QLogic: Fiscal 1Q16 Financial Results

(in $ million)	1Q15	1Q16	Growth
Revenue	119.4	113.4	*-5%*
Net income (loss)	6.0	2.6

QLogic Corp. announced its first quarter financial results for the period ended June 28, 2015.

Net revenue for the first quarter of fiscal 2016 was $113.4 million compared to $119.4 million in the same quarter last year.

Revenue from Advanced Connectivity Platforms was $102.6 million during the first quarter of fiscal 2016 compared to $104.7 million in the same quarter last year.

Net income on a GAAP basis for the first quarter of fiscal 2016 was $2.6 million, or $0.03 per diluted share, compared to $6.0 million, or $0.07 per diluted share, for the first quarter of fiscal 2015. Net income on a non-GAAP basis for the first quarter of fiscal 2016 was $16.5 million, or $0.19 per diluted share, compared to $18.5 million, or $0.21 per diluted share, for the first quarter of fiscal 2015.

“We are disappointed with our first quarter financial performance. Our first quarter results were adversely impacted by lower than expected demand due to weakness in our traditional enterprise server and storage markets, and operational issues including an inventory build-up primarily at a major OEM customer that was not identified on a timely basis,” said Prasad Rampalli, president and CEO. “We have taken actions to address these execution areas where we fell short and also plan to take actions over the next few months to reduce our operating costs by streamlining our business and prioritizing our investments. We remain committed to our strategy and will continue to focus on our core and expansion markets to deliver long-term growth and enhance shareholder value.”

Comments

QLogic revenue by business
(in $ million)

Business

1Q15

1Q16

Q/Q growth

Previsions 2Q16

Q/Q growth

Advanced Connectivity Platforms (1)

104.7

102.6

-2%

-9%

Legacy Connectivity Products (2)

14.7

10.8

-27%

-17%

Total

119.4

113.4

-5%

102

-10%

(1) adapters and ASICs with server and storage connectivity applications
(2) switch products

Prasad L. Rampalli, president and CEO:
"We're targeting to reduce operating expenses to approximately $200 million for fiscal year 2016 as compared to total operating expenses of $221 million in fiscal year 2015.
"Our first quarter results were adversely impacted by two primary factors. First, as we communicated in our preliminary results announcement, we saw a lower-than-expected demand due to a soft macro environment and weakness in our traditional enterprise server and storage markets. Since our pre announcement, others in the industry have reported similar weakness in enterprise markets and challenging market conditions.
"Second, we had our own set of operational execution issues that contributed to our disappointing performance. These operational execution issues consisted of: one, an inventory buildup primarily at a major OEM customer due to a slower-than-expected transition to next-generation servers in enterprise environments that was not identified on a timely basis; and two, execution issues in scaling our Ethernet channel business.
"(...) our revenue from FC products performed below our expectations during the first quarter. While we do not break out our revenue by specific products or customers, I can say that we experienced weakness from several of our leading Fibre Channel server and storage connectivity customers. We believe this is due to weaker-than-expected traditional enterprise server and storage system shipments which directly impacted our revenue from FCl products.
"(...) we believe our revenue in the second half of fiscal 2016 will grow from the first half of the year."

Jean Hu, CFO:
"For the second quarter of fiscal 2016, we expect total revenue to be in the range of $98 million to $106 million.
"We expect a sequential decline in our revenue from Advanced Connectivity Platform at middle point. It's the result of several factors. First we expect revenue from FC adapters to be approximately flat sequentially. Second, our targeted ASIC revenue is expected to decline sequentially but we continue to expect year-over-year growth in fiscal 2016. Third, we expect our revenue from Ethernet products to decline sequentially and as mentioned earlier will be impacted by approximately $3 million to $4 million as a result of expected depletion of a majority of the inventory buildup at one of our major OEM customers."