Press Release

Acacia Communications Reports First Quarter 2019 Results

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MAYNARD, Mass., May 02, 2019 (GLOBE NEWSWIRE) -- Acacia Communications, Inc. (NASDAQ: ACIA), a leading provider of high-speed coherent optical interconnect products, today reported financial results for its first quarter ended March 31, 2019.

“I am pleased with our strong first quarter results, which exceeded the high end of our guidance on revenue, non-GAAP gross margin, non-GAAP net income and non-GAAP diluted EPS,” said Raj Shanmugaraj, President and Chief Executive Officer of Acacia Communications. “Our continued investment in industry leading coherent technologies has helped us develop a broad portfolio of products that address the needs of network operators from edge to submarine networks. We believe we are well positioned to benefit from the adoption of coherent technologies in shorter-reach pluggable interfaces.

“I am excited to report that in the first quarter our revenue increased $32.3 million, or 44%, on a year-over-year basis, and our profitability also improved significantly, as demonstrated by the year-over-year increase of both our GAAP and non-GAAP net income,” said John Gavin, Chief Financial Officer of Acacia Communications. “We believe that these results demonstrate the leverage in our operating model and have allowed us to continue to strengthen our balance sheet.”

Results for the First Quarter of 2019

  • Revenue of $105.2 million, increased 44% year-over-year
  • GAAP gross margin of 47.4%; non-GAAP gross margin* of 47.4%
  • GAAP income from operations of $3.1 million; non-GAAP income from operations* of $13.9 million
  • GAAP net income of $7.0 million; non-GAAP net income* of $15.4 million
  • EBITDA* of $6.3 million; adjusted EBITDA* of $17.1 million
  • GAAP diluted EPS of $0.17; non-GAAP diluted EPS* of $0.37

Outlook for the Second Quarter of 2019

The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially, as a result of, among other things, the important factors discussed at the end of this press release. Acacia Communications disclaims any obligation to update these forward-looking statements.

Acacia Communications’ guidance for its second quarter ending June 30, 2019 is:

Quarter Ending June 30, 2019
($ in millions, except per share data) Low       High
Revenue $ 104.0     to   $ 112.0  
Non-GAAP Gross Margin*   45 %   to     47 %
Non-GAAP Net Income* $ 11.7     to   $ 17.5  
Non-GAAP Diluted EPS* $ 0.28     to   $ 0.42  
                   

*Non-GAAP gross margin, non-GAAP income from operations, non-GAAP net income, earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted EBITDA and non-GAAP diluted earnings per share (EPS) are non-GAAP financial measures that are not prepared in accordance with generally accepted accounting principles (GAAP). Please refer below to Use of Non-GAAP Financial Information for descriptions of these non-GAAP financial measures and to the Reconciliation of GAAP Measures to Non-GAAP Measures, attached as Schedule D, for reconciliations of the most directly comparable GAAP financial measures to these non-GAAP financial measures.

Acacia Communications has not reconciled the above second quarter 2019 guidance for GAAP net income and GAAP diluted EPS to non-GAAP net income and non-GAAP diluted EPS, respectively, because the expected tax benefits derived from any employee equity awards during the second quarter of 2019 cannot be reasonably calculated or predicted at this time. Accordingly, a reconciliation is not available without unreasonable effort.

Conference Call

Acacia Communications will host a conference call to discuss its results for the first quarter of 2019, recent developments and the Company’s business outlook and strategy at 5 p.m. Eastern Time today. The live webcast of the call, along with the Company’s earnings press release, can be accessed at the Acacia Communications’ Investor Relations website at http://ir.acacia-inc.com. The U.S. dial-in for the call is 1-877-407-8293 (1-201-689-8349 for non-U.S. callers). Please ask to be joined to the Acacia Communications call. A replay of the conference call will be available until May 16, 2019, at 11:59 p.m. Eastern Time, while an archived version of the webcast will be available on the Acacia Communications’ Investor Relations website for 90 days. The U.S. dial-in for the conference call replay is 1-877-660-6853 (1-201-612-7415 for non-U.S. callers). The replay access code is 1368-9236.

Use of Non-GAAP Financial Information

This press release includes non-GAAP financial measures that are not prepared in accordance with, nor an alternative to, GAAP. In addition, these non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly-titled measures presented by other companies.

