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Press release from GlobeNewswire (a Nasdaq OMX company)

Audience Announces Second Quarter 2012 Financial Results

Thursday, July 26, 2012

Audience Announces Second Quarter 2012 Financial Results13:05 EDT Thursday, July 26, 2012MOUNTAIN VIEW, Calif., July 26, 2012 (GLOBE NEWSWIRE) -- Audience, Inc. (Nasdaq:ADNC), the leading provider of intelligent voice and audio solutions that improve voice quality and the user experience in mobile devices, today announced its second quarter 2012 financial results. Revenue for the second quarter of 2012 was $33.4 million, compared with $24.9 million for the same period in 2011. As reported under U.S. generally accepted accounting principles (GAAP), second quarter 2012 net income was $4.3 million, or $0.17 per diluted share based on weighted average shares outstanding of 14.3 million, compared with GAAP net income of $2.8 million, or $0.07 per diluted share based on weighted average shares outstanding of 3.6 million, in the same period in 2011. Gross margin on a GAAP basis for the second quarter of 2012 was 62.2% of revenue, compared to 53.6% of revenue for the same period in 2011. Gross margin on a non-GAAP basis for the second quarter of 2012 was 62.3% of revenue, compared to 53.7% of revenue for the same period in 2011. Non-GAAP net income for the second quarter of 2012 was $5.0 million, or $0.24 per diluted share based on weighted average shares outstanding of 20.7 million. This compares with non-GAAP net income of $3.3 million or $0.22 per diluted share based on weighted average shares outstanding of 3.6 million for the same period in 2011. "In our first quarter as a public company we are pleased to report solid financial results, driven by strong demand for our unique product offerings," said Peter Santos, president and chief executive officer. "We believe that our leading market position, expanding market size, and key mobile OEM and mobile operator relationships position us well for the future." "In addition to favorable market dynamics and our technology expertise, we realized strong operating results through solid execution," said Kevin Palatnik, chief financial officer. "We remain focused on carefully controlling expenses while investing in key product areas that will be relevant to our customers and help them to achieve continued success." The following statements are based on current expectations. These statements are forward looking and actual results may differ materially.Business Outlook For the third quarter of 2012, the company expects total revenue to be in the range of $33 million to $36 million. Third quarter GAAP gross margin is expected to be in the range of 59% to 62%. Third quarter GAAP net income is expected to be in the range of $1.1 million to $2.1 million, including $0.7 million of stock based compensation expense, or $0.05 to $0.09 per diluted share on approximately 23.4 million diluted weighted average shares outstanding. Non-GAAP gross margin is expected to be in the range of 59% to 62%. Third quarter non-GAAP net income is expected to be in the range of $1.8 million to $2.8 million, or $0.08 to $0.12 per share on a diluted basis. A schedule showing a reconciliation of the business outlook from GAAP diluted net income per share to non-GAAP diluted net income per share is included with this release.Quarterly Conference Call Today Peter Santos, president and chief executive officer, and Kevin Palatnik, chief financial officer, will host a second quarter 2012 financial results conference call today at 1:30 pm (Pacific) / 4:30 pm (Eastern). Attendees are asked to join the conference call at least ten minutes prior to the scheduled conference call time. The call can be accessed by dialing 1-877-212-6076 (toll free) or 1-707-287-9331 (international). A live and archived webcast of the call will be available on Audience's website at http://investor.audience.com/ until August 9, 2012. Audience expects that its corporate representatives will meet privately during the quarter with investors, the media, investment analysts and others. At these meetings, Audience may reiterate the business outlook published in this press release. At the same time, Audience will keep this press release, including the business outlook, publicly available on its website. Beginning September 14, 2012, Audience will observe a Quiet Period during which Audience's representatives will not comment on Audience's business outlook, financial results or expectations. The Quiet Period will extend until the day when Audience's Third Quarter 2012 Earnings Release is published, which is currently scheduled for October 25, 2012.Use of Non-GAAP Financial Measures Audience prepares its financial statements in accordance with generally accepted accounting principles for the United States (GAAP). The non-GAAP financial measures such as gross margin, net income and earnings per share information for the three and six months ended June 30, 2012 and similar periods from the prior year included in this press release are different from those otherwise presented under GAAP. The following are explanations of each type of adjustment that we incorporate into non-GAAP financial measures: Stock-based compensation expense relates to equity incentive awards granted to our employees, directors, and consultants accounted for under GAAP. Stock-based compensation expense has been and will continue to be a significant recurring expense for Audience. While we include the dilutive impact of such equity awards in weighted average shares outstanding, the expense associated with stock-based awards reflects a non-cash charge that we exclude from non-GAAP net income. Stock warrant revaluation expense is related to preferred stock warrants outstanding that have to be revalued each quarter. We believe the comparisons of ongoing