Intermolecular, Inc.
May 4, 2017

Intermolecular Announces First Quarter 2017 Financial Results

SAN JOSE, Calif., May 4, 2017 /PRNewswire/ -- Intermolecular, Inc. (NASDAQ: IMI) today reported results for its first Quarter ended March 31, 2017.

Results Highlights:

  • First quarter total revenue of $9.9 million
  • Implemented cost reductions to enable positive Adjusted EBITDA at $10 million revenue per quarter
  • New customer agreements and broader, high velocity pipeline create strong foundation for growth

First Quarter Fiscal 2017 Results
Revenue for the first quarter of 2017 was $9.9 million, down 5.1% compared to fourth quarter 2016 revenue of $10.5 million and down 32% compared to $14.5 million in the same period a year ago. Program revenue was $6.8 million, down 23% compared to $8.8 million in the previous quarter and down 43% from the $12.0 million recorded in the first quarter of 2016. Licensing and royalty revenue was $3.1 million (including a $1.5 million payment in connection with the completion of a CDP), up 91% compared to $1.6 million in the previous quarter and up 23% compared to $2.6 million in the same period a year ago.

GAAP net loss for the first quarter was $(5.8) million, or $(0.12) per share, compared to a net loss of $(3.0) million in the fourth quarter of 2016, or $(0.06) per share. The GAAP net loss for the first quarter of 2016 was $(1.7) million, or $(0.03) per share. 

Non-GAAP net loss for the first quarter was $(5.2) million, or $(0.10) per share, compared to a non-GAAP net loss of $(2.3) million, or $(0.05) per share, in the prior quarter and $(0.6) million, or $(0.01) per share in the first quarter of 2016. 

Adjusted EBITDA loss for the first quarter was $(1.9) million, compared to EBITDA of $1.4 million in the first quarter of 2016. 

In the first quarter, the company implemented a restructuring plan to reduce its cost structure. Included in the first quarter results is a charge of $1.3 million in connection with the restructuring. Management estimates the restructuring will save the company approximately $1.8 million per quarter starting in the second quarter of 2017. As a result, the company expects to generate positive adjusted EBITDA at $10 million revenue per quarter.

Cash and investments increased from $27.8 million at December 31, 2016 to $28.0 million at March 31, 2017.

"We are pleased to report that our customer engagement efforts have succeeded in bringing in 3 new customers with contracts signed this year.  Our pipeline has deepened with additional opportunities that leverage our core capabilities for materials innovation particularly in the semiconductor ecosystem," said Chris Kramer, President and CEO of Intermolecular.  "The restructuring that we implemented in March 2017 has enabled IMI to become a leaner and more nimble organization.  Our reduced cost structure coupled with our new customer relationships position us well for future growth and profitability."

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 "Non-GAAP Financial Measures" and "Reconciliation of GAAP to Non-GAAP Financial Measures" below.

Conference Call Today
Intermolecular will host a conference call and simultaneous audio-only webcast at 5:00 p.m. Eastern Time/2:00 p.m. Pacific Time today with Chris Kramer, CEO and president, and Bill Roeschlein, chief financial officer, for Intermolecular.

The call can be accessed by dialing (877) 251-1860; international callers should dial (224) 357-2386. Please dial-in ten minutes prior to the scheduled conference call time. The conference ID is 12869271. A live and archived webcast (audio only) of the call will be available on Intermolecular's Website at http://ir.intermolecular.com 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.

"Intermolecular" and the Intermolecular logo are registered trademarks; all rights reserved. Learn more at www.intermolecular.com

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 relate to, but are not limited to, 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.

Intermolecular, Inc.

Condensed Consolidated Statements of Operations

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




Three Months Ended March 31,



2017


2016

Revenue:







Program revenue


$

6,812


$

11,961

Licensing and royalty revenue



3,133



2,557

Total revenue



9,945



14,518

Cost of revenue:







Cost of program revenue



2,697



4,736

Cost of licensing and royalty revenue



290



60

Total cost of revenue



2,987



4,796

Gross profit



6,958



9,722

Operating expenses:







Research and development



7,108



6,904

Sales and marketing



1,481



1,943

General and administrative



3,008



2,600

Restructuring charges



1,348



Total operating expenses



12,945



11,447

Loss from operations



(5,987)



(1,725)

Other income (expense):







Interest income (expense), net



55



32

Other income (expense), net



97



16

Total other income (expense), net



152



48

Loss before provision for income taxes



(5,835)



(1,677)

Provision for income taxes



1



3

Net loss


$

(5,836)


$

(1,680)

Net loss per share, basic and diluted


$

(0.12)


$

(0.03)

Weighted-average number of shares used in computing net loss per share, basic and diluted



49,519,251



49,286,456

 

Intermolecular, Inc.