Schedule D of this press release provides reconciliations of Acacia Communications’ most comparable GAAP financial measures to non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development expenses, non-GAAP sales, general and administrative expenses, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP net income, non-GAAP effective tax rate, EBITDA, adjusted EBITDA and non-GAAP diluted EPS.

Acacia Communications believes that providing these non-GAAP financial measures to investors, in addition to providing the most directly comparable GAAP measures, provides investors the benefit of viewing the Company’s performance using the same financial metrics that its management team uses in making many key decisions and evaluating how its results of operations may look in the future. Acacia Communications’ management does not believe that items not involving cash expenditures, such as non-cash compensation related to equity awards, are part of its critical decision making process. Also, Acacia Communications’ management does not believe that items such as warranty and other charges arising from a manufacturing process quality issue or certain litigation related costs and settlement reserves outside the normal course of the Company’s business or certain adjustments to its valuation allowance against deferred tax assets are reflective of the Company’s underlying operating performance. Further, in connection with the seven-year denial of export privileges imposed on April 15, 2018 by the U.S. Department of Commerce against ZTE, which was subsequently lifted on July 13, 2018, the Company recorded inventory write-offs. Acacia Communications’ management does not believe these write-offs, and any subsequent adjustments as a result of management’s ongoing evaluation of the ZTE inventory, are reflective of the Company’s underlying operating performance. Additionally, Acacia Communications’ management believes the impacts of the U.S. Tax Cuts and Jobs Act (the “Act”) which were recorded in the fourth quarter of 2017 upon enactment of the Act, including the revaluation of its deferred tax assets and liabilities and the repatriation of accumulated foreign earnings, is a unique event that limits comparability with prior periods and does not accurately reflect the underlying performance of its continuing business operations for the period in which they were incurred. Therefore, Acacia Communications excludes those items, as applicable, from non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development expenses, non-GAAP sales, general and administrative expenses, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP net income, non-GAAP effective tax rate, non-GAAP diluted EPS, EBITDA and adjusted EBITDA. The impacts of the Act have been excluded in the fourth quarter of 2017. For all other periods, the impacts of the Act have not been excluded.

Acacia Communications’ non-GAAP financial measures reflect adjustments based on the metrics described below, as well as the related income tax effects. The income tax effect of these non-GAAP adjustments is determined by recalculating income tax expense excluding these adjustments.

Non-GAAP gross profit and non-GAAP gross margin.    Acacia Communications defines non-GAAP gross profit as gross profit as reported on its consolidated statements of operations, excluding the impact of stock-based compensation, which is a non-cash charge, warranty and other charges arising from a manufacturing process quality issue and ZTE-related inventory write-offs and subsequent adjustments. Acacia Communications defines non-GAAP gross margin as the non-GAAP gross profit divided by revenue as reported on its consolidated statements of operations. Acacia Communications has presented non-GAAP gross profit and non-GAAP gross margin because the Company believes that the exclusion of stock-based compensation, warranty and other charges arising from a manufacturing process quality issue and ZTE-related inventory write-offs and subsequent adjustments facilitates comparisons of its results of operations to other companies in its industry.

Non-GAAP research and development expenses.    Acacia Communications defines non-GAAP research and development expenses as research and development expenses as reported on the Company’s consolidated statements of operations, excluding the impact of stock-based compensation. Acacia Communications has presented non-GAAP research and development expenses because the Company believes that the exclusion of stock-based compensation facilitates comparisons of its results of operations to other companies in its industry.

Non-GAAP sales, general and administrative expenses.    Acacia Communications defines non-GAAP sales, general and administrative expenses as sales, general and administrative expenses as reported on the Company’s consolidated statements of operations, excluding the impact of stock-based compensation and certain litigation related costs and settlement reserves. Acacia Communications has presented non-GAAP sales, general and administrative expenses because the Company believes that the exclusion of stock-based compensation and certain litigation related costs and settlement reserves facilitates comparisons of its results of operations to other companies in its industry.

Non-GAAP operating expenses.    Acacia Communications defines non-GAAP operating expenses as operating expenses as reported on the Company’s consolidated statements of operations, excluding the impact of stock-based compensation and certain litigation related costs and settlement reserves. Acacia Communications has presented non-GAAP operating expenses because the Company believes that the exclusion of stock-based compensation and certain litigation related costs and settlement reserves facilitates comparisons of its results of operations to other companies in its industry.

