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Peregrine Semiconductor Announces Fourth Quarter and Full Year 2013 Financial Results

Peregrine Semiconductor Corporation (Peregrine Semiconductor) (NASDAQ: PSMI), a fabless provider of high-performance radio frequency integrated circuits (RFICs), today announced its fourth quarter and 2013 fiscal year financial results.

Fourth quarter 2013 revenue was $43.3 million, compared with $63.0 million for the same period in 2012. Revenue for fiscal year 2013 was $202.3 million, compared with $203.9 million for fiscal year 2012.

As reported under U.S. generally accepted accounting principles (GAAP), fourth quarter 2013 net loss was $6.8 million, compared with a GAAP net income of $5.6 million in the same period in 2012. Net loss for fiscal 2013 was $4.1 million, compared with a GAAP net income of $7.3 million for fiscal 2012. Diluted net loss per share was $0.21 for the fourth quarter of 2013 compared to a net income per share of $0.15 for the same period in 2012. Diluted net loss per share for fiscal year 2013 was $0.13 per share, compared net income per share to $0.15 per share for fiscal 2012.

Non-GAAP net loss for the fourth quarter of 2013 was $5.1 million, or $0.16 per diluted share based on weighted average shares outstanding of 32.7 million. This compares with non-GAAP net income of $6.9 million or $0.19 per diluted share based on weighted average shares outstanding of 36.5 million for the same period in 2012. Non-GAAP net income for fiscal year 2013 was $2.6 million, or $0.07 per diluted share based on weighted average shares outstanding of 35.7 million. This compares with non-GAAP net income of $11.7 million or $0.36 per diluted share based on weighted average shares outstanding of 32.2 million for fiscal year 2012.

Gross margin on a GAAP basis for the fourth quarter of 2013 was 36.0% of revenue, compared to 43.3% of revenue for the same period in 2012. Gross margin on a non-GAAP basis for the fourth quarter of 2013 was 36.6% of revenue, compared to 43.6% of revenue for the same period in 2012. Gross margins in the fourth quarter were impacted by a higher than normal inventory write-down of $3.1 million. Gross margin on a GAAP basis for fiscal year 2013 was 40.2% of revenue, compared to 39.1% of revenue for fiscal year 2012. Gross margin on a non-GAAP basis for fiscal year 2013 was 40.7% of revenue, compared to 39.4% of revenue for fiscal year 2012. Operating expenses increased to $22.4 million for the fourth quarter 2013 as a result of higher than expected legal expenses and restructuring charges by $1.4 million.

“We reported fourth quarter revenue in line with our prior guidance. For 2014, we see a number of challenges facing the smartphone industry. However, we believe our product development and our progress in developing an integrated RF front-end positions us well for 2015 as the industry enters a strategic transition,” commented Jim Cable, President and Chief Executive Officer. “Today, I am pleased to announce our introduction of the Ultra CMOS Global 1, the world’s first reconfigurable RF front-end system, featuring our multi-mode, multi-band power amplifier and integrated suite of switches and tuning elements. We are pleased to demonstrate that our power amplifier offers raw performance comparable with GaAs, but with all the benefits of our UltraCMOS SOI process.”

Business Outlook

For the first quarter of 2014, the company expects revenue to be in the range of $33 million to $36 million. First quarter GAAP gross margin is expected to be in the range of 36% to 38%.

Quarterly Conference Call Today

Jim Cable, President and Chief Executive Officer, and Jay Biskupski, Chief Financial Officer, will host a fourth quarter and full year 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 1-877-303-8027 (toll free) or 1-760-536-5165 (international). The passcode is 33642584. A live and archived webcast of the call will be available on Peregrine's website at http://investors.psemi.com/ for one week following the live call.

Use of GAAP and Non-GAAP Financial Measures

Peregrine Semiconductor 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 loss per share information for the year and three months ended December 28, 2013, and similar periods from the prior year included in this press release are different from those otherwise presented under GAAP. The non-GAAP financial measures exclude non-cash compensation expense for stock options. When evaluating the performance of our business and developing short and long-term plans, we do not consider share-based compensation charges. Although share-based compensation is necessary to attract and retain quality employees, our consideration of share-based compensation places its primary emphasis on overall shareholder dilution rather than the accounting charges associated with such grants. Because of the varying availability of valuation methodologies and subjective assumptions, we believe that the exclusion of share-based compensation allows for more accurate comparison of our financial results to previous periods. In addition, we believe it useful to investors to understand the specific impact of the application of the fair value method of accounting for share-based compensation on our operating results. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business. However, investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. These measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.

For more information on our non-GAAP financial measures and a reconciliation of such measures to the nearest GAAP measure, please see the “Condensed Consolidated Reconciliation of GAAP to Non-GAAP Results” table in this press release.

