TriQuint Semiconductor's CEO Discusses Q4 2011 Results - Earnings Call Transcript

TriQuint Semiconductor (TQNT)

Q4 2011 Earnings Call

February 08, 2012 5:00 pm ET

Executives

Steven J. Buhaly - Chief Financial Officer, Principal Accounting Officer, Vice President of Finance & Administration and Secretary

Ralph Quinsey - Chief Executive Officer, President and Executive Director

Analysts

Edward F. Snyder - Charter Equity Research

Parag Agarwal - UBS Investment Bank, Research Division

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

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

Quinn Bolton - Needham & Company, LLC, Research Division

Aalok K. Shah - D.A. Davidson & Co., Research Division

Dale Pfau - Cantor Fitzgerald & Co., Research Division

David A. Duley - Merriman Capital, Inc., Research Division

Thomas A. Sepenzis - Northland Securities Inc., Research Division

Presentation

Operator

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Good afternoon. My name is Kendra, and I will be your conference operator today. At this time, I would like to welcome everyone to the TriQuint Semiconductor Fourth Quarter Earnings Conference Call. [Operator Instructions] I would not like to turn the call over to your host, Mr. Steve Buhaly. Sir, you may begin your conference.

Steven J. Buhaly

Thank you. Good afternoon. And welcome to our fourth quarter and fiscal 2011 conference call. With me today is Ralph Quinsey, our President and Chief Executive Officer. During the call, we will make forward-looking statements about TriQuint's business and projected financial results. I would like to remind you that actual results could differ materially from our projections based on various risk factors, including those described in the press release we issued earlier today and our reports on Forms 10-K, 10-Q, and the other filings with the Securities and Exchange Commission.

All numbers during the call will be presented on a non-GAAP basis. Non-GAAP financial measures report tax on a cash basis and exclude equity compensation charges, entries associated with acquisitions and other specifically identified nonroutine items. These non-GAAP measures are provided to enhance understanding of our core operating performance. A full reconciliation of these non-GAAP measures to our GAAP results is in our press release and in the investor's section of our website.

I will now turn the call over to Ralph to provide an overview of the quarter.

Ralph Quinsey

Thanks, Steve, and welcome, everyone. On today's call, I will summarize our Q4 and full year 2011 results followed by an overview of our major markets. Steve will provide a detailed look at Q4 and specific guidance for Q1. I will then summarize and open up the call to questions.

TriQuint's revenue for Q4 was $227 million, and EPS was $0.08, both at the high-end of our guidance. Gross margin was 31% and operating expenses were $56.9 million, including $2.3 million of legal expenses related to our antitrust and IP claims against Avago.

For 2011, revenue grew 2% to $896.1 million with Mobile Devices growing 6%, offsetting a 4% decline in Networks revenue and a 9% decline in Defense and Aerospace. EPS was $0.51 for 2011. TriQuint closed the year with no debt and $163.3 million in cash and investments.

TriQuint delivered our sixth consecutive year of revenue growth in 2011 as we manage through capacity expansions and the impact of economic uncertainty. We were able to grow important submarkets such as 3G and optical, while also expanding our overall capacity footprint. We are involved in one of the most exciting technology trends in the world, wireless data access, and I believe these investments -- the investment that we have made will lead to improved long-term financial results for the company.

Additionally, a growing request from our high-volume customers is assurance of supply and with our dual-site capability for GaAs now in place, we can assure our customers a flexible and continuous supply of product independent of localized disruptions.

Turning to our markets. I'm excited about the opportunities ahead for TriQuint. Wireless data remains a compelling opportunity. Smartphones, tablets, e-readers and other consumer devices, all with expanding RF content, are some of the fastest-growing consumer devices. Between 2010 and 2012, smartphones are expected to double in volume from about 300 million units to over 600 million. New users and new applications are creating unprecedented growth in this traffic. This in turn requires more infrastructure equipment supported by TriQuint's products.

Lastly, TriQuint continues to lead in advanced technology development as we have begun high-volume shipments of GaN products with the defense industry. I will now add some color on each market starting with Mobile Devices. Mobile Devices' revenue for Q4 2011 grew 7% sequentially and 6% in 2011 as compared to 2010. We were able to grow our 3G/4G revenue 20% year-over-year. This growth was offset by a decline in 2G revenue, primarily the result of declines in our legacy CDMA and GSM revenue streams. We intentionally moved away from these submarkets during the period our capacity was limited.

We have recently reengaged in the GSM market with our next-generation high-performance low-cost QUANTUM Tx Module. We believe our Mobile Devices TAM will continue to grow with increased smartphone adoption and increased our content as multiple bands of 3G and 4G also known as LTE, are added to devices.

In 2011, based on our estimates, we believe overall handset units grew approximately 9% with much faster growth in smartphone. Smartphones currently represent approximately 30% of the market. I expect them to pass 50% in the next few years as they push into the mid- and low-end of the market. This growth is compounded with increased RF content to support the number of frequency bands required in 3G and LTE. There are over 30 frequency bands defined in the standard and each band drives expanded content. Handsets have gone from dual-band voice capability to now include 4 or 5 3G bands and 2 or 3 LTE bands plus WiFi. This has significantly expanded the RF dollar content from about $1 to, in some cases, over $10.

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