Micrel, Incorporated (MCRL)
Q1 2010 Earnings Call Transcript
April 22, 2010 4:30 pm ET
Ray Zinn – Chairman, President and CEO
Ray Wallin – CFO and VP of Finance
Tore Svanberg – Thomas Weisel Partners
Doug Freedman – Broadpoint
Christopher Longiaru – Sidoti & Company
Adam France – 1492 Capital Management
Previous Statements by MCRL
» Micrel, Incorporated Q2 2009 Earnings Call Transcript
» Micrel, Incorporated Q1 2009 Earnings Call Transcript
» Micrel Inc. Q4 2008 Earnings Call Transcript
and gentlemen, thank you for standing by and welcome to the Micrel Incorporated 2010 first quarter results conference call. During today's presentation, all parties will be placed in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator instructions)
This conference is being recorded today, Thursday, April 22nd of 2010 and I would now like to turn the conference over to Ray Zinn, President and CEO. Please go ahead, sir.
Thank you, Michaela. Well, welcome to our Q1 2010 conference call. With me today is Ray Wallin, our Chief Financial Officer who will be giving us the prepared information. Before I start, I'd like to say that I'm very happy and proud of what we've done in Q1, but more so I'm more pleased and excited about Micrel's future. Q2 going forward. I think looks very good for the Company and I think you're going to see that as we move forward and listen to the prepared information prepared by Ray Wallin. So with that, let me turn this over to Ray Wallin. Ray?
Thank you, Ray. So in conjunction with this conference call, a number of supplemental charts will be made available on Micrel's website during the following prepared remarks. To access these charts, go to www.micrel.com and click on the link to the first quarter 2010 conference call slides.
We will begin today's call with the legal disclaimers and safe harbor statement. All material contained in the webcast is the sole property and copyright of Micrel Incorporated with all rights reserved. Certain statements in this conference call, which are not historical facts, may be considered forward-looking statements that involve risks and uncertainties.
Forward-looking statements include statements regarding future business results, future levels of sales and profitability, future customer demand and economic and industry projections. Various factors could cause actual results to differ materially from what is set forth in such forward-looking statements.
Some of the factors that could affect the company's results have been set forth in our press release dated April 22, 2010 and are also described in detail in the company's SEC filings, including but not limited to our Annual Report on Form 10-K for the year ended December 31st, 2009.
Listeners who do not have a copy of the first quarter earnings press release may view the press release on the company's website at www.micrel.com. We will review the financial results for the first quarter ending March 31st, 2010 and then discuss our outlook for the second quarter of 2010. Our prepared remarks will then be followed by a question and answer session with the financial community.
Let's begin with Micrel's first quarter financial and operational highlights. We are off to a good start in 2010 as the company continues to participate in the recovery of the semi conductor industry. Driven by demand from customers who serve in the industrial and communications end market we generated solid revenue growth and very strong bookings.
At the top line first quarter revenue increased 9.7%, compared to the prior quarter which was better than we anticipated. This is the fourth consecutive quarter of revenue growth since the recession bottomed for the company in early 2009. In addition, our first quarter book-to-bill ratio was significantly above one and was at the second highest level we have seen in the 32 year history of Micrel. As a result, total backlog is at record level and is more than two times higher than total backlog at the same time last year.
And importantly, since the current cycle is a result of a recovery from the global recession that began in the latter part of 2008, we do not believe there will be appreciable amount of order cancellations and inventory overbuild. In addition to the improving demand, we continue to be encouraged by the company's solid operating performance. First quarter gross margin was 55.4%, which marks the fourth quarter in a row of sequential growth margin improvement for the company.
Moreover our operating margin of 22.2% in the first quarter increased significantly from recent prior periods. In fact operating margins were at the highest level since the third quarter of 2006. This continued margin expansion demonstrates our execution and focus on cost containment, the leverage inherent in our business model and our ability to generate profitable growth.
Further more, our ongoing focus on working capital management resulted in improvements in most of the key balance sheet metrics during the first quarter and cash flow from operations jumped to nearly $18 million in the period. We continue to put our cash to good use. The reinvestment in our business to research and development has resulted in a significant number of new product introductions that has dramatically expanded our served addressable market.
We also remain focused on enhancing shareholder value and as we announced in the press release this afternoon, we maintained our quarterly $0.035 share dividend and continue to buyback stock through stock repurchases which more than offset the dilution of stock option purchases.
With that let's now move on to a closer look at Micrel's first quarter financial details. Revenues in the quarter totaled $67.2 million, compared to $61.2 million in the fourth quarter of 2009 and $47 million in the year ago period. To reiterate, the 9.7% sequential growth in the quarter was better than expected and was primarily due to improved demand and the industrial and communications end market.