Acacia Communications Reports Second Quarter 2016 Results
“Our record second quarter results exceeded our expectations across the board and reflect the success of our disruptive technology in transforming cloud, content and communications networks. These results are a testament to our strategy and demonstrate our leadership position in the high-growth 100G plus optical networking market,” said Raj Shanmugaraj, President and CEO of
“We are delighted to have completed our IPO during the second quarter and are excited about the many opportunities ahead of us,” said
Results for the Second Quarter of 2016
- Revenue of
$116.2 million , increased 101% year-over-year - GAAP gross margin of 46.4% of revenue; non-GAAP gross margin of 47.0% of revenue
- GAAP income from operations of
$23.5 million ; non-GAAP income from operations of$32.6 million - GAAP net income of
$17.6 million ; non-GAAP net income of$28.9 million - EBITDA of
$22.0 million ; adjusted EBITDA of$34.7 million - GAAP diluted EPS of
$0.43 ; non-GAAP diluted EPS of$0.77
Outlook for the Third Quarter of 2016
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 release.
Acacia Communications’ expectations for the third quarter of 2016 are:
Quarter Ending
Revenue (millions) | $ | 120.0 | to | $ | 128.0 | ||
Non-GAAP Net Income (millions) | $ | 26.0 | to | $ | 31.0 | ||
Non-GAAP Diluted Earnings Per Share | $ | 0.64 | to | $ | 0.76 |
Conference Call
Use of Non-GAAP Financial Information
This release includes non-GAAP financial measures that are not in accordance with, nor an alternative to, generally accepted accounting principles. In addition, these non-GAAP 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’ non-GAAP gross profit, non-GAAP income from operations, non-GAAP net income, non-GAAP diluted EPS, EBITDA and adjusted EBITDA to its GAAP measures.
Acacia Communications’ non-GAAP financial measures reflect adjustments based on the measures 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.
Because of these limitations, non-GAAP financial measures should be considered along with other operating and financial performance measures presented in accordance with GAAP.
Non-GAAP gross profit. Acacia Communications defines non-GAAP gross profit as gross profit as reported on its consolidated income statements, excluding the impact of stock-based compensation, which is a non-cash charge. Acacia Communications has presented non-GAAP gross profit because the Company believes that the exclusion of stock-based compensation allows for more accurate comparisons of the Company’s results of operations to other companies in its industry.
Non-GAAP income from operations. Acacia Communications defines non-GAAP income from operations as income from operations as reported on the Company’s consolidated income statements, excluding the impact of stock-based compensation. Acacia Communications has presented non-GAAP income from operations because the Company believes that the exclusion of stock-based compensation allows for more accurate comparisons of its results of operations to other companies in its industry.
Non-GAAP net income and Non-GAAP diluted EPS. Acacia Communications defines non-GAAP net income as net income as reported on the Company’s consolidated income statements, excluding the impact of stock-based compensation and the change in fair value of the preferred stock warrant liability, both of which are non-cash charges, and the tax impact on those excluded items.
In order to calculate non-GAAP diluted EPS, Acacia Communications uses a non-GAAP weighted-average share count. The Company defines non-GAAP weighted-average shares used to compute non-GAAP diluted EPS as GAAP weighted-average shares used to compute diluted net income per share attributable to common stockholders, adjusted to reflect the conversion of its redeemable convertible preferred stock into common stock and the conversion of its redeemable convertible preferred stock warrants into common stock warrants, both as if they had occurred at the beginning of the period.
Acacia Communications has presented non-GAAP net income and non-GAAP diluted EPS because the Company believes that the exclusion of stock-based compensation and the change in fair value of the preferred stock warrant liability allows for more accurate comparisons of its results of operations to other companies in its industry.
