RF Micro Devices (RFMD)

Q2 2012 Earnings Call

October 25, 2011 5:00 pm ET


Robert M. Van Buskirk - Corporate Vice President, President of Multi Market Products Group and Head of New Multi Market Products Group

Doug DeLieto - Vice President of Investor Relations

Steven E. Creviston - Corporate Vice President and President of Cellular Products Group

Robert A. Bruggeworth - Chief Executive Officer, President, Director and Member of Strategic Development Committee

Norman Hilgendorf - Vice President of Corporate Development

William A. Priddy - Chief Financial Officer, Corporate Vice President of Administration and Secretary


Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division

Venkatesh Nathamuni - JP Morgan Chase & Co, Research Division

Cody G. Acree - Williams Financial Group, Inc., Research Division

Harsh N. Kumar - Morgan Keegan & Company, Inc., Research Division

Edward F. Snyder - Charter Equity Research

Quinn Bolton - Needham & Company, LLC, Research Division

Nathan Johnsen - Pacific Crest Securities, Inc., Research Division

Anthony J. Stoss - Craig-Hallum Capital Group LLC, Research Division

Dale Pfau - Cantor Fitzgerald & Co., Research Division

Ittai Kidron - Oppenheimer & Co. Inc., Research Division

Michael A. Burton - Kaufman Bros., L.P., Research Division

Parag Agarwal - UBS Investment Bank, Research Division

Sujeeva De Silva - ThinkEquity LLC, Research Division

Aalok Shah - D.A. Davidson

Blayne Curtis - Barclays Capital, Research Division

Todd K. Koffman - Raymond James & Associates, Inc., Research Division



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Ladies and gentlemen, thank you for standing by. Welcome to the fiscal -- the RF Micro Devices Fiscal 2012 Second Quarter Conference Call. [Operator Instructions] This conference is being recorded today, October 25, 2011. It is now my pleasure to introduce our host for today, Mr. Douglas DeLieto, Vice President, Investor Relations for RFMD. Please go ahead, sir.

Doug DeLieto

Thanks very much, Dianne. Hello, everybody, and welcome to our conference call. At 4:00 p.m. today, we issued a press release. If anyone listening did not receive a copy of the release, please call Samantha Alphonso at the Financial Relations Board at (212) 827-3746. Sam can fax a copy to you and verify that you are on our distribution list. In the meantime, the release is also available on our website, rfmd.com, under the heading Investors.

At this time, I want to remind our audience that this call will include forward-looking statements that involve risk factors that could cause our actual results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statements contained in the earnings release published today, as well as our most recent SEC filings for a complete description.

In today's release and on today's call, we provide both GAAP and non-GAAP financial measures. We provide this supplemental information to enable investors to perform additional comparisons of operating results, and to analyze financial performance without the impact of certain non-cash expenses for unusual items, that may obscure trends in our underlying performance.

During our call, our comments and comparison to income statement items will be based primarily on non-GAAP results. For a complete reconciliation of GAAP to non-GAAP financial measures, please refer to our earnings release issued earlier today, available on our corporate website, rfmd.com, under Investors.

In fairness to all listeners, we ask our participants, please limit themselves to one question and to a follow up. Sitting with me today are Bob Bruggeworth, President and CEO; and Dean Priddy, Chief Financial Officer. I'm also joined by Eric Creviston, Norm Hilgendorf, and Bob Van Buskirk, who lead our Cellular Products Group, Multi-Market Products Group and Compound Semiconductor Group, respectively, as well as other members of RFMD's management team.

And with that, I'll turn the call over to Bob.

Robert A. Bruggeworth

Thanks, Doug, and welcome, everyone. We're pleased to report that RFMD continues to transition very successfully into a highly diversified, growth-oriented supplier of RF components and compound semiconductors. Despite the challenging macro environment, our product and technology leadership, and our sharp focus on operational excellence, are enabling RFMD to deliver broad-based market share gains, revenue growth above expectations, and greatly, improved financial performance.

RFMD's September quarterly revenue grew approximately 14% sequentially, well ahead of the growth rate of our underlying markets. We believe this is the beginning of a multiyear product and technology cycle, during which, we will achieve consistent growth, diversification and market share gains.

Of note, sales of RFMD's 3G/4G Cellular Products, grew more than 50% sequentially during the September quarter. We supported aggressive new product ramps at Foxconn, HTC, Samsung, Huawei, ZTE, RIM, LG, Motorola and others, and sales of our 3G/4G components, totaled more than 40% of our cellular revenue.

We also extended our early leadership in LTE. We captured new design wins in 4G LTE, with our ultra high efficiency 3G/4G PAs, also called our Phenom product family. We ramped new switches and antenna control solutions, in support of leading 4G LTE smartphones. We are also supporting platform integration at multiple LTE baseband suppliers using our next-generation PowerSmart LTE power platform.

In China, demand for our components exceeded expectations, not only in 2G, but also in 3G. New product ramps in 3G, included a recently launched Android smartphone from Lenovo, that features MediaTek's latest 3G chipset, and multiple RFMD PAs. Sales of RFMD's 3G entry components for emerging market handsets, doubled sequentially, and we expect sales would double again in the December quarter. Emerging markets, in particular China, represent the next big smartphone market, and RFMD enjoys an extremely strong, early-mover advantage. We have extensive product design resources, located domestically in China, and we have deep relationships with hundreds of domestic brands.

In 3G and 4G, RFMD continues to win by solving the increasingly-complex RF challenges, confronting device manufacturers. We are delivering industry-leading products and technologies to the world's leading OEMs, and we believe we are on a path to expand our market share significantly, just as we did in 2G, with our product and technology leadership. Today's overlapping macro trends of mobility, broadband data and energy efficiency, present our industry a significant, long-term growth opportunity, while RFMD's industry-leading products and technologies position us to outpace our industry and deliver market share gains.

In the cellular market, we are expanding our customer relationships, and winning additional content at the world's leading smartphone manufacturers. PowerSmart continues to proliferate across our customers smartphone platforms, and we are pleased to announce today, that PowerSmart shipments exceeded an annualized $100 million run way -- run rate during the September quarter, a goal we had originally set for the end of our fiscal year.

In SSCPL, our switches, power management ICs and antenna control solutions, continue to grow aggressively. During the quarter, SSCPL revenue nearly doubled for the third consecutive quarter, placing it near $100 million in annualized revenue. The customer list for these solutions include Foxconn, HTC, Samsung, Huawei, ZTE, RIM, LG, Motorola and others. This positions RFMD extremely well, at both in terms of product mix and customer exposure, as we are in production today in support of all of the world's leading smartphone manufacturers.

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