Use of Forward Looking Statements

This press release contains forward looking statements regarding our management's future expectations, beliefs, intentions, goals, strategies, plans and prospects. Such statements constitute “forward-looking” statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The achievement of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. If any of these risks or uncertainties materialize or if any of the assumptions prove incorrect, our actual results, performance or achievements could be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such risks and uncertainties include, but are not limited to, our dependence on a limited number of customers for a substantial portion of our revenues; intellectual property risks; intense competition in our industry; our ability to develop and introduce new and enhanced products on a timely basis and achieve market acceptance of those products; consumer acceptance of our customers’ products that incorporate our solutions; our lack of long-term supply contracts and dependence on limited sources of supply; and potential decreases in average selling prices for our products.

For further information regarding risks and uncertainties associated with Peregrine’s business, please refer to the filings that we make with the Securities and Exchange Commission from time to time, including those set forth in the section entitled “Risk Factors” in our Form 10-K for the year ended December 29, 2012 and additional information that will be set forth in our Form 10-K that will be filed for the year ended December 28, 2013, which should be read in conjunction with these financial results. These documents are available on the SEC Filings section of the Investor Relations section of our website at http://investors.psemi.com/. Please also note that forward-looking statements represent our management's beliefs and assumptions only as of the date of this press release. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information, becomes available in the future.

About Peregrine Semiconductor

Peregrine Semiconductor (NASDAQ: PSMI), founder of RF SOI (silicon on insulator), is a leading fabless provider of highperformance, integrated RF solutions. Since 1988 Peregrine and its founding team have been perfecting UltraCMOS® technology - a patented, advanced form of SOI - to deliver the performance edge needed to solve the RF market's biggest challenges, such as linearity. With products that deliver best-in-class performance and monolithic integration, Peregrine is the trusted choice for market leaders in automotive, broadband, industrial, Internet of Things, military, mobile devices, smartphones, space, test-and-measurement equipment and wireless infrastructure. Peregrine holds more than 170 filed and pending patents and has shipped over 2 billion UltraCMOS units. For more information, visit http://www.psemi.com.

The Peregrine Semiconductor name, logo, and UltraCMOS are registered trademarks of Peregrine Semiconductor Corporation in the U.S.A., and other countries.

Peregrine Semiconductor Corporation

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 
    Three Months Ended       Years Ended
December 28,
2013
  December 29,
2012
December 28,
2013
  December 29,
2012
Net revenue $ 43,324 $ 62,999 $ 202,316 $ 203,908
Cost of net revenue 27,717   35,717   120,920   124,135  
Gross profit 15,607 27,282 81,396 79,773
Operating expense:
Research and development 10,775 10,616 42,192 34,134
Selling, general and administrative 11,655     10,788   43,142   36,971  
Total operating expense 22,430   21,404   85,334   71,105  
Income (loss) from operations (6,823 ) 5,878 (3,938 ) 8,668
Interest income (expense), net 35 (107 ) (130 ) (1,354 )
Other income (expense), net 34   2   84   (130 )
Income (loss) before income taxes (6,754 ) 5,773 (3,984 ) 7,184
Provision (benefit) for income taxes 74     146   67   (88 )
Net income (loss) (6,828 ) 5,627 (4,051 ) 7,272
Net income allocable to preferred stockholders       (4,515 )
Net income (loss) attributable to common stockholders $ (6,828 ) $ 5,627   $ (4,051 ) $ 2,757  
Net income (loss) per share
Basic $ (0.21 ) $ 0.18   $ (0.13 ) $ 0.19  
Diluted* $ (0.21 ) $ 0.15   $ (0.13 ) $ 0.15  
Shares used to compute net income (loss) per share
Basic 32,687   31,837   32,294   14,291  
Diluted 32,687   36,548   32,294   18,651  
 

* Diluted net income per share attributable to common stockholders is computed by dividing net income attributable to common stockholders, calculated as net income less income allocable to preferred stockholders for the period prior to their conversion upon our initial public offering, by the weighted average number of common shares outstanding, including unvested shares subject to repurchase, and potential dilutive securities assuming the dilutive effect of outstanding stock options and warrants using the treasury stock method.

 
 
Peregrine Semiconductor Corporation

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

   
December 28, December 29,
2013 2012
Assets
Current assets:
Cash and cash equivalents $ 16,249 $ 44,106
Short-term marketable securities 28,035 30,361
Accounts receivable, net 16,905 13,353
Inventories 53,489 57,017
Prepaids and other current assets 4,085   11,108  
Total current assets 118,763 155,945
Property and equipment, net 23,122 22,871
Long-term marketable securities 18,888 18,892
Other assets 102   210  
Total assets $ 160,875   $ 197,918  
 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 12,983 $ 22,306
Accrued liabilities 11,829 12,672
Accrued compensation 4,542 5,726
Customer deposits 916 24,425
Deferred revenue 6,131 12,755
Current portion of obligations under capital leases   11  
Total current liabilities 36,401 77,895
Obligations under capital leases, less current portion 18
Other long-term liabilities 943 886
Stockholders’ equity:
Common stock 33 32
Additional paid-in capital 348,684 340,221
Accumulated deficit (224,986 ) (220,935 )
Accumulated other comprehensive loss (200 ) (199 )
Total stockholders’ equity 123,531   119,119  
Total liabilities and stockholders’ equity $ 160,875   $ 197,918  
 
