VeriSilicon Holdings, a China-based outsourcer of semiconductor design and development solutions, filed on Friday with the SEC to raise up to $75 million in an initial public offering.
Business
The company refers to its business model as Silicon Platform as a Service (SiPaaS), and provides end-to-end design and delivery of its chips for semiconductor companies, original equipment manufacturers and original design manufacturers. VeriSilicon claims it is taking advantage of an industry shift from fabless to design-lite; semiconductor companies have begun outsourcing some design aspects instead of just the fabrication of integrated circuits. The company generates revenue from semiconductor design (24% of 1H14 revenue; 13% of gross profit), their procurement (63%; 42%) and licensing (13%; 45%).
Financials
Revenue increased 32% to $77 million during the six months ended June 30, 2014 compared to the prior year period. The growth of its design service revenue outpaced procurement, while licensing and royalties remained flat. Its total gross margin increased about 30 bps to 30% ($23 million). Adjusted EBITDA rose from $216,000 to $5.5 million (7% margin) as the company R&D and SG&A costs decreased as a percent of revenue. VeriSilicon had $16 million of debt at quarter-end and will use IPO proceeds to redeem preferred shares and for working capital.
Shareholders
Primary shareholders include Austin Ventures, Sierra Ventures, VantagePoint Capital Partners, Chairman and CEO Wayne Dai, Walden Riverwood Ventures, Shanghai Venture Capital and WestSummit Capital. Recently recruited CFO Shannon Gao previously served as CFO of Spreadtrum Communications (Nasdaq: SPRD), a fabless semiconductor company that recently sold a 20% stake to Intel for $1.5 billion.
Semiconductor IPOs
The year's only other semiconductor manufacturer, SunEdison Semiconductor (SEMI), has gained 30% since it raised $94 million in May. One semiconductor company also IPO'd in 2013, China-based Montage Technology Group (MONT), which has gained 115% since its September offering.
The Shanghai, China-based company, which was founded in 2001 and booked $146 million in sales for the 12 months ended June 30, 2014, plans to list on the NASDAQ under the symbol VERI. VeriSilicon Holdings initially filed confidentially on July 22, 2014. Barclays, Jefferies & Co., Stifel and Wells Fargo Securities are the joint bookrunners on the deal. No pricing terms were disclosed.