Non-GAAP income from operations.    Acacia Communications defines non-GAAP income from operations as income (loss) from operations as reported on the Company’s consolidated statements of operations, excluding the impact of stock-based compensation, warranty and other charges arising from a manufacturing process quality issue, ZTE-related inventory write-offs and subsequent adjustments and certain litigation related costs and settlement reserves. Acacia Communications has presented non-GAAP income from operations because the Company believes that the exclusion of stock-based compensation, warranty and other charges arising from a manufacturing process quality issue, ZTE-related inventory write-offs and subsequent adjustments and certain litigation related costs and settlement reserves facilitates comparisons of its results of operations to other companies in its industry.

Non-GAAP net income, non-GAAP effective tax rate and non-GAAP diluted EPS.    Acacia Communications defines non-GAAP net income as net income (loss) as reported on the Company’s consolidated statements of operations, excluding the impact of stock-based compensation which is a non-cash charge, as well as warranty and other charges arising from a manufacturing process quality issue, ZTE-related inventory write-offs and subsequent adjustments, certain litigation related costs and settlement reserves, the tax effects of those excluded items and certain valuation allowance adjustments against deferred tax assets. Additionally, the impacts of the Act in the fourth quarter of 2017 have been excluded as it is a unique event that limits comparability with prior periods and does not accurately reflect the underlying performance of the Company’s continuing business operations for the period in which they were incurred.

Acacia Communications defines non-GAAP effective tax rate as the non-GAAP provision (benefit) for income taxes divided by non-GAAP income before provision (benefit) for income taxes. Non-GAAP provision (benefit) for income taxes is defined as the (benefit) provision for income taxes as reported on the Company’s consolidated statements of operations, as adjusted for the tax effects of excluding stock-based compensation expense, warranty and other charges arising from a manufacturing process quality issue, ZTE-related inventory write-offs and subsequent adjustments, certain litigation related costs and settlement reserves, as well as the impact of certain valuation allowance adjustments against deferred tax assets and the impact of the Act in the fourth quarter of 2017. Non-GAAP income before provision (benefit) for income taxes is defined as GAAP income (loss) before (benefit) provision for income taxes as reported on the Company’s consolidated statements of operations, excluding stock-based compensation expense, warranty and other charges arising from a manufacturing process quality issue, ZTE-related inventory write-offs and subsequent adjustments and certain litigation related costs and settlement reserves.

In order to calculate non-GAAP diluted EPS, Acacia Communications uses a non-GAAP weighted-average share count which will include the impact of dilutive stock-based awards for periods in which there was a GAAP net loss resulting in GAAP diluted net loss per share, but a non-GAAP net income.

Acacia Communications has presented non-GAAP net income, non-GAAP effective tax rate and non-GAAP diluted EPS because the Company believes that the exclusion of the items discussed above facilitates comparisons of its results of operations to other companies in its industry and more accurately reflects the underlying performance of our continuing business operations.

EBITDA and Adjusted EBITDA.    Acacia Communications defines EBITDA as net income (loss) as reported on the Company’s consolidated statements of operations before depreciation, interest income, net, and its (benefit) provision for income taxes. Acacia Communications defines adjusted EBITDA as EBITDA excluding the impact of stock-based compensation, warranty and other charges arising from a manufacturing process quality issue, ZTE-related inventory write-offs and subsequent adjustments and certain litigation related costs and settlement reserves. Acacia Communications has presented adjusted EBITDA because it is a key measure used by its management and board of directors to understand and evaluate the Company’s operating performance, to establish budgets and to develop operational goals for managing its business. In particular, Acacia Communications believes that the exclusion of the amounts eliminated in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of its core operating performance.

Acacia Communications uses these non-GAAP financial measures to evaluate its operating performance and trends, and make planning decisions. Acacia Communications believes that each of these non-GAAP financial measures helps identify underlying trends in its business that could otherwise be masked by the effect of the items that the Company excludes. Accordingly, Acacia Communications believes that these financial measures provide useful information to investors and others in understanding and evaluating its operating results, enhancing the overall understanding of the Company’s past performance and future prospects, and allowing for greater transparency with respect to key financial metrics used by its management in its financial and operational decision-making.

