MACOM Technology Solutions Holdings, Inc.
Nov 15, 2016

MACOM Reports Fourth Quarter and Fiscal Year 2016 Financial Results

LOWELL, Mass.--(BUSINESS WIRE)-- MACOM Technology Solutions Holdings, Inc. (NASDAQ: MTSI) ("MACOM"), a leading supplier of high-performance analog RF, microwave, millimeterwave and photonic semiconductor products, today announced its financial results for its fiscal fourth quarter and fiscal year ended September 30, 2016.

Fiscal Year 2016 GAAP Results

Fiscal Year 2016 Adjusted Non-GAAP Results

Fourth Quarter Fiscal Year 2016 GAAP Results

Fourth Quarter Fiscal Year 2016 Adjusted Non-GAAP Results

Management Commentary

John Croteau, MACOM's President and Chief Executive Officer, stated, "I am pleased to announce another quarter of solid execution, with Networks up 5% sequentially driven primarily by Metro/Long-haul. Aerospace and Defense saw a strong quarter and was up 18% sequentially, while Multi-market saw strong growth of 10% sequentially. Our R&D investments are showing results, specifically with our high performance MMIC-based products, which are expected to continue to drive growth in A&D and Multi-market moving into 2017.

"Additionally, we continued to advance our GaN initiative, completing Gen4 GaN qualification during the quarter. We now have purchase orders in-house for two strategic basestation OEMs for mainstream LTE frequency bands. Lastly, as we continue to expand our footprint beyond just optoelectronics, and into photonic content with our new 25G Lasers, we believe our Optical growth aspirations remain sustainable over the short, medium and long term."

Mr. Croteau concluded, "With the close of 2016 we've posted three years of unprecedented growth and Non-GAAP profitability. We've delivered 32 percent compound annual growth, more than doubling revenue over the past three years. Adjusted gross margin improved 970 basis points over the same period. Most importantly, we've expanded non-GAAP earnings by 47 percent compounded annually over that time."

Business Outlook

For the fiscal first quarter ending December 30, 2016, MACOM expects revenue to be in the range of $150 million to $154 million, adjusted gross margin between 57% and 59%, and adjusted earnings per share to be between $0.54 and $0.58 utilizing a 12% adjusted income tax rate on an anticipated 56.5 million fully diluted shares outstanding.

Conference Call

MACOM will host a conference call on Tuesday, November 15, 2016 at 5:00 p.m. Eastern Time to discuss its fourth fiscal quarter and fiscal year 2016 financial results and business outlook. Investors and analysts may join the conference call by dialing 1-877-837-3908 and providing the passcode 96988646.

International callers may join the teleconference by dialing +1-973-872-3000 and entering the same confirmation code at the prompt. A telephone replay of the call will be made available beginning two hours after the call and will remain available for 5 business days. The replay number is 1-855-859-2056 with a passcode of 96988646. International callers should dial +1-404-537-3406 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 in the Investors section of MACOM's website at http://www.macom.com. To listen to the live call, please go to the Investors section of MACOM's website and click on the conference call link at least fifteen minutes prior to the start of the conference call. For those unable to participate during the live broadcast, a replay will be available shortly after the call and will remain available for approximately 30 days.

About MACOM

MACOM enables a better-connected and safer world by delivering breakthrough semiconductor technologies for optical, wireless and satellite networks that satisfy society's insatiable demand for information.

Today, MACOM powers the infrastructure that millions of lives and livelihoods depend on every minute to communicate, transact business, travel, stay informed and be entertained. Our technology increases the speed and coverage of the mobile Internet and enables fiber optic networks to carry previously unimaginable volumes of traffic to businesses, homes and datacenters.

Keeping us all safe, MACOM technology enables next-generation radars for air traffic control and weather forecasting, as well as mission success on the modern networked battlefield.

MACOM is the partner of choice to the world's leading communications infrastructure, aerospace and defense companies, helping solve their most complex challenges in areas including network capacity, signal coverage, energy efficiency and field reliability, through its best-in-class team and broad portfolio of analog RF, microwave, millimeterwave and photonic semiconductor products.