 
Peregrine Semiconductor Corporation

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 
Years Ended
December 28,   December 29,
2013 2012
Operating activities
Net income (loss) $ (4,051 ) $ 7,272
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization 6,589 4,579
Loss on disposal of property and equipment 46 31
Stock-based compensation 6,615 4,437
Revaluation of warrants to fair value 633
Imputed interest related to deposit arrangements, net (313 ) 420
Amortization of premium and discount on investments, net 368 169
Cash received for lease incentives 135 115
Changes in operating assets and liabilities:
Accounts receivable (3,634 ) (255 )
Inventories 3,545 (27,188 )
Prepaids and other current and noncurrent assets 7,330 (7,751 )
Accounts payable and accrued liabilities (12,585 ) 16,098
Customer deposits (11,425 ) 11,425
Deferred revenue (6,217 ) 6,865  
Net cash provided by (used in) operating activities (13,597 ) 16,850
Investing activities
Purchases of property and equipment (5,884 ) (17,212 )
Proceeds from sale of equipment 6 6
Purchase of marketable securities (39,097 ) (54,663 )
Sale of marketable securities 41,027   5,100  
Net cash used in investing activities (3,948 ) (66,769 )
Financing activities
Proceeds from customer deposit financing arrangement 13,000
Payments on customer deposit financing arrangement (12,084 )
Proceeds from line of credit 3,000
Payments on line of credit (10,749 )
Payments on obligations under capital leases (37 ) (661 )
Payments on notes payable (1,618 )
Proceeds from exercise of stock options 1,845 445
Proceeds from exercise of warrants 31
Proceeds from initial public offering, net of offering cost 80,278
Costs paid in connection with initial public offering   (1,811 )
Net cash provided by (used in) financing activities (10,276 ) 81,915
Effect of exchange rate changes on cash and cash equivalents (36 ) (9 )
Net change in cash and cash equivalents (27,857 ) 31,987
Cash and cash equivalents at beginning of year 44,106   12,119  
Cash and cash equivalents at end of year $ 16,249   $ 44,106  
 
 
Peregrine Semiconductor Corporation

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(in thousands, except per share data)

(unaudited)

   
Three Months Ended   Years Ended
December 28,
2013
  December 29,
2012
December 28,
2013
  December 29,
2012
Gross profit - GAAP $ 15,607   36.0 % $ 27,282     43.3 % $ 81,396   40.2 % $ 79,773     39.1 %
Non-cash compensation expense (1) 231   0.6   184   0.3   883   0.5   588   0.3  
 
Gross profit - Non-GAAP $ 15,838   36.6 % $ 27,466   43.6 % $ 82,279   40.7 % $ 80,361   39.4 %
;
Income (loss) from operations - GAAP $ (6,823 ) (15.7 )% $ 5,878 9.3 % $ (3,938 ) (2.0 )% $ 8,668 4.3 %
Non-cash compensation expense (1) 1,761   4.0   1,321   2.1   6,615     3.3   4,437     2.1  
 
Income (loss) from operations - Non-GAAP $ (5,062 ) (11.7 )% $ 7,199   11.4 % $ 2,677   1.3 % $ 13,105   6.4 %
 
Net income (loss) - GAAP $ (6,828 ) (15.7 )% $ 5,627 8.9 % $ (4,051 ) (2.0 )% $ 7,272 3.6 %
Non-cash compensation expense (1) 1,761   4.0   1,321   2.1   6,615   3.3   4,437   2.1  
 
Net income (loss) - Non-GAAP $ (5,067 ) (11.7 )% $ 6,948   11.0 % $ 2,564   1.3 % $ 11,709   5.7 %
 
Diluted net income (loss) per share attributable to common stockholders - GAAP $ (0.21 ) $ 0.15 $ (0.13 ) $ 0.15
Adjustment to reflect conversion of preferred stock at the beginning of period 0.07
Non-cash compensation expense 0.05   0.04   0.20   0.14  
 
Diluted net income (loss) per share - Non-GAAP $ (0.16 ) $ 0.19   $ 0.07   $ 0.36  
 
Net income (loss) attributable to common stockholders - GAAP $ (6,828 ) $ 5,627   $ (4,051 ) $ 2,757  
Net income (loss) - Non-GAAP $ (5,067 ) $ 6,948   $ 2,564   $ 11,709  
 
Shares used to compute diluted net income (loss) per share attributable to common stockholders - GAAP 32,687 36,548 32,294 18,651
Adjustment to reflect conversion of preferred stock at the beginning of period 13,529
Dilutive effect of stock options and warrants     3,401    
 
Shares used to compute diluted net income (loss) per share - Non-GAAP 32,687   36,548   35,695   32,180  
 
(1) Includes stock-based compensation as follows:
Three Months Ended   Years Ended
December 28,
2013
December 29,
2012
December 28,
2013
December 29,
2012
Cost of net revenue $ 231 $ 184 $ 883 $ 588
Research and development 563 484 2,097 1,419
Selling, general and administrative 967   653   3,635   2,430  
Total $ 1,761   $ 1,321   $ 6,615   $ 4,437  

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