Acacia Communications’ non-GAAP financial measures are not prepared in accordance with GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures rather than gross profit, gross margin, research and development expenses, sales, general and administrative expenses, operating expenses, income (loss) from operations, net income (loss), effective tax rate or diluted earnings (loss) per share, which are the most directly comparable GAAP measures. Some of these limitations are:

  • Acacia Communications excludes stock-based compensation expense from each of its non-GAAP financial measures, although it has recently been, and will continue to be for the foreseeable future, a significant recurring expense for its business and an important part of the Company’s compensation strategy;
  • Acacia Communications excludes the tax benefits generated from the exercise of non-qualified stock options, the disqualifying disposition of incentive stock options and ESPP shares, and the vesting of restricted stock units, including any excess tax benefits and shortfalls recognized by the Company in the year of the taxable transaction, in calculating its non-GAAP effective tax rate, non-GAAP net income, and non-GAAP diluted EPS. The Company believes that excluding these tax benefits enables investors to see the full effect that excluding stock-based compensation expense had on the operating results. These benefits are tied to the exercise or vesting of underlying employee equity awards and the price of our common stock at the time of exercise or vesting, which factors may vary from period to period independent of the operating performance of the Company’s business. Similar to stock-based compensation expense, the Company believes that excluding these tax benefits provides investors and management with greater visibility to the underlying performance of its business operations and facilitates comparison with other periods as well as the results of other companies in its industry;
  • Acacia Communications excludes warranty and other charges arising from a manufacturing process quality issue from its non-GAAP gross profit, non-GAAP gross margin, non-GAAP income from operations, non-GAAP net income, non-GAAP effective tax rate, non-GAAP diluted EPS and adjusted EBITDA measures, as management does not believe the charges are reflective of the Company’s underlying operating performance;
  • Acacia Communications excludes certain adjustments to its valuation allowance against deferred tax assets from its non-GAAP net income, non-GAAP effective tax rate and non-GAAP diluted EPS measures, as management does not believe the charges are reflective of the Company’s underlying operating performance;
  • Acacia Communications excludes ZTE-related inventory write-offs and subsequent adjustments from its non-GAAP gross profit, non-GAAP gross margin, non-GAAP income from operations, non-GAAP net income, non-GAAP effective tax rate, non-GAAP diluted EPS and adjusted EBITDA measures, as management believes the activity is not related to the Company’s normal course of business and is not reflective of the Company’s underlying operating performance;
  • Acacia Communications excludes certain litigation related costs and settlement reserves from its non-GAAP sales, general and administrative expenses, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP net income, non-GAAP effective tax rate, non-GAAP diluted EPS and adjusted EBITDA measures, if management believes the activity is not related to the Company’s normal course of business and is not reflective of the Company’s underlying operating performance. These expenses may continue in the future;
  • Non-GAAP net income, non-GAAP effective tax rate and non-GAAP diluted EPS do not reflect the impact of the Act in the fourth quarter of 2017, part of which is federal taxes incurred on the repatriation of accumulated foreign earnings which will be paid over an eight-year period;
  • EBITDA and adjusted EBITDA exclude depreciation expense and, although this is a non-cash expense, the assets being depreciated may have to be replaced in the future;
  • EBITDA and adjusted EBITDA do not reflect interest income, which increases cash available to the Company, as this income is not generated by the Company’s core operations;
  • EBITDA and adjusted EBITDA do not reflect the (benefit) provision for income tax which may impact cash available to the Company; and
  • the expenses and other items that the Company excludes in its calculation of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA when they report their operating results.

Because of these limitations, non-GAAP financial measures should be considered along with other operating and financial performance measures presented in accordance with GAAP.

Acacia Communications’ use of non-GAAP financial measures, and the underlying methodology when excluding certain items, is not necessarily an indication of the results of operations that may be expected in the future, or that Acacia Communications will not, in fact, record such items in future periods.

Investors should consider Acacia Communications’ non-GAAP financial measures in conjunction with the corresponding GAAP financial measures.

About Acacia Communications

Acacia Communications develops, manufactures and sells high-speed coherent optical interconnect products that are designed to transform communications networks through improvements in performance, capacity and cost. By implementing optical interconnect technology in a silicon-based platform, a process Acacia Communications refers to as the “siliconization of optical interconnect,” Acacia Communications is able to offer products at higher speeds and density with lower power consumption, that meet the needs of cloud and service providers and can be easily integrated in a cost-effective manner with existing network equipment. www.acacia-inc.com.

