Power-One, Inc. Q1 2010 Earnings Call Transcript

Power-One, Inc. Q1 2010 Earnings Call Transcript
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Power-One, Inc. (PWER)

Q1 2010 Earnings Call Transcript

April 29, 2010 5:00 pm ET

Executives

Kevin Trosian – VP, IR

Richard Thompson – President and CEO

Linda Heller – SVP, Finance, Treasurer and CFO

Analysts

Stephen Ferranti – Stephens Incorporated

Bill Ong – Merriman

Colin Rusch – ThinkEquity

Joe Maxa – Dougherty & Company

Walter Nasdeo – Ardour Capital

Craig Irwin – Wedbush

Presentation

Operator

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Good day, everyone. And welcome to the Power-One Incorporated first quarter 2010 earnings results conference call. This call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Power-One's Vice President of Investor Relations, Mr. Kevin Trosian. Mr. Trosian, please go ahead, sir.

Kevin

Trosian

Good afternoon, everyone. Thank you for joining us today to discuss Power-One's 2010 first quarter results. Joining me today are Richard Thompson, Chief Executive Officer; and Linda Heller, Chief Financial Officer. By now you should have received a copy of today's press release. If not, it is available on the company's website at www.power-one.com.

Before we begin, I would like to remind you that this conference call may contain forward-looking statements reflecting Power-One's use of future events, projections or expectations. Any such forward-looking statements may deal with or include matters which involve risks and uncertainties.

Power-One's actual results may differ materially from those results as discussed, or information provided in the forward looking statements. We refer you to the company’s reporting documents as filed with the SEC for a discussion of the risk factors that may have a material impact on results.

Additionally, in adherence with Regulation FD, we have opened up this call so that all interested investors are free to listen in. The press release and this conference call will be our only forum to answer questions regarding our estimated performance going forward.

Consequently, should you have any questions regarding our estimates of sales and profits or other financial matters for the upcoming quarter, as well as how they may affect our income statement models and balance sheet, this is the time that we are able to respond to these questions.

I will now turn the call over to Richard Thompson, the company's Chief Executive Officer. Please go ahead, Rich.

Richard Thompson

Thank you, Kevin. I will begin today's call with an overview of the company's first quarter performance and discuss how we are positioned for growth and profitability by taking global market share and increasing our margins. After my remarks, Linda Heller, our Chief Financial Officer, will provide greater detail on the financial results of the quarter and we will then take your questions.

Let me start by saying we are pleased with our first quarter results and operating performance, as we posted GAAP profitability for the second quarter in a row. As you can see from our published results, our renewable energy products continue to perform extremely well, accounting for $82 million or 54% of the company's revenue in the first quarter.

We expanded the sale of our inverters across a variety of regions, as we showed strong growth in China and Australia and are making solid inroads in the North American markets.

In the first quarter, Asia accounted for 11% of renewable energy products, versus a negligible amount in the first quarter of 2009. We experienced growing [ph] demand from Germany due to season shares [ph] speculation. However, we also saw increasing demand from other regions, indicating that demand is being driven by customer needs rather than solely by season shares.

While this is a positive for the industry and while power products were down sequentially due to component shortages and seasonality. The 90 and 180 day backlog increase versus last quarter indicating increased demand for this market as well.

Taking a look at our financial performance excluding one-time items, we expanded gross margins to 31% led by both volume and product. Topline growth and operating efficiencies drove EBITDA to $29 million and diluted earnings per share to $0.09 after adjusting for special items. Linda will add more financial details later in the call.

Overall, order volume for Power-One has increased dramatically as seen by our backlog and overall demand. We added a number of new customers, distributors and EPCs for renewable energy in the quarter.

Power conversion demand was strong for in production programs and standard products, although we suspect a large or high percentage was inventory replenishment versus demand expansion. Additionally, we closed three new digital license agreements in the quarter, as well as received court confirmation of our digital power IP in the case against Artesyn, Astec, and Emerson.

Looking specifically at renewable energy, sales reached 280 megawatts in the quarter, up from over 200 megawatts last quarter. We are experiencing strong demand across all of our string and central inverter products, with our three phase 2.5 kilowatt string inverter remaining our best selling product for commercial installations.

While the industry-wide demand is strong, we are winning orders from new distributors and APC. The Value Power-One inverters and their market leading harvesting yields are aligned and uptime.

Our technology, strategic marketing initiative and the quality of our products have all led to our recent market share gains. Further, we believe our wind products will provide another solid future revenue stream, as the introduction of wind inverters effectively doubled our total addressable market.

Given our results and expectations for future growth, we are making investments to capitalize on the opportunities available. In particular, we will continue investing in our go-to-market strategy. This includes adding personnel and engineers for both our power and renewable energy product lines.

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