Inphi revenue grows 19 percent year-on-year

Q3 revenue growth reflects an increase in demand for COLORZ inter-data centre solutions and coherent DSP products from ClariPhy acquisition

Inphi, a high-speed data movement interconnect company, has announced financial results for its third quarter ended September 30, 2017.

Revenue from continuing operations in Q3 2017 was $84.5 million on a US generally accepted accounting principles (GAAP) basis, up 19 percent year-over-year, compared with $70.7 million in Q3 2016. This revenue growth reflects an increase in demand for COLORZ inter-data centre solutions and coherent DSP products from the ClariPhy acquisition.

Gross margin from continuing operations under GAAP in Q3 2017 was 49.8 percent, compared with 68.1 percent in Q3 2016. The decrease in gross margin was primarily due to a Q3 impairment charge of acquired intangibles as well as amortisation of other intangibles and a change in the product mix.

GAAP operating loss from continuing operations in Q3 2017 was $52.5 million or (62.1 percent) of revenue from continuing operations, compared to GAAP income from continuing operations in Q3 2016 of $10.2 million or 14.5 percent of revenue from continuing operations. The loss was due to an impairment of $47 million ($36.7 million net of tax) in technology intangibles from the ClariPhy acquisition due to a change in product roadmap following the acquisition.

GAAP net loss from continuing operations for Q3 2017 was $48.8 million, or ($1.15) per diluted common share, compared with GAAP net income from continuing operations of $6.6 million, or $0.15 per diluted common share in Q3 2016.

Non-GAAP Results

Gross margin from continuing operations on a non-GAAP basis in Q3 2017 was 71.4 percent, compared to 73.0 percent in Q3 2016. The decrease was largely due to change in product mix.

Non-GAAP operating income from continuing operations in Q3 2017 was $17.3 million from continuing operations, compared with $20.9 million from continuing operations in Q3 2016. The decrease is primarily due to impact of our Q3 net investment in developing new Coherent DSP components as part of the ClariPhy acquisition.

Non-GAAP net income from continuing operations in Q3 2017 was $15.8 million, or $0.36 per diluted common share. This compares with non-GAAP net income from continuing operations of $20.6 million, or $0.46 per diluted common share in Q3 2016.

"Q3 was a solid quarter of execution for Inphi, in a market still waiting for a rebound in China long haul and metro," said president and CEO Ford Tamer. "Once again, we had strong growth in the data centre market from COLORZ, and we continue to introduce new PAM-based products, like Vega and Polaris that will lead to continued growth in the data centre market in 2018 and beyond."

Nine Months 2017 Results

Revenue from continuing operations in the nine months ended September 30, 2017 was $262.5 million, compared with $185.4 million in the nine months ended September 30, 2016. GAAP net loss from continuing operations in the nine months ended September 30, 2017 was $75.0 million, or ($1.78) per diluted share, on approximately 42.0 million basic weighted average common shares outstanding. This compares with GAAP net income from continuing operations of $7.4 million, or $0.17 per diluted share, on approximately 44.0 million diluted weighted average common shares outstanding in the nine months ended September 30, 2016.

Non-GAAP net income from continuing operations in the nine months ended September 30, 2017 was $50.9 million, or $1.15 per diluted weighted average common share outstanding, on approximately 44.3 million diluted weighted average common shares outstanding. This compares with non-GAAP net income from continuing operations of $45.7 million in the nine months ended September 30, 2016, or $1.04 per diluted weighted average common share outstanding, on approximately 44.0 million diluted weighted average common shares outstanding.

Business Outlook

Revenue in Q4 2017 is expected to be in a range of $84.3 million to $88.3 million. The midpoint being $86.3 million or up sequentially 2.2 percent with Q3 2017.

GAAP gross margin is expected to be approximately 59.9 percent to 61.4 percent. Non-GAAP gross margin is expected to be approximately 70.6 percent to 71.6 percent. Stock-based compensation expense is expected to be in the range of $11.9 million to $12.3 million.

GAAP results are expected to be a net loss in a range between $11.9 million to $14.4 million, or ($0.28) "“ ($0.34) per basic share, based on 42.7 million estimated weighted average basic shares outstanding.

Non-GAAP net income, excluding stock-based compensation expense, amortisation of intangibles and inventory step up fair value related to acquisitions and noncash interest on convertible debt, is expected to be in the range of $14.7 million to $17.2 million, or $0.33-$0.39 per diluted share, based on 44.3 million estimated diluted shares outstanding.