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Intermolecular Reports Fourth Quarter and Full Year 2018 Financial Results

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Intermolecular Reports Fourth Quarter and Full Year 2018 Financial Results
2018 Marked First Full Year of Positive Adjusted EBITDA Since 2013
Positive Operating Cash Flow of $5.9 million in 2018

SAN JOSE, Calif., Feb. 12, 2019 /PRNewswire/ -- Intermolecular, Inc. (Nasdaq: IMI), the trusted partner for advanced materials innovation, today reported results for the fourth quarter and full year ended December 31, 2018.

Q4 2018 Financial and Operational Highlights

  • Revenue of $6.3 million, which exceeded the company's guidance.
  • Program revenue totaled $6.0 million or 95% of total revenue.
  • Gross profit totaled $4.6 million or 73% of total revenue.
  • Adjusted EBITDA loss totaled $(1.5) million, which exceeded the company's guidance.
  • Net loss totaled $(2.6) million.
  • Secured two program contracts during the period, including a major new program service agreement with a leading global semiconductor manufacturer. Management expects a material revenue contribution from this customer in 2019.

Full Year 2018 Financial and Operational Highlights

  • Revenue was $33.7 million.
  • Program revenue increased 10% to $32.0 million or 95% of total revenue.
  • Gross profit totaled $23.7 million or 70% of total revenue.
  • Total operating expenses decreased 22% to $28.0 million.
  • Adjusted EBITDA improved to $1.8 million compared to a loss of $(0.7) million in 2017.
  • Net loss improved to $(3.4) million compared to net loss of $(10.4) million in 2017.
  • Operating cash flow of $5.9 million in 2018.
  • Cash and investments at December 31, 2018 was $30.4 million (or $0.61 per share), an improvement from $25.8 million (or $0.52 per share) at the end of the prior fiscal year. The company continues to have no debt.

Management Commentary
"Our performance in 2018 reflected the successful execution of our plan – with $5.9 million of operating cash flow generated with the combination of strong performance with existing customers, commencement of major contracts with new customers, higher gross margins, a reduced cost structure and better working capital management," said Intermolecular President and CEO Chris Kramer. "While we concluded certain programs to our customers' satisfaction in 2018 which resulted in a short-term dip in our revenues which will continue in the first quarter of 2019, we retain excellent relationships with each of these customers, and we have secured major new customer programs that position us well for growth going forward.   

"We entered 2019 on solid footing with a strong balance sheet and a robust pipeline of business.  Following the major new customer we won in late 2018, we secured another contract with a new top tier leading global semiconductor company in the first quarter. With our lower cost structure and higher gross margins, our high throughput services platform now has strong operating leverage which will drive our profitability as we continue to scale our business."

Fourth Quarter of 2018 Financial Results
Revenue for the fourth quarter of 2018 was $6.3 million, a decrease of 20% from $7.9 million in the third quarter of 2018, and a decrease of 40% from $10.6 million in the same period a year ago. Program revenue was $6.0 million, an 18% decrease from $7.4 million in the third quarter of 2018, and a 32% decrease from $8.9 million in the same period a year ago.

Gross profit for the fourth quarter of 2018 was $4.6 million (73% of total revenue), a 21% decrease from $5.8 million (74% of total revenue) in the third quarter of 2018, and a 33% decrease from $6.9 million (65% of total revenue) in the same period a year ago.

Total operating expenses for the fourth quarter of 2018 were $7.5 million, an 11% increase from $6.7 million in the third quarter of 2018, and an increase of 8% compared to $6.9 million in the same period a year ago.

Net loss for the fourth quarter of 2018 totaled $(2.6) million or $(0.05) per basic and diluted share, compared to net loss of $(0.7) million or $(0.01) per basic and diluted share in the third quarter of 2018, and compared to net income of $0.1 million or $0.00 per basic and diluted share in the same period a year ago.