operations should exclude effects of such revaluations as preferred stock warrant revaluation represents a non-cash expense. The shares used to compute non-GAAP basic and diluted net income per share include the assumed conversion of all outstanding shares of convertible preferred stock into shares of common stock using the as-if converted method as of the beginning of each period presented or the date of issuance, if later. In May 2012, in conjunction with the closing of our initial public offering, all of our outstanding preferred stock was converted into shares of our common stock. Audience has provided these measures in addition to GAAP financial results because management believes these non-GAAP measures help provide a consistent basis for comparison between quarters and annual growth rates that are not influenced by certain non-cash charges and therefore are helpful in understanding Audience's underlying operating results. These non-GAAP measures are some of the primary measures Audience's management uses for planning and forecasting. These measures are not in accordance with, or an alternative to, GAAP and these non-GAAP measures may not be comparable to information provided by other companies. Reconciliations of the GAAP to non-GAAP results are presented at the end of this press release.Cautionary Note Concerning Forward-Looking Statements Statements in the press release and certain matters to be discussed on the second quarter conference call regarding Audience, Inc., which are not historical facts, are "forward-looking statements" within the meaning the Private Securities Litigation Reform Act of 1995. These forward looking statements may be identified by terms such as believe, expect, may, will, provide, could and should and the negative of these terms or other similar expressions. These statements, including statements relating to expectations of future revenue, net income and operating margin performance, future success for various products and our leadership position in the market, the demand for our solutions including continued demand by customers upon whom we are substantially dependent, our ability to enable the rollout of next generation products and other operating prospects are based on current expectations and assumptions that are subject to risks and uncertainties. Our actual results could differ materially from those we anticipate as a result of various factors, including: our dependence on a single OEM for a majority of our revenue and the transition our relationship with that OEM is undergoing; our dependence on a limited number of customers for a substantial portion of revenue; our need to maintain and expand our existing relationships with our OEMs and to establish relationships with new OEMs in order to maintain and increase our revenue; our ability to sustain profitable operations due to our history of losses and accumulated deficit; quarterly fluctuations in our results due to factors such as the timing of OEM product launches, customer purchasing behavior in light of anticipated mobile phone launches and our assessments of whether we have excess or obsolete inventory, among other factors; competition in the market for our products; pressure on the average selling prices for our products; our lengthy sales cycle and the lack of certainty whether any given OEMs products will achieve market acceptance; our OEMs' lengthy and expensive process to qualify our products; our ability to develop new or enhanced products in a timely manner that achieve market acceptance; our reliance on third parties to manufacture, assemble and test our products; defects that may be present in our products; the impact of current or future intellectual property litigation and claims for indemnification; changes in tax laws or our ability to utilize our tax structure and net operating losses and other risks inherent in fabless semiconductor businesses. For a discussion of these and other related risks, please refer to "Risk Factors" in our Registration Statement on Form S-1, which is available on the SEC's website at www.sec.gov. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management's beliefs and assumptions only as of the date made. You should review our SEC filings carefully and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.About Audience Audience is the leading provider of intelligent voice and audio solutions that improve voice quality and the user experience of mobile devices. Its family of earSmart™ intelligent voice processors is based on the processes of human hearing, to suppress background noise and enhance mobile voice quality. Audience's technology substantially improves the mobile voice experience, while also improving the performance of speech-based services, and enhancing audio quality for multimedia. Audience earSmart™ processors are featured in mobile devices from leading providers in Asia-Pacific, Europe and the U.S. The company is based in Mountain View, California. For more information on earSmart Advanced Voice processors from Audience, please go to www.audience.com. The Audience, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=13590 ADNC-F      Audience, Inc.Condensed consolidated balance sheets(In thousands)(Unaudited)        June 30, 2012December 31, 2011Assets     Current assets:     Cash and cash equivalents  $112,578 $15,983 Restricted cash  40 40 Accounts receivable, net  9,705 8,465 Inventories  18,530 20,242 Prepaid expenses and other current assets  2,500 2,659  Total current assets  143,353 47,389       Property and equipment, net  3,621 2,237 Long-term deposit  785 69 Restricted cash – non-current portion  170 170 Total assets  $147,929 $49,865      Liabilities, convertible preferred stock and stockholders' equity (deficit)     Current liabilities:     Equipment leasing – current portion  $ — $103 Accounts payable  