Adjusted EBITDA. Acacia Communications defines adjusted EBITDA as the Company’s net income excluding stock-based compensation and the change in fair value of the preferred stock warrant liability; interest income/expense; depreciation; and its provision for income taxes. 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 expenses 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 expenses 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, income from operations, net income or diluted EPS, which are the nearest GAAP equivalents. Some of these limitations are:
Acacia Communications excludes stock-based compensation expense from each of its non-GAAP financial measures, as 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 change in fair value of its preferred stock warrant liability from its non-GAAP net income, and EBITDA and adjusted EBITDA measures, as it has historically been a recurring non-cash charge but it will not recur in the periods following the Company’s initial public offering;- adjusted EBITDA excludes depreciation expense and, although these are non-cash expenses, the assets being depreciated may have to be replaced in the future;
- adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest, which reduces cash available to the Company;
- adjusted EBITDA does not reflect income tax payments that reduce 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 its operating results.
With respect to the guidance provided under “Outlook for the Third Quarter of 2016” above, the Company has not reconciled its expectations as to non-GAAP net income or non-GAAP diluted EPS to GAAP net income or GAAP EPS because stock-based compensation expense cannot be reasonably calculated or predicted at this time. Accordingly, a reconciliation is not available without unreasonable effort.
Acacia Communications’ use of non-GAAP 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
Investors should consider Acacia Communications’ non-GAAP financial measures in conjunction with the corresponding GAAP measures.
About
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 converting optical interconnect technology to a silicon-based technology, a process
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” or “continue” or the negative of these terms or other similar expressions are intended to identify forward-looking statements.
SCHEDULE A | |||||||
ACACIA COMMUNICATIONS, INC. | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(in thousands) | |||||||
June 30, 2016 |
December 31, 2015 |
||||||
(unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 159,009 | $ | 27,610 | |||
Accounts receivable | 77,889 | 41,260 | |||||
Inventory | 23,264 | 27,920 | |||||
Prepaid expenses and other current assets | 1,853 | 3,179 | |||||
Deferred product costs | 1,482 | 3,476 | |||||
Total current assets | 263,497 | 103,445 | |||||
Property and equipment, net | 20,768 | 15,925 | |||||
Deferred tax asset | 11,643 | 11,189 | |||||
Other assets | 317 | 185 | |||||
Total assets | $ | 296,225 | $ | 130,744 | |||
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 48,574 | $ | 25,015 | |||
Accrued liabilities | 18,314 | 15,521 | |||||
Deferred revenue | 7,090 | 7,762 | |||||
Total current liabilities | 73,978 | 48,298 | |||||
Preferred stock warrant liability | - | 3,254 | |||||
Other long-term liabilities | 964 | 396 | |||||
Total liabilities | 74,942 | 51,948 | |||||
Redeemable convertible preferred stock | - | 70,780 | |||||
Stockholders' equity: | |||||||
Common stock | 4 | 1 | |||||
Additional paid-in capital | 181,747 | - | |||||
Retained earnings | 39,532 | 8,015 | |||||
Total stockholders' equity | 221,283 | 8,016 | |||||
Total liabilities, redeemable convertible preferred stock and stockholders' equity | $ | 296,225 | $ | 130,744 |
SCHEDULE B | |||||||||||||||
ACACIA COMMUNICATIONS, INC. | |||||||||||||||