Non-GAAP net loss, which excludes stock-based compensation expense, for the fourth quarter of 2018 totaled $(2.2) million, or $(0.04) per basic and diluted share, compared to non-GAAP net loss of $(0.5) million, or $(0.01) per basic and diluted share in the third quarter of 2018, and compared to non-GAAP net income of $0.4 million, or $0.01 per basic and diluted share in the same period a year ago. 

Adjusted EBITDA loss for the fourth quarter of 2018 totaled $(1.5) million, compared to an adjusted EBITDA of $0.5 million in the third quarter of 2018 and $2.1 million in the same period a year ago. 

Cash and investments totaled $30.4 million at the end of fourth quarter of 2018, a decrease of $0.2 million compared to $30.6 million at the end of third quarter of 2018. The company had no debt at quarter end.   

Full Year 2018 Financial Results
Revenue for 2018 was $33.7 million, a decrease of 10% from $37.2 million in the same period a year ago. Program revenue totaled $32.0 million, an increase of 10% from $29.0 million in 2017.

Gross profit for 2018 was $23.7 million (70% of total revenue), a 6% decrease from $25.1 million (67% of total revenue) in 2017.

Total operating expenses for 2018 was $28.0 million, a decrease of 22% compared to $36.1 million in 2017.

Net loss for 2018 totaled $(3.4) million or $(0.07) per basic and diluted share, an improvement from a net loss of $(10.4) million or $(0.21) per basic and diluted share in 2017.

Non-GAAP net loss for 2018 totaled $(2.4) million or $(0.05) per basic and diluted share, an improvement from a non-GAAP net loss of $(8.9) million or $(0.18) per basic and diluted share in 2017. 

Adjusted EBITDA for 2018 totaled $1.8 million, an improvement from an adjusted EBITDA loss of $(0.7) million in 2017. 

First Quarter 2019 Financial Outlook
The following statements are based on Intermolecular's current expectations for the first quarter ending March 31, 2019. The following statements are forward-looking, and actual results could differ materially depending on market conditions and the factors set forth under "Forward-Looking Statements" below. Intermolecular does not plan to update, nor does it undertake any obligation to update, this outlook in the future.

  • Revenue is projected to be in the range of $6.1 million to $6.5 million;
  • Net loss is projected to be between $(2.3) million and $(3.0) million, or between $(0.05) and (0.06) per share (based on approximately 49.8 million shares expected to be outstanding);
  • Non-GAAP net loss is projected to be between $(1.9) million and $(2.5) million, or between $(0.04) and $(0.05) per share, respectively (based on approximately 49.8 million shares expected to be outstanding); and,
  • Adjusted EBITDA loss is projected to be between $(1.4) million and $(2.0) million.

Intermolecular reports revenue, cost of revenue, gross margin, operating income (loss), net income (loss) and earnings (loss) per share in accordance with U.S. generally accepted accounting principles (GAAP) and additionally on a non-GAAP basis. A reconciliation of the non-GAAP financial measures with the most directly comparable GAAP measures, as well as a description of the items excluded from the non-GAAP measures, is included in the financial statements portion of this press release. Please refer to "Reconciliation of GAAP to Non-GAAP Financial Measures" and "Reconciliation of GAAP Net Loss to Non-GAAP Net Loss" below.

Conference Call
Intermolecular will host a conference call and simultaneous audio-only webcast today (February 12, 2019) at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) to discuss these results. The call will be hosted by Intermolecular President and CEO Chris Kramer and CFO Bill Roeschlein.

U.S. dial-in number: (877) 251-1860
International dial-in number: (224) 357-2386
Conference ID: 4880935

Please call the conference telephone number five to ten minutes prior to start time. An operator will register your name and organization. If you have difficulty connecting with the conference call, please contact Intermolecular's IR team at (949) 574-3860. A live and archived webcast (audio only) of the call will be available on Intermolecular's website for up to 30 days after the call.