MACOM is a pillar of the semiconductor industry, thriving for more than 60 years of daring to change the world for the better, through bold technological strokes that deliver true competitive advantage to customers and superior value to investors.

Headquartered in Lowell, Massachusetts, MACOM is certified to the ISO9001 international quality standard and ISO14001 environmental management standard. MACOM has design centers and sales offices throughout North America, Europe, Asia and Australia.

MACOM, M/A-COM, M/A-COM Technology Solutions, M/A-COM Tech, Partners in RF & Microwave, and related logos are trademarks of MACOM. All other trademarks are the property of their respective owners. For more information about MACOM, please visit www.macom.com follow @MACOMtweets on Twitter, join MACOM on LinkedIn, or visit the MACOM YouTube Channel.

Special Note Regarding Forward-Looking Statements

This press release and our commentary in our conference call held today each contain forward-looking statements based on MACOM management's beliefs and assumptions and on information currently available to our management. Forward-looking statements include, among others, information concerning our stated business outlook and future results of operations, our expectations to ramp up volume GaN base station production programs beginning in the first half of fiscal year 2017, our expectations concerning our high performance MMIC products, growth in our A&D or Multi-Market businesses in 2017, the results of our GaN base station initiative, the sustainability of our optical growth aspirations, the expected outcome of our ongoing litigation against Infineon and any other statements regarding future trends, business strategies, competitive position, industry conditions, acquisitions and market opportunities. Forward-looking statements include all statements that are not historical facts and generally may be identified by terms such as "anticipates," "believes," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "projects," "seeks," "should," "will," "would" or similar expressions and the negatives of those terms.

Forward-looking statements contained in this press release reflect MACOM's current views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause those events or our actual activities or results to differ materially from those expressed in any forward-looking statement. Although MACOM believes that the expectations reflected in the forward-looking statements are reasonable, it cannot and does not guarantee future events, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including the potential that the expected rollout of 5G network upgrades, fiber-to-the-home network technology or other new optical or other network technology deployments in China, Japan and other geographies fails to occur, occurs more slowly than we expect or does not result in the amount or type of new business we anticipate, lower than expected demand in the optical network infrastructure market or any or all of our primary end markets or from Huawei or any or all of our large OEM customers based on seasonal effects, regulatory action or inaction, macro-economic weakness or otherwise, the potential for greater than expected pricing pressure and average selling price erosion based on attempts to win or maintain market share, competitive factors, technology shifts or otherwise, the potential for inventory obsolescence and related write-offs, the expense, business disruption or other impact of any current or future investigations, administrative actions, litigation or enforcement proceedings we may be involved in, the potential loss of access to any in-licensed intellectual property or inability to license technology we may require on reasonable terms, the impact of any claims of intellectual property infringement or misappropriation, which could require us to pay substantial damages for infringement, expend significant resources in prosecuting or defending such matters or developing non-infringing technology, incur material liability for royalty or license payments, or prevent us from selling certain of our products, greater than expected dilutive effect on earnings of our equity issuances, outstanding indebtedness and related interest expense and other costs, our failure to realize the expected economies of scale, lowered production cost and other anticipated benefits of our previously announced GaN intellectual property licensing program, the potential for defense spending cuts, program delays, cancellations or sequestration, failures or delays by any customer in winning business or to make purchases from us in support of such business, lack of adoption or delayed adoption by customers and industries we serve of MMICs, Active Antennas, SPAR tiles, GaN, InP lasers or other solutions offered by us, failures or delays in porting and qualifying GaN or InP process technology to our fabrication facilities or third party facilities and achieving anticipated manufacturing economies of scale, lower than expected utilization and absorption in our manufacturing facilities, lack of success or slower than expected success in our new product development or new product introduction efforts, loss of key personnel to competitors or otherwise, failure of any announced transaction to close in accordance with its terms, failure to successfully integrate acquired companies, technologies or products or realize synergies associated with acquisitions, the potential that we will experience difficulties in managing the personnel and operations associated with our acquisitions, loss of business due to competitive factors, product or technology obsolescence, customer program shifts or otherwise, the potential for a shift in the mix of products sold in any period toward lower-margin products or a shift in the geographical mix of our revenues, the impact of any executed or abandoned acquisition, divestiture, joint venture, financing or restructuring activity, the impact of supply shortages or other disruptions in our internal or outsourced supply chain, the impact of changes in export, environmental or other laws applicable to us, the relative success of our cost-savings initiatives, as well as those factors described in "Risk Factors" in MACOM's filings with the Securities and Exchange Commission (SEC), including its Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2016, as filed with the SEC on July 27, 2016 and its Annual Report on Form 10-K for the fiscal year ended October 2, 2015 as filed with the SEC on November 24, 2015. MACOM undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Discussion Regarding the Use of Historical and Forward-Looking Non-GAAP Financial Measures