Forward Looking Statements

This press release includes statements concerning Acacia Communications and its future expectations, plans and prospects that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “will” or “continue” or the negative of these terms or other similar expressions are intended to help you identify forward-looking statements. The forward-looking statements in this press release are only predictions. Acacia Communications has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that the Company believes may affect its business, financial condition and results of operations. These forward-looking statements speak only as of the date of this press release and are subject to a number of risks, uncertainties and assumptions including, without limitation, the Company’s ability to sustain or increase revenue from its larger customers, generate revenues from new customers, or offset the discontinuation of concentrated purchases by its larger customers with purchases by new or existing customers, the Company’s ability to anticipate the timing and scale of demand for our products, including from its largest customers, the Company’s expectations regarding expenses and revenue, its ability to maintain and expand gross profit, the sufficiency of the Company’s cash resources and needs for additional financing, the Company’s ability to produce products free of problems, defects, errors and vulnerabilities, the Company’s anticipated growth strategies, its expectations regarding competition, the anticipated trends and challenges in its business and the market in which it operates, the Company’s expectations regarding, and the capacity and stability of, its supply chain and manufacturing, the size and growth of the potential markets for its products and the ability to serve those markets, the scope, progress, expansion and costs of developing and commercializing its products, the timing, rate and degree of introducing any of its products into the market and the market acceptance of any of its products, the Company’s ability to establish and maintain development partnerships, its ability to attract or retain key personnel, the Company’s expectations regarding federal, state and foreign regulatory requirements, including export controls, tax law changes and interpretations, economic sanctions and anti-corruption regulations, regulatory or legislative developments in the United States and foreign countries, including trade policy and tariffs and export control laws or regulations that could impede its ability to sell its products to its customer ZTE Kangxun Telecom Co. Ltd. or any of its affiliates or that could impede its ability to sell products to other customers in certain foreign jurisdictions, particularly in China, the Company’s ability to obtain and maintain intellectual property protection for its products, and other risks set forth under the caption “Risk Factors” in the Company’s public reports filed with the SEC, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2019 to be filed with the SEC and in other filings that the Company may make with the SEC in the future. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as indicative of future events. Acacia Communications assumes no obligation to publicly update or revise any forward-looking statements contained in this press release as a result of new information, future events or otherwise.

SCHEDULE A
ACACIA COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
  March 31, 2019   December 31, 2018
ASSETS      
Current assets:      
Cash and cash equivalents $ 73,532     $ 60,444  
Marketable securities - short-term 265,899     264,660  
Accounts receivable 83,391     90,831  
Inventory 26,712     25,511  
Prepaid expenses and other current assets 11,793     12,598  
Total current assets 461,327     454,044  
Marketable securities - long-term 89,811     74,764  
Property and equipment, net 26,619     26,643  
Operating lease right-of-use assets 23,870      
Deferred tax asset 40,166     38,717  
Other assets 897     7,691  
Total assets $ 642,690     $ 601,859  
       
LIABILITIES AND STOCKHOLDERS EQUITY      
Current liabilities:      
Accounts payable $ 48,974     $ 46,650  
Accrued liabilities 39,006     31,848  
Deferred revenue 5,542     5,101  
Total current liabilities 93,522     83,599  
Income taxes payable 7,929     8,791  
Non-current operating lease liabilities 14,784      
Other long-term liabilities 6,829     6,742  
Total liabilities 123,064     99,132  
       
Stockholders’ equity:      
Common stock 4     4  
Treasury stock (39,712 )   (39,712 )
Additional paid-in capital 369,634     360,267  
Accumulated other comprehensive income (loss) 183     (372 )
Retained earnings 189,517     182,540  
Total stockholders’ equity 519,626     502,727  
Total liabilities and stockholders’ equity $ 642,690     $ 601,859  
               


SCHEDULE B
ACACIA COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
  Three Months Ended March 31,
  2019   2018
Revenue $ 105,216     $ 72,941  
Cost of revenue 55,374     48,870  
Gross profit 49,842     24,071  
Operating expenses:      
Research and development 30,953     24,445  
Sales, general and administrative 15,787     14,288  
Total operating expenses 46,740     38,733  
Income (loss) from operations 3,102     (14,662 )
Other income, net:      
Interest income, net 2,446     1,354  
Other expense, net (52 )   (71 )
Total other income, net 2,394     1,283  
Income (loss) before benefit for income taxes 5,496     (13,379 )
Benefit for income taxes (1,481 )   (4,301 )
Net income (loss) $ 6,977     $ (9,078 )
Earnings (loss) per share:      
Basic $ 0.17     $ (0.23 )
Diluted $ 0.17     $ (0.23 )
Weighted-average shares used to compute earnings (loss) per share:      
Basic 40,284     39,836  
Diluted 41,962     39,836  
           


