Verigy Ltd. F2Q10 (Qtr End 04/30/10) Earnings Call Transcript

Verigy Ltd. F2Q10 (Qtr End 04/30/10) Earnings Call Transcript
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Verigy Ltd. (VRGY)

F2Q10 Earnings Call

May 20, 2010 4:30 pm ET

Executives

Judy Davies - Vice President of Investor Relations

Keith Barnes - Chairman, Chief Executive Officer, and President

Bob Nikl - Chief Financial Officer

Analysts

Raj Seth - Cowen and Company

Krish Sankar – Bank of America Merrill Lynch

Michael Chu - Morgan Stanley

C J Muse - Barclays Capital

James Covello - Goldman Sachs

Analyst for Gary Hsueh - Oppenheimer & Co.

David Duley – Steelhead Securities

Presentation

Operator

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Good day ladies and gentlemen and welcome to the second quarter 2010 Verigy earnings conference call. My name is Melanie and I will be your coordinator today. At this time, all lines are muted; however, we will accept your questions-at the end of today’s session. (Operator instructions) As a reminder, this call is being recorded for replay purposes.

I would now like to turn the conference over to Miss Judy Davies, Vice President of Investor Relations. Please proceed.

Judy Davies

Thank you Melanie and good afternoon everyone. Welcome to our financial teleconference for Verigy’s 2010 fiscal second quarter, which ended April 30. I am Judy Davies and I am joined today by Keith Barnes, our Chairman, CEO, and President; and Bob Nikl, our CFO.

Our second quarter financial press release was sent out today over Business Wire and it is posted on the company’s website. For any reason, if you are not able to locate this press release or require assistance in finding the information, please contact me directly at 408-864-7549. A replay of this call will be available via telephone and webcast from May 20 through June 3. You may access the call by going to the Investor Relations section of Verigy’s website.

We will be making forward-looking statements today that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.

Factors that may cause results to differ materially from those in the forward-looking statements are discussed in our most recent periodic and current reports filed with the SEC. These forward-looking statements, including guidance, provided during today's call are only valid as of this date and Verigy undertakes no obligation to update the forward-looking statements.

In addition, during this call, we will discuss non-GAAP financial measures including non-GAAP net income, earnings per share, and gross margin. You will find a reconciliation to the most directly comparable GAAP financial measures on our website.

At the conclusion of our prepared remarks, we will open up the call for questions. To enable us to answer all of your questions, please limit yourself to one question and no more than one follow-up. As a reminder, this conference call is being recorded and it will be available for replay on our website at www.verigy.com.

Thank you all again, and now it is my pleasure to turn the call over to Keith Barnes.

Keith Barnes

Thank you, Judy. Good afternoon, everyone and thank you for joining us today. We’re pleased to report continued strength in our business and improved financial results. Orders grew substantially to $171 million, a sequential increase of 55% and significantly above our expectation of 15% to 20% growth.

Our book to bill ratio was 1.43. Revenue was $120 million, up approximately 13% sequentially and exceeded the top end of our guidance range. We also improved our bottom line considerably. On a non-GAAP basis, the company returned to profitability, delivering earnings of $0.05 per share.

The environment for SOC continued to strengthen in Q2. Total SOC sales which include both 93K and our low cost products were $83 million, the fifth consecutive quarter of growth, and more than double the comparable quarter one year ago.

We had several new wins for the 93K including RF design wins at 5 new customers in Taiwan, Japan, and Korea. These wins were fueled by a strong broad based recovery and continued demand for computers, smartphones, digital TVs, internet infrastructure, and wireless land applications.

Throughout the quarter, several existing 93K customers began ramping production and this led to multiple Port Scale RF orders from several OSATs driven by fabless and IDM customers in the United States, Europe, and Asia.

In Q2, we set a record for shipments of Port Scale RF system upgrades. We are now very close to reaching the milestone of 250 Port Scale RF systems installed worldwide. We also received recognition from Qualcomm for helping them launch one of their critical devices into production. We’ve been working closely with them to ensure that they meet their production commitments for 4G LTE cellular transceivers and RF [sip] devices. These devices are important to cellular phone carriers that are rolling out handsets with 4G broadband capabilities.

During the quarter we also won a repeat order for multiple systems in a cost sensitive digital consumer application space. This market segment continues its strong ramp driven by electronic devices used in iPads, smartphones, and other RF products.

Another highlight in Q2 was a multiple system order that we received from a new foundry customer and this is a strategic win for us. We received our first 93K order from a fabless customer in Korea to test multimedia processors and we took our first order from a new product group within a network processor company. This product group has been a competitor’s stronghold for many years. Winning this business has enabled us to expand our market share in this account. We expect to generate multiple system orders from this customer for high volume manufacturing.

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