About Intermolecular, Inc.
Intermolecular® is the trusted partner for advanced materials innovation. Advanced materials are at the core of innovation in the 21st century for a wide range of industries including semiconductors, consumer electronics, automotive and aerospace. With its substantial materials expertise, accelerated learning and experimentation platform, and information and analytics infrastructure, Intermolecular has a ten-year track record helping leading companies accelerate and de-risk materials innovation. Learn more at www.intermolecular.com.

"Intermolecular" and the Intermolecular logo are registered trademarks; all rights reserved.

Forward-Looking Statements
Statements made in this press release and the earnings call referencing the press release that are not statements of historical fact are forward-looking statements. Forward-looking statements are subject to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are commonly identified by words such as "would," "may," "expects," "believes," "plans," "intends," "projects" and other terms with similar meaning. Investors are cautioned that the forward-looking statements in this document are based on current beliefs, assumptions and expectations, speak only as of the date of this document and involve risks and uncertainties that could cause actual results to differ materially from current expectations. Such statements are subject to certain known and unknown risks and uncertainties, many of which are difficult to predict and generally beyond Intermolecular's control, that could cause actual results and other future events to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. Material factors that could cause actual results to differ materially from current expectations include, without limitation, the following: our ability to productize our workflows with existing and future customers; expectations regarding our future revenue, cash flow and GAAP and non-GAAP net income or loss; financial condition; the ability of our new business model to generate profits and long-term shareholder returns; the extent to which technology developed in collaboration with our customers will continue to remain on the critical path and have significant value for such customers and us as well as the industry as a whole; and anticipated growth in our current markets through expansion of existing customer programs and the entry into other engagements with new customers. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations, including but not limited to: our ability to execute on our strategy, prove our business model and remain technologically competitive in rapidly evolving industry conditions; commercial acceptance of our HPC platform and methodology as effective R&D tools; our ability to achieve and sustain profitability; the ability of our customers to achieve their announced product roadmaps in a timely manner; the extent to which we are able to successfully extend and expand relationships with existing customers; our ability to manage the growth of our business; the rapid technology changes and volatility of the customers and industries we serve; our potential need for future capital to finance our operations; and other risks described in our most recent annual report on Form 10-K as updated by our quarterly reports on Form 10-Q and other filings with the Securities and Exchange Commission available at www.sec.gov, particularly in the sections titled "Risk Factors." All forward-looking statements are based on management's current estimates, projections and assumptions, and we assume no obligation to update them.

Non-GAAP Financial Measures
To supplement the financial data presented on a GAAP basis, we also disclose certain non-GAAP financial measures, which exclude the effect of stock-based compensation expense. These non-GAAP financial measures are not prepared in accordance with GAAP, do not serve as an alternative to GAAP and may be calculated differently than non-GAAP financial information disclosed by other companies. These results should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. We believe that our non-GAAP financial information provides useful information to management and investors regarding financial and business trends relating to our financial condition and results of operations because the non-GAAP measures exclude charges that management considers to be outside of Intermolecular's core operating results. We believe that the non-GAAP measures of revenue, cost of net revenue, gross profit, gross margin, operating (loss) income, net (loss) income, earnings per share and net (loss) income per share, viewed in combination with our financial results calculated in accordance with GAAP, provide investors with additional perspective and a more meaningful understanding of our ongoing operating performance. In addition, management uses these non-GAAP measures to review and assess financial performance, to determine executive officer incentive compensation and to plan and forecast performance in future periods.

