Novellus Systems, Inc. (NVLS)
Q1 2010 Earnings Call Transcript
April 21, 2010 4:30 pm ET
Robin Yim – VP, Treasurer and IR
Jeff Benzing – EVP, Chief Administrative Officer and Principal Financial Officer
Rick Hill – Chairman and CEO
Mahesh Sanganeria – RBC Capital Markets
Krish Sankar – Bank of America/Merrill Lynch
C.J. Muse – Barclays Capital
Stephen O'Rourke – Deutsche Bank
Conor Irvine – Needham & Company
Gary Hsueh – Oppenheimer & Co.
Satya Kumar – Credit Suisse
Stephen Chin – UBS
Ethan Steinberg – Friess Associates
Ben Pang – Caris
Patrick Ho – Stifel Nicolaus
Jagadish Iyer – Arete Research
Timothy Arcuri – Citi
Welcome to Novellus First Quarter 2010 Earnings Conference Call. As a reminder, this call is being recorded April 21st, 2010.
At this time, I would like to turn the conference over to Ms. Robin Yim of Novellus Systems. Please go ahead, ma’am.
Previous Statements by NVLS
» Novellus Systems, Inc. Q4 2009 Earnings Call Transcript
» Novellus Systems Inc. Q3 2009 Earnings Call Transcript
» Novellus Q2 2009 Earnings Call Transcript
Thank you, Kelly. Good afternoon, everyone and thank you for joining the Novellus Systems first quarter 2010 earnings conference call. Joining me on the call today are Rick Hill, Chairman and Chief Executive Officer; Jeff Benzing, Chief Administrative Officer; and John Hertz, Vice President of Corporate Finance.
Financial results for the first quarter 2010 were released on PR Newswire shortly after 1:00 PM Pacific Daylight Time. You can obtain a copy of the news release in the Investor Relations section of our website at novellus.com.
Today’s earnings call contains forward-looking statements about Novellus’ business outlook, the future performance of Novellus and our products and forecasts of key metrics for the second quarter of 2010.
Specific forward-looking statements include, but are not limited to, our expectations regarding forecasted growth in the electronics, semiconductor, and semiconductor capital equipment industries, our expectations that we will continue to maintain our position or grow the market share, the forecasted bookings, shipment volumes, revenue, gross margin, operating expense, tax rate, and earnings per share target for the second quarter of 2010 including our expectation that our fiscal 2010 tax rate will be 15% to 20% and the sufficiency of our tax reserve, and other unanticipated future events.
We caution you that forward-looking statements are projections and expectations regarding future events, which may involve risks and uncertainties that could cause actual results to differ materially from the results contemplated, including an inaccurate basis for our financial forecast.
Information concerning risks that could cause actual results to differ materially is contained in today’s press release, our filings with the Securities and Exchange Commission, including our Form 10-K for fiscal 2009 and our most recent Form 8-K. Forward-looking statements are based on information as of today and we assume no obligation to update any of these statements.
Jeff Benzing will begin today’s call with a review of the financial results for the first quarter. Then Rick Hill will discuss the state of the business and our industry outlook, followed by guidance for the second quarter of 2010, and then open the call for the question-and-answer session.
I’ll now turn the call over to Jeff.
Thank you, Robin. I'll start by reviewing our first quarter 2010 results, which I'm pleased to say were very strong as we began to realize the earnings potential we have built into our leaned operating model.
Our first quarter 2010 net bookings came in at $321.4 million, up 24.7% sequentially from $257.6 million in the fourth quarter of 2009 and at the midpoint of our revised guidance range of up 20% to 30%. First quarter shipments of $282.8 million were up 15.7% from $244.5 million in the fourth quarter and near the high end of our revised guidance range of $265 million to $285 million.
First quarter revenues were $276.2 million, up 13.1% from $244.2 million in the fourth quarter and $6 million above the high end of our revised guidance range of $255 million to $270 million. By geographic region, first quarter revenues are as follows; United States 26%, Greater China 38%, Korea 26%, Japan 4%, and Europe 6%.
Throughout the rest of my remarks related to the P&L, I will be distinguishing between GAAP results and results that exclude certain other charges. I'd like to preface my remarks with a discussion – a description of these other charges and will refer to them collectively going forward as other items. Please note that a detailed breakout of these items by type and geography is included in today's press release.
Other items totaled $6 million in the first quarter. These other items included $4.4 million of legal expenses related to the Linear Technology Corporation trial, which concluded on February 26, 2010 in favor of Novellus; $900,000 in costs related to the completion of the consolidation of our manufacturing facility in Oregon; and $700,000 in charges for reductions in workforce and restructuring.
Moving on to discuss the results, first quarter GAAP gross margin finished at 48.5%. Excluding other items, gross margin was 48.7%, which was at the high end of guidance range of 47% to 49%. Gross margin in Q1 benefitted from product mix and higher absorption of fixed overhead costs as shipment volumes continued to increase throughout the quarter.
First quarter GAAP operating expenses totaled $84.9 million. Excluding other items, operating expenses were $79.5 million, up only 7.4% sequentially while revenues rose 13.1% quarter-over-quarter. I am pleased to announce that we performed to our model and kept our operating expenses below our target even at these revenue levels with the reinstatement of variable compensation accruals, no shutdowns, and the restoration of executive salaries, all of which totaled an incremental $11.3 million expense versus the fourth quarter of 2009.