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QLogic Reports Second Quarter Results for Fiscal Year 2016
  • Delivers Q2 net revenue of $103.4 million
  • Achieves Q2 net income per diluted share of $0.03 GAAP and $0.17 non-GAAP
  • Guides Q3 revenue of $115 - $121 million and non-GAAP earnings per diluted share of $0.24 - $0.28

ALISO VIEJO, Calif.--(BUSINESS WIRE)--Oct. 22, 2015-- QLogic Corp. (Nasdaq:QLGC), a leading supplier of high performance network infrastructure solutions, today announced its second quarter financial results for the period ended September 27, 2015.

Net revenue for the second quarter of fiscal 2016 was $103.4 million compared to $127.5 million in the same quarter last year. Revenue from Advanced Connectivity Platforms was $93.4 million during the second quarter of fiscal 2016 compared to $114.9 million in the same quarter last year.

Net income on a GAAP basis for the second quarter of fiscal 2016 was $2.2 million, or $0.03 per diluted share, compared to $11.0 million, or $0.12 per diluted share, for the second quarter of fiscal 2015. Net income on a non-GAAP basis for the second quarter of fiscal 2016 was $14.7 million, or $0.17 per diluted share, compared to $22.0 million, or $0.25 per diluted share, for the second quarter of fiscal 2015.

“During the second quarter, we prioritized our investment programs to renew focus on our core Fibre Channel and Ethernet product portfolios. We have launched new Fibre Channel products and achieved significant design wins with our 25/50/100Gb differentiated Ethernet solutions,” said Jean Hu, chief financial officer and acting chief executive officer, QLogic. “We believe we are making important progress on the business and operational fronts and remain sharply focused on improving our financial performance in the second half of fiscal 2016 and beyond.”

Business Outlook for the Third Quarter of Fiscal 2016

QLogic expects to achieve net revenue in the range of $115 - $121 million for the third quarter of fiscal 2016. The Company is forecasting third quarter non-GAAP earnings per diluted share of $0.24 - $0.28. QLogic estimates that GAAP earnings per diluted share will be lower than non-GAAP earnings per diluted share by $0.08 - $0.13 per share in the third quarter of fiscal 2016. The Company’s forecasted guidance is a forward-looking statement and does not include the effects of future acquisitions/divestitures, unanticipated asset impairments and other special charges, and other non-recurring items not reflective of ongoing operations. Our forward-looking estimates of both GAAP and non-GAAP measures of our financial performance may differ materially from our actual results and should not be relied upon as statements of fact.

Non-GAAP Financial Measures

QLogic uses certain non-GAAP financial measures to supplement financial statements based on GAAP. A summary of the historical non-GAAP financial measures and a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as a description of the reasons that management believes that these non-GAAP financial measures provide useful information to investors and the additional purposes for which management uses these non-GAAP financial measures, is presented in the accompanying financial schedules.

Conference Call

QLogic’s second quarter fiscal 2016 conference call is scheduled for today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). Jean Hu, chief financial officer and acting chief executive officer, will host the conference call. The call is being webcast live via the Internet at http://ir.qlogic.com. Phone access to participate in the conference call is available at (719) 325-2429, conference ID: 103235.

The financial information that the company intends to discuss during the conference call will be available on the company’s website at http://ir.qlogic.com for twelve months following the conference call. A replay of the webcast will also be available at http://ir.qlogic.com for twelve months.

Follow QLogic @ twitter.com/qlogic

QLogic – the Ultimate in Performance

QLogic (Nasdaq:QLGC) is a global leader and technology innovator in high performance server and storage networking connectivity products. Leading OEMs and channel partners worldwide rely on QLogic for their server and storage networking solutions. For more information, visit www.qlogic.com.

