Trident Microsystems, Inc. Q1 2010 Earnings Call Transcript

Trident Microsystems, Inc. Q1 2010 Earnings Call Transcript
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Trident Microsystems, Inc. (TRID)

Q1 2010 Earnings Call Transcript

May 5, 2010 4:30 pm ET

Executives

John Swenson – Director, Corporate Finance & IR

Pete Mangan – EVP and CFO

Sylvia Summers Couder – CEO

Analysts

Rajvindra Gill – Needham & Company

Presentation

Operator

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Good day, ladies and gentlemen, and welcome to the Q1 2010 Trident Microsystems earnings conference call. My name is Katrina and I will be your operator for today.

At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator instructions) I would now like to turn the call over to your host for today, John Swenson. Please proceed.

John Swenson

Thank you. Good afternoon and welcome to Trident Microsystems’ conference call for the first quarter ending March 31, 2010. After the market closed today, Trident issued a press release discussing results for the quarter. The press release is accessible online at www.TridentMicro.com.

This call is being broadcast live over the web and is accessible using the link found in today’s earnings press release. A replay of the webcast will be available starting tomorrow by accessing the Investor Relations section of Trident’s Web site.

Before we begin, please note that during this call we will make forward-looking statements. These include comments related to guidance on anticipated revenues and operating losses, the pace of restructuring and integration activities, future product shipments and other statements. We are not obligated to update these statements.

Actual results may differ materially from the forward-looking statements made today and have in fact done so in the past. These projections or forward-looking statements are subject to certain risk and uncertainties.These risks include in particular our ability to realize the benefits from the NXP transaction, supply constraints, the ability to obtain design wins among major OEMs for our products, and competitive pressures including pricing and competitor’s new product introductions, the competitive DTV and set-top box markets, and our ability to retain key employees.

These and other factors are discussed in our press releases and in the company’s filings with the SEC. We encourage you to read these documents and to come to your own conclusions about the risk and uncertainties inherent in Trident’s business.

Also please note we will present non-GAAP financial information in this call. For a reconciliation of our non-GAAP information to the most comparable information under GAAP, please refer to our earnings press release.

On today’s call are Sylvia Summers, Trident’s CEO and Pete Mangan, Trident’s Executive VP and CFO. Pete will review the financial results for the quarter and then Sylvia will follow with further discussion of Trident’s business. Finally, Pete will provide guidance for the second quarter and we will then open the call for questions.

Now, I’ll turn the call over to Pete Mangan. Pete?

Pete Mangan

Thank you, John, and welcome everyone. I am very pleased to present the results for the first quarter of calendar year 2010, which is also the first quarter of our new fiscal year. Please note that the first quarter results include approximately eight weeks of performance from the NXP product lines acquired in the quarter with exception of revenues from our new major distributors which contributed roughly three to four weeks of revenue. The shorter period for distribution resulted as the NXP inventory in the channel had to be resold before we could recognize revenue on Trident’s shipments.

With that said, net revenues for the quarter came in at $90.4 million, up substantially post acquisition from $31.9 million in the prior sequential quarter, and at the high end of our guidance. To help base line the quarter, our new TV business unit delivered $72.9 million or 81% of total revenues, while set-top box provided $17.5 million or 19% of total revenues. Within TV, our old Trident represented $42.4 million, up approximately 30% from the prior quarter, driven by our low end DTV design win in Korea. During the quarter, we had two customers with greater than 10% of revenues with Samsung contributing 30% to total revenues, a similar percentage to the prior quarter, and Philips 11%.

Regionally, Korea represented 43% of total revenues, followed by EMEA 24%, Asia Pac at 17%, Japan 12% and North America 4%. Overall, blended average selling price for the quarter was $3.06. In TV, ASPs were $3.29 with unit shipments evenly split between DTV and standard products. Our DTV product line includes SoCs, discrete demods, and FRC products, while our standard products include analog CRT, discrete audio, and PCTV devices.

Our non-GAAP gross margin for the quarter was 28 points, 4 points higher than the high end of our guidance. Manufacturing support costs related to the NXP products came in substantially lower than expected, as we had a very conservative forecast during this transition quarter. In addition, we achieved better than expected yields in the first quarter of production for our low end DTV SoC.

As a result of the acquisition, we had significant adjustments between non-GAAP and GAAP gross margins totalling $11.6 million non-cash related resulting in a GAAP gross margin of 15%, which was essentially flat with the prior quarter. Non-GAAP operating expenses of $51 million came in significantly better than our guidance for the quarter. We had forecasted conservatively here as well but we also saw approximately $2 million to $3 million of R&D, IT, and other spending shifts based upon the timing of expenses from Q1 to Q2.

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