Intermolecular Reports Second Quarter 2019 Financial Results

Intermolecular, Inc.

Condensed Consolidated Statements of Operations

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

Three Months Ended June 30,

Six Months Ended June 30,

2019

2018

2019

2018

Revenue:

Program revenue

$

4,485

$

9,365

$

10,870

$

18,621

Licensing and royalty revenue

133

437

399

856

Total revenue

4,618

9,802

11,269

19,477

Cost of revenue:

Cost of program revenue

1,437

2,856

3,255

6,231

Cost of licensing and royalty revenue

—

3

—

4

Total cost of revenue

1,437

2,859

3,255

6,235

Gross profit

3,181

6,943

8,014

13,242

Operating expenses:

Research and development

4,216

4,056

8,362

8,087

Sales and marketing

974

858

1,864

1,654

General and administrative

3,494

1,748

5,832

4,034

Total operating expenses

8,684

6,662

16,058

13,775

Income (loss) from operations

(5,503)

281

(8,044)

(533)

Other income (expenses), net

Interest income (expense), net

172

140

355

245

Other income (expense), net

(3)

75

93

162

Total other income (expense), net

169

215

448

407

Income (loss) before provision for income taxes

(5,334)

496

(7,596)

(126)

Provision for income taxes

-

-

-

1

Net income (loss)

$

(5,334)

$

496

$

(7,596)

$

(127)

Earnings (loss) per share:

Basic

$

(0.11)

$

0.01

$

(0.15)

$

(0.00)

Diluted

$

(0.11)

$

0.01

$

(0.15)

$

(0.00)

Weighted-average number of shares used in computing earnings (loss) per share:

Basic

49,758,224

49,672,739

49,757,917

49,627,584

Diluted

49,758,224

50,059,639

49,757,917

49,627,584

Intermolecular, Inc.

Condensed Consolidated Balance Sheets

(In thousands, Unaudited)

As of June 30, 2019

As of December 31, 2018

ASSETS

Current assets:

Cash and cash equivalents

$

2,160

$

8,351

Short-term investments

21,753

22,098

Total cash, cash equivalents and short-term investments

23,913

30,449

Accounts receivable

1,941

3,349

Prepaid expenses and other current assets

1,004

936

Total current assets

26,858

34,734

Materials inventory

2,375

2,638

Property and equipment, net

2,809

3,432

Intangible assets, net

1,892

2,075

Right-of-use lease assets - operating

10,841

—

Other assets

503

514

Total assets

$

45,278

$

43,393

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

112

$

760

Accrued liabilities

1,592

1,234

Accrued compensation and employee benefits

1,984

3,431

Current portion of lease obligation - operating

1,816

—

Deferred revenue

159

917

Total current liabilities

5,663

6,342

Deferred rent

—

2,667

Long term lease obligation - operating

11,832

—

Total liabilities

17,495

9,009

Stockholders' equity:

Common stock

50

50

Additional paid-in capital

216,974

216,034

Accumulated other comprehensive income (loss)

28

(27)

Accumulated deficit

(189,269)

(181,673)

Total stockholders' equity

27,783

34,384

Total liabilities and stockholders' equity

$

45,278

$

43,393

Intermolecular, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands, Unaudited)

Six Months Ended June 30,

2019

2018

Cash flows from operating activities:

Net loss

$

(7,596)

$

(127)

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

Depreciation, amortization and accretion

1,123

2,693

Amortization expense - Right of use lease assets operating

787

—

Stock-based compensation

935

482

Loss on disposal of property and equipment

2

—

Changes in operating assets and liabilities:

Accounts receivable

1,408

4,074

Prepaid expenses and other assets

(57)

393

Materials inventory

291

(134)

Accounts payable

(520)

(750)

Accrued and other liabilities

(1,634)

(67)

Deferred revenue

(759)

(633)

Net cash (used in) provided by operating activities

(6,020)

5,931

Cash flows from investing activities:

Purchase of investments

(13,804)

(19,367)

Redemption of investments

14,202

12,010

Purchase of property and equipment

(574)

(489)

Net cash used in investing activities

(176)

(7,846)

Cash flows from financing activities:

Proceeds from exercise of common stock options

5

172

Net cash provided by financing activities

5

172

Net decrease in cash and cash equivalents

(6,191)

(1,743)

Cash and cash equivalents at beginning of period

8,351

6,090

Cash and cash equivalents at end of period

$

2,160

$

4,347

Intermolecular, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

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

Three Months Ended June 30,

Six Months Ended June 30,

2019

2018

2019

2018

GAAP cost of net revenue

$

1,437

$

2,859

$

3,255

$

6,235

Stock-based compensation expense (a)

(36)

(39)

(81)

(92)

Non-GAAP cost of net revenue

$

1,401

$

2,820

$

3,174

$

6,143

GAAP gross profit

$

3,181

$

6,943

$

8,014

$

13,242

Stock-based compensation expense (a)

36

39

81

92

Non-GAAP gross profit

$

3,217

$

6,982

$

8,095

$

13,334

As a percentage of net revenue:

GAAP gross margin

68.9

%

70.8

%

71.1

%

68.0

%

Non-GAAP gross margin

69.7

%

71.2

%

71.8

%

68.5

%

GAAP operating income (loss)

$

(5,503)

$

281

$

(8,044)

$

(533)

Stock-based compensation expense (a):

- Cost of net revenue

36

39

81

92

- Research and development

120

59

233

114

- Sales and marketing

57

21

110

51

- General and administrative

259

93

511

225

Non-GAAP operating income (loss)

$

(5,031)

$

493

$

(7,109)

$

(51)

GAAP net income (loss)

$

(5,334)

$

496

$

(7,596)

$

(127)

Stock-based compensation expense (a)

472

212

935

482

Non-GAAP net income (loss)

$

(4,862)

$

708

$

(6,661)

$

355

GAAP net income (loss)

$

(5,334)

$

496

$

(7,596)

$

(127)

Interest (income) expense, net

(172)

(140)

(355)

(245)

Provision for taxes

—

—

—

1

Depreciation, amortization, impairments and accretion

458

1,270

1,123

2,693

Stock-based compensation expense (a)

472

212

935

482

Adjusted EBITDA

$

(4,576)

$

1,838

$

(5,893)

$

2,804

Shares used in computing basic and diluted earnings per share:

Basic

49,758,224

49,672,739

49,757,917

49,627,584

Diluted

49,758,224

50,059,639

49,757,917

49,627,584

GAAP earnings (loss) per share:

Basic

$

(0.11)

$

0.01

$

(0.15)

$

(0.00)

Diluted

$

(0.11)

$

0.01

$

(0.15)

$

(0.00)

Non-GAAP earnings (loss) per share:

Basic

$

(0.10)

$

0.01

$

(0.13)

$

0.01

Diluted

$

(0.10)

$

0.01

$

(0.13)

$

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.