SANTA CLARA, Calif., — February 27, 2014 — OmniVision Technologies, Inc. (Nasdaq: OVTI), a leading developer of advanced digital imaging solutions, today reported financial results for the third quarter of fiscal 2014 that ended on January 31, 2014.
Revenues for the third quarter of fiscal 2014 were $352.0 million, as compared to $397.2 million in the second quarter of fiscal 2014, and $423.5 million in the third quarter of fiscal 2013. GAAP net income in the third quarter of fiscal 2014 was $30.6 million, or $0.54 per diluted share, as compared to net income of $26.3 million, or $0.47 per diluted share in the second quarter of fiscal 2014, and $21.3 million, or $0.40 per diluted share in the third quarter of fiscal 2013.
For the third quarter of fiscal 2014, the Company recorded a one-time after-tax benefit of approximately $15.9 million, or $0.28 per diluted share, related to the initial public offering (“IPO”) of its equity investee, China WLCSP Limited (“WLCSP”). The one-time benefit comprised a step-up in the book value of the Company’s investment in WLCSP, as well as a gain realized by the Company when it sold a portion of its WLCSP equity interest. Since the sale occurred at the end of the third fiscal quarter, the Company’s cash, cash equivalents and short-term investments as of January 31, 2014 did not include the associated sales proceeds.
Non-GAAP net income in the third quarter of fiscal 2014 was $40.4 million, or $0.69 per diluted share. Non-GAAP net income in the second quarter of fiscal 2014 was $34.9 million, or $0.60 per diluted share. Non-GAAP net income in the third quarter of fiscal 2013 was $31.5 million, or $0.56 per diluted share. Non-GAAP net income excludes stock-based compensation expenses and the related tax effects. Please refer to the attached schedule for a reconciliation of GAAP net income to non-GAAP net income for the three and nine months ended January 31, 2014 and 2013 and for the three months ended October 31, 2013.
GAAP gross margin for the third quarter of fiscal 2014 was 19.6%, as compared to 18.8% for the second quarter of fiscal 2014 and 16.9% for the third quarter of fiscal 2013. The sequential increase in third quarter gross margin was primarily attributable to continued reduction in the Company’s overall production costs.
OMNIVISION Confidential – Security A 2/27/2014 1:24:16 PM The Company ended the period with cash, cash equivalents and short-term investments totaling $393.0 million, an increase of $127.4 million from the previous quarter. The increase was primarily attributable to cash provided by operating activities in the third quarter of fiscal 2014.
“Our third quarter performance was better than we expected, and we continued to report improvements on multiple financial metrics, including gross margin and cash position,” said Shaw Hong, chief executive officer of OmniVision Technologies, Inc. “Our flagship PureCel® sensors are gaining traction in the market. PureCel® sensors have significantly better pixel performance, lower power consumption, and an attractive cost structure. We are very excited about our new product lineup.”
Based on current trends, the Company expects revenues for the fourth quarter of fiscal 2014 will be in the range of $275 million to $305 million and GAAP net income per share will be between $0.05 and $0.21 per diluted share. Excluding the estimated expense and related tax effects associated with stock-based compensation, the Company expects its non-GAAP net income per share will be between $0.19 and $0.35 per diluted share. Refer to the table below for a reconciliation of GAAP to non-GAAP net income.
OmniVision Technologies, Inc. will host a conference call today at 5:00 p.m. Eastern time to discuss these results further. This conference call can be accessed via a webcast at www.ovt.com. The call can also be accessed by dialing 866‑515‑2910 (domestic) or 617‑399‑5124 (international) and entering passcode 49688021.
A replay of the call will remain available at www.ovt.com for approximately twelve months. A replay of the call will also be available for ten days beginning approximately three hours after the conclusion of the call. To access the replay, dial 888‑286‑8010 (domestic) or 617‑801‑6888 (international) and enter passcode 26599973.