In addition to GAAP reporting, MACOM provides investors with financial measures that have not been calculated in accordance with United States Generally Accepted Accounting Principles ("GAAP"), such as: non-GAAP gross profit and gross margin, non-GAAP income from operations and operating margin, non-GAAP net income, non-GAAP diluted earnings per share, adjusted EBITDA, and Free Cash Flow. From time to time in this release or elsewhere, we may alternatively refer to such non-GAAP measures as "adjusted" measures. This non-GAAP information excludes the effect, where applicable, of discontinued operations, intangible amortization expense, share-based compensation costs, impairment and restructuring charges, changes in common stock warrant liability, financing and litigation costs, acquisition and integration related costs, other costs and the tax effect of each adjustment. The non-GAAP information includes consulting agreement related income associated with the Automotive divestiture.

Management believes that these excluded items are not reflective of our underlying performance. Management uses these non-GAAP financial measures to; evaluate our ongoing operating performance and compare it against prior periods, make operating decisions, forecast future periods, evaluate potential acquisitions, compare our operating performance against peer companies and assess certain compensation programs. The exclusion of these and other similar items from our non-GAAP financial results should not be interpreted as implying that these items are non-recurring, infrequent or unusual. We believe this non-GAAP financial information provides additional insight into our ongoing performance and have therefore chosen to provide this information to investors for a more consistent basis of comparison and to help them evaluate the results of our ongoing operations and enable more meaningful period-to-period comparisons. These non-GAAP measures are provided in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

A reconciliation between GAAP and non-GAAP financial data is included in the supplemental financial data attached to this press release. We have not provided a reconciliation with respect to any forward-looking non-GAAP financial data presented, because we do not have and cannot reliably estimate certain key inputs required to calculate the most comparable GAAP financial data, such as the future price per share of our common stock for purposes of calculating the value of our common stock warrant liability, future acquisition costs, the possibility and impact of any litigation costs, changes in our GAAP effective tax rate, and impairment charges. We believe these unknown inputs are likely to have a significant impact on any estimate of the comparable GAAP financial data.

Investors are cautioned against placing undue reliance on these non-GAAP financial measures and are urged to review and consider carefully the adjustments made by management to the most directly comparable GAAP financial measures to arrive at these non-GAAP financial measures. Non-GAAP financial measures may have limited value as analytical tools because they may exclude certain expenses that some investors consider important in evaluating our operating performance or ongoing business performance. Further, non-GAAP financial measures may have limited value for purposes of drawing comparisons between companies because different companies may calculate similarly titled non-GAAP financial measures in different ways because non-GAAP measures are not based on any comprehensive set of accounting rules or principles.

Additional information and management's assessment regarding why certain items are excluded from our Non-GAAP measures are summarized below:

Amortization Expense - is related to acquired intangible assets which are based upon valuation methodologies, and are generally amortized over the expected life of the intangible asset at the time of acquisition, which may result in amortization amounts that vary over time. The expense is not considered by management in making operating decisions, and the expense is non-cash.

