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Rubicon Technology, Inc. Q2 2010 Earnings Call Transcript

Rubicon Technology, Inc. Q2 2010 Earnings Call Transcript

Rubicon Technology Inc., (RBCN)

Q2 2010 Earnings Call

August 5, 2010 05:00 pm ET


Raja Parvez – President and Chief Executive Officer

Bill Weissman – Chief Financial Officer, Treasurer and Secretary


Jonathan Dorsheimer – Canaccord Genuity

Steven Chen – UBS

Avinash Kant -- D.A. Davidson & Company

Yair Reiner - Oppenheimer & Company.

Anil Doradla - William Blair

Amar Zaman - Piper Jaffray

Lauren Stroller - Lazard Capital Markets.

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Good day ladies and gentlemen and welcome to the Second Quarter 2010 Rubicon Technology, Inc Earnings Conference Call. My name is Glen and I’ll be your coordinator for today. At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s conference. (Operator instructions) and I’d like to turn the presentation over to your host for today's conference, Mr. Bill Weissman, Chief Financial Officer of Rubicon Technology. Please proceed, sir

Bill Weissman

Thank you Glen and good afternoon everyone. We are pleased you could join us today for Rubicon’s second quarter 2010 earnings conference call. My name is Bill Weissman, and I'm Rubicon's Chief Financial Officer. With me today is Raja Parvez, Rubicon's President and CEO.

We have allotted one hour for our call this afternoon. Raja will provide an overview of second quarter results of operations and discuss the current market environment and then I will review our financial results in detail as well as discuss our outlook for the third quarter 2010. We will then be happy to take your questions.

Today's call is being simulcast on our Investor Relations website located at A replay of this call will be available for eight days and the webcast will be archived in the Investor Relations section of our website. As a reminder, our press release and preliminary financial statements are also available on our website

Before we begin, please be advised that certain statements in this presentation relate to future results that are forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, the accuracy of which are necessarily subject to risks, uncertainties, and assumptions as to future events that may prove not to be accurate.

Factors that could cause actual results to differ materially from those expressed or implied include general economic conditions and factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission.

We undertake no obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.

Now, I’d like to introduce our President and CEO, Raja Parvez.

Raja Parvez

Thank you, Bill. Good afternoon everyone and thank you for joining us today. The second quarter was a record quarter for Rubicon with revenue increasing 37% sequentially to $15.8 million, gross margin rising to approximately 46% and diluted earnings per share reaching $0.18. Demand continues to be very strong from the LED market as the adoption of LED back lighting for medium to large displays such as LED LCD televisions, desktop monitors and Notebook and Netbook computers continue at a rapid pace and general lighting applications for LED continue to advance.

Existing LED chip maker continue to add significant capacity and there are many new entrants into LED chip manufacturing particularly in China where local governments are providing subsidies for the purchase of MOCVD reactors. As a result, we expect to see continued strong demand for sapphire.

The in balance in sapphire demand and supply and demand that resulted in a 16% sequential increase in average selling prices in the second quarter and we expect another sequential increase in ESP’s in the third quarter of at least 20%. Bill will provide more information on our third quarter outlook in a few minutes. We expect continued strong growth in LED backlighting for the next several years with LED backlighting for televisions and large displays achieving at least 75% penetration by the end of year 2012.

In addition, LED use in general lighting applications continued to develop with industry report indicating that LED sale in this market are expected to be up 30% in 2010 over the previous year with continued strong growth over the next several years. The trend among the major LED chip manufacturers towards using larger diameter substrates continues and in the quarter 72% of our revenue from substrates sale came from greater than 2 inch material with only 28% from the sale of 2 inch.

It is especially worth noting that our revenue from the sale of 6 inch polish wafers increased 140% sequentially, going from 1.8 million in the first quarter to 4.4 million in the second quarter with all of this incremental revenue coming from the LED market. We currently sell 6 inch polish substrates to several LED chip manufacturers.

Most of these companies are in varying stages of research and development using 6 inch wafers. However, one of these customers, which is one of the world’s leading LED chip manufacturer, is now moving into production using 6 inch substrates and I am very pleased to announce that Rubicon has signed a long term supply agreement with this customer to supply six inch poly substrate in support of this initiative.

The contract starts in November of this year which is when our current purchase order with them is complete and runs through the end of year 2011 and has a total contact value of $71 million. This continued migration to larger diameter substrates by the world’s leading chip manufacturers is an important trend for Rubicon because our high volume chip abilities in both larger diameter crystal growth and large diameter wafer polishing uniquely positions us to serve this growing segment of the market.

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