7,027 7,711 Accrued and other current liabilities  5,427 4,405 Deferred credits and income  522 474 Total current liabilities  12,976 12,693       Deferred rent – non-current portion  66 132 Convertible preferred stock warrant liability  — 1,137 Total liabilities  13,042 13,962       Convertible preferred stock:  — 74,348       Stockholders' equity (deficit):     Preferred stock  — — Common stock  20 1 Additional paid-in capital  168,520 3,732 Accumulated other comprehensive income (loss)  — (31) Accumulated deficit  (33,653) (42,147) Total stockholders' equity (deficit)  134,887 (38,445) Total liabilities, convertible preferred stock and stockholders' equity (deficit)  $147,929 $49,865                    Audience, Inc.Condensed consolidated statements of comprehensive income(In thousands, except per share data)(Unaudited)            Three months endedSix months ended  June 30, 2012June 30, 2011June 30, 2012June 30, 2011 Revenue:         Hardware  $21,144 $24,870 $40,553 $53,410 Licensing  12,213 — 23,912 —           Total revenue  33,357 24,870 64,465 53,410           Cost of revenue  12,618 11,533 26,037 21,947           Gross profit  20,739 13,337 38,428 31,463           Operating expenses:         Research and development  7,878 5,183 13,546 10,217 Selling, general and administrative  8,147 5,081 15,671 9,050           Total operating expenses  16,025 10,264 29,217 19,267           Income from operations  4,714 3,073 9,211 12,196           Interest income (expense), net  10 (2) 13 (5)           Other income (expense), net  (257) (321) (465) (658)           Income before taxes  4,467 2,750 8,759 11,533           Provision for income taxes  (142) — (265) —           Net income  $4,325 $2,750 $8,494 $11,533           Net income per share:         Basic  $0.20 $0.09 $0.39 $0.61 Diluted  $0.17 $0.07 $0.33 $0.51           Weighted average shares used in computing net income per share:         Basic  11,343 918 6,202 895 Diluted  14,330 3,591 9,211 3,569           Other comprehensive income:         Foreign currency translation adjustments  $83  $ (18) $31  $ (21) Net comprehensive income  $4,408 $2,732 $8,525 $11,512                    Audience, Inc.Unaudited reconciliation of GAAP to non-GAAP adjustments(in thousands)            Three months endedSix months ended  June 30, 2012June 30, 2011June 30, 2012June 30, 2011 GAAP to non-GAAP net income reconciliation:                   GAAP net income  $4,325 $2,750 $8,494 $11,533 Stock-based compensation:         Cost of revenue  29 24 54 48 Research and development  208 84 350 166 Sales, general and administrative  354 98 724 188 Revaluation of warrant liability  123 321 290 658 Non-GAAP net income  $5,039 $3,277 $9,912 $12,593                              Audience, Inc.Unaudited computation of GAAP earnings per share(in thousands, except for per share amounts)            Three months endedSix months ended  June 30, 2012June 30, 2011June 30, 2012June 30, 2011 Computation of GAAP net income per share:                   Net income  $4,325 $2,750 $8,494 $11,533 Non-cumulative dividends to preferred stockholders  (749) (1,498) (2,248) (2,996) Undistributed earnings allocated to preferred stockholders  (1,307) (1,171) (3,835) (7,995) Net income, basic  2,269 81 2,411 542 Adjustment for undistributed earnings reallocated to holders of common stock  187 187 604 1,274 Net income – diluted  $2,456 $268 $3,015 $1,816           Weighted average shares used in computing net income per share:     Basic  11,343 918 6,202 895 Diluted  14,330 3,591 9,211 3,569           Net income per share:         Basic  $0.20 $0.09 $0.39 $0.61 Diluted  $0.17 $0.07 $0.33 $0.51                    Audience, Inc.Unaudited reconciliation of GAAP to non-GAAP diluted weighted average shares(in thousands)                      Three months endedSix months ended  June 30, 2012June 30, 2011June 30, 2012June 30, 2011 GAAP to non-GAAP reconciliation of diluted weighted average shares:               GAAP – diluted weighted average shares  14,330 3,591 9,211 3,569 Adjustments  6,385 (a) — 9,795 (a) —  Non-GAAP – diluted weighted average shares  20,715 3,591 19,006 3,569           (a)  Adjustments for the non-GAAP diluted weighted average shares computed to give effect to the convertible preferred stock using the as-if converted method in to common shares as if the conversion occurred since the beginning of each period presented.                    Audience, Inc.Unaudited reconciliation of GAAP to non-GAAP diluted earnings per shares(in thousands, except for per share amounts)            Three months endedSix months ended  June 30, 2012June 30, 2011June 30, 2012June 30, 2011 GAAP to non-GAAP reconciliation of diluted net income per share:       GAAP net income - diluted  $2,456 $268 $3,015 $1,816 Non-GAAP – diluted weighted average shares  20,715 3,591 19,006 3,569           Non-GAAP – diluted net income per share  $0.12 $0.07 $0.16 $0.51 Non-cumulative dividends to preferred stockholders  0.03 — 0.12 — Undistributed earnings allocated to preferred stockholders  0.06 — 0.19 — Adjustments for undistributed earnings reallocated to holders of common stock  (0.01) — (0.03) — Stock-based compensation:  0.03 0.06 0.06 0.11 Revaluation of warrant liability:  0.01 0.09 0.02 0.19 Non-GAAP – diluted net income per share  $0.24 $0.22 $0.52 $0.81  Audience, Inc.Estimated computation of GAAP to non-GAAP diluted earnings per share    Three Months EndingSept. 30, 2012 Estimated GAAP diluted earnings per share   $0.05 to $0.09 Estimated stock-based compensation expense per share    $0.03 Estimated non-GAAP diluted earnings per share   $0.08 to $0.12CONTACT: Investors and Shareholders The Blueshirt Group Suzanne Craig 415-217-4962 suzanne@blueshirtgroup.com Melanie Friedman 415-217-4964 melanie@blueshirtgroup.com Media and Industry Analysts Andrew Humber 650-254-2973 ahumber@audience.com