Share-Based and Non-cash Compensation Expense - includes share based compensation including awards that are equity and liability classified on our balance sheet as well as non-cash compensation expense primarily associated with amounts due to employees of an acquired business that were placed in escrow at the time of the acquisition and amortized as expense over a 2-year period. Share Based Compensation expense is partially outside of our control due to factors such as stock price volatility and interest rates, which may be unrelated to our operating performance during the period in which the expense is incurred. It is an expense based upon valuation methodologies and assumptions that vary over time, and the amount of the expense can vary significantly between companies due to factors that can be outside of their control. Share-based and Non-Cash Compensation Expense amounts are not considered by management in making operating decisions.

Impairment Charges - includes expenses associated with our strategic decision to exit a product line and end programs with a license and technology transfer as well as certain related fixed assets and inventory. We believe these charges are one-time in nature and are not correlated to future business operations and including such charges does not reflect our ongoing operations.

Restructuring Charges - includes amounts primarily associated with approved plans to reduce staffing and manufacturing or administrative footprints. We believe these amounts are not correlated to future business operations and including such charges does not reflect our ongoing operations.

Warrant Liability Expenses/Gains - are associated with mark-to-market fair value adjustments which are largely based on the value of our common stock, which may vary from period to period due to factors such as stock price volatility. We believe these amounts are not correlated to future business operations and including such charges does not reflect our ongoing operations.

Non Cash Interest Expense - includes amounts associated with the amortization of certain fees associated with the establishment of our Credit Agreement and Term Loans that are being amortized over the life of the agreement. We believe these amounts are non-cash in nature and not correlated to future business operations and including such charges does not reflect our ongoing operations.

Litigation Costs - includes gains, losses and expenses related to the resolution of other-than-ordinary-course threatened and actually filed lawsuits and other-than-ordinary-course contractual disputes and legal matters. We exclude these gains and losses because they are not considered by management in making operating decisions. We believe such gains, losses and expenses do not necessarily reflect the performance of our ongoing operations for the period in which such charges are recognized and the amount of such gains or losses and expenses can vary significantly between companies and make comparisons less reliable.

Acquisition and Integration Related Costs - includes such items as professional fees incurred in connection with pre-acquisition and integration specific activities, post-acquisition employee retention amounts, contingent consideration adjustments, severance and other amounts accrued or paid to terminated employees of acquired businesses, costs including salaries incurred which are not expected to have a continuing contribution to operations or are expected to have a diminishing contribution during the integration period and the amortization of the fair market step-up value of acquired inventory and fixed assets. We believe the exclusion of these items is useful in providing management a basis to evaluate ongoing operating activities and strategic decision making.

Discontinued Operations excluding consulting income - includes the profit and loss amounts of discontinued operations, with the exception of consulting income associated with a consulting agreement we entered into at the time of our Automotive business divestiture. We believe excluding gains and losses associated with historically divested businesses from our net income provides management with a comparable basis to our current ongoing operating activities. We do not exclude the consulting agreement income classified as discontinued operations because management views this income as part of our ongoing operations and correlated with future operations.

Other - historical amounts are primarily associated with the impairment of a minority investment of $3.5 million during the second fiscal quarter of 2015 as well as income associated with transition service agreements entered in connection with divested businesses. We believe these amounts are not correlated to future business operations and including such charges does not reflect our ongoing operations.

Tax Effect of Non-GAAP Adjustments - adjustments to arrive at an estimate of our Adjusted Non-GAAP cash tax rate associated with our Adjusted Non-GAAP income over a period of time. These adjustments have resulted in an estimated Adjusted Non-GAAP cash tax rate of 15% for our fiscal years 2016 and 2015, respectively. We believe it is beneficial for our management to review Adjusted Non-GAAP cash tax rate on a consistent basis over periods of time. Certain items including many of the items noted above may have a significant impact on our US GAAP tax expense and associated tax rate during a specific period of time.

Adjusted EBITDA - is a calculation that adds depreciation expense and consulting agreement income to our Adjusted Non-GAAP Income from Operations. Adjusted EBITDA is a measure that management reviews and utilizes for operational analysis purposes. We believe competitors and others in the financial industry utilize this Non-GAAP measure for analysis purposes.

Free Cash Flow - is a calculation that starts with cash flow from operating activities and reduces this amount by our capital expenditures in the applicable period. Free Cash Flow is a measure that management reviews and utilizes for cash flow analysis purposes. We believe competitors and others in the financial industry utilize this Non-GAAP measure for analyzing a company's cash flow.

 

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share data)

       
Three Months Ended Fiscal Year Ended
September 30,     July 1,     October 2, September 30,     October 2,
2016 2016 2015 2016 2015
Revenue $ 152,697 $ 142,288 $ 112,564 $ 544,338 $ 420,609
Cost of revenue 70,893   68,326   55,603   262,729   217,019  
Gross profit 81,804   73,962   56,961   281,609   203,590  
Operating expenses:
Research and development 30,109 26,064 22,002 107,698 82,188
Selling, general and administrative 40,265 35,866 29,964 145,433 110,030
Impairment charges 760 11,765
Restructuring charges 1,365   1,092   308   3,465   1,280  
Total operating expenses 71,739   63,782   52,274   268,361   193,498  
Income from operations 10,065   10,180   4,687   13,248   10,092  
Other income (expense):
Warrant liability gain (expense) (12,691 ) 15,339 9,651 (16,431 ) (6,020 )
Interest expense, net (5,310 ) (4,363 ) (4,425 ) (18,427 ) (18,376 )
Other income (expense), net 5   16   131   39   (1,096 )
Total other (expense) income (17,996 ) 10,992   5,357   (34,819 ) (25,492 )
 
(Loss) income before income taxes (7,931 ) 21,172 10,044 (21,571 ) (15,400 )
Income tax benefit (11,804 ) (181 ) (3,797 ) (17,983 ) (9,858 )
Income (loss) from continuing operations 3,873 21,353 13,841 (3,588 ) (5,542 )
Income from discontinued operations 1,228   1,199   40,564   5,022   54,131  
Net income $ 5,101   $ 22,552   $ 54,405   $ 1,434   $ 48,589  
 
Net income (loss) per share:
Basic:
Income (loss) from continuing operations $ 0.07 $ 0.40 $ 0.26 $ (0.07 ) $ (0.11 )
Income from discontinued operations 0.02   0.02   0.76   0.09   1.06  
Income per share - basic $ 0.10   $ 0.42   $ 1.02   $ 0.03   $ 0.95  
 
Diluted:
Income (loss) from continuing operations $ 0.07 $ 0.11 $ 0.08 $ (0.07 ) $ (0.11 )
Income from discontinued operations 0.02   0.02   0.74   0.09   1.06  
Income per share - diluted $ 0.09   $ 0.13   $ 0.81   $ 0.03   $ 0.95  
 
Shares - Basic 53,676   53,516   53,287   53,364   51,146  
Shares - Diluted 55,285   55,288   54,991   53,364   51,146  
 

       

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited and in thousands)

September 30, October 2,
2016 2015
ASSETS
Current assets:
Cash and cash equivalents $ 332,977 $ 122,312
Short term investments 23,776 39,557
Accounts receivable, net 108,331 83,950
Inventories 114,935 79,943
Deferred income taxes 31,431
Income tax receivable 21,607 15,854
Prepaids and other current assets 11,318   11,172
Total current assets 612,944 384,219
Property and equipment, net 99,167 83,759
Goodwill and intangible assets, net 379,626 337,012
Deferred income taxes 89,606 48,239
Other long-term assets 7,208   7,605
TOTAL ASSETS $ 1,188,551   $ 860,834
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of debt obligations $ 7,203 $ 4,058
Accounts payable, accrued liabilities and other 84,947   67,418
Total current liabilities 92,150 71,476
Long-term debt obligations, less current portion 576,345 335,087
Common stock warrant liability 38,253 21,822
Deferred income taxes 11,765
Other long-term liabilities 7,254   7,916
Total liabilities 725,767 436,301
Stockholders' equity 462,784   424,533
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,188,551   $ 860,834

 

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)

 
    Fiscal Year Ended
September 30,     October 2,
2016 2015
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,434 $ 48,589
Adjustments to reconcile loss to net operating cash 118,813 109,045
Gain on sale of business (63,256 )
Change in operating assets and liabilities (41,015 ) (60,700 )
Net cash from operating activities 79,232   33,678  
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net (85,517 ) (208,352 )
Purchases, sales and maturities of investments 15,257 (40,183 )
Proceeds from discontinued operations 7,500
Sale of businesses 81,208
Strategic investments 1,500
Purchases of property and equipment (31,326 ) (38,252 )
Acquisition of intellectual property (777 ) (3,346 )
Net cash used in investing activities (94,863 ) (207,425 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 247,625
Payments of notes payable and assumed debt (14,076 ) (5,004 )
Proceeds from stock offering 127,761
Proceeds from stock option exercises and employee stock purchases 5,460 5,450
Repurchase of common stock (9,995 ) (8,626 )
Borrowings on revolving facility 100,000
Payments on revolving facility (100,000 )
Other financing activities (1,660 ) 2,826  
Net cash from financing activities 227,354   122,407  
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (1,058 ) (243 )
NET CHANGE IN CASH AND CASH EQUIVALENTS 210,665 (51,583 )
CASH AND CASH EQUIVALENTS — Beginning of period 122,312   173,895  
CASH AND CASH EQUIVALENTS — End of period $ 332,977   $ 122,312  

 

   

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(unaudited and in thousands, except per share data)

 
Three Months Ended     Fiscal Year Ended
September 30, 2016     July 1, 2016     October 2, 2015     September 30, 2016     October 2, 2015
Amount     % Revenue     Amount     % Revenue     Amount     % Revenue     Amount     % Revenue     Amount     % Revenue
Gross profit - GAAP $ 81,804     53.6     $ 73,962     52.0     $ 56,961     50.6     $ 281,609     51.7     $ 203,590     48.4
Amortization expense 6,366 4.2 6,440 4.5 7,647 6.8 26,615 4.9 27,285 6.5
Share-based and non-cash compensation 628 0.4 685 0.5 586 0.5 2,546 0.5 2,254 0.5
Impairment and restructuring charges 1,950 0.4
Acquisition and integration related costs 542 0.4 422 0.3 (590 ) (0.5 ) 3,645 0.7 7,086 1.7
Other                                                 1,625       0.4  
Adjusted gross profit (NonGAAP) $ 89,340       58.5       $ 81,509       57.3       $ 64,604       57.4       $ 316,365       58.1       $ 241,840       57.5  
                                                       
Three Months Ended     Fiscal Year Ended
September 30, 2016     July 1, 2016     October 2, 2015     September 30, 2016     October 2, 2015
Amount     % Revenue     Amount     % Revenue     Amount     % Revenue     Amount     % Revenue     Amount     % Revenue
Operating expenses - GAAP $ 71,739 47.0 $ 63,782 44.8 $ 52,274 46.4 $ 268,362 49.3 $ 193,498 46.0
Amortization expense (6,498 ) (4.3 ) (6,415 ) (4.5 ) (4,345 ) (3.9 ) (23,640 ) (4.3 ) (11,695 ) (2.8 )
Share-based and non-cash compensation (9,099 ) (6.0 ) (6,206 ) (4.4 ) (7,769 ) (6.9 ) (33,904 ) (6.2 ) (29,000 ) (6.9 )
Impairment and restructuring charges (1,365 ) (0.9 ) (1,852 ) (1.3 ) (309 ) (0.3 ) (15,230 ) (2.8 ) (1,280 ) (0.3 )
Litigation costs (1,037 ) (0.7 ) (818 ) (0.6 ) (188 ) (0.2 ) (2,194 ) (0.4 ) (933 ) (0.2 )
Acquisition and integration related costs (2,146 ) (1.4 ) (1,911 ) (1.3 ) (1,218 ) (1.1 ) (9,784 ) (1.8 ) (7,241 ) (1.7 )
Other (573 )     (0.4 )                             (573 )     (0.1 )     1,625       0.4  
Adjusted operating expenses (NonGAAP) $ 51,021       33.4       $ 46,580       32.7       $ 38,445       34.2       $ 183,037       33.6       $ 144,974       34.5  
                                                       
Three Months Ended     Fiscal Year Ended
September 30, 2016     July 1, 2016     October 2, 2015     September 30, 2016     October 2, 2015
Amount     % Revenue     Amount     % Revenue     Amount     % Revenue     Amount     % Revenue     Amount     % Revenue
Income (loss) from operations - GAAP $ 10,065 6.6 $ 10,180 7.2 $ 4,687 4.2 $ 13,247 2.4 $ 10,092 2.4
Amortization expense 12,864 8.4 12,855 9.0 11,992 10.7 50,255 9.2 38,983 9.3
Share-based and non-cash compensation 9,727 6.4 6,891 4.8 8,354 7.4 36,450 6.7 31,253 7.4
Impairment and restructuring charges 1,365 0.9 1,852 1.3 308 0.3 17,180 3.2 1,280 0.3
Litigation costs 1,037 0.7 817 0.6 188 0.2 2,194 0.4 933 0.2
Acquisition and integration related costs 2,688 1.8 2,334 1.6 628 0.6 13,428 2.5 14,326 3.4
Other 573       0.4                               573       0.1              
Adjusted income from operations (NonGAAP) $ 38,319       25.1       $ 34,929       24.5       $ 26,157       23.2       $ 133,327       24.5       $ 96,867       23.0  
Depreciation expense 4,689 3.1 5,278 3.7 3,786 3.4 18,710 3.4 14,128 3.4
Other income (expense), net 1,880       1.2       1,890       1.3                   7,516       1.4              
Adjusted EBITDA $ 44,888       29.4       $ 42,097       29.6       $ 29,943       26.6       $ 159,553       29.3       $ 110,995       26.4  
                                                       
Three Months Ended     Fiscal Year Ended
September 30, 2016     July 1, 2016     October 2, 2015     September 30, 2016     October 2, 2015
Amount     % Revenue     Amount     % Revenue     Amount     % Revenue     Amount     % Revenue     Amount     % Revenue
Net income (loss) - GAAP $ 5,101 3.3 $ 22,552 15.8 $ 54,405 48.3 $ 1,434 0.3 $ 48,589 11.6
Amortization expense 12,864 8.4 12,855 9.0 11,992 10.7 50,255 9.2 38,980 9.3
Share-based and non-cash compensation 9,727 6.4 6,891 4.8 8,355 7.4 36,450 6.7 31,254 7.4
Impairment and restructuring charges 1,365 0.9 1,852 1.3 308 0.3 17,180 3.2 1,280 0.3
Warrant liability expense (gain) 12,691 8.3 (15,339 ) (10.8 ) (9,651 ) (8.6 ) 16,432 3.0 6,020 1.4
Non-cash interest 503 0.3 405 0.3 405 0.4 1,731 0.3 1,652 0.4
Litigation costs 1,037 0.7 817 0.6 188 0.2 2,194 0.4 933 0.2
Acquisition and integration related costs 2,688 1.8 2,334 1.6 628 0.6 13,406 2.5 12,326 2.9
Discontinued operations 647 676 0.5 (40,564 ) (36.0 ) 2,478 0.5 (54,131 ) (12.9 )
Other 573 0.4 (130 ) (0.1 ) 573 0.1 3,096 0.7
Tax effect of non-GAAP adjustments (17,114 )     (11.2 )     (5,111 )     (3.6 )     (7,117 )     (6.3 )     (36,605 )     (6.7 )     (21,877 )     (5.2 )
Adjusted net income (NonGAAP) $ 30,082       19.7       $ 27,932       19.6       $ 18,819       16.7       $ 105,528       19.4       $ 68,122       16.2  
                                                       
