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Audience Announces First Quarter 2015 Financial Results

MOUNTAIN VIEW, CA — (Marketwired) — 04/30/15 — Audience, Inc. (NASDAQ: ADNC), the leader in advanced voice and audio processing for mobile devices, today announced its first quarter 2015 financial results.

Revenue for the first quarter of 2015 was $18.4 million, compared with $36.0 million for the same period in 2014. As reported under U.S. generally accepted accounting principles (GAAP), first quarter 2015 net loss was ($17.6) million, or ($0.75) per diluted share based on weighted average shares outstanding of 23.4 million. This compares with GAAP net loss of ($7.3) million, or ($0.33) per diluted share based on weighted average shares outstanding of 22.2 million, for the same period in 2014. Gross margin on a GAAP basis for the first quarter of 2015 was 42.6% of revenue, compared to 51.7% of revenue for the same period in 2014.

Non-GAAP net loss, as defined below, for the first quarter of 2015 was ($10.8) million, or ($0.46) per diluted share based on weighted average shares outstanding of 23.4 million. This compares with non-GAAP net loss of ($3.4) million, or ($0.15) per diluted share based on weighted average shares outstanding of 22.2 million, for the same period in 2014. Gross margin on a non-GAAP basis for the first quarter of 2015 was 47.0% of revenue, compared to 51.9% of revenue for the same period in 2014.

On April 30, 2015, Knowles Corporation (NYSE: KN), and Audience issued a release announcing that Knowles, Orange Subsidiary, Inc. and Audience entered into an agreement and plan of merger today, pursuant to which each outstanding share of Audience will receive $5.00 in total consideration, consisting of $2.50 in cash and $2.50 in Knowles stock, subject to a collar as described more completely in the announcement press release, which is available on Audience–s web site ().

“This transaction offers the potential to transform the mobile audio chain and deliver substantial feature, integration and performance benefits to our customers. We believe that it possesses significant strategic synergies and maximizes value for Audience shareholders,” said Peter Santos, president and CEO, Audience. “After careful consideration, our board of directors concluded that the opportunity to combine with Knowles represents the best possible outcome for shareholder value. Our board of directors believes that a larger platform will enable the combined company to pursue Audience–s business more effectively. This conclusion was reached in light of material declines in forecast demand over the last thirty days from our largest customer relative to management expectations for 2Q15, combined with the concentration of Audience–s business at that customer. The impact of this forecast change is to dramatically erode projected operating results for 2015 as well as our projected cash balances, and to introduce concerns about our ability to continue as a standalone entity without additional capital.”

Peter Santos, president and chief executive officer, and Kevin Palatnik, chief financial officer, will not be hosting the scheduled conference call today at 2:00 pm (Pacific) / 5:00 pm (Eastern).

Audience prepares its financial statements in accordance with generally accepted accounting principles for the United States (GAAP). The non-GAAP financial measures, such as gross margin, net loss and loss per share information for the three month period ended March 31, 2015 and the similar period from the prior year included in this press release are different from those otherwise presented under GAAP. The following are explanations of each type of adjustment that we incorporate into non-GAAP financial measures:

Stock-based compensation expense relates to equity incentive awards granted to our employees, directors and consultants. Stock-based compensation expense has been and will continue to be a significant recurring expense for Audience. The expense associated with stock-based awards reflects a non-cash charge that we exclude from non-GAAP net loss.

On July 11, 2014, Audience completed its acquisition of Sensor Platforms, Inc. The amortization of purchased intangible assets that were recorded in connection with the acquisition has been excluded from non-GAAP net loss.

The acquisition-related fees and expenses that were recorded in connection with the merger with Knowles have been excluded from non-GAAP net loss.

Non-GAAP financial information is adjusted for a tax rate equal to our three year annual estimated tax rate on non-GAAP income. Our three year estimated tax rate on non-GAAP income is determined annually and may be adjusted during the year to take into account events or trends that we believe materially impact the estimated annual rate including, but not limited to, significant changes resulting from tax legislation, material changes in the geographic mix of revenues and expenses and other significant events. Due to the differences in the tax treatment of items excluded from non-GAAP earnings, as well as the methodology applied to our estimated annual tax rates, our estimated tax rate on non-GAAP income may differ from our GAAP tax rate and from our actual tax liabilities.

Audience has provided these measures in addition to GAAP financial results because management believes these non-GAAP measures help provide a consistent basis for comparison between quarters and annual growth rates that are not influenced by certain non-cash charges and therefore are helpful in understanding Audience–s underlying operating results. These non-GAAP measures are some of the primary measures Audience–s management uses for planning and forecasting. These measures are not in accordance with, or an alternative to, GAAP and these non-GAAP measures may not be comparable to information provided by other companies. Reconciliations of the GAAP to non-GAAP results are presented at the end of this press release.

