TriQuint Semiconductor, Inc. Q1 2010 Earnings Call Transcript

TriQuint Semiconductor, Inc. Q1 2010 Earnings Call Transcript
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TriQuint Semiconductor, Inc. (TQNT)

Q1 2010 Earnings Call Transcript

April 28, 2010 5:00 pm ET

Executives

Steve Buhaly – CFO

Ralph Quinsey – President & CEO

Deborah

Burke – VP, Human Resources

Analysts

Nathan Johnson – Pacific Crest Securities

Patrick Newton – Stifel Nicolaus

Jason Schmidt – Craig-Hallum

Mike Burton – FBN Securities

Todd Koffman – Raymond James

Aldrin Chang [ph] – Barclays Capital

Edward Snyder – Charter Equity Research

Steve Ferranti – Stephens Incorporated

Bill Dezellem – Tieton Capital Management

Colin Denman – D. A. Davidson

Richard Shannon – Northland Securities

Quinn Bolton – Needham & Company

David Duley – Steelhead Securities

Presentation

Operator

Compare to:
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Good afternoon. My name is Ashley, and I will be your conference operator today. At this time, I would like to welcome everyone to the TriQuint Semiconductor first quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ prepared remarks, there will be a question-and-answer session. (Operator instructions) Thank you.

It is now my pleasure to turn the conference over to our host, Mr. Steve Buhaly. Sir, you may proceed with your conference call.

Steve Buhaly

Thank you, Ashley. Good afternoon and welcome to our first quarter 2010 conference call. This call will include forward-looking statements about TriQuint's projected results. Results could differ materially based on various factors, including those described in our reports on Forms 10-K and 10-Q and other filings with the Securities and Exchange Commission.

This presentation also includes non-GAAP financial measures, which exclude equity compensation charges and charges associated with acquisitions. These non-GAAP measures are provided to enhance understanding of our core operating performance. A full reconciliation of these non-GAAP measures is in our press release and in the Investors section of our Website.

Ralph will now provide an overview of the quarter.

Ralph Quinsey

Thank you, Steve. This was another great quarter for TriQuint, with revenues at $181 million, improved gross margin and non-GAAP earnings of $0.12 per share. We achieved 52% revenue growth over the first quarter of 2009, with Networks at 42%, Mobile Devices at 63% and Defense and Aerospace at 35%.

These results are a solid start to 2010, our 25

th

anniversary year. Steve will provide more details on financial performance during his comments. The major themes of the quarter are a rebounding infrastructure market and continued strong smartphone demand. Our Q1 Networks revenue was above original expectations, as demand returned to this market. The increased percentage of Networks revenue for the company is favorable to overall margins. The Networks recovery appears to be broad-based across many of our network customers.

In Mobile Devices, we are benefiting from the rising tide of strong smartphone demand and expansion of our content required for 3G data. We expect sales of smartphone units to increase by more than 20% this year and require four to six times the RF content per device as compared to voice-only phones. In Q1, our GaAs factory utilization was 76% and new product revenue defined as revenue from products introduced within the previous two years was 60% of total revenues. Investors should be aware our utilization metric is not a good indicator of growth or growth potential as we have been and will continue to increase capacity.

Looking more closely at Mobile Devices, the largest of our three major markets, revenue in Q1 increased 63% over Q1 of 2009 and decreased 14% sequentially. Mobile data is the demand driver for Mobile Devices, with 3G revenue up 85% in Q1 2010 over Q1 2009. Growth is being helped by the expansion of 3G to new mobile devices such as data cards and electronic readers. Additionally, the industry appears to have avoided any excess inventory buildup post-selling season and through the winter New Year as our order rates remain very healthy. Other strong submarkets compared to Q1 2009 are wireless LAN and EDGE, where 2G revenue was about flat compared to the same period last year.

Smartphone revenue represents approximately 65% of our total Mobile Devices revenue, with the remaining revenue coming from CDMA, EDGE and GSM, primarily from voice phones. From a product perspective, fully-integrated transmit modules, a product category where TriQuint is a leader, was 58% of our Mobile Devices revenue in Q1 2010 and power amplifier modules was 24%. I continue to expect solid revenue growth in Mobile Devices driven by ramping new opportunities and unit growth of existing platforms and products.

Now, switching to our Networks market, I am happy to report continuing signs of recovery in demand. Our Networks revenue was up 27% sequentially and up 42% over Q1 2009. Radio access revenue, which is large base station infrastructure was up 23% sequentially and 22% from Q1 2009. Transport was up 26% sequentially and 35% compared to the year-ago quarter. This represents a broad recovery in Networks, with each of our submarkets and many of our customers participating. Our strong sequential growth was well balanced between our major markets of base stations, transport and emerging. I expect increased spending in North America infrastructure will offset some softening in China.

TriPower, an innovative gas technology that increases efficiency for high power RF is one of the most exciting opportunities in this market. Customer interest is high for TriPower, and I expect will play a material role in future revenue growth. More immediately, we are seeing healthy order rates broadly in the Networks market. Our new products in table that support video data and voice, data and voice to home are expected to continue with strong momentum in the second half of the year building on nearly 100% growth we saw in Q1 of 2010 as compared to Q1 of 2009.

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