We estimate that our net proceeds from the sale of the common stock that we are
offering will be approximately $75.3 million, based on the initial public
offering price of $17.00 per share, and after deducting underwriting discounts
and commissions and estimated offering expenses that we must pay. If the
underwriters’ option to purchase additional shares from us in this offering is
exercised in full, we estimate that our net proceeds will be approximately
$87.8 million after deducting underwriting discounts and commissions and
estimated offering expenses that we must pay. We will not receive any proceeds
from the sale of shares of our common stock by the selling stockholders.
We intend to use the net proceeds to us from this offering for working capital
and other general corporate purposes including research and development and the
expansion of our product lines to penetrate new market segments where voice and
audio quality impacts the user experience. We may also use part of the net
proceeds to develop technology partnerships and to acquire other businesses,
products or technologies. However, we do not have any agreements or commitments
for any specific acquisition at this time. Our management will have broad
discretion to use the net proceeds from this offering.
Pending use of net proceeds to us from this offering, we intend to invest the
net proceeds in investment grade, interest-bearing securities.
The market for mobile device components is highly competitive and we expect
competition to intensify in the future. There are a number of components in the
voice and audio subsystem of a mobile device including baseband processors,
audio codecs and voice and audio processors. Currently, we provide only voice
and audio processors and do not compete in other aspects of the mobile device
component market. In the future, we may elect to expand our offerings to
include other subsystem components and we would need to compete against
companies offering those subsystem components. Companies that currently compete
for sales of other mobile device components may enter the voice and audio
processor market with stand-alone components or components with other
functionalities and compete with us.
We currently face competition from a number of established companies that
produce components for the mobile device audio subsystem, including companies
that produce dedicated voice and audio solutions, such as Maxim, ON
Semiconductor, Qualcomm, Texas Instruments, Wolfson and Yamaha. We also face
competition from smaller, privately held companies and could face competition
from new market entrants, whether from new ventures or from established
companies moving into the areas of voice and audio subsystems that our products
address. We also compete against solutions internally developed by OEMs, as
well as combined third-party software and hardware systems.
Our ability to compete effectively depends on a number of factors, including:
• our processors’ scalability, performance, quality, ease of use and cost
effectiveness relative to those of our competitors’ products;
• our success in developing and creating demand for new and proprietary
technologies to offer products and features previously not available in
the marketplace;
• our success in identifying new markets, applications and technologies;
• our ability to attract, retain and support other OEMs and to establish and
maintain relationships with MNOs;
• our ability to recruit and retain engineering, sales and marketing
personnel;
• our products’ interoperability with various data access protocols and
other voice and audio subsystem components of mobile devices;
• our ability to continue to establish greater name recognition and build
upon our reputation in the industry;
• our ability to respond effectively to aggressive business tactics by our
competitors, including selling at lower prices or asserting intellectual
property rights irrespective of the validity of the claims; and
• our ability to protect our intellectual property.
With respect to these factors, based on publicly available data, we believe
that we compete favorably on performance, scalability and cost.
and technology
to function like human hearing. Our low power, hardware-accelerated digital
signal processors (DSPs) and associated algorithms substantially improve sound
quality and suppress noise in mobile devices. As the primary driver of the
mobile device market, the mobile phone continues to play an increasingly
prominent role in peoples’ lives. Voice communication is a primary function of
mobile phones, and we expect voice to increasingly complement touch as a core
user interface, heightening the importance of voice and audio quality in mobile
devices.
The human auditory system is remarkable for its ability to isolate individual
sources within a complex sound mixture, which we refer to as auditory
intelligence. We have incorporated this auditory intelligence into an
intelligent platform by employing computational auditory scene analysis (CASA),
a scientific discipline dedicated to mapping the sound separation functions in
human hearing, into a computational framework. This approach enables our
products to intelligently characterize, group and isolate sounds to improve
sound quality while suppressing noise. We believe that our approach addresses
the challenge of providing clear and consistent voice and audio quality more
effectively than other available solutions. We also believe that our highly
scalable platform will enable us to create and drive differentiated user
experiences, such as robust speech recognition and high-quality audio for
mobile video communication.
Our platform consists of our proprietary, purpose-built DSPs, analog and mixed
signal circuits and algorithms for voice isolation and noise suppression. We
also provide our proprietary AuViD graphical design tools to help original
equipment manufacturers (OEMs) design in and tune our products in their efforts
to bring mobile devices with the best voice and audio quality to market
rapidly. Our technologies and tools are underpinned by our significant
intellectual property, resulting in a strong foundation from which to extend
the value of our platform through continued innovation and integration of
adjacent voice and audio functionality.
We were founded in 2000 and initially targeted the rapidly growing mobile
device market, including mobile phones, media tablets and mobile PCs. We began
production shipments in 2008 and, as of March 31, 2012, had sold over 160
million processors to our OEM customers. In addition to the mobile device
market, we believe that our voice and audio technology is applicable to a broad
range of other market segments, including automobile infotainment systems,
digital cameras, digital televisions, headsets and set top boxes, although we
have not yet released products for those specific market segments. We outsource
the manufacture of our voice and audio processors to independent foundries and
use third parties for assembly, packaging, test and logistics. We had total
revenue of $5.7 million, $47.9 million, $97.7 million and $31.1 million for
2009, 2010, 2011 and the three months ended March 31, 2012, respectively. We
had net income (loss) of $(16.8) million, $4.8 million, $8.3 million and $4.2
million for 2009, 2010, 2011 and the three months ended March 31, 2012,
respectively.
Historically, our revenue has been significantly concentrated in a small number
of OEMs, contract manufacturers (CMs) and distributors and we expect that
concentration to continue for the foreseeable future. In 2010 and 2011, CMs for
Apple, Inc. (Apple), our largest OEM, represented 82% and 75% of our revenue,
respectively, and Samsung Electronics Co., Ltd. (Samsung) represented 7% and
20% of our revenue, respectively. In the three months ended March 31, 2011 and
2012, our largest OEM and its CMs represented 95% and 62% and Samsung
represented 5% and 36% of our revenue, respectively. We are undergoing a
transition in our sales model with our largest OEM and have licensed
semiconductor intellectual property (processor IP) to the OEM for its latest
generation of mobile phones, and are continuing to sell processors to its CMs
for older generations of mobile phones. We began receiving royalty revenue from
this OEM in the three months ended March 31, 2012 and we expect that our total
revenue from this OEM and its CMs will decline as we receive a lower royalty
per mobile device than the selling price of a stand-alone processor.
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We were founded in July 2000 in California under the name Applied Neurosystems
Corporation and we changed our name to Audience, Inc. in June 2002. In June
2011, we reincorporated as a Delaware corporation under the name Audience, Inc.
Our principal executive offices are located at 440 Clyde Avenue, Mountain View,
California 94043. Our telephone number is (650) 254-2800. Our website address
is www.audience.com.