Disclaimer – Forward-Looking Statements

This press release contains statements relating to future results of the company (including certain beliefs and projections regarding business and market trends) that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include without limitation, the company’s belief that it is making important progress on the business and operational fronts, its ability to improve the company’s financial performance, and its ability to achieve the company’s business outlook and financial guidance. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected or implied in the forward-looking statements. The company advises readers that these potential risks and uncertainties include, but are not limited to: potential fluctuations in operating results; gross margins that may vary over time; unfavorable economic conditions; the stock price of the company may be volatile; the company's dependence on the networking markets served; the company's ability to compete effectively with other companies; the company's dependence on a small number of customers; the ability to maintain and gain market or industry acceptance of the company's products; the company's dependence on sole source and limited source suppliers; the company's dependence on relationships with certain third-party subcontractors and contract manufacturers; uncertain benefits from strategic business combinations, acquisitions and divestitures; the ability to attract and retain key personnel; the complexity of the company's products; declining average unit sales prices of comparable products; sales fluctuations arising from customer transitions to new products; seasonal fluctuations and uneven sales and purchasing patterns with our customers and suppliers; changes in the company's tax provisions or adverse outcomes resulting from examination of its income tax returns; international economic, currency, regulatory, political and other risks; facilities of the company and its suppliers and customers are located in areas subject to natural disasters; the ability to protect proprietary rights; the ability to satisfactorily resolve any infringement claims; a reduction in sales efforts by current distributors; declines in the market value of the company's marketable securities; changes in and compliance with regulations; difficulties in transitioning to smaller geometry process technologies; the use of "open source" software in the company's products; system security risks, data protection breaches and cyber-attacks; and the company’s ability to borrow under its credit agreement is subject to certain covenants.

More detailed information on these and additional factors that could affect the company's operating and financial results are described in the company's Forms 10-K, 10-Q and other reports filed, or to be filed, with the Securities and Exchange Commission. The company urges all interested parties to read these reports to gain a better understanding of the business and other risks that the company faces. The forward-looking statements contained in this press release are made only as of the date hereof, and the company does not intend to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

QLogic and the QLogic logo are registered trademarks of QLogic Corporation. Other trademarks and registered trademarks are the property of the companies with which they are associated.

       
QLOGIC CORPORATION
 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 

(unaudited — in thousands, except per share amounts)

 
Three Months Ended Six Months Ended

September 27,
2015

   

September 28,
2014

September 27,
2015

   

September 28,
2014

Net revenues $ 103,354 $ 127,503 $ 216,759 $ 246,952
Cost of revenues   42,175   52,093   89,242   100,847
Gross profit   61,179   75,410   127,517   146,105
Operating expenses:
Engineering and development 32,255 35,480 67,861 73,301
Sales and marketing 13,624 15,453 29,110 31,487
General and administrative 4,925 8,697 12,001 17,597
Special charges   8,154   2,259   9,233   4,803
Total operating expenses   58,958   61,889   118,205   127,188
Operating income 2,221 13,521 9,312 18,917
Interest and other income, net   153   296   512   438
Income before income taxes 2,374 13,817 9,824 19,355
Income taxes   136   2,807   5,030   2,345
Net income $ 2,238 $ 11,010 $ 4,794 $ 17,010
Net income per share:
Basic $ 0.03 $ 0.13 $ 0.06 $ 0.19
Diluted $ 0.03 $ 0.12 $ 0.05 $ 0.19
Number of shares used in per share calculations:
Basic   86,911   87,914   87,122   87,654
Diluted   87,407   88,102   88,160   88,177
 
     
QLOGIC CORPORATION
 
RECONCILIATION OF GAAP NET INCOME TO
NON-GAAP NET INCOME
 

(unaudited — in thousands, except per share amounts)

 
Three Months Ended Six Months Ended

September 27,
2015

 

September 28,
2014

September 27,
2015

   

September 28,
2014

GAAP net income $ 2,238 $ 11,010 $ 4,794 $ 17,010
Items excluded from GAAP net income:
Stock-based compensation 1,934 4,735 7,921 10,275
Amortization of acquisition-related intangible assets 3,682 4,119 7,318 8,567
Amortization of license fee 563 695 1,180 1,394
Acquisition-related charges 263 1,034
Special charges 8,154 2,259 9,233 4,803
Income tax adjustments   (1,869 )   (1,066 )   773   (2,582 )
Total non-GAAP adjustments   12,464   11,005   26,425   23,491
Non-GAAP net income $ 14,702 $ 22,015 $ 31,219 $ 40,501
Net income per diluted share:
GAAP net income $ 0.03 $ 0.12 $ 0.05 $ 0.19
Adjustments   0.14   0.13   0.30   0.27
Non-GAAP net income $ 0.17 $ 0.25 $ 0.35 $ 0.46
 

Non-GAAP Financial Measures

The non-GAAP financial measures contained herein are a supplement to the corresponding financial measures prepared in accordance with generally accepted accounting principles (GAAP). The non-GAAP financial measures presented exclude the items summarized in the above table. Management believes that adjustments for these items assist investors in making comparisons of period-to-period operating results and that these items are not indicative of the company’s on-going core operating performance.