Condensed Consolidated Balance Sheets

(In thousands, Unaudited)




As of March 31, 2017


As of December 31,
2016

ASSETS







    Current assets:







Cash and cash equivalents


$

7,631


$

5,759

Short-term marketable securities



19,953



20,035

Total cash, cash equivalents and short-term marketable securities



27,584



25,794

Accounts receivable, net



3,815



5,063

Prepaid expenses and other current assets



1,217



1,397

Total current assets



32,616



32,254

Long-term marketable securities



400



1,995

Materials inventory



3,273



3,357

Property and equipment, net



9,807



10,964

Intangible assets, net



3,341



4,001

Other assets



586



597

Total assets


$

50,023


$

53,168








LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities:







Accounts payable


$

746


$

309

Accrued compensation and employee benefits



1,890



1,663

Deferred revenue



1,717



1,533

Accrued liabilities



2,673



1,451

Total current liabilities



7,026



4,956

Other long-term liabilities



3,165



3,216

Total liabilities



10,191



8,172

Stockholders' equity:







Common stock



50



50

Additional paid-in capital



213,973



213,313

Accumulated other comprehensive loss



(21)



(32)

Accumulated deficit



(174,170)



(168,335)

Total stockholders' equity



39,832



44,996

Total liabilities and stockholders' equity


$

50,023


$

53,168

 

Intermolecular, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands, Unaudited)




Three Months Ended March 31,



2017


2016

Cash flows from operating activities:







Net loss


$

(5,836)


$

(1,680)

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







Depreciation, amortization and accretion



1,977



1,972

Stock-based compensation



656



1,122

Gain on disposal of property and equipment



(4)



3

Gain on disposal of intangible assets



(1,239)



Changes in operating assets and liabilities:







Prepaid expenses and other assets



215



82

Materials inventory



78



201

Accounts receivable



1,248



(1,369)

Accounts payable



381



(655)

Accrued and other liabilities



1,394



(2,236)

Deferred revenue



183



51

Net cash used in operating activities



(947)



(2,509)

Cash flows from investing activities:







Purchase of investments



(2,827)



(5,134)

Redemption of investments



4,408



13,816

Purchase of property and equipment



(264)



(1,356)

Proceeds from sale of equipment



7



2

Proceeds from sale of intangible assets



1,500



Capitalized intangible assets





(45)

Net cash  provided by investing activities



2,824



7,283

Cash flows from financing activities:







Payment of capital leases



(5)



Proceeds from exercise of common stock options





693

Net cash (used in) provided by financing activities



(5)



693

Net increase in cash and cash equivalents



1,872



5,467

Cash and cash equivalents at beginning of period



5,759



11,676

Cash and cash equivalents at end of period


$

7,631


$

17,143

 

Intermolecular, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

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




Three Months Ended March 31,




2017



2016


GAAP cost of net revenue


$

2,987



$

4,796


Stock-based compensation expense (a)



(65)




(206)


Non-GAAP cost of net revenue


$

2,922



$

4,590


GAAP gross profit


$

6,958



$

9,722


Stock-based compensation expense (a)



65




206


Non-GAAP gross profit


$

7,023



$

9,928


As a percentage of net revenue:









GAAP gross margin



70.0

%



67.0

%

Non-GAAP gross margin



70.6

%



68.4

%

GAAP operating loss


$

(5,987)



$

(1,725)


Stock-based compensation expense (a):









- Cost of net revenue



65




206


- Research and development



182




330


- Sales and marketing



59




142


- General and administrative



350




444


Non-GAAP operating loss


$

(5,331)



$

(603)











GAAP net loss


$

(5,836)



$

(1,680)


Stock-based compensation expense (a)



656




1,122


Non-GAAP net loss


$

(5,180)



$

(558)











GAAP net loss


$

(5,836)



$

(1,680)


Interest income/ (expense), net



55




32


Provision for taxes



1




3


Depreciation, amortization (impairments) and accretion



1,977




1,971


Restructuring charges (b)



1,348





Stock-based compensation expense (a)



656




1,122


Adjusted EBITDA


$

(1,909)



$

1,384











Shares used in computing GAAP basic and diluted earnings per share



49,519




49,286


GAAP earnings per share:









Basic and diluted net loss per share


$

(0.12)



$

(0.03)


Shares used in computing Non-GAAP basic and diluted earnings per share



49,519




49,286


Non-GAAP earnings per share:









Basic and diluted net loss per share


$

(0.10)



$

(0.01)




(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.

CONTACT:

Bill Roeschlein
Intermolecular, Inc.
Chief Financial Officer
bill.roeschlein@intermolecular.com
+1.408.582.5415

Intermolecular Logo (PRNewsFoto/Intermolecular)

 

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SOURCE Intermolecular, Inc.

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