CONDENSED CONSOLIDATED INCOME STATEMENTS | |||||||||||||||
(in thousands, except per share data) | |||||||||||||||
(unaudited) | |||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenue | $ | 116,192 | $ | 57,846 | $ | 200,681 | $ | 105,090 | |||||||
Cost of revenue | 62,240 | 37,441 | 111,323 | 68,081 | |||||||||||
Gross profit | 53,952 | 20,405 | 89,358 | 37,009 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 21,839 | 8,820 | 37,253 | 16,723 | |||||||||||
Sales, general and administrative | 8,649 | 2,932 | 12,703 | 5,055 | |||||||||||
Total operating expenses | 30,488 | 11,752 | 49,956 | 21,778 | |||||||||||
Income from operations | 23,464 | 8,653 | 39,402 | 15,231 | |||||||||||
Other expense: | |||||||||||||||
Interest income (expense), net | 20 | (84 | ) | 28 | (132 | ) | |||||||||
Change in fair value of preferred stock warrant liability | (3,609 | ) | (1,061 | ) | (3,361 | ) | (1,443 | ) | |||||||
Other (expense) income | (58 | ) | (85 | ) | (78 | ) | 167 | ||||||||
Total other expense, net | (3,647 | ) | (1,230 | ) | (3,411 | ) | (1,408 | ) | |||||||
Income before provision for income taxes | 19,817 | 7,423 | 35,991 | 13,823 | |||||||||||
Provision for income taxes | 2,219 | 2,716 | 3,796 | 4,779 | |||||||||||
Net income | 17,598 | 4,707 | 32,195 | 9,044 | |||||||||||
Accretion of redeemable convertible preferred stock | (636 | ) | (1,085 | ) | (1,722 | ) | (2,159 | ) | |||||||
Undistributed earnings attributable to participating securities | (6,455 | ) | (2,868 | ) | (17,467 | ) | (5,466 | ) | |||||||
Net income attributable to common stockholders - basic and diluted | $ | 10,507 | $ | 754 | $ | 13,006 | $ | 1,419 | |||||||
Net income per share attributable to common stockholders: | |||||||||||||||
Basic | $ | 0.51 | $ | 0.12 | $ | 0.95 | $ | 0.23 | |||||||
Diluted | $ | 0.43 | $ | 0.09 | $ | 0.77 | $ | 0.18 | |||||||
Weighted-average shares used to compute net income per share attributable to common stockholders: | |||||||||||||||
Basic | 20,760 | 6,363 | 13,751 | 6,274 | |||||||||||
Diluted | 24,373 | 8,063 | 16,927 | 7,973 |
SCHEDULE C | |||||||
ACACIA COMMUNICATIONS, INC. | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW | |||||||
(in thousands) | |||||||
(unaudited) | |||||||
Six Months Ended June 30, | |||||||
2016 | 2015 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 32,195 | $ | 9,044 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation | 3,820 | 1,956 | |||||
Stock-based compensation | 9,461 | 315 | |||||
Deferred income taxes | (454 | ) | - | ||||
Non-cash interest | - | 72 | |||||
Change in fair value of preferred stock warrant liability | 3,361 | 1,443 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (36,629 | ) | (21,778 | ) | |||
Inventory | 4,656 | (15 | ) | ||||
Prepaid expenses and other current assets | (1,026 | ) | 1,513 | ||||
Deferred product costs | 1,994 | (540 | ) | ||||
Other assets | (109 | ) | - | ||||
Accounts payable | 22,929 | 8,346 | |||||
Accrued liabilities | 2,826 | 2,585 | |||||
Deferred revenue | (672 | ) | (1,153 | ) | |||
Other long-term liabilities | 568 | - | |||||
Net cash provided by operating activities | 42,920 | 1,788 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of property and equipment | (8,033 | ) | (4,811 | ) | |||
Deposits | (23 | ) | - | ||||
Net cash used in investing activities | (8,056 | ) | (4,811 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Repayment of long-term debt | - | (2,155 | ) | ||||
Payment of capital lease obligation | (34 | ) | (16 | ) | |||
Proceeds from initial public offering, net of underwriting discounts and commissions | 97,757 | - | |||||
Payment of initial public offering costs | (1,471 | ) | - | ||||
Proceeds from the exercise of common stock options | 283 | 93 | |||||
Net cash provided by (used in) financing activities | 96,535 | (2,078 | ) | ||||