Corporate Contact
Bill Roeschlein
Intermolecular, Inc.
Chief Financial Officer
bill.roeschlein@intermolecular.com
(408) 582-5415

Investor Contact
Matt Glover or Najim Mostamand, CFA
Liolios
IMI@liolios.com
(949) 574-3860

 

Intermolecular, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts, Unaudited)




Three Months Ended December 31,


Twelve Months Ended December 31,



2018


2017


2018


2017

Revenue:









Program revenue


$6,009


$8,850


$31,984


$29,010

Licensing and royalty revenue


312


1,698


1,676


8,193

Total revenue


6,321


10,548


33,660


37,203

Cost of revenue:









Cost of program revenue


1,713


3,353


9,999


11,449

Cost of licensing and royalty revenue


1


344


9


656

Total cost of revenue


1,714


3,697


10,008


12,105

Gross profit


4,607


6,851


23,652


25,098

Operating expenses:









Research and development


4,677


4,206


17,228


21,535

Sales and marketing


910


734


3,256


4,019

General and administrative


1,901


1,974


7,516


9,198

Restructuring charges





1,351

Total operating expenses


7,488


6,914


28,000


36,103

Loss from operations


(2,881)


(63)


(4,348)


(11,005)

Other income (expense):









Interest income (expense), net


180


84


594


266

Other income (expense), net


104


95


344


337

Total other income (expense), net


284


179


938


603

Income (loss) before provision for income taxes


(2,597)


116


(3,410)


(10,402)

Provision for income taxes




1


1

Net income (loss)


$(2,597)


$116


$(3,411)


$(10,403)










Basic net income (loss) per common share


$(0.05)


$0.00


$(0.07)


$(0.21)

Diluted net income (loss) per common share


$(0.05)


$0.00


$(0.07)


$(0.21)










Shares used in basic net income (loss) per common share


49,751


49,559


49,689


49,547

Shares used in diluted net income (loss) per common share


49,751


49,765


49,689


49,547

 

Intermolecular, Inc.

Condensed Consolidated Balance Sheets

(In thousands, Unaudited)




As of December 31, 2018



As of December 31, 2017


ASSETS









Current assets:









Cash and cash equivalents


$

8,351



$

6,090


Short-term investments



22,098




18,060


Total cash, cash equivalents and short-term investments



30,449




24,150


Accounts receivable



3,349




5,519


Prepaid expenses and other current assets



936




1,069


Total current assets



34,734




30,738


Long-term investments






1,657


Materials inventory



2,638




2,781


Property and equipment, net



3,432




5,913


Intangible assets, net



2,075




2,620


Other assets



514




600


Total assets


$

43,393



$

44,309











LIABILITIES AND STOCKHOLDERS' EQUITY









Current liabilities:









Accounts payable


$

760



$

928


Accrued liabilities



1,234




865


Accrued compensation and employee benefits



3,431




2,535


Deferred revenue



917




941


Total current liabilities



6,342




5,269


Other long-term liabilities



2,667




2,967


Total liabilities



9,009




8,236


Stockholders' equity:









Common stock



50




50


Additional paid-in capital



216,034




214,796


Accumulated other comprehensive loss



(27)




(35)


Accumulated deficit



(181,673)




(178,738)


Total stockholders' equity



34,384




36,073


Total liabilities and stockholders' equity


$

43,393



$

44,309


 

Intermolecular, Inc.

Condensed Consolidated Statements of Cash Flows

 (In thousands, Unaudited)




Twelve Months Ended December 31,




2018



2017


Cash flows from operating activities:









Net loss


$

(3,411)



$

(10,403)


Adjustments to reconcile net loss to net cash used in operating activities:









Depreciation, amortization and accretion



4,717




7,194


Stock-based compensation



1,053




1,472


(Gain) loss on disposal of property and equipment



(9)




68


Changes in operating assets and liabilities:









Accounts receivable



2,646




(456)


Prepaid expenses and other assets



219




585


Materials inventory



50




557


Accounts payable



(197)




592


Accrued and other liabilities



894




110


Deferred revenue



(24)




(592)


Net cash (used in) provided by operating activities



5,938




(873)


Cash flows from investing activities:









Purchase of investments



(27,362)




(20,888)


Redemption of investments



24,775




22,861


Purchase of property and equipment



(1,287)




(777)


Proceeds from sale of equipment



10




14


Net cash (used in) provided by investing activities



(3,864)