SCHEDULE C
ACACIA COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
(unaudited)
  Three Months Ended March 31,
  2019   2018
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income (loss) $ 6,977     $ (9,078 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:      
Depreciation 3,243     3,266  
Stock-based compensation 8,008     6,538  
Deferred income taxes (1,449 )   (3,239 )
Non-cash lease expense 1,074      
Other non-cash (benefits) charges (643 )   45  
Changes in operating assets and liabilities:      
Accounts receivable 7,440     11,837  
Inventory (1,201 )   5,076  
Prepaid expenses and other current assets 805     (665 )
Other assets (96 )   208  
Accounts payable 1,658     (12,105 )
Accrued liabilities 4,661     5,527  
Deferred revenue 519     3,358  
Income taxes payable (862 )   (1,829 )
Lease liabilities (815 )    
Other long-term liabilities 9     121  
Net cash provided by operating activities 29,328     9,060  
       
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchases of property and equipment (2,724 )   (6,704 )
Purchases of marketable securities (105,206 )   (73,534 )
Sales and maturities of marketable securities 90,290     87,830  
Deposits     20  
Net cash (used in) provided by investing activities (17,640 )   7,612  
       
CASH FLOWS FROM FINANCING ACTIVITIES:      
Proceeds from the issuance of common stock under stock-based compensation plans 1,400     968  
Net cash provided by financing activities 1,400     968  
       
Net increase in cash and cash equivalents 13,088     17,640  
Cash and cash equivalents—Beginning of period 60,444     67,495  
Cash and cash equivalents—End of period $ 73,532     $ 85,135  
       
Supplemental cash flow disclosures:      
Cash paid (refunds received) for income taxes, net $ 878     $ (72 )
Non-cash transactions:      
Right of use assets acquired under operating leases $ 3,328     $  
               


SCHEDULE D
ACACIA COMMUNICATIONS, INC.
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
 (in thousands, except for per share data)
(unaudited)

  Three Months Ended
  Q1 2019   Q4 2018   Q1 2018
Non-GAAP Gross Profit and Non-GAAP Gross Margin          
GAAP gross profit $ 49,842     $ 53,011     $ 24,071  
Stock-based compensation - cost of revenue 520     474     521  
Warranty and other charges due to manufacturing process quality issue (79 )   (1,526 )   (375 )
Inventory write-offs (392 )   (3,263 )   7,063  
Non-GAAP gross profit $ 49,891     $ 48,696     $ 31,280  
GAAP gross margin 47.4 %   49.5 %   33.0 %
Non-GAAP gross margin 47.4 %   45.5 %   42.9 %
           
  Three Months Ended
  Q1 2019   Q4 2018   Q1 2018
Non-GAAP R&D Expenses          
GAAP research and development expenses $ 30,953     $ 28,925     $ 24,445  
Stock-based compensation 4,746     4,655     3,788  
Non-GAAP research and development expenses $ 26,207     $ 24,270     $ 20,657  
           
  Three Months Ended
  Q1 2019   Q4 2018   Q1 2018
Non-GAAP SG&A Expenses          
GAAP sales, general and administrative expenses $ 15,787     $ 12,458     $ 14,288  
Stock-based compensation 2,742     2,620     2,229  
Litigation related costs and settlement reserves 3,253     242     3,621  
Non-GAAP sales, general and administrative expenses $ 9,792     $ 9,596     $ 8,438  
           
  Three Months Ended
  Q1 2019   Q4 2018   Q1 2018
Non-GAAP Operating Expenses          
GAAP operating expenses $ 46,740     $ 41,383     $ 38,733  
Stock-based compensation 7,488     7,275     6,017  
Litigation related costs and settlement reserves 3,253     242     3,621  
Non-GAAP operating expenses $ 35,999     $ 33,866     $ 29,095  
           