Effect of exchange rates on cash | - | (3 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 131,399 | (5,104 | ) | ||||
Cash and cash equivalents—Beginning of period | 27,610 | 21,128 | |||||
Cash and cash equivalents—End of period | $ | 159,009 | $ | 16,024 | |||
SCHEDULE D | |||||||||||
ACACIA COMMUNICATIONS, INC. | |||||||||||
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES | |||||||||||
(in thousands, except per share data) | |||||||||||
(unaudited) | |||||||||||
Q2 2016 | Q1 2016 | Q2 2015 | |||||||||
Non-GAAP Gross Profit | |||||||||||
GAAP gross profit | $ | 53,952 | $ | 35,406 | $ | 20,405 | |||||
Stock-based compensation - cost of revenue | 660 | 32 | 12 | ||||||||
Non-GAAP gross profit | $ | 54,612 | $ | 35,438 | $ | 20,417 | |||||
Non-GAAP gross margin | 47.0 | % | 41.9 | % | 35.3 | % |
Q2 2016 | Q1 2016 | Q2 2015 | |||||||||
Non-GAAP Income from Operations | |||||||||||
GAAP income from operations | $ | 23,464 | $ | 15,938 | $ | 8,653 | |||||
Stock-based compensation | 9,171 | 290 | 186 | ||||||||
Non-GAAP income from operations | $ | 32,635 | $ | 16,228 | $ | 8,839 |
Q2 2016 | Q1 2016 | Q2 2015 | |||||||||
Non-GAAP Net Income | |||||||||||
GAAP net income | $ | 17,598 | $ | 14,598 | $ | 4,707 | |||||
Stock-based compensation | 9,171 | 290 | 186 | ||||||||
Change in fair value of preferred stock warrant liability | 3,609 | (248 | ) | 1,061 | |||||||
Tax effect of excluded items | (1,496 | ) | (69 | ) | 126 | ||||||
Non-GAAP net income | $ | 28,882 | $ | 14,571 | $ | 6,080 |
Q2 2016 | Q1 2016 | Q2 2015 | |||||||||
GAAP diluted net income per share attributable to common stockholders | $ | 0.43 | $ | 0.30 | $ | 0.09 | |||||
Accretion to redemption value and undistributed earnings allocated to participating securities |
(0.12 | ) | 0.11 | (0.07 | ) | ||||||
Stock-based compensation | 0.38 | 0.04 | 0.02 | ||||||||
Change in fair value of preferred stock warrant liability | 0.14 | (0.00 | ) | 0.13 | |||||||
Tax effect of excluded items | (0.06 | ) | (0.01 | ) | 0.02 | ||||||
Non-GAAP diluted EPS | $ | 0.77 | $ | 0.44 | $ | 0.19 | |||||
Weighted-average shares used to compute GAAP diluted net income per share attributable to common shareholders |
24,373 | 8,867 | 8,063 | ||||||||
Adjustment for conversion of preferred stock | 12,753 | 24,177 | 24,177 | ||||||||
Conversion of preferred stock warrant into common stock warrant | 245 | 245 | 245 | ||||||||
Weighted-average shares used to compute non-GAAP diluted EPS | 37,371 | 33,289 | 32,485 |
SCHEDULE D (Cont.) | |||||||||||
ACACIA COMMUNICATIONS, INC. | |||||||||||
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES | |||||||||||
(in thousands) | |||||||||||
(unaudited) | |||||||||||
Q2 2016 | Q1 2016 | Q2 2015 | |||||||||
EBITDA and Adjusted EBITDA | |||||||||||
GAAP net income | $ | 17,598 | $ | 14,598 | $ | 4,707 | |||||
Depreciation | 2,154 | 1,666 | 1,044 | ||||||||
Interest (income) expense, net | (20 | ) | (9 | ) | 84 | ||||||
Provision for income taxes | 2,219 | 1,577 | 2,716 | ||||||||
EBITDA | 21,951 | 17,832 | 8,551 | ||||||||
Stock-based compensation | 9,171 | 290 | 186 | ||||||||
Change in fair value of preferred stock warrant liability | 3,609 | (248 | ) | 1,061 | |||||||
Adjusted EBITDA | $ | 34,731 | $ | 17,874 | $ | 9,798 |
SCHEDULE E | |||||||
ACACIA COMMUNICATIONS, INC. | |||||||
SUPPLEMENTAL CASH FLOW INFORMATION | |||||||
(in thousands) | |||||||
(unaudited) | |||||||
Six Months Ended June 30, | |||||||
2016 | 2015 | ||||||
Supplemental cash flow information: | |||||||
Cash paid for income taxes | $ | 2,819 | $ | 2,419 | |||
Cash paid for interest | $ | - | $ | 53 | |||
For further information: Investor Relations Contact:Monica Gould Office: (212) 871-3927 Email: IR@acacia-inc.com Public Relations Contact:Jason Ouellette Office: (617) 399-4908 Email: Jason.ouellette@text100.com