1,210


Cash flows from financing activities:









Payment of capital leases






(17)


Proceeds from exercise of common stock options



187




11


Net cash (used in) provided by financing activities



187




(6)


Net increase in cash and cash equivalents



2,261




331


Cash and cash equivalents at beginning of period



6,090




5,759


Cash and cash equivalents at end of period


$

8,351



$

6,090


 

Intermolecular, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share amounts and percentages, Unaudited)




Three Months Ended
December 31,



Twelve Months Ended
December 31,




2018



2017



2018



2017


GAAP cost of net revenue


$

1,714



$

3,697



$

10,008



$

12,105


Stock-based compensation expense (a)



(45)




(47)




(170)




(191)


Non-GAAP cost of net revenue


$

1,669



$

3,650



$

9,838



$

11,914


GAAP gross profit


$

4,607



$

6,851



$

23,652



$

25,098


Stock-based compensation expense (a)



45




47




170




191


Non-GAAP gross profit


$

4,652



$

6,898



$

23,822



$

25,289


As a percentage of net revenue:

















GAAP gross margin



72.9

%



65.0

%



70.3

%



67.5

%

Non-GAAP gross margin



73.6

%



65.4

%



70.8

%



68.0

%

GAAP operating loss


$

(2,881)



$

(63)



$

(4,348)



$

(11,005)


Stock-based compensation expense (a):

















- Cost of net revenue



45




47




170




191


- Research and development



114




66




297




373


- Sales and marketing



47




23




121




119


- General and administrative



222




115




465




789


Non-GAAP operating income (loss)


$

(2,453)



$

188



$

(3,295)



$

(9,533)



















GAAP net income (loss)


$

(2,597)



$

116



$

(3,411)



$

(10,403)


Stock-based compensation expense (a)



428




251




1,053




1,472


Non-GAAP net income (loss)


$

(2,169)



$

367



$

(2,358)



$

(8,931)



















GAAP net income (loss)


$

(2,597)



$

116



$

(3,411)



$

(10,403)


Interest (income) expense, net



(180)




(84)




(594)




(266)


Provision for taxes









1




1


Depreciation, amortization, impairment and accretion



813




1,824




4,717




7,194


Restructuring charges (b)












1,351


Stock based compensation expense (a)



428




251




1,053




1,472


Adjusted EBITDA


$

(1,536)



$

2,107



$

1,766



$

(651)



















Shares used in computing earnings per share:

















Basic



49,751




49,559




49,689




49,547


Diluted



49,751




49,765




49,689




49,547


GAAP earnings (loss) per share:

















Basic


$

(0.05)



$

0.00



$

(0.07)



$

(0.21)


Diluted


$

(0.05)



$

0.00



$

(0.07)



$

(0.21)


Non-GAAP earnings (loss) per share:

















Basic


$

(0.04)



$

0.01



$

(0.05)



$

(0.18)


Diluted


$

(0.04)



$

0.01



$

(0.05)



$

(0.18)




(a) 

Stock-based compensation reflects expense recorded relating to stock-based awards. The Company excludes this item when it evaluates the continuing operational performance of the Company, as management believes this provides it a meaningful understanding of its core operating performance.



(b) 

Restructuring charges incurred in connection with a reduction in headcount primarily comprised of employee severance and benefit costs.


 

Intermolecular, Inc.

First Quarter 2019 Outlook

Reconciliation of GAAP Net Loss to Non-GAAP Net Loss

(In thousands, except per share amounts, Unaudited)


GAAP net loss range


$(2,300) -   $(3,000)

Stock-based compensation


$400 -   $500

Non-GAAP net loss range


$(1,900) -   $(2,500)




GAAP and Non-GAAP diluted shares


49,800

GAAP net loss per share range


$(0.05) -   $(0.06)

Non-GAAP net loss per share range


$(0.04) -   $(0.05)

 

Intermolecular Logo (PRNewsfoto/Intermolecular, Inc.)

 

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