  Three Months Ended
  Q1 2019   Q4 2018   Q1 2018
Non-GAAP Income from Operations          
GAAP income (loss) from operations $ 3,102     $ 11,628     $ (14,662 )
Stock-based compensation 8,008     7,749     6,538  
Warranty and other charges due to manufacturing process quality issue (79 )   (1,526 )   (375 )
Litigation related costs and settlement reserves 3,253     242     3,621  
Inventory write-offs (392 )   (3,263 )   7,063  
Non-GAAP income from operations $ 13,892     $ 14,830     $ 2,185  
                       


SCHEDULE D (Cont.)
ACACIA COMMUNICATIONS, INC.
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
 (in thousands, except for per share data)
(unaudited)
 
  Three Months Ended
  Q1 2019   Q4 2018   Q1 2018
Non-GAAP Net Income          
GAAP net income (loss) $ 6,977     $ 9,088     $ (9,078 )
Stock-based compensation 8,008     7,749     6,538  
Warranty and other charges due to manufacturing process quality issue (79 )   (1,526 )   (375 )
Litigation related costs and settlement reserves 3,253     242     3,621  
Inventory write-offs (392 )   (3,263 )   7,063  
Tax effect of excluded items (2,415 )   917     (3,491 )
Valuation allowance adjustments     4,042      
Non-GAAP net income $ 15,352     $ 17,249     $ 4,278  
           
  Three Months Ended
  Q1 2019   Q4 2018   Q1 2018
Non-GAAP Effective Tax Rate          
GAAP effective tax rate (26.9 )%   34.0 %   32.1 %
Tax effect of excluded items 32.6 %   (11.8 )%   (55.5 )%
Valuation allowance adjustments %   (23.8 )%   %
Non-GAAP effective tax rate 5.7 %   (1.6 )%   (23.4 )%
           
  Three Months Ended
  Q1 2019   Q4 2018   Q1 2018
Earnings (Loss) Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA          
GAAP net income (loss) $ 6,977     $ 9,088     $ (9,078 )
Depreciation 3,243     3,514     3,266  
Interest income, net (2,446 )   (2,291 )   (1,354 )
(Benefit) provision for income taxes (1,481 )   4,692     (4,301 )
Earnings (loss) before interest, taxes, depreciation and amortization (EBITDA) 6,293     15,003     (11,467 )
Stock-based compensation 8,008     7,749     6,538  
Warranty and other charges due to manufacturing process quality issue (79 )   (1,526 )   (375 )
Litigation related costs and settlement reserves 3,253     242     3,621  
Inventory write-offs (392 )   (3,263 )   7,063  
Adjusted EBITDA $ 17,083     $ 18,205     $ 5,380  
                       


SCHEDULE D (Cont.)
ACACIA COMMUNICATIONS, INC.
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
 (in thousands, except for per share data)
(unaudited)
  Three Months Ended
  Q1 2019   Q4 2018   Q1 2018
Non-GAAP Diluted EPS          
GAAP Diluted net income (loss) per share $ 0.17     $ 0.22     $ (0.23 )
Stock-based compensation 0.19     0.18     0.16  
Warranty and other charges due to manufacturing process quality issue     (0.04 )   (0.01 )
Litigation related costs and settlement reserves 0.08     0.01     0.09  
Inventory write-offs (0.01 )   (0.08 )   0.18  
Tax effect of excluded items (0.06 )   0.02     (0.09 )
Valuation allowance adjustments     0.10      
Non-GAAP diluted EPS $ 0.37     $ 0.41     $ 0.10  
           
Weighted-average shares used to compute GAAP diluted net income (loss) per share 41,962     41,946     39,836  
Dilutive stock-based awards         2,084  
Weighted-average shares used to compute non-GAAP diluted EPS 41,962     41,946     41,920  
                 


  Three Months Ending
  June 30, 2019
  Low   High
Estimated Non-GAAP Gross Margin Outlook      
Estimated GAAP gross margin 44.7 %   46.5 %
Estimated stock-based compensation - cost of revenue 0.3 %   0.3 %
Estimated Non-GAAP gross margin** 45 %   47 %
           

**Totals may not sum due to rounding.

SOURCE Acacia Communications, Inc.

For further information:

Investor Relations Contact:
Monica Gould
Office: (212) 871-3927
Email: IR@acacia-inc.com

Lindsay Savarese
Office: (212) 331-8417
Email: IR@acacia-inc.com

Public Relations Contact:
Kelly Karr
Office: (408) 718-9350
Email: PR@acacia-inc.com

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Source: Acacia Communications, Inc.