OmniVision Technologies, Inc.
F1Q13 Earnings Call
August 30, 2012 05:00 pm ET
Mary McGowan - IR
Shaw Hong - CEO & President
Ray Cisneros - SVP, Worldwide Sales and Sales Operations
Hasan Gadjali - VP, Marketing and Business Development
Anson Chan - CFO & VP, Finance
Daniel Amir - Lazard
Paul Coster - JPMorgan
Harsh Kumar - Stephens Inc
Raji Gill - Needham & Company
Brian Peterson - Raymond James
Betsy Van Hees - Wedbush Securities
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Ladies and Gentlemen, thank you and welcome to the OmniVision Technology’s conference call for the first quarter of fiscal 2013. At the time all participants are in a listen-only mode. Later we will open up the call for your questions. Instructions for queuing up will be provided at that time. As a remainder this conference call is being recorded for replay purposes. I would now like to turn the conference call over to Mary McGowan. Please proceed.
Thank you very much. Good afternoon everyone and welcome to our fiscal 2013 first quarter earnings conference call. On today’s call will be Shaw Hong, President and CEO; Ray Cisneros, Senior VP of Worldwide Sales and Sales Operations; Hasan Gadjali, VP of Worldwide Marketing and Business Development and Anson Chan, Chief Financial Officer.
During this conference call, we may make forward-looking statements regarding our business, including statements relating to revenues, earnings targets and our product plans. This is based on information as of today, August 30, 2012. Actual results may differ-materially from those set forth in such statements.
These and other forward-looking statements involve assumptions, risks and uncertainties that could cause actual results to differ materially. For a discussion of these risk factors, you should review the forward-looking disclosures in the earnings release we issued today as well as the risk factors and other disclosures in OmniVision’s SEC filings and reports, including the most recent annual report on Form 10-K and recent quarterly reports on Form 10-Q.
During today’s call, we will also discuss certain GAAP and non-GAAP financial measures, the latter of which excludes stock-based compensation expenses and related tax effects. A reconciliation between the two is available in our earnings release posted on our website.
With that, I’ll now turn the call over to Mr. Shaw Hong. Shaw?
Thank you, Mary. And welcome to all of you joining us on the call and webcast. Earlier this afternoon, we issued a press release describing our results for the first fiscal quarter of 2013. For those who have not read the release, I will provide you with a recap of our financial results.
In Q1, we recorded revenues of $258 million and we shipped $166 million image sensors. On a non-GAAP basis, gross margin was 19.5% and net income was $11.6 million or $0.21 per diluted share. Our cash balance decreased by $94 million to $237 million and our inventory balance increased by $112 million to $403 million.
These were results of a strategic decision to build inventory to support our fast growing business in the face of strong seasonal demand. Before I turn the call over to our management team to provide details on our Q1 financial results and our outlook, I would like to make a few comments of my own on the quarter and on our expectation to the seasonal cycle this year.
First, I am pleased to report that for the third consecutive quarter, we have exceeded the high end of our revenue guidance. More importantly, we have continued to raise the bar on our outlook for the next quarter and we have increased it by a significant degree. Based on our current visibility, we believe our first fiscal quarter is indicative of a strong seasonal cycle for fiscal 2013 and I am excited about the market opportunities available to us.
The mobile phone market has contributed the most to our first quarter revenues. Strong demand from smartphone applications is a major reason for our continued strength in this market. Separately, the entertainment market remains a significant contributor to our Q1 revenues. We believe one of the main drivers, it’s our leadership position in tablets, which we have been including as part of our entertainment business.
With that said demand growth from smartphone and tablet applications continues to accelerate. We believe our participation in the mobile phone market and the entertainment market will continue to be the major driver for our top line performance in fiscal 2013. In the past few months, we’ve been focusing our efforts on building inventory and increasing our supply chain throughput to make sure we deliver on our promises when our end use customers choose our designs.
We’ve been working closely with all of our supply chain partners to maximize all aspect of production. Our efforts range from prioritizing production schedules to expanding capacity to streamlining supply chain logistics. Given our strong cash balance we’ve also made a strategic decision to pre build inventory to further increase our ability to meet the strong seasonal ramp from our target markets.
Meeting this strong demand is an ongoing challenge. We have been diligently executing our plan to tackle this challenge. I would also like to add that while we have regained revenues momentum, our gross margin remained under pressure as a result of our current cost structure. We continue to take actions that we believe will lead to margin expansion over time. As we move forward, we remind ourselves and our investors that our investment in R&D is the leading differentiator for the company.