Safe Harbor Statement
Certain statements in this press release, including statements regarding our expectations regarding revenues and earnings per share for the three months ending April 30, 2014 are forward-looking statements. These forward-looking statements are based on management’s current expectations, and certain factors could cause actual results to differ materially from those in the forward-looking statements. These factors include, without limitation, our ability to maintain or increase sales to current key customers and end-users of our products; competition in current and emerging markets for image sensor products, including pricing pressures that could result from competition; our ability to increase the average selling prices or lower the costs associated with the development and manufacture of our new, complex products and technologies; fluctuations of wafer manufacturing costs, manufacturing yields, manufacturing capacity and other manufacturing processes and the impact on gross margins; the continued growth and development of current markets and the emergence of new markets in which we sell, or may sell, our products; fluctuations in sales mix and average selling prices; our ability to timely complete the product development cycle for new sensors; our ability to obtain design wins from various image sensor device manufacturers including manufacturers of mobile phones, tablets and entertainment devices, notebooks and webcams, security and surveillance systems, digital still and video cameras, automotive and medical imaging systems; our dependence on third party wafer foundries and their ability to manufacture our wafers in the required quantities, at acceptable quality, yields and costs, and in a timely manner; our ability to accurately forecast customer demand for our products; the impact of general economic conditions on orders from the end-user customers of our products; the market acceptance of products into which our products are designed; the development, production, introduction and marketing of new products and technology; the occurrence of litigation regarding intellectual property or indemnification claims from our suppliers or customers relating to our intellectual property; our strategic investments and relationships, and other risks detailed from time to time in our Securities and Exchange Commission filings and reports, including, but not limited to, our most recent Annual Report on Form 10-K and recent Quarterly Reports on Form 10-Q. We expressly disclaim any obligation to update information contained in any forward-looking statement.
Use of Non-GAAP Financial Information
To supplement the reader’s overall understanding of both its reported results presented in accordance with U.S. generally accepted accounting principles (“GAAP”) and its outlook, the Company also presents non-GAAP measures of net income and net income per share which are adjusted from results based on GAAP. In particular, the Company excludes stock-based compensation expenses and the related tax effects. The non-GAAP financial measures which the Company discloses also exclude the effects of stock-based compensation on the number of basic and diluted common shares used in calculating non-GAAP basic and diluted net income per share. The Company provides these non-GAAP financial measures to enhance an investor’s overall understanding of its current financial performance and to assess its prospects for the future. These non-GAAP financial measures reflect an additional way of viewing aspects of the Company’s operations that, when viewed with its GAAP results and the accompanying reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting the Company’s business. The economic basis for the Company’s decision to use non-GAAP financial measures is that the adjustments to net income did not reflect the on-going relative strength of the Company’s performance. The Company’s objective is to minimize any confusion in the financial markets by providing non-GAAP net income and non-GAAP net income per share measurements and disclosing the related components. These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the financial measures prepared in accordance with GAAP.
The Company uses non-GAAP financial measures for internal management purposes to conduct and evaluate its business, when publicly providing its business outlook and to facilitate period-to-period comparisons. The Company views non-GAAP net income per share as a primary indicator of the profitability of its underlying business. In addition, because stock-based compensation is a non-cash expense and is offset in full by a credit to additional paid-in capital, it has no effect on total stockholders’ equity. As the calculation of non-GAAP financial measures differs between companies, the non-GAAP financial measures used by the Company may not be comparable to similarly titled measures used by other companies. Other than stock-based compensation and the related tax effects, these differences may cause the Company’s non-GAAP measures to not be directly comparable to other companies’ non-GAAP measures. Although these non-GAAP financial measures adjust cost, expenses and basic and diluted share items to exclude the accounting treatment of stock-based compensation, they should not be viewed as a non-GAAP presentation reflecting the elimination of the underlying stock-based compensation programs. Thus, the Company’s non-GAAP presentations are not intended to present, and should not be used, as a basis for assessing what its operating results might be if it were to eliminate its stock-based compensation programs. The Company compensates for these limitations by providing full disclosure of the net income and net income per share on a basis prepared in accordance with GAAP to enable investors to consider net income and net income per share determined under GAAP as well as on an adjusted basis, and perform their own analysis, as appropriate. As a result of the foregoing limitations, the Company does not use, nor does the Company intend to use, the non-GAAP financial measures when assessing the Company’s performance against that of other companies.
Estimating stock-based compensation expenses and the related tax effects for a future period is subject to inherent risks and uncertainties, including but not limited to the price of the Company’s stock, stock market volatility, expected option life, risk-free interest rates, and the number of option exercises and sales during the quarter.