOR GAAP DILUTED

NET INCOME (LOSS) PER SHARE CALCULATION TO THE SHARES USED FOR

NON-GAAP DILUTED NET INCOME PER SHARE CALCULATION

(IN THOUSANDS)

(UNAUDITED)
 
  Three months ended   Twelve months ended
December 31,

2011
  December 31,

2010
  December 31,

2011
  December 31,

2010
Shares used in calculation - Diluted (GAAP) 70,547   65,155   69,190   60,426
The effect of removing stock-based compensation expense for non-GAAP presentation purpose 2,117 2,269 2,147 2,526
The effect of dilutive potential common shares due to reporting non-GAAP net income 4,592   5,979   4,631   5,065
Shares used in calculation - Diluted (Non-GAAP) 77,256   73,403   75,968   68,017

NETLOGIC MICROSYSTEMS, INC.

RECONCILIATION OF GAAP GROSS MARGIN TO NON-GAAP GROSS MARGIN

(IN THOUSANDS, EXCEPT PERCENTAGES)

(UNAUDITED)
 
  Three months ended   Twelve months ended
December 31,

2011
    December 31,

2010
    December 31,

2011
    December 31,

2010
GAAP gross margin $ 60,912 63.3 % $ 61,867 61.6 % $ 248,925 61.4 % $ 208,318 54.6 %
Reconciling items:
Stock-based compensation 283 0.3 % 379 0.4 % 1,056 0.3 % 915 0.2 %
Amortization of intangible assets 9,790 10.2 % 10,430 10.4 % 48,260 11.9 % 39,458 10.3 %
Fair value adjustment related to acquired inventory   - 0.0 %   - 0.0 %   2,381 0.6 %   16,018 4.2 %
Non-GAAP gross margin $ 70,985 73.8 % $ 72,676 72.4 % $ 300,622 74.2 % $ 264,709 69.3 %

NETLOGIC MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

(UNAUDITED)
 
  December 31,

2011
  December 31,

2010
ASSETS  
Current assets:
Cash, cash equivalents and short-term investments $ 258,868 $ 256,167
Accounts receivables, net 38,189 19,829
Inventories 35,051 36,290
Deferred income taxes 2,143 8,428
Prepaid expenses and other current assets   8,530       11,458  
Total current assets 342,781 332,172
Property and equipment, net 30,115 20,507
Goodwill 166,760 112,700
Intangible asset, net 192,961 180,838
Other assets   42,473       66,372  
Total assets $ 775,090     $ 712,589  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 6,133 $ 17,257
Accrued liabilities 23,972 27,848
Contingent earn-out liability, current 51,741 -
Deferred margin 815 4,242
Software licenses and other obligations, current   5,281       4,514  
Total current liabilities 87,942 53,861
Contingent earn-out liability, long-term 6,193 -
Software licenses and other obligations, long-term 2,978 2,033
Other liabilities   38,275       37,782  
Total liabilities   135,388       93,676  
Stockholders' equity
Common stock 713 675
Additional paid-in capital 887,328 807,780
Accumulated other comprehensive loss (2,123 ) (28 )
Accumulated deficit   (246,216 )     (189,514 )
Total stockholders' equity   639,702       618,913  
Total liabilities and stockholders' equity $ 775,090     $ 712,589  

Copyright Business Wire 2010

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