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LTX-Credence Corporation (LTXC)

Barclays Capital Global Technology, Media and Telecommunications

May 23, 2012 04:15 pm ET


Rich Yerganian - VP, IR


C.J. Muse - Barclays Capital


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Thank you, all for coming. My name is C.J. Muse with Barclays. I am a semiconductor analyst. It's my pleasure to have LTX-Credence with us today. We have Rich Yerganian, VP of Investor Relations. We have roughly 25 minutes. We will have brief presentation, move to Q&A, and then after that, we will have a breakout session in Liberty 5.

With that, let me turn it over to Rich.

Rich Yerganian

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Thank you, C.J.

Just to start out with, in case you are not aware this morning, we announced our fiscal Q3 results for the quarter ended April 30, we announced revenues of just shy of $31 million. Midpoint of our guidance was $30 million, and we had a loss per share of $0.10 per share on a non-GAAP basis.

Our guidance for our fourth quarter, which ends the end of July, was significantly up in terms of revenues with the guidance being between $42 million and $46 million in revenues, and EPS, from breakeven at the low end, to $0.04 a share profit that’s behind the guidance. So certainly heading in the right direction in terms of the overall business cycles represent two quarters in a row of sequential growth. We believe that the bottom of the cycle certainly is behind us as we enter this new phase of growth.

For the company, we are in the semiconductor test equipment market, which you can breakdown into two major segments, the standalone memory devices and everything else or what we refer to as the SoC space. The SoC space in 2011, which is the area that we focus on as a company, represented approximately $1.8 million in product revenues, so it's the last calendar year. Again, we don't really talk much about the memory space, because we don't participate in it and have no plans to participate in it.

Within the SoC space, we target about 70% of the overall market size there. SoC represents everything from purely analog devices to all the way through purely digital devices along the RF and power and various capabilities in between.

We don't focus on the high end digital or the microprocessor or graphics processor part of the market that represents typically about 30% of the overall SoC space. We instead focus on what we believe to be the higher growth, more opportunities to differentiating your solutions part of the market, which are the application-specific or ASSP market, microcontrollers, data converters, RF, frontend devices, such as power amplifiers and transceivers, as well as power management devices. Again, that represents about 70% of the overall market which is what we view as our addressable market of about $1.2 billion in calendar year 2011.

Looking at those target markets in a bit more granular way. On this slide here, you can see that the various sizes of the IC market both, for 2011 and expected growth into 2012, but most important column on this chart is probably the third column or fourth column, which is the unit volume compound annual growth rate. Our business is driven by unit volume expansion in the semiconductors, because the more units that are created the more units that need to be tested on equipment. So that's a very key metric for our business' unit volumes.

You can see from each of the various market segments, our estimate of share in each of those spaces and while we are the smallest of the three remaining semiconductor test equipment manufacturers in this space, we have pretty health share positions in our target markets.

The one market that we felt we needed to address that we didn't have a very good position yet we included as part of our addressable market was what we refer to as a digitally-centric application-specific market segment. These are devices that have, many of them are found in the mobility space although not exclusively, but these are devices that have high digital content, but also have requirements for RF or certain power requirements and the like. This is capabilities that we had in one of our product lines, some of those capabilities one of our product lines and some of the other capabilities in another product line, but we didn't have one that brought it all together in a solution that could really target these devices effectively and be consistent with our position in the marketplace which is to deliver the lowest cost solution for our customers.

The most important markets out of these three, the application-specific market is the single largest, so certainly very important in order of importance, the power and microcontroller markets come next and then the RF power amplifier market, one where we have a dominant position, it's an important market for us, but it's not necessarily one of high growth, because we already have such a dominant share position there, but all these other market segments do represent significant opportunities for growth from a share position and that's what we are focused on achieving.

We have a series of four major product lines within the company. We will start with the ASL product, which is focused on the low end or low complexity analog in power management space. This is a product that's been around, in its initial form, for over 10 or 12 years or so, has a very, very large installed base, especially throughout Asia, somewhere north of 4,000 units installed and it's been a workhorse in that particular marketplace.

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