The tender offer for Audience–s outstanding common stock has not yet commenced. This press release is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any Audience securities. The solicitation and the offer to buy common stock of Audience will be made only pursuant to an offer to purchase and related materials that Knowles and Orange Subsidiary, Inc. intend to file with the SEC on Form S-4 and Schedule TO, respectively, which will include an Offer to Exchange, a letter of transmittal and related documents (the “Tender Materials”). Audience also intends to file a solicitation/recommendation statement on Schedule 14D-9 with respect to the tender offer. Audience stockholders and other investors should read the Tender Materials contained in the Form S-4, Schedule TO and the Schedule 14D-9 to be filed by Knowles, Orange Subsidiary, Inc. and Audience, respectively, carefully because these documents will contain important information, including the terms and conditions of the tender offer. Audience stockholders may obtain any other Tender Materials subsequently filed with the SEC from its website (at ), without charge. Materials filed by Knowles and Orange Subsidiary, Inc. may be obtained for free at Knowles–s web site, www Knowles com. Materials filed by Audience may be obtained for free at Audience–s web site, . Stockholders and other investors are urged to read carefully all tender offer materials prior to making any decisions with respect to the tender offer.

Statements in the press release regarding Audience, Inc., which are not historical facts, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by terms such as believe, expect, may, will, provide, could and should and the negative of these terms or other similar expressions. This release contains forward-looking statements that involve risks and uncertainties, including statements regarding the impacts of the pending transaction with Knowles and Audience–s outlook for 2015 and are based on current expectations and assumptions that are subject to risks and uncertainties. Our actual results could differ materially from those we anticipate as a result of various factors, including among others: the impact of the proposed acquisition on Audience–s financial results, including expenses; Audience–s ability to complete the proposed transaction, including the outcome of regulatory reviews of the proposed transaction, the failure to retain key Audience employees; customer and partner uncertainty regarding the anticipated benefits of the proposed transaction; the failure of Knowles and Audience to achieve the anticipated synergies of the proposed transaction,, completion of our March 31, 2015 review by our independent auditors, and potential fluctuations in the company–s quarterly and annual operating results and financial condition, including but not limited to matters related to tax; our dependence on a single OEM, Samsung Electronics Co. Ltd., for a substantial portion of our revenue; weak demand for high end smartphones integrating our products and the impact on our business; our need to maintain and expand our existing relationships with our OEMs, including Samsung and leading Chinese OEMs, and to establish relationships with new OEMs in order to maintain and increase our revenue; our ability to sustain profitable operations due to our history of losses and accumulated deficit; quarterly fluctuations in our results due to factors such as the timing of OEM product launches and customer purchasing behavior in light of anticipated mobile phone launches; our assessments of whether we have excess or obsolete inventory; increasing competition and new entrants in the market for our products; our need to diversify our sources of revenue; our ability to successfully integrate Sensor Platforms– team and technology; our ability to enter new end user product markets, as well as new geographic markets; pressure on the average selling prices for our products; our lengthy sales cycle and the lack of certainty as to whether any given OEM–s products will achieve market acceptance; our OEMs– lengthy and expensive process to qualify our products; our ability to develop new or enhanced products, including codecs, Advanced Voice and Continuous VoiceQ products, in a timely manner that achieve market acceptance; our reliance on third parties to manufacture, assemble and test our products; increased defects that may be present in our products as we scale our manufacturing processes; the impact of future intellectual property litigation and claims for indemnification; changes in tax laws or our ability to utilize our tax structure and net operating losses and other risks inherent in fabless semiconductor businesses. For a discussion of these and other related risks, please refer to “Risk Factors” in our most recent Annual Report on Form 10-K for the year ended December 31, 2014, which is available on the SEC–s website at . Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management–s beliefs and assumptions only as of the date made. You should review our SEC filings carefully and with the understanding that our actual future results may be materially different from what we expect.

Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Audience is the leader in Advanced Voice, and a pioneer in Multisensory processing and natural user experience technology for consumer devices. Its technologies, based in auditory neuroscience, improve the mobile voice experience, as well as enhance speech-based services and audio quality for multimedia. In early 2014, the Company announced its expansion into Multisensory and motion processing. Through the combination of Advanced Voice and Multisensory processing, Audience aims to transform the way consumers engage with devices by enabling seamless natural user experiences and context-aware services The Company–s products have been shipped in more than 500 million devices worldwide. For more information, see .

For more information on Audience® products please go .


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