The company has presented non-GAAP net income and non-GAAP net income per diluted share, on a basis consistent with its historical presentation, to assist investors in understanding the company’s core net income and core net income per diluted share on an on-going basis. These non-GAAP financial measures may also assist investors in making comparisons of the company’s core net profitability with historical periods and comparisons of the company’s core net profitability with the corresponding results for competitors. Management believes that non-GAAP net income and non-GAAP net income per diluted share are important measures in the evaluation of the company’s profitability. These non-GAAP financial measures exclude the adjustments described in the above table, and thus provide an overall measure of the company’s on-going net profitability and related profitability on a per diluted share basis.

Management uses non-GAAP net income and non-GAAP net income per diluted share in its evaluation of the company’s core after-tax results of operations and trends between fiscal periods and believes that these measures are important components of its internal performance measurement process. In addition, the company prepares and maintains its budgets and forecasts for future periods on a basis consistent with these non-GAAP financial measures. Management believes that providing these non-GAAP financial measures allows investors to view the company’s financial results in the way that management views the financial results.

The non-GAAP financial measures presented herein have certain limitations in that they do not reflect all of the costs associated with the operations of the company’s business as determined in accordance with GAAP. Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. The non-GAAP financial measures presented by the company may be different from the non-GAAP financial measures used by other companies.

For additional information on the items excluded from the non-GAAP financial measures and why the company believes that these non-GAAP financial measures provide useful supplemental information to investors, the company refers you to the Form 8-K regarding this release filed today with the Securities and Exchange Commission.

A summary of the non-GAAP adjustments presented in the table above by the financial statement line impacted is as follows:

     
(unaudited – in thousands) Three Months Ended Six Months Ended

September 27,
2015

 

September 28,
2014

September 27,
2015

   

September 28,
2014

Non-GAAP Adjustments:
Cost of revenues:
Stock-based compensation $ 186 $ 258 $ 436 $ 613
Amortization of acquisition-related intangible assets 3,514 4,119 6,981 8,567
Amortization of license fee 563 695 1,180 1,394
Acquisition-related charges     263     1,034
Total cost of revenue adjustments   4,263   5,335   8,597   11,608
Operating expenses:
Engineering and development:
Stock-based compensation 1,585 2,309 4,859 5,280
Sales and marketing:
Stock-based compensation 422 1,073 1,623 2,083
Amortization of acquisition-related intangible assets 168 337
General and administrative:
Stock-based compensation (259 ) 1,095 1,003 2,299
Special charges   8,154   2,259   9,233   4,803
Total operating expense adjustments   10,070   6,736   17,055   14,465
Total non-GAAP adjustments before income taxes 14,333 12,071 25,652 26,073
Income tax adjustments   (1,869 )   (1,066 )   773   (2,582 )
Total non-GAAP adjustments $ 12,464 $ 11,005 $ 26,425 $ 23,491
 
   
QLOGIC CORPORATION
 
SUMMARY OF RECONCILING ITEMS BETWEEN FORECASTED
NON-GAAP AND GAAP EARNINGS PER DILUTED SHARE
 
THIRD QUARTER OF FISCAL 2016
 

QLogic is forecasting third quarter non-GAAP earnings per diluted share of $0.24 - $0.28. The Company estimates that GAAP earnings per diluted share will be lower than non-GAAP earnings per diluted share by $0.08 - $0.13 per share in the third quarter of fiscal 2016. This difference is comprised of the following:

 
Stock-based compensation $0.05 - $0.06
Amortization of acquisition-related intangible assets and license fee $0.05
Special charges and other $0.01 - $0.03
Income taxes

($0.03 - $0.01)

 

$0.08 - $0.13
 

The Company’s forecasted guidance is a forward-looking statement and does not include the effects of future acquisitions/divestitures, unanticipated asset impairments and other special charges, and other non-recurring items not reflective of ongoing operations. Our forward-looking estimates of both GAAP and non-GAAP measures of our financial performance may differ materially from our actual results and should not be relied upon as statements of fact.

 
     
QLOGIC CORPORATION
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 

(unaudited — in thousands)

 

September 27,
2015

March 29,
2015

ASSETS
Current assets:
Cash and cash equivalents $ 101,870 $ 115,241
Marketable securities   205,819   201,174
Total cash and marketable securities 307,689 316,415
Accounts receivable, net 59,217 87,436
Inventories 50,111 29,978
Deferred tax assets 12,023 12,545
Other current assets   17,197   21,802
Total current assets 446,237 468,176
Property and equipment, net 75,279 78,501
Goodwill 167,232 167,232
Purchased intangible assets, net 70,176 77,659
Deferred tax assets 32,853 36,335
Other assets   20,045   20,752
$ 811,822 $ 848,655
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 33,063 $ 40,497
Accrued compensation 13,878 22,476
Accrued taxes 1,694 2,711
Other current liabilities   16,174   11,718
Total current liabilities 64,809 77,402
Accrued taxes 15,008 14,516
Other liabilities   7,796   9,721
Total liabilities   87,613   101,639
Stockholders’ equity:
Common stock 218 215
Additional paid-in capital 1,004,659 983,579
Retained earnings 1,727,458 1,722,664
Accumulated other comprehensive loss (661 ) (99 )
Treasury stock   (2,007,465 )   (1,959,343 )
Total stockholders’ equity   724,209   747,016
$ 811,822 $ 848,655
 
   
QLOGIC CORPORATION
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 

(unaudited — in thousands)

 
Six Months Ended

September 27,
2015

 

September 28,
2014

Cash flows from operating activities:
Net income $ 4,794 $ 17,010
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 21,037 23,855
Stock-based compensation 7,921 10,275
Deferred income taxes 4,045 4,077
Asset impairments 1,237 1,011
Other non-cash items, net 98 810
Changes in operating assets and liabilities:
Accounts receivable 28,579 (20,287 )
Inventories (20,133 ) (12,106 )
Other assets 649 (840 )
Accounts payable 92 6,162
Accrued compensation (8,598 ) (7,256 )
Accrued taxes, net (4,785 ) (3,012 )
Other liabilities   1,179   (7,930 )
Net cash provided by operating activities   36,115   11,769
Cash flows from investing activities:
Purchases of available-for-sale securities (93,765 ) (84,318 )
Proceeds from sales and maturities of available-for-sale securities 87,997 80,376
Purchases of property and equipment (18,778 ) (12,068 )
Proceeds from disposition of assets held for sale   7,553  
Net cash used in investing activities   (16,993 )   (16,010 )
Cash flows from financing activities:
Proceeds from issuance of common stock under stock-based awards 18,728 3,536
Minimum tax withholding paid on behalf of employees for restricted stock units (5,566 ) (3,450 )
Purchases of treasury stock (46,770 )
Other financing activities   1,115   (173 )
Net cash used in financing activities   (32,493 )   (87 )
Net decrease in cash and cash equivalents (13,371 ) (4,328 )
Cash and cash equivalents at beginning of period   115,241   91,258
Cash and cash equivalents at end of period $ 101,870 $ 86,930
 
       
QLOGIC CORPORATION
 
SUPPLEMENTAL FINANCIAL INFORMATION
 

(unaudited — in thousands)

 

Net Revenues

 

A summary of the company’s revenue components is as follows:

 
Three Months Ended Six Months Ended

September 27,
2015

   

September 28,
2014

September 27,
2015

   

September 28,
2014

Advanced Connectivity Platforms $ 93,372 $ 114,877 $ 195,928 $ 219,578
Legacy Connectivity Products   9,982   12,626   20,831   27,374
$ 103,354 $ 127,503 $ 216,759 $ 246,952
 

Source: QLogic Corp.

QLogic Corporation
Media Contact:
Jess Page
949-542-1455
jess.page@qlogic.com
or
Investor Contact:
Doug Naylor
949-542-1330
doug.naylor@qlogic.com