MIPS Technologies CEO Discusses F1Q2011 Results - Earnings Call Transcript

MIPS Technologies CEO Discusses F1Q2011 Results - Earnings Call Transcript
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MIPS Technologies, Inc. (

MIPS

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F1Q2011 Earnings Call Transcript

October 25, 2010 4:45 pm ET

Executives

Jen Bernier – Public Relations Manager

Sandeep Vij – President and CEO

Maury Austin – CFO

Analysts

Jeff Schreiner – Capstone Investments

Gary Mobley – Benchmark

Anthony Stoss – Craig-Hallum

Charlie Anderson – Dougherty & Company

Presentation

Operator

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Good afternoon and welcome to the MIPS Technologies first quarter 2011 financial results call. Today's conference is being recorded. If you have any objection, you may disconnect at this time. I'll now turn the call over to Jen Bernier, MIPS' Public Relations Manager. Ma'am, you may begin.

Jen Bernier

Thank you. Welcome to the MIPS Technologies first quarter 2011 earnings conference call. I'm Jen Bernier, MIPS' Public Relations Manager. Leading the call today are Sandeep Vij, Chief Executive Officer, and Maury Austin, Chief Financial Officer. After they discuss the business highlights and detailed financial results, we will open the call for Q&A. If you do not have a copy of the earnings release, it is available on our website at www.mips.com.

Before we begin, I would like to remind you that this conference call may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including projections of certain operating results for the second quarter of fiscal 2011.

Listeners are cautioned not to place undue reliance on this forward-looking information. Many important factors could cause the results to differ materially from those contained in such projections or forward-looking statements. We refer you to the Risk Factors section of the documents that we file from time to time with the Securities and Exchange Commission for factors that would cause the results to differ materially from our forward-looking statements.

In our financial discussions today, we will be referring to first quarter 2011 GAAP and non-GAAP results. MIPS' management believes that non-GAAP information is useful because it can enhance the understanding of the company's ongoing economic performance. MIPS Technologies uses non-GAAP measures in evaluating its financial results as well as for internal planning and budgeting purposes.

The non-GAAP discussed results today exclude stock and non-recurring charges incurred during the period. Please refer to the earnings press release or the Investor Relations page of our website for a reconciliation of GAAP to non-GAAP.

As a reminder, the playback number for this conference call is 203-369-3809 and the access code is MIPS. The recorded call will be available for 30 days after the call. An audio replay will also be posted on the Investor Relations page of our website at www.mips.com.

With that said, I will now turn the call over to Sandeep Vij.

Sandeep Vij

Thanks, Jen. Good afternoon, everyone, and thank you for joining us today. We were pleased with our financial results this quarter, as we continued to see strong momentum and a robust pipeline of opportunities and as we set new records on a number of financial metrics. We wrapped up Q1 with solid financial results, healthy cash flow, and a pro forma operating margin of 44%, surpassing our target of 35% for the second consecutive quarter.

This quarter, we came in above guidance on both licensing and royalty revenue, with overall revenue up by approximately 50% year-over-year. On the licensing side, revenue was up by more than 70% year-over-year showing the continued traction our solutions are having in the market. Royalty revenue increased by almost 40% over the prior year. Our licensees together shipped 157 million units in the quarter, making this our fourth consecutive quarter of record unit shipments. Unit volume was up by approximately 47% over the prior year.

Pro form net income was up by 235% over the prior year, resulting in strong cash flow from operations. Our cash balance at the end of the quarter was approximately $56 million, the highest MIPS has seen since early 2007. Pro forma EPS was also well above guidance, and compared to a year ago, has increased by 3X. We are clearly pleased with these results and with the strong traction we are seeing across our target markets.

This quarter’s design wins included 10 license deals, four of which were with customers who are new to MIPS. We have two new mobile-related design wins with our IUNIKA leveraging MIPS for mobile computing devices such as e-books, laptops and netbooks, and Sequans, a 4G chipset provider using MIPS for their next generation mobile solutions.

We also had two broad deals covering a range of MIPS cores and one architectural license renewal. We are seeing increasing interest and traction in our multi-core offerings. This quarter, we introduced a main superscalar 1074K core, the second multi-core product from MIPS, which provides the industry’s fastest fully synthesizable multi-core IP. It is fast and it is small.

Compared to the ARM Cortex-A9 MP, we have a more than 20% frequency advantage with our custom libraries or process tweaks. And compared to Intel’s Atom, we can fit three 1074Kf cores in the area of a single Intel Atom CPU core. And the 1074K solution provides nearly 2.5X the performance. In a recent article, industry pundit Jon Peddie called our 1074K, and I quote, “the Atom smasher.”

Our traction at the high end continues. We secured three license deals for the new 1074K core this quarter as well as multiple licenses of our multi-threaded, multi-core 1004K product. We expect that we will see increasing interest in our multi-core solutions, as customers look to push the limits of performance while keeping power consumption and silicon costs to a minimum.

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