Three Months Ended     Fiscal Year Ended
September 30, 2016     July 1, 2016     October 2, 2015     September 30, 2016     October 2, 2015
Net Income (Loss)     Income (loss) per diluted share     Net Income (Loss)     Income (loss) per diluted share     Net Income (Loss)     Income (loss) per diluted share     Net Income (Loss)     Income (loss) per diluted share     Net Income (Loss)     Income (loss) per diluted share
Net income - GAAP 5,101 22,552 54,405 1,434 48,589
Warrant liability gain             (15,339 )           (9,651 )                              
Net income (loss) - diluted $ 5,101       $ 0.09       $ 7,213       $ 0.13       $ 44,754       $ 0.81       $ 1,434       $ 0.03       $ 48,589       $ 0.95  
Adjusted (NonGAAP) $ 30,082       $ 0.54       $ 27,932       $ 0.51       $ 18,819       $ 0.34       $ 105,528       $ 1.91       $ 68,122       $ 1.28  
 
                                                       
Three Months Ended     Fiscal Year Ended
September 30, 2016     July 1, 2016     October 2, 2015     September 30, 2016     October 2, 2015
Shares           Shares           Shares           Shares           Shares      
Diluted shares - GAAP 55,285 53,516 54,991 53,364 51,146
Incremental shares             1,772                         1,855             2,056        
Adjusted diluted shares (NonGAAP) 55,285             55,288             54,991             55,219             53,202        
                                                       
Three Months Ended     Fiscal Year Ended
September 30, 2016     July 1, 2016     October 2, 2015     September 30, 2016     October 2, 2015
Amount     % Revenue     Amount     % Revenue     Amount     % Revenue     Amount     % Revenue     Amount     % Revenue
Interest expense- GAAP 5,512 3.6 4,477 3.1 4,425 3.9 18,942 3.5 18,376 4.4
Non-cash interest expense (503 )     (0.3 )     (405 )     (0.3 )     (405 )     (0.4 )     (1,731 )     (0.3 )     (1,652 )     (0.4 )
Adjusted Interest Expense (NonGAAP) $ 5,009       3.3       $ 4,072       2.9       $ 4,020       3.6       $ 17,211       3.2       $ 16,724       4.0  
                                                       
Three Months Ended     Fiscal Year Ended
September 30, 2016     July 1, 2016     October 2, 2015     September 30, 2016     October 2, 2015
Amount     % Revenue     Amount     % Revenue     Amount     % Revenue     Amount     % Revenue     Amount     % Revenue
Cash flow from operations 24,885 16.3 19,249 13.5 5,483 4.9 79,232 14.6 33,678 8.0
Capital expenditures (7,226 )     (4.7 )     (7,138 )     (5.0 )     (6,627 )     (5.9 )     (32,103 )     (5.9 )     (41,598 )     (9.9 )
Free cash flow $ 17,659       11.6       $ 12,111       8.5       $ (1,144 )     (1.0 )     $ 47,129       8.7       $ (7,920 )     (1.9 )
                   
Three Months Ended

September 30, 2016

    July 1, 2016    

April 1, 2016

    January 1, 2016
Amount     Amount     Amount     Amount
Revenue - GAAP 152,697 142,288 133,579 115,774
FiBest and Aeroflex/Metelics revenue 20,682       20,052       18,780       4,577  
Adjusted revenue - excluding acquisitions (NonGAAP) 132,015       122,236       114,799       111,197  
 
Adjusted gross profit (NonGAAP) 89,340 81,509 77,556 67,959
FiBest and Aeroflex/Metelics gross profit 9,356       7,312       7,026       1,234  
Adjusted gross profit - excluding acquisitions (NonGAAP) 79,984       74,197       70,530       66,725  
Adjusted gross margin (NonGAAP) 61 %     61 %     61 %     60 %

Company Contact:
MACOM Technology Solutions Holdings, Inc.
Robert J. McMullan, 978-656-2753
Senior Vice President and Chief Financial Officer
bob.mcmullan@macom.com
or
Investor Relations Contact:
Shelton Group
Leanne K. Sievers, 949-224-3874
EVP, Investor Relations
lsievers@sheltongroup.com

Source: MACOM Technology Solutions Holdings, Inc.

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