MOUNTAIN VIEW, CA — (Marketwired) — 10/31/13 — Audience, Inc. (NASDAQ: ADNC), the leader in advanced voice and audio processing for mobile devices, today announced its third quarter 2013 financial results.
Revenue for the third quarter of 2013 was $34.5 million, compared with $40.8 million for the same period in 2012. As reported under U.S. generally accepted accounting principles (GAAP), third quarter 2013 net loss was $2.3 million, or ($0.11) per diluted share based on weighted average shares outstanding of 21.6 million. This compares with GAAP net income of $3.7 million, or $0.16 per diluted share based on weighted average shares outstanding of 23.2 million, for the same period in 2012. Gross margin on a GAAP basis for the third quarter of 2013 was 55.9% of revenue, compared to 55.0% of revenue for the same period in 2012.
Non-GAAP net loss as defined below, for the third quarter of 2013 was $0.3 million, or ($0.01) per diluted share based on weighted average shares outstanding of 21.6 million. This compares with non-GAAP net income of $4.9 million, or $0.21 per diluted share based on weighted average shares outstanding of 23.2 million, for the same period in 2012. Gross margin on a non-GAAP basis for the third quarter of 2013 was 56.2% of revenue, compared to 55.1% of revenue for the same period in 2012.
“Strong demand for Audience® earSmart solutions contributed to a solid third quarter as we continued to penetrate the mobile device market worldwide,” said Peter Santos, president and chief executive officer. “We were pleased to announce in the third quarter that one of China-s leaders in mobility, ZTE, has chosen the eS305 for their new ZTE Geek mobile handset. We also announced the release of our eS320, the world-s first Advanced Voice processor created specifically for tablets, ultrabooks and hybrid all-in-one PCs, and we see these platforms becoming increasingly important as users look for an improved and consistent user experience on every device they use.”
“We reported a good quarter as we continued to focus on operational excellence and the diversification of our solutions across additional platforms, building upon our strong relationships with Samsung and leading Chinese OEMs,” said Kevin Palatnik, chief financial officer. “We expect to close the year with continued penetration into the Chinese handset marketplace and look forward to reporting on wins in adjacent markets.”
For the fourth quarter of 2013, Audience expects total revenue to be in the range of $31 to $34 million. Fourth quarter GAAP gross margin is expected to be in the range of 52% to 55%. Fourth quarter GAAP net loss, which includes $1.7 million of expected stock-based compensation expense, is expected to be in the range of $4.4 to $5.3 million, or ($0.20) to ($0.24) per diluted share on approximately 22.1 million diluted weighted average shares outstanding.
Fourth quarter non-GAAP gross margin is expected to be in the range of 52% to 55%. Fourth quarter non-GAAP net loss is expected to be in the range of $2.7 to $3.6 million, or ($0.12) to ($0.16) 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.
The above information concerning guidance represents Audience-s outlook only as of the date hereof and is subject to change as a result of amendments to material contracts and other changes in business conditions. Audience undertakes no obligation to update or revise any financial forecast or other forward looking statements, as a result of new developments or otherwise.
Peter Santos, president and chief executive officer, and Kevin Palatnik, chief financial officer, will host a third quarter 2013 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 may be accessed by dialing 1-877-212-6076 (toll free) or 1-707-287-9331 (international). The passcode is 77210693. A live and archived webcast of the call will be available on Audience-s website at for 30 days.
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 December 13, 2013, 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 Fourth Quarter 2013 Earnings Release is published, which is currently scheduled to be February 6, 2014.
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 months and quarter ended September 30, 2013 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 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 reflected in the nine months ended September 30, 2012 is related to preferred stock warrants outstanding that had to be revalued each quarter prior to our initial public offering. We believe the comparisons of ongoing operations should exclude effects of such revaluations as preferred stock warrant revaluation represented a non-cash expense that did not occur after our initial public offering.
On June 5, 2012, Audience entered into a lease agreement for its future corporate headquarters facility in Mountain View, California. Pursuant to the lease agreement, the lease falls under “build-to-suit” accounting treatment and therefore, in accordance with accounting for the effect of lessee involvement in asset construction, the company is considered to be the owner of the real estate project during the construction period. As such, Audience recorded an asset for construction in progress for incurred construction costs, and a liability for those costs that are not funded by the company. Additionally, the rent costs associated with the ground lease during construction was recorded to the income statement. This rent cost is a non-cash charge that the company excluded from its non-GAAP net income. The construction was completed and the lease commenced October 1, 2013.
Non-GAAP financial information is adjusted for a tax rate equal to our annual estimated tax rate on non-GAAP income. Our estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenues and expenses and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.
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 and certain preferred stock warrants 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.
Statements in the press release and certain matters to be discussed on the third quarter conference call regarding Audience, Inc., which are not historical facts, are “forward-looking statements” within the meaning of 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, reporting on wins in the market, the demand for our solutions including continued demand by customers upon whom we are substantially dependent and diversification of our customer base 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, Samsung Electronics Co. Ltd., for a substantial portion of our revenue; weak demand for high end smart phones and the impact on our business; our need to maintain and expand our existing relationships with our OEMs, including Samsung and leading Chinese 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; increasing competition and new entrants in the market for our products; our need to develop products for the lower end of the smartphone market; our need to diversify our sources of revenue; our ability to enter new end user product markets, such as notebooks and smart TVs, as well as new geographic markets; pressure on the average selling prices for our products; our lengthy sales cycle and the lack of certainty as to whether any given OEM-s 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 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 most recent Form 10-Q for the three months ended June 30, 2013, which is available on the SEC-s website at . 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.
Audience is the leader in advanced voice and audio processing for 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, see .
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For more information, contact:
Investors
The Blueshirt Group
Suzanne Schmidt
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Melanie Solomon
415-217-4964
Diane